<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Revised Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934*
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/ / Preliminary Proxy Statement /_/ Confidential, For Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted By
/_/ Definitive Additional Materials Rule 14a-6(e)(2))
/_/ Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
RARE MEDIUM GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/_/ Fee paid previously with preliminary materials:
/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the
<PAGE>
previous filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.
3) Filing Party:
4) Date Filed:
* This revised definitive proxy statement amends and restates Proposal II
contained in the Registrant's definitive proxy statement that was
previously filed by the Registrant on May 8, 2000.
2
<PAGE>
RARE MEDIUM GROUP, INC.
565 FIFTH AVENUE, 29TH FLOOR
NEW YORK, NEW YORK 10017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 15, 2000
To the holders of Common Stock and Series A Convertible Preferred Stock
(collectively, the "Stockholders") of Rare Medium Group, Inc., a Delaware
corporation (the "Company"):
Please take notice that an Annual Meeting of Stockholders (the "Annual
Meeting") of the Company will be held in the Forest Ballroom of the W Hotel, 541
Lexington Avenue, New York, NY 10022 on June 15, 2000, at 10:00 a.m., local
time, for the following purposes, all as more fully described in the attached
Proxy Statement:
1. To elect three (3) Class 1 Directors;
2. To ratify the amendments to the Company's 1998 Long-Term
Incentive Plan;
3. To ratify the appointment of KPMG LLP as the independent
auditors of the Company for the year ending December 31, 2000;
and
4. 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 the Annual
Meeting. The Board of Directors of the Company has fixed the close of business
on April 21, 2000 as the record date (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 the Record Date will be entitled to notice
of, and to vote at, the meeting or any postponement or adjournment thereof.
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 FORM OF PROXY. 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
Vice President, General Counsel
and Secretary
New York, New York
May 15, 2000
Important
Please complete, sign, date and promptly mail your proxy card.
<PAGE>
RARE MEDIUM GROUP, INC.
565 FIFTH AVENUE, 29TH FLOOR
NEW YORK, NEW YORK 10017
-------------------------------------------------------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 2000
-------------------------------------------------------------------------
This Proxy Statement and the accompanying proxy card are being
furnished to the holders (the "Stockholders") of the common stock, par value
$0.01 per share (the "Common Stock"), and Series A Convertible Preferred Stock,
par value $0.01 per share (the "Series A Preferred Stock"), of Rare Medium
Group, Inc. (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board of Directors") for use in
voting at the Annual Meeting of Stockholders to be held at the time and place
and for the purposes set forth in the accompanying Notice of Annual Meeting, and
any and all adjournments or postponements thereof (the "Annual Meeting"). This
Proxy Statement and the accompanying proxy card are first being mailed or
delivered to the Stockholders on or about May 15, 2000.
Only holders of Common Stock and Series A Preferred Stock of record on
the books of the Company at the close of business on April 21, 2000 (the "Record
Date") will be entitled to notice of, and to vote at, the Annual Meeting. On
that date, there were outstanding 49,617,118 shares of Common Stock and 924,837
shares of Series A Preferred Stock. The holders of a majority of the votes
entitled to vote at the Annual Meeting, present in person or represented by
proxy, will constitute a quorum for the transaction of business at the meeting.
Each share of Common Stock outstanding on the Record Date is entitled to one
vote on each matter which may be brought before the Annual Meeting. The holders
of the Series A Preferred Stock are entitled to an aggregate of 9,750,000 votes
as of such Record Date, or 10.54 votes per share of Series A Preferred Stock.
Other than the election of directors, which requires a plurality of the votes
cast, Proposals II and III submitted to the Stockholders require the affirmative
vote of the holders of a majority of the total number of votes of the capital
stock of the Company represented and entitled to vote at the Annual Meeting.
Only holders of Series A Preferred Stock will vote on the election of Michael S.
Gross as a Class 1 Director. Abstentions and broker non-votes will be counted
for purposes of determining whether a quorum is present at the meeting. In
determining the outcome of the election of directors, instructions withholding
authority and broker non-votes will not be taken into account and will have no
effect on the outcome of the vote. For purposes of tabulating the votes with
respect to Proposals II and III, abstentions will have the effect of a vote
"Against" such proposals and broker non-votes will not be taken into account and
will have no effect on the outcome of the vote.
It is expected that the solicitation of proxies will be primarily by
mail. Proxies also may be solicited personally or by telephone, telecopy,
telegraph or teletype by officers, directors or employees of the Company without
additional compensation. The total expense of preparing, assembling and mailing
proxy material and the Annual Report to Stockholders will be borne by the
Company. Such expense may also include reimbursement for out-of-pocket
disbursements incurred by brokerage houses and other custodians, nominees or
other fiduciaries for forwarding such documents to the Stockholders.
All proxies delivered pursuant to this solicitation are revocable by
giving written notice to the Secretary of the Company by the person executing
the proxy at any time before the voting thereof. On the accompanying proxy a
Stockholder may substitute the name of another person in place of those persons
presently named as proxies. In order to vote, a substitute must present adequate
identification to the Secretary before the voting occurs. Proxies given in the
form enclosed, unless previously revoked, will be voted at the Annual Meeting in
accordance with the instructions contained therein and, if no choice is
specified, will be voted in favor of the election of the three nominees for
director and for the proposals set forth herein and in the Notice of Annual
Meeting.
<PAGE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Annual Meeting......................................................................................... 1
Proposal I
Election of Directors.................................................................................... 2
Proposal II
Ratify the Amendments to the 1998 Long-Term Incentive Plan............................................... 8
Proposal III
Ratify the Appointment of KPMG LLP as the Independent Auditors of the Company for the Year Ended
December 31, 2000..................................................................................... 13
Security Ownership of Certain Beneficial Owners and Management............................................. 14
Executive Compensation..................................................................................... 16
Forward-Looking Statements................................................................................. 24
Other Business............................................................................................. 24
Stockholder Proposals...................................................................................... 24
Additional Information..................................................................................... 24
Annual Report on Form 10-K................................................................................. 24
</TABLE>
<PAGE>
[This page intentionally left blank]
<PAGE>
THE ANNUAL MEETING
DATE, TIME AND PLACE
This Annual Meeting is scheduled to be held at 10:00 a.m., local time,
on June 15, 2000, in the Forest Ballroom of the W Hotel, 541 Lexington Avenue,
New York, New York 10022.
PURPOSE
At the Annual Meeting the holders of the Common Stock and the Series A
Preferred Stock will be asked to consider and vote upon each of the following
matters:
1. The election of three Class 1 Directors;
2. The ratification of the amendments to the Company's 1998
Long-Term Incentive Plan;
3. The ratification of the appointment of KPMG LLP as the
independent auditors of the Company for the year ending
December 31, 2000; and
4. The transaction of such other business as may come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has unanimously voted for and approved the above
proposals and recommends a vote for approval of the election of the three
nominees for director set forth herein and for each of the above proposals by
the Stockholders entitled to vote at the Annual Meeting.
RECORD DATE
The Board of Directors has fixed the close of business on April 21,
2000 as the Record Date for the determination of Stockholders entitled to notice
of, and to vote at, the Annual Meeting. Only Stockholders of record at the close
of business on the Record Date will be entitled to notice of, and to vote at,
the Annual Meeting. On the Record Date, there were issued and outstanding
49,617,118 shares of Common Stock and 924,837 shares of Series A Preferred
Stock. Each holder of Common Stock entitled to vote at the Annual Meeting will
be entitled to one vote per share. The holders of the Series A Preferred Stock
are entitled to an aggregate 9,750,000 votes as of the Record Date, or 10.54
votes per share of Series A Preferred Stock. The holders of Common Stock and
Series A Preferred Stock will vote together as a single class on each matter
presented at the Annual Meeting, except that only the holders of Series A
Preferred Stock will vote on the election of Michael S. Gross as a Class 1
director.
QUORUM
The holders of a majority of the votes entitled to vote at the Annual
Meeting, present in person or represented by proxy, will constitute a quorum for
the transaction of business at the Annual Meeting. If a quorum is not present or
represented at the Annual Meeting, the holders of a majority of the shares
represented at the Annual Meeting shall have the power to adjourn the Annual
Meeting from time to time, without notice, other than by announcement at the
meeting, until a quorum is present or represented. At any such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the original meeting. If and when a quorum is
present or represented at the Annual Meeting or any adjournment thereof, the
Stockholders present or represented at the meeting may continue to transact
business until adjournment notwithstanding the withdrawal from the meeting of
Stockholders counted in determining the existence of a quorum.
REQUIRED VOTE
Other than the election of directors, which requires a plurality of the
votes cast, Proposals II and III submitted to the Stockholders require the
affirmative vote of the holders of a majority of the total number of votes of
the capital stock of the Company represented and entitled to vote at the Annual
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present at the meeting. In determining the
outcome of the election of directors, instructions withholding authority and
broker non-votes will not be taken into account and will have no effect on the
outcome of the vote. For purposes of tabulating the votes
<PAGE>
with respect to Proposals II and III, abstentions will have the effect of a vote
"Against" such proposals and broker non-votes will not be taken into account and
will have no effect on the outcome of the vote.
All votes cast by proxy or in person will be counted by a
representative of the American Stock Transfer & Trust Company, transfer agent
for the Common Stock, who will serve as the inspector of elections at the Annual
Meeting and who will separately tabulate affirmative votes, negative votes,
abstentions and broker non-votes for the election of directors and each
proposal. Broker non-votes occur where a broker holding stock in street name
votes the shares on some matters but not others. The missing votes are deemed to
be broker non-votes. The inspector of elections will treat broker non-votes as
shares that are present and entitled to vote for the purpose of determining the
presence of a quorum. However, for the purpose of determining the outcome of any
matter as to which the broker or nominee has indicated on the proxy that it does
not have discretionary authority to vote, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters).
As of the Record Date, directors and executive officers of the Company
and their affiliates had the right to vote approximately 16% of all votes
entitled to vote at the Annual Meeting. Such directors and executive officers of
the Company and their affiliates have indicated that they intend to vote all of
their shares "For" the election of each director nominee and each of the
proposals.
