Exhibit 10.4

 

INVESTORS’ RIGHTS AGREEMENT

 

This Investors’ Rights Agreement (the “AGREEMENT”) is entered into as of May 27,
2003 (the “EFFECTIVE DATE”) by and among 24/7 Real Media, Inc., a Delaware
corporation (the “COMPANY”), and the persons and entities listed on EXHIBIT A
attached hereto (the “PURCHASERS”).

 

RECITALS

 

A. The Purchasers have agreed to purchase from the Company, and the Company has
agreed to sell to the Purchasers, shares of the Company’s Series C-1 Nonvoting
Convertible Preferred Stock, par value $0.01 per share (the “SERIES C-1 STOCK”
and, collectively with the Series C Stock, the “PREFERRED STOCK”), and
accompanying warrants (the “WARRANTS”) to purchase shares of the Company’s
Common Stock, par value $0.01 per share (the “COMMON STOCK”) on the terms and
conditions set forth in that certain Series C-1 Preferred Stock and Common Stock
Warrant Purchase Agreement, dated as of May 27, 2003, by and among the Company
and the Purchasers, as such agreement may be amended from time to time (the
“PURCHASE AGREEMENT”).

 

B. The Purchase Agreement provides that the Purchasers shall be granted certain
information, registration and participation rights, all as more fully set forth
herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:

 

1.              INFORMATION RIGHTS.

 

1.1 SEC FILINGS. The Company covenants and agrees that, commencing on the
Effective Date, for so long as any Purchaser holds shares of Series C Stock
issued pursuant to the conversion of Series C-1 Stock issued under the Purchase
Agreement, the Company will timely file all reports required under the Exchange
Act of 1934, as amended (the “EXCHANGE ACT”).

 

1.2 BUDGET AND FINANCIAL INFORMATION. The Company covenants and agrees that,
commencing on the Effective Date, for so long as a Purchaser holds at least
twenty-five percent (25%) of all the shares of Series C Stock issued to the
Purchasers upon conversion of Series C-1 Stock originally issued under the
Purchase Agreement (such share number to be proportionately adjusted to reflect
any stock splits and combinations, stock dividends, recapitalizations and the
like with respect to the Series C Stock) (such Purchaser, a “MAJOR PURCHASER”),
upon receipt of a written request from the Major Purchaser, the Company will
furnish to each such Major Purchaser the financial statements (including
unaudited financial statements), operating plans and budgets (including any
amendments thereto), and other financial and business information materials that
the Company distributes to nonemployee members of the Board of Directors of the
Company (the “BOARD”) or any committee thereof, as and when such materials are
distributed to such nonemployee Board or committee members; PROVIDED that the
Company shall not be required to deliver such materials to a Major Purchaser to
the extent that: (i) the distribution of such materials to such Major Purchaser
would waive the Company’s attorney-client privilege, or (ii) the Board
reasonably determines that such materials are sensitive and highly confidential
and that the Company would be materially harmed by disclosure of such materials
to such Major Purchaser; PROVIDED, FURTHER, that distribution of such materials
to a Board member that is an officer or employee of such Major Purchaser shall
satisfy the requirements of this Section 1.2 as to such Major Purchaser.

 

1.3 CONFIDENTIALITY; NON-PUBLIC INFORMATION. Each Major Purchaser agrees to hold
all information received pursuant to this Section 1 in confidence, and not to
use or disclose any of such information to any third party, except to the extent
such information may be made publicly available by the Company. Each Major
Purchaser agrees that it will not trade the Company’s securities if it has
non-public Company information that could be material.

 

1.4 INSPECTION RIGHTS. The Company shall permit each Major Purchaser, at such
Major Purchaser’s request and expense, to visit and inspect the Company’s
properties, to examine its books of account and records and to

 

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discuss the Company’s affairs, finances and accounts with its officers, all in a
reasonable manner and at such reasonable times as may be requested by such Major
Purchaser.

 

2.              REGISTRATION RIGHTS.

 

2.1  DEFINITIONS. For purposes of this Section 2:

 

(a)  REGISTRATION. The terms “REGISTER,” “REGISTRATION” and “REGISTERED” refer
to a registration effected by preparing and filing a registration statement in
compliance with the U.S. Securities Act of 1933, as amended (the “SECURITIES
ACT”), and the declaration or ordering of effectiveness of the S-3 Registration
Statement.

