Edgar Filing: RARE MEDIUM GROUP INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
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RARE MEDIUM GROUP, INC.
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RARE MEDIUM GROUP, INC.
44 WEST 18TH STREET, 6TH FLOOR
NEW YORK, NEW YORK 10011

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 17, 2002

To the holders of common stock and convertible preferred stock of Rare
Medium Group, Inc., a Delaware corporation:

Please take notice that our annual meeting of stockholders for the
year ended December 31, 2001 will be held in the Concorde Room, 3rd floor,
at the Dylan Hotel, 52 East 41st Street, New York, New York 10017 on
December 17, 2002, at 8:00 a.m., local time, for the following purposes,
all as more fully described in the attached Proxy Statement:

1. To elect two (2) Class 3 Directors;

2. To ratify the appointment of KPMG LLP as the independent auditors
of the Company for the year ending December 31, 2002; and

3. To transact such other business as may come before the annual
meeting or any adjournment or postponement thereof.

Stockholders are urged to read carefully the attached proxy statement
for additional information concerning the matters to be considered at our
annual meeting. The board of directors has fixed the close of business on
October 30, 2002 as the record date for the determination of stockholders
entitled to vote at the annual meeting. Only stockholders of record at the
close of business on October 30, 2002 will be entitled to notice of, and to
vote at, the meeting or any postponement or adjournment thereof. The proxy
statement is being mailed to these stockholders on or about November 18,
2002.

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF
STOCKHOLDERS. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE
RESPECTFULLY URGE YOU TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD OR VOTING INSTRUCTION CARD. A SELF-ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.

By Order of the Board of Directors,

/s/ Robert C. Lewis
-------------------------------------
Robert C. Lewis
Senior Vice President, General Counsel
and Secretary

New York, New York
November 12, 2002

IMPORTANT
Please complete, sign, date and promptly mail your proxy card
or voting instruction card.

TABLE OF CONTENTS

PAGE

Presentation of Share and Per Share Amounts 2
Questions and Answers about the Annual Meeting 2
Proposal 1 - Election of Directors 6
Proposal 2 - Ratify the Appointment of KPMG LLP as the Independent Auditors 11
of the Company for the Year Ended December 31, 2002
Security Ownership of Certain Beneficial Owners and Management 12
Executive Compensation 14
Board Audit Committee Report 17
Board Compensation Committee Report on Executive Compensation 17
Performance Graph 19
Forward Looking Statements 20
Other Business 20
Stockholder Proposals 20
Additional Information 21
Annual Report on Form 10-K 21

PRESENTATION OF SHARE AND PER SHARE AMOUNTS

At the special meeting of stockholders held on July 11, 2002,
stockholders approved a one for ten reverse stock split which became
effective on July 18, 2002. As a result of the reverse stock split, each
ten shares of our voting common stock or non-voting common stock issued and
outstanding on July 18, 2002 were automatically combined into and became
one share of our voting common stock or non-voting common stock, respectively.

Proportionate voting rights and other rights of the holders of our
voting and non-voting common stock were not affected by the reverse split.
For example, a holder of 2.0% of the voting power of the outstanding shares
of our common stock immediately prior to the reverse split continues to
hold 2.0% of the voting power of the outstanding shares of our common stock
after the reverse stock split. The terms of all outstanding options and
warrants to purchase shares of our common stock were equitably adjusted
such that the number of shares underlying each option or warrant was
decreased to one tenth of the previous number of shares and the exercise
price was increased to 10 times the previous exercise price. Although the
number of shares of our preferred stock was not affected by the reverse
stock split, the per share conversion price was increased 10 times from
$7.00 to $70.00 (and was further adjusted to $68.50 pursuant to
anti-dilution provisions of the preferred stock agreement as a result of
the issuance of additional shares of common stock in the rights offering at
a price below the conversion price of the preferred stock at the time of
the offering).

All share data, including per share amounts, included in this proxy
statement have been restated to give effect to the one for ten reverse
stock split.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

When And Where Is The Annual Meeting?

The annual meeting will be held on December 17, 2002, beginning at
8:00 a.m., local time, in the Concorde Room, 3rd floor, at the Dylan Hotel,
52 East 41st Street, New York, New York 10017.

What Is The Purpose Of The Annual Meeting?

At the annual meeting, we will ask you to consider and approve the
matters set forth in the accompanying notice of meeting and described in
this proxy statement, including the election of directors and ratification
of our independent public accountants.

Why Did I Receive This Proxy Statement?

We sent you this proxy statement and the enclosed proxy card or voting
instruction card because our board of directors is soliciting your proxy to
vote at the annual meeting of stockholders.

This proxy statement summarizes the information you need to know to
vote on an informed basis at the annual meeting; however, you do not need
to attend the annual meeting to vote your shares (see "How Do I Vote?"). We
began sending this proxy statement, the attached notice of annual meeting
and the enclosed proxy card on or about November 18, 2002, to all
stockholders entitled to vote.

How Many Shares Of Voting Stock Are Outstanding?

On October 30, 2002, the record date, there were 6,682,615 shares of
our voting common stock outstanding. In addition to this voting common
stock, there were 8,990,212 shares of our non-voting common stock and
1,105,830 shares of preferred stock outstanding, all of which are owned by
Apollo Investment Fund IV, L.P.; Apollo Overseas Partners IV, L.P.; and AIF
IV/RRR LLC (collectively, the "Apollo Stockholders").

Who Is Entitled To Vote?

If our records show that you are a holder of our voting common stock
or our preferred stock as of the close of business on October 30, 2002, you
are entitled to receive notice of the annual meeting and to vote such
shares of common stock or preferred stock that you held on the record date.
The voting common stockholders and the preferred stockholders will vote
together as a single class on each matter presented at the annual meeting.
The holders of our non-voting common stock are not entitled to vote such shares.

How Many Votes Is The Common Stock Entitled To?

Each share of outstanding voting common stock owned as of the record
date entitles the holder to one vote for each matter to be voted upon.
Accordingly, the holders of common stock are entitled to an aggregate of
6,682,615 votes. None of the outstanding shares of non-voting common stock
are entitled to vote.

How Many Votes Is The Preferred Stock Entitled To?

The holders of preferred stock are entitled to an aggregate of 975,000
votes, or 0.882 votes per share of preferred stock.

How Many Votes Are The Holders Of Preferred Stock Entitled To, Based On Their
Aggregate Holdings?

In addition to being entitled to 975,000 votes with respect to the
preferred stock, the Apollo Stockholders and an affiliate also own
1,745,375 shares of our voting common stock and 8,990,212 shares of our
non-voting common stock. Although the Apollo Stockholders and the affiliate
beneficially own 68.5% of our common stock and 35.5% of our outstanding
voting power, they have agreed that all voting common shares which would
otherwise entitle them and the affiliate, collectively, to cast more than
29.9% of our voting power will be voted pro-rata with all other votes cast
by the holders of voting common stock.

Can I Attend The Annual Meeting?

If you owned common stock or preferred stock on the record date, you
can attend the annual meeting. You should be prepared to present photo
identification for admittance. In addition, if your shares are held in the
name of your broker, bank or other nominee, you must bring an account
statement or letter from the nominee indicating that you are the beneficial
owner of the shares on the record date.

What Is The Difference Between Holding Shares As A Stockholder Of Record And
Holding Shares As A Beneficial Owner?

Most of our stockholders hold their shares through a broker or other
nominee, rather than directly in their own name. The following are some
distinctions between shares held of record and those owned beneficially.

o Stockholder of Record: If your shares are registered directly in
your name with our transfer agent, American Stock Transfer &
Trust Co., you are considered, with respect to those shares, the
stockholder of record, and these proxy materials are being sent
directly to you by the transfer agent. As a stockholder of
record, you have the right to grant your voting proxy directly to
us or to vote in person at the annual meeting. The transfer agent
has enclosed or sent a proxy card for you to use.

o Beneficial Owner: If your shares are held in a brokerage account
or by another nominee, you are considered the beneficial owner of
the shares held in "street name," and these proxy materials are
being forwarded to you by your broker or nominee, together with a
voting instruction card. As the beneficial owner, you have the
right to direct your broker or nominee how to vote your shares
and are also invited to attend the annual meeting.

