Exhibit 10.2
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PLEDGE, ESCROW AND DISBURSEMENT AGREEMENT
by and among
RARE MEDIUM GROUP, INC.
(the "Company"),
APOLLO INVESTMENT FUND IV, L.P.
(the "Purchaser")
and
THE CHASE MANHATTAN BANK
(the "Escrow Agent")
June 4, 1999
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PLEDGE, ESCROW AND DISBURSEMENT AGREEMENT
THIS PLEDGE, ESCROW AND DISBURSEMENT AGREEMENT, dated as of June 4, 1999 (this
"Agreement"), is by and among RARE MEDIUM GROUP, INC., a Delaware corporation
(the "Company"), APOLLO INVESTMENT FUND IV, L.P., a Delaware limited partnership
(the "Purchaser") and THE CHASE MANHATTAN BANK, a New York State chartered bank,
in its capacity as collateral agent and escrow agent (the "Escrow Agent").
RECITALS
A. The Securities and the Escrow Proceeds. Pursuant to that certain
Amended and Restated Securities Purchase Agreement dated as of June 4, 1999 (the
"Securities Purchase Agreement") by and among the Company, the Purchaser, Apollo
Overseas Partners IV, L.P. and AIF IV/RRRR LLC, the Company will issue the
following (collectively, the "Securities") to the Purchaser and certain of its
affiliates and certain other parties (i) 126,000 shares of its Series A
Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred
Shares") and 744,000 shares of its Series B Preferred Stock, par value $0.01 per
share (the "Series B Preferred Shares"); (ii) 126,000 detachable ten-year
warrants (the "Series 1-A Warrants") with the Series A Preferred Shares, and
744,000 detachable ten-year warrants (the "Series 1-B Warrants") with the Series
B Preferred Shares, each of which shall entitle its holder to purchase from the
Company 13.5 shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), at a purchase price ranging from $0.01 to $4.20 per share
depending on the market price of the Common Stock on the date of exercise; (iii)
12,262,542 ten-year warrants (the "Series 2 Warrants"), which shall initially be
divided into two series, each of which shall entitle its holder to purchase from
the Company one (1) share of Common Stock initially at a purchase price of $7.00
per share; and (iv) up to an additional 500,000 Series A Preferred Shares and an
additional 775,000 Series B Preferred Shares for the payment of dividends, each
such share to be issued with a Series 1-A or Series 1-B Warrant, respectively.
Immediately after receipt of payment for the Securities (the "Deposit Time"),
the Company will deposit $74,400,000 of the net proceeds from the sale of the
Securities (the "Escrow Proceeds") into a segregated cash collateral account
with the Escrow Agent at its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
in the name of The Chase Manhattan Bank, as Escrow Agent, entitled "Collateral
Account for Rare Medium Group, Inc." (the "Escrow Account"). The Escrow Account
and all balances and investments from time to time therein shall be under the
sole dominion and control of the Escrow Agent. Capitalized terms used but not
defined herein shall have the meanings assigned to them in the Securities
Purchase Agreement.
B. Purpose. The parties hereto desire to set forth their agreement with
regard to the administration of the Escrow Account, the creation of a security
interest in the Collateral (as defined herein) and the conditions upon which
funds will be released from the Escrow Account and the conditions upon which the
security interest and Lien (as defined herein) described herein will be
released.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Security Interest.
1.1. Pledge and Assignment. The Company hereby pledges, assigns and sets
over to the Purchaser and grants to the Purchaser a first priority continuing
security interest in all of the Company's right, title and interest to all of
the following, whether now owned or existing or hereafter acquired or created
(collectively, the "Collateral"):
1.1.1. the Escrow Account;
1.1.2. all funds from time to time held in the Escrow Account, including,
without limitation, the Escrow Proceeds and all certificates and instruments, if
any, from time to time, representing or evidencing the Escrow Account or the
Escrow Proceeds;
1.1.3. all Pledged Investments (as defined herein), whether the same shall
constitute certificated securities, uncertificated securities, investment
property, instruments, general intangibles, whether in the possession, custody
or control of, or otherwise held by or registered in the name of, the Escrow
Agent or the Purchaser and all certificates and instruments, if any, from time
to time representing or evidencing the Pledged Investments;
1.1.4. all notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Purchaser or the Escrow Agent for or on behalf of the Company
for or in addition to any or all of the then existing Collateral;
1.1.5. all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Collateral; and
1.1.6. all proceeds of the foregoing including, without limitation, cash
proceeds.
