Document:

Exhibit 4.3

 

[FORM OF WARRANT]

 

NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY ONLY BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B)
AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (C) RULE 144(K) UNDER SAID ACT
AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE
SKY LAWS.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

24/7 REAL MEDIA, INC.

 

Warrant To Purchase Common
Stock

 

Warrant No.: W-7

Number of Shares:  1,802,820

Date of Issuance: September 26, 2003 (“Issuance Date”)

 

24/7 Real Media, Inc., a Delaware corporation (the “Company”), hereby certifies that, for Ten
United States Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, THE RIVERVIEW GROUP,
LLC, the registered holder hereof or its permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including all Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after
the date hereof, but not after 5:30 P.M., New York Time, on the Expiration Date
(as defined below), One Million Eight Hundred Two Thousand Eight Hundred Twenty
(1,802,820) fully paid nonassessable shares of Common Stock (as defined below)  (the “Warrant
Shares”).  Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15.  This
Warrant is one of the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1
of that certain Securities Purchase Agreement, dated as of September 26, 2003
(the “Initial Issuance Date”),
among the Company and the purchasers (the “Purchasers”)
referred to therein (the “Securities Purchase
Agreement”).

 

 

1.             EXERCISE OF
WARRANT.

 

(a)           Mechanics of
Exercise.  Subject to the terms and conditions hereof (including, without
limitation, the limitations set forth in Section 1(f)), this Warrant may be
exercised by the holder hereof on any day from and after the date hereof, in
whole or in part, by (i) delivery of a written notice, in the form
attached hereto as Exhibit A (the “Exercise
Notice”), of such holder’s election to exercise this Warrant,
(ii) (A) payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate
Exercise Price”) in cash or by wire transfer of immediately
available funds or (B) if applicable, by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d)) and (iii) the surrender to a common carrier for overnight
delivery to the Company, on or as soon as practicable following the date the
holder of this Warrant delivers the Exercise Notice to the Company, of this
Warrant (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction). 
On or before the third Business Day following the date on which the
Company has received each of the Exercise Notice, the Aggregate Exercise Price
(or notice of a Cashless Exercise) and this Warrant (or an indemnification undertaking
with respect to this Warrant in the case of its loss, theft or destruction)
(the “Exercise Delivery Documents”),
the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the
Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate number of
shares of Common Stock to which the holder of this Warrant is entitled pursuant
to such exercise to the holder’s or its designee’s balance account with DTC
through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder of this Warrant or its
designee, for the number of shares of Common Stock to which the holder of this
Warrant is entitled pursuant to such exercise.  Upon delivery of the Exercise
Notice, this Warrant and the Aggregate Exercise Price referred to in clause
(ii)(A) above or notification to the Company of a Cashless Exercise referred to
in Section 1(d), the holder of this Warrant shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised as of the date of the Exercise Notice,
irrespective of the date of delivery of the certificates evidencing such
Warrant Shares.  If the number of
Warrant Shares represented by this Warrant submitted for exercise pursuant to this
Section 1(a) is greater than the number of Warrant Shares being acquired upon
an exercise, then the Company shall as soon as practicable and in no event
later than three Business Days after any exercise and at its own expense, issue
a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which this Warrant is exercised.  No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. 
The Company shall pay any and all taxes, including without limitation,
all documentary stamp, transfer or similar taxes, or other incidental expense
that may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant.

 

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(b)           Exercise Price.  For purposes of this Warrant, “Exercise Price” means $1.9137, subject to
adjustment as provided herein.

 

(c)           Company’s Failure to
Timely Deliver Securities.  Subject
to Section 1(f), if the Company shall fail for any reason or for no reason to
issue to the holder within five Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of shares of Common Stock to
which the holder is entitled or to credit the holder’s balance account with DTC
for such number of shares of Common Stock to which the holder is entitled upon
the holder’s exercise of this Warrant, the Company shall pay as additional
damages in cash to such holder on each day after such fifth  Business Day that the issuance of such
Common Stock certificate is not timely effected an amount equal to 1.0% of the
product of (A) the sum of the number of shares of Common Stock not issued to
the holder on a timely basis and to which the holder is entitled and (B) the
difference between the Weighted Average Price of the Common Stock on the
trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating Section
1(a) and the Exercise Price.  In addition, the holder, upon written notice
to the Company, may void its Exercise Notice with respect to, and have
returned, any portion of this Warrant that has not been exercised pursuant to
such Exercise Notice; provided that the voiding of an Exercise Notice shall not
affect the Company’s obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 1(c) or otherwise.

 

(d)           Cashless Exercise.  If
at any time after the 120th day after the Issuance Date, the
Registration Statement (as defined in the Registration Rights Agreement) is not
effective and available for the resale of all of the Warrant Shares for a
period of five or more Trading Days (as defined in the Registration Rights
Agreement), the holder of this Warrant may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless Exercise”):

 

                Net Number = (A
x B) - (A x C)

B

 

For purposes of the foregoing formula:

 

A= the total number of shares with respect to
which this Warrant is then being exercised.

 

B= the Weighted Average Price of the Common
Stock (as reported by Bloomberg) on the date immediately preceding the date of
the Exercise Notice.

 

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C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.

 

(e)           Disputes.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 12.

 

(f)            Limitations on
Exercises.

 

(i)            Beneficial Ownership.  The Company shall not effect the exercise of
this Warrant, and no Person (as defined below) who is a holder of this Warrant
shall have the right to exercise this Warrant, to the extent that after giving
effect to such exercise, such Person (together with such Person’s affiliates)
would beneficially own in excess of 9.99% of the shares of the Common Stock
outstanding immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this
Warrant beneficially owned by such Person and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. 
For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company’s most recent Form 10-Q, Form 10-K
or other public filing with the Securities and Exchange Commission, as the case
may be, (2) a more recent public announcement by the Company or (3) any other
notice by the Company or its Transfer Agent setting forth the number of shares
of Common Stock outstanding.  For any
reason at any time, upon the written or oral request of the holder of this
Warrant, the Company shall within two Business Days confirm in writing to the
holder of this Warrant the number of shares of Common Stock then
outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including the SPA
Securities and the SPA Warrants, by the holder of this Warrant and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.

