Exhibit 4.5
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SERIES 2-A
WARRANT
to Purchase Common Stock of
RARE MEDIUM GROUP, INC.
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Warrant No. [___]
Original Issue
Date: June 4, 1999
TABLE OF CONTENTS
1. DEFINITIONS ........................................................... 1
2. EXERCISE OF WARRANT ................................................... 7
2.1 Manner of Exercise ................................................ 7
2.2 Payment of Taxes .................................................. 8
2.3 Fractional Shares ................................................. 8
2.4 Reduced Exercise Price ............................................ 8
3. TRANSFER, DIVISION AND COMBINATION .................................... 9
3.1 Transfer .......................................................... 9
3.2 Division and Combination .......................................... 9
3.3 Expenses .......................................................... 9
3.4 Maintenance of Books .............................................. 9
4. ANTIDILUTION PROVISIONS ............................................... 9
4.1 Upon Issuance of Common Stock ..................................... 9
4.2 Upon Acquisition of Common Stock .................................. 10
4.3 Provisions Applicable to Adjustments .............................. 11
4.4 Upon Stock Dividends or Splits12
4.5 Upon Combinations ................................................. 12
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers 13
4.7 Deferral in Certain Circumstances ................................. 13
4.8 Other Anti-Dilution Provisions13
4.9 Appraisal Procedure ............................................... 13
4.10 Adjustment of Number of Shares Purchasable ....................... 14
4.11 Exceptions. 14
4.12 Notice of Adjustment of Exercise Price ........................... 14
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION;
NOTICE OF EXPIRATION .................................................. 14
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY ............................................................. 15
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD;
TRANSFER BOOKS ........................................................ 15
7.1 Notices of Corporate Actions....................................... 15
7.2 Taking of Record .................................................. 16
7.3 Closing of Transfer Books ......................................... 16
8. TRANSFER RESTRICTIONS ................................................. 17
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8.1 Restrictions on Transfers ......................................... 17
8.2 Restrictive Legends ............................................... 17
8.3 Termination of Securities Law Restrictions ........................ 18
9. LOSS OR MUTILATION .................................................... 18
10. OFFICE OF THE COMPANY ................................................. 19
11. FINANCIAL AND BUSINESS INFORMATION .................................... 19
12. DILUTION FEE .......................................................... 21
13. MISCELLANEOUS ......................................................... 21
13.1 Nonwaiver ........................................................ 21
13.2 Notice Generally ................................................. 21
13.3 Indemnification .................................................. 21
13.4 Limitation of Liability .......................................... 22
13.5 Remedies ......................................................... 22
13.6 Successors and Assigns ........................................... 22
13.7 Amendment ........................................................ 22
13.8 Severability ..................................................... 22
13.9 Headings ......................................................... 22
13.10 GOVERNING LAW; JURISDICTION ..................................... 23
ANNEX A
SUBSCRIPTION FORM ..................................................... 25
ANNEX B
ASSIGNMENT FORM ....................................................... 26
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NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANTS
REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR
ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE
OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT.
Warrant No. [___]
SERIES 2-A
WARRANT
TO PURCHASE ____ SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
RARE MEDIUM GROUP, INC.
THIS IS TO CERTIFY THAT APOLLO INVESTMENT FUND IV, L.P., or its
registered assigns, is entitled, at any time prior to the Expiration Date (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from RARE MEDIUM GROUP, INC., a Delaware corporation (the
"Company"), one (1) share of the Common Stock of the Company (subject to
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adjustment as provided herein), at a purchase price per share (the initial
"Exercise Price", subject to adjustment as provided herein) equal to $7.00.
