-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eky+PMgDKmSnNgDAw61pAMsCLiy6HojfZ6TU/ShVxoOcx2IOm8Y8z5s7KFHhCEg6 GKV2iI+lLzz+36YFxqqXBA== 0000950115-99-000838.txt : 19990624 0000950115-99-000838.hdr.sgml : 19990624 ACCESSION NUMBER: 0000950115-99-000838 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RARE MEDIUM GROUP INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 232368845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-76107 FILM NUMBER: 99636866 BUSINESS ADDRESS: STREET 1: 44 WEST 18TH STREET CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2126346950 MAIL ADDRESS: STREET 1: 44 WEST 18TH STREET, 6TH FL CITY: NEW YORK STATE: NY ZIP: 10011 FORMER COMPANY: FORMER CONFORMED NAME: ICC TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL COGENERATION CORP DATE OF NAME CHANGE: 19891005 S-3/A 1 AMENDMENT TO REGISTRATION STATEMENT Registration No. 333-76107 As filed with the Securities and Exchange Commission on May 28, 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- Amendment No. 2 to FORM S-3 Registration Statement Under The Securities Act of 1933 ------------------- RARE MEDIUM GROUP, INC. (Exact name of Registrant as specified in its charter) Delaware 23-2368845 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 44 West 18th Street, 6th Floor, New York, NY 10011 (212) 634-6950 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Richard P. Jaffe, Esquire Mesirov Gelman Jaffe Cramer & Jamieson, LLP 1735 Market Street, 38th Floor Philadelphia, Pennsylvania 19103-7598 Telephone: (215) 994-1046 Telefax: (215) 994-1111 (Name and address, including zip code, and telephone number, including area code, of agent for service) ------------------- Approximate date of commencement of proposed sale to public: From time to time after this registration statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / --------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. The Information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated May 28, 1999 PROSPECTUS 1,588,462 Shares RARE MEDIUM GROUP, INC. COMMON STOCK -------------------- This prospectus relates to the offer for sale from time to time of up to 1,588,462 shares of common stock of Rare Medium Group, Inc. by Capital Ventures International, a selling securityholder of Rare Medium Group, Inc. We will not receive any portion of the proceeds from the resale of the shares by Capital Ventures International. Our common stock is listed on the Nasdaq National Market under the symbol RRRR. On May 24, 1999, the closing sale price of the common stock, as reported on the Nasdaq National Market, was $13 - 1/8 per share. Investing in our common stock involves a high degree of risk. For a discussion of certain factors you should consider in connection with any decision to purchase shares in this offering please see "Risk Factors" beginning on page 3. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is May __, 1999. TABLE OF CONTENTS RISK FACTORS...................................................................3 THE COMPANY...................................................................13 RECENT DEVELOPMENTS...........................................................13 SELLING SECURITYHOLDER........................................................18 PLAN OF DISTRIBUTION..........................................................19 USE OF PROCEEDS...............................................................20 LEGAL MATTERS.................................................................20 EXPERTS.......................................................................21 WHERE YOU CAN GET MORE INFORMATION............................................21 INCORPORATION OF DOCUMENTS BY REFERENCE.......................................22 FORWARD-LOOKING STATEMENTS....................................................22 (2) RISK FACTORS Investing in our common stock is very risky. In deciding whether to invest, you should carefully consider the following risk factors, in addition to the other information in this prospectus and information incorporated into this prospectus by reference. Any one of the following risks could result in a material adverse effect on our business, results of operation, financial condition and the market price of our common stock. The Rare Medium Business Has a Limited Operating History, Which Makes it More Difficult to Predict Whether or Not We Will Generate Revenues or Have Successful Business Operations. We acquired Rare Medium, Inc. on April 15, 1998. As a result of such acquisition, we have changed our overall operations to focus solely on the business of providing Internet professional services and other Internet related products and services. Moreover, Rare Medium, Inc. itself was founded in September 1995. With a very limited operating history on which to evaluate Rare Medium, Inc.'s business and prospects, it is more difficult for you to predict whether or not we will be successful. On a pro-forma basis, as if the operations of Rare Medium, Inc. were included from January 1, 1998, we had revenue in 1998 and 1997 of $5,829,819 and $3,856,233, respectively, and losses from operations of $18,392,883 in 1998 and $5,613,174 in 1997. You should evaluate our chances of generating revenues or having successful business operations in view of the risks, uncertainties, delays and difficulties associated with starting a new business many of which may be beyond our control. There is no assurance that we will be successful in meeting the challenges and addressing the risks that we face in a new and rapidly expanding market such as Internet professional services and other Internet related products and services. In addition, our business strategy has been evolving and is expected to continue to evolve. There can be no assurance that our strategy will generate revenues or that it will meet the demands created by changing industry conditions and competition. There Can Be No Assurance That We Will Achieve or Sustain Profitability. Although we have experienced revenue growth ($5,829,819 in 1998 versus $3,856,233 in 1997 on a pro-forma basis, as if the operations of Rare Medium, Inc. were included from January 1, 1998, this growth may not be sustainable or indicative of future operating results. In addition, we have incurred substantial costs to expand and integrate our operations (an $18,392,883 loss from operations in 1998 and a $5,612,174 loss from operations in 1997 on a pro-forma basis, as if the operations of Rare Medium, Inc. were included from January 1, 1998, and we intend to continue to invest heavily in acquisitions, infrastructure and marketing. Our ongoing integration costs will include the combination of the financial, information and communications systems of the various companies that we have acquired and expect to acquire. Our ongoing expansion costs will include the leasing of additional office space, the purchase and leasing of new computer and communications equipment and the hiring of additional employees. As a result of these and other costs, we may continue to incur operating losses through 1999 or beyond, and there can be no assurance that we will achieve or sustain profitability. (3) Our Ability to Obtain Additional Financing in Order to Meet Our Future Capital Needs is Uncertain. We have entered into definitive agreements with Apollo Investment Fund IV, L.P. and several other purchasers to raise $87.0 million in equity capital through the issuance of $15 million of Series A Convertible Preferred Stock and $72 million of Series B Preferred Stock, and we expect to close on the transaction contemplated by such agreements on or before May 31, 1999, subject to the satisfaction of closing conditions. The $72 million received as consideration for the Series B Preferred Stock will be held in escrow following closing pending receipt of stockholder approval of the conversion of the Series B Preferred Stock into Series A Convertible Preferred Stock, as required by the agreements with the purchasers and by the Nasdaq National Market listing rules. If such stockholder approval is not obtained within 120 days after closing, the purchasers will have the right to cause us to redeem the Series B Preferred Stock and have the $72 million held in escrow returned to them. There can be no assurance that the closing conditions will be satisfied or that such transaction will be consummated or, if consummated, that we would obtain such stockholder approval. If we fail to consummate such equity transaction, we will need to sell additional equity or debt securities or seek credit facilities within twelve months in order to fund our capital requirements and to satisfy our debt obligations to several former stockholders of Rare Medium, Inc. in the years 2000 and 2001. In addition, if we fail to consummate such transaction or consummate the transaction but fail to obtain stockholder approval of the conversion of the Series B Preferred Stock into Series A Convertible Preferred Stock or the authorization for a new class of non-voting common stock, we could need to raise additional funds sooner in order to support more rapid expansion, develop new or enhanced services and products, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. We have not entered into any other agreements to raise additional funds and in the event we fail to consummate the transaction contemplated by the agreements with Apollo Investment Fund IV, L.P. and the other purchasers, we may not be able to borrow money or issue more shares of common stock to meet our cash needs, or if we could complete another transaction, it may not be on terms that are favorable or reasonable from our prospective. Sales of additional equity or convertible debt securities, including in the event the transaction with Apollo Investment Fund IV, L.P. and the other purchasers is consummated, would result in additional dilution to our stockholders. Future liquidity and capital requirements will depend upon numerous factors, including the success of our existing and new service offerings and competing technological and market developments. There can be no assurance that future funding, if needed, will be available, or, if available, will be under terms acceptable to us. See "Recent Developments - Agreement with Apollo Investments Fund IV, L.P." Delisting of Our Common Stock From Trading on the Nasdaq National Market Would Reduce Marketability of Our Shares. Since our common stock was trading at or below the minimum $5.00 per share closing bid price requirement for continued listing on the Nasdaq National Market during 1998 and earlier this year, and since we did not have net tangible assets of at least $4 million, we received notice from Nasdaq that we must take steps to come into compliance with the Nasdaq National Market listing standards or our common stock will be delisted from the Nasdaq (4) National Market. A hearing with Nasdaq was held on February 4, 1999. We proposed a plan to Nasdaq which we believe should enable us to remain listed on the Nasdaq National Market. On April 22, 1999, we were notified by Nasdaq that it had determined to continue the listing of our common stock on the Nasdaq National Market, provided that on or before June 30, 1999 we conduct our 1999 Annual Meeting of Stockholders and consummate the equity transaction contemplated with Apollo Investment Fund IV, L.P. In the event we fail to meet these requirements, and we are not otherwise in compliance with the Nasdaq listing requirements, Nasdaq may consider us for continued listing on the Nasdaq Small Cap Market or may determine to delist us. Further, if we consummate the equity transaction contemplated by the agreements with Apollo Investment Fund IV, L.P. and the other purchasers but fail to obtain stockholder