 

(b)  REGISTRABLE SECURITIES. The term “REGISTRABLE SECURITIES” means:

 

(1) all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Series C Stock issued or issuable upon conversion of
the Series C-1 Stock issued under the Purchase Agreement, that are now owned or
may hereafter be acquired by any Purchaser or any Purchaser’s permitted
successors and assigns;

 

(2) all the shares of Common Stock of the Company issued or issuable upon
exercise of any Warrants issued or issuable under the Purchase Agreement, that
are now owned or may hereafter be acquired by any Purchaser or any Purchaser’s
permitted successors and assigns; and

 

(3) any shares of Common Stock of the Company issued (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued)
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, all such shares of Common Stock described in clauses (1), (2)
and (3) of this subsection 2.1(b); EXCLUDING in all cases, however, any
Registrable Securities sold by a person in a transaction in which rights under
this Section 2 are not assigned in accordance with this Agreement or any
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.

 

(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of shares of
“REGISTRABLE SECURITIES THEN OUTSTANDING” shall mean the number of shares of
Common Stock which are Registrable Securities that are then (1) issued and
outstanding or (2) issuable pursuant to the exercise or conversion of then
outstanding and then exercisable or convertible and qualifying options, warrants
or convertible securities.

 

(d) HOLDER. The term “HOLDER” means any person owning of record Registrable
Securities or any assignee of record of such Registrable Securities to whom
rights set forth herein have been duly assigned in accordance with this
Agreement; PROVIDED, HOWEVER, that for purposes of this Agreement, a record
holder of shares of Series C Stock convertible into such Registrable Securities,
a record holder of shares of Series C-1 Stock convertible into shares of Series
C Stock that are convertible into such Registrable Securities, and a record
holder of Warrants exercisable into such Registrable Securities, shall each be
deemed to be the Holder of such Registrable Securities; and PROVIDED FURTHER,
that the Company shall in no event be obligated to register shares of Series C
Stock, Series C-1 Stock, Warrants, and that Holders of Registrable Securities
will not be required to convert or exercise their shares of Series C Stock,
Warrants into Common Stock (or convert their shares of Series C-1 Stock into
shares of Series C Stock), in order to exercise the registration rights granted
hereunder, until immediately before the closing of the offering to which the
registration relates.

 

(e) FORM S-3. The term “FORM S-3” means such form under the Securities Act as is
in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

 

(f)  SEC. The term “SEC” means the U.S. Securities and Exchange Commission.

 

(g) STOCKHOLDER APPROVAL DATE. The term “STOCKHOLDER APPROVAL DATE” means the 
first

 

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date that shares of Series C-1 Stock convert into Series C Stock.

 

2.2  MANDATORY FORM S-3 REGISTRATION.

 

(a) SHELF REGISTRATION. On or before the thirtieth (30th) day after the
Stockholder Approval Date, the Company shall file with the SEC a registration
statement on Form S-3, and any related qualification or compliance, with respect
to the sale or distribution by the Holders on a delayed or continuous basis of
all of the Registrable Securities (the “SHELF REGISTRATION”); PROVIDED, HOWEVER,
that the Company shall not be obligated to effect such registration,
qualification or compliance pursuant to this Section 2.2 in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance, and PROVIDED, FURTHER, that the
Company shall have no obligation to register the Registrable Securities if
Stockholder Approval is not received. The Company shall use commercially
reasonable efforts to have the Shelf Registration declared effective by the SEC
as promptly as practicable; PROVIDED, that in the event the Company receives
notice from the SEC that the Shelf Registration will not be subject to SEC
review, the Company shall have the S-3 Registration Statement declared effective
as soon as possible following receipt of such notice from the SEC; PROVIDED,
FURTHER, that in the event the Shelf Registration is reviewed by the SEC, the
Company shall work diligently to resolve any SEC comments in favor of the
Company as soon as possible and, following receipt of notice from the SEC that
all such comments are resolved, will have the Shelf Registration declared
effective as soon as possible thereafter; and PROVIDED, FURTHER, that in no
event shall the Shelf Registration be declared effective later than the date
that any other registration statement filed by the Company after the Effective
Date is declared effective (other than any registration statement relating to
any Company employee benefit plan or any registration statement filed by the
Company on Form S-4 that is not reviewed by the SEC). The Company shall leave
the Shelf Registration in effect until the earlier of: (A) the date on which all
Registrable Securities shall either (i) have been registered under the
Securities Act and been disposed of, or (ii) be, in the reasonable opinion of
counsel to the Company that has been delivered to the applicable Holders,
saleable in a three (3) month period by the current Holders thereof without
registration under the Securities Act pursuant to Rule 144 under the Securities
Act; or (B) the date three (3) years from the date on which the Shelf
Registration is declared effective by the SEC (the “SHELF TERMINATION DATE”).