The Company and the Purchaser hereby appoint the Escrow Agent to act as the
Purchaser's agent, for purposes of perfecting the foregoing pledge, assignment
and security interest in the Collateral, and the Escrow Agent hereby accepts
such appointment. The Escrow Agent hereby acknowledges the security interest in
the Collateral granted by the Company in favor of the Purchaser hereunder. The
Escrow Agent further acknowledges that it is holding the Collateral for the
benefit of the Purchaser and the Company and subject to the pledge and security
interest granted to the Purchaser hereunder. For so long as the foregoing
pledge, assignment and security
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interest remains in effect, the Escrow Agent hereby waives any right of
setoff or banker's lien or clearing liens that it, in its individual capacity,
may have with respect to any or all of the Collateral.
1.2. Secured Obligations. This Agreement secures the due and punctual
payment and performance of all obligations of the Company to redeem the Series B
Preferred Shares in accordance with the terms of such Securities and the
Securities Purchase Agreement, including, without limitation, the obligation to
pay any dividends accrued thereon (collectively, the "Secured Obligations").
1.3. Delivery of Collateral. All certificates or instruments, if any,
representing or evidencing the Collateral shall be held by or on behalf of the
Escrow Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignments in blank, all in form and substance reasonably satisfactory to the
Purchaser and the Escrow Agent. All securities in uncertificated or book-entry
form, if any, representing or evidencing the Collateral shall be registered in
the name of the Purchaser or any of its nominees by book-entry or as otherwise
appropriate so as to properly identify the interest of the Purchaser therein. In
addition, the Purchaser shall have the right, at any time following the
occurrence of a Redemption Event (as defined herein), and only for so long as
such Redemption Event is continuing, to instruct the Escrow Agent to release the
Collateral and to transfer to or to register in the name of the Purchaser or any
of its nominees any or all other Collateral. Except as otherwise provided
herein, all Collateral shall be deposited and held in the Escrow Account. The
Purchaser shall have the right at any time to exchange certificates or
instruments representing or evidencing all or any portion of the Collateral for
certificates or instruments of smaller or larger denominations in the same
aggregate amount.
1.4. Further Assurances. Prior to, contemporaneously herewith, and at any
time and from time to time hereafter, the Company shall, at the Company's
expense, execute and deliver to the Purchaser or the Escrow Agent such other
instruments and documents, and shall take all further action as it deems
reasonably necessary or advisable or as the Purchaser or the Escrow Agent may
reasonably request, and the Company shall take all necessary action to preserve
and protect the security interest created hereby as a first priority, perfected
lien and encumbrance upon the Collateral. The Company shall pay all reasonable
costs incurred in connection with any of the foregoing.
1.5. Maintaining the Escrow Account. So long as this Agreement is in full
force and effect:
1.5.1. the Company shall establish and maintain the Escrow Account
with the Escrow Agent in New York, New York, and the Escrow Account and the
Collateral shall at all times remain under the exclusive dominion and
control of the Escrow Agent for the benefit of the Purchaser and the
Company; and
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1.5.2. notwithstanding any term or condition to the contrary in any
other agreement relating to the Escrow Account and except as otherwise
provided by the provisions of Article 3 of this Agreement, no amount
(including, without limitation, interest on or other proceeds of the Escrow
Account or on any Pledged Investments held therein) shall be paid or
released to or for the account of, or withdrawn by or for the account of,
the Company or any other person or entity other than the Purchaser from the
Escrow Account.
1.6. Transfers and Other Liens. Until termination of this Agreement
pursuant to Section 8, the Company agrees that it shall not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the Collateral or (ii) create or permit to exist any Lien
(other than clearing liens and margin liens) upon or with respect to any of the
Collateral, except for the security interest under this Agreement.
1.7. Attorneys-in-Fact. The Company hereby irrevocably appoints the
Escrow Agent as the Company's attorney-in-fact, coupled with an interest,
with full authority in the place and stead of the Company and in the name of
the Company or otherwise, from time to time in the Escrow Agent's discretion
to, so long as any Redemption Event has occurred and is continuing, take any
action and to execute any instrument which the Escrow Agent may deem
reasonably necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect all
instruments made payable to the Company representing any interest payment,
dividend or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same, and the expenses of the
Escrow Agent (including reasonable fees of its agents and counsel) incurred
in connection therewith shall be payable by the Company.