approval of the conversion of the Series B Preferred Stock issued in such transaction into Series A Convertible Preferred Stock or authorization of a new class of non-voting common stock as required by the agreements with such purchasers and by the Nasdaq National Market listing rules, we may be delisted from the Nasdaq National Market. In the event we are unable to maintain our listing on the Nasdaq National Market, we currently meet the listing standards for, and would seek to apply for, listing on the Nasdaq Small Cap Market. There can be no assurance, however, that such an application would be approved. In the event we were unable to list our common stock on the Nasdaq Small Cap Market or any other exchange at such time, there would be no established trading market for our common stock except as may be established in the National Association of Securities Dealers Inc.'s OTC Bulletin Board Service or in the "pink sheets," which would have a material adverse effect on the liquidity and market price of our common stock. Our Acquisition Strategy May Not Produce the Desired Results. A key component of our growth strategy is to acquire Internet related businesses, that complement or enhance our business, on acceptable terms. We expect the competition for acquisition candidates to continue to increase. There is no assurance that we will identify and compete for attractive acquisition candidates or complete acquisitions at reasonable purchase prices, in a timely manner or at all. To the extent we have to use cash consideration for acquisitions in the future, we may need to obtain additional financing. To the extent our management must devote significant time and attention to the integration of technology, operations, businesses and personnel as a result of these acquisitions, our ability to service current clients and win new clients may suffer. In addition, our senior management faces the difficult and potentially time consuming challenge of implementing uniform standards, controls, procedures and policies throughout our current and future acquisitions. We could also experience financial or other setbacks if any of the acquired businesses experienced problems in the past of which our management is not presently aware. For example, if an acquired business had dissatisfied customers or had any performance problems, our reputation could suffer as a result of our association with that business. In addition, we may experience disputes with the sellers of acquired businesses and may fail to retain key acquired personnel. (5) We May Face Difficulties Managing Our Growth Internally and as a Result of Acquisitions. Our recent growth has strained our managerial and operational resources. A key part of our strategy is to grow, both by hiring more personnel and through acquisitions, which will continue to strain our resources. To manage future growth, our management must continue to improve our operational and financial systems and expand, train, retain and manage our employee base. There can be no assurance that we will be able to manage our growth effectively. If our systems, procedures and controls are inadequate to support our operations, our expansion would be halted and we could lose our opportunity to gain significant market share. Possible Decline in the Trading Price of Our Common Stock if Operating Results Fluctuate. Our operating results have fluctuated in the past, and may continue to fluctuate in the future, as a result of a variety of factors, many of which are outside of our control, including the timing of new projects; reductions, cancellations or completions of major projects; the loss of significant clients; the opening or closing of an office; our relative mix of business; changes in pricing by us or our competitors; employee utilization rates; changes in personnel; costs related to expansion of our business; increased competition; and marketing budget decisions by our clients. As a result of these fluctuations, we believe that period-to-period comparisons of our operating results cannot be relied upon as indicators of future performance. A high percentage of our expenses, including those related to employee compensation and facilities, are fixed. If the number and size of our projects decreases in any period, then our revenues and operating results may also decrease. In some quarters our operating results may fall below the expectations of securities analysts and investors due to any of the factors described above. In such event, the trading price of the common stock would likely decline. Loss of Key Management Personnel Could Adversely Affect Our Business. Our business operations depend largely on the skills of our key management and technical personnel, as well as key management and technical personnel of companies acquired by us. Almost all of our executive officers have recently joined us and many of our key personnel have worked together for a relatively short period. The loss of one or more of our key management and technical personnel may materially and adversely affect our business, results of operations and financial condition. Except for Glenn S. Meyers, we do not maintain key man insurance for any of our employees. We cannot guarantee that we will be able to replace any of such persons in the event their services become unavailable. We Are Dependent on Our Ability to Recruit, Train and Retain Internet Solutions Professionals Who Are In Short Supply. We also believe continued hiring of new personnel will be required to support our business. Our business operations also depend in large part on our ability to identify, hire, train and retain (6) Internet professionals who can provide the technical, strategic, creative, marketing and audience development skills required by clients. There is a shortage of qualified personnel and we compete with other companies for this limited pool. There is no assurance that we will be able to attract, train, or retain qualified personnel. Competition For Internet Professional Services is Intense with Low Barriers to Entry Which May Affect Our Business Operations. The market for Internet professional services is relatively new, intensely competitive, rapidly evolving and subject to rapid technological change. While relatively new, the market is already highly competitive and characterized by an increasing number of entrants who have introduced or developed products and services similar to those offered by us. We expect competition not only to persist, but to increase. Increased competition may result in price reductions, reduced margins and loss of market share. Our competitors fall into several categories, including Internet service firms, technology consulting firms, technology integrators, strategic consulting firms, and in-house information technology, marketing and design departments of our potential clients. Most of our current and potential competitors have longer operating histories, larger installed customer bases, greater name recognition, longer relationships with clients and significantly greater financial, technical, marketing and public relations resources than we do. At any time our current and potential competitors could increase their resource commitments to our markets. The barriers to entry into our business are also relatively low. As a result, we expect to face additional competition from new market entrants in the future. The market for our services is rapidly evolving and is subject to continuous technological change. As a result, our competitors may be better positioned to address these developments or may react more favorably to these changes. We compete on the basis of a number of factors, including the attractiveness of the Internet professional services offered, the breadth and quality of these services, creative design and systems engineering expertise, pricing, technological innovation, and understanding clients' strategies and needs. Many of these factors are beyond our control. Existing or future competitors may develop or offer strategic Internet services that provide significant technological, creative, performance, price or other advantages over the services offered by us. Our Fixed-Price Contracts Involve Financial Risk. Most of our contracts are currently on a fixed-price basis, rather than a time and materials basis. Further, the average size of our contracts is currently increasing, which results in a corresponding increase in our exposure to the financial risks of fixed price contracts. We assume greater financial risk on fixed-price contracts than on time and materials engagements. We have only a limited history in estimating our costs for our engagements, particularly for larger projects. We have had to commit unanticipated resources to complete some of our projects, resulting in lower gross margins on such contracts. We may experience similar situations in the future. In addition, we typically assume the fixed-price contracts of the companies we acquire. If we fail to estimate accurately the resources and time required for an engagement, to manage client expectations effectively or to complete fixed-price engagements (7) within our budget, on time and to our clients' satisfaction, we would be exposed to cost overruns, potentially leading to losses on these engagements. In addition, we recognize revenues from fixed-fee contracts based on our estimate of the percentage of each project completed in a reporting period. To the extent our estimates are inaccurate, the revenues and operating profits, if any, we report for periods during which we are working on a project may not accurately reflect the final results of the project and we would be required to make adjustments to such estimates in a subsequent period. We Generally Do Not Have Long-Term Contracts and the Need to Establish Relationships with New Clients Creates an Uncertain Revenue Stream. Our clients generally retain us on a project by project basis, rather than under long-term contracts. As a result, a client may or may not engage us for further services once a project is completed. Establishment and development of relationships with additional companies and other corporate users of information technology is an important component of our business operations. The absence of long-term contracts and the need for new clients create an uncertain revenue stream. A client which accounts for a significant portion of our revenues in a given period may not generate a similar amount of revenues, if any, in subsequent periods. There is no assurance that we will be able to add new major clients or to secure new engagements with existing clients. In addition, some of our existing clients may unilaterally reduce the scope of, or terminate, existing projects. There is no assurance that we will be able to maintain our business relationship or avoid a material reduction in the use of our services by any of our significant existing clients. Developing and Strengthening Our Brand is Essential to Our Business Operations. We believe that maintaining and strengthening the Rare Medium brand is an important aspect of attracting and maintaining clients. The importance of brand recognition will increase as competition in the market for Internet professional services increases. Building a brand requires a successful marketing effort and successful delivery of product to clients. A single engagement involving client dissatisfaction could tarnish the perception of Rare Medium as a whole despite any efforts to maintain and strengthen the Rare Medium brand name. There can be no assurance that the strategy adopted and expenses incurred by us will result in a stronger brand. Our Success Depends Upon Key Strategic Relationships. We have established key strategic relationships with Microsoft, Macromedia, IBM, Oracle, Vignette