-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bh/PjMcZ7PTnxtqhdU14UnlBKEBiM1G/ss5tPMTLNhPhlXNqXz8XjCjp2VjmxPrf JDC2E8mwf/ILxewnpDWfxw== 0000912057-02-027222.txt : 20020712 0000912057-02-027222.hdr.sgml : 20020712 20020712171358 ACCESSION NUMBER: 0000912057-02-027222 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020712 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: 24/7 MEDIA INC CENTRAL INDEX KEY: 0001062195 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 133995672 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-54665 FILM NUMBER: 02702241 BUSINESS ADDRESS: STREET 1: 1250 BROADWAY STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2122317100 MAIL ADDRESS: STREET 1: 1250 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10001 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WAECHTER JOSEPH CENTRAL INDEX KEY: 0001177312 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O MERCHANTS GROUP INTERNATIONAL STREET 2: 465 CALIFORNIA ST STE 640 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153152015 MAIL ADDRESS: STREET 1: C/O MERCHANTS GROUP INTERNATIONAL STREET 2: 465 CALIFORNIA ST STE 640 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 SC 13D 1 a2084251zsc13d.txt SC 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 24/7 REAL MEDIA, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 901314 10 4 - -------------------------------------------------------------------------------- (CUSIP Number) David Michaels, Esq. Joseph Waechter c/o Fenwick and West LLP c/o Merchant's Group Intenational 275 Battery Street, Suite 1600 465 California Street, Suite 640 San Francisco, CA 94111 San Francisco, California, 94104 (415) 875-2300 (415) 391-3344 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 2, 2002 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box /_/ *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 1 OF 11 PAGES - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) JOSEPH WAECHTER - -------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) /_/ 2 (B) /_/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CALIFORNIA, USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER 8,970,733 OF ------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED ------------------------------------------------------------- BY 9 SOLE DISPOSITIVE POWER EACH 8,970,733 REPORTING ------------------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,970,733 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) /_/ - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - -------------------------------------------------------------------------------- SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 2 OF 11 PAGES Statement on Schedule 13D This Statement on Schedule 13D relates to the beneficial ownership of common stock, par value $0.01 per share (the "Common Stock"), of 24/7 Real Media, Inc., a Delaware corporation (the "Company"). This Schedule 13D is being filed on behalf of the Reporting Person (as defined below). ITEM 1. SECURITY AND ISSUER. The class of equity securities to which this statement relates is the Common Stock of the Company. The principal executive offices of the Company are located at 1250 Broadway, New York, New York 10001. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is filed by Joseph Waechter, who is referred to as the "Reporting Person" in this Schedule 13D. Sunra Capital Holding Limited, a Bermuda company ("Sunra"), purchased preferred stock of the Company and was issued certain warrants, each of which is either convertible or excercisable, as the case may be, into the subject securities, all as described more fully below. Sunra's acquisition of such securities was conducted under the direction of the Reporting Person pursuant to a Management Agreement, dated as of June 21, 2002, a form of which is listed as Exhibit I hereto (the "Management Agreement"). Under the Management Agreement, Sunra engaged the Reporting Person as the sole manager of the investment capital of Sunra and any investments made with such capital. By virtue of this agreement, Sunra granted the Reporting Person absolute control over the subject shares with respect to, among other things, the voting and disposition of such shares. The Management Agreement does not have a specific term of existence, but does give Sunra the unilateral right to terminate the Management Agreement with the Reporting Person on notice that must exceed 90 days. (b) The principal business address of the Reporting Person is: c/o Merchant's Group International, 465 California Street, Suite 640, San Francisco, California 94104. (c) The principal occupation of the Reporting Person is to act as an officer, director or other manager of various entitities engaged in investment activities. (d) The Reporting Person has not been convicted in a criminal proceeding in the past five years (excluding traffic violations or similar misdemeanors). (e) During the past five years, the Reporting Person was not a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The Reporting Person is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 3 OF 11 PAGES On July 1, 2002, the Company entered into a Series A and Series A-1 Preferred Stock and Common Stock Warrant Stock Purchase Agreement, attached hereto as Exhibit A (the "Purchase Agreement"), in connection with a private placement of securities by the Company. Pursuant to the Purchase Agreement, at the initial closing of the private placement on July 2, 2002, the Company sold 160,00 shares of its newly created Series A Convertible Preferred Stock, par value $0. 