24/7 MEDIA INC, S-1/A, 1999-04-14

24/7 MEDIA INC
S-1/A, 1999-04-14
ADVERTISING

Previous: LIL MARC INC, 10KSB, 1999-04-14

Next: CURTIS INTERNATIONAL LTD, 10QSB, 1999-04-14

Registration No. 333-70857

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
---------------

Amendment No. 2
to

FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

---------------

24/7 MEDIA, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7319 13-3995672
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1250 Broadway, New York, NY 10001
(212) 231-7100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

---------------

DAVID J. MOORE
Chief Executive Officer
24/7 Media, Inc.
1250 Broadway, New York, New York 10001
(212) 231-7100
Fax (212) 760-1081
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

---------------

Copies of Communications to:

<TABLE>
<S> <C>
Ronald R. Papa, Esq. Larry W. Sonsini, Esq.
Proskauer Rose LLP David Drummond, Esq.
1585 Broadway Wilson Sonsini Goodrich & Rosati
New York, New York 10036-8299 Professional Corporation
(212) 969-3000 650 Page Mill Road
Fax (212) 969-2900 Palo Alto, California 94304
(650) 493-9300
Fax (650) 493-6811
</TABLE>

---------------

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

---------------

The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

Subject to Completion
Preliminary Prospectus dated April 14, 1999

PROSPECTUS
- ----------

3,500,000 Shares

[Logo of 24/7 Media]

Common Stock

----------------

24/7 Media, Inc. is offering 2,000,000 shares of common stock and selling
stockholders are offering 1,500,000 shares. Our shares are traded on the Nasdaq
National Market under the symbol "TFSM." The last reported sale price of our
common stock on April 12, 1999 was $46.75. per share.

Investing in our common stock involves risks which are described in the
"Risk Factors" section beginning on page 5 of this prospectus.

----------------

<TABLE>
<CAPTION>
Per Share Total
----------- ------
<S> <C> <C>
Public Offering Price ............................ $ $
Underwriting Discount ............................ $ $
Proceeds, before expenses, to 24/7 Media ......... $ $
Proceeds to selling stockholders ................. $ $
</TABLE>

The underwriters may also purchase up to an additional 525,000 shares from
us at the public offering price, less the underwriting discount, within 30 days
from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

The shares of common stock will be ready for delivery in New York, New
York on or about , 1999.
----------------

Merrill Lynch & Co.

Allen & Company Incorporated

CIBC World Markets

J.P. Morgan & Co.

PaineWebber Incorporated

Wit Capital Corporation

----------------

The date of this prospectus is , 1999.

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>

EDGAR GRAPHIC-IMAGES DESCRIPTION:

INSIDE FRONT COVER

Graphic: Logo of Company
Language: 24/7 Media provides advertising solutions to advertisers and
Web sites by offering media expertise combined with sophisticated
technology. 24/7 Media reaches one-half of the online audience.
Source: Media Metrix, 2/99, indicating that 24/7 Media reached
over 31 million users representing 52.9% of the online
audience.

INSIDE FRONT GATEFOLD

Title: 24/7 MEDIA AT A GLANCE
Caption 1: STRATEGIES FOR CONTINUED GROWTH. 24/7 Media's objective is to
provide comprehensive advertising solutions for web sites and
maximize the effectiveness of Internet advertising campaigns.
- Expand our networks of Web sites.
- Maximize sales and marketing effectiveness.
- Increase value of ad inventory.
- Enhance capabilities of ad targeting technology.
- Provide highest level of customer service.

Caption 2: BRAND NAME WEB SITES. 24/7 Media provides advertising sales
solutions for more than 150 high profile Web sites. (see inside
back cover for additional Web sites).

Partes' FreeEdgar
cars.com
Match.com
AT&T WorldNet Service
MapQuest
Wall Street Sports
NetRadio Network
EarthLink
Reuters
Knight Ridder/Real Cities
HomeSeekers.com
Talk City

Caption 3: INDUSTRY GROWTH. Worldwide Internet advertising spending
is expected to increase from $1.5 billion in 1998 to $15.3
billion in 2003.
- Graphic bar chart depicting growth of the online advertising
industry.
- Source: Forrester Research, Media and Technologies Report,
August 1998.
- There can be no assurance that such rapid industry growth rates
will be achieved or that 24/7 Media will experience similar rates
of growth.

Caption 4: EXPERIENCED MANAGEMENT. 24/7 Media's senior managers have
extensive media sales and technology expertise. Combined: More
than 85 years experience in advertising sales and media and more
than 30 years experience in technology and operations.

Caption 5: REACH. During February 1999, the one billion impressions generated
by our networks of Web sites reached more than one-half of U.S.
Internet users.
- Graphic bar chart depicting our reach statistics relative to
those of other Web sites.
- Source: Media Metrix, Top Web Properties, December 1998. Media
Metrix does not rank ad networks.
*Based upon our list of Web sites submitted to Media Metrix.

Caption 6: ENHANCED TECHNOLOGY.

Breadth of tactics, precision in delivery.

24/7 Media provides online advertisers targeting opportunities
through a variety of tactics including banners, direct email,
sponsorships, promotions, syndicated content and emerchant
programs.

24/7 Media intends to further segment and target our audience by
employing our Profilz[TM] database. We continue to build and
enhance Profilz, a database of user profiles, through
contributions from several sources including Intelliquest, a
leading provider of data for interactive marketing; registration
data from 24/7's web publisher clients; opt-in email lists;
promotions/sweepstakes entries; and ecommerce transactions.

<PAGE>

Caption 7: PRESTIGIOUS ADVERTISERS. 24/7 Media maintains sales and marketing
relationships with leading Internet and traditional
advertisers and advertising agencies. (see inside back cover for
additional advertisers).

Ameritech
Anderson & Lembke
Bell South
Charles Schwab
Dell
Ford
J. Walter Thompson
Modem Media
Microsoft
Ogilvy & Mather

INSIDE BACK COVER

Caption: 24/7 MEDIA.
24/7 Media provides comprehensive sales solutions to top Web sites
and maintains sales and marketing relationships with leading
advertisers.
-(Advertisers:)

Ameritech
Anderson & Lembke
Bank of America
Barnes & Noble
BBDO Interactive
Bell South
Bozell Worldwide
Carat Freeman
Charles Schwab
Cone Interactive
Daytek
Dell
Eagle River Interactive
Ford
i-traffic
J. Walter Thompson
MicroWarehouse
Modem Media
Microsoft
Ogilvy & Mather
Preview Travel
Prodigy
USWeb/CKS

- This is a partial, but representative, list of our
advertisers and Web sites. [Names of Web sites to be inserted.]
- See the "Business" section of this prospectus for additional
advertisers and Web sites.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary ................................................................... 1
Risk Factors ......................................................................... 5
Use of Proceeds ...................................................................... 13
Dividend Policy ...................................................................... 13
Price Range of Common Stock .......................................................... 13
Forward-Looking Statements ........................................................... 13
Capitalization ....................................................................... 14
Dilution ............................................................................. 14
Selected Consolidated Financial Data ................................................. 15
Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Business ............................................................................. 24
Management ........................................................................... 34
Transactions between the Company and Officers, Directors and Principal Stockholders .. 42
Principal and Selling Stockholders ................................................... 44
Description of Capital Stock ......................................................... 46
Shares Eligible for Future Sale ...................................................... 48
Underwriting ......................................................................... 49
Legal Matters ........................................................................ 50
Experts .............................................................................. 50
Where You Can Find More Information .................................................. 51
Index to Financial Statements ........................................................ F-1
</TABLE>

----------------

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you different information. If anyone provides you different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus is accurate as of the date on the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.

(i)
<PAGE>

PROSPECTUS SUMMARY

This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. The terms "we" and "our
company" mean 24/7 Media, Inc., its subsidiaries and each of its predecessor
entities. Unless otherwise indicated, all information in this prospectus
assumes that the underwriters do not exercise their over-allotment option.

24/7 Media

Overview

We are an Internet advertising and direct marketing firm that enables both
advertisers and Web publishers to capitalize on the many opportunities presented
by Internet advertising, direct marketing and electronic commerce. We generate
revenue by selling advertisements and promotions for our Affiliated Web sites.
In particular, we operate:

o the 24/7 Network, a network of over 150 high profile Affiliated Web
sites to which we delivered an aggregate of more than 900 million
advertisements in December 1998;

o the ContentZone, a network of over 2,500 small to medium-sized
Affiliated Web sites to which we delivered an aggregate of more than
50 million advertisements in December 1998; and

o the 24/7 Media Europe Network, a network of over 60 Web sites that
generated an aggregate of more than 200 million page views in December
1998, through our recently acquired 60% owned subsidiary, 24/7 Media
Europe, Ltd.

In addition, we are supporting the development of the 24/7 Media Asia
Network through an agreement with China.com Corporation.

We believe that advertisers seek to place Internet ads in ways to maximize
unduplicated "reach," which is the number of unique Web users that visit a Web
site or set of Web sites at least once in a given month. According to Media
Metrix, our networks reached 52.9% of all U.S. Internet users in February 1999.
We believe that this reach figure is among the highest in the Internet
advertising industry.

We plan to aggressively recruit Web sites, both domestically and
internationally, for our networks. We expect this strategy to further extend
our reach, provide advertisers with a broad and diverse base of online content
and Web page views, and improve our brand awareness and visibility with media
buyers.

In addition, as online advertisers and direct marketers increase their use
of the Internet, they seek solutions and technologies that allow them to
efficiently deliver highly targeted messages. Our customized solutions allow
advertisers and direct marketers to tailor their ad campaigns to reach desired
audiences, while reducing costs, easing time pressures and alleviating the need
to purchase a series of ad campaigns from numerous Web publishers. We are
currently working on several initiatives to increase our targeting
capabilities, including the development of our Profilz[TM] database.

As Internet traffic grows, Web publishers increasingly seek to maximize
the value of their online advertising inventory. Our extensive sales and
marketing experience provides Web publishers access to media buyers at large ad
agencies and enables them to sell advertising without incurring the costs and
challenges associated with building and maintaining an ad sales force.

Our senior management team includes several individuals with over fifteen
years of experience in advertising sales in the television and proprietary
online network industries. Other members of senior management contribute
extensive knowledge of ad serving technology and data base targeting. We
leverage our media sales and technology expertise to maximize the value of ad
campaigns for both advertisers and Affiliated Web sites.

Our principal executive offices are located at 1250 Broadway, New York,
New York, 10001, and our telephone number at that location is (212) 231-7100.
Our company's main Web site address is www.247media.com.

1
<PAGE>

RECENT DEVELOPMENTS

Acquisition of Sift, Inc. On March 10, 1999, we announced the acquisition
of Sift, Inc., a provider of e-mail-based direct marketing services, in
exchange for approximately 763,000 shares of our common stock.

Sift provides a suite of services for Internet-enabled, database-driven
e-mail marketing, including an e-mail distribution service bureau, list
management services, and a service that appends e-mail addresses to existing
customer database lists. Sift manages and rents e-mail databases containing more
than three million e-mail addresses of customers that have elected to receive
material of interest to them via e-mail. These e-mail addresses are segmented by
demographic, lifestyle, and avocational/vocational interest criteria. Sift's
direct marketing services are used by more than 200 technology, publishing and
direct marketing firms, including Cahner's Business Information, Cisco Systems,
Dell Computer, Dun & Bradstreet, Experian, Hearst Books/Business Publishing,
Intel, Netscape Communications, Oracle, RealNetworks, and Scholastic.

As a result of the Sift acquisition, we expect to be able to offer
customer relationship management programs as a complement to our existing list
of services. Our advertising clients are expected to be able to e-mail product
and service information to prospective and existing clients either by renting
Sift's elective e-mail lists or by providing their own customer databases to
which Sift will append e-mail addresses. We plan to integrate these services
with our Profilz database. Sift will continue to operate from its Sunnyvale,
California offices while integrating its sales function with our national sales
force.

Local Market Affiliation Agreement with NBC. On March 17, 1999, we
announced an exclusive agreement with NBC-Interactive Neighborhood that allows
us to sell advertising on NBC network television stations and their associated
Web sites at the local market level. Under the terms of the agreement, we will
recruit, train and staff sales and support personnel who will operate out of
the local NBC stations as well as in our regional offices. We will also jointly
provide ad sales consulting and regional representation services to more than
100 NBC stations that are currently affiliated with NBC-IN.

We will collaborate with NBC-IN on the development of advertising packages
that leverage the reach and brand-building strengths of NBC local television
with the direct response data collection and marketing functionality of NBC's
local station Web sites. Initial launch markets include NBC-owned and operated
stations in New York, Los Angeles, Chicago, Washington, D.C., Dallas and San
Diego with initial plans to follow in an additional 14 broadcast station
markets.

Cross Promotion Agreement and Equity Exchange with TechWave Inc. On April
5, 1999, we entered into a cross promotion agreement with TechWave Inc.
TechWave provides e-commerce technology and enabling services, an online
shopping network, creative design services, and product fulfillment to
15,000 Web sites.

Under this agreement, we will promote TechWave's services to our
Affiliated Web sites while TechWave will promote our advertising representation
and e-mail management services to TechWave's clients. In addition, we will
co-brand our Click2Buy transactional banner service with TechWave's ShopNow e-
commerce Web site, an online shopping destination. Each party will receive a
share of the other party's revenues generated under the cross promotion
agreement.

We also agreed to acquire 19.8% of TechWave in exchange for consideration
totalling $30.1 million. The purchase price consists of two parts:

o $5.0 million, to be paid out of the proceeds of this offering, only if
the offering is consummated; and

o shares of our common stock with a value equal to $30.1 million, less
any cash paid. If the consideration is paid entirely in shares of our
common stock, a total of 614,756 shares will be issued.

2
<PAGE>

The Offering

<TABLE>
<S> <C>
Common stock offered by 24/7 Media ......... 2,000,000 shares
Common stock offered by the selling
stockholders .............................. 1,500,000 shares
Total offering ........................... 3,500,000 shares
Common stock to be outstanding after the
offering .................................. 18,432,244 shares(1)
Use of proceeds ............................ For general corporate purposes, including working capital,
expansion of sales and marketing capabilities, capital
expenditures and possible acquisitions. See "Use of
Proceeds."
Risk factors ............................... See "Risk Factors" for a discussion of factors you should
carefully consider before deciding to invest in our
common stock.
Nasdaq National Market symbol .............. TFSM
</TABLE>

------------
(1) Excludes approximately 2,156,208 shares of common stock issuable upon
exercise of stock options outstanding at March 12, 1999 granted under our
1998 stock incentive plan (of which 53,233 are vested and exercisable at
March 12, 1999) and approximately 514,837 shares of common stock reserved
for issuance pursuant to future grants under the 1998 stock incentive plan.
The outstanding stock options have a weighted average exercise price of
$15.69 per share. Also excludes:

o approximately 3,327,985 shares of common stock issuable upon exercise
of outstanding warrants at March 12, 1999. Such warrants have a
weighted average exercise price of $9.96 per share; and

o shares of common stock and options to purchase common stock issued on
March 8, 1999 in the Sift acquisition.

3
<PAGE>

Summary Consolidated Financial Data

<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
-------------------------- ---------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1997 1998 1998 1998 1998 1998
------------- ------------ ------------- ------------- -------------- --------------
(In thousands, except for share and per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Historical
- ----------------------------------
Consolidated Statements of Operations Data:
Advertising revenue ............. $ 1,467 $ 19,744 $ 1,076 $ 3,661 $ 5,462 $ 9,545
Consulting and license fees ..... 1,681 119 -- 40 66 13
Total revenue ................. 3,148 19,863 1,076 3,701 5,528 9,558
Gross profit .................... 1,493 3,893 146 603 912 2,232
Operating loss .................. (5,210) (25,394) (2,131) (9,873) (6,101) (7,289)
Net loss ........................ (5,306) (24,723) (2,298) (9,838) (5,856) (6,731)
Cumulative dividends on
mandatorily redeemable
convertible preferred stock..... -- (276) (34) (152) (90) --
Net loss attributable to
common stockholders ............ (5,306) (24,999) (2,332) (9,990) (5,946) (6,731)
========== ========== ========== ========== =========== ===========
Basic and diluted net loss per
share .......................... $ (4.88) $ (2.62) $ (0.76) $ (1.27) $ (0.51) $ (0.43)
========== ========== ========== ========== =========== ===========
Weighted average shares
outstanding .................... 1,086,614 9,533,056 3,055,432 7,892,251 11,737,255 15,496,638
</TABLE>

<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------
Actual As Adjusted (1)
---------- ----------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents ............................................... $33,983 $121,341
Working capital ......................................................... 32,226 119,584
Goodwill, net ........................................................... 10,935 10,935
Total assets ............................................................ 62,716 150,074
Obligations under capital leases, excluding current installments ........ 34 34
Total stockholders' equity .............................................. 51,946 139,304
</TABLE>

- ----------------

(1) Adjusted to reflect our sale of 2,000,000 shares of common stock, the net
proceeds from which are estimated to be approximately $87.4 million after
deducting underwriting discounts and estimated offering expenses payable by
us. We intend to use the net proceeds of the offering for general corporate
purposes, including working capital, capital expenditures, the expansion of
our operations, and sales and marketing capabilities. See "Use of
Proceeds."

4
<PAGE>

RISK FACTORS

You should carefully consider the following risk factors before you decide
to buy our common stock. These risks may adversely impair our business
operations.

We have an extremely limited operating history

None of our predecessor companies had an operating history of more than
four years. We, therefore, have an extremely limited operating history. You
must consider the risks, expenses and difficulties typically encountered by
companies with limited operating histories, particularly companies in new and
rapidly expanding markets such as Internet advertising. To address these risks,
among other things, we must effectively:

o develop new relationships and maintain existing relationships with
Affiliated Web sites, advertisers, and other third parties;

o further develop and upgrade our technology;

o respond to competitive developments;

o implement and improve operational, financial and management
information systems; and

o attract, retain and motivate qualified employees.

We are integrating several companies that we have acquired

We were formed in January 1998 to consolidate three Internet advertising
companies and have since acquired three companies and a majority interest in
two others. In combining these entities, we have had to integrate and improve
our financial and management controls, ad serving technology, reporting systems
and procedures, and expand, train and manage our work force. Although we
continue this process of integration, completion of such integration may take a
significant period of time and will require the dedication of management and
other resources, which may distract management's attention from our other
operations.

We anticipate continued losses and we may never be profitable

We incurred net losses of $5.3 million and $24.7 million for the years
ended December 31, 1997 and 1998, respectively, and each of our predecessors
had net losses in every year of their operation. We anticipate that we will
incur operating losses for the foreseeable future due to a high level of
planned operating and capital expenditures. Although our revenue has grown
rapidly in recent periods, such growth may not continue and may not lead to
profitability.

Our quarterly operating results may fluctuate widely

Our results of operations may fluctuate significantly in the future as a
result of a variety of factors, many of which are beyond our control. These
factors include:

o the addition of new or loss of current advertisers or Affiliated Web
sites;

o changes in fees paid by advertisers;

o changes in service fees payable by us to Web publishers, or ad serving
fees payable by us to third parties;

o the introduction of new Internet advertising services by us or our
competitors;

o variations in the levels of capital or operating expenditures and
other costs relating to the expansion of our operations; and

o general economic conditions.

Our future revenues and results of operations may be difficult to forecast due
to the above factors.

We believe that our revenues are also subject to seasonal fluctuations
because advertisers generally place fewer advertisements during the first and
third calendar quarters of each year. Expenditures by advertisers tend to vary
in cycles that reflect overall economic conditions as well as budgeting and
buying patterns. Our revenue could be materially reduced by a decline in the
economic prospects of advertisers or the economy in general, which could alter
current or prospective advertisers' spending priorities or budget cycles or
extend our sales cycle.

5
<PAGE>

Our expense levels are based in large part on our investment plans and
estimates of future revenues. In particular, we expect to significantly
increase our operating expenses and capital expenditures to expand our sales
and marketing organization and to develop and integrate our Profilz and ad
serving technologies. Such expenses may precede or may not be followed by
increased revenues, as we may be unable to, or may elect not to, adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.

Due to the above factors, we believe that period-to-period comparisons of
our results of operations may not be meaningful. You should not rely on past
periods as indicators of future performance. In future periods, our results of
operations may fall below the expectations of securities analysts and
investors, which could adversely affect the trading price of our common stock.

The Internet advertising market is new and unproven and may not continue to
develop

The Internet as an advertising medium has not been in existence for a
sufficient period of time to demonstrate its effectiveness. Our business would
be adversely affected if the Internet advertising market fails to develop. Most
of our current or potential advertising customers have not devoted a
significant portion of their advertising expenditures to Internet advertising
and may not find Internet advertising to be effective for promoting their
products and services relative to advertising across traditional media.
Companies adopting Internet advertising must accept new ways of conducting
business and exchanging information.

There are currently no widely accepted standards to measure the
effectiveness of Internet advertising. We cannot be certain that such standards
will develop to sufficiently support Internet advertising as a significant
advertising medium. Advertisers may not accept our or third-party measurements
of impressions on Web sites utilizing our services. In addition, the
effectiveness of Internet advertising depends on the accuracy of information
contained in the databases used to target advertisements. We cannot be certain
that the information in our database will be accurate or that advertisers will
be willing to have advertisements targeted by any database containing such
potential inaccuracies. Actual or perceived ineffectiveness of online
advertising in general, or accuracy of measurements or database information in
particular, could limit the long-term growth of online advertising.

Banner advertising, from which we currently derive most of our revenues,
may not be an effective advertising method in the future. We cannot be certain
that any other forms of Internet advertising will be developed or accepted by
the market. Even if new methods are developed, we may not be able to take
advantage of them. Moreover, "filter" software programs that limit advertising
from being delivered to a Web site are currently available. The Internet
advertising market and our business could be adversely affected if use of
filter software becomes widespread.

Adoption of online direct marketing, particularly by those entities that
have historically relied upon traditional means of direct marketing, such as
telemarketing and direct mail, requires the broad acceptance of a new and
substantially different approach to direct marketing. Intensive marketing and
sales efforts may be necessary to educate prospective advertisers regarding the
uses and benefits of our products and services to generate demand for our
services. Enterprises may be reluctant or slow to adopt a new approach that may
replace, limit, or compete with their existing systems. In addition, since
online direct marketing is emerging as a new and distinct market apart from
online advertising, potential adoptors of online direct marketing services will
increasingly demand functionality tailored to their specific requirements.

We rely on a limited number of Web publishers and the 24/7 Network generates
substantially all of our revenues

The 24/7 Network generates substantially all of our revenues and it
consists of a limited number of Affiliated Web sites that have contracted for
our services under agreements cancellable generally upon a short notice period.
For the years ended December 31, 1997 and 1998, approximately 68% and 47%,
respectively, of the 24/7 Network's pro forma advertising revenues were derived
from advertisements on the top ten Affiliated Web sites on the 24/7 Network.
For the year ended December 31, 1998, the top ten Web sites included AT&T
WorldNet Service, Netscape Communications, Encompass, Reuters, Comedy Central,
TreeLoot, EarthLink, MapQuest, The Mining Company and Live World Productions.
The top ten Web sites for the year ended December 31, 1997 on a pro forma basis
included AT&T WorldNet Service, Reuters, USA.NET, Columbia House, Comedy
Central, Reuters-MoneyNet, Maps on Us, Universal Media, FlashNet

6
<PAGE>

Communications and FoxNews Internet. We experience turnover from time to time
among our Affiliated Web sites, and we cannot be certain that the Web sites
named above remain or will remain associated with us.

Affiliated Web sites generally measure satisfaction by acceptable revenue
levels, high levels of customer service and timely and accurate reporting.
Levels of traffic on Affiliated Web sites may not remain consistent or increase
over time, and we may be unable to replace any departed Affiliated Web site
with another Web publisher with comparable traffic patterns and user
demographics. The loss or reduction in traffic on these Web sites may cause
advertisers or Web publishers to withdraw from the 24/7 Network which in turn
could lower our reach.

We rely on a limited number of advertisers and ad agencies

We generate our revenues from a limited number of advertisers and ad
agencies that purchase space on Affiliated Web sites. We expect that a limited
number of these entities may continue to account for a significant percentage
of our revenues for the foreseeable future. For the years ended December 31,
1997 and 1998, our top ten advertisers and ad agencies accounted for an
aggregate of approximately 48% and 38%, respectively, of the 24/7 Network's pro
forma advertising revenues. See "Management's Discussion and
Analysis--General."

Advertisers and ad agencies typically purchase advertising under purchase
order agreements that run for a limited time. We cannot be certain that current
advertisers and ad agencies will continue to purchase advertising from us or
that we will be able to attract additional advertisers and ad agencies
successfully, or that agencies and advertisers will make timely payment of
amounts due to us.

Our development of a next generation ad serving technology may not be
successful and may cause business disruption

We are currently developing a next generation ad serving technology that
is intended to serve as our sole ad serving solution. To complete this
development, we must, among other things, ensure that this technology will
function efficiently at high volumes, interact properly with our Profilz
database, offer all the functionality demanded by our customers and assimilate
our sales and reporting functions. This development effort could fail
technologically or could take more time than expected. Even if we successfully
address all these challenges, we must then work with our Affiliated Web sites
to transition them to our new system, which would also create a risk of
business disruption and loss of Affiliated Web sites.

We currently depend on third party ad serving technology

Unless and until the development of and transition to our own ad serving
technology is complete, we will be primarily dependent on AdForce, Inc. to
deliver ads to our networks and Web sites. If such service becomes unavailable
or fails to serve our ads properly or fails to produce the frequent operational
reports required, our business would be adversely affected.

Additionally, our use of multiple systems to serve ads requires us to
employ significant effort to prepare information for billing, Web site
statements and financial reporting. We are upgrading our systems to integrate a
new accounting system with our ad serving technologies to improve our
accounting, control and reporting methods. Our inability to upgrade our existing
reporting systems and streamline our procedures may cause delays in the timely
reporting of financial information.

Our markets are highly competitive

The markets for Internet advertising and related products and services are
intensely competitive and such competition is expected to increase. We believe
that our ability to compete depends upon many factors both within and beyond
our control, including:

o the timing and market acceptance of new products and enhancements of
existing services developed by us and our competitors;

o changing demands regarding customer service and support;

o shifts in sales and marketing efforts by us and our competitors; and

o the ease of use, performance, price and reliability of our services
and products.

7
<PAGE>

Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. We cannot be certain that we will
be able to successfully compete against current or future competitors.

In addition, the Internet must compete for a share of advertisers' total
budgets with traditional advertising media, such as television, radio, cable
and print. To the extent that the Internet is perceived to be a limited or
ineffective advertising medium, advertisers may be reluctant to devote a
significant portion of their advertising budgets to Internet advertising, which
could limit the growth of Internet advertising.

Technological change may render our services obsolete

The Internet market is characterized by rapidly changing technology,
evolving industry standards, frequent new product announcements and
enhancements, and changing customer demands. The introduction of new products
and services embodying new technologies and the emergence of new industry
standards can render existing products and services obsolete. Our success
depends on our ability to adapt to rapidly changing technologies and to improve
the performance, features and reliability of our services and products in
response to changing customer and industry demands. Furthermore, we may
experience difficulties that could delay or prevent the successful design,
development, testing, introduction or marketing of services. New services or
enhancements to existing services may not adequately meet the requirements of
our current and prospective advertisers and Affiliated Web sites or achieve any
degree of significant market acceptance.

We depend on the continued viability of the Web infrastructure

Our success depends upon the development and maintenance of a viable Web
network infrastructure. The current Web infrastructure may be unable to support
an increased number of users. The timely development of products such as high
speed modems and communications equipment will be necessary to continue
reliable Web access. Furthermore, the Web has experienced outages and delays as
a result of damage to portions of its infrastructure. Such outages and delays,
including those resulting from Year 2000 problems, could adversely affect Web
sites and the level of traffic on our networks. The effectiveness of the Web
may decline due to delays in the development or adoption of new standards and
protocols designed to support increased levels of activity. Even if such
infrastructure, standards or protocols or complementary products, services or
facilities are developed, we may be required to incur substantial expenditures
to adapt our services to changing or emerging technologies.

We depend on third parties to maintain our critical systems

A key to our strategy is to generate a high volume of traffic for our
products and services. In particular, our success depends on the performance of
our proprietary ad serving technology and services of third parties, including
AdForce and other ad serving technologies. Our primary computer hardware and
software is housed at GlobalCenter, Inc., a third party provider of Internet
communication services. See "Business--Facilities and Systems." Any proprietary
or third party ad server system failure, including failures that delay the
delivery of advertisements to Web sites, could reduce customer satisfaction.

In general, our operations are dependent upon the proper operation of our
own and third party computer systems. Any damage from fire, power loss,
telecommunications failures, vandalism and other malicious acts, human error,
and similar unexpected events could adversely affect our business. In addition,
failure of our telecommunications providers to provide the data communications
capacity in the time frame required by us could cause interruptions in the
services we provide. Large increases in the volume of advertising delivered
through our ad servers could strain the capacity of the software or hardware we
deploy, which could lead to slower response time or system failures. Despite
precautions taken by us, unanticipated problems affecting our computer and
telecommunications systems in the future could cause interruptions in the
delivery of our services.

8
<PAGE>

We must continue to successfully manage rapid growth

We have experienced rapid growth and expansion in operations that have
placed a significant strain on our managerial, operational and financial
resources. We have grown from approximately 60 employees on a pro forma basis
as of September 30, 1997 to approximately 200 employees as of December 31,
1998. We expect the number of employees to increase in the future. To
successfully compete in the evolving Internet industry, we must:

o continue to improve our financial and management controls;

o enhance our reporting systems and procedures;

o continue to scale our ad serving systems and upgrade their functional
capabilities; and

o expand, train and manage our work force.

We cannot be certain that our systems, procedures or controls will be adequate
to support our expanding operations, or that management will be able to respond
effectively to such growth. Our future results of operations also depend on the
expansion of our sales, marketing and customer support departments.

Acquisitions or strategic investments may divert management attention and
consume resources

We intend to continue pursuing selective acquisitions of businesses,
technologies and product lines as a key component of our growth strategy. We
regularly seek to acquire or invest in companies or assets that will enhance
our revenue growth, operations and profitability. Any future acquisition or
investment may result in the use of significant amounts of cash, potentially
dilutive issuances of equity securities, incurrence of debt and amortization
expenses related to goodwill and other intangible assets. In addition,
acquisitions involve numerous risks, including:

o the difficulties in the integration and assimilation of the
operations, technologies, products and personnel of an acquired
business;

o the diversion of management's attention from other business concerns;

o the availability of favorable acquisition financing for future
acquisitions; and

o the potential loss of key employees of any acquired business.

Our inability to successfully integrate any acquired company could
adversely affect our business.

Our international expansion may pose new legal and cultural challenges

We have operations in a number of international markets. We intend to
continue to expand our international operations and international sales and
marketing efforts. To date, we have limited experience in marketing, selling
and distributing our solutions internationally. International operations are
subject to other inherent risks, including:

o changes in regulatory requirements;

o reduced protection for intellectual property rights in some countries;

o potentially adverse tax consequences;

o general import/export restrictions relating to encryption technology
and/or privacy;

o difficulties and costs of staffing and managing foreign operations;

o political and economic instability;

o fluctuations in currency exchange rates; and

o seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world.

In addition to these factors, due to our minority stake in the 24/7 Media
Asia Network, we are relying on China.com Corporation to conduct operations,
establish our network, aggregate Web publishers and coordinate sales and
marketing efforts. The success of the 24/7 Media Asia Network is directly
dependent on the success of China.com Corporation and its dedication of
sufficient resources to our relationship.

9
<PAGE>

We depend upon our CEO and principal sales managers and other senior managers
to grow

Our success depends upon our senior management and key sales and technical
personnel, particularly David J. Moore, Chief Executive Officer, and Jacob I.
Friesel, Executive Vice President. The loss of the services of one or more of
these persons could materially adversely affect our business. Our success also
depends on our ability to attract and retain qualified technical, sales and
marketing, customer support, financial and accounting, and managerial
personnel. Competition for such personnel in the Internet industry is intense,
and we cannot be certain that we will be able to retain our key personnel or
that we can attract, integrate or retain other highly qualified personnel in
the future. We have experienced in the past, and may continue to experience in
the future, difficulty in hiring and retaining candidates with appropriate
qualifications, especially in sales and marketing positions. Although we have
not experienced any material impact from the difficulty in hiring and retaining
qualified employees, we may be materially impacted in the future from such
hiring difficulties.

We rely on proprietary rights that may not adequately protect our intellectual
property and we may be held liable for infringing the rights of others

We rely upon patent, trademark, copyright and trade secret laws to protect
our intellectual property. We have pursued the protection of our trademarks by
applying to register them in the United States and internationally. We own a
registration for the 24/7 Media trademark in the United States. Our trademark
registrations or patent applications may not be approved or granted or may be
successfully challenged by others or invalidated through administrative process
or litigation. If our trademark registrations are not approved or granted due
to the prior issuance of trademarks to third parties or for other reasons, we
may be unable to enter into arrangements with such third parties on
commercially reasonable terms to allow us to continue to use such trademarks.
Such patent, trademark, copyright and trade secret protection may not be
available in every country in which our services are distributed or made
available.

In addition, we protect our proprietary rights through the use of
confidentiality agreements with employees and affiliates. We also license
proprietary rights to third parties. There is a risk that:

o these agreements and licenses may not provide adequate protection of
our proprietary rights;

o our employees and affiliates may not keep such information
confidential; and

o this proprietary information will otherwise become known, or be
independently developed by competitors.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and we cannot be certain as to the future
viability or value of any of our proprietary rights within the industry. The
steps we take to protect our proprietary rights may not be adequate and third
parties may infringe or misappropriate our proprietary rights. Claims of
alleged infringement of the trademarks and other intellectual property rights
of third parties by us and our business partners could subject us to
significant liability for damages and could result in invalidation of our
proprietary rights and, even if not meritorious, could be time-consuming and
expensive to defend, and could result in the diversion of management time and
attention.

Privacy concerns may prevent us from selling demographically targeted
advertising

We are developing our Profilz database to collect data derived from user
activity on our networks and from other sources. We cannot be certain that any
trade secret, copyright or other protection will be available for such data or
that others will not claim rights to such data. We must also keep information
regarding Web publishers confidential under our contracts with Web publishers.

Ad serving technology enables the use of "cookies," in addition to other
mechanisms, to deliver targeted advertising, to help compile demographic
information, and to limit the frequency with which an advertisement is shown to
the user. Cookies are bits of information keyed to a specific server, file
pathway or directory location that are stored on a user's hard drive and passed
to a Web site's server through the user's browser software. Cookies are placed
on the user's hard drive without the user's knowledge or consent, but can be
removed by the user at any time. Due to privacy concerns, some Internet
commentators, advocates and governmental bodies have suggested that the use of
cookies be limited or eliminated. Any limitation on our ability to use cookies
could impair our targeting capabilities and adversely affect our business.

10
<PAGE>

Potential government regulation may hinder our growth

Due to the increasing popularity and use of the Web, laws and regulations
may be adopted regarding user privacy, pricing, acceptable content, taxation
and quality of products and services. Although there are currently few laws or
regulations directly governing access to or commerce on the Internet, any new
legislation could inhibit the growth in use of the Web and decrease the
acceptance of the Web as a communications and commercial medium, which could
have a material adverse effect on our business, results of operations and
financial condition.

Further, due to the global nature of the Web, governments of states or
foreign countries may attempt to regulate Internet transmissions or levy sales
or other taxes relating to our activities. We cannot be certain that violations
of local laws will not be alleged by applicable governments or that we will not
violate such laws or new laws will not be enacted in the future. Moreover, the
applicability of existing laws governing issues such as property ownership,
libel and personal privacy is uncertain in regards to the Internet.

Our failure to be year 2000 compliant could adversely affect us

Beginning in the year 2000, the date fields coded in software products and
computer systems will need to accept four digit entries in order to distinguish
21st century dates from 20th century dates. Significant uncertainty exists in
the software industry concerning the potential effects associated with such
compliance issues. We cannot assure you that all of our material operating
software and systems will be Year 2000 compliant. We are working with our
external suppliers and service providers to ensure that they and their systems
will be able to support our needs and, where necessary, interoperate with our
hardware and software infrastructure in preparation for the year 2000. We do
not anticipate that we will incur material expenses to make our computer
software programs and operating systems Year 2000 compliant. However, we cannot
be certain that unanticipated costs associated with any Year 2000 compliance
will not exceed our present expectations.

In addition, our ad servers and our customers may also be impacted by Year
2000 complications. Any failure by us, our ad servers or our customers to make
their products Year 2000 compliant could result in:

o a decrease in sales of our products;

o an increase in the allocation of resources to address Year 2000
problems without additional revenue commensurate with such dedication
of resources; or

o an increase in litigation costs relating to losses suffered by our
customers due to such Year 2000 problems. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

Our principal stockholders, officers and directors can act together to
substantially influence our business and policies

After this offering, the directors and executive officers and their
affiliates will beneficially own approximately 36.6% of the outstanding common
stock. As a result, these stockholders will be able to exercise substantial
control over all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in our control. See "Management" and "Security Ownership of Certain
Beneficial Owners and Management."

The broad discretion we have to use the proceeds of this offering may increase
the risk that they will not be used effectively

The net proceeds of this offering will be added to our working capital and
will be available for general corporate purposes, including capital
expenditures and potential future acquisitions. As of the date of this
prospectus, we cannot specify with certainty the particular uses for the net
proceeds to be received upon completion of this offering. Accordingly, our
management will have broad discretion in the application of the net proceeds.
See "Use of Proceeds."

Sales of substantial amounts of our common stock after this offering could
decrease our stock price

We will have 18,432,244 shares of common stock outstanding after this
offering. Sale of a large number of shares could have an adverse effect on the
market price of our common stock. The 3,550,000 shares sold in our initial
public offering, the 3,500,000 shares to be sold in this offering and 271,074
shares already issued

11
<PAGE>

pursuant to our registration statement on Form S-8 generally will be
eligible for immediate sale in the public market without restriction and
250,000 shares that have been sold pursuant to Rule 144 and are eligible
for sale in the public market without restriction. The remaining
11,111,170 shares of common stock held by existing stockholders are
"restricted securities" within the meaning of Rule 144 under the
Securities Act and may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144,
144(k) or 701 promulgated under the Securities Act. Our directors,
officers and other stockholders who after the offering will hold an
aggregate of 6,301,047 of our outstanding shares have agreed that they
will not sell, directly or indirectly, any common stock without the
prior consent of the representatives of the underwriters for a period of
90 days from the date of this prospectus. See "Underwriting." As a
result of contractual and legal restrictions, additional shares will be
available for sale in the public market as follows:

o 4,560,123 shares may be eligible for sale upon the expiration of their
respective one-year holding periods which for a majority of these
shares occurred on or before April 12, 1999; and

o 6,301,047 shares may be eligible for sale upon the expiration of
lock-up agreements 90 days after the date of this prospectus.

In addition, there are outstanding options to purchase 2,156,208 shares of
common stock, 263,472 of which will, upon exercise, be eligible for sale in the
public market not more than 90 days after the date of this prospectus. There are
also outstanding warrants to purchase 3,327,985 shares of common stock, 216,024
of which may be eligible for sale upon the expiration of their respective
one-year holding periods, which generally occurred on or before April 12, 1999
and 3,111,961 of these warrant shares will be eligible for sale in the public
market after expiration of lock-up agreements 90 days after the date of this
prospectus. In addition, stockholders that own approximately 6,500,000 shares of
common stock have the right to include their shares in future registration
statements. See "Shares Eligible For Future Sale."

Our share price may continue to be very volatile

The trading price of our common stock has fluctuated widely in its short
history and is likely to continue to be highly volatile and subject to wide
fluctuations caused by, among other things:

o investors' perceptions;

o variations in quarterly results of operations;

o the gain or loss of significant advertisers or Affiliated Web sites;

o changes in our revenue or earnings estimates by industry analysts;

o announcements of technological innovations or new services by us or
our competitors; or

o general conditions in the economy in general or in Internet-related
industries.

In addition, the stock market in general has experienced extreme price and
volume fluctuations that have affected the market price for many companies in
industries similar or related to ours and that have been unrelated to the
operating performance of these companies. These market fluctuations may have a
material adverse effect on the market price of our common stock.

12
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 2,000,000 shares of common stock
sold by us in this offering are estimated to be approximately $87.4 million
(approximately $110.6 million if the underwriters' overallotment option is
exercised in full) based on an assumed offering price of $46.75 per share, after
deducting underwriting discounts and estimated offering expenses payable by us.

We intend to use the net proceeds of this offering for general corporate
purposes, including working capital, and for the expansion of our operations
and sales and marketing capabilities. In addition, we may use a portion of the
net proceeds of this offering to acquire or invest in complementary businesses,
technologies, services or products. As of the date of this prospectus, we
cannot specify with certainty the particular uses for the net proceeds to be
received upon completion of this offering. Accordingly, our management will
have broad discretion in the application of the net proceeds. Pending such
uses, the net proceeds will be primarily invested in short-term, investment
grade instruments, certificates of deposit or direct or guaranteed obligations
of the United States.

DIVIDEND POLICY

We have not declared or paid any dividends on our capital stock since our
inception and do not anticipate paying dividends in the foreseeable future. Our
current policy is to retain earnings, if any, to finance the expansion of the
our business. The future payment of dividends will depend on the results of
operations, financial condition, capital expenditure plans and other factors
that we deem relevant and will be at the sole discretion of our board of
directors.

PRICE RANGE OF COMMON STOCK

Since our initial public offering on August 13, 1998, our common stock has
traded on the Nasdaq National Market under the symbol "TFSM." The following
table sets forth the high and low closing prices of the common stock, for the
periods indicated, as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
High Low
--------- --------
<S> <C> <C>
Year Ended December 31, 1998
Third Quarter (from August 14, 1998) ......... $20 1/4 $ 6 3/4
Fourth Quarter ............................... 34 1/8 6 3/8
Year Ending December 31, 1999
First Quarter ................................ $51 1/2 $23 1/4
Second Quarter (to April 12, 1999) ........... 51 5/8 46 3/4
</TABLE>

On April 12, 1999, the last reported sale price for our common stock on the
Nasdaq National Market was $46.75. As of April 12, 1999, there were
approximately 247 holders of record of our common stock.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. We intend such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and we are including this
statement for purposes of complying with these safe harbor provisions. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth under "Risk Factors".

Words such as "expect", "anticipate", "intend", "plan", "believe",
"estimate" and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus might not occur.

13
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998
(i) on an actual basis and (ii) on an as adjusted basis to give effect to our
sale of 2,000,000 shares of common stock, after deducting underwriting
discounts and estimated offering expenses payable by us. See "Use of Proceeds."
The capitalization information stated in the table below should be read in
conjunction with the more detailed Consolidated Financial Statements and Notes
thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
December 31, 1998
---------------------------
Actual As Adjusted
------------ ------------
(In thousands, except share
and per share amounts)
<S> <C> <C>
Obligations under capital leases, excluding current installments ......... $ 34 $ 34
Stockholders' equity(1) ..................................................
Preferred stock, $.01 par value; 10,000,000 shares authorized;
no shares issued and outstanding on an actual
or as adjusted basis .................................................. -- --
Common stock, $.01 par value; 70,000,000 shares authorized;
15,718,873 shares issued and outstanding actual; 17,718,873
shares issued and outstanding on an as adjusted basis ................. 157 177
Additional paid-in-capital ............................................. 90,438 177,776
Deferred stock compensation ............................................ (345) (345)
Accumulated deficit .................................................... (38,304) (38,304)
--------- ---------
Total stockholders' equity ............................................ 51,946 139,304
--------- ---------
Total capitalization ................................................. $ 51,980 $ 139,338
========= =========
</TABLE>

- ------------

(1) Excludes approximately 2,156,208 shares of common stock issuable upon
exercise of stock options outstanding at March 12, 1999 granted under our
1998 stock incentive plan (of which 53,233 are vested and exercisable at
March 12, 1999) and approximately 514,837 shares of common stock reserved
for issuance pursuant to future grants under the 1998 stock incentive
plan. The outstanding stock options have a weighted average exercise price
of $15.69 per share. Also excludes:

o approximately 3,327,985 shares of common stock issuable upon exercise
of outstanding warrants at March 12, 1999. Such warrants have a
weighted average exercise price of $9.96 per share; and

o shares of common stock and options to purchase common stock issued on
March 8, 1999 in the Sift acquisition.

DILUTION

As of December 31, 1998, our net tangible book value was $40,995,000 in
the aggregate, or $2.61 per share. Net tangible book value per share represents
our total tangible assets less total liabilities, divided by the number of
outstanding shares of common stock. Dilution per share represents the
difference between the amount per share paid by investors in this offering of
common stock and the net tangible book value per share after the offering.
After giving effect to the sale of 2,000,000 shares of common stock and after
our application of the estimated net proceeds from the offering, our net
tangible book value as of December 31, 1998 would have been $128,353,000 in the
aggregate, or $7.24 per share. This represents an immediate increase in net
tangible book value of $4.63 per share to existing shareholders and an
immediate dilution in net tangible book value of $39.51 per share to new
investors purchasing shares of common stock in the offering. If the public
offering price is higher or lower, the dilution to the new investors will
increase or decrease accordingly. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share ....................................... $ 46.75
Net tangible book value per share before the offering ............... $ 2.61
Increase in net tangible book value per share attributable
to new investors ................................................... 4.63
-------
Net tangible book value per share after the offering .................. 7.24
--------
Dilution in net tangible book value per share to new investors ........ $ 39.51
========
</TABLE>

14
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data as of and for each of the years
in the three-year period ended December 31, 1998 have been derived from our
audited consolidated financial statements, which are included elsewhere in this
prospectus. The selected financial data as of December 31, 1994, 1995, and 1996
and for the period from September 1994 through December 31, 1994 and the year
ended December 31, 1995 have been derived from the financial statements of
Interactive Imaginations, which are not included in this prospectus, and our
accounting records. We believe that due to the acquisitions in 1998, the period
to period comparisons are not meaningful and should not be relied upon as
indicative of future performance. You should read the selected consolidated
financial data stated below in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
September
1994 (inception) Year Ended December 31,
through December 31, ----------------------------------------------------
1994 1995 1996 1997 1998
--------------------- ----------- ------------- ------------- ------------
(In thousands, except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenues:
Advertising ...................................... $ -- $ 152 $ 1,106 $ 1,467 $ 19,744
Consulting and license fees ...................... -- -- 436 1,681 119
-------- -------- ---------- ---------- ----------
Total revenues .................................. -- 152 1,542 3,148 19,863
Cost of revenues .................................. -- 198 1,593 1,655 15,970
-------- -------- ---------- ---------- ----------
Gross profit (loss) .............................. -- (46) (51) 1,493 3,893
Operating expenses:
Sales and marketing .............................. -- 115 2,240 1,673 7,971
General and administrative ....................... 35 581 3,010 2,623 8,692
Product development .............................. -- 426 1,461 1,418 1,902
Other expenses ................................... -- -- -- 989 --
Write-off of acquired in-process technology -- -- -- -- 5,000
Amortization of goodwill ......................... -- -- -- -- 5,722
-------- -------- ---------- ---------- ----------
Total operating expenses ........................ 35 1,122 6,711 6,703 29,287
-------- -------- ---------- ---------- ----------
Operating loss .................................... (35) (1,168) (6,762) (5,210) (25,394)
Interest (expense) income, net .................... -- -- (34) (96) 671
-------- -------- ---------- ---------- ----------
Net loss .......................................... (35) (1,168) (6,796) (5,306) (24,723)
Cumulative dividends on mandatorily ...............
convertible preferred stock ...................... -- -- -- -- (276)
-------- -------- ---------- ---------- ----------
Net loss attributable to common stockholders ...... $ (35) $ (1,168) $ (6,796) $ (5,306) $ (24,999)
======== ======== ========== ========== ==========
Basic and diluted net loss per share .............. $ (.14) $ (2.78) $ (6.48) $ (4.88) $ (2.62)
======== ======== ========== ========== ==========
Weighted average shares outstanding ............... 250,000 420,908 1,049,432 1,086,614 9,533,056
</TABLE>

<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------------------------------
1998
1994 1995 1996 1997 1998 As Adjusted(1)
--------- --------- ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents .................... $11 $ -- $1,690 $ 94 $33,983 $121,341
Working capital (deficit) .................... (9) (235) (6) (1,165) 32,226 119,584
Goodwill, net ................................ -- -- -- -- 10,935 10,935
Total assets ................................. 29 497 3,951 1,039 62,716 150,074
Long-term debt ............................... -- -- -- 2,317 -- --
Obligations under capital leases, excluding
current installments ........................ -- -- -- -- 34 34
Total stockholders' equity (deficit) ......... 9 204 1,751 (2,728) 51,946 139,304
</TABLE>

- ------------
(1) Adjusted to reflect our sale of 2,000,000 shares of common stock, the net
proceeds from which are estimated to be approximately $87.4 million after
deducting underwriting discounts and estimated offering expenses payable
by us. We intend to use the net proceeds of the offering for general
corporate purposes, including working capital, and for the expansion of
our operation and sales and marketing capabilities. See "Use of Proceeds."

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

General

We are the result of several mergers and acquisitions, and the combination
of these entities resulted in an integrated Internet advertising company with
both media sales and technology expertise. We were incorporated in January 1998
to consolidate three Internet advertising companies:

o Petry Interactive, Inc., which established the network business model
and contributed its network of Web sites which became the foundation
for the 24/7 Network.

o Advercomm, Inc., which folded several high profile Web sites into the
24/7 Network, which increased the breadth of content available on the
24/7 Network and accelerated our ability to organize our 24/7 Network
into channels of Web sites with similar content.

o Interactive Imaginations, Inc., which contributed the ContentZone, a
network that offers advertising solutions for small to medium-sized
Web sites.

We subsequently acquired Intelligent Interactions, a developer of ad serving
and targeting technology, and CliqNow!, a network of over 75 medium to large
Web sites. We believe that the combination of these predecessor entities has
enabled us to offer advertisers and Web publishers comprehensive advertising
solutions and to pursue our objective of becoming the leading Internet
advertising and direct marketing firm.

We generate substantially all of our revenues by delivering advertisements
and promotions to Affiliated Web sites on our networks. We typically sell our
advertisements under purchase order agreements with advertisers which are
short-term in nature or subject to cancellation. We sell our products and
services through our sales and marketing staff located in New York, Atlanta,
Boston, Chicago, Dallas, Detroit, Los Angeles, San Francisco, Seattle and the
Washington, D.C. area and 12 offices in Europe.

The pricing of ads is based on a variety of factors, including the gross
dollar amount spent on the advertising campaign and whether the campaign is
delivered on a specific Web site, a channel of Web sites or across the entire
24/7 Network. We strive to sell 100% of our inventory through the combination
of advertisements sold on a "CPM" basis, which is the cost to the advertiser to
run 1,000 ads, and a "cost-per-action" basis whereby revenues are generated if
the user responds to the ad with an action, such as an inquiry or a purchase of
the product advertised.

We recognize advertising revenues in the period that the advertisement is
delivered, provided that no significant obligations remain. In nearly all
cases, we recognize revenues generated from advertising sales, net of any
commissions paid to advertising agencies on behalf of their clients. We pay our
Affiliated Web sites a service fee calculated as a percentage of revenues
generated by advertisements run on the Web site, which amount is included in
cost of revenues. In addition, we are generally responsible for billing and
collecting for advertisements delivered to our networks. We expect to generate
the majority of our revenues for the foreseeable future from advertisements
delivered to Affiliated Web sites on our networks.

We recently started to sell sponsorship advertising, which involves a
greater degree of coordination among us, the advertiser and Affiliated Web
sites. These sponsorships are generally priced based on the length of time that
the sponsorship runs, rather than on a CPM basis. Revenues relating to
sponsorship advertising are recognized ratably over the sponsorship period.

One of our key strategies is to aggressively recruit Web sites of all
sizes for our networks in order to extend our reach and to provide advertisers
with a broad base of page views and online content. We added a number of
high-profile Web sites during the third and fourth quarters of 1998, including
cars.com, Cybershop, New York Mets, Real Cities, Reuters Health, San Francisco
Giants, Server.com, and Sports Network.com. For the years ended December 31,
1997 and 1998, approximately 68% and 47%, respectively, of the 24/7 Network's
pro forma advertising revenues were derived from advertisements on the top ten
Affiliated Web sites on the 24/7 Network. For the year ended December 31, 1998,
one Affiliated Web site accounted for approximately 14% of our total
advertising revenue.

In addition, for the years ended December 31, 1997 and 1998, our top ten
advertisers and ad agencies accounted for an aggregate of approximately 48% and
38%, respectively, of the 24/7 Network's pro forma advertising revenues.

16
<PAGE>

On December 29, 1998, we acquired an initial 67% interest, on an as
converted basis, in CardSecure, a company which provides e-commerce enabling
technology as well as Web site hosting services. In January 1999, we acquired a
60% interest in 24/7 Media Europe Ltd., formerly known as InterAd Holdings
Limited, which operates the 24/7 Media Europe Network. Finally, in March 1999,
we acquired Sift, Inc., a full-service e-mail management company.

The period-to-period comparisons of our historical operating results
should not be relied upon as indicative of future performance. Our prospects
should be considered in light of the risks, expenses and difficulties
encountered by companies in the early stages of development, particularly
companies in the rapidly evolving Internet market. Although we have experienced
revenue growth in recent periods, we anticipate that we will incur operating
losses for the foreseeable future due to a high level of planned operating and
capital expenditures. In particular, we expect to increase our operating
expenses and capital expenditures in order to expand our sales and marketing
organization and to develop, integrate and scale our Profilz database and
proprietary ad serving technologies.

Results of Operations

Quarterly Results of Operations (Unaudited)

Our 1998 results of operations were significantly affected by inclusion of
acquired companies' activities, as well as our growth. The following table
presents our quarterly results of operations for 1998. We believe that all
necessary adjustments, consisting of normal recurring adjustments, have been
included in the amounts stated below.

<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31
1998 1998 1998 1998
----------- ------------ ------------- -------------
(In thousands, except for share and per share amounts)
<S> <C> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenues:
Advertising ......................................... $ 1,076 $ 3,661 $ 5,462 $ 9,545
Consulting and license fees ......................... -- 40 66 13
-------- -------- ------- -------
Total revenues ..................................... 1,076 3,701 5,528 9,558
Cost of revenues ..................................... 930 3,098 4,616 7,326
-------- -------- ------- -------
Gross profit ....................................... 146 603 912 2,232
-------- -------- ------- -------
Operating expenses:
Sales and marketing ................................. 654 1,629 2,524 3,164
General and administrative .......................... 1,288 1,801 2,119 3,484
Product development ................................. -- 515 487 900
Write-off of acquired in-process technology ......... -- 5,000 -- --
Amortization of goodwill ............................ 335 1,531 1,883 1,973
-------- -------- ------- -------
Total operating expenses ........................... 2,277 10,476 7,013 9,521
-------- -------- ------- -------
Operating loss ...................................... (2,131) (9,873) (6,101) (7,289)
Interest (expense) income:
Interest income ................................... 26 50 250 560
Interest expense ................................... (193) (15) (5) (2)
-------- -------- ---------- ----------
Total interest (expense) income ..................... (167) 35 245 558
-------- -------- --------- ---------
Net loss ............................................ $ (2,298) $ (9,838) $(5,856) $(6,731)
======== ======== ========= =========
</TABLE>

Revenues. Our revenues increased each quarter primarily due to an increase
in advertising revenue on the 24/7 Network. In particular, this increase in
revenue was due to increases in the number of Web sites on the 24/7 Network,
the number of advertisers using our advertising solutions and the number of
advertisements delivered to the 24/7 Network. We expect the 24/7 Network to
continue to account for a significant portion of our total advertising revenue.