PROXIES
The enclosed proxies provide that each Stockholder may specify that his
or her shares be voted "For" the director nominees or to "Withhold Authority"
for the nominees and "For," "Against" or "Abstain" from voting with respect to
each of the proposals. All shares of Common Stock and Series A Preferred Stock
represented by properly executed proxies received prior to or at the Annual
Meeting and not revoked will be voted in accordance with the instructions
indicated in such proxies. Properly executed proxies that do not contain voting
instructions will be voted "For" approval of the election of each director
nominee and "For" approval of each of the other proposals. Stockholders are
urged to mark the box on the proxy to indicate how their shares of Common Stock
or Series A Preferred Stock are to be voted.
It is not expected that any matter other than those referred to herein
will be brought before the Annual Meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their own judgment with respect to such matters, unless authority to do so is
withheld in the proxy.
Any Stockholder who executes and returns a proxy may revoke such proxy
in writing at any time before it is voted at the Annual Meeting by: (i) filing
with the Secretary of the Company, at 565 Fifth Avenue, 29th Floor, New York,
New York 10017, written notice of such revocation bearing a later date than the
proxy or a subsequent, later dated and signed proxy relating to the same shares;
or (ii) attending the Annual Meeting and voting in person (although attendance
at the Annual Meeting will not in and of itself constitute revocation of a
proxy).
The cost of this solicitation of proxies will be borne by the Company.
Directors, officers and regular employees of the Company may solicit proxies in
person, by telephone, by telecopy, by mail or by other means of communication,
but such persons will not be specifically compensated for such services. The
Company will reimburse American Stock Transfer & Trust Company for forwarding
proxy materials to beneficial owners and serving as inspectors of election. The
Company has retained Morrow & Co. to assist it in the solicitation of proxies
and will pay Morrow & Co. a fee of approximately $12,000. The total estimated
cost for this solicitation is approximately $50,000.
PROPOSAL I
ELECTION OF DIRECTORS
At the Special Meeting of Stockholders held on March 16, 1999, the
Stockholders approved an amendment to the Company's Certificate of Incorporation
establishing a classified Board of Directors, divided into three classes having
staggered terms of three years each. Pursuant to Article Ninth of the
Certificate of Incorporation, which was approved by the Stockholders at such
Special Meeting, and Article III, Section 1 of the Amended and Restated By-Laws
of the Company, the Board of Directors may determine, with certain limitations,
the total
2
<PAGE>
number of directors and the number of directors to be elected at any Annual
Meeting of Stockholders or special meeting in lieu thereof. The Board of
Directors has currently fixed the total number of directors at seven, consisting
of three Class 1 directors, two Class 2 directors and two Class 3 directors. The
number of directors is subject to increase to eight as contemplated by the
Amended and Restated Securities Purchase Agreement, dated June 4, 1999 (the
"Securities Purchase Agreement with Apollo"), by and among the Company and
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and AIF
IV/RRRR LLC (hereinafter collectively referred to as the "Apollo Stockholders"
or the "Preferred Stockholders"). On June 4, 1999, the Apollo Stockholders
designated Andrew Africk as their Preferred Stock Director pursuant to the
Certificate of Designations governing the Series A Preferred Stock (the
"Certificate of Designations") and Mr. Africk now serves as a Class 2 director
at the discretion of the Preferred Stockholders. On August 19, 1999, following
stockholder approval of the transactions pursuant to which the Series A
Preferred Stock was issued, the Apollo Stockholders designated Michael S. Gross
as their second Preferred Stock Director pursuant to the Certificate of
Designations and Mr. Gross now serves as a Class 1 director at the discretion of
the Preferred Stockholders. Although Mr. Rowan is a Class 1 nominee, and is
affiliated with the Apollo Stockholders, he has not been designated by the
Apollo Stockholders. The term of the Class 1 directors expires at the Annual
Meeting and until their successors are duly elected and qualified. The Class 2
directors have a term expiring at the 2001 annual meeting of Stockholders and
until their successors are duly elected and qualified. The Class 3 directors
have terms expiring at the 2002 annual meeting of Stockholders and until their
successors are duly elected and qualified.
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.
INFORMATION WITH RESPECT TO DIRECTOR NOMINEES
Listed below are the nominees for Class 1 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 1 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.
<TABLE>
<CAPTION>
NAME AGE CLASS POSITION DIRECTOR SINCE
- -------------------------------------------------------------------------- --- ----- -------- --------------
<S> <C> <C> <C> <C>
Class 1 nominees to be elected by Common Stockholders:
Jeffrey M. Killeen........................................................ 46 1 Director 1998
Marc J. Rowan............................................................. 37 1 Director 1999
Class 1 nominee to be elected by Preferred Stockholders:
Michael S. Gross.......................................................... 38 1 Director 1999
</TABLE>
CLASS 1 NOMINEES
Jeffrey M. Killeen. Mr. Killeen has been a director of the Company
since October 1998. Mr. Killeen has been the Chief Executive Officer of
Forbes.com, the on-line division of Forbes magazine, since August 1999. Prior to
that, Mr. Killeen was the Chief Operating Officer of barnesandnoble.com, an
e-commerce company, from January 1998 to March 1999. Before joining
barnesandnoble.com, Mr. Killeen served as President and Chief Executive Officer
of Pacific Bell Interactive Media from August 1994 to January 1998.
Marc J. Rowan. Mr. Rowan 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.) and of Lion Advisors, L.P. (a financial advisor to, and representative
of institutional investors with respect to, securities
3
<PAGE>
investments). 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 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. and of Lion Advisors, L.P. Mr. Gross is also a director of Allied
Waste Industries, Inc., Breuners Home Furnishing, Inc., Clark Enterprises Inc.,
Converse, Inc., Florsheim Group, Inc., United Rentals, Inc., Encompass Services
Corporation and Saks Incorporated.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE CLASS I
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.
<TABLE>
<CAPTION>
NAME AGE CLASS POSITION DIRECTOR SINCE
- ------------------------------------------------------------- --- ----- ------------------ --------------
<S> <C> <C> <C> <C>
Glenn S. Meyers.............................................. 39 3 Chairman and Chief 1998
Executive
Officer
William F. Stasior........................................... 59 3 Director 2000
Richard T. Liebhaber......................................... 65 2 Director 1998
Andrew D. Africk............................................. 33 2 Director 1999
</TABLE>
Glenn S. Meyers. Mr. Meyers, a Class 3 director, is the co-founder,
Chairman and Chief Executive Officer of the Company. He is also Chairman and
Chief Executive Officer of the Company's wholly-owned subsidiary, Rare Medium,
Inc. and has been a member of the Company's Board of Directors as well as the
Company's Chief Executive Officer since April 1998. Prior to joining Rare
Medium, Inc. in September 1996, Mr. Meyers was President of Brookridge Capital
Management, an Internet venture capital firm from 1994 to September 1996. Mr.
Meyers is also a director of L90, Inc.
William F. Stasior. Mr. Stasior joined the Board of Directors in April
2000 as a Class 3 director, replacing Steven Winograd upon Mr. Winograd's
resignation. 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 and Emerging Vision Inc., an optical retailer.
Richard T. Liebhaber. Mr. Liebhaber, a Class 2 director, has been a
member of the Board of Directors since June 1998. Mr. Liebhaber has been a
Managing Director of Veronis, Suhler & Associates, Inc., the New York media
merchant banking firm, since June 1, 1995. In addition, Mr. Liebhaber is
currently a member of the following boards of directors: Qwest Communications,
Inc., Advanced Radio Telecommunications, AVICI Systems, Inc., Internet
Communications Corporation, and Alcatel USA, Inc. Mr. Liebhaber also serves as a
consultant and member of the Advisory Board of Corning, Inc.
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. and of Lion Advisors, L.P. Mr. Africk is also a director of
Continental Graphics Holdings, Inc. and Encompass Services Corporation, as well
as several private venture companies.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held five (5) meetings during the year ended
December 31, 1999. Each director attended all of the meetings of the Board of
Directors.
The Board of Directors has an Audit Committee and a Compensation
Committee which meet as the need arises. 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 Executive Vice President and Chief Financial Officer, 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 four
(4) times during the year ended December 31, 1999. The Audit Committee met on
February 14, 2000, with the Company's auditors to discuss the results of the
1999 audit. During the last fiscal year, the Audit Committee was composed of
Steven Winograd, Richard T. Liebhaber and Andrew D. Africk. In April 2000, Mr.
Winograd resigned as director and Mr. Stasior replaced Mr. Winograd on the Board
of Directors. The Audit Committee is currently composed of Richard T. Liebhaber
and Andrew D. Africk. The Compensation Committee met once during the year ended
December 31, 1999 on August 30, 1999. Prior to that meeting, the Board of
Directors as a whole considered, and from time to time considers, matters
relating to Executive Compensation. The Compensation Committee periodically
reviews and evaluates the compensation of the Company's officers and administers
grants of options from the Company's Equity Participation Plan, Nonqualified
Stock Option Plan, the Amended and Restated Equity Plan for Directors and the
Company's 1998 Long-Term Incentive Plan. 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.
Under the Company's 1998 Long-Term Incentive Plan, each new
non-employee director of the Company is automatically granted an option to
purchase shares of Common Stock as of the effective date of the non-employee
director's initial election to the Board of Directors and thereafter at the
close of business on the date of final adjournment of each Annual Meeting of
Stockholders. The number of shares of Common Stock subject to each initial
option will be 25,000 shares and the number of shares subject to each annual
option will be 25,000 shares or, if so determined by the Board of Directors,
such other number of shares specified in the most recent resolution of the Board
of Directors adopted on or prior to the date of the Annual Meeting of
Stockholders that coincides with or most recently precedes the date of grant of
the option. In general, the exercise price per share of Common Stock purchasable
upon exercise of a non-employee director's initial or annual option 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 directors of the Company in 1998, each of Steven Winograd
and Jeffrey M. Killeen was granted an option to purchase 75,000 shares of Common
Stock on October 28, 1998 under the Amended and Restated Equity Plan for
Directors, exercisable at $1.9375 per share, the fair market value of the Common
Stock on the date of grant. Richard T. Liebhaber was granted an option to
purchase 75,000 shares of Common Stock on November 2, 1998 under the Amended and
Restated Equity Plan for Directors, exercisable at $2.8125 per share, the fair
market value of the Common Stock on the date of grant. All of these options vest
ratably over three years. It is anticipated that future grants of stock options
to directors will principally be made under the Company's 1998 Long-Term
Incentive Plan.