01 per share, of the Company ("Series A Preferred Stock") at a per share price of $10, for an aggregate purchase price of $1,600,000. Also pursuant to the Purchase Agreement, the Company sold 340,00 shares of its newly created Series A-1 Non Voting Convertible Preferred Stock, par value $0. 01 per share, of the Company ("Series A-1 Preferred Stock") at a per share price of $10, for an aggregate purchase price of $3,400,000. Each issued and outstanding share of Series A Preferred Stock is convertible into Common Stock at any time at the option of the holder thereof at an initial conversion price of $0.20535 (the "Per Share Purchase Price"), or at an initial conversion rate of approximately 48.697 shares of Common Stock for each share of Series A Preferred Stock converted, which conversion rate is subject to "weighted average" antidilution adjustments (subject to certain exceptions) and certain other adjustments as set forth in the Certificate of Designations of Series A Preferred Stock of the Company listed as Exhibit B hereto (the "Series A Certificate of Designations"). Upon the date of appropriate Company stockholder approval, each issued and outstanding share of Series A-1 Preferred Stock will become automatically convertible into Series A Preferred Stock at an initial conversion price of $10 (the "Conversion"), or at an initial conversion rate of approximately one share of Series A Preferred Stock for each share of Series A-1 Preferred Stock converted. If the stockholders do not approve the conversion of the Series A-1 Preferred Stock, each share of Series A-1 Preferred Stock will become redeemable (the "Redemption"), at the option of Reporting Person, acting pursuant to its authority under the Management Agreement, at at a per share price of $10. The price of the conversion or redemption of the Series A-1 Preferred Stock, as the case may be, is subject to "weighted average" antidilution adjustments (subject to certain exceptions) and certain other adjustments as set forth in the Certificate of Designations of Series A-1 Preferred Stock of the Company listed as Exhibit C hereto (the "Series A-1 Certificate of Designations" and collectively with the Series A Certificate of Designations, the "Certificates of Designation"). The Purchase Agreement provides for $3.4 million in cash to be held in escrow until the earlier date upon which the Series A-1 Preferred Stock is either converted or redeemed in accordance with the foregoing. At the closing on July 2, 2002, Sunra was also issued three warrants--a Series A Warrant, at no further cost, to purchase up to 779,158 shares of Common Stock, a form of which SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 4 OF 11 PAGES is listed as Exhibit D hereto (the "Series A Warrant"); a Contingent Warrant, at no further cost, to purchase up to 1,000,000 shares of Common Stock, a form of which is listed as Exhibit E hereto (the "Contingent Warrant"); and a Series A-1 Warrant, at no further cost, to purchase up to 1,655,710 shares of Common Stock, a form of which is listed as Exhibit F hereto (the "Series A-1 Warrant" and together with the Series A Warrant, the Contingent Warrant and the Series A-1 Warrant, the "Closing Warrants"). Each Closing Warrant has an initial exercise price equal to the Per Share Purchase Price, subject to adjustment upon the occurrence of certain dilution events, including a subdivision or combination of the outstanding shares of Common Stock (the "Exercise Price"). The Series A Warrant is immediately exercisable upon the issuance thereof. The Contingent Warrant will become exercisable as of the date of Redemption, and terminates as of the date of Conversion; the Series A-1 Warrant will become exercisable as of the date of Conversion, and will terminate on the date of Redemption. Each Closing Warrant will expire on the fifth anniversary of the first date that they become exercisable. The Purchase Agreement provides an option to purchase additional shares of Series A Preferred Stock at an additional closing (the "Additional Closing"), which is subject to the affirmative election of the Reporting Person on behalf of Saura, to purchase such additional shares of Series A Preferred Stock and approval from the Company's stockholders (the "Option"). Pursuant to the Purchase Agreement, at the Additional Closing, the Company may be required to sell up to 200,000 additional shares of Series A Preferred Stock for an aggregate purchase price of $2,000,000, subject to satisfaction of the conditions to closing conditions contained therein. Subject to satisfaction of the material conditions set forth in the Purchase Agreement, at the Additional Closing, the Company will issue Sunra an additional warrant, at no further cost, to purchase up to 973,947 shares of Common Stock at the Exercise Price, a form of which is listed as Exhibit D hereto (the "Additional Warrant"). The Additional Warrant will become immediately exercisable upon the date of its issuance and will expire on the fifth anniversary of such date. The Reporting Person is a member of Merchants Partners LLC, a California limited liability company, and, therefore, may be considered a beneficial owner of a warrant to purchase 400,000 shares of the Company's Common Stock at an exercise price equal to the Per Share Purchase Price that is immediately exercisable for a five-year term beginning as of the date of the Closing, a form of which is listed as Exhibit H hereto (the "Finder's Warrant" and together with the Closing Warrants and the Additional Warrant, the "Warrants"). Merchants Partners LLC was assigned the Finder's Warrant by Merchant's Group International, a corporation for which the Reporting Person is a director. This Item 3 does not