 

(b) EFFECT OF FAILURE TO FILE REGISTRATION STATEMENT AND DELAY IN OR FAILURE TO
MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) the Company fails to
file the Shelf Registration with the SEC covering the resale of all Registrable
Securities on or before the thirtieth (30th) day after the Stockholder Approval
Date, (ii) the Shelf Registration is not declared effective by the SEC on or
before the date that is 120 days after the Stockholder Approval Date, or (iii)
on any day prior to the Shelf Termination Date and after the Shelf Registration
has been declared effective by the SEC, sales of the Registrable Securities
required to be included on such Shelf Registration cannot be made (other than
during a Permitted Suspension, as defined below) pursuant to the Shelf
Registration (including, without limitation, because of a failure to keep the
Shelf Registration effective, to disclose such information as is necessary for
sales to be made pursuant to the Shelf Registration or to register sufficient
shares of Common Stock for resale under the Registration Statement); THEN, as
partial relief for the harm to any Holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to the Holders on a pro rata basis relative to
the number of Registrable Securities held by each Holder (on an as-converted
and  as-exercised into Common Stock basis without regard to current
xercisability or convertability) an aggregate amount in cash equal to 1% of the
Purchase Price for the Preferred Stock for each month in which the Shelf
Registration is not filed, effective or available for sale, as the case may be,
payable on the last business day of each such month, provided that such amount
shall be increased to two percent (2%) of the Purchase Price upon the fourth
full succeeding month, and for each full succeeding month thereafter, in which
the Shelf Registration is not filed, effective or available for sale, as the
case may be.

 

(c) EXPENSES. The Company shall pay all expenses incurred in connection with the
S-3 Registration Statement required pursuant to this Section 2.2, including
without limitation all filing, registration and qualification, printers’ and
accounting fees and counsel for the Company (other than commissions or other
amounts payable to brokers in connection with the sale of Registrable Securities
by Holders pursuant to the Shelf Registration and the fees and disbursements of
any one or more legal counsels to the Holders).

 

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2.3  PIGGYBACK REGISTRATIONS.

 

(a) NOTICE OF COMPANY REGISTRATION. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but EXCLUDING the Shelf Registration and any registration statements
relating to any employee benefit plan or a corporate reorganization or other
transaction covered by Rule 145 promulgated under the Securities Act, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the resale of Registrable
Securities) and will afford each such Holder an opportunity to include in such
registration statement all or any part of the Registrable Securities then held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
shall, within twenty (20) days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice shall inform
the Company of the number of Registrable Securities such Holder wishes to
include in such registration statement. If a Holder decides not to include all
of its Registrable Securities in any registration statement thereafter filed by
the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein. The
Company shall have no obligation to include any Registrable Securities of a
Holder in a registration statement under this Section 2.3 if, in the reasonable
opinion of counsel to the Company delivered to such Holder, all such Registrable
Securities proposed to be sold by such Holder may be sold in a three (3) month
period without registration under the Securities Act pursuant to Rule 144 under
the Securities Act.