If I Plan To Attend The Annual Meeting, Should I Still Vote By Proxy?

Whether you plan to attend the annual meeting or not, we urge you to
vote by returning the enclosed proxy card or voting instruction card.
Returning the proxy card or voting instruction card will not affect your
right to attend the annual meeting and vote.

How Do I Vote?

o If you are a stockholder of record, you may instruct the proxy
holders named in the enclosed proxy card how to vote your shares
of common stock or shares of preferred stock by signing, dating
and mailing the proxy card in the postage-paid envelope that has
been provided to you. If you are a stockholder of record and
attend the annual meeting, you may deliver your completed proxy
card in person.

o If you are a beneficial owner, you will receive a voting
instruction card from your nominee which you must properly
execute in order to have your shares voted by proxy by the
nominee. Beneficial owner stockholders who wish to vote at the
meeting will need to obtain a proxy form from the broker, bank or
other nominee that holds their shares of record.

Can I Change My Vote Or Revoke My Proxy?

Any stockholder who executes and returns a proxy may revoke such proxy
or change his or her vote at any time before it is voted at the annual
meting by:

(1) filing with the Secretary of Rare Medium Group, at 44 West 18th
Street, 6th Floor, New York, New York 10011, written notice of
revocation bearing a later date than the proxy; or

(2) filing a duly executed proxy bearing a later date; or

(3) appearing in person and voting by ballot at the annual meeting.

Any stockholder of record as of the record date attending the annual
meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the
annual meeting will not constitute revocation of a previously given proxy.
If you are a beneficial owner who has properly executed and returned a
voting instruction card to your broker or nominee, you may change your vote
by submitting new voting instructions to your broker or nominee, or, if you
have obtained a legal proxy from your broker or nominee giving you the
right to vote your shares, by attending the annual meeting and voting in person.

What Does It Mean If I Get More Than One Proxy Card?

If your shares are registered differently and are in more than one
account, you will receive more than one proxy card or voting instruction
card, each of which will indicate the number of shares you are entitled to
vote on that particular card. Sign and return all proxy cards or voting
instruction cards to ensure that all your shares are voted.

Am I Entitled To Appraisal Rights?

No. You will have no right under Delaware law to seek appraisal of the
value of our common stock in connection with the matters being voted upon.

How Does The Board Of Directors Recommend I Vote On The Proposals?

The board of directors recommends that you vote in favor of the
election of the director nominees and in favor of ratification of our
independent public accountants.

What Constitutes A Quorum And Why Is It Necessary?

In order to carry on the business of the annual meeting, we must have
a quorum. The holders of a majority of the total number of votes of our
capital stock, present in person or represented by proxy, will constitute a
quorum for the transaction of business at the annual meeting. Abstentions
and broker non-votes, if any, will count for quorum purposes. If you submit
a properly executed proxy card or voting instruction card, even if you
abstain from voting, you will be considered part of the quorum.

What Is A Broker Non-Vote?

A broker non-vote occurs with respect to any proposal when a broker
holds your shares in its name and is not permitted to vote on that proposal
without instruction from the beneficial owner of the shares and no
instruction is given.

What Vote Is Required For Approval Of The Proposals?

Our directors will be elected by a plurality of the votes cast at the
annual meeting. In the election of directors, votes to withhold authority,
abstentions from voting and broker non-votes, if any, will be disregarded
and have no effect on the outcome of the vote.

Ratification of the appointment of the independent auditors requires
the affirmative vote of the holders of a majority of the total number of
votes of our capital stock, present in person or represented by proxy. With
respect to the ratification of the appointment of auditors, abstentions
from voting will have the same effect as voting against such matter and
broker non-votes, if any, will be disregarded and have no effect on the
outcome of the vote.

As of November 8, 2002, our directors, executive officers and
affiliates had the right to vote 1,747,041 shares of our common stock and
all of the shares of our preferred stock (with 975,000 votes). The Apollo
Stockholders have indicated that they will vote, or cause to be voted,
2,289,627 votes that they control, 29.9% of the votes entitled to be cast
at the meeting, in favor of the election of the director nominees and in
favor of the ratification of the appointment of the independent auditors.
In accordance with an investment agreement limiting the Apollo Stockholders
to control no more than 29.9% of the vote at the annual meeting, an
affiliate of the Apollo Stockholders has agreed to vote 430,748 shares of
common stock pro-rata with all other votes cast by holders of voting common
stock.

Will Other Matters Be Voted On At The Annual Meeting?

We are not aware of any other matters to be presented at the annual
meeting other than those described in this proxy statement. If any other
matters not described in the proxy statement are properly presented at the
meeting, proxies will be voted in accordance with the best judgment of the
proxy holders.

What Are The Costs Of Soliciting These Proxies And Who Pays Them?

All expenses of soliciting proxies, including clerical work, printing
and postage, will be paid by us. Our directors, officers and other
employees may solicit proxies in person, by mail, by telephone, by
facsimile, through the Internet or by other means of communication, but
such persons will not be specifically compensated for such services. We
will reimburse American Stock Transfer & Trust Company for forwarding proxy
materials to stockholders of record and serving as inspectors of election
and will pay the expenses associated with forwarding proxy materials to
beneficial owners by a third party agent and various banks and brokers.

PROPOSAL 1
ELECTION OF DIRECTORS

INFORMATION WITH RESPECT TO DIRECTOR NOMINEES

Listed below are the nominees for class 3 directors, with information
showing the principal occupation, business experience and current public
directorships, if any, of each, the age of each as of the date of this
proxy statement and the year each was first elected a director of the Company.

Unless authority is withheld, proxies in the accompanying form will be
voted in favor of electing the individuals identified in the table below as
class 3 directors of the Company. If the proxy is executed in such a manner
as to withhold authority to vote for one or more nominees for director,
such instructions will be followed by the persons named as proxies.

All nominees for director to be elected at the annual meeting are
currently members of the board of directors. The Company has no reason to
believe that any of the nominees will be unable to serve. In the event that
any nominee should not be available, the persons named in the proxy will
vote for the others and may vote for a substitute for such nominee.

Our Amended and Restated Certificate of Incorporation provides for a
classified board of directors, divided into three classes having staggered
terms of three years each. Currently, the board of directors has six
members, consisting of two class 1 directors, two class 2 directors and two
class 3 directors. The term of the class 3 directors expires at this 2002
annual meeting and until their successors are duly elected and qualified.
The class 1 and class 2 directors have terms expiring at the 2003 and 2004
annual meeting of stockholders, respectively, and until their successors are
duly elected and qualified.

CLASS 3 NOMINEES
Director
Name Age Class Position Since
---- --- ----- ------------------ --------
Glenn S. Meyers 41 3 Chairman and Chief 1998
Executive Officer

William F. Stasior 61 3 Director 2000

Glenn S. Meyers. Mr. Meyers is the co-founder, Chairman and Chief
Executive Officer of the Company and has been a member of the Company's
Board of Directors, as well as the Company's Chief Executive Officer, since
April 1998 when the Company acquired Rare Medium, Inc. as a wholly owned
subsidiary. Prior to joining Rare Medium, Inc. in September 1996 where he
served as Chairman and Chief Executive Officer until December 2001, Mr.
Meyers was President of Brookridge Capital Management, an Internet venture
capital firm from 1994 to September 1996.