provide a complete description of the Management Agreement, the Purchase Agreement, the Certificate of Designations, or the Warrants and each such description is qualified in its entirety by reference to-the respective agreement or document, which is listed as an exhibit hereto and is either attached hereto or is incorporated by reference from the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (the "Commission") on July 3, 2002 or Amendment 1 to the Company's Current Report on Form 8-K filed with the Commision on July 12, 2002 as applicable. SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 5 OF 11 PAGES The total amount of the funds required to purchase the subject securities was and is anticipated to be furnished from the investment capital of the client or clients of the Reporting Person. No part of the purchase price is anticipated to be borrowed by such Reporting Person or his clients for the purpose of acquiring such securities. ITEM 4. PURPOSE OF TRANSACTION. (a) The Company entered into the Purchase Agreement pursuant to which the Company agreed to issue and sell the number of shares of Series A Preferred Stock, Series A-1 Preferred Stock and the Warrants all as described in Item 3 above. In addition, the Company also granted the Option in the Purchase Agreement as described in Item 3 above. In addition, the Reporting Person may from time to time, depending on prevailing market, economic and other conditions, acquire additional shares of the capital stock of the Company or engage in discussions with the Company concerning further acquisitions of shares of the capital stock of the Company or further investments in the Company. The Reporting Person intends to review his investment in the Company on a continuing basis and, depending upon the price and availability of shares of Common Stock, subsequent developments affecting the Company, the Company's business and prospects, other investment and business opportunities available to such Reporting Person, general stock market and economic conditions, tax considerations and other factors considered relevant, may decide at any time to increase or to decrease the size of his investment in the Company. (b) Not applicable. (c) Not applicable. (d) Pursuant to the Purchase Agreement, the Company increased the size of its Board of Directors to eight (8) persons and appointed a director selected by the Reporting Person, pursuant to its authority under the Management Agreement. Upon the Conversion, the Reporting Person, pursuant to its authority under the Management Agreement, will have the right to designate a second director. (e) The Company entered into the Purchase Agreement pursuant to which the Company agreed to issue and sell the number of shares of Series A Preferred Stock, Series A-1 Preferred Stock and the Warrants all as described in Item 3 above. In addition, the Company granted the Option in the Purchase Agreement as described in Item 3 above. Pursuant to the Purchase Agreement, the capitalization and dividend policy of the Company was altered by the Company's filing of the Certificates of Designation with the Secretary of the State of Delaware, the execution of the Investors' Rights Agreement (as defined below) and the issuance of the Warrants. A summary of such documents is as follows: THE CERTIFICATE OF DESIGNATION OF SERIES A AND SERIES A-1 PREFERRED STOCK. Each share of Series A Preferred Stock is convertible into Common Stock of the Company at any time at the option of the holder thereof at the Per Share Purchase Price. There will be no change to the Per SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 6 OF 11 PAGES Share Purchase Price 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 Conversion Price. The Series A Preferred Stock is not redeemable. 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 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 the Reporting Person, acting pursuant to its authority under the Management Agreement, 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 $3.4 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 the Reporting Person, acting pursuant to its authority under the Management Agreement, redeems Sunra's Series A-1 Preferred Stock. At any time after the second anniversary of the earlier of the Conversion or Redemption, 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 SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 7 OF 11 PAGES 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. WARRANTS. The Company has also issued the Closing Warrants and the Finder's Warrant, all as described in Item 3 above. Moreover the Company may become obligated to issue the Additional Warrant as described in Item 3 above. Each of the Warrants may be exercised through a cashless exercise. INVESTORS' RIGHTS AGREEMENT. The Company also entered into an Investors' Rights Agreement, listed in Exhibit G hereto (the "Investors' 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 the Conversion and upon exercise of the Warrants, 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 foregoing summary of the Purchase Agreement, the Certificates of Designation, the Warrants and the Investors' Rights Agreement and the agreements and transactions contemplated thereby is qualified in its entirety by reference to the respective agreement or document, which is listed as an exhibit hereto and is either attached hereto or is incorporated by reference from the Company's Current Report on Form 8-K filed with the Commission on July 3, 2002 or Amendment 1 to the Company's Current Report on Form 8-K filed with the Commision on July 12, 2002 as applicable. (f) Not applicable. (g) The