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 75,000 shares of
Common Stock under the 1998 Long-Term Incentive Plan, exercisable at $7.00 per
share, both of which vest ratably over three years. Upon becoming a director of
the Company as of August 19, 1999, Michael S. Gross was granted an option to
purchase 75,000 shares of Common Stock under the 1998 Long-Term Incentive Plan,
exercisable at $7.00 per share, which vests ratably over three years.
5
<PAGE>
EXECUTIVE OFFICERS
The names of the Company's executive officers, and certain information
about them, is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION OFFICER SINCE
- --------------------------------------------------- ---- ------------------------------------- -------------
<S> <C> <C> <C>
Glenn S. Meyers.................................... 39 Chairman and Chief Executive Officer 1998
Suresh V. Mathews.................................. 45 President and Chief Operating Officer 1999
Jeffrey J. Kaplan.................................. 51 Executive Vice President and 1999
Chief Financial Officer
Robert C. Lewis.................................... 35 Vice President, General Counsel 1998
and Secretary
Craig C. Chesser................................... 39 Vice President and Treasurer 1998
Michael A. Hultberg................................ 34 Vice President and Controller 1999
</TABLE>
Glenn S. Meyers--Chairman and Chief Executive Officer. Mr. Meyers is
the co-founder, Chairman and Chief Executive Officer of the Company. He is also
Chairman and Chief Executive Officer of the Company's wholly-owned subsidiary,
Rare Medium, Inc. and has been a member of the Company's Board of Directors as
well as the Company's Chief Executive Officer since April 1998. Prior to joining
Rare Medium, Inc. in September 1996, Mr. Meyers was President of Brookridge
Capital Management, an Internet venture capital firm from 1994 to September
1996. Mr. Meyers is also a director of L90, Inc.
Suresh V. Mathews--President and Chief Operating Officer. Mr. Mathews
was appointed the Company's President and Chief Operating Officer in April 2000.
Mr. Mathews has also been the President and Chief Operating Officer of the
Company's wholly-owned subsidiary, Rare Medium, Inc. since January 1999. Prior
to joining Rare Medium, Inc., Mr. Mathews was Senior Vice President and Chief
Information Officer of Quaker State Corporation from June 1991 to December 1998.
Jeffrey J. Kaplan--Executive Vice President and Chief Financial
Officer. Mr. Kaplan has been the Company's Executive Vice President and Chief
Financial Officer since September 1999. Mr. Kaplan served as Executive Vice
President, Chief Financial Officer and Director of Safety Components
International, Inc., a leading manufacturer of airbag cushions and fabric from
February 1997 to August 1999. From October 1993 to February 1997, Mr. Kaplan
served as Executive Vice President, Chief Financial Officer and Director of
International Post Limited, a leading provider of post-production services for
commercial and advertising markets.
Robert C. Lewis--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. 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--Vice President and Treasurer. Mr. Chesser has been a Vice
President of the Company since July 1998 and has been 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--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
APOLLO SECURITIES PURCHASE AND CONVERSION
On June 4, 1999, the Company issued and sold to the Apollo
Stockholders, for an aggregate purchase price of $87.0 million, 126,000 shares
of Series A Preferred Stock, 126,000 Series 1-A warrants, 1,916,994 Series 2-A
warrants, 744,000 shares of Series B Convertible Preferred Stock, 744,000 Series
1-B warrants and 10,345,548 Series 2-B warrants.
6
<PAGE>
Under the terms of the Securities Purchase Agreement with the Apollo
Stockholders, at the 1999 annual meeting of Stockholders held on August 19,
1999, the holders of Common Stock approved the conversion of all of the Series B
Convertible Preferred Stock, Series 1-B warrants and Series 2-B warrants,
including the additional Series B securities that have been issued as dividends,
into like amounts of Series A Preferred Stock, Series 1-A warrants and Series
2-A warrants, respectively. Pursuant to the approval, all Series B Convertible
Preferred Stock, Series 1-B warrants and Series 2-B warrants were converted into
Series A Preferred Stock, Series 1-A warrants and Series 2-A warrants,
respectively. The Series A securities are convertible into or exercisable for
voting Common Stock whereas the Series B securities were convertible into or
exercisable for non-voting Common Stock.
From time to time the Company has provided, and may in the future
provide, internet related professional advisory and consultative services in the
ordinary course of business and on terms believed to be comparable to those
obtainable by third parties to portfolio companies in which the Apollo
Stockholders have an investment or in which they have considered investing. In
addition, in March 2000 the Company committed up to $2,806,000 to a special
purpose investment vehicle and on terms coincident with those of the other
investors therein, who were principals of Apollo Advisors IV, L.P., for the
purpose of making securities investments.
TRANSACTIONS WITH BEAR, STEARNS & CO. INC.
Pursuant to an agreement dated April 12, 1999, the Company retained
Bear Stearns as its financial advisor to provide investment banking services,
including advisory services in connection with the investment transaction
consummated pursuant to the Securities Purchase Agreement with the Apollo
Stockholders for which it has received a fee of $2,392,500. In addition, as
acknowledged by the terms of the agreement with Bear Stearns, an affiliate of
Bear Stearns has invested, indirectly, $10,000,000 in the securities of the
Company in the transaction consummated with Apollo Investment Fund IV, L.P and
the other Preferred Stockholders pursuant to the Securities Purchase Agreement
with the Apollo Stockholders. Steven Winograd, a director of the Company until
April 2000, invested $250,000 in the Company through AIF IV/RRRR LLC, one of the
Apollo Stockholders.
In addition, the Company paid Bear Stearns a fee of $600,000 plus
expenses, for investment banking services that it rendered in connection with
the private placement of 2,500,000 shares of Common Stock in January 2000 and a
fee of $500,000 plus expenses for investment banking services rendered in
connection with the acquisition of two of the Company's Internet professional
services subsidiaries in December 1999. Steven Winograd, a director of the
Company until April 2000, was also a Senior Managing Director at Bear Stearns
until April 2000.
EMPLOYMENT AGREEMENTS
For a description of the employment agreements between the Company and
certain executive officers, please see the descriptions under the heading
"Executive Compensation--Employment Contracts and Change-in-Control
Arrangements."
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), 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 (the "SEC") 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 SEC 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 and written representations that no other
reports were required, the Company believes that during the year ended December
31, 1999, its officers, directors and greater-than-10% stockholders complied
with all Section 16(a) filing requirements, with the exception of late filings
of Initial Statements of Beneficial Ownership of Securities on Form 3 for each
of Suresh V. Mathews, Jeffrey J. Kaplan, Craig C. Chesser and Michael A.
Hultberg. Such forms were subsequently filed with the SEC.
7
<PAGE>
PROPOSAL II
RATIFY THE AMENDMENTS TO THE 1998 LONG-TERM INCENTIVE PLAN
The Board recommends that the Stockholders ratify an amendment to the
Company's 1998 Long-Term Incentive Plan (the "Plan") to: (i) increase the number
of shares of Common Stock available for issuance under the Plan from 8,000,000
shares to 23,000,000 shares; (ii) provide that no participant in the Plan may be
granted options and stock appreciation rights ("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 (iii) provide that all
options and SARs will terminate no later than the tenth anniversary of the date
of grant. Under the Plan prior to its amendment: (i) there were 8,000,000 shares
reserved for issuance under the Plan; (ii) no participant could be granted
options in any one year for more than 400,000 shares or other awards for more
than 200,000 shares, and (iii) the option expiration date would be determined in
the discretion of the Committee (as defined below). In the event that the
Stockholders do not approve the amendment: (i) the number of shares of Common
Stock reserved for issuance under the Plan will increase from 8,000,000 to
15,500,000 (rather than 23,000,000 under the amendment) and (ii) certain options
granted under the Plan will not qualify for treatment as incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") (see "Certain Federal Income Tax Consequences - Incentive
Stock Options").
THE PLAN
The purpose of the Plan, which was adopted on May 6, 1998 by the Board
and ratified by the Stockholders on March 16, 1999, is to enable the Company to
compete successfully in attracting, retaining, motivating and rewarding
executive officers, key employees, directors and consultants of and service
providers to the Company and its subsidiaries and to enable such persons to
acquire or increase their proprietary interest in the Company, thereby promoting
a closer identity of interests between such persons and the Stockholders. The
Board believes that the Plan increases the Company's flexibility in furthering
such purposes. The Plan provides for the grant of ISOs, non-qualified stock
options ("NSOs"), stock appreciation rights ("SARs"), restricted stock awards,
deferred stock awards, bonus stock awards, dividend equivalents and other types
of stock-based awards. Awards granted under the Plan may, at the discretion of
the Committee (as defined below) be granted alone or in addition to, in tandem
with or in substitution for any other award granted under the Plan. Executive
officers and key employees of the Company and its subsidiaries, including any
director or officer who is also an executive officer or key employee; directors
of the Company; and persons who provide consulting or other services to the
Company deemed by the Committee to be of substantial value to the Company, are
eligible to be granted awards under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Compensation Committee of the Board
(the "Committee"). The Committee has the full authority, in its sole discretion,
among other things, to interpret the Plan, to establish from time to time
regulations for the administration of the Plan and to determine the persons to
whom awards will be granted and the terms of the awards. In appointing members
to the Committee, the Board will consider whether each member will qualify as a
"non-employee director" within the meaning of Rule 16 b-3 ("Rule 16 b-3") under
the 1934 Act and as an "outside director" within the meaning of Treasury
Regulation Section 1.162-27(e)(3) under Section 162(m) of the Code, but such
members are not required to so qualify at the time of appointment or during
their term of service on the Committee. The Board will perform the functions of
the Committee for purposes of granting awards to non-employee directors, and the
Board may perform any function of the Committee under the Plan for any other
purpose, including without limitation, for the purpose of ensuring that
transactions under the Plan by participants who are then subject to Section 16
of the 1934 Act in respect of the Company are exempt under Rule 16 b-3.
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<PAGE>
STOCK OPTIONS
The Committee is authorized to grant awards of options, including ISOs
and NSOs. The exercise price per share of Common Stock purchasable under an
option will be determined by the Committee; provided, however, that such
exercise price must be at least 100% of the fair market value of such shares of
Common Stock on the date the option is granted. The Committee will determine the
date or dates at which an option may be exercised in whole or in part, the
methods by which the exercise price may be paid or deemed to be paid, the form
of such payment, including, without limitation, cash, shares of Common Stock,
other awards, other property or through "cashless exercise arrangements" (to the
extent permitted by applicable law), and the methods by which Common Stock will
be delivered or deemed to be delivered to participants. The term of an option
granted under the Plan will be for such period as may be determined by the
Committee; provided, however, that in no event will the term of any ISO or any
SAR granted in tandem therewith exceed a period of ten years from the date of
grant (or such shorter period as may be applicable under Section 422 of the
Code).