In addition to advertising revenues, we generated revenues through
consulting and license fees from licensing our Adfinity ad serving system to
third parties. This revenue represented less than 2% of our total revenues in
any quarter, and for the full year. We no longer offer new licenses for
Adfinity to third parties and we do not currently expect to recognize any
meaningful revenues from the licensing of Adfinity in the future.

17
<PAGE>

Cost of Revenues and Gross Profit. Cost of revenues consists primarily of
fees paid to Affiliated Web sites, which are calculated as a percentage of
revenues resulting from ads delivered on our networks. Cost of revenues also
includes third party ad serving costs, depreciation of our ad serving system
and Internet access costs. Gross profit in dollars increased during the four
quarters of 1998. However, gross margin, which is gross profit as a percent of
total revenues, declined through the first three quarters before improving
slightly in the fourth quarter. The fluctuation in gross margin over the
periods presented was caused by:

o the significant growth in advertising revenue generated by the 24/7
Network, which typically pays higher fees to Affiliated Web sites, at
the same time that advertising revenue generated by the ContentZone
remained relatively flat;

o an increase in third party ad serving costs related to the growth of
the 24/7 Network; and

o the increased rates paid by us for third party ad serving costs which
began late in the first quarter of 1998 in connection with the
transition to a single ad serving technology. Until we complete the
transition to a single ad serving technology, we expect to continue to
incur high ad serving costs.

Sales and Marketing Expenses. Sales and marketing expenses consist
primarily of sales force salaries and commissions, advertising expenditures and
costs of trade shows, conventions and marketing materials. Through all quarters
of 1998, sales and marketing expenses increased as a result of the growth of
our business and the resulting additions to sales staff as well as increased
marketing expenses. We expect sales and marketing expenses to increase as we
continue to invest in sales and marketing personnel, expand into new markets
and broaden our visibility.

General and Administrative Expenses. General and administrative expenses
consist primarily of compensation, facilities expenses and other overhead
expenses incurred to support the growth of our business. Through all quarters
of 1998, general and administrative expenses increased as a result of the
growth of our business, the addition of new personnel and increased operating
expenses. We expect general and administrative expenses to continue to increase
due to the additional personnel and other expenses required to support our
anticipated business growth.

Product Development Expenses. Product development expenses consist
primarily of compensation and related costs incurred to further develop our ad
serving capabilities. Product development expenses increased beginning in the
second quarter of 1998 primarily as a result of our Adfinity development
efforts as well as initial development of our Profilz database initiative.
Costs further increased in the fourth quarter due to our retention of several
technology consultants to support and accelerate our development of Adfinity
and Profilz. We believe that continued investment in product development,
particularly for our technology initiatives, is critical to our strategy of
providing excellent service, and we expect to increase the future amounts spent
on product development.

Years Ended December 31, 1996, 1997 and 1998

During 1997, the historical results of operations of Interactive
Imaginations, the stability and morale of its workforce and overall value of
the common stock were negatively impacted by certain significant factors. Such
events included a class action lawsuit in the second and third quarters of
1997, which resulted in extraordinary expenses of $232,000 in legal costs,
unfavorable publicity to Interactive Imaginations, a significant diversion of
management resources, and difficulty in obtaining financing to continue its
operations.

For the fiscal year ended December 31, 1998, our historical results of
operations reflect the acquisitions of Petry, Advercomm, CliqNow!, Intelligent
Interactions and Card Secure from their respective dates of acquisition.
Interactive Imaginations, our then parent, was merged into us on April 9, 1998
in a manner similar to a pooling-of-interests. As a result, our historical
results of operations for the fiscal years ended December 31, 1996 and 1997
represent the results of Interactive Imaginations and do not reflect any of the
operating results of Petry, Advercomm, CliqNow!, Intelligent Interactions or
Card Secure.

We do not believe that the historical revenues or expenses for the years
1996 and 1997 as discussed below are reliable or accurate indicators of the
future performance of the combined company. See "Selected Consolidated
Financial Data" and our Consolidated Financial Statements and related Notes
thereto.

Revenues. Total revenues were $1.5 million, $3.1 million and $19.9 million
for the years ended December 31, 1996, 1997 and 1998, respectively. The
increase in 1998 was caused primarily by the inclusion

18
<PAGE>

of the acquired companies' activities and a significant increase in advertising
revenue, offset by a decline in revenues caused by the cessation of a license
agreement with SegaSoft in 1997. Growth in revenues from 1996 to 1997 resulted
from increases in advertising revenue generated by the ContentZone and
Riddler.com, our online games site, and consulting and license fees derived
from the SegaSoft agreement. We do not expect to realize meaningful revenues
from the SegaSoft agreement in the future.

Cost of Revenues and Gross Profit (Loss). Cost of revenues was $1.6
million, $1.7 million and $16.0 million for the years ended December 31, 1996,
1997 and 1998, respectively. The increase in 1998 was primarily related to
increased payments to our Affiliated Web sites which were caused by growth in
advertising revenue and the temporary increase in rates in connection with our
transition to a single ad serving technology. This increase was offset by
reduced ContentZone ad serving costs. The increase in cost of revenues from
1996 to 1997 was due to the related growth in advertising revenue on the
ContentZone. The smaller percentage increase from 1996 to 1997 was due to a
significant increase in the percentage of total advertising revenue generated
by Riddler.com, which does not entail payment of fees to Affiliated Web sites.
Gross profit increased from 1996 to 1997 primarily due to a significant
increase in high margin revenues generated by the SegaSoft agreement.

Operating Expenses. Total operating expenses were $6.7 million, $6.7
million and $29.3 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The increase from 1997 to 1998 was caused by:

o higher sales and marketing and general and administrative expenses
resulting from the acquisitions we completed in 1998;

o additional operating expenses incurred in anticipation of future
growth, particularly in the number of employees, offices, and other
operating expenses to support expanded U.S. operations;

o amortization of goodwill resulting from the acquisitions we completed
in 1998; and

o acquired in-process technology of approximately $5.0 million from the
acquisition of Intelligent Interactions which was immediately charged
to operations in April 1998. The value of the acquired in-process
technology was determined using a combination of a risk-adjusted
income approach and an independent valuation. The acquired in-process
technology had not reached the stage of technological feasibility at
the date of acquisition and had no alternative future use.

The decrease in operating expenses from 1996 to 1997 was primarily due to
the consolidation of the Interactive Imaginations business, offset by $989,000
in other expenses recorded in 1997. Other expenses in 1997 included $232,000 of
legal costs associated with the successful defense of a class-action lawsuit
filed by certain Affiliated Web sites on the ContentZone, as well as a net
write-off of $757,000 of property and equipment that was deemed to have no
future economic value.

Liquidity and Capital Resources

Historically, we financed our operations primarily from private placements
of equity and convertible debt securities. Concurrently with the merger of
Petry and Advercomm into us in February 1998, we completed a private placement
of preferred stock and warrants which resulted in net proceeds of $9.8 million.
In August 1998, we completed an initial public offering of our common stock
pursuant to which we realized net proceeds of approximately $44.8 million. As
of December 31, 1998, we had cash and cash equivalents of $34.0 million.

In addition to funding on-going operations, our principal commitments
consist of various obligations under operating and capital leases. Total lease
expense, excluding rent, was $50,000 for the twelve-month period ended December
31, 1997, as compared to $380,000 for the twelve-month period ended December
31, 1998. During the second and third quarters of 1998, we entered into a
series of operating leases with Sun Microsystems Finance for computer equipment
and software related to our Adfinity system, with a combined fair market value
of $849,000. These operating leases, as amended, require monthly payments and
expire in December 2001. During the fourth quarter of 1998, we entered into a
lease line of credit for up to $3.0 million with Chase Manhattan Bank to
finance capital equipment. As of December 1998, total obligations under this
lease line of credit were approximately $600,000. Total rent expense for
currently outstanding leases is expected to be approximately $130,000 per
quarter.

Furthermore, we expect to incur approximately $1.0 million in leasehold
improvements prior to moving into additional leased office space at our
headquarters in New York City, which lease runs through 2008. In the

19
<PAGE>

aggregate, our annual lease expense for this office space will be approximately
$1.2 million. We believe that the expenses associated with such additional
office space will not have a material effect on our financial position.

Net cash used in operating activities was $4.9 million, $4.5 million and
$14.6 million for the years ended December 31, 1996, 1997 and 1998,
respectively. Net cash used in operating activities resulted from our net
operating losses, adjusted for certain non-cash items, including:

o significant increases in accounts receivable, accounts payable and
accrued liabilities in 1998, resulting from the significant increase
in advertising revenues and related expenses in the fourth quarter of
1998 compared to 1997;

o the write-off of acquired in-process technology in the second quarter
of 1998;

o the amortization of goodwill in 1998 related to the acquisitions we
completed in 1998;

o the write-off of property and equipment in 1997; and

o a significant advance by SegaSoft in late 1996 for revenues that were
primarily recognized during 1997.

The significant increase in accounts receivable at December 31, 1998 is
partially attributable to the increase in unbilled receivables from
approximately $56,000 in 1997 to approximately $3,510,000 in 1998 which also
resulted from the increase in advertising revenues generated by the Company
during the fourth quarter of 1998. Unbilled receivables, which are a normal
part of the Company's business, represent receivables which are generally
invoiced only after the revenue has been earned. The terms of the related
advertising contracts typically require billing at the end of each month. All
unbilled receivables as of December 31, 1998 have been subsequently billed.

Net cash used in investing activities was $1.6 million, $19,000 and $6.1
million for the years ended December 31, 1996, 1997 and 1998, respectively. Net
cash used in investing activities resulted primarily from capital expenditures
relating to computer equipment, the cash portion of the purchase of CliqNow!,
and the cash portion of our minority equity investment in China.com
Corporation. During 1999, we expect to incur significant capital expenditures
related to the expansion of our business. In particular, we intend to develop
and enhance our proprietary ad serving technology and our Profilz database,
which may involve investments in software and hardware that in the aggregate
could total approximately $15 million. To the extent that we invest in
significant ad serving and database software and hardware or make cash
investments in other businesses in the future, net cash used in investing
activities could increase.

Net cash provided by financing activities was $8.2 million, $2.9 million
and $54.6 million for the years ended December 31, 1996, 1997 and 1998,
respectively. Net cash provided by financing activities during these periods
included issuances of convertible notes, convertible preferred stock, common
stock and warrants. Prior to December 31, 1998, all of the previously issued
convertible notes, convertible preferred stock and warrants were converted or
exercised into common stock, except for warrants to purchase approximately 3.8
million shares of common stock with exercise prices ranging from $3.81 to
$11.42 per share.

No provision for federal or state income taxes has been recorded because
we incurred net operating losses for all periods presented. At December 31,
1998, we had approximately $30.9 million of federal and state net operating
loss carryforwards available to offset future taxable income; such
carryforwards expire in various years through 2018.

As a result of various equity transactions during 1996, 1997 and 1998,
management believes that we have undergone an "ownership change" as defined by
section 382 of the Internal Revenue Code. Accordingly, the utilization of a
portion of the net operating loss carryforward may be limited. Due to this
limitation, and the uncertainty regarding the ultimate utilization of the net
operating loss carryforward, we have not recorded any tax benefit for losses
and a valuation allowance has been recorded for the entire amount of the net
deferred tax asset.

In addition, events such as this offering, our initial public offering and
other sales of our stock may partially restrict our ability to utilize our net
operating loss carryforwards.

On January 20, 1999, we invested $3.9 million to purchase a 60% interest
in 24/7 Media Europe Ltd., formerly known as InterAd Holdings Limited, which
operates the 24/7 Media Europe Network.

20
<PAGE>

We expect to invest an additional aggregate of up to $5 million of working
capital in our subsidiaries in 1999 to support their future operations.

We believe that our current cash and cash equivalent balances will be
sufficient to fund our requirements for working capital and capital
expenditures for at least the next 12 months. To the extent that we encounter
unanticipated opportunities, we may need to raise additional funds sooner, in
which case we may sell additional equity or debt securities or borrow funds
from banks or other financial sources. Sales of additional equity or
convertible debt securities may result in additional dilution of our
stockholders. We cannot be certain that we will be able to sell additional
equity or debt securities in the future or that additional financing will be
available to us when needed on commercially reasonable terms, or at all.

Year 2000 Compliance

Beginning in the Year 2000, the date fields coded in some software
products and computer systems will need to accept four digit entries in order
to distinguish 21st century dates from 20th century dates and, as a result,
many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such "Year 2000" requirements.

Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. Significant uncertainty exists in the
software industry concerning the potential effects associated with such
compliance issues.

State of Readiness

We have developed a remediation plan for our Year 2000 issue that involves
identification, assessment and testing of the equipment and systems affected:

o We have assessed our information technology (IT) equipment and
systems, which includes our ad servers and ad serving technology.

o We have identified and assessed non-information technology (non-IT)
embedded systems such as building security, voice mail, fire
prevention, climate control and other systems.

o We are analyzing the readiness of significant third party vendors and
suppliers of services.

Our evaluation, which we expect to complete by the second quarter of 1999,
covers the following phases:

o identification of all IT equipment and systems, and non-IT systems;

o assessment of repair or replacement requirements;

o repair or replacement;

o testing;

o implementation; and

o creation of contingency plans in the event of Year 2000 failures.

We have reviewed our non-IT systems and internally developed programs, and
we do not consider them to be date sensitive to the Year 2000. Based on this
evaluation, we do not believe that our systems and programs present Year 2000
issues, and we generally believe that we will be Year 2000 compliant.

We have internally developed ad serving systems and a financial system and
are using a service bureau for ad serving and payroll. We believe that our IT
systems are sensitive to Year 2000. However, our internal systems are
significantly less complex than bank or brokerage systems for achieving Year
2000 compliance. With no legacy hardware, our late model systems require
patches and updates to reach compliance. We also plan to implement a Year 2000
compliant standard software image across desktops by the second quarter of
1999.

All of our internal systems have been inventoried and all non-compliant
third party components have been identified and are in the process of being
upgraded. Test equipment to facilitate Year 2000 testing has been installed and
testing will begin in the second quarter of 1999. Our current financial system
will be replaced with a Year 2000 compliant system third quarter of 1999. All
mission critical non-IT systems have been identified and will be tested by the
end of the second quarter of 1999.

21
<PAGE>

Although we believe that we will be Year 2000 compliant, we use third
party equipment and software that may not be Year 2000 compliant. We are
currently in the process of evaluating the Year 2000 compliance of the third
party products used in our internal systems and our major vendors, but are
unable to predict the extent to which:

o the Year 2000 issue will affect our suppliers; or

o we would be vulnerable to the suppliers' failure to remediate any Year
2000 issues on a timely basis.

We have placed each of our vendors and suppliers in a priority category
according to their importance to our business. We have sent letters to all
critical third party service suppliers asking about the status of their Year
2000 program. Vendor readiness is being assessed and tracked. In the event we
do not receive satisfactory commitments from a key supplier, we are making
plans for continuing availability of service through alternate channels. We
expect to have certification that all key vendors and suppliers are Year 2000
compliant by the third quarter of 1999.

The failure of such a major supplier to convert its systems on a timely
basis or in a manner compatible with our systems causing us to incur
unanticipated expenses to remedy any problems, could adversely affect our
business.

In addition, the software and hardware products used by Web publishers,
advertisers, governmental agencies, public utilities, telecommunication
companies and others, may not be Year 2000 compliant. If these products are not
Year 2000 compliant, our customers' ability to use our products may be
disrupted. Furthermore, the purchasing patterns of advertisers may be affected
by Year 2000 issues as companies expend significant resources to become Year
2000 compliant. These expenditures may result in reduced funds available for
Web advertising or sponsorship of Web services, which could adversely affect
our business.

Costs to Address Our Year 2000 Issue

To date, we have not incurred any material expenditures in connection with
identifying or evaluating Year 2000 compliance issues. Most of our expenses
have related to the opportunity cost of time spent by our employees evaluating
our software, the current versions of our products, and Year 2000 compliance
matters generally. We do not believe that the costs to evaluate or address Year
2000 issues will be material. However, the full impact of the Year 2000 issues
cannot be determined at this time. The failure by certain third parties to
address their Year 2000 issues on a timely basis could adversely affect our
business.

Contingency Plan

We have not developed a Year 2000-specific contingency plan. If Year 2000
compliance issues are discovered, we then will evaluate the need for
contingency plans relating to such issues. We intend to actively work with and
encourage our suppliers to minimize the risks of business disruptions resulting
from Year 2000 issues and develop contingency plans where necessary. Such plans
may include, but are not limited to, using alternative suppliers and
establishing contingent supply arrangements. We expect to have such plans in
place by the second quarter of 1999.

The worst case scenario related to Year 2000 issues would involve a major
shutdown of the Internet, which would result in a total loss of revenue to us
until it were resolved. Internally, the most likely worst case scenario would
be that we would have problems with our offline batch processes that stall or
generate incorrect information for Web site reporting. This could result in a
substantial delay in reporting to our Web sites, billing our customers and
preparing our financial statements.

Impact of Recently Issued Accounting Pronouncements

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance for determining whether computer software is internal-use
software and on accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the
public. It also provides guidance on capitalization of the costs incurred for
computer software developed or obtained for internal use. We have not yet
determined the impact, if any, of adopting SOP 98-1, which will be effective
for our year ending December 31, 1999.

22
<PAGE>

In June 1998, the FASB issued SFAS No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. This statement is not expected to affect us, as we currently do not have
any derivative instruments or hedging activities.

23
<PAGE>

BUSINESS

Overview

We are an Internet advertising and direct marketing firm that enables both
advertisers and Web publishers to capitalize on the many opportunities
presented by Internet advertising, direct marketing and electronic commerce. We
generate revenue by selling advertisements and promotions for our Affiliated
Web sites. In particular, we operate:

o the 24/7 Network, a network of over 150 high profile Affiliated Web
sites to which we delivered an aggregate of more than 900 million
advertisements in December 1998;

o the ContentZone, a network of over 2,500 small to medium-sized
Affiliated Web sites to which we delivered an aggregate of more than
50 million advertisements in December 1998; and

In addition, we are supporting the development of the 24/7 Media Asia
Network through an agreement with China.com Corporation.

We operate in the rapidly growing Internet advertising industry.
International Data Corp. estimates that at the end of 1998 there were over 51
million Web users in the United States and over 97 million Web users worldwide
and that by the end of 2002 the number of Web users will increase to over 135
million in the United States and to over 319 million worldwide. Forrester
Research estimates that the dollar value of Internet advertising worldwide will
increase from $1.5 billion in 1998 to $15.3 billion in 2003. There can be no
assurance that such rapid industry growth rates will be achieved or that we will
experience similar rates of growth.

We believe that advertisers seek to place Internet ads in ways to maximize
unduplicated reach. In February 1999 we delivered an aggregate of approximately
one billion impressions and, according to Media Metrix, our networks reached
52.9% of all U.S. Internet users. We believe that this reach figure is among the
highest in the Internet advertising industry. We plan to aggressively recruit
Web sites for our networks to:

o further extend our reach;

o provide advertisers with a broad and diverse base of online content
and page views; and

o improve our brand awareness and visibility with media buyers.

In addition, as online advertisers and direct marketers increase their use
of the Internet, they seek solutions and technologies that allow them to
efficiently deliver highly targeted messages. Our customized solutions allow
advertisers and direct marketers to tailor their ad campaigns to reach desired
audiences, while reducing costs, easing time pressures and alleviating the need
to purchase a series of ad campaigns from numerous Web publishers. Advertisers
and direct marketers can achieve their objectives by buying ad space on a
specific Web site, within a particular content channel or across an entire
network. We are currently working on several initiatives to increase our
targeting capabilities, including the development of our Profilz database.

As Internet traffic grows, Web publishers increasingly seek to maximize
the value of their online inventory. Our extensive sales and marketing
experience provides Web publishers access to media buyers at large ad agencies
and enables them to sell advertisement space without incurring the costs and
challenges associated with building and maintaining an ad sales force.

Our senior management team includes several individuals each of whom has
over fifteen years of experience in advertising sales in the television and
proprietary online network industries. Other members of senior management
contribute extensive knowledge of ad serving technology and database targeting.
We leverage our media sales and technology expertise to maximize the value of ad
campaigns for both advertisers and Affiliated Web sites.

24
<PAGE>

Industry Background

Growth of the Internet and the Web

The Internet and the Web are experiencing dramatic growth in terms of both
the number of Web users and the number of Web sites. IDC estimates that at the
end of 1998 there were over 51 million Web users in the United States and over
97 million Web users worldwide and that by the end of 2002 the number of Web
users will increase to over 135 million in the United States and to over 319
million worldwide. In addition, Web users are spending an increasing amount of
time on the Web; a 1997 U.S. Department of Commerce study estimated that
overall traffic on the Internet is doubling every 100 days. According to
Network Solutions, the number of paid active Internet domains, including .com,
.net, .edu and .org, had grown to over 4 million by January 1999. The growth in
the number of Web users, the amount of time users spend on the Web and the
number of Web sites is being driven by the increasing importance of the
Internet as a sales and distribution channel, a communications medium and an
information resource.

Growth of Online Commerce

The Internet is dramatically affecting the methods by which consumers and
businesses are buying and selling goods and services. The Web provides online
merchants with the ability to reach a global audience and to operate with
minimal infrastructure, reduced overhead and greater economies of scale, while
providing consumers with a broad selection, increased pricing power and
unparalleled convenience. As a result, a growing number of consumers are
transacting business on the Web, including trading securities, buying consumer
goods, paying bills and purchasing airline tickets. IDC estimates that
approximately 28% of Web users purchased goods or services over the Web in 1998
and that approximately 40% of Web users will make online purchases in 2002.
Jupiter Communications also estimates that retail consumer purchases of goods
and services over the Internet will increase from $5.0 billion in 1998 to $29.4
billion in 2002. We believe that as electronic commerce expands, advertisers
and direct marketers will increasingly use the Web to advertise products, drive
traffic to their Web sites, attract customers and facilitate transactions.

Growth of Internet Advertising

The Web is evolving into an important medium for advertisers due to its
interactive nature, global reach, rapidly growing audience and the expected
increase in online commerce. Unlike more traditional advertising methods, the
Web gives advertisers the potential to target advertisements to broad audiences
or to selected groups of users with specific interests and characteristics. The
Web also allows advertisers and direct marketers to measure the effectiveness
and response rates of advertisements and to track the demographic
characteristics of Web users. The interactive nature of Web advertising enables
advertisers to better understand potential customers, and to change messages
rapidly and cost effectively in response to customer behavior and product
availability. Additionally, the Web allows advertisers and direct marketers to
reach users with attractive demographic profiles. In June 1998, IDC estimated
that 38% of Web users have a college degree, 40% have a household income
greater than $60,000, and the average Web user is approximately 33 years old.

The unique capabilities of online advertising, the growth in traffic on
the Web and the favorable characteristics of Web users have led to a
significant increase in online advertising. Forrester Research estimates that
the dollar value of Internet advertising in the U.S. will increase from $1.3
billion in 1998 to $10.4 billion in 2003, representing a 52% compounded annual
growth rate. International online ad spending is expected to grow from $0.2
billion in 1998 to $4.7 billion in 2003, representing an 87% compounded growth
rate. By comparison, Broadcasting & Cable estimates that $130 billion was spent
in 1998 on traditional media advertising in the U.S., including television,
radio, outdoor and print. Until recently, the leading Internet advertisers have
been technology companies, search engines and Web publishers. However, many of
the largest advertisers utilizing traditional media, including consumer
products companies and automobile manufacturers, are expanding their use of
online advertising. We believe that online advertising will continue to capture
an increasing share of available advertising dollars and that this trend will
drive demand for online ad inventory and for sophisticated Internet advertising
solutions.

Opportunities for Direct Marketing

The Web also represents an attractive medium for direct marketing, which
has traditionally been conducted through direct mail, telemarketing and
televison infomercials. The interactive nature of the Web

25
<PAGE>

enables direct marketers to deliver targeted promotions to consumers at the
point-of-sale. The success of a direct marketing campaign is measured by the
response rate of consumers. The Internet has the potential to enable direct
marketers to increase consumer response rates and decrease
costs-per-transaction by targeting and delivering direct marketing campaigns to
particular consumers based on their demographic profile, self-selected
interests and online behavioral characteristics. By providing a more
cost-effective method to reach target customers, online advertising is expected
to improve the direct marketer's return on investment. The Direct Marketing
Association estimates that in 1998 $163 billion was spent on direct marketing
initiatives in the United States, and Jupiter Communications estimates that
expenditures on direct marketing over the Internet will exceed $1.3 billion in
2002.

Challenges Facing Advertisers, Direct Marketers and Web Publishers

While the Web offers numerous opportunities, most online advertisers,
direct marketers and Web publishers face a number of significant challenges to
realizing the potential of Internet advertising. As online advertisers, direct
marketers and Web publishers increase their use of the Internet, they seek
solutions and technologies which will allow them to deliver highly targeted
messages, receive real-time feedback, benefit from business efficiencies and
capitalize on other potential advantages of online advertising and direct
marketing.

Advertisers and Direct Marketers. For advertisers and direct marketers,
large advertising campaigns can be time-consuming, expensive and difficult to
manage and can require the use of media purchasers at advertising agencies to
place advertisements. Given the breadth of content available on the Web, it is
difficult for advertisers and direct marketers to justify the costs of
transacting individually with a number of smaller, but desirable, sites in
order to reach a large online audience. In addition, many advertisers and
direct marketers lack the analytical tools to evaluate and optimize the
effectiveness of advertising campaigns, target appropriate users, efficiently
place advertisements and deliver content. Advertisers and direct marketers also
find that individual Web sites typically lack the technology to serve a variety
of advertisements to a broad reach of Internet users.

Web Publishers. Web publishers who seek to sell ad space on their Web
sites face an array of challenges. Most Web publishers have difficulty
attracting and maintaining experienced personnel to sell ad space on their Web
sites and justifying the costs of establishing such a sales force. In addition,
most Web publishers cannot afford, or lack the ability, to operate and maintain
sophisticated ad servers and databases to provide effective ad serving,
targeting and reporting to advertisers. Furthermore, for sales personnel at all
but the largest Web sites, it can be difficult to gain access to media buyers
at large advertising agencies. As a result, online advertising spending is
highly concentrated on large Web sites. In March 1999, Forrester Research
estimated that the nine largest Web sites accounted for 15% of total Web page
views and 67% of all dollars spent on Internet advertising. We believe all but
the largest Web sites will continue to face challenges in capturing a share of
the total advertising dollars spent on the Internet.

Our Solution

We operate the 24/7 Network and the ContentZone, which are networks of Web
sites that enable both advertisers and Web publishers to capitalize on the many
opportunities presented by Internet advertising, direct marketing and
electronic commerce. The 24/7 Network is comprised of over 150 high profile Web
sites and the ContentZone is comprised of over 2,500 small to medium-sized Web
sites. We offer comprehensive advertising sales solutions for both emerging and
mature Web publishers and provide advertisers and direct marketers with
targeted ad delivery across our networks. In February 1999, we delivered an
aggregate of approximately one billion impressions and, according to Media
Metrix, our networks reached 52.9% of all U.S. Internet users. We believe that
this reach figure is among the highest in the Internet advertising industry.

Benefits to Advertisers and Direct Marketers

We reduce costs and ease time pressures for advertisers and direct
marketers by alleviating the need to purchase a series of ad campaigns from
numerous Web publishers. Our networks provide advertisers and direct marketers
with access to a wide variety of online content and a broad reach of Internet
users. Advertisers and direct marketers can enhance the effectiveness of
advertising and direct marketing campaigns by customizing their ad delivery on
our networks and buying ad space either on selected Affiliated Web sites,
within a particular content channel or across an entire network. We believe
that ad serving technology using

26
<PAGE>

our Profilz database will enable advertisers to optimize ad performance by
reaching highly targeted audiences based on demographic profiles and user
behavior. In addition, we provide advertisers and direct marketers with
comprehensive reporting services to monitor the effectiveness of ad delivery.

Benefits to Web Publishers

Membership in our networks enables Web publishers to generate advertising
revenues by gaining access to advertisers and direct marketers without the
costs and challenges associated with building and maintaining their own ad
sales force and ad serving technology. Web sites included on our networks
benefit from our experienced management team, our extensive sales and marketing
organization and our direct access to advertisers and agencies. The
organization of our networks into content channels enhances the value of
inventory on small to medium-sized Web sites. Furthermore, we believe that the
targeting capabilities of ad serving technology using our Profilz database will
increase the value of Web publishers' inventory. We also provide sophisticated
tracking and reporting functions for our Affiliated Web sites.

Strategy

Our objective is to provide comprehensive advertising solutions for Web
publishers to maximize the effectiveness of advertisers' Internet advertising
campaigns. We intend to reach our objective by implementing the following
interconnected strategies:

Expand our Networks of Web Sites

We plan to aggressively recruit Web sites for our networks, both
domestically and internationally, to extend our reach and to provide a broad
base of page views and online content to advertisers. We believe that our
approach to expansion is unique in that we recruit Web sites of all sizes,
including high-profile or larger to medium-sized Web sites on the 24/7 Network,
as well as medium to smaller-sized Web sites on the ContentZone. Such a
collection of Web sites of diverse sizes and content allows advertisers to
target Internet users by interest and enhances the value of each Affiliated Web
site's inventory. An increased number of Affiliated Web sites and an expanded
breadth of available content will further enable advertisers to consolidate
their ad purchases and will improve our brand awareness and visibility with
media buyers.

Maximize Sales and Marketing Effectiveness

We believe that our sales and marketing organization is among the largest
in the Internet advertising industry, providing us with a competitive
advantage. We intend to leverage the substantial media sales experience of our
management team in order to maximize the value of ad campaigns to benefit both
advertisers and our Affiliated Web sites. We believe that advertiser awareness
of us is critical to our success. Accordingly, we continually expand our
services for advertisers and advertising agencies in order to establish and
expand the recognition of our corporate identity. We also promote our service
offerings through our Web site, trade publication advertisements, direct mail
and promotional activities, trade shows and other media events.

Increase Value of Ad Inventory

We seek to increase the rate at which users click on advertisements by
employing the Profilz database to deliver advertisements to a more highly
targeted audience, resulting in more effective advertising campaigns and
enabling us to charge higher rates. Furthermore, we believe that as we increase
the breadth and depth of our content channels, the sale of ads targeted to
specific channels will increase, displacing lower cost run of network
campaigns, in which ads are delivered across the Web sites in a network, and
cost-per-action campaigns that generate revenues only if the user responds to
the ad with an action, such as an inquiry or a purchase of the product
advertised. We intend to further increase the value of our Affiliated Web
sites' ad inventory by selling sponsorships on Affiliated Web sites and by
further refining our management of ad space inventory.

Enhance Capabilities of Ad Targeting Technology

We intend to enhance our targeting capabilities through continued
investment in our technology initiatives. We are developing Profilz to create a
profile of an individual Internet user by integrating such user's online
behavior with third party demographic and lifestyle data. We believe that these
profiles will enable us to deliver targeted advertisements to the right person
at the right time.

27
<PAGE>

Provide Highest Level of Customer Service

We emphasize service for our Affiliated Web sites and advertisers. For
example, we employ techniques of benchmarking, statistical analysis and
continuous process improvement to provide our Affiliated Web sites and
advertisers with "best of class" service. We continually survey our Affiliated
Web sites and advertisers to monitor service levels and identify and resolve
problems.

Our Products and Services

Internet Advertising Networks

The 24/7 Network. Through the 24/7 Network, we provide advertisement sales
and delivery services and related functions to over 150 Affiliated Web sites.
The 24/7 Network aggregates large and medium-sized Web sites that are
attractive to advertisers, generate a high number of ad impressions and
contribute a variety of online content to the network. Web publishers seeking
to join the 24/7 Network must meet specified standards, such as quality content
and brand name recognition, specified levels of existing and projected page
views, attractive user demographics, and sponsorship opportunities. The 24/7
Network includes, among others, the following Web sites:

<TABLE>
<S> <C>
o AT&T WorldNet Service o HomeSeekers.com
o The Associated Press--The Wire o Knight Ridder/Real Cities
o Baltimore Orioles o MapQuest
o Blizzard o Match.com
o cars.com o New York Magazine
o ChannelOne.com o New York Mets
o College Hoops Insider o Partes' FreeEdgar
o Currency Site o Reader's Digest
o Delphi o Reuters MoneyNet
o Doonesbury o Reuters News Network
o EarthLink o Soap Opera Digest
o Encompass o Talk City
o GoTo.com o Wall Street Sports
o HeadHunter.NET o YachtWorld

</TABLE>

For all Affiliated Web sites on the 24/7 Network, we sell Web
site-specific advertising campaigns as well as bundle advertisements for sale
in one of the channels listed above or across the entire network. For our
flagship Affiliated Web sites on the 24/7 Network, we appoint a relationship
manager, actively solicit sponsorships and integrate sales efforts with the Web
site's management.

ContentZone. The ContentZone is a network of over 2,500 small to
medium-sized Web sites to which we provide advertisement sales and delivery
services and related functions. Such Web sites encompass a broad and diverse
range of content that reflects the eclectic, grass-roots nature of the Web. The
ContentZone provides one of a few advertising opportunities for such small and
emerging Web sites. Advertisement delivery is highly automated and ads are
delivered across Web sites included in specific channels on the ContentZone or
across the entire ContentZone. Any Web publisher possessing non-objectionable
content on its Web site can qualify for admission to the ContentZone, and we
"graduate" ContentZone members to the 24/7 Network if they generate a
sufficient number of ad impressions and satisfy the requisite standards.

The 24/7 Media Europe Network. Through 24/7 Media Europe Ltd., our
majority owned subsidiary acquired in January 1999, we operate the 24/7 Media
Europe Network. The 24/7 Media Europe Network provides advertisement sales and
delivery services and related functions to over 60 Affiliated Web sites that
during December 1998 aggregated more than 200 million page views. This network
currently covers Belgium, Denmark, Finland, France, Germany, Holland, Italy,
Norway, Portugal, Spain and UK.

The 24/7 Media Asia Network. Through an agreement with China.com
Corporation, we are supporting the development of the 24/7 Media Asia Network.
This network covers Australia, China, Hong Kong, Japan, Korea, Singapore,
Southeast Asia and Taiwan. The 24/7 Media Asia Network, launched in November
1998, includes high profile Asian Web sites such as China.com, Hongkong.com,
Taiwan.com, and Netscape's Netsearch, Netguide and Goyoyo Web sites.

28
<PAGE>

Channels on the Networks

The 24/7 Network's and the ContentZone's Affiliated Web sites are
currently organized into the following 20 topical channels:

<TABLE>
<S> <C>
o Automotive o Local
o Business/Financial o Music
o Careers o News/Information
o Community o Real Estate
o E-commerce o Search/Directory
o Entertainment o Sports
o Games o Technology
o Health o Teen/College
o ISP/Portal o Travel
o Kids o Women/Family
</TABLE>

We are presently enhancing existing channels and developing several new
channels for our networks prompted by user and advertiser interests.

To enhance our Sports channel, we entered into a three-year agreement with
American Cities Studios, a new media design and sports marketing firm, to
exclusively co-market our services to professional sports franchises and
leagues and NCAA teams. Under this agreement, American Cities has primary
responsibility for recruiting new Web sites and assists our sponsorships
department in the development of cross-property packages. We are responsible
for all other aspects of sales and administration for these Web sites. As a
result of the agreement, leading sports sites designed by American Cities
Studios, including the official team Web sites of the New York Mets, Baltimore
Orioles, Detroit Tigers, Chicago White Sox, San Francisco Giants, St. Louis
Cardinals, San Diego Padres and Tampa Bay Devil Rays, as well as other high
profile sports sites, including College Hoops Insider, Corel WTA tour and
NYSports.net, joined the Sports channel of the 24/7 Network.

Advertisers on the Networks

We focus our sales and marketing efforts on the leading Internet and
traditional advertisers and advertising agencies, many of which have utilized
our solutions. Advertisers and advertising agencies employ us in various ways.
Advertisers and ad agencies typically buy advertising using written purchase
order agreements that run for a limited time. Based on our breadth of online
content and our extensive reach, we have the ability to package personalized
advertising solutions for advertisers and ad agencies. Our sales force works
closely with advertisers to customize ad delivery to enhance the effectiveness
of advertising campaigns. Stated below is a representative list of advertising
agencies and advertisers that delivered advertisements on our networks in 1998.
Some of these advertising agencies and advertisers represented less than one
percent of 24/7 Media's total revenues in 1998.

29
<PAGE>

Advertising Agencies

<TABLE>
<S> <C>
o Anderson & Lembke o Kirshenbaum Bond & Partners
o BBDO Interactive o Left Field
o Beyond Interactive o McCann-Erickson
o Bozell Worldwide o Media.com
o Carat Freeman o Modem Media
o Cone Interactive o Ogilvy & Mather
o Eagle River Interactive o Organic Online
o Euro RSCG/DSW Partners o Saatchi & Saatchi
o iballs o USWeb/CKS
o i-traffic o Western International Media
o J. Walter Thompson
Advertisers

o Ameritech o iMall
o Bank of America o Intellipost
o Barnes & Noble o MicroWarehouse
o Bell South o Microsoft
o Cendant o News Corporation
o Charles Schwab o NextCard
o Daytek Electronics Corp. o Preview Travel
o Deja News o Prodigy
o Dell o theglobe.com
o Ford
</TABLE>

Technology

Ad Serving Technology

We are currently developing a next generation ad serving technology that
is intended to serve as our sole ad serving solution. To complete this
development, we must, among other things, ensure that this technology will
function efficiently at high volumes, interact properly with our Profilz
database, offer all the functionality demanded by our customers and assimilate
our sales and reporting functions. If we successfully address all these
challenges, we must then work with our Affiliated Web sites to transition them
to our new system.

Unless and until the development of and transition to our own ad serving
technology is complete, we will be primarily dependent on AdForce, Inc. to
deliver ads to our networks and Web sites. Additionally, we currently employ
multiple systems to serve ads. We are upgrading our systems to integrate a new
accounting system with our ad serving technologies to improve our accounting,
control and reporting methods.

30
<PAGE>

Profilz

We are in the process of building Profilz, an online database of Web user
profiles, which we expect to employ with our ad serving technology to deliver
ads based on demographic profiles. We will compile data for Profilz through
agreements with Affiliated Web sites that have a database of registered users
as well as through our strategic relationship with Intelliquest Information
Group, Inc. IntelliQuest registers one million consumers in an average month,
and processed electronic registrations for over 1.8 million new technology
products during December 1998. With these partners we will set cookies and
retrieve basic user information, which may include name, address, city, state,
zip code and e-mail address. To complete the demographic and lifestyle profile
of these records, we will match them with an IntelliQuest file that contains
more than 200 demographic and lifestyle data characteristics on over 100
million U.S. households. Since advertisers seek to reach consumers who fit
their demographically-profiled target, our Profilz database will provide online
advertisers the ability to execute highly targeted, database marketing
campaigns based on consumers' lifestyles and interests, and track the
effectiveness of the campaigns markets.

E-Commerce Initiatives

We recently acquired rights to a technology that enables transactional
banners, through which an Internet user is able to view a banner, click on the
banner, and purchase products directly in the banner without being transported
to another Web site. We believe this service is attractive to Affiliated Web
sites because it is designed to allow them to run transaction-based advertising
at potentially high rates and receive a percentage of the e-commerce sale
without losing user traffic to the e-commerce merchant. The technology also
enables us and the product manufacturer to track the success of a campaign in
real-time. We are currently testing this service under the consumer brand
"Click2Buy".

Privacy Protection

In using our targeting technology and software, we adhere to the
principles of the Direct Marketing Association regarding privacy concerns. To
address privacy concerns, users are permitted, at their request, to "opt-out"
of demographic profile targeting. When a subscriber objects to profile
targeting, our ad serving technology automatically delivers ads based only on
non-user specific information, such as Web page subject matter.

Sales and Marketing

We believe we maintain one of the largest Internet advertising sales
organizations. We sell services in the United States through a sales and
marketing organization which included 72 salespeople as of December 31, 1998.
These employees are located at our headquarters in New York and our offices in
Atlanta, Boston, Chicago, Dallas, Detroit, Los Angeles, San Francisco, Seattle
and the Washington, D.C. area.

Our 24/7 Media Europe Network has offices in Belgium, Denmark, Finland,
France, Germany, Holland, Italy, Norway, Portugal, Spain and UK.

Advertisers typically purchase advertising under written purchase order
agreements that run for a limited time. We believe that the terms of our
purchase order agreements are consistent with industry practice. These
agreements provide for our indemnification by the advertiser for breach of
representations and warranties and limit the right of the advertiser to cancel
or modify a campaign once commenced. We recently started to sell sponsorship
advertising whereby an advertiser enters into a long-term agreement with a
single Web site, typically with exclusivity and renewal privileges and
restrictions on the advertisers' ability to cancel the agreement. Sponsorship
advertising involves a greater degree of integration among our company, the
advertiser and the Affiliated Web sites.

We believe that we have a competitive advantage due to the geographic
breadth of our sales force and our ability to continually improve our sales and
marketing capabilities. We continuously leverage the substantial media
experience of our management team to maximize the value of ad campaigns for
both advertisers and Affiliated Web sites. We also employ a Web site
relationship department that surveys Affiliated Web sites and monitors
qualitative indicators of service levels in order to continuously improve our
customer service.

We believe that advertiser awareness of our company and our services is
critical to our success. As a result, we seek to continually communicate with
advertisers and advertising agencies through our Web site,

31
<PAGE>

trade publication advertisements, public relations, direct mail, ongoing
customer communications programs, promotional activities, trade shows and
online advertisements over our networks and on third party Web sites.

International

Our international strategy consists of acquiring or entering into
strategic alliances with existing Internet advertising networks in foreign
countries. In January 1999, we acquired a 60% interest in 24/7 Media Europe
Ltd., formerly known as InterAd Holdings Limited, which operates the 24/7 Media
Europe Network. In October 1998 we entered into an agreement with China.com
Corporation to jointly develop the 24/7 Media Asia Network. We collaborate with
China.com on expanding and training its China and Hong Kong-based sales force
as well as recruiting Web sites for the network. We will receive royalties from
all sales through the 24/7 Media Asia Network for a period of between seven and
ten years and we acquired a 10% equity stake in China.com in exchange for $3.0
million in cash and approximately 204,000 shares of common stock. We also have
mutual sales agreements with both the 24/7 Media Europe Network and the 24/7
Media Asia Network. Additionally, ClickThrough Interactive of Canada has the
exclusive third party right to sell page views on the 24/7 Network when such
pages are accessed by Canadian Internet users, and we have the exclusive third
party right to sell page views on the ClickThrough network when accessed by
U.S. Internet users.

Intellectual Property

Intellectual property is critical to our success, and we rely upon patent,
trademark, copyright and trade secret laws in the United States and other
jurisdictions to protect our proprietary rights and intellectual property.
Although we do not currently have any patents, we have filed applications with
the United States Patent and Trademark Office to protect aspects of our
Adfinity technology. We have also applied to register our trademarks both
domestically and internationally. These trademark registrations and patent
applications may not be approved or granted and may be challenged by others or
invalidated through administrative process or litigation. Patent, trademark,
copyright and trade secret protection may not be available in every country in
which our services are distributed or made available. In addition, we protect
our proprietary rights through the use of confidentiality agreements with
employees, consultants and affiliates.

Profilz will collect demographic profiles of Internet users and the ad
serving technology we employ collects and uses data derived from user activity
on our networks and Affiliated Web sites. This data is intended to be used for
advertisement targeting and for predicting advertisement performance. Although
we believe that we have the right to use such data, trade secret, copyright or
other protection may not be available for such information or others may claim
rights to such information. Further, under our contracts with Web publishers
using our services, we are obligated to keep information regarding the Web
publisher confidential.

Competition

The markets for Internet advertising and related products and services are
intensely competitive and we expect competition to increase.

We compete for Internet advertising revenues with large Web publishers and
Web portals, such as America Online, Excite, GeoCities, Go Network, Infoseek,
Lycos, Microsoft Network and Yahoo!. Our networks compete for Web site clients
with a variety of Internet advertising networks, including DoubleClick,
AdSmart, Flycast, Real Media and Link Exchange. We also encounter competition
from a number of other sources, including content aggregators, companies
engaged in advertising sales networks, advertising agencies, and other entities
that facilitate Internet advertising. Many of our existing competitors, as well
as a number of potential new competitors, have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than we do.

Employees

As of December 31, 1998, we employed approximately 200 persons, including
130 in sales, marketing and customer support, 35 in technology and product
development, and 35 in accounting, human resources and administration. We are
not subject to any collective bargaining agreements and believe that we enjoy a
good relationship with our employees.

32
<PAGE>

Facilities and Systems

Our principal executive offices are located at 1250 Broadway, New York,
New York. They consist of approximately 39,000 square feet under a lease that
expires in 2008 and provides for total annual rent of approximately $1,200,000,
subject to increase annually to reflect increases in operating expenses. 26,000
square feet of this space is currently under construction to provide for the
expansion of personnel and facilities and is expected to be occupied in the
second quarter of 1999. We also temporarily lease office space at One Penn
Plaza, New York, New York.

In addition, we lease office space for our sales, marketing and product
development staff in Atlanta, Boston, Chicago, Dallas, Detroit, Los Angeles,
San Francisco, Seattle and the Washington, D.C. area. We believe that our
existing facilities, will be sufficient for our purposes over the next 12
months.

Our primary ad serving software and hardware are housed at GlobalCenter,
Inc. in Herndon, Virginia. Our agreement with GlobalCenter provides for
Internet connectivity services, the lease of hardware, the licensing of
software, and the lease of secure space to store and operate this equipment.
Service orders currently in place under this agreement, which expire in May
1999, require monthly payments of approximately $27,000. GlobalCenter may not
increase prices or terminate services during the pendency of any service order.
Our agreement with GlobalCenter includes a "99% Uptime Guarantee." Downtime
results in certain returns of payment and gives rise to a right of termination
by us. In the future, we may opt to utilize other facilities similar to
GlobalCenter, including facilities owned by us, in other regions of the United
States and the world.

Legal Proceedings

We are not a party to any material legal proceedings.

33
<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table provides information concerning our executive officers
and directors:

<TABLE>
<CAPTION>
Name Age Position and Offices
- ---- --- --------------------
<S> <C> <C>
David J. Moore 46 President and Chief Executive Officer and a Director
R. Theodore Ammon 48 Chairman of the Board
Jacob I. Friesel 49 Executive Vice President -- Sales and Marketing and a
Director
C. Andrew Johns 39 Executive Vice President, Treasurer and Chief Financial
Officer
John F. Barry III 47 Director
Jack L. Rivkin 57 Director
Arnie Semsky 53 Director
Charles W. Stryker, Ph.D. 51 Director
</TABLE>

David J. Moore has been our President and Chief Executive Officer and a
Director since February 1998. Mr. Moore was Chief Executive Officer of Petry
from December 1995 to February 1998. From 1993 to 1994, Mr. Moore was President
of Geomedica, an online service for physicians, which he sold to Reuters. From
1982 to 1992, Mr. Moore was a Group Vice President at Hearst/ABC-Viacom
Entertainment Services, where he participated in the launch of Cable Health
Network, Lifetime Television, Lifetime Medical Television, a service targeted
to physicians, and HealthLink Television, a physician waiting room television
service. From 1979 to 1982, Mr. Moore had a television advertising sales
position with Turner Broadcasting. Mr. Moore received a B.A. degree in
Communications from Northern Illinois University.

R. Theodore Ammon, Chairman of our Board, has been Chairman of the Board
of Big Flower Holdings, Inc. and its predecessor company, Big Flower Press
Holdings, Inc. since 1993. From 1990 to 1992, Mr. Ammon was a General Partner
of Kohlberg Kravis Roberts & Co., a New York and San Francisco-based investment
firm, and an executive of such firm prior to 1990. Mr. Ammon also serves on the
board of directors of each of Host Marriott Corporation, Culligan Water
Technologies, Inc. and Samsonite Corporation. Mr. Ammon received a B.A. degree
in Economics from Bucknell University.

Jacob I. Friesel has been our Executive Vice President -- Sales and
Marketing and a Director since February 1998. From 1997 to 1998, Mr. Friesel
was President of Katz Millennium Marketing, the Internet media sales division
of Katz Media Group, Inc. He was Vice President, Strategic Planning for the
Katz Television Group from 1994 to 1997. From 1993 to 1994, he was a Vice
President and General Sales Manager of Katz American Television, a leading
advertising representative of major market television stations. He was Vice
President, General Sales Manager of Katz Continental Television from 1991
through 1993, and was employed in various media advertising sales and
management positions with the Katz Agency from 1976 to 1991. Mr. Friesel
received a B.A. degree in Mass Communications from the City University of New
York.

C. Andrew Johns has been Executive Vice President, Treasurer and Chief
Financial Officer since April 1998. From 1996 to 1998, he was co-founder and
Managing Director of Manufacturers Renaissance Network, Inc., which provides
strategic consulting and investment banking services to small and medium-sized
businesses. From 1990 to 1996, Mr. Johns was President and owner of Strathmore
Hill Associates, Inc., an investment banking and strategic consulting firm. Mr.
Johns received a M.B.A. degree from Stanford University Graduate School of
Business and a B.S. degree in Commerce from The University of Virginia. Mr.
Johns is a Chartered Financial Analyst.

John F. Barry III, a Director, is presently the Managing General Partner
of Prospect Street Ventures, a private equity and venture capital firm, which
he joined in 1990. From 1988 to 1989, he was the head of investment banking at
L.F. Rothschild & Co. From 1983 to 1988, he was a corporate finance specialist
at Merrill Lynch and from 1979 to 1983, he was a securities attorney with Davis
Polk & Wardwell. Mr. Barry serves on the boards of directors of nine
information technology companies, including Skyline Multimedia, Inc. Mr. Barry
is also the chairman of Bondnet Trading Systems, Inc. Mr. Barry received a J.D.
degree from Harvard Law School and a B.A. degree in History from Princeton
University.

34
<PAGE>

Jack L. Rivkin, a Director, has been a Senior Vice President of Travelers
Investment Group Inc. since January 1997, where he is responsible for the
management of venture capital and private equity partnerships for various
Travelers insurance companies. He is also a director and member of the
investment committee of Greenwich Street Capital Partners, L.P., a $460 million
merchant banking fund affiliated with Travelers, and an adjunct professor at
Columbia University Business School. From October 1995 to December 1996, he was
a Senior Vice President of the Investment Group of Travelers Group Inc. From
March 1993 to October 1995, Mr. Rivkin was vice chairman and director of Global
Research at Smith Barney. From 1987 to 1992, Mr. Rivkin was director of the
Equities Division and Director of Research of Lehman Brothers. From 1984 to
1987, Mr. Rivkin was President of PaineWebber Capital, Inc., the merchant
banking arm of PaineWebber Group, and Chairman of Mitchell Hutchins Asset
Management. Mr. Rivkin is also a director of HumaScan Inc., a medical device
company, and PRT Group, Inc., an information technology company. Mr. Rivkin
received a M.B.A. degree from Harvard Business School and a B.A. degree in
Metallurgical Engineering from the Colorado School of Mines.

Arnie Semsky, a Director, has been self-employed as a media advisor since
January 1999. He previously served as the Executive Vice President, Worldwide
Media Director of the BBDO Worldwide unit of Omnicom Group from 1982 until
December 1998. Mr. Semsky joined BBDO Worldwide in 1979 as Vice President and
Associate Director of Network Programming and he has served as a member of the
board of directors of BBDO Worldwide since 1991. Mr. Semsky received a B.A.
degree in English from Pace University.

Charles W. Stryker, Ph.D., a Director, has been President of IntelliQuest
Marketing Information Solutions, Inc. and President of Zona/Research since
1998. Dr. Stryker served as a Director of IntelliQuest Information Group Inc.
from October 1997 to March 1998. From 1991 to 1997, he was President of each of
MkIS User Forum and Information Technology Forum, companies providing marketing
information, consulting and service products to executives and technology
companies. Dr. Stryker received a B.S. degree and a M.S. degree in Electrical
Engineering and a Ph.D. in Computer Science from New York University.

Key Employees

Joseph T. Apprendi has been Senior Vice President -- Strategic Sales since
January 1999. Mr. Apprendi was Senior Vice President -- Sponsorships and
Promotions from June 1998 to December 1998. From March 1998 to June 1998, Mr.
Apprendi was Executive Vice President of the CliqNow! Sales Group of K2 Design,
Inc. From February 1996 to March 1998, Mr. Apprendi was Senior Vice President
of Media and Promotion for K2 Design, Inc., from September 1995 to February
1996, Mr. Apprendi was an Account Executive with Harrington, Righter, and
Parson, Inc. and from June 1992 to September 1995, Mr. Apprendi was an Account
Executive with MMT Sales, Inc., a national broadcast advertising sales rep
firm. Mr. Apprendi received a B.A. degree in Economics from Oberlin College.

Mark A. Burchill has been Senior Vice President of Business Development
and International since February 1998 and was Senior Vice President and
co-founder of Petry from December 1995 to February 1998. In 1994, Mr. Burchill
was Director of International Sales & Development for Petry Media Corp, a
television rep firm. From 1992 to 1994, Mr. Burchill was a market consultant
for the Los Angeles Rams and MTV Networks while also pursuing a graduate
degree. From 1989 to 1992, Mr. Burchill was a Senior Media Planner in the media
department of Young & Rubicam Advertising. Mr. Burchill received a M.B.A.
degree from Anderson School of Management at the University of California at
Los Angeles and a B.A. degree from Hobart College.

Garrett P. Cecchini has been Senior Vice President, e-Commerce since
January 1999. Mr. Cecchini was Senior Vice President of National Sales from
February 1998 through December 1998. From February 1997 to February 1998, he
was Vice President, General Manager of Katz Millennium Marketing. From December
1994 to February 1997, Mr. Cecchini was co-founder of Goodman Cecchini Media
Design, a Web site development concern, and US Cybersites, a commercial
bandwidth reseller. From 1992 to 1994, Mr. Cecchini was Vice President,
Director of Sales for Sony Pictures Entertainment's Columbia TriStar Television
Division, a syndicator of television programming. From January 1991 to December
1992, Mr. Cecchini was Senior Vice President, Director of Sales for Telemundo
Group, Inc., a Spanish language television network. Mr. Cecchini received a
B.S. degree in Accounting and Marketing from Manhattan College.