Certificates of Designation as filed with the Secretary of State of Delaware. Certain terms and conditions of the Certificate of Designations are described in Item 4(e) above. The Warrants issued pursuant to the Purchase Agreement. Certain terms and conditions of the Warrants are described in Item 3 above. SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 8 OF 11 PAGES (h) Not applicable. (i) Not applicable. (j) Not applicable. Except as set forth above in this statement, the Reporting Person does not have any present plans or proposals that relate to or would result in: (i) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (iii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (iv) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (v) any material change in the present capitalization or dividend policy of the Company; (vi) any other material change in the Company's business or corporate structure; (vii) changes in the Company's charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (viii) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (ix) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF.THE ISSUER. (a) and (b) The approximate percentages of shares of Common Stock reported as beneficially owned by the Reporting Person is based upon 50,220,440 shares of Common Stock outstanding as of May 15, 2002, as reported in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002, plus shares issuable to Sunra or Merchants Partners LLC as described herein. The amount shown as beneficially owned by the Reporting Person includes the 7,791,575 shares of Common Stock into which the shares of Series A Preferred Stock may presently be converted and the 1,179,158 shares of Common Stock for which the Series A Warrant and the Finder's Warrant may presently be excersiable. As the Conversion and the Additional Closing are subject to the satisfaction of certain material conditions related thereto, including prior stockholder approval, the Contingent Warrant, the Series A-1 Warrant, the additional shares of Series A Preferred Stock issued at the Additional Closing and the Additional Warrant, each as described in Item 3 above, are not yet issued or exercisable, as the case may be, and are not reflected as beneficially owned in this statement. However, if the Conversion is completed and Reporting Person, on behalf of Sunra, exercises the Option in full, then the Reporting Person will become the beneficial owners of approximately 37,896,957 shares of Common Stock, or approximately 43% of the Company's outstanding Common Stock. SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 9 OF 11 PAGES Please see Items 7, 8, 9, 10, 11, and 13 of the cover sheet for the Reporting Person. (c) Except as set forth in Items 3 and 5 above, the Reporting Person has not effected any transaction in the Common Stock during the past 60 days. (d) Except as set forth in Item 3, no person other than the beneficial owner referred to herein is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER: The Purchase Agreement was entered into as of July 1, 2002. Certain terms and conditions of the Purchase Agreement, the Closing Warrants, and the Additional Warrant and the Certificate of Designations are described in Item 3 above. The Investors' Rights Agreement was entered into as of July 1, 2002. Certain terms and conditions of the Registration Rights Agreement are described in Item 4 above. The Management Agreement was entered into as of June 21, 2002. Certain terms and conditions of the Finder's Agreement are described in Item 3 above. Except as described above, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 above or between such persons and any other person with respect to any securities of the Company. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit A Series A and Series A-1 Preferred Stock and Common Stock Warrant Purchase Agreement, dated as of July 1, 2002, between the Company and Sunra (filed as Exhibit 10.1 to the Company's Form 8-K/A filed with the Commission on July 12, 2002, and incorporated herein by reference). Exhibit B Certificate of Designations of Series A Convertible Preferred Stock of the Company (filed as Exhibit 4.1 to the Company's Form 8-K/A filed with the Commission on July 12, 2002, and incorporated herein by reference). Exhibit C Certificate of Designations of Series A-1 Non Voting Convertible Preferred Stock of the Company (filed as Exhibit 4.1 to the Company's Form 8-K filed with the Commission on July 3, 2002, and incorporated herein by reference). Exhibit D Form of Series A Warrant and Additional Warrant. SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 10 OF 11 PAGES Exhibit E Form of Contingent Warrant. Exhibit F Form of Series A-1 Warrant (filed as Exhibit 10.2 to the Company's Form 8-K filed with the Commission on June 3, 2002, and incorporated herein by reference). Exhibit G Investors' Rights Agreement, dated as of July 1, 2002, by and among the Company and the investors named therein (filed as Exhibit 10.3 to the Company's Form 8-K filed with the Commission on July 3, 2002, and incorporated herein by reference). Exhibit H Form of Finder's Warrant Exhibit I Form of Management Agreement, dated as of June 21, 2002, between the Company and Joseph Waechter SCHEDULE 13D CUSIP NO. 901314 10 4 PAGE 11 OF 11 PAGES SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 12, 2002 /s/ Joseph Waechter -------------------------- Joseph Waechter EX-99.1 3 a2084251zex-99_1.txt EXHIBIT D-FORM OF SERIES A AND ADDITIONAL WARRANT EXHIBIT D 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. , 2002 WARRANT TO PURCHASE COMMMON STOCK OF 24/7 REAL MEDIA, INC. No. 1 Void after , 2007 CUSIP No.: 901314 10 4 Number of shares: Up to 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 on or after the above specified date of this Warrant and on or prior to the close of business on the Expiration Date (as defined below), but not thereafter, up to _____ 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 earlier to occur of (i) the fifth anniversary of the date first written above and (ii) 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, "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 "WARRANT" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein. 1.11 "WARRANT PRICE" means an exercise price per share equal to $0.20535. The Warrant Price is subject to adjustment as provided herein. 