The terms of any ISO granted under the Plan shall comply in all
respects with the provisions of Section 422 of the Code. No ISO will be granted
more than ten years after the effective date of the Plan. No ISO will be granted
to any employee who immediately after the grant would own more than 10% of the
total combined voting power or value of all classes of capital stock of the
Company, or any subsidiary of the Company, unless the option price is at least
110% of the fair market value of the shares of Common Stock subject to the
option, and the option on the date of grant shall expire not later than five
years from the date the option is granted. In addition, the aggregate fair
market value of the shares of Common Stock, determined at the date of grant,
with respect to which ISOs are exercisable for the first time by a participant
during any calendar year, shall not exceed $100,000.
NON-EMPLOYEE DIRECTOR OPTIONS
Non-employee directors of the Company are eligible for automatic grants
of NSOs under the Plan. A non-employee director will automatically be granted an
initial option covering 25,000 shares of Common Stock as of the effective date
of the non-employee director's initial election to the Board. In addition,
unless an alternative arrangement has been made, a non-employee director will
automatically be granted an option covering 25,000 shares of Common Stock at the
close of business on the date of final adjournment of each annual meeting of
stockholders of the Company, to the extent such non-employee director then
qualifies as a non-employee director. Each option granted to a non-employee
director will have an exercise price equal to the fair market value of the
shares of Common Stock on the date of grant and will expire at the earlier of
ten years from the date of grant or one year after the date the non-employee
director ceases to serve as a director of the Company for any reason. Each
option granted to a non-employee director may be exercised, prior to expiration,
commencing one year after the date of grant, or at such earlier date as may be
specified by the Board; provided, however, that an option may be exercised
following a non-employee director's termination of service as a director for
reasons other than death or disability, but only if the non-employee director
served for, at least, eleven months after the date of grant or the option was
otherwise exercisable at the date of termination of service. The exercise price
of an option granted to a non-employee director may be paid in cash or by
surrender of shares of Common Stock already owned by the non-employee director
(except for shares acquired from the Company by exercise of an option less than
six months before the date of surrender) having a fair market value at the time
of exercise equal to the exercise price, or by a combination of cash and shares.
The other terms of the options granted to non-employee directors will be
consistent with the terms of stock options granted to employees.
STOCK APPRECIATION RIGHTS
The Committee is authorized to grant awards of SARs. An SAR granted to
a participant will confer upon such participant a right to receive upon exercise
the excess of the fair market value of one share of Common Stock on the date of
exercise (or, if the Committee shall so determine in the case of an SAR that is
not related to an ISO, during a specified period before or after the date of
exercise) over the exercise price of the SAR as determined by the Committee as
of the date of grant, which will not be less than the fair market value of one
share of Common Stock on the date of grant. The Committee will determine the
date, or dates, at which an SAR may be exercised in whole or in part, the method
of exercise, method of settlement, form of consideration payable in settlement,
method by which Common Stock will be delivered or deemed to be delivered to a
participant, whether an SAR will be in tandem with any other award, and any
other terms and conditions of any
9
<PAGE>
SAR. An SAR designated as a "limited SAR" may only be exercised upon the
occurrence of certain events constituting a "change in control" of the Company
as defined in the Plan. Limited SARs may be either freestanding or issued in
tandem with other awards.
RESTRICTED STOCK AWARDS
The Committee is authorized to grant awards of Common Stock that are
subject to restrictions on transferability and other restrictions imposed by the
Committee. Except to the extent restricted under the award agreement relating to
the restricted stock, a participant granted restricted stock will have all the
rights of a stockholder of the Company. Except as otherwise determined by the
Committee, upon termination of a participant's employment or service during the
applicable restricted period, the restricted stock granted to such participant
that is at that time subject to restrictions will be forfeited and reacquired by
the Company; provided, however, that the Committee may provide, by rule or
regulation or in any award agreement, or may determine in an individual case,
that restrictions or forfeiture conditions relating to the restricted stock will
be waived in whole or in part in the event of termination resulting from
specified causes.
DEFERRED STOCK AWARDS
The Committee is authorized to grant awards of Common Stock that are
subject to restrictions on transferability and other restrictions imposed by the
Committee. Delivery of the shares of Common Stock will occur upon the expiration
of the deferral period applicable to the deferred stock, as determined by the
Committee. Except as otherwise determined by the Committee, upon termination of
a participant's employment or service during the applicable deferral period, the
deferred stock granted to such participant that is at that time subject to
forfeiture conditions will be forfeited; provided, however, that the Committee
may provide, by rule or regulation or in any award agreement, or may determine
in an individual case, that restrictions or forfeiture conditions relating to
the deferred stock will be waived in whole or in part in the event of
termination resulting from specified causes.
BONUS STOCK AWARDS
The Committee is authorized under the Plan to grant shares of Common
Stock as a bonus, or to grant shares of Common Stock or other awards in lieu of
Company obligations to pay cash under other plans or compensatory arrangements.
DIVIDEND EQUIVALENTS
The Committee is authorized under the Plan to grant dividend
equivalents entitling a participant to receive cash, shares of Common Stock or
other property equal in value to dividends paid with respect to a specified
number of shares of Common Stock. Dividend equivalents may be awarded on a
free-standing basis or in connection with another award.
OTHER STOCK-BASED AWARDS
The Committee is authorized under the Plan, subject to limitations
under applicable law, to grant other stock-based awards that may be denominated,
payable in, or valued in whole or in part or by reference to, or otherwise based
on, or related to, shares of Common Stock and factors that may influence the
value of Common Stock as deemed by the Committee to be consistent with the
purposes of the Plan.
ACCELERATION UPON A CHANGE IN CONTROL
Unless otherwise provided by the Committee in an award agreement, all
conditions and restrictions relating to an award granted under the Plan,
including limitations on exercisability, risks of forfeiture, deferral periods
and conditions and restrictions requiring the continued performance of services
or the achievement of performance objectives with respect to the exercisability
or settlement of such award, shall immediately lapse upon the occurrence of
certain events constituting a change in control of the Company.
10
<PAGE>
TRANSFERABILITY
Except as otherwise determined by the Committee, and in any event in
the case of an ISO and stock appreciation rights in tandem therewith, no award
granted under the Plan is transferable by a participant, except by will or the
laws of descent and distribution, and, in the case of ISOs and SARs in tandem
therewith, will be exercisable during the lifetime of a participant only by such
participant or his or her guardian or legal representative.
AMENDMENT; TERMINATION
The Board may amend, alter, suspend, discontinue or terminate the Plan
or the Committee's authority to grant awards under the Plan without the consent
of the Stockholders or participants thereunder, except that any such action
shall be subject to the approval of the Stockholders at or before the next
annual meeting of Stockholders for which the record date is after such Board
action if such Stockholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the Stock may then be listed or quoted, and the Board may otherwise, in
its discretion, determine to submit such other changes to the Plan to the
Stockholders for approval; provided, however, that, without the consent of an
affected participant, no such action may materially impair the rights of such
participant under any award theretofore granted to him or her. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue, or
terminate any award theretofore granted and any award agreement relating
thereto; provided, however, that without the consent of an affected participant,
no such action may materially impair the rights of such participant under such
award.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax
consequences to participants of the Plan of the grant and exercise of NSOs and
ISOs. This discussion does not address all aspects of taxation relating to the
NSOs and ISOs that may be relevant to particular holders in light of their
personal investment or tax circumstances and does not discuss any state, local
or foreign tax issues. This discussion is based on the Code as currently in
effect and on applicable Treasury regulations and judicial and administrative
interpretations, all of which are subject to change possibly with retroactive
effect. It is recommended that holders of NSOs or ISOs consult their tax
advisers before exercise of any such stock option and before disposing of any
shares of Common Stock acquired upon the exercise thereof. Different rules may
apply in the case of a participant subject to Section 16 of the Exchange Act.
Nonqualified Stock Options
A participant generally will not be taxed upon the grant of an NSO.
Rather, at the time of exercise of such NSO (and in the case of an untimely
exercise of an ISO), the participant will recognize ordinary income for federal
income tax purposes in an amount equal to the excess of the fair market value of
the Common Stock purchased over the option price. A participant's holding period
with respect to the Common Stock will begin on the date of exercise. The Company
will generally be entitled to a tax deduction at such time and in the same
amount that the participant recognizes ordinary income.
If shares of Common Stock acquired upon exercise of an NSO (or upon
untimely exercise of an ISO) are later sold or exchanged, then the difference
between the amount realized on such sale and the fair market value of such
Common Stock on the date that ordinary income was recognized with respect
thereto will generally be taxable as long-term or short-term capital gain or
loss (if the Common Stock is a capital asset of the participant) depending upon
the length of time such shares were held by the participant.
Incentive Stock Options
A participant will not be subject to tax upon either the grant of an
ISO or upon a timely exercise of an ISO. Exercise of an ISO will be timely if
made during its term and if the participant remains an employee of the Company
or a subsidiary at all times during the period beginning on the date of grant of
the ISO and ending on the date three months before the date of exercise (or one
year before the date of exercise in the case of a disabled participant).
Exercise of an ISO will also be timely if made by the legal representative of a
participant who dies (i) while in the employ of the Company or a subsidiary or
(ii) within three months after termination of employment. The tax consequences
of an untimely exercise of an ISO will be determined in accordance with the
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rules applicable to NSOs described above. (See "Certain Federal Income Tax
Consequences--Nonqualified Stock Options.")
If the Common Stock acquired pursuant to the timely exercise of an ISO
is later disposed of, the participant will, except as noted below, recognize
long-term capital gain or loss (if the stock is a capital asset of the
participant) equal to the difference between the amount realized on such sale
and the option price. The Company, under these circumstances, will not be
entitled to any federal income tax deduction in connection with either the
exercise of the ISO or the sale of such Common Stock by the participant.