William F. Stasior. Mr. Stasior joined the Board of Directors in April
2000. Mr. Stasior was the Chairman and Chief Executive Officer of Booz
Allen & Hamilton Inc., a management and technology consulting firm, from
1991 to 1999, and had served on the Board of Directors of Booz Allen since
1979. Since October 1999, Mr. Stasior has been the Senior Chairman of Booz
Allen. Mr. Stasior also serves on the Board of Directors of OPNET, a
software company that specializes in enhancing network performance for the
Internet and other applications.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The board of directors has carefully considered the class 3 director
nominees and believes that their election by the stockholders is in the
best interests of Rare Medium Group and its stockholders and, accordingly,
unanimously recommends that stockholders vote for the class 3 director nominees.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE CLASS 3
NOMINEES.

INFORMATION WITH RESPECT TO CONTINUING DIRECTORS

Listed below are the continuing directors, with information showing
the principal occupation, business experience and current public
directorships, if any, of each, the age of each and the year each was first
elected a director of the Company.

Director
Name Age Class Position Since
---- --- ----- -------- -----
Marc J. Rowan 40 1 Director 1999
Michael S. Gross 41 1 Director 1999
Andrew D. Africk 36 2 Director 1999
Jeffrey M. Killeen 49 2 Director 1998

Marc J. Rowan. Mr. Rowan, a class 1 director, has been a member of the
Board of Directors since June 1999. Mr. Rowan is one of the founding
principals of Apollo Advisors, L.P. (which, together with its affiliates,
acts as the managing general partner of several private securities
investment funds, including Apollo Investment Fund IV, L.P.). Mr. Rowan is
also a director of Vail Resorts, Inc., Quality Distribution, Inc., National
Financial Partners, Inc., Samsonite Corporation, Wyndam International and
NRT Incorporated.

Michael S. Gross. Mr. Gross, a class 1 director, has been a member of
the Board of Directors since August 1999. Mr. Gross is one of the founding
principals of Apollo Advisors, L.P. Mr. Gross is also a director of Allied
Waste Industries, Inc., Breuners Home Furnishing, Inc., Clark Enterprises
Inc., CVEO Corporation, Florsheim Group, Inc., United Rentals, Inc.,
Encompass Services Corporation and Saks Incorporated.

Andrew D. Africk. Mr. Africk, a class 2 director, has been a member of
the Board of Directors since June 1999. Mr. Africk is a partner of Apollo
Advisors, L.P. Mr. Africk is also a director of Encompass Services
Corporation, as well as several private venture companies.

Jeffrey M. Killeen. Mr. Killeen, a class 2 director, has been a
director of the Company since October 1998. Since January 1, 2002, Mr.
Killeen has been Chairman & Chief Executive Officer of Globalspec, Inc., an
information services company. Mr. Killeen was the Chief Executive Officer
of Forbes.com from August 1999 to March 2001. Prior to that, from January
1998 to March 1999, Mr. Killeen was the Chief Operating Officer of
barnesandnoble.com. Before joining barnesandnoble.com, Mr. Killeen served
as President and Chief Executive Officer of Pacific Bell Interactive Media
from August 1994 to January 1998.

BOARD MEETINGS AND COMMITTEES

The Board of Directors held eight (8) meetings during the year ended
December 31, 2001. Each director attended all of the meetings of the Board
of Directors and meetings of committees on which he serves.

The Board of Directors has an Audit Committee and a Compensation
Committee which meet as the need arises. The Board of Directors does not have
a nominating committee. The Audit Committee reviews and makes recommendations
with respect to the Company's internal controls and financial reports and in
connection with such reviews and recommendations, communicates with and
receives information independently from appropriate Company financial
personnel regarding the Company's financial condition. The Audit Committee,
with the Company's Senior Vice President and Controller and Senior Vice
President, Finance and Treasurer, also reviews the scope and results of the
annual audit with the Company's auditors and other activities the auditors
perform with the Company. The Audit Committee met six (6) times during the
year ended December 31, 2001. The Audit Committee met on March 7, 2002, with
the Company's auditors to discuss the results of the 2001 audit. The Audit
Committee is currently composed of two outside directors, Jeffrey M. Killeen
and William F. Stasior, both of whom are independent under Rule 4200(a)(14) of
the National Association of Securities Dealers' ("NASD") listing standards,
and Andrew D. Africk, who continues to servie on the Audit COmmittee as the
Board of Directors determined that exceptional and limited circumstances exist
pursuant to Rule 4350(d)(2)(B) of the NASD listing standards. The Compensation
Committee met two (2) times during the year ended December 31, 2001. The
Compensation Committee periodically reviews and evaluates the compensation of
the Company's officers and administers grants of options from the Company's
1998 Long-Term Incentive Plan and the Amended and Restated Equity Plan for
Directors. The Compensation Committee is currently composed of Jeffrey M.
Killeen and Andrew D. Africk.

COMPENSATION OF DIRECTORS

Each non-employee director receives a per meeting fee of $1,000 for
each meeting of the Board of Directors and $500 for each committee meeting
attended, along with expenses incurred in connection with each meeting attended.

The Compensation Committee has authority under the Company's 1998
Long-Term Incentive Plan to make stock option awards to non-employee
directors of the Company. Historically, the Compensation Committee has
awarded non-employee directors a stock option for 7,500 shares, vesting
ratably over three years in lieu of an automatic grant of an option to
purchase 2,500 shares of common stock as of the effective date of the
non-employee director's initial election to the Board of Directors, vesting
in one year, and thereafter, at the close of business on the date of final
adjournment of each annual meeting of stockholders as provided in the 1998
Long-Term Incentive Plan. In general, the exercise price per share of
common stock purchasable upon exercise of a non-employee director's options
will be equal to 100% of the fair market value of a share of common stock
on the date of grant of the option.

Upon becoming a director of the Company in 1998, Jeffrey M. Killeen
was granted an option to purchase 7,500 shares of common stock on October
28, 1998 under the Amended and Restated Equity Plan for Directors,
exercisable at $19.375 per share, the fair market value of the common stock
on the date of grant. This option vested ratably over three years and has
fully vested as of the date hereof. On December 21, 2001, the exercise
price of this option was repriced at $6.00, the fair market value of the
common stock on that date. For more information regarding the repricing of
this option, see section entitled "Repricing of Options" below.

Upon becoming directors of the Company on June 4, 1999, each of Andrew
D. Africk and Marc J. Rowan was granted an option to purchase 7,500 shares
of common stock under the 1998 Long-Term Incentive Plan, exercisable at
$70.00 per share, both of which vested ratably over three years and have
fully vested as of the date hereof. Upon becoming a director of the Company
as of August 19, 1999, Michael S. Gross was granted an option to purchase
7,500 shares of common stock under the 1998 Long-Term Incentive Plan,
exercisable at $70.00 per share, which vested ratably over three years and
has fully vested as of the date hereof. On December 21, 2001, the exercise
prices of the options granted to Messrs. Africk, Rowan, and Gross were
repriced at $6.00, the fair market value of the common stock on that date.
For more information regarding the repricing of these options, see section
entitled "Repricing of Options" below.

Upon becoming a director of the Company in April, 2000, William
Stasior was granted an option to purchase 7,500 shares of common stock on
April 26, 2000 under the 1998 Long Term Incentive Plan exercisable at
$210.625 per share, the fair market value of the common stock on the date
of grant. This option vests ratably over three years. During the year 2000,
Mr. Stasior served as a consultant to the Company's Internet professional
services subsidiary, Rare Medium, Inc., and pursuant to a consulting
agreement Mr. Stasior received compensation of $10,000 per month for his
consulting services. This consulting agreement was terminated in the spring
of 2001. In addition, as compensation for his consulting services Mr.
Stasior received an option to purchase an additional 7,500 shares of common
stock on April 26, 2000 under the 1998 Long Term Incentive Plan exercisable
at $210.625 per share, the fair market value of the common stock on the
date of grant. This option was to vest ratably over three years; however,
upon the termination of Mr. Stasior's consulting agreement with Rare
Medium, Inc. as of July 2, 2001, the unvested portion of the option,
covering 5,000 shares, related to the remaining term of this agreement were
cancelled. The remaining portion of the option, covering 2,500 shares, has
vested as of the date hereof. On December 21, 2001, the exercise prices of
these options were repriced at $6.00, the fair market value of the common
stock on that date. For more information regarding the repricing of these
options, see section entitled "Repricing of Options" below.