1.12 "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 2 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 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 3 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, 4 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 Preferred Stock and/or Series A-1 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 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 6 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 7 (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. The Securities 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 8 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 9 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] 10 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 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-99.2 4 a2084251zex-99_2.txt EXHIBIT E-FORM OF CONTINGENT WARRANT EXHIBIT E 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 , 2002 WARRANT TO PURCHASE COMMMON STOCK OF 24/7 REAL MEDIA, INC. No. 3 CUSIP No.: 901314 10 4 Number of shares: Up to 1,000,000 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 Trigger 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 (1,000,000) 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 Trigger Date; (ii) the first date that a share of the Company's Series A-1 Nonvoting Convertible Preferred Stock issued under the Purchase Agreement converts into shares of Series A Convertible Preferred Stock; 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 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. 1.11 "TRIGGER DATE" means the earliest date on which any holder of Series A-1 Preferred Stock is entitled to deliver a valid "Redemption Request" (as defined in the Series A-1 Designation) in accordance with Section 6.1 of the Series A-1 Designation. 2 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 Trigger 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. 3 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 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 Preferred Stock and/or Series A-1 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 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. 6 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 7 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. 8 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 9 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] 10 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: ----------------- By: By: ----------------------------- ----------------------------- Name: Name: --------------------------- --------------------------- Title: Title: -------------------------- -------------------------- [SIGNATURE PAGE TO CONTINGENT 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-99.3 5 a2084251zex-99_3.txt EXHIBIT H-FORM OF FINDER'S WARRANT Exhibit H 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 , 2002 WARRANT TO PURCHASE COMMMON STOCK OF 24/7 REAL MEDIA, INC. No. 4 Void after , 2007 CUSIP No.: 901314 10 4 Number of shares: Up to 400,000 24/7 Real Media, Inc., a Delaware corporation (the "COMPANY"), with principal offices at 1250 Broadway, New York, New York, 10001, hereby acknowledges that Merchant Partners LLC 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 on or after the above specified date of this Warrant and on or prior to the close of business on the Expiration Date (as defined below), but not thereafter, up to four hundred thousand (400,000) 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 Finder's Fee Agreement dated as of June 28, 2002 (the "FEE AGREEMENT"), between the Company and Merchants Group International, 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 earlier to occur of (i) the fifth anniversary of the date first written above and (ii) 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 2, 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 "WARRANT" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein. 1.11 "WARRANT PRICE" means an exercise price per share equal to $0.20535. The Warrant Price is subject to adjustment as provided herein. 1.12 "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 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 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; 3 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 4 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 5 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 6 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 Fee 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. 