 

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(ii)           Principal Market Regulation.  The Company shall not be obligated to issue
any shares of Common Stock upon
conversion of all outstanding SPA Securities and exercise of all outstanding
SPA Warrants (including, the Warrant to purchase 428,571 shares of Common Stock
issued to the Company’s placement agent (the “Placement
Agent Warrants”) if the issuance of such shares of Common
Stock would exceed that number of shares of Common Stock which the Company may
issue upon exercise of this Warrant (including, as applicable, any shares of
Common Stock issued upon conversion of or as payment of any interest under the
SPA Securities) without breaching the Company’s obligations under the rules or
regulations of the Principal Market (the “Exchange
Cap”).  No Purchaser shall be
issued, upon exercise of any SPA
Warrants or conversion of the SPA Securities, shares of Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the sum of the
number of Conversion Shares and Warrant Shares underlying the SPA Securities
and the SPA Warrants issued to such Purchaser pursuant to the Securities
Purchase Agreement on the Issuance Date and the denominator of which is the sum
of the number of Conversion Shares and Warrant Shares underlying the SPA
Securities and the SPA Warrants issued to all the Purchasers pursuant to the
Securities Purchase Agreement on the Issuance Date and the number of shares of
Common Stock issuable pursuant to the Placement Agent Warrants issued on the
Issuance Date (with respect to each Purchaser, the “Exchange Cap Allocation”). 
In the event that any Purchaser shall sell or otherwise transfer
any of such Purchaser’s SPA Warrants, the transferee shall be allocated a pro
rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions
of the prior sentence shall apply to such transferee with respect to the
portion of the Exchange Cap Allocation allocated to such transferee.  In the event that any holder of SPA Warrants
shall exercise all of such holder’s SPA Warrants into a number of shares of
Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder shall
be allocated to the respective Exchange Cap Allocations of the remaining
holders of SPA Warrants on a pro rata basis in proportion to the shares of
Common Stock underlying the SPA Warrants then held by each such holder.

 

2.             ADJUSTMENT OF
EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant Shares shall be
adjusted from time to time as follows:

 

(a)           Adjustment upon
Issuance of Common Stock.  If and
whenever on or after the date of issuance of this Warrant the Company issues or
sells, or in accordance with this Section 2 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock issued or deemed to have been issued by the Company in
connection with any Excluded Security) for a consideration per share (the “New Securities Issuance Price”) less than a
price (the “Applicable Price”)
equal to the Exercise Price in effect immediately prior to such issue or sale
or deemed issuance or sale (the foregoing a “Dilutive

 

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Issuance”), then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the greater of (x) the New Securities Issuance Price and (y) the quotient
obtained by dividing (A) the sum of (i) the aggregate principal face amount of
SPA Securities then outstanding and (ii) the product of the aggregate number of
Warrant Shares) issuable pursuant to all of the SPA Warrants then outstanding multiplied by the Exercise Price
then in effect by (B) 16,999,811 minus the aggregate number of shares issued
pursuant to the SPA Securities and the SPA Warrants on or prior to the date of
the Dilutive Issuance.  For purposes of
determining the adjusted Exercise Price under this Section 2(a), the following
shall be applicable:

 

(i)            Issuance of Options.  If the Company in any manner grants any
Options, other than Excluded Securities, and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price,
then, solely for purposes of this Section 2, such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per share.  For purposes of this Section 2(a)(i), the “lowest
price per share for which one share of Common Stock is issuable upon exercise
of such Options or upon conversion, exercise or exchange of such Convertible
Securities” shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option. 
No further adjustment of the Exercise Price or number of Warrant Shares
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion, exercise or exchange of such
Convertible Securities.

 

(ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sells
any Convertible Securities, other than Excluded Securities, and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable Price,
then, solely for purposes of this Section 2, such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share.  For the purposes of this
Section 2(a)(ii), the “lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance or
sale of the Convertible Security and upon conversion, exercise or exchange of
such Convertible Security.  No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such Common Stock upon conversion, exercise or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities

 

6

 

is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(a), no further adjustment of the Exercise Price or number of Warrant Shares
shall be made by reason of such issue or sale.

 

(iii)          Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for Common Stock increases or decreases at any
time, the Exercise Price and the number of Warrant Shares in effect at the time
of such increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such time had such
Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold.  For purposes of this Section 2(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
date of issuance of this Warrant are increased or decreased in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such increase or decrease.  No
adjustment pursuant to this Section 2(a) shall be made if such adjustment would
result in an increase of the Exercise Price to an Exercise Price greater than
the Exercise Price in effect on the Issuance Date (as adjusted for any stock
splits, reverse stock splits, stock dividends, stock combinations and similar
transactions after the Issuance Date) then in effect or a decrease in the
number of Warrant Shares to a number less than the number of Warrant Shares (as
adjusted for any stock splits, reverse stock splits, stock dividends, stock
combinations and similar transactions after the Issuance Date) then issuable
hereunder.

 

(iv)          Calculation of Consideration Received.  If case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $0.01.  If
any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor.  If any Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Weighted Average Price of such security on the date of receipt.  If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of

 

7

 

such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be.  The fair value of any
consideration other than cash or securities will be determined jointly by the
Board of Directors of the Company and the holders of SPA Warrants representing
at least a majority of the shares of Common Stock obtainable upon exercise of
the SPA Warrants then outstanding unless the Board of Directors of the Company
shall have obtained a fairness opinion from an independent financial advisor in
which case the fair value shall be as stated in such fairness opinion.  If, in the absence of a fairness opinion,
such parties are unable to reach agreement within 10 days after the occurrence
of an event requiring valuation (the “Valuation
Event”), the fair value of such consideration will be determined in
accordance with Section 12 hereof.