 

(b) UNDERWRITING. If a registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, then the Company
shall so advise the Holders of Registrable Securities in such notice. In such
event, the right of any such Holder’s Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter(s) selected for such underwriting. Notwithstanding any
other provision of this Agreement, if the managing underwriter(s) determine(s)
in good faith that marketing factors require a limitation of the number of
shares to be underwritten and so notifies the Holders requesting inclusion of
their Registrable Securities in such registration, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, FIRST, to the
Company, SECOND to Holders requesting inclusion of their Registrable Securities
in such registration statement on a pro rata basis based on the number of
Registrable Securities each such Holder has requested to be included in the
registration, PROVIDED HOWEVER, that the right of the underwriters to exclude
shares (including Registrable Securities) from the registration and underwriting
as described above shall be restricted so that the number of Registrable
Securities included in any such registration is not reduced below twenty percent
(20%) of the shares included in the registration. If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw therefrom
by written notice, given in accordance with Section 5.1 hereof, to the Company
and the underwriter, delivered at least twenty (20) days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder that is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single “Holder,” and any
pro rata reduction with respect to such “Holder” shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such “Holder,” as defined in this sentence.

 

(c) EXPENSES. All expenses incurred in connection with a registration pursuant
to this Section 2.3, including without limitation all registration and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company (but excluding underwriters’ and brokers’ discounts and
commissions and the fees and disbursements of legal counsel for the selling
Holders, if any), shall be borne by the Company. Each Holder

 

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participating in a registration pursuant to this Section 2.3 shall bear such
Holder’s proportionate share (based on the number of shares sold by such Holder
over the total number of shares included in such registration at the time it
goes effective) of all discounts, commissions or other amounts payable to
underwriters, brokers or legal counsel to the Holders in connection with such
offering.

 

2.4 OBLIGATIONS OF THE COMPANY. When required to effect the registration of any
Registrable Securities pursuant to this Agreement, the Company shall keep each
Holder participating in such registration advised in writing as to the
initiation of each registration and as to the completion thereof, and shall, as
expeditiously as reasonably possible:

 

(a) Prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use commercially reasonable efforts to cause such
registration statement to become effective (such obligations to be in addition
to any other requirements with respect to the filing and effectiveness of the
Shelf Registration under Section 2.2 above);

 

(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;

 

(c) Furnish to the Holders participating in such registration and the
underwriters of the securities being registered such number of copies of the
registration statement, preliminary prospectus, final prospectus, in conformity
with the requirements of the Securities Act, and such other documents as such
underwriters may reasonably request in order to facilitate the public offering
of such securities;

 

(d) Use reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions;

 

(e) In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering. Each Holder participating in such
underwriting hereby agrees to also enter into and perform its obligations under
such an agreement;

 

(f) Notify each Holder of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing and, subject to
Section 2.5, at the request of any such Holder, prepare promptly and furnish to
such Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchaser of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;

 

(g) Make available for inspection by any Holder participating in such
registration who is a Major Purchaser, any underwriter participating in any
disposition pursuant to such registration, and any attorney or accountant
retained by any such Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company’s officers and directors to supply all information reasonably requested
by any such Holder, underwriter, attorney or accountant in connection with such
registration statement; provided, however, that such Holder, underwriter,
attorney or accountant shall execute a written agreement in favor of the Company
obligating such person to hold in confidence and trust all information so
provided; and

 

(h) Furnish, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters:
(1) an opinion, dated as of such date, of the counsel representing

 

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the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, and (2) a “comfort” letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.

 

2.5 PERMITTED SUSPENSION. Notwithstanding any other provision of this Agreement,
from and after the time a registration statement filed under this Section 2
covering Registrable Securities is declared effective, the Company shall have
the right to suspend the registration statement and the related prospectus in
order to prevent premature disclosure of any material non-public information
related to corporate developments by delivering notice of such suspension to the
Holders (a “PERMITTED SUSPENSION”), PROVIDED, HOWEVER, that the Company may
exercise the right to such Permitted Suspension only for an aggregate of thirty
(30) days during any consecutive ninety (90) day period and only for an
aggregate of sixty (60) days during any consecutive twelve (12) month period.
From and after the date of a notice of a Permitted Suspension under this Section
2.5, each Holder agrees not to use the registration statement or the related
prospectus for resale of any Registrable Security until the earlier of (1)
notice from the Company that such suspension has been lifted, or (2) the first
day on which the length of such Permitted Suspension, when aggregated with prior
Permitted Suspensions, exceeds either or both of the time limits referred to in
the immediately preceding sentence.

 

2.6 FURNISH INFORMATION. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2 and 2.3 hereof that each
of the selling Holders shall furnish to the Company such information regarding
itself, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of their Registrable Securities.

 

2.7 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.