1.8. Escrow Account Statement. Each month, the Escrow Agent shall
deliver to the Company and the Purchaser a statement in a form satisfactory
to the Company and the Purchaser setting forth with reasonable particularity
the balance of funds then in the Escrow Account and the manner in which such
funds are invested. The parties hereto instruct the Escrow Agent that on the
first date upon which the balance in the Escrow account is reduced to zero,
the Escrow Agent shall deliver to the Company and to the Purchaser a notice
that the balance in the Escrow Account has been reduced to zero.
2. Investment and Liquidation of Funds in Escrow Account. Funds deposited
in the Escrow Account shall be invested and reinvested by the Escrow Agent on
the following terms and conditions:
2.1. Pledged Investments. Subject to the provisions of Articles 2 and 3,
funds held by the Escrow Agent in the Escrow Account may, at the written
direction of the Company, be invested and reinvested solely in the following
("Pledged Investments"): (x) securities that are (i) direct obligations of
the United States of America for the payment of which the full faith and
credit of the United States of America is pledged, (ii) obligations of a
Person controlled or
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supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which in
either case, are not callable or redeemable at the option of the issuer
thereof, or (iii) any "AAA" - rated money market mutual fund that invests in
(i) and (ii) and (y) depository receipts issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in clause (x) above and held by such
bank for the account of the holder of such depository receipt, or with
respect to any specific payment of principal or interest on any U.S.
Government Obligation which is so specified and held, provided that (except
as required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal or interest of the U.S. Government
Obligation evidenced by such depository receipt.
If the Company fails to give written investment instructions to the
Escrow Agent by 10:00 a.m. (New York time) on any Business Day (other than
the Closing Date) on which there is uninvested cash and/or maturing Pledged
Investments in the Escrow Account, the Purchaser is hereby authorized and
directed to direct the Escrow Agent to, and the Escrow Agent shall, invest
any such cash or the proceeds of any maturing Pledged Investments in the
investments described in clause (iii) above. On the Closing Date, the Company
may direct the Purchaser, who shall direct the Escrow Agent, to invest the
proceeds in the Escrow Account in Pledged Investments until 2:00 p.m., which
instructions shall be executed no later than 12:00 noon on the Business Day
immediately following the Closing Date. The Company's failure to give such
investment instructions shall not constitute a default or a Redemption Event
hereunder.
2.2 Interest. All interest and income earned and dividends and other
property received on funds invested in Pledged Investments shall be held in
the Escrow Account and reinvested in accordance with the terms hereof and
shall be subject to the security interest granted hereunder to the Purchaser.
2.3 Limitation of Purchaser's and Escrow Agent's Liability. Subject to
Section 10.12, in no event shall the Purchaser or the Escrow Agent have any
liability to the Company, or any other Person, nor shall the Company have any
liability to the Purchaser, for investing the funds from time to time in the
Escrow Account in accordance with the provisions of this Article 2,
regardless of whether greater income or a higher yield could have been
obtained had the Escrow Agent invested such funds in different Pledged
Investments, or for any loss (including breakage costs or loss of principal)
associated with the sale or liquidation of Pledged Investments in accordance
with the terms of this Agreement.
2.4. Liquidation of Funds. In liquidating any Pledged Investments in
accordance with Article 3 of this Agreement, the Company shall direct the
Escrow Agent as to which Pledged Investments shall be liquidated.
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3. Release of Collateral
3.1. Release of Collateral to the Company. Upon the execution by an
officer of the Company of a certificate in the form attached hereto as
Exhibit A-1 and the acknowledgment and agreement thereto by a duly authorized
representative of the Purchaser, indicating that:
(a) (i) all approvals by the holders of any class or series of shares of
stock of the Company required pursuant to Section 7.11 of the Securities
Purchase Agreement have been obtained on or before the date which is 120 days
after the Closing Date (the "Outside Date"), or the Company and the Purchaser
have mutually agreed that no such approvals are necessary; and (ii) all
Series B Preferred Shares have been converted into Series A Preferred Shares,
all Series 1-B Warrants have been converted into Series 1-A Warrants and all
Series 2-B Warrants have been converted into Series 2-A Warrants, or
(b) the Company requests that the Purchaser permit the release from the
Escrow Account of the amount set forth in such certificate, which the Company
agrees to use for the purposes described in such certificate, it being
understood and agreed that the Purchaser has the sole discretion to accept or
reject such request for release of funds,
the Escrow Agent shall comply with any instructions set forth in such
certificate which have been acknowledged and agreed to by the Purchaser.