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1. DEFINITIONS
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As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means any other Person (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with such Person. The term "control" (including the
terms "controlled by" and "under common control with") as used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"After-Tax Basis" when referring to a payment that is required
hereunder (the "target amount"), shall mean a total payment (the "total amount")
that, after deduction of all federal, state and local taxes that are required to
be paid by the recipient in respect of the receipt or accrual of such total
amount, is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Fair Value" or the fair market value, as to any other
property (in either case, the "valuation amount"). So long as Apollo Investment
Fund IV, L.P. or any of its Affiliates (the "Apollo Stockholders") beneficially
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own sufficient Warrants to constitute the Majority Warrant Holders, the
valuation amount shall be determined in good faith jointly by the Board of
Directors and the Majority Warrant Holders; provided, however, that if such
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parties are not able to agree on the valuation amount within a reasonable period
of time (not to exceed twenty (20) days) the valuation amount shall be
determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the Board of Directors and the Majority
Warrant Holders. If the Board of Directors and the Majority Warrant Holders are
unable to agree upon an acceptable investment banking firm within ten (10) days
after the date either party proposed that one be selected, the investment
banking firm will be selected by an arbitrator located in New York City, New
York, selected by the American Arbitration Association (or if such organization
ceases to exist, the arbitrator shall be chosen by a court of competent
jurisdiction). The arbitrator shall select the investment banking firm (within
ten (10) days of his appointment) from a list, jointly prepared by the Board of
Directors and the Majority Warrant Holders, of not more than six investment
banking firms of national standing in the United States, of which no more than
three may be named by the Board of Directors and no more than three may be named
by the Majority Warrant Holders. The arbitrator may consider, within the ten-
day period allotted, arguments from the parties regarding which investment
banking firm to choose, but the selection by the arbitrator shall be made in its
sole discretion from the list of six. The Board of Directors and the Majority
Warrant Holders shall submit their respective valuations and other relevant data
to the investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Company and the Majority
Warrant Holders and the valuation amount calculated by the investment banking
firm. The determination of the final valuation amount by such investment-
banking firm shall be final and binding upon the parties. The Company shall pay
the fees and expenses of the investment banking firm and arbitrator (if any)
used to determine the valuation amount. If required by any such investment
banking firm or arbitrator, the Company shall execute a retainer and engagement
letter containing reasonable terms and conditions, including, without
limitation, customary provisions concerning the rights of indemnification and
contribution by the Company in favor of such investment banking firm or
arbitrator and its officers, directors, partners, employees, agents and
Affiliates. If the Apollo Stockholders no longer constitute the Majority
Warranty Holders, the valuation amount shall be determined in good faith by the
Board of Directors.
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"Appraised Value" per share of Common Stock as of a date specified
herein shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected by the Majority
Warrant Holders and reasonably acceptable to the Company. If the investment
bank selected by the Majority Warrant Holders is not reasonably acceptable to
the Company, and the Company and the Majority Warrant Holders cannot agree on a
mutually acceptable investment bank, then the Company and the Majority Warrant
Holders shall each choose one such investment bank and the respective chosen
firms shall jointly select a third investment bank, which shall make the
determination. The Company shall pay the costs and fees of each such investment
bank (including any such investment bank selected by the Majority Warrant
Holders), and the decision of the investment bank making such determination of
Appraised Value shall be final and binding on the Company and all affected
holders of Warrants or Warrant Stock. Such Appraised Value shall be determined
as a pro rata portion of the value of the Company taken as a whole, based on the
higher of (A) the value derived from a hypothetical sale of the entire Company
as a going concern by a willing seller to a willing buyer (neither acting under
any compulsion) and (B) the liquidation value of the entire Company. No
discount shall be applied on account of (i) any Warrants or Warrant Stock
representing a minority interest, (ii) any lack of liquidity of the Common Stock
or the Warrants, (iii) the fact that the Warrants or Warrant Stock may
constitute "restricted securities" for securities law purposes, (iv) the
existence of any call option or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein
shall mean the consolidated book value of the Company and its Subsidiaries as of
such date divided by the number of shares of Common Stock Outstanding on such
date. Such book value shall be determined in accordance with GAAP, except that
there shall be no reduction in such book value by reason of any amount that may
be required either as an offset to or reserve against retained earnings or as a
deduction from book value as a result of the issuance, existence, anticipated
exercise of, or anticipated cost to the Company of the repurchase of, any of the
Warrants.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value
$0.01 per share, as constituted on the Original Issue Date, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other class of stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.6 hereof) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.6 hereof.
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"Company" means Rare Medium Group, Inc., a Delaware corporation, and
any successor corporation.
