Document:

Exhibit 10.1

 

	
  

  

 

24/7 Real Media, Inc.
1250 Broadway, 28th Floor

New York, New York 10001

 

May 23, 2003

 

PubliGroupe USA
Holding, Inc.

1100 Santa Monica Blvd, Suite
550

Los Angeles, CA, 90025

 

RE:          Exchange And
Amendment of Notes; Certain Other Matters

 

Dear Moritz,

 

We refer to
(i) that certain Agreement And Plan Of Merger, dated as of October 30, 2001 (as
amended, supplemented or otherwise modified from time to time, the “Merger  Agreement”), among 24/7
Media, Inc., a Delaware corporation (“Parent”), Real Media, Inc., a Delaware
corporation (the “Company”), PubliGroupe USA Holding,
Inc., a Delaware corporation (“Publigroupe”), and Continuum Holding
Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent
(“Merger
Sub”); (ii) that certain unsecured promissory note, dated
October 30, 2001, in the principal amount of $4,500,000 issued by the Company
in favor of Publigroupe and guaranteed by Parent pursuant to the Parent
Guarantee (as defined) (the “First Note”); (iii) that certain unsecured
promissory note, dated January 9, 2002, in the principal amount of $1,500,000
issued by Parent to Publigroupe (the “Second Note”); (iv) that certain
unsecured promissory note, dated May 14, 2002, in the principal amount of
$1,500,000 issued by Parent to Publigroupe pursuant to Section 7.01(b) of the
Merger Agreement (the “Third Note” and, collectively, with the
First Note and Second Note, the “Notes”); (v) that certain guarantee
issued on October 30, 2001 by Parent guaranteeing the obligations of Company
under the First Note (the “Parent Guarantee”); and (vi) that
certain Lock-Up and Standstill Agreement, dated October 31, 2001 (the “Lock-Up
Agreement”).

 

As a result of
the merger undertaken pursuant to the Merger Agreement, and the consummation of
the other of transactions contemplated thereby, Merger Sub merged with and into
the Company effectively making the Company a wholly owned subsidiary of
Parent.  In connection therewith, Parent
changed its name to 24/7 Real Media, Inc.

 

Each of
Parent, the Company and Publigroupe now intend to provide for (i) the transfer
and delivery of the Notes to Parent and the Company for cancellation, (ii) the
cancellation of the Parent Guarantee, (iii) the payment by Parent to
Publigroupe of certain consideration described below upon the satisfaction of
certain conditions, (iv) the amendment of the Lock-Up Agreement, and (v) other
agreements set forth herein.

 

In
consideration of the foregoing, and of the covenants and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each of the undersigned hereby agrees as
follows:

 

1

 

1.             Cancellation
of Notes; Consent and Acknowledgment of Publigroupe. Subject
solely to the satisfaction of the conditions set forth in Paragraph 4(b) of
this letter agreement (the “Letter
Agreement”), at a Closing which shall take place on a date (the
“Closing Date”) as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Paragraph 4, Publigroupe hereby irrevocably agrees to transfer and deliver to
the Company for cancellation the First Note and to Parent for cancellation the
Second Note and the Third Note and to cancel the debt evidenced by all the
Notes.  Publigroupe hereby expressly
acknowledges, consents and agrees that, as of the Closing Date, (i) the Notes,
including principal and all accrued interest, shall be deemed paid in full and
Parent and the Company, shall be fully and forever discharged from any
obligation whatsoever with respect to the Notes, and (ii) the Parent Guarantee
shall be revoked, cancelled and terminated and shall be of no further force and
effect whatsoever.

 

2.             Payment of Consideration by Parent.
Subject solely to the satisfaction of the conditions set forth in Paragraph
4(a) of this Letter Agreement, at the Closing, in exchange for delivery by
Publigroupe and cancellation of the Notes and the debt evidenced thereby,
Parent (i) shall pay to Publigroupe at the Closing one million five hundred thousand United States dollars (U.S.
$1,500,000) in cash via wire transfer (the “Cash Consideration”), and (ii) shall
issue to Publigroupe or its designated affiliate 4,800,000 shares of common
stock, par value $.01 per share, of Parent (“Parent Common Stock”), as proportionately adjusted to
reflect any stock splits and combinations, stock dividends, recapitalizations
and the like with respect to Parent’s common stock subsequent to the date
hereof (the “Shares”).

 

3.             Amendment
of Lock-Up Agreement. 
The parties hereby agree that, as of the Closing Date, the Lock-Up
Agreement shall be amended:

 

(i) by
deleting Section 2 thereof in its entirety and inserting in lieu thereof, the
following:  “Publigroupe hereby agrees
that it will not sell more than 1,000,000 shares of Parent Common Stock owned
by it on any trading day or more than 5,000,000 shares of Parent Common Stock
owned by it in any calendar month, in each case proportionately adjusted to
reflect any stock splits and combinations, stock dividends, recapitalizations
and the like with respect to Parent’s Common Stock subsequent to the date
hereof, except with the prior written consent of Parent; provided, however,
that the foregoing restriction shall not apply to any private sale, transfer or
disposition by Publigroupe of any of the shares of Parent Common Stock owned by
it to a third party”; and

 

(ii) by adding
the following sentence to the end of Section 3: “Notwithstanding anything
contained in this Section 3 to the contrary, Publigroupe shall be permitted to
receive from Parent 4,800,000 shares of Parent Common Stock pursuant to the
Letter Agreement dated May       , 2003.”

 

4.             Conditions to Closing.

 

(a)           Conditions to Parent’s Obligations.  The obligation of Parent to issue the Shares
and pay the Cash Consideration at the Closing is subject to the fulfillment on
or prior to the Closing of each of the following conditions, provided that
these conditions are for Parent’s sole benefit and may be waived by Parent at
any time in its sole discretion by providing Publigroupe with written notice
thereof.

 

(1) Parent
shall have taken all corporate action (including obtaining any relevant
stockholder approval) which may, in the opinion of its counsel, be necessary in
order that Parent may validly and legally issue the Shares.

 

2

 

(2) All
governmental and third party Permits, filings and waivers necessary for
consummation of the transactions to be consummated at the Closing shall have
been obtained.

 

(3) No
temporary restraining order, preliminary or permanent injunction or other order
or decree, and no other legal restraint or prohibition shall exist which
prevents or arguably prevents the consummation of the transactions contemplated
by this Letter Agreement, nor shall any proceeding have been commenced or
threatened with respect to the foregoing.

 

(4)
Publigroupe shall have delivered the original Notes, together with such
instruments of transfer as are reasonably requested by Parent or the Company,
and such documentation as may be required to fully terminate the Parent
Guarantee, in each case pursuant to Section 1 above.

 

(b)           Conditions to Publigroupe’s Obligations.   The obligation of Publigroupe to transfer
and deliver the Notes to Parent for cancellation at the Closing is subject to
the fulfillment on or prior to the Closing of each of the following conditions,
provided that these conditions are for Publigroupe’s sole benefit and may be
waived by Publigroupe at any time in its sole discretion by providing Parent
with written notice thereof.

 

(1) Parent
shall have taken all corporate action (including obtaining any relevant
stockholder approval) which may, in the opinion of Publigroupe’s counsel, be
necessary in order that Parent may validly and legally issue the Shares.

 

(2) All
governmental and third party Permits, filings and waivers necessary for
consummation of the transactions to be consummated at the Closing shall have
been obtained.

 

(3) The Parent
shall have executed and delivered certificates for the Shares, containing
customary restrictive legends, in such denominations as the Purchaser shall
request.

 

(4) No
temporary restraining order, preliminary or permanent injunction or other order
or decree, and no other legal restraint or prohibition shall exist which
prevents or arguably prevents the consummation of the transactions contemplated
by this Letter Agreement, nor shall any proceeding have been commenced or
threatened with respect to the foregoing.