3.2. Release of Collateral to the Purchaser. Upon the execution and
delivery by a duly authorized representative of the Purchaser of a
certificate in the form attached hereto as Exhibit A-2 indicating that:
(a) any one or more approvals by the holders of any class or series of
shares of stock of the Company required pursuant to Section 7.11 of the
Securities Purchase Agreement have not been obtained on or before the Outside
Date; and
(b) the Purchaser is tendering with such certificate Series B Preferred
Shares to the Escrow Agent, which Securities shall be delivered by the Escrow
Agent to the Company upon receipt by the Purchaser of the amount of immediately
available funds requested therein, the Escrow Agent shall comply with any
instructions set forth in such certificate to deliver the Collateral described
therein to the Purchaser. The Purchaser agrees to provide notice to the Company
of the release of the Collateral to the Purchaser pursuant to this Section 3.2.
3.3 Automatic Termination. If the Company shall not have responded to
the notice from the Requisite Holders required by Section 4(b) of the
Certificate of Designation of Series B Preferred Stock within the time limits
prescribed therein and the right of the holders of Series B Preferred Stock
to require the Company to redeem the Series B Preferred Stock thereunder
shall expire, (i) this Agreement shall terminate automatically, (ii) the
Company and
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the Purchaser shall notify the Escrow Agent in writing that the
Agreement has terminated and (iii) the Escrow Agent shall deliver the
Collateral to the Company.
4. Representations and Warranties. The Company hereby represents and
warrants that:
4.1. The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation or
of the certificate of incorporation of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Company or result in the creation or imposition of any Lien on any assets of
the Company, except for the security interests granted under this Agreement.
4.2. Except as contemplated hereunder, the Company is the record and
beneficial owner of the Collateral, free and clear of any and all Liens or
claims of any person or entity (except for the security interests granted
under this Agreement and closing liens and margin liens). No financing
statement covering the Collateral is on file in any public office other than
the financing statements filed pursuant to this Agreement.
4.3. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity and commercial
reasonableness.
4.4 Upon the filing of financing statements required by the Uniform
Commercial Code (the "UCC"), the pledge of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
and to the Collateral, securing the payment of the Secured Obligations for
the benefit of the Purchaser, enforceable as such against all creditors of
the Company and any persons purporting to purchase any of the Collateral from
the Company.
4.5. No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (1) for the
pledge by the Company of the Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Company (except
for any filings or other actions necessary, to perfect Liens on the
Collateral) or (2) for the exercise by the Purchaser of the rights, provided
for in this Agreement or the remedies in respect of the Collateral pursuant
to this Agreement.
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4.6. No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Company, threatened by or against the Company with respect this Agreement or
any of the transactions contemplated hereby.
5. Covenants.
The Company covenants and agrees with the Escrow Agent and the
Purchaser, from and after the date of this Agreement until the termination of
this Agreement pursuant to Section 8 hereof, as follows:
(i) The Company shall not (a) sell or otherwise dispose of, or
grant any option or warrant with respect to, any of the Collateral
(except in the ordinary course of business) or (b) create or permit to
exist any Lien upon or with respect to any of the Collateral (except for
the lien created pursuant to this Agreement and clearing liens and
margin liens) and, except as otherwise provided in this Agreement, at
all times shall be the sole beneficial owner of the Collateral.
(ii) The Company shall not (a) enter into any agreement or
understanding that purports to or may restrict or inhibit the Escrow
Agent's or the Purchaser's rights or remedies hereunder, including,
without limitation, the Purchaser's right to sell or otherwise dispose
of the Collateral in accordance with the terms of this Agreement or (b)
fail to pay or discharge any tax, assessment or levy of any nature not
later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment with regard to the Collateral.