35
<PAGE>

Ronald A. Johnson has been Senior Vice President and Chief Information
Officer since December 1998. Prior to joining our company, Mr. Johnson was with
Bell Atlantic since 1983 where he led development and network integration of
systems for Bell Atlantic's cellular, video, Internet and electronic publishing
subsidiaries. Immediately prior to joining our company, Mr. Johnson headed
systems development for Bell Atlantic Internet Solutions, Inc. and Big Yellow,
Bell Atlantic's online yellow pages. Mr. Johnson managed the systems/network
integration of interactive video-on-demand (VOD) systems for Bell Atlantic's
Northern Virginia ADSL trial resulting in the integration and deployment of VOD
for Telecom Italia in Rome, Italy. Specifically, he managed billing and
operational support systems for Bell Atlantic, NYNEX and US West as they
started their cellular businesses. Mr. Johnson received a B.A. degree in
Chemistry from Central Methodist College.

Geoff Judge has been Senior Vice President of Affiliate Relations since
February 1998. Mr. Judge was President of Interactive Imaginations from
September 1997 to February 1998 and was Executive Vice President, Marketing and
Sales from May 1997 to September 1997. From 1995 to 1997, Mr. Judge was Vice
President, Marketing for iMarket Inc., a software company. From 1994 to 1995,
Mr. Judge was Vice President--Marketing at Doubleday Direct, where he managed
the membership base of the company's nine book clubs. From 1985 to 1994, Mr.
Judge was at American Express in numerous roles including Vice President and
General Manager, Travel & Corporate Insurance Group, where he managed an
operating group of over 70 people, and a $90 million portfolio of products that
were direct marketed to cardmembers. Mr. Judge received a M.B.A. degree from
the Columbia University Graduate School of Business and a B.A. degree in
Economics from Northwestern University.

Mark E. Moran has been Senior Vice President and General Counsel since
April 1998. From June 1993 to April 1998, Mr. Moran was an associate attorney
at Proskauer Rose LLP. From April 1986 to May 1993, Mr. Moran was a financial
analyst in the Securities Processing Division of The Bank of New York. Mr.
Moran received a J.D. degree from Fordham Law School, a M.B.A. degree in
Finance from Fordham Graduate School of Business, and a B.A. degree in
Economics from The University of Virginia.

Scott Paternoster has been Senior Vice President--National Sales since
January 1999. From June 1998 to December 1998, Mr. Paternoster was President of
the CliqNow! division of our company. From February 1996 to June 1998, Mr.
Paternoster was Founder and President of the CliqNow! Sales Group of K2 Design,
Inc. and from 1989 to February 1996, Mr. Paternoster was the New York Sales
Manager and an Account Executive at MMT Sales, Inc., a national broadcast
advertising sales rep firm. Mr. Paternoster received a B.S. degree in Economics
and Management from Ithaca College.

Stuart D. Shaw has been Senior Vice President of Finance & Administration
since February 1998. He was Vice President and Chief Financial Officer of Petry
Interactive, Inc. from October 1997 to February 1998. From 1991 to 1997, Mr.
Shaw was Director of Financial Reporting, then Vice President of Customer
Resources for Penguin Books, a trade publisher. From 1989 to 1991, Mr. Shaw was
Controller for Warren, Gorham & Lamont, a publisher of professional resource
literature. From 1983 to 1989, Mr. Shaw was an auditor with Arthur Andersen.
Mr. Shaw received a B.B.A. degree in Public Accounting from Pace University.
Mr. Shaw is a Certified Public Accountant.

Committees of the Board of Directors

Audit Committee. The Audit Committee, composed of Messrs. Ammon, Rivkin
and Barry, who are not employed by us and are, thus, independent directors,
does the following:

o makes recommendations concerning the engagement of independent public
accountants;

o reviews with the independent public accountants the plans and results
of the audit engagement;

o approves professional services provided by the independent public
accountants;

o reviews the independence of the independent public accountants;

o considers the range of audit and non-audit fees; and

o reviews the adequacy of our internal accounting controls.

36
<PAGE>

Compensation Committee. The compensation committee, composed of Messrs.
Moore, Rivkin and Stryker, approves the salaries and other benefits of our
executive officers and administers any of our non-stock based bonus or
incentive compensation plans, excluding any cash awards intended to qualify for
the exception for performance-based compensation under Section 162(m) of the
Code. In addition, the compensation committee consults with our management
regarding pension and other benefit plans, and compensation policies and our
practices.

Stock Option Committee. The stock option committee, composed of Messrs.
Ammon, Rivkin and Barry, directors who qualify as outside directors under
Section 162(m) of the Code and as non-employee directors under Rule 16b-3(c) of
the Exchange Act, administers any of our stock-based incentive plans, including
the 1998 stock incentive plan. In addition, the stock option committee is
responsible for granting any cash awards intended to qualify for the exception
for performance-based compensation under Section 162(m) of the Code.

Election of Directors

Prior to our first annual stockholders' meeting our board of directors
will be divided into three classes. Directors of each class will be elected at
the annual stockholders' meeting held in the year in which the term for such
class expires and will serve the following for three years. No determination
has been made as to which directors will be members of each class.

Compensation of Directors

Directors do not receive salaries or cash fees for serving as directors or
for serving on committees. All members of the board of directors who are not
employees or consultants are reimbursed for their expenses for each meeting
attended and are eligible to receive stock options pursuant to the 1998
incentive plan. Under the 1998 stock incentive plan, each existing non-employee
director has been granted a non-qualified option to purchase 18,750 shares of
common stock at the fair market value on the date of grant, and each new non-
employee director will be granted a non-qualified option to purchase 18,750
shares of common stock at the fair market value on the date of grant. Upon the
date of each annual stockholders' meeting, each existing non-employee director
shall be granted a non-qualified option to purchase 4,688 shares of common
stock, or a pro rata portion thereof if the director did not serve the entire
year since the date of the last annual meeting. All options granted to
non-employee directors will vest at the rate of 25% on each of the first four
anniversaries of the date of grant, assuming the non-employee director is a
director on those dates, and all such options generally will be exercisable for
a period of ten years from the date of grant. Upon a change of control, all
unvested options which have not yet expired will automatically become 100%
vested.

Executive Compensation and Employment Agreements

We have entered into employment agreements with our executive officers and
each of our key employees named in this document providing for annual
compensation in excess of $100,000. The material terms of such employment
agreements generally are as follows:

o the employment term runs through December 31, 1999, except as stated
below and is automatically renewable for successive one-year terms
unless either party gives written notice to the other at least six
months prior to the expiration of the then employment term;

o during the employment term and thereafter, we will indemnify the
executive to the fullest extent permitted by law, in connection with
any claim against such executive as a result of such executive serving
as one of our officers or directors or in any capacity at our request
in or with regard to any other entity, employee benefit plan or
enterprise;

o any dispute or controversy arising under or in connection with the
employment agreement (other than injunctive relief) shall be settled
exclusively by arbitration;

o we may terminate the agreement at any time with or without cause (as
defined in the agreement) and, if an executive is terminated without
cause (including our giving notice of non-renewal), he will receive
severance pay in an amount generally equal to six months' base salary
and bonus, plus continued medical benefits for a period equal to the
severance period as well as acceleration of outstanding options; and

37
<PAGE>

o if termination is the result of the executive's death or disability, we
will pay to the executive or his estate an amount equal to six months'
base salary at his then current rate of pay (reduced in the case of
disability by his long-term disability policy payments).

The agreement of David J. Moore extends through January 1, 2001. Mr.
Moore's agreement provides for an annual base salary of $225,000 and a target
bonus of $275,000, $300,000 and $325,000 for 1998, 1999, and 2000,
respectively. Mr. Moore was also awarded 56,250 shares of restricted stock that
vest over three years. In connection with this issuance, we are recognizing
compensation expense of $90,000 ratably over the three-year vesting period. If
we terminate Mr. Moore without cause, he is entitled to receive severance pay
in an amount equal to two times base salary, plus the maximum bonus for which
he is eligible during the fiscal year of termination.

The agreements of our other executive officers and named key employees
provide for base salaries between $100,000 and $180,000 and target incentives,
based on attainment of corporate goals, between $35,000 and $130,000.

On December 11, 1998, we entered into a severance agreement with Yale R.
Brown, our former director and Executive Vice President under which Mr. Brown
resigned as an officer and director. We agreed to pay Mr. Brown the sum of
$140,000 as severance, including attorneys' fees, and we exchanged mutual
releases of substantially all claims arising out of his employment.

38
<PAGE>

Executive Compensation And Other Information

Summary of Cash and Certain Other Compensation

The following table provides information about the compensation paid or
payable by us for services rendered in all capacities to our Chief Executive
Officer and our other executive officers who earned more than $100,000 for
1998.

<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------------------------------------------- ----------------------------
All
Other Restricted Securities Other
Name and Annual Stock Underlying Compen-
Principal Position Salary Bonus Compensation Award(s) Options (#) sation
- -------------------------- ------------------ ----------- -------------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
David J. Moore ........... $259,137 $343,750 $0 56,250 0 0
President and
Chief Executive
Officer
C. Andrew Johns .......... 105,192(1) 66,706 0 0 62,500 0
Chief Financial
Officer
Jacob I. Friesel ......... 153,125(2) 150,391 0 0 0 0
Executive Vice
President
Yale R. Brown ............ 255,202(3) 13,923 0 0 0 0
Former Executive
Vice President
</TABLE>

- ------------

(1) Mr. Johns commenced his employment with us on April 17, 1998.
(2) Mr. Friesel commenced his employment with us on February 24, 1998.
(3) Mr. Brown commenced his employment with us on April 13, 1998 and terminated
his employment on December 11, 1998. Amounts include all payments,
totaling approximately $140,000, to be made pursuant to a severance
agreement.

Stock Options

The following table contains information concerning the grant of options
under the 1998 stock incentive plan to each of our executive officers during
the year ended December 31, 1998. We did not grant any stock appreciation
rights in 1998.

Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of
Securities Options Stock Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price Expiration ----------------------------
Name Granted(#)(1) Fiscal Year(2) ($/Share) Date(3) 5% 10%
- ----------------- --------------- ---------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
C. Andrew Johns 62,500 4.3% $ 4.00 3/25/08 $157,224 $398,436
</TABLE>

- ------------

(1) All options granted in 1998 were granted pursuant to the 1998 stock
incentive plan. The grant to Mr. Johns is exercisable in annual increments
of 25% of the total grant, beginning on the first anniversary of the date
of grant. All options were granted at the fair market value of common
stock on the effective date of grant.
(2) The total number of options granted to directors and employees in 1998 was
1,455,645.
(3) Each option may be subject to earlier termination if the officer's
employment with us is terminated.

39
<PAGE>

The following table provides information for each of our executive
officers with respect to the value of options exercised during the year ended
December 31, 1998 and the value of outstanding and unexercised options held as
of December 31, 1998. There were no stock appreciation rights exercised during
1998 and none were outstanding as of December 31, 1998.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-end Option Values

<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares at December 31, 1998 at December 31, 1998(1)
Acquired Value ------------------------------- ---------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
C. Andrew Johns $ -- $ -- 0 62,500 $0 $1,500,000
</TABLE>

- ------------
(1) Represents the difference between the closing market price of the common
stock as reported by Nasdaq on December 31, 1998 of $28.00 per share and
the exercise price per share of in-the-money options multiplied by the
number of shares underlying the in-the-money options.

1998 Stock Incentive Plan

Background; Purpose; Eligibility. The following description of the
incentive plan is intended only as a summary. The incentive plan is intended to
foster stock ownership by employees and directors and thereby attract, retain
and reward such employees and directors. All of our employees, consultants and
non-employee directors that satisfy requirements are eligible to be granted
awards under the incentive plan.

Administration. The incentive plan is administered by the stock option
committee of our board of directors. The stock option committee has full
authority and discretion, subject to the terms of the incentive plan, to
determine who is eligible to receive awards and the amount and type of awards.
Terms and conditions of awards are set forth in written grant agreements. No
option may have an exercise price less than the fair market value of the common
stock at the time of original grant (or, in the case of an incentive stock
option granted to a ten percent stockholder, 110% of fair market value). Awards
under the incentive plan may not be made on or after the tenth anniversary of
the date of its adoption, but awards granted prior to such date may extend
beyond that date. All options granted under the incentive plan expire no more
than ten years from the date of grant.

Available Shares and Other Units. A maximum of 3,000,000 shares of common
stock may be issued pursuant to the incentive plan. The maximum number of
incentives that may be granted to any individual for each fiscal year during
the term of the incentive plan is 187,500. In general, upon the cancellation or
expiration of an award, the unissued shares of common stock subject to such
awards will again be available for awards under the incentive plan.

Amendments. The incentive plan may be amended by the board of directors,
except that, generally, stockholder approval is required to take the following
actions:

o increase the aggregate number of shares of common stock reserved for
awards or the maximum individual limits for any fiscal year;

o change the classification of employees and non-employee directors
eligible to receive awards;

o decrease the minimum option price of any option;

o extend the maximum option period under the incentive plan; or

o change any rights with respect to non-employee directors.

Stock Options. Under the incentive plan, the stock option committee may
grant options to purchase shares of common stock. Options may be incentive
stock options or non-qualified stock options. The stock option committee will
determine the number of shares subject to the option, the term of the option,
the exercise price per share, the vesting schedule, and the other material
terms of the option.

40
<PAGE>

Restricted Stock. The incentive plan authorizes the stock option committee
to award shares of restricted stock. Upon the award of restricted stock, the
recipient has all rights of a stockholder, unless otherwise specified by the
stock option committee at the time of grant, subject to the conditions and
restrictions generally applicable to restricted stock.

Change of Control. In the event that we merge with another company, upon
the sale of substantially all of our assets or securities representing 40% or
more of the total combined voting power of our then outstanding securities, or
upon changes in membership of the board of directors during any two-year
period, then:

o each option will be fully vested and immediately exerciseable, or each
option may be repurchased by us for an amount of cash equal to the
excess of the change of control price (as defined in the incentive plan)
over the exercise price; and

o the restrictions on shares of restricted stock shall lapse as if the
applicable restriction period had ended.

41
<PAGE>

TRANSACTIONS BETWEEN THE COMPANY AND OFFICERS, DIRECTORS
AND PRINCIPAL STOCKHOLDERS

Investments by The Travelers Insurance Company

In November 1996, we entered into a Securities Purchase Agreement with The
Travelers Insurance Company for the sale and issuance of convertible preferred
shares with an initial conversion price of $11.48, subject to adjustment in the
event that we subsequently sold securities at a lower price. Travelers'
investment was approximately $1,000,000 and was subsequently converted into
119,613 shares of common stock. In addition, in 1997 and January 1998, we
issued to The Travelers Insurance Company senior convertible notes in an
aggregate principal amount of $1,400,000 with initial conversion prices ranging
from $1.60 per share to $11.48 per share and also issued warrants. These
securities were subsequently converted into approximately 642,401 shares of
common stock. Jack L. Rivkin, one of our directors, is the Senior Vice
President of the Investment Group of Travelers Group Inc.

Merger of Petry, Advercomm and Interactive Imaginations into our Company

Under an Agreement and Plan of Merger, dated February 2, 1998, Petry and
Advercomm were merged into 24/7 Media, Inc. Upon consummation of these mergers,
each share of common stock of Petry was converted into 20,988.74 shares of our
common stock and each share of common stock of Advercomm was converted into
262.36 shares of our common stock.

In connection with the acquisitions of Petry and Advercomm, we entered
into a Securities Purchase Agreement, dated February 25, 1998, with investors
including Travelers and David J. Moore, our President and Chief Executive
Officer, for the sale and issuance of preferred shares and warrants for total
proceeds of $10,060,002. For each $10,000 invested, the investors received
10,000 shares of Series A preferred stock, which were automatically converted
into common stock at a conversion price of $3.81 upon consummation of our
initial public offering, and approximately 1,313 Class A warrants, exercisable
into common stock at an exercise price of $7.62 per share, and approximately
1,313 Class B warrants, exercisable into common stock at an exercise price of
$11.42 per share.

Petry entered into an oral consulting agreement with a corporation of
which C. Andrew Johns, our Executive Vice President, Treasurer and Chief
Financial Officer was an officer and a 50% stockholder, pursuant to which the
corporation was paid $75,000 and Class C warrants to purchase 18,750 shares of
common stock at an exercise price of $3.81 per share for consulting services
rendered in connection with the merger. We recorded $13,500 of acquisition
costs in connection with these warrants. We also paid the corporation a
consulting fee of approximately $33,000 for services rendered in connection
with the acquisition of Intelligent Interactions.

On February 24, 1998, Michael P. Paolucci, one of our former directors,
entered into a Confidential Separation Agreement and General Release with us
pursuant to which Mr. Paolucci's employment as an executive of Interactive
Imaginations was terminated. The terms of the Separation Agreement generally
provide for each party to release and discharge the other party from all causes
of action, claims, judgments, obligations, damages or liabilities. We agreed to
issue to Mr. Paolucci Class C warrants to purchase 625,000 shares of common
stock at an exercise price of $3.81 per share and extended from January 31,
2000 to January 31, 2005 the term of a fully vested option held by Mr. Paolucci
to purchase 13,000 shares of common stock at $1.72 per share. Accordingly, we
recorded compensation expense of $450,000 during the three month period ended
March 31, 1998 in connection with this transaction.

We also entered into a Consulting Agreement, dated as of January 1, 1998
with Neterprises, Inc., pursuant to which Mr. Paolucci, President and sole
stockholder of Neterprises, Inc., agreed to provide management and consulting
services to us for a term of up to one year in connection with the
identification and evaluation of potential strategic relationships and
potential acquisition targets. In return for such services, Mr. Paolucci
received a lump sum payment of $180,000 and received a monthly fee of $12,500.
This agreement terminated December 31, 1998.

Intelligent Interactions Acquisition

Under an Agreement and Plan of Merger, dated as of April 9, 1998, we
acquired Intelligent Interactions and shareholders of Intelligent Interactions
received shares of our capital stock. Such shareholders (i) entered

42
<PAGE>

into an amended and restated version of the Shareholders' Agreement and (ii)
were granted registration rights with respect to their shares of common stock.
See "Description of Capital Stock--Registration Rights."

During 1995 and 1996, Intelligent Interactions borrowed $56,000 and
$55,000, respectively, from Yale R. Brown, who was the founder and principal
stockholder of Intelligent Interactions. All amounts outstanding at September
6, 1996 under these notes, plus accrued interest on those amounts, were
converted into one instrument in the amount of $114,000. During 1997, the full
outstanding balance was paid on this obligation.

Future Transactions

Our board of directors has adopted a policy that future transactions
between us and our officers, directors, principal stockholders and their
affiliates will be subject to approval of a majority of the Independent
Directors, and will be on terms no less favorable to us than we could obtain
from unaffiliated third parties.

Other

For information regarding the grant of stock options to executive officers
and directors, see "Management-- Awards to Non-employee Directors,"
"--Executive Compensation and Employment Agreements," "--1998 Stock Incentive
Plan" and "Security Ownership of Certain Beneficial Owners and Management."

43
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of the common stock as of March 12, 1999, by: (i) each person who we know to
own beneficially more than 5% of the common stock; (ii) each of our directors
and executive officers; (iii) our current directors and executive officers as a
group and (iv) other selling stockholders.

<TABLE>
<CAPTION>
Ownership After
Offering and
Ownership Prior Ownership After Over-Allotment
to Offering(1) Offering (2) Option (3)
-------------------------- ------------------------- ----------------
Number of Shares Being Number of
Beneficial Owner Shares Percentage Offered Shares Percentage Percentage
- -------------------------------- ------------- ------------ -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Executive Officers and
Directors:
David J. Moore(4)(5) 994,893 6.1% 90,000 904,893 4.9% 4.8%
R. Theodore Ammon(6) 1,751,703 10.1 0 1,751,703 9.1 8.8
Jacob I. Friesel(4)(7) 787,078 4.8 78,707 708,371 3.8 3.7
C. Andrew Johns(4)(8) 27,000 * 0 27,000 * *
John Barry(9) 1,750,703 10.1 0 1,750,703 9.1 8.8
Jack I. Rivkin(10) 2,576,540 14.9 0 2,576,540 13.3 13.0
Arnie Semsky(4) 0 * 0 0 * *
Charles Stryker(11) 0 * 0 0 * *
All directors and officers as a
group (8 persons) 7,887,917 41.3 168,707 7,719,210 36.6 35.7

Other 5% Stockholders:
Yale R. Brown(12) 856,759 5.1 386,111 470,648 2.5 2.5

All other Selling
Stockholders:
David Banks (13) 1,981 * 1,307 674 * *
John S. Bonanni 9,309 * 2,000 7,309 * *
Mark A. Burchill (14) 524,719 3.2 78,707 446,012 2.4 2.4
Garrett P. Cecchini (15) 787,079 4.8 90,000 697,079 3.8 3.7
China.com Corporation 203,851 1.2 134,500 69,351 * *
General Electric
Pension Trust 210,929 1.3 100,000 110,929 * *
K2 Design, Inc. 196,492 1.2 129,644 66,848 * *
Russell Lucas 436 * 288 148 * *
Judith A. Mack 3,400 * 2,243 1,157 * *
John J. Mack 29,144 * 19,229 9,915 * *
Albert G. Nichols 3,839 * 2,533 1,306 * *
Albert G. Nichols IRA 4,254 * 2,807 1,447 * *
H. Gerald Nordberg (16) 13,732 * 9,060 4,672 * *
Vincent R. Paolucci (17) 3,000 * 1,979 1,021 * *
Edward V. Ryan, trustee (18) 9,677 * 6,385 3,292 * *
Matthew Walker 273,430 1.7 180,407 93,023 * *
Donald E. Wallens 3,871 * 2,554 1,317 * *
Walter S. Weiss 172 * 113 59 * *
Windsong Partners, L.P. 2,851 * 1,425 1,426 * *
Zero Stage Capital (19) 522,977 3.2 180,000 342,977 1.8 1.8
Totals for other Selling
Stockholders 2,805,143 16.8 945,182 1,859,961 10.0 9.7
Totals for all Principal and
Selling Stockholders 11,549,819 59.1 1,500,000 10,049,819 46.6 45.5
</TABLE>

- ------------
* Represents less than 1% of the outstanding common stock.

44
<PAGE>

(1) Applicable percentage ownership is based on 16,432,244 shares of common
stock outstanding as of March 12, 1999. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities,
subject to community property laws, where applicable. Shares of common
stock subject to options or warrants that are exercisable within 60 days
of March 12, 1999 and beneficially owned by the person holding such
options and warrants are treated as outstanding for the purpose of
computing the percentage ownership for such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Assumes that the underwriters' over-allotment option to purchase up to
525,000 shares is not exercised.
(3) Assumes that the underwriters' over-allotment option to purchase 525,000
shares is exercised in full.

(4) The address of Messrs. Moore, Friesel, Johns and Semsky is c/o 24/7 Media,
Inc., 1250 Broadway, New York, New York 10001.

(5) Includes 37,500 unvested shares of common stock issued pursuant to the
Incentive Plan and subject to forfeiture pursuant thereto. Includes
244,505 shares held by a family trust and other trusts held for the
benefit of family members, beneficial ownership of which is disclaimed by
Mr. Moore. Mr. Moore's wife is the trustee of each such trust.
(6) Represents 875,351 shares, Class A warrants to purchase 437,676 shares and
Class B warrants to purchase 437,676 shares held by Big Flower Digital
Services, Inc., an indirect subsidiary of Big Flower Holdings, Inc. Mr.
Ammon is the Chairman of the board of directors of Big Flower Holdings,
Inc. Mr. Ammon does not own any shares our common stock in his individual
capacity and expressly disclaims beneficial ownership of the shares held
by Big Flower Digital Services, Inc. The address of each of these entities
is c/o Big Flower Holdings, Inc., 3 East 54th Street, New York, New York
10022.
(7) Includes 262,360 shares held by a family trust, beneficial ownership of
which is disclaimed by Mr. Friesel.
(8) Includes 2,000 shares held by family members, options to acquire 15,625
shares and Class C warrants to purchase 9,375 shares.
(9) Represents 656,513 shares, Class A warrants to purchase 328,257 shares and
Class B warrants to purchase 328,257 shares held by Prospect Street NYC
Discovery Fund, L.P. and 218,838 shares, Class A warrants to purchase
109,419 shares and Class B warrants to purchase 109,419 shares held by
Prospect Street NYC Co-Investment Fund, L.P. Mr. Barry is one of our
directors and is the Managing General Partner of Prospect Street NYC
Discovery Fund, L.P. Mr. Barry does not own any shares of our common stock
in his individual capacity and expressly disclaims beneficial ownership of
the shares held by Prospect Street NYC Discovery Fund, L.P. and Prospect
Street NYC Co-Investment Fund, L.P. The address of each of these entities
is c/o Prospect Street Ventures, 10 East 40th St., 44th floor, New York,
New York 10016.
(10) Represents 1,666,829 shares, Class A warrants to purchase 437,676 shares
and Class B warrants to purchase 437,676 shares held by The Travelers
Insurance Company, and 34,359 shares held by The Travelers Indemnity
Company. Mr. Rivkin is one of our directors and is Senior Vice President
of Travelers Investment Group Inc., an affiliate of The Travelers
Insurance Company and The Travelers Indemnity Company. Mr. Rivkin does not
own any shares of our common stock in his individual capacity and
expressly disclaims beneficial ownership of the shares held by The
Travelers Insurance Company and The Travelers Indemnity Company. The
address of each of these entities is c/o Travelers Group Inc., 388
Greenwich Street, 36th floor, New York, New York 10013. None of Travelers
Group Inc., The Travelers Insurance Company, The Travelers Indemnity
Company or their respective affiliates has assumed or has any
responsibility for our management, business or operations, or for the
statements contained in this prospectus or the registration statement of
which this prospectus forms a part, other than the limited information
regarding securities ownership contained in this table.
(11) The address of Mr. Stryker is c/o IntelliQuest Information Systems, Inc.,
380 Interstate North Parkway, Suite 310, Atlanta, Georgia 30339.
(12) Represents 636,611 shares, Class A warrants to purchase 87,534 shares,
Class B warrants to purchase 87,534 shares and Class C warrants to
purchase 45,080 shares. Mr. Brown is a former officer and director of our
company and was co-founder of Intelligent Interactions Corporation. Mr.
Brown's address is 1175 North East Miami Gardens Drive, Apt. 709E, North
Miami Beach, Florida 33719.
(13) Represents 1,471 shares, Class A warrants to purchase 203 shares, Class B
warrants to purchase 203 shares and Class C warrants to purchase 104
shares.
(14) Mr. Burchill is one of our Senior Vice Presidents.
(15) Includes 175,000 shares held by a family trust held for the benefit of
family members. Mr. Cecchini is the trustee. Mr. Cecchini is one of our
Senior Vice Presidents.
(16) Includes 6,866 shares held by a family trust.
(17) All 3,000 shares are held by a family trust for the benefit of family
members. Ron Paolucci is the trustee for each trust.
(18) Represents 9,677 shares held by a trust for the beneficial ownership of
John R. Schmidt. Mr. Ryan's address is c/o J.H. Whitney & Co., 630 Fifth
Avenue, New York, New York, 10111.
(19) Represents 388,595 shares, Class A warrants to purchase 53,432 shares,
Class B warrants to purchase 53,432 shares and Class C warrants to
purchase 27,518 shares held by Zero Stage Capital Company, Inc.

Our company and all of our selling stockholders except for David J. Moore,
Jacob I. Friesel, Mark A. Burchill and Garrett P. Cecchini are parties to
registration rights agreements under which those selling stockholders are
participating in this offering. Under these agreements, we are required to pay
expenses incident to the registration, offering and sale of the securities,
other than underwriting commissions, and to indemnify the selling stockholders
against civil liabilities, including liabilities under the Securities Act. See
"Description of Capital Stock--Registration Rights."

45
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock is complete in all material
respects but should be read in conjunction with (i) applicable provisions of
Delaware law and (ii) the provisions of our certificate of incorporation and
by-laws, copies of which have been filed as exhibits to the registration
statement of which this prospectus is a part.

Our authorized capital stock consists of 70,000,000 shares of common
stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share, which may be issued in one or more classes and series.
Upon consummation of this offering, there will be 18,432,244 shares of common
stock and no shares of preferred stock issued and outstanding. The following
description of our capital stock is based upon our certificate of
incorporation.

Common Stock

Each holder of common stock is entitled to one vote per share of record on
all matters to be voted upon by the stockholders. Holders do not have
cumulative voting rights. Stockholders casting a plurality of the votes of
stockholders entitled to vote in an election of directors may elect all of the
directors. Subject to the preferential rights of any preferred stock that may
at the time be outstanding, each share of common stock will have an equal and
ratable right to receive dividends when, if, and as declared from time to time
by the board of directors. We may be subject to future agreements which
restrict the payment of dividends.

If we are liquidated, dissolved or subject to winding up, then holders of
our common stock are entitled to an equal share of all assets remaining after
payments to creditors and after satisfaction of any liquidation preference of
shares of preferred stock that may at the time be outstanding. Holders of
common stock have no preemptive, subscription, conversion or redemption rights
and are not subject to further calls or assessments by us. All outstanding
shares of common stock are validly issued, fully paid and nonassessable. The
shares of common stock offered by us in this offering will also be, when issued
and paid for, validly issued, fully paid and nonassessable.

Preferred Stock

Our certificate of incorporation authorizes the board of directors,
without any vote or action by the stockholders, subject to applicable law,
regulations and stock exchange rules, to issue up to 10,000,000 shares of
preferred stock in one or more classes and to fix the designations,
preferences, rights, qualifications, limitations and restrictions thereof.
Although it presently has no intention to do so, the board of directors could
issue preferred stock with voting and conversion rights that could adversely
affect the voting powers of the holders of the common stock and the market
price of the common stock. The issuance of preferred stock may also have the
effect of delaying, deferring or preventing a change in our control without
further action by the stockholders.

Registration Rights

Under the terms of registration rights agreements, dated as of April 9,
1998 and June 1, 1998, and also under stock purchase agreements, the beneficial
holders of approximately 6,500,000 shares of common stock are entitled to
demand that we register their shares under the Securities Act, subject to
limitations. Subject to limited exceptions, we are not required to effect more
than three registrations for any investor. In addition, in the event that we
propose to register any shares of common stock under the Securities Act, either
for our account or for stockholders, some stockholders are entitled to include
their shares therein, subject to limitations. Further, at any time after we
become eligible to file a registration statement on Form S-3, such holders may
require us to file registration statements under the Securities Act on Form
S-3. These registration rights are subject to conditions and limitations, among
them the right of the underwriters of an offering to limit the number of shares
of common stock held by security holders included in such registration. We are
generally required to bear all of the expenses of all such registrations,
except underwriting discounts and commissions. Registration of any of the
shares of common stock held by security holders with registration rights would
result in such shares becoming freely tradable without restriction under the
Securities Act immediately upon effectiveness of such registration.

46
<PAGE>

Delaware Anti-Takeover Law and Charter Provisions

We are subject to Section 203 of the Delaware General Corporation Law
which generally prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder.
Section 203 applies unless:

o prior to the date such stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder
becoming an interested stockholder;

o upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding certain shares; or

o on or after such date the stockholder became an interested stockholder,
the business combination is approved by the board of directors and
authorized at a meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.

Provisions of our certificate of incorporation and Delaware law may delay,
defer or prevent a change in our control and may adversely affect the voting
and other rights of holders of common stock. In particular, our certificate of
incorporation provides for a classified board of directors and the inability of
stockholders to vote cumulatively for directors.

Limitation on Directors' Liability and Indemnification Matters

Our certificate of incorporation provides that, except to the extent
prohibited by Delaware law, our directors will not be personally liable to us
or our stockholders for monetary damages for any breach of fiduciary duty while
serving as directors. This provision also does not affect the directors'
responsibilities under Delaware corporate law or any other laws, such as the
Federal securities laws or state or Federal environmental laws. Insofar as the
indemnification for liabilities arising under the Securities Act may be
permitted to our directors or officers, we have been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

We have obtained liability insurance for our senior officers and directors
and have entered into indemnity agreements to indemnify our executive officers
and directors in addition to the indemnification provided for in our
certificate of incorporation and bylaws. These agreements, among other things,
indemnify our directors and executive officers for expenses, judgments and
fines and amounts paid in settlement, actually and reasonably incurred by any
such person in any action, suit or proceeding arising out of such person's
services as a director or executive officer on our behalf. We believe that
these provisions and agreements are necessary to attract and retain qualified
directors and officers.

Effects of Authorized but Unissued Stock

Upon consummation of this offering, there will be 18,432,244 shares of
common stock, not including shares reserved for issuance upon the exercise of
outstanding warrants or reserved under the 1998 stock incentive plan, and
10,000,000 shares of preferred stock available for issuance without stockholder
approval, except as may be required by our certificate of incorporation, by
applicable law or regulatory agencies or by the rules of the Nasdaq National
Market or any stock exchange on which the common stock may then be listed. We
do not currently have plans to issue additional shares of capital stock. See
"Shares Eligible for Future Sale; Registration Rights."

Stock Transfer Agent and Registrar

The Stock Transfer Agent and Registrar for the common stock is The Bank of
New York, located at 101 Barclay Street, 11E, New York, New York and its
telephone number at such location is (800) 524-4458.

47
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of common stock in the public market
could adversely affect market prices. Only a limited number of shares will be
available for sale shortly after this offering because of certain contractual
and legal restrictions on resale but sales of substantial amounts of our common
stock in the public market after the restrictions lapse could adversely affect
the prevailing market price and our ability to raise equity capital.

Upon completion of this offering, we will have outstanding an aggregate of
18,432,244 shares of common stock. Of these shares, the 3,550,000 shares sold
in our initial public offering, the 3,500,000 shares sold in this offering,
250,000 shares that have been sold pursuant to Rule 144 and are eligible for
sale in the public market and 271,074 shares already issued pursuant to our
registration statement on Form S-8 will generally be freely tradable without
restriction or further registration under the Securities Act. The remaining
11,111,170 shares of common stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act and may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under the
Securities Act. Holders of 6,301,047 of our shares of common stock, including
all of our directors and officers, have agreed that they will not sell, directly
or indirectly, any common stock without the prior consent of the representatives
of the underwriters for a period of 90 days from the date of this prospectus. As
a result of these contractual and legal restrictions, additional shares will be
available for sale in the public market as follows:

o 6,301,047 shares may be eligible for sale upon expiration of the lock-up
agreements 90 days after the date of this prospectus; and

o 4,560,123 shares may be eligible for sale upon the expiration of their
respective one-year holding periods which for most of such shares
occurred on or before April 12, 1999.

In addition, there are outstanding options to purchase 2,156,208 shares of
common stock, 263,472 of which will, upon exercise, be eligible for sale in the
public market less than 90 days after the date of this prospectus and an
additional 1,892,736 of which will, upon exercise, be eligible for sale in the
public market 90 or more days after the date of this prospectus. There are also
outstanding warrants to purchase 3,327,985 shares of common stock, 216,024 of
which will be eligible for sale in the public market upon expiration of their
one-year holding periods, which generally occurred on or before April 12, 1999,
and 3,111,961 of which will be eligible for sale in the public market upon
expiration of lock-up agreements 90 days after the date of this prospectus.

Holders of a substantial number of shares of common stock are entitled to
require us to register shares under the Securities Act. This would result in
such shares becoming freely tradable without restriction under the Securities
Act, immediately upon the effectiveness of such registration.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least one year, including the
holding period of any prior owner except an affiliate, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:

o one percent of the number of shares of common stock then outstanding,
which will equal approximately 184,432 shares immediately after this
offering; or

o the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is deemed not to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the restricted shares for at least two years, including the
holding period of any prior owner except an affiliate, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144; therefore, unless otherwise
restricted, such "144(k) shares" may be sold immediately upon the completion of
this offering.

We have filed a registration statement on Form S-8 under the Securities
Act covering shares of common stock reserved for issuance under our 1998 stock
incentive plan. Such registration statement has become effective. Accordingly,
shares registered under such registration statement will generally be available
for sale in the open market, unless such shares are subject to vesting
restrictions with us or the lock-up agreements described herein.

48
<PAGE>

UNDERWRITING

General
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Allen & Company
Incorporated, CIBC Oppenheimer Corp., J.P. Morgan Securities Inc., PaineWebber
Incorporated and Wit Capital Corporation are acting as representatives of each
of the underwriters named below. Subject to the terms and conditions stated in
the Purchase Agreement among us and the underwriters, we and the selling
stockholders have agreed to sell to each of the underwriters, and each of the
underwriters, severally and not jointly, has agreed to purchase from us and the
selling stockholders the number of shares of common stock stated opposite its
name below.

<TABLE>
<CAPTION>
Underwriter Number of Shares
- -------------------------------------- -----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................
Allen & Company Incorporated .........
CIBC Oppenheimer Corp. ...............
J.P. Morgan Securities Inc. ..........
PaineWebber Incorporated .............
Wit Capital Corporation ..............
---------

Total ........................... 3,500,000
=========
</TABLE>

Subject to the terms and conditions stated in the Purchase Agreement, the
several underwriters have agreed to purchase all of the shares of common stock
being sold pursuant to the Purchase Agreement if any shares of common stock are
purchased. Under the terms of the Purchase Agreement, the commitments of the
non-defaulting Underwriters may in some circumstances be increased or the
Purchase Agreement may be terminated.

We and the selling stockholders have agreed to indemnify the several
underwriters against some liabilities, including some liabilities under the
Securities Act, or to contribute to payments the underwriters may be required
to make in respect thereof.

The underwriters offer the shares of common stock, subject to prior sale,
when as and if issued to and accepted by them, subject to approval of some
legal matters by counsel for the underwriters and some other conditions. The
underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part.

A prospectus in electronic format is being made available on a Web site
maintained by Wit Capital. In addition, all dealers purchasing shares from Wit
Capital in this offering have agreed to make a prospectus in electronic format
available on Web sites maintained by each of these dealers.

Commissions and Discounts

The representatives have advised us and the selling stockholders that they
propose initially to offer the shares of common stock to the public at the
public offering price stated on the cover page of this prospectus, and to some
dealers at such price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share on sales to some other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.

The following table shows the per share and total underwriting discounts
that we and the selling stockholders will pay to the underwriters. This
information is presented assuming either no exercise or full exercise by the
underwriters of their over-allotment options.

<TABLE>
<CAPTION>
Without
Per Share Option With Option
----------- -------- ------------
<S> <C> <C> <C>
Public Offering Price ............................ $ $ $
Underwriting Discount ............................ $ $ $
Proceeds, before expenses, to 24/7 Media ......... $ $ $
Proceeds to selling stockholders ................. $ $ $
</TABLE>

We will not receive any of the proceeds from the sale of shares by the
selling stockholders. We will pay the expenses of the offering, estimated at
$____.

49
<PAGE>

Over-allotment Option

We have granted to the underwriters an option exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of an
additional 525,000 shares of common stock at the public offering price stated
on the cover of this prospectus, less the underwriting discount. The
underwriters may exercise this option solely to cover over-allotments, if any,
made on the sale of the common stock offered hereby. To the extent that the
underwriters exercise this option, each underwriter will be obligated, subject
to some conditions, to purchase a number of additional shares of common stock
proportionate to such underwriter's initial amount reflected in the table
above.

No Sales of Similar Securities

We and our executive officers and directors and all of the selling
stockholders have agreed, for a period of 90 days after the date of this
prospectus, subject to exceptions, not to directly or indirectly issue, sell,
or otherwise dispose of or transfer any shares of common stock or securities
convertible into or exchangeable or exercisable for common stock, without the
prior written consent of Merrill Lynch on behalf of the underwriters. See
"Shares Eligible for Future Sale."

Price Stablization, Short Positions and Penalty Bids

Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters
and some selling group members to bid for and purchase the common stock. As an
exception to these rules, the representatives are permitted to engage in some
transactions that stabilize the price of the common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the common stock.

If the underwriters create a short position in the common stock in
connection with this offering, i.e., if they sell more shares of common stock
than are stated on the cover page of this prospectus, the representatives may
reduce that short position by purchasing common stock in the open market. The
representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.

Neither we nor any of the selling stockholders or underwriters make any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the common
stock. In addition, neither we nor any of the selling stockholders or
underwriters make any representation that the representatives will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.

Passive Market Making

In connection with the offering, underwriters and selling group members
may engage in passive market making transactions in the common stock on the
Nasdaq National Market in accordance with Regulation M under the Exchange Act
during a period before the commencement of offers or sales of common stock
hereunder.

Other Relationships

Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, our company in the ordinary course of business
and have engaged, and may in the future engage, in commercial banking and
investment banking transactions with our company, for which they have received
or may receive customary compensation.

LEGAL MATTERS

The validity of the common stock offered hereby is being passed upon by
Proskauer Rose LLP, New York, New York. Certain legal matters in connection
with this offering will be passed upon for the Underwriters by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California.

EXPERTS

Our consolidated financial statements as of December 31, 1997 and 1998 and
for each of the years in the three-year period ended December 31, 1998 and the
financial statements of Interactive Holdings, LLC as of December 31, 1997 and
for the period from February 1, 1997 (inception) to September 28, 1997
(Predecessor)

50
<PAGE>

and the period from September 29, 1997 to December 31, 1997 (Successor), have
been included in this prospectus and elsewhere in the Registration Statement in
reliance on the reports of KPMG LLP, independent certified public accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
auditing and accounting.

The financial statements of (i) Intelligent Interactions Corporation as of
December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996
and the period from inception (February 28, 1995) to December 31, 1995 and (ii)
CliqNow!, a division of K2 Design, Inc., as of December 31, 1997 and for the
fiscal year ended December 31, 1997 included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving their reports.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the
Securities and Exchange Commission. Our Securities and Exchange Commission
filings are also available over the Internet at the Securities and Exchange
Commission's Web site at http://www.sec.gov. You may also read and copy any
document we file at the Securities and Exchange Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms and their copy charges. You may also inspect our Commission reports and
other information at the Nasdaq National Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20606-1500.

-------------------------

24/7 Media, Intelligent Interactions, ContentZone, Riddler.com, CliqNow!,
Profilz and Adfinity are our trademarks. This prospectus contains our other
product names, tradenames and trademarks and of other entities, all of which
are the property of their respective owners.

51
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
24/7 MEDIA, INC. (Successor Company to Interactive Imaginations, Inc.)
Independent Auditors' Report ........................................................ F-2
Consolidated Balance Sheets ......................................................... F-3
Consolidated Statements of Operations ............................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) ........................... F-5
Consolidated Statements of Cash Flows ............................................... F-6
Notes to Consolidated Financial Statements .......................................... F-7

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Overview ............................................................................ F-33
Unaudited Pro Forma Consolidated Statements of Operations ........................... F-36
Notes to Unaudited Pro Forma Consolidated Financial Information ..................... F-37

INTERACTIVE HOLDINGS, LLC (Successor to Petry Interactive, Inc.)
Independent Auditors' Report ........................................................ F-38
Balance Sheet ....................................................................... F-39
Statements of Operations ............................................................ F-40
Statements of Cash Flows ............................................................ F-41
Notes to Financial Statements ....................................................... F-42

INTELLIGENT INTERACTIONS CORPORATION
Report of Independent Public Accountants ............................................ F-46
Balance Sheets ...................................................................... F-47
Statements of Operations ............................................................ F-48
Statements of Stockholders' Equity .................................................. F-49
Statements of Cash Flows ............................................................ F-50
Notes to Financial Statements ....................................................... F-51

CLIQNOW!
Report of Independent Public Accountants ............................................ F-58
Balance Sheets ...................................................................... F-59
Statements of Operations and Changes in Parent Company's Investment and Advances .... F-60
Statements of Cash Flows ............................................................ F-61
Notes to Financial Statements ....................................................... F-62
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
24/7 Media, Inc.

We have audited the accompanying consolidated balance sheets of 24/7
Media, Inc. and subsidiaries (successor company to Interactive Imaginations,
Inc.) as of December 31, 1997 and 1998, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for each of the
years in the three-year period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 24/7 Media,
Inc. and subsidiaries as of December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.

KPMG LLP

New York, New York
March 2, 1999

F-2
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................. $ 94,000 $ 33,983,000
Accounts receivable, net of allowance for doubtful
accounts of $64,000 and $268,000,
respectively ......................................................... 176,000 8,442,000
Prepaid expenses and other current assets ............................. 15,000 537,000
------------- -------------
Total current assets .............................................. 285,000 42,962,000
------------- -------------
Property and equipment, net .............................................. 591,000 2,022,000
Goodwill, net ............................................................ -- 10,935,000
Investment in affiliated company ......................................... -- 6,566,000
Deferred offering costs .................................................. 111,000 --
Intangible assets, net ................................................... 3,000 16,000
Deposits ................................................................. 49,000 215,000
------------- -------------
Total assets ...................................................... $ 1,039,000 $ 62,716,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ...................................................... $ 883,000 $ 5,649,000
Accrued liabilities ................................................... 471,000 5,006,000
Current installments of obligations under capital leases .............. -- 30,000
Deferred revenue ...................................................... 96,000 51,000
------------- -------------
Total current liabilities ......................................... 1,450,000 10,736,000
------------- -------------
Senior convertible notes payable--related parties, net of debt
discount of $158,000 .................................................... 2,317,000 --
Obligations under capital leases, excluding current installments ......... -- 34,000
Stockholders' equity (deficit):
Convertible preferred stock, $.01 par value; 10,000,000 shares
authorized; 158,144 and no shares issued and outstanding,
respectively; with aggregate liquidation preference of
$4,539,000 at December 31, 1997....................................... 2,000 --
Common stock, $.01 par value; 70,000,000 shares authorized;
1,148,762 and 15,718,873 shares issued and outstanding,
respectively ......................................................... 11,000 157,000
Additional paid-in capital ............................................ 10,564,000 90,438,000
Deferred stock compensation ........................................... -- (345,000)
Accumulated deficit ................................................... (13,305,000) (38,304,000)
------------- -------------
Total stockholders' equity (deficit) .............................. (2,728,000) 51,946,000
------------- -------------
Commitments and contingencies

Total liabilities and stockholders' equity
(deficit) ........................................................ $ 1,039,000 $ 62,716,000
============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1996 1997 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Revenues:
Advertising .................................. $ 1,106,000 $ 1,467,000 $ 19,744,000
Consulting and license fees .................. 436,000 1,681,000 119,000
------------ ------------ -------------
Total revenues ........................... 1,542,000 3,148,000 19,863,000
Cost of revenues ................................ 1,593,000 1,655,000 15,970,000
------------ ------------ -------------
Gross profit (loss) ...................... (51,000) 1,493,000 3,893,000
------------ ------------ -------------
Operating expenses:
Sales and marketing .......................... 2,240,000 1,673,000 7,971,000
General and administrative ................... 3,010,000 2,623,000 8,692,000
Product development .......................... 1,461,000 1,418,000 1,902,000
Write-off of property and equipment .......... -- 757,000 --
Legal costs in connection with claim ......... -- 232,000 --
Write-off of acquired in-process
technology .................................. -- -- 5,000,000
Amortization of goodwill ..................... -- -- 5,722,000
------------ ------------ -------------
Total operating expenses ................. 6,711,000 6,703,000 29,287,000
------------ ------------ -------------
Loss from operations ..................... (6,762,000) (5,210,000) (25,394,000)
Interest income ................................. 12,000 18,000 886,000
Interest expense ................................ (46,000) (114,000) (215,000)
------------ ------------ -------------
Net loss ................................. (6,796,000) (5,306,000) (24,723,000)
Cumulative dividends on mandatorily
convertible preferred stock .................... -- -- (276,000)
------------ ------------ -------------
Net loss attributable to common
stockholders ................................... $ (6,796,000) $ (5,306,000) $ (24,999,000)
============ ============ =============
Net loss per share--basic and diluted ........... $ (6.48) $ (4.88) $ (2.62)
============ ============ =============
Weighted average shares outstanding ............. 1,049,432 1,086,614 9,533,056
============ ============ =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 1996, 1997 and 1998

<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
----------------------------------------------------------------------------
Convertible Common stock Common stock
preferred stock voting Class A
------------------------- ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount
------------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1995 .................... -- $ -- -- $ -- 73,333 $ 1,000
Issuance of Class A common stock, net of $39,000
issuance costs .................................... -- -- -- -- 34,371 --
Common stock Class A converted ..................... -- -- 1,077,033 11,000 (107,704) (1,000)
Issuance of common stock to officer ................ -- -- 2,083 -- -- --
Issuance of warrants in connection
with mandatory conversion subordinated notes....... -- -- -- -- -- --
Notes converted to preferred stock ................. 52,262 1,000 -- -- -- --
Issuance of preferred stock, net of $237,000
issuance costs .................................... 88,460 1,000 -- -- -- --
Net loss ........................................... -- -- -- -- -- --
-------- --------- --------- -------- -------- ---------
Balance as of December 31, 1996 .................... 140,722 2,000 1,079,116 11,000 -- --
Issuance of preferred stock ........................ 17,422 -- -- -- -- --
Issuance of common stock to officer ................ -- -- 10,462 -- -- --
Issuance of warrants in connection
with senior convertible notes--related parties .... -- -- -- -- -- --
Senior convertible notes payable--related parties
converted into common stock ....................... -- -- 59,184 -- -- --
Net loss ........................................... -- -- -- -- -- --
-------- --------- --------- -------- -------- ---------
Balance as of December 31, 1997 .................... 158,144 2,000 1,148,762 11,000 -- --
Issuance of warrants in connection with senior
convertible notes payable--related parties ........ -- -- -- -- -- --
Issuance of warrants to former officer ............. -- -- -- -- -- --
Issuance of warrants to consultant ................. -- -- -- -- -- --
Issuance of common stock for acquired businesses.... -- -- 5,278,167 53,000 -- --
Issuance of stock options to employees ............. -- -- -- -- -- --
Issuance of common stock to officer ................ -- -- 56,250 1,000 -- --
Amortization of deferred stock compensation ........ -- -- -- -- -- --
Issuance of common stock to consultants ............ -- -- 5,909 -- -- --
Offering costs in connection with mandatorily
redeemable convertible preferred stock ............ -- -- -- -- -- --
Senior convertible notes payable--related parties
converted into common stock ....................... -- -- 828,036 8,000 -- --
Convertible preferred stock converted into
common stock ...................................... (158,144) (2,000) 542,908 5,000 -- --
Conversion of warrants into common stock ........... -- -- 191,349 2,000 -- --
Imputed interest on loans payable--related parties -- -- -- -- -- --
Accrual of cumulative dividends on mandatorily
redeemable convertible preferred stock ............ -- -- -- -- -- --
Issuance of common stock in initial public
offering, net ..................................... -- -- 3,550,000 36,000 -- --
Conversion of mandatorily redeemable convertible
preferred stock into common stock ................. -- -- 3,807,533 38,000 -- --
Exercise of stock options .......................... -- -- 106,108 1,000 -- --
Issuance of common stock to China.Com .............. -- -- 203,851 2,000 -- --
Net loss for the period ............................ -- -- -- -- -- --
-------- --------- --------- -------- -------- ---------
Balance as of December 31, 1998 .................... -- $ -- 15,718,873 $157,000 -- $ --
======== ========= ========== ======== ======== =========

<CAPTION>
Stockholders' Equity (Deficit)
----------------------------------------------
Additional Deferred Total
paid-in stock Accumulated stockholders'
capital compensation deficit equity (deficit)
-------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Balance as of December 31, 1995 .................... $ 1,406,000 $ -- $ (1,203,000) $ 204,000
Issuance of Class A common stock, net of $39,000
issuance costs .................................... 4,486,000 -- -- 4,486,000
Common stock Class A converted ..................... (10,000) -- -- --
Issuance of common stock to officer ................ 37,000 -- -- 37,000
Issuance of warrants in connection
with mandatory conversion subordinated notes....... 18,000 -- -- 18,000
Notes converted to preferred stock ................. 1,499,000 -- -- 1,500,000
Issuance of preferred stock, net of $237,000
issuance costs .................................... 2,301,000 -- -- 2,302,000
Net loss ........................................... -- -- (6,796,000) (6,796,000)
----------- ---------- ------------- --------------
Balance as of December 31, 1996 .................... 9,737,000 -- (7,999,000) 1,751,000
Issuance of preferred stock ........................ 500,000 -- -- 500,000
Issuance of common stock to officer ................ 32,000 -- -- 32,000
Issuance of warrants in connection
with senior convertible notes--related parties .... 201,000 -- -- 201,000
Senior convertible notes payable--related parties
converted into common stock ....................... 94,000 -- -- 94,000
Net loss ........................................... -- -- (5,306,000) (5,306,000)
----------- ---------- ------------- --------------
Balance as of December 31, 1997 .................... 10,564,000 -- (13,305,000) (2,728,000)
Issuance of warrants in connection with senior
convertible notes payable--related parties ........ 12,000 -- -- 12,000
Issuance of warrants to former officer ............. 450,000 -- -- 450,000
Issuance of warrants to consultant ................. 20,000 -- -- 20,000
Issuance of common stock for acquired businesses.... 10,769,000 -- -- 10,822,000
Issuance of stock options to employees ............. 332,000 (332,000) -- --
Issuance of common stock to officer ................ 89,000 (90,000) -- --
Amortization of deferred stock compensation ........ -- 77,000 -- 77,000
Issuance of common stock to consultants ............ 22,000 -- -- 22,000
Offering costs in connection with mandatorily
redeemable convertible preferred stock ............ (229,000) -- -- (229,000)
Senior convertible notes payable--related parties
converted into common stock ....................... 2,666,000 -- -- 2,674,000
Convertible preferred stock converted into
common stock ...................................... (3,000) -- -- --
Conversion of warrants into common stock ........... (2,000) -- -- --
Imputed interest on loans payable--related parties 9,000 -- -- 9,000
Accrual of cumulative dividends on mandatorily
redeemable convertible preferred stock ............ -- -- (276,000) (276,000)
Issuance of common stock in initial public
offering, net ..................................... 44,735,000 -- -- 44,771,000
Conversion of mandatorily redeemable convertible
preferred stock into common stock ................. 17,169,000 -- -- 17,207,000
Exercise of stock options .......................... 271,000 -- -- 272,000
Issuance of common stock to China.Com .............. 3,564,000 -- -- 3,566,000
Net loss for the period ............................ -- -- (24,723,000) (24,723,000)
----------- ---------- ------------- --------------
Balance as of December 31, 1998 .................... $90,438,000 $ (345,000) $ (38,304,000) $ 51,946,000
=========== ========== ============= ==============
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------
1996 1997 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .............................................................. $ (6,796,000) $ (5,306,000) $ (24,723,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization ........................................ 305,000 365,000 459,000
Amortization of debt discount ........................................ 18,000 43,000 158,000
Write-off of property and equipment .................................. -- 757,000 --
Write-off of acquired in-process technology .......................... -- -- 5,000,000
Accrued interest on senior convertible notes--related
parties ............................................................. -- 69,000 15,000
Imputed interest on note payable--related party ...................... -- -- 9,000
Provision for doubtful accounts ...................................... 66,000 -- 347,000
Amortization of intangible assets .................................... -- -- 5,722,000
Non-cash compensation ................................................ 37,000 32,000 569,000
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable ................................................. (274,000) 91,000 (6,209,000)
Prepaid assets and other current assets ............................. (237,000) 222,000 (440,000)
Deposits ............................................................ (45,000) 12,000 (166,000)
Accounts payable .................................................... -- 746,000 1,377,000
Accrued liabilities ................................................. 443,000 (43,000) 3,296,000
Deferred revenue .................................................... 1,550,000 (1,454,000) (45,000)
------------ ------------ -------------
Net cash used in operating activities ............................. (4,933,000) (4,466,000) (14,631,000)
------------ ------------ -------------
Cash flows from investing activities:
Increase in intangible assets ......................................... (41,000) -- (13,000)
Cash paid for acquisitions, net ....................................... -- -- (1,491,000)
Proceeds from sale of property and equipment .......................... -- 23,000 --
Purchases of property and equipment ................................... (1,537,000) (42,000) (1,560,000)
Cash paid for investment in affiliated company ........................ -- -- (3,000,000)
------------ ------------ -------------
Net cash used in investing activities ............................. (1,578,000) (19,000) (6,064,000)
------------ ------------ -------------
Cash flows from financing activities:
Net proceeds from issuance of Mandatorily Redeemable Series A
Preferred Stock ...................................................... -- -- 10,060,000
Deferred offering costs ............................................... -- (111,000) (321,000)
Proceeds from senior convertible notes payable--related parties ....... -- 2,500,000 150,000
Proceeds from notes payable--related parties .......................... -- -- --
Repayment of notes payable--related parties ........................... (87,000) -- (296,000)
Proceeds from exercise of stock options ............................... -- -- 272,000
Proceeds from mandatory conversion subordinated notes
payable .............................................................. 1,500,000 -- --
Proceeds from issuance of common stock, net ........................... 4,486,000 -- 44,771,000
Proceeds from issuance of convertible preferred stock, net ............ 2,302,000 500,000 --
Payment of capital lease obligations .................................. -- -- (52,000)
------------ ------------ -------------
Net cash provided by financing activities ......................... 8,201,000 2,889,000 54,584,000
------------ ------------ -------------
Net change in cash and cash equivalents ........................... 1,690,000 (1,596,000) 33,889,000
Cash and cash equivalents at beginning of period ......................... -- 1,690,000 94,000
------------ ------------ -------------
Cash and cash equivalents at end of period ............................... $ 1,690,000 $ 94,000 $ 33,983,000
============ ============ =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies

(a) Summary of Operations

24/7 Media, Inc. ("24/7 Media" or the "Company") operates networks of Web
sites that enable both advertisers and Web publishers to capitalize on the
opportunities presented by Internet advertising, direct marketing and
electronic commerce. The Company generates revenues by delivering
advertisements and promotions to Web sites affiliated with the Company. The
Company's network properties include The 24/7 Network, The 24/7 Media Europe
Network, commencing January 29, 1999 (see note 13), and The ContentZone, which
are networks of Web sites to which advertisements and promotions are served.