 

(5) Parent
shall have delivered the Cash Consideration and the Shares pursuant to Section
2 above.

 

(6) The shares
of common stock of Parent shall be listed on a stock exchange, securities
trading exchange or automated quotation system.

 

(7) On or
before the thirtieth (30th) day after the Closing Date, the Company shall file
with the SEC a registration statement on Form S-3, and any related
qualification or compliance, with respect to the sale or distribution by the
Holders on a delayed or continuous basis of all of the Registrable Securities (the
“SHELF REGISTRATION”); PROVIDED, HOWEVER, that the Company shall not be
obligated to effect such registration, qualification or compliance in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance. The Company shall use
commercially reasonable efforts to have the Shelf Registration declared
effective by the SEC as promptly as practicable; PROVIDED, that in the

 

3

 

event the
Company receives notice from the SEC that the Shelf Registration will not be
subject to SEC review, the Company shall have the S-3 Registration Statement
declared effective as soon as possible following receipt of such notice from
the SEC; PROVIDED, FURTHER, that in the event the Shelf Registration is
reviewed by the SEC, the Company shall work diligently to resolve any SEC
comments in favor of the Company as soon as possible and, following receipt of
notice from the SEC that all such comments are resolved, will have the Shelf
Registration declared effective as soon as possible thereafter. The Company
shall leave the Shelf Registration in effect until the date on which all
Registrable Securities shall either (i) have been registered under the
Securities Act and been disposed of, or (ii) be, in the reasonable opinion of
counsel to the Company that has been delivered to the applicable Holders,
saleable in a three (3) month period by the current Holders thereof without
registration under the Securities Act pursuant to Rule 144 under the Securities
Act.

 

(c)  Best efforts to satisfy conditions.  From the date of execution of this Letter
Agreement, each of Publigroupe and Parent agrees to use commercially reasonable
best efforts to satisfy in a timely manner each of the conditions to be
satisfied by it as provided in this paragraph 4.  In particular, Parent agrees to seek to satisfy the condition set
forth in paragraphs 4(a)(1) and 4(b)(1) no later than June 15, 2003.

 

5.  Representations and Warranties.     Each party hereto represents that: (i) it
has not assigned any of its rights or obligations under the Notes prior to the
date of this Agreement, (ii) the execution, delivery and performance of this
Letter Agreement: (a) has been duly authorized, (b) does not conflict with any
provisions of any instrument to which it is a party or by which it is bound,
and (c) constitutes a valid, legal and binding obligation of such party, (d)
the person executing this Letter Agreement on behalf of such party has been
duly authorized to execute this Letter Agreement in the name of such party and
(e) does not require any party to obtain, perform or send any notices,
consents, approvals or other actions and will not cause or result in a default,
event of default, acceleration event, termination event or otherwise entitle
any other party to exercise any other right or remedy materially adverse to the
interests of the parties hereto, except for such notices, consents and
approvals that have been obtained prior to or in connection with the execution
of this Letter Agreement or as otherwise set forth herein.

 

Publigroupe
further represents and warrants that it has good and valid title to the Notes,
free and clear of all liens, pledges, charges, encumbrances, security
interests, equities, options, restrictions (including any voting agreements,
voting trusts, restrictions on voting rights or rights of disposition), claims
or third party rights of whatever nature (collectively, “Encumbrances”) and, after consummation
of the transactions contemplated hereby, Parent will have good and valid title
to the Second Note and the Third Note and Company will have good and valid
title to the First Note, in each case free and clear of any Encumbrances.

 

Parent further
represents and warrants that it has filed all forms, reports and documents
required to be filed by the Company with the Securities and Exchange Commission
(the “SEC”) since the
filing of the Company’s annual report on Form 10-K for the year ended December
31, 2001 (the “SEC Reports”).
As of their respective dates, each of the SEC Reports, as of the date filed and
as they may have been subsequently amended, (i) were prepared in accordance
with all requirements of the Securities Act of 1933, as amended , or the
Securities Exchange Act of 1934, as amended, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such SEC Reports, (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

4

 

In addition,
Parent represents and warrants that: (i) the certificates delivered to
Publigroupe pursuant to Section 4(b)(3) shall represent all of the Shares and
shall be accompanied by such other documents and instruments, if any, necessary
to permit Publigroupe to acquire the Shares free and clear of any Encumbrances
of any kind, other than restrictions on transfer under applicable securities
laws, and (ii) the Shares when delivered to Publigroupe will be validly issued
and outstanding shares of voting common stock of Parent, fully paid and
non-assessable, and will not be subject to preemptive rights of any other
person, other than any such rights that have been waived prior to or in
connection with the execution of this Letter Agreementand (iii) the Shares
shall have beenduly listed for trading on The NASDAQ Stock Market as of the
Closing Date

 

6.  Miscellaneous.  In the event of any conflict between this
Letter Agreement on the one hand and the Notes, the Parent Guarantee and the
Lock-up Agreement on the other hand, the provisions of this Agreement shall
control.  This Letter Agreement may not
be changed, amended, modified or discharged orally, but only by a written
instrument signed by Parent, the Company and Publigroupe, and may be waived
only by an instrument in writing signed by the party waiving compliance.  The rights, duties and obligations of the
parties under this Letter Agreement may not be assigned without the prior
written consent of the other parties hereto. 
This Letter Agreement shall be binding upon each party hereto and its
heirs, legal representatives, successors and permitted assigns and the terms
hereof shall inure to the benefit of such party and its successors and
permitted assigns.

 

7.  Public Announcements.  Neither party shall use the other’s name nor
refer to the other directly or indirectly in connection with the investment
contemplated herein in any advertisement, news release or professional or trade
publication, or in any other manner, unless otherwise required by law, or with
prior written consent.  The parties
agree that there will be no press release or other public statement issued by
either party relating to this Letter Agreement unless required by law or
mutually agreed to, and further agree to keep the terms and conditions of such
in strictest confidence, it being understood that this restriction shall not
prohibit disclosure to the parties’ counsel, accountants and professional
advisors.  Notwithstanding the
foregoing, Parent may disclose the existence of this Letter Agreement to bona fide
potential investors who are under obligations of nondisclosure, similar to
those contained herein and which Parent believes in good faith are seriously
considering investing in Parent.  In
addition, Parent may disclose that a financial relationship exists between the
parties hereto to customers, potential customers, strategic partners or
potential strategic partners.

 

8.  Dispute Resolution.  The parties agree to negotiate in good faith
to resolve any dispute between them regarding this Letter Agreement.  If the negotiations do not resolve the
dispute to the reasonable satisfaction of both parties, then each party shall
nominate one officer as its representative. These representatives shall, within
fifteen (15) days of a written request by either party to call such a meeting,
meet in person and shall attempt in good faith to resolve the dispute.  If the disputes cannot be resolved in such
meeting, then such disputes shall be determined in New York, by the appointment
of a single arbitrator to be agreed between the parties, or failing agreement
within 5 business days, after either party has given to the other a written
request to concur in the appointment of an arbitrator, by an arbitrator to be
appointed by the Chartered Institute of Arbitrators.  This procedure shall be a prerequisite before taking any
additional action hereunder.

 

9.  Governing Law.  The
provisions of this Letter Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. The invalidity,
illegality or unenforceability of any provision of this Letter Agreement shall
not affect or impair the validity, legality

 

5

 

or enforceability of the
remainder of this Letter Agreement, and to this end, the provisions of this
Letter Agreement are declared to be severable.

 

[Signature
pages follow.]