"Current Market Price" shall mean as of any specified date the average
of the daily market price of one share of the Common Stock for the shorter of
(x) the twenty (20) consecutive Business Days immediately preceding such date or
(y) the period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date. The "daily
market price" of one share of Common Stock for each such Business Day shall be:
(i) if the Common Stock is then listed on a national securities exchange or is
listed on NASDAQ and is designated as a National Market System security, the
last sale price of one share of Common Stock, regular way, on such day on the
principal stock exchange or market system on which such Common Stock is then
listed or admitted to trading, or, if no such sale takes place on such day, the
average of the closing bid and asked prices for one share of Common Stock on
such day as reported on such stock exchange or market system or (ii) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or designated as a National Market System security on NASDAQ
but is traded over-the-counter, the average of the closing bid and asked prices
for one share of Common Stock as reported on NASDAQ or the Electronic Bulletin
Board or in the National Daily Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10
hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Excluded Stock" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at
any date herein specified, the initial Exercise Price set forth in the preamble
of this Warrant as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
"Expiration Date" shall mean the tenth anniversary of the Original
Issue Date.
"Fair Value" per share of Common Stock as of any specified date shall
mean (A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if
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the Common Stock is not publicly traded on such date, (1) the fair market value
per share of Common Stock as determined in good faith by the Board of Directors
of the Company and set forth in a written notice to each Holder or (2) if the
Majority Warrant Holders object in writing to such price as determined by the
Board of Directors within thirty (30) days after receiving notice of same, the
Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean (a) with respect to this Warrant, the Person in
whose name the Warrant set forth herein is registered on the books of the
Company maintained for such purpose and (b) with respect to any other Warrant or
shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock
is registered on the books of the Company maintained for such purpose.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Uniform Commercial Code or comparable
law of any jurisdiction).
"Majority Warrant Holders", with respect to a given determination,
shall mean the Holders of Warrants representing more than fifty percent (50%) of
all then outstanding Warrants.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor
reporting system.
"Opinion of Counsel" means a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was
issued, as set forth on the cover page of this Warrant.
"Original Warrants" shall mean the Warrants originally issued by the
Company on June 4, 1999 to the Apollo Stockholders.
"Outside Date" shall mean the date that is 120 days after the Original
Issue Date.
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"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any Subsidiary, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 8.2(a)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Series A Preferred Stock" shall mean the Series A Convertible
Preferred Stock of the Company.
"Series B Preferred Stock" shall mean the Series B Preferred Stock of
the Company.
"Share Withholding Option" has the meaning set forth in Section 2.1
hereof.
"Subsidiary" shall mean any corporation, association or other business
entity (i) at least 50% of the outstanding voting securities of which are at the
time owned or controlled directly or indirectly by the Company; or (ii) with
respect to which the Company possesses, directly or indirectly, the power to
direct or cause the direction of the affairs or management of such person.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest therein, which would constitute a "sale" thereof or a
transfer of a beneficial interest therein within the meaning of the Securities
Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such
exercise.
"Warrants" shall mean the Original Warrants and all warrants issued
upon transfer, division or combination of, or in substitution for, such Original
Warrants, and any additional Warrants issued together with shares of Series A
Preferred Stock paid as dividends, or any other such Warrant. All Warrants
shall at all times be identical as to terms and conditions, except as to
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the number of shares of Common Stock for which they may be exercised and their
date of issuance.
"Warrant Stock" generally shall mean the shares of Common Stock
issued, issuable or both (as the context may require) upon the exercise of
Warrants.
2. EXERCISE OF WARRANT
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2.1 Manner of Exercise. (a) From and after the Original Issue Date
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and until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder
(as determined pursuant to Section 2.2 below). In order to exercise this
Warrant, in whole or in part, the Holder shall (i) deliver to the Company at its
Designated Office a written notice of the Holder's election to exercise this
Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and
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specify the number of shares of Common Stock to be purchased, together with this
Warrant and (ii) pay to the Company the Warrant Price (the date on which both
such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in
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the form of the subscription form appearing at the end of this Warrant as Annex
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A, duly executed by the Holder or its duly authorized agent or attorney.