and Advanced Technology Group which can be terminated on short notice. The loss of any of these or other strategic relationships would deprive us of the opportunity to: o gain early access to leading-edge technology, o cooperatively market products with the vendor, o cross-sell additional services, and o gain enhanced access to vendor training and support. (8) Our Business Depends on the Growing Demand for Internet Solutions. Because we are in the business of providing Internet solutions, our future success depends on the continued expansion of, and reliance of consumers and businesses on, the Internet and related technical solutions. The Internet may not be able to support an increased number of users or an increase in the volume of data transmitted over it. As a result, the performance or reliability of the Internet may be adversely affected as use increases. The improvement of the Internet in response to increased demands will require timely improvement of the high speed modems and other communications equipment that form the Internet infrastructure. The Internet has already experienced outages and delays as a result of damage to portions of its infrastructure. The effectiveness of the Internet may also decline due to delays in the development or adoption of new technical standards and protocols designed to support increased levels of activity. There can be no assurance that the infrastructure, products or services necessary to maintain and expand the Internet will be developed. Our Business Operations Depend on our Ability to Adapt to Technological Innovations. Our business operations depend, in part, on our ability to keep pace with rapid technological change, new products and services embodying new processes and technologies and industry standards and practices. Failure to respond to these changes could render our existing service practices and methodologies obsolete. There can be no assurance that we will respond quickly, cost-effectively or sufficiently to these developments. There is a Potential For Misappropriation of Proprietary Information and Intellectual Property. We limit access to and distribution of our proprietary information, as well as proprietary information licensed from third-parties. Our management cannot ensure that these strategies will be adequate to deter misappropriation of our proprietary information and material. Despite efforts to protect our intellectual property, we also face the risk of undetected misappropriation of our proprietary information or materials; development of similar technologies by our competitors; unenforceability of the non-competition agreements entered into by our key employees; and infringement claims, even if not meritorious, against us. If any of these risks materialize, we could be required to pay significant amounts to defend our rights or pay damages, and our managerial resources could be diverted. We May be Subject to Legal Liability to Our Clients. Many of our engagements involve the development and implementation of Internet solutions that are important to our clients' businesses. Our failure or inability to meet a client's expectations in the performance of services could injure our business reputation or result in a claim for substantial damages against us regardless of our responsibility for such failure. In addition, the services we provide for our clients may include confidential or proprietary client information. Although we have implemented policies to prevent such client information from (9) being disclosed to unauthorized parties or used inappropriately, any such unauthorized disclosure or use could result in a claim against us for substantial damages. Our contractual provisions attempting to limit such damages may not be enforceable in all instances or may otherwise fail to protect us from liability for damages. Moreover, we do not currently have errors and omissions insurance. Our Systems May Not Be Year 2000 Compliant. The "Year 2000 Issue" refers to the problem of many computer programs using the last two digits to represent a year rather than four digits (i.e., "99" for 1999). Some of the computer programs used by us may have date-sensitive software that may not operate properly when dealing with years past 1999, which is when "00" will represent the year 2000. To the extent that this situation exists, there is a potential for computer system failure or miscalculations, which could cause a disruption of operation of that program. The problem is not limited to computer software, since some equipment may have date-sensitive processors that may not be able to properly use dates after the year 1999. We have appointed a Year 2000 Task Force to perform an audit, which consists of analysis and testing, to assess the scope of our risks and bring our applications into compliance. Based upon conclusions from the analysis and findings to date, we believe most of our applications and those of our vendors, customers and clients are Year 2000 compliant, and that expenditures to correct any deficiencies not yet identified would not be significant. We are in the testing stage of our audit. However, no assurance can be given that any or all of our or third party systems are or will be Year 2000 compliant or that the costs required to address the Year 2000 issue or the impact of a failure to achieve substantial Year 2000 compliance will not have a material adverse effect on our financial condition or results of operations. The Market Price of Our Common Shares May be Highly Volatile. Stock prices of growth companies such as ours may fluctuate widely, often for reasons that are unrelated to the actual operating performance of the particular company. In addition, the market price of the common stock is subject to significant fluctuation due to: o variations in stock market conditions, o changes in financial estimates by securities analysts or by our failure to meet estimates, o variations in quarterly operating results, o general conditions effecting all participants in our industry, o announcements by us or our competition, o regulatory developments, and o economic or other external factors. Our Business is Subject to General Economic Conditions. Our revenues and results of operations will be subject to fluctuations based upon the general economic conditions in the United States and, to a lesser extent, abroad. If there is a general economic downturn or a recession in the United States, we expect that business enterprises, including our customers and potential customers, would substantially and immediately reduce their budgets or delay implementation of Internet-based business solutions. (10) A deterioration in existing economic conditions could therefore materially and adversely affect our business, results of operations and financial condition. Governmental Regulation of the Internet Could Impact our Operations. Currently, we are not subject to any direct governmental regulation other than the securities laws and regulations applicable to all publicly owned companies, and laws and regulations applicable to businesses generally. Few laws or regulations are directly applicable to access to, or commerce on, the Internet. Due to the increasing popularity and use of the Internet, it is likely that a number of laws and regulations may be adopted at the local, state, national or international levels with respect to the Internet. Any new legislation could inhibit the growth in use of the Internet and decrease the acceptance of the Internet as a communications and commercial medium, which could in turn decrease the demand for our services or otherwise have a material adverse effect on our future operating performance. We Do Not Intend to Pay Dividends in the Foreseeable Future. We have not paid a cash dividend on our common stock and currently expect to retain our future earnings, if any, for use in the operation and expansion of our business. We do not anticipate paying any cash dividends in the foreseeable future. The Issuance of Preferred Stock or Additional Common Stock May Adversely Impact Shareholders. Our board has the authority to issue up to 10,000,000 shares of our preferred stock, $.01 par value per share, and to determine the terms, including voting rights, of those shares without any further vote or action by our stockholders. The voting and other rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. We have agreed to issue Series A Convertible Preferred Stock and Series B Preferred Stock to Apollo Investment Fund IV, L.P. and several other purchasers as discussed under the heading "Recent Developments - Agreement with Apollo Investment Fund IV, L.P." appearing on page 15 of this prospectus. Similarly, our board may, under general circumstances, issue additional shares of common stock without any further vote or action by stockholders, which would have the effect of diluting common stockholders. An issuance could occur in the context of another public or private offering of shares of common stock or preferred stock or in a situation where the common stock or preferred stock is used to acquire the assets or stock of another company. Our stockholders have approved an increase in the authorized shares of common stock from 50,000,000 shares, to 200,000,000 shares at a special meeting of stockholders held on March 16, 1999. The issuance of common stock or preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control. (11) Anti-Takeover Provisions Could Make a Third-Party Acquisition of Us Difficult. We are a Delaware corporation. The Delaware General Corporation Law contains provisions which could have the effect of making it more difficult for a third party to acquire control of us. In addition, our stockholders have approved an amendment to our certificate of incorporation to provide for a classified board, with each board member serving a staggered three year term, at a special meeting of stockholders held on March 16, 1999. The existence of a classified board of directors could make it more difficult for a third-party to acquire control of us. Shares Eligible for Future Sale Could Dilute the Outstanding Common Shares and Thereby Cause Our Stock Price to Decline. As of April 30, 1999, there were 35,965,923 shares of common stock outstanding, of which approximately 9.0 million shares constituted "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act of 1933. Such restricted shares may be sold by the holders of such shares, subject to any applicable restrictions under Rule 144. In addition, as of April 30, 1999, there were outstanding options to purchase approximately 9.0 million shares of common stock, of which options to purchase approximately 3.2 million shares of common stock were currently exercisable. Approximately 3.7 million additional shares of common stock were reserved for issuance under our stock option plans, including our 1998 Long-Term Incentive Plan. The shares underlying outstanding options, including the shares offered by this prospectus, and the remaining 3.5 million shares which are reserved for issuance under our 1998 Long-Term Incentive Plan are covered by effective registration statements. As of April 30, 1999, we also had outstanding warrants to purchase approximately 315,000 shares of common stock (excluding the warrants issued to Capital Ventures International discussed in the following paragraph), all of which were currently exercisable. All of the underlying shares of common stock under the warrants have customary piggyback registration rights. See "Recent Developments Agreement with Apollo Investment Fund IV, L.P." Effective January 28, 1999, we sold convertible debentures in the principal amount of $3.5 million to Capital Ventures International which are convertible into common stock at a