 

6

 

If the
foregoing correctly sets forth our mutual understanding then please have an
authorized signatory of Publigroupe USA Holding, Inc. sign two (2) original
copies of this Letter Agreement where indicated below.  Once this Letter Agreement has been signed
by an authorized representative of Publigroupe USA Holding, Inc., please return
the original copies to my attention, for signature by an authorized
representative of 24/7 Real Media, Inc.  
An original copy of this Letter Agreement will be returned to you for your
records in due course.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  24/7 Real Media,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Real Media, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

Acknowledged and Agreed as of
the date first

above written:

 

 

Publigroupe USA
Holding Inc.

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

7Exhibit 10.2

 

24/7 REAL MEDIA, INC.

 

SERIES C AND SERIES C-1 PREFERRED STOCK AND
COMMON STOCK WARRANT

 

PURCHASE AGREEMENT

 

This SERIES C AND SERIES C-1 PREFERRED STOCK AND COMMON STOCK WARRANT
PURCHASE AGREEMENT (the “AGREEMENT”) is made as of May 27, 2003, by and among
24/7 Real Media, Inc., a Delaware corporation (the “COMPANY”) and the parties
listed on the Schedule of Purchasers attached to this Agreement as EXHIBIT A
(each purchaser hereinafter individually referred to as a “PURCHASER” and
collectively as the “PURCHASERS”).

 

RECITALS

 

WHEREAS, the Company desires to sell and the Purchasers desire to
purchase shares of the Company’s C-1 Nonvoting Convertible Preferred Stock, par
value $0.01 per share (the “SERIES C-1 STOCK”), convertible (upon approval of
the Company’s stockholders) into shares of the Company’s Series C Convertible
Preferred Stock (the “SERIES C STOCK”) and accompanying warrants to purchase
shares of the Company’s Common Stock, par value $0.01 per share (the “COMMON
STOCK”).

 

NOW THEREFORE,
in consideration of the mutual covenants and agreements set forth herein and
for other good and valuable consideration the receipt and adequacy of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:

 

SECTION 1. PURCHASE
AND SALE OF STOCK AND WARRANTS

 

1.1 AUTHORIZATION. As of the Closing, the Company will have authorized
the issuance and sale to the Purchasers, pursuant to the terms of this
Agreement, of up to 500,000 shares of the Series C-1 Stock having the powers,
designations, preferences, relative and other special rights, and the
qualifications, limitations and restrictions set forth in the resolutions of
the Board attached hereto as EXHIBIT C (the “SERIES C-1 DESIGNATION”), and,
subject to the prior approval of the Board Proposals (as defined in Section
6.9) up to 500,000 shares of the Series C Stock issuable upon conversion of the
Series C-1 Stock, having the powers, designations, preferences, voting rights,
relative and other special rights, and the qualifications, limitations and
restrictions set forth in the resolutions of the Company’s Board of Directors
(the “BOARD”) attached hereto as EXHIBIT D (the “SERIES C DESIGNATION”).  The shares of Common stock issuable upon
conversion of all the Series C Stock issuable upon conversion of the Series C-1
Stock issued hereunder is referred to herein as the “CONVERSION STOCK.

 

1.2 AGREEMENT TO PURCHASE AND
SELL STOCK. Subject to the terms and conditions of this Agreement including,
without limitation, the satisfaction (or waiver) of the conditions set forth in
Sections 4 and 5 below, each Purchaser severally agrees to purchase from the
Company at the Closing, and the Company agrees to issue and sell to each
Purchaser at the Closing, the number of shares of Series C-1 Stock set forth
beside such Purchaser’s name in the columns entitled “Series C-1 Shares” on
EXHIBIT A hereto, at a price per share equal to Ten Dollars ($10.00) (the
“PURCHASE PRICE PER SHARE”). The shares of Series C-1 Stock issued and sold to
the Purchasers at the Closing are referred to herein as the “SERIES C-1
SHARES.” Notwithstanding the forgoing, the Purchasers shall have the right
prior to the Closing to substitute additional purchasers who may purchase some
or all of the number of Series C-1 Shares set forth beside such Purchaser’s
name on EXHIBIT A hereto at the

 

 

Closing, subject to the approval
of the Company, which approval shall not be unreasonably withheld, in which
event EXHIBIT A hereto shall be modified accordingly and each such substituted
purchaser shall be deemed a “Purchaser” hereunder.

 

1.3 WARRANTS. Subject to the
terms and conditions hereof, at the Closing, the Company shall issue and
deliver to each Purchaser: (a) a warrant in substantially the form attached
hereto as EXHIBIT E to purchase up to that number of shares of Common Stock set
forth besides Purchaser’s name on Exhibit A hereto, such warrant to be
exercisable at an exercise price per share equal to the Closing Discounted
Common Stock Price (as defined in the Series C Designation), and to become
exercisable only upon the occurrence of certain events as identified therein
(the “CLOSING WARRANT”), and (b) a warrant in substantially the form attached
hereto as EXHIBIT F to purchase up to that number of shares of Common Stock
equal to that number of shares of Common Stock set forth besides Purchaser’s
name on Exhibit A hereto, such warrant to be exercisable at an exercise price
per share equal to the Closing Discounted Common Stock Price, and to become
exercisable only upon the occurrence of certain events as identified therein
(each, a “CONTINGENT WARRANT”). The shares of Common Stock issuable upon
exercise of the Closing Warrants are referred to herein as the “CLOSING WARRANT
SHARES” and the shares of Common Stock issuable upon exercise of the Contingent
Warrants are referred to herein as the “CONTINGENT WARRANT SHARES.”

 

1.4 CLOSING. The closing of the
purchase and sale of the Series C-1 Shares hereunder shall be held at the law
offices of the Company, 1250 Broadway, New York, New York, 10001, at 10:00 a.m.
local time promptly following the satisfaction (or waiver) of the conditions
set forth in Sections 4 and 5 hereof (other than conditions which will be
satisfied at, but not before, the Closing) or at such other time and place as
the Company and Purchasers purchasing a majority of the Series C-1 Shares
mutually agree (which time and place are designated as the “CLOSING”).

 

1.5 DELIVERY. Subject to the
terms of this Agreement, at the Closing, the Company shall deliver to each
Purchaser (i) certificates representing the number of Series C-1 Shares
purchased by such Purchaser as designated on EXHIBIT A hereto and (ii) the
Closing Warrants and the Contingent Warrant deliverable to such Purchaser
pursuant to Section 1.3 hereof, against payment to the Company of the aggregate
Purchase Price Per Share for the Series C-1 Shares so purchased by check or
wire transfer of immediately available funds to such account as may be
designated by the Company no later than 12:00 p.m. Pacific Time on the business
day preceding the Closing.

 

SECTION 2. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.

 

The Company hereby represents
and warrants to the Purchasers, as of the date of this Agreement and as of the
Closing, and except as set forth with reasonable specificity on the Disclosure
Letter delivered to Purchasers concurrently with this Agreement (the
“DISCLOSURE LETTER”), as follows:

 

2.1 ORGANIZATION AND STANDING:
CERTIFICATE OF INCORPORATION AND BYLAWS. The Company is a corporation duly organized
and validly existing under the laws of the State of Delaware, is in good
standing under such laws and is authorized to exercise all of its corporate
powers, rights and privileges. The Company has the requisite corporate power
and authority to own, lease and operate its properties and assets and to
conduct its business as presently conducted, other than such corporate power
and authority, the absence of which would not reasonably be expected to cause a
Material Adverse Effect. The Company is qualified to do business as a foreign
corporation in each jurisdiction where the failure to be so qualified would
reasonably be expected to cause a Material Adverse Effect. True, correct and
complete copies of the Company’s Certificate of Incorporation and Bylaws, each
as will be in effect at the Closing, have been delivered to counsel for the
Purchasers.