24/7 Media was incorporated in Delaware on January 23, 1998 as a wholly
owned subsidiary of Interactive Imaginations, Inc. ("Interactive Imaginations")
to consolidate three Internet advertising companies: (i) Petry Interactive,
Inc. ("Petry"), which sold advertising for Web sites organized in a network,
(ii) Advercomm, Inc. ("Advercomm"), a newly formed corporation which brought a
number of high profile Web sites to The 24/7 Network, and (iii) Interactive
Imaginations. Interactive Imaginations had been incorporated in the State of
New York in September 1994 and first recognized revenue in June 1995.

On February 25, 1998, pursuant to an Agreement and Plan of Merger dated
February 2, 1998, the Company simultaneously consummated the merger of each of
Petry and Advercomm with and into the Company (the mergers, together with the
concurrent investment of approximately $10.0 million by certain third party
investors as well as with an existing investor of Interactive Imaginations, the
"Initial Merger"). Effective February 25, 1998, 24/7 Media commenced operation
of The 24/7 Network, a network of high profile Web sites to which
advertisements are served. On April 9, 1998, Interactive Imaginations (24/7
Media's then parent) was merged with and into the Company in a manner similar
to a pooling of interests. As a result, 24/7 Media's historical results of
operations for all periods prior to the Initial Merger represent those of
Interactive Imaginations.

Pursuant to the Agreement and Plan of Merger, certain conditions necessary
to cause the merger included the following: the Company was required to cause
(i) the conversion of all of the then outstanding shares of its Convertible
Preferred Stock into Common Stock, (ii) the conversion of substantially all of
the then outstanding senior convertible notes payable to related parties into
Common Stock, (iii) substantially all warrants exerciseable for Common Stock to
be surrendered in exchange for Common Stock, and (iv) the investment of at
least $10 million in the Company, pursuant to the Securities Purchase
Agreement.

In connection with the Initial Merger, Interactive Imaginations entered
into a Securities Purchase Agreement, dated February 25, 1998, with certain
investors (including David J. Moore, the Company's President and Chief
Executive Officer), for the sale and issuance of preferred shares and warrants
in a private placement for total proceeds of $10,060,002, of which the
preferred shares automatically converted into 2,641,849 shares of Common Stock
at a conversion price of approximately $3.81 per share upon consummation of the
Company's initial public offering in August 1998 (the "IPO"). For each $10,000
invested, the investors received 10,000 shares of Series A Preferred Stock,
approximately 1,313 Class A Warrants, exercisable into Common Stock at an
exercise price of $7.62 per share, and approximately 1,313 Class B Warrants,
exercisable into Common Stock at an exercise price of $11.42 per share. Also in
connection with the Initial Merger, Interactive Imaginations entered into a
Shareholders' Agreement, dated February 25, 1998, among The Travelers Insurance
Company (an existing investor in Interactive Imaginations), Prospect Street NYC
Discovery Fund, L.P., Big Flower Digital Services, Inc. and certain individual
investors (the "Shareholders' Agreement"), which included standard terms and
conditions and provided these shareholders with a right to elect three members
of the seven member board of directors of the Company and a right of first
refusal with respect to transfers of Company securities. The Shareholders'
Agreement was terminated in its entirety upon the consummation of the IPO. In
connection with the Initial Merger, certain shareholders of the Company were
granted registration rights with respect to their shares of Common Stock.

F-7
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

On April 13, 1998, the Company acquired Intelligent Interactions
Corporation ("Intelligent Interactions"), a corporation that developed and
licensed ad serving technology and e-commerce software. As of June 1, 1998, the
Company acquired CliqNow!, a network of Web sites ("CliqNow!") which were
subsequently folded into The 24/7 Network. On December 29, 1998, the Company
acquired a 67% interest in CardSecure, Inc. ("CardSecure"). On December 30,
1998, the Company acquired a 10% common equity interest in China.com
Corporation ("China.com").

Inherent in the Company's business are various risks and uncertainties,
including its limited operating history, unproven business model and the
limited history of electronic commerce on the Internet. The Company's success
may depend in part upon the emergence of the Internet as a communications
medium, prospective project development efforts, and the acceptance of the
Company's solutions by the marketplace.

(b) Principles of Consolidation

The Company's consolidated financial statements as of December 31, 1998
and for the year ended December 31, 1998 include the accounts of the Company
and its majority-owned and controlled subsidiaries from their respective dates
of acquisition (i) Petry and Advercomm from February 25, 1998, (ii) Intelligent
Interactions from April 13, 1998, (iii) CliqNow! from June 1, 1998
(collectively, the "Acquisitions"), and CardSecure, Inc. ("CardSecure") from
December 29, 1998. The Company's audited financial statements as of December
31, 1997 and for each of the years in the two-year period ended December 31,
1997 include the historical results of Interactive Imaginations (see note 2).
All significant intercompany transactions and balances have been eliminated in
consolidation.

Equity investments of the Company in which significant influence is not
exercised are carried under the cost method.

In connection with the Initial Merger, no single former shareholder group
obtained more than 50 percent of the outstanding shares of the Company.
However, the Company's former common shareholder interest group received the
largest portion of the voting rights in the combined entity and, therefore, was
deemed to be the accounting acquirer.

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(d) Cash and Cash Equivalents

The Company considers all highly liquid securities, with original
maturities of three months or less, to be cash equivalents. Cash equivalents at
December 31, 1997 and 1998 were $0 and $32,810,000 respectively, which
consisted principally of money market accounts.

(e) Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets,
generally three to five years. Leasehold improvements are amortized using the
straight-line method over the estimated useful lives of the assets or the term
of the leases, whichever is shorter. Leased property meeting certain criteria
is capitalized and the present value of the

F-8
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

related lease payments is recorded as a liability. Amortization of capitalized
leased assets is computed on the straight-line method over the term of the
leases.

(f) Intangible Assets

Intangible assets including trademarks and licenses are amortized using
the straight-line method over the estimated useful lives of one to five years.

Goodwill resulting from the acquisition of Internet advertising businesses
is estimated by management to be primarily associated with the acquired
workforce, contracts and technological know how. As a result of the rapid
technological changes occurring in the Internet industry and the intense
competition for qualified Internet professionals and customers, recorded
goodwill is amortized on the straight-line basis over the estimated period of
benefit, which is two to three years.

(g) Income Taxes

The Company accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in results of
operations in the period that the tax change occurs.

(h) Deferred Revenue

Deferred revenue consists of prepaid advertising fees, although the
majority of the Company's advertising customers generally pay after the
services have been provided. As of December 31, 1997 and 1998, the Company had
deferred revenue of $96,000 and $51,000, respectively.

(i) Revenue Recognition

The Company's advertising revenues are derived principally from short-term
advertising agreements in which the Company delivers advertising impressions or
full-page advertisements for a fixed fee to third-party Web sites comprising
The 24/7 Network, The 24/7 Media Europe Network and The ContentZone, and to a
lesser extent its Riddler.com Web site.

Revenues from advertising are recognized in the period the advertising
impressions are delivered, provided collection of the resulting receivables is
probable. For the years ended December 31, 1996 and 1997, the Company's cash
advertising revenue related solely to The ContentZone and to a lesser extent
its Riddler.com Web site.

Third party Web sites which register Web pages with the Company's networks
and display advertising banners on those pages are commonly referred to as
"Affiliated Web sites." These third party Web sites are not "related party"
relationships or transactions as defined in Statement of Financial Accounting
Standards No. 57, "Related Party Disclosures." The Company pays its Affiliated
Web sites a service fee for providing advertising space to the Company's
networks. The Company becomes obligated to make payments to such Affiliated Web
sites, which have contracted with the Company to be part of the Company's
networks, in the period the advertising impressions are delivered. Such
expenses are classified as cost of revenues in the consolidated statements of
operations.

F-9
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

The Company's licensing revenue is derived principally from software
licensing fees and fees from maintenance, consulting and support of its
software. Licensing fees are recognized as performance occurs under the terms
of the applicable agreement. Expenses from the Company's licensing revenues are
primarily payroll costs to deliver, modify and support the software. These
expenses are classified in cost of revenues in the consolidated statements of
operations and were not material.

At December 31, 1997 and 1998, accounts receivable included approximately
$56,000 and $3,510,000, respectively, of unbilled receivables, which are a
normal part of the Company's business, as receivables are generally invoiced
only after the revenue has been earned. The increase in unbilled receivables
from 1997 to 1998 resulted from the increase in advertising revenues generated
by the Company during the fourth quarter of 1998. The terms of the related
advertising contracts typically require billing at the end of each month. All
unbilled receivables as of December 31, 1998 have been subsequently billed.

(j) Barter Transactions

The Company historically traded advertisements on its Web properties in
exchange for advertisements on the Internet sites of other companies. Barter
revenues and expenses are recorded at the fair market value of services
provided or received, whichever is more determinable in the circumstances.
Revenue from barter transactions is recognized as income when advertisements
are delivered on the Company's Web properties. Barter expense is recognized
when the Company's advertisements are run on other companies' Web sites, which
is typically in the same period when the barter revenue is recognized.
Advertising barter revenues and expenses were approximately $55,000, $83,000
and $0 for the years ended 1996, 1997 and 1998, respectively.

The Company historically received payment for its advertising services in
the form of goods that were used as prizes for the Riddler game site. Prize
revenue and the corresponding prize expense were recorded at the estimated fair
market value of the prizes received. Advertising prize revenues were
approximately $196,000, $86,000 and $0 for the years ended 1996, 1997 and 1998,
respectively.

The Company expects that barter revenue will continue to represent only a
small percentage of total revenues in the future.

(k) Product Development Costs

Product development costs and enhancements to existing products are
charged to operations as incurred. Software development costs are capitalized
when a product's technological feasibility has been established by completion
of a working model of the product and ending when a product is available for
general release and use. To date, completion of a working model of the
Company's products and general release have substantially coincided. As a
result, the Company has not capitalized any software development costs.

(l) Deferred Offering Costs

At December 31, 1997, specific incremental costs directly attributable to
the issuance of mandatorily redeemable convertible preferred stock were
deferred. These costs have been charged against additional paid-in capital as a
result of the Company's issuance of mandatorily redeemable convertible
preferred stock during the first quarter of 1998.

(m) Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation

F-10
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

cost is recognized based on the difference, if any, on the date of grant
between the fair value of the Company's Stock and the amount an employee must
pay to acquire the Stock.

The Company accounts for non-employee Stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.

(n) Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets.

(o) Advertising Expenses

The Company expenses the cost of advertising and promoting its services as
incurred. Such costs are included in sales and marketing on the statements of
operations and totaled $515,000, $181,000 and $1,394,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.

(p) Financial Instruments and Concentration of Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities. At December 31, 1997 and
1998, the fair value of these instruments approximated their financial
statement carrying amount because of the short term maturity of these
instruments. Substantially all of the Company's cash equivalents were invested
in money market accounts and other highly-liquid instruments. The Company has
not experienced any significant credit losses to date.

The fair value of the Senior Convertible Notes Payable was determined
based on an imputed market rate of interest which is equal to its carrying
amount on the balance sheet.

Total cash advertising revenues associated with major customers (excluding
barter) are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
Customer(1)
A ........... $ -- $ -- $2,771,000
B ........... 212,000 326,000 --
C ........... 178,000 157,000 --
</TABLE>

For the year ended December 31, 1998, one Affiliated Web site accounted
for approximately 14% of the Company's total revenues.

F-11
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

Accounts receivable regarding significant advertising customers are as
follows:

<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997 1998
---------- --------- -----
<S> <C> <C> <C>
Customer(1)
D ............. $94,000 $ -- $--
E ............. 41,000 -- --
F ............. -- 31,000 --
</TABLE>

(1) Each of the customers listed in the revenue and accounts receivable
tables are different.

To date, accounts receivable have been derived from advertising fees
billed to advertisers located in the United States. The Company generally
requires no collateral. The Company maintains reserves for potential credit
losses; historically, management believes that such losses have been adequately
reserved for and within expectations.

(q) Loss Per Share

Loss per share is presented in accordance with the provisions of Statement
of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS 128).
Basic EPS excludes dilution for Common Stock equivalents and is computed by
dividing income or loss available to Common shareholders by the weighted
average number of Common Shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue Common Stock were exercised or converted into Common Stock
and resulted in the issuance of Common Stock. Diluted net loss per share is
equal to basic net loss per share since all Common Stock equivalents are
anti-dilutive for each of the periods presented.

Diluted net loss per common share for the years ended December 31, 1996,
1997 and 1998 does not include the effects of options to purchase 180,297,
293,311, and 1,530,491 shares of common stock, respectively; 6,533, 180,228,
and 3,802,985 common stock warrants, respectively; 351,805, 395,360, and 0
shares of convertible preferred stock on an "as if" converted basis,
respectively; 0, 767,575, and 0 shares of senior convertible notes payable on
an "as if" converted basis, respectively; as the effect of their inclusion is
anti-dilutive during each period.

Net loss applicable to Common Stockholders for the year ended December 31,
1998 has been increased to give effect to $276,000 of cumulative dividends on
mandatorily redeemable convertible preferred stock through the date of its
conversion into Common Stock in connection with the Company's IPO (see note 6).

(r) Recent Accounting Pronouncements

The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" in the quarter
ended March 31, 1998. SFAS No. 130 requires the Company to report in its
financial statements, in addition to its net income (loss), comprehensive
income (loss), which includes all changes in equity during a period from
non-owner sources including, as applicable, foreign currency items, minimum
pension liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. There were no differences between
the Company's comprehensive loss and its net loss as reported.

F-12
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(1) Summary of Operations and Significant Accounting Policies--Continued

for the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. It also provides
guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company has not yet determined the
impact, if any, of adopting SOP 98-1, which will be effective for the Company's
year ending December 31, 1999.

In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997. The Company has determined
that it does not have any separately reportable business segments.

(s) Reclassifications

Certain reclassifications have been made to prior year's consolidated
financial statements to conform to the current year's presentation.

(2) Acquisitions and Investment in Affiliated Company

Petry and Advercomm Acquisitions

On February 25, 1998, in connection with the Initial Merger, the Company
acquired all of the outstanding stock of Petry and Advercomm in separate
transactions in exchange for 2,623,591 and 1,705,334 shares of the Company's
Common Stock, respectively, for a total purchase price of $4,198,000 and
$2,729,000, respectively, plus acquisition costs of $157,000. The fair value of
the 4,328,925 aggregate shares of Common Stock issued in connection with the
acquisition of Petry and Advercomm was estimated to be $1.60 per share,
determined primarily by reference to the Common Stock conversion price of $1.60
per share in connection with the Company's issuance of approximately $1,000,000
senior convertible notes payable and detachable warrants during September and
November 1997, and supported by an independent valuation of the Company's
Common Stock as of February 25, 1998.

The Petry and Advercomm acquisitions have been accounted for using the
purchase method of accounting, and accordingly, the purchase price has been
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed on the basis of their fair values on the acquisition date.
The aggregate purchase price of the Petry and Advercomm acquisitions were
$7,084,000. Of this, $(1,549,000) of the aggregate purchase price was allocated
to net tangible liabilities consisting primarily of cash, accounts receivable,
property and equipment, accounts payable and accrued liabilities. The
historical carrying amounts of such net liabilities approximated their fair
values. The purchase price in excess of the fair value of identified tangible
and intangible assets and liabilities assumed in the amount of $8,633,000 was
allocated to goodwill and is being amortized over its estimated useful life of
two years from the date of acquisition.

The Petry and Advercomm acquisitions have been primarily structured as tax
free exchanges of stock; therefore, the differences between the recognized fair
value of the acquired assets, including intangible assets, and their historical
tax bases is not deductible for income tax purposes.

Intelligent Interactions Acquisition

During April 1998, the Company entered into an Agreement and Plan of
Merger (the "II Merger") to acquire all of the outstanding stock of Intelligent
Interactions.

Upon consummation of the II Merger, each share of common stock of
Intelligent Interactions was converted into approximately 16.3 shares of Common
Stock, 2.3 Class A Warrants, 2.3 Class B Warrants and

F-13
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(2) Acquisitions and Investment in Affiliated Company--Continued

1.2 Class C Warrants of the Company. Therefore, the Company issued 949,242
shares of Common Stock, 265,212 of Class A Warrants, 265,212 of Class B
Warrants and 136,553 of Class C Warrants. The warrants have exercise prices of
$7.62, $11.42 and $3.81 per share, respectively, and expire in five years. The
Company's Class A, B, and C Warrants were determined to have a fair value of
$0, $0, and $0.72 per share, respectively, using the Black-Scholes Option Model
and supported by an independent valuation of the Warrants issued in the
transaction.

Each share of Preferred Stock, Series A Preferred Stock, Series AA
Preferred Stock or Series AAA Preferred Stock of Intelligent Interactions was
converted into approximately 18 shares of Mandatorily Redeemable Convertible
Preferred Stock--Series A, par value $.01 per share, 2.7 Class A Warrants, 2.7
Class B Warrants and 1.4 Class C Warrants of the Company. Total Mandatorily
Redeemable Convertible Preferred Shares issued were 3,561,505 shares which
converted into 0.2626 shares of the Company's Common Stock, or 935,269 shares
of Common Stock in connection with the Company's IPO. Each shareholder of
record of the Mandatorily Redeemable Convertible Shares had the right to cause
the Company to redeem at the option of the shareholder all or part of the
shareholder's outstanding shares by paying cash of $1.00 per share plus accrued
dividends no later than the fifth anniversary of the original issue date. The
convertible note payable was also converted into Mandatorily Redeemable
Convertible Preferred Stock--Series A and detachable warrants were terminated
as a result of the merger.

Additionally, the Company assumed 212,804 stock options for the purchase
of Common Stock in accordance with the II Merger. The stock options have
exercise prices ranging from $0.16 to $0.48, as defined in the II Merger
Agreement, and expire in no more than 10 years.

The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the total purchase price of $7,671,000 has been
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed on the basis of their fair values on the acquisition date.
Approximately $(154,000) of the aggregate purchase price was allocated to net
tangible liabilities consisting primarily of cash, accounts receivable,
property and equipment, accounts payable and accrued liabilities. The
historical carrying amounts of such net liabilities approximated their fair
values. The fair value of the purchased existing technology and in-process
technology were determined by management using a risk-adjusted income valuation
approach. This approach directly measured the value of the purchased in-process
technology (exclusive of the purchased existing technology) by converting the
cash flows directly attributable to the purchased in-process technology at a
rate of return adjusted for the risks inherent in the development and ultimate
technological feasibility of such technology. Based upon an independent
appraisal, which takes into account replacement cost of assets, market
multiples and present value of future after-tax earnings attributable to the
purchased in-process technology, $5,000,000 of the purchase price was allocated
to in-process technology and was immediately charged to operations because such
in-process technology had not reached the stage of technological feasibility at
the acquisition date and had no alternative future use. The value was derived
exclusive of the value of the purchased existing technology. The purchase price
in excess of the fair value of identified tangible assets and liabilities
assumed in the amount of $2,825,000 was allocated to goodwill and other
intangibles and is being amortized over its estimated useful life of two years.

The fair value of the Company's equity securities issued as consideration
for the Intelligent Interactions acquisition was determined based upon a number
of factors, including the sale of 10,060,002 shares of Mandatorily Convertible
Redeemable Preferred Stock-Series A on February 25, 1998 (excluding detachable
warrants) for $10,060,002 in cash. The fair value of the Company's Mandatorily
Convertible Redeemable Preferred Stock was estimated to be $1.06 per preferred
share ($4.24 per Common Share on an as if converted

F-14
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(2) Acquisitions and Investment in Affiliated Company--Continued

basis) and its Common Stock at $4.00 per share. The higher fair value
attributable to the Mandatorily Convertible Preferred Shares versus Common
Shares is due to the convertible feature of the Preferred Shares.

CliqNow! Acquisition

As of June 1, 1998, the Company acquired the CliqNow! division of K2
Design, Inc., an Internet advertising network comprised of medium to large Web
sites organized into eight topical channels, for $4,240,000, plus acquisition
costs of $96,000, with $1,240,000 payable in cash and $3,000,000 payable in
Series B Convertible Redeemable Preferred Stock (Series B). The Company issued
3,000 shares of Preferred Stock which, by its terms, automatically converted
into 230,415 shares of Common Stock upon consummation of the IPO, at the IPO
price per share, net of the underwriting discount, or $13.02 per share, which
was deemed to be the fair value of the securities. Approximately $160,000 of
the aggregate purchase price was allocated to net tangible assets consisting
primarily of cash, accounts receivable, property and equipment, accounts
payable and accrued liabilities. The purchase price in excess of the fair value
of identifiable tangible and intangible assets and liabilities assumed in the
amount of $4,176,000 was allocated to goodwill and is being amortized over its
estimated useful life of two years.

CardSecure Acquisition

On December 29, 1998, the Company acquired an initial 67% ownership stake
(on an as converted basis) in CardSecure, Inc., a company which provides
e-commerce enabling technology as well as Web site hosting services, through a
$500,000 cash investment. The CardSecure acquisition has been accounted for
using the purchase method of accounting and accordingly, CardSecure's financial
statements have been included in the Company's consolidated financial
statements from its date of acquisition, December 29, 1998. Approximately
$(522,000) of the aggregate purchase price was allocated to net tangible
liabilities consisting primarily of cash, accounts receivable, property and
equipment, accounts payable and accrued liabilities. The purchase price in
excess of the value of identified tangible assets and liabilities assumed in
the amount of $1,022,000 was allocated to goodwill and other intangibles and is
being amortized over its estimated useful life of three years.

Summary

<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
--------------------------------------------
NET
TANGIBLE IN-PROCESS
EFFECTIVE ACQUISITION ASSETS RESEARCH AND INTANGIBLES/
ACQUIRED ENTITY DATE COSTS (LIABILITIES) DEVELOPMENT GOODWILL
- -------------------------- ------------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Petry February 25, 1998 $ 4,293,000 $ (1,635,000) $ -- $ 5,928,000
Advercomm February 25, 1998 2,791,000 85,000 -- 2,706,000
Intelligent Interactions April 13, 1998 7,671,000 (154,000) 5,000,000 2,825,000
CliqNow! June 1, 1998 4,336,000 160,000 -- 4,176,000
CardSecure December 29, 1998 500,000 (522,000) -- 1,022,000
----------- ------------ ---------- -----------
$19,591,000 $ (2,066,000) $5,000,000 $16,657,000
=========== ============ ========== ===========
</TABLE>

F-15
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(2) Acquisitions and Investment in Affiliated Company--Continued

The following unaudited pro forma consolidated amounts give effect to the
Acquisitions as if they had occurred at January 1, 1997, or date of inception,
if later, by consolidating the results of operations of Petry, Advercomm,
Intelligent Interactions, CliqNow!, and CardSecure with the results of the
Company for years ended December 31, 1997 and 1998. The pro forma adjustments
include the elimination of all intercompany transactions. Advercomm was
incorporated in November 1997 and had no operations in 1997; however, the
operation of Advercomm's network based advertising services commenced on
February 1, 1998; accordingly, Advercomm results of operations are only
included in the pro forma statement of operations for the period from February
1, 1998 to February 25, 1998 (date of acquisition).

The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods
presented and should not be construed as being representative of future
operating results.

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1997 1998
---------------- ----------------
<S> <C> <C>
Total revenues ............................................... $ 5,507,000 $ 22,349,000
Net loss ..................................................... (17,795,000) (28,923,000)
Net loss attributable to common stockholders ................. (18,341,000) (29,302,000)
Net loss per share--basic and diluted ........................ $ (4.13) $ (2.83)
Weighted average shares used in basic and diluted net loss per
share calculation(1) ........................................ 4,443,053 10,369,861
</TABLE>

- ------------
(1) The Company computes net loss per share in accordance with the provisions
of SFAS No. 128, "Earnings Per Share." Basic net loss per share is
computed by dividing the net loss for the period by the weighted average
number of Common Shares outstanding during the period. The weighted
average Common Shares used to compute pro forma basic net loss per share
includes the actual weighted average Common Shares outstanding for the
historical years ended December 31, 1997 and 1998, respectively, plus the
Common Shares issued in connection with each of the Acquisitions from
January 1, 1997 or inception of operations of the acquired companies, if
later. The Common Stock issued in connection with the acquisition of each
of the acquired companies were as follows: Intelligent Interactions'
949,242 Shares, as if the acquisition occurred on January 1, 1997, Petry's
2,623,591 Shares based on the February 1, 1997 date of inception of
operations, and Advercomm's 1,705,334 Shares based on the February 1, 1998
date of inception of operations, all of which were adjusted for the
weighted average period such Shares were considered to be outstanding. In
addition, diluted net loss per share is equal to basic net loss per share
as Common Stock issuable upon exercise of employee stock options and upon
exercise of outstanding warrants are not included because they are
antidilutive. In future periods, the weighted average Shares used to
compute diluted earnings per share will include the incremental shares of
Common Stock relating to outstanding options and warrants to the extent
such incremental Shares are dilutive.

Investment in China.com

On December 30, 1998, the Company invested $3.0 million in cash and issued
203,851 shares of Common Stock to China.com Corporation in exchange for a 10%
equity interest in China.com. The investment of $6,566,000 in China.com will be
carried under the cost method of accounting.

F-16
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(3) Balance Sheet Components

Prepaid Expenses and Other Current Assets

<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Prepaid operating lease .......................... $ -- $ 101,000
Prepaid insurance ................................ -- 142,000
Other prepaid .................................... 15,000 294,000
--------- ----------
$ 15,000 $ 537,000
========= ==========
</TABLE>

Property and Equipment, Net

<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Computer equipment ............................... $ 972,000 $2,465,000
Furniture and fixtures ........................... -- 250,000
Leasehold improvements ........................... -- 208,000
--------- ----------
972,000 2,923,000
Less accumulated depreciation and amortization ... (381,000) (901,000)
--------- ----------
$ 591,000 $2,022,000
========= ==========
</TABLE>

At December 31, 1997 and 1998, computer equipment includes equipment with
a cost of $0 and $116,000, respectively, acquired under a capital lease (see
Note 10). The net book value of the related equipment at December 31, 1997 and
1998, is $0 and $105,000, respectively.

During September 1997, as part of the Company's consolidation and
downsizing, it conducted a book-to-physical inventory of its property and
equipment. As a result of this book-to-physical observation, the Company
identified and wrote off $757,000 of equipment purchases, net of accumulated
depreciation, that could no longer be located and has instituted additional
controls to safeguard its fixed assets.

Intangible Assets

<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
----------- --------------
<S> <C> <C>
Goodwill .............................. $ -- $ 16,657,000
Less accumulated amortization ......... -- (5,722,000)
-------- ------------
$ -- $ 10,935,000
======== ============

Licenses .............................. $ -- $ 15,000
Trademarks ............................ 4,000 4,000
-------- ------------
4,000 19,000
Less accumulated amortization ......... (1,000) (3,000)
-------- ------------
$ 3,000 $ 16,000
======== ============
</TABLE>

F-17
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(3) Balance Sheet Components--Continued

Accrued Liabilities

<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
----------- -------------
<S> <C> <C>
Professional fees ............................ $226,000 $ 379,000
Employee commissions and expenses(1) ......... -- 2,723,000
Ad management fees ........................... -- 406,000
Affiliate royalties .......................... 81,000 464,000
Rent and lease obligations ................... -- 282,000
Other ........................................ 164,000 752,000
-------- ----------
$471,000 $5,006,000
======== ==========
</TABLE>

- ------------
(1) Employee commissions and expenses include commissions earned by the
Company's sales staff for the most recent period, as well as out-of-pocket
expenses incurred by those employees. All such balances as of December 31,
1998 have been subsequently paid.

(4) Income Taxes

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented and has no
carryback potential. At December 31, 1998, the Company had approximately
$30,946,000 of federal and state net operating loss carryforwards available to
offset future taxable income; such carryforwards expire in various years
through 2018.

As a result of various equity transactions during 1996, 1997 and 1998 (see
notes 2 and 6), management believes the Company has undergone an "ownership
change" as defined by section 382 of the Internal Revenue Code. Accordingly,
the utilization of a portion of the net operating loss carryforwards is
limited. Due to this limitation, and the uncertainty regarding the ultimate
utilization of the net operating loss carryforwards, no tax benefit for losses
has been recorded by the Company in 1996, 1997 and 1998, and a full valuation
allowance has been recorded for the entire amount of the net deferred tax
asset.

The tax effects of temporary differences and tax loss carryforwards that
give rise to significant portions of federal and state deferred tax assets and
deferred tax liabilities at December 31, 1997 and 1998 are presented below.

F-18
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(4) Income Taxes--Continued

<TABLE>
<CAPTION>
1997 1998
--------------- ----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ................................... $ 6,030,000 $ 13,926,000
Deferred revenues .................................................. 43,000 23,000
Reserve for sales allowances ....................................... 0 165,000
Accounts receivable principally due to allowance for doubtful
accounts .......................................................... 29,000 121,000
Amortization of goodwill ........................................... 0 482,000
Accrued compensation ............................................... 0 290,000
Other .............................................................. 2,000 2,000
------------ -------------
Gross deferred tax assets ........................................... 6,104,000 15,009,000
Less: valuation allowance ........................................... (5,955,000) (14,828,000)
Net deferred tax assets ........................................... 149,000 181,000
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation (149,000) (181,000)
------------ -------------
Gross deferred tax liabilities ...................................... (149,000) (181,000)
------------ -------------
$ -- $ --
============ =============
</TABLE>

(5) Notes Payable

Mandatory Conversion Subordinated Notes

In August, September and October 1996, the Company issued Mandatory
Conversion Subordinated Notes ("Notes") in the aggregate principal amount of
$1,500,000, bearing an interest rate equal to 8% per annum and convertible into
Series A Preferred Stock at the price per share achieved in the then proposed
private placement of Series A Preferred Stock. Under the terms and conditions
of the Notes, the Notes were converted into 52,262 shares of Series A Preferred
Stock of the Company upon completion of the November 1996 private placement of
Series A Preferred Stock at the purchase price per share ($28.70) of such sale
of Series A Preferred Stock (See Note 6--Convertible Preferred Shares). All
accrued interest on these Notes, aggregating $22,000, was paid to the holders
thereof in connection with the conversion to Convertible Preferred Shares.

In connection with the issuance of Mandatory Convertible Subordinated
Notes in August 1996, in the principal amount of $500,000, the Company also
issued to the note holder detachable warrants to purchase 6,533 of the
Company's Common Shares at a price of $11.48 per share. Such warrants expire no
later than three years from the date of issuance. The value attributed to the
warrants of $18,000 was recorded as debt discount and subsequently charged to
interest expense in connection with the conversion of the aforementioned notes.
The Company determined the value of the warrants based upon its estimate of its
effective borrowing rate of 12% at the date of issuance.

Senior Convertible Notes Payable--Related Parties

During 1997, the Company received $2,500,000 in proceeds from the issuance
of senior convertible notes payable primarily to affiliates of stockholders of
the Company, bearing an interest rate of 8% compounded semi-annually. The
notes, including interest thereon, were due on the earlier of prepayment,
redemption, conversion of the notes into Common Stock or May 15, 1999, the
maturity date. Each of the notes was issued with detachable warrants allowing
such holders to purchase shares of the Company's Common Stock at prices ranging
from $1.60 to $11.48 per share. The value attributed to the warrants of
$201,000 was recorded as debt discount and was being amortized to interest
expense using the imputed interest method over the term of the notes. The
Company

F-19
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(5) Notes Payable--Continued

determined the value of the warrants based upon its estimate of its effective
borrowing rates at the date of each issuance (which rates were 12% prior to
September 1, 1997 and 15% subsequent to September 1, 1997).

The notes were convertible into Common Stock at conversion prices, as
defined in the original note agreements, ranging from $1.60 to $11.48 per share
upon occurrence of certain events, subject to anti-dilution provisions. The
original conversion price for the $1,500,000 of Notes issued prior to September
1, 1997 was $11.48 per share and for the $1,000,000 of Notes issued between
September 1, 1997 and December 31, 1997 was $1.60 per share. The conversion
prices were determined by negotiations among the parties. On December 22, 1997,
$94,000 of the notes, including interest thereon, were converted into 59,184
shares of Common Stock at $1.60 per share. During 1997, the Company recorded
$43,000 of interest expense in connection with the amortization of the debt
discount and conversion of the aforementioned notes.

During January 1998, the Company received $150,000 in proceeds from the
issuance of senior convertible notes payable with terms similar to the notes
issued during 1997. The notes were convertible into 43,321 shares of Common
Stock at $3.48 per share, subject to anti-dilution provisions. The value
attributable to 4,310 warrants, to purchase shares of the Company's Common
Stock at $3.48 per share, of $12,000 was recorded as debt discount. The Company
determined the value of the warrants based upon its estimate of its effective
borrowing rate of 15% at the date of issuance.

In connection with the Securities Purchase Agreement and the Merger,
$2,056,000 of the Senior Convertible Notes Payable--Related Parties, plus
accrued interest thereon, were converted into 750,586 shares of Common Stock,
and approximately $500,000 of such notes, plus accrued interest thereon, were
converted into 77,450 shares of Common Stock. With regard to the $1,500,000 of
notes issued prior to September 1, 1997, the original conversion price of
$11.48 per share was adjusted to $8.36 per share under the anti-dilution
provisions triggered by the subsequent financings at lower conversion prices
per share.

Additionally, in accordance with the terms and conditions of the
Securities Purchase Agreement (which terms and conditions were determined by
negotiations among the various parties to the agreement), 177,679 warrants were
exchanged for 99,119 shares of Common Stock. Since the Company exchanged one
equity security (common shares) for another equity security (warrants) of
equivalent value it resulted in no financial statement impact other than to
record the par value of the common stock issued by increasing common stock and
reducing additional paid in capital.

Loan Payable--Related Party

On September 30, 1998, the Company settled all of its obligations to Petry
Media Corporation which arose in connection with the Company's acquisition of
Petry in February 1998 for a lump sum payment of $829,000. Accordingly, the
difference between the lump sum payment of $829,000 and the Company's recorded
obligations for its outstanding loan payable and accrued royalties payable in
the amount of $184,000 and 218,000, respectively, was attributed to the
contingent purchase obligation and resulted in an adjustment of $427,000 to the
Petry purchase price. Such amount increased goodwill and is being amortized
over its remaining amortization period from October 1, 1998.

Warrants

In connection with the issuance of Mandatory Conversion Subordinated Notes
in August 1996, in the principal amount of $500,000, the Company also issued to
the note holder detachable warrants to purchase 6,533 of the Company's Common
Shares at a price of $11.48 per share. Such warrants expire no later than three
years from the date of issuance. The Company recorded the fair value of the
warrants as original issue debt discount.

On April 9, 1997, the Company granted warrants to a consultant to purchase
4,375 of the Company's Common Shares at an exercise price of $49.72 per share.
The fair value, using a Black-Scholes Option Model, of the warrants was deemed
insignificant on the date of grant.

F-20
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(5) Notes Payable--Continued

In connection with the issuance of Senior Convertible Notes
Payable--Related Parties, warrants to purchase 169,316 and 35,609 Common
Shares, at prices ranging from $1.60 to $11.48, were outstanding as of December
31, 1997 and February 25, 1998, respectively, and such warrants expire no later
than three years from the date of issuance. The Company recorded the fair value
of the warrants as original issue debt discount.

As of February 24, 1998, Interactive Imaginations and Michael P. Paolucci
entered into a Confidential Separation Agreement and General Release ("Release
Agreement") pursuant to which Mr. Paolucci's employment as an executive of
Interactive Imaginations was terminated. The terms of the Release Agreement
generally provide that Mr. Paolucci and Interactive Imaginations agreed to
release and discharge the other party (and its successors and assigns) from all
causes of action, claims, judgments, obligations, damages or liabilities.
Interactive Imaginations agreed to issue to Mr. Paolucci Class C Warrants to
purchase up to 625,000 shares of Common Stock at an exercise price of $3.81 per
share. Accordingly, the Company recorded $450,000 of expense during the first
quarter of 1998 in connection with this transaction based upon an independent
valuation of the Class C Warrants. In addition, Interactive Imaginations agreed
to extend the term from January 31, 2000 to January 31, 2005 in respect of a
fully vested option held by Mr. Paolucci to purchase 13,000 shares of
Interactive Imaginations Common Stock at $1.72 per share. No expense was
recorded in connection with such extension although the exercise price of $1.72
per share was below the fair value of the Company's Common Stock on the date
the options were extended, at $3.81 per share; such amount was deemed
insignificant on the date of extension. During January 1999, Mr. Paolucci
exercised his Class C Warrants to purchase 625,000 shares of Common Stock in
exchange for 546,775 shares of Common Stock in a cashless exercise.

In February 1998, the Company issued to a consultant a warrant to purchase
28,750 shares of Common Stock at an exercise price of $3.48 per share in
exchange for services. Under the terms and conditions of the Securities
Purchase Agreement (as determined by negotiations among the parties to such
agreement), such warrants were converted into 12,650 shares of Common Stock.
The Company recorded compensation expense of $20,000, based upon the fair
market value ($1.60 per Common Share as determined by an independent valuation
of the Company's Common Stock) of the 12,650 shares of Common Stock into which
the warrants were converted under the terms and conditions of the Securities
Purchase Agreement. All of these warrants and common shares are included as
part of the 177,679 warrants exchanged for 99,119 shares of Common Stock
disclosed in the following paragraph.

In accordance with the terms and conditions of the Securities Purchase
Agreement (which terms and conditions were determined by negotiations among the
various parties to the agreement), 177,679 warrants were exchanged for 99,119
shares of Common Stock. Since the Company exchanged one equity security (common
shares) for another equity security (warrants) of equivalent value it resulted
in no financial statement impact other than to record the par value of the
common stock issued by increasing common stock and reducing additional paid in
capital.

Upon consummation of the II Merger (as discussed in Note 2), each share of
common stock of Intelligent Interactions was converted into approximately 16.3
shares of common stock, 2.3 Class A Warrants, 2.3 Class B Warrants and 1.2
Class C Warrants of the Company. Therefore, the Company issued 949,242 shares
of common stock, 265,212 of Class A Warrants, 265,212 of Class B Warrants and
136,553 of Class C Warrants. The warrants have exercise prices of $7.62, $11.42
and $3.81 per share, respectively and expire in five years. The Company's Class
A, B, and C Warrants were determined to have a fair value of $0, $0, and $0.72
per share, respectively, using the Black-Scholes Option Model and supported by
an independent valuation of the Warrants issued in the transaction. Each share
of Preferred Stock, Series A Preferred Stock,

F-21
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(5) Notes Payable--Continued

Series AA Preferred Stock or Series AAA Preferred Stock of Intelligent
Interactions was converted to approximately 18 shares of Mandatorily Redeemable
Convertible Preferred Stock--Series A, par value $.01 per share, 2.7 Class A
Warrants, 2.7 Class B Warrants and 1.4 Class C Warrants of the Company.

During the third quarter of 1998, certain investors in the II Merger
elected to effect a cashless exercise of 185,159 warrants with a
weighted-average exercise price of approximately $8.35 per share as provided
for in the original terms of the II Merger Agreement. This resulted in the
issuance of 93,230 shares of common stock. The average market price of the
Company's common stock at the date that the warrants were exercised was
approximately $16.64 per share.

Warrant activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Warrants Exercise
Granted Price
------------ ---------
<S> <C> <C>
Outstanding at December 31, 1995 ......... --
Granted .................................. 6,533 11.48
Exercised ................................ --
Canceled ................................. --
---------
Outstanding at December 31, 1996 ......... 6,533 11.48
Granted .................................. 173,695 3.56
Exercised ................................ --
Canceled ................................. --
---------
Outstanding at December 31, 1997 ......... 180,228 3.84
Granted .................................. 3,985,595 8.35
Exercised ................................ (362,838) 6.21
Canceled ................................. --
---------
Outstanding at December 31, 1998 ......... 3,802,985 $ 8.32
=========
</TABLE>

All warrants are currently exercisable and have expiration dates generally
five years from the date of grant.

(6) Common Stock, Convertible Preferred Shares and Mandatorily Redeemable
Convertible Preferred Stock

Stock Split

On July 20, 1998, the Company effected a 1-for-4 reverse stock split.
Accordingly, all references in the financial statements to the number of shares
of common stock and to per share amounts have been restated to reflect these
changes.

Common Stock

During 1996, the Company issued 34,371 Class A Common Shares in exchange
for $4,525,000 in cash. Each Class A Common Share was converted into 2.5 shares
of Common Stock pursuant to a recapitalization in March 1996.

In March 1996, the Company's shareholders approved a recapitalization plan
which provided for: (i) conversion of the 1,000,000 previously authorized Class
A Common Shares into 30,000,000 Common Shares,

F-22
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(6) Common Stock, Convertible Preferred Shares and Mandatorily Redeemable
Convertible Preferred Stock--Continued

par value $.01 per share; (ii) conversion of each of the 107,703 issued and
outstanding Class A Common Shares into 2.5 of the new Common Shares (any
remaining fractional shares could be purchased or sold by each shareholder in
the conversion); and (iii) conversion of the 1,000 previously authorized Class
B Common Shares into 2,000,000 Preferred Shares, par value $.01 per share.

As part of an employment agreement, an officer of the Company was given
approximately 12,500 shares of Common Stock which were to be issued pro rata on
a monthly basis, over a three-year period beginning in July 1996, as additional
compensation. On October 31, 1997, the officer signed a termination agreement
with the Company whereby the officer received the remaining 8,333 of the 12,500
Shares. The Company recorded compensation expense at the time of each issuance
of Common Stock based upon the Company's estimate of the fair value using the
conversion rates of the Company's most recent issuance of convertible debt. The
fair market value of the Shares issued at the date of each issuance was
approximately $11.48 per share in 1996 and $11.48 per share for issuances prior
to September 1, 1997 and $1.60 per share for issuances between September 1,
1997 and October 31, 1997. As a result, for the years ended December 31, 1997
and 1996, the Company recorded compensation expense of $32,000 and $37,000,
respectively.

In February 1998, the Company awarded to the President 56,250 shares of
restricted Common Stock which were granted at the fair market value of the
Company's Common Stock of $1.60 per share as determined by an independent
appraisal of the Company's Common Stock in connection with the Initial Merger,
and vest over a three year period. In connection with this issuance, the
Company is recognizing compensation expense of $90,000 ratably over a
three-year period. For the year ended December 31, 1998, the Company recognized
$25,000 in compensation expense.

In August 1998, the Company completed an offering of 3,550,000 shares of
its Common Stock, par value $.01 per share, in an initial public offering at an
offering price of $14.00 per share. Net proceeds to the Company from this
initial public offering totaled $44.8 million, after offering costs of $1.4
million.

Convertible Preferred Shares

In November 1996, the Company designated 500,000 Convertible Preferred
Shares, par value $.01 per share, out of the 2,000,000 Preferred Shares which
were authorized in March 1996, the rights and preferences of which were
generally senior to the Company's Common Shares and were more fully described
in the Company's Amended Certificate of Incorporation (the "Amended
Certificate"). Thereafter, the Company completed a private placement of 140,722
Preferred Shares for an aggregate price of $4,039,000. Such consideration
consisted of the cancellation of outstanding Notes (described above) in the
aggregate principal amount of $1,500,000 plus $2,539,000 in cash. Each
Preferred Share was convertible into 2.5 Common Shares (subject to an
anti-dilution adjustment as set forth in the Amended Certificate) upon the
occurrence of certain events in respect of the Company or the holders of
Preferred Shares. In January 1997, the Company issued 17,422 shares of
Preferred Stock for a payment of $500,000 in cash.

As of December 31, 1996 and 1997, the 140,722 and 158,144 issued and
outstanding Preferred Shares were convertible into 351,805 and 395,360 Common
Shares, respectively.

The Preferred Shares, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, as defined, on a pari
passu basis, were entitled to receive an amount equal to $28.70 per share, to
be paid out of the assets of the Company available for distribution before any
such payments were to be made on any shares of the Company's Common Shares or
any other capital stock of the Company other than the Preferred Shares, plus
any declared and unpaid dividends.

F-23
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(6) Common Stock, Convertible Preferred Shares and Mandatorily Redeemable
Convertible Preferred Stock--Continued

The Preferred Shares were subject to mandatory conversion, and would
automatically convert into Common Shares, as noted above, in the event:

(i) the Company successfully consummated a firm commitment for an
underwritten initial public offering of its equity securities for:

(a) a gross per share price offered to the public of at least 200% of
the then current per share conversion price, as defined; and

(b) a total gross offering amount, as defined, of at least
$20,000,000; or

(ii) the holders of a majority of the Preferred Shares voted in favor of or
consent to such conversion.

For as long as the Preferred Shares were outstanding, the Company could
not, without the prior written consent or affirmative vote of the holders of at
least 66 2/3 % of all of the outstanding Preferred Shares:

(i) authorize or issue any other equity securities of the Company which
rank superior to the Preferred Shares with respect to conversion,
dividends, redemption, liquidation, antidilution or other preferences,
designations, rights or powers;

(ii) authorize or issue any securities of the Company which have voting
rights superior to the Preferred Shares; or

(iii) otherwise amend, alter or repeal the preferences, designations,
rights or powers of the Preferred Shares or enter into any transaction
that shall result in any such amendment, alteration, or repeal, which
would have an adverse effect upon holders of such shares.

On February 25, 1998, in accordance with the terms and conditions of the
Securities Purchase Agreement, all 158,144 issued and outstanding Preferred
Shares were converted into 542,908 Common Shares, after giving effect to
anti-dilution provisions.

Mandatorily Redeemable Convertible Preferred Stock

On February 25, 1998, the Company entered into a Securities Purchase
Agreement for the sale and issuance of 10,060,002 shares of Mandatorily
Redeemable Convertible Preferred Stock--Series A ("Mandatorily Redeemable
Convertible Preferred Stock" or "Series A"), par value $.01 per share,
1,320,904 Class A Warrants to purchase Common Stock at an exercise price of
$7.62 per share and 1,320,904 Class B Warrants to purchase Common Stock at an
exercise price of $11.42 per share in a private placement for total proceeds of
$10,060,002. Such warrants are immediately exerciseable and expire on February
25, 2003. No value has been attributed to the Class A and Class B warrants
based upon an independent valuation of the securities.

After giving effect to the Securities Purchase Agreement, including the
Merger, the capital stock of the Company consisted of: (i) 100,000,000 common
shares, of which 6,870,300 shares were issued and outstanding, 2,641,808 shares
were reserved for issuance upon conversion of issued and outstanding
Mandatorily Redeemable Convertible Preferred Stock or "Series A," 1,320,904
shares were reserved for issuance upon exercise of issued and outstanding Class
A Warrants, 1,320,904 shares were reserved for issuance upon exercise of issued
and outstanding Class B Warrants, 643,750 were reserved for issuance upon
exercise of issued and outstanding Class C Warrants, 35,609 were reserved for
issuance upon exercise of issued and outstanding unclassified warrants, 62,757
(subject to adjustment) were reserved for issuance upon exercise of outstanding
convertible debentures, and 1,437,500 shares were reserved for issuance to key
employees, officers and directors of, and consultants to, the Company under
stock incentives that had been granted or were available for grant by the
Company pursuant to the 1998 Stock Incentive Plan; and (ii) 30,000,000
preferred shares, of which 10,060,002 were outstanding, all of which were

F-24
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(6) Common Stock, Convertible Preferred Shares and Mandatorily Redeemable
Convertible Preferred Stock--Continued

designated as Mandatorily Redeemable Convertible Preferred Stock or Series A
shares, all of which were in a private placement.

Each share of Series A was convertible, at the option of the holder, at
any time and without the payment of additional consideration into Common Stock
determined by the sum of (i) the Payment Price of $1.00 per Series A Share
divided by the conversion price of $3.81 per Common Share (as adjusted), plus
(ii) all accrued and unpaid dividends with respect to such Share divided by the
dividend conversion price which is equal to twice the conversion price of
$3.81.

The Series A Shares ranked (i) prior to the Common Stock of the Company;
(ii) pari passu with any Securities (as defined in the Securities Purchase
Agreement); and (iii) junior to any Senior Securities, in each case as to
dividends and other distributions of assets and upon liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary. The Series A
shareholders were entitled to receive, when and as declared by the Board of
Directors out of funds legally available, dividends at a rate of $0.04 per
share per annum. Such dividends were subsequently canceled pursuant to the
Securities Purchase Agreement because the Company consummated a qualified
initial public offering (as defined in the Securities Purchase Agreement) prior
to January 31, 1999.

The Series A Shares were subject to certain anti-dilution protection, if
the Company raised funds in the future, while the Preferred Stock was still
outstanding, at a Common Stock-equivalent value which was less than the
conversion price of the Preferred Stock.

In the event the Company had not completed a qualified public offering on
or prior to the fifth anniversary of the original issue date, each shareholder
of record of Series A Shares would have the right to cause the Company to
redeem at the option of the shareholder all or part of the shareholder's
outstanding Series A Shares by paying cash of $1.00 per share plus any
dividends accrued. Additionally, if the Company failed to maintain at least $10
million of Key-Man Life Insurance on the President and Chief Executive Officer
of the Company, each shareholder of record of Series A Shares would have the
right to cause the company to redeem at the option of the shareholder all or
part of the shareholder's outstanding Series A Shares by paying cash of $1.00
per share plus any dividends accrued.

Series A shareholders had one vote for each full Common Share into which a
Series A Share would be convertible.

In connection with the Company's IPO, all of the Company's 13,621,507
Series A Shares automatically converted into 3,577,118 shares of Common Stock.
Such amounts included: i) 10,060,002 Series A Shares issued in connection with
the Initial Merger which converted into 2,641,849 shares of Common Stock; and
ii) 3,561,505 Series A Shares issued in connection with the Intelligent
Interactions acquisition which converted into 935,269 shares of Common Stock
(see note 2), each of which, by their terms, automatically converted into
Common Stock in connection with the Company's IPO. In addition, the 3,000
shares of Series B Convertible Redeemable Preferred Stock issued in connection
with the CliqNow! acquisition, by its terms, automatically converted into
230,415 shares of Common Stock in connection with the Company's IPO (see note
2). The total number of common shares issued in connection with the automatic
conversion of the Company's mandatorily redeemable convertible preferred stock
in connection with the IPO was 3,807,553 shares of Common Stock.

F-25
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(6) Common Stock, Convertible Preferred Shares and Mandatorily Redeemable
Convertible Preferred Stock--Continued

Shares Reserved for Future Issuance

Shares reserved for future issuance as of December 31, 1998 are as
follows:

<TABLE>
<CAPTION>
Common
Stock
------------
<S> <C>
Reserved for issued and outstanding Class A Warrants .................. 1,512,494
Reserved for issued and outstanding Class B Warrants .................. 1,512,494
Reserved for issued and outstanding Class C Warrants .................. 742,388
Reserved for issued and outstanding unclassified warrants ............. 35,609
Reserved for stock incentives under the 1998 Stock Incentive Plan ..... 2,893,891
</TABLE>

(7) Stock Option Plan

During 1998, the board of directors and stockholders of the Company
approved the 1998 Stock Incentive Plan as amended (the "Plan"). The following
is a summary of the material features of the Plan. This Plan replaced the 1995
Stock Option Plan--Amended, which had been established in 1995 and amended in
1996.

All employees of and consultants to the Company are eligible under the
Plan. Eligibility under the Plan shall be determined by the Stock Incentive
Committee. The Plan provides for the grant of any or all of the following types
of awards: (i) stock options, including incentive stock options and
non-qualified stock options; (ii) stock appreciation rights, in tandem with
stock options or free standing; and (iii) restricted stock. In addition, the
Plan provides for the non-discretionary award of stock options to non-employee
directors of the Company.

A maximum of 3,000,000 shares of Common Stock may be issued or used for
reference purposes pursuant to the Plan. The maximum number of shares of Common
Stock subject to each of stock options or stock appreciation rights that may be
granted to any individual under the Plan is 187,500 for each fiscal year during
the term of the Plan. If a stock appreciation right is granted in tandem with a
stock option, it shall be applied against the individual limits for both stock
options and stock appreciation rights, but only once against the maximum number
of shares available under the Plan.

The Company applies APB Opinion No. 25 in accounting for its Plan. The
Company recorded a deferred compensation charge of approximately $332,000 in
the second quarter of 1998 in connection with the grant of stock options to
employees, representing the difference between the deemed fair value of the
Company's Common Stock for accounting purposes and the exercise price of such
options at the date of grant. Such amount is presented as a reduction of
stockholders' equity (deficit) and amortized over the vesting period of the
applicable options, generally four years. The Company granted such options at a
weighted average exercise price of $5.74 per share. Amortization of deferred
stock compensation is recorded in general and administrative expense in the
consolidated statement of operations.