If, however, the Common Stock acquired pursuant to the exercise of an
ISO is disposed of by the participant prior to the expiration of two years from
the date of grant of the ISO or within one year from the date such stock is
transferred to him upon exercise (a "disqualifying disposition"), any gain
realized by the participant will generally be subject to tax at the time of such
disqualifying disposition as follows: (i) at ordinary income rates to the extent
of the difference between the option price and the lesser of the fair market
value of the Common Stock on the date the ISO is exercised and the amount
realized on such disqualifying disposition and (ii) if the Common Stock is a
capital asset of the participant, as short-term or long-term capital gain to the
extent of any excess of the amount realized on such disqualifying disposition
over the fair market value of the stock on the date which governs the
determination of the participant's ordinary income. In such case, the Company
may claim a federal income tax deduction at the time of such disqualifying
disposition for the amount taxable to the participant as ordinary income. Any
capital gain recognized by the participant will be long-term or short-term
capital gain, depending upon whether the disqualifying disposition occurs more
than one year after the date of exercise.
The amount by which the fair market value of the stock on the exercise
date of an ISO exceeds the option price will generally be an item of adjustment
for purposes of the "alternative minimum tax" imposed by Section 55 of the Code.
Exercise with Shares
According to a published ruling of the Internal Revenue Service, a
participant who pays the option price upon exercise of an NSO, in whole or in
part, by delivering shares of Common Stock already owned by the participant will
recognize no gain or loss for federal income tax purposes on the shares
surrendered, but will otherwise be subject to tax according to the rules for
NSOs described above. (See "Certain Federal Income Tax
Consequences--Nonqualified Stock Options.") With respect to shares acquired upon
exercise which are equal in number to the shares surrendered, the basis of such
shares will be equal to the basis of the shares surrendered, and the holding
period of the shares acquired will include the holding period of the shares
surrendered. The basis of additional shares received upon exercise will be equal
to the fair market value of such shares on the date of exercise, and the holding
period for such additional shares will commence on such date.
The Treasury Department has issued proposed regulations that, if
adopted in their current form, would appear to provide for the following rules
with respect to the exercise of an ISO by surrender of previously owned shares
of Common Stock. If the shares surrendered in payment of the exercise price of
an ISO are "statutory option stock" (including stock acquired pursuant to the
exercise of an ISO) and if, at the date of surrender, the applicable holding
period for ISOs has not been met, such surrender will constitute a
"disqualifying disposition" and any gain realized on such transfer will be
subject to tax, as discussed above. (See "Certain Federal Income Tax
Consequences--Incentive Stock Options.") Otherwise, when shares of Common Stock
are surrendered upon exercise of an ISO, in general, (i) no gain or loss will be
recognized as a result of the exchange, (ii) the number of shares received that
is equal in number to the shares surrendered will have a basis equal to the
shares surrendered and (except for purposes of determining whether a disposition
will be a disqualifying disposition) will have a holding period that includes
the holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins on
the date of the exchange. If any of the shares of Common Stock received are
disposed of within two years of the date of grant of the ISO or within one year
after exercise, the shares of Common Stock with the lowest basis will be deemed
to be disposed of first, and such disposition will be a disqualifying
disposition giving rise to ordinary income as discussed above.
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REQUIRED VOTE
The affirmative vote of the holders of a majority of the total number
of the votes of the capital stock of the Company represented and entitled to
vote at the Annual Meeting is required to approve this Proposal II.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
AMENDMENTS TO THE 1998 LONG-TERM INCENTIVE PLAN.
PROPOSAL III
RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2000
The firm of KPMG LLP, independent accountants, audited the financial
statements of the Company for the year ended December 31, 1999. 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, 2000. 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 III.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS REAPPOINTED, AND RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF, KPMG LLP AS INDEPENDENT AUDITORS FOR THE
YEAR ENDED DECEMBER 31, 2000.
In compliance with Item 304 of Regulation S-K and as reported in the
Company's Current Report on Form 8-K dated August 13, 1998, and filed with the
Securities and Exchange Commission on August 20, 1998, the Company provides the
following information:
1. The Board of Directors of the Company on August 13, 1998 chose
KPMG LLP to perform the auditing engagement for the Company.
2. In their report dated March 20, 1998, PriceWaterhouseCoopers
("PWC") expressed an opinion that the December 31, 1997
financial statements were prepared assuming that the Company
will continue to exist as a going concern and that the Company
incurred losses accumulating to $54,184,410 through December
31, 1997. This factor, among others, raised substantial doubt
about the Company's ability to continue as a going concern.
Other than the above, the reports of PWC on the Company's
financial statements for the fiscal years 1997 and 1998 did
not in either case contain an adverse opinion or a disclaimer
of opinion, nor were either of the same qualified or modified
as to uncertainty, audit scope or accounting principles.
3. The decision to change accountants was approved by the Board
of Directors of the Company.
4. During the Company's 1997 and 1998 fiscal years there were no
disagreements with PWC on any matter of accounting principles
or practices, financial statement disclosure, or auditing
scope or procedure.
5. None of the events referred to in paragraphs (a)(1)(v)(A)
through (D) of Item 304 occurred within the Company's two most
recent fiscal years or any subsequent interim period.
6. KPMG LLP was engaged by the Company on August 13, 1998. The
Company did not consult KPMG LLP on any of the matters
described in Items 304(a)(1)(iv) or 304 (a)(1)(v) of
Regulation S-K.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information, as
of April 21, 2000, 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE
NAME AND ADDRESS POSITION BENEFICIALLY OWNED(1) OF CLASS
- -------------------------------------- -------------------------------------- --------------------- ----------
<S> <C> <C> <C>
Glenn S. Meyers....................... Chairman and Chief Executive Officer 266,666 * (2)
Suresh V. Mathews..................... President and Chief Operating Officer 250,000 * (3)
Jeffrey J. Kaplan..................... Executive Vice President and Chief -- * (4)
Financial Officer
Robert C. Lewis....................... Vice President, General Counsel and 57,500 * (5)
Secretary
Craig C. Chesser...................... Vice President and Treasurer 16,666 * (6)
Michael A. Hultberg................... Vice President and Controller -- * (7)
John S. Gross......................... Former Sr. Vice President and CFO -- *
Jeffrey M. Killeen.................... Director 25,000 * (8)
Steven Winograd....................... Director (9) 25,000 * (8)(10)
Richard T. Liebhaber.................. Director 25,000 * (11)
Andrew D. Africk ..................... Director 37,984,871 43.4%(12)
c/o Rare Medium Group, Inc.
565 Fifth Avenue, 29th Floor
New York, New York 10017
Marc. J. Rowan ....................... Director 37,984,871 43.4 (13)
c/o Rare Medium Group, Inc.
565 Fifth Avenue, 29th Floor
New York, New York 10017
Michael S. Gross ..................... Director 37,959,871 43.3 (14)
c/o Rare Medium Group, Inc.
565 Fifth Avenue, 29th Floor
New York, New York 10017
Pilgrim Baxter & Associates, Ltd. .... 5,523,600 10.0
825 Duportrail Road
Wayne, PA 19087
Putnam Funds ......................... 4,670,182 8.6 (15)
One Post Office Square
Boston, MA 02109
Apollo Investment Fund IV, L.P. ...... 37,959,871 43.3 (16)
Two Manhattanville Road
Purchase, NY 10577
All executive officers, directors and
nominees as a group (12 persons).... 38,675,703 43.8 (17)
</TABLE>
- ------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership has been determined pursuant to Rule 13d-3 under
the Exchange Act.
(2) Does not include options to purchase an additional 1,133,334 shares of
Common Stock that are not exercisable within 60 days of April 21, 2000.
(Footnotes continued on next page)
14
<PAGE>
(Footnotes continued from previous page)
(3) Does not include options to purchase an additional 750,000 shares of
Common Stock that are not exercisable within 60 days of April 21, 2000.
(4) Does not include options to purchase an additional 350,000 shares of
Common Stock that are not exercisable within 60 days of April 21, 2000.
(5) Does not include options to purchase an additional 37,500 shares of
Common Stock that are not exercisable within 60 days of April 21, 2000.
(6) Does not include options to purchase an additional 33,334 shares of
Common Stock that are not exercisable within 60 days of April 21, 2000.
(7) Does not include options to purchase 75,000 shares of Common Stock that
are not exercisable within 60 days of April 21, 2000.
(8) Does not include options to purchase 50,000 shares of Common Stock that
are not exercisable within 60 days of April 21, 2000.
(9) Mr. Winograd resigned as a director of the Company effective as of
April 26, 2000.
(10) On April 26, 2000, the Company and Mr. Winograd entered into an
agreement allowing the remainder of his options to vest as if he were
still a director of the Company.
(11) Does not include options to purchase 50,000 shares of Common Stock that
are not exercisable within 60 days of April 21, 2000.
(12) Includes an aggregate of 37,959,871 shares of Common Stock issuable to
the 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. Does not include options to
purchase 50,000 Shares at $7.00 that vest annually and ratably through
June 4, 2002 contingent on continued service as a director.
(13) Includes an aggregate of 37,959,871 shares of Common Stock issuable to
the 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. Does not include options to
purchase 50,000 Shares at $7.00 that vest annually and ratably through
June 4, 2002 contingent on continued service as a director.
(14) Includes an aggregate of 37,959,871 shares of Common Stock issuable to
the 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. Does not include options to
purchase 75,000 Shares at $7.00 that vest annually and ratably through
August 19, 2002 contingent on continued service as a director.
(15) Based upon information provided to the Company by the Putnam Funds,
this includes Shares beneficially owned by the following affiliated
entities:
<TABLE>
<S> <C>
Putnam OTC & Emerging Growth Fund.............................. 2,443,100
Putnam Variable Trust--Putnam VT OTC & Emerging Growth Fund.... 83,000
Putnam Emerging Information Sciences Trust S.A................. 50,000
Putnam New Opportunities Fund.................................. 1,354,520
Putnam Variable Trust--Putnam VT New Opportunities Fund........ 276,162
Putnam Voyager Fund II......................................... 421,700
Putnam Funds Trust--Putnam Investment Fund 98.................. 40,400
Putnam Investment Funds--Putnam Worldwide Equity Fund.......... 1,300
---------
4,670,182
</TABLE>
(16) Represents 37,959,871 shares of Common Stock issuable upon the
conversion of an aggregate of 924,837 shares of the Company's Series A
Preferred Stock and exercise of an aggregate of 924,843 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 exercise of all the Series 1-A warrants and Series 2-A warrants
held by the Apollo Stockholders, such 37,959,871 shares of Common Stock
would consist of 29,071,244 shares of Common Stock beneficially owned
by Apollo Investment Fund IV, L.P., 1,559,085 shares of Common Stock
beneficially owned by Apollo Overseas Partners IV, L.P. and 7,329,542
shares of Common Stock beneficially owned by AIF IV/RRRR LLC. The
holders of the Company's Series A Preferred Stock are only entitled to
an aggregate of 9,750,000 votes as of May 1, 2000, or 10.54 votes per
share of Series A Preferred Stock. Messrs. Africk, Rowan and Gross,
directors of the Company and associated with Apollo Advisers IV, L.P.,
disclaim beneficial ownership of the shares held by the Apollo
Stockholders.