6. Remedies upon Default. If any Redemption Event shall have occurred
and be continuing:
(i) The Purchaser may, upon 48 hours written notice to the Company,
at any time or from time to time, direct the Escrow Agent to liquidate
all Pledged Investments and transfer all funds in the Escrow Account to
the Purchaser for its own account.
(ii) The Escrow Agent and/or the Purchaser may also exercise in
respect of the Collateral, in addition to the other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC in effect at that
time in the State of New York (whether or not the UCC applies to the
affected Collateral), and may also, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Purchaser's or the Escrow Agent's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Purchaser may deem commercially reasonable.
The Company agrees that, to the extent notice of sale shall be required
by law, at least ten days' notice to the Company of the time and place
of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The
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Purchaser and the Escrow Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Purchaser or the Escrow Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place
to which it was so adjourned.
(iii) Any cash held by the Escrow Agent as Collateral and all net
cash proceeds received by the Purchaser or the Escrow Agent in respect
of any sale or liquidation of, collection from, or other realization
upon all or any part of the Collateral may, in the discretion of the
Purchaser, be held by the Purchaser or the Escrow Agent as collateral
for, and/or then or at any time thereafter be applied (after payment of
any costs and expenses incurred in connection with any sale, liquidation
or disposition of or realization upon the Collateral and the payment of
any amounts payable to the Purchaser or the Escrow Agent) in whole or in
part by the Purchaser or the Escrow Agent against all or any part of the
Secured Obligations in such order as the Purchaser shall elect. Any
surplus of such cash or cash proceeds held by the Purchaser or the
Escrow Agent and remaining after payment in full of all the Secured
Obligations and the costs and expenses incurred by and amounts payable
to the Purchaser or the Escrow Agent hereunder or under the Securities
Purchase Agreement shall be paid over to the Company or to whomsoever
shall be lawfully entitled to receive such surplus.
7. Indemnity and Authority of the Escrow Agent.
7.1. The Escrow Agent shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Escrow Agent by the terms
hereof, together with such powers as are reasonably incident thereto. The
Escrow Agent may perform any of its duties hereunder or in connection with
the Escrow Account by or through agents or employees and shall be entitled to
retain counsel of its choice and to act in reliance upon the advice of such
counsel concerning all such matters. Neither the Escrow Agent, nor any
director, officer, partner, principal, employee, attorney or agent of the
Escrow Agent (each, an "Indemnified Person") shall be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Escrow Agent and its directors, officers,
partners, principals, employees, attorneys and agents shall be entitled to
rely on any communication, instrument or document reasonably believed by it
or them to be genuine and correct and to have been signed or sent by the
proper person or persons. The Company agrees to indemnify and hold harmless
the Escrow Agent and each Indemnified Person from and against any and all
costs, expenses (including the reasonable fees and disbursements of counsel
(including the reasonably allocated costs of inside counsel)), claims and
liabilities incurred by the Escrow Agent or such Indemnified Person hereunder
arising out of or incurred in connection with such persons or in connection
with the performance of its duties or obligations hereunder or under the
Securities Purchase Agreement, the Certificate of Designation for the Series
B Preferred Stock or the Series 1-B Warrant or exercising any rights provided
for hereunder or in the Securities Purchase Agreement, the Certificate of
Designation for the Series B Preferred Stock or the Series 1-B Warrant,
unless
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such claim or liability shall be attributable to bad faith, gross
negligence or willful misconduct on the part of the Escrow Agent or such
Indemnified Person.
7.2. No provision of this Agreement shall require the Escrow Agent or
the Purchaser to expend or risk its own funds or incur any liability, other
than pursuant to the Escrow Agent's or the Purchaser's gross negligence or
wilful misconduct.
7.3. The obligations of the Company under this Section 7 shall survive
the satisfaction and discharge of this Agreement or the resignation or
removal of the Escrow Agent pursuant to Section 7.4 hereof.
7.4. The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing to the Purchaser and the
Company of such resignation specifying a date when such resignation shall
take effect. The Escrow Agent shall have the right to withhold an amount
equal to the amount due and owing to the Escrow Agent, plus any costs and
expenses the Escrow Agent shall reasonably believe may be incurred by the
Escrow Agent in connection with the termination of this Agreement.
7.5. Anything in this Agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action unless such loss or
damage shall be attributable to bad faith, gross negligence or wilful
misconduct on the part of the Escrow Agent.
