8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
                                  JULY 2, 2002


                              24/7 REAL MEDIA, INC
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)







           DELAWARE                      1-14355                 13-3995672
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER)     (I.R.S. EMPLOYER
        INCORPORATION)                                       IDENTIFICATION NO.)


                    1250 BROADWAY, NEW YORK, NEW YORK, 10001
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 231-7100



ITEM 5  OTHER EVENTS

On July 2, 2002, 24/7 Real Media, Inc., a Delaware corporation ("24/7", or the
"Company"), entered into a Series A and Series A-1 Preferred Stock and Common
Stock Warrant Purchase Agreement (the "Purchase Agreement") with Sunra Capital
Holdings Limited ("Sunra"), a newly formed investment fund advised by Merchant's
Group International.

Sunra purchased $1.6 million of 24/7's newly created Series A Convertible
Preferred Stock (the "Series A Preferred Stock"), $3.4 million of its newly
created Series A-1 Non Voting Convertible Preferred Stock (the "Series A-1
Preferred Stock"), and may, at its option, purchase up to an additional $2
million of the Series A Preferred Stock (the "Option"). All then-outstanding
shares of Series A-1 Preferred Stock will automatically be converted into shares
of Series A Preferred Stock upon the approval of the Company's stockholders of
such conversion (the "Conversion"), and will not otherwise be convertible into
Series A Preferred Stock or any other class of capital stock of the Company. The
Series A-1 Preferred Stock will be redeemable in full at the option of Sunra in
the event the stockholders reject the Conversion or fail to approve the
Conversion by October 15, 2002, or if the Company's Board of Directors withdraws
its recommendation that the stockholders approve the Conversion. To secure its
potential obligation to redeem the Series A-1 Preferred Stock, the Company has
placed $3.6 million into escrow, which will be released either to the Company if
and when stockholder approval for the Conversion is obtained or to Sunra when it
redeems its Series A-1 Preferred Stock. The Series A Preferred Stock is not
redeemable.

Each share of Series A Preferred Stock is convertible into common stock of the
Company (the "Common Stock") at any time at the option of the holder thereof at
a conversion price of $0.20535 per share of Common Stock (the "Per Share
Purchase Price"). There will be no change to the conversion ratio of the Series
A Preferred Stock based upon the future trading price of the Common Stock. The
conversion ratio of the Series A Preferred Stock is subject to adjustment in the
event of certain future issuances of Company equity at an effective per share
purchase price lower than the Per Share Purchase Price.

The Company has also issued three warrants to Sunra to purchase shares of Common
Stock at an exercise price per share equal to the Per Share Purchase Price, of
which (i) one warrant entitles Sunra to purchase up to approximately 780,000
shares of Common Stock and is immediately exercisable; (ii) another warrant
entitles Sunra to purchase up to approximately 1.66 million additional shares of
Common Stock and only becomes exercisable upon the effective date of the
Conversion; and (iii) a final warrant entitles Sunra to purchase up to
approximately 1.0 million additional shares of Common Stock and only becomes
exercisable in the event Sunra becomes entitled to redeem its Series A-1
Preferred Stock. Each such warrant will remain exercisable until the fifth
anniversary of the date on which the warrant first became exercisable.



All warrants issued pursuant to this transaction may be exercised through a
cashless exercise.

If the Option is exercised in full, then Sunra will become the beneficial owner
of approximately 37,897,000 shares of Common Stock, or approximately 42.7% of
the Company's outstanding common stock. The closing of the Option is contingent
upon prior stockholder approval.

At any time after the second anniversary of the earlier of the conversion or
redemption of the Series A-1 Preferred Stock, each share of outstanding Series A
Preferred Stock will automatically convert into the applicable number of shares
of Common Stock if the Common Stock is then traded and the average per share
closing price of the Common Stock on the Nasdaq National Market or the Nasdaq
Smallcap Market, or similar quotation system or a national securities exchange,
is greater than three (3) times the Per Share Purchase Price over a sixty (60)
trading day period, the average daily trading volume of the Common Stock over
such period is at least 200,000 shares and certain other conditions are
satisfied.

The Series A and Series A-1 Preferred Stock will accrue and cumulate dividends
at a rate of 6% per year, compounded monthly, payable when, as and if declared
by the Company's Board of Directors. All accrued dividends must be paid before
any dividends may be declared or paid on the Common Stock, and shall be paid as
an increase in the liquidation preference of the Series A and Series A-1
Preferred Stock payable upon the sale, merger, liquidation, dissolution or
winding up of the Company.

In the event of a liquidation, dissolution or winding up of the Company, if the
holders of Common Stock would receive consideration per share equal to less than
three (3) times the Per Share Purchase Price (assuming for this purpose the
prior conversion in full of all Series A and Series A-1 Preferred Stock into the
applicable number of shares of Common Stock), then the holders of the Series A
and Series A-1 Preferred Stock are entitled to a liquidation preference payment
per share equal to the Per Share Purchase Price, plus any dividends accrued but
unpaid as of such date. After payment of the foregoing preference, the holder of
each share of Series A and Series A-1 Preferred Stock would then also
participate with the holders of the Common Stock in the distribution of the
proceeds from such a liquidation event to the holders of the Common Stock. A
merger, consolidation or sale of the Company will be treated as a liquidation
event unless such transaction has been approved by the holders of a majority of
the outstanding Series A Preferred Stock.

Holders of the Series A Preferred Stock generally will vote together with the
holders of shares of Common Stock, with each share of Series A Preferred Stock
representing that number of votes equal to that number of shares of Common Stock
into which it is then convertible. However, the holders of the Series A
Preferred Stock will be entitled to a separate class vote with respect to
certain matters, including the creation of a class or series of stock having
preferences or privileges senior to or on a parity with the Series A Preferred
Stock and any amendment or



waiver of any provision of the Company's Certificate of Incorporation or Bylaws
that would adversely affect the rights, privileges and preferences of the Series
A Preferred Stock. Additionally, at any time prior to the second anniversary of
the redemption or conversion of the Series A-1 Preferred Stock, holders of the
Series A Preferred Stock will be entitled to a separate class vote with respect
to a proposed merger, consolidation, or sale of the Company, unless, at the time
of the signing of a definitive agreement or taking of such other action
necessary to effect such a transaction, the fair market value of one share of
Common Stock is greater than three times the Per Share Purchase Price.
Additionally, pursuant to the right of the holders of the Series A Preferred
Stock to designate a member to the Company's board of directors, Joseph
Waechter, President of Sunra and a director of Merchant's Group International,
joined the Company's Board of Directors upon the completion of this sale of
Series A and Series A-1 Preferred Stock. Upon the Conversion, Sunra will have
the right to designate a second director.

Merchant's Group International acted as a "finder" for this transaction. The
Company has paid or will pay Merchant's Group the following compensation: (i) a
warrant to purchase 400,000 shares of Common Stock at an exercise price equal to
the Per Share Purchase Price that is immediately exercisable for a five-year
term beginning on the date it was issued and (ii) $280,000 in cash, of which
$64,000 was paid at the closing of this transaction, $136,000 will become
payable upon the effective date of the Conversion, and $80,000 will become
payable if the Option is fully exercised.

The parties also entered into a Registration Rights Agreement pursuant to which
the Company is obligated to file a registration statement covering the resale of
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock and upon exercise of all warrants issued to Sunra and Merchant's Group
International in connection with this transaction, and has also granted
piggyback registration rights to the holders of such shares, on a pari passu
basis with existing registration rights holders, to participate in certain
registered offerings of the Company's securities.

The Company expects to seek approval of the Conversion at its Annual Meeting of
Stockholders, expected to be held in the third quarter. The Company also agreed
with Sunra that it would submit for stockholder approval certain proposals to
authorize a reverse split of the Common Stock, to become effective at such
future time and in such proportion as the Board of Directors may decide.

The Certificate of Designation filed with the Secretary of State of the State of
Delaware relating to the Series A Preferred Stock and the Series A and Series
A-1 Preferred Stock and Common Stock Warrant Purchase Agreement, a related
warrant and the Investor Rights Agreement entered into with Sunra are filed as
exhibits hereto and are hereby incorporated by reference.

The foregoing description of the transaction is only a summary and is qualified
in its entirety by reference to the aforementioned transaction documents. The
Company intends to use the proceeds for general corporate purposes.




ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS

         (a)      Financial Statements of Businesses Acquired

                  Not applicable

         (b)      Unaudited Pro Forma Consolidated Financial Information

                  Not applicable.

         (c)      Exhibits

         (d)      Exhibits

         4.1      Certificate of Designation of Series A Convertible Preferred
         Stock

         10.1     Series A and Series A-1 Preferred Stock and Common Stock
         Warrant Purchase Agreement dated as of July 2, 2002 between the Company
         and Sunra Capital Holdings Limited ("Sunra")*.

         10.2     Form of Warrant to purchase Common Stock to be issued to
         Sunra.

         10.3     Investor Rights Agreement dated as of July 2, 2002 among the
         Company, Sunra and Merchant Partners LLC.

         * Disclosure schedules are omitted, but will be furnished
         supplementally to the Commission upon request.






                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                24/7 Real Media, Inc


Date July 3, 2002                               By: /s/ Mark E. Moran
                                                   ----------------------------
                                                   Executive Vice President and
                                                   General Counsel

EX-4.1

                                                                     EXHIBIT 4.1

                      RESOLUTION OF THE BOARD OF DIRECTORS
                                    APPROVING
                            THE DESIGNATION STATEMENT
                                   RELATING TO
                SERIES A-1 NONVOTING CONVERTIBLE PREFERRED STOCK

     WHEREAS, the Amended and Restated Certificate of Incorporation of 24/7 Real
Media, Inc., a Delaware corporation (the "CORPORATION"), as amended to the date
hereof (the "CERTIFICATE OF INCORPORATION") authorizes the Corporation to issue
a total of 10,000,000 shares of preferred stock, par value $0.01 per share
("PREFERRED STOCK"), which may be divided into one or more classes and/or series
as the Corporation's Board of Directors (the "BOARD") may determine;

     WHEREAS, the Certificate of Incorporation expressly vests in the Board of
Directors the authority to fix the powers, designations, preferences, rights and
qualifications, limitations or restrictions, of the Preferred Stock; and

     WHEREAS, the Board of Directors deems it advisable to designate a series of
the Preferred Stock consisting of Three Hundred Forty Thousand (340,000) shares
designated as Series A Nonvoting Convertible Preferred Stock;

     NOW, THEREFORE, IT IS HEREBY RESOLVED, that pursuant to Article Fourth of
the Certificate of Incorporation, there be and hereby is authorized and created,
pursuant to the terms of this designation statement (this "DESIGNATION
STATEMENT") a series of Preferred Stock, which series shall have the powers,
designations, preferences, relative and other special rights, and the
qualifications, limitations and restrictions set forth below:

     SERIES A-1 CONVERTIBLE PREFERRED STOCK. Three Hundred Forty Thousand
(340,000) of the authorized shares of Preferred Stock of the Corporation are
hereby designated "Series A-1 Nonvoting Convertible Preferred Stock", $0.01 par
value per share (the "SERIES A-1 PREFERRED STOCK"). The powers, designations,
preferences, relative and other special rights, and the qualifications,
limitations and restrictions and other matters relating to the Series A-1
Preferred Stock are as follows:

     1.   DEFINITIONS. For purposes of this Designation Statement, the following
definitions apply:

          1.1  "ACQUIRING STOCKHOLDER" shall mean, with respect to a Combination
Transaction, a stockholder or stockholders of the Corporation that (i) merges or
combines with the Corporation in such Combination Transaction or (ii) owns or
controls a majority of another corporation that merges or combines with the
Corporation in such Combination Transaction.

          1.2  "COMBINATION TRANSACTION" shall mean a reorganization,
consolidation, merger or similar transaction or series of related transactions.

          1.3  "COMMON STOCK" shall mean the Common Stock, par value $0.01 per
share, of the Corporation.



          1.4  "COMMON STOCK DIVIDEND" shall mean a stock dividend declared and
paid on the Common Stock that is payable in shares of Common Stock.

          1.5  "CONVERSION SHARES" shall mean three hundred forty thousand
(340,000) shares of Series A Preferred Stock issuable upon conversion of the
Series A-1 Preferred Stock originally issued under the Series A Purchase
Agreement (as adjusted for any Series A Preferred Stock Events,
recapitalizations or the like, with respect to the Series A Preferred Stock).

          1.6  "DISTRIBUTION" shall mean the transfer of cash or property by the
Corporation to one or more of its stockholders without consideration, whether by
dividend or otherwise (except a dividend in shares of Corporation's stock). A
Permitted Repurchase (defined below) is not a Distribution.

          1.7  "DIVIDEND ACCRUAL DATE" shall mean the first day of each calendar
month.

          1.8  "DIVIDEND RATE" shall mean a dollar amount per share equal to six
percent (6%) of the Original Issue Price for the Series A-1 Preferred Stock, per
annum, for the Series A-1 Preferred Stock (as adjusted for any stock splits,
stock dividends, recapitalizations or the like, with respect to the Series A-1
Preferred Stock).

          1.9  "ORIGINAL ISSUE DATE" for the Series A-1 Preferred Stock shall
mean the date on which the first share of Series A-1 Preferred Stock is issued
by the Corporation.

          1.10 "ORIGINAL ISSUE PRICE" shall mean $10.00 per share for the Series
A-1 Preferred Stock, and $10.00 per share for the Series A Preferred Stock (as
adjusted for any stock splits, stock dividends, recapitalizations or the like,
with respect to such series of Preferred Stock).

          1.11 "PERMITTED REPURCHASES" shall mean the repurchase by the
Corporation of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other persons performing
services for the Corporation or a Subsidiary that are subject to restricted
stock purchase agreements, stock option exercise agreements or similar
agreements under which the Corporation has the option to repurchase such shares.

          1.12 "SERIES A DESIGNATION" shall mean the resolutions adopted by the
Board authorizing the Series A Preferred Stock, as filed with the Delaware
Secretary of State.

          1.13 "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, par value $0.01 per share, of the Corporation.

          1.14 "SERIES A PREFERRED STOCK EVENT" shall mean, at any time or from
time to time after the Original Issue Date for the Series A-1 Preferred Stock,
(i) the issue by the Corporation of additional shares of Series A Preferred
Stock in connection with a dividend payable in shares of Series A Preferred
Stock, or other distribution, on outstanding Series A Preferred Stock, (ii) a
subdivision of the outstanding shares of Series A Preferred Stock into a greater
number of shares of Series A Preferred Stock, or (iii) a combination of the
outstanding shares of Series A Preferred Stock into a smaller number of shares
of Series A Preferred Stock.

                                        2


          1.15 "SERIES A PURCHASE AGREEMENT" shall mean that certain Series A
and A-1 Preferred Stock and Common Stock Warrant Purchase Agreement dated on or
about July 1, 2002 by and among the Corporation and the persons and entities
listed on Exhibit A thereto.

          1.16 "SUBSIDIARY" shall mean any corporation of which at least fifty
percent (50%) of the outstanding voting stock is at the time owned directly or
indirectly by the Corporation or by one or more of such subsidiary corporations.

     2.   DIVIDEND RIGHTS.

          2.1  CUMULATIVE DIVIDEND PREFERENCE. The holders of the then
outstanding Series A-1 Preferred Stock shall be entitled to receive, when, as
and if declared by the Board, out of any funds and assets of the Corporation
legally available therefor, cumulative dividends at the annual Dividend Rate for
the Series A-1 Preferred Stock, prior and in preference to the payment of any
dividend or other Distribution on the Common Stock (other than a Common Stock
Dividend). Such dividends shall begin accruing on each share of Series A-1
Preferred Stock on the first Dividend Accrual Date occurring after the date on
which such share of Series A Preferred Stock is issued by the Corporation, and
shall accrue on each subsequent Dividend Accrual Date thereafter until paid,
whether or not earned or declared. No accumulation of dividends on the Series
A-1 Preferred Stock shall compound or bear any interest. Unless the full amount
of any accrued and unpaid dividends accrued on the Series A-1 Preferred Stock
shall have been paid or declared in full and a sum sufficient for the payment
thereof reserved and set apart, no dividend (other than a Common Stock Dividend)
shall be paid or declared, and no Distribution shall be made, on any Common
Stock; PROVIDED, HOWEVER, that this restriction shall not apply to Permitted
Repurchases. Payments of any accrued dividends to the holders of the Series A
Preferred Stock and the Series A-1 Preferred Stock shall be made pro rata, on an
equal priority, pari passu basis.