The per share weighted-average fair value of stock options granted during
1996, 1997 and 1998 was $9.28, $1.60 and $4.44, respectively, on the date of
grant using the Black-Scholes method with the following weighted-average
assumptions: 1996--risk-free interest rate 6.18%, and an expected life of three
years; 1997--risk-free interest rate 5.64%, and an expected life of two years;
and 1998--risk-free interest rate 5.20%, and an expected life of 4 years. As
permitted under the provision of SFAS No. 123, and based on the historical lack
of a public market for the Company's options, no volatility was reflected in
the options pricing calculation for options granted prior to the IPO. For
option grants subsequent to the Company's August 1998 IPO, a volatility factor
of 150% was used.

Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's net
income would have been reduced to the pro forma amounts indicated below:

F-26
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(7) Stock Option Plan--Continued

<TABLE>
<CAPTION>
1996 1997 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Net loss:
As reported ......... $ (6,796,000) $ (5,306,000) $ (24,999,000)
Pro forma ........... (6,839,000) (5,323,000) (25,373,000)
Net loss per share:
As reported ......... $ (6.48) $ (4.88) $ (2.62)
Pro forma ........... (6.52) (4.90) (2.66)
</TABLE>

Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
Weighted
average
Options exercise
granted price
------------- ---------
<S> <C> <C>
Outstanding at December 31, 1995 ......................... 64,425 $ 3.08
Granted .................................................. 56,889 11.28
Exercised ................................................ -- --
Canceled ................................................. (13,017) 5.12
--------- ------
Outstanding at December 31, 1996 ......................... 108,297 7.14
Granted (a) .............................................. 207,797 1.60
Exercised ................................................ -- --
Canceled ................................................. (22,783) 6.44
--------- ------
Outstanding at December 31, 1997 ......................... 293,311 3.27
Granted .................................................. 1,455,645 6.87
Exercised ................................................ (106,108) 2.57
Canceled ................................................. (112,357) 2.87
--------- ------
Outstanding at December 31, 1998 ......................... 1,530,491 $ 6.77
========= ======
Vested at December 31, 1997 .............................. 132,373 $ 3.13
========= ======
Vested at December 31, 1998 .............................. 181,008 $ 1.55
========= ======
Options available for grant at December 31, 1998 ......... 1,307,150
=========
</TABLE>

- ------------
(a) At December 31, 1997, the total number of options outstanding for purchase
of Common Shares under the 1995 Stock Option Plan--Amended exceeded the
options available for issuance. Subsequent to December 31, 1997, the
Company replaced the 1995 Stock Option Plan--Amended with the 1998 Stock
Incentive Plan and increased the number of Shares available under the plan
to a maximum of 3,000,000.

F-27
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(7) Stock Option Plan--Continued

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------- ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 0.16-1.72 325,372 2.0 years $ 0.77 163,827 $ 0.88
4.00-6.94 944,869 3.1 years 5.24 6,869 4.58
8.00-17.75 133,000 2.7 years 11.47 10,312 10.13
22.69-34.13 127,250 3.0 years 26.30 -- --
--------- -------
1,530,491 181,008
========= =======
</TABLE>

(8) Major Contracts

In November 1996, the Company entered into an agreement with SegaSoft to
license the rights to its registration-driven ad targeting software. The
contract term was for two years from the earlier of the first commercial use of
SegaSoft's Heat Network or August 1, 1997. The Company accounted for the
SegaSoft agreement in accordance with Statement of Position 91-1, "Software
Revenue Recognition." The Company received license fees of $1,800,000, of which
$1,200,000 was received by December 31, 1996. In addition, the Company received
a $300,000 non-refundable consulting retainer fee in November 1996. This fee,
plus an additional $100,000 credit, was applied against consulting service fees
for design modifications to the software for the SegaSoft Heat Network, which
were recognized as revenues as services were performed. The Company accounted
for the majority of the license fee, or $1,300,000, as performance occurred
over the period during which the licensed software was transferred to SegaSoft
and modified to perform to SegaSoft's specifications. The period in which the
fees associated with software license transfer and consulting services both
commenced in November 1996 and concluded in August 1997. For the years ended
December 31, 1996, 1997 and 1998, the Company recorded approximately $429,000,
$1,681,000 and $0 in revenue, respectively; the cost of sales associated with
the Segasoft consulting and license fee were $10,000, $57,000 and $0,
respectively.

During 1996, the Company entered into an agreement with SegaSoft for
advertising on The ContentZone and/or Riddler.com. The term of the contract was
for one year from the date of signing. The Company received a prepayment in
full for $540,000 in 1996. Revenue from the agreement was recognized ratably
over the terms of the contract. For the years ended December 31, 1996, 1997 and
1998, the Company recorded $212,000, $326,000 and $0 in revenue, respectively.

During 1996, the Company entered into an agreement with Microsoft
Corporation for advertising on The ContentZone. The term of the contract was
for one year from the date of signing. The Company received a prepayment in
full for $150,000 in 1996. Revenue from the agreement was recognized ratably
over the terms of the contract. For the years ended December 31, 1996, 1997 and
1998, the Company recorded $75,000, $75,000 and $0 in revenue, respectively.

(9) Supplemental Cash Flow Information

Supplemental disclosure of cash flow information:

During 1996, 1997 and 1998, the amount of cash paid for interest was
$28,000, $0 and $3,000, respectively.

F-28
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(9) Supplemental Cash Flow Information --Continued

Non-cash financing activities:

During 1996, the Company converted $1,500,000 of mandatory conversion
subordinated notes into Preferred Shares.

During 1997, the Company converted $94,000 of senior convertible notes
into Common Stock.

During 1998, the Company issued an aggregate of 5,278,167 shares of Common
Stock, 3,561,505 Series A Shares, 3,000 Series B Shares, 265,212 Class A
Warrants, 265,212 Class B Warrants and 136,553 Class C Warrants in connection
with the Acquisitions.

During 1998, the Company converted all outstanding shares of convertible
preferred stock into 4,350,441 shares of Common Stock, converted $2,556,000 of
senior convertible notes payable--related parties, plus accrued interest, into
828,036 shares of Common Stock and outstanding warrants were converted into
191,349 shares of Common Stock.

During 1998, the Company recorded imputed interest payable on loans
payable--related party of $9,000.

In February 1998, the Company issued warrants to a former officer for
$450,000 (see Note 5).

In April 1998, the Company issued 5,909 shares of Common Stock to a
consultant for $22,000.

During 1998, the Company entered into a capital lease for approximately
$85,000 of equipment.

In December 1998, the Company issued 203,851 shares of Common Stock in
exchange for an equity interest in China.com.

(10) Commitments

The Company leases its facilities and certain equipment under operating
lease agreements. Rental expense from operating leases amounted to $175,000,
$183,000 and $690,000 for the years ended 1996, 1997 and 1998, respectively.

On June 1, 1996, the Company entered into an eighteen-month operating
lease for the use of computer equipment with a fair market value of
approximately $852,000. The lease required six quarterly payments of $163,000
beginning on June 1, 1996. In October 1997, the lease agreement was modified
and as a result the quarterly payments were adjusted to $46,000 through the
extended term of the lease, November 30, 1998. Rent expense for the operating
lease was $381,000, $612,000 and $182,000 for the years ended 1996, 1997 and
1998, respectively.

On May 14, 1998 and July 7, 1998, the Company entered into two operating
leases for computer equipment and software related to its Adfinity system, with
a combined fair market value of $849,000. The operating lease as, amended,
requires monthly payments and expires in December, 2001. Total rent expense for
currently outstanding leases is expected to be approximately $91,000 per
quarter.

In 1998, the Company entered into an operating lease agreement for space
rental at its new corporate headquarters for a period of 10 years. The
Company's annual lease expense for this office space will be approximately
$1,200,000. The Company expects to incur approximately $1,000,000 in leasehold
improvements in connection with the new office space.

During the fourth quarter of 1998, the Company entered into a lease line
of credit for up to $3,000,000 to finance capital equipment. As of December
1998, total obligations under this lease line of credit were approximately
$600,000.

F-29
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(10) Commitments --Continued

The Company's Adfinity ad serving software and hardware are housed at
GlobalCenter, Inc. in Herndon, Virginia. The agreement with GlobalCenter
provides for Internet connectivity services, the lease of certain hardware, the
licensing of certain software, and the lease of secure space to store and
operate such equipment. Service orders in place under this agreement, which
expire in May 1999, require monthly payments of approximately $27,000.

Future minimum payments under noncancelable operating leases and capital
leases at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
Operating Capital
Year ending December 31 leases leases
- ----------------------------------------------------------- ------------- ----------
<S> <C> <C>
1999 ................................................... $ 1,973,000 $35,000
2000 ................................................... 2,220,000 36,000
2001 ................................................... 1,984,000 --
2002 ................................................... 1,677,000 --
2003 ................................................... 1,397,000 --
Thereafter ............................................. 4,564,000 --
----------- -------
Total minimum lease payments ........................ $13,815,000 71,000
===========
Less amount representing interest ................... 7,000
-------
Present value of net minimum lease payments ......... 64,000
Less current portion ................................ 30,000
-------
Long term portion ................................... $34,000
=======
</TABLE>

The Company entered into a Consulting Agreement, dated as of January 1,
1998 with Neterprises, Inc. ("Consulting Agreement"), pursuant to which Mr.
Paolucci, President and sole stockholder of Neterprises, Inc., and at that time
a director of the Company, agreed to provide management and consulting services
to Interactive Imaginations for a term of up to one year in connection with the
identification and evaluation of potential strategic relationships and
potential acquisition targets. In return for such services, Mr. Paolucci
received a lump sum payment of $180,000 and currently receives a monthly fee of
$12,500. This agreement was not renewed in 1999.

On December 11, 1998, the Company entered into a severance agreement with
Yale R. Brown, a former director and Executive Vice President, under which Mr.
Brown resigned as an officer and director. The Company agreed to pay Mr. Brown
the sum of $140,000 as severance, including attorneys' fees, and the Company
exchanged mutual releases of substantially all claims arising out of this
employment.

(11) Legal Proceedings

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operation or liquidity. During 1997, the Company
successfully defended claims against the Company; however, legal costs incurred
in connection with such claims amounted to $232,000.

F-30
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(12) Selected Quarterly Financial Data--Unaudited

The following is a summary of selected quarterly financial data for the
years ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>
1998 Quarters Ended
--------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues ............................................. $ 1,076,000 $ 3,701,000 $ 5,528,000 $ 9,558,000
Operating loss(a) .................................... (2,131,000) (9,873,000) (6,101,000) (7,289,000)
Net loss ............................................. (2,298,000) (9,838,000) (5,856,000) (6,731,000)
Cumulative dividends on mandatorily redeemable
convertible preferred stock ......................... (34,000) (152,000) (90,000) --
Net loss attributable to common stockholders ......... (2,332,000) (9,990,000) (5,946,000) (6,731,000)
Net loss per share attributable to common
stockholders ........................................ (0.76) (1.27) (0.51) (0.43)
</TABLE>

<TABLE>
<CAPTION>
1997 Quarters Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues ............................................. $1,194,000 $ 985,000 $ 549,000 $ 420,000
Operating loss ....................................... (798,000) (1,424,000) (2,400,000) (588,000)
Net loss ............................................. (784,000) (1,428,000) (2,433,000) (661,000)
Cumulative dividends on mandatorily redeemable
convertible preferred stock ......................... -- -- -- --
Net loss attributable to common stockholders ......... (784,000) (1,428,000) (2,433,000) (661,000)
Net loss per share attributable to common
stockholders ........................................ (0.73) (1.32) (2.25) (0.59)
</TABLE>

- ------------
(a) In April 1998, the Company acquired Intelligent Interactions in a
transaction accounted for as a purchase (see note 2). The preliminary
purchase price was allocated to the acquired assets and liabilities based
on their estimated fair values as of the date of the acquisition. This
included $5,477,000 allocated to purchased in-process technology and
charged to operations at the time of acquisition. Accordingly, the Company
expensed this amount in its originally reported June 30, 1998 operating
results.

During the fourth quarter of 1998, the Company finalized the purchase price
allocation related to the purchased in-process technology and core
technology being acquired. This adjustment decreased the amount previously
allocated to in-process technology and increased goodwill by $477,000 which
is being amortized on a straight-line basis over two years. As a result, the
Company has restated the above quarterly financial information for the
second and third quarters of 1998 to reflect this change.

(13) Subsequent Events--Unaudited

On January 20, 1999, the Company purchased a 60% interest in 24/7 Media
Europe, Ltd. ("24/7 Media Europe", formerly InterAd Holdings Limited), which
operates the 24/7 Media Europe Network, for $3,900,000. The Company expects to
potentially invest up to an additional $5,000,000 of working capital in 24/7
Media Europe and Sift Inc. (discussed below) in 1999 to support their future
operations. The InterAdHoldings acquisition will be accounted for using the
purchase method of accounting and accordingly, InterAdHoldings' financial
statements will be included in the Company's 1999 consolidated financial
statements from its date of acquisition, January 20, 1999.

In 1999 through February 28, the Company granted 705,500 stock options at
exercise prices of $28.00 to $38.13 per share, all of which were granted at the
fair market value of the Company's Common Stock at the time of grant. These
stock options have a weighted average exercise price of $28.49 per share.

On March 17, 1999, the Company announced an exclusive three-year agreement
with NBC-Interactive Neighborhood for the Company to sell advertising on NBC
Network television stations and their associated Web sites at the local market
level. Under the terms of the agreement, the Company will recruit, train and

F-31
<PAGE>

24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997

(13) Subsequent Events--Unaudited --Continued

staff sales and support personnel who will operate out of both the NBC stations
as well as in the Company's regional offices. The Company will also jointly
provide ad sales consulting and regional representation services to more than
100 NBC stations that are currently affiliated with NBC-IN.

The Company and NBC-IN will collaborate with NBC-IN on the development of
advertising packages that leverage the reach and brand-building strengths of
NBC local television with the direct response, data collection and marketing
functionality of NBC's local station Web sites. Initial launch markets include
NBC-owned and operated stations in New York, Los Angeles, Chicago, Washington,
D.C., Dallas and San Diego with initial plans to follow in an additional 14
broadcast station markets.

As part of this Agreement, the Company issued to NBC warrants to purchase
up to 150,000 shares of the Company's Common Stock for $26.05 per share. These
warrants are exercisable for up to five years from the date of issuance and
vest ratably over the last fifteen months of the three-year term of the
agreement. The 150,000 warrants to acquire common stock that were issued to NBC
were valued at $3.6 million using a Black-Scholes pricing model, based on the
following assumptions: risk-free interest rate of 6%, dividend yield of 0%,
expected life of 5 years and volatility of 150%. The value of this contract
will be amortized using the straight-line method over the life of the
three-year contract.

On March 8, 1999, the Company acquired Sift, Inc., a provider of e-mail
based direct marketing services, in exchange for approximately 763,000 shares
of the Company's Common Stock for all the outstanding common stock of Sift,
Inc. This business combination will be accounted for as a pooling-of-interests
combination and, accordingly, the Company's historical consolidated financial
statements presented in future reports will be restated to include the accounts
and results of operations of Sift, Inc.

The following unaudited pro forma data summarizes the combined results of
operations of the Company and Sift, Inc. as if the combination has been
consummated on December 31, 1998:

<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------
1996 1997 1998
---------------- ---------------- -----------------
<S> <C> <C> <C>
Net sales .............. $ 1,543,000 $ 3,217,000 $ 20,699,000
============ ============ =============
Net loss ............... $ (7,437,000) $ (6,323,000) $ (25,544,000)
============ ============ =============
Loss per share ......... $ (4.10) $ (3.42) $ (2.48)
============ ============ =============
</TABLE>

F-32
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

OVERVIEW

During the period from January 1, 1998 through December 31, 1998, the
Company acquired five entities (the "Acquisitions") in separate transactions.
The Acquisitions are as follows:

Petry and Advercomm Acquisitions
On February 25, 1998, in connection with the Initial Merger, the Company
acquired all of the outstanding stock of Petry and Advercomm in separate
transactions in exchange for 2,623,591 and 1,705,334 shares of the Company's
Common Stock, respectively, for a total purchase price of $4,198,000 and
$2,729,000, respectively, plus acquisition costs of $157,000. The fair value of
the 4,328,925 aggregate shares of Common Stock issued in connection with the
acquisition of Petry and Advercomm was estimated to be $1.60 per share,
determined primarily by reference to the Common Stock conversion price of $1.60
per share in connection with the Company's issuance of approximately $1,000,000
senior convertible notes payable and detachable warrants during September and
November 1997, and supported by an independent valuation of the Company's
Common Stock as of February 25, 1998.

Intelligent Interactions Acquisition
During April 1998, the Company entered into an Agreement and Plan of
Merger (the "II Merger") to acquire all of the outstanding stock of Intelligent
Interactions. Upon consummation of the II Merger, each share of common stock of
Intelligent Interactions was converted into approximately 16.3 shares of Common
Stock, 2.3 Class A Warrants, 2.3 Class B Warrants and 1.2 Class C Warrants of
the Company. Therefore, the Company issued 949,242 shares of Common Stock,
265,212 of Class A Warrants, 265,212 of Class B Warrants and 136,553 of Class C
Warrants. The warrants have exercise prices of $7.62, $11.42 and $3.81 per
share, respectively, and expire in five years. The Company's Class A, B, and C
Warrants were determined to have a fair value of $0, $0, and $0.72 per share,
respectively, using the Black-Scholes Option Model and supported by an
independent valuation of the Warrants issued in the transaction.

F-33
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

CliqNow! Acquisition
As of June 1, 1998, the Company acquired the CliqNow! division of K2
Design, Inc., an Internet advertising network comprised of medium to large Web
sites organized into eight topical channels, for $4,240,000, plus acquisition
costs of $96,000, with $1,240,000 payable in cash and $3,000,000 payable in
Series B Convertible Redeemable Preferred Stock (Series B). The Company issued
3,000 shares of Preferred Stock which, by its terms, automatically converted
into 230,415 shares of Common Stock upon consummation of the IPO, at the IPO
price per share, net of the underwriting discount, or $13.02 per share, which
was deemed to be the fair value of the securities.

CardSecure Acquisition
On December 29, 1998, the Company acquired an initial 67% ownership stake
(on an as converted basis) in CardSecure, Inc. ("CardSecure"), a company which
provides e-commerce enabling technology as well as Web site hosting services,
through a $500,000 cash investment. The CardSecure acquisition has been
accounted for using the purchase method of accounting and accordingly,
CardSecure's financial statements have been included in the Company's
consolidated financial statements from its date of acquisition, December 29,
1998.

Each of the Acquisitions has been accounted for using the purchase method
of accounting, and accordingly, each purchase price has been allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their fair values on the acquisition dates. The historical
carrying amounts of such assets and liabilities consisting of cash, accounts
receivable, property and equipment, accounts payable and accrued expenses
approximated their fair values. The fair value of the purchased existing
technology and in-process technology in connection with the II Merger were
determined by management using a risk-adjusted income valuation approach. This
approach directly measured the value of the purchased in-process technology
(exclusive of the purchased existing technology) by converting the cash flows
directly attributable to the purchased in-process technology at a rate of
return adjusted for the risks inherent in the development and ultimate
technological feasibility of such technology. Based upon an independent
appraisal, which takes into account replacement cost of assets, market
multiples and present value of future after-tax earnings attributable to the
purchased in-process technology, $5,000,000 of the purchase price was allocated
to in-process technology and was immediately charged to operations because such
in-process technology had not reached the stage of technological feasibility at
the acquisition date and had no alternative future use. The value was derived
exclusive of the value of the purchased existing technology. The following
summarizes the purchase price allocation for each of the respective
acquisitions:

The following unaudited pro forma consolidated statement of operations
gives effect to the Company's acquisitions as if they had occurred on January
1, 1998 (or date of inception, if later) by consolidating the results of
operations of each of Petry, Advercomm, Intelligent Interactions, CliqNow! and
CardSecure with the results of operations of 24/7 Media for the year ended
December 31, 1998. 24/7 Media's consolidated financial statements for the year
ended December 31, 1998 include the accounts of the Company and its
majority-owned and controlled subsidiaries from their respective dates of
acquisition (i) Petry and Advercomm

F-34
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

from February 25, 1998, (ii) Intelligent Interactions from April 13, 1998,
(iii) CliqNow! from June 1, 1998, and CardSecure, Inc. from December 29, 1998.
Advercomm was incorporated in November 1997 and had no operations in 1997;
however, the operation of Advercomm's network based advertising services
commenced on February 1, 1998; accordingly, Advercomm results of operations are
only included in the pro forma statement of operations for the period from
February 1, 1998 to February 24, 1998. The pro forma adjustments include the
elimination of all intercompany transactions.

The historical financial statements of the Company, Petry, Intelligent
Interactions and CliqNow! are included elsewhere in this Prospectus and the
unaudited pro forma consolidated financial information presented herein should
be read in conjunction with those financial statements and related notes.

F-35
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------
24/7 Media, Inc.
(successor company
to Interactive Petry
Imaginations, Inc.) Interactive, Inc. Advercomm, Inc.(1)
--------------------- ------------------- --------------------
<S> <C> <C> <C>
Revenues:
Advertising ............................ $ 19,744,000 $ 747,000 $23,000
License fees ........................... 119,000 -- --
------------- ---------- -------
Total revenues ........................ 19,863,000 747,000 23,000

Cost of revenues ........................ 15,970,000 650,000 15,000
------------- ---------- -------
Gross profit .......................... 3,893,000 97,000 8,000
------------- ---------- -------
Operating expenses:
Sales and marketing .................... 7,971,000 298,000 --
General and administrative ............. 8,692,000 233,000 3,000
Product development .................... 1,902,000 -- --
Write-off of acquired
in-process technology ................ 5,000,000 -- --
Amortization of goodwill ............... 5,722,000 -- --
------------- ---------- -------
Total operating expenses .............. 29,287,000 531,000 3,000
------------- ---------- -------
Operating (loss) income ................. (25,394,000) (434,000) 5,000
Total interest income (expense), net .... 671,000 (6,000) --
------------- ---------- -------
Net loss .............................. (24,723,000) (440,000) 5,000
Cumulative dividends on
mandatorily convertible preferred
stock ................................. (276,000) -- --
------------- ---------- -------
Net loss attributable to common
stockholders .......................... $ (24,999,000) $ (440,000) $ 5,000
============= ========== =======
Basic net loss per share (C) .......... $ (2.62)
=============
Shares outstanding (C) ................ 9,533,056
=============

<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------------------------------
Pro forma Pro forma
Intelligent Card- Acquisition consolidated
Interactions Corp. CliqNow! Secure Adjustments 24/7 Media, Inc.
-------------------- ------------ --------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising ............................ $ -- $ 966,000 $ 662,000 -- $ 22,142,000
License fees ........................... 88,000 -- -- -- 207,000
---------- --------- ------------ ----------- -------------
Total revenues ........................ 88,000 966,000 662,000 -- 22,349,000

Cost of revenues ........................ 13,000 536,000 -- -- 17,184,000
---------- --------- ------------ ----------- -------------
Gross profit .......................... 75,000 430,000 662,000 -- 5,165,000
---------- --------- ------------ ----------- -------------
Operating expenses:
Sales and marketing .................... 227,000 224,000 872,000 -- 9,592,000
General and administrative ............. 221,000 293,000 851,000 -- 10,293,000
Product development .................... 67,000 -- -- -- 1,969,000
Write-off of acquired
in-process technology ................ -- -- -- -- 5,000,000
Amortization of goodwill ............... -- -- 2,171,000(A) 7,893,000
---------- --------- ------------ ----------- -------------
Total operating expenses .............. 515,000 517,000 1,723,000 2,171,000 34,747,000
---------- --------- ------------ ----------- -------------
Operating (loss) income ................. (440,000) (87,000) (1,061,000) (2,171,000) (29,582,000)
Total interest income (expense), net .... (5,000) -- (1,000) -- 659,000
---------- --------- ------------ ----------- -------------
Net loss .............................. (445,000) (87,000) (1,062,000) (2,171,000) (28,923,000)
Cumulative dividends on
mandatorily convertible preferred
stock ................................. -- -- (103,000)(B) (379,000)
---------- --------- ------------ ----------- -------------
Net loss attributable to common
stockholders .......................... $ (445,000) $ (87,000) $ (1,062,000) $(2,274,000) $ (29,302,000)
========== ========= ============ =========== =============
Basic net loss per share (C) .......... $ (2.83)
=============
Shares outstanding (C) ................ 10,369,861
=============
</TABLE>

(1) Represents Advercomm from February 1, 1998 (inception) to February 24, 1998
(date of merger).

See accompanying notes to Unaudited Pro Forma Consolidated Financial
Information.

F-36
<PAGE>

24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following adjustments were applied to the historical financial
statements of the Company and the Acquisitions to arrive at the pro forma
consolidated financial information.

(A) To record amortization expense related to goodwill of the
Acquisitions, which is amortized on an entity by entity basis, as if each
acquisition had occurred on January 1, 1998 (or inception, if later), over its
estimated useful life of two years for Petry, Advercomm, Intelligent
Interactions and CliqNow! and three years for CardSecure. The pro forma
additional amount of goodwill amortization expense recorded, as if each
acquisition had occurred on January 1, 1998 (or inception, if later) through
the date of each acquisition, was $494,000, $113,000, $353,000, $870,000 and
$341,000 for Petry, Advercomm, Intelligent Interactions, CliqNow! and
CardSecure, respectively.

(B) To give effect to the cumulative dividends at a rate of $0.04 per
share per annum on 13,621,507 shares of the Company's mandatorily redeemable
convertible preferred stock, as if it had been outstanding from January 1, 1998
through the date of issuance.

(C) The Company computes net loss per share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share". Basic net loss per share is
computed by dividing the net loss for the period by the weighted average number
of common shares outstanding during the period. The weighted average common
shares used to compute pro forma basic net loss per share includes the actual
weighted average common shares outstanding for the historical year ended
December 31, 1998 adjusted for the common shares issued in connection with the
acquisition of each of the acquired companies from January 1, 1998 or inception
of operations of the acquired companies, if later. The common stock issued in
connection with the acquisition of each of the acquired companies are as
follows:

<TABLE>
<CAPTION>
Incremental
Common Average
Acquired Effective Shares Shares
Entity Date Issued Outstanding
- -------------------------- ------------------- ----------- ----------------
<S> <C> <C> <C>
Petry February 25, 1998 2,623,591 446,020
Advercomm February 25, 1998 1,705,334 153,475(a)
Intelligent Interactions April 13, 1998 949,242 237,310
-------
836,805
=======
</TABLE>

- ------------
(a) Based on the February 1, 1998 date of inception.

In addition, diluted net loss per share is not presented because the
inclusion of common stock issuable upon exercise of employee stock options and
upon exercise of outstanding warrants is antidilutive.

In future periods, the weighted average shares used to compute diluted
earnings per share will include the incremental shares of Common Stock relating
to outstanding options and warrants to the extent such incremental shares are
dilutive.

F-37
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Members of Interactive Holdings, LLC
(successor to Petry Interactive, Inc.)

We have audited the accompanying balance sheet of Interactive Holdings,
LLC (successor to Petry Interactive, Inc.) as of December 31, 1997 (Successor),
and the related statements of operations and cash flows for the period from
February 1, 1997 (inception) to September 28, 1997 (Predecessor) and for the
period from September 29, 1997 to December 31, 1997 (Successor). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Interactive Holdings, LLC
as of December 31, 1997 (Successor), and the results of its operations and its
cash flows for the period February 1, 1997 (inception) to September 28, 1997
(Predecessor) and the period from September 29, 1997 to December 31, 1997
(Successor) in conformity with generally accepted accounting principles.

As discussed in note 1 to the financial statements, on September 29, 1997,
Interactive Holdings, LLC acquired Petry Interactive, Inc. As a result of the
change in control, the financial information for the period after the change in
control is presented on a different cost basis than that for the period before
the change in control and, therefore, is not comparable.

KPMG LLP

New York, New York
June 2, 1998

F-38
<PAGE>

INTERACTIVE HOLDINGS, LLC
(SUCCESSOR TO PETRY INTERACTIVE, INC.)

BALANCE SHEET

<TABLE>
<CAPTION>
December 31,
1997
-------------
Successor
<S> <C>
ASSETS
Current Assets:
Cash ...................................................................... $ 117,849
Accounts receivable, net of allowance for doubtful accounts of $158,777 ... 803,089
Prepaid expenses and other current assets ................................. 6,449
----------
Total current assets .................................................. 927,387
----------
Other assets ................................................................. 5,000
----------
Total assets .......................................................... $ 932,387
==========
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Loan payable--related party ............................................... $ 300,000
Accounts payable .......................................................... 8,875
Accrued liabilities ....................................................... 1,297,024
----------
Total current liabilities ............................................. 1,605,899
----------
Other long-term liabilities .................................................. 16,733
----------
Total liabilities ............................................................ 1,622,632
----------
Members' deficit:
Common Stock; $0.01 par value, 200,000 shares authorized, 100 shares issued
and outstanding .......................................................... 1
Paid in capital ........................................................... 6,000
Members' deficit .......................................................... (696,246)
----------
Total members' equity (deficit) ....................................... (690,245)
----------
Commitments and contingencies
Total liabilities and members' deficit ................................ $ 932,387
==========
</TABLE>

See accompanying notes to financial statements.
F-39
<PAGE>

INTERACTIVE HOLDINGS, LLC
(SUCCESSOR TO PETRY INTERACTIVE, INC.)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period from
February 1, 1997 Period from
(inception) September 29, 1997
to to
September 28, 1997 December 31, 1997
-------------------- -------------------
(Predecessor) (Successor)
<S> <C> <C>
Advertising revenue ..................... $ 514,982 $ 754,279
Cost of revenues ........................ 449,621 724,973
------------ ----------
Gross profit ..................... 65,361 29,306
------------ ----------
Operating expenses:
Sales and marketing .................. 1,306,125 424,386
General and administrative ........... 950,210 295,163
------------ ----------
Total operating expenses ......... 2,256,335 719,549
Interest expense ..................... -- 6,000
------------ ----------
Net loss ......................... $ (2,190,974) $ (696,243)
============ ==========
</TABLE>

See accompanying notes to financial statements.
F-40
<PAGE>

INTERACTIVE HOLDINGS, LLC
(SUCCESSOR TO PETRY INTERACTIVE, INC.)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period from
February 1, 1997 Period from
(inception) September 29, 1997
to to
September 28, 1997 December 31, 1997
-------------------- -------------------
(Predecessor) (Successor)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................ $ (2,190,974) $ (696,243)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation ................................................... 10,358 --
Provision for doubtful accounts ................................ 12,992 145,786
Imputed interest on loan payable--related party ................ 6,000
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable ........................................... (424,800) (410,861)
Prepaid assets and other current assets ....................... (5,490) (960)
Other assets .................................................. -- (5,000)
Accounts payable .............................................. 15,000 (6,125)
Accrued liabilities ........................................... 528,501 785,252
------------ ----------
Net cash used by operating activities ....................... (2,054,413) (182,151)
------------ ----------
Cash flows from financing activities:
Proceeds from loan payable--related party ....................... -- 300,000
Net cash transferred from--related party ........................ 2,180,617 --
------------ ----------
Net cash provided by financing activities ................... 2,180,617 300,000
------------ ----------
Net change in cash .......................................... 126,204 117,849
Cash at the beginning of period .................................... -- --
------------ ----------
Cash at end of period .............................................. $ 126,204 $ 117,849
============ ==========
</TABLE>

See accompanying notes to financial statements.
F-41
<PAGE>

INTERACTIVE HOLDINGS, LLC
(FORMERLY PETRY INTERACTIVE, INC.)

NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(All information subsequent to December 31, 1997 is Unaudited)

(1) Summary of Operations and Significant Accounting Policies

(a) Summary of Operations
Interactive Holdings, LLC. (the "Company") operates a network of Web sites
that enables both advertisers and Web publishers to capitalize on the many
opportunities presented by Internet advertising, direct marketing and commerce.
The Company generates revenues by delivering advertisements and promotions to
Web sites affiliated with the Company ("Affiliated Web sites"). The Company was
formed on September 24, 1997, to acquire Petry Interactive, Inc., a wholly
owned subsidiary of Petry Media Corporation. The Company did not have any
operations prior to its acquisition of Petry Interactive, Inc. At the time of
its acquisition, Petry Interactive, Inc.'s operations consisted solely of a
network of Web sites to which the Company delivered advertisements and
promotions.

Inherent in the Company's business are various risks and uncertainties,
including its limited operating history, unproven business model and the
limited history of commerce on the Internet. The Company's success may depend
in part upon the emergence of the Internet as a communications medium,
prospective project development efforts, and the acceptance of the Company's
solutions by the marketplace.

On February 24, 1998, the Company distributed all of the issued and
outstanding shares of Petry Interactive, Inc. to its members, and such shares
were exchanged by Interactive Holdings, LLC's members for 2,623,592 shares of
24/7 Media, Inc.'s stock under a Plan of Merger and Securities Purchase
Agreement.

(b) Basis of Presentation
On February 1, 1997, Petry Interactive commenced its Internet advertising
network solutions business (Predecessor). Predecessor financial statements
presented herein relate solely to that business. On September 29, 1997, the
Company entered into a Stock Purchase Agreement whereby all of the outstanding
shares of Petry Interactive, Inc. were purchased by the Company in exchange for
$100 in cash plus a warrant to purchase 20% of the Company for $0.25.
Accordingly, the statements of operations and cash flows for the period
February 1, 1997 (inception) to September 28, 1997 reflect the operations of
the Predecessor, and the balance sheet as of December 31, 1997 and the
statements of operations, members' deficit and cash flows for the period
September 29, 1997 to December 31, 1997 reflect the operations and financial
position under the ownership of the Company (Successor).

As a result of the change in control, the financial information for the
period after the change in control is presented on a different cost basis than
that for the period before the change in control and, therefore, is not
comparable.

The accompanying financial statements include certain corporate general
and administrative expenses incurred on a consolidated basis by PMC for the
period February 1, 1997 (inception) to September 28, 1997 that have been
allocated to the Company. Such allocations include corporate salaries, rent,
professional services and depreciation and are included in general and
administrative expenses in the Company's statement of operations. In
management's opinion, the basis for the allocation of such costs is reasonable
and is based upon a proportionate allocation of actual costs incurred using an
estimate of the amount of time spent and equipment and space used. However, the
expenses allocated to the Company, although made on a basis management believes
to be reasonable, may not necessarily be representative of what the Company
would have incurred on a stand alone basis.

F-42
<PAGE>

INTERACTIVE HOLDINGS, LLC
(FORMERLY PETRY INTERACTIVE, INC.)

NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1997
(All information subsequent to December 31, 1997 is Unaudited)

(1) Summary of Operations and Significant Accounting Policies--Continued

Allocated costs are as follows:

<TABLE>
<CAPTION>
Period from
February 1, 1997
(inception) to
September 28, 1997
-------------------
(Predecessor)
<S> <C>
Corporate salaries ............ $534,686
Rent .......................... 63,896
Professional services ......... 23,594
Depreciation .................. 10,358
--------
$632,534
========
</TABLE>

The purchase of the Predecessor Interactive Holdings LLC was accounted for
using the purchase method of accounting. The estimated fair value of the net
assets acquired is as follows:

<TABLE>
<S> <C>
Accounts receivable, net ...................... $538,013
Prepaid and other current assets .............. 5,490
Accounts payable and accrued expenses ......... 543,502
</TABLE>

The estimated fair value of the net assets acquired was determined by
management by reference to the fair value of these instruments at the date of
purchase which approximated their financial statement carrying amount.

(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(d) Income Taxes
For the period February 1, 1997 (inception) to September 28, 1997, federal
and state income taxes are provided as if the Company filed a separate tax
return. On a stand alone basis, the Company owes no current taxes and has not
been allocated any income tax expense (benefit) by PMC.

For the period September 29, 1997 to December 31, 1997, for federal and
state income tax purpose, the Company is treated as a partnership. The Company
incurred a net operating loss of $696,243 for the period, accordingly, no
provision has been made for income taxes, as income or loss is included in the
tax returns of the members.

(e) Revenue Recognition
The Company's advertising revenues are derived principally from short-term
advertising agreements in which the Company delivers advertising impressions or
full-page deliveries for a fixed fee to third-party Web sites comprising the
Petry Network. For the period February 1, 1997 (inception) to September 28,
1997, revenues from advertising were recognized ratably over the term of the
agreement as services were performed. For the period from September 29, 1997,
to December 31, 1997, revenues from advertising are recognized in the period
the advertising impressions are delivered provided collection of the resulting
receivable is probable.

Third party Web sites which register web page(s) with the Company's
network and display advertising banners on those pages are commonly referred to
as "Affiliated Web sites." These third party Web sites are

F-43
<PAGE>

INTERACTIVE HOLDINGS, LLC
(FORMERLY PETRY INTERACTIVE, INC.)

NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1997
(All information subsequent to December 31, 1997 is Unaudited)

(1) Summary of Operations and Significant Accounting Policies --Continued

not "related party" relationships or transactions as defined in Statement of
Financial Accounting Standards No. 57, "Related Party Disclosures." The Company
pays its Affiliated Web sites a service fee for providing advertising space to
the Petry Network. The Company becomes obligated to make payments to such
Affiliated Web sites, which have contracted with the Company to be part of the
Petry Network, in the period the advertising impressions are delivered. Such
expenses are classified as cost of revenues in the statements of operations.

At December 31, 1997, accounts receivable include approximately $500,700
of unbilled receivables for which revenue was recognized in 1997.

(f) Advertising Expenses
The Company expenses the cost of advertising and promoting its services as
incurred. Such costs are included in sales and marketing in the statement of
operations and totaled $18,000 and $19,765 for the period February 1, 1997
(inception) to September 28, 1997 and for the period September 29, 1997 to
December 31 1997, respectively.

(g) Financial Instruments and Concentration of Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, accounts receivable,
accounts payable and accrued liabilities. At December 31, 1997 the fair value
of these instruments approximated their financial statement carrying amount.

Accounts receivable have been derived from advertising fees billed to
advertisers located in the United States. The Company generally requires no
collateral. The Company maintains reserves for potential credit losses. At
December 31, 1997, one customer accounted for over 10% of the Company's
accounts receivable, accounting for 12% of total receivables.

(2) Balance Sheet Components

Accrued Liabilities
A summary of accrued liabilities follows:

<TABLE>
<CAPTION>
December 31,
1997
-------------
<S> <C>
Affiliate royalties .......... $ 684,532
Ad management fees ........... 219,120
Employee commissions ......... 203,729
Other ........................ 189,643
----------
$1,297,024
==========
</TABLE>

(3) Loan Payable--Related Party

In connection with the Stock Purchase Agreement with PMC, dated September
29, 1997, PMC agreed to lend an aggregate of $300,000 during the period
September 29, 1997 to December 31, 1997. The loan is repaid at a rate of 5% of
the gross commissions or other revenues received by the Company, after
deducting advertising agency commissions and web-site royalties. The loan has
no stated interest and is expected to be paid within the next year.

In accordance with Staff Accounting Bulletin Topic 5:T, the Company has
imputed an interest cost because these loans have no stated interest rate. The
imputed interest rate used was based on a market rate of interest of 12%. For
the three month period ended December 31, 1997, interest expense was $6,000.

F-44
<PAGE>

INTERACTIVE HOLDINGS, LLC
(FORMERLY PETRY INTERACTIVE, INC.)

NOTES TO FINANCIAL STATEMENTS--Continued
December 31, 1997
(All information subsequent to December 31, 1997 is Unaudited)

(4) Commitments

In connection with the Stock Purchase Agreement dated September 29, 1997,
the Company is obligated to pay PMC a royalty of 5% of the gross commissions or
other revenues received by the Company, after deducting advertising agency
commissions and web-site royalties. Total royalties to be paid will not exceed
$1,000,000. Any payments of the royalty amount commences upon full repayment of
the loan payable--
related party (See note 3). As of December 31, 1997, the Company had accrued
$16,733 in royalty payments to PMC which are included in other long-term
liabilities.

(5) Legal Proceedings

The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operation or liquidity.

(6) Warrants

In connection with the Stock Purchase Agreement dated September 29, 1997,
the Company issued to PMC a warrant for 25 shares of common stock, $.01 par
value for $0.25. The warrant was exercised in connection with the February 1998
Plan of Merger and Securities Purchase Agreement (see Note 1).

F-45
<PAGE>

Report of Independent Public Accountants

To Intelligent Interactions Corporation:

We have audited the accompanying balance sheets of Intelligent
Interactions Corporation (a Delaware corporation in the development stage) as
of December 31, 1996 and 1997, and the related statements of operations,
stockholders' deficit and cash flows for the period from inception (February
28, 1995) to December 31, 1995 and the years ended December 31, 1996 and 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Intelligent Interactions
Corporation as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for the period from inception to December 31, 1995 and the
years ended December 31, 1996 and 1997, in conformity with generally accepted
accounting principles.

/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
May 13, 1998

F-46
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION (A Development Stage Company)

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, March 31,
----------------------------- ---------------
1996 1997 1998
------------- --------------- ---------------
ASSETS (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 531,100 $ 423,548 $ 3,675
Accounts receivable .............................................................. -- 23,768 87,499
Other current assets ............................................................. 100 7,169 13,568
---------- ------------- -------------
Total current assets ........................................................... 531,200 454,485 104,742
---------- ------------- -------------
Property and equipment, at cost:
Computer equipment ............................................................... 93,243 151,163 151,163
Furniture and fixtures ........................................................... 2,329 16,648 16,648
Software ......................................................................... 2,656 22,714 22,714
---------- ------------- -------------
98,228 190,525 190,525
Less--Accumulated depreciation ................................................... (11,537) (46,073) (61,074)
---------- ------------- -------------
86,691 144,452 129,451
---------- ------------- -------------
Total assets ................................................................... $ 617,891 $ 598,937 $ 234,193
========== ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 27,298 $ 100,542 $ 121,801
Accrued expenses ................................................................. 36,184 121,991 183,102
Line of credit ................................................................... -- 19,583 17,195
Note payable to officer .......................................................... 86,446 -- --
Convertible notes payable ........................................................ -- 450,000 450,000
---------- ------------- -------------
Total current liabilities ...................................................... 149,928 692,116 772,098
Commitments (Note 5) ...............................................................
Convertible, redeemable preferred stock; $0.01 par value
Series A; 71,870 shares authorized; 71,870 issued and outstanding in 1996, 1997
and 1998, respectively; entitled to liquidation preference of $16.42 per share
plus unpaid dividends; 8% per annum ($1,209,075, $1,303,483 and $1,327,085
in the aggregate in 1996, 1997 and 1998, respectively) .......................... 1,209,075 1,303,483 1,327,085
Series A-1; 71,870 shares authorized; none issued or outstanding ................. -- -- --
Series AA; 54,150 shares authorized; 0 and 54,142 issued and outstanding in 1996
and in 1997 and 1998, respectively; entitled to liquidation preference of $18.47
per share plus unpaid dividends; 8% per annum ($1,056,447 and $1,076,447 in
the aggregate in 1997 and 1998, respectively) ................................... -- 1,056,447 1,076,447
Series AA-1; 54,150 shares authorized; none issued or outstanding ................ -- -- --
Series AAA; 78,304 shares authorized; 0 and 48,712 issued and outstanding in
1996 and in 1997 and 1998, respectively; entitled to liquidation preference of
$20.53 per share plus unpaid dividends; 8% per annum ($1,030,948 and
$1,050,949 in 1997 and 1998, respectively in the aggregate)...................... -- 1,030,948 1,050,949
Series AAA-1; 78,304 shares authorized; none issued or outstanding ............... -- -- --
---------- ------------- -------------
Total convertible, redeemable preferred stock value 1,209,075 3,390,878 3,454,481
---------- ------------- -------------
Stockholders' deficit:
Common stock; $0.01 par value; 930,000 shares authorized; 230,170 shares issued
and outstanding in 1996, 1997, and 1998, respectively ........................... 2,412 2,412 2,412
Additional paid-in capital ....................................................... 142,290 142,290 142,290
Treasury stock ................................................................... (6,600) (6,600) (6,600)
Deficit accumulated during the development stage ................................. (879,214) (3,622,159) (4,130,488)
---------- ------------- -------------
Total stockholders' deficit .................................................... (741,112) (3,484,057) (3,992,386)
---------- ------------- -------------
Total liabilities and stockholders' deficit .................................... $ 617,891 $ 598,937 $ 234,193
========== ============= =============

</TABLE>

The accompanying notes are an integral part of these balance sheets.
F-47
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION (A Development Stage Company)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period From Period From
Inception Inception
(February 28, (February 28,
1995) To Year Ended Year Ended Quarter Ended Quarter Ended 1995) To
December 31, December 31, December 31, March 31, March 31, March 31,
1995 1996 1997 1997 1998 1998
--------------- -------------- ---------------- --------------- --------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Consulting and license
fees and support ............ $ -- $ -- $ 65,432 $ -- $ 88,362 $ 153,794
Cost of revenues ............. -- -- -- -- 13,200 13,200
---------- ---------- ------------ ---------- ---------- ------------
Gross profit .............. -- -- 65,432 -- 75,162 140,594
Operating expenses:
Sales and marketing .......... -- 254,515 1,249,910 182,043 226,548 1,730,973
Product development .......... 21,964 92,280 327,995 91,386 66,738 508,977
General and
administrative .............. 133,238 350,368 1,055,589 250,165 221,168 1,760,363
---------- ---------- ------------ ---------- ---------- ------------
Total operating expenses ...... 155,202 697,163 2,633,494 523,594 514,454 4,000,313
---------- ---------- ------------ ---------- ---------- ------------
Loss from operations .......... (155,202) (697,163) (2,568,062) (523,594) (439,292) (3,859,719)
Interest income (expense),
net .......................... 473 (1,438) 6,861 460 (5,434) 462
Other income .................. -- 3,085 -- -- -- 3,085
---------- ---------- ------------ ---------- ---------- ------------
Net loss ...................... (154,729) (695,516) (2,561,201) (523,134) (444,726) (3,856,172)
Less dividends on
preferred stock .............. -- (28,969) (181,744) (23,602) (63,603) (274,316)
---------- ---------- ------------ ---------- ---------- ------------
Net loss applicable to
common stock ................. $ (154,729) $ (724,485) $ (2,742,945) $ (546,736) $ (508,329) $ (4,130,488)
========== ========== ============ ========== ========== ============
</TABLE>

The accompanying notes are an integral part of these balance sheets.
F-48
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION (A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY

Stockholders'
Deficit
-------------------
Preferred Stock Common Stock
----------------------- -------------------
Shares Amount Shares Amount
---------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Inception, February 28, 1995 ....................... -- $ -- -- $ --
Sale of Common Stock to Founders at $0.60 per
share, July, September, and December 1995 ........ -- -- 206,670 2,067
Stock issued to employees for services rendered
valued at $0.60 per share, December 1995.......... -- -- 14,500 145
Net loss .......................................... -- -- -- --
-- ---------- ------- ------
Balance, December 31, 1995 ......................... -- -- 221,170 2,212
Stock issued to employee for services rendered
valued at $0.60 per share, February 1996.......... -- -- 20,000 200
Sale of Series A Preferred Stock to investors
valued at $16.42 per share, September 1996........ 71,870 1,180,106 -- --
Repurchase of 11,000 of terminated employee's
shares by the Company at $0.60 per share,
November 1996 ..................................... -- -- -- --
Accrued dividends on Preferred Stock .............. -- 28,969 -- --
Net loss .......................................... -- -- -- --
------ ---------- ------- ------
Balance, December 31, 1996 ......................... 71,870 1,209,075 241,170 2,412
Sale of Series AA Preferred Stock to investors
valued at $18.47 per share, April 1997............ 54,142 1,000,002 -- --
Sale of Series AAA Preferred Stock to investors
valued at $20.53 per share, August 1997........... 48,712 1,000,057 -- --
Accrued Dividends on Preferred Stock .............. -- 181,744 -- --
Net loss .......................................... -- -- -- --
------ ---------- ------- ------
Balance, December 31, 1997 ......................... 174,724 3,390,878 241,170 2,412
Accrued dividends on Preferred Stock
(unaudited) ...................................... -- 63,603 -- --
Net loss (unaudited) .............................. -- -- -- --
------- ---------- ------- ------
Balance, March 31, 1998 (unaudited) ................ 174,724 $3,454,481 241,170 $2,412
======= ========== ======= ======

<CAPTION>
Stockholders' Deficit
------------------------------------------
Deficit
Accumulated
Additional During the
Paid-In Treasury Development
Capital Stock Stage
------------ ------------- ---------------
<S> <C> <C> <C>
Inception, February 28, 1995 ....................... $ -- $ -- $ --
Sale of Common Stock to Founders at $0.60 per
share, July, September, and December 1995 ........ 121,935 -- --
Stock issued to employees for services rendered
valued at $0.60 per share, December 1995.......... 8,555 -- --
Net loss .......................................... -- -- (154,729)
-------- --------- ------------
Balance, December 31, 1995 ......................... 130,490 -- (154,729)
Stock issued to employee for services rendered
valued at $0.60 per share, February 1996.......... 11,800 -- --
Sale of Series A Preferred Stock to investors
valued at $16.42 per share, September 1996........ -- -- --
Repurchase of 11,000 of terminated employee's
shares by the Company at $0.60 per share,
November 1996 ..................................... -- (6,600) --
Accrued dividends on Preferred Stock .............. -- -- (28,969)
Net loss .......................................... -- -- (695,516)
-------- --------- ------------
Balance, December 31, 1996 ......................... 142,290 (6,600) (879,214)
Sale of Series AA Preferred Stock to investors
valued at $18.47 per share, April 1997............ -- -- --
Sale of Series AAA Preferred Stock to investors
valued at $20.53 per share, August 1997........... -- -- --
Accrued Dividends on Preferred Stock .............. -- -- (181,744)
Net loss .......................................... -- -- (2,561,201)
-------- --------- ------------
Balance, December 31, 1997 ......................... 142,290 (6,600) (3,622,159)
Accrued dividends on Preferred Stock
(unaudited) ...................................... -- -- (63,603)
Net loss (unaudited) .............................. -- -- (444,726)
-------- --------- ------------
Balance, March 31, 1998 (unaudited) ................ $142,290 $ (6,600) $ (4,130,488)
======== ========= ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-49
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION (A Development Stage Company)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period From
Inception
(February 28,
1995) To Year Ended Year Ended
December 31, December 31, December 31,
1995 1996 1997
--------------- -------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $ (154,729) $ (695,516) $ (2,561,201)
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation ........................................ 2,185 9,352 34,536
Compensation expense on stock grants ................ 8,700 12,000 --
Changes in operating assets and liabilities:
Accounts receivable ................................ -- -- (23,768)
Other current assets ............................... (1,000) 900 (7,069)
Accounts payable and accrued expenses .............. 5,497 57,985 159,051
---------- ----------- ------------
Net cash used in operating activities ............. (139,347) (615,279) (2,398,451)
Cash flows from investing activities:
Purchases of property and equipment .................. (13,109) (85,119) (92,297)
---------- ----------- ------------
Net cash used in investing activities ............. (13,109) (85,119) (92,297)
Cash flows from financing activities:
Proceeds from sale of common stock ................... 124,002 -- --
Proceeds from sale of preferred stock ................ -- 1,180,106 2,000,059
Purchase of treasury shares .......................... -- (6,600) --
Proceeds from note payable ........................... -- -- 450,000
Net proceeds from (payments on) line of credit ....... 10,000 (10,000) 19,583
Net proceeds from (payments on) note payable to
officer ............................................. 56,000 30,446 (86,446)
---------- ----------- ------------
Net cash provided by financing activities ......... 190,002 1,193,952 2,383,196
---------- ----------- ------------
Net increase (decrease) in cash ....................... 37,546 493,554 (107,552)
Cash and cash equivalents, beginning of period ........ -- 37,546 531,100
---------- ----------- ------------
Cash and cash equivalents, end of period .............. $ 37,546 $ 531,100 $ 423,548
========== =========== ============
Supplemental cash flow information:
Cash paid for interest ............................... $ -- $ 10,331 $ 15,284
========== =========== ============

<CAPTION>
Period From
Inception
(February 28,
Quarter Ended Quarter Ended 1995) To
March 31, March 31, March 31,
1997 1998 1998
--------------- --------------- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $ (523,134) $ (444,726) $ (3,856,172)
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation ........................................ 3,815 15,001 61,074
Compensation expense on stock grants ................ -- -- 20,700
Changes in operating assets and liabilities:
Accounts receivable ................................ (100) (63,731) (87,499)
Other current assets ............................... (19,192) (6,399) (13,568)
Accounts payable and accrued expenses .............. 101,677 82,370 304,903
---------- ---------- ------------
Net cash used in operating activities ............. (436,934) (417,485) (3,570,562)
Cash flows from investing activities:
Purchases of property and equipment .................. (50,749) -- (190,525)
---------- ---------- ------------
Net cash used in investing activities ............. (50,749) -- (190,525)
Cash flows from financing activities:
Proceeds from sale of common stock ................... -- -- 124,002
Proceeds from sale of preferred stock ................ -- -- 3,180,165
Purchase of treasury shares .......................... -- -- (6,600)
Proceeds from note payable ........................... -- -- 450,000
Net proceeds from (payments on) line of credit ....... -- (2,388) 17,195
Net proceeds from (payments on) note payable to
officer ............................................. (28,101) -- --
---------- ---------- ------------
Net cash provided by financing activities ......... (28,101) (2,388) 3,764,762
---------- ---------- ------------
Net increase (decrease) in cash ....................... (515,784) (419,873) 3,675
Cash and cash equivalents, beginning of period ........ 531,100 423,548 --
---------- ---------- ------------
Cash and cash equivalents, end of period .............. $ 15,316 $ 3,675 $ 3,675
========== ========== ============
Supplemental cash flow information:
Cash paid for interest ............................... $ 1,928 $ 6,626 $ 32,241
========== ========== ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-50
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(1) Business Description and Risk Factors

Intelligent Interactions Corporation (the "Company"), was incorporated on
February 28, 1995, in the state of Delaware. The Company is developing the
Intelligent Programming Engine (IPE[TM]), an enabling technology necessary to
ensure the economic viability of the information super highway. The IPE[TM]
provides targeted content delivery through interactive on-line networks. The
Company is in the development stage and has a limited operating history, has
incurred operating losses since its inception, and expects losses to continue
and increase. Since its inception, the Company has been engaged in development
and organizational efforts, including development of its IPE[TM] software
technology; creation of development and deployment plans; and recruitment of
administrative, technical, and business development staff. Many of the
Company's current and potential competitors have substantially greater
financial and technological resources, sales and marketing capabilities, and
experience than the Company. The Company's success will depend on the continued
service of its management team and technical personnel. There can be no
assurance that the Company will be successful in the development or
commercialization of its services.

In April 1998, the Company was acquired by 24/7 Media, Inc. ("24/7 Media"
See Note 8). 24/7 Media has committed to fund the future operations of
Intelligent Interactions.