 

(v)           Record Date.  If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

 

(b)           Adjustment upon
Subdivision or Combination of Common Stock.  If the Company at any time after the date of issuance of this
Warrant subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of Warrant
Shares will be proportionately increased. 
If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any
adjustment under this Section 2(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

 

(c)           Other Events.  If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors, in their reasonable discretion, will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to
protect the rights of the holder of this Warrant; provided that no such
adjustment pursuant to this Section 2(c) will increase the Exercise Price or
decrease the number of Warrant Shares as otherwise determined pursuant to this
Section 2.

 

3.             RIGHTS UPON
DISTRIBUTION OF ASSETS.  In addition
to any adjustments pursuant to Section 2 above, if the Company shall declare or
make any dividend or other

 

8

 

distribution of its assets (or rights to acquire its assets) to holders
of Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this
Warrant, then, in each such case:

 

(a)           any Exercise Price in
effect immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Weighted Average Price of the
Common Stock on the trading day immediately preceding such record date minus
the value of the Distribution (as determined in good faith by the Company’s
Board of Directors) applicable to one share of Common Stock, and (ii) the
denominator shall be the Weighted Average Price of the Common Stock on the
trading day immediately preceding such record date; and

(b)           the number of Warrant
Shares shall be increased to a number of shares equal to the number of shares
of Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the fraction set forth
in the immediately preceding paragraph (a); provided that in the event that the
Distribution is of common stock (“Other
Common Stock”) of a company whose common stock is traded on a
national securities exchange or a national automated quotation system, then the
holder of this Warrant may elect to receive a warrant to purchase Other Common
Stock in lieu of an increase in the number of Warrant Shares, the terms of
which shall be identical to those of this Warrant, except that such warrant
shall be exercisable into the number of shares of Other Common Stock that would
have been payable to the holder of this Warrant pursuant to the Distribution
had the holder exercised this Warrant immediately prior to such record date and
with an aggregate exercise price equal to the product of the amount by which
the exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding paragraph (a)
and the number of Warrant Shares calculated in accordance with the first part
of this paragraph (b).

 

4.             PURCHASE RIGHTS;
ORGANIC CHANGE.

 

(a)           Purchase Rights.  In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the “Purchase Rights”),
then the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

 

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(b)           Organic Change.  Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company’s assets to another Person or other transaction, in each case which
is effected in such a way that holders of Common Stock are entitled to receive
securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic Change.”  Subject to Section 4(k) of the Securities
Purchase Agreement, prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the Person
issuing the securities or providing the assets in such Organic Change (in each
case, the “Acquiring Entity”) a
written agreement (in form and substance reasonably satisfactory to the holders
of SPA Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding) to deliver to
the holder of this Warrant in exchange for this Warrant, a security of the
Acquiring Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant and reasonably satisfactory to the holder of
this Warrant (including, an adjusted exercise price equal to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and
exercisable for a corresponding number of shares of Common Stock acquirable and
receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant), if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation, merger or
sale).  In the event that an Acquiring
Entity is directly or indirectly controlled by a company or entity whose common
stock or similar equity interest is listed, designated or quoted on a
securities exchange or trading market, the holder of this Warrant may elect to
treat such Person as the Acquiring Entity for purposes of this Section
4(b).  Prior to the consummation of any
other Organic Change, the Company shall be required to make appropriate
provision (in form and substance reasonably satisfactory to the holders of SPA
Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding) to insure that
the holder of this Warrant thereafter will have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant
including those set forth in Sections 1(f)(i) and 1(f)(ii) of this Warrant),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been acquirable and receivable upon the
exercise of this Warrant as of the date of such Organic Change (without regard
to any limitations on the exercise of this Warrant including those set forth in
Sections 1(f)(i) and 1(f)(ii) of this Warrant).

 

5.             NONCIRCUMVENTION.  The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the rights of
the holder of this Warrant.  Without
limiting the generality of the foregoing, the Company (i) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect,
(ii) will take all such actions as may be necessary or appropriate in
order that

 

10

 

the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (iii) will, so long as any of the
SPA Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 130% of the number of
shares of Common Stock as shall from time to time be necessary to effect the
exercise of the SPA Warrants then outstanding (without regard to any
limitations on exercise).

 

6.             WARRANT HOLDER NOT
DEEMED A STOCKHOLDER.  Except as
otherwise specifically provided herein, no holder, solely in such Person’s
capacity as a holder, of this Warrant shall be entitled to vote or receive
dividends or be deemed the holder of shares of the Company for any purpose, nor
shall anything contained in this Warrant be construed to confer upon the holder
hereof, solely in such Person’s capacity as a holder of this Warrant, any of
the rights of a shareholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition,
nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company
will provide the holder of this Warrant with copies of the same notices and
other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

 

7.             REISSUANCE OF
WARRANTS.

 

(a)           Transfer of Warrant.  If this Warrant is to be transferred, the
holder shall surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the holder of this Warrant a new Warrant
(in accordance with Section 7(d)), registered as the holder of this Warrant may
request, representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the holder of this Warrant representing the right to
purchase the number of Warrant Shares not being transferred.

 

(b)           Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the holder of this Warrant to the Company in
customary form, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company shall execute and deliver to the Holder a new Warrant
(in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.

 

(c)           Warrant Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company,

 

11

 

for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant
Shares then underlying this Warrant, and each such new Warrant will represent
the right to purchase such portion of such Warrant Shares as is designated by
the holder of this Warrant at the time of such surrender; provided, however,
that no Warrants for fractional shares of Common Stock shall be given.

 

(d)           Issuance of New Warrants.  Whenever the Company is required to issue a
new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the holder of
this Warrant which, when added to the number of shares of Common Stock
underlying the other new Warrants issued in connection with such issuance, does
not exceed the number of Warrant Shares then underlying this Warrant), (iii)
shall have an issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same rights and
conditions as this Warrant.