7 9.1 REPRESENTATIONS. Holder hereby represents and warrants to the Company as follows. Holder is a sophisticated investor having such knowledge and experience in business and investment matters that Holder is capable of protecting Holder's own interests in connection with the acquisition, exercise or disposition of this Warrant. Holder is an "accredited investor" within the meaning of Regulation D promulgated under the Act. Holder is aware that this Warrant and the Shares are being, or will be, issued to Holder in reliance upon Holder's representation in this Section 9.1 and that such securities are restricted securities that cannot be publicly sold except in certain prescribed situations. Holder is aware of the provisions of Rule 144 promulgated under the Act and of the conditions under which sales may be made thereunder. Holder has received such information about the Company as Holder deems reasonable, has had the opportunity to ask questions and receive answers from the Company with respect to its business, assets, prospects and financial condition and has verified any answers Holder has received from the Company with independent third parties to the extent Holder deems necessary. The Holder of this Warrant, by acceptance hereof, acknowledges this Warrant and the Shares to be issued upon exercise hereof or conversion thereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any Shares to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the Act or any state securities laws. 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. 9.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part 8 without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if (a) the transfer is to the shareholders or constituent partners of Holders by way of dividend or distribution to all of the same or (b) there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder's notice of proposed sale and/or transfer. 9.4 TRANSFER PROCEDURE. Subject to the provisions of Section 9.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company a written notice of the portion of the Warrant being transferred, such notice setting forth the name, address and taxpayer identification number of the transferee, and surrendering this Warrant to the Company for reissuance to the transferee(s) (and to the new Holder for any remaining Shares, if applicable). Unless the Company is filing financial information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, the Company shall have the right to refuse to transfer any portion of this Warrant to any person who directly competes with the Company. 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. 9 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 in the Fee 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. 10 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] 11 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: MERCHANT PARTNERS LLC ---------------------- By: By: ----------------------------- ----------------------------- Name: Name: --------------------------- --------------------------- Title: Title: -------------------------- -------------------------- [SIGNATURE PAGE TO FINDER'S WARRANT] 12 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-99.4 6 a2084251zex-99_4.txt EXHIBIT I-MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT This Agreement is entered into as of the 21st day of June, 2002 between Sunra Capital Holdings, Ltd. ("SCH") and Joseph Waechter ("Advisor"). 1. APPOINTMENT OF ADVISOR. SCH hereby engages Advisor to provide the investment services described in this Agreement with respect to SCH. Advisor agrees to provide those services. 2. AUTHORITY AND DISCRETION OF ADVISOR. 2.1 GENERAL INVESTMENT AUTHORITY. SCH grants to Advisor absolute power and authority to manage and administer, in its sole discretion, the assets of SCH, including full power and authority to exercise all incidents of ownership with respect to such assets, including, but not limited to, the sole power to vote or to direct the voting of any Securities (as defined below) held by SCH and the sole power to dispose, or to direct the disposition of any such Securities, in the name, and for the account and risk, of SCH, including the power and authority to do any of the following things, in the sole discretion of Advisor, without prior approvals and directions from, or consultations with, SCH or any Custodian: (a) to have and exercise, in its sole discretion all "Voting power" as such term is defined and used in the Securities Exchange Act of 1934 ("Exchange Act") and under Rule 13(d)-3, as promulgated under the Exchange Act; (b) to have and exercise, in its sole discretion all "Investment power" as such term is defined and used in the Exchange Act and under Rule 13(d)-3, as promulgated under the Exchange Act; (c) to authorize sub-advisers, in their discretion, to buy, sell, transfer, assign, pledge, lend, exchange, deliver and otherwise trade in Securities (as defined below); and purchase Securities in public offerings (including initial public offerings) and private placements; (d) to engage directly in investment activities of the kind contemplated by clause (c) above; (e) to invest in limited partnerships managed by Advisor (in which event, the assets so invested would no longer be included in the computation of the performance fee described in Section 3.1 below), so long as SCH delivers to Advisor a separate written authorization to make any such investment; (f) to select and engage Custodians for SCH assets, enter into and terminate agreements with Custodians on terms and conditions approved by Advisor, and monitor the performance of the Custodians; (g) to perform any other act, including the signing and delivering of contracts, instruments, orders, receipts and all other documents, incidental to the broad powers granted to Advisor under this Agreement; and (h) to select and engage other investment advisers as sub-advisers to SCH, enter into and terminate agreements with those sub-advisers on terms and conditions approved by Advisor, and monitor the performance of the sub-advisers. As used in this Section 3, the term "Securities" encompasses common stock, preferred stock, warrants, convertible securities, bonds, notes, options, shares of investment companies, partnership interests, interests in REITs, derivative instruments, and any similar or related investment instruments or vehicles. 