 

2

 

2.2 CORPORATE POWER; AUTHORIZATION.

 

(a) The Company has the requisite corporate power to execute and deliver
the Financing Agreements, and, upon approval of the Board Proposals, to issue
and sell the Securities (as defined below) hereunder, to execute and file the
Series C Designation and the Series C-1 Designation (the “CERTIFICATES OF
DESIGNATION”) and to carry out and perform its obligations under the terms of
the Financing Agreements and the Certificates of Designation.

 

(b) All corporate action on the part of the Company, its stockholders,
officers and directors necessary for the authorization, execution, delivery and
performance of the Financing Agreements and Certificates of Designation and for
the authorization, sale, issuance (or reservation for issuance) and delivery of
the Securities, and the performance of the Company’s obligations hereunder and thereunder,
has been taken, other than stockholder approval of the Board Proposals. This
Agreement has been duly executed and delivered by the Company and constitutes,
and the Investors’ Rights Agreement when executed and delivered will
constitute, legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application affecting the enforcement of
creditors’ rights. The Certificates of Designation have been filed prior to the
Closing with the Secretary of State of the State of Delaware and will be in
full force and effect, enforceable against the Company in accordance with their
terms and shall not have been amended unless in compliance with their terms.

 

2.3 SUBSIDIARIES. Each of the subsidiaries of the Company (the
“SUBSIDIARIES”) is validly existing, and the Company is the sole record and
beneficial owner of the all of the capital stock of each of the Subsidiaries.
There is no obligation or commitment of the Company or any Subsidiary to issue
shares, options, warrants or other rights with respect to any Subsidiary to any
person. The Company has no affiliated companies other than the Subsidiaries and
does not otherwise own or control, directly or indirectly, any material equity
interest in any other corporation, partnership, association or other business
entity except as disclosed in the Financial Statements. The Company is not a
party to any material partnership or joint venture.

 

2.4 CAPITALIZATION.

 

(a) The authorized capital stock of the Company consists of (A)
140,000,000 shares of Common Stock, of which 69,600,000 are issued and
outstanding as of the date hereof and (B) 10,000,000 shares of Preferred Stock,
$0.01 par value per share (the “PREFERRED STOCK”), of which 825,000 shares are
issued and outstanding, and of which 800,000 shares are designated as Series A
Preferred Stock and 25,000 shares are designated as Series B Preferred Stock.
All such issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
Except as set forth in the Financing Agreements or in Schedule 2.4 of the
Disclosure Letter, and except for approximately 24,000,000 shares of Common
Stock reserved for issuance under the Company’s Stock Incentive Plans, of which
approximately 19,300,000 shares are subject to outstanding options issued under
such plan and 1,100,000 shares have been issued and are included in the issued
and outstanding Common Stock number listed in the preceding sentence; 3,000,000
shares of Common Stock reserved for issuance under the Company’s 2002 Equity
Compensation Plan, of which 2,200,000 shares have been issued and are

 

3

 

included in the issued and outstanding Common Stock number listed in the
preceding sentence; and 5,700,000shares of Common Stock issuable upon the
exercise of warrants, (i) no shares of the Company’s capital stock are subject
to preemptive rights or any other similar rights; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, and there are no contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing indebtedness of the Company or by which the
Company is or may become bound; (iv) there are no amounts outstanding under,
and there will be no amounts due upon termination of, any credit agreement or
credit facility; (v) there are no financing statements securing obligations in
any amounts greater than Five Hundred Thousand Dollars ($500,000) in the
aggregate, filed in connection with the Company; (vi) there are no agreements
or arrangements under which the Company is obligated to register the sale of
any of its securities under the Securities Act; (vii) there are no outstanding
securities or instruments of the Company or which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of the Company; (viii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (ix) the Company does not
have any stock appreciation rights or “phantom” stock plans or agreements or
any similar plan or agreement.

 

(b) ISSUANCE OF SECURITIES. As of the Closing, the Series C-1 Stock will
have been duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issuance thereof and
(iii) entitled to the rights and preferences set forth in the Certificates of
Designation. Subject only to approval of the stockholders of the Company of the
Board Proposals, at least 32,750,00 shares of Common Stock (subject to
adjustment pursuant to the completion of any stock dividend, stock subdivision,
stock combination, recapitalization, reorganization, consolidation, or merger)
will have been duly authorized and reserved for issuance upon conversion of the
Series C Shares and upon exercise of the Warrants. As of the Closing, at least
500,000 shares of Series C Stock (subject to adjustment pursuant to the
completion of any stock dividend, stock subdivision, stock combination,
recapitalization, reorganization, consolidation, or merger) will have been duly
authorized and reserved for issuance upon conversion of the Series C-1 Shares.
Upon conversion of the Series C Stock in accordance with the Series C
Designation and upon the exercise of the Warrants in accordance with their
terms, the shares of Conversion Stock and Warrant Stock, as applicable, shall
be (i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
liens and charges with respect to the issuance thereof and (iii) entitled to
the rights accorded to a holder of Common Stock. Upon conversion of the Series
C-1 Stock in accordance with the Series C-1 Designation, the shares of Series
C-1 Conversion Stock shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the
issuance thereof and (iii) entitled to the rights accorded to a holder of
Series C Stock under the Series C Designation. Subject to the accuracy of the
representations and warranties of each of the Purchasers in this Agreement, the
issuance by the Company of the Securities is exempt from registration under the
Securities Act and applicable state securities laws, and the Securities will be
issued in compliance with all applicable state and federal securities laws. The
issuance of the Securities are not (and will not be) subject to any preemptive
rights or rights of first refusal. Upon the Conversion, each share of Series C
Stock shall be convertible pursuant to the terms of the Series C Designation into
41.39416 shares of Common Stock. Upon the Closing, each share of Series C-1
Stock shall be convertible pursuant to the

 

4

 

terms of the Series C-1 Designation into one share of Series C Stock.

 

2.5 SEC FILINGS; FINANCIAL STATEMENTS.

 

(a) The Company has filed all forms, reports and documents required to
be filed by the Company with the Securities and Exchange Commission (the “SEC”)
since the filing of the Company’s annual report on Form 10-K for the year ended
December 31, 2001. All such forms, reports and documents, including the
Company’s annual report on Form 10-K for the year ended December 31, 2002, are
referred to herein as the “COMPANY SEC REPORTS.” As of their respective dates,
each of the Company SEC Reports, as of the date filed and as they may have been
subsequently amended, (i) were prepared in accordance with all requirements of
the Securities Act of 1933, as amended (the “SECURITIES ACT”), or the
Securities Exchange Act of 1934, as amended (the “EXCHANGE ACT”), as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports, (ii) did not contain any untrue statement of a material
fact or did not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company or any of its Subsidiaries is a party or to
which the property or assets of the Company or any of its Subsidiaries are
subject are included as part of or specifically identified in the Company SEC
Reports or have been specifically identified as material agreements on SCHEDULE
2.5(a) of the Disclosure Letter, and made available, to counsel to the
Purchasers.