 

8.             NOTICES.  Whenever notice is required to be given
under this Warrant, unless otherwise provided herein, such notice shall be
given in accordance with Section 9(f) of the Securities Purchase
Agreement.  The Company shall provide
the holder of this Warrant with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. 
Without limiting the generality of the foregoing, the Company will give
written notice to the holder of this Warrant (i) reasonably promptly upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least the same
number of days prior to the date on which the Company provides notice to any
other Person who has the right to receive notice of such an event (A) with
respect to any dividend or distribution upon the Common Stock, (B) with respect
to any grants, issues or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of Common
Stock or (C) for determining rights to vote with respect to any Change of
Control (as defined in the SPA Securities), dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder.  Notwithstanding the foregoing, Section 4(j)
of the Securities Purchase Agreement shall apply to all notices given pursuant
to this Warrant.

 

9.             AMENDMENT AND
WAIVER.  Except as otherwise
provided herein, the provisions of this Warrant may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of SPA Warrants representing at least a majority of the
shares of Common Stock obtainable upon exercise of the SPA Warrants then
outstanding; provided that no such action may increase the exercise price of
this Warrant or decrease the number of shares or class of stock obtainable upon
exercise of this Warrant without the written consent of the holder of this
Warrant.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
SPA Warrants then outstanding.

 

12

 

10.           GOVERNING LAW.  This Warrant shall be construed and enforced in accor­dance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

 

11.           CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. 
The headings of this Warrant are for convenience of reference and shall
not form part of, or affect the interpretation of, this Warrant.

 

12.           DISPUTE RESOLUTION.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two Business Days of receipt of
the Exercise Notice giving rise to such dispute, as the case may be, to the
holder of this Warrant.  If the holder
of this Warrant and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted
to the Holder, then the Company shall, within two Business Days submit via
facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the holder of this Warrant or (b) the disputed arithmetic calculation of the
Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause the investment bank
or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank’s or
accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.

 

13.           REMEDIES, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.  The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant, the Securities Purchase Agreement, the
SPA Securities and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit the right of the holder of this Warrant right to
pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder of this Warrant
and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event
of any such breach or threatened breach, the holder of this Warrant shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

 

14.           TRANSFER.  This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be
required by Section 2(f) of the Securities Purchase Agreement.

 

13

 

15.           CERTAIN DEFINITIONS.  For purposes of this Warrant, the following
terms shall have the following meanings:

 

(a)           “Bloomberg”
means Bloomberg Financial Markets.

 

(b)           “Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.

 

(c)           “Common Stock”
means (i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of such Common
Stock.

 

(d)           “Convertible
Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common Stock.

 

(e)           “Excluded
Securities” shall have the meaning given to it in the Securities
Purchase Agreement.

 

(f)            “Expiration
Date” means the date five years after the applicable Closing Date
(as defined in the Securities Purchase Agreement) or, if such date falls on a
day other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”),
the next date that is not a Holiday.

 

(g)           “Options”
means any rights, warrants or options to subscribe for or purchase Convertible
Securities or Common Stock.

 

(h)           “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

 

(i)            “Principal
Market” means The Nasdaq SmallCap Market or in the event that the
Company is no longer listed with The Nasdaq SmallCap Market, the market or
exchange on which the Common Stock is then listed and traded, which only may be
either The New York Stock Exchange, Inc., the American Stock Exchange or the
Nasdaq National Market.

 

(j)            “Registration
Rights Agreement” means that certain registration rights agreement
between the Company and the Purchasers.

 

(k)           “SPA
Securities” means the subordinated convertible debentures issued
pursuant to the Securities Purchase Agreement.

 

(l)            “Weighted
Average Price” means, for
any security as of any date, the dollar volume-weighted average price for such
security on the Principal Market during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as the Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or
such

 

14

 

other time as the Principal Market publicly announces is the official
close of trading) as reported by Bloomberg through its “Volume at Price”
functions, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York Time (or such
other time as such market publicly announces is the official close of trading)
as reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Weighted Average Price
of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder. 
If the Company and the holder of this Warrant are unable to agree upon
the fair market value of such security, then such dispute shall be resolved
pursuant to Section 12.  All such
determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable calculation
period.

 

[Signature Page Follows]

 

15

 

IN WITNESS WHEREOF,
the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.

 

 

	
   

  	
  24/7 REAL MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David J. Moore

  
	
   

  	
   

  	
  Chief Executive Officer

  

 

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS

WARRANT TO PURCHASE COMMON STOCK

 

24/7 REAL MEDIA, INC.

 

The
undersigned holder hereby exercises the right to purchase
                              
of the shares of Common Stock (“Warrant
Shares”) of 24/7 Real Media, Inc., a Delaware corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

 

After giving effect to the exercise of the Warrant Shares requested to
be converted pursuant hereto, the undersigned will not be the beneficial owner
of 10% or more of the outstanding Common Stock (determined as set forth in
Section 1(f)(i) of the Warrant).

 

1.  Form of Exercise Price.  The Holder intends that payment of the
Exercise Price shall be made as:

 

	
   

  	
                            

  	
  a
  “Cash Exercise” with respect to
                                 
  Warrant Shares; 

  	
   

  
	
   

  	
   

  	
  and/or

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
                            

  	
  a
  “Cashless Exercise” with respect to
                               
  Warrant Shares.

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

[Insert this paragraph (2) in the event that the
holder has not elected a Cashless Exercise in accordance with the terms of the
Warrant as to all of the Warrant Shares to be issued pursuant hereto] 
2.  Payment of Exercise
Price.  The holder is hereby delivering
to the Company payment in the amount of $               
representing the Aggregate Exercise Price for such Warrant Shares not subject
to a Cashless Exercise in accordance with the terms of the Warrant.

 

3.  Delivery of Warrant Shares.  The Company shall deliver to the holder
                       
Warrant Shares in accordance with the terms of the Warrant.

 

 

	
  Date:
                                     
     , 200    

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name
  of Registered Holder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs
The Bank of New York to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated September 26,
2003 from the Company and acknowledged and agreed to by The Bank of New York.