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(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute (or cause to be executed) and deliver
(or cause to be delivered) to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Notice and shall be
registered in the name of the Holder or, subject to Section 8 below, such other
name as shall be designated in the Exercise Notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and the Holder or any other Person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the
Holder by one or more of the following methods: (i) by delivery of a certified
or official bank check in the amount of such Warrant Price payable to the order
of the Company, (ii) by instructing the Company to withhold a number of shares
of Warrant Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price (the "Share Withholding Option"), or
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(iii) by surrendering to the Company shares of Common Stock previously acquired
by the Holder with an aggregate Fair Value equal to such Warrant Price. In the
event of any withholding of Warrant Stock or surrender of Common Stock pursuant
to clause (ii) or (iii) above where the number of shares whose Fair Value is
equal to the Warrant Price is not a whole number, the number of shares withheld
by or surrendered to the Company shall be rounded up to
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the nearest whole share and the Company shall make a cash payment to the Holder
based on the incremental fraction of a share being so withheld by or surrendered
to the Company in an amount determined in accordance with Section 2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical to this Warrant. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares of Common Stock
in the name of any Person who acquired this Warrant (or part hereof) or any
shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the
Company.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
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exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable, issued without violation of any preemptive rights
and free and clear of all Liens (other than any created by actions of the
Holder). The Company shall pay all expenses in connection with, and all taxes
and other governmental charges that may be imposed with respect to, the issue or
delivery thereof, unless such tax or charge is imposed by law upon the Holder,
in which case such taxes or charges shall be paid by the Holder and the Company
shall reimburse the Holder therefor on an After-Tax Basis. The Company shall
not, however, be required to pay any tax or governmental charge which may be
payable in respect of any Transfer involved in the issue and delivery of shares
of Common Stock issuable upon exercise of the Warrant in a name other than that
of the holder of the Warrants to be exercised, and no such issue or delivery
shall be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
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fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by (i) the Current Market Price of one
share of Common Stock on the Exercise Date, if the Common Stock is then publicly
traded, or (ii) the Book Value per share of Common Stock based on the most
recent available consolidated balance sheet of the Company, if the Common Stock
is not then publicly traded.
2.4 Reduced Exercise Price. On the Outside Date, in the event that
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the Company shall not have obtained the approval of its stockholders of the
conversion of the Series B Preferred Stock to Series A Preferred Stock, the
Exercise Price herein shall be reduced to $0.01.
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3. TRANSFER, DIVISION AND COMBINATION
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3.1 Transfer. Subject to compliance with Section 8 hereof, each
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transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
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Holder or its agent or attorney and funds sufficient to pay any transfer taxes
described in Section 2.2 in connection with the making of such transfer. Upon
such surrender and delivery and, if required, such payment, the Company shall,
subject to Section 8, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by the new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to compliance with the
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applicable provisions of this Warrant including, without limitation, Section 8,
this Warrant may be divided or combined with other Warrants upon presentation
hereof at the Designated Office, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with the applicable
provisions of this Warrant as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its
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own expense any new Warrant or Warrants required to be issued under this Section
3.
3.4 Maintenance of Books. The Company agrees to maintain, at the
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Designated Office, books for the registration and transfer of the Warrants
(other than pursuant to Section 2.2 hereof).
4. ANTIDILUTION PROVISIONS
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The number of shares of Common Stock for which this Warrant is
exercisable and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time
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or from time to time after the Original Issuance Date, issue any shares of
Common Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, other than shares of Series A Preferred Stock, Series B Preferred
Stock or Excluded Stock, without consideration or for consideration per share
less than either (x) the Exercise Price or (y) the Fair Value of the Common
Stock, in effect immediately
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prior to the issuance of such Common Stock or securities, then such Exercise
Price shall forthwith be lowered to a price equal to the price obtained by
multiplying:
(i) the Exercise Price in effect immediately prior to the
issuance of such Common Stock or securities by
(ii) a fraction of which (x) the denominator shall be the
number of shares of Common Stock outstanding on a fully-diluted basis
immediately after such issuance and (y) the numerator shall be the sum
of (i) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately prior to the date of such issuance and (ii)
the number of additional shares of Common Stock which the aggregate
consideration for the number of shares of Common Stock so offered
would purchase at the greater of the Exercise Price or the Fair Value
per share of Common Stock.
For purposes of this Section 4, "fully diluted basis" shall be
determined in accordance with the treasury method of GAAP.