conversion price equal to $5.27 per share. In addition, we issued warrants to purchase 404,625 shares of common stock at an exercise price of $5.27 per share to Capital Ventures International. Capital Ventures International purchased additional convertible debentures in the principal amount of $2.5 million at the same conversion rate, together with additional warrants to purchase 289,017 shares of common stock at the same exercise price. Thereafter, Capital Ventures International converted all of such convertible debentures and exercised all of such warrants in exchange for 1,588,462 shares of our common stock. Possible or actual sales made under Rule 144 or pursuant to registration or other exemptions from registration under the Securities Act of 1933, of the aforementioned shares of common stock may have an adverse effect upon the market price of the common stock. (12) THE COMPANY Currently, through our wholly-owned subsidiary, Rare Medium, Inc. and our other subsidiaries, we provide Internet professional services and other Internet related products and services primarily to large and medium sized businesses, including Fortune 500 companies. Such services focus on helping clients develop Internet strategies, improve business processes and develop interactive content using Internet-based technologies by providing clients with Internet business strategy consulting, marketing, creative design and development needs analysis, architecture planning, Internet, Intranet and Extranet solutions, hosting and maintenance. In addition, prior to April 15, 1998, we had been principally engaged in the design, development, manufacture and marketing of desiccant-based climate control systems. Through a series of transactions during 1998, we acquired Rare Medium, Inc. and our other operating subsidiaries and divested ourself of our desiccant-based air conditioning systems operations. Providing Internet professional services and other Internet related products and services is our sole business. The mailing address and telephone number of our principal executive office is 44 West 18th Street, 6th Floor, New York NY 10011, (212) 634-6950. RECENT DEVELOPMENTS The Acquisition of Rare Medium, Inc. On April 15, 1998, we acquired by merger all of the stock of Rare Medium, Inc., a privately held New York corporation. Rare Medium, Inc. is an Internet professional services company engaged in the design, delivery and implementation of Internet web site applications and strategies, with its principal offices located in New York City. Total consideration for the purchase was approximately $46.2 million, consisting of a combination of $10 million in cash, 4,269,300 shares of our common stock in a private placement of securities, and the balance in a secured promissory note dated April 15, 1998. The Rare Medium Noteholders. In connection with exchange agreements between us and several of the holders of the secured promissory note described above, effective December 31, 1998, in a private placement of securities we issued an aggregate of 2,951,814 shares of common stock to such note holders in exchange for their beneficial interest in $11,773,881 of the original principal amount of such note and accrued and unpaid interest thereunder through December 31, 1998. Pursuant to an exchange agreement between us and two of our employees effective April 5, 1999, we (a) amended such employee's employment agreements and (b) issued an aggregate of 963,052 shares of common stock to such employees in exchange for their beneficial interest in $3,987,031 of the original principal amount of the note. We will record an expense in the amount of approximately $1 million related to this transaction, which is the value of the shares issued as of April 5, 1999 in excess of the amount of debt converted to shares. As a result of these transactions, there is a remaining principal balance of $6,439,066 payable under the note, which bears interest at the prime rate, payable (13) semi-annually, with principal due in two equal installments on April 15, 2000 and April 15, 2001. The Acquisition of I/O 360, Inc. and DigitalFacades Corporation. On August 14, 1998, we acquired by merger all of the stock of I/O 360, Inc., a privately held New York corporation, and DigitalFacades Corporation, a privately held California corporation . I/O 360 and DigitalFacades are Internet professional services companies engaged in the design, delivery and implementation of Internet web site applications and strategies. In consideration of the purchase of I/O 360, we issued 786,559 shares of common stock in a private placement of securities valued at $3.0 million (based on the average closing price per share of our common stock for the 15 trading days during the period from August 3, 1998 through August 21, 1998, inclusive, as reported in The Wall Street Journal). In consideration for the purchase of DigitalFacades, we issued 719,144 shares of common stock valued at $3.0 million (based on the average closing price per share of our common stock for the 20 trading days prior to August 13, 1998, as reported in The Wall Street Journal). The Sale of a Majority of its Partnership Interests in Fresh Air Solutions, L.P. On October 14, 1998, through our wholly-owned subsidiary, ICC Desiccant Technologies, Inc. (now known as Investment Holding Co.), we completed the sale of a majority of our partnership interests in Fresh Air Solutions, L.P. for total consideration of $1,500,000, of which $1,125,000 was paid in cash and $375,000 was paid by delivery of an unsecured promissory note issued by Fresh Air Solutions, L.P. In addition, the unaffiliated investment entity that purchased the Fresh Air Solutions, L.P. partnership interests also assumed all liabilities of Fresh Air Solutions, L.P. which were known to two members of management of Fresh Air Solutions, L.P. or which otherwise arose on or after November 18, 1997, regardless of whether they were known to such management. As a result of the sale of partnership interests, Investment Holding Co. retained, as its sole asset, a 32.4% passive investment limited partnership interest in Fresh Air Solutions, L.P. Subsequent to the sale of the partnership interests referred to above, Fresh Air Solutions, L.P. redeemed the 10% limited partnership interest in Fresh Air Solutions, L.P. held by Engelhard Corporation in exchange for the 20% limited partnership interest in Engelhard Hexcore, L.P. held by Fresh Air Solutions, L.P. and $1 million in cash. As a result, Investment Holding Co.'s interest in Fresh Air Solutions, L.P. has been increased to a 36% limited partnership interest. The Private Placement of Convertible Debentures and Warrants to Capital Ventures International. Pursuant to the terms of a securities purchase agreement, dated as of January 28, 1999, Capital Ventures International agreed to purchase from us in a private placement of securities, in two tranches, convertible debentures in the aggregate principal amount of $6,000,000 and five year warrants to purchase an aggregate of 693,642 shares of common stock at an exercise price of $5.27 per share, subject to reset. The first tranche of the transaction (14) closed January 28, 1999, at which time Capital Ventures International purchased convertible debentures in the aggregate principal amount of $3,500,000 and warrants to purchase 404,625 shares of common stock. The term of the convertible debentures was four years. The principal amount of the convertible debentures plus accrued interest thereon at 8% per annum were convertible, at the option of the purchaser, into shares of common stock at conversion price equal to $5.27 per share until July 27, 1999 (unless certain events occur earlier) and, thereafter, at a per share price equal to the lowest of: o $5.27, o 105% of the average closing bid price of the common stock for the lowest two trading days during the 15 trading days ending on July 27, 1999, and o 92% of the average closing bid price of the common stock for the lowest two trading days during the 15 trading days ending on the trading day immediately preceding the applicable conversion date, but in no event less than $2.49 per share, subject to adjustment. In the event that the common stock trades below $2.49 for a certain period of time, we had the right to prepay the convertible debentures at an amount equal to 120% of principal plus accrued interest. Except under limited circumstances, Capital Ventures International was not entitled to convert the convertible debentures or exercise the warrants to the extent that the shares to be received by Capital Ventures International upon such conversion or exercise would cause Capital Ventures International to beneficially own more than 4.9% of the outstanding common stock. Pursuant to the terms of the securities purchase agreement, Capital Ventures International purchased the remaining convertible debentures in the principal amount of $2.5 million and the remaining 289,017 warrants. Thereafter, Capital Ventures International converted all $6,000,000 convertible debentures and exercised all 693,642 warrants for 1,588,462 shares of our common stock. Such shares represent approximately 4.4% of our outstanding common stock. Agreement with Apollo Investment Fund IV, L.P. On May 7, 1999, we entered into definitive agreements, as amended and restated, with Apollo Investment Fund IV, L.P., pursuant to which we have agreed to sell 150,000 shares of Series A Convertible Preferred Stock with attached warrant for $15 million and 720,000 shares of Series B Preferred Stock with attached warrant for $72 million to Apollo Investment Fund IV, L.P. and several other purchasers. We anticipate that closing will occur on or before May 31, 1999, subject to the satisfaction of closing conditions. The Series A Convertible Preferred Stock acquired at closing will have full voting rights together with the common stockholders equal to approximately 5.6% of our outstanding common stock. The Series B Preferred Stock will have no voting rights, subject to our obtaining stockholder approval of the conversion of the Series B Preferred Stock into Series A Convertible Preferred Stock within a certain period, as discussed below. In order to comply with the Nasdaq National Market listing requirements, which in certain cases require stockholder approval of issuances of common stock or securities convertible into or exercisable for common stock in an amount equal to 20% or more of the common stock or voting power of an issuer outstanding before the issuance, the agreements with the purchasers require us to obtain stockholder approval of the conversion of the non-voting Series B Preferred Stock into Series A Convertible Preferred Stock. Upon such (15) conversion, the aggregate Series A Convertible Preferred Stock outstanding will have full voting rights together with the common stockholders equal to approximately 25.7% of our outstanding common stock. The $72 million received as consideration for the Series B Preferred Stock will be held in escrow following closing pending receipt of stockholder approval of the conversion of the Series B Preferred Stock into Series A Convertible Preferred Stock. Upon obtaining such approval, the Series B Preferred Stock will automatically convert into Series A Convertible Preferred Stock without any further action. If such stockholder approval is not obtained within 120 days after closing, each share of Series B Preferred Stock will be convertible into non-voting common stock, at the option of the holder thereof, unless the holder of a majority of the then outstanding shares of Series B Preferred Stock determines to delay or restrict such convertibility. Stockholder approval is also required for the creation of a class of non-voting common stock. If such stockholder