 

	
   

  	
  24/7 REAL MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  David J. Moore

  
	
   

  	
   

  	
  Chief Executive OfficerExhibit
4.4

 

REGISTRATION RIGHTS
AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement“),
dated as of September 26, 2003, by and among 24/7 Real Media, Inc., a Delaware
corporation, with headquarters located at 1250 Broadway, 27th Floor,
New York, New York 10001 (the “Company“), and the investors listed on the
Schedule of Buyers attached hereto (each, a “Buyer“ and collectively, the
“Buyers”).

 

WHEREAS:

 

A.            In
connection with the Securities Purchase Agreement by and among the parties
hereto dated as of as of the date hereof (the “Securities Purchase Agreement“),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell on the date hereof to each
Buyer (i) subordinated convertible debentures of the Company (the “Debentures”) which shall be convertible
into shares of the Company’s common stock, par value $.01 per share (the “Common Stock“)
(as converted, the “Conversion Shares”)
in accordance with the terms of the Debentures, and (ii) warrants (the “Warrants“)
which will be exercisable to purchase shares of Common Stock (as exercised
collectively, the “Warrant Shares“);

 

B.            To
induce the Buyers to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “1933
Act“), and applicable state securities laws.

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:

 

1.             Definitions.

 

As used in this Agreement, the following terms shall
have the following meanings:

 

a.             “Business Day“ means any day other than
Saturday, Sunday or any other day on which commercial banks in The City of New
York are authorized or required by law to remain closed.

 

b.             “Investor“ means a Buyer, any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 and any transferee or assignee thereof to whom a transferee or
assignee assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9.

 

 

c.             “Person“ means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and governmental or any department or agency
thereof.

 

d.             “register,” “registered,” and “registration”
refer to a registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the 1933 Act and
pursuant to Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis (“Rule 415“), and the declaration or ordering
of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the “SEC“).

 

e.             “Registrable Securities“ means (i) the
Conversion Shares issued or issuable upon conversion of all of the Debentures,
(ii) the Interest Shares (as defined in the Debentures) issued or issuable
under the Debentures, (iii) the Repayment Shares (as defined in the Debentures)
issued or issuable under the Debentures, (iv) the Warrant Shares issued or
issuable upon exercise of the Warrants and (v) any shares of capital stock issued
or issuable with respect to the Debentures, the Conversion Shares, the Interest
Shares, the Repayment Shares, the Warrant Shares or the Warrants as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on conversions of the Debentures
or exercise of the Warrants.

 

f.              “Registration Statement“ means a
registration statement or registration statements of the Company filed under
the 1933 Act covering the Registrable Securities.

 

Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.

 

2.             Registration.

 

a.             Mandatory
Registration.  The Company shall
prepare, and, as soon as practicable but in no event later than 30 days after
the date hereof (the “Filing Deadline“), file with the SEC a
Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities.  In the event
that Form S-3 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration, subject to the
provisions of Section 2(d).  The
Registration Statement prepared pursuant hereto shall register for resale at
least 13,500,000 shares, subject to adjustment as provided in Section
2(e).  The Company shall use its best
efforts to have the Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the date which is (i) in the event
that the Registration Statement is not subject to a full review by the SEC, 90
days after the date hereof or (ii) in the event that the Registration Statement
is subject to a full review by the SEC, 120 days after the date hereof (the “Effectiveness
Deadline“).

 

b.             Allocation
of Registrable Securities.  The
initial number of Registrable Securities included in any Registration Statement
and each increase in the number of Registrable Securities included therein
pursuant to Section 2(e) shall be allocated pro rata among the Investors based
on the number of Registrable Securities held by each Investor at the time the

 

2

 

Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC.  In the event that an Investor sells or
otherwise transfers any of such Investor’s Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such
transferor.  Any shares of Common Stock
included in a Registration Statement and which remain allocated to any Person
which ceases to hold any Registrable Securities covered by such Registration
Statement shall be allocated to the remaining Investors, pro rata based on the
number of Registrable Securities then held by such Investors which are covered
by such Registration Statement.  In no
event shall the Company include any securities other than Registrable
Securities on any Registration Statement without the prior written consent of
Buyers holding at least a majority of the Registrable Securities.

 

c.             Legal
Counsel.  Subject to Section 5
hereof, the Investors holding at least a majority of the Registrable Securities
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 (“Legal
Counsel“), which shall initially be Schulte Roth & Zabel LLP or
such other counsel as thereafter designated by the holders of at least a
majority of the Registrable Securities.

 

d.             Ineligibility
for Form S-3.  In the event that
Form S-3 is not available for the registration of the resale of Registrable
Securities hereunder, the Company shall (i) register the resale of the
Registrable Securities on another appropriate form reasonably acceptable to the
holders of at least a majority of the Registrable Securities and (ii) undertake
to register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

 

e.             Sufficient
Number of Shares Registered.  In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the applicable Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least 130% of the number of such
Registrable Securities as of the trading day immediately preceding the date of
the filing of such amendment or new Registration Statement, in each case, as
soon as practicable, but in any event not later than fifteen (15) Trading Days
after the Company becomes aware of the necessity therefor arises.  The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as reasonably practicable following the filing thereof.  For purposes of the foregoing provision, the
number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the
number of shares of Common Stock available for resale under such Registration
Statement is less than 115% of the number of Registrable Securities issued and
issuable upon conversion of the Debentures and exercise of the Warrants
excluding Registrable Securities which have been sold or transferred pursuant
to such Registration Statement.  The
calculation set forth in the foregoing sentence shall be made without regard to
any limitations on the conversion of the Debentures or the exercise of the
Warrants and such

 

3

 

calculation shall assume that the Debentures and the Warrants are
convertible or exercisable into shares of Common Stock and the maximum number
of Interest Shares under the Debentures, assuming the initial outstanding
principal amount of the Debentures remains outstanding through the Original
Maturity Date (as defined in the Debentures) and assuming no conversions or
redemptions of the Debentures prior to the Original Maturity Date, are issuable
at the then prevailing Interest Conversion Price ( as defined in the
Debentures), the Conversion Rate (as defined in the Debentures) or Warrant
Exercise Price (as defined in the Warrants), as applicable.