It is anticipated that future grants of stock options to directors
will principally be made under the Company's 1998 Long-Term Incentive Plan.

EXECUTIVE OFFICERS

The names of the Company's current executive officers, and certain
information about them, is set forth below.

Name Age Position Officer Since
---- --- -------- -------------

Glenn S. Meyers 41 Chairman and Chief Executive Officer 1998
Jeffrey A. Leddy 47 President and Chief Operating Officer 2002
Robert C. Lewis 37 Senior Vice President, General Counsel and Secretary 1998
Craig C. Chesser 41 Senior Vice President, Finance and Treasurer 1998
Michael A. Hultberg 36 Senior Vice President and Controller 1999

Glenn S. Meyers - Chairman and Chief Executive Officer. Mr. Meyers is
the co-founder, Chairman and Chief Executive Officer of the Company and has
been a member of the Company's Board of Directors as well as the Company's
Chief Executive Officer since April 1998 when the Company acquired Rare
Medium, Inc. as a wholly owned subsidiary. Prior to joining Rare Medium,
Inc. in September 1996 where he served as Chairman and Chief Executive
Officer until December 2001, Mr. Meyers was President of Brookridge Capital
Management, an Internet venture capital firm from 1994 to September 1996.

Jeffrey A. Leddy - President and Chief Operating Officer. Mr. Leddy
was appointed President and Chief Operating Officer on October 9, 2002,
having served as the Company's Senior Vice President of Operations since
June 2002. From September 1980 to December 2001, Mr. Leddy worked for EMS
Technologies, most recently as a Vice President. Mr Leddy also currently
serves as President of Miraxis, LLC, an affiliate of the Company, a
position he has held since September 2001.

Robert C. Lewis - Senior Vice President, General Counsel and
Secretary. Mr. Lewis has been the Company's Vice President and General
Counsel since May 1998 and Secretary of the Company since August 1998. Mr.
Lewis was appointed the Company's Senior Vice President on July 26, 2000.
Prior to joining the Company, Mr. Lewis was an associate at the law firm of
Fried, Frank, Harris, Shriver & Jacobson from October 1992.

Craig C. Chesser - Senior Vice President Finance and Treasurer. Mr.
Chesser has been a Vice President of the Company since July 1998 and has
been Vice President Finance since February, 2001 and the Treasurer of the
Company since November 1999. Mr. Chesser served as Corporate Controller of
the Company from July 1998 to November 1999. Prior to joining the Company,
Mr. Chesser was Vice President, Finance for TransCare Corporation, a health
care industry consolidator. Previously, Mr. Chesser was Vice President,
Finance and Administration for Sunwestern Investment Group, a venture
capital organization.

Michael A. Hultberg - Senior Vice President and Controller. Mr. Hultberg
joined the Company as Vice President and Controller in November 1999. From
July 1988 to November 1999, Mr. Hultberg was employed by KPMG LLP, most
recently as Senior Manager.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TENDER OFFER

In connection with the settlement of a purported class action lawsuit,
an affiliate of the Apollo Stockholders conducted a cash tender offer for
up to 1,500,291 shares, or approximately 23% of the Company's outstanding
common stock at a price of $2.80 per share, a price equaling 105% of the
average closing prices of the common stock for the five trading days prior
to April 9, 2002. The Apollo Stockholders purchased 474,427 shares pursuant
to the tender offer and agreed that so long as any tendered shares are held
by them or any of their affiliates, they and their affiliates will cause
all such shares held by them, which would otherwise entitle them and their
affiliates, collectively, to cast more than 29.9% of voting power of our
outstanding capital stock, to be voted pro-rata with all other votes cast
by holders of common stock. The tender offer was intended to provide
additional liquidity for the Company's common stockholders and, thereby,
provide near term support for the market price of the Company's common
stock in light of the one for ten reverse stock split.

RIGHTS OFFERING AND ADVANCE PURCHASE

In connection with the settlement of a purported class action lawsuit,
the Company distributed to each holder of record of its common stock,
warrants and preferred stock, as of the close of business on May 16, 2002,
one non-transferable right to purchase one additional share of its common
stock, for each share held, at a purchase price of $2.01 per share. On July
11, 2002, the rights offering was approved by the Company's stockholders
and was concluded on July 16, 2002, with 9,138,105 shares of common stock
purchased for gross proceeds of $18.4 million.

Under an investment agreement made in connection with the settlement,
the Apollo Stockholders agreed to purchase, in advance of the rights
offering, 3,876,584 shares of the Company's non-voting common stock. This
purchase equaled the number of shares of voting common stock that they
would otherwise have been entitled to purchase in the rights offering,
after giving effect to the cancellation of 20% of the outstanding warrants
in connection with the settlement. In connection with the advance purchase,
the Apollo Stockholders paid $2.01 per share for an aggregate gross
purchase price of approximately $7.8 million. The Apollo Stockholders
purchased an additional 5,113,628 shares of non-voting common stock
pursuant to their over subscription privilege. Under the terms of the
preferred stock agreement, the conversion price of the preferred stock was
adjusted from $70.00 to $68.50 as a result of the issuance of the
additional shares of common stock pursuant to the rights offering at a
price below the conversion price of the preferred stock at the time of the
offering. Similarly, under the terms of the Series 1-A and 2-A Warrants,
the exercise price of the Series 1-A and 2-A Warrants was adjusted from
$42.00 and $70.00, respectively, to $41.12 and $68.50, respectively, and,
accordingly, the number of shares purchasable under the warrants increased
as a result of the issuance of shares of common stock pursuant to the
rights offering at a price below the exercise price of the warrants in
effect at the time of the offering.

EMPLOYMENT AGREEMENTS

For a description of the employment agreements between the Company and
certain executive officers, please see the descriptions under the heading
"Employment Contracts and Change-in-Control Arrangements" on page 15.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who
own more than 10% of a registered class of the Company's securities, to
file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and greater than 10%
stockholders are required by Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company that no other reports were required,
the Company believes that during the year ended December 31, 2001, its
officers, directors and greater-than-10% stockholders complied with all
Section 16(a) filing requirements.

PROPOSAL 2
RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2002

The firm of KPMG LLP, independent accountants, audited the financial
statements of the Company for the year ended December 31, 2001. The Board
of Directors of the Company has unanimously reappointed, and recommends to
the stockholders the ratification of the appointment of, KPMG LLP as
independent auditors for the Company for the year ended December 31, 2002.
If the appointment is not ratified by the stockholders, the Board of
Directors may reconsider its recommendation.

A representative of KPMG LLP is expected to be available at the annual
meeting to respond to appropriate questions and will be given the
opportunity to make a statement if he or she so desires.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the total number
of the votes of capital stock of the Company represented and entitled to
vote at the annual meeting is required to approve this Proposal 2.

AUDIT FEES

For the fiscal year ended December 31, 2001, the aggregate fees for
professional services rendered for the audit of the Company's annual
financial statements for the fiscal year ended December 31, 2001 and the
reviews of the financial statements included in the Company's Forms 10-Q
for the fiscal year ended December 31, 2001 were $215,000, all of which has
been billed.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

For the fiscal year ended December 31, 2001, the Company did not incur
any charges or pay any fees related to any financial information systems
design and implementation services provided by KPMG LLP.