 

2.8  INDEMNIFICATION. In the event any Registrable Securities are included in a
registration statement under Sections 2.2 or 2.3:

 

(a) BY THE COMPANY. To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the current and former partners, officers,
directors and members of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, the
“VIOLATIONS” and, individually, a “VIOLATION”):

 

(1) any untrue statement or alleged untrue statement of a material fact
contained such registration statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto; or

 

(2) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading; or

 

(3) any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement.

 

The Company will reimburse each such Holder, partner, officer, member or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, within one (1) month after a request for
reimbursement has been received by the Company, in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the indemnity agreement contained in this subsection 2.8(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action

 

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if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, member, director,
underwriter or controlling person of such Holder.

 

(b) BY SELLING HOLDERS. To the extent permitted by law, each selling Holder will
severally, but not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed such registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder’s partners, directors,
members or officers or any person who controls such Holder within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, member, controlling person, underwriter or other such Holder, partner
or director, member, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any violation of subsections
2.8(a)(1) and 2.8(a)(2) above, in each case to the extent (and only to the
extent) that such violation occurs in reliance upon and in conformity with
written information furnished by such Holder with respect to the Holder (and
none other) for use in connection with such registration. Each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, member, controlling person, underwriter or other Holder,
partner, officer, member, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action within one (1) month after a request for reimbursement has
been received by the indemnifying Holder; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 2.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and PROVIDED FURTHER, that the total amounts
payable in indemnity by a Holder under this subsection 2.8(b) in respect of any
Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.

 

(c) NOTICE. Promptly after receipt by an indemnified party under this Section
2.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.8, deliver to the
indemnifying party a written notice of the commencement thereof. The
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.

 

(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity agreements of
the Company and Holders are subject to the condition that, insofar as they
relate to any Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time such
registration statement becomes effective or the amended prospectus filed with
the SEC pursuant to SEC Rule 424(b) (the “FINAL PROSPECTUS”), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Final
Prospectus was furnished to the indemnified party and was not furnished to the
person asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Securities Act.

 

(e) CONTRIBUTION. If the indemnification provided for in this Section 2.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying the indemnified
party, shall contribute to the amount paid or payable by such indemnified party
with respect to such loss, liability, claim, damage or

 

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expense in the proportion that is appropriate to reflect the relative fault of
the indemnifying party and the indemnified party in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. In any such case, (A) no such Holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

 

(f) SURVIVAL. The obligations of the Company and Holders under this Section 2.8
shall survive the completion of any offering of Registrable Securities in the
S-3 Registration Statement, and otherwise.

 

2.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement granting any holder or prospective holder of any securities of the
Company registration rights with respect to such securities that are
inconsistent with, or prior in any respect to, the rights granted to the Holders
herein.

 

3.              PARTICIPATION RIGHTS.

 

3.1 GENERAL. Each Purchaser and any party to whom such Purchaser’s rights under
this Section 3 have been duly assigned in accordance with subsection 4.1 hereof
(EACH such Purchaser or assignee being hereinafter referred to as a “RIGHTS
HOLDER”) has the right to purchase such Rights Holder’s Pro Rata Share (as
defined below), of all (or any part) of any “New Securities” (as defined in
Section 3.2 hereof) that the Company may from time to time issue after the
Effective Date, PROVIDED, HOWEVER, such Rights Holder shall have no right to
purchase any such New Securities if such Rights Holder cannot demonstrate to the
Company’s reasonable satisfaction that such Rights Holder is at the time of the
proposed issuance of such New Securities an “accredited investor” as such term
is defined in Regulation D under the Securities Act. A Rights Holder’s “PRO RATA
SHARE” for purposes of this participation right is the ratio of (a) the number
of Registrable Securities as to which such Rights Holder is the Holder (and/or
is deemed to be the Holder under subsection 2.1(d) hereof), to (b) a number of
shares of Common Stock of the Company equal to the sum of (1) the total number
of shares of Common Stock of the Company then outstanding, plus (2) the total
number of shares of Common Stock of the Company into which all then outstanding
shares of Preferred Stock of the Company are convertible (assuming for this
purpose that shares of Series C-1 Preferred Stock are then fully convertible
into Series C Preferred Stock), plus (3) the total number of shares of Common
Stock of the Company subject to then outstanding options and warrants (including
options and warrants exercisable for securities which are ultimately convertible
into Common Stock); PROVIDED, HOWEVER, a Rights Holder’s Pro Rata Share with
respect to any offering of New Securities shall not exceed the Rights Holder’s
Pro Rata Share calculated as of the last date on which securities were issued
under the Purchase Agreement.