 

f.              Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.  If (i) a Registration
Statement covering all the Registrable Securities required to be covered
thereby and required to be filed by the Company pursuant to this Agreement is
(A) not filed with the SEC on or before the Filing Deadline (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day
after such Registration Statement has been declared effective by the SEC sales
of all the Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(r)) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register sufficient shares of
Common Stock)(a “Maintenance Failure”),
then, as partial relief for the damages 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 each holder of Debentures relating
to such Registration Statement:  on the
earlier of (A) the last day of each 30 day period after a Filing Failure, an
Effectiveness Failure and the initial day of a Maintenance Failure, as the case
may be until such event is cured, or (B) on the third Trading Day after any
such Filing Failure, Effectiveness Failure or Maintenance Failure is cured, an
amount in cash equal to the product of (i) the aggregate Principal (as defined
in the Debentures) of such Investor’s Debentures convertible into Conversion
Shares included in such Registration Statement multiplied by (y) 0.02, provided,
however, that such payment shall apply on a pro-rata basis for any
portion of a 30 day period prior to the cure of a Filing Failure, Effectiveness
Failure or Maintenance Failure as applicable; and, provided  further,
that any payment made pursuant to clause (B) of this sentence shall relieve the
Company of its obligation to make any payment pursuant to clause (A) of this
sentence with respect to the first thirty day period following such Filing
Failure, Effectiveness Failure or Maintenance Failure.  The payments to which a holder shall be
entitled pursuant to this Section 2(f) are referred to herein as “Registration Delay Payments.”  Registration Delay Payments shall be paid on
the earlier of (I) the last day of the calendar month during which such Registration
Delay Payments are incurred and (II) the third Trading Day after the event or
failure giving rise to the Registration Delay Payments is cured.  In the event the Company fails to make any
Registration Delay Payments pursuant to this Section 2(f) in a timely manner,
such Registration Delay Payments shall bear interest at the rate of 1.5% per
month, or such lower maximum amount as is permitted by law, (prorated for
partial months) until paid in full.

 

4

 

3.             Related
Obligations.

 

At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), 2(d) or 2(e), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:

 

a.             The Company shall submit to the SEC, within
two (2) Business Days after the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff of the SEC has
no further comments on a particular Registration Statement, as the case may be,
a request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such
request.  The Company shall keep
each Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under
the 1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the “Registration Period“).  The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any 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 (in
the case of prospectuses, in the light of the circumstances in which they were
made) not misleading.

 

b.             The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which
prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act,
as the Company determines may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration
Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the Company
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the “1934 Act“), the Company shall have
incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement
for the Company to amend or supplement such Registration Statement.

 

c.             The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least four (4) Business Days prior to its filing with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K and any similar or successor reports) within two
Business Days prior to their filing with the

 

5

 

SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which the Investors holding a majority of the
Registrable Securities reasonably objects. 
The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of the Investors holding a majority of the
Registrable Securities, which consent shall not be unreasonably withheld,
conditioned or delayed.  The Company
shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, and (ii) upon the
effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto.

 

d.             The
Company shall furnish to each Investor whose Registrable Securities are
included in any Registration Statement, without charge,  (i) promptly after the same is prepared and
filed with the SEC and not otherwise available on the EDGAR system, one copy of
such Registration Statement and any amendment(s) thereto (including financial
statements and schedules), all documents (including exhibits) incorporated
therein by reference, and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request) and (iii) such other documents not available on the EDGAR system as
such Investor may reasonably request from time to time, including copies of any
preliminary or final prospectus, in order to facilitate the disposition of the
Registrable Securities owned by such Investor.

 

e.             The
Company shall use its reasonable best efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of such jurisdictions in the
United States as the Investor may reasonably request, (ii) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. 
The Company shall promptly notify Legal Counsel and each Investor who
holds Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or “blue sky” laws of
any jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

 

f.              The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event, as
a result of which the prospectus included in a Registration Statement, as then
in effect,

 

6

 

includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and, subject to Section 3(r), promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request).  The Company shall also promptly notify Legal
Counsel and each Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective (notification of
such effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

 

g.             The
Company shall use its reasonable best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

 

h.             If
any Investor is required under applicable securities law to be described in the
Registration Statement as an underwriter, at the reasonable request of such
Investor, the Company shall furnish to such Investor, on the date of
effectiveness of the Registration Statement and thereafter from time to time on
such dates as an Investor may reasonably request (i) a letter, dated such date,
from the Company’s independent certified public accountants in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the Investors,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Investors.

 

i.              Upon
the written request of one Investor (as may be designated by the holders of at
least a majority of the Registrable Securities) in connection with any
Investor’s due diligence requirements, if any, the Company shall make available
for inspection by (i) any Investor, (ii) Legal Counsel and (iii) one firm of
accountants or other agents retained by the Investors (collectively, the “Inspectors“), all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the “Records“), as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree in
writing (in a form reasonably acceptable to the Company) to hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to
be

 

7

 

confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such Records
has been made generally available to the public other than by disclosure in
violation of this or any other agreement of which the Inspector has
knowledge.  Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.  Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.

 

j.              The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company in writing unless (i) disclosure
of such information is necessary or desirable to comply with federal or state
securities laws or applicable rules and regulations of NASDAQ or any other
relevant market or exchange, (ii) the disclosure of such information is
necessary or desirable to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement of which the Company has knowledge.  The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

 

k.             The
Company shall use its best efforts either to (i) cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation and
quotation of all the Registrable Securities covered by a Registration Statement
on The Nasdaq SmallCap Market.  The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).

 

l.              If
requested by the Investors holding a majority of the Registrable Securities,
the Company shall cooperate with the Investors who hold Registrable Securities
being offered and, to the extent applicable, facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such
names as the Investors may request.