Common Stock Split
Pursuant to the amendment of its certificate of incorporation in 1996, the
Company exchanged existing outstanding common stock for 241,170 shares of $0.01
par value common stock completing a 10 to 1 stock split. All amounts have been
restated to reflect the 10 to 1 stock split and change in par value.

(2) Summary of Significant Accounting Policies

Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Included in cash and
cash equivalents are investments in a money market account.

Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over a three-year period. Depreciation expense
for 1996 and 1997 was $9,352 and $34,536, respectively.

Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or income tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Management has established a valuation reserve against the net deferred tax
asset related primarily to the Company's net operating loss carryforward.

F-51
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(2) Summary of Significant Accounting Policies--Continued

The Company, with the consent of its stockholders, had previously elected
under the Internal Revenue Code to be an "S" corporation, effective February
28, 1995. In lieu of corporate income taxes, the stockholders of an "S"
corporation are taxed on their proportionate shares of the Company's taxable
income. No provision or liability for income taxes has been included in the
financial statements for the period of time that the Company was a Subchapter
"S" corporation.

The Company terminated the Subchapter "S" election, by the admittance of a
nonqualified stockholder, on September 10, 1996.

Revenue Recognition
Revenue from software licenses and software support agreements is
recognized ratably over the term of the agreement. Revenue from consulting
services is recognized as the services are provided.

The American Institute of Certified Public Accountants (the "AICPA") has
issued a Statement of Position (the "SOP") SOP-97-2, "Software Revenue
Recognition," and is effective for fiscal years beginning after December 15,
1997. The Company adopted SOP-97-2 effective January 1, 1998 and the adoption
did not have a material impact on the Company.

Product Development Costs
Product development costs and enhancements to existing products are
charged to operations as incurred. Software development costs are required to
be capitalized when a product's technological feasibility has been established
by completion of a working model of the product and ending when a product is
available for general release to customers. To date, completion of a working
model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
development costs since such costs have not been significant.

Unaudited Interim Financial Statements
The accompanying balance sheet as of March 31, 1998 and the accompanying
statements of operations stockholders' deficit and cash flows for the three
months ended March 31, 1997 and 1998 included herein have been prepared by the
Company and are unaudited. The information furnished in the unaudited financial
statements referred to above includes all adjustments which are, in the opinion
of management, necessary for a fair presentation of such financial statements.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire fiscal
year.

Increase in Authorized Shares
In March 1998, the Board of Directors increased the authorized stock of
the company to consist of 930,000 shares of common stock, $0.01 par value, and
78,304 shares of Series AAA Preferred Stock, no par value. All share amounts in
the accompanying financial statements reflect the increase in authorized
shares.

Reclassifications
Certain reclassifications of prior year amounts have been made to conform
to the December 31, 1997 presentation.

(3) Line of Credit and Note Payable

The Company maintains a line of credit with a bank in the amount of
$50,000. The agreement with the bank provides for a floating interest rate of
prime plus 2 percent, which was 10.25 and 10.50 percent as of December 31, 1996
and 1997, respectively. Borrowings are secured by government securities
belonging to a founder of the Company. The line of credit expires in September
1998. There were no borrowings outstanding at December 31, 1996 and 1997.

F-52
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(3) Line of Credit and Note Payable--Continued

In January 1997, the Company obtained an additional line of credit with a
bank in the amount of $400,000. The agreement with the bank provides for a
floating interest rate of prime plus one and a half percent which was 10
percent at December 31, 1997. Borrowings are secured by all assets of the
Company. The line of credit expires on July 31, 1998. As of December 31, 1997,
borrowings of $19,583 were outstanding. The line was repaid and cancelled in
April 1998.

During 1995, the Company borrowed $56,000 from the Company's founder and
principal stockholder. The note was originally due in December 1996 and accrued
interest at an annual rate of 10 percent, which was to be paid quarterly.
During 1996, the Company borrowed an additional $55,500 from the Company's
founder and principal stockholder. All amounts outstanding at September 6,
1996, under these notes as well as the 1995 note, plus accrued interest on
those amounts were converted into one instrument in the amount of $113,856.
Principal and interest at the annual rate of 10 percent is due monthly over a
12 month period that began in October 1996. During 1996, the Company paid
$27,410 and $7,052 in principal and interest, respectively, on this obligation.
During 1997, the balance of $86,446 and $3,642 in principal and interest,
respectively, was paid on this obligation.

During 1997, the Company received an aggregate of $450,000 in proceeds
from the issuance of convertible notes payable, bearing an interest rate of 9.5
percent per annum. The notes, and accrued interest, are due on June 29, 1998.
The notes are convertible into any new series of preferred stock ("New Series")
issued by the Company through June 29, 1998 at the same price at which the New
Series is issued. If the Notes are not so converted within this period,
thereafter, each holder of the notes will have the right to convert the
principal and interest of its note into the Series AAA Preferred stock with a
purchase price of $20.53. The Notes were converted as a result of the Merger
(Note 8) at the same price at which the New Series is issued.

(4) Stockholders' Equity

Common Stock
In September 1996, the Company amended its certificate of incorporation to
increase the number of authorized shares of common stock from 25,000 to 900,000
shares, as well as to effect a 10 for 1 stock split. Common shares are subject
to repurchase by the Company under certain circumstances. In the event a
stockholder terminates employment with the Company, the Company may elect to
repurchase any or all of the shares at the higher of the employee's original
purchase price per share or fair market value. To the extent the employee's
shares are not fully vested, the Company may elect to repurchase any or all of
the unvested shares at the employee's original purchase price. The Company also
has the right of first refusal to purchase a stockholder's shares for the price
offered to the stockholder in the event a stockholder elects to sell his or her
shares. This right of first refusal and repurchase upon termination expires in
the event of an initial public offering of the Company's stock. The Company
recognized compensation expense on the shares of common stock issued to
employees in 1995 and 1996 for services rendered. Compensation expense was
$8,700 and $12,000 for the years ended December 31, 1995 and 1996,
respectively.

Preferred Stock
In 1996, the Company issued 71,870 shares of Series A Convertible,
Redeemable and Voting Preferred Stock ("Series A Preferred Stock") at $16.42
per share. The Preferred Stock is redeemable at any time after September 10,
2003, upon written request from not less than 67 percent of the outstanding
Preferred stockholders at the time of the request. The redemption price shall
be paid in cash equal to the original issue price per share ($16.42) plus any
accrued but unpaid dividends. Dividends are cumulative and accrue at the rate
of 8 percent per share per annum.

F-53
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(4) Stockholders' Equity--Continued

In April 1997, the Company issued 54,l42 shares of Series AA Convertible,
Redeemable and Voting Preferred Stock ("Series AA Preferred Stock") at $18.47
per share. The Series AA Preferred Stock is redeemable at any time after April
16, 2004, upon written request from not less than 67 percent of the outstanding
Preferred stockholders at the time of request. The redemption price shall be
paid in cash equal to the original price per share ($18.47) plus any accrued
but unpaid dividends. Dividends are cumulative and accrue at the rate of 8
percent per share per annum.

In August 1997, the Company issued 48,712 shares of Series AAA
Convertible, Redeemable and Voting Preferred Stock ("Series AAA Preferred
Stock") at $20.53 per share. The Series AAA Preferred Stock is redeemable at
any time after August 11, 2004, upon written request from not less than 67
percent of the outstanding Preferred stockholders at the time of request. The
redemption price shall be paid in cash equal to the original price per share
($20.53) plus any accrued but unpaid dividends. Dividends are cumulative and
accrue at the rate of 8 percent per share per annum.

The Series A, Series AA, and Series AAA (collectively, "Preferred Stock")
automatically converts to common stock at an initial ratio of 1 to 1 upon a
firm commitment of an underwritten public offering, at not less than $65.68 per
share or $10,000,000 in aggregate proceeds. The conversion ratio is adjustable
for certain future dilutive events. Conversion to common stock can also occur
upon written request of 67 percent of the outstanding Preferred stockholders.

In the event of liquidation, dissolution, or winding up of the Company,
the holders of each share of Preferred Stock will be paid out prior to and in
preference of holders of common stock in an amount equal to the original issue
price ($16.42 for Series A, $18.47 for Series AA, and $20.53 for Series AAA)
plus all declared but unpaid dividends.

Warrants
The convertible notes payable contained detachable warrants which can be
exercised after the first to occur of the conversion of the notes into the New
Series or June 29, 1998. If the Notes convert into the New Series, the warrants
will be exercisable for the New Series at the same price as those received by
the New Series. If the Notes do not convert into the New Series by June 29,
1998, the warrants will thereafter be exercisable for the Series AAA Preferred
Stock at a purchase price of $20.53. Such warrants will expire within five
years of the agreement. The aggregate purchase price payable upon full exercise
of the warrants equals $157,500 and the number of shares issuable upon full
exercise equals the aggregate purchase price divided by the purchase price per
share under the warrants. The warrants were deemed to have no value as the
Company believes the exercise price of the warrants is in excess of the fair
value of the Company's common stock. In addition, the warrants were terminated
as a result of the Merger (Note 8).

1996 Stock Option Plan
The Company has issued stock options to its employees under the 1996
Equity Incentive Plan. These options were issued at fair market value at the
date of grant. These options are summarized as follows:

<TABLE>
<CAPTION>
Number Weighted Average Option Price
of Shares Exercise Price Per Share
----------- ------------------ -----------------
<S> <C> <C> <C>
Company inception ......... -- $ -- $ --
Granted ................... 70,700 1.09 0.60 -- 1.65
Exercised ................. -- -- --
Forfeited ................. (10,000) .60 0.60
------- ------- -------------
</TABLE>

F-54
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(4) Stockholders' Equity --Continued

<TABLE>
<CAPTION>
Number Weighted Average Option Price
of Shares Exercise Price Per Share
----------- ------------------ ----------------
<S> <C> <C> <C>
Balance at December 31, 1996 .................. 60,700 1.17 0.60 -- 1.65
Granted ....................................... 22,500 1.77 1.65 -- 2.05
Exercised ..................................... -- -- --
Forfeited ..................................... (24,000) 1.65 1.65
------- ----- ----
Balance at December 31, 1997 .................. 59,200 1.20 0.60 -- 2.05
Granted ....................................... 2,000 2.05 2.05
Exercised ..................................... -- -- --
Forfeited ..................................... (9,600) 1.65 1.65
------- ----- ----
Balance at March 31, 1998 (unaudited) ......... 51,600 $ 1.15 $0.60 -- 2.05
======= ====== =============
</TABLE>

No options are exercisable at December 31, 1996 and 1997. The weighted
average remaining life for options outstanding at December 31, 1996 and 1997,
was 7.14 years and 6.47 years, respectively, and at March 31, 1998 was 6.11
years.

In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 defines a
"fair value based method" of accounting for an employee stock option or similar
equity instrument. Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period.

SFAS No. 123 allows an entity to continue to use the intrinsic value
method as defined by APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and management has elected to do so. Under the intrinsic value
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. However, entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share, as if the fair value based method of accounting had
been applied. Accordingly, net loss would be as follows:

<TABLE>
<CAPTION>
As Reported Pro Forma
Year Ended Net Loss Net Loss
- ----------------- --------------- --------------
<S> <C> <C>
1996 ......... $ (695,516) $ (701,914)
1997 ......... (2,561,201) (2,564,751)
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1996 and 1997: no dividend yield, zero percent volatility, risk-free
interest rates approximating 6 percent, and the estimated life of the option is
the contractual term of the option. The weighted-average fair value of options
granted for the years ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 and 1998, were $0.39, $0.79, $0.72 and $0.89,
respectively.

(5) Commitments

In January 1997, the Company entered into a noncancelable operating lease
for office space that expires April 30, 1998. Minimum lease payments required
under this lease are $23,576 in 1998. Total rent paid in 1996 and 1997 was
$27,086 and $69,000, respectively.

F-55
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(6) Income Taxes

As of December 31, 1996 and 1997, the Company had net operating loss
carryforwards for Federal income tax purposes of approximately $213,000 and
$3,082,000, respectively, that begin expiring in 2011. Net operating loss
carryforwards are subject to review and possible adjustment by the Internal
Revenue Service and may be limited in the event of significant changes in the
ownership of the Company.

SFAS No. 109 requires that the tax benefit of financial reporting net
operating losses and tax credits be recorded as an asset to the extent that
management assesses the utilization of such net operating losses and tax
credits to be "more likely than not." As of December 31, 1996 and 1997, the
Company's net deferred tax assets were approximately $81,000 and $1,171,000,
respectively, which consists primarily of the net operating loss carryforward
and a valuation reserve was recorded against the entire amount.

(7) Accrued Expenses

Accrued expenses consists of the following as of:

<TABLE>
<CAPTION>
December 31,
March 31,
1996 1997 1998
---------- ---------- ------------
(unaudited)
<S> <C> <C> <C>
Vacation $13,808 $ 33,809 $ 23,685
Accrued Compensation -- 20,000 26,000
Professional Fees -- 36,000 73,000
Travel Expenses -- 21,425 36,042
Other 22,376 10,757 24,375
------- -------- --------
$36,184 $121,991 $183,102
======= ======== ========
</TABLE>

(8) Intelligent Interactions Acquisition

During April 1998, 24/7 Media, Inc. ("24/7 Media") acquired all of the
outstanding stock of Intelligent Interactions (the "Merger").

Upon consummation of the Merger, each share of common stock of Intelligent
Interactions was converted into approximately 4.1 shares of common stock, 0.6
Class A Warrants, 0.6 Class B Warrants and 0.3 Class C Warrants of 24/7 Media.
In the aggregate 949,243 shares of Common Stock, 3,561,505 shares of Series A
Preferred Stock, 265,152 Class A Warrants, 265,152 Class B Warrants and 136,553
Class C Warrants were issued in connection with the transaction. The Warrants
expire on April 10, 2003.

The Series A shares rank (i) prior to the Common Stock of 24/7 Media; (ii)
pari passu with any Securities (as defined in the Securities Purchase
Agreement); and (iii) junior to any Senior Securities, in each case as to
dividends and other distribution of assets and upon liquidation, dissolution or
winding up of 24/7 Media, whether voluntary or involuntary. The Series A
shareholders are entitled to receive, when and as declared by the Board of
Directors out of funds legally available, dividends at a rate of $0.04 per
share per annum. Such dividends shall be cancelled pursuant to the Securities
Purchase Agreement if 24/7 Media consummates a qualified initial public
offering (as defined in the Securities Purchase Agreement) prior to January 1,
1999.

Each share of Series A shall be convertible, at the option of the holder,
at any time and without the payment of additional consideration into common
stock determined by the sum of (i) the Payment Price of $1.00 per Series A
share divided by the conversion price of $3.81 per common share (as adjusted),
plus (ii) all accrued and unpaid dividends with respect to such share divided
by the dividend conversion price of equal to twice the conversion price of
$3.81.

F-56
<PAGE>

INTELLIGENT INTERACTIONS CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and 1996 and
As of March 31, 1998 (unaudited)
(All information subsequent to December 31, 1997 is Unaudited)

(8) Intelligent Interactions Acquisition--Continued

Each Series A share (and, as applicable, all accrued but unpaid dividends
thereon), shall automatically be converted into common shares at the conversion
price (and dividend conversion price) immediately upon the closing of a
qualified public offering.

In the event 24/7 Media has not completed a qualified public offering on
the prior to the fifth anniversary of the original issue date, each shareholder
of record of Series A shares will have the right to cause 24/7 Media to redeem
at the option of the shareholder all or part of the shareholder's outstanding
Series A shares by paying cash of $3.81 per share plus any dividends accrued.
Additionally, if 24/7 Media fails to maintain at least $10 million of Key-Man
Life Insurance on the President and Chief Executive Officer of the Company,
each shareholder of record of Series A Shares will have the right to cause the
company to redeem at the option of the shareholder all or part of the
shareholder's outstanding Series A Shares by paying cash of $3.81 per share
plus any dividends accrued.

Series A shareholders have one vote for each full common share into which
a Series A share would be convertible.

Each share of Preferred Stock, Series A Preferred Stock, Series AA
Preferred Stock or Series AAA Preferred Stock of Intelligent Interactions was
converted to approximately 18 shares of Mandatorily Redeemable Convertible
Preferred Stock--Series A, par value $.01 per share, 2.7 Class A Warrants
(exercise price of $7.62), 2.7 Class B Warrants (exercise price of $11.42) and
1.4 Class C Warrants (exercise price of $3.81) of 24/7 Media. The convertible
note payable was also converted into Mandatorily Redeemable Convertible
Preferred Stock--Series A and the detachable warrants were terminated as a
result of the merger.

In addition, each option to purchase shares of common stock of Intelligent
Interactions was converted into an option to purchase approximately 4 shares of
common stock of 24/7 Media under the terms and pursuant to the conditions of
the 24/7 Media 1998 Stock Incentive Plan.

F-57
<PAGE>

Report of Independent Public Accountants

To CliqNow!:

We have audited the accompanying balance sheet of CliqNow!, a division of
K2 Design, Inc. as of December 31, 1997 and the related statements of
operations and changes in parent company's investment and advances and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CliqNow! as of December 31,
1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
June 12, 1998

F-58
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc.)

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash ...................................................................... $ 0 $ 0
Accounts receivable, net of allowance for doubtful accounts of $21,000..... 535,708 634,643
Prepaid and other current assets .......................................... 52,960 12,250
-------- --------
Total current assets .................................................... 588,668 646,893
Fixed Assets, net of accumulated depreciation ............................... 30,936 36,574
-------- --------
Total assets ............................................................ $619,604 $683,467
-------- --------
LIABILITIES AND PARENT COMPANY'S INVESTMENT AND ADVANCES
Current Liabilities:
Accounts payable .......................................................... $165,337 $183,051
Accrued liabilities ....................................................... 189,297 164,586
Deferred revenue .......................................................... 25,607 336,172
-------- --------
Total current liabilities ............................................... 380,241 683,809
Parent Company's Investment and Net Advances ................................ 239,363 (342)
-------- --------
Total liabilities and parent company's investment and advances .......... $619,604 $683,467
-------- --------
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-59
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc.)

STATEMENTS OF OPERATIONS AND CHANGES IN
PARENT COMPANY'S INVESTMENT AND ADVANCES

<TABLE>
<CAPTION>
Year Ended Quarter Ended Quarter Ended
December 31, March 31, March 31,
1997 1997 1998
-------------- --------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Advertising Revenues ........................ $ 896,427 $ 15,295 $ 500,559
Cost of Revenues ........................... 479,742 4,616 284,452
---------- ---------- ----------
Gross Profit ............................. 416,685 10,679 216,107
Operating Expenses:
Sales and Marketing ........................ 417,093 60,694 122,198
General and Administrative ................. 461,755 77,073 143,365
---------- ---------- ----------
Total Operating Expenses .................... 878,848 137,767 265,563
Loss from operations ........................ (462,163) (127,088) (49,456)
Provision for Income Taxes .................. -- -- --
---------- ---------- ----------
Net loss .................................... (462,163) (127,088) (49,456)
Parent Company's Investment and Net Advances,
beginning of the period .................... -- -- 239,363
Parent Company advances (payments) .......... 701,526 147,619 (190,249)
---------- ---------- ----------
Parent Company's Investment and Net Advances,
end of the period .......................... $ 239,363 $ 20,531 $ (342)
========== ========== ==========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-60
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc.)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended Quarter Ended Quarter Ended
December 31, March 31, March 31,
1997 1997 1998
-------------- --------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss .................................................. $ (462,163) $ (127,088) $ (49,456)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation ............................................. 8,809 -- 3,806
Changes in operating assets and liabilities:
Accounts receivable ..................................... (535,708) (15,295) (98,935)
Prepaid and other current assets ........................ (52,960) -- 40,710
Accounts payable ........................................ 165,337 -- 17,714
Accrued liabilities ..................................... 189,297 10,514 (24,711)
Deferred revenue ........................................ 25,607 -- 310,565
---------- ---------- ----------
Net cash provided by (used in) operating
activities ............................................ (661,781) (131,869) 199,693
Cash Flows from Investing Activities:
Purchases of fixed assets ................................. (39,745) (15,750) (9,444)
Cash Flows from Financing Activities:
Increase (decrease) in due to parent company, net ......... 701,526 147,619 (190,249)
---------- ---------- ----------
Net increase in cash ................................... -- -- --
Cash, beginning of the period .............................. -- -- --
---------- ---------- ----------
Cash, end of the period .................................... $ -- $ -- $ --
========== ========== ==========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-61
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc)

NOTES TO FINANCIAL STATEMENTS
As of December 31, 1997 and
As of March 31, 1998 (unaudited)

(1) Organization and Business

CliqNow! ("Cliq" or "the Company") is a division of K2 Design, Inc.
("K2"). The Company was established in 1996 with operations commencing in 1997.
The Company creates Web site networks which are composed of individual,
homogenous websites joined by a link page. Each website network creates a
synergy yielding greater exposure for each website than could have been
achieved individually.

K2 is a full service interactive communications, design and technology
company, engaged primarily in the business of interactive advertising. K2 also
provides various other information delivery services. K2's customers are
primarily U.S.-based corporations operating in a wide variety of industries.

(2) Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Basis of Presentation
The accompanying financial statements include certain corporate general
and administrative expenses incurred on a consolidated basis by K2 that have
been allocated to the Company. Such allocations include various sales and
marketing costs, general and administrative expenses, depreciation and other
indirect costs and are included in the Company's statement of operations. In
management's opinion, the basis for the allocation of such costs is reasonable
and is based upon proportionate allocation of actual costs incurred using an
estimate of the amount of time spent and equipment and space used. However, the
expenses allocated to the Company, although made on a basis management believes
to be reasonable, may not necessarily be representative of what the Company
would have incurred on a stand-alone basis.

Allocated costs are as follows:

<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
1998 1997
----------------- -------------
<S> <C> <C>
General and administrative ......... $ 85,409 $303,565
Sales and marketing ................ 1,864 --
Depreciation ....................... 3,806 8,809
Other indirect costs ............... 22,451 120,953
-------- --------
$113,530 $433,327
======== ========
</TABLE>

The allocation of costs for the three months ended March 31, 1997 was not
material.

Revenue Recognition
The Company sells advertising space for banners on all webpages in the
network. The advertisers are pre-billed based on terms of the specific
agreements entered into. Revenue is earned progressively as adviews occur. At
the end of each reporting period all unearned revenue is deferred.

Each website is paid a commission based on the number of clicks on their
respective website.

F-62
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc.)

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and
As of March 31, 1998 (unaudited)

(2) Summary of Significant Accounting Policies --Continued

Fixed Assets
Fixed assets are carried at cost and depreciated using the straight-line
method over the estimated useful lives. Fixed assets are primarily comprised of
computer equipment and are being depreciated over three years.

Income Taxes
K2 has elected to be treated as a C Corporation. As a result, K2 is
subject to Federal, New York state and city income taxes on K2's taxable
income. Cliq's operations are included in the consolidated tax return of K2.
Income taxes are calculated and provided for on a consolidated basis.
Accordingly, no provision for income taxes has been recorded for Cliq for the
year ended December 31, 1997.

Federal, state and city income taxes are provided in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred taxes were not significant for
the year ended December 31, 1997.

Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, and
accounts payable approximate fair market value based upon the relatively
short-term nature of these financial instruments.

Unaudited Interim Financial Statements
The accompanying balance sheet as of March 31, 1998 and the accompanying
statements of operations and changes in parent Company's investment and
advances, and cash flows for the three months ended March 31, 1997 and 1998
included herein have been prepared by the Company and are unaudited. The
information furnished in the unaudited financial statements referred to above
includes all adjustments which are, in the opinion of management, necessary for
a fair presentation of such financial statements. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the entire fiscal year.

Reclassifications
Certain expenses in the December 31, 1997 statement of operations of Cliq
have been classified on a basis different than those reported in the December
31, 1997 Form 10-K of K2.

(3) Parent Company's Investment and Advances
Operations of Cliq are funded through advances from K2. As of December 31,
1997, $701,526 of advances from K2 were outstanding. Those advances have no
defined repayment terms and will be repaid from the operations of Cliq. In
addition, the balance at December 31, 1997 also includes the accumulated losses
of Cliq from inception.

(4) Major Customers
During 1997, the Company had sales to 2 customers representing 23% and 11%
of revenues. The Company had accounts receivable from these customers amounting
to $307,501 as of December 31, 1997.

F-63
<PAGE>

CLIQNOW!
(A Division of K2 Design, Inc.)

NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1997 and
As of March 31, 1998 (unaudited)

(5) Subsequent Event (unaudited)

In May 1998, K2 entered into an agreement with 24/7 Media, Inc. to sell
the Cliq division. K2 will receive $1 million in cash and $3 million in 24/7
Media, Inc. Series B Convertible Preferred Stock. A portion of this cash and
stock will be paid to executives of Cliq.

F-64
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,500,000 Shares

[24/7 Media logo]

Common Stock

-------------------

P R O S P E C T U S

-------------------

Merrill Lynch & Co.
Allen & Company Incorporated

CIBC World Markets

J.P. Morgan & Co.
PaineWebber Incorporated

Wit Capital Corporation

, 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

Part II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses and costs (other
than underwriting discounts and commissions) expected to be incurred by the
Company in connection with the issuance and distribution of the securities
being registered, all of which will be paid by the Registrant.

<TABLE>
<S> <C>
SEC registration fee ...................... $ 45,877
NASD fee ..................................
Nasdaq Listing Fee ........................
Legal fees and expenses ................... 125,000
Printing and engraving expenses ........... 175,000
Accounting fees and expenses ..............
Blue Sky fees and expenses ................
Transfer agent and registrar fees ......... 5,000
Miscellaneous ............................. 55,000
----------
Total ................................... $
==========
</TABLE>

Item 14. Indemnification of Directors and Officers.
The General Corporation Law of the State of Delaware ("DGCL") permits the
Company and its stockholders to limit directors' exposure to liability for
certain breaches of the directors' fiduciary duty, either in a suit on behalf
of the Company or in an action by stockholders of the Company.

The Certificate of Incorporation of the Company (the "Charter") eliminates
the liability of directors to stockholders or the Company for monetary damages
arising out of the directors' breach of their fiduciary duty of care. The
Charter also authorizes the Company to indemnify its directors, officers,
incorporators, employees, and agents with respect to certain costs, expenses,
and amounts incurred in connection with an action, suit, or proceeding by
reason of the fact that such person was serving as a director, officer,
incorporator, employee, or agent of the Company. In addition, the Charter
permits the Company to provide additional indemnification rights to its
officers and directors and to indemnify them to the greatest extent possible
under the DGCL. The Company has entered into indemnification agreements with
each of its officers and directors and intends to enter into indemnification
agreements with each of its future officers and directors. Pursuant to such
indemnification agreements, the Company has agreed to indemnify its officers
and directors against certain liabilities, including liabilities arising out of
the offering made by this registration statement.

The Company maintains a standard form of officers' and directors'
liability insurance policy which provides coverage to the officers and
directors of the Company for certain liabilities, including certain liabilities
which may arise out of this registration statement.

The Underwriting Agreement filed as Exhibit 1.1 hereto provides for
reciprocal indemnification between the Company and its controlling persons, on
the one hand, and the Underwriters and their controlling persons, on the other
hand, against certain liabilities in connection with this offering, including
liabilities under the Securities Act.

Item 15. Recent Sales of Unregistered Securities
The Registrant has sold and issued the following securities within the
past three years. None of the transactions set forth below involved any public
offering or any underwriter, and the Company believes that each transaction was
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof, Regulation D promulgated thereunder, or Rule 701 pursuant
to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701, or, with respect to paragraph 13 below, in
reliance on Rule 145(a)(2) under the Securities Act. The recipients in each
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to share
certificates and instruments issued in

II-1
<PAGE>

such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Company. The shares of
common stock set forth below reflect the one for four reverse split of the
Registrant's Common Stock to be effective prior to the closing of the offering
of common stock.

(1) During 1996, the Registrant issued 34,371 shares of its Class A Common
Stock (which were converted into 85,928 shares of common stock) to certain
members of senior management, including Michael P. Paolucci, immediate family
members of senior management, and certain sophisticated investors, including
The Travelers Insurance Company, for an aggregate purchase price of $4,525,000.
Each of the investors was sophisticated within the meaning of the exemption
provided for by Section 4(2) of the Securities Act.

(2) In August 1996, the Registrant issued convertible subordinated notes to
G.E. Pension Trust, The Travelers Insurance Company and Porridge Partners II,
institutional investors, in the principal amount of $500,000, convertible into
common stock at a price of $11.48 per share and warrants to purchase 6,533
shares of common stock at a price of $11.48 per share. Each of the purchasers
was sophisticated within the meaning of the exemption provided for by Section
4(2) of the Securities Act.

(3) In November 1996 through January 1997, the Registrant completed a series
of private placements of 158,144 shares of preferred stock, to a group of
investors including The Travelers Insurance Company, convertible into common
stock at a price of $11.48 per share, subject to anti-dilution adjustment, for
an aggregate purchase price of $4,538,733. Each of the investors was
sophisticated within the meaning of the exemption provided for by Section 4(2)
of the Securities Act.

(4) During 1997, the Registrant received $2,500,000 in proceeds from the
issuance of senior convertible notes primarily to affiliates and stockholders
of the Company, including The Travelers Insurance Company, bearing an interest
rate of 8% compounded semiannually. Each of the notes was issued with
detachable warrants allowing the holder to purchase shares of common stock at
price ranges ranging from $1.60 to $11.48 per share. Each of the investors was
sophisticated within the meaning of the exemption provided for by Section 4(2)
of the Securities Act. was sophisticated within the meaning of the exemption
provided for by Section 4(2) of the Securities Act.

(5) In April 1997, the Registrant granted warrants to Hambrecht & Quist, LLC,
an investment banking firm, to purchase 4,375 shares of common stock at $49.72
per share. The recipient was sophisticated within the meaning of the exemption
provided for by Section 4(2) of the Securities Act.

(6) In January 1998, the Registrant issued $150,000 in senior convertible
notes to The Travelers Insurance Company, convertible into 43,321 shares of
common stock at $3.48 per share. The purchaser was sophisticated within the
meaning of the exemption provided for by Section 4(2) of the Securities Act.

(7) In January 1998, the Registrant granted warrants to purchase 28,750 shares
of common stock to Cowan and Company, an investment banking firm, in
consideration of services rendered to the Registrant. The recipient was
sophisticated within the meaning of the exemption provided for by Section 4(2)
of the Securities Act.

(8) In connection with the February 1998 merger of Petry Interactive, Inc. and
Advercomm, Inc. with and into the Registrant, (i) the Registrant issued
2,623,592 shares of common stock to former shareholders of Petry Interactive,
Inc., including David J. Moore, Mark A. Burchill and Scott E. Cohen, and
1,705,334 shares of common stock to former shareholders of Advercomm, Inc.,
including Jacob I. Friesel and Garrett P. Cecchini; (ii) the Registrant granted
a former employee (Michael P. Paolucci) warrants to purchase 625,000 shares of
common stock at a purchase price of $3.81 per share in connection with the
termination of such employee's employment with the Registrant; (iii) the
registrant issued to certain investors 10,060,002 shares of preferred stock,
convertible into common stock at a conversion price of $3.81 per share, for
aggregate proceeds of $10,000,000; (iv) the Registrant granted certain
investors warrants to purchase 1,320,904 share of common stock at $7.61 per
share and warrants to purchase 1,320,904 shares of common stock at $11.42 per
share; (v) the Registrant granted to consultants warrants to purchase an
aggregate of 18,750 shares of common stock at $3.81 per share. Each of the
recipients of securities pursuant to the Merger Agreement was sophisticated
within the meaning of the exemption provided for by Section 4(2) of the
Securities Act.

(9) In connection with the reincorporation of the Registrant from a New York
corporation to a Delaware corporation in March 1998, the Company issued shares
of its Common Stock and Series A Convertible

II-2
<PAGE>

Preferred Stock in exchange for the issued and outstanding capital stock of its
predecessor corporation. In addition, in connection with such reincorporation,
all options and warrants to purchaser common shares of the predecessor were
converted into options or warrants to purchase shares of Common Stock.

(10) In connection with the April 1998 acquisition of Intelligent
Interactions, Corp., (i) the Registrant issued 949,243 shares of common stock
to certain former shareholders of Intelligent Interactions Corp., including
Yale R. Brown and Matthew B. Walker; (ii) the Registrant issued 3,561,505
shares of preferred stock, convertible into common stock at a conversion price
of $3.81 per share, to certain former preferred shareholders of Intelligent
Interactions Corp; (iii) the Registrant granted to certain former shareholders
of Intelligent Interactions Corp., including Yale R. Brown and Matthew B.
Walker, warrants to purchase 265,152 shares of common stock at a purchase price
of $7.61 per share, warrants to purchase 265,152 shares of common stock at a
purchase price of $11.42 per share and warrants to purchase 136,553 shares of
common stock at a purchase price of $3.81 per share. Each of the recipients of
securities pursuant to the Merger Agreement was sophisticated within the
meaning of the exemption provided for by Section 4(2) of the Securities Act.

(11) In April 1998, the Registrant issued 5,909 shares of common stock to
Heritage Capital Corp., an investment banking firm, in consideration of
services rendered to the Registrant. The recipient was sophisticated within the
meaning of the exemption provided for by Section 4(2) of the Securities Act.

(12) In June 1998, in connection with the acquisition of the CliqNow! division
of K2 Design, Inc., the Registrant issued to K2 Design 3,000 shares of the
Registrant's Series B Convertible Preferred Stock, which automatically
converted into 230,415 shares of common stock at the time of the initial public
offering. The recipient was sophisticated within the meaning of the exemption
provided for by Section 4(2) of the Securities Act.

(13) The Registrant from time to time has granted stock options to employees
in reliance upon an exemption under the Securities Act of 1933 pursuant to Rule
701. From January 1996 through January 15, 1999 an aggregate of 2,441,176
shares of common stock were issued pursuant to option exercises at exercise
prices ranging from $0.16 to $41.50 to employees, directors and consultants.

(14) We issued 203,851 shares of common stock to China.com Corporation in
connection with an Equity Exchange Agreement, dated December 31, 1998. The
recipient was sophisticated within the meaning of the exemption provided for by
Section 4(2) of the Securities Act.

(15) On March 8, 1999, in connection with the acquisition of Sift, Inc., we
issued approximately 763,000 shares of common stock to former stockholders of
Sift. We relied on the exemptions provided by Regulation D for the issuance of
these shares.

(16) On March 17, 1999, we issued to NBC-Interactive Neighborhood 150,000
warrants to purchase shares of common stock at an exercise price of $26.05 per
share. The recipient was sophisticated within the meaning of the exemption
provided for by Section 4(2) of the Securities Act.

II-3
<PAGE>

Item 16. Exhibits and Financial Statement Schedule/Index

The following exhibits are filed herewith or incorporated herein by
reference.

<TABLE>
<CAPTION>
Exhibit
Number Description
- ---------- --------------------------------------------------------------------------------------------
<S> <C>
1.1 *Form of Underwriting Agreement.
1.2 *Form of Lock Up Agreement.
3.1 +Amended and Restated Certificate of Incorporation of the Company.
3.2 +By-laws of the Company.
5.1 *Opinion of Proskauer Rose LLP.
10.1 +1998 Stock Incentive Plan.
10.2 +Form of Stock Option Agreement.
10.3.1 +Lease Agreement, dated April 30, 1998, between the Company and 38-32 Associates.
10.3.2 +Lease Option Notice, dated July 7, 1998 between the Company and 38-32 Associates.
10.4 +Agreement and Plan of Merger dated February 2, 1998 by and among Interactive
Imaginations, Inc., 24/7 Acquisition Corp., Petry Interactive, Inc. and Advercomm, Inc.
10.5 +Agreement and Plan of Merger dated as of April 9, 1998 by and among 24/7 Media, Inc.,
Interactions Acquisition Corp. and Intelligent Interactions Corporation and the persons set
forth on the signature pages thereto.
10.6 +Asset Purchase Agreement, dated as of June 1, 1998, by and between 24/7 Media, Inc. and
K2 Design, Inc.
10.7 +Securities Purchase Agreement, dated February 25, 1998, among Interactive Imaginations and
certain investors named therein.
10.8 +Registration Rights Agreement, dated April 9, 1998 by and among 24/7 Media, Inc., The
Travelers Insurance Company, Prospect Street NYC Discovery Fund, L.P., Prospect Street
NYC Co-Investment Fund, L.P. , Big Flower Digital Services, Inc., David Banks, Trinity
Ventures V, L.P., Trinity V Side-By-Side Fund, L.P., Zero Stage Capital V Limited
Partnership, and F&W Investments 1996.
10.9 +Employment Agreement between David J. Moore and Interactive Imaginations, Inc., dated
February 24, 1998.
10.10 +Employment Agreement between Jacob I. Friesel and Interactive Imaginations, Inc., dated
February 24, 1998.
10.11 +Employment Agreement between Yale R. Brown and 24/7 Media, Inc., dated April 9, 1998.
10.12 +Employment Agreement between C. Andrew Johns and 24/7 Media, Inc., dated April 20,
1998.
10.13 +Consulting Agreement dated as of January 1, 1998 by and between Interactive Imaginations,
Inc. and Neterprises, Inc.
10.14 +Confidential Separation Agreement and General Release by and between Michael P. Paolucci
and Interactive Imaginations, Inc., dated February 24, 1998.
10.15 +Form of Indemnification Agreement.
10.16 +GlobalCenter Master Service Agreement, dated May 1, 1998.
10.17 +Operating Lease agreement dated June 1, 1996 between Brentwood Credit Corporation, AT&T
Systems Leasing and Interactive Imaginations, Inc. (including amendments thereto).
10.18 +Operating Lease agreement, dated May 18, 1998, as amended on July 7, 1998 between Sun
Microsystems and 24/7 Media, Inc. and as amended on July 7, 1998.
10.19 +Pledge and Security Agreement, dated as of November 11, 1997, between Interactive
Imaginations, Inc. and The Travelers Insurance Company.
</TABLE>

II-4
<PAGE>

<TABLE>
<S> <C>
+Senior Convertible Note with Warrants Purchase Agreement, dated as of June 11, 1997,
10.20 between Interactive Imaginations, Inc. and The Travelers Insurance Company.
10.21 +Amended and Restated Stockholders' Agreement by and among 24/7 Media, Inc. and certain
investors named therein.
10.22 **+Marketing, Development, License and Software Agreement, dated October 23, 1998, between
24/7 Media, Inc., China Internet Corporation and China.com Corporation.
10.23 **Joint Marketing Agreement, dated September 30, 1998, between 24/7 Media, Inc., American
Cities Studios, Inc. and Cybernet International Corporation.
10.24 **Subscription Agreement, dated January 20, 1999, between 24/7 Media, Inc., InterAd Holdings
Ltd., Interadventures Limited and Gordon Wallace Simpson of Fairways.
10.25 **Agreement and Plan of Merger, dated March 8, 1999, between 24/7 Media, Inc., Factor K
Acquisition Corporation and Sift, Inc.
10.26 +Affiliation Agreement, dated March 11, 1999, between 24/7 Media, Inc. and NBC Multimedia,
Inc.
10.27 Master Lease Agreement, dated May 18, 1998 between 24/7 Media, Inc. and Sun
Microsystems Finance.
10.28 Master Lease Agreement, dated December 12, 1998, between 24/7 Media, Inc. and Chase
Equipment Leasing, Inc.
10.29 +Service Argreement, dated January 1, 1999, between 24/7 Media, Inc. and Imgis, Inc.,
d/b/a/ "AdForce".
10.30 Cross Promotion Agreement, dated April 5, 1999, between 24/7 Media, Inc. and TechWave Inc.
11.1 Statement regarding computation of per share earnings.
21.1 *Subsidiaries of the Company.
23.1 Consent of KPMG LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 *Consent of Proskauer Rose LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included with signature page).
27.1 Financial Data Schedule.
99.1 Schedule for Valuation and Qualifying Accounts--Allowance for Doubtful Accounts.
</TABLE>

- ----------------
+ Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1 (File No. 333-56085).
* To be filed by amendment.

** Previously filed.
+ Confidential treatment has been requested for certain provisions of this
Exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended.
The omitted portions have been separately filed with the Commission.

II-5
<PAGE>

Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
a registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-6
<PAGE>

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of New York, State of New York on April 14, 1999.

24/7 MEDIA, INC.

By: /s/ David J. Moore
------------------

David J. Moore
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below on April 14, 1999 by the
following persons in the capacities indicated:

<TABLE>
<CAPTION>
Signature Title
- --------------------------- ------------------------------------------------
<S> <C>
/s/ David J. Moore Chief Executive Officer and Director
- ------------------------- (Principal Executive Officer)
David J. Moore

* Chairman of the Board
- -------------------------
R. Theodore Ammon

* Executive Vice President and Director
- -------------------------
Jacob I. Friesel

* Director
- -------------------------
John F. Barry

* Director
- -------------------------
Jack L. Rivkin

Director
- -------------------------
Arnie Semsky

* Director
- -------------------------
Charles W. Stryker, Ph.D.

/s/ C. Andrew Johns Executive Vice President, Treasurer & Chief
- ------------------------- Financial Officer (Principal Financial Officer)
C. Andrew Johns

* Senior Vice President and Controller
- ------------------------- (Principal Accounting Officer)
Stuart D. Shaw

* = By /s/ Mark E. Moran
-------------------
Mark E. Moran
Attorney-in-fact
</TABLE>

II-7
<PAGE>

Exhibits and Financial Statement Schedule/Index

II-8
<PAGE>

<TABLE>
<S> <C>
10.21 +Amended and Restated Stockholders' Agreement by and among 24/7 Media, Inc. and certain
investors named therein.
10.22 **+Marketing, Development, License and Software Agreement, dated October 23, 1998, between
24/7 Media, Inc., China Internet Corporation and China.com Corporation.
10.23 **Joint Marketing Agreement, dated September 30, 1998, between 24/7 Media, Inc., American
Cities Studios, Inc. and Cybernet International Corporation.
10.24 **Subscription Agreement, dated January 20, 1999, between 24/7 Media, Inc., InterAd Holdings
Ltd., Interadventures Limited and Gordon Wallace Simpson of Fairways.
10.25 **Agreement and Plan of Merger, dated March 8, 1999, between 24/7 Media, Inc., Factor K
Acquisition Corporation and Sift, Inc.
10.26 +Affiliation Agreement, dated March 11, 1999, between 24/7 Media, Inc. and NBC Multimedia,
Inc.
10.27 Master Lease Agreement, dated May 18, 1998 between 24/7 Media, Inc. and Sun
Microsystems Finance.
10.28 Master Lease Agreement, dated December 12, 1998, between 24/7 Media, Inc. and Chase
Equipment Leasing, Inc.
10.29 +Service Argreement, dated January 1, 1999, between 24/7 Media, Inc. and Imgis, Inc.,
d/b/a/ "AdForce".
10.30 Cross Promotion Agreement, dated April 5, 1999, between 24/7 Media, Inc. and TechWave Inc.
11.1 Statement regarding computation of per share earnings.
21.1 *Subsidiaries of the Company.
23.1 Consent of KPMG LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 *Consent of Proskauer Rose LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included with signature page).
27.1 Financial Data Schedule.
99.1 Schedule for Valuation and Qualifying Accounts--Allowance for Doubtful Accounts.
</TABLE>

- ----------------
+ Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1 (File No. 333-56085).
* To be filed by amendment.

II-9

24/7 MEDIA, INC. / NBC
AFFILIATION
AGREEMENT

AFFILIATION AGREEMENT, dated as of March 11, 1999 (the "Effective
Date"), among 24/7 Media, Inc., a Delaware corporation with an address at 1250
Broadway, 27th floor, New York, NY 10001 ("24/7"), and NBC Multimedia, Inc., a
Delaware corporation with an address at 30 Rockefeller Plaza, New York, NY 10112
("NBC").

WHEREAS, National Broadcasting Company, Inc. (hereinafter the "NBC
Network") and/or its affiliates are the operators and owners of the television
stations (the "O/O TV Stations") and the Internet Web sites (the "O/O Web
Sites") specified on Schedule A hereto;

WHEREAS, the NBC Network provides television programming and, through
NBC Interactive Neighborhood ("NBC-IN"), Internet content, to affiliated
television stations ("NBC Affiliates"), each of which operates and owns a
television station and many of which operate an associated Internet Web site
(the "Affiliate Web Sites", and collectively with the O/O Web Sites, the "Web
Sites");

WHEREAS, 24/7 operates a network of Internet Web sites (the "24/7
Network") for which it solicits advertisers, advertising agencies, buying
services or others ("Advertisers") regarding the placement of advertising
banners and similar devices and sponsorships ("Advertising") for display on
pages, screens, and other segments or spaces on web sites reasonably suitable
for the display of such Advertising;

WHEREAS, NBC wishes to engage 24/7 to sell Advertising on the Web Sites
individually and in packages that combine inventory from certain of the Web
Sites, the O/O TV Stations, NBC Affiliates and, in certain limited circumstances
set forth in Section 2.A, the 24/7 Network, and 24/7 wishes to accept such
engagement; and

WHEREAS, NBC and 24/7 wish to encourage NBC Affiliates to become
parties to an Affiliation Agreement (the "Affiliate Agreement") among the NBC
Affiliates, 24/7 and NBC-IN;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:

1. Affiliation.

A. NBC hereby designates 24/7 as its exclusive third-party Internet
advertising representation firm during the Term to sell (a) Co-op Advertising
(as defined below) in packages that combine inventory from one or more of the
Web Sites covered by an O/O TV Station or NBC Affiliate where 24/7 then has in
place a dedicated full-time salesperson on site pursuant to Section 2.F (the
"Manned Markets"), and on-air inventory from such O/O TV Stations and/or NBC
Affiliates, and (b) Advertising on the Web Sites in the Manned Markets. In
addition, NBC

Confidential treatment has been requested for certain portions of this Exhibit
pursuant to Rule 406 under the Securities Act of 1933, as amended. The omitted
portions have been filed separately with the Securities and Exchange Commission
and are indicated by asterisk (*).

1
<PAGE>

hereby grants 24/7 the non-exclusive right to sell Co-op Advertising and
Advertising in all markets covered by an O/O TV Station that are not Manned
Markets. 24/7 shall have a right of first refusal to man such markets before NBC
engages another third party. NBC also agrees to arrange for the O/O TV Stations,
and to use commercially reasonable efforts to encourage NBC Affiliates, to
become party to an Affiliate Agreement substantially in the form of Exhibit A
(each, an "Affiliate Agreement") to be attached hereto within 30 days of the
Effective Date in accordance with the timetable set forth on Schedule B hereto.

B. For purposes of this Agreement, "Co-op Advertising" is intended to
mean a coordinated television and Internet advertising campaign in which
multiple advertisers participate simultaneously on a cooperative basis, and
which (x) incorporate a promotional television advertisement in which viewers
are directed to the Web Site of the television station upon which such
advertisement appears, and more specifically to a promotion appearing on such
Web Site (the "Promotion"), (y) incorporate Advertising appearing on such Web
Site which directs end users to the Promotion, and (z) results in at least 30%
of the total ad buy being allocated to such Web Site Advertising. It is mutually
understood and agreed that 24/7 may have the opportunity to sell Co-op
Advertising that deviates from the terms set forth herein; provided, that (i)
24/7 may do so only with the consent of NBC and the applicable station manager,
which consents may be withheld in NBC's or such station manager's discretion, as
the case may be, and (ii) payments with respect to such modified Co-op
Advertising shall be governed by the applicable Affiliate Agreement.

2. Obligations of 24/7.

In furtherance of the foregoing, 24/7 covenants and agrees to:

A. utilize its best efforts to sell Co-op Advertising and
Advertising to Advertisers for placement on the Web Sites, the O/O TV Stations
and the NBC Affiliate stations located in the Manned Markets, at such prices as
NBC, the O/O TV Stations, such NBC Affiliate stations and 24/7 shall mutually
agree, and in accordance with this Agreement and any Affiliation Agreements;
provided, that if the inventory of a Web Site sought by a particular Advertiser
(including any inventory controlled by NBC-IN thereon) is sold out or otherwise
not sufficient to meet the needs of a particular advertiser for the time periods
sought by such Advertiser, then 24/7 may offer such Advertiser inventory during
such time periods on the 24/7 Network solely as a supplement to such Web Site's
inventory;

B. utilize commercially reasonable efforts to sell Advertising
for placement on the Web Sites in the non-Manned Markets, all in accordance with
this Agreement and the applicable Affiliation Agreements, if any, with all such
Advertising and the rates therefor subject to the approval of the applicable
station management and NBC-IN.

C. offer inventory on the 24/7 Network to the O/O TV Stations
and the NBC Affiliates in those situations when such O/O TV Stations and/or NBC
Affiliates have identified an advertiser who seeks more inventory than is
available on such O/O TV Station's or NBC Affiliate's Web Site;

2
<PAGE>

D. not to sell packages which in any fashion combine Internet
inventory and television inventory on behalf of any competitor of the NBC
Network, the O/O TV Stations or the NBC Affiliates in any local market
containing an O/O Station or an NBC Affiliate that executes the Affiliate
Agreement within 90 days' after first being offered the opportunity to do so;
provided, that 24/7 agrees to negotiate in good faith with each such O/O Station
and NBC Affiliate and incorporate reasonable changes to the Affiliate Agreement
in order to accommodate the needs of each such O/O Station or NBC Affiliate, as
the case may be;

E. offer all services set forth in this Section 2 to O/O TV
Stations and NBC Affiliates in accordance with the timetables set forth on
Schedules A and B;

F. maintain suitable and qualified personnel in
administrative, sales and technical positions necessary for 24/7 to perform
effectively the terms of this Agreement; 24/7 shall hire and employ during the
Term one salesperson resident in each of the fifteen (15) mutually agreed upon
O/O TV Stations and NBC Affiliate stations (with the intention of manning at
least 20 of the top 25 markets); which salespersons shall devote substantially
all of their full-time efforts to the sale of Advertising in their assigned
market pursuant to this Agreement (each, a "Manned Market Salesperson", and
collectively the "Manned Market Salespeople"); provided, that if any such Manned
Market Salesperson's employment is terminated, whether voluntarily or
involuntarily, or if any such Manned Market Salesperson dies or becomes
permanently disabled, then 24/7 shall promptly replace such Manned Market
Salesperson; and provided, further, that the hiring of each such Manned Market
Salesperson, and any replacements therefor, shall be subject to the reasonable
approval of NBC and station management of the applicable O/O TV Station or NBC
Affiliate, as the case may be;

G. serve or cause to be served Advertising to the Web Sites;
it is understood that Advertising shall be served initially through a
re-direction of Advertising from 24/7's ad serving system to DART, the ad
serving system currently employed by NBC; provided, that NBC may elect at any
time upon 60 days notice to 24/7 to transition fully to 24/7's ad serving system
at 24/7's sole cost and expense, whereupon 24/7 shall use its best efforts to
promptly effect a smooth transition to its system; and provided, further, that
upon such election by NBC, the parties shall negotiate in good faith regarding a
service level agreement covering Internet up-time, server up-time and response
time, and other metrics relating to the performance of 24/7's ad serving system
and the Internet connectivity thereof, which in no event shall be less favorable
to NBC than that of any service level agreement provided to any other customer
of 24/7;

H. provide NBC with prompt notice, via e-mail posting, of all
new Co-op Advertising and Advertising that has been sold by 24/7 to be displayed
on the Web Sites, and honor any decision by NBC or the station management of the
applicable O/O TV Station or NBC Affiliate, as the case may be, to decline any
Co-op Advertising or Advertising, in accordance with the Provisions in 3(B)
below;

I. provide NBC with real-time access to records that will
allow it to monitor the volume of paid Co-op Advertising and Advertising
delivered to the Web Sites and the

3
<PAGE>

revenue produced (subject to billing corrections and adjustments) thereby; all
such records, including data, statistical information or other traffic analysis,
produced or provided by 24/7 (the "Data") shall be the joint property of 24/7
and NBC; provided, however, that 24/7 shall not, and shall ensure that any third
party ad serving company engaged by 24/7 contractually agrees not to, sell or
otherwise distribute the Data to any third parties without the prior written
consent of NBC, which may be withheld by NBC in its sole discretion;

J. to assist NBC in the acquisition of syndicated content
acquisitions for the Web Sites; provided, that NBC shall have no obligation to
accept any such acquisition sourced by 24/7;

K. conduct quarterly sales seminars and reviews during the
Term in rotating locations as mutually agreed by 24/7 and NBC-IN, with the
content and format of such seminars to be developed by 24/7 in cooperation with
the Steering Committee (as defined below) with the intent of communicating the
sales experiences and successes of the Manned Market Salespeople to the sales
staffs of the non-Manned Market stations; provided, that the quality of such
seminars shall be at a level reasonably acceptable to NBC-IN; and provided,
further, that 24/7 and NBC shall be jointly responsible for all costs and
expenses associated therewith (such costs to be subject to mutual prior
approval) other than travel, lodging and meals of the attendees of such
seminars, which shall be at the sole expense of the applicable O/O TV Station or
NBC Affiliate, as the case may be; and

L. provide sales and marketing products, including brochures,
marketing materials and case studies, to the sales staffs of the non-Manned
Markets, which are of a quality reasonably acceptable to NBC-IN; provided, that
NBC shall reimburse 24/7 for the actual and reasonable out of pocket costs and
expenses of such products and that all such costs and expenses shall be subject
to NBC's prior approval.

3. Obligations of NBC.

NBC covenants and agrees to:

A. consult with 24/7 regarding the hiring and daily management of the
Manned Market Salespeople, and provide such sales personnel suitable office
space at the applicable O/O TV Station, and to make available to such sales
personnel the reasonable use of all existing office facilities (general support
staff, telephone system fax machines, photocopiers, rest rooms, kitchen
facilities) on the same basis that such facilities are made available to
employees of NBC or the TV Stations; no indirect or communal expense shall be
allocated to 24/7 for the provisions in this paragraph, other than for expenses
incurred directly by the 24/7 employee (i.e. long distance telephone, travel and
entertainment, personal computer and personal office supplies);

B. provide 24/7 with NBC Network policies, as amended from time to
time, regarding the acceptance of advertising and notify 24/7 within two
business days from the time notice of any new Co-op Advertising or Advertising
is given in accordance with Section 2.F of NBCs rejection of any new Co-op
Advertising or Advertising. Failure to provide timely notice

4
<PAGE>

of rejection of the new Co-op Advertising or Advertising shall be deemed
acceptance thereof, until such time as NBC notifies 24/7 of NBC's rejection
thereof at which time 24/7 shall promptly remove the Co-op Advertising or
Advertising;

C. furnish 24/7 with all subscribership, viewership, inventory, and
usage reports, reviews and audience studies, deliveries, census requirements,
and any other information regarding the Web Sites as is reasonably available to
NBC and is deemed appropriate by NBC in its sole discretion for use by 24/7 for
the sale of Co-op Advertising and Advertising; and

D. not engage, contract with, license or permit any 3rd party Internet
advertising representation firm other than 24/7 and its employees to sell, or
represent NBC or any of the O/O TV Stations for the sale of Advertising and
Co-op Advertising for which 24/7 has been granted exclusive Internet advertising
representation rights pursuant to Section 1.