approvals are not obtained, the Series B Preferred Stock can be returned to us for the purchase price thereof, plus a redemption premium of 10%, and the conversion price of the detachable warrants will be reset. There can be no assurance that the closing conditions will be satisfied or that the transaction contemplated by such definitive agreements will be consummated or, if consummated, that we would obtain such stockholder approval. Each share of Series A Convertible Preferred Stock will be convertible into a number of shares of common stock determined by dividing the liquidation preference of $100 per share, plus accrued and unpaid dividends, by the conversion price of $7.00. Each share of Series A Convertible Preferred Stock and Series B Preferred Stock will be entitled to preferred dividends, a liquidation preference, and will be issued with detachable warrants to purchase 13.5 shares of common stock at a variable strike price based on the then current market price of the common stock. At closing, the purchasers will also be issued warrants to purchase an aggregate of approximately 12 million shares of common stock at an exercise price of $7.00 per share. For as long as Apollo Investment Fund IV, L.P. owns at least 25% of the securities acquired at closing, the holders of the Series A Convertible Preferred Stock and Series B Preferred Stock, voting as a separate class, will have the right to elect one of the members of our Board of Directors and maintain at least 25% representation on the Board if the Board size is increased. We have retained Bear Stearns & Co. Inc. as our financial advisor in connection with the transaction contemplated with Apollo Investment Fund IV, L.P. Nasdaq National Market Listing On April 22, 1999, we were notified by Nasdaq that it had determined to continue the listing of our common stock on the Nasdaq National Market provided that on or before June 30, 1999, we conduct our 1999 annual meeting of stockholders and consummate the equity transaction contemplated by the Apollo Investment Fund IV, L.P. In the event we fail to meet these requirements, and we are not otherwise in compliance with the Nasdaq listing requirements, Nasdaq may consider us for continued listing on the Nasdaq Small Cap Market or may determine to delist us. (16) Other Developments On February 25, 1999, we acquired the assets of Interface Alternatives, Inc. through a newly-formed subsidiary, iface.com, which is in the business of providing software and solutions for voice-over-internet protocol for voice, video and fax communications via the Internet. We own 80% of the stock of iface.com and previous management of Interface Alternatives, Inc. owns the remaining 20%. As consideration for the assets of Interface Alternatives, Inc., which are currently estimated at $350,000, iface.com assumed the liabilities of Interface Alternatives, Inc., which are currently estimated at $250,000. In addition, we provided cash at closing to iface.com in the amount of $250,000 and a one-year line of credit in the amount of $250,000. The acquisition will be accounted for under the purchase method of accounting. On February 25, 1999 we signed a definitive agreement to acquire 100% of the outstanding stock of Internet Games Corporation, a privately held Delaware corporation. liveuniverse.com, as the business is now known, is a community and entertainment network which seeks to provide web masters and home page builders with major portal services such as chat rooms, message boards, greeting cards, guest books, traffic counters and mailing lists. As consideration for the acquisition, we issued 150,000 shares of common stock. The transaction has closed subsequent to March 31, 1999, and will be accounted for using the purchase method of accounting. On February 26, 1999, we signed a definitive agreement to acquire 100% of the outstanding stock of FS3 Interactive, Inc. FS3 creates Internet-based business solutions, including web marketing, design, programming, and E-commerce enabling solutions. As consideration for the purchase, we paid approximately $3.5 million by issuing 768,975 shares of common stock, which was determined based upon an agreed-upon formula equal to two times FS3's trailing twelve-month revenues divided by an agreed-upon share valuation. The transaction has been closed. On March 5, 1999, we signed a definitive agreement to acquire 100% of the outstanding stock of Big Hand, Inc. and its subsidiary CircumStance Inc. Big Hand creates Internet-based solutions, including web marketing, design, programming and E-commerce enabling solutions. As consideration for the purchase, we paid approximately $6.6 million by issuing 1,460,683 shares of common stock, which was determined based upon and agreed-upon formula equal to two times trailing twelve-month revenues of Big Hand and CircumStance divided by an agreed-upon share valuation. The transaction has been closed. On March 16, 1999, we officially changed our name from ICC Technologies, Inc. to Rare Medium Group, Inc., increased our number of authorized shares of common stock from 50,000,000 to 200,000,000, adopted staggered terms for our directors, and received approval for our 1998 Long-Term Incentive Plan, by a stockholder vote approving such actions at a special meeting of stockholders. On March 19, 1999, we signed a definitive agreement to acquire 100% of the outstanding stock of Hype! Inc., a Canadian corporation. Hype! is an Internet marketing and communications company. As consideration for the purchase, we issued 270,729 shares of common stock. The transaction has been closed. (17) By agreement dated May 7, 1999, we agreed to acquire 100% of the outstanding stock of Struthers Martin, Inc., a privately held Georgia corporation. Struthers is a leader in Internet and network integration services and enterprise management, and has completed work for such organizations as IBM's Interactive Media Division, Bally Total Fitness, and Lucent Technologies. As consideration for the $6 million purchase price (which does not include the minimum $1.8 million of cash which must remain in Struthers Martin, Inc. at closing), we will issue 406,091 shares of common stock. The transaction will be accounted for using the purchase method of accounting. SELLING SECURITYHOLDER The shares of common stock offered by this prospectus represent a good faith estimate of the maximum number of shares of common stock which were acquired upon the consumation of the agreement pursuant to which Capital Ventures International agreed to convert all $6,000,000 of such convertible debentures and exercise all 693,642 of the warrants that were issued to Capital Ventures International in a private placement of securities, for 1,588,462 shares of our common stock. Such shares represent approximately 4.4% of our outstanding common stock. Our registration of the shares of common stock does not necessarily mean that Capital Ventures International will sell all or any of the shares. The following table sets forth certain information regarding the beneficial ownership of the common stock as of May 21, 1999, by Capital Ventures International. The information provided in the table below with respect to Capital Ventures International has been obtained from such stockholder and our records. Except as otherwise disclosed below, Capital Ventures International has not, or within the past three years has not had, any position, office or other material relationship with the us. Because Capital Ventures International may sell all or some portion of the shares of common stock beneficially owned by it, only an estimate (assuming Capital Ventures International sells all of its shares offered hereby) can be given as to the number of shares of common stock that will be beneficially owned by it after this offering. In addition, Capital Ventures International may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time since the date on which we obtained the information regarding the shares of common stock beneficially owned by it, all or a portion of the shares of common stock beneficially owned by it in transactions exempt from the registration requirements of the Securities Act of 1933. (18)
Name of Stockholder Number of Shares Number of Shares Number of Shares Percentage of Common Beneficially Owned Being Offered Beneficially Owned Stock Beneficially Prior to Offering (1) After Offering (2) Owned After Offering - ------------------------------------------------------------------------------------------------------------------------------------ Capital Ventures International 1,688,462 1,588,462 100,000 * - ------------------------------------------------------------------------------------------------------------------------------------
* Less than 1% of the outstanding shares of common stock. (1) Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the Commission under the Securities Exchange Act of 1934. Shares not outstanding but deemed beneficially owned by virtue of the right of a person or group to acquire them within 60 days are treated as outstanding only for purposes of determining the number of shares and percent owned by such person or group. (2) Assumes that all shares covered by this prospectus are sold in the offering. PLAN OF DISTRIBUTION The shares of common stock may be offered from time to time by Capital Ventures International or its donees, pledgees, transferees or other successors in interest for resale by this prospectus in one or more transactions at fixed prices, at market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Capital Ventures International may offer their shares of common stock in one or more of the following transactions: o in brokerage transactions; o on any national securities exchange or quotation service on which the common stock may be listed or quoted at the time of sale, including the Nasdaq National Market; o in the over-the-counter market; o in private transactions; o through settlement of short sales, or through long sales, options or transactions involving cross or block trades; o by pledge to secure debts and other obligations; or o a combination of any of the above transactions or by other legally available means. If required, we will distribute a supplement to this prospectus to describe material changes in the terms of the offering. The shares of common stock described in this prospectus may be sold from time to time directly by Capital Ventures International. Alternatively, Capital Ventures International may from time to time offer shares of common stock to or through underwriters, broker/dealers or agents. Capital Ventures International and any underwriters, broker/dealers or agents that participate in the distribution of the shares of common stock may be deemed to be "underwriters" (19) within the meaning of the Securities Act of 1933. Any profits on the resale of shares of common stock and any compensation received by any underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. In addition, Capital Ventures International or its successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of shares of common stock in the course of hedging the position they assumed with Capital Ventures International. Capital Ventures International or their successors in interest may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares of common stock, which shares of common stock may be resold thereafter pursuant to this prospectus. Any shares covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather that pursuant to this prospectus. Capital Ventures International may choose not to sell all of the shares. Capital Ventures International may transfer, devise, or gift such shares by other means not described in this prospectus. To comply with the securities laws of various states the common stock must be offered or sold only through registered or licensed brokers or dealers. In addition, in various states, the common stock may not be offered or sold unless they have been registered or qualified for sale or an exemption is available and complied with. Under the Securities Exchange Act of 1934, any person engaged in a distribution of the common stock may not simultaneously engage in market-making activities with respect to the common stock for nine business days prior to the start of the distribution. In addition, Capital Ventures International and any other person participating in a distribution will be subject to the Securities Exchange Act of 1934 which may limit the timing of purchases and sales of common stock by Capital Ventures International or any other such person. These factors may affect the marketability of the common stock and the ability of brokers or dealers to engage in market-making activities. All expenses of this registration will be paid by us. These expenses include the SEC's filing fees and fees under the state securities or "blue sky" laws. Capital Ventures International will pay all underwriting discounts and selling commissions, if any. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the shares by Capital Ventures International. LEGAL MATTERS The validity of the shares will be passed upon for the Company by Mesirov Gelman Jaffe Cramer & Jamieson, LLP, Philadelphia, Pennsylvania 19103-7598. (20) EXPERTS The consolidated balance sheet as of December 31, 1998 and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows and financial statements schedule for the year then ended incorporated in this prospectus by reference to the Annual Report on Form 10-K of Rare Medium Group, Inc. for the year ended December 31, 1998 as amended on Form 10-K/A and on Form 10-K/A-2, have been so incorporated in reliance on the report of KPMG LLP, independent accountants, which includes an explanatory paragraph that states that Rare Medium Group, Inc. has suffered net losses and losses from continuing operations, has a working capital deficiency, and has incurred accumulated losses through December 31, 1998. These factors raise substantial doubt about Rare Medium Group Inc.'s ability to continue as a going concern. KPMG LLP's report is given on the firm's authority as experts in accounting and auditing. The consolidated balance sheet as of December 31, 1997 and the consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows of Rare Medium Group, Inc. for each of the two years in the period ended December 31, 1997 incorporated in this prospectus by reference to the Annual Report on Form 10-K of Rare Medium Group, Inc. for the year ended December 31, 1998, as amended on Form 10-K/A and on Form 10-K/A-2, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, which report includes an explanatory paragraph which refers to conditions that raise substantial doubt about Rare Medium Group, Inc.'s ability to continue as a going concern. PricewaterhouseCoopers LLP's report is given on the firm's authority as experts in accounting and auditing. The balance sheets as of December 31, 1997 and 1998 and the statements of operations, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1997, of Engelhard/ICC incorporated by reference in this prospectus by reference to the Annual Report on Form 10-K of Rare Medium Group, Inc. for the year ended December 31, 1998, as amended on Form 10-K/A and Form 10-K/A-2, have been incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants. PricewaterhouseCoopers LLP's report is given on the firm's authority as experts in accounting and auditing. WHERE YOU CAN GET MORE INFORMATION We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC public reference rooms in Washington DC, New York NY or Chicago IL. You can request copies of these documents by writing to the SEC and paying a fee for the copying costs. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC's Web site at "http://www.sec.gov." In addition, you can read and copy our SEC filings at the office of the National Association of Securities Dealers, Inc. at 1735 K Street, Washington DC 20006. (21) INCORPORATION OF DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. Specifically, we incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934: o Annual Report on Form 10-K for the year ended December 31, 1998; o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999; o Current Reports on Form 8-K filed with the SEC on February 4, 1999, and February 10, 1999; o Definitive Proxy Statement for a Special Meeting of Stockholders held on March 16, 1999, filed with the SEC on February 17, 1999; and o The description of the common stock contained in ICC's Registration Statement on Form 10 dated September 15, 1985 filed with the SEC under the Securities Exchange Act of 1934 (Commission File No. 0-12865). You may request a copy of these filings, at no cost, by writing, telephoning or emailing us at the following address: John S. Gross, Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary Rare Medium Group, Inc. 44 West 18th Street, 6th Floor New York, NY 10011 Telephone: (212) 634-6950 johng@raremedium.com This prospectus is part of a Registration Statement we filed with the SEC. You should rely only on the information provided in this prospectus or incorporated by reference. We have not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of the document. We are not making an offer of these securities in any state where the offer is not permitted. FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's capital needs, business strategy, the listing of its common stock on the Nasdaq National Market, Year 2000 compliance, expectations and intentions. The words "believe," "anticipate," "expect," "estimate," "intend," and similar expressions identify forward-looking statements. Forward-looking statements necessarily involve risks and uncertainties, and the Company's actual results could differ materially from (22) those anticipated in the forward-looking statements, including those set forth below under "Risk Factors" and elsewhere in this prospectus. The factors set forth below under "Risk Factors" and other cautionary statements made in this prospectus should be read and understood as being applicable to all related forward-looking statements wherever they appear in this prospectus. (23) PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The expenses in connection with the issuance and distribution of the securities being registered are set forth in the following table (all amounts except the registration fee and the listing fee are estimated): SEC Registration Fee $3,649 Nasdaq National Market Listing Fees 17,500 Legal Fees and Expenses 25,000 Accountants' Fees and Expenses 5,000 Miscellaneous Costs 5,000 ------------------- ----- Total $56,149 ===== ======= All expenses in connection with the issuance and distribution of the securities being offered shall be borne by the Company. Item 15. Indemnification of Directors and Officers The Company's Certificate of Incorporation contains a provision which limits the personal liability of directors to the Company or Capital Ventures International for monetary damages for breach of fiduciary duty. The Certificate of Incorporation provides that a director of the Company shall not be personally liable for a breach of fiduciary duty as a director except for liabilities: (i) for any breach of the director's duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for an unlawful dividend payment or an unlawful repurchase or redemption of stock, or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Certificate of Incorporation also provides that the Company will indemnify and pay legal expenses and damages incurred by officers and directors in any legal action arising from their actions as agents of the Company as long as the officer or director had acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, or with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful. Nothing in these provisions eliminates a director's fiduciary duty to act with care, nor do they preclude a stockholder from pursuing injunctive or other equitable remedies. Item 16. Exhibits Exhibit No. - ----------- 4.1. Form of Securities Purchase Agreement dated as of January 28, 1999 between the Company and Capital Ventures International and the form of 8% Convertible Term Debenture dated January 28, 1999 issued to Capital Ventures International and form of Stock Purchase Warrant, dated January 28, 1999 issued to Capital Ventures International were filed as part of Exhibit 10.1 to the Company's Form 8-K filed with the Commission on February 4, 1999 and are incorporated herein by reference. 4.2 Form of Agreement dated May 28, 1999 between the Company and Capital Ventures International. 5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP. 23 Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP is included in their opinion filed as Exhibit 5 hereto. 23.1 Consent of KPMG LLP, Independent Accountants. 23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 24 Power of attorney (set forth on the signature page hereto). Item 17. Undertakings (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Act"); II-2 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement: Provided, However, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions discussed in Item 15 of this registration statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the II-3 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 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all requirements for filing on Form S-3 and has duly caused this Amendment to Registration Statement to be signed in its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on May 28, 1999. RARE MEDIUM GROUP, INC. By: /s/ Glenn S. Meyers ------------------------------------- Glenn S. Meyers Chairman of the Board, President (Chief Executive Officer) Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Glenn S. Meyers* Chairman of the Board and President (Chief May 28, 1999 - ----------------------------------- Executive Officer) Glenn S. Meyers /s/ John S. Gross* Senior Vice President, Chief Financial May 28, 1999 - ----------------------------------- Officer, Treasurer and Assistant Secretary John S. Gross (Principal Financial and Accounting Officer) (signatures continued on next page)
II-5
Signature Title Date - --------- ----- ---- /s/ Jeffrey M. Killeen* Director May 28, 1999 - ----------------------------------- Jeffrey M. Killeen /s/ Richard T. Liebhaber* Director May 28, 1999 - ----------------------------------- Richard T. Liebhaber /s/ Steven Winograd* Director May 28, 1999 - ----------------------------------- Steven Winograd
*By Glenn S. Meyers, Attorney-in-Fact. II-6 EXHIBIT INDEX
Exhibit No. Page No. - ----------- -------- 4.1. Form of Securities Purchase Agreement dated as of January 28, 1999 between the Company and Capital Ventures International and the form of 8% Convertible Term Debenture dated January 28, 1999 issued to Capital Ventures International and form of Stock Purchase Warrant, dated January 28, 1999 issued to Capital Ventures International were filed as part of Exhibit 10.1 to the Company's Form 8-K filed with the Commission on February 4, 1999 and are incorporated herein by reference. 4.2 Form of Agreement dated May 28, 1999 between the Company and Capital Ventures International. 5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP. 23 Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP is included in their opinion filed as Exhibit 5 hereto. 23.1 Consent of KPMG LLP, Independent Accountants. 23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 24 Power of attorney (set forth on the signature page of the Registration Statement).