 

8

 

m.            If
requested by an Investor, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests in writing to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to
be sold in such offering; (ii) as soon as practicable make all required filings
of such prospectus supplement or post-effective amendment after being notified
of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

 

n.             The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

 

o.             The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of a Registration Statement.

 

p.             The
Company shall otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.

 

q.             Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

 

r.              Notwithstanding
anything to the contrary herein, at any time after the Registration Statement
has been declared effective by the SEC, the Company may delay the disclosure of
material non-public information concerning the Company the disclosure of which
at the time is not, in the good faith opinion of the Board of Directors of the
Company and its counsel, in the best interest of the Company and, in the
opinion of counsel to the Company, otherwise required (a “Grace Period“); provided,
that the Company shall promptly (i) notify the Investors in writing of the
existence of material non-public information giving rise to a Grace Period
(provided that in each notice the Company will not disclose the content of such
material non-public information to the Investors) and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date
on which the Grace Period ends; and, provided further, that no Grace Period
shall exceed ten (10) consecutive Trading Days and during any

 

9

 

three hundred sixty five (365) day period such Grace Periods shall not
exceed an aggregate of thirty (30) Trading Days and the first day of any Grace
Period must be at least two (2) Trading Days after the last day of any prior
Grace Period (each, an “Allowable Grace Period“).  For purposes of determining the length of a
Grace Period above, the Grace Period shall begin on and include the date the
Investors receive the notice referred to in clause (i) and shall end on and
include the later of the date the Investors receive the notice referred to in
clause (ii) and the date referred to in such notice.  The provisions of Section 3(f) hereof shall not be applicable
during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the Company shall again be
bound by the first sentence of Section 3(f) with respect to the information
giving rise thereto unless such material non-public information is no longer
applicable.  Each Investor agrees to
keep confidential any information provided by the Company pursuant to this
Section 3(r) until the Company shall have made public disclosure of such
information within the meaning of Rule 101(e) of Regulation FD.  Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the applicable
Registration Statement, prior to the Investor’s receipt of the notice of a Grace
Period and for which the Investor has not yet settled.

 

4.             Obligations Of The
Investors.

 

a.             At
least seven (7) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the
information the Company requires from each such Investor if such Investor
elects to have any of such Investor’s Registrable Securities included in such
Registration Statement.  It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish, in a
manner consistent with the last sentence of this Section 4(a), to the Company
such information regarding itself, the Registrable Securities held by it and
the intended method of disposition of the Registrable Securities held by it as
shall be reasonably required to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.  All information provided to the Company by
an Investor pursuant to the prior sentence or pursuant to Section 3(m) hereof
shall be in writing, and such writing shall expressly acknowledge that the
information is being provided for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto.

 

b.             Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such Investor’s
election to exclude all of such Investor’s Registrable Securities from such
Registration Statement.

 

c.             Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first

 

10

 

sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor’s receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3(g)
or the first sentence of 3(f) or receipt of notice that no supplement or
amendment is required.  Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the
first sentence of 3(f) and for which the Investor has not yet settled.

 

5.             Expenses of
Registration.

 

All reasonable expenses, other than underwriting
discounts and commissions (which shall be borne by the Investors), incurred in
connection with the performance of the Company’s obligations hereunder and
under the transactions contemplated hereby, including registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees,
and fees and disbursements of counsel for the Company shall be paid by the
Company.  The Company shall also
reimburse the Investors for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections 2
and 3 of this Agreement which amount shall be limited to $5,000 for each
Registration Statement.

 

6.             Indemnification.

 

In the event any Registrable Securities are included
in a Registration Statement under this Agreement:

 

a.             To
the fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls
any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person“), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or
several (collectively, “Claims“),
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages“), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: 
(i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities are offered (“Blue Sky Filing“),
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary

 

11

 

prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in the light of the circumstances under
which the statements therein were made, not misleading, (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations“).  Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a):  (w) shall not apply to a Claim by
an Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely
made available by the Company pursuant to Section 3(d); (x) with respect to any
preliminary prospectus, shall not inure to the benefit of any such Indemnified
Person from whom the Person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any Person
controlling such Person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, and if such prospectus was timely made available
by the Company pursuant to Section 3(d), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding
such advice, used it or failed to deliver the correct prospectus as required by
the 1933 Act and such correct prospectus was timely made available pursuant to
Section 3(d); (y) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company, including a corrected prospectus, if such
prospectus or corrected prospectus was timely made available by the Company
pursuant to Section 3(d); and (z) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld or
delayed.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

 

b.             In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement and each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified Party“), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the
extent,

 

12

 

and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement or
any post-effective amendment thereof or supplement thereto or any prospectus
contained therein; and, subject to Section 6(c), such Investor will reimburse
any legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim as promptly as such
expenses are incurred and are due and payable; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld or delayed; provided, further, however, that an Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.

 

c.             Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6 of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and 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
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not more than one counsel for such Indemnified Person or Indemnified Party to
be paid by the indemnifying party, if, in the reasonable opinion of the
Indemnified Person or the Indemnified Party, as the case may be, the representation
by such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Indemnified Party and any other
party represented by such counsel in such proceeding.  In the case of an Indemnified Person, legal counsel referred to
in the immediately preceding sentence shall be selected by the Investors
holding at least a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
Claim.  The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto.  No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to
entry of any judgment or enter into any

 

13

 

settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation. 
Following indemnification as provided for hereunder, the indemnifying
party shall be subrogated to all rights of the Indemnified Party or Indemnified
Person with respect to all third parties, firms or corporations relating to the
matter for which indemnification has been made.  The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

 

d.             The
indemnification required by this Section 6 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.

 

e.             The
indemnity agreements contained herein shall be in addition to  (i) any cause of action or similar right of
the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

 

7.             Contribution.

 

To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the
indemnifying party agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to the fullest
extent permitted by law; provided, however, that: (i) no contribution shall be
made under circumstances the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (ii) no
Person involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant
to such Registration Statement.