          2.2  PARTICIPATION RIGHTS. In the event that the Corporation shall
declare a dividend or other Distribution on the Common Stock out of funds
legally available therefor (other than a Common Stock Dividend), then the
holders of the then outstanding Series A-1 Preferred Stock shall be entitled to
a proportionate share of any such dividend or other Distribution as though each
holder of such Series A-1 Preferred Stock was the holder of the greatest whole
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock issuable upon conversion pursuant to Section 5 of all the Series
A-1 Preferred Stock held by such holder, in each case as of the record date
fixed for the determination of holders of Common Stock entitled to receive such
dividend or other Distribution, assuming for this purpose that the Automatic
Conversion Date is such record date.

          2.3  NON-CASH DIVIDENDS. Whenever a dividend provided for in this
Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board, provided that dividends payable in
securities (other than Common Stock Dividends, dividends declared and paid on
the Series A Preferred Stock that are payable in shares of Series A Preferred
Stock, and dividends declared and paid on the Series A-1 Preferred Stock that
are payable in shares of Series A-1 Preferred Stock) shall be valued in the
manner set forth in Sections 3.4(a) and (b) hereof.

                                        3


     3.   LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the funds and
assets that may be legally distributed to the Corporation's stockholders (the
"AVAILABLE FUNDS AND ASSETS") shall be distributed to stockholders in the
following manner:

          3.1  LIQUIDATION PREFERENCE. The holders of each share of Series A-1
Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share
equal to the Original Issue Price for the Series A-1 Preferred Stock plus all
accrued but unpaid dividends on the Series A-1 Preferred Stock. The Series A-1
Preferred Stock shall rank on parity with the Series A Preferred Stock with
respect to the liquidation, dissolution or winding up of the Corporation. If
upon any liquidation, dissolution or winding up of the Corporation, the
Available Funds and Assets shall be insufficient to permit the payment to
holders of the Series A-1 Preferred Stock and the Series A Preferred Stock of
their full preferential amounts, then all of the Available Funds and Assets
shall be distributed among the holders of the then outstanding Series A-1
Preferred Stock and the Series A Preferred Stock pro rata, on an equal priority,
pari passu basis, according to their respective liquidation preferences.

          3.2  PARTICIPATION RIGHTS. If there are any Available Funds and Assets
remaining after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Series A-1 Preferred Stock and Series A
Preferred Stock of their full liquidation preference amounts payable pursuant to
Section 3.1 above for the Series A-1 Preferred Stock, and pursuant to Section
3.1 of the Series A Designation for the Series A Preferred Stock, in connection
with a liquidation, dissolution or winding up of the Corporation, then all such
remaining Available Funds and Assets shall be distributed among the holders of
the then outstanding Common Stock, Series A Preferred Stock and Series A-1
Preferred Stock pro rata according to the number of shares of Common Stock held
by such holders, where, for this purpose: (a) each holder of outstanding Series
A-1 Preferred Stock will be deemed to hold (in lieu of their Series A-1
Preferred Stock), the greatest whole number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock issuable upon conversion
pursuant to Section 5 of all the Series A-1 Preferred Stock held by such holder,
in each case as of the record date fixed for the determination of holders of
Common Stock entitled to receive such distribution, and assuming for this
purpose that the Automatic Conversion Date is such record date, and (b) each
holder of outstanding Series A Preferred Stock will be deemed to hold (in lieu
of their Series A Preferred Stock), the greatest whole number of shares of
Common Stock issuable upon conversion of such holder's Series A Preferred Stock,
as of the record date fixed for the determination of holders of Common Stock
entitled to receive such distribution; UNTIL SUCH TIME AS: (x) in the case of
the Series A-1 Preferred Stock, each holder of then outstanding Series A-1
Preferred Stock shall have received, in distributions made in connection with
such liquidation, dissolution or winding up, an aggregate amount per share of
Series A-1 Preferred Stock held equal to three (3) times the Original Issue
Price for the Series A-1 Preferred Stock (such aggregate dollar amount to
include all amounts previously paid to such holder pursuant to the liquidation
preference of the Series A-1 Preferred Stock including without limitation any
dividends paid thereon), and (y) in the case of the Series A Preferred Stock,
each holder of then outstanding Series A Preferred Stock shall have received, in
distributions made in connection with such liquidation, dissolution or winding
up, an aggregate amount per share of Series A

                                        4


Preferred Stock held equal to three (3) times the Original Issue Price for the
Series A Preferred Stock (such aggregate dollar amount to include all amounts
previously paid to such holder pursuant to the liquidation preference of the
Series A Preferred Stock including without limitation any dividends paid
thereon); AFTER WHICH TIME the holders of then outstanding Common Stock shall be
entitled to receive all the remaining Available Funds and Assets (if any) pro
rata according to the number of outstanding shares of Common Stock then held by
each of them.

          3.3  MERGER OR SALE OF ASSETS. Each of the following transactions
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this Section 3 (and in the case of a
transaction described in Section 3.3(a) below, the Available Funds and Assets
shall be the consideration paid by the acquiror in such transaction): (a) a
Combination Transaction in which the Corporation is a constituent corporation
if, as a result of such Combination Transaction, the voting securities of the
Corporation that are outstanding immediately prior to the consummation of such
Combination Transaction (OTHER THAN any such securities that are held by an
Acquiring Stockholder) do not represent, or are not converted into, securities
of the surviving corporation of such Combination Transaction (or such surviving
corporation's parent corporation if the surviving corporation is owned by the
parent corporation) that, immediately after the consummation of such Combination
Transaction, together possess at least a majority of the total voting power of
all securities of such surviving corporation (or its parent corporation, if
applicable) that are outstanding immediately after the consummation of such
Combination Transaction, including securities of such surviving corporation (or
its parent corporation, if applicable) that are held by the Acquiring
Stockholder; or (b) a sale of all or substantially all of the assets of the
Corporation (each of the foregoing transactions, a "SALE TRANSACTION").

          The Corporation shall not enter into any Sale Transaction that does
not provide for the treatment of the holders of Series A-1 Preferred Stock in a
manner consistent with the provisions of this Section 3. In the event that the
requirements of the immediately preceding sentence are not complied with in
connection with a Sale Transaction, the Corporation shall forthwith either: (x)
cause the closing of Sale Transaction to be postponed until such time as such
requirements have been complied with, or (y) cancel such Sale Transaction, in
which event the rights, preferences and privileges of the holders of the Series
A-1 Preferred Stock shall revert to and be the same as such rights, preferrences
and privileges existing immediately prior to the latest date on which the notice
referred to in Section 3.5 below with respect to such Sale Transaction could be
given in compliance with the provisions of such Section 3.5.

          3.4  NON-CASH CONSIDERATION. If any assets of the Corporation
distributed to stockholders in connection with any liquidation, dissolution, or
winding up of the Corporation are other than cash, then the value of such assets
shall be their fair market value as determined in good faith by the Board,
EXCEPT THAT any securities to be distributed to stockholders in a liquidation,
dissolution, or winding up of the Corporation shall be valued as follows:

               (a)  The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:

                    (i)   unless otherwise specified in a definitive agreement
for the acquisition of the Corporation, if the securities are then traded on a
national securities exchange,

                                        5


the Nasdaq National Market or the Nasdaq SmallCap Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the twenty (20)
trading day period ending three (3) trading days prior to the distribution; and

                    (ii)  if (i) above does not apply but the securities are
actively traded over-the-counter, then, unless otherwise specified in a
definitive agreement for the acquisition of the Corporation, the value shall be
deemed to be the average of the closing bid prices over the twenty (20) trading
day period ending three (3) trading days prior to the distribution; and

                    (iii) if there is no active public market as described in
clauses (i) or (ii) above, then the value shall be the fair market value
thereof, as determined in good faith by the Board.

               (b)  The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in subparagraphs (a)(i),(ii) or (iii) of this subsection to
reflect the approximate fair market value thereof, as determined in good faith
by the Board.

               (c)  Any determination in good faith by the Board pursuant to
this Section 3.4 shall be conclusive and final and shall be binding on the
Corporation and all stockholders thereof.

          3.5  NOTICE. Written notice of any liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 3, stating the nature
of such liquidation, dissolution or winding up, and specifying the anticipated
effective date of such liquidation, dissolution or winding up, shall be given in
the manner specified in Section 5.10 hereof at least twenty (20) days prior to,
and no more than sixty (60) days prior to, the effective date of such
liquidation, dissolution or winding up.

     4.   VOTING RIGHTS.

          4.1  NO VOTING RIGHTS. Except as otherwise provided by law and as
provided in Section 4.2 below, holders of Series A-1 Preferred Stock shall have
no voting rights.

          4.2  PROTECTIVE PROVISIONS. The Corporation shall not, without the
approval, by vote or written consent, of the holders of a majority of the Series
A-1 Preferred Stock then outstanding, voting as a separate class: (a) amend its
Certificate of Incorporation or Bylaws in any manner that would alter or change
the rights, preferences, privileges or restrictions of the Series A-1 Preferred
Stock so as to adversely affect any of the rights, preferences, privileges or
restrictions of such series of Preferred Stock, or (b) increase or decrease
(other than pursuant to Section 7.1 below) the total number of authorized shares
of Series A-1 Preferred Stock.

     5.   CONVERSION. The outstanding shares of Series A-1 Preferred Stock shall
be convertible into Series A Preferred Stock as follows:

                                        6


          5.1  AUTOMATIC CONVERSION.

               (a)  At the close of business on the date: (i) of any meeting of
the holders of the Common Stock at which a quorum shall be present and at which
a majority of the shares of Common Stock voting shall have voted (in person or
by proxy) in favor of a proposal to approve the issuance of the Conversion
Shares upon conversion of the Series A-1 Preferred Stock, or (ii) that such
other action shall have been taken by the stockholders of the Corporation as
shall have satisfied the stockholder approval requirements of Nasdaq with
respect to the issuance of the Conversion Shares upon conversion of the Series
A-1 Preferred Stock, in either case prior to the Corporation's receipt of a
Redemption Request (as defined in Section 6.1 below) delivered in accordance
with Section 6.1, each then outstanding share of Series A-1 Preferred Stock
shall be automatically converted into fully paid and nonassessable shares of
Series A Preferred Stock effective as of the date such stockholder approval is
obtained (the "AUTOMATIC CONVERSION DATE"), as provided herein (such conversion,
the "AUTOMATIC CONVERSION").

               (b)  Upon an Automatic Conversion in accordance with Section
5.1(a), and effective as of the close of business on the Automatic Conversion
Date, the outstanding shares of Series A-1 Preferred Stock shall be converted
into Series A Preferred Stock automatically without the need for any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; PROVIDED, HOWEVER, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Series A Preferred Stock issuable upon
such conversion unless the certificates evidencing such shares of Series A-1
Preferred Stock are either delivered to the Corporation or its transfer agent as
provided below, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation and/or its transfer agent to indemnify
the Corporation and/or its transfer agent from any loss incurred by it in
connection with such certificates. Upon the occurrence of such Automatic
Conversion of the Series A-1 Preferred Stock: (i) the Corporation shall deliver
written notice of such Automatic Conversion in the manner specified in Section
5.10 hereof promptly after the Automatic Conversion Date to each holder of
Series A-1 Preferred Stock that was converted into Series A Preferred Stock in
the Automatic Conversion, and (ii) the holders of Series A-1 Preferred Stock
shall surrender the certificates representing such shares at the office of any
transfer agent for the Series A-1 Preferred Stock or Series A Preferred Stock.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Series A Preferred
Stock into which the shares of Series A-1 Preferred Stock surrendered were
convertible on the Automatic Conversion Date.

          5.2  CONVERSION PRICE. Each share of Series A-1 Preferred Stock shall
be convertible in accordance with Section 5.1 above into the number of shares of
Series A Preferred Stock which results from dividing the Original Issue Price
for the Series A-1 Preferred Stock by the conversion price for the Series A-1
Preferred Stock that is in effect at the time of conversion (the "CONVERSION
PRICE"). The initial Conversion Price for the Series A-1 Preferred Stock shall
be the Original Issue Price for the Series A-1 Preferred Stock. The Conversion
Price of the Series A-1 Preferred Stock shall be subject to adjustment from time
to time as provided below.

                                        7


Following each adjustment of the Conversion Price, such adjusted Conversion
Price shall remain in effect until a further adjustment of such Conversion Price
hereunder.

          5.3  ADJUSTMENT UPON SERIES A PREFERRED STOCK EVENT. Upon the
happening of a Series A Preferred Stock Event, the Conversion Price of the
Series A-1 Preferred Stock shall, simultaneously with the happening of such
Series A Preferred Stock Event, be adjusted by multiplying the Conversion Price
of the Series A-1 Preferred Stock in effect immediately prior to such Series A
Preferred Stock Event by a fraction, (i) the numerator of which shall be the
number of shares of Series A Preferred Stock issued and outstanding immediately
prior to such Series A Preferred Stock Event, and (ii) the denominator of which
shall be the number of shares of Series A Preferred Stock issued and outstanding
immediately after such Series A Preferred Stock Event, and the product so
obtained shall thereafter be the Conversion Price for the Series A-1 Preferred
Stock. The Conversion Price for the Series A-1 Preferred Stock shall be
readjusted in the same manner upon the happening of each subsequent Series A
Preferred Stock Event.

          5.4  ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at any time
or from time to time after the Original Issue Date for the Series A-1 Preferred
Stock the Corporation pays a dividend or makes another distribution to the
holders of the Series A Preferred Stock payable in securities of the
Corporation, other than an event constituting a Series A Preferred Stock Event,
then in each such event provision shall be made so that the holders of the
Series A-1 Preferred Stock shall receive upon conversion thereof, in addition to
the number of shares of Series A Preferred Stock receivable upon conversion
thereof, the amount of securities of the Corporation which they would have
received had their Series A-1 Preferred Stock been converted into Series A
Preferred Stock on the date of such event (or such record date, as applicable)
and had they thereafter, during the period from the date of such event (or such
record date, as applicable) to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Series A-1 Preferred Stock or with
respect to such other securities by their terms.

          5.5  ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Issue Date for the Series A-1
Preferred Stock the Series A Preferred Stock issuable upon the conversion of the
Series A-1 Preferred Stock is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (OTHER THAN by a Series A Preferred Stock Event or
a stock dividend, reorganization, merger, or consolidation provided for
elsewhere in this Section 5), then in any such event each holder of Series A-1
Preferred Stock shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the number of
shares of Series A Preferred Stock into which such shares of Series A-1
Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.

          5.6  REORGANIZATIONS, MERGERS AND CONSOLIDATIONS. If at any time or
from time to time after the Original Issue Date for the Series A-1 Preferred
Stock there is a reorganization

                                        8


of the Corporation (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section 5)
or a merger or consolidation of the Corporation with or into another corporation
(except an event which is governed under Section 3.3), then, as a part of such
reorganization, merger or consolidation, provision shall be made so that the
holders of the Series A-1 Preferred Stock thereafter shall be entitled to
receive, upon conversion of the Series A-1 Preferred Stock, the number of shares
of stock or other securities or property of the Corporation, or of such
successor corporation resulting from such reorganization, merger or
consolidation, to which a holder of Series A Preferred Stock deliverable upon
conversion would have been entitled on such reorganization, merger or
consolidation. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Series A-1 Preferred Stock after the reorganization, merger
or consolidation to the end that the provisions of this Section 5 (including
adjustment of the Conversion Price then in effect and number of shares issuable
upon conversion of the Series A-1 Preferred Stock) shall be applicable after
that event and be as nearly equivalent to the provisions hereof as may be
practicable. This Section 5.6 shall similarly apply to successive
reorganizations, mergers and consolidations.

          5.7  CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Price for the Series A-1 Preferred Stock, the
Corporation, at its expense, shall promptly cause its Chief Financial Officer to
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
cause such certificate to be delivered to each registered holder of the Series
A-1 Preferred Stock in accordance with Section 5.10.