EX-4.2 2 AGREEMENT AGREEMENT AGREEMENT (this "Agreement") dated as of May 28, 1999, between Rare Medium Group, Inc., a Delaware corporation (the "Company") and Capital Ventures International ("CVI"). RECITALS A. Pursuant to a Securities Purchase Agreement dated as of January 28, 1999 (the "SPA"), CVI purchased from the Company $3,500,000 principal amount of 8% Convertible Debentures (the "Initial Debentures"), and a Stock Purchase Warrant (the "Initial Warrant") to acquire 404,625 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"). B. The SPA gives CVI the right to acquire, and CVI desires to acquire, an additional $2,500,000 principal amount of 8% Convertible Debentures (the "Additional Debentures") and additional Warrants (the "Additional Warrants") to acquire 289,017 shares of Common Stock. The Initial Debentures and the Additional Debentures are referred to herein collectively as the "Debentures"; and the Initial Warrants and the Additional Warrants are referred to herein collectively as the "Warrants" and the Debentures and Warrants are referred to herein collectively as the "CVI Securities." C. The Company has entered into a Securities Purchase Agreement dated as of May 7, 1999, as amended and restated, with Apollo Investment Fund IV, L.P. and certain other parties (the "Apollo Agreement"), which will provide the Company with $87,000,000 of capital. D. The parties hereto desire to enter into a transaction pursuant to which the Debentures and Warrants (following the acquisition by CVI of the Additional Debentures and the Additional Warrants) will be converted and exercised, respectively, into shares of Common Stock as specified herein. E. The Common Stock to be issued to CVI upon conversion and exercise of the CVI Securities will be registered for resale under the Securities Act of 1933, as amended (the "Securities Act") pursuant to a Registration Statement on Form S-3, and otherwise have the rights set forth in the Registration Rights Agreement, dated as of January 28, 1999 between the Company and CVI, as amended through the date hereof (as so amended, the "Registration Rights Agreement"). NOW THEREFORE, the parties hereto, intending to be bound, hereby agree as follows: SECTION 1. Conversion and Exercise; Closing (a) Subject to the terms and conditions set forth below, CVI agrees to deliver the CVI Securities to the Company free of any lien or encumbrance, created by CVI, and the Company agrees to accept such delivery and, in consideration thereof, issue to CVI 1,588,462 fully-paid and non-assessable shares of Common Stock (the "CVI Shares"). The conversion, exercise, delivery and cancellation of the CVI Securities in consideration of the issuance of the CVI Shares is referred to herein as the "Transaction." (b) The closing (the "Closing") of the transactions constituting the Transaction shall take place at the offices of Sidley & Austin, 875 Third Avenue, New York, New York 10022 on the date (the "Closing Date") of, and simultaneously with, the closing of the purchase and sale under the Apollo Agreement. The Company shall provide CVI not less than three (3) days prior written notice of the Closing Date. (c) At the Closing, CVI shall convert, exercise and deliver the CVI Securities, which shall thereupon be cancelled by the Company, against the issuance by the Company of the CVI Shares in such denominations as CVI shall specify in writing not more than two (2) days prior to the Closing. Upon the foregoing deliveries, all remaining rights and obligations of the parties under the SPA, the Debentures and the Warrants shall be terminated and of no further force and effect. SECTION 2. Closing Conditions 2.1. Conditions to Obligations of Both Parties The obligation of each of the parties to consummate the Transaction pursuant to Section 1 is subject to the satisfaction of each of the following conditions: (a) The closing of the purchase and sale under the Apollo Agreement shall occur simultaneously with the Closing hereunder. (b) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered or promulgated by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. 2.2. Conditions to Obligations of CVI The obligation of CVI to consummate the Transaction pursuant to Section 1 is subject to the satisfaction of each of the following conditions: (a) the Company's representations and warranties set forth in Section 3(a) shall be true and correct in all material respects as of the date hereof and as of the Closing Date; 2 (b) the Company shall have performed its obligations set forth in Section 4(a) hereof on or prior to the Closing Date; (c) the CVI Shares shall have been duly authorized and, when issued in the Transaction, shall be validly issued, fully-paid and non-assessable, and shall be authorized for trading on the NASDAQ National Market, and (d) the Registration Rights Agreement shall have been amended, if necessary, to cover the CVI Shares. 2.3. Conditions to Obligations of the Company The obligation of the Company to consummate the Transaction pursuant to Section 1 is subject to the satisfaction of each of the following conditions: (a) CVI's representations and warranties set forth in Section 3(b) shall be true and correct in all material respects as of the date hereof and as of the Closing Date; and (b) CVI shall have performed each of its obligations set forth in Section 4(b) hereof on or prior to the Closing Date. SECTION 3. Representations and Warranties (a) The Company represents and warrants to CVI that: (i) the Company is a corporation validly existing and in good standing under the laws of the State of Delaware; (ii) the Company has all corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and (assuming the due authorization, execution and delivery hereof by CVI) constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (iii) the execution and delivery by the Company of this Agreement, the consummation of the transactions contemplated hereby, and compliance by the Company with the provisions hereof will not conflict with, constitute a default under or violate (x) any of the 3 terms, conditions or provisions of its certificate of incorporation or by-laws, (y) any of the terms, conditions or provisions of any document, agreement or other instrument to which the Company is a party or by which its property is bound, or (z) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority binding on it or its property; (iv) no consent, approval, waiver, license or authorization or other action by, or filing with, any court or governmental agency, commission, authority or other person or entity is required in connection with the execution and delivery by the Company of this Agreement, the consummation by the Company of the transactions contemplated hereby and compliance by the Company with any of the provisions hereof; (v) the CVI Shares have been duly authorized and, when issued in the Transaction in consideration of the conversion, exercise, delivery and cancellation of the CVI Securities, will be validly issued, fully-paid and non-assessable shares of Common Stock free of any liens or encumbrances created by the Company, and will be authorized for trading on the NASDAQ National Market; and (vi) The Company has amended its Registration Statement on Form S-3 filed with the Securities and Exchange Commission pursuant to the Registration Rights Agreement to cover resales of the CVI Shares. (b) CVI represents and warrants to the Company that: (i) CVI is validly existing and in good standing under the laws of its jurisdiction of formation; (ii) CVI has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by CVI, and the consummation by CVI of the transactions contemplated hereby, have been duly authorized by all necessary corporate or partnership action on the part of CVI. This Agreement has been duly and validly executed and delivered by CVI and (assuming the due authorization, execution and delivery hereof by the Company) constitutes a legal, valid and binding obligation of CVI enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (iii) the execution and delivery by CVI of this Agreement, the consummation of the transactions contemplated hereby, and compliance by CVI with the provisions hereof will not conflict with, constitute a default under or violate (x) any of the terms, conditions or provisions of its constituent documents, (y) any of the terms, conditions or provisions of any document, agreement or other instrument to which CVI is a party or by which its property is bound, or (z) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority binding on it or its property; (iv) no consent, approval, waiver, license or authorization or other action by, or filing with, any court or governmental agency, commission, authority or other person or entity is required in connection with the execution and delivery by CVI of this Agreement, or the consummation 4 by CVI of the transactions contemplated hereby and compliance by CVI with any of the provisions hereof; (v) as of the date hereof, CVI has, with respect to $3,500,000 principal amount of the Initial Debentures and the Initial Warrants (exercisable with respect to 404,625 shares of Common Stock), and as of the Closing Date, CVI will have with respect to both the foregoing and $2,500,000 principal amount of Additional Debentures and the Additional Warrants (exercisable with respect