 

(b) Each of the financial statements (including, in each case, any
related notes thereto) contained in the Company SEC Reports (collectively, the
“FINANCIAL STATEMENTS”)

 

(i) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (ii) have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, and
(iii) fairly presented the financial position of the Company at the respective
dates thereof and for the periods indicated therein, except in the case of
unaudited quarterly financial statements for the omission of certain footnotes
and subject to normal and recurring year-end adjustments. The unaudited
financial statements of the Company for the period ending March 31, 2003, in
the form provided to the Purchasers (the “UNAUDITED 3/31/02 FINANCIAL
STATEMENTS”), (i) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and with each other, and (ii) represented in all material respects
the financial position of the Company at the respective dates thereof and for
the periods indicated, except for the omission of footnotes and statement of
cash flows and subject to normal and recurring year-end adjustments. Except as
set forth in the Unaudited 3/31/02 Financial Statements or specifically
identified in the Company SEC Reports, the Company has no liabilities,
contingent or otherwise, other than obligations and commitments incurred in the
ordinary course of business that are not required under generally accepted
accounting principles to be reflected in the Unaudited 3/31/02 Financial
Statements, in each case which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company is not aware of any material liability of any nature, direct or
indirect, contingent or otherwise, or any amount not adequately reflected or
reserved against in the Unaudited 3/31/02 Financial Statements and notes
thereto.

 

(c) The Company satisfies the requirements for use of Form S-3 for
registration of the resale of Registrable Securities (as defined in the
Investors’ Rights Agreement). The Company is not required to file and, if it
were to file a registration statement on Form S-3 on the date hereof,
would not be required to file any agreement, note, lease, mortgage, deed or
other instrument entered into prior to the date

 

5

 

hereof and to which the Company is a party or by which the Company is
bound which has not been previously filed as an exhibit to its reports filed
with the SEC. To the knowledge of the Company, except for the issuance of the
Series C-1 Shares and the Warrants contemplated by this Agreement, no event,
liability, development or circumstance has occurred or exists, or is currently
contemplated to occur, with respect to the Company or its business, properties,
operations, prospects or financial condition, that would be required to be
disclosed by the Company under applicable securities laws or the rules and
policies of Nasdaq and the Company’s listing agreement with Nasdaq, and which
has not been publicly disclosed.

 

2.6 NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has engaged in any
form of general solicitation or general advertising (within in the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
Securities.

 

2.7 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company take any action or steps that would
cause the offering of the Securities to be integrated with other offerings.

 

2.8 APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation or the laws of the state of
its incorporation which is or could become applicable to the Purchasers as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities, or as a result of the acquisition by the
Purchasers of additional shares of Common Stock (whether then-outstanding or
newly issued).

 

SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

 

Each Purchaser hereby represents and warrants to the Company, as of the
date of the Agreement and as of the Closing, but only with respect to such
Purchaser, as follows:

 

3.1 AUTHORIZATION. All action on the part of such Purchaser necessary
for the authorization, execution, delivery and performance by Purchaser of the
Financing Agreements has been taken, and the Financing Agreements, when
executed and delivered by the Purchaser, will constitute valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws of general application affecting the enforcement of
creditor’s rights.

 

3.2 INVESTMENT. Purchaser (i) is acquiring the Series C-1 Shares, and
the Warrants, (ii) upon conversion of the Series C, will acquire the Conversion
Stock then issuable upon conversion thereof, (iii) upon conversion of the
Series C-1 Shares, will acquire the Series C Conversion Stock then issuable

 

6

 

upon conversion thereof and (iv) upon exercise of the Warrants, will
acquire the Warrant Shares issuable upon exercise thereof (each of the
foregoing securities to be acquired by the Purchaser hereunder, or upon
conversion or exercise of securities acquired hereunder, are collectively
referred as the “SECURITIES”), for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act.
Purchaser understands that the Securities to be purchased by Purchaser have not
been and will not be (except as contemplated by the Investors’ Rights
Agreement) registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein.

 

3.3 EXPERIENCE; ACCREDITED INVESTOR. Purchaser has such knowledge and
experience in financial or business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the Securities and
protecting its own interests in connection with such investment. Purchaser is
an “accredited investor” within the meaning of Regulation D promulgated under
the Securities Act.

 

3.4 RULE 144. Purchaser acknowledges that the Securities are restricted
securities within the meaning of applicable securities laws, have not been
registered under the Securities Act, and must be held indefinitely unless
subsequently registered under the Securities Act and applicable state and other
securities laws or unless an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act that permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions. The Securities
will bear a legend reflecting these conditions on transferability thereof.

 

3.5 INFORMATION. Purchaser believes Purchaser has had an opportunity to
discuss the Company’s business, management and financial affairs with the Company’s
management and an opportunity to review the Company’s facilities. Purchaser
represents and acknowledges that it believes it has had an opportunity to ask
questions and receive answers from the Company’s officers, employees and
directors regarding the terms and conditions of the offering of the Securities.
Purchaser has sought such advice as Purchaser has considered necessary to make
an informed investment decision with respect to its acquisition of the
Securities. The foregoing, however, does not limit or modify any Purchaser’s
rights under this Agreement including, without limitation, the representations
and warranties of the Company in this Agreement or the right of the Purchasers
to rely thereon.

 

3.6 FURTHER LIMITATIONS ON DISPOSITIONS. Without in any way limiting the
representations set forth above, Purchaser further agrees that, if at the time
of any transfer of any Securities, such Securities shall not be registered
under the Securities Act, prior to any disposition of all or any portion of the
Securities, the Company may require, as a condition of allowing such transfer,
that the holder or transferee furnish to the Company (i) such information as is
appropriate to establish that such transfer may be made without registration
under the Securities Act; and (ii) at the expense of the holder or transferee,
an opinion by legal counsel designated by such holder or transferee and
reasonably satisfactory in form and substance to the Company, to the effect
that such transfer may be made without registration under the Securities Act.
No such opinion of the Counsel shall be necessary for any transfer to any
person or entity that is deemed to be an “affiliate” of the Purchaser for
purposes of the Securities Act, if the transferee agrees in writing to be subject
to the terms hereof to the same extent as if the transferee were an original
Purchaser hereunder. Notwithstanding the foregoing, with the prior written
consent of the Company, which consent shall not be unreasonably withheld, the
Securities may be pledged in connection with a bona fide margin account or
other loan secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Purchaser effecting a pledge of Securities shall be required to provide the
Company with any

 

7

 

notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other agreement arising hereunder; provided that in order
to make any sale, transfer or assignment of Securities, such Purchaser and its
pledgee must make such disposition in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.

 

3.7 RESIDENCE. Purchaser is a resident of that jurisdiction specified in
its address listed on EXHIBIT A.

 

3.8 CONFIDENTIALITY. Purchaser shall not disclose or provide to any
other person or entity any non-public information or materials, or copies
thereof, whatsoever about the Company, disclosed or made available to the
Purchasers in connection with the transactions contemplated hereby, or in
Purchaser’s capacity as stockholder of the Company; provided, however, that
Purchaser may disclose such information to the Purchasers’ legal and financial
advisors in connection with advice to be rendered by them to the Purchasers, or
to Purchaser’s investors or potential investors or affiliates, or to any
transferee or potential transferee of the Securities if such transfer is made
in compliance with all the terms and conditions of this Agreement. Prior to
such disclosure, Purchasers shall: (i) advise such legal and financial advisors
or Purchaser’s investors or potential investors or affiliates, or transferees
or potential transferee, as the case may be, that each of them shall not
further disclose such information or materials to any other person or entity or
utilize such information or materials for the benefit of any person or entity
other than the Company or the Purchasers, or such transferee, in the capacity
of a stockholder of the Company, or in connection with the transactions
contemplated hereby; and (ii) ensure that each such person or entity executes
an nondisclosure agreement in favor of the Company, the form of which is
customary for general commercial transactions. The nondisclosure obligations
set forth above shall not apply to any information which the Company determines
in writing shall not be the subject of such nondisclosure obligations, nor
shall such obligations apply to any information which, by applicable law, the
Company may not prohibit the Purchasers from disclosing. The Purchasers may
disclose any information to any governmental authority having jurisdiction over
it, provided that the Company when reasonably possible shall be given reasonable
advance written notice of Purchaser’s intent to disclose any information
covered under this Section 3.8 unless Purchaser is precluded from doing so by
applicable law.