4.2 Upon Acquisition of Common Stock. If the Company or any
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Subsidiary shall, at any time or from time to time after the Original Issuance
Date, directly or indirectly, redeem, purchase or otherwise acquire any shares
of Common Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock
(other than shares of Series A Preferred Stock or Series B Preferred Stock that
are redeemed according to their terms), or options to purchase or rights to
subscribe for such convertible or exchangeable securities, for a consideration
per share greater than the Fair Value (plus, in the case of such options,
rights, or securities, the additional consideration required to be paid to the
Company upon exercise, conversion or exchange) for shares of Common Stock in
effect immediately prior to such event, then the Exercise Price shall forthwith
be lowered to a price equal to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such
event by
(ii) a fraction of which (x) the denominator shall be the
Fair Value per share of Common Stock immediately prior to such event
and (y) the numerator shall be the result of dividing:
(A) (1) the product of (a) the number of shares of
Common Stock outstanding on a fully-diluted basis
and (b) the Fair Value per share of Common Stock,
in each case immediately prior to such event,
minus (2) the aggregate consideration paid by the
Company in such event (plus, in the case of such
options, rights, or convertible or exchangeable
securities, the aggregate additional
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consideration to be paid by the Company upon
exercise, conversion or exchange), by
(B) the number of shares of Common Stock outstanding
on a fully-diluted basis immediately after such
event.
4.3 Provisions Applicable to Adjustments. For the purposes of any
------------------------------------
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the following
provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash
in a public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor before deducting
therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value thereof as
determined in accordance with the Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
shares of Series A Preferred Stock, shares of Series B Preferred Stock and
options to acquire Excluded Stock:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options
to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the
time such options or rights were issued and for a
consideration equal to the consideration
(determined in the manner provided in
subparagraphs (i) and (ii) above), if any,
received by the Company upon the issuance of such
options or rights plus the minimum purchase price
provided in such options or rights for the Common
Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in
exchange of any such convertible or exchangeable
securities or upon the exercise of options to
purchase or rights to subscribe for such
convertible or exchangeable securities and
subsequent conversion or exchange thereof shall
be deemed to have been issued at the time such
securities, options, or rights
11
were issued and for a consideration equal to the
consideration received by the Company for any
such securities and related options or rights
(excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional consideration, if any, to be received
by the Company upon the conversion or exchange of
such securities or the exercise of any related
options or rights (the consideration in each case
to be determined in the manner provided in
paragraphs (i) and (ii) above) and
(C) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise
of any such options or rights or conversions of
or exchanges for such securities, other than a
change resulting from the antidilution provisions
thereof, the applicable Exercise Price shall
forthwith be readjusted to such Exercise Price as
would have been obtained had the adjustment made
upon the issuance of such options, rights or
securities not converted prior to such change or
options or rights related to such securities not
converted prior to such change been made upon the
basis of such change.
(D) No further adjustment of the Exercise Price
adjusted upon the issuance of any such options,
rights, convertible securities or exchangeable
securities shall be made as a result of the
actual issuance of Common Stock on the exercise
of any such rights or options or any conversion
or exchange of any such securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the
------------------------------
Original Issuance Date, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the record
date for the determination of holders of Common Stock entitled to receive such
stock dividend, or to be affected by such subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of shares of Common
Stock purchasable on exercise of the Warrants shall be increased in proportion
to such increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance
-----------------
Date, the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, following the record date to determine shares
affected by such combination, the Exercise Price shall be appropriately
increased so that the number of shares of Common Stock purchasable on exercise
of each of the Warrants shall be decreased in proportion to such decrease in
outstanding shares.