to 289,017 shares of Common Stock) title, free and clear of all claims, liens, charges, encumbrances, options and security interests created by CVI; and (vi) as of the date hereof and the Closing Date, each of the statements set forth in Section 2 of the SPA is true and correct with respect to the CVI Shares. SECTION 4. Other Agreements (a) CVI agrees to exercise its right to acquire the Additional Debentures and the Additional Warrants for $2,500,000, pursuant to the SPA, on or prior to the Closing Date; and will not sell, assign, pledge, encumber, transfer or otherwise dispose of any of the CVI Securities prior to the earlier of termination of this Agreement or the Apollo Agreement. (b) Each party hereto agrees to use reasonable efforts to obtain all consents and approvals, and to do all other things, necessary to effect the transactions contemplated by this Agreement on or prior to the Closing Date. The parties agree to take such further action and to deliver or cause to be delivered to each other at the Closing and at such other times thereafter such additional agreements or instruments as either of them may reasonably request for the purpose of carrying out this Agreement and the agreements and transactions contemplated hereby. (c) CVI agrees, in connection with any proxy solicited by the Company, to vote the CVI Shares in the manner recommended by the Board of Directors of the Company. SECTION 5. Miscellaneous 5.1. Termination This Agreement may be terminated and the Transaction may be abandoned at any time prior to the Closing Date (provided that any such termination shall not relieve any party from liability for a breach of any provision hereof prior to such termination): 5 (a) by the mutual written consent of the parties; (b) by either party if the closing under the Apollo Agreement shall not have occurred on or prior to June 30, 1999; (c) by CVI if any representation, warranty, covenant or agreement of the Company contained in this Agreement shall have been breached in any material respect, or if any of the conditions set forth in Section 2.1 or 2.2 shall not have been satisfied (or waived in writing by CVI) on or prior to the Closing Date; and (d) by the Company if any representation, warranty, covenant or agreement of CVI contained in this Agreement shall have been breached in any material respect, or if any of the conditions set forth in Section 2.1 or 2.3 shall not have been satisfied (or waived in writing by the Company) on or prior to the Closing Date. 5.2. Amendment and Waiver This Agreement shall be binding upon and shall inure to the benefit of any and all successors and assigns of the parties hereto. This Agreement may not be assigned by any party by operation of law or otherwise, without the express prior written consent of each of the other parties, which consent may be granted or withheld in each such party's sole discretion. 5.3. Amendment and Waiver This Agreement may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, provided that the same are in writing and signed by the parties hereto. 5.4. Counterparts This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same. 5.5. Headings The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof. 5.6. Governing Law THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITH THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 6 5.7. Entire Agreement This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. 5.8. Notices Any notice to be delivered hereunder shall be in writing and shall be sent by facsimile or prepaid overnight courier to the respective party at its address set forth on the signature page hereof. 5.9. Severability If any term, Provision, covenant Or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. 5.10. Specific Performance The parties agree that the CVI Securities and the CVI Shares are unique and each party will be irreparably harmed in the event this Agreement is not specifically enforced. The parties further agree that it is impossible to measure solely in monetary damages the damages that will accrue by reason of a refusal by a party to perform its obligations under this Agreement. Therefore, in the event that a party shall institute any action to enforce the provisions of this Agreement, each party hereby agrees that the instituting party does not have an adequate remedy at law and that injunctive or other equitable relief will not constitute any hardship upon 7 the other party. Nothing in this Section 5.10 shall be construed as prohibiting the parties from pursuing any other remedies for a breach or threatened breach of this Agreement by the other party. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. RARE MEDIUM GROUP, INC. ------------------------------------------- By: Glenn S. Meyers Title: Chairman, CEO and President Address: 44 West 18th Street, 6th Floor New York, New York 10011 Facsimile: (212) 271-9445 Telephone: (212) 271-9444 CAPITAL VENTURES INTERNATIONAL By: Heights Management, Inc., its authorized agent ------------------------------------------ By: Title Address: Heights Capital Management Inc. 425 California Street, Suite 1100 San Francisco, California 94101 Facsimile: (415) 403-6525 Attention: Andrew Frost or Michael Spolan Telephone: 8 EX-5 3 OPINION Exhibit 5 May 28, 1999 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Rare Medium Group, Inc. Registration Statement on Form S-3 ---------------------------------- Dear Sir/Madam: As counsel to Rare Medium Group, Inc., a Delaware corporation (the "Company"), we are familiar with the corporate proceedings relating to the proposed registration on Form S-3 (the "Registration Statement"), which is to be filed with the Securities and Exchange Commission on or about May 28, 1999, of 1,588,462 shares of the Company's Common Stock, par value $.01 per share (the "Shares"), to be issued pursuant to the agreement relating to the conversion of the Convertible Debentures and exercise of the Warrants (as defined in the Registration Statement). We have examined the Company's Certificate of Incorporation, as amended, the Company's By-Laws, as amended, and related minutes of action taken by the Board of Directors of the Company, and such other documents and corporate records relating to the Company and the issuance and sale of the Convertible Debentures and Warrants, and the conversion and exercise thereof, respectively, pursuant to the conversion and exercise agreement, as we deemed appropriate for purposes of rendering this opinion. Based upon the foregoing, it is our opinion that the Shares, when issued and paid for upon due conversion of the Convertible Debentures and due exercise of the Warrants in accordance with the terms of the Convertible Debentures or Warrants and the conversion and exercise agreement, as the case may be, will be validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as Exhibit 5 of the Registration Statement and to the references made to this firm under the heading "Legal Matters" in the prospectus comprising a part of the Registration Statement. Very truly yours, /s/ Mesirov Gelman Jaffe Cramer & Jamieson, LLP ----------------------------------------------- EX-23.1 4 CONSENT OF KPMG LLP CONSENT OF INDEPENDENT AUDITOR We consent to the incorporation by reference in this Amendment No. 2 to the Registration Statement of Rare Medium Group, Inc. (the "Company") on Form S-3 of our reports dated March 29, 1999, relating to the consolidated balance sheet as of December 31, 1998 and the related consolidated statements of operations, stockholders' equity (deficit), cash flows and financial statement schedule for the year then ended which reports are included in the Company's annual report on Form 10-K, as amended on Form 10-K/A and Form 10-K/A-2. Our report, dated March 29, 1999, contains an explanatory paragraph that states that the Company has suffered net losses and losses from continuing operations, has a working capital deficiency, and has incurred accumulated losses through December 31, 1998. These factors raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of that uncertainty. KPMG LLP New York, New York May 25, 1999 EX-23.2 5 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We consent to the incorporation by reference in this Amendment No. 2 to the Registration Statement of Rare Medium Group, Inc. (formerly ICC Technologies, Inc.) (the Company) on Form S-3 of our report, which includes an explanatory paragraph which refers to conditions that raise substantial doubt about the Company's ability to continue as a going concern, dated March 20, 1998, on our audits of the consolidated financial statements of the Company as of December 31, 1997 and for the years ended December 31, 1997 and 1996, which report is included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, as amended on Form 10-K/A and Form 10K/A-2. We also consent to the incorporation by reference in the Registration Statement (set forth above) of the Company of our report, dated March 20, 1998, on our audits of the financial statements of Engelhard/ICC as of December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995, which report is also included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, as amended on Form 10-K/A and Form 10-K/A-2. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania May 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----