ALL OTHER FEES

For the fiscal year ended December 31, 2001, the aggregate fees billed
for services rendered by KPMG LLP, other than the fees discussed in the
foregoing paragraphs, were $474,425, which related to services for
offerings, registration statements and related filings, due diligence
related services and tax services.

The audit committee has concluded that provision of these non-audit
services is compatible with maintaining KPMG LLP's independence.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors has carefully considered Proposal 2, the
proposal to ratify the appointment of KPMG LLP as independent auditors of
the Company, and believes that its approval by the stockholders is in the
best interests of Rare Medium Group and its stockholders and, accordingly,
unanimously recommends that stockholders vote for the approval of Proposal 2.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and notes thereto set forth certain information,
as of November 8, 2002 (except as noted otherwise), regarding beneficial
ownership of the shares of Common Stock of the Company by (i) each person
who is known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of common stock, (ii) each of the Company's named
executive officers under the Summary Compensation Table under the heading
"Executive Compensation," (iii) each director and nominee for director, and
(iv) all executive officers and directors of the Company as a group. Unless
otherwise indicated, the stockholders listed possess sole voting and
investment power with respect to the shares indicated as owned by them.

Number of Shares of
Common Stock Percentage
Name and Address Position Beneficially Owned (1) of Class
-------------------------------- -------------------------------------- ------------------------ ------------

Glenn S. Meyers Chairman and Chief Executive Officer 126,666 * (2)
Robert C. Lewis Senior Vice President, General Counsel 19,500 * (2)
and Secretary
Craig C. Chesser Senior Vice President Finance and 17,500 * (3)
Treasurer
Michael A. Hultberg Senior Vice President and Controller 17,500 * (2)
Jeffrey M. Killeen Director 7,500 * (2)
William Stasior Director 7,500 * (2)
Andrew D. Africk Director 13,836,358 73.7% (4)(9)
c/o Rare Medium Group, Inc.
44 West 18th Street, 6th Floor
New York, New York 10011
Marc J. Rowan Director 13,836,358 73.7% (5)(9)
c/o Rare Medium Group, Inc.
44 West 18th Street, 6th Floor
New York, New York 10011
Michael S. Gross Director 13,836,358 73.7% (6)(9)
c/o Rare Medium Group, Inc.
44 West 18th Street, 6th Floor
New York, New York 10011
Apollo Investment Fund IV, L.P. 13,828,858 73.3% (7)(9)
Two Manhattanville Road
Purchase, New York 10577
All executive officers, directors and 14,047,523 74.0% (8)(9)
nominees as a group (9 persons)

----------------
* Represents beneficial ownership of less than 1%.

(1) Beneficial ownership has been determined pursuant to Rule 13d-3 under
the Exchange Act.

(2) Represents options to purchase shares of common stock that are
currently exercisable, but does not include options that become
exercisable upon a change of control of the Company and upon certain
other conditions.

(3) Includes options to purchase 15,833 shares of common stock that are
currently exercisable.

(4) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,093,271 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr.
Africk is a principal of Apollo Advisors IV, L.P, which together with
an affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Africk disclaims beneficial ownership of such
shares. Includes options to purchase 7,500 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control of the Company.

(5) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,093,271 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr.
Rowan is a principal of Apollo Advisors IV, L.P, which together with
an affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Rowan disclaims beneficial ownership of such
shares. Includes options to purchase 7,500 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control of the Company.

(6) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,093,271 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr.
Gross is a principal of Apollo Advisors IV, L.P, which together with
an affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Gross disclaims beneficial ownership of such
shares. Includes options to purchase 7,500 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control of the Company.

(7) Represents the aggregate of (i) 1,270,948 shares of common stock
acquired through the exercise of Series 1-A warrants, (ii) 474,427
shares of common stock acquired in a tender offer, (iii) 8,990,212
shares of non-voting common stock acquired pursuant to the rights
offering, and (iv) 3,093,271 shares of common stock issuable upon
conversion of the aggregate of 1,105,830 shares of the Company's
Series A Preferred Stock and the exercise of an aggregate of 141,446
Series 1-A warrants and 12,262,542 Series 2-A warrants held by the
Apollo Stockholders. Assuming conversion of all the Series A Preferred
Stock and the exercise of all the Series 1-A warrants and Series 2-A
warrants held by the Apollo Stockholders, such 13,828,858 shares of
common stock would consist of 11,912,907 shares of common stock
beneficially owned by Apollo Investment Fund IV, L.P., 598,855 shares
of common stock beneficially owned by Apollo Overseas Partners IV,
L.P., 842,669 shares of common stock beneficially owned by AIF IV/
RRRR LLC and 474,427 shares of common stock owned by AP/RM
Acquisition, LLC. The holders of the Company's Series A Preferred
Stock are only entitled to an aggregate of 975,000 votes with respect
to the Series A Preferred Stock as of November 8, 2002, or 0.882 votes
per share of Series A Preferred Stock. Messrs. Africk, Rowan and
Gross, directors of the Company and associated with Apollo Advisors
IV, L.P., disclaim beneficial ownership of the shares held by the
Apollo Stockholders.

(8) Messrs. Africk, Rowan and Gross, directors of the Company and
associated with Apollo Advisors IV, L.P., disclaim beneficial
ownership of shares held by the Apollo Stockholders. See footnote
numbers 4, 5 and 6 above. Includes options to purchase an aggregate of
216,999 shares of common stock that are currently exercisable, but
does not include options that become exercisable upon a change of
control of the Company.

(9) Subject to final court approval of the settlement of the purported
class action lawsuit, warrants held by the Apollo Stockholders to
acquire 275,245 shares of our common stock will be cancelled.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth, for the three
years ended December 31, 2001, the compensation for services in all
capacities earned by the Company's Chief Executive Officer and its next
most highly compensated executive officers.

Summary Compensation Table

Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
(1) ($) (#) ($) (2)
--------------------------- ---- ------- --------- ------------ --------- ----------- ------- ------------

Glenn S. Meyers 2001 $278,096 $-- $18,000 $-- -- $-- $--
Chairman and 2000 267,400 1,469,090 18,000 -- -- -- --
Chief Executive Officer 1999 257,192 2,157,889 17,600 -- -- -- --

Robert C. Lewis 2001 140,000 90,000 6,000 -- 10,000 -- 2,500
Senior Vice President, 2000 128,692 40,000 -- -- -- -- 2,500
General Counsel and 1999 110,135 -- -- -- 6,800 (3) -- 2,500
Secretary

Craig C. Chesser 2001 164,077 90,000 1,500 -- 10,000 -- 2,500
Senior Vice President Finance 2000 133,961 40,000 6,000 -- 2,500 (3) -- 2,500
and Treasurer 1999 118,692 10,000 3,000 -- 3,250 (3) -- 2,500

Michael A. Hultberg 2001 177,135 90,000 3,000 -- 10,000 -- --
Senior Vice President and 2000 145,000 40,000 -- -- -- -- --
Controller 1999 25,096 -- -- -- 7,500 (3) -- --

--------------
(1) Represents non-accountable expense allowance.
(2) Represents 401(k) employer matching contributions.
(3) The exercise prices of these options were repriced to $1.30, the fair
market value of the common stock as of October 5, 2001, the date of
repricing.

The following table sets forth information concerning grants of stock
options to purchase common stock during the year ended December 31, 2001 to
the named executive officers.