 

8.             Reports Under The
1934 Act.

 

With a view to making available to the Investors the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration (“Rule 144“), the Company agrees to:

 

a.             make
and keep public information available, as those terms are understood and
defined in Rule 144;

 

b.             file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the

 

14

 

Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company’s obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

 

c.             furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.

 

9.             Assignment of
Registration Rights.

 

The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor’s Registrable Securities if: 
(i) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement.

 

10.           Amendment of
Registration Rights.

 

Provisions 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 Investors who then hold at least a majority of the Registrable
Securities.  Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.  No such amendment
shall be effective to the extent that it applies to less than all of the
holders of the Registrable Securities. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.

 

11.           Miscellaneous.

 

a.             A
Person is deemed to be a holder of Registrable Securities whenever such Person
owns or is deemed to own of record such Registrable Securities.  If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the record owner of such
Registrable Securities.

 

15

 

b.             Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed
to have been delivered:  (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated
and kept on file by the sending party); or (iii) one Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. 
The addresses and facsimile numbers for such communications shall be:

 

	
   

  	
  If to the Company:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  24/7 Real Media, Inc.

  	
   

  
	
   

  	
   

  	
  1250 Broadway, 27th Floor

  	
   

  
	
   

  	
   

  	
  New York, New York 10001

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
  (212) 231-7100

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 760-2811

  
	
   

  	
   

  	
  Attention:

  	
  Mark E. Moran, Esq.

  Executive Vice President and General Counsel

  
					

 

	
   

  	
  with a copy (which
  shall not constitute notice) to:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Proskauer Rose LLP 

  	
   

  
	
   

  	
   

  	
  1585 Broadway 

  	
   

  
	
   

  	
   

  	
  New York, NY 10036

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
  (212) 969-3000

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 969-2900

  
	
   

  	
   

  	
  Attention:

  	
  Ronald R. Papa, Esq.

  
					

 

	
   

  	
  If to Legal Counsel:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Schulte Roth & Zabel LLP

  	
   

  
	
   

  	
   

  	
  919 Third Avenue

  	
   

  
	
   

  	
   

  	
  New York, New York 
  10022

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
  (212) 756-2000

  
	
   

  	
   

  	
  Facsimile:

  	
  (212) 593-5955

  
	
   

  	
   

  	
  Attention:

  	
  Eleazer Klein, Esq.

  
					

 

If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers attached hereto, with copies to such Buyer’s representatives as set
forth on the Schedule of Buyers, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. 
Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a

 

16

 

nationally recognized overnight delivery service in accordance with
clause (i), (ii) or (iii) above, respectively.

 

c.             Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

 

d.             All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York.  Each party hereby
irrevocably submits to the non- exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

e.             This
Agreement, the Securities Purchase Agreement, the Debentures, the Warrants and
the instruments referenced herein and therein constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
thereof.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein.  This Agreement, the
Securities Purchase Agreement, the Debentures, the Warrants and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

 

f.              Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of
and be binding upon the permitted successors and assigns of each of the parties
hereto.

 

g.             The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

17

 

h.             This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

 

i.              Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.

 

j.              All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by Investors holding at least a majority of the Registrable Securities,
determined as if all the Warrants then outstanding have been exercised for
Registrable Securities without regard to any limitations on exercises of the
Warrants.

 

k.             The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.

 

l.              This
Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

 

m.            This
Agreement shall terminate and be of no further effect on the date on which the
Investors shall have sold or can sell pursuant to Rule 144(k) all of the
Conversion Shares, Repayment Shares, Interest Shares and Warrant Shares and
none of the Debentures or the Warrants remain outstanding.

 

* * * * * *

 

18

 

IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of day and year first
above written.

 

 

	
  COMPANY:

  	
   

  	
  BUYERS:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  24/7 REAL
  MEDIA, INC.

  	
   

  	
  THE
  RIVERVIEW GROUP, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David J. Moore

  	
   

  	
  By:

  	
  /s/ Terry Feeney

  	
   

  
	
   

  	
  Name:  David J. Moore

  	
   

  	
   

  	
  Name:  Terry Feeney

  	
   

  
	
   

  	
  Title:    Chief Executive Officer

  	
   

  	
   

  	
  Title:    Chief Operating Officer

  	
   

  
							

 

19

 

SCHEDULE OF BUYERS

 

 

	
  Investor

  	
   

  	
  Investor Address

  and Facsimile Number

  	
   

  	
  Investor’s Representative’s Address 

  and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Riverview Group, LLC

  	
   

  	
  666 Fifth Avenue, 8th
  Floor

  New York, New York  10103

  Attention:  Daniel Cardella

  Facsimile:(212) 977-1667

  Telephone: (212) 841-4100

  	
   

  	
  Schulte Roth & Zabel LLP

  919 Third Avenue

  New York, New York 10022

  Attention:  Eleazer Klein, Esq.

  Facsimile:  (212) 593-5955

  Telephone:  (212) 756-2000

  

 

 

EXHIBIT A

 

FORM OF NOTICE OF
EFFECTIVENESS

OF REGISTRATION STATEMENT

 

The Bank of New York

101 Barclay Street

New York, NY 10007-2702

 

 

Attn:  [                     ]

 

Re:          24/7
Real Media, Inc.

 

Ladies and Gentlemen:

 

We are counsel to 24/7 Real Media, Inc., a Delaware
corporation (the “Company”), and have represented the Company in connection
with the preparation of a Registration Statement (the “Registration Statement”)
on Form S-3 (File No. 333-                     )
which was filed with the Securities and Exchange Commission (the “SEC”)  on [INSERT FILING DATE].  The Registration Statement covers the resale
of [                     ]
shares of common stock of the Company (the “Shares”) by the selling
stockholders listed therein.

 

In connection with the foregoing, we advise you that a
member of the SEC’s staff has advised us by telephone that the SEC has entered an
order declaring the Registration Statement effective under the Securities Act
of 1933, as amended, at [ENTER
TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Shares are
available for resale under the 1933 Act pursuant to the Registration Statement.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

CC:          [LIST NAMES OF HOLDERS]

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