4. Governance.

A. 24/7 shall appoint a senior officer to manage the relationship
contemplated hereby and shall hire the Manned Market Salespeople to sell Co-op
Advertising and Advertising pursuant to this Agreement; provided, that the
hiring or appointment of all such personnel, and any replacements therefor,
shall be subject to NBC's reasonable approval. All such personnel shall be
employees of 24/7 and shall be compensated entirely by 24/7. 24/7's relationship
manager and its sales personnel shall provide periodic reports to NBC in a
format reasonably acceptable to NBC regarding sales of Co-op Advertising and
Advertising made pursuant to this Agreement and shall confer directly with the
station managers of the O/O TV Stations and each participating NBC Affiliate
regularly as needed to discuss strategies and goals and to resolve sales
conflicts.

B. The parties shall form a steering committee (the "Steering
Committee") which shall be composed, of six representatives, one from each of
(i) the O/O TV Stations, (ii) the NBC Affiliates, (iii) NBC-IN, and three from
24/7. The Steering Committee shall assist in developing and maintaining
processes in order to achieve the best overall performance by 24/7 hereunder,
including, without limitation, resolving conflicts between station management
and their resident Manned Market Salespeople, the timing of NBC Affiliate
roll-outs, and setting priorities for the program. The parties shall use their
best efforts to incorporate the recommendations of the Steering Committee into
their performance under this Agreement and, the Affiliate Agreements.

5. Payments.

A. Advertisers shall be directed to pay all cash and other
consideration generated from the sale of Co-op Advertising and Advertising by
24/7 pursuant to and during the term of this Agreement and at all times
thereafter following the termination of this Agreement (each, a "Payment")
directly to NBC or the applicable NBC Affiliate. If 24/7 receives any such
payment from an advertiser, it shall immediately forward such payment to NBC or
the applicable NBC Affiliate without any deduction or set-off whatsoever. 24/7
will submit a monthly billing statement outlining commissions earned for
Advertising on NBC-IN sold by 24/7, which billing

5
<PAGE>

statement shall specify the amounts due 24/7 according to Schedule C. NBC shall
pay 24/7 all undisputed amounts owed to 24/7 within forty-five (45) days after
NBC's collection of the Payment that gave rise to such obligation. It is
understood that when calculating the portion of the Payment owed to 24/7
hereunder, NBC shall exclude those advertising agency commissions actually
retained by agencies or paid by NBC to agencies with respect to the sale of
Advertising.

B. In the event that NBC converts to 24/7 ad serving
technology, NBC may elect to have 24/7 serve advertisements not sold by 24/7.
For such ad serving NBC will pay a serving fee at a cost per thousand ("CPM ")
as shown below: *

6. Equity Issuance. In consideration of the foregoing, on the date hereof, 24/7
shall grant NBC a warrant which will give NBC the right to purchase 150,000
shares of common stock, par value $.01 per share (the "Common Stock"), of 24/7
in the form attached hereto as Exhibit 6(a) and pursuant to a Warrant Purchase
Agreement, in the form attached hereto as Exhibit 6(b). The exercise price per
share shall be equal to the average closing price of the Common Stock as
reported by Nasdaq on the five trading days immediately preceding the date of
this Agreement.

7. Intellectual Property. All hardware, software, programs, codes, trade names,
technology, intellectual property, licenses, patents, trademarks, copyrights,
trade secrets, know-how, and processes owned by 24/7 as of the Effective Date
(collectively, the "24/7 Technology") used by 24/7 under this Agreement shall
remain the sole property of 24/7. NBC shall have no rights, title or interest in
the 24/7 Technology. All hardware, software, programs, codes, trade names,
technology, intellectual property, licenses, patents, trademarks, copyrights,
trade secrets, know-how, and processes owned by NBC as of the Effective Date
(collectively, the "NBC Technology") used by NBC under this Agreement shall
remain the sole property of NBC. 24/7 shall have no rights, title or interest in
the NBC Technology. Upon the expiration or termination of this Agreement, each
party shall promptly return all information, documents, manuals and other
materials belonging to the other party except as otherwise provided in this
Agreement.

8. Year 2000. In addition to any other warranties and representations provided
by 24/7 pursuant hereto, whether pursuant to this Agreement, by law, equity, or
otherwise, 24/7 represents and warrants that (a) any product(s) and/or
service(s) provided by 24/7 hereunder, including, without limitation, each item
of hardware, software, or firmware; any system, equipment, or products
consisting of or containing one or more thereof; and any and all enhancements,
upgrades, customizations, modifications, maintenance and the like
("Products/Services") shall be Year 2000 Compliant at the time of delivery and
at all times

6
<PAGE>

thereafter and in all subsequent updates or revisions of any kind, and (b)
24/7's supply of the Products/Services to NBC shall not be interrupted, delayed,
decreased, or otherwise affected by dates/times prior to, on, after or spanning
January 1, 2000. For purposes of this Agreement, Year 2000 Compliant means that
(1) the Products/Services accurately process, provide and/or receive date/time
data (including without limitation calculating, comparing, and sequencing),
within, from, into, and between centuries (including without limitation the
twentieth and twenty-first centuries), including leap year calculations, and (2)
neither the performance nor the functionality nor 24/7's supply to NBC of the
Products/Services will be affected by dates/times prior to, on, after, or
spanning January 1, 2000. The design of said Products/Services to ensure
compliance with the foregoing warranties and representations shall include,
without limitation, date data century recognition, calculations that accommodate
same century and multi-century formulae and date values, and date data interface
values that reflect the century. In particular, but without limitation, (i) no
value for current date/time will cause any error, interruption, or decreased
performance in the operation of such Products/Services, (ii) all manipulations
of date/time-related data (including, but not limited to, calculating,
comparing, sequencing, processing, and outputting) will produce correct results
for all valid dates/times, including when used in combination with other
products, (iii) date elements in interfaces and data storage will specify the
correct century to eliminate date ambiguity without human intervention,
including leap year calculations, (iv) where any date element is represented
without a century, the correct century will be unambiguous for all manipulations
involving that element, (v) authorization codes, passwords, and zaps (purge
functions) should function normally and in the same manner prior to, on, after
and spanning January 1, 2000, including, without limitation, the manner in which
they function with respect to expiration dates/times and CPU serial numbers. No
obligation of 24/7 under this Agreement shall be excused by reason of the
failure of any other person's (other than NBC's) Products/Services to be Year
2000 Compliant, nor shall such occurrence(s) be deemed a force majeure event.

In the event of breach of this warranty, in addition to any other remedies NBC
may have, whether pursuant to this Agreement, by law, equity or otherwise, NBC
shall be entitled to repair or replacement of any non-Compliant item, at no cost
to NBC, within sixty (60) days after notice of breach from NBC to 24/7, or such
different period as specified by NBC in its sole discretion. In addition to
24/7's obligations as set forth above, 24/7 shall indemnify and hold NBC
harmless from and against any claims, costs, losses, damages, or expenses
(including reasonable attorneys' fees) incurred by NBC arising out of or
relating to (a) any failure of the Products/Services to be Year 2000 Compliant
or (b) any failure of 24/7 or its vendors', sub-suppliers', or contractors'
Products/Services to be Year 2000 Compliant. Notwithstanding anything herein to
the contrary, the liability of 24/7 for a breach of 24/7's Year 2000 Compliant
representation and warranty shall not be subject to any limitations or
exclusions of remedies or warranties contained in this Agreement or any other
agreement between the parties.

9. Confidentiality. During the Term, each party hereto (the "Disclosing Party")
may disclose to the other party (the "Receiving Party") information in
connection with the performance of this Agreement, including, without
limitation, information concerning the Disclosing Party's business, products,
services, content, technical data, trade secrets, customer or advertiser lists,
marketing plans, financial documents or data, which when provided hereunder in

7
<PAGE>

documentary or other tangible form shall be marked or stamped "Confidential",
and which if disclosed orally or visually shall be identified in a writing
marked "Confidential" by the Disclosing Party and submitted to the Receiving
Party within thirty (30) days after disclosure. All such information of or about
the Disclosing Party shall be "Confidential Information". The parties shall use
the Confidential Information of the other party solely to perform its
obligations under this Agreement, and all Confidential Information shall remain
the sole property of the Disclosing Party. 24/7 and NBC covenant to each other
that during the Term and for a period of three (3) years thereafter, neither
party shall disclose to any third party (other than its employees and directors,
in their capacity as such, and the employees and directors of any affiliate, on
a need to know basis so long as they are bound by the terms of this Agreement)
any information regarding the terms and provisions of this Agreement or any
Confidential Information of the other party except (i) in connection with any
federal securities laws and any applicable rules and regulations of any stock
exchange or quotation system; and (ii) in a confidential disclosure made in
connection with a contemplated financing, merger, consolidation or sale of
capital stock of 24/7 or NBC or any affiliate of NBC. Notwithstanding the
foregoing, the Receiving Party shall have no obligation under this Agreement
with respect to any Confidential Information disclosed to it which (a) the
Receiving Party can demonstrate was already known to it at the time of its
receipt hereunder, (b) is or becomes generally available to the public other
than by means of the Receiving Party's breach of its obligations under this
Agreement, (c) is independently obtained from a third party whose disclosure
violates no duty of confidentiality, (d) is independently developed by or on
behalf of the Receiving Party without access to or use of or reliance on any
Confidential Information furnished to it under this Agreement, and such
independent development can be reasonably evidenced by the Receiving Party, or
(e) is disclosed pursuant to applicable law or regulation or by operation of
law, provided that the Receiving Party may disclose only such information as is
legally required, and provided further that the Receiving Party shall provide
reasonable notice to the Disclosing Party of such requirement and a reasonable
opportunity to object to such disclosure.

10. Publicity. Each party shall consult with the other party before issuing any
press or other release or otherwise making any other public statement or any
statement to employees, customers or vendors of the parties with respect to this
Agreement; provided, however, that except as required by applicable law, neither
party shall issue any such press release or make any such public statement or
any statement to employees, customers or vendors without the prior written
consent of the other party.

11. Records and Audit. Each party shall maintain complete, clear and accurate
books and records to verify in detail the calculations used to determine
payments hereunder. Each party shall keep, store and maintain such books and
records for at least three years after Termination of the Agreement. At any time
during the Term or for three years thereafter, either party may, on thirty days'
notice to the other party, appoint an independent certified account to audit the
other party's books and records during normal business hours to verify
calculations, and the other party shall provide reasonable cooperation and
assistance necessary to the performance of said audit; provided, however, that
each party shall be limited to one (1) such audit in any twelve (12) month
period.

8
<PAGE>

12. Term and Termination.

A. The term of this Agreement (the "Term") shall commence on
the Effective Date and shall continue in effect until (3) three months after the
date, as determined under the provisions of Section 18 below, on which either
party gives written notice to the other party of its election to terminate the
Agreement; provided, however, that except as set forth below in this Section,
neither party may give notice of termination to the other party until three (3)
months prior to the third anniversary of the Effective Date.

B. On or after October 1, 2000, either party terminate the
Agreement with 60 days' prior written notice if gross total billings for Co-op
Advertising and Advertising sold pursuant to this Agreement is less than
$* for the three months ended September 30, 2000.

C. This Agreement may be terminated by either party on 60
days' prior written notice to the other party upon the occurrence of a material
breach by the other party of any covenant, duty or undertaking herein, which
material breach continues without cure for a period of 45 days after written
notice of such breach from the non-breaching party to the breaching party.

D. Either party may terminate this Agreement if a form of the
Affiliate Agreement is not agreed upon and attached to this Agreement within
thirty (30) days of the Effective Date.

E. This Agreement may be terminated by NBC commencing 18
months after the Effective Date if any of the following have occurred: (i) a
significant change of ownership of 50% or more of NBC-IN, (ii) a merger of
NBC-IN (or a company holding all or substantially all of the assets constituting
NBC-IN) with a major Internet company, (iii) a sale of all or substantially all
of the assets constituting NBC-IN, or (iv) a spin-off of NBC Internet properties
or other material change in NBC-IN's status; provided, that NBC must provide
24/7 with 90 days prior written notice of such termination and such notice of
termination may not be given prior to 15 months after the Effective Date. If NBC
terminates the Agreement pursuant to this Section, then on the date such
termination becomes effective it shall pay 24/7 a termination fee (the
"Termination Fee") equal to *.

9
<PAGE>

13. Indemnification.

A. NBC shall indemnify and hold harmless 24/7 and its
officers, directors, employees and agents against and in respect of any and all
claims, suits, actions, proceedings and investigations instituted by third
parties, as well as any judgments, damages, settlements, liabilities, and legal
and other expenses (including reasonable legal fees and expenses of attorneys)
as and when incurred, arising out of or based upon (a) any misrepresentation or
breach of the representations and warranties of NBC set forth in this Agreement,
and (b) any non-compliance by NBC with any covenants or agreements of NBC
contained in or made pursuant to this Agreement. 24/7 shall indemnify and hold
harmless NBC, its affiliates, and their respective officers, directors,
employees and agents, against and in respect of any and all claims, suits,
actions, proceedings and investigations instituted by third parties, as well as
any judgments, damages, settlements, liabilities, and legal and other expenses
(including reasonable legal fees and expenses of attorneys) as and when
incurred, arising out of or based upon (a) any misrepresentation or breach of
the representations and warranties of 24/7 set forth in this Agreement, and (b)
any non-compliance by 24/7 with any covenants or agreements of 24/7 contained in
or made pursuant to this Agreement.

B. Upon the assertion of any claim or the commencement of any suit or
proceeding against an indemnified party by any third party that may give rise to
liability of an indemnifying party hereunder, the indemnified party shall
promptly notify the indemnifying party of the existence of such claim and shall
give the indemnifying party reasonable opportunity to defend and/or settle the
claim at its own expense and with counsel of its own selection. The indemnified
party shall cooperate with the indemnifying party and shall at all times have
the right to fully participate in, but not control, such defense with its own
counsel and at its own expense. The indemnified party shall not make any
settlement of any claims which might give rise to liability of the indemnifying
party hereunder without the prior written consent of the indemnifying party.

14. No Poaching. NBC and 24/7 agree that during the Term, neither NBC nor 24/7
will solicit or recruit the services of each other's employees, or hire any such
employees, for the purpose of selling Internet Advertising without prior written
consent of the other party. In addition, upon termination of this Agreement, the
party that first provides notice of termination (unless such notice is pursuant
to Sections 12.C or 12.D), shall not solicit or recruit the services of the
other party's employees, or hire any such employees, for the purpose of selling
Internet Advertising for a period of one year without prior written consent of
the other party.

15. No Waiver. This Agreement shall not be waived or modified except by a
written consent to that effect signed by NBC and 24/7.

16. Assignment. Neither party may assign this Agreement without the prior
written consent of the other, except (a) in connection with the sale of all or
substantially all of its assets, (b) to the surviving entity in any merger or
consolidation, or (c) in the case of NBC, to an affiliated company. Each party
agrees that if it assigns or transfers this Agreement, it shall cause such
successor, assignee, or transferee to assume all of such party's obligations
hereunder.

10
<PAGE>

17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed therein, without regard to principles of conflicts of laws.

18. Notices. All notices required or permitted to be given hereunder shall be in
writing and either hand-delivered, telecopied, mailed by certified first class
mail, postage prepaid, or sent via electronic mail to the other party or parties
hereto at the address(es) set forth below. A notice shall be deemed given when
delivered personally, when the telecopied notice is transmitted by the sender,
three business days after mailing by certified first class mail, or on the
delivery date if delivered by electronic mail.

19. Entire Agreement. This Agreement, including the Schedules and Exhibits
attached hereto, constitutes the entire agreement and supersedes all prior
agreements of the Parties with respect to the transactions set forth herein and,
except as otherwise expressly provided herein, is not intended to confer upon
any other person any rights or remedies hereunder.

20. Survival. The provisions of Sections 2.1, 5, 7-11, 13, 14 & 17 shall survive
any expiration or termination of this Agreement.

21. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.

11
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement this 11th day of March, 1999.

24/7 MEDIA, INC.

By: /s/ David J. Moore
------------------------------
Name: David J. Moore
Title: CEO

NBC MULTIMEDIA, INC.

By: /s/ Vincent C. Grosso
------------------------------
Name: Vincent C. Grosso
Title: VP NBC Interactive

3/11/99

12
<PAGE>

SCHEDULE A

O/O TV Stations and Web Sites

13
<PAGE>

SCHEDULE B

Roll-out to O/O TV Stations and NBC Affiliates

<PAGE>

SCHEDULE C
Payments

I. Owned & Operated Stations

The percentage of the Payment that shall be retained by 24/7 and NBC-IN
respectively with respect to on-air advertising ("On-Air") and Internet
advertising ("Online") shall be determined in accordance with the following
table:

With respect to Co-op Advertising, the Payment amount shall be allocated between
On-Air and Online in a fashion that reasonably reflects the actual value of the
On-Air and Online components of such Co-op Advertising.

TV Station commission rates are applicable to all revenue in the corresponding
Aggregate Annual Payments bracket, and are not retroactive to the first dollar.
For example, if the Aggregate Annual Payment is $20 million, split 60/40 between
television and Internet, 24/7 shall retain $*.

The first Aggregate Annual Payment Period shall be deemed to run from the date
of this Agreement through December 31, 1999.

15
<PAGE>

II. NBC Affiliates

The percentage of the Payment that shall be retained by 24/7 and NBC-IN
respectively with respect to On-Air and Online shall be determined in accordance
with the following table:

16
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page No.

<S> <C>
1. Affiliation.....................................................................................1
2. Obligations of 24/7.............................................................................2
3. Obligations of NBC..............................................................................4
4. Governance......................................................................................5
5. Payments........................................................................................5
6. Equity Issuance.................................................................................6
7. Intellectual Property...........................................................................6
8. Year 2000.......................................................................................6
9. Confidentiality.................................................................................7
10. Publicity.......................................................................................8
11. Records and Audit...............................................................................8
12. Term and Termination............................................................................9
13. Indemnification................................................................................10
14. No Poaching....................................................................................10
15. No Waiver......................................................................................10
16. Assignment.....................................................................................10
17. Governing Law..................................................................................11
18. Notices........................................................................................11
19. Entire Agreement...............................................................................11
20. Survival.......................................................................................11
21. Counterparts...................................................................................11

SCHEDULE A O/O TV Stations and Web Sites............................................13

SCHEDULE B Roll-out to O/O TV Stations and NBC Affiliates...........................14
</TABLE>

Sun
microsystems

SUN MICROSYSTEMS FINANCE
MASTER LEASE AGREEMENT

Master Lease # SL2890

Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor, subject
to the following terms of this Master Lease Agreement ("Master Lease") and any
Lease Schedule ("Schedule"), collectively referred to as the Lease ("Lease"),
the personal property described in any Schedule together with all attachments,
replacements, parts, substitutions, additions, upgrades, accessories, software
licenses and operating manuals (the "Product"). Each Schedule shall constitute a
separate, distinct, and independent Lease and contractual obligation of Lessee.

1. Commencement Date And Term

The initial lease term ("Initial Term") and Lessee's rental obligations shall
begin on the Commencement Date and continue for the number of Rental Periods
specified in the Lease as set forth in Section 2 below and shall renew
automatically thereafter until terminated by either party upon not less them
ninety (90) days' prior written notice. The Commencement Date with respect to
each item of Product shall be the 16th day after date of shipment to Lessee.

2. Rent and Rental Period

All rental payments and any other amounts payable under a Lease are collectively
referred to as "Rent". The Rental Period shall mean the rental payment period of
either calendar months, quarters, or as otherwise specified in each Schedule.
Rent for the specified Rental Period is due and payable in advance, to the
address specified in Lessor's invoice, on the first day of each Rental Period
during the Initial Term and any extension (collectively, the "Lease Term"),
provided, however, that Rent for the period of time (if any) from the
Commencement Date to the first day of the first Rental Period shall begin to
accrue on the Commencement Date. If any Rent is not paid when due, Lessee will
pay a service fee equal to five percent (5%) of the overdue amount plus interest
at the rate of one and one half percent (1.5%) per month or the maximum legal
interest rate, whichever is less.

3. Net Lease, Taxes and Fees

Each Schedule shall constitute a net lease and payment of Rent shall be absolute
and unconditional, and shall not be subject to any abatement, reduction, setoff,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever. Lessee agrees to pay Lessor when due shipping charges, fees,
assessments and all taxes (municipal, state and federal) imposed upon a Lease or
the Product or its ownership, leasing, renting, possession or use except for
taxes based on Lessor's income.

4. Title

Product shall always remain personal property. Lessee shall have no right or
interest in the Product except as provided in this Master Lease and the
applicable Schedule and shall hold the Product subject and subordinate to the
rights of Lessor. Lessee agrees to execute UCC financing statements as and when
requested by Lessor and hereby appoints Lessor as its attorney-in-fact to
execute such financing statements. Lessor may file a photocopy of any Lease as a
financing statement.

Lessee will, at its expense, keep the Product free and clear from any liens or
encumbrances of any kind (except any caused by Lessor) and will indemnify and
hold Lessor harmless from and against any loss or expense caused by Lessee's
failure to do so. Lessee shall give Lessor immediate written notice of any
attachment or judicial process affecting the Product or Lessor's ownership. If
requested, Lessee will label the Product as the property of Lessor and shall
allow, subject to Lessee's reasonable security requirements, the inspection of
the Product during regular business hours.

5. Use, Maintenance And Repair

Lessee, at its own expense, shall keep the Product in good repair, appearance
and condition, other than normal wear and tear and shall obtain and keep in
effect throughout the term of the Schedule a hardware and software maintenance
agreement with the manufacturer or other party acceptable to Lessor. All parts
furnished in connection with such repair and maintenance shall be
manufacturer-authorized parts and shall immediately become components of the
Product and the property of Lessor. Lessee shall use the Product in compliance
with the manufacturer's or supplier's suggested guidelines.

- 1 -
<PAGE>

6. Delivery And Return of Product

Lessee assumes the full expense of transportation, insurance, and installation
to Lessee's site. Upon termination of each Schedule, Lessee will provide
operating condition and is eligible for continued maintenance and that the
operating system is at the then current level, unless under a Sun service
contract during the Lease Term. Lessee, at its expense, shall deinstall, pack
and ship the Product to a U.S. location identified by Lessor. Lessee shall
remain obligated to pay Rent on the Product until the Product and certification
are received by Lessor.

7. Assignment And Relocation

Lessee may sublease or assign its rights under this agreement with Lessor's
prior written consent, which consent shall not be unreasonably withheld,
subject, however, to any terms and conditions which Lessor may require. No
permitted assignment or sublease shall relieve Lessee of any of its obligations
hereunder.

Lessee acknowledges Lessor may sell and/or assign its interest or grant a
security interest in each Lease and/or the Product to an assignee ("Lessor's
Assignee"), so long as Lessee is not in default hereunder. Lessor or Lessor's
Assignee shall not interfere with Lessee's right of quiet enjoyment and use of
the Product. Upon the assignment of each Lease, Lessor's Assignee shall have any
and all discretions, rights and remedies of Lessor, and all references to Lessor
shall mean Lessor's Assignee. In no event shall any assignee of Lessor be
obligated to perform any duty, covenant or condition under this Lease, and
Lessee agrees it shall pay such assignee without any defense, rights of set-off
or counterclaims and shall not hold or attempt to hold such assignee liable for
any of Lessor's obligations hereunder.

Lessee, at its expense, may relocate Product (after packing it for shipment in
accordance with the manufacturer's instructions) to a different address with
thirty (30) days' prior written notice to Lessor. The Product shall at all times
be used solely within the United States.

8. Upgrades And Additions

Lessee may affix or install any accessory, addition, upgrade, equipment or
device on the Product ("Additions") provided that such Additions (i) can be
removed without causing material damage to the Product, (ii) do not reduce the
value of the Product and (iii) are obtained from or approved by Sun Microsystems
Computer Corporation and are not subject to the interest of any third party
other than Lessor. Any other Additions may not be installed without Lessor's
prior written consent. At the end of the Schedule Term, Lessee shall remove any
Additions which (i) were not leased by Lessor and (ii) are readily removable
without causing material damage or impairment of the intended function, use, or
value of the Product and restore the Product to its original configuration. Any
Additions which are not so removable will become the Lessor's property (lien
free).

9. Lease End Options

Upon written notice given at least ninety (90) days prior to expiration of the
Lease Term, and provided Lessee is not in default under any Schedule, Lessee may
(i) exercise any purchase option set forth in the Schedule, or (ii) renew the
Schedule for a minimum extension period of twelve (12) months, or (iii) return
the Product to Lessor at the expiration date of the Schedule pursuant to Section
6 above.

10. Insurance, Loss or Damage

Effective upon shipment of Product to Lessee and until Product is received by
Lessor, Lessee shall provide at its expense (i) insurance against the loss or
theft or damage to the Product for the full replacement value, and (ii)
insurance against public liability and property damage. Lessee shall provide a
certificate of insurance that such coverage is in effect, upon request by
Lessor, naming Lessor as loss payee and/or additional insured as may be
required.

Lessee shall bear the entire risk of loss, theft, destruction of or damage to
any item of Product. No loss or damage shall relieve Lessee of the obligation to
pay Rent or any other obligation under the Schedule. In the event of loss or
damage, Lessee shall promptly notify Lessor and shall, at Lessor's option, (i)
place the Product in good condition and repair, or (ii) replace the Product with
lien-free Product of the same model, type and configuration in which case the
relevant Schedule shall continue in full force and effect and clear title in
such Product shall automatically vest in Lessor, or (iii) pay Lessor the present
value of remaining Rent plus the buyout purchase option price provided for in
the applicable Schedule.

- 2 -
<PAGE>

11. Selection, Warranties And Limitation of Liability

Lessee acknowledges that it has selected the Product and disclaims any reliance
upon statements made by Lessor. Lessee acknowledges and agrees that use and
possession of the Product by Lessee shall be subject to and controlled by the
terms of any manufacturer's or, if appropriate, supplier's warranty, and Lessee
agrees to look solely to the manufacturer or, if appropriate, supplier with
respect to all mechanical, service and other claims, and the right to enforce
all warranties made by said manufacturer are hereby assigned to Lessee for the
term of the Schedule.

EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LESSOR HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, NON-FRINGEMENT, THE DESIGN, QUALITY,
CAPACITY OR CONDITION OF THE PRODUCT, ITS MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE. IT BEING AGREED THAT AS THE LESSEE SELECTED BOTH THE PRODUCT
AND THE SUPPLIER, NO DEFECT, EITHER PATENT OR LATENT SHALL RELIEVE LESSEE OF ITS
OBLIGATION HEREUNDER. LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR SPECIFIC
PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND INCLUDING,
WITHOUT LIMITATION, INDIRECT INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY
NATURE, DAMAGES ARISING FROM THE LOSS OF USE OF PRODUCT, LOST DATA, LOST
PROFITS, OR FOR ANY CLAIM OR DEMAND.

12. Indemnity

Lessee shall indemnify and hold harmless Lessor and Lessor's Assignee from and
against any and all claims, actions, suits, proceedings, liabilities, damages,
penalties, costs and expenses (including reasonable attorneys' fees), arising
out of the use, operation, possession, ownership (for strict liability in tort
only), selection, leasing, maintenance, delivery or return of any item of
Product.

13. Default And Remedies

Lessee shall be in default of any Lease if (i) Lessee fails to pay Rent within
ten (10) days of due date; (ii) Lessee fails to perform or observe or breaches
any covenant or condition or any representation or warranty in such Lease, and
such failure or breach continues unremitted for a period of ten (10) days after
written notice from Lessor; (iii) Lessee, except as expressly permitted in the
Lease, attempts to move, sell, transfer, encumber, or sublet without consent any
item of Product leased under such Lease; (iv) Lessee files or has filed against
it a petition in bankruptcy or becomes insolvent or makes an assignment for the
benefit of creditors or consents to the appointment of a trustee or receiver or
either shall be appointed for Lessee or for a substantial part of its property
without its consent; or (v) Lessee or any guarantor of Lessee is declared
legally deceased or if Lessee shall terminate its existence by merger,
consolidation, sale of substantially all of its assets or otherwise.

Upon default, Lessor may, at its option, take one or more of the following
actions: (i) declare all sums due and to become due under the Schedule
immediately due and payable, (ii) require Lessee to return immediately all
Product leased under such Schedule to Lessor in accordance with Paragraph 6
hereof, (iii) without breach of the peace take immediate possession of and
remove the Product, (iv) sell any or all of the Product at public or private
sale or otherwise dispose of, hold, use or lease to others, or (v) exercise any
right or remedy which may be available to Lessor under applicable law, including
the right to recover damages for the breach of the Schedule. In addition, Lessee
shall be liable for reasonable attorney's fees, other costs and expenses
resulting from any default, or the exercise of Lessor's remedies, including
placing such Product in the condition required by Paragraph 6 hereof. Each
remedy shall be cumulative and in addition to any other remedy otherwise
available to Lessor at law or in equity. No express or implied waiver of any
default shall constitute a waiver of any of Lessor's other rights.

14. Lessee's Representations

Lessee represents and warrants for this Master Lease and each Schedule that the
execution, delivery and performance by Lessee have been duly authorized by all
necessary corporate action; the individual executing was duly authorized to do
so; the Master Lease and each Schedule constitute valid, binding agreements of
the Lessee enforceable in accordance with their terms; that all

- 3 -
<PAGE>

information supplied by Lessee, including but not limited to the credit
application and other financial information concerning Lessee, is accurate in
all material respects as of the date provided; and if there is any material
change in such information prior to manufacturer's or, if appropriate,
supplier's shipment of Product under the Schedule, Lessee will advise Lessor of
such change in writing.

15. Applicable Law

This Master Lease and each Schedule shalt in all respects be governed by and
construed in accordance with the laws of the state of California without giving
effect to the principles of conflict of laws.

16. Miscellaneous

Lessee agrees to execute and deliver to Lessor such further documents,
including, but not limited to, financing statements, assignments, and financial
reports and take such further action as Lessor may reasonably request to protect
Lessor's interest in the Product.

The performance of any act or payment by Lessor shall not be deemed a waiver of
any obligation or default on the part of Lessee. Lessor's failure to require
strict performance by Lessee of any of the provisions of this Master Lease shall
not be a waiver thereof. No rights or remedies referred to in Article 2A of the
Uniform Commercial Code will be conferred on Lessee unless expressly granted in
this Master Lease.

This Master Lease together with any Schedule constitutes the entire
understanding between the parties and supersedes any previous representations or
agreements whether verbal or written with respect to the use, possession and
lease of the Product described in that Schedule. In the event of a conflict, the
terms of the Schedule shall prevail over the Master Lease.

No amendment or change of any of the terms or conditions herein shall be binding
upon either party unless they are made in writing and are signed by an
authorized representative of each party Each Schedule is non-cancellable for the
full term specified and each Schedule shall be binding upon, and shall inure to
the benefit of Lessor, Lessee, and their respective successors, legal
representatives and permitted assigns.

All agreements, representations and warranties contained herein shall be for the
benefit of Lessor and shall survive the execution, delivery and termination of
this Master Lease, any Schedule or related document.

Any provision of this Master Agreement and/or each Schedule which is
unenforceable shall not cause any other remaining provision to be ineffective or
invalid. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. Any notices or demands in connection
with any Schedule shall be given in writing by regular or certified mail at the
address indicated in the Schedule, or to any other address specified.

THIS MASTER LEASE SHALL BECOME EFFECTIVE
ON THE DATE ACCEPTED BY LESSOR.

LESSOR: SUN MICROSYSTEMS FINANCE
A Sun Microsystems, Inc. Business

By: /s/ Gregg E. Gerst
----------------------------------
(Authorized Signature)

NAME: Gregg E. Gerst
----------------------------------

TITLE: Manager, U.S. Leasing Programs
----------------------------------

DATE:
----------------------------------

LESSEE: 24/7 Media, Inc.
---------------------------------------------
(Full legal name of Lessee) (Business Entity)

BY: /s/ Yale R. Brown
---------------------------------------------
(Authorized Signature)

NAME: Yale R. Brown
---------------------------------------------

TITLE: EVP
---------------------------------------------

DATE: 5/18/98
---------------------------------------------

- 4 -

Chase Equipment Leasing, Inc. Reference Number____________

THIS MASTER LEASE AGREEMENT dated as of ___________, 1998 (hereinafter referred
to as "Lease") by and between Chase Equipment Leasing, Inc., a New York
corporation, with a place of business located at One Chase Square, Rochester, NY
14643 (hereinafter referred to together with its assigns, if any, as "Lessor")
and 24/7 Media, Inc., a corporation organized and existing under the laws of the
State of Delaware with its mailing address and chief place of business at 1250
Broadway, New York, NY 10001 (hereinafter referred to as "Lessee").

The Parties hereto for good and valuable consideration and intending to be
legally bound hereby agree as follows:

1. PROCEDURE FOR LEASING:

(a) SCHEDULES. Subject to the terms and conditions set forth herein,
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor such
unit or units of equipment (the "Equipment" and individually sometimes "Item" or
"Item of Equipment") described in any Master Lease Schedule (a "Schedule") from
time to time executed by the parties pursuant hereto, and any and all such
Schedules are deemed a part hereof. Each Schedule incorporates by reference
this Lease and shall constitute, subject to Section 9 hereof, a separate lease.
Capitalized terms not otherwise defined herein have the meaning provided for in
any Schedule.

(b) CONDITIONS PRECEDENT. The obligation of Lessor to purchase Equipment
from the manufacturer or supplier thereof ("Supplier") and to lease the same to
Lessee under any Schedule is subject to receipt by Lessor prior to the
Commencement Date with respect to the Schedule of each of the following
documents in form and substance satisfactory to Lessor: (i) a Schedule relating
to the Equipment then being leased hereunder, (ii) a purchase order assignment,
(iii) a Certificate of Acceptance and Closing Certificate, (iv) a certificate of
insurance which complies with the requirements of Section 4(f) and the Schedule,
and (v) a bill of sale transferring title to each Item to Lessor and such other
documents and conditions as Lessor may reasonably require including Lessor's
determination that there has been no material adverse change in the financial
condition of Lessee or any Guarantor. Lessor hereby appoints Lessee its agent
for inspection and acceptance of each Item from the Supplier. Upon execution by
Lessee of the Certificate of Acceptance, each Item described therein will be
deemed to have been delivered to, and irrevocably accepted by Lessee for lease
hereunder.

(c) UCC 2A FINANCE LEASE. The parties hereto intend that each Schedule
constitute a "finance lease" under Article 2A of the Uniform Commercial Code as
in effect in New York and Lessee hereby waives the provisions of UCC Sections 2A
401 through 403 inclusive and Section 508, and acknowledge that under no
circumstances shall any Schedule be subject to repudiation by Lessee. Lessee
waives any right to suspend performance of its obligations under any Schedule.
This is not a consumer lease and the promises of Lessee in each Schedule are
irrevocable.

2. TERM AND RENT:

The lease of and rent for Equipment will commence on the day specified in
the related Schedule as the Commencement Date, and will continue for the period
specified as the "term" therein as the same may be extended pursuant to the
terms hereof. Lessee promises to make each payment of rent during the term on
the due dates and in the amounts set forth in each Schedule without notice or
demand at Lessor's address set forth above or as otherwise directed by Lessor in
writing and no payment of rent will be refunded for any cause or reason
whatsoever. The parties hereto intend that the rents and other amounts payable
by Lessee hereunder will continue to be payable in all events unless the
obligation to pay same is terminated pursuant to the terms hereof. If any
payment hereunder falls due on a day on which Lessor is not open for business,
such payment shall be due and payable on the next preceding day on which Lessor
is open for business. To secure all obligations of Lessee under each Schedule,
Lessee hereby grants to Lessor a security interest in: (i) any security deposit
or advance rent paid by Lessee hereunder, each of which shall be in all cases
non-interest bearing; and (ii) all other funds, balances, accounts, proceeds of
collateral and/or other property of any kind of Lessee or in which Lessee has an
interest now or hereafter in the possession, custody, or control of Lessor or
The Chase Manhattan Bank and any of its direct or indirect affiliates and
subsidiaries, including without limitation Chase Securities, Inc..

3. LATE CHARGE:

If any rent or any other amount due hereunder from Lessee other than the
amounts due under this Section 3 is not paid within five (5) days after the due
date, Lessee agrees to pay a late charge equal to five percent (5%) on the
amount of such delinquent rent or other payment, but not exceeding the maximum
amount permissible under applicable law. The failure of Lessor to collect any
late charge will not constitute a waiver of Lessor's right with respect thereto.
Late charges Will be due and payable on the due date for the next following
payment of rent.

4. LESSEE REPRESENTATIONS AND COVENANTS:

Lessee represents and warrants, and covenants and agrees, as follows and
each such representation, warranty and covenant shall be deemed made and renewed
as of the date hereof and as of the Commencement Date under each Schedule
without the necessity of any further act or instrument:

(a) GENERAL. (i) Lessee is duly organized and validly existing under the
laws of the state indicated at the outset; this Lease and each Schedule and all
instruments delivered in connection herewith and therewith have been duly
authorized by all necessary action, and duly executed and delivered and
constitute valid, legal and binding agreements, enforceable in accordance with
their terms except to the extent limited by applicable bankruptcy and insolvency
laws; and no such document nor Lessee's performance thereunder will conflict
with Lessee's organizational documents or with any indenture, contract or
agreement by which Lessee is bound or with any statute, judgment, decree, rule
or regulation binding upon Lessee; (ii) no consent or approval of any trustee or
holder of any indebtedness or obligation of Lessee, and no consent or approval
of any governmental authority, is necessary for Lessee's execution or
performance of this Lease; (iii) them is no litigation or other proceeding
pending, or to the best of the Lessee's knowledge, threatened against or
affecting Lessee which, if decided adversely to Lessee, would adversely affect
or impair the title of Lessor to the Equipment or which, if decided adversely to
Lessee would materially adversely affect the business operations or financial
condition of Lessee; (iv) all balance sheets, statements of profit and loss and
other financial data that have been delivered to Lessor with respect to Lessee
are complete and correct in all material respects, fairly present the financial
condition of the Lessee on the dates for which, and the results of its
operations for the periods for which, the same have been furnished and have been
prepared in accordance with generally accepted accounting principles
consistently applied; and (v) there has been no material adverse change in the
condition of Lessee, financial or otherwise, since the date of the most recent
financial statements delivered to Lessor.

(b) NO ABATEMENT. This is a net Lease and Lessee's promise to pay rent and
all other amounts hereunder is irrevocable and independent and not subject to
cancellation, termination, modification, repudiation, excuse or substitution
without the written consent of Lessor. Lessee agrees to pay all such amounts
when due by acceleration or otherwise without abatement, irrespective of any
claims, demands, set-offs, actions, suits, or proceedings that it may have or
assert against Lessor or any Supplier or manufacturer of Equipment. Lessor will
have no liability to Lessee upon the failure of any Supplier, manufacturer or
one or more others to perform any obligations at any time due to Lessor, Lessee
or any other person and, in all such events, Lessee waives any right in any
suit, action or proceeding to any exemplary, punitive or consequential damages
whatsoever.
<PAGE>

(c) LIENS AND ENCUMBRANCES. THE EQUIPMENT IS FREE AND CLEAR FROM ALL
CLAIMS, LIENS AND ENCUMBRANCES WHATSOEVER; LESSEE WILL DEFEND THE EQUIPMENT
AGAINST ALL LIENS AND WILL NOT ASSIGN, SUBLET, MORTGAGE, OR ALTER ANY OF THE
EQUIPMENT LEASED HEREUNDER OR ANY INTEREST IN THIS LEASE, NOR WILL LESSEE REMOVE
ANY OF THE EQUIPMENT FROM THE LOCATION SPECIFIED IN THE SCHEDULE WITHOUT THE
PRIOR WRITTEN CONSENT OF LESSOR, AND ANY ATTEMPT TO SO ASSIGN, SUBLET, MORTGAGE,
HYPOTHECATE, ALTER OR REMOVE WILL CONSTITUTE A DEFAULT HEREUNDER AND SUCH
ASSIGNMENT, SUBLEASE, MORTGAGE, OR HYPOTHECATION WILL BE VOID AND WITHOUT
EFFECT. In order to secure all obligations of Lessee hereunder, Lessee assigns
and grants to Lessor a security interest in all rights, powers and privileges
under any sublease of the Equipment hereafter authorized in writing by Lessor.

(d) USE AND OPERATION. Lessee will at all times use the Equipment only in
compliance with applicable laws and consistent with the instructions supplied
and use intended for such Equipment by the Supplier and manufacturer thereof.
Lessee will not use the Equipment to carry, contain or produce directly or
indirectly any hazardous substances as defined under applicable federal, state
or local law or regulation. Lessee will not without the prior written consent of
Lessor affix or instill any accessory, equipment or device on any Equipment
leased hereunder if such addition will impair the originally intended function
or use of such Equipment. All additions, repairs, parts, supplies, accessories,
equipment and devices furnished, attached or fixed to any Equipment will
thereupon without further act or instrument become the property of Lessor
(except such as may be removed without in any way affecting or impairing the
originally intended function, condition or use of such Item). Further, Lessee
will not, without the prior written consent of Lessor and subject to such
conditions as Lessor may impose for its protection, affix to or install any
Equipment in any other personal property or in real property.

(e) SERVICE AND MAINTENANCE. Lessee will at its sole expense at all times
maintain all Equipment in good operating order, repair, condition and appearance
and keep all Equipment protected from the elements, except during use in the
normally contemplated manner. At Lessor's request, Lessee will at its expense
affix in a prominent position on each Item of Equipment plates, tags or other
identifying labels showing ownership of the Equipment by Lessor. Lessor will at
all reasonable times have the right to inspect the Equipment and Lessee's
maintenance records related thereto. Lessee at its sole expense will make all
alterations and modifications with respect to the Equipment that may at any time
during the term of this Lease or any Schedule hereunder be required to comply
with any applicable law or any governmental rule or regulation.

(f) INSURANCE. Lessee hereby assumes all risks of damage, loss, theft, or
destruction, partial or complete, with respect to each Item of Equipment during
the term of the Lease and during any storage period until Lessee has returned or
disposed of the Equipment as provided for herein. Lessee will at its own expense
keep each Item of Equipment insured for an amount at least equal to the
Stipulated Loss Value of the Equipment as set forth in the Schedule against all
risks with extended coverage and insurance companies acceptable to Lessor with
Lessor named as loss payee. Lessee agrees to obtain and maintain at its expense
with insurance companies acceptable to Lessor general public liability insurance
naming Lessor as an additional insured together with Lessee, as their interests
may appear, in no event less than One Million Dollars ($1,000,000) or such
greater amount, if any, as specified in the related Schedule against claims for
bodily injury, death or property damage arising out of the use, ownership,
possession, operation or condition of the Equipment. Each insurer will agree, by
endorsement upon the policy or policies issued by it, or by independent
instruments furnished to Lessor, that Lessor will have the power to file claims
against the insurer under said policy, that it will give Lessor thirty (30) days
written notice before the policy or policies in question will be altered,
expired or canceled, and that no act or default of any person other than Lessor,
its agents, or those claiming under Lessor, will affect Lessor's right to
recover under such policy or policies in case of loss. Although any and all
obligations imposed on the insured shall be obligations solely of Lessee, Lessee
will deliver to Lessor the policies or evidence of insurance satisfactory to
Lessor prior to the Commencement Date and thirty (30) days prior to each
expiration date thereof for each Item of Equipment. The failure of Lessee to
secure or maintain such insurance will constitute a default under this Lease. In
the event of such breach, Lessor may, but will not be obligated to, obtain such
insurance. In the event that Lessor obtains such insurance, an amount equal to
the cost of such insurance will be deemed supplemental rent to be paid forthwith
by Lessee. In the event that any policies insuring against liability risks
described above shall now or hereafter provide coverage on a "claims made"
basis, Lessee shall continue to maintain such policies in effect for a period
of not less than three years after the expiration of the Lease term of any
Schedules.

(g) RETURN OF EQUIPMENT. Upon cancellation or expiration of any Schedule
upon default or otherwise, Lessee will, at its sole cost and expense, cease
using the Equipment, store the Equipment for up to ninety (90) days while
maintaining the insurance required above, and promptly return the Equipment to
Lessor when directed to do so F.O.B. the destination specified by Lessor, in the
same condition as received, reasonable wear and tear and normal depreciation
excepted. Lessee shall pay on demand holdover rent equal to a full monthly rent
for each mouth or any day thereof during which Lessee fails to return the
Equipment when so directed by Lessor and this obligation is without limitation
to any consequential damages for which Lessee may be responsible as a result of
such failure to return the Equipment. Subject to the prior exercise of any
option otherwise provided, Lessee agrees to deliver notice to Lessor at least 90
days prior to the last day of the term confirming to Lessor the intent of Lessee
to return the Equipment and Lessee shall pay rent for a full 90 day notice
period notwithstanding any delay in the delivery of such notice under any
Schedule.

5. TRANSFER OF WARRANTIES:

To the extent permitted by law and contract, Lessor will pass through
without representation to Lessee the benefit of all warranties, if any, of the
Supplier of the Equipment and, so long as there is no default hereunder, Lessee
will have the right to, and will, directly avail itself of all warranties by the
Supplier with respect to the Equipment. Lessor will not take any action which
prejudices Lessee's right to, or under the terms of, any such warranty. If
subsequent to the Commencement Date Lessee shall determine that the Equipment is
unsatisfactory for any reason including any failure of the Equipment to conform
to the specifications set forth in any purchase order, Lessee shall make any
claim on account thereof solely against the Supplier and Lessee will give Lessor
notice of any such claim made by Lessee against any Supplier and any cash
settlement of any such claim will be payable solely to Lessor.

6. LOSS OR DAMAGE:

(a) Lessee hereby assumes and is solely responsible for the entire risk of
use and operation of the Equipment and for each and every accident or hazard
resulting therefrom and all losses and damages associated therewith howsoever
arising.

(b) In the event of total loss, destruction, theft, confiscation or damage
beyond repair (determined without reference to the remaining term with respect
thereto) to the Equipment or any Item (a "Casualty Occurrence"), Lessee will pay
to Lessor on the next due date for rent following the Casualty Occurrence or on
the last day of the term thereof, whichever first occurs, any unpaid rent due
with respect to such Equipment plus the Stipulated Loss Value as provided for in
the related Schedule. Upon payment of the Stipulated Loss Value, Lessor will be
entitled to recover possession of such Item and Lessee an behalf of Lessor will
dispose of such Item and account to Lessor for the proceeds. So long as no
default exists hereunder, upon the payment of the Stipulated Loss Value for any
Item of Equipment and all other amounts then due under this Section 6(b) or
otherwise, this Lease and Lessee's obligation to pay rent shall terminate as to
such Item of Equipment and title thereto shall be transferred to Lessee or
otherwise as Lessee may direct, provided however that to the extent Lessee shall
recover an amount in excess of the Stipulated Loss Value from the further sale
or lease of any such Item of Equipment, Lessee shall pay over such excess to
Lessor.

(c) In the event of damage to any Item of Equipment which does not amount
to a Casualty Occurrence, Lessee will give prompt notice of such damage to
Lessor and at Lessee's sole cost and expense promptly repair such Item to its
previous condition which assumes Lessee has met all of its obligations required
for maintenance hereunder. Provided Lessee is not in breach or default of this
Lease, any proceeds of insurance received by Lessor with respect to any such
loss will be paid over by Lessor to Lessee to the extent necessary to reimburse
Lessee for costs incurred and paid by Lessee in repairing such damaged
Equipment, but only upon evidence satisfactory to Lessor that such repairs have
been accomplished.

7. TAX TREATMENT:

(a) Unless otherwise provided for in the related Schedule, it is agreed by
the parties that they are entering into each Schedule with the assumption that
Lessor and the consolidated group of which Lessor is a member (all references to
Lessor in this Section include such consolidated group) will be treated for
federal

2
<PAGE>

income tax purposes (and, to the extent allowable, for state and local tax
purposes) as the owner of all Equipment leased thereunder and will have a
federal income tax rate of 35% (plus any applicable state and local tax rate)
during the term hereof. The indemnities and assumptions of liability provided
for in this Section 7 and all Of Lessor's rights and privileges herein will
continue in full force and effect notwithstanding the expiration or cancellation
of the Lease.

(b) Lessee acknowledges and agrees that each Schedule is executed by
Lessor based upon the following representations and warranties of Lessee: (i)
each item has been placed in service on the Commencement Date, (ii) Lessor will
not under the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (the "Code"), be required to include in its gross income,
for federal income tax purposes, any amount with respect to any improvement,
modification or addition made by Lessee to any Item; (iii) Lessor is entitled to
accelerated cost recovery deductions ("Recovery Deductions) for Lessor's Cost of
each Item over the number of years indicated on the related Schedule by using
the 200% declining balance method switching to the straight line method when
most beneficial to maximize Lessor's after tax rate of return and the half year
convention, unless otherwise required by operation of Code Section
168(d)(3)(A), (iv) no Item is limited use property within the meaning of Rev.
Proc. 76-30; and (v) for federal income tax purposes, all amounts included in
Lessor's gross income with respect to each Item will be treated as derived from
or allocable to sources within the United States,

(c) If by reason of (1) the inaccuracy in law or in fact of any of the
assumptions or representations or warranties set forth in Subsections (a) or (b)
of this Section, or (2) the inaccuracy of any statement or any letter or
document furnished to Lessor by or on behalf of Lessee in connection with the
transactions contemplated under the Lease, or (3) any act, failure to act or
omission of or by Lessee, or (4) any change in the Code occurring after the
Commencement Date, Lessor will (i) lose, will not have the right to claim or if
there will be disallowed with respect to Lessor all or any portion of the
Recovery Deduction as to any Item, or (ii) be required to include in its gross
income any amount in respect to any alteration, modification or addition to, any
Item, other than an alteration, modification or addition which is permitted
without adverse tax consequences to Lessor under Rev. Procs. 75-21, 76-30 or
79-48, or (iii) stiffer a decrease in Lessor's net after rate of return over the
then remaining portion of the term of the Lease (any such occurrence referred to
hereinafter as "Loss"), then at Lessor's option either (X) the rent will, on and
after the next succeeding date for the payment thereof upon notice to Lessee by
Lessor that a Loss has occurred, and describing the amount as to which Lessor
intends to claim indemnification and the reason for such adjustment in
reasonable detail, be increased by such amount, which will cause Lessor's net
after tax rate of return over the then remaining portion of the term of the
Lease (taking into account the tax effect from deferred utilization of tax basis
resulting from changes in the method of calculating Recovery Deductions) to
equal the net after tax rate of return that would have been available if such
Loss had not occurred, or (Y) in lieu of a rent increase, Lessee shall pay to
Lessor on such next succeeding date for the payment of rent such sum as will
cause Lessor's net after tax rate of return over the term of the Lease in
respect of the Equipment to equal the net return that would have been available
if such Loss had not occurred. If such Loss occurs after the expiration or
cancellation of the Lease, Lessor will notify Lessee of such Loss and Lessee
will, within sixty (60) days after such notice, pay to Lessor such sum as
required by the preceding clause (Y). Lessee will forthwith pay on demand to
Lessor an amount on an after-tax basis which will be equal to the amount of any
interest and/or penalties which may be assessed by the United States or any
state against Lessor as a result of the Loss. For purposes of this Section, a
Loss will occur upon the earliest of (1) the happening of any event which may
cause such Loss, (2) the payment by Lessor to the Internal Revenue Service of
the tax increase resulting from such Loss, or (3) the adjustment of Lessor's tax
return to reflect such Loss. Lessor will not be entitled to any payment under
this Section on account of any Loss due solely to one or more of the following:
(i) the failure of Lessor to have sufficient taxable income to benefit from the
Recovery Deduction; (ii) disposition of the Equipment by Lessor prior to a
default which has occurred and is continuing hereunder; or (iii) Lessor's
failure to properly claim the Recovery Deduction. In the event Lessee becomes
obligated under the terms hereof to make an indemnification payment, the
Stipulated Loss Values for any affected Schedule shall be revised as may be
necessary in the reasonable opinion of the Lessor so that the amount payable by
Lessee shall be sufficient to yield to Lessor the same net after tax rate of
return that would have been available to Lessor upon payment of such amount had
the Loss giving rise to the indemnity payment not occurred but taking into
account any indemnity payment made in respect of a Loss and the assumptions made
by Lessor in originally establishing the affected Stipulated Loss Values. The
revised Stipulated Loss Values shall be applicable to any payment of such amount
coming due after such earlier Loss shall have occurred which required the
adjustment hereunder.

8. INDEMNIFICATION:

LESSEE ACKNOWLEDGES THAT IT ALONE SELECTS THE EQUIPMENT AND THE SUPPLIER(S)
THEREOF. LESSEE UNDERSTANDS AND AGREES THAT LESSOR MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED, WITH RESPECT TO THE EQUIPMENT
INCLUDING THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT AS IS. NO
DEFECT OR UNFITNESS OF THE EQUIPMENT SHALL RELIEVE LESSEE OF THE OBLIGATION TO
PAY RENT OR OF ANY OTHER OBLIGATION UNDER THIS LEASE. Accordingly, Lessee agrees
to indemnify, save and keep harmless Lessor, its agents, employees, successors
and assigns from and against any and all losses, damages, expenses (including
legal expenses), penalties, injuries, claims, actions and suits of whatsoever
kind and nature, in contract or tort, howsoever arising from any cause
whatsoever including, but not limited to, Lessor's strict liability in tort, or
otherwise arising out of (i) the selection, manufacture, purchase, financing,
acceptance or rejection of Equipment, the ownership of Equipment during the term
of the Lease, and the delivery, lease, possession, maintenance, uses, condition,
return or operation of Equipment (including without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement); or (ii) the condition of Equipment
sold or disposed of after use by Lessee, any sublessee or employee of Lessee.
Lessee will, upon request, at its expense, defend any and all actions based on,
or arising out of, any of the foregoing. This indemnification shall survive the
expiration or cancellation of the Lease.