Option / SAR Grants in the Last Year

Percent of Potential Realizable Value
Number of Total at Assumed Annual Rates of
Securities Options/SARs Stock Appreciation for
Underlying Granted to Exercise or Option Term
Options /SARs Employees in Base Price Expiration -----------------------------
Name Granted (1)(2) Fiscal Year ($/Share) Date 5% 10%
---- -------------- ------------ ---------- ---------- ----------- ----------

Glenn S. Meyers -- 0.0% N/A N/A N/A N/A
Robert C. Lewis 10,000 3.9% $6.00 12/20/06 16,577 36,631
Craig C. Chesser 10,000 3.9% $6.00 12/20/06 16,577 36,631
Michael A. Hultberg 10,000 3.9% $6.00 12/20/06 16,577 36,631

--------------
(1) The vesting of the options is subject to acceleration in the event of
a change in control of the Company, which means, generally, the
consummation of any merger or consolidation involving the Company, any
sale of substantially all of the Company's assets or other transaction
or related transactions as a result of which a single person or
several persons acting in concert own a majority of the shares of
common stock.

(2) These options were granted on December 21, 2001 at an exercise price
of $6.00, the per share fair market value of the common stock at that
time. The options have a term of five (5) years. Options are
exercisable on the one-year anniversary of the date of grant.

The following table sets forth information concerning the exercise of
options to purchase shares of common stock by the named executive officers
during the year ended December 31, 2001, as well as the number and
potential value of unexercised options (both options which are presently
exercisable and options which are not presently exercisable) as of December
31, 2001.

Aggregated Option/SAR Exercises in the Last Year and Year-End Option/SAR Values

Number of Value of
Number of Securities Unexercised
Securities Underlying In-the-Money
Underlying Options/SARs at Options/SARs at
Options/SARs Fiscal Y/E (#) Fiscal Y/E ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- -------------- -------------

Glenn S. Meyers -- -- 86,667/53,333 0/0
Robert C. Lewis -- -- 9,500/10,000 57,950/14,000
Craig C. Chesser -- -- 5,833/10,000 35,584/14,000
Michael A. Hultberg -- -- 5,000/12,500 30,500/29,250

EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS

MEYERS EMPLOYMENT AGREEMENT

In connection with the transactions consummated pursuant to the 1998
acquisition by the Company of Rare Medium, Inc., the Company entered into
an Employment Agreement effective April 15, 1998 with Glenn S. Meyers (the
"Meyers Employment Agreement"). Pursuant to the Meyers Employment
Agreement, as amended, Mr. Meyers was engaged as the Chairman, President
and Chief Executive Officer of the Company and Rare Medium, Inc. to serve
for a term of five years, expiring April 15, 2003. Mr. Meyers receives an
annual base salary of $250,000, with a minimum annual increase during the
term of not less than 4% per annum. In addition to base compensation, Mr.
Meyers is entitled to receive, for each calendar year during the term,
incentive compensation equal to 2.0% of revenues derived from activities of
Rare Medium, Inc. for such calendar year in excess of the revenues of Rare
Medium, Inc. for the preceding year. Effective June 4, 1999, the Meyers
Employment Agreement has been amended and restated to effect a ceiling of
$150,000,000 on revenues of the Company for determining such annual
incentive compensation payable to Mr. Meyers. In addition, the amended and
restated agreement provides that, in the event gross revenues exceed such
revenue ceiling, the Compensation Committee of the Board of Directors will,
with such assistance as it will deem necessary, establish an incentive
bonus program for Mr. Meyers based on objective and subjective factors to
appropriately incentivize him. Such revised incentive bonus program shall
be designed to allow Mr. Meyers to continue to receive increases in annual
bonuses based on, and subject to, the targets and criteria established by
the Compensation Committee, in amounts similar to the incentive bonuses
previously received by Mr. Meyers. The Meyers Employment Agreement provides
Mr. Meyers with a right to terminate his employment agreement upon a breach
of such agreement or upon the occurrence of certain events constituting a
"change in control" of the Company as defined therein. Upon such a "change
in control," Mr. Meyers would be entitled to receive a lump sum payment
from the Company which shall be equal to all salary and incentive
compensation for the remaining term and the cash value of all benefits
which would have been received by him for the remaining term. In addition,
all of his unvested stock options shall immediately vest and become
exercisable. The Meyers Employment Agreement also contains a covenant not
to compete with the Company or any of its affiliates for the term of the
agreement, plus one additional year. Concurrently with the execution of the
Meyers Employment Agreement, the Company granted to Mr. Meyers options to
acquire an aggregate of 200,000 shares of common stock at exercise prices
equal to $23.75 per share (the fair market value at the time of issuance),
which options become exercisable ratably on a monthly basis over a period
of 60 months from the date of grant and expire ten years from the date of grant.

OTHER CURRENT EMPLOYMENT AGREEMENTS

The Company has employment agreements with each of Craig Chesser,
Michael Hultberg and Robert Lewis, each of whom is an executive officer of
the Company. Under these agreements, if, either (i) after 90 days following
a change in control of the Company, the executive terminates his employment
or (ii) the executive is terminated for other than "cause" as such term is
defined in his respective agreement, then the executive is entitled to
receive severance compensation and benefits in a lump sum payment
consisting of one year of his current salary and the right to exercise all
vested stock options and unvested stock options which become exercisable
upon a change of control through the option exercise date for such options.
For purposes of these agreements, a change in control of the Company occurs
when, among other things, the stockholders of the Company approve a merger
of the Company.

STOCK PLANS

On May 6, 1998, the Board of Directors adopted the Company's 1998
Long-Term Incentive Plan (the "Plan"). The Plan was approved by the
Company's stockholders on March 16, 1999. The Plan provides for the
granting of awards to directors (whether or not employees), executive
officers, key employees and consultants and other service providers in the
form of stock options, stock appreciation rights, restricted stock awards,
deferred stock awards, bonus stock awards, dividend equivalents, and other
types of stock based awards. The variety of awards authorized by the Plan
is intended to give the Company flexibility to adapt the Company's
compensation practices as the business environment in which it operates
changes. The maximum aggregate number of shares of common stock that may be
delivered for all purposes under the Plan is 2,300,000, subject to
adjustment. The Plan is administered by the Compensation Committee of the
Board of Directors. These options have generally carried five-year terms
and have become exercisable cumulatively in three equal installments, with
the first installment becoming exercisable on the one-year anniversary of
each grantee's date of employment. In 2000, the Board of Directors amended
and restated the Plan to: (1) increase the number of shares of common stock
available for issuance under the Plan to 2,300,000; (2) provide that no
participant in the Plan may be granted options and stock appreciation
rights, or SARs, that become exercisable in any one year for more than
700,000 shares of common stock and awards other than options and SARs that
may be settled for the first time in any one year by delivery of more than
350,000 shares of common stock; and (3) provide that all options and SARs
will terminate no later than the tenth anniversary of the date of grant.
These amendments to the Plan were ratified by the Company's stockholders on
June 15, 2000. As of December 31, 2001, there were approximately 1,900,000
options available for grant under the Plan.

In 1994, the Company adopted an Equity Plan for Directors (the "Equity
Plan for Directors") pursuant to which non-employee directors of the
Company received automatic option grants whose vesting was dependent on the
market price of the common stock. On October 26, 1998, the Board of
Directors amended and restated the Equity Plan for Directors to change the
plan from a formula-based stock option plan as described above to a
discretionary plan (the "Amended and Restated Equity Plan for Directors"),
thereby providing more flexibility in determining incentive based stock
option awards for non-employee directors of the Company. The Amended and
Restated Equity Plan for Directors authorized 50,000 aggregate shares of
common stock for the granting of such options under the plan, of which
10,800 were available for granting stock options as of December 31, 2001.
The Company did not make any grants to directors under the Amended and
Restated Equity Plan for Directors in 2001. Subsequent to November 1998,
grants of stock options to directors have been made under the Company's
Amended and Restated 1998 Long-Term Incentive Plan.