 

3.2 NEW SECURITIES. “NEW SECURITIES” shall mean any Common Stock or Preferred
Stock of the Company, whether now authorized or not, and rights, options or
warrants to purchase such Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible or exchangeable into such
Common Stock or Preferred Stock; PROVIDED, HOWEVER, that the term “New
Securities” DOES NOT INCLUDE:

 

(a) shares of Common Stock issued or issuable upon conversion of the outstanding
shares of Preferred Stock, and shares of Series C Stock issued or issuable upon
conversion of the Series C-1 Stock;

 

(b) any shares of Common Stock or Preferred Stock (or options, warrants or
rights therefor) granted or issued hereafter to employees, officers, directors,
contractors, consultants or advisers to, the Company or any subsidiary pursuant
to incentive agreements, stock purchase or stock option plans, stock bonuses or
awards, warrants, contracts or other arrangements approved by the Board;

 

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(c) any shares of Common Stock or Preferred Stock (and/or options or warrants
therefor) issued to parties that are strategic partners investing in connection
with a commercial relationship with the Company under arrangements that are, in
each case, approved by the Board;

 

(d) shares of Common Stock or Preferred Stock issued pursuant to: (i)
acquisitions of other corporations or entities by the Company by consolidation,
merger, purchase of all or substantially all of the assets, or other
reorganization in which the Company acquires, in a single transaction or series
of related transactions, all or substantially all of the assets of such other
corporation or entity or fifty percent (50%) or more of the voting power of such
other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other entity; provided that each such transaction or series of
transactions has been approved by the Board, or (ii) purchases of less than a
fifty percent (50%) equity ownership of other corporations or entities in
connection with joint ventures or other strategic arrangements or other
commercial relationships, provided such arrangements are approved in each case
by the Board;

 

(e) any shares of Series C Stock, Series C-1 Stock or Warrants issued under the
Purchase Agreement;

 

(f) shares of Common Stock or Preferred Stock issuable upon exercise of any
options or warrants to purchase any securities of the Company outstanding as of
the Effective Date and any securities issuable upon the conversion thereof;

 

(g) shares of the Company’s Common Stock or Preferred Stock issued in connection
with any stock split or stock dividend or recapitalization; and

 

(h) shares of the Company’s Common Stock or Preferred Stock issued by the
Company to the public pursuant to a registration statement filed under the
Securities Act.

 

3.3 PROCEDURES. In the event that the Company proposes to undertake an issuance
of New Securities, it shall give to each Rights Holder a written notice of its
intention to issue New Securities (the “NOTICE”), describing the type of New
Securities and the price and the general terms upon which the Company proposes
to issue such New Securities given in accordance with Section 5.1 hereof. Each
Rights Holder shall have twenty (20) days from the date such Notice is
effective, as determined pursuant to Section 5.1 hereof based upon the manner or
method of notice, to agree in writing to purchase such Rights Holder’s Pro Rata
Share of such New Securities for the price and upon the general terms specified
in the Notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased (not to exceed such Rights Holder’s
Pro Rata Share). If any Rights Holder fails to so agree in writing within such
twenty (20) day period to purchase such Rights Holder’s full Pro Rata Share of
an offering of New Securities (a “NONPURCHASING HOLDER”), then such
Nonpurchasing Holder shall forfeit the right hereunder to purchase that part of
his Pro Rata Share of such New Securities that he, she or it did not so agree to
purchase and the Company shall promptly give each Rights Holder who has timely
agreed to purchase his full Pro Rata Share of such offering of New Securities (a
“PURCHASING HOLDER”) written notice of the failure of any Nonpurchasing Holder
to purchase such Nonpurchasing Holder’s full Pro Rata Share of such offering of
New Securities (the “OVERALLOTMENT NOTICE”). Each Purchasing Holder shall have a
right of overallotment such that such Purchasing Holder may agree to purchase a
portion of the Nonpurchasing Holders’ unpurchased Pro Rata Shares of such
offering on a pro rata basis according to the relative Pro Rata Shares of the
Purchasing Holders, at any time within five (5) days after receiving the
Overallotment Notice.