 

3.9 GENERAL SOLICITATION. Purchaser is not purchasing the Securities as
a result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

3.10 BROKER-DEALER. Neither Purchaser nor any Affiliate of Purchaser is
a registered broker-dealer under the rules and regulations of the SEC and NASD.

 

SECTION 4. CONDITIONS
TO PURCHASERS’ OBLIGATIONS.

 

The obligation of each Purchaser hereunder to purchase Series C-1 Shares
at the Closing is subject to the fulfillment on or prior to the Closing of each
of the following conditions, provided that these conditions are for each such
Purchaser’s sole benefit and may be waived by such Purchaser at any time in its
sole discretion by providing the Company with written notice thereof.

 

(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 2 hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on and as of the Closing with the same force and effect as if they had
been made on and as of the same date.

 

8

 

(b) COVENANTS. All covenants, agreements, and conditions in this
Agreement required to be performed or complied with by the Company on or prior
to the Closing shall have been performed or complied with in all material
respects by the Company.

 

(c) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser, as applicable.

 

(d) PERMITS. All governmental and third party Permits, filings and
waivers necessary for consummation of the transactions to be consummated at the
Closing shall have been obtained.

 

(e) FILING OF DESIGNATIONS. The Series C Designation and the Series C-1
Designation shall have been filed with the Secretary of State of the State of
Delaware.

 

(f) GOOD STANDING CERTIFICATES. The Company shall have delivered a
certificate of status dated as of a date no more than ten (10) business days
prior to the Closing issued by the Secretary of State of the State of Delaware
to the effect that the Company is legally existing and in good standing.

 

(g) SECRETARY’S CERTIFICATE. The Company shall have delivered a
certificate executed by the Secretary or Assistant Secretary of the Company
dated as of the Closing certifying to the following matters: (i) the
resolutions adopted by the Board relating to the transactions contemplated by
this Agreement, (ii) the Company’s certificate of incorporation as of the
Closing, including the Series C Designation and Series C-1 Designation, as
certified by the Delaware Secretary of State, (iii) the Bylaws of the Company;
and (iv) incumbency of the officers of the Company authorized to execute the
Financing Agreements and the Warrants.

 

(h) STOCK CERTIFICATES AND WARRANTS. The Company shall have executed and
delivered: (i) with respect to the Closing, certificates for the Series C-1
Shares purchased by such Purchaser at the Closing (in such denominations as the
Purchaser shall request) and the Closing Warrant and the Contingent Warrant to
be issued to such Purchaser at the Closing.

 

(i) FINANCING AGREEMENTS. The Company shall have executed each of the
Financing Agreements and delivered the same to such Purchaser.

 

(j) COMPLIANCE CERTIFICATE. The Chief Executive Officer and Chief
Financial Officer of the Company shall have executed and delivered as of the
Closing, a certificate certifying that the conditions specified in Sections 4
(a), (b), and (o) have been fulfilled.

 

(k) LISTING OF COMMON STOCK. The Common Stock shall be designated for
quotation on either the NASDAQ National Market or the NASDAQ SmallCap Market,
and shall not have been suspended by the SEC or NASDAQ from trading on such
market, and the Conversion Stock shall have been approved for listing on such market,
subject only to notice of issuance and, in the case of the Common Stock
issuable upon conversion of the Series C-1 Conversion Stock, approval by the
Company’s stockholders of the Board Proposals.

 

(l) RESERVATION OF COMMON STOCK. The Company shall have agreed, upon
approval by its stockholders of the Increase in Authorized Shares, to reserve
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series C-1 Conversion Stock into Common Stock,
and the exercise of the Warrants and the Contingent Warrants for Common Stock,
at

 

9

 

least 32,750,000 shares of Common Stock,

 

(m) NO INJUNCTIONS. No temporary restraining order, preliminary or
permanent injunction or other order or decree, and no other legal restraint or
prohibition shall exist which prevents or arguably prevents the consummation of
the transactions contemplated by the Financing Agreements, nor shall any
proceeding have been commenced or threatened with respect to the foregoing.

 

(n) NO MATERIAL ADVERSE EFFECT. Between the time of the execution of
this Agreement and the Closing, there shall have been no development, condition
or circumstance which has had or could reasonably be expected to have a Material
Adverse Effect.

 

SECTION 5. CONDITIONS
TO COMPANY’S OBLIGATIONS

 

The Company’s obligation to issue, sell and deliver the Series C-1
Shares, the Closing Warrants and the Contingent Warrants at the Closing is
subject to the fulfillment at or prior to the Closing of the following
conditions, any of which may be waived in whole or in part by the Company at
any time in its sole discretion by providing the Purchasers with written notice
thereof.

 

(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchasers in Section 3 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects at the Closing, with the same force and effect as if they had
been made on or as of the same date.

 

(b) PAYMENT OF THE PURCHASE PRICE. The Purchasers shall have delivered
to the Company the aggregate Purchase Price for the Series C-1 Shares purchased
at the Closing.

(c) FINANCING AGREEMENTS. The Purchasers
shall have executed each of the Financing Agreements and delivered the same to
the Company.

 

(d) COVENANTS. All covenants,
agreements, and conditions in this Agreement required to be performed or
complied with by the Purchasers on or prior to the Closing shall have been
performed or complied with in all material respects by such Purchasers.

 

(e) NO INJUNCTIONS. No temporary
restraining order, preliminary or permanent injunction or other order or
decree, and no other legal restraint or prohibition shall exist which prevents
or arguably prevents the consummation of the transactions contemplated by the
Financing Agreements, nor shall any proceeding have been commenced or
threatened with respect to the foregoing.

 

SECTION 6. COVENANTS. The
parties hereby covenant and agree as follows:

 

6.1 OBLIGATIONS. Subject to any
party’s right to terminate this Agreement pursuant to Section 7.1, each party
shall use reasonable best efforts to satisfy in a timely manner each of the
conditions to be satisfied by it as provided in Section 4 (in the case of the
Company) or Section 5 (in the case of the Purchasers).

 

6.2 FORM D AND BLUE SKY. The
Company agrees to file timely a Form D with the SEC with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Purchaser promptly after such filing. The Company shall, on or before the
Closing, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the 

 

10

 

applicable Securities for, sale
to the Purchasers at the Closing, pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Purchasers on or prior to the Closing. The Company shall
make all timely filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the
states of the United States following the Closing.

 

6.3 REPORTING STATUS. With a
view to making available to the Purchasers the benefits of Rule 144 promulgated
under the Securities Act or any similar rule or regulation of the SEC that may
at any time permit the Purchasers to sell securities of the Company to the
public without registration (“RULE 144”), the Company shall take all action
reasonably available to: (1) make and keep public information available, as
those terms are understood and defined in Rule 144; and (2) file with the SEC
in a timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act. This Section 6.4 shall terminate
with respect to a Purchaser when such Purchaser is able to sell pursuant to
Rule 144(k): (a) all the shares of Common Stock acquired hereunder then held by
such Purchaser, and (b) all the shares of Common Stock issuable to such
Purchaser upon conversion or exercise of any Series C Stock or Warrants
(assuming exercise on a “cashless” exercise basis) acquired hereunder: (i) then
held by such Purchaser or (ii) issuable upon conversion of any Series C-1 Stock
acquired hereunder then held by such Purchaser.

 

6.4 RESERVATION OF SHARES. The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than one hundred percent (100%)
of the number of shares of Common Stock needed to provide for the issuance of
the Conversion Stock and the Warrant Stock, and one hundred percent (100%) of the
number of shares of Series C Stock needed to provide for the issuance of the
Series C Stock, without regard to any limitations on conversions or exercise.