12
4.6 Upon Reclassifications, Reorganizations, Consolidations or
----------------------------------------------------------
Mergers. In the event of any capital reorganization of the Company, any
-------
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Company with or into another corporation
(where the Company is not the surviving corporation or where there is a change
in or distribution with respect to the Common Stock), each Warrant shall after
such reorganization, reclassification, consolidation, or merger be exercisable
for the kind and number of shares of stock or other securities or property of
the Company or of the successor corporation resulting from such consolidation or
surviving such merger, if any, to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon exercise of such Warrant would
have been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
4.7 Deferral in Certain Circumstances. In any case in which the
---------------------------------
provisions of this Section 4 shall require that an adjustment shall become
effective immediately after a record date of an event, the Company may defer
until the occurrence of such event issuing to the holder of any Warrant
exercised after such record date and before the occurrence of such event the
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event and issuing to such holder only the shares of capital
stock issuable upon such exercise before giving effect to such adjustments;
provided, however, that the Company shall deliver to such holder an appropriate
-------- -------
instrument or due bills evidencing such holder's right to receive such
additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or
------------------------------
issues any securities on or after the Original Issuance Date containing
provisions protecting the holder or holders thereof against dilution in any
manner more favorable to such holder or holders thereof than those set forth in
this Section 4, such provisions (or any more favorable portion thereof) shall be
deemed to be incorporated herein as if fully set forth in this Warrant and, to
the extent inconsistent with any provision of this Warrant, shall be deemed to
be substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
-------------------
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the determination of the adjustment, the shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
and issuing to such holder only the shares of capital stock issuable upon such
exercise before giving effect to such adjustment and (2) paying to such holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 2.3 above; provided, however, that the Company shall deliver to such
-------- -------
holder an appropriate instrument or due bills evidencing such holder's right to
receive such additional shares or cash.
13
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment
------------------------------------------
of the Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the
holders of the Warrants shall thereafter be entitled to purchase upon the
exercise thereof, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of
----------
Common Stock upon exercise of any warrants or options (A) outstanding on the
Original Issuance Date or (B) awarded to employees or directors of the Company
pursuant to an employee stock option plan or stock incentive plan approved by
the Board of Directors; (ii) any issuance of securities by the Company in
underwritten public offerings; and (iii) repurchases by the Company of Common
Stock approved by the Board of Directors (collectively, the "Excluded Stock").
--------------
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise
--------------------------------------
Price is adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price
in accordance with this Section 4 and shall prepare a certificate
signed by the Treasurer or Chief Financial Officer of the Company
setting forth the adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed at each office or agency
maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been
adjusted and setting forth the adjusted Exercise Price shall forthwith
be prepared by the Company, and as soon as practicable after it is
prepared, such notice shall be mailed by the Company at its expense to
all Holders at their last addresses as they shall appear in the stock
register.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
--------------------------------------------------------------------------
(a) The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all Liens, and shall use its best efforts to obtain all such
authorizations, exemptions or consents from
14
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before
six months prior to the tenth anniversary of the Original Issue Date, but no
earlier than nine months prior to the tenth anniversary of the Original Issue
Date, advance notice of such tenth anniversary and of the anticipated Expiration
Date. If the Company fails to fulfill in a timely manner the notice obligation
set forth in the prior sentence, it shall provide such notice as soon as
possible thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGIS TRATION WITH OR
--------------------------------------------------------------------
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
--------------------------------------
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares of
Common Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction over such action. If any shares of Common Stock required to be
reserved for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal or state law
(other than under the Securities Act or any state securities law) before such
shares may be so issued, the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
-------------------------------------------------------------
7.1 Notices of Corporate Actions.
----------------------------
In case:
(a) the Company shall take an action or an event shall occur,
that would require an Exercise Price adjustment pursuant to Section 4;
or
(b) the Company shall grant to the holders of its Common Stock
rights or warrants to subscribe for or purchase any shares of capital
stock of any class; or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock),
or of any
15
consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of
the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer
for all or a portion of the outstanding shares of Common Stock (or
shall amend any such tender offer to change the maximum number of
shares being sought or the amount or type of consideration being
offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the stock register, at least 30 days prior to
the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or granting of rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
who will be entitled to such dividend, distribution, rights or warrants are to
be determined, (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of the amendment thereto). Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Exercise Price and the number and kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrants. Neither the failure to give any such notice nor any defect therein
shall affect the legality or validity of any action described in clauses (a)
through (e) of this Section 7.1.