BOARD AUDIT COMMITTEE REPORT

The Audit Committee has reviewed and discussed the audited financial
statements with the Company's management. The Audit Committee has discussed
with the Company's independent auditors the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards AU
Section 380), as may be modified or supplemented. The Audit Committee has
received the written disclosures and the letter from the Company's
independent accountants required by the Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as may be modified or supplemented, and
has discussed with the Company's independent accountants the independent
accountant's independence. Based on the review and discussions referred to
above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001.

By the Audit Committee
of the Board of Directors,

/s/ JEFFREY M. KILLEEN
----------------------
Jeffrey M. Killeen

/s/ WILLIAM F. STASIOR
----------------------
William F. Stasior

/s/ ANDREW D. AFRICK
----------------------
Andrew D. Africk

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors reviews,
recommends and approves changes to the Company's compensation policies and
benefits programs, administers the Company's stock option plans, including
approving stock option grants, and otherwise seeks to ensure that the
Company's compensation philosophy is consistent with the Company's best
interests and is properly implemented. The members of the Compensation
Committee are Jeffrey M. Killeen and Andrew D. Africk.

COMPENSATION PHILOSOPHY AND REVIEW

The Company's compensation philosophy for its executive officers
serves two principal purposes: (1) to provide a total compensation package
for such officers that is competitive and enables the Company to attract
and retain key executive and employee talent needed to accomplish the
Company's business objectives, and (2) to directly link compensation to
improvements in Company performance and increases in stockholder value as
measured principally by the trading price of the common stock.

The 2001 compensation levels for the Company's executive officers
generally were determined on an individual basis, including consideration
of employment agreements entered into between the Company and such individuals.

Members of the Compensation Committee approve the material terms of
any employment agreement, and any amendments thereto, entered into between
the Company and an executive officer, as well as any stock option grants to
an executive officer. In determining compensation levels for 2001, the
Compensation Committee primarily relied upon factors relating to
responsibilities of the executive officer and both his current and expected
future contributions to the Company. The Compensation Committee did not
determine it necessary to, and did not attempt to, specifically analyze
compensation levels at companies included in the indexes under the caption,
"Performance Graph."

ELEMENTS OF EXECUTIVE OFFICER COMPENSATION

The Company's executive compensation consists primarily of salary,
bonus and awards of stock options. The Company emphasizes the award of
stock options and makes use of cash incentive bonuses to reward performance
and retain its executive officers. The Compensation Committee believes that
in the highly competitive, emerging markets in which the Company has
historically operated, equity-based compensation provides the greatest
incentive for outstanding executive performance and the greatest alignment
of management and stockholder long-term interests.

Officer Salaries. The Compensation Committee reviews each executive
officer's salary annually. Except to the extent that salary increases are
prescribed by written employment agreements, in determining the appropriate
salary levels, the Compensation Committee considers, among other factors,
the officer's scope of responsibility, prior experience and past
accomplishments.

Stock Option Grants. As noted above, the Company has relied
substantially on long-term equity compensation as the principal means of
providing long-term incentives for its executive officers and key
employees. The Company's practice has been to set option exercise prices at
not less than 100% of fair market value on the date of grant. Options are
generally granted for a term of five to ten years. Options granted to
executive officers and key employees become exercisable over time and are
typically dependent on continuing employment with the Company or one of its
subsidiaries, thus providing incentive to remain in the Company's employ.

In determining the size of the stock option grants, the Compensation
Committee considers various subjective factors primarily relating to the
responsibilities of the individual officers and key employees, and also
their current and expected future contributions to the Company, as well as
the number of shares owned by the officer or key employee or which remain
unvested under outstanding options. In addition, the Compensation Committee
examines the level of equity incentives held by each officer and key
employee relative to the other officers' and key employees' equity
positions and their tenure, responsibilities, experience and value to the
Company.

REPRICING OF OPTIONS

Report of the Compensation Committee. On October 5, 2001, the
Compensation Committee determined that because the outstanding options held
by certain executive officers and employees were exercisable at prices that
were significantly above prevailing market prices for the Company's common
stock, they no longer provided an adequate level of incentive. Accordingly,
to reincentivize certain executive officers and employees of the Company
and in recognition of their service to the Company, the Compensation
Committee approved the repricing of the exercise prices of options to
purchase an aggregate of 35,000 shares of common stock to $1.30 per share,
the fair market value at the date of the repricing. On December 21, 2001,
the Compensation Committee approved an additional repricing of the exercise
prices of options to purchase an aggregate of 40,000 shares of common stock
held by non-management directors to $6.00 per share, the fair market value
at the date of the repricing.

10-Year Option Repricings. The following table provides information
related to the repricing of each option held by the executive officers of
the Company during the last ten completed fiscal years.

Length of
Number of Exercise Original
Securities Market Price Price of Option Term
Underlying of Stock at Stock at Remaining
Options Time of Time of New at Date of
Repriced or Repricing or Repricing Exercise Repricing
Name Date Amended Amendment or Amendment Price or Amendment
---- ---- ------- --------- ------------ -------- ------------

Craig C. Chesser 10/5/01 1,167 $1.30 $23.75 $1.30 23 Months
10/5/01 833 $1.30 $51.10 $1.30 28 Months
10/5/01 1,334 $1.30 $85.63 $1.30 36 Months
10/5/01 2,500 $1.30 $145.00 $1.30 46 Months
Michael A. Hultberg 10/5/01 7,500 $1.30 $147.50 $1.30 37 Months
Robert C. Lewis 10/5/01 3,200 $1.30 $23.75 $1.30 23 Months
10/5/01 3,800 $1.30 $47.70 $1.30 30 Months
10/5/01 2,500 $1.30 $85.63 $1.30 36 Months

POLICY OF DEDUCTIBILITY OF COMPENSATION

Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility of a corporation of compensation in excess of $1,000,000 paid
to any of its five most highly compensated executive officers. However,
compensation that qualifies as "performance-based" is excluded from the
$1,000,000 limit if, among other requirements, the compensation is payable
only upon attainment of pre-established, objective performance goals under
a plan approved by shareholders.

Total cash compensation paid for salaries and bonuses during 2001 did
not exceed the $1,000,000 limit for any individual executive. In addition,
the Compensation Committee does not anticipate that total cash compensation
paid for salaries and bonuses during 2002 will exceed the $1,000,000 limit
for any individual executive. Stock option grants to date do not meet the
requirement that such grants be "performance based" and are, therefore, not
exempt from the limitations on deductibility. The Compensation Committee
will continue to monitor the compensation levels potentially payable under
the Company's cash and stock option compensation programs, but intends to
retain the flexibility necessary to provide total cash and stock option
compensation in line with competitive practice, the Company's compensation
philosophy and the Company's best interests.

In conclusion, the Compensation Committees believes that the policies
and programs described in this report are competitive and effectively align
executive compensation with the Company's goal of maximizing the return to
stockholders.

By the Compensation Committee
of the Board of Directors,

/s/ JEFFREY M. KILLEEN
----------------------
Jeffrey M. Killeen

/s/ ANDREW D. AFRICK
----------------------
Andrew D. Africk

PERFORMANCE GRAPH

The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company, the Nasdaq Market Index, and the Media
General Internet Software and Services Index from December 31, 1996 through
December 31, 2001. The cumulative total shareholder returns on the
Company's common stock was measured by dividing the difference between the
Company's share price at the end and the beginning of the measurement
period by the share price at the beginning of the measurement period. The
total stockholder return assumes $100 invested at the beginning of the
period in common stock, in the Nasdaq Market Index and the Industry Index.
The Company did not pay dividends on its common stock during the
measurement period and the calculations of cumulative total stockholders
return on the common stock did not include dividends. The Company presents
below the Internet Software and Services Index as a comparative industry
index for the Company's Internet professional services business, which it
commenced upon the acquisition of Rare Medium, Inc. in April 1998.