          5.8  FRACTIONAL SHARES. No fractional shares of Series A Preferred
Stock shall be issued upon any conversion of Series A-1 Preferred Stock. In lieu
of any fractional share to which the holder would otherwise be entitled, the
Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the fair value of one share of Series A Preferred Stock, which
shall be equal to the fair market value of the shares of Common Stock and other
securities or property issuable upon conversion of such share of Series A
Preferred Stock on the Automatic Conversion Date as determined in good faith by
the Board (with reference to the closing price of the Corporation's Common Stock
(as reported by a national securities exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market or a similar national quotation system on which the
Common Stock is then traded).

          5.9  RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Series A Preferred Stock and Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A-1 Preferred Stock and the
conversion of the Series A Preferred Stock issuable upon conversion of the
Series A-1 Preferred Stock: (a) such number of its shares of Series A Preferred
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A-1 Preferred Stock, and (b) such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock issuable
upon conversion of all Series A-1 Preferred Stock; and if at any time the number
of authorized but unissued shares of Series A Preferred Stock or Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series A-1 Preferred Stock and the conversion of all Series A Preferred
Stock

                                        9


issuable upon conversion of all then outstanding Series A-1 Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Series A
Preferred Stock and/or Common Stock to such number of shares as shall be
sufficient for such purposes.

          5.10 NOTICES. Any notice or certificate required by the provisions of
this Designation Statement to be given to the holders of shares of the Series
A-1 Preferred Stock shall be deemed given upon the earliest of: (i) actual
receipt, (ii) one (1) business day after deposit with a recognized express
courier, fees prepaid, addressed to each holder of record at the address of such
holder appearing on the books of the Corporation, or (iii) on the date of
transmission by facsimile (with confirmation of receipt), sent to each holder of
record at the fascimile address of such holder appearing on the books of the
Corporation.

          5.11 NO IMPAIRMENT. The Corporation shall not avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series A-1
Preferred Stock against impairment.

     6.   REDEMPTION.

          6.1  MANDATORY REDEMPTION. Subject to the terms and conditions of this
subsection, if the Corporation receives a written request signed by the holders
of a majority of the then outstanding shares of Series A-1 Preferred Stock
requesting that the Corporation redeem their shares of Series A-1 Preferred
Stock (the "REDEMPTION REQUEST") at any time after the first to occur of: (x)
the date of any meeting of the holders of the Common Stock of the Corporation at
which a quorum shall be present and at which a vote shall be taken with respect
to a proposal to approve the issuance of the Conversion Shares upon conversion
of the Series A-1 Preferred Stock and at which a majority of the shares of
Common Stock voting shall not vote (in person or by proxy) in favor of such
proposal (provided that if such meeting shall be postponed or adjourned to a
later date, then the date of such meeting shall be deemed to be the date of such
meeting as so postponed or adjourned), unless such other action shall have been
taken by the stockholders of the Corporation as shall have satisfied the
stockholder approval requirements of Nasdaq with respect to such issuance of the
Conversion Shares upon conversion of the Series A-1 Preferred Stock; (y) the
date on which the Board or any committee thereof withdraws, amends or modifies,
or proposes or resolves to withdraw, amend or modify in a manner adverse to the
holders of Series A-1 Preferred Stock and Series A Preferred Stock, the
unanimous recommendation of the Board that the Corporation's stockholders vote
in favor of and adopt and approve the Board Proposals (as defined in the Series
A Purchase Agreement); and (z) October 15, 2002, then the Corporation shall
redeem, from any source of funds legally available therefor, on the date seven
(7) business days following its receipt of such written redemption request (or
the next succeeding business day if such date is a holiday or weekend) (the
"REDEMPTION DATE"), all shares of Series A-1 Preferred Stock outstanding on the
Redemption Date for an amount per share of Series A-1 Preferred Stock so
redeemed equal to the Original Issue Price for the Series A-1 Preferred Stock
(the "REDEMPTION PRICE").

                                       10


          6.2  EXCESS REDEMPTION. If upon the Redemption Date or any Excess
Redemption Date (as defined below) the funds and assets of the Corporation
legally available to redeem the Series A-1 Preferred Stock shall be insufficient
to redeem all shares of Series A-1 Preferred Stock, then the Corporation shall
redeem shares of Series A-1 Preferred Stock on the Redemption Date to the extent
of the funds and assets of the Corporation legally available therefor, pro rata
among all holders of then outstanding Series A-1 Preferred Stock according to
the number of shares held by each holder thereof on the Redemption Date, and any
shares of Series A-1 Preferred Stock not so redeemed on the Redemption Date (the
"EXCESS REDEMPTION SHARES") shall continue to be outstanding and entitled to all
dividend, liquidation, and other rights, preferences, privileges and
restrictions of the Series A-1 Preferred Stock until such shares have been
redeemed hereunder. The Corporation shall promptly return the certificate(s)
representing the Excess Redemption Shares, or issue new certificates
representing the Excess Redemption Shares to the extent such certificates were
cancelled, to the holders of record thereof to the extent such holders had
delivered their certificate(s) representing such Excess Redemption Shares to the
Corporation in connection with the applicable redemption. Excess Redemption
Shares shall be redeemed by the Corporation on the first business day of each
calendar month after the calendar month following the calendar month including
the Redemption Date, to the full extent of legally available funds of the
Corporation at such time (each such date of redemption of Excess Redemption
Shares, an "EXCESS REDEMPTION DATE").

          6.3  REDEMPTION NOTICE. At least five (5) days prior to the Redemption
Date and each Excess Redemption Date, if any, written notice shall be given by
the Corporation pursuant to Section 5.10 hereof to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A-1 Preferred Stock, notifying such holder of the
redemption to be effected, specifying the subsection hereof under which such
redemption is being effected, the Redemption Date or Excess Redemption Date, as
applicable, the applicable Redemption Price (calculated to take into effect all
dividends accrued and unpaid on the Series A-1 Preferred Stock as of such
Redemption Date or Excess Redemption Date), and the place at which payment may
be obtained and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, the certificate or certificates representing
the shares to be redeemed (the "REDEMPTION NOTICE").

          6.4  SURRENDER OF CERTIFICATES. On or before the Redemption Date and
any Excess Redemption Date, if any, each holder of Series A-1 Preferred Stock to
be redeemed shall surrender the certificate(s) representing such shares of
Series A-1 Preferred Stock to be redeemed to the Corporation, in the manner and
at the place designated in the Redemption Notice, and thereupon the Redemption
Price for each shares shall be payable to the order of the person whose name
appears on such certificate(s) as the owner thereof, and each surrendered
certificate shall be cancelled and retired.

          6.5  EFFECT OF REDEMPTION. If the Redemption Notice shall have been
duly given, and if on the Redemption Date or the Excess Redemption Date the
applicable Redemption Price is paid, then notwithstanding that the certificates
evidencing any of the shares of Series A-1 Preferred Stock so called for
redemption shall not have been surrendered, all dividends with respect to such
shares shall cease to accrue after such Redemption Date or Excess Redemption
Date, as the case may be, such shares shall not thereafter be transferred on the
Corporation's books and the rights of all of the holders of such shares with
respect to such shares shall

                                       11


terminate after such Redemption Date or Excess Redemption Date, except only the
right of the holders to receive the applicable Redemption Price without interest
upon surrender of their certificate(s) therefor.

     7.   MISCELLANEOUS.

          7.1  NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series
A-1 Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.

          7.2  PREEMPTIVE RIGHTS. No stockholder of the Corporation shall have a
right to purchase shares of capital stock of the Corporation sold or issued by
the Corporation except to the extent that such a right may from time to time be
set forth in a written agreement between the Corporation and a stockholder.

          7.3  PREFERRED STOCK WRITTEN CONSENT. Notwithstanding any other
provision of this Designation Statement, with respect to matters involving only
the Series A-1 Preferred Stock and the rights, preferences, privileges and
restrictions granted to and imposed on the Series A-1 Preferred Stock, the
holders of the Series A-1 Preferred Stock may take action without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of majority of
the Series A-1 Preferred Stock then outstanding.

                                       12

EX-10.1

                                                                    EXHIBIT 10.1

                              24/7 REAL MEDIA, INC.

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

                               PURCHASE AGREEMENT

This SERIES A AND SERIES A-1 PREFERRED STOCK AND COMMON STOCK WARRANT PURCHASE
AGREEMENT (the "AGREEMENT") is made as of July 1, 2002, 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 Series A Convertible Preferred Stock, par value $0.01
per share (the "SERIES A STOCK") and Series A-1 Nonvoting Convertible Preferred
Stock, par value $0.01 per share (the "SERIES A-1 STOCK"), and accompanying
warrants to purchase shares of the Company's Common Stock, par value $0.01 per
share (the "COMMON STOCK").

                                    AGREEMENT

     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 360,000 shares of the Series A Stock, and of up to 340,000
shares of the Series A Stock issuable upon conversion of the Series A-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 C (the "SERIES A DESIGNATION"), and of up to 340,000 shares of
the Series A-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 D (the "SERIES
A-1 DESIGNATION"), subject, in the case of the Additional Closing Shares (as
defined below), to the prior approval of the stockholders of the Company. The
shares of Common stock issuable upon conversion of all the Series A Stock issued
hereunder (including Series A Stock issuable upon conversion of the Series A-1
Stock issued hereunder), is referred to herein as the "CONVERSION STOCK" and the
Series A Stock issuable upon conversion of the Series A-1 Stock issued hereunder
is referred to herein as the "SERIES A-1 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 4.1, 4.2, 5.1 and 5.2 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 A Stock and Series A-1 Stock set forth beside such
Purchaser's name in the columns entitled "Series A Shares" and "Series A-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 A Stock issued and sold
to the Purchasers at the Closing are referred to herein as the "SERIES A CLOSING
SHARES" and the shares of Series A-1 Stock issued and sold to the Purchasers at
the Closing are referred to herein as the "SERIES A-1 PURCHASED 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 A Closing Shares and Series A-1 Purchased 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 equal to the aggregate number of Series A
Closing Shares purchased under this Agreement by such Purchaser at the Closing
divided by the Closing Discounted Common Stock Price (as defined in the Series A
Designation (the "CLOSING DISCOUNTED COMMON STOCK PRICE"), such warrant to be
exercisable at an exercise price per share equal to the Closing Discounted
Common Stock Price (each, a "SERIES A CLOSING WARRANT"), (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 the aggregate number of Series A-1
Purchased Shares purchased under this Agreement by such Purchaser at the Closing
divided by the Closing Discounted Common Stock Price, 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 "SERIES A-1 CLOSING WARRANT"; the
Series A Closing Warrants and the Series A-1 Closing Warrants are referred to
collectively herein as the "CLOSING WARRANTS"), and (c) a warrant in
substantially the form attached hereto as EXHIBIT G to purchase up to that
number of shares of Common Stock equal to (i) one million (1,000,000),
multiplied by (ii) the percentage of the number of Series A Closing Shares and
Series A-1 Purchased Shares purchased by such Purchaser at the Closing, 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 A
Closing Shares and the Series A-1 Purchased Shares hereunder shall be held at
the law offices of counsel to the Company, Proskauer Rose LLP, 1585 Broadway,
New York, New York, 10036, at 10:00 a.m. local time promptly following the
satisfaction (or waiver) of the conditions set forth in Sections

                                        2


4.1, 4.2, 5.1 and 5.2 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 A Closing Shares and Series A-1
Purchased 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 A Closing Shares and Series A-1 Purchased 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 A Closing 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,
and by delivery to State Street Bank & Trust N.A. (the "ESCROW AGENT") on behalf
of the Company, of the aggregate Purchase Price Per Share for the Series A-1
Purchased Shares so purchased, by check or wire transfer of immediately
available funds, to be held in escrow by the Escrow Agent pursuant to the terms
of that certain escrow agreement to be executed and delivered by the Purchasers,
the Company and the Escrow Agent on or before the Closing in the form attached
hereto as EXHIBIT H (the "ESCROW AGREEMENT").

          1.6 ADDITIONAL CLOSING NOTICE. In the event that, at any time from and
after the Closing and prior to the date that is five (5) business days prior to
the scheduled date of the Stockholder Meeting, the Company shall receive written
notice from one or more of the Purchasers (the "ADDITIONAL CLOSING PURCHASERS")
stating each such Additional Closing Purchaser's intention to purchase shares of
Series A Stock in the Additional Closing (as defined below), including the
number of shares of Series A Stock to be so purchased by each Additional Closing
Purchaser (which number of shares shall not be less than an aggregate of
$500,000 divided by the Purchase Price Per Share, or greater than an aggregate
of $2 million divided by the Purchase Price Per Share) (the "ADDITIONAL CLOSING
NOTICE"), then, subject to the terms and conditions of this Agreement including,
without limitation, the satisfaction (or waiver) of the conditions set forth in
Sections 4.1, 4.3, 5.1 and 5.3 below, each Additional Closing Purchaser
severally agrees to purchase from the Company at the Additional Closing, and the
Company agrees to issue and sell to each Additional Closing Purchaser at the
Additional Closing, the number of shares of Series A Stock listed in the
Additional Closing Notice for purchase by such Additional Closing Purchasers
(the "ADDITIONAL CLOSING SHARES"). Upon receipt of the Additional Closing Notice
by the Company, EXHIBIT A hereto shall be deemed to be modified to include the
applicable Additional Closing Shares in the column labeled "Additional Series A
Shares" next to each Additional Closing Purchaser. Notwithstanding the forgoing,
the Additional Closing Purchasers shall have the right to substitute additional
purchasers who may purchase some or all of such number of Additional Closing
Shares at the Additional Closing, subject to the approval of the Company, which
approval shall not be unreasonably withheld, in which event EXHIBIT A hereto and
the Investors' Rights Agreement (as defined below) shall be modified accordingly
and each such substituted purchaser shall be deemed a "Purchaser" hereunder and
thereunder.

                                        3


          1.7 ADDITIONAL SERIES A WARRANTS. Subject to the terms and conditions
hereof, at the Additional Closing, the Company shall issue to each Additional
Closing Purchaser a warrant in substantially the form attached hereto as
EXHIBIT E to purchase up to that number of shares of Common Stock equal to the
aggregate number of Additional Closing Shares purchased under this Agreement by
such Additional Closing Purchaser at the Additional Closing divided by the
Closing Discounted Common Stock Price, such warrant to be exercisable at an
exercise price per share equal to the Closing Discounted Common Stock Price
(each, an "ADDITIONAL CLOSING WARRANT"). The shares of Common Stock issuable
upon exercise of the Additional Closing Warrants are referred to herein as the
"ADDITIONAL CLOSING WARRANT SHARES" and the Closing Warrant Shares, Contingent
Warrant Shares and the Additional Closing Warrant Shares are referred to herein
collectively as the "WARRANT SHARES." The Closing Warrants, the Contingent
Warrants and the Additional Closing Warrants are referred to herein collectively
as the "WARRANTS."

          1.8 ADDITIONAL CLOSING. The closing of the purchase and sale of the
Additional Closing Shares hereunder shall be held at the law offices of counsel
to the Company, Proskauer Rose LLP, 1585 Broadway, New York, New York, 10036,
promptly following the satisfaction (or waiver) of the conditions set forth in
Sections 4.1, 4.3, 5.1 and 5.3 hereof (other than conditions which will be
satisfied at, but not before, the Additional Closing) or at such other time and
place as the Company and Additional Closing Purchasers purchasing a majority of
the Additional Series A Shares mutually agree, but in no event later than three
(3) days after the date of the satisfaction (or waiver) of the conditions set
forth in Sections 4.1, 4.3, 5.1 and 5.3 hereof (other than conditions which will
be satisfied at, but not before, the Additional Closing) (which time and place
are designated as the "ADDITIONAL CLOSING").

          1.9 DELIVERY. Subject to the terms of this Agreement, at the
Additional Closing, the Company shall deliver to each Additional Closing
Purchaser (i) certificates representing the number of Additional Closing Shares
purchased by such Additional Closing Purchaser as designated on EXHIBIT A hereto
and (ii) the Additional Closing Warrant deliverable to such Purchaser in
connection with the Additional Closing hereunder, against payment to the Company
of the aggregate Purchase Price Per Share for the Additional Closing Shares so
purchased by check or wire transfer of immediately available funds.

     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 the Additional 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

                                        4


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 CORPORATE POWER; AUTHORIZATION.