 

3.4 FAILURE TO EXERCISE. In the event that any Rights Holder fails to exercise
in full the participation right within such twenty (20) plus five (5) day
period, then the Company shall have ninety (90) days thereafter to sell the New
Securities with respect to which such Rights Holder’s rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company’s Notice
to the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such ninety (90) day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to the Rights Holders pursuant to this Section 3.

 

3.5 TERMINATION. The Company’s obligations to provide the Notice under Section
3.3 and the Rights

 

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Holders’ right to purchase their Pro Rata Share of New Securities under this
Section 3 shall terminate upon (1) any reorganization, consolidation, merger or
similar transaction or series of related transactions (each, a “COMBINATION
TRANSACTION”) in which the Company is a constituent corporation or is a party
if, as a result of such combination transaction, the voting securities of the
Company that are outstanding immediately prior to the consummation of such
combination transaction (OTHER THAN any such securities that are held by an
“Acquiring Stockholder”, as defined below) do not represent, or are not
converted into, securities of the surviving corporation of such combination
transaction (or such surviving corporation’s parent corporation if the surviving
corporation is owned by the parent corporation) that, immediately after the
consummation of such combination transaction, together possess at least a
majority of the total voting power of all securities of such surviving
corporation (or its parent corporation, if applicable) that are outstanding
immediately after the consummation of such combination transaction, including
securities of such surviving corporation (or its parent corporation, if
applicable) that are held by the Acquiring Stockholder; or (2) a sale of all or
substantially all of the assets of the Company, that is followed by the
distribution of the proceeds to the Company’s stockholders or (3) as to each
Rights Holder, when such Rights Holder no longer holds any Registrable
Securities. For purposes of this Section 3.5, an “ACQUIRING STOCKHOLDER” means a
stockholder or stockholders of the Company that (1) merges or combines with the
Company in such combination transaction or (2) owns or controls a majority of
another corporation that merges or combines with the Company in such combination
transaction.

 

4.              ASSIGNMENT AND AMENDMENT.

 

4.1  ASSIGNMENT. Notwithstanding anything herein to the contrary:

 

(a) INFORMATION RIGHTS. The rights of a Major Purchaser under Section 1 hereof
may be assigned to a transferee or assignee in connection with any transfer or
assignment of Series C Stock; PROVIDED, HOWEVER, that such transferee or
assignee (i) is a subsidiary, affiliate or partner or limited liability company
member of such Holder or Rights Holder (including spouses and ancestors, lineal
descendants and siblings of any of the foregoing who acquire Registrable
Securities by gift, will or intestate succession) or (ii) acquires from such
party at least at least that minimum number of shares of Series C Stock
described in Section 1 hereof necessary to qualify as a Major Purchaser.

 

(b) REGISTRATION RIGHTS; PARTICIPATION RIGHTS. The registration rights of a
Holder under Section 2 hereof and the participation right of a Rights Holder
under Section 3 hereof may be assigned to a transferee or assignee in connection
with any transfer or assignment of Registrable Securities by such party
(including any transfer or assignment of Preferred Stock and/or Warrants
ultimately convertible or exercisable into Registrable Securities); PROVIDED,
HOWEVER, that such transferee or assignee (i) is a subsidiary, affiliate or
partner or limited liability company member of such Holder or Rights Holder
(including spouses and ancestors, lineal descendants and siblings of any of the
foregoing who acquire Registrable Securities by gift, will or intestate
succession) or (ii) acquires from such party at least two hundred fifty thousand
(250,000) shares of such Registrable Securities (as adjusted for any stock
dividends paid in such Registrable Securities, and combinations, stock splits,
recapitalizations and the like with respect to such Registrable Securities).

 

(c) GENERAL. No transfer or assignment of information rights pursuant to Section
4.1(a), or of registration rights or participation rights pursuant to Section
4.1(b), shall be permitted or effective unless: (i) the Company is provided with
written notice by the assigning or transferring party at the time of such
assignment or transfer stating the name and address of the assignee or
transferee and identifying the securities of the Company as to which the rights
in question are being assigned or transferred, and (ii) such assignee or
transferee agrees in writing to receive such assigned or transferred rights
subject to all the terms and conditions of this Agreement, including without
limitation the provisions of this Section 4.1.