COMPARISON OF CUMULATIVE 5-YEAR ANNUAL RETURN AMONG
RARE MEDIUM GROUP, INC., NASDAQ MARKET INDEX,
AND INTERNET SOFTWARE AND SERVICES INDEX

................................................................................
GRAPHIC OMITTED
IGT: "75756chart.eps"
................................................................................

LEGEND:

Fiscal Year Ending
--------------------------------------------------------------------------------------
Company/Index/Market 1996 1997 1998 1999 2000 2001
----------- ----------- ---------- ------------ ----------- -----------

Rare Medium Group, Inc. 100.00 32.18 75.86 627.59 35.05 13.61
Media General Internet Software
& Services Index 100.00 59.28 155.54 452.69 100.12 67.56
Nasdaq Market Index 100.00 122.32 172.52 304.29 191.25 152.46

--------------
(1) Assumes $100 invested on January 1, 1996 and reinvestment of dividends.

(2) The Media General "Internet Software Services and Index" relates to
the primary business engaged in by the Company during 2001 through its
subsidiary Rare Medium, Inc., which was acquired in April 1998.

FORWARD LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believe," "anticipate," "expect," "estimate," "intent" and similar
expressions identify forward-looking statements. Forward looking statements
necessarily involve risks and uncertainties, and our actual results could
differ materially from those anticipated in the forward-looking statements.
Factors that would cause actual results to differ materially from the
Company's current expectations include but are not limited to those factors
set forth in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 filed with the SEC and the Company's Registration
Statement on Form S-3/A for the rights offering filed with the SEC on May
29, 2002. A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 has been mailed with this proxy statement.

OTHER BUSINESS

The Board of Directors knows of no business other than the matters set
forth herein which will be presented at the annual meeting. Inasmuch as
matters not known at this time may come before the meeting, the enclosed
proxy confers discretionary authority with respect to such matters as may
properly come before the meeting and it is the intention of the persons
named in the proxy to vote in accordance with their judgment on such matters.

STOCKHOLDER PROPOSALS

The Company expects that the date of the 2003 annual meeting of
stockholders will change by more than 30 days from this year's annual
meeting. Stockholders who wish to submit proposals pursuant to Rule 14a-8
of the 1934 Act for inclusion in the Proxy Statement for the Company's 2003
annual meeting of stockholders must submit the same to the Secretary of the
Company within a reasonable time before the Company begins to print and
mail its proxy materials at the Company's principal executive office, 44
West 18th Street, 6th Floor, New York, New York 10011. In order for a
shareholder proposal at the 2003 annual meeting submitted outside of Rule
14a-8 to be considered "timely" within the meaning of Rule 14a-4(c) of the
1934 Act, such proposal must be received by the Company within a reasonable
time before the Company mails its proxy materials.

ADDITIONAL INFORMATION

The Company is a reporting company and files annual, quarterly and
current reports, proxy statements and other information with the SEC. You
may read and copy these reports, proxy statements and other information at
the SEC public reference rooms in Washington, DC, New York, NY or Chicago,
IL. You can request copies of these documents by writing to the SEC and
paying a fee for the copying costs. Please call the SEC at 1-800-SEC-0330
for more information about the operation of the public reference rooms. The
Company's SEC filings are also available at the SEC's Web site at
"http://www.sec.gov." In addition, you can read and copy the Company's SEC
filings at the office of the National Association of Securities Dealers,
Inc. at 1735 K Street, Washington, DC 20006.

ANNUAL REPORT ON FORM 10-K

The Company is required to file an Annual Report on Form 10-K with the
SEC. A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, filed with the SEC is available without charge by
writing to Robert C. Lewis, Senior Vice President, General Counsel and
Secretary, Rare Medium Group, Inc., 44 West 18th Street, 6th Floor, New
York, New York 10011.

IMPORTANT -- MAIL YOUR SIGNED PROXY CARD OR VOTING INSTRUCTION CARD

Please complete, sign, date and mail the enclosed proxy card or voting
instruction card in the enclosed self-addressed envelope.

By Order of the Board of Directors,

/s/ Robert C. Lewis
-----------------------------------
Robert C. Lewis
Senior Vice President, General Counsel
and Secretary

November 12, 2002
New York, New York

-------------------------------------------------------------------------------

COMMON STOCK PROXY

RARE MEDIUM GROUP, INC.
44 WEST 18TH STREET, 6TH FLOOR, NEW YORK, NEW YORK 10011
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON DECEMBER 17, 2002

The undersigned hereby appoints Glenn S. Meyers, Chairman and Chief
Executive Officer of Rare Medium Group, Inc. and Robert C. Lewis, Senior
Vice President, General Counsel and Secretary of Rare Medium Group, Inc.,
and each of them, with full power of substitution, proxies to represent the
undersigned at the annual meeting of stockholders of Rare Medium Group,
Inc. to be held at 8:00 a.m., local time, on December 17, 2002, in the
Concorde Room, 3rd floor, at the Dylan Hotel, 52 East 41st Street, New
York, New York 10017, and at any adjournment or postponement thereof and
thereat to vote all of the shares of stock which the undersigned would be
entitled to vote, with all the powers the undersigned would possess if
personally present.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RARE MEDIUM
GROUP, INC. Unless otherwise specified in the boxes provided below, this
Proxy will be a vote FOR the director nominees in Proposal 1 and FOR
Proposal 2, and in the discretion of the above named persons as to any
other matter that may properly come before the annual meeting.

1. The election of two Class 3 directors, Glenn S. Meyers and
William F. Stasior, to the Board of Directors.

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY

FOR ALL NOMINEES EXCEPT AS NOTED BELOW:

____________________________________________________

2. The ratification of the appointment of KPMG LLP as the independent
auditors of the Company for the year ended December 31, 2002.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In the discretion of persons named above, to act upon such other
business as may properly come before the annual meeting or any adjournment
or postponement thereof.

THE PROXY HOLDERS WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN THE
MANNER INDICATED ON THE REVERSE SIDE HEREOF. UNLESS A CONTRARY DIRECTION IS
INDICATED, THE PROXY HOLDERS WILL VOTE SUCH SHARES "FOR" THE DIRECTOR
NOMINEES ON PROPOSAL 1 AND "FOR" PROPOSAL 2 SET FORTH ON THE REVERSE SIDE
HEREOF. IF ANY FURTHER MATTERS PROPERLY COME BEFORE THE ANNUAL MEETING, IT
IS THE INTENTION OF THE PERSONS NAMED ABOVE TO VOTE SUCH PROXIES IN
ACCORDANCE WITH THEIR BEST JUDGMENT.

________________________
Signature

Dated: __________________, 2002

In case of joint owners, each joint owner must sign. If signing for a
corporation or partnership or an agent, attorney or fiduciary, indicate the
capacity in which you are signing.

PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS ON THIS CARD
AND RETURN IN THE ENCLOSED ENVELOPE

--------------------------------------------------------------------------------

PREFERRED STOCK PROXY

RARE MEDIUM GROUP, INC.
44 WEST 18TH STREET, 6TH FLOOR, NEW YORK, NEW YORK 10011
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON DECEMBER 17, 2002

1. The election of two Class 3 directors, Glenn S. Meyers and William F.
Stasior, to the Board of Directors.

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY

FOR ALL NOMINEES EXCEPT AS NOTED BELOW:

____________________________________________________

2. The ratification of the appointment of KPMG LLP as the independent
auditors of the Company for the year ended December 31, 2002.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In the discretion of persons named above, to act upon such other
business as may properly come before the annual meeting or any adjournment
or postponement thereof.

________________________
Signature

Dated: __________________, 2002

In case of joint owners, each joint owner must sign. If signing for a
corporation or partnership or an agent, attorney or fiduciary, indicate the
capacity in which you are signing.

PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS ON THIS CARD
AND RETURN IN THE ENCLOSED ENVELOPE