               (a) The Company has the requisite corporate power to execute and
deliver the Financing Agreements, to issue and sell the Securities (as defined
below) hereunder, to execute and file the Series A Designation and the Series
A-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, the Escrow Agreement 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
the Stockholder Approval. This Agreement has been duly executed and delivered by
the Company and constitutes, and the Investors' Rights Agreement and the Escrow
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 50,966,713 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 no shares are issued
and outstanding, and of which 700,000 shares are designated as Series A Stock
and 340,000 shares are designated as Series A-1 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

                                        5


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
11,386,547 shares of Common Stock reserved for issuance under the Company's 1998
Stock Incentive Plan, of which 8,301,509 shares are subject to outstanding
options issued under such plan and 1,023,162 shares have been issued and are
included in the issued and outstanding Common Stock number listed in the
preceding sentence; 2,500,000 shares of Common Stock reserved for issuance under
the Company's 2001 Stock Incentive Plan for Non-Officers, of which 2,176,184
shares are subject to outstanding options issued under such plan and 5,188
shares have been issued and are included in the issued and outstanding Common
Stock number listed in the preceding sentence; 1,250,000 shares of Common Stock
reserved for issuance under the Company's 2001 Equity Compensation Plan, of
which 1,250,000 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 248,397 shares have been issued and are included in
the issued and outstanding Common Stock number listed in the preceding sentence;
and 4,020,412 shares of Common Stock issuable upon the exercise of the warrants
listed in Schedule 2.4 of the Disclosure Letter, (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 A Stock
and the Series A-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. As of the Closing, at least 12,200,390 shares
of Common Stock (subject to adjustment pursuant to the completion of any stock
dividend, stock

                                        6


subdivision, stock combination, recapitalization, reorganization, consolidation,
or merger) will have been duly authorized and reserved for issuance upon
conversion of the Series A Closing Shares and upon exercise of the Warrants. As
of the Closing, at least 340,000 shares of Series A 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 A-1 Purchased Shares. Upon conversion of the Series A Stock in accordance
with the Series A 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 A-1 Stock in accordance with the Series A-1
Designation, the shares of Series A-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 A Stock under the Series A 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
Closing, each share of Series A Stock shall be convertible pursuant to the terms
of the Series A Designation into 48.69735 shares of Common Stock. Upon the
Closing, each share of Series A-1 Stock shall be convertible pursuant to the
terms of the Series A-1 Designation into one share of Series A 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, 2000. All such forms, reports and documents, including
the Company's annual report on Form 10-K for the year ended December 31, 2001,
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")

                                        7


(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 May 31, 2002, in the form provided to the
Purchasers (the "UNAUDITED 5/31/02 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 5/31/02
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
5/31/02 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 5/31/02 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 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 A Closing Shares, the Additional Series A
Shares, the Series A-1 Purchased 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 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company and its
Subsidiaries have good and marketable title to, or in the case of leased
properties and assets, valid and enforceable leaseholds or licensed interests
in, all of their respective material properties and assets. Such properties and
assets are not subject to any material mortgage, pledge, lien, security
interest, conditional sales agreement, encumbrance or charge, except liens for
current taxes not yet due and payable and mechanics liens incurred in the
ordinary course of business. The material properties and assets of the Company
and its Subsidiaries are in good condition and repair in all material respects.
Except as disclosed in Schedule 2.6 of the Disclosure Letter, such material
properties and assets constitute all of the material properties and assets,
tangible and

                                        8


intangible, of any nature whatsoever, necessary to operate the Company's
business as it is currently being operated.

          2.7 INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries (a)
own or have sufficient right to use, free and clear of all liens, claims and
restrictions, all material patents, trade secrets, inventions, know-how,
designs, processes, technical data, trademarks, service marks, trade names,
copyrights and other intangible or intellectual property rights ("INTELLECTUAL
PROPERTY RIGHTS") (and licenses with respect to the foregoing) needed for or
used in the conduct of its business as now conducted and as proposed to be
conducted (as set forth in the SEC Reports) without infringing upon or otherwise
acting adversely to the right or claimed right of any person or entity under or
with respect to any of the foregoing, and (b) are not obligated or under any
liability whatsoever to make any material payments by way of royalties, fees or
otherwise to any owner of, licensor of, or other claimant to, any Intellectual
Property Right, with respect to the use thereof or in connection with the
conduct of their businesses. Neither the Company nor any of its Subsidiaries are
infringing upon or otherwise acting adversely to the right or, to the Company's
knowledge, claimed right of any person under or with respect to any Intellectual
Property Right. The Company has not received any written or, to the actual
knowledge of any directors or executive officers of the Company, other
communications alleging that the Company or any of its Subsidiaries have
violated any Intellectual Property or other proprietary right of any other
person or entity, which, singly or in the aggregate, if the subject of any
unfavorable decision, ruling or finding, would reasonably be expected to cause a
Material Adverse Effect. The Company has no knowledge of any third party that is
infringing or improperly using any Intellectual Property Right held by the
Company or any of its Subsidiaries, and except as disclosed in the Company SEC
Reports neither the Company nor any of its Subsidiaries have instituted any
action, suit or proceeding in which an act constituting an infringement of any
such Intellectual Property Right was alleged to have been committed by a third
party. There is no claim, action or proceeding being made by the Company or any
of its Subsidiaries regarding any of the foregoing Intellectual Property Rights
of the Company or any of its Subsidiaries or brought or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries regarding
any of the foregoing Intellectual Property Rights of the Company or any of its
Subsidiaries, or the use of any Intellectual Property Rights of any third party
by the Company or any of its Subsidiaries that, if the subject of an unfavorable
decision, ruling or finding would reasonably be expected to cause a Material
Adverse Effect.

          2.8 PROPRIETARY INFORMATION AGREEMENTS. All current and former
employees and consultants of the Company and its Subsidiaries that have or are
reasonably expected to contribute to the development of the products or
technology of the Company and/or its Subsidiaries are parties to a written
confidentiality and invention and proprietary rights assignment agreement
substantially in the form previously delivered to counsel for the Purchasers,
except where the Company's failure to obtain such agreements, in any single case
or in the aggregate, should not be reasonably expected to adversely affect the
assets, properties, financial condition, operating results or business of the
Company. To the Company's knowledge, none of the current or former employees of
the Company or any of its Subsidiaries is, or is alleged to be, in material
violation of any employment agreement, non-competition agreement, invention or
proprietary information disclosure agreement, or other contract or agreement to
which any of them is a party which violation or alleged violation relates to
their

                                        9


relationship to the Company, its Subsidiaries, their businesses or operations,
or is in material violation of the Confidentiality and Inventions Agreement with
the Company or any of its Subsidiaries to which such employee is a party. None
of the employees of the Company or its Subsidiaries, to the Company's knowledge,
has taken, removed or made use of any material proprietary documentation,
manuals, products, materials, or any other tangible item from his or her
previous employer, and the Company and its Subsidiaries has not and will not
make use of any such material proprietary items in the business of the Company.
The Company and its Subsidiaries have taken all commercially reasonable steps to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, any of the Intellectual Property Rights of the Company and its
Subsidiaries.

          2.9 PRIVACY. The Company and its Subsidiaries have obtained any and
all necessary consents from customers with regard to their collection and
dissemination of personal customer information in accordance in all material
respects with any applicable privacy policy published or otherwise communicated
by Company and any applicable laws, rules or regulations. The practices of the
Company and its Subsidiaries regarding the collection and use of personal
customer information are and have been in all material respects in accordance
with such privacy policies and with all applicable laws, rules or regulations.
The use of the current products and services of the Company and its Subsidiaries
by customers for the intended purposes of such products and services, as
described in the Company SEC Reports and in the product documentation of the
Company and its Subsidiaries, does not violate any laws, rules or regulations
regarding the collection, use or disclosure of personal information in any
material respect.

          2.10 GOVERNMENTAL PERMITS. The Company and its Subsidiaries have all
governmental permits, operating authority, licenses, franchises, certificates,
consents, rights and privileges as are necessary to the operation of their
businesses as currently conducted, the absence of which would reasonably be
expected to cause a Material Adverse Effect (collectively, "PERMITS"). Such
Permits are in full force and effect, no material violations have been or are
expected to have been recorded in respect of any such Permits, and no material
proceeding is pending or threatened that could result in the revocation or
limitation of any of such Permits. The Company has not received any written
notice of proceedings relating to the revocation or modification of any such
Permits. The Company and its Subsidiaries have conducted their businesses in
material compliance with all Permits.

          2.11 COMPLIANCE WITH OTHER INSTRUMENTS; NO CONFLICTS. The Company and
its Subsidiaries are not in violation, breach or default of any term of their
respective certificates of incorporation or bylaws, or, in any material respect,
of any term or provision of any material mortgage, indenture, contract,
agreement or instrument to which the Company or any of its Subsidiaries is a
party, or of any provision of any foreign or domestic state or federal judgment,
decree, order statute, rule or regulation applicable to or binding upon the
Company or any of its Subsidiaries other than such violation, breach or default
which has not caused and would not reasonably be expected to cause a Material
Adverse Effect. The execution, delivery and performance of the Financing
Agreements and the Escrow Agreement by the Company, and the consummation by the
Company of the transactions contemplated hereby and thereby, the performance by
the Company of its obligations under the Certificates of Designation, and the

                                       10


issuance of the Securities have not and will not (with or without notice or
lapse of time, or both): (a) conflict with or violate, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, indenture or instrument
(including, without limitation, any stock option, employee stock purchase or
similar plan or any employment or similar agreement) to which the Company or any
of its Subsidiaries is a party (including, without limitation, triggering the
application of any change of control or similar provision (whether "single
trigger" or "double trigger")); (b) violate any provision of the certificates of
incorporation or bylaws of the Company or any of its Subsidiaries; (c) result in
the creation of any material mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company or any of its Subsidiaries, or
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any material Permit applicable to the operations or assets of the Company or any
of its Subsidiaries; or (d) result in a violation by the Company or any of its
Subsidiaries of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of NASDAQ). The business of the Company and its Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, which violation would reasonably be expected to cause a Material Adverse
Effect on the Company. The Company is not in violation of the listing
requirements of NASDAQ or its listing agreement with Nasdaq.

          2.12 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the Company's knowledge, overtly threatened in
writing or, to the actual knowledge of any directors or executive officers of
the Company, by other means against the Company or any of its Subsidiaries or
its or their properties before any court, governmental agency, public board or
self-regulatory organization (other than ordinary course litigation that, if
determined adversely to the Company, would not be reasonably be expected to
cause a Material Adverse Effect).

          2.13 EMPLOYEES. The Company SEC Reports accurately describe, as of the
date of this Agreement, the employee benefit plans and arrangements of the
Company and its Subsidiaries therein described. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its Subsidiaries is bound by
or subject to (and none of its or their assets is bound by or subject to) any
arrangement with any labor union and neither the Company nor any of its
Subsidiaries has any collective bargaining agreements covering any of its
employees. There is no pending or, to the best of the Company's knowledge,
threatened union organizing effort or labor dispute involving the Company or any
of its Subsidiaries and any group of its or their employees. Subject to
applicable law and to the terms of employment agreements described in Schedule
2.13, copies of which have been provided to the Purchasers, the employment of
each officer and employee of the Company or any of its Subsidiaries is
terminable at the will of the Company. The Company and its Subsidiaries are in
compliance in all material respects with all federal, state, local and foreign
laws and regulations respecting employment and employment practices, terms and
conditions of employment, wages and hours, equal employment opportunity and with
other laws related to employment. No executive officer (as defined in Rule
501(f) of the Securities Act) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer's employment with the
Company.

                                       11


          2.14 INSURANCE. The Company has obtained and maintains in full force
and effect fire, casualty, directors' and officers' liability and other and
liability insurance policies with recognized insurers with such coverages as are
customary for companies in businesses similarly situated. The Company has not
been refused any insurance coverage sought or applied for and has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that is not materially in
excess of current levels.

          2.15 MATERIAL CONTRACTS AND OBLIGATIONS.

               (a) Except for the contracts and agreements filed as exhibits to
the Company SEC Reports, Schedule 2.15(a) of the Disclosure Letter contains a
complete list of all contracts to which the Company or any of its Subsidiaries
are a party, or to which any of their respective assets or properties are
subject, in each case which are, or would reasonably be expected to become,
significant or material to the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole.

               (b) There are no existing, pending or, to the actual knowledge of
any directors or executive officers of the Company, threatened claims for
indemnification with respect to infringement or misappropriation (or alleged or
potential infringement or misappropriation) of intellectual property rights
under any material agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound, except for claims arising after December 31, 2001 that have been
settled, satisfied or otherwise resolved in full prior to the date hereof.

               (c) Neither the Company nor any of its Subsidiaries, nor, to the
Company's knowledge, is any other party in default under or material violation
of any contract listed on Schedule 2.15(a) of the Disclosure Letter or
referenced in Section 2.15(a) to which the Company or any of its Subsidiaries is
a party.

          2.16 TAX RETURNS AND PAYMENTS. The Company and its Subsidiaries have
accurately prepared and timely filed all tax returns (foreign, federal, state
and local) required to be filed by them or obtained extensions therefor. All
taxes shown to be due and payable on said returns, any assessments received, and
all other taxes due and payable by the Company or any of its Subsidiaries on or
before the date hereof have been paid or will be paid prior to the time they
become delinquent. The federal income and state income franchise tax, sales or
use tax returns of the Company and its Subsidiaries have not been audited by any
governmental authority since January 1, 2001. No material deficiency assessment
or proposed adjustment of the Company's or any of its Subsidiaries' foreign or
federal income tax or state or local taxes is pending and the Company has no
knowledge of any proposed material liability for any tax to be imposed upon its
properties or assets for which the Company has not adequately reserved. The
provision for taxes of the Company and its Subsidiaries as shown in the
Financial Statements is materially adequate for taxes due or accrued as of the
date thereof. The Company has not elected pursuant to the Internal Revenue Code
of 1986, as amended (the "CODE"), to be treated as a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code and has not made any

                                       12


other elections pursuant to the Code (other than elections which relate solely
to methods of accounting, depreciation or amortization) which would reasonably
be expected to cause a Material Adverse Effect on the Company.

          2.17 NO OTHER AGREEMENTS RELATING TO VOTING OR TRANSFER. Except as
contemplated by the Financing Agreements and the Company's Certificate of
Incorporation, there is no agreement between the Company, any of its
Subsidiaries, or any of officers or directors of the Company or any of its
Subsidiaries, that directly affects or relates to the voting of or giving of
consents or approvals with respect to any voting security.

          2.18 CERTAIN TRANSACTIONS. Except as disclosed in the Company SEC
Reports, (i) the Company and its Subsidiaries are not directly or indirectly
indebted to any officers or directors of the Company or any of its Subsidiaries,
or to any member of his or her immediate family, in any amount whatsoever, or to
any holder of more than five percent (5%) of the Company's outstanding Common
Stock, (ii) no holder of more than five percent (5%) of the Company's
outstanding Common Stock or any of the Company's Subsidiaries, or officer or
director of the Company or any of its Subsidiaries, or member of his or her
immediate family, has incurred any indebtedness for borrowed money, or incurred
any other liabilities, to the Company or any of its Subsidiaries, of greater
than $60,000, or has any direct or indirect ownership interest in any firm or
corporation with which the Company or any of its Subsidiaries has a business
relationship, or any firm or corporation that currently directly competes with
the Company or any of its Subsidiaries (except with respect to any interest in
less than one percent of the stock of any corporation whose stock is publicly
traded), (iii) none of the officers or directors of the Company and its
Subsidiaries, or member of his or her immediate family, is directly or
indirectly interested in or party to any contract or commercial or financial
relationship with the Company or any of its Subsidiaries with a value exceeding
$100,000, and (iv) the Company and its Subsidiaries are not guarantors or
indemnitors of any material indebtedness of any other person, firm or
corporation.