 

4.2 AMENDMENT AND WAIVER OF RIGHTS. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Purchasers (and/or any of their permitted
successors or assigns) holding at least a majority of all Registrable Securities
then outstanding; PROVIDED, that solely for the purposes of amending or waiving
the provisions of Section 2 hereof (and for no other purpose hereunder) shall be
considered to be a Purchaser hereunder. Any amendment or waiver effected in
accordance

 

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with this Section 4.2 shall be binding upon each Purchaser, the Company, and
their permitted successors and assigns.

 

5.              GENERAL PROVISIONS.

 

5.1 NOTICES. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if deposited in the U.S. mail by registered or certified
mail, return receipt requested, postage prepaid, as follows:

 

(a)  if to the Company, at:

 

24/7 Real Media, Inc.
1250 Broadway
New York, NY 10001
Attn: General Counsel
Tel: (212) 231-7100
Fax: (212) 760-2811

 

(b)  if to any Purchaser, to such Purchaser’s address listed on EXHIBIT A
hereto.

 

Any party hereto (and such party’s permitted successors, assigns or transferees)
may by notice so given provide and change its address for future notices
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner set forth
above.

 

5.2 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Agreement, and supersede any and all prior
understandings and agreements, whether oral or written, between or among the
parties hereto with respect to the specific subject matter hereof.

 

5.3 GOVERNING LAW. This Agreement shall be governed by and construed exclusively
in accordance with the internal laws of the State of New York as applied to
contracts made and to be performed entirely within the State of New York.

 

5.4 SEVERABILITY. If any provision of this Agreement is determined by any court
or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable
in any respect, such provision will be enforced to the maximum extent possible
given the intent of the parties hereto. If such clause or provision cannot be so
enforced, such provision shall be stricken from this Agreement and the remainder
of this Agreement shall be enforced as if such invalid, illegal or unenforceable
clause or provision had (to the extent not enforceable) never been contained in
this Agreement. Notwithstanding the forgoing, if the value of this Agreement
based upon the substantial benefit of the bargain for any party is materially
impaired, which determination as made by the presiding court or arbitrator of
competent jurisdiction shall be binding, then both parties agree to substitute
such provision(s) through good faith negotiations.

 

5.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is intended to
confer upon any person, other than the parties hereto and their successors and
assigns, any rights or remedies under or by reason of this Agreement.

 

5.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 4.1 hereof,
this Agreement, and the rights and obligations of the parties hereunder, will be
binding upon and inure to the benefit of their respective successors, assigns,
heirs, executors, administrators and legal representatives.

 

5.7 TITLES AND HEADINGS. The titles, captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. Unless otherwise specifically stated, all references
herein to “Sections,” “subsections” and “exhibits” will mean “Sections,”
“subsections” and “exhibits” to this Agreement.

 

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5.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered will be deemed an original, and all
of which together shall constitute one and the same agreement.

 

5.9 INTENTIONALLY DELETED.

 

5.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement there is a
reference to a specific number of shares of Common Stock or Preferred Stock of
the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.

 

5.11 FURTHER ASSURANCES. The parties agree to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

 

5.12 FACSIMILE SIGNATURES. This Agreement may be executed and delivered by
facsimile and upon such delivery the facsimile signature will be deemed to have
the same effect as if the original signature had been delivered to the other
party.

 

5.13 RIGHTS OF HOLDERS. Each party to this Agreement shall have the absolute
right to exercise or refrain from exercising any right or rights that such party
may have by reason of this Agreement, including, without limitation, the right
to consent to the waiver or modification of any obligation under this Agreement,
and such party shall not incur any liability to any other party or other Holder
of any securities of the Company as a result of exercising or refraining from
exercising any such right or rights.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Investors’ Rights
Agreement as of the date and year first above written.

 

“COMPANY”

 

24/7 REAL MEDIA, INC.

 

By:

/s/ Norman Blashka

 

 

Norman Blashka

Title: Executive Vice President and Chief Financial Officer

 

“PURCHASERS”

 

 

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