7.6. In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands
from any party hereto which, in its opinion, conflict with any provisions of
this Agreement, it shall be entitled to refrain from taking any action and
its sole obligation shall be to keep safely all property held in escrow until
it shall be directed otherwise in writing by all of the other parties hereto
or by a final order or judgment of a court of competent jurisdiction.
7.7. Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Escrow Agent in its individual capacity shall be a party, or any
corporation to which substantially all the corporate trust business of the
Escrow Agent in its individual capacity may be transferred, shall be the
Escrow Agent under this Agreement without further act.
7.8. The Escrow Agent shall have the right to withhold an amount equal
to the amount due and owing to the Escrow Agent pursuant to Section 10.7
hereof.
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8. Termination. This Agreement shall create a continuing security
interest in and to the Collateral and such security interest shall, unless
otherwise provided in this Agreement, remain in full force and effect until
the release of all funds and other Collateral held in the Escrow Account
pursuant to Section 3 of this Agreement, at which time, subject to the
provisions of Section 10.3 hereof, this Agreement shall terminate.
9. Definitions.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions of the City of New York are authorized by law,
regulation or executive order to remain closed.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the UCC (or equivalent statutes) of any jurisdiction).
"Redemption Event" means the date on which a duly authorized
representative of the Purchaser delivers a certificate in the form attached
hereto as Exhibit A-2, indicating that:
(a) any one or more approvals by the holders of any class or series of
shares of stock of the Company required pursuant to Section 7.11 of the
Securities Purchase Agreement have not been obtained on or before the Outside
Date; and
(b) the Purchaser is tendering with such certificate Series B Preferred
Shares to the Escrow Agent for delivery by the Escrow Agent to the Company
upon receipt by the Purchaser of the amount of immediately available funds
requested therein.
10. Miscellaneous.
10.1. Waiver. The parties hereto (other than the breaching party) may
specifically waive any breach of this Agreement by any other party, but no
such waiver shall be deemed to have been given unless such waiver is in
writing, signed by the waiving parties, and specifically designates the
breach waived, nor shall any such waiver constitute a continuing waiver of
similar or other breaches.
10.2. Invalidity. If, for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other
provisions of this Agreement inoperative, unenforceable or invalid, and the
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inoperative, unenforceable or invalid provision shall be construed as if it
were written so as to effectuate, to the maximum extent possible, the
parties' intent.
10.3. Survival of Provisions. All representations, warranties and
covenants of the Company and the Purchaser contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the
termination of this Agreement; provided, however, that the Company's
obligations pursuant to Section 7 hereof shall survive the termination of
this Agreement (including any termination under applicable bankruptcy laws)
or the resignation or removal of the Escrow Agent pursuant to Section 7.4
hereof.
10.4. Assignment. This Agreement shall inure to and be binding upon the
parties and their respective successors and permitted assigns; provided,
however, that neither the Company nor the Purchaser may assign its rights or
obligations hereunder without the express prior written consent of the other.
10.5. Entire Agreement; Amendments. This Agreement, the Securities
Purchase Agreement and the Securities contain the entire agreement among the
parties with respect to the subject matter hereof and supersede any and all
prior agreements, understandings and commitments with respect thereto,
whether oral or written. This Agreement may be amended only by a writing
signed by duly authorized representatives of all parties.
10.6. Notices. All notices and other communications required or
permitted to be given or made under this Agreement to any party hereto shall
be delivered in writing by hand delivery or overnight delivery, or shall be
delivered by facsimile or telephonically with confirmation in writing not
more than twenty-four hours following such telephonic notice. A notice given
in accordance with the preceding sentence shall be deemed to have been duly
given upon the sending thereof. Notices should be addressed as follows:
if to the Company:
Rare Medium Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Mesirov ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Purchaser:
Apollo Investment Fund IV, L.P.
c/o Apollo Management, L.P.
1301 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Sidley & Austin
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Escrow Agent:
The Chase Manhattan Bank
Corporate Trust Group
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Escrow Administration, 10th Floor
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address, facsimile number or phone number as the specified
entity most recently may have designated in writing in accordance with this
paragraph to the other parties.