 

6.5 LISTING. The Company shall
promptly secure the listing of all of the Common Stock issuable upon conversion
or exercise, as applicable, of the Series C-1 Shares, the Warrants and the
Series C-1 Conversion Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and, shall use commercially
reasonable efforts to maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all of the shares of Common Stock issuable
from time to time under the terms of the Financing Agreements. So long as any
Securities are outstanding, the Company shall maintain the Common Stock’s
authorization for quotation or listing on the Nasdaq.

 

6.6 TRANSFER AGENT MATTERS. The
Company and the Purchasers shall agree, prior to the Closing, on a form of
letter of instruction to be delivered to the Company’s transfer agent regarding
the issuance of the Securities (which shall include, among other matters,
irrevocable instructions to issue certificates upon conversion of the Series
C-1 Shares, and the Series C-1 Conversion Shares). The Company shall, prior to
or as of the Closing, deliver to the transfer agent an executed copy of such
letter authorizing the transfer agent to issue, pursuant to the instructions in
the letter, the Securities.

 

6.7 CERTAIN TAX MATTERS. The
Purchasers and the Company shall, prior to the each of the Closing, agree in
writing on how to allocate the aggregate purchase price paid at such Closing
among the Series C-1 Shares and the Warrants, as applicable.

 

6.8 PRESS RELEASE. The Company
shall issue a press release or other announcement of this Agreement and the
transactions contemplated hereby in such form as mutually agreed by the Company
and the Purchasers, promptly following the Closing. The Purchasers shall not issue
any press release or

 

11

 

make any other public statement
with respect to the Financing Agreements or the transactions contemplated
thereby, except as required by law.

 

6.9 COMPANY STOCKHOLDER MEETING.
The Company will take all action necessary in accordance with the Delaware
General Corporation Law and its Certificate of Incorporation and Bylaws to
convene a special meeting of the stockholders of the Company (including any
adjournment thereof, the “COMPANY STOCKHOLDER MEETING”) for the purpose of
adopting and approving: (i) to the extent required under its certificate of
incorporation to permit the issuance of the Series C Stock, an increase in
shares of Common Stock authorized for issuance under the Company’s certificate
of incorporation from 140 million to not less than 280 million, and (ii) to the
extent required under the rules of the Nasdaq Stock Market, the issuance of the
Series C Shares (the “BOARD PROPOSALS”). The Company shall use its best efforts
to schedule and hold the Company Stockholder Meeting as soon as practicable
after: (a) if the Proxy Statement (as defined below) is not reviewed by the
SEC, the expiration of the 10 calendar day period set forth in Rule 14a-6 under
the Exchange Act or, (b) if the Proxy Statement is reviewed by the SEC, the
date on which the SEC has cleared the Proxy Statement for distribution, but in
any event on or before August 15, 2003 (the “STOCKHOLDER MEETING DEADLINE”).
The Company shall take all action reasonably available to it to ensure that the
Company Stockholder Meeting is called, noticed, convened, held and conducted,
and that all proxies solicited by the Company in connection with the Company
Stockholder Meeting are solicited, in compliance with the Delaware General
Corporation Law, its Certificate of Incorporation and Bylaws, the rules of
Nasdaq and all other applicable legal requirements. The Company may adjourn the
Company Stockholder Meeting if as of the time for which the Company Stockholder
Meeting is originally scheduled (as set forth in the Proxy Statement) there are
insufficient shares of Common Stock represented (either in person or by proxy)
to constitute a quorum necessary to conduct the business of the Company
Stockholder Meeting.   Notwithstanding
anything in this Article 6, to the extent that no stockholder approval is
required to permit the issuance of the Series C Stock, the Company shall have
no obligation to the Purchasers to convene the Company Stockholder Meeting nor
shall the Company have any other obligations to the Purchasers under Sections
6.9, 6.10 and 6.11 of this Agreement.

 

6.10 PROXY STATEMENT. The
Company shall provide each stockholder entitled to vote at the Company
Stockholder Meeting with a proxy statement filed with the SEC (the “PROXY
STATEMENT”), which has been previously reviewed by Purchasers and counsel of
their choice (and with respect to which the Company has provided Purchasers and
their counsel with an opportunity to comment), soliciting each such
stockholder’s affirmative vote at the Company Stockholder Meeting for adoption
and approval of the Board Proposals (such affirmative approval being referred
to herein as the “STOCKHOLDER APPROVAL”), and the Company shall solicit and use
its best efforts to obtain its stockholders’ adoption and approval of the Board
Proposals at the Company Stockholder Meeting and at any postponement or
adjournment thereof. The Company shall promptly notify the Purchasers of any
comments by the SEC on the Proxy Statement and shall provide the Purchasers
with a copy of such comments.

 

6.11 BOARD RECOMMENDATION.

 

(a) RECOMMENDATION. Subject to
Section 6.11(b) below: (i) the Board shall unanimously recommend that the
Company’s stockholders vote in favor of and adopt and approve the Board
Proposals at the Company Stockholder Meeting; (ii) the Proxy Statement shall
include a statement to the effect that the Board has unanimously recommended
that the Company’s stockholders vote in favor of and adopt and approve the
Board Proposals at the Company Stockholder Meeting; and (iii) neither the Board
nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to the Purchasers, the
unanimous recommendation of the Board

 

12

 

that the Company’s stockholders
vote in favor of and adopt and approve the Board Proposals.

 

(b) ACQUISITION PROPOSAL.
Nothing in this Agreement shall prevent the Board from withholding,
withdrawing, amending or modifying its unanimous recommendation in favor of the
Board Proposals if (i) an Acquisition Proposal (as defined below) is made to
the Company and is not withdrawn, (ii) the Company shall have provided written
notice to the Purchasers (a “NOTICE OF ACQUISITION PROPOSAL”) advising
Purchasers that the Company has received a Acquisition Proposal, specifying all
of the material terms and conditions of such Acquisition Proposal and
identifying the person or entity making such Acquisition Proposal, (iii) the
Board concludes in good faith, after consultation with its outside counsel,
that, in light of such Acquisition Proposal, the withholding, withdrawal,
amendment or modification of such recommendation is required or necessary in
order for the Board to comply with its fiduciary obligations to the Company’s
stockholders under applicable law and (iv) the Company shall not have violated
any of the restrictions set forth in Section 6.8 or this Section 6.11. For
purposes of this Agreement “ACQUISITION PROPOSAL” shall mean a bona fide
written offer made by a third party to consummate any of the following
transactions: (i) a possible merger or consolidation of Company with or into
any other entity or (ii) a disposition of all or substantially all of the
assets of Company.

 

6.12 COMPLIANCE WITH LAW. Each
Purchaser agrees that, prior to October 31, 2003, such Purchaser shall not
engage in any short sales, contracts or options to sell, or other hedging
activities with respect to the Conversion Stock.

 

6.13 REDEMPTION FUNDS. While any
shares of Series C-1 Stock remain outstanding, the Company shall maintain
sufficient legally available funds to permit redemption in full of all then
outstanding Series C-1 Stock pursuant to the terms of the Series C-1
Designation under the Delaware General Corporation Law and the Company’s
Certificate of Incorporation and Bylaws.

 

SECTION 7.
MISCELLANEOUS

 

7.1 TERMINATION. This Agreement may be terminated at any time by mutual
written consent of the Company and Purchasers who have agreed to purchase, or
who have purchased, a majority of the Series C-1 Shares.