2.2 CUSTODIAN INSTRUCTIONS. SCH authorizes Advisor to give written instructions to each Custodian at any time and from time to time to (a) deliver Securities sold, exchanged or otherwise disposed of from SCH, upon receipt of payment for such Securities, (b) pay cash for Securities delivered to a Custodian upon acquisition for SCH. SCH authorizes and directs each Custodian to follow such instructions. Except for payment of fees under Section 4 below, this authority shall not include the authority to cause Securities or cash to be delivered to Advisor. 2.3 OTHER AUTHORIZATIONS. SCH, at its expense, shall promptly and duly execute and deliver such documents and assurances, including, but not limited to, any powers of attorney and authorizations to buy, sell or otherwise dispose of any assets held by SCH, and shall take such further action as the Advisor may from time to time request in order to carry out the intent and purpose of this Agreement and the other agreements and transactions contemplated herein, including, but not limited to, voting of the Securities and the acquisition and disposition thereof in accordance with the power and authority granted Advisor hereunder and thereunder, and to establish and protect the rights and remedies created or intended to be created in favor of Advisor hereunder. Further, SCH will furnish, and direct any Custodian engaged by SCH or Advisor to furnish, such additional authorizations as may be requested from time to time by Advisor, or by brokers or other third parties with which SCH has dealings, in order to implement the authority granted in this Section 2 or otherwise carry out the intent and purpose of this Agreement. 3. FEES AND EXPENSES. 3.1 MANAGEMENT FEE. The Management Fee is calculated at the annual rate of 2.0% of the net assets of SCH. The Management Fee will be paid quarterly in advance based on the value of the net assets of SCH as of the first day of each calendar quarter (adjusted for subscriptions made during the quarter). SCH will pay the Management Fee in U.S. dollars promptly following the beginning of such quarter, unless the Advisor elects to defer receipt of the Management Fee as further described below. The Management Fee will be prorated for any period that is less than a full calendar quarter, and will be deducted in computing the net profit or net loss of SCH. For purposes of this agreement the effective date for billing purposes is July 1, 2002. Notwithstanding the foregoing, SCH, with the consent of the Advisor, may waive or reduce the Management Fee with regard to certain shareholders that are employees or affiliates of the Advisor, relatives of such persons, and for certain strategic investors. 3.2 INCENTIVE FEE. The Incentive Fee is an amount, paid annually, equal to twenty percent (20%) of the net profits, if any, during each fiscal year allocable to SCH, subject to a loss carryforward. If SCH has a loss chargeable to it during any fiscal year, and during a subsequent fiscal year there is a profit allocable to SCH, there will be no Incentive Fee payable with respect to SCH until the amount of the loss previously allocated has been recouped. Advisor will be paid the Incentive Fee within 30 days after the end of the fiscal year. In the event that the Management Agreement is terminated prior to the last day of any fiscal year, the Incentive Fee for that fiscal year will be computed as if the termination date was the end of such fiscal year. 3.3 EXPENSES. SCH is responsible for all expenses related to the management of SCH, including all Custodian fees and expenses, sub-adviser performance fees, sub-adviser asset-based fees, bank service fees, wire transfer fees, exchange fees, debit-balance interest and similar administrative and transaction costs. These costs and expenses will be debited to SCH as they are incurred and will be promptly paid by SCH. 4. MANAGEMENT FEE BILLING. SCH specifically authorizes its custodian Bank(s) to pay Advisor's fees upon receipt of Advisor's invoice, pursuant to the provisions of such fees as stated in section 3 of this agreement. 5. STANDARD OF CARE. SCH acknowledges that the investment strategies contemplated for SCH entail inherent risks and that Advisor does not guarantee either that SCH will realize any particular return or that there will not be losses by SCH. Advisor shall not be liable to SCH or any Custodian for Advisor's acts or omissions or SCH losses. 6. TERMINATION. This Agreement may be terminated by either party on 90 days' written notice. The incentive fee provisions of section 3.2 remain in effect until all investments made by SCH prior to the termination date have been sold, in the event of a termination by SCH. 7. MISCELLANEOUS 7.1 ASSIGNMENT. Advisor will not assign this Agreement without SCH's prior written consent. 7.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement. It supersedes all prior written and oral understandings on this subject. 7.3 GOVERNING LAW. This Agreement is governed by Bermuda law. 7.4 SUCCESSORS. This Agreement shall be binding upon, and inure to the benefit of, SCH and Advisor and their respective successors and permitted assigns. 7.5 SIGNATURES. Joseph Waechter Sunra Capital Holdings Ltd. -------------------------- ---------------------------- -----END PRIVACY-ENHANCED MESSAGE-----