7.2 Taking of Record. In the case of all dividends or other
----------------
distributions by the Company to the holders of its Common Stock with respect to
which any provision of any Section hereof refers to the taking of a record of
such holders, the Company will in each such case take such a record and will
take such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time,
-------------------------
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
16
8. TRANSFER RESTRICTIONS
---------------------
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares
-------------------------
of Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered without compliance with the provisions of, and are
otherwise restricted by the provisions of, the Securities Act, the rules and
regulations thereunder and this Warrant. Each certificate, if any, evidencing
such shares of Restricted Common Stock issued upon any such Transfer, other than
in a public offering pursuant to an effective registration statement, shall bear
the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon
such Transfer shall bear the restrictive legend set forth in Section 8.2(b),
unless the Holder delivers to the Company an Opinion of Counsel to the effect
that such legend is not required for the purposes of compliance with the
Securities Act. Holders of the Warrants or the Restricted Common Stock, as the
case may be, shall not be entitled to Transfer such Warrants or such Restricted
Common Stock except in accordance with this Section 8.1.
8.2 Restrictive Legends. (a) Except as otherwise provided in this
-------------------
Section 8, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGE, MORTGAGE, PLEDGED,
HYPOTHECATED OF OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY
THE PROVISIONS OF, THE ACT AND THE RULES AND REGULATIONS
THEREUNDER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN A
CERTAIN SERIES 2-A WARRANT DATED JUNE 4, 1999, ORIGINALLY ISSUED BY
RARE MEDIUM GROUP, INC. (THE "WARRANT") PURSUANT TO THE EXERCISE OF
WHICH SUCH SHARES WERE ISSUED. A COPY OF THE WARRANT IS AVAILABLE AT
THE EXECUTIVE OFFICES OF RARE MEDIUM GROUP, INC."
(b) Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
17
"NEITHER THIS SERIES 2-A WARRANT NOR ANY OF THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SERIES 2-A WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE STOCK
ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF OTHERWISE
DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE
RULES AND REGULATIONS THEREUNDER AND THIS WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
------------------------------------------
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1(b) upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2 shall terminate as to any particular
Warrant or shares of Restricted Common Stock when the Company shall have
received from the Holder thereof an Opinion of Counsel to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as
to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN SERIES 2-A
WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON
______________, 20__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the Holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 8.2(a).
9. LOSS OR MUTILATION
------------------
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Apollo Stockholders, shall be a sufficient indemnity) and, in case
of mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided,
--------
however, that, in the case of mutilation, no indemnity shall be required if this
-------
Warrant in identifiable form is surrendered to the Company for cancellation.
18
10. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
-----------------
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
ββ ββββ ββββ ββββββ, βββ βββββ, βββ ββββ, βββ ββββ βββββ. The Company may from
time to time change the Designated Office to another office of the Company or
its agent within the United States by notice given to all registered Holders at
least ten (10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
----------------------------------
(a) Financial Reports.
-----------------
Until (i) the Company shall no longer be required to deliver financial
reports in connection with the Series A Preferred Stock, or (ii) the Expiration
Date, whichever first occurs, the Company shall furnish to Apollo Investment
Fund IV, L.P. the following:
(i) Monthly Reports. As soon as available, but not later than
---------------
30 days after the end of each fiscal month, a consolidated balance sheet
of the Company as of the end of such period and consolidated statements of
income of the Company for such period and for the period commencing at the
end of the previous fiscal year and ending with the end of such period,
setting forth in each case in comparative form the corresponding figures
for the corresponding period of the preceding fiscal year, and including
comparisons to the budget or business plan and an analysis of the variances
from the budget or plan, all prepared in accordance with generally accepted
accounting principals consistently applied (except for the absence of
footnotes and year-end adjustments).
(ii) Quarterly Reports. As soon as available, but not later than
-----------------
45 days after the end of each quarterly accounting period, (A) a
consolidated balance sheet of the Company as of the end of such period and
consolidated statements of income, cash flows and changes in shareholders'
equity for such quarterly accounting period and for the period commencing
at the end of the previous fiscal year and ending with the end of such
period, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and
including comparisons to the budget or business plan and an analysis of the
variances from the budget or plan, all prepared in accordance with
generally accepted accounting principals consistently applied, subject to
normal year-end adjustments and the absence of footnote disclosure, and (B)
a report by management of the Company of the operating and financial
highlights of the Company and its Subsidiaries for such period, which shall
include (x) a comparison between operating and financial results and budget
and (y) an analysis of the operations of the Company and its Subsidiaries
for such period.
19
(iii) Annual Audit. As soon as available, but not later than 90
------------
days after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of
income, cash flows and changes in shareholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by the report of a "Big 5" firm of independent certified public
accountants selected by the Company's Board of Directors (the
"Accountants"). The Company and its Subsidiaries shall maintain a system
-----------
of accounting sufficient to enable its Accountants to render the report
referred to in this Section 11(b)(iii).