 

7.2 WAIVERS AND AMENDMENTS. Neither this Agreement nor any term hereof
may be amended except by a written instrument signed by the Company and
Purchasers holding a majority of the shares of Common Stock purchased
hereunder, assuming the prior conversion or exercise, as the case may be, of
all the then-outstanding Warrants and shares of Series C Stock into shares of
Common Stock (assuming prior conversion of all then outstanding shares of
Series C-1 Stock into Series C Stock). This Agreement may not be waived except
by an instrument in writing executed by the party entitled to the benefits
thereby waived. No waiver of any term, provision or condition of this
Agreement, in any one or more instances, shall be deemed to be, or construed to
be, a further or continuing waiver of any such term, provision or condition, or
as a waiver of any other term, provision or condition of this Agreement.

 

7.3 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of New York as such laws are applied to agreements
between New York residents entered into and to be performed entirely within New
York. Each party hereto irrevocably submits to the non-exclusive jurisdiction
of the state and federal courts sitting in the Southern District of New York
for the adjudication of any dispute hereunder.

 

7.4 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive

 

13

 

any investigation made by the Purchasers and the closing of the
transactions contemplated hereby until the earlier of (i) the first anniversary
of the earlier of the date the Series C-1 Stock is converted into Series C
Stock or the Company receives a “Redemption Request” (as defined in Section 6.1
of the Series C-1 Designation) delivered in accordance with Section 6.1 of the
Series C-1 Designation, or (ii) the date on which the Purchasers have sold or
otherwise transferred (other than to their affiliates) all the Securities
issued to such Purchasers hereunder. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder as of the date of such certificate or instrument.

 

7.5 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. Notwithstanding anything else herein to the contrary, each of
the Purchasers may freely assign its rights hereunder to any person or entity
that is deemed to be an “affiliate” of such Purchaser for purposes of the
Securities Act.

 

7.6 ENTIRE AGREEMENT. This Agreement (i) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and supercedes all prior understandings and agreements relating to the
subjects hereof, whether written or oral between the parties hereof and (ii)
terminates any and all rights the parties may have had that arose under or in
connection with all prior understanding and agreements, including in each case
all prior term sheets between the Company and any or all of the Purchasers.

 

7.7 SEVERABILITY OF THIS AGREEMENT. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

 

7.8 LEGENDS. Each certificate representing the Series C -1 Shares, the
Series C Shares or the Conversion Stock shall be endorsed with a legend
referencing such restrictions of such rules and regulations of the SEC and such
contractual restrictions as the Company deems appropriate and a legend in
substantially the following form:

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.

 

Each certificate representing the Series C Shares, the Series C-1
Shares, or the Conversion Stock shall also bear any legend required by any
applicable state or foreign securities laws. The Company need not register a
transfer of Shares or Conversion Stock unless the conditions specified in the
foregoing legends are satisfied. The Company may also instruct its transfer
agent not to register the transfer of any of the Series C Shares, the Series
C-1 Shares, or Conversion Stock unless the conditions specified in the
foregoing legend is satisfied.

 

7.9 REMOVAL OF LEGENDS AND TRANSFER RESTRICTIONS. The legend relating to
the Securities Act endorsed on a stock certificate pursuant to Section 7.8 of
this Agreement and the stop transfer instructions with respect to the shares of
the Series C Stock, the Series C-1 Stock, or Common

 

14

 

Stock into which the Series C is convertible represented by such certificate
shall be removed and the Company shall issue a certificate without such legend
to the holder of such shares, if such shares are sold under the Shelf
Registration or Rule 144 or, in the event subsection (ii) below applies, are
eligible to be sold and such holder provides to the Company an opinion of
counsel reasonably satisfactory to the Company to the effect that (i) a public
sale, transfer or assignment may be made without registration or (ii) such
shares may be sold pursuant to Rule 144(k) of the Securities Act.

 

7.10 TITLES AND SUBTITLES The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

7.11 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.

 

7.12 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to the Purchasers, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by the Purchasers of any breach or default under this
Agreement, or any waiver by the Purchasers of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchasers, shall be
cumulative and not alternative.

 

7.13 EXPENSES.

 

Each party will bear its respective costs, fees and expenses (including
legal and auditors’ fees) incurred in connection with the Financing Agreements
and the transactions contemplated hereby and thereby; provided, however, that
in the event that any action, suit or other proceeding is instituted concerning
or arising out of the Financing Agreements or the transactions contemplated hereby
and thereby, the prevailing party shall recover all of such party’s reasonable
costs, fees and expenses (including legal fees) incurred in each such action,
suit or other proceeding, including any and all appeals or petitions therefrom.

 

7.14 NOTICES. Any notice, instruction, or communication required or
permitted to be given under this Agreement to any party shall be in writing
(which may include telex, telegram, telecopier, or other similar form of
reproduction followed by a mailed hard copy) and shall be deemed given when
actually received or, if earlier, five days after deposit in the United States
Mail by certified or express mail, return receipt requested, postage prepaid,
(or for foreign addresses by Federal Express, DHL or other comparable delivery
service) addressed to the principal office of such party or to such other
address as such party may request by written notice. Each party shall make an
ordinary, good faith effort to ensure that the person to be given notice
actually receives such notice. The address of the Purchasers shall be as set
forth at EXHIBIT A hereto or at such other address as the Purchasers shall have
furnished to the Company in writing; or if to any other holder of any Shares,
at such address as such holder shall have furnished the Company in writing or,
until any such holder so furnishes an address to the Company, at the address of
the last holder of such Shares who has so furnished an address to the Company.
Notice of change of address shall be given in accordance herewith. For ease of
reference, a current business address for the Company is as follows:

 

	
  To Company:

  	
  24/7 Real Media, Inc.

  

 

15

 

	
   

  	
  1250 Broadway

  
	
   

  	
  New York, NY 10001

  
	
   

  	
  Attn: General Counsel

  
	
   

  	
  Tel:

  	
  (212) 231-7100

  
	
   

  	
  Fax:

  	
  (212) 760-2800

  

 

7.16 CERTAIN DEFINITIONS. The following terms are used in this Agreement
with the meanings indicated or referred to below.

 

“FINANCING AGREEMENTS” means this Agreement and the Investors’ Rights
Agreement.

 

“INVESTORS’ RIGHTS AGREEMENT” means the Investors’ Rights Agreement

substantially in the form of EXHIBIT B hereto.

 

“MATERIAL ADVERSE EFFECT” means any material adverse effect on the
business, properties, assets, operations, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
or on the Company’s ability to consummate the transactions contemplated hereby
or to enter into the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Financing Agreements.

 

“NASD” means the National Association of Securities Dealers.

 

“NASDAQ” means The Nasdaq National Market or SmallCap Market.

 

“PURCHASE PRICE” means the aggregate amount of cash payable to the
Company by the Purchasers equal to the Price Per Share multiplied by the number
of Series C-1 Preferred Stock to be purchased as of the applicable Closing.

 

[THE
REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

16

 

IN WITNESS WHEREOF, the parties
have executed and delivered or caused this Series C and Series C-1 Preferred
Stock and Common Stock Warrant Purchase Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the day and year
first written above.

 

“COMPANY”

 

24/7 REAL MEDIA, INC.

 

	
  By:

  	
  /s/ Norman Blashka

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Norman
  Blashka

  	
   

  	
   

  	
   

  
	
  Title:
  Executive Vice President and Chief Financial Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “PURCHASERS”

  	
   

  	
   

  	
   

  
						

 

[SIGNATURE PAGE TO
SERIES C AND SERIES C-1 PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE
AGREEMENT]

 

17

 

LIST
OF EXHIBITS

 

	
  Exhibit
  A

  	
   

  	
  Schedule
  of Purchasers

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Investors’ Rights Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of Certificate of Designation designating the Series C-1
  Nonvoting Convertible Preferred Stock

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Certificate of Designation designating the Series C
  Convertible Preferred Stock

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of Closing Warrant

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  Form of Contingent Warrant

  

 

18

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