10.7. Fees and Expenses. The Company shall from time to time pay to the
Purchaser and the Escrow Agent their reasonable fees and expenses and any
reasonable fees and expenses of their counsel, that the Purchaser and Escrow
Agent may incur in connection with (a)
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the administration of this Agreement; (b) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral; (c) the exercise or enforcement of any of the rights of the
Purchaser and Escrow Agent hereunder; or (d) the failure by the Company to
perform or observe any of the provisions hereof, in each case other than any
such expense that arise from the bad faith, gross negligence or willful
misconduct of the Purchaser or the Escrow Agent. The Escrow Agent's fees
shall be in accordance with Schedule I hereto.
10.8. Tax Identification Number. Each of the Purchaser and the Company
shall provide the Escrow Agent with its Tax Identification Number (TIN) as
assigned by the Internal Revenue Service. All interest or other income earned
under this Agreement shall be allocated and paid as provided herein and
reported by the recipient to the Internal Revenue Services as having been so
allocated and paid.
10.9. Confirmation. (a) In the event funds transfer instructions are
given (other than in writing at the time of execution of this Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is
authorized to seek confirmation of such instructions by telephone call-back
to the person or persons designated on Schedule II hereto, and the Escrow
Agent may rely upon the confirmations of anyone purporting to be the person
or persons so designated. The persons and telephone numbers for call-backs
may be changed only in a writing actually received and acknowledged by the
Escrow Agent. The parties to this Agreement acknowledge that such security
procedure is commercially reasonable.
(b) It is understood that the Escrow Agent and the beneficiary's bank in
any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary
bank. The Escrow Agent may apply any of the escrowed funds for any payment
order it executes using any such identifying number, even where its use may
result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated.
10.10. Security Interest Absolute. All rights of the Purchaser and the
security interests hereunder, and all obligations of the Company hereunder,
shall be absolute and unconditional irrespective of (a) any lack of validity
or enforceability of the Securities Purchase Agreement, the Securities or any
other agreement or instrument relating thereto; (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or any consent to
any departure from the Securities Purchase Agreement; (c) any exchange,
surrender, release or non-perfection of any Liens on the Collateral for all
or any of the Secured Obligations; or (d) to the extent permitted by
applicable law, any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company in respect of the
Secured Obligations or of this Agreement.
10.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute
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one and the same instrument. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile shall be effective as delivery
of a manually executed counterpart of this Agreement; provided that an
original is supplied as soon as practical thereafter.
10.12. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THE COMPANY, THE PURCHASER AND THE ESCROW AGENT IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE COMPANY, THE PURCHASER AND THE ESCROW AGENT AGREE THAT ALL
DISPUTES BETWEEN OR AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS
LOCATED IN NEW YORK, NEW YORK, BUT THE COMPANY, THE PURCHASER AND THE
ESCROW AGENT ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. THE COMPANY
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT CONSIDERING THE DISPUTE INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(iii) THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH THE PURCHASER HAS COMMENCED A PROCEEDING DESCRIBED IN
THIS PARAGRAPH, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
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(iv) THE COMPANY, THE PURCHASER AND THE ESCROW AGENT EACH WAIVE ANY
AND ALL RIGHTS TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, IN
CONNECTION WITH, OR RELATING OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM PURSUANT TO, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ALL DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
(v) THE COMPANY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) BUSINESS DAYS AFTER SUCH
MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ESCROW AGENT OR
THE PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDING OR OTHERWISE PROCEED AGAINST THE COMPANY IN
ANY OTHER JURISDICTION.
(vii) THE COMPANY AGREES THAT THE ESCROW AGENT SHALL NOT HAVE ANY
LIABILITY TO THE COMPANY (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATING OR INCIDENTAL TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A COURT THAT IS BINDING ON THE
ESCROW AGENT THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON
THE PART OF THE ESCROW AGENT CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
(viii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, THE COMPANY WAIVES ALL RIGHTS OF
NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE PURCHASER OR
THE ESCROW AGENT OF ITS RIGHTS DURING THE CONTINUANCE OF A REDEMPTION
EVENT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY,
ATTACH OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE SECURED
OBLIGATIONS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
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THE PURCHASER OR THE ESCROW AGENT IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY
UPON THE COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS, TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
PURCHASER OR THE ESCROW AGENT, OR TO ENFORCE BY SPECIFIC PERFORMANCE,
TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS
AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN THE COMPANY ON THE
ONE HAND AND THE PURCHASER AND/OR THE ESCROW AGENT ON THE OTHER HAND.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day first written above.