(iv) Miscellaneous. Promptly upon becoming available, each of
-------------
the following:
(A) copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by the Company
or its Subsidiaries to its shareholders generally or released to the public
and copies of all regular and periodic reports, if any, filed by the
Company or its Subsidiaries with the SEC, any securities exchange or the
NASD;
(B) notification in writing of the existence of any default
under any material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of their assets are bound;
(C) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by its
accountants; and
(D) upon request, any other routinely collected financial or
other information available to management of the Company or its
Subsidiaries (including, without limitation, routinely collected
statistical data).
(b) Other Holders. Without duplication of any document or information
-------------
provided pursuant to this Section 12, the Company shall provide to each Holder
of Warrants or Warrant Stock the following:
(i) as soon as available, but not later than 45 days after the
end of each quarterly accounting period, a Form 10-Q or, if the Company
does not then file quarterly reports with the SEC, the documents referred
to in Section 11(a)(ii).
(ii) as soon as available, but not later than 90 days after the
end of each fiscal year, a Form 10-K or, if the Company does not then file
annual reports with the SEC, the audited consolidated financial statements
referred to in Section 11(a)(iii).
(iii) simultaneously with any distribution of any document to
the stockholders of the Company generally, any such document so
distributed.
20
12. DILUTION FEE
------------
In the event any dividends are declared with respect to the Common
Stock, the holder of this Warrant as of the record date established by the Board
of Directors for such dividend shall be entitled to receive as a dilution fee
(the "Dilution Fee") an amount (whether in the form of cash, securities or other
------------
property) equal to the amount (and in the form) of the dividends that such
holder would have received had this Warrant been exercised for purchase of
Common Stock as of the record date of such dividend, such Dilution Fee to be
payable on the payment date of the dividend established by the Board of
Directors (the "Dilution Fee Payment Date"). The record date for any such
-------------------------
Dilution Fee shall be the record date for the applicable dividend, and any such
Dilution Fee shall be payable to the persons in whose name this Warrant is
registered at the close of business on the applicable record date.
13. MISCELLANEOUS
-------------
13.1 Nonwaiver. No course of dealing or any delay or failure to
---------
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
13.2 Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or communication hereunder to be made pursuant
to the provisions of this Warrant shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued
upon the exercise hereof, at its last known address appearing on the books
of the Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall have been sent by Federal Express or another recognized
overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any
---------------
payments provided for in this Warrant, the Company shall pay to the Holder
hereof (a) interest at the Agreed Rate on any amounts due and owing to such
Holder and (b) such further amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys' fees and
expenses incurred by such Holder in collecting any amounts due hereunder. The
21
Company shall indemnify, save and hold harmless the Holder hereof and the
Holders of any Warrant Stock issued upon the exercise hereof from and against
any and all liability, loss, cost, damage, reasonable attorneys' and
accountants' fees and expenses, court costs and all other out-of-pocket expenses
incurred in connection with or arising from any default hereunder by the
Company. This indemnification provision shall be in addition to the rights of
such Holder or Holders to bring an action against the Company for breach of
contract based on such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
-----------------------
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in
--------
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections
----------------------
3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and to the extent applicable, all Holders of shares of Warrant
Stock issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified
---------
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
--------
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may be
purchased upon exercise of such Warrant (before giving effect to any adjustment
as provided therein) without the written consent of the Holder thereof.
13.8 Severability. Wherever possible, each provision of this Warrant
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
22
13.10 GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL
---------------------------
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS
WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND
DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, SHALL HAVE, EXCEPT AS SET FORTH
BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS
--------
ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK.
23
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
RARE MEDIUM GROUP, INC.
By:_________________________________
Name:
Title:
[SEAL]
Attest:
By:_____________________________
Name:
Title:
24
ANNEX A
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SUBSCRIPTION FORM
-----------------
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares Common Stock of Rare Medium
Group, Inc. and herewith makes payment therefor in ______________, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to _________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
ANNEX B
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ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all of the
rights of the under signed under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
---------------------------- ----------------
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Rare Medium Group,
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated:___________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.