(17) Messrs. Africk, Rowan and Gross, directors of the Company and
associated with Apollo Advisers IV, L.P., disclaim beneficial ownership
of the shares held by the Apollo Stockholders. See footnote numbers 12,
13 and 14 above.
15
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the three
years ended December 31, 1999, the compensation for services in all capacities
earned by the Company's Chief Executive Officer and each other named executive
officer whose total annual salary, bonus and other annual compensation exceeded
$100,000 in 1999, including a former executive officer whose compensation would
have placed him in the disclosed group had he been an executive officer as of
December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S)($) SARS (#) PAYOUTS($)
- ----------------------------------- ---- -------- ---------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Glenn S. Meyers.................... 1999 $257,192 $2,157,889 $ 17,600 (4) -- -- --
Chairman and 1998 178,082 35,193 20,000 (4) -- 2,000,000 --
Chief Executive Officer
Suresh V. Mathews.................. 1999 208,558 (1) -- -- -- 1,000,000 --
President and
Chief Executive Officer
Jeffrey J. Kaplan.................. 1999 64,039 (2) -- 3,850 (4) -- 350,000 --
Executive Vice President and
Chief Financial Officer
Robert C. Lewis.................... 1999 110,135 -- -- -- 68,000 --
Vice President, General 1998 47,596 -- -- -- 32,000 --
Counsel and Secretary
Craig C. Chesser................... 1999 118,692 10,000 3,000 (4) -- 32,500 --
Vice President and Treasurer 1998 43,846 -- -- -- 17,500 --
Michael A. Hultberg................ 1999 25,096 (3) -- -- -- 75,000 --
Vice President and Controller
John S. Gross...................... 1999 169,327 -- 100,000 (5) -- -- --
Former Sr. Vice President and 1998 113,750 -- 3,875 (4) -- 150,000 --
Chief Financial Officer
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR COMPENSATION
- ----------------------------------- ---- ------------
<S> <C> <C>
Glenn S. Meyers.................... 1999 --
Chairman and 1998 --
Chief Executive Officer
Suresh V. Mathews.................. 1999 $1,514 (6)
President and
Chief Executive Officer
Jeffrey J. Kaplan.................. 1999 --
Executive Vice President and
Chief Financial Officer
Robert C. Lewis.................... 1999 2,500 (6)
Vice President, General 1998 --
Counsel and Secretary
Craig C. Chesser................... 1999 2,500 (6)
Vice President and Treasurer 1998 --
Michael A. Hultberg................ 1999 --
Vice President and Controller
John S. Gross...................... 1999 1,924 (6)
Former Sr. Vice President and 1998 --
Chief Financial Officer
</TABLE>
- ------------------
(1) Represents compensation from January 29, 1999.
(2) Represents compensation from September 27, 1999.
(3) Represents compensation from November 1, 1999.
(4) Represents non-accountable expense allowance.
(5) Represents payment pursuant to severance agreement.
(6) Represents 401(k) employer matching contributions in 1999.
The following table sets forth information concerning grants of stock
options to purchase Common Stock during the year ended December 31, 1999 to the
named executive officers.
OPTION/SAR GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS/ APPRECIATION
UNDERLYING SARS GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
- ---------------------------------------- ------------- --------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Glenn S. Meyers......................... -- 0.0% N/A N/A N/A N/A
Suresh V. Mathews....................... 1,000,000(2) 8.3% $ 5.110 1/29/09 $3,213,652 $8,144,024
Jeffrey J. Kaplan....................... 350,000(3) 2.9% $ 9.500 9/21/09 2,091,075 5,299,194
Robert C. Lewis......................... 43,000(4) 0.4% $ 4.770 4/01/04 69,291 141,150
25,000(5) 0.2% $ 8.563 9/27/04 59,145 130,695
Craig C. Chesser........................ 12,500(6) 0.1% $ 5.110 1/29/04 17,647 38,996
20,000(7) 0.2% $ 8.563 9/27/04 47,316 104,556
Michael A. Hultberg..................... 75,000(8) 0.6% $14.750 11/01/04 305,636 675,377
John S. Gross........................... -- 0.0% N/A N/A N/A N/A
</TABLE>
- ------------------
(1) The number of shares of Common Stock covered by the options are subject
to anti-dilution adjustments in the event of any stock dividend, stock
split or combination of shares, recapitalization or other change in the
Company's capital stock. 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 or a lower
(Footnotes continued on next page)
16
<PAGE>
(Footnotes continued from previous page)
percentage of Common Stock in certain cases (except for certain
transactions that do not involve a change in the holders of a majority
of the outstanding shares of Common Stock and the ownership of a
majority of the outstanding shares of Common Stock by a single person).
(2) These options were granted on January 29, 1999 at an exercise price of
$5.11, the per share fair market value of the Common Stock at that
time. The options have a term of ten (10) years. Options are
exercisable cumulatively in four (4) equal annual installments,
beginning on January 29, 2000.
(3) These options were granted on September 21, 1999 at an exercise price
of $9.50, the per share fair market value of the Common Stock at that
time. The options have a term of ten (10) years. Options are
exercisable cumulatively in four (4) equal annual installments,
beginning on September 21, 2000.
(4) These options were granted on April 1, 1999 at an exercise price of
$4.77, 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 cumulatively in three (3) equal annual installments,
beginning on May 18, 1999.
(5) These options were granted on September 27, 1999 at an exercise price
of $8.563, 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 cumulatively in two (2) equal annual installments,
beginning on May 18, 1999.
(6) These options were granted on January 29, 1999, at an exercise price of
$5.11, the per share fair market value at that time. The options have a
term of five (5) years. Options are exercisable cumulatively in three
(3) equal annual installments, beginning on July 27, 1999.
(7) These options were granted on September 27, 1999 at an exercise price
of $8.563, 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 cumulatively in three (3) equal annual installments,
beginning on July 27, 1999.
(8) These options were granted on November 1, 1999 at an exercise price of
$14.75, 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 cumulatively in three (3) equal annual installments,
beginning on November 1, 2000.
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, 1999, 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, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
UNDERLYING FISCAL Y/E (#) SARS AT FISCAL Y/E
OPTIONS/SARS VALUE EXERCISABLE/ EXERCISABLE/
NAME ACQUIRED ON EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------------------ ----------- -------------------- -----------------------
<S> <C> <C> <C> <C>
Glenn S. Meyers...................... 600,000 $10,172,820 66,666/1,333,334 $2,116,646/42,333,355
Suresh V. Mathews.................... -- -- 0/1,000,000 0/29,015,000
Jeffrey J. Kaplan.................... -- -- 0/350,000 0/8,618,750
Robert C. Lewis...................... -- -- 25,000/75,000 759,452/2,157,863
Craig C. Chesser..................... 16,666 532,270 0/33,334 0/955,884
Michael A. Hultberg.................. -- -- 0/75,000 0/1,453,125
John S. Gross........................ 145,000 1,258,813 0/0 0/0
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
MEYERS EMPLOYMENT AGREEMENT
In connection with the transactions consummated pursuant to the
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, 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
17
<PAGE>
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 the Employee. 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 2,000,000 shares of Common Stock at exercise
prices equal to $2.375 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.
MATHEWS EMPLOYMENT AGREEMENT
The Company entered into an Employment Agreement dated January 29, 1999
with Suresh V. Mathews (the "Mathews Employment Agreement"). Pursuant to the
Mathews Employment Agreement, Mr. Mathews has been engaged as the President and
Chief Operating Officer of Rare Medium, Inc. to serve for a term of four years.
Mr. Mathews receives an annual base salary of $225,000. The Mathews Employment
Agreement provides Mr. Mathews with a right to terminate the Mathews Employment
Agreement upon the occurrence of certain events constituting a "change in
control" of the Company as defined therein. Upon such a "change in control", Mr.
Mathews would be entitled to receive all salary and incentive compensation for
the remaining term, the cash value of all benefits which would have been
received by him for the remaining term and the cash value of all unexercised
stock options (whether or not vested) or the cashless exercise value thereof. In
the event the Company discharges Mr. Mathews other than "for cause," Mr. Mathews
would be entitled to receive his base salary for a period of twelve months
following such discharge. The Mathews 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. In connection with Mr. Mathews'
employment with the Company, the Company granted to Mr. Mathews options to
acquire an aggregate of 1,000,000 shares of Common Stock, at an exercise price
equal to $5.11 per share (the fair market value at the time of issuance), which
vest ratably over a four year period and expire ten years from the date of the
grant. In the event the Company terminates Mr. Mathews' employment without
cause, 50% of all unvested options will become immediately vested and
exercisable, and all options will be exercisable through their initial
expiration date. On April 26, 2000, the Board of Directors of the Company
appointed Mr. Mathews President and Chief Operating Officer of the Company, in
addition to his position at Rare Medium, Inc.
KAPLAN EMPLOYMENT AGREEMENT
The Company entered into an Employment Agreement dated September 21,
1999 with Jeffrey J. Kaplan (the "Kaplan Employment Agreement"). Pursuant to the
Kaplan Employment Agreement, Mr. Kaplan has been engaged as the Executive Vice
President and Chief Financial Officer of the Company to serve for a term of four
years. Mr. Kaplan receives an annual base salary of $225,000. The Kaplan
Employment Agreement provides Mr. Kaplan with a right to terminate his
employment agreement upon the occurrence of certain events constituting a
"change in control" of the Company, as defined therein. Upon such a "change in
control," Mr. Kaplan would be entitled to receive all salary and incentive
compensation for the remaining term, the cash value of all benefits which would
have been received by him for the remaining term and the cash value of all
unexercised stock options (whether or not vested). In the event the Company
discharges Mr. Kaplan other than
18
<PAGE>
"for cause," Mr. Kaplan would be entitled to receive his base salary for a
period of twelve months following such discharge. The Kaplan 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. In
connection with Mr. Kaplan's employment with the Company, the Company granted to
Mr. Kaplan options to acquire an aggregate of 350,000 shares of Common Stock, at
an exercise price equal to $9.50 per share (the fair market value at the time of
issuance), which vest ratably over a four year period and expire ten years from
the date of the grant. In addition, in the event the Company terminates
Mr. Kaplan's employment without cause, 50% of all unvested options will become
immediately vested and exercisable, and all options will be exercisable through
their initial expiration date.