          2.19 CHANGES. Since March 31, 2002 there has not been:

               (a) any development, condition or circumstance which has had or
should reasonably be expected to have a Material Adverse Effect;

               (b) any material damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of the Company or any of its
Subsidiaries (as such business is presently conducted);

               (c) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
Subsidiaries, except in the ordinary course of business;

               (d) any waiver by the Company or any of its Subsidiaries of a
material right or of a material debt owed to it;

                                       13


               (e) any change or amendment to a material contract or material
arrangement by which the Company, any of its Subsidiaries or any of its assets
or properties is bound or subject, except in the ordinary course of business
which have not been in the aggregate materially adverse;

               (f) any material change in any compensation arrangement or
agreement with any officer, or any employee or group of employees who receive,
in the aggregate, a material amount of cash, options and other remuneration
under such arrangement(s) or agreement(s), of the Company or any of its
Subsidiaries;

               (g) any sale, assignment, license or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets of the Company
or any of its Subsidiaries other than non-exclusive licenses in the ordinary
course of business;

               (h) any resignation or termination of employment of any officer
of the Company or any of its Subsidiaries; and the Company does not know of the
impending resignation or termination of employment of any such officer;

               (i) to the actual knowledge of any director or executive officer
of the Company, receipt of notice that there has been a loss of, or order
cancellation by, any major customer of the Company or any of its Subsidiaries;

               (j) any loans made by the Company or any of its Subsidiaries to
or for the benefit of its employees, officers or directors, or any members of
their immediate families in excess of $250,000 individually or in the aggregate,
other than travel advances and other advances made in the ordinary course of its
business, or any guarantees made by the Company or any of its subsidiaries to or
for the benefit of any of the foregoing persons other than in the ordinary
course;

               (k) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct
redemption, purchase or other acquisition of any of such stock by the Company or
any of its Subsidiaries;

               (l) any other event or condition of any character that the
Company believes would reasonably be expected to cause a Material Adverse
Effect; or

               (m) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.19.

          2.20 EMPLOYEE BENEFIT PLANS. The Company and its Subsidiaries have
materially complied with all applicable material local, state and federal
regulations with respect to each employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement
and employee benefit plan subject to the Employee Retirement Income Security Act
of 1974, as amended.

          2.21 ENVIRONMENTAL AND SAFETY LAWS. The Company and its Subsidiaries
(a) are in material compliance with any and all Environmental Laws, (b) have
received all material

                                       14


permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct its business, (c) are in material compliance with
all terms and conditions of any such permit, license or approval and (d) have no
material expenditures that are or, to Company's knowledge, will be required in
order to comply with any such Environmental Laws. The term "ENVIRONMENTAL LAWS"
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) as
they currently exist, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

          2.22 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.

          2.23 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.

          2.24 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of his
actions for, or on behalf of, the Company or any of its Subsidiaries used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

                                       15


          2.25 INTERNAL ACCOUNTING CONTROLS. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
general accepted accounting principles and to maintain asset and liability
accountability and (iii) access to assets or incurrence of liability is
permitted only in accordance with management's general or specific
authorization.

          2.26 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 and the Additional 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 A Closing
Shares, the Series A-1 Purchased Shares, the Additional Closing Shares (if any)
and the Warrants, (ii) upon conversion of the Series A Closing Shares and the
Additional Closing Shares (if any), will acquire the Conversion Stock then
issuable upon conversion thereof. (iii) upon conversion of the Series A-1
Purchased Shares, will acquire the Series A-1 Conversion Stock then issuable
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.

                                       16


          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 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

                                       17


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.

          4.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING AND THE
ADDITIONAL CLOSING. The obligation of each Purchaser hereunder to purchase
Series A Closing Shares and Series A-1 Purchased Shares at the Closing, and the
obligation of each Additional Closing Purchaser hereunder to purchase Additional
Closing Shares at the Additional Closing, if any, is subject to the fulfillment
on or prior to the Closing or the Additional Closing, as applicable, of each of
the following conditions, provided that these conditions are for each such
Purchaser's

                                       18


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 respect to the Closing) or the
Additional Closing (with respect to the Additional Closing) with the same force
and effect as if they had been made on and as of the same date.

               (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 (with respect to the Closing) or the Additional Closing (with
respect to the Additional 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 or the Additional Closing
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 (with respect to the Closing) or the Additional Closing (with
respect to the Additional Closing) shall have been obtained.

               (e) FILING OF DESIGNATIONS. The Series A Designation and the
Series A-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 three (3) business days
prior to the Closing (with respect to the Closing) or the Additional Closing
(with respect to the Additional 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 (with respect to the Closing) or the Additional Closing
(with respect to the Additional 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 (with respect to the Closing) or the Additional Closing (with
respect to the Additional Closing), including the Series A Designation and
Series A-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 A Closing Shares and the Series A-1 Purchased Shares purchased by such
Purchaser at the Closing (in such denominations

                                       19


as the Purchaser shall request) and the Series A Closing Warrant, the Series A-1
Closing Warrant and the Contingent Warrant to be issued to such Purchaser at the
Closing, or (ii) with respect to the Additional Closing, certificates for the
Additional Closing Shares purchased by such Additional Closing Purchaser at the
Additional Closing (in such denominations as the Additional Closing Purchaser
shall request) and the Additional Warrant to be issued to such Additional
Closing Purchaser at the Additional Closing.

               (i) FINANCING AGREEMENTS. The Company shall have executed each of
the Financing Agreements and delivered the same to such Purchaser or Additional
Closing Purchaser, as applicable.

               (j) COMPLIANCE CERTIFICATE. The Chief Executive Officer and Chief
Financial Officer of the Company shall have executed and delivered as of the
Closing or the Additional Closing, as applicable, a certificate certifying that
the conditions specified in Sections 4.1(a), (b), and (o) have been fulfilled.

               (k) OPINION OF COUNSEL. Such Purchaser or Additional Purchaser,
as applicable, shall have received an opinion of Proskauer Rose LLP, counsel to
the Company, as of the Closing or the Additional Closing, as applicable, in
substantially the form as attached hereto as EXHIBIT I.

               (l) 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 A-1 Conversion Stock, approval by
the Company's stockholders.

               (m) RESERVATION OF COMMON STOCK. The Company shall have reserved
out of its authorized and unissued Common Stock: (a) with respect to the
Closing, solely for the purpose of effecting the conversion of the Series A
Purchased Shares and of the Series A-1 Conversion Stock into Common Stock, and
the exercise of the Closing Warrants and the Contingent Warrants for Common
Stock, at least 27,783,541 shares of Common Stock, and (b) with respect to the
Additional Closing, solely for the purpose of effecting the conversion of the
Additional Closing Shares into Common Stock and the exercise of the Additional
Warrants for Common Stock, at least 10,713,416 shares of Common Stock.

               (n) 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.

               (o) NO MATERIAL ADVERSE EFFECT. Between the time of the execution
of this Agreement and the Closing or the Additional Closing, as applicable,
there shall have been no

                                       20


development, condition or circumstance which has had or could reasonably be
expected to have a Material Adverse Effect.

               (p) TRANSFER AGENT CERTIFICATE. The Company shall have caused to
be delivered a certificate executed by the transfer agent of the Company dated
as of the Closing of the Additional Closing, as applicable, certifying the total
number of shares of Common Stock of the Company outstanding as of the day
immediately prior to the Closing or the Additional Closing, as applicable.

          4.2 ADDITIONAL CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
The obligation of each Purchaser hereunder to purchase Series A Closing Shares
and Series A-1 Purchased Shares at the Closing is subject to the fulfillment on
or prior to the Closing of each of the following conditions (in addition to the
conditions in Section 4.1 above), 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) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by the Company and the Escrow Agent.

               (b) BOARD OF DIRECTORS. The number of authorized members of the
Board shall be eight (8) effective upon the Closing; at the request of Sunra,
Joseph Waechter shall have been appointed to the Board effective as of the
Closing to serve as one of the "SERIES A DIRECTORS" (as defined in the Series A
Designation) and, to the extent Mr. Waechter has been appointed to the Board,
the Company shall have entered into an indemnification agreement with Mr.
Waechter reasonably acceptable to the Purchasers.

               (c) RESERVATION OF SERIES A STOCK. The Company shall have
reserved out of its authorized and unissued Series A Stock, solely for the
purpose of effecting the conversion of the Series A-1 Purchased Shares into
Series A Stock, at least 340,000 shares of Series A Stock.

               (d) EXECUTIVE AGREEMENT. The Company and certain employees of the
Company listed on the signature page to the Amendments to Employment Agreements
for Certain Senior Executives in the form attached hereto as EXHIBIT J (the
"EXECUTIVE AGREEMENT") shall have duly executed and delivered the Executive
Agreement to each Purchaser.

          4.3 ADDITIONAL CONDITIONS TO ADDITIONAL CLOSING PURCHASERS'
OBLIGATIONS AT THE ADDITIONAL CLOSING. The obligation of each Additional Closing
Purchaser hereunder to purchase Additional Closing Shares at the Additional
Closing is subject to the fulfillment on or prior to the Additional Closing of
each of the following conditions (in addition to the conditions in Section 4.1
above), provided that these conditions are for each such Additional Closing
Purchaser's sole benefit and may be waived by such Additional Closing Purchaser
at any time in its sole discretion by providing the Company with written notice
thereof.

               (a) STOCKHOLDER APPROVAL. At a meeting duly called at which a
quorum shall be present, in person or by proxy, the stockholders of the Company
shall have, in

                                       21


satisfaction of Nasdaq stockholder approval requirements, approved the issuance
of the Series A-1 Conversion Stock, the Additional Closing Shares (including the
Conversion Stock issuable upon conversion thereof), and the Additional Closing
Warrants (including the Common Stock issuable upon exercise thereof) (the
"NASDAQ CAP SHARES"), or such other action shall have been taken by the
stockholders of the Company as shall have satisfied the stockholder approval
requirements of Nasdaq with respect to such issuance of the Nasdaq Cap Shares.

     SECTION 5. CONDITIONS TO COMPANY'S OBLIGATIONS

          5.1 CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING AND THE
ADDITIONAL CLOSING. The Company's obligation to issue, sell and deliver the
Series A Closing Shares, the Series A-1 Purchased Shares, the Closing Warrants
and the Contingent Warrants at the Closing, and the Company's obligation to
issue, sell and deliver the Additional Closing Shares and the Additional Closing
Warrants at the Additional Closing, is subject to the fulfillment at or prior to
the Closing or the Additional Closing, as applicable, 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 or the Additional Closing, as applicable, 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 or the
Additional Closing Purchasers, as applicable, shall have delivered to the
Company: (i) with respect to the Closing, the aggregate Purchase Price Per Share
for the Series A Closing Shares and Series A-1 Purchased Shares purchased at the
Closing, and (ii) with respect to the Additional Closing, the aggregate Purchase
Price Per Share for the Additional Closing Shares purchased at the Additional
Closing.

               (c) FINANCING AGREEMENTS. The Purchasers or the Additional
Closing Purchasers, as applicable, 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 or the
Additional Purchasers, as applicable, on or prior to the Closing (with respect
to the Closing) or the Additional Closing (with respect to the Additional
Closing) shall have been performed or complied with in all material respects by
such Purchasers or Additional 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.

                                       22


          5.2 ADDITIONAL CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING. The
Company's obligation to issue, sell and deliver the Series A Closing Shares, the
Series A-1 Purchased 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 (in addition to the conditions set forth in Section 5.1
above), 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) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by the Purchasers and the Escrow Agent.

               (b) EXECUTIVE AGREEMENT. The Executive Agreement shall have been
duly executed and delivered by the Purchaser and each employee of the Company
listed on the signature page thereto.

          5.3 ADDITIONAL CONDITIONS TO COMPANY'S OBLIGATIONS AT THE ADDITIONAL
CLOSING. The Company's obligation to issue, sell and deliver the Additional
Closing Shares and the Additional Closing Warrants at the Additional Closing is
subject to the fulfillment at or prior to the Additional Closing of the
following conditions (in addition to the conditions set forth in Section 5.1
above), any of which may be waived in whole or in part by the Company at any
time in its sole discretion by providing the Additional Closing Purchasers with
written notice thereof.

               (a) STOCKHOLDER APPROVAL. At a meeting duly called at which a
quorum shall be present, in person or by proxy, the stockholders of the Company
shall have, in satisfaction of Nasdaq stockholder approval requirements,
approved the issuance of the Nasdaq Cap Shares, or such other action shall have
been taken by the stockholders of the Company as shall have satisfied the
stockholder approval requirements of Nasdaq with respect to such issuance of the
Nasdaq Cap Shares.

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

          6.1 BOARD OF DIRECTORS MATTERS. The Company shall (i) increase the
size of the Board to eight effective no later than the Closing, shall (ii)
appoint Joseph Waechter as a member of the Board effective immediately after the
Closing to serve as one of the Series A Directors, and shall (iii) take all
action reasonably available to it to appoint the Additional Director (as defined
below) as a member of the Board effective immediately after the issuance of
Series A-1 Conversion Stock to serve as the other Series A Director. For
purposes of the preceding sentence, the "ADDITIONAL DIRECTOR" means a person
nominated by the holders of a majority of the then outstanding shares of Series
A Preferred Stock, the name of which nominee shall be conveyed by such holders
to the Company. The Company agrees to appoint Joseph Waechter to the Board
committee(s) responsible for searching for and recommending candidates for
executive management positions and approving compensation of executive officers.
The Company also agrees to place either or both Series A Directors, upon their
request, on the audit, compensation and other committees, if such Series A
Directors are qualified to serve on such committees under applicable Nasdaq
rules. The Company shall enter into an indemnification agreement reasonably
acceptable to the Purchasers with each Series A Director.

                                       23


          6.2 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).

          6.3 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 and the Additional Closing, take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the applicable Securities for, sale to the
Purchasers or the Additional Closing Purchasers, as applicable, at the Closing
and the Additional Closing, as applicable, 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 and the Additional Closing Purchasers
on or prior to the Closing and the Additional Closing, as applicable. 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 and the Additional Closing.

          6.4 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 A
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 A-1 Stock acquired hereunder then held by such Purchaser.

          6.5 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 Shares and the Warrant
Stock, and one hundred percent (100%) of the number of shares of Series A Stock
needed to provide for the issuance of the Series A-1 Conversion Stock, without
regard to any limitations on conversions or exercise.

          6.6 LISTING. The Company shall promptly secure the listing of all of
the Common Stock issuable upon conversion or exercise, as applicable, of the
Series A Closing Shares, the Additional Closing Shares, the Warrants and the
Series A-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,

                                       24


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.

          6.7 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 A Closing Shares, the Series A-1
Purchased Shares, the Additional Closing Shares and the Series A-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.

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

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

          6.10 TRANSACTIONS WITH CERTAIN STOCKHOLDERS. So long as any Series A
Stock, Series A-1 Stock or Warrants are outstanding, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement any agreement, transaction, commitment or arrangement with any of its
stockholders who beneficially own 10% or more of the Common Stock (excluding any
shares of Common Stock purchased on the open market) (each a "RELATED PARTY"),
except for (a) any agreement, transaction, commitment or arrangement on an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (b) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company, or (c) except as set forth on Schedule
6.10. For purposes of this Section 6.10, (i) any director who is also an officer
of the Company or any Subsidiary shall not be a disinterested director with
respect to any such agreement, transaction, commitment or arrangement, and (ii)
beneficial ownership shall be determined in accordance with Rule 13d-3 of the
Exchange Act.

          6.11 EXCLUSIVITY. Without the prior approval of the Purchasers, until
the earlier to occur of: (i) the first date on which the Purchasers are entitled
to deliver a valid "Redemption Request" (as defined in Section 6.1 of the Series
A-1 Designation); (ii) the Automatic Conversion Date (as defined in Section
5.1(a) of the Series A-1 Designation); and (iii) or the termination of this
Agreement pursuant to its terms, neither the Company nor any of the Company's
directors, officers, employees, agents or representatives will solicit,
facilitate, encourage, entertain, discuss, negotiate or accept or enter into any
offer, inquiry or proposal from

                                       25


or any agreement with any party other than the Purchasers concerning any
issuance of shares or instruments that are convertible into, or exercisable to
purchase, shares such that the shares issued or issuable in the aggregate
represents more than five percent (5%) of the Company's fully-diluted
capitalization (other than or in connection with (x) any Sale Transaction (as
defined in the Series A Designation) or (y) an acquisition of another
corporation or business entity by the Company that would not require approval by
the Company's stockholders and is not primarily for financing purposes) (any
such transaction, a "COMPETING TRANSACTION"), or provide any confidential
information of the Company to any party other than Purchasers concerning any
such Competing Transaction. The Company shall notify the Purchasers promptly of
any proposals by third parties with respect to a Competing Transaction. The
Company shall deal exclusively with the Purchasers notwithstanding any such
third party proposals.