RARE MEDIUM GROUP, INC.
By
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By
----------------------------------
Name:
Title:
APOLLO INVESTMENT FUND IV, L.P.
By: APOLLO ADVISORS IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.
its general partner
By
----------------------------------
Name:
Title: Vice President
EXHIBIT A-1
Form of Certificate for Release of Funds to Company
Date: __________
The undersigned officer of Rare Medium Group, Inc., a Delaware
corporation (the "Company") hereby certifies, pursuant to Section 3.1 of the
Pledge, Escrow and Disbursement Agreement dated as of June 4, 1999 by and
among the Company, Apollo Investment Fund IV, L.P., (the "Purchaser"), and
The Chase Manhattan Bank, as collateral agent and escrow agent (the "Escrow
Agent"), that
[(a) all approvals by the holders of any class or series of shares of
stock of the Company required pursuant to Section 7.11 of the Securities
Purchase Agreement have been obtained on or before the date which is 120 days
after the Closing Date (the "Outside Date"), or the Company and the Purchaser
have mutually agreed that no such approvals are necessary for such
conversion; and
(b) all Series B Preferred Shares have been converted into Series A
Preferred Shares, all Series 1-B Warrants have been converted into Series 1-A
Warrants and all Series 2-B Warrants have been converted into Series 2-A
Warrants.]
[The Company hereby requests that the Purchaser permit the release from the
Escrow Account of the amount set forth below, which the Company agrees to use
for the sole purpose of [describe requested used of proceeds], it being
understood and agreed that the Purchaser has the sole discretion to accept or
reject such request for release of funds.]
The Company hereby requests the Purchaser, by signing below, to direct
the Escrow Agent to liquidate $________ worth of Pledged Investments in the
Escrow Account by not later than 12:00 noon (New York time) on ________, 1999
and to transfer $__________ in immediately available funds to the Company.
Capitalized terms used herein without definition shall have the meanings
set forth in the Pledge, Escrow and Disbursement Agreement.
By
----------------------------------
Name:
Title:
Acknowledged and agreed to by:
APOLLO INVESTMENT FUND IV, L.P.
By: APOLLO ADVISORS IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.
its general partner
By
----------------------------------
Name:
Title: Vice President
▇-▇
▇▇▇▇▇▇▇ ▇-▇
Form of Certificate for Release of Funds to Purchaser
Date: __________
The undersigned officer of Apollo Capital Management IV, Inc., the
general partner of Apollo Investment Fund IV, L.P., a Delaware limited
partnership (the "Purchaser") hereby certifies, pursuant to Section 3.2 of
the Pledge, Escrow and Disbursement Agreement dated as of June 4, 1999 by and
among Rare Medium Group, Inc. (the "Company"), the Purchaser and The Chase
Manhattan Bank as collateral agent and escrow agent (the "Escrow Agent"),
that
(a) any one or more approvals by the holders of any class or series of
shares of stock of the Company required pursuant to Section 7.11 of the
Securities Purchase Agreement have not been obtained on or before the date
which is 120 days after the Closing Date (the "Outside Date"); and
(b) the Purchaser is tendering herewith Series B Preferred Shares to the
Escrow Agent, which Securities shall be delivered by the Escrow Agent to the
Company upon receipt by the Purchaser of the amount of immediately available
funds requested below.
The Purchaser hereby directs the Escrow Agent to liquidate $________
worth of Pledged Investments in the Escrow Account by not later than 12:00
noon (New York time) on ________, 1999 and to transfer $__________ in
immediately available funds to the Purchaser, and promptly thereafter to
deliver all the Series B Preferred Shares tendered herewith to the Company.
A-3
Capitalized terms used herein without definition shall have the meanings
set forth in the Pledge, Escrow and Disbursement Agreement.
APOLLO INVESTMENT FUND IV, L.P.
By: APOLLO ADVISORS IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.
its general partner
By
----------------------------------
Name:
Title: Vice President
A-4
SCHEDULE I
Fees
(a) $20,000 assuming investment in the Chase US Government Money Market
Account (otherwise known as the VISTA Account); or
(b) $30,000 assuming investment in alternative money market investments.