STOCK PLANS
The Company's Board of Directors has approved an equity participation
plan that allows the Compensation Committee to incentivize the Company's
employees by allocating to them up to 20% of any profit the Company might
recognize when and if the Company's investments in portfolio and incubator
companies become liquid, subject to vesting and other requirements. The Company
will have the right to pay such amount either in cash, in the Company's Common
Stock or a combination thereof. Although the Company expects the Compensation
Committee to make allocations of awards under this plan in the first half of
2000, no awards have been made as of May 1, 2000. Depending on the structure of
the awards under this plan, the Company may be required to record compensation
expense in accordance with generally accepted accounting principles.
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 23,000,000 (of which
15,000,000 have not yet been ratified by the Stockholders), subject to
adjustment. The Plan is administered by the Compensation Committee of the Board
of Directors. These options generally carry five-year terms and 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.
The Company has a Nonqualified Stock Plan ("NQSOP") for directors,
officers and key employees of the Company. The NQSOP will expire on July 18,
2000. The Company does not intend to make any additional grants of options under
the NQSOP prior to the NQSOP's expiration. 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 500,000 aggregate shares of Common Stock
for the granting of such options under the plan, of which 108,000 were available
for granting stock options as of December 31, 1999. Subsequent grants of stock
options to directors have been made under the Company's 1998 Long-Term Incentive
Plan and the Company does not intend to make any additional grants to directors
under the Amended and Restated Equity Plan for Directors.
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.
19
<PAGE>
COMPENSATION PHILOSOPHY AND REVIEW
The Company's compensation philosophy for its executive officers serves
two principal purposes: (i) 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 (ii) 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 1999 compensation levels for the Company's executive officers
generally were determined on an individual basis at the time of hiring, in many
cases pursuant to employment agreements entered into between the Company and
such individuals. The Company has continued to build its management team at a
rapid pace through the recruitment and hiring of additional key officers and
employees and through acquisitions of additional Internet professional services
firms.
Members of the Board of Directors reviewed and approved each employment
agreement entered into between the Company and an executive officer in 1999, as
well as stock options granted to executive officers in 1999. In determining
compensation levels for 1999, the Company primarily relied upon publicly
available compensation information and informal survey information obtained by
management with respect to cash compensation and stock option grants to
similarly situated officers of Internet business service companies of comparable
size and market capitalization. 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,
health insurance and similar benefits, and the award of stock options. The
Company emphasizes the award of stock options and to date the Company has made
only limited use of cash incentive bonuses, although the Company paid bonuses to
its Chief Executive Officer in 1999. The Compensation Committee believes that in
the highly competitive, emerging markets in which the Company operates,
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 senior
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, past accomplishments and
data on prevailing compensation levels in relevant markets for executive talent.
Compensation for the Company's Chief Executive Officer in 1999, Glenn
S. Meyers, was determined pursuant to the Meyers Employment Agreement, dated
effective April 15, 1998. The Meyers Employment Agreement provides for 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, the Meyers Employment
Agreement provides for annual incentive compensation equal to 2% of revenues, up
to a maximum of $150 million in 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. In accordance with such formula, Mr. Meyers
received incentive compensation of $657,889 for 1999. Mr. Meyers also received a
one-time bonus payment of $1,500,000 in 1999 in connection with certain
transactions not related to the provisions of the Meyers Employment Agreement.
The Compensation Committee believes that the base salary levels of the
executive officers, including Mr. Meyers, are at or below the median of base
salary levels for comparable companies considered in the informal information
reviewed by the Compensation Committee. The Compensation Committee believes this
is appropriate in light of the Company's emphasis on long-term equity
compensation.
Stock Option Grants. As noted above, the Company has relied
substantially on long-term equity compensation as the principal means of
compensating and providing incentives for its executive officers and key
employees. It is the Company's practice to set option exercise prices at not
less than 100% of fair market value on the date of grant. Thus, the value of the
stockholders' investment in the Company must appreciate before an optionee
receives any financial benefit from the option. Options are generally granted
for a term of five years.
20
<PAGE>
Options granted to executive officers and key employees become exercisable over
time and are 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. Concurrently with the
execution of the Meyers Employment Agreement, and as an inducement for him to
enter into such employment agreement, the Company granted to Mr. Meyers options
to acquire an aggregate of 2,000,000 shares of Common Stock at an exercise price
equal to $2.375 per share, which was equal to the fair market value of the
Common Stock at the time of grant, which options became 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. As of the date of this Proxy Statement, 200,000 of
Mr. Meyers' options have vested and remain unexercised. The Compensation
Committee believes that such grant is commensurate with Mr. Meyers' level of
responsibility and his contributions to the Company during 1999 and to date. In
addition to Mr. Meyers, during 1999 the Compensation Committee or the Board of
Directors as a whole approved grants of options to purchase an aggregate of
1,525,500 shares of the Common Stock to other executive officers as a group.
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.
With the exception of Mr. Meyers, total cash compensation paid for
salaries and bonuses during 1999 did not exceed the $1,000,000 limit for any
individual executive. In addition, with the exception of Mr. Meyers, the
Compensation Committee does not anticipate that total cash compensation paid for
salaries and bonuses during 2000 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
21
<PAGE>
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company, the Nasdaq Market Index, and the Internet
Software and Services Index from December 31, 1994 through December 31, 1999.
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
[LINE GRAPH]
LEGEND:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------------------------------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Rare Medium Group, Inc................................. 100.00 150.43 74.36 23.93 56.41 466.67
Internet Software and Services Index(1)(2)............. 100.00 134.62 99.17 58.79 154.26 448.96
NASDAQ Market Index.................................... 100.00 129.71 161.18 197.16 278.08 490.46
</TABLE>
- ------------------
Assumes $100 invested on January 1, 1994 and reinvestment of dividends.
(1) The Proxy Statement filed by the Company relating to the annual meeting
held in August, 1999 contained a comparison to the Industrial
Electrical Equipment Index in addition to the Internet Software and
Services Index shown above. The Industrial Electrical Equipment Index
was provided for purposes of comparison for the business of the Company
as it was conducted prior to October, 1998. As the Company is no longer
engaged in the electrical equipment business, this comparison is no
longer relevant to the business as currently conducted and thus has
been omitted from the performance graph for 1999.
(2) The "Internet Software Services and Index" relates to the business
currently engaged in by the Company, which it commenced upon the
acquisition of Rare Medium Inc. in April 1998. This index, issued by an
outside firm includes 1-800-Flowers.Com Inc A, 24/7 Media Inc.,
3Dshopping.Com, 724 Solutions Inc., Accrue Software Inc., Agency.Com
Ltd., Allaire Corporation, Allied Riser Cmmctns, Alloy Online Inc.,
Allscripts Inc., Alteon Websystems Inc., Amazon.Com Inc., Andover.Net
Incorporated, Appliedtheory Corp.,
(Footnotes continued on next page)
22
<PAGE>
(Footnotes continued from previous page)
Appnet Incorporated, Apropos Technology, Ariba Inc., Arrowpoint
Cmmunctns, Art Technology Group Inc., Artistdirect Inc., ASD Systems
Inc., Ashford.Com Incorporated, Audible Inc., Audiohighway.Com,
Autobytel.Com Inc., Autoweb.Com Inc., Backweb Technologies Ltd.,
Baltimore Tech Plc Ads, Barnesandnoble.Com Inc., Be Free Inc.,
Beyond.Com Corporation, Bid.Com International, Bigstar Entertainment,
Biznessonline.Com Inc., Blaze Software Inc., Bluestone Software Inc.,
Braun Consulting Inc., Broadbase Software Inc., Broadvision Inc.,
Buy.Com Incorporated, C-Bridge Internet Solutn, Cacheflow Incorporated,
Caldera Systems Inc., CDnow Inc., Checkfree Holdings Corp. Citrix
Systems Inc., Claimsnet.Com Inc., CMGI Inc., Cobalt Group Inc.,
Collegelink.Com., Crosswalk.Com Inc., Cybercash Inc., Cyberian Outpost
Inc., Data Return Corporation, Datalink.Net Inc., Deltathree.Com Inc Cl
A Digex Inc., Digital Courier Tech Inc., Digital Impact Inc.,
Digitalthink Inc., Dlj Direct, Doubleclick Inc., Drugmax.Com Inc.,
Drugstore.Com Inc., E*Trade Group Inc., E-Med Soft.Com, E-Sim Ltd.,
E-Stamp Corporation, Ebay Inc., Ebenx Incorporated, Ebookers.Com Plc,
Ecollege.Com, Efax.Com., Egghead.Com Inc., Egreetings Networks Inc., El
Sitio Incorporated, Elec Communications Corp., Eloquent Incorporated,
Emusic.Com Inc., Engage Technologies Inc., Eprise Corporation, Espeed
Incorporated Cl A, Etoys Inc., Exactis.Com Incorporated, Excelon
Corporation, Exodus Communications, Expedia Incorporated, Extreme
Networks Inc., F5 Networks Inc., Fashionmall.Com Inc., Fastnet
Corporation, Fatbrain.Com Inc., Finet.Com, Fogdog Incorporated,
Freemarkets Incorporated, Ftd.Com Inc., Garden.Com Inc., Getthere.Com