          6.12 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) the
issuance of the Nasdaq Cap Shares, (ii) a combination of up to thirty (30)
outstanding shares of Common Stock into one share of Common Stock at the
discretion of the Board, and (iii) certain matters identified in the Executive
Agreement (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 October 15, 2002 (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.

          6.13 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.

                                       26


          6.14 BOARD RECOMMENDATION.

               (a) RECOMMENDATION. Subject to Section 6.14(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 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 6.11 or this Section 6.14. 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.

          6.15 EQUITY LINE. For a period of one year from the Closing, the
Company shall not issue any securities pursuant the Common Stock Purchase
Agreement dated March 2001 by and between the Company, and Maya Cove Holdings
Inc., a British Virgin Islands corporation, or any other agreement related
thereto, without approval of the Board (including at least one of the Series A
Directors).

          6.16 COMPLIANCE WITH LAW. Each Purchaser agrees that, prior to
December 31, 2002, such Purchaser shall not engage in any short sales, contracts
or options to sell, or other hedging activities with respect to the Conversion
Stock.

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

                                       27


          6.18 EXECUTIVE BONUSES. The Company shall not compensate, in any
manner, any of the executive officers whose names appear on the signature page
to the Executive Amendments other than as expressly provided in such executive
officers' respective employment agreements, each as amended by the Executive
Amendments ("EXPECTED COMPENSATION"), for the fiscal year ending December 31,
2002. The Company shall not otherwise avoid or seek to avoid carrying out the
intent of this Section 6.18 and the Executive Amendments, which is to reduce and
limit the amount of compensation to be paid to the executive officers referred
to above for the fiscal year ending December 31, 2002 (whether or not such
compensation is actually paid in 2002), but shall act at all times in good faith
to ensure that no compensation other than Expected Compensation is paid or
accrued with respect to such executive officers for the fiscal year ending
December 31, 2002. Notwithstanding the foregoing provisions of this Section
6.18, this Section 6.18 shall not apply to compensation arrangements approved by
the Board (including at least one of the Series A Directors).

     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 A Closing Shares and
Series A-1 Purchased 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 A Stock into shares of Common
Stock (assuming prior conversion of all then outstanding shares of Series A-1
Stock into Series A 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 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 A-1 Stock is
converted into Series A Stock or the Company receives a "Redemption Request" (as
defined in Section 6.1 of the Series A-1 Designation) delivered in accordance
with Section 6.1 of the Series A-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

                                       28


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 PLACEMENT AGENT'S FEE. The Purchasers acknowledge that the Company
intends to pay a fee to Merchants Group International pursuant to that certain
letter agreement, dated as of June 28, 2002, between Merchants Group
International and the Company in connection with the sale of the Securities to
the Purchasers, in its capacity as the placement agent for the Series A
Purchased Shares, the Additional Series A Purchased Shares and the Series A-1
Purchased Shares. Each of the parties to this Agreement hereby represents that,
on the basis of any actions and agreements by it, there are no other brokers or
finders entitled to compensation in connection with the sale of the Series A
Purchased Shares, the Additional Series A Purchased Shares and the Series A-1
Purchased Shares to the Purchasers.

          7.9 LEGENDS. Each certificate representing the Series A Purchased
Shares, the Additional Series A Purchased Shares, the Series A-1 Purchased
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

                                       29


     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 A Purchased Shares, the Additional
Series A Purchased Shares, the Series A-1 Purchased 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 A Purchased Shares, the Additional Series A
Purchased Shares, the Series A-1 Purchased Shares, or Conversion Stock unless
the conditions specified in the foregoing legend is satisfied.

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

          7.11 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.

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

          7.13 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.

          7.14 EXPENSES.

               (a) Except as set forth below in this paragraph and in
subsections 7.14(b) and 7.14(c), each party will bear its respective costs, fees
and expenses (including legal

                                       30


and auditors' fees) incurred in connection with the Financing Agreements and the
transactions contemplated hereby and thereby, provided that the Company will pay
the first $75,000 of such legal and accounting expenses incurred by Sunra in
connection with the Financing Agreements and the transactions contemplated
hereby and thereby.

               (b) The Company shall pay all fees and expenses in connection
with satisfying its obligations under Sections 6.6 and 6.13.

               (c) 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.

          7.15 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.
                                       1250 Broadway
                                       New York, NY 10001
                                       Attn: General Counsel
                                       Tel:   (212) 231-7100
                                       Fax:   (212) 760-2800

A copy of any notice to the Company shall be given to:
                                       Proskauer Rose LLP
                                       1585 Broadway
                                       New York, New York 10036
                                       Attn: Ronald R. Papa
                                       Tel:   (212) 969-3325
                                       Fax:   (212) 969-2900

                                       31


          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 A
Preferred Stock and Series A-1 Preferred Stock to be purchased as of the
applicable Closing.

"SUNRA" means Sunra Capital Holdings Limited, a Bermuda entity.

               [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       32


          IN WITNESS WHEREOF, the parties have executed and delivered or caused
this Series A and Series A-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:
    -----------------------------

Printed Name:

Title:


"PURCHASERS"

SUNRA CAPITAL HOLDINGS LIMITED


By:
    -----------------------------

Printed Name: Joseph Waechter

Title: President


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



                                LIST OF EXHIBITS

Exhibit A     Schedule of Purchasers
Exhibit B     Form of Investors' Rights Agreement
Exhibit C     Form of Board resolutions designating the Series A Convertible
              Preferred Stock
Exhibit D     Form of Board resolutions designating the Series A-1 Nonvoting
              Convertible Preferred Stock
Exhibit E     Form of Series A Closing Warrant and Additional Closing Warrant
Exhibit F     Form of Series A-1 Closing Warrant
Exhibit G     Form of Contingent Warrant
Exhibit H     Form of Escrow Agreement
Exhibit I     Form of Legal Opinion of Proskauer Rose LLP
Exhibit J     Form of the Amendments to Employment Agreements for Certain Senior
              Executives

                                        1


                                    EXHIBIT A

                             SCHEDULE OF PURCHASERS



                                                                                 CLOSING
                                             ------------------------------------------------------------------------------------
                                                                            NO. OF                     NO. OF
                                                             NO. OF        SERIES A      NO. OF      SERIES A-1       NO. OF
                                                            SERIES A        CLOSING    SERIES A-1      CLOSING      CONTINGENT
                                              PURCHASE      CLOSING        WARRANT     PURCHASED       WARRANT       WARRANT
PURCHASERS AND ADDRESS                        PRICE ($)      SHARES         SHARES       SHARES        SHARES         SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
SUNRA CAPITAL HOLDINGS LIMITED                 $10.00        160,000        779,158      340,000     1,655,710      1,000,000

465 California Street, Suite 630
San Francisco CA 94104
Attention: Joseph Waechter
Tel: (415) 315-2025
Fax: (415) 391-3345

A copy of any notice to Sunra shall be
given to:

Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94036
Attn.:David Michaels
Tel:(415) 875-2455
Fax:(415) 281-1350


                                                            ADDITIONAL CLOSING
                                              --------------------------------------------
                                                                NO. OF        NO. OF
                                                              ADDITIONAL    ADDITIONAL
                                                PURCHASE       CLOSING        CLOSING
PURCHASERS AND ADDRESS                          PRICE ($)       SHARES     WARRANT SHARES
                                              -------------------------------------------
                                                                     
SUNRA CAPITAL HOLDINGS LIMITED                   $10.00         200,000       973,947

465 California Street, Suite 630
San Francisco CA 94104
Attention: Joseph Waechter
Tel: (415) 315-2025
Fax: (415) 391-3345

A copy of any notice to Sunra shall be
given to:

Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94036
Attn.:David Michaels
Tel:(415) 875-2455
Fax:(415) 281-1350


                                        1

EX-10.2

                                                                    EXHIBIT 10.2

                                    EXHIBIT F

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.

                                  JULY 1, 2002

                        WARRANT TO PURCHASE COMMMON STOCK
                                       OF
                              24/7 REAL MEDIA, INC.

No.  2
CUSIP No.: 901314 10 4                         Number of shares: Up to 1,655,710

               24/7 Real Media, Inc., a Delaware corporation (the "COMPANY"),
with principal offices at 1250 Broadway, New York, New York, 10001, hereby
acknowledges that Sunra Capital Holdings Limited is entitled, upon the terms and
subject to the conditions of this Warrant, to purchase from the Company at any
time or from time to time after the Series A-1 Conversion Date (as defined
below) and on or prior to the close of business on the Expiration Date (as
defined below), but not thereafter, up to one million six hundred fifty-five
thousand seven hundred and ten (1,655,710) shares of Warrant Stock (as defined
below) (the "SHARES") at a price per share equal to the Warrant Price (as
defined below). The Warrant Price and the number and character of shares of
Warrant Stock purchasable under this Warrant are subject to adjustment as
provided herein.

          This Warrant is issued pursuant to that certain Series A and Series
A-1 Preferred Stock and Common Stock Warrant Purchase Agreement dated as of July
1, 2002 (the "PURCHASE AGREEMENT"), by and among the Company, the original
holder of this Warrant and certain other purchasers listed on the Schedule of
Purchasers attached to the Purchase Agreement as EXHIBIT A, and is subject to
the provisions thereof.

          1.   DEFINITIONS. The following definitions shall apply for purposes
of this Warrant:

               1.1    "ACQUIRING STOCKHOLDER" means a stockholder or
stockholders of a corporation that (i) merges or combines with the Company in a
combination transaction (as defined in Section 1.2 below) or (ii) owns or
controls a majority of another corporation that merges or combines with the
Company in such combination transaction.

               1.2    "ACQUISITION" means (a) any sale or exchange of the
capital stock by the stockholders of the Company in one transaction or series of
related transactions where more than 50% of the outstanding voting power of the
Company is acquired by a person or entity or group of related persons or
entities; or (b) any reorganization, consolidation, merger or similar



transaction or series of related transactions (each, a "COMBINATION
TRANSACTION") in which the Company is a constituent corporation or is a party
if, as a result of such combination transaction, the voting securities of the
Company that are outstanding immediately prior to the consummation of such
combination transaction (OTHER THAN any such securities that are held by an
Acquiring Stockholder) do not represent, or are not converted into, securities
of the surviving corporation of such combination transaction (or such surviving
corporation's parent corporation, if the surviving corporation is owned by the
parent corporation) that, immediately after the consummation of such combination
transaction, together possess at least a majority of the total voting power of
all securities of such surviving corporation (or its parent corporation, if
applicable) that are outstanding immediately after the consummation of such
combination transaction, including securities of such surviving corporation (or
its parent corporation, if applicable) that are held by the Acquiring
Stockholder; or (c) a sale of all or substantially all of the assets of the
Company, that is followed by the distribution of the proceeds to the Company's
stockholders.

               1.3    "COMMON STOCK" means common stock, par value $0.01, of the
Company.

               1.4    "COMPANY" means the "COMPANY" as defined above and
includes any corporation or entity which shall succeed to or assume the
obligations of the Company under this Warrant.

               1.5    "EXPIRATION DATE" means the earliest to occur of (i) the
fifth anniversary of the Series A-1 Conversion Date, (ii) the date on which the
Company shall receive a valid "Redemption Request" (as defined in the Series A-1
Designation) delivered in accordance with Section 6.1 of the Series A-1
Designation, and (iii) provided the conditions set forth in the last sentence of
Section 4.2 for termination of the Warrant are satisfied, the Liquidation Date
(as defined in Section 4.2 below).

               1.6    "HOLDER" means any person who shall at the time be the
registered holder of this Warrant.

               1.7    "INVESTORS' RIGHTS AGREEMENT" means that certain
Investors' Rights Agreement dated as of July 1, 2002, by and among the Company,
the original Holder of this Warrant, "MPLLC" (as defined therein) and certain
"Purchasers" (as defined therein).

               1.8    "NET EXERCISE" means an exercise of this Warrant pursuant
to Section 2.6.

               1.9    "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and a government or any department or agency
thereof.

               1.10   "SERIES A-1 CONVERSION DATE" the first date that a share
of the Company's Series A-1 Nonvoting Convertible Preferred Stock issued under
the Purchase Agreement convert into shares of Series A Convertible Preferred
Stock.

               1.11   "SERIES A-1 DESIGNATION" means the resolutions adopted by
the Company's Board of Directors designating the Company's Series A-1 Nonvoting
Convertible Preferred Stock as filed with the Delaware Secretary of State.



               1.12   "WARRANT" means this Warrant and any warrant(s) delivered
in substitution or exchange therefor, as provided herein.

               1.13   "WARRANT PRICE" means an exercise price per share equal to
$0.20535. The Warrant Price is subject to adjustment as provided herein.

               1.14   "WARRANT STOCK" means fully paid, non-assessable shares of
Common Stock of the Company. The number and character of shares of Warrant Stock
are subject to adjustment as provided herein and the term "WARRANT STOCK" shall
include stock and other securities and property at any time receivable or
issuable upon exercise of this Warrant in accordance with its terms.

          2.   EXERCISE.

               2.1    METHOD OF EXERCISE. Subject to the terms and conditions of
this Warrant, the Holder may exercise this Warrant in whole or in part, at any
time or from time to time on any business day after the Series A-1 Conversion
Date and on or before the close of business on the Expiration Date, by delivery
at the principal offices of the Company of: (i) the notice of exercise in the
form attached hereto as EXHIBIT 1 (the "EXERCISE NOTICE") duly executed by the
Holder, (ii) payment in the form indicated on the Exercise Notice either by Net
Exercise or by delivery of an amount equal to the product obtained by
multiplying the number of shares of Warrant Stock to be purchased by the Holder
as reflected in the Exercise Notice by the then-effective Warrant Price as
determined in accordance with the terms hereof, and (iii) this Warrant (or an
indemnification undertaking, in form and substance satisfactory to the Company,
with respect to this Warrant in the case of its loss, theft or destruction) (the
"EXERCISE DELIVERY DOCUMENTS").

               2.2    FORM OF PAYMENT. Payment may be made by (i) a check
payable to the Company's order, (ii) wire transfer of funds to the Company,
(iii) cancellation of indebtedness of the Company to the Holder, (iv) Net
Exercise, or (v) any combination of the foregoing.

               2.3    PARTIAL EXERCISE. Upon a partial exercise of this Warrant,
this Warrant shall be surrendered by the Holder and replaced with a new Warrant
of like tenor in which the number of shares of Warrant Stock subject thereto
will equal the total number of Warrant Stock subject hereto as reduced by the
number of Warrant Stock acquired pursuant to such partial exercise.

               2.4    NO FRACTIONAL SHARES. No fractional shares may be issued
upon any exercise of this Warrant, and any fractions shall be rounded down to
the nearest whole number of shares. If upon any exercise of this Warrant a
fraction of a share results, the Company will pay the cash value of any such
fractional share, calculated on the basis of the then-effective Warrant Price.

               2.5    RESTRICTIONS ON EXERCISE. This Warrant may not be
exercised if the issuance of the Warrant Stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other laws or regulations. As a condition to the exercise of this Warrant, the
Holder shall execute the Notice of Exercise, confirming and acknowledging that
the representations and warranties of the Holder set forth in Section 3 of the
Purchase Agreement are true and correct as of the date of exercise.



               2.6    NET ISSUE ELECTION. The Holder may elect to convert this
Warrant or any portion thereof, without the payment by the Holder of any
additional consideration, into shares of Warrant Stock, by delivery of the
Exercise Notice duly executed by the Holder with the net issue election
selected, at the principal offices of the Company. Thereupon, the Company will
issue to the Holder such number of shares of Warrant Stock as is computed using
the following formula:

                                   X = Y (A-B)
                                       -------
                                          A

where:    X =  the number of shares to be issued to the Holder pursuant to this
               Section 2.6;

          Y =  the number of shares covered by this Warrant in respect of
               which the net issue election is made pursuant to this Section
               2.6;

          A =  the Fair Market Value (as defined below) of one share of
               Warrant Stock at the time the net issue election is made pursuant
               to this Section 2.6; and

          B =  the Warrant Price in effect at the time the net issue election
               is made pursuant to this Section 2.6.