Inc., Globix Corp., Gsv Incorporated, Harbinger Corporation, Harris
Interactive, Hearme, High Speed Access Corp., Homegrocer.Com Inc.,
Ibasis Incorporated, Ifx Corp., Imagex.Com Inc., Imaginon Inc., Imanage
Incorporated, Improvenet Incorporated, Inktomi Corporation, Innodata
Corporation, Integrated Info Systems, Interliant Inc., Internet Capital
Group, Internet Pictures Corp., Interworld Corporation, Intranet
Solutions Inc., Intraware Inc., Iona Technologs Plc Adr, Iparty Corp.,
Iprint.Com Inc., Iss Group Inc., Iturf Inc., Itxc Corporation, Ixl
Enterprises Inc., Jacada Ltd., Jfax.Com Inc., Juniper Networks, K2
Design Inc., Kana Communications Inc., Keynote Systems Inc., Kpnqwest
N.V. Cl C, L90 Incorporated, Landacorp Inc., Lendingtree Inc., Liberate
Technologies, Lifeminders.Com Inc., Lionbridge Technologies, Liquid
Audio Inc., Litronic Inc., Loudeye Technologies, Mail.Com Inc Cl A,
Marimba Inc., Matrixone Inc., Mcafee.Com Corporation, Mcglen Internet
Group, Mediaplex Inc., Medicalogic Incorporated, Messagemedia Inc.,
Mortgage.Com Inc., Mp3.Com Inc., Musicmaker.Com Inc., Mustang.Com Inc.,
Mypoints.Com Inc., Myweb Inc.Com, N2h2 Inc., National Info Consortium,
Neoforma.Com Inc., Net.Genesis Corporation, Netcreations Inc.,
Netgateway Incorporated, Netopia Inc., The Netplex Group Inc.,
Netpliance Incorporated, Network Solutions Inc A, Netzee Inc., Netzero
Inc., Ondisplay Incorporated, Online Resrcs & Cmmnctns,
Onlinetradinginc.Com., Onvia.Com Inc., Open Market Inc., Open Text Cp,
Opus360 Corporation, Otg Software Inc., Pacific Softworks Inc.,
Partsbase.Com Inc., Pcorder.Com Inc., Peapod Inc., Pets.Com
Incorporated, Phone.Com Inc., Planetrx.Com Inc., Popmail.Com Inc.,
Preview Systems Inc., Priceline.Com Inc., Primix Solutions Inc., Primus
Knowledge Solutns, Promotions.Com Inc., Prosoft Training.Com.,
Purchasepro.Com Inc., Quintus Corporation, Qxl.Com Plc Ads, Rainmaker
Systems Inc., Ramp Networks Inc., Rare Medium Group Inc., Realnetworks
Inc., Red Hat Inc., Redback Networks Inc., Retek Incorporated, Rhythms
Netconnections, S1 Corporation, Saba Software Inc., Safeguard
Scientific Inc., Saga Systems Inc., Savvis Communications Cp, Scient
Corporation, Sciquest.Com Inc., Selectica Incorporated, Shopnow.Com
Incorporated, Smarterkids.Com Inc., Snowball.Com Inc., Software.Com,
Sonicwall Incorporated, Spyglass Inc., Stamps.Com Inc., Stockwalk.Com
Group Inc., Streamedia Cmmnctns Inc., Streamline.Com Inc.,
Styleclick.Com Inc., Synergy Brands Inc., Talk City Inc., Talk.Com
Inc., Telemate.Net Software, Ticketmaster Online Cl B, Topjobs.Net Plc
Ads, Travelocity.Com Inc., Tumbleweed Communication, Ubid Inc.,
Ubrandit.Com., Ultimate Software Gp Inc., Universal Access Inc., Uproar
Incorporated, Us Search Corp.Com., Usabancshares.Com Inc.,
Usinternetworking Inc., Value America Inc., Verisign Inc., Verity Inc.,
Viant Inc., Viewcast.Com Inc., Vignette Corporation, Vocaltec
Communications, Watchguard Technologies, Web Street Incorporated, Webb
Interactive Srvcs, Websense Incorporated, Webtrends Corporation, White
Pine Software Inc., Xpedior Incorporated, Youbet.Com Inc., Ziff Davis
Inc Zdnet and Zixit Corporation.
23
<PAGE>
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, 1999 filed with the SEC.
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
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 2001 Annual
Meeting of Stockholders must submit the same to the Secretary of the Company on
or before January 15, 2001 at the Company's principal executive office, 565
Fifth Avenue, 29th Floor, New York, NY 10017. In order for a shareholder
proposal at the 2001 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 on or prior to April 3, 2001.
ADDITIONAL INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy these reports, proxy statements and other information at the SEC public
reference rooms in Washington, DC, New York, NY or Chicago, IL. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
costs. Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference rooms. Our SEC filings are also available at
the SEC's Web site at "http://www.sec.gov." In addition, you can read and copy
our SEC filings at the office of the National Association of Securities Dealers,
Inc. at 1735 K Street, Washington, DC 20006.
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, 1999, FILED WITH THE SEC IS AVAILABLE WITHOUT CHARGE BY WRITING TO
ROBERT C. LEWIS, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, RARE MEDIUM
GROUP, INC., 565 FIFTH AVENUE, 29TH FLOOR, NEW YORK, NEW YORK 10017.
IMPORTANT--MAIL YOUR SIGNED PROXY CARD
Please complete, sign, date and mail the enclosed Proxy Card.
By Order of the Board of Directors.
/S/ Robert C. Lewis
Robert C. Lewis, Vice President,
General Counsel and Secretary
May 15, 2000
New York, New York
24
<PAGE>
PROXY
RARE MEDIUM GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 15, 2000
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Glenn S. Meyers, Chairman of the Board
and Chief Executive Officer of Rare Medium Group, Inc. (the "Company"), and
Jeffrey J. Kaplan, Executive Vice President and Chief Financial Officer of the
Company, or either of them individually and each of them with the full power of
substitution, as attorney and proxy of the undersigned for and in the name,
place and stead of the undersigned to appear at the Annual Meeting of
Stockholders of the Company to be held on the 15th day of June, 2000, at 10:00
a.m., local time, in the Forest ballroom at the W Hotel, located at 541
Lexington Avenue, New York, New York 10022, and at any postponement or
adjournment thereof (the "meeting"), and to vote all of the shares of Common
Stock which the undersigned is entitled to vote, with all the powers and
authority the undersigned would possess if personally present. The Board of
Directors recommends a vote for approval of each of the nominees for Director
and for each of the proposals to be voted on at the meeting.
The Board of Directors has fixed the close of business on April 21,
2000, as the record date for the determination of Stockholders entitled to vote
at the meeting. Only Stockholders of record at the close of business on the
record date will be entitled to notice of, and to vote at, the meeting or any
postponement or adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES PROVIDED, THE PERSONS
NAMED HEREIN INTEND TO VOTE FOR APPROVAL OF EACH OF THE NOMINEES FOR DIRECTOR
AND FOR APPROVAL OF EACH OF THE PROPOSALS TO BE VOTED ON AT THE MEETING.
THE SAID ATTORNEY AND PROXY PRESENT AT SAID MEETING MAY EXERCISE ALL
THE POWERS HEREUNDER. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE
ACCOMPANYING PROXY STATEMENT.
(Continued and to be signed on reverse side)
<PAGE>
Please mark your votes
as in this example /X/
1. TO ELECT TWO CLASS 1 DIRECTORS, MARK J. ROWAN AND JEFFREY M. KILLEEN
FOR WITHHOLD
the two AUTHORITY
nominees as to vote for the two
a group nominees as a group
/ / / /
(To withhold authority to vote for any individual nominee, write the nominee's
name in the line below.)
- --------------------------------------------------------------------------------
2. TO RATIFY THE AMENDMENTS TO THE COMPANY'S 1998 LONG-TERM INCENTIVE
PLAN;
FOR AGAINST ABSTAIN
/ / / / / /
3. TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF
THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000; AND
FOR AGAINST ABSTAIN
/ / / / / /
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY COME BEFORE THE ANNUAL MEETING
OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Stockholder's Signature Dated: , 2000
---------------------------- ----------------
Signature Dated: , 2000
------------------------------------------ ----------------
NOTE: It is necessary that you date this Proxy and sign your name (or names)
exactly as it appears on the label indicating any official position or
representative capacity.
<PAGE>
PROXY
RARE MEDIUM GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 15, 2000
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Glenn S. Meyers, Chairman of the Board
and Chief Executive Officer of Rare Medium Group, Inc. (the "Company"), and
Jeffrey J. Kaplan, Executive Vice President and Chief Financial Officer of the
Company, or either of them individually and each of them with the full power of
substitution, as attorney and proxy of the undersigned for and in the name,
place and stead of the undersigned to appear at the Annual Meeting of
Stockholders of the Company to be held on the 15th day of June, 2000, at 10:00
a.m., local time, in the Forest ballroom at the W Hotel, located at 541
Lexington Avenue, New York, New York 10022, and at any postponement or
adjournment thereof (the "meeting"), and to vote all of the shares of Preferred
Stock which the undersigned is entitled to vote, with all the powers and
authority the undersigned would possess if personally present. The Board of
Directors recommends a vote for approval of the nominee for Director and for
each of the proposals to be voted on at the meeting.
The Board of Directors has fixed the close of business on April 21,
2000, as the record date for the determination of Stockholders entitled to vote
at the meeting. Only Stockholders of record at the close of business on the
record date will be entitled to notice of, and to vote at, the meeting or any
postponement or adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES PROVIDED, THE PERSONS
NAMED HEREIN INTEND TO VOTE FOR APPROVAL OF EACH OF THE NOMINEES FOR DIRECTOR
AND FOR APPROVAL OF EACH OF THE PROPOSALS TO BE VOTED ON AT THE MEETING.
THE SAID ATTORNEY AND PROXY PRESENT AT SAID MEETING MAY EXERCISE ALL
THE POWERS HEREUNDER. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE
ACCOMPANYING PROXY STATEMENT.
(Continued and to be signed on reverse side)
<PAGE>
Please mark your votes
as in this example /X/
1. TO ELECT ONE CLASS 1 DIRECTOR, MICHAEL S. GROSS.
FOR WITHHOLD
the AUTHORITY
nominee to vote for the nominee
/ / / /
(To withhold authority to vote for the nominee, write the nominee's name in the
line below.)
- --------------------------------------------------------------------------------
2. TO RATIFY THE AMENDMENTS TO THE COMPANY'S 1998 LONG-TERM INCENTIVE
PLAN;
FOR AGAINST ABSTAIN
/ / / / / /
3. TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF
THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000; AND
FOR AGAINST ABSTAIN
/ / / / / /
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY COME BEFORE THE ANNUAL MEETING
OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Stockholder's Signature Dated: , 2000
---------------------------- ----------------
Signature Dated: , 2000
------------------------------------------ ----------------
NOTE: It is necessary that you date this Proxy and sign your name (or names)
exactly as it appears on the label indicating any official position or
representative capacity.