          If the above calculation results in a negative number, then no Warrant
Stock shall be issued or issuable at the time the net issue election is made
pursuant to this Section 2.6.

          As used herein, "FAIR MARKET VALUE" of a share of Warrant Stock shall
mean: (i) if the Warrant Stock is traded on a securities exchange or the Nasdaq
National Market or Nasdaq Smallcap Market or if it is actively traded
over-the-counter, the average daily closing price of the Common Stock for the 10
consecutive trading days through and including the date prior to the date the
Exercise Notice is delivered for Net Exercise; and (ii) in all other cases, the
fair value as mutually determined in good faith by the Company and the Holder.

          3.   ISSUANCE OF STOCK. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of delivery of
the Exercise Delivery Documents as provided above, and the person entitled to
receive the shares of Warrant Stock issuable upon such exercise shall be treated
for all purposes as the holder of record of such shares as of the close of
business on such date. In the event of any exercise of the rights represented by
this Warrant, the Company shall promptly following the date of its receipt of
the Exercise Delivery Documents: (i) in the case of a public resale of such
Warrant Stock, at the holder's request, credit such aggregate number of shares
of Warrant Stock to which the holder shall be entitled to the holder's or its
designee's balance account with the Depositary Trust Company ("DTC") through its
Deposit Withdrawal Agent Commission system, or (ii) issue and deliver to the
address as specified in the Exercise Notice, a certificate or certificates in
such denominations as may be requested by the holder in the Exercise Notice,
registered in the name of the holder or its designee, for the number of shares
of Warrant Stock to which the holder shall be entitled upon such exercise. Upon
delivery of the Exercise Delivery Documents, the Holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Stock with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing such Warrant
Stock.



          4.   SALE, MERGER, CONSOLIDATION OR LIQUIDATION OF THE COMPANY.

               4.1    ASSUMPTION OF WARRANT. Upon the closing of any Acquisition
where the consideration for the Acquisition to be received by the Company's
stockholders consists solely of stock or securities of the acquirer or an entity
affiliated with the acquirer: (i) the successor entity shall assume the
obligations of this Warrant, (ii) this Warrant shall be exercisable for the same
securities as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing thereof, and (iii) the
Warrant Price shall be adjusted accordingly; PROVIDED, HOWEVER, that this
Section 4.1 shall not apply to an Acquisition in which each holder of a share of
the Company's Common Stock, Series A Convertible Preferred Stock and/or Series
A-1 Nonvoting Convertible Preferred Stock (a "COMPANY SHARE") will receive for
each such outstanding Company Share then held by such holder a number of shares
or securities listed or admitted to trading on the New York Stock Exchange, or
other principal national stock exchange, or the Nasdaq National Market, with an
aggregate Fair Market Value equal to an amount per Company Share (determined on
an as converted to common stock basis) that is at least equal to the product
obtained by multiplying the then applicable Warrant Price by three (3).

               4.2    TERMINATION OF WARRANT. In the case of (a) the closing of
an Acquisition which is not subject to Section 4.1 or (b) the proposed
liquidation and dissolution of the Company, the Company shall give Holder the
Company Notice (as defined in Section 10 below), which notice shall also
include, for purposes of this Section 4.2, the Company's best estimate of the
aggregate consideration receivable by stockholders of the Company and the
anticipated or proposed date upon which such event is expected to occur. During
the period from Holder's receipt of such Company Notice to 5:00 p.m. Pacific
time on the day prior to the date such event is expected to occur as set forth
in such Company Notice (the "LIQUIDATION DATE"), Holder may exercise or convert
this Warrant in accordance with its terms, whether or not exercise or conversion
is contingent upon the happening of such event and/or existence of a minimum
value of the Shares receivable upon exercise or conversion as provided on
Holder's Exercise Notice; PROVIDED THAT such minimum value shall be no greater
than the per share price set forth in such Company Notice. Subject to prior
exercise or conversion as provided in the preceding sentence and provided that
(a) the Company Notice of the proposed event is actually received by Holder, as
evidenced by a return receipt of certified mail delivery, a certificate of
delivery by hand delivery or written verification of delivery from the overnight
courier, and (b) the event actually occurs within thirty (30) days after the
date it is expected to occur, as such date was specified in the Company Notice,
this Warrant will terminate on the Liquidation Date.

               4.3    AUTOMATIC EXERCISE OF WARRANT. Notwithstanding any
provisions herein to the contrary, in the event this Warrant is not assumed
pursuant to Section 4.1, if the Holder does not notify the Company of the
Holder's intent to exercise or not to exercise this Warrant prior to the
Liquidation Date, and the Fair Market Value of one share of Common Stock on the
Liquidation Date is greater than the Exercise Price, then the Holder shall be
deemed to have net exercised this Warrant immediately prior to the Liquidation
Date pursuant to the terms set forth in Section 2.6 above. The Holder shall upon
written notification by the Company within thirty (30) days thereafter surrender
this Warrant at the principal office of the Company together with a properly
endorsed Exercise Notice, whereupon the Company shall issue to the Holder a
number of shares of Common Stock computed using the formula set forth in Section
2.6 above.



          5.   ADJUSTMENT PROVISIONS. The number and character of shares of
Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property at the time receivable or issuable upon exercise of
this Warrant) and the Warrant Price therefor, are subject to adjustment solely
upon the occurrence of the following events:

               5.1    ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS, ETC. The
Warrant Price of this Warrant and the number of shares of Warrant Stock issuable
upon exercise of this Warrant shall each be proportionally adjusted to reflect
any stock dividend, stock split, reverse stock split, combination of shares or
other similar event affecting the number of outstanding shares of Common Stock
(or such other stock or securities) that occurs after the date of this Warrant.

               5.2    ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In case
the Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution payable respect to the Common Stock that is payable in securities
of the Company (other than issuances with respect to which adjustment is made
under Section 5.1), then, and in each such case, the Holder, upon exercise of
this Warrant at any time after the consummation, effective date or record date
of such event, shall receive, in addition to the shares of Warrant Stock
issuable upon such exercise prior to such date, the securities or such other
assets of the Company to which the Holder would have been entitled upon such
date if the Holder had exercised this Warrant immediately prior thereto (all
subject to further adjustment as provided in this Warrant).

               5.3    RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant (other than an Acquisition described in Section 4
above or a stock dividend, split, etc. described in Sections 5.1 and 5.2 above),
Holder shall be entitled to receive, upon exercise or conversion of this
Warrant, the number and kind of securities and property that Holder would have
received for the Shares if this Warrant had been exercised immediately before
such reclassification, exchange, substitution or other event. The Company or its
successor shall promptly issue to Holder a new Warrant for such new securities
or other property. The new Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 5.3 including, without limitation, appropriate adjustments to the
Warrant Price and to the number of securities or amount of property issuable
upon exercise or conversion of the new Warrant.

               5.4    NOTICE OF ADJUSTMENTS. The Company shall promptly give
written notice to the Holder of each adjustment or readjustment of the Warrant
Price or the number of shares of Warrant Stock or other securities issuable upon
exercise of this Warrant. The notice shall be signed by the Company's Chief
Financial Officer and shall describe the adjustment or readjustment and show in
reasonable detail the facts on which the adjustment or readjustment is based.

               5.5    NO CHANGE NECESSARY. The form of this Warrant need not be
changed because of any adjustment in the Warrant Price or in the number of
shares of Warrant Stock issuable upon its exercise.

               5.6    RESERVATION OF STOCK. If at any time the number of shares
of Common Stock or other securities issuable upon exercise of this Warrant shall
not be sufficient to effect



the exercise of this Warrant, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock or other securities issuable upon exercise of
this Warrant as shall be sufficient for such purpose.

          6.   REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company hereby
represents, warrants, covenants and agrees as follows:

               6.1    ISSUANCE OF WARRANTS AND WARRANT STOCK. This Warrant is,
and any Warrants issued in substitution for or replacement of this Warrant will
upon issuance be, validly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issuance thereof, and shall not
be subject to preemptive rights or other similar rights of stockholders of the
Company. All Warrant Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof or net
exercise in accordance with the terms hereof, be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created by or through
the Company with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Warrant Stock.

               6.2    CERTAIN ACTIONS. 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 to be observed or performed by it hereunder, but will at all times in
good faith assist in carrying out all of the provisions of this Warrant and in
the taking of all such action as may reasonably be requested by the Holder of
this Warrant in order to protect the exercise privilege of the Holder of this
Warrant, consistent with the tenor and purpose of this Warrant.

               6.3    OBLIGATIONS BINDING ON SUCCESSORS. Subject to Section 4.1,
this Warrant will be binding upon any entity succeeding to the Company in one or
a series of transactions by merger, consolidation or acquisition of all or
substantially all of the Company's assets or other similar transactions.

               6.4    INVESTORS' RIGHTS AGREEMENT. The Company is obligated to
register the Warrant Stock for resale under the Securities Act pursuant to the
Investors' Rights Agreement (as defined in Section 1 hereof), and to provide the
Holder with certain participation rights in certain future offerings of equity
securities by the Company. The shares of Warrant Stock issuable upon exercise of
this Warrant shall constitute Registrable Securities (as such term is defined in
the Investors' Rights Agreement). The Holder of this Warrant shall be entitled
to all of the benefits afforded to a Holder of any such Registrable Securities
under the Investors' Rights Agreement.

          7.   TAXES. The Company shall pay any and all documentary, stamp,
transfer and other similar taxes which may be payable with respect to the
issuance and delivery of Common Stock upon exercise of this Warrant.

          8.   OWNERSHIP AND TRANSFER.

               8.1    The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant (the "WARRANT
REGISTER"), in which the Company shall record the name and address of the Person
in whose name this Warrant has been issued, as well as the name and



address of each transferee. The Company may treat the Person in whose name any
Warrant is registered on the Warrant Register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this Warrant.

               8.2    Subject to restrictions set forth in the Purchase
Agreement and the Investors' Rights Agreement, this Warrant and all rights
hereunder shall be assignable and transferable by the holder hereof without the
consent of the Company upon surrender of this Warrant with a properly executed
assignment at the principal executive offices of the Company (or such other
office or agency of the Company as it may designate in writing to the holder
hereof).

          9.   REPRESENTATIONS AND WARRANTIES OF THE HOLDER.

               9.1    PURCHASE AGREEMENT. The Holder hereby acknowledges that
pursuant to the provisions of Section 3 of the Purchase Agreement: (i) Holder
has made certain representations and warranties regarding its investment intent
with respect to the acquisition of this Warrant and any Warrant Stock issuable
upon exercise of this Warrant (the "SECURITIES"), (ii) that the Securities are
subject to certain restrictions on transfer as set forth therein, and (iii) that
such restrictions on transfer may be applicable to any transferee of the
Securities, as provided therein.

               9.2    LEGENDS. This Warrant and the Shares shall be imprinted
with a legend in substantially the following form:

               THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
               OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
               SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
               ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE
               SECURITIES ARE SUBJECT TO RESTRICTIONS ON
               TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED,
               SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
               ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
               RESPECT TO THESE SECURITIES UNDER THE SECURITIES ACT OR
               APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
               COUNSEL SATISFACTORY TO THE COMPANY THAT ANY PROPOSED
               TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
               ANY APPLICABLE STATE SECURITIES LAWS.

Any such legend endorsed on the certificate representing shares of Warrant Stock
issued upon exercise of this Warrant shall be removed and the Company shall
issue a certificate for such shares without such legend to the holder thereof if
such Warrant Stock is registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available or if
such holder provides to the Company an opinion of counsel reasonably
satisfactory to the Company to the effect that a public sale, transfer or
assignment may be made without registration or the Warrant Stock may be sold
pursuant to Rule 144(k) of the Securities Act.

          10.  NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a)
to declare



any dividend or distribution upon the Shares or on its Common Stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to effect any reclassification or recapitalization of the Shares
or its Common Stock; or (c) to enter into any Acquisition, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company shall
give Holder (1) at least fifteen (15) days prior written notice of the date on
which a record will be taken for such dividend, distribution or for determining
rights to vote, if any, in respect of the matters referred to in (b) above or
(2) in the case of the matters referred to in (c) above at least fifteen (15)
days prior written notice of the date when the same will take place (and
specifying the date on which the holders of Common Stock will be entitled to
exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event) (each of subsection (1) or (2), the "COMPANY
NOTICE").

          11.  MISCELLANEOUS.

               11.1   LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking or other form of security reasonably
acceptable to the Company (or in the case of a mutilated Warrant, the Warrant),
issue a new Warrant of like denomination and tenor as this Warrant so lost,
stolen, mutilated or destroyed. Notwithstanding the foregoing, if this Warrant
is lost by, stolen from or destroyed by the original holder hereof, the
affidavit of such original holder setting forth the circumstances of such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required by the Company as a
condition to the execution and delivery by the Company of a new Warrant to such
original holder other than such original holder's unsecured written agreement to
indemnify the Company solely for losses actually incurred by the Company as a
direct consequence of the loss, theft or destruction of the Warrant.

               11.2   NO RIGHTS OR LIABILITIES AS STOCKHOLDER. This Warrant does
not by itself entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by the Holder
to purchase Warrant Stock by exercise of this Warrant, no provisions of this
Warrant, and no enumeration herein of the rights or privileges of the Holder,
shall cause the Holder to be a stockholder of the Company for any purpose.

               11.3   ATTORNEYS' FEES. In the event any party is required to
engage the services of any attorneys for the purpose of enforcing this Warrant,
or any provision thereof, the prevailing party shall be entitled to recover its
reasonable expenses and costs in enforcing this Warrant, including attorneys'
fees.

               11.4.  GOVERNING LAW. This Warrant 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. The parties hereto irrevocably submit to the jurisdiction of
the state and federal courts sitting in the Southern District of New York.

               11.5.  HEADINGS. The headings and captions used in this Warrant
are used for convenience only and are not to be considered in construing or
interpreting this Warrant. All references in this Warrant to sections and
exhibits shall, unless otherwise provided, refer to sections hereof and exhibits
attached hereto, all of which exhibits are incorporated herein by this



reference.

               11.6.  NOTICES. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on EXHIBIT A to the Purchase Agreement or, in the case
of the Company, at the principal offices of the Company, or at such other
address as the Holder or the Company, as the case may be, may designate by
giving ten (10) days' advance written notice to all other parties.

               11.7   AMENDMENT; WAIVER. This Warrant may be amended only by a
written agreement executed by each of the parties hereto. No amendment of or
waiver of, or modification of any obligation under this Warrant will be
enforceable unless set forth in a writing signed by the party against which
enforcement is sought. Any amendment effected in accordance with this section
will be binding upon all parties hereto and each of their respective successors
and assigns. No delay or failure to require performance of any provision of this
Warrant shall constitute a waiver of that provision as to that or any other
instance. No waiver granted under this Warrant as to any one provision herein
shall constitute a subsequent waiver of such provision or of any other provision
herein, nor shall it constitute the waiver of any performance other than the
actual performance specifically waived.

               11.8   SEVERABILITY. If one or more provisions of this Warrant
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Warrant and the balance of the Warrant shall be interpreted
as if such provision(s) were so excluded and shall be enforceable in accordance
with its terms.

               11.9   TERMS BINDING; SUCCESSORS AND ASSIGNS. By acceptance of
this Warrant, the Holder accepts and agrees to be bound by all the terms and
conditions of this Warrant. Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
permitted assigns, heirs, executors and administrators of the parties hereto.

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

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]



          IN WITNESS WHEREOF, the parties have executed and delivered or caused
this Warrant to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first written above.

24/7 REAL MEDIA, INC.:                          ACCEPTED BY HOLDER:


                                   Name of Holder:SUNRA CAPITAL HOLDINGS LIMITED

By:                                             By:

Name:                                           Name:  JOSEPH WAECHTER

Title:                                          Title: PRESIDENT


                     [SIGNATURE PAGE TO SERIES A-1 WARRANT]



                                    EXHIBIT 1

                                 EXERCISE NOTICE

                  (To be signed only upon exercise of Warrant)

To: 24/7 Real Media, Inc.

          (1)  The undersigned Holder hereby elects to purchase _____shares of
Common Stock of 24/7 Real Media, Inc. (the "WARRANT STOCK"), pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price for such shares in full.

                                     - OR -

          (1)  NET ISSUE ELECTION. The undersigned Holder elects to convert the
Warrant into such shares of Common Stock of 24/7 Real Media, Inc. (the "WARRANT
STOCK") by net issue election pursuant to Section 2.6 of the Warrant. This
conversion is exercised with respect to ______shares Warrant Stock covered by
the Warrant.

                                     - OR -

          (1)  The undersigned elects to _______[EXERCISE] / _______[CONVERT]
this Warrant into such shares of Common Stock of 24/7 Real Media, Inc. (the
"WARRANT STOCK") by _______[NET ISSUE ELECTION PURSUANT TO SECTION 2.6 OF THE
WARRANT] / ______[TENDERING HEREWITH PAYMENT OF THE PURCHASE PRICE FOR SUCH
SHARES IN FULL]. This exercise or conversion _____ [IS] / _____ [IS NOT]
contingent upon the closing of the Acquisition or other event specified in the
Company Notice to Holder in accordance with Section 10 of the Warrant received
by Holder on ________________ and _____ [IS] / _____ [IS NOT] contingent upon a
sale price or fair market value for the Company's Common Stock in the
Acquisition or other event of no less than the lesser of (a) $__________ per
share or (b) the per share price set forth in the Company Notice. This
conversion or exercise is with respect to ______shares Warrant Stock covered by
the Warrant.

                   [STRIKE PARAGRAPHS ABOVE THAT DO NOT APPLY]

          (2)  In exercising the Warrant, the undersigned Holder hereby confirms
and acknowledges that the representations and warranties set forth in Section 3
of the Purchase Agreement (as defined in the Warrant) and Section 9 of the
Warrant as they apply to the undersigned Holder are true and correct as of this
date.

               [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]



(3)  Please issue a certificate or certificates representing such shares of
Warrant Stock in the name or names specified below:


(Name)                                     (Name)

(Address)                                  (Address)

(Address)                                  (Address)

(City, Country, Postal Code)               (City, Country, Postal Code)



(Date)                                     (Signature of Holder)

EX-10.3

                                                                    EXHIBIT 10.3

                           INVESTORS' RIGHTS AGREEMENT

     This Investors' Rights Agreement (the "AGREEMENT") is entered into as of
July 1, 2002 (the "EFFECTIVE DATE") by and among 24/7 Real Media, Inc., a
Delaware corporation (the "COMPANY"), Merchant Partners LLC, a California
limited liability company ("MPLLC"), and the persons and entities listed on
EXHIBIT A attached hereto (the "PURCHASERS"). For the avoidance of doubt, MPLLC
is not a Purchaser hereunder.

                                    RECITALS

     A.   The Purchasers have agreed to purchase from the Company, and the
Company has agreed to sell to the Purchasers, shares of the Company's Series A
Convertible Preferred Stock, par value $0.01 per share (the "SERIES A STOCK")
and Series A-1 Nonvoting Convertible Preferred Stock, par value $0.01 per share
(the "SERIES A-1 STOCK" and, collectively with the Series A Stock, the
"PREFERRED STOCK"), and accompanying warrants (the "WARRANTS") to purchase
shares of the Company's Common Stock, par value $0.01 per share (the "COMMON
STOCK") on the terms and conditions set forth in that certain Series A and
Series A-1 Preferred Stock and Common Stock Warrant Purchase Agreement, dated as
of July 1, 2002, by and among the Company and the Purchasers, as such agreement
may be amended from time to time (the "PURCHASE AGREEMENT").

     B.   In connection with the Purchase Agreement, the Company has agreed to
issue to MPLLC a warrant to purchase shares of Common Stock (the "MPLLC
WARRANT").

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

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

     1.   INFORMATION RIGHTS.

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

          1.2  BUDGET AND FINANCIAL INFORMATION. The Company covenants and
agrees that, commencing on the Effective Date, for so long as a Purchaser holds
at least twenty-five percent (25%) of all the shares of Series A Stock
originally issued to the Purchasers from time to time under the Purchase
Agreement and upon conversion of Series A-1 Stock originally issued under the
Purchase Agreement (such share number to be proportionately adjusted to reflect
any stock splits and combinations, stock dividends, recapitalizations and the
like with respect to the Series A Stock) (such Purchaser, a "MAJOR PURCHASER"),
the Company will furnish to each such Major Purchaser the financial statements
(including unaudited financial statements), operating



plans and budgets (including any amendments thereto), and other financial and
business information materials that the Company distributes to nonemployee
members of the Board of Directors of the Company (the "BOARD") or any committee
thereof, as and when such materials are distributed to such nonemployee Board or
committee members; PROVIDED that the Company shall not be required to deliver
such materials to a Major Purchaser to the extent that: (i) the distribution of
such materials to such Major Purchaser would waive the Company's attorney-client
privilege, or (ii) the Board reasonably determines that such materials are
sensitive and highly confidential and that the Company would be materially
harmed by disclosure of such materials to such Major Purchaser; PROVIDED,
FURTHER, that distribution of such materials to a Board member that is an
officer or employee of such Major Purchaser shall satisfy the requirements of
this Section 1.2 as to such Major Purchaser.

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

          1.4  INSPECTION RIGHTS. The Company shall permit each Major Purchaser,
at such Major Purchaser's request and expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all in a
reasonable manner and at such reasonable times as may be requested by such Major
Purchaser.

     2.   REGISTRATION RIGHTS.

          2.1  DEFINITIONS. For purposes of this Section 2:

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

               (b)  REGISTRABLE SECURITIES. The term "REGISTRABLE SECURITIES"
means:

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

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

                                        2


                    (3)  all the shares of Common Stock of the Company issued or
issuable upon exercise of the MPLLC Warrant, that are now owned or may hereafter
be acquired by MPLLC or MPLLC's permitted successors and assigns; and

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

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

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

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

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


               (g)  STOCKHOLDER APPROVAL DATE. The term "STOCKHOLDER APPROVAL
DATE" means the first to occur of: (A) the first date that shares of Series A-1
Stock convert into Series A Stock; and (B) October 15, 2002.

                                        3


          2.2  MANDATORY FORM S-3 REGISTRATION.

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

               (b)  EFFECT OF FAILURE TO FILE REGISTRATION STATEMENT AND DELAY
IN OR FAILURE TO MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) the
Company fails to file the Shelf Registration with the SEC covering the resale of
all Registrable Securities on or before the thirtieth (30th) day after the
Stockholder Approval Date, (ii) the Shelf Registration is not declared effective
by the SEC on or before the date that is 270 days after the Stockholder Approval
Date, or (iii) on any day prior to the Shelf Termination Date and after the
Shelf Registration has been declared effective by the SEC, sales of the
Registrable Securities required to be included on such Shelf Registration cannot
be made (other than during a Permitted Suspension, as defined below) pursuant to
the Shelf Registration (including, without limitation, because of a failure to
keep the Shelf Registration effective, to disclose such information as is
necessary for sales to be made pursuant to the Shelf Registration or to register
sufficient shares of Common Stock for resale under the Registration Statement);
THEN, as partial relief for the harm to any Holder by reason of any such delay
in or reduction of its ability to sell the underlying shares of Common Stock
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to the Holders on a pro rata basis relative to
the number of Registrable Securities held by each Holder (on an as-converted and
as-exercised into Common Stock basis without regard to current exercisability or
convertability) an aggregate

                                        4


amount in cash equal to twenty-five thousand dollars ($25,000) per month for
each month in which the Shelf Registration is not filed, effective or available
for sale, as the case may be, payable on the last business day of each such
month, provided that such amount shall be increased to fifty thousand dollars
($50,000) upon the fourth full succeeding month, and for each full succeeding
month thereafter, in which the Shelf Registration is not filed, effective or
available for sale, as the case may be.

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

          2.3  PIGGYBACK REGISTRATIONS.

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

               (b)  UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities in such
notice. In such event, the right of any such Holder's Registrable Securities to
be included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the

                                        5


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

               (c)  EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 2.3, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company (but excluding underwriters' and
brokers' discounts and commissions and the fees and disbursements of legal
counsel for the selling Holders, if any), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.3 shall bear
such Holder's proportionate share (based on the number of shares sold by such
Holder over the total number of shares included in such registration at the time
it goes effective) of all discounts, commissions or other amounts payable to
underwriters, brokers or legal counsel to the Holders in connection with such
offering.

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

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

                                        6


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

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

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

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

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

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

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

                                        7


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

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

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

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

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

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

                                        8


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

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

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

The Company will reimburse each such Holder, partner, officer, member or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, within one (1) month after a request for
reimbursement has been received by the Company, in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the indemnity agreement contained in this subsection 2.8(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, member, director, underwriter or controlling person of such Holder.

               (b)  BY SELLING HOLDERS. To the extent permitted by law, each
selling Holder will severally, but not jointly, indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed such
registration statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors, members or officers or any person who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, member, controlling person, underwriter or other
such Holder, partner or director, member, officer or controlling person of such
other Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
violation of subsections 2.8(a)(1) and 2.8(a)(2) above, in each case to the
extent (and only to the extent) that such violation occurs in reliance upon and
in conformity with written information furnished by such Holder with respect to
the Holder (and none other) for use in connection with such registration. Each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, member, controlling person,
underwriter or other Holder, partner, officer, member, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action within one (1) month after a
request for reimbursement has been received by the indemnifying Holder;
PROVIDED, HOWEVER, that the indemnity agreement contained in this subsection
2.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement

                                        9


is effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and PROVIDED FURTHER, that the total amounts payable in
indemnity by a Holder under this subsection 2.8(b) in respect of any Violation
shall not exceed the net proceeds received by such Holder in the registered
offering out of which such Violation arises.

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

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

               (e)  CONTRIBUTION. If the indemnification provided for in this
Section 2.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying the
indemnified party, shall contribute to the amount paid or payable by such
indemnified party with respect to such loss, liability, claim, damage or expense
in the proportion that is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. In any such case, (A) no such Holder will be
required to contribute any amount in excess of the public offering price of all
such

                                       10


Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

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

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

     3.   PARTICIPATION RIGHTS.

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

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

                                       11


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

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

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

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

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

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

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

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

          3.3  PROCEDURES. In the event that the Company proposes to undertake
an issuance of New Securities, it shall give to each Rights Holder a written
notice of its intention to issue New Securities (the "NOTICE"), describing the
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities given in accordance with Section
5.1 hereof. Each Rights Holder shall have twenty (20) days from the date such
Notice is effective, as determined pursuant to Section 5.1 hereof based upon the
manner or method of notice, to agree in writing to purchase such Rights Holder's
Pro Rata Share of such New Securities for the price and upon the general terms
specified in the Notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased

                                       12


(not to exceed such Rights Holder's Pro Rata Share). If any Rights Holder fails
to so agree in writing within such twenty (20) day period to purchase such
Rights Holder's full Pro Rata Share of an offering of New Securities (a
"NONPURCHASING HOLDER"), then such Nonpurchasing Holder shall forfeit the right
hereunder to purchase that part of his Pro Rata Share of such New Securities
that he, she or it did not so agree to purchase and the Company shall promptly
give each Rights Holder who has timely agreed to purchase his full Pro Rata
Share of such offering of New Securities (a "PURCHASING HOLDER") written notice
of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Holder's full Pro Rata Share of such offering of New Securities (the
"OVERALLOTMENT NOTICE"). Each Purchasing Holder shall have a right of
overallotment such that such Purchasing Holder may agree to purchase a portion
of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a
pro rata basis according to the relative Pro Rata Shares of the Purchasing
Holders, at any time within five (5) days after receiving the Overallotment
Notice.

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

          3.5  TERMINATION. The Company's obligations to provide the Notice
under Section 3.3 and the Rights Holders' right to purchase their Pro Rata Share
of New Securities under this Section 3 shall terminate upon (1) any
reorganization, consolidation, merger or similar transaction or series of
related transactions (each, a "COMBINATION TRANSACTION") in which the Company is
a constituent corporation or is a party if, as a result of such combination
transaction, the voting securities of the Company that are outstanding
immediately prior to the consummation of such combination transaction (OTHER
THAN any such securities that are held by an "Acquiring Stockholder", as defined
below) do not represent, or are not converted into, securities of the surviving
corporation of such combination transaction (or such surviving corporation's
parent corporation if the surviving corporation is owned by the parent
corporation) that, immediately after the consummation of such combination
transaction, together possess at least a majority of the total voting power of
all securities of such surviving corporation (or its parent corporation, if
applicable) that are outstanding immediately after the consummation of such
combination transaction, including securities of such surviving corporation (or
its parent corporation, if applicable) that are held by the Acquiring
Stockholder; or (2) a sale of all or substantially all of the assets of the
Company, that is followed by the distribution of the proceeds to the Company's
stockholders or (3) as to each Rights Holder, when such Rights Holder no longer
holds any Registrable Securities. For purposes of this Section 3.5, an
"ACQUIRING STOCKHOLDER" means a stockholder or stockholders of the Company that
(1) merges or combines with the Company in such combination transaction or (2)
owns or controls a majority of another corporation that merges or combines with
the Company in such combination transaction.

                                       13


     4.   ASSIGNMENT AND AMENDMENT.

          4.1  ASSIGNMENT. Notwithstanding anything herein to the contrary:

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

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

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

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

          4.3  NEW PURCHASERS. Notwithstanding anything herein to the contrary,
if pursuant to Section 1.6 of the Purchase Agreement, Additional Closing
Purchasers (as defined in

                                       14


the Purchase Agreement) purchase Additional Closing Shares (as defined in the
Purchase Agreement), then each such Additional Closing Purchaser shall become a
party to this Agreement as a "Purchaser" hereunder, without the need of
obtaining any consent, approval or signature of any Purchaser, when such
Additional Closing Purchaser has both: (a) purchased Additional Closing Shares
under the Purchase Agreement and paid the Company all consideration payable for
such Additional Closing Shares and (b) executed one or more counterpart
signature pages to this Agreement as a "Purchaser."

     5.   GENERAL PROVISIONS.

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

               (a)  if to the Company, at:

                    24/7 Real Media, Inc.
                    1250 Broadway
                    New York, NY 10001
                    Attn: General Counsel
                    Tel: (212) 231-7100
                    Fax: (212) 760-2800

               with a copy to:

                    Proskauer Rose LLP
                    1585 Broadway
                    New York, NY 10036
                    Attn: Ronald R. Papa, Esq.
                    Tel: (212) 969-3325
                    Fax: (212) 969-2900

               (b)  if to MPLLC at:

                    465 California Street, Suite 630
                    San Francisco, CA 94104
                    Attention: Joseph Waechter
                    Telephone: (415) 315-2025
                    Facsimile: (415) 391-3345

               with a copy to:

                    Fenwick & West LLP
                    Two Palo Alto Square
                    Palo Alto, CA 94306
                    Attention: David Michaels, Esq.
                    Telephone: (415) 875-2300

                                       15


                    Facsimile: (415) 281-1350

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

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

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

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

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

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

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

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

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

                                       16


          5.9  COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.

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

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

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

                                       17


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

THE COMPANY:

24/7 REAL MEDIA, INC.

By:
     ------------------------------

Name:
      -----------------------------

Title:
      -----------------------------

THE PURCHASERS:


SUNRA CAPITAL HOLDINGS LIMITED

By:
     ------------------------------

Name: Joseph Waechter
      -----------------------------

Title: President
       ----------------------------

MPLLC:

MERCHANT PARTNERS LLC


By:
     ------------------------------

Name: Edward Hall
      -----------------------------

Title: Managing Partner
       ----------------------------

           [SIGNATURE PAGE TO 24/7 REAL MEDIA, INC. INVESTORS' RIGHTS
                                   AGREEMENT]



                                    EXHIBIT A

                               LIST OF PURCHASERS

SUNRA CAPITAL HOLDINGS LIMITED

465 California Street, Suite 630
San Francisco, CA 94104
Attention: Joseph Waechter
Telephone: (415) 315-2025
Facsimile: (415) 391-3345

A copy of any notice to Sunra shall be given to:

Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94036
Attn.: David Michaels
Tel:   (415) 875-2455
Fax:   (415) 281-1350