9. DEFAULT; REMEDIES:

Each of the following will constitute a default hereunder: (a) Lessee fails
to pay rent within five (5) days from and after the date such payment of rent is
due and payable or Lessee fails to pay any other amount when due under any
Schedule; (b) Lessee fails to maintain the insurance required hereunder or
breaches any other term, provision, obligation or covenant hereof (including
without limitation any Schedule) or commits any other act of default specified
in this Lease; (c) any representation or warranty of Lessee contained herein or
in any other document or instrument delivered in connection herewith or made
from time to time hereafter is false or misleading when made; (d) Lessee or any
guarantor, surety, endorser or pledgor of property given to secure Lessee's
obligations hereunder ("Guarantor") becomes insolvent, ceases to do business as
a going concern, or transfers or sells all or substantially all of its assets
without the prior written consent of Lessor; (e) the Equipment or any Item is
abused, illegally used, or misused; (f) the death, dissolution, merger,
consolidation or reorganization of Lessee or any Guarantor; (g) Lessee or any
Guarantor makes any assignment for the benefit of creditors, or if a petition in
bankruptcy, reorganization, insolvency, receivership or the like is filed with
respect to Lessee or any Guarantor or property of Lessee or any Guarantor is
attached or a receiver, trustee or liquidator is appointed for Lessee or any
Guarantor or any of Lessee's or Guarantor's property or whenever Lessor may deem
itself insecure hereunder; (h) the transfer of more than a 25% ownership
interest in Lessee or any Guarantor by shareholders, partners, members or
proprietors thereof in any year without Lessor's prior written consent, (i)
Lessee or any Guarantor (x) incurs any accumulated funding deficiency within the
meaning of the Employee Retirement Income Security Act of 1974, as amended from
time to time and the regulations thereunder, equal to 5% of Lessee's
consolidated tangible net worth (as defined by generally accepted accounting
principles), or (y) incurs any liability of comparable size to the pension
Benefit Guaranty Corporation, (j) Lessee or any material subsidiary or any
Guarantor fails to comply with the provisions of the Fair Labor Standards Act of
1938, as amended, (k) Lessee or any Guarantor fails to pay or perform or observe
any term, covenant, agreement or condition contained in, or there shall occur
any payment or other default under or as defined in, any other agreement
applicable to Lessee or any Guarantor or by which Lessee or any Guarantor is
bound (as used herein, an "Other Agreement") involving a liability, indebtedness
or performance obligation of Lessee or any Guarantor with a potential liability
to Lessee or any Guarantor in an amount equal to or in excess of $50,000, which
shall not be remedied within the period of time (if any) within which such Other
Agreement permits such default to be remedied, regardless of whether such
default (i) is waived by any other party to such Other Agreement or (ii)
produces or results in the cancellation of such Other Agreement or the
acceleration of such liability, indebtedness or other obligation;

3
<PAGE>

(l) attachment, distraint, levy, execution or final judgment for the payment of
money aggregating in excess of $50,000 will be outstanding against Lessee or its
property for more than sixty (60) days from the date of entry and will not have
been discharged in full or stayed or fully bonded; (m) Lessee or any Guarantor
shall suffer the loss of any material license or franchise when Lessor shall
reasonably conclude that such loss fairly impairs Lessee's or such Guarantor's
ability to perform its obligations required hereunder or with respect hereto; or
(n) Lessee or any Guarantor shall violate any financial covenant contained in
any agreement for borrowed money applicable to Lessee or Guarantor as of the
Commencement Date of any Schedule and all such financial covenants shall survive
the satisfaction of debt applicable thereto and shall be deemed incorporated
herein by reference and remain fully applicable to Lessee's obligations
hereunder.

Upon any such default, Lessor, at its option, may do any one or more of the
following: (1) declare this Lease and any or all Schedules in default upon
notice to Lessee, whereupon Lessee shall be liable for and Lessor may forthwith
recover from Lessee as liquidated damages for breach of this Lease and not as a
penalty an amount equal to the sum of (X) all accrued and unpaid rent through
the date of such declaration of default, plus (Y) an amount equal to the
Stipulated Loss Value for the Equipment as of the due date for the installment
of rent immediately preceding the declaration of default; (2) proceed by
appropriate court action or actions to enforce Lessee's performance of this
Lease and/or to recover damages for the breach thereof; (3) cancel this Lease
and any or all Schedules upon notice to Lessee; (4) whether or not this Lease or
any Schedules be so cancelled, and without notice to Lessee, repossess the
Equipment wherever found, with or without legal process, and for this purpose
Lessor and/or its agents may enter upon any premises of or under control or
jurisdiction of Lessee or any agent of Lessee without liability for suit, action
or other proceeding by Lessee (any damages occasioned by such repossession being
hereby expressly waived by Lessee except for damages occasioned by gross
negligence or willful misconduct) and remove the Equipment therefrom. Lessor's
remedies as provided herein are not exclusive but are cumulative and in addition
to all other remedies in Lessor's favor at law, in equity or in bankruptcy. The
receipt and acceptance by Lessor of any rent or other payment after a default
will not be deemed to be a waiver of such default by Lessor. Lessor shall not,
by any act, delay, omission, or otherwise, be deemed to have waived any default
or any of its rights or remedies hereunder unless such waiver be in writing,
signed by the Lessor, and then only to the extent therein set forth. In the
event that any court determines that any provision in this Lease is invalid or
unenforceable in whole or in part, such determination will not prohibit Lessor
from establishing its damages as a result of any breach of this Lease in any
action in which Lessor seeks to recover such damages. Any repossession or resale
of any Equipment will not bar an action for damages for breach of this Lease,
and the bringing of an action or the entry of judgment against Lessee will cot
bar Lessor's right to repossess any or all Equipment.

With respect to any Equipment returned to Lessor, or repossessed by Lessor
pursuant to provision (4) above, Lessor may hold or use such Equipment for any
purpose whatsoever or either sell same at private or public sale, for cash or
credit, or re-lease same for such term and upon such rental as will be solely
determined by Lessor. In the event that Lessor is able to sell or re-lease all
or any Equipment returned to Lessor then the proceeds of any sale or re-leasing
of such Equipment, after first deducting therefrom all costs and expenses of
repossession, storage, repairs, reconditioning, sale, re-leasing, attorneys'
fees and collection fees with respect to such Equipment, shall be deducted from
the liquidated damages for which Lessee is obligated hereunder. In addition to
the foregoing, Lessor may also recover from Lessee all costs and expenses,
including without limitation fees of collection agencies and reasonable
attorneys' fees, including the allocated costs and fees of Lessor's in-house
legal counsel, incurred by Lessor in exercising any of its rights or remedies
hereunder. Lessee irrevocably consents to the in personam jurisdiction of the
federal and/or state courts located in the State of New York over controversies
arising from or relating to this Lease or any obligation with respect thereto
and waives the right to impose any counterclaim or offset of any nature in any
such litigation. Lessee irrevocably appoints each and every owner, partner,
member and/or officer of Lessee as its attorney upon whom may be served by
certified mail any process, notice or pleading in any action or proceeding
against it under this Lease or related thereto.

10. ASSIGNMENTS:

LESSOR MAY WITHOUT LESSEE'S CONSENT SELL, ASSIGN OR OTHERWISE TRANSFER OR
GRANT A SECURITY INTEREST IN ITS RIGHT, TITLE AND INTEREST IN ANY ITEM OR
SCHEDULE AND THE RENT DUE OR TO BECOME DUE THEREUNDER AND WHEN SO SOLD,
ASSIGNED, TRANSFERRED OR ENCUMBERED, EACH SCHEDULE WILL BE FREE OF ANY
COUNTERCLAIM, SET-OFF, DEFENSE, OR CROSSCLAIM BY LESSEE AS AGAINST LESSOR OR
SUCH ASSIGNEE WHENEVER ARISING, BEFORE OR AFTER SUCH SALE, ASSIGNMENT, TRANSFER
OR SECURITY GRANT BUT NO SUCH ACTION WILL INCREASE LESSEE'S OBLIGATIONS
HEREUNDER, EXCEPT THAT UPON NOTICE TO LESSEE THEREOF, LESSEE, AGREES TO DIRECT
ALL PAYMENTS HEREUNDER, IF REQUESTED, TO LESSOR'S ASSIGNEE. Lessor may provide
lease information on a confidential basis to any prospective purchaser, assignee
or participant

11. PAYMENT OF TAXES:

Lessee agrees to pay promptly when due, and to indemnify and hold Lessor
harmless from all license, title and registration fees whatsoever, all
levies, imposts, duties, charges or withholdings whatsoever, and all
sales, use, personal property, franchise (howsoever calculated), and other
taxes whatsoever (together with any penalties, fines or interest thereon)
whether assessed, levied or imposed by any governmental or taxing
authority against or upon Lessor or otherwise, with respect to any
Equipment or the purchase, acquisition, ownership, delivery, leasing,
possession, use, operation, control, return or other disposition thereof,
or the rents, receipts or earnings arising therefrom, or with respect to
this Lease, excluding, however, (i) any such taxes or charges to the
extent they are included in Lessor's Cost, (ii) any federal taxes levied
on Lessor's net income, or (iii) state or local taxes levied on Lessor's
net income, as net income is determined under, and at rates which do not
exceed those originally imposed by the jurisdiction in which the Equipment
is located as specified in the related Schedule. In the event any such
fees, levies, imposts, duties, charges or taxes are paid by Lessor, or if
Lessor be required to collect or pay any thereof, Lessee will reimburse
Lessor therefor (plus any penalties, fines or interest thereon) promptly
upon demand. Until Lessor notifies Lessee to the contrary, Lessee will
promptly before any penalty attaches, prepare and file in Lessor's name or
on Lessor's behalf all personal property tax returns covering the
Equipment and Lessee will pay the personal property taxes levied or
assessed thereon directly to the levying authority. If Lessor timely
notifies Lessee that Lessor will prepare and/or file any such return,
Lessee will, promptly upon being invoiced by Lessor, reimburse Lessor for
the full amount of such personal property taxes so paid by Lessor. If any
capital adequacy requirements are imposed upon Lessor or its parent which
require the maintenance of additional capital or impose additional
expenses as a result of this Lease, and the effect of such requirements is
to reduce Lessor's expected rate of return hereunder, Lessee shall pay to
Lessor such amount or amounts as may be necessary to compensate Lessor for
such reduction. The indemnification obligations of Lessee under this
Section will continue in full force and effect notwithstanding the
expiration or other cancellation hereof. Lessee will either provide Lessor
a copy of all property and other tax returns filed hereunder by Lessee in
Lessor's name or on Lessor's behalf or provide to Lessor an affidavit of a
responsible corporate officer certifying that the property taxes so
identified therein have been reported and are current. The amount which
Lessee shall be required to pay to Lessor with respect to any obligation
which is subject to indemnification under this Section 11 shall be an
amount sufficient to restore Lessor to the same position, after
considering the effect of the receipt of such indemnification on its
United States federal income taxes and state and city income taxes or
franchise taxes based on net income, that it would have been in had such
indemnification not been required hereunder.

4
<PAGE>

12. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS:

In case of failure of Lessee to comply with any provision of this Lease or
any Schedule, Lessor will have the right, but will not be obligated, to effect
such compliance in whole or in part, and all money spent by and expenses of
Lessor will be paid by Lessee forthwith and will bear interest at the daily
equivalent of eighteen percent (18%) per annum from the date said obligation was
due. Lessor's action in effecting such compliance will not be a waiver of
Lessee's default. All such money spent by and expenses of Lessor and any other
obligation assumed or incurred by Lessor in effecting such compliance will
constitute additional rent payable to Lessor with the next rent payment.

13. NOTICES:

All notices required or permitted to be given hereunder will be in writing
and will be deemed given and received three (3) days after first deposit in the
United States mail if sent by registered or certified mail to the address of
Lessor or Lessee stated herein or in any Schedule or to such other place as
either party may in writing direct pursuant to this Section. Notice by hand
delivery shall be deemed given and received upon delivery. Notice by overnight
courier shall be deemed given and received on the date scheduled for delivery.

14. FINANCIAL INFORMATION AND REPORTING:

(a) Lessee shall annually, within ninety (90) days after the close of
Lessee's fiscal year furnish to Lessor an audit report of financial statements
of Lessee (including a balance sheet as of the close of such year and statements
of income, changes in financial condition and shareholder's equity for such
year) prepared in accordance with generally accepted accounting principles and
certified by Lessee's independent public accountants. Lessee shall also provide
quarterly financial statements of Lessee similarly prepared for each of the
first three quarters of each fiscal year, which shall be certified (subject to
normal year-end adjustments) by Lessee's chief financial officer and furnished
to Lessor within forty-five (45) days following the end of the quarter.

(b) Lessee will furnish Lessor with any and all information regarding
Lessee's business, condition or operations, financial or otherwise, which Lessee
furnishes to any other creditor. This information shall be furnished to Lessor
at the same time it's furnished to such other creditor.

(c) Lessee will immediately furnish Lessor with such further information
regarding Lessee's business, condition, property, assets or operations,
financial otherwise, as Lessor may from time to time reasonably request, all
prepared in form and detail reasonably satisfactory to Lessor.

(d) Lessee will at all times maintain true and complete records and
books of account including, without limiting the generality of the foregoing,
appropriate reserves for possible losses and liabilities, all in accordance
with generally accepted accounting principles consistently applied.

(e) Lessee shall permit, and cause any subsidiary to permit,
representatives of Lessor to visit and inspect any of the properties of Lessee
or any Subsidiary, to examine its or their corporate or partnership books and
records, to make extracts or copies of such books and records, and to discuss
its or their affairs, finances and accounts with its or their officers or
partners, as applicable. The foregoing may be done at any time within regular
business hours.

(f) Lessee will promptly notify Lessor in writing of the commencement of
any litigation to which Lessee or any of its subsidiaries or affiliates may be a
party (except for litigation in which Lessee's (or the affiliate's) contingent
liability is fully covered by insurance) which, if decided adversely to Lessee
would adversely affect or impair the title of Lessor to the Equipment or which,
if decided adversely to Lessee would materially adversely affect the business
operations or financial condition of Lessee. In addition, Lessee will
immediately notify Lessor, in writing, of any judgment against Lessee if such
judgment would have the effect described in the preceding sentence.

15. ADDITIONAL DOCUMENTS:

Lessee agrees to execute or obtain and deliver to Lessor at Lessor's
request such additional documents as Lessor may reasonably deem necessary to
protect Lessor's interest in the Equipment and this Lease including, without
limitation, financing statements, and Lessee hereby authorizes Lessor to execute
in Lessee's name as Lessee's attorney-in-fact any financing statements and
amendments thereto necessary or appropriate to protect Lessor's interest
hereunder. Lessee will pay, or reimburse Lessor on demand, for any filing fees
or expenses incurred by Lessor in connection with any such additional documents,
Neither execution of financing statements nor the filing of the same will be
construed as evidence of indebtedness by Lessee. Lessee will obtain, at Lessee's
sole expense, from each owner, landlord, mortgagee or other person having an
encumbrance, lien or other interest on or in the premises in which the Equipment
is or will be located, all necessary consents to the installation and use of the
Equipment therein and the removal thereof in accordance with the terms of this
Lease, together with waivers of claim with respect to the Equipment, and record
the same when and where necessary. Lessee hereby designates Lessor its
attorney-in-fact and authorizes and empowers Lessor to execute, endorse and
complete in Lessee's name and on Lessee's behalf all instruments representing
the proceeds of any security or insurance for the Lease or Equipment thereunder,
all financing statements and other documents including Schedules and Riders and
to insert thereon all dates, amounts and serial numbers as necessary or
appropriate to provide to Lessor the benefits anticipated by any Schedule.

16. MISCELLANEOUS:

The validity, construction and performance of this Lease and each Schedule
will in all respects be governed by the laws of the State of New York without
reference to conflict of law provisions. The Lease will not be binding on Lessor
until executed by an authorized officer of Lessor. LESSOR AND LESSEE WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING HEREFROM OR RELATED HERETO.
Any provision herein contained which may be illegal, unenforceable, or
inconsistent with applicable law or any governmental rule or regulation will be
deemed modified or altered to conform thereto, or otherwise omitted but shall in
no way impair the legality or enforceability of the remaining Lease provisions.
Nothing herein contained will convey to Lessee any right, title or interest in
and to any Item leased hereunder except as a lessee. Lessee shall promptly pay
(or reimburse, as Lessor may elect) all costs and expenses including reasonable
attorneys' fees, including the allocated costs and fees of Lessor's in-house
legal counsel, which Lessor has or may hereafter incur in connection with the
negotiation and preparation of this Lease and any amendment, modification,
consent or waiver hereunder. If more than one party executes this Lease as
Lessee, each such party shall be jointly and severally bound by the terms and
provisions of this Lease. Any person who signs as an officer or agent for a
corporation, partnership or other entity warrants that he has authority from
such corporation, partnership or other entity to enter into this Lease on its
behalf. Each Item of Equipment delivered pursuant to this Lease to a subsidiary
of Lessee or to any entity or person designated by Lessee, whether at the
request of Lessee or such subsidiary, entity or person shall be Equipment for
all purposes of this Lease, and Lessee shall be and remain primarily liable for
the obligations under this Lease with respect to such Equipment. Lessor shall
not be obligated to purchase and deliver any Item of Equipment unless Lessor has
executed a Schedule covering the Equipment.

17. ENTIRE AGREEMENT:

This Lease and any instrument referred to herein together with any
Schedule(s), Attachment(s) or Rider(s) signed by the parties or delivered in
connection herewith constitute the entire agreement of the parties with respect
to the subject matter hereof and will collectively constitute the Lease with
respect to an Item of Equipment and supersede all negotiations and prior written
or oral agreement of the parties with respect thereto. No agent or employee of
the Supplier is authorized to bind Lessor to the Lease, to waive or alter any
term or condition herein or add any provision hereto, No modification of the
Lease or waiver of any of its provisions or conditions will be valid unless in
writing and signed by Lessor and Lessee.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
date set forth above.

Chase Equipment Leasing, Inc. (Lessor)

By: /s/ Janice M. Schawillie, Contract Administrator
-------------------------------------------------
(Signature) (Title)

247/Media, Inc. (Lessee)

By: /s/ C. Andrew Johns, EVP & CFO
-------------------------------------------------
(Signature) (Title)

5
<PAGE>

Chase Equipment Leasing, Inc. Rider to Lease

Rider Number 1 to
Master Lease Agreement dated ________________, 199_
(as indicated above, hereinafter the "Lease")

Chase Equipment Leasing, Inc.
One Chase Square
Rochester, NY 14643

This Rider is incorporated by reference into the above referenced Lease as if
set forth at length and Lessee and Lessor confirm all the terms and provisions
thereof except as specifically set forth herein to the contrary.

Capitalized terms used herein shall have the meaning attributable to them in the
Lease.

1. Section 2, TERM AND RENT: The last sentence of this section is rewritten
in its entirety as follows:

"To secure all obligations of Lessee under each Schedule, Lessee hereby
grants to Lessor a security interest in any security deposit or advance
rent paid by Lessee hereunder, each of which shall be in all cases
non-interest bearing."

2. Section 9. DEFAULT; REMEDIES:

In the first paragraph, subsection (h) change 25% to 51%.

Insert a new paragraph at the end of the second paragraph to read as
follows: "Notwithstanding anything to the contrary in the preceding
paragraph, in no event shall Lessee be deemed in default under (b), (i),
(j), (m) or (n) unless and until it shall have received ten days' notice
to cure any claimed default as specified, delivered in writing by (i)
overnight courier or (ii) confirmed receipt of fax to Lessee. The ten day
period shall commence from the date of the delivery of the notice of
default.

3. Section 14. FINANCIAL INFORMATION AND REPORTING:

Subsection (b), in the first sentence after "furnishes to" delete the word
"any" and insert "and shares with". In that same sentence, change the last
word "creditor" to "creditors".

In subsection (e), at the end of the second sentence, insert, "upon
reasonable notice to Lessee".

Except as expressly modified hereby, all terms and provisions of the Lease shall
remain in hill force and effect. the parties hereto have caused their duly
authorized officers to execute this Rider on the dates set forth below and,
unless otherwise specifically provided herein, this Rider shall operate to amend
the Lease only as it is incorporated by reference into Schedules executed on or
after the dates set forth below and not otherwise.

Chase Equipment Leasing, Inc. 24/7 Media, Inc.
(Lessor) (Lessee)

By: /s/ Janice M. Schawillie By: /s/ C. Andrew Johns
------------------------------ ----------------------------

RIDER TO LEASE (LSB-AMND.DOC) 12/97
(Use this form to amend either Master Agreement, Items 1
or 11, or to amend the Synthetic Lease, Item 15.)

Title: Contract Administrator Title: EVP&CFO
Dated: 12/28/98 Dated: 12/28/98

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS EXHIBIT
PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE OMITTED
PORTIONS HAVE BEEN SEPARATELY FILED WITH THE COMMISSION AND ARE INDICATED BY
ASTERISK (*).

AdForce[TM] Service Agreement 24/7 Media Agreement

This Service Agreement ("Agreement") is entered into as of January 1, 1999 (the
"Effective Date") between 24/7 Media, Inc., a Delaware corporation with its
principal executive offices at 1250 Broadway, New York, New York 10001-3701
("24/7 Media"), and Imgis, Inc., d/b/a "AdForce," a California corporation with
offices at 10590 North Tantau Avenue, Cupertino, CA 95014 ("AdForce").

1. AdForce Service Definition. The AdForce service is an Internet advertising
administration system that will allow 24/7 Media to manage advertising
across its network of multiple Web sites. As part of the AdForce service,
AdForce Will provide 24/7 Media the AdForce client application ("Client"),
through which 24/7 Media will be able to (a) generate ad tags, (b) schedule
advertising to run in the online environments in which 24/7 Media places
those ad tags, and (c) generate reports on such advertising. In addition,
AdForce will maintain an AdForce server complex from which AdForce will
electronically deliver advertising scheduled by 24/7 Media to the online
environments containing the ad tags placed by 24/7 Media. The delivery of
"Impressions," defined as the transmission of advertisements by AdForce to
an AdForce ad tag, may be verified by monthly third-party audits of the
AdForce service, conducted by the Audit Bureau of Verification Services,
Inc. or other third party chosen by AdForce.

2. AdForce Service. (a) Generally. The AdForce service includes the targeting
features and reports listed in Exhibit A. AdForce will use best efforts to
accommodate 24/7 Media's custom report requests; any custom reports agreed
to by both parties will be developed by AdForce at the rate set forth on
Exhibit A. Features added to the AdForce service in the future (e.g.
demographic targeting, behavior tracking) may be included without charge in
the AdForce service, or in AdForce's sole discretion, be subject to
additional fees. The AdForce services include the functionality described in
Section 1 and Exhibit A, plus telephone client services support from the
hours of 6 a.m. to 6 p.m., Pacific Standard Time, Monday-Friday, excluding
major holidays. AdForce will also maintain 24 x 7 technical service support
via phone, cell phone or pager. Pricing for the AdForce service is detailed
in Exhibit A. AdForce will exercise all commercially reasonable efforts at
all times to correct errors in the Client and in software used to operate
the AdForce server complex,

(b) Certain Technical and Integration Support, (i) AdForce shall
participate when reasonably requested, in technical meetings with 24/7 Media
staff, and shall furnish 24/7 Media within ninety (90) days from the
Effective Date a production monitoring page and access to AdForce's customer
issues tracking system (excluding in either case metrics or issues unique to
non-24/7 Media customers or campaigns) (ii) AdForce will use commercially
reasonable efforts to design and implement at 24/7 Media's request and at
24/7 Media's expense on a time and materials basis, an interface to access
24/7 Media's Profilz database to enable 24/7 Media, on an exclusive basis,
to deliver targeted advertising to its customers. Promptly following
execution of this Agreement, and at 24/7 Media's request, AdForce and 24/7
Media personnel will develop a plan and budget for such development, and
determine any incremental pricing to be charged by AdForce for ad management
and delivery on such new service, AdForce shall not, however, be precluded
in any way from developing its own targeting advertising products or from
cooperating with third parties on other advertising services or products,
whether targeted or otherwise. (iii) AdForce is presently delivering
advertisements on behalf of 24/7 Media using a combination of 24/7 Media ad
tags and AdForce ad tags. AdForce agrees to cooperate with 24/7 Media in
good faith to convert any existing AdForce ad tags to 24/7 Media ad tags,
and that 24/7 Media may use the AdForce system to generate 24/7 Media ad
tags for all future 24/7 Media campaigns.

(c) Capacity. Provided 24/7 Media provides AdForce the impression
forecasts referenced in Section 3 below, and that 24/7 Media meets its
guarantee (or compensates AdForce for impression deliveries short of the
guarantee) provided in Section 3 below, AdForce covenants and warrants it
will have the capacity to serve properly on behalf of 24/7 Media the
impression volumes requested by 24/7 Media in its impression forecasts.

3. 24/7 Media Obligations. 24/7 Media agrees to implement 24/7 Media ad tags
using the process described in the AdForce User Guide and Help
documentation. Should the average file size of 24/7 Media's advertisements
exceed 20 kilobytes, as reasonably determined by AdForce on a monthly basis,
24/7 Media agrees to pay the incremental fee listed in Exhibit A to
compensate for AdForce's higher bandwidth costs. 24/7 Media agrees to
provide AdForce quarterly volume forecasts (with expected monthly volumes)
of Impressions to be delivered using the AdForce service; these forecasts
will be provided no later than thirty (30) days prior to the beginning of
each calendar quarter. Finally, 24/7 Media agrees that during the Term (as
defined in Exhibit A below) hereof, 24/7 Media will manage and deliver
through the AdForce service not less * of the impressions anticipated in its
quarterly forecasts; if, for any reason other than AdForce's default, 24/7
Media fails to deliver this guaranteed amount, 24/7 Media will pay to
AdForce the difference between * of the guaranteed amount and the amount
actually served, multiplied by the applicable CPM rate set forth on
Exhibit A.

4. Ownership/Limitations on Use, Subject to the terms and conditions of this
Agreement, 24/7 Media will have the right to use the Client in its offices
solely for purposes of using the AdForce service. AdForce shall at all times
have sole and exclusive ownership of all right, title and interest in and to
such Client and the AdForce service as a whole, any

Page 1 of 7

Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.

<PAGE>

AdForce(TM) Service Agreement 24/7 Media Agreement

enhancements thereto and in any materials and data AdForce provides to 24/7
Media. Notwithstanding anything contained elsewhere in this Agreement, the
parties acknowledge that 24/7 Media owns the domain name www.247media.com
and that this ownership shall survive the termination of this Agreement,
24/7 Media may not copy, modify, alter, sell, distribute or sublicense the
Client or reverse assemble, reverse compile or otherwise attempt by any
other method to create or derive the source programs of the AdForce service
or the Client, nor authorize or contract with third parties to do the same.

5. Data Rights. All data AdForce collects or stores in managing and
delivering ads for 24/7 Media which specifically pertain to 24/7 Media or
its customers and is used for designing, scheduling or administering
campaigns, generating reports and generating future media plans, including
information about sites in the media plan, impression limits, ad costs,
creatives, campaign results, click-through rates or transaction rates
(collectively "Campaign Data"), shall be owned by and is proprietary and
confidential to 24/7 Media. Accordingly, AdForce may not use such Campaign
Data for any purpose where such data can be specifically associated with the
identity of 24/7 Media or its clients; provided, however, that AdForce may
use such Campaign Data for reporting where such information is aggregated
with information from other AdForce customers and/or not specifically
identifiable as 24/7 Media information. Further, 24/7 Media shall own all
data collected or stored as a side effect of serving or tracking ads that is
not Campaign Data ("Clickstream Data"). However, AdForce can use Clickstream
Data for any purposes that do not expose Campaign Data to any third party,
and will not be required to store such information for more than twelve (12)
months. 24/7 Media may request at any time during the term of the Term
Sheet, or any renewal term, to receive copies of Clickstream Data from
AdForce. AdForce will supply such data at the following rates; *.

6. Confidentiality. Any 24/7 Media passwords to AdForce, AdForce user
guides, the AdForce Client, and the AdForce "help" documentation, whether
on-line or in printed form, are confidential and proprietary to AdForce. As
indicated above, all Campaign Data is proprietary and confidential to 24/7
Media. Such information shall not be used, disclosed or reproduced by the
other party without the consent of the party providing said information,
except for any information, data or material which: (a) at the time of
disclosure to the receiving party was known or in the possession of the
receiving party; (b) is independently developed by the receiving party; (c)
is generally available to the public without any breach of this Agreement,

7. Indemnification. (a) 24/7 Media. Subject to subsection (b), 24/7 Media shall
indemnify and hold harmless AdForce from any liability and damages and costs
(including reasonable costs and attorneys' fees) arising out of or relating
to advertising placed by 24/7 Media using the AdForce service, including,
without limitation, failure of the AdForce service or the Client, content,
libel, invasion of privacy, and rights of publicity; provided: (i) AdForce
promptly notifies 24/7 Media of such claims; (ii) 24/7 Media has sole
control of the defense and settlement of such claims and is not responsible
for any settlement that it does not approve in writing; and (iii) AdForce
renders all assistance required.

(b) AdForce. AdForce shall indemnify and hold harmless 24/7 Media
from any third party Claims and liabilities for infringement arising out of
or relating to 24/7 Media's use of the Client pursuant to this Agreement,
provided that: (i) 24/7 Media promptly notifies AdForce of such claims; (ii)
AdForce has sole control of the defense and settlement of such claims and is
not responsible for any settlement that it does not approve in writing; and
(iii) 24/7 Media renders all assistance required. If an injunction is
entered against 24/7 Media's use of the Client, AdForce will, at its option,
(A) obtain a license permitting such use, (B) modify the Client to avoid the
infringement, or (C) if it cannot reasonably do either of the foregoing,
terminate 24/7 Media's access to the Client and this Agreement.

8. Warranty. 24/7 Media warrants that it is free to enter into this
Agreement and that this Agreement constitutes the valid and binding
obligation of 24/7 Media, enforceable in accordance with its terms, AdForce
warrants that it is free to enter into and perform this Agreement and,
except for events beyond AdForce's control, including but not limited to
Internet service disruptions or access outages and other events of force
majeure, (a) the AdForce service will conform in all material respects to
the functionality described in Sections 1 and 2; (b) AdForce either owns,
has, or will otherwise acquire the right (and will, during the term hereof
maintain such right) to use all hardware and software components of the
AdForce service, and will not infringe on any United States federal or state
intellectual property rights of any third party.

Y2K. AdForce warrants to 24/7 that without any requirement for any human
intervention whatsoever (i) the overall operation, functions and performance
of the AdForce system will employ in connection with its obligations under
this Agreement (the "AdForce System") will be unaffected in any way by any
date data, date setting, date value, date input or other date related data
and any combination thereof (collectvely with records using such data, the
"Date Plan"), whether falling on, after or before September 9, 1999,
December 31, 1999 or January 1, 2000 (collectively, the "Millennium Dates");
(ii) the AdForce System will correctly and accurately, without human
intervention, store, define, merge, archive, display, recognize, return,
manage, extract support, calculate,

Page 2 of 7
Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.

<PAGE>
AdForce(TM) Service Agreement 24/7 Media Agreement

compare, manipulate interpret, sort, accept, sequence, tag, present and
conduct any other operation or process on, any Date Data, will not
abnormally end as a result of Date Data, will not result in or cause logical
or mathematical errors or inconsistencies in any user-interface
functionalities or otherwise, and will move backwards and forwards across,
Date Data without error relating to or occasioned by Date Data; and (iii)
the AdForce System shall correctly accommodate same century end
multi-century formulas in data calculations, shall process two digit century
Date Data and the fields assigned special values in a manner that correctly
resolves any ambiguities as to intended century date and shall correctly
reflect each century in Date Data values and Date Data interface values, and
the AdForce System does and will have the ability to properly interface with
internal and external applications or systems of third parties with whom
AdForce exchanges data electronically, including vendors, suppliers,
customers, banks and governmental agencies. AdForce warrants to 24/7 that
the AdForce System shall conform to the warranties in this Section from and
at all times during the term of this Agreement, before, on or after a
Millennium Date, regardless of whether 24/7 uses the AdForce System on,
before or after a Millennium Date,

EXCEPT AS SPECIFIED IN THIS SECTION 8, ADFORCE HEREBY DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY AND ALL
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT, IN CONNECTION WITH THIS AGREEMENT.

9. Liability. EXCEPT IN CASES OF WILLFUL MISCONDUCT, NEITHER PARTY WILL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR EXEMPLARY DAMAGES, EVEN IF
IT HAS BEEN WARNED OF THE POSSIBILITY OF SUCH DAMAGES.

10. Termination. The term of this Agreement is as described in Exhibit A. Either
party may terminate this Agreement in the event that the other party ceases
to do business, or undergoes a bankruptcy or insolvency proceeding, or an
assignment for the benefit of creditors. Upon the expiration or termination
of this Agreement for any reason, the parties will use best efforts to
effect an orderly transition of 24/7 Media to another ad serving solution,
and each party will return all Confidential Information of the other party
in its possession. All accrued payment obligations of 24/7 Media shall
survive expiration or termination of the Agreement, as shall the parties'
rights end obligations under Sections 4 through 9, Sections 11 through 13,
and Sections 15 and 16.

11. Assignment. This Agreement is not assignable or transferable by either
party without the prior written consent of the other party, except that a
party may assign the Agreement (a) by operation of law, or (b) to any
entity acquiring substantially all of assignor's assets. 24/7 Media
specifically consents to AdForce's March/April 1999 reincorporation into
Delaware.

12. Payment Terms. 24/7 Media shall pay to AdForce the dollar amounts determined
from the pricing schedule set forth in Exhibit A within fifteen (15) days
from date of invoice. All payments to AdForce shall be remitted in U. S.
Dollars. Fees for the AdForce service are subject to change at the
expiration of the initial Term and upon renewal of this Agreement.

13. General. This Agreement is the complete and exclusive statement of the
mutual understanding of the parties and supersedes and cancels all previous
written and oral agreements and communications relating to the subject
matter of this Agreement. No failure or delay in exercising any right
hereunder will operate as a waiver thereof, nor will any partial exercise of
any right or power hereunder preclude further exercise. Any waivers or
amendments shall be effective only if made in writing. If any provision of
this Agreement shall be adjudged by any court of competent jurisdiction to
be unenforceable or invalid, that provision shall be limited or eliminated
to the minimum extent necessary so that this Agreement shall otherwise
remain in full force and effect and enforceable. This Agreement shall be
governed by the law of the State of New York without regard to the conflicts
of law provisions thereof. The prevailing party in any action to enforce
this Agreement will be entitled to recover its attorney's fees and costs in
connection with such action. Nothing contained herein shall be construed as
establishing a partnership, joint venture, employment or other business
relationship between the parties hereto other then that of independent
contractors. This Agreement may be executed in counterparts.

14. Service Guarantees: 24/7 Media may demand "make-goods," (free ad deliveries
for ads not delivered during down times exceeding the allowable amounts)
for: (i) failure of ad delivery to maintain * up time, calculated on a
calendar monthly basis, for * (ii) failure of the AdForce administration
system to maintain * up time, excluding reasonable scheduled downtime and
events beyond AdForce's reasonable control, calculated on a calendar monthly
basis, for * consecutive calendar months; (iii) failure to maintain
average AdForce ad selector internal response time for ad delivery at equal
to or less than *, calculated on a calendar monthly basis, for *; (iv)
persistent documented failure of AdForce's customer support to 24/7 Media
over *; and (v) AdForce's failure to provide technical support for any
period in excess of *.
Page 3 of 7
Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.
<PAGE>

AdForce(TM) Service Agreement 247 Media Agreement

15. Non-solicitation. For a period commencing on the date hereof and terminating
* after the end of the Term, neither party may solicit employees of the
other, nor hire any employees or ex-employees of the other within *
following termination of employment with the other party. Further, during
the Term hereof, AdForce agrees not to solicit Web sites in the 24/7 network
for any purpose, including the providing of ad serving services or for
purchasing registration or other data, without the written consent of 24/7
Media.

16. Dispute Resolution. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled exclusively by
arbitration, and neither party shall under any circumstance cease
performance of its obligations under the Agreement notwithstanding any
alleged breach by the other. Such arbitration shall be conducted before a
single arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. The arbitration shall take
place in Palo Alto, California, if commenced by 24/7 Media and in New York,
New York, if commenced by AdForce. Judgment may be entered on the
arbitrator's award in any court having jurisdiction, and the parties
irrevocably consent to the jurisdiction of the California and New York
courts for that purpose. The parties waive personal service in connection
with any such arbitration; any process or other papers under this provision
may be served outside California or New York by registered mail, return
receipt requested, or by personal service, provided a reasonable time for
appearance or response is allowed. The decision of the arbitrator shall be
final and binding on the parties. The parties shall equally divide all costs
of the American Arbitration Association and the arbitrator. Each party shall
bear its own legal fees in any dispute. The arbitrator may grant injunctive
or other relief.

17. International Support. AdForce is presently serving ads for 24/7 Media
Europe Ltd. out of its data center in California pursuant to a contract with
Euroserve Media GmbH., AdForce will make every commercially reasonable
effort to ensure adequate support of 24/7 Media in Europe. AdForce shall
supply such services under direct contract with 24/7 Media Europe Ltd. and
shall provide such services on a most favored nation basis for contracts
entered into for ad delivery in Europe.

18. Publicity. AdForce and 24/7 agree to consult with one another prior to
making any disclosures, publicly or privately, about this Agreement. AdForce
and 24/7 agree that neither party shall issue a press release announcing
this Agreement

IN WITNESS WHEREOF, the parties have executed this Agreement as of January 1,
1999 (the "Effective Date").

By: /s/ C. Andrew Johns Accepted: /s/ Rex S. Jackson
------------------------- ---------------------
Print Name: C. ANDREW JOHNS Name: REX S. JACKSON
----------------- ------------------------
Title: EVP & CFO Title: VP/GC
---------------------- -----------------------
Company: 24/7 Media, Inc. Imgis, Inc., d/b/a "AdForce"

Page 4 of 7
Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.

<PAGE>

AdForce(TM) Service Agreement 24/7 Media Agreement

Exhibit A

Reporting and Targeting

Reports Available - The following reports are currently available in the

AdForce service:
AdForce Reporting

The following reports are currently available with all levels of the AdForce
service:
<TABLE>
<CAPTION>
Network Reports Website Reports Advertiser Reports
- --------------------------------------------------------------------------------
<S> <C> <C>
Daily Campaign Details Activity by Advertiser Campaign On-line Summary
Daily Campaign Summary Activity by Area Code Summary by Area Code
Monthly Billing Report Activity by Browser Summary by Banner
Summary by Advertiser Activity by Content Unit Summary by Browser
Summary by Area Code Activity by Country Summary by Category
Summary by Browser Activity by Date Summary by Country
Summary by Category Activity by Domain Summary by Date
Summary by Country Activity by Keyword Summary by Domain
Summary by Date Activity by Hour Summary by Hour
Summary by Domain Activity by Operating System Summary by Operating System
Summary by Hour Activity by Pay Type Summary by Service Provider
Summary by Operating System Activity by Service Provider Summary by SIC Code
Summary by Payment Type Activity by SIC Code Summary by Website
Summary by Service Provider Website Revenue Campaign Summary
Summary by SIC Code Monthly Billing Report
Summary by Website
Website Revenue

All other reports currently provided by AdForce to 24/7 Media.

AdForce Targeting Capabilities - The AdForce service includes targeting on the following
parameters, when AdForce databases allow the parameter to be resolved:

o Browser Type - Different campaigns can be delivered to visitors of different browsers.
o Operating System - Different campaigns can be delivered to visitors with different operating systems.
o Domain Type - Different campaigns can be delivered to visitors from different domain types.
o Service Provider - Different campaigns can be delivered to visitors with different ISPs.
o Telephone Area Code - Different ads can be delivered to visitors in different area codes.
o SIC Code - Different ads can be delivered to visitors working for companies with different SIC codes.
o Country - Different campaigns can be delivered to visitors from different countries.
o Frequency - An advertisement can be shown a "specified number of times to each visitor.
o Sequence - A series of advertisements can be shown In sequence to a visitor.
o Keywords - Advertisements can be targeted on the basis of a search word or phrase.
o Site Data - Ads can be targeted on the basis of a site's data (i.e., with registered users).
o Day/Date/Time of Day - Ads can be scheduled to run during specific times and on specific days.
o Content Area - Ads can be targeted to a specific area of a site.
</TABLE>

Page 5 of 7
Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.

<PAGE>

AdForce(TM) Service Agreement 24/7 Media Agreement

Term; Level of Service. The initial term ("Term") shall commence on the
Effective Date and end on the fifth (5th) anniversary of such data;
provided, however, that at any time 24/7 Media may terminate this Agreement
for any reason, or for no reason, by giving AdForce * prior written notice
of its election to terminate, 24/7 Media may renew this Agreement for
subsequent * by giving written notice to AdForce within * from expiration of
the Term, or any renewal term.

24/7 Media agrees to pay AdForce for all Impressions delivered through the
AdForce service after the Effective Date at the applicable rate set forth
below, which shall be subject to change upon renewal of this Agreement.

AdForce Service
---------------------------------------
Campaign Management Scheduling
Features Delivery
Inventory Forecast
Reporting
Targeting
---------------------------------------
Auditing Free monthly audit
---------------------------------------

CPMs for Ad Delivery

o Beginning April 1, 1999: Buttons (ad size limit 10 kilobytes) will be *
CPM. House ads and unpaid ads that are redirected will be * CPM, subject to
a maximum cap of * of volume in any given month; any excess will be billed
at * CPM. Unpaid ads that are served directly will be * CPM, subject to
a maximum cap of * of volume in any given month; any excess will be billed
at * CPM.

o AdForce pricing and fees for processing and delivering demographically
targeted advertising via TargetForce or for AdForce's TrackForce product are
not included in the above pricing and will be covered in a separate
agreement.

o AdForce will use commercially reasonable efforts to accommodate 24/7 Media's
requests for custom reports. If the parties agree to one or more custom
reports, AdForce shall develop such report(s) at the rate of * per hour,
plus direct out-of-pocket expenses. Should 24/7 Media make a request for any
such custom work, AdForce shall first prepare a written quote for such work
for 24/7 Media's review and approval. There may also be additional charges
for other reports that AdForce adds to its service in the future.

o At 24/7 Media's request, AdForce will supply on-site training to 24/7 Media
personnel at the rate of * per day, plus reasonable travel and
out-of-pocket expenses.

o An additional * per thousand Impressions will be applied for each 10
kilobytes (or fraction thereof) that the average size of advertisements
placed by 24/7 Media through the AdForce service in a calendar month exceeds
20 kilobytes.

Page 6 of 7
Confidential--Not to be shared outside 24/7 Media or AdForce, Inc.

CROSS PROMOTION AGREEMENT

THIS CROSS PROMOTION AGREEMENT, dated April 5, 1999 (the "Agreement"),
is made between 24/7 Media, Inc. ("24/7"), a Delaware corporation with an
address at 1250 Broadway, 27th floor, New York, NY 10001 and TechWave Inc.
("TW"), a Washington corporation with an address at 411 First Avenue South,
Suite 200 N, Seattle, WA 98104.

WHEREAS, 24/7 operates networks of Internet Web sites (collectively, the
"24/7 Network") for which it solicits advertising, promotions and direct
marketing to generate revenues for the Web sites affiliated with the 24/7
Network (the "24/7 Affiliates"), places advertising, promotions and direct
marketing on the 24/7 Network for advertisers and agencies (the "24/7
Advertisers") and, through its Sift, Inc. subsidiary, offers customer
relationship management and other e-mail based services (collectively, the "24/7
Services");

WHEREAS, TW currently provides e-commerce technology and enabling
services; online store development, creative design services, product
fulfillment and online sales and marketing to third parties ("TW Affiliates")
for the establishment and promotion of transactional capabilities through the
Internet (the "TW Services");

WHEREAS, 24/7 and TW wish to cross promote each other's services to
their customer bases on a most favored nation basis and to jointly promote their
services to prospective new customers; for purposes of this Agreement, "Most
Favored Nation" shall mean that services are offered to a party on terms and
conditions, including price, that are at least as favorable as those offered to
other parties that are comparable in size and scope;

1. Promotion and Provision of TW Services

A. 24/7 agrees to promote to 24/7 Affiliates the TW Services. 24/7 shall
make an initial direct marketing solicitation of the 24/7 Affiliates and shall
provide reasonable additional support as may be requested by TW from time to
time;

B. TW agrees to provide special incentives to 24/7 Affiliates in order
to induce them to avail themselves of the TW Services; these special incentives
will be mutually agreed upon by both 24/7 and TW and are contemplated to be
discounts and similar arrangements;

C. TW shall be solely responsible for development of marketing materials
relating to TW Services.

D. 24/7 shall be responsible for the mailing costs associated with the
TW Services as it is offered to 24/7 Affiliates.

E. TW shall be solely responsible for providing all TW Services,
including customer service in respect of the TW Services;

F. TW shall be deemed the seller of TW Services pursuant hereto and
shall be solely responsible for collecting and remitting to the appropriate
jurisdiction any and all

1
<PAGE>

applicable sales or use or other taxes and shall fully indemnify and hold 24/7
harmless for any sales, use or similar transaction taxes that are assessed,
whether against 24/7 or TW, with respect to the sale of TW Services;

G. TW agrees to pay 24/7 20% of all gross revenue generated and
collected by TW during the term of this Agreement from the sale of TW Services
to 24/7 Affiliates and 24/7 Advertisers. TW agrees to provide 24/7 within 45
days after the end of each month with (i) a report showing all 24/7 Affiliates
for which TW provided TW services in the prior month and the revenue generated
from such TW Services and (ii) payment equal to 24/7's appropriate share of all
revenue collected in the prior month.

H. The revenue sharing payment contemplated by Section 1.G. shall apply
only in respect of existing and after acquired 24/7 Affiliates and 24/7
Advertisers who are not currently also TW Affiliates at the time they are
acquired by 24/7. A list of all current 24/7 Affiliates is attached hereto as
Exhibit 1. A list of all current TW Affiliates is attached hereto as Exhibit 2.
TW agrees not to solicit any current or future 24/7 Affiliate or 24/7 Advertiser
except pursuant to a joint promotion prepared by both parties pursuant hereto.

2. Promotion and Provision of 24/7 Services

A. TW agrees to promote to TW Affiliates the 24/7 Services. TW shall
make an initial direct marketing solicitation of the TW Affiliates and shall
provide reasonable additional support as may be requested by 24/7 from time to
time;

B. 24/7 agrees to provide special incentives to TW Affiliates in order
to induce them to avail themselves of the 24/7 Services; these special
incentives will be mutually agreed upon by both 24/7 and TW and are contemplated
to be discounts and similar arrangements.

C. 24/7 shall be solely responsible for development of marketing
materials relating to 24/7 Services.

D. TW shall be responsible for the mailing costs associated with the
24/7 Services as it is offered to TW Affiliates.

E. 24/7 shall be solely responsible for providing all 24/7 Services,
including customer service in respect of the 24/7 Services;

F. 24/7 shall be deemed the seller of 24/7 Services pursuant hereto and
shall be solely responsible for collecting and remitting to the appropriate
jurisdiction any and all applicable sales or use or other taxes and shall fully
indemnify and hold TW harmless for any sales, use or similar transaction taxes
that are assessed, whether against 24/7 or TW, with respect to the sale of 24/7
Services;

G. 24/7 agrees to pay TW a percentage of all revenue generated and
collected during the term of this Agreement from the sale of 24/7 Services to TW
Affiliates as follows: (i) E-mail services - 15% of gross revenue; (ii)
advertising and sponsorship placements - 10% of gross advertising spending (only
in instances where no advertising agency commission is earned) per Affiliate;
(iii) Sale of product by TW Affiliates in transactional banners or equivalents
run on 24/7 networks - 15% of gross spread, defined as gross revenue minus cost
of product and other third party costs; (iv) Transactions for sale of product
not by TW Affiliates in transactional

2
<PAGE>

banners or equivalents run on 24/7 networks - $.40 per transaction with limited
fraud check service; additional amounts will be paid for enhanced fraud check
services, on a per transaction basis, which will be determined on an as needed
basis with most favored nation pricing for 24/7; this provision begins at the
time that TW begins providing back-end transaction processing services; (v)
Advertising Representations of Network Sites - a finder's fee of (a) $500 per
Web site that generates at least 1mm ad impressions per month; (b) $250 per Web
site that generates between 500K - 1mm ad impressions per month; and (c) $50 per
Web site that generates between 100k - 500K ad impressions per month. This will
be determined after Affiliate is represented by 24/7 for a period of 30 days to
verify impression levels. 24/7 agrees to provide TW within 45 days after the end
of each month with (i) a report showing all TW Affiliates for which 24/7
provided 24/7 services in the prior month and the revenue generated from such
24/7 Services and (ii) payment equal to TW's appropriate share of all revenue
collected in the prior month.

H. The revenue sharing payment contemplated by Section 2.G. shall apply
only in respect of existing and after acquired TW Affiliates who are not
currently also 24/7 Affiliates or 24/7 Advertisers at the time they are acquired
by TW. A list of all current TW Affiliates is attached hereto as Exhibit 2. A
list of all current 24/7 Affiliates and 24/7 Advertisers is attached hereto as
Exhibit 1. 24/7 agrees not to solicit any current or future TW Affiliate except
pursuant to a joint promotion prepared by both parties pursuant hereto.

3. Branding.

A. 24/7 agrees to co-brand its Click2Buy transactional banner service
with the "ShopNow" logo in a manner to be mutually agreed upon and to direct
traffic to ShopNow.com upon completion of the Click2Buy transaction.

B. TW agrees to co-brand ShopNow.com with a Click2Buy logo (or other
branding as 24/7 chooses) in a manner to be mutually agreed upon.

4. Additional Covenants.

A. 24/7 agrees to make available to TW and to TW Affiliates reasonable
amounts of advertising inventory on the 24/7 Network, on a cpm, cpc and
"default" basis, at "most favored nation" rates, and to make available at least
the amount of the guaranteed spend by TW pursuant to 4.B. on a non pre-emptible
basis.

B. TW agrees to purchase advertising on the 24/7 Networks at an
aggregate minimum cost of $1,000,000 during each twelve (12) month period of
this Agreement (reduced proportionately for any partial period due to early
termination of this Agreement);

5. Marketing Programs. 24/7 and TW will jointly define marketing programs and
budgets through written marketing plans updated no less frequently than every
six (6) months. In the event of a disagreement, 24/7 shall have the final
controlling rights on all marketing and promotion of the joint services
(including but not limited to presentation, copy, format, design, script
development, etc.) subject to non-contravention of existing agreements, laws or
regulations, and subject to reasonable limits on costs to be incurred by TW.

6. Participation in Profilz and other Co-op Databases.

3
<PAGE>

A. 24/7 agrees to grant TW access, on a most favored nation price basis,
to 24/7 Profilz to enable TW to use Profilz for its own internal purposes or to
offer Profilz to TW Affiliates to enhance their online advertising campaigns;

B. 24/7 also agrees to offer TW access on a most favored nation pricing
basis to any other database services or technology that 24/7 develops during the
Term;.

C. Subject to contractual and legal restrictions between TW and TW
Affiliates, TW agrees to provide all available registration and transactional
information to the Profilz database; 24/7 shall compensate TW for such
registration data on a Most Favored Nation basis; TW will have access to
contributed names and information that has been appended to it; TW will be able
to participate in Profilz and other 24/7 Co-op Database initiatives that are
created during the Term of this Agreement.

7. Exclusivity

A. TW hereby grants 24/7 the sole third party right to sell advertising,
sponsorships and promotions on all web sites operated by TW (Buysoftware.com,
shopnow.com, etc.) during the Term. This exclusivity shall expire with respect
to any one web site operated by TW (Buysoftware.com, shopnow.com, etc.) in the
event 24/7 fails to achieve an overall CPM of $2 or more on such web site for
three consecutive months. TW may continue to sell advertising on up to 50% of
the advertising inventory on the sites using internal sales force. 24/7 and TW
will mutually agree on what part of the sites represent the 50% and may adjust
minimum CPM accordingly.

B. TW hereby grants 24/7 the sole third party right to sell advertising,
sponsorships and promotions on all TW affiliate sites. 24/7 agrees and TW
acknowledges that TW cannot prohibit TW affiliates from directly engaging other
third parties for ad representations.

C. TW hereby grants to 24/7 the sole third party right to offer ad
placement services to TW affiliates. 24/7 agrees and TW acknowledges that TW
cannot prohibit TW affiliates from engaging other third parties for ad
placements.

D. TW hereby appoints 24/7 as the premier provider of email services on
a service bureau, CRM and list rental basis to TW and TW Affiliates. Such
exclusivity is based on TW receiving business terms substantially equivalent to
those offered by third parties and shall not preclude TW from sending emails
itself; 24/7 acknowledges that TW is party to existing agreements that shall be
phased out over 180 days;

E. 24/7 agrees not to engage any of the following direct competitors of
TW as a co-marketing partner for e-commerce technologies offered by TW: Digital
River, Cybersource, PaymentTech, Go2Net, Imall, CyberCash, First USA. Also, TW
shall have a right of first refusal on any other partnership with 24/7 for
e-commerce technology or services from other third parties assuming TW provides
similar products and services in terms of functionality and quality;

F. 24/7 agrees to extend this Agreement to include non-U.S. networks
affiliated with 24/7, provided that 24/7 has substantial control of such
non-U.S. networks and presuming that TW establishes non-U.S. operations that are
on a par in terms of quality with the TW U.S. operations.

4
<PAGE>

8. Term and Termination

A. The term of this Agreement (the "Term") shall commence on the
Effective Date and shall continue until terminated by either party pursuant to
this Section 8.

B. Either party may terminate the Agreement by giving written
notice no earlier than two years and eight months after the Effective Date.
Termination will be effective four (4) months after the date on which written
notice is given, as determined under the provisions of Section 19 below, to the
other party.

C. Notwithstanding Section 8.B. above, this Agreement may be
terminated by either party on 60 days' prior written notice to the other party
upon the occurrence of a material breach by the other party of any covenant,
duty or undertaking herein, which material breach continues without cure for a
period of 30 days after written notice of such breach from the non-breaching
party to the breaching party.

D. Notwithstanding 8.B above, in the event (i) of a sale or distribution
of all or substantially all of the assets of TW or a sale to a single party of
more than 50% of the voting stock of TW or (ii) that TW or its affiliates begins
to compete directly with the 24/7 Services, 24/7 may, in its sole discretion,
terminate this Agreement immediately. In the event that 24/7 terminates this
Agreement pursuant to the preceding sentence of this Section, TW shall reimburse
24/7 for reasonable out-of-pocket expenses incurred in transferring the
Agreement, at 24/7's election, to another e-commerce vendor. With 24/7's
approval, which shall not be unreasonably withheld, TW may negotiate transfer
expenses on behalf of 24/7 with another e-commerce vendor of 24/7's choosing to
ensure the reasonableness of the expenses. With 24/7's approval, TW may provide
components of the transfer.

E. Either party may terminate this Agreement with immediate effect: (i)
upon the institution by the other party of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by the other party to institution of
bankruptcy or insolvency proceedings against it or the filing by the other party
of a petition or answer or consent seeking reorganization or release under the
Federal Bankruptcy Code, or any other applicable Federal or state law, or the
consent by the other party to the filing of any such petition or the appointment
of a receiver, liquidator, assignee, trustee, or other similar official of the
other party or of any substantial part of its property, or the making by the
other party of an assignment for the benefit of creditors, or the admission in
writing by the other party of an assignment for the benefit of creditors, or the
admission in writing by the other party of its inability to pay its debts
generally as they become due or the taking of corporate action by the other
party in furtherance of any such actions; (ii) if, within 60 days after the
commencement of an action against the other party seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar relief under any
present or future law or regulation, such action shall not have been dismissed
or all orders or proceedings thereunder affecting the operations or the business
of the other party stayed, or if the stay of any such order or proceeding shall
thereafter be set aside; or if, within 60 days after the appointment without the
consent or acquiescence of the other party of any trustee, receiver or
liquidator or similar official of the other party, or of all or any substantial
part of the property of the other party, such appointment shall not have been
vacated.
F. Notwithstanding Section 8.A above, this Agreement will terminate if
the Equity Exchange set forth in Section 9 of this Agreement is not closed
within 10 days of execution of this Agreement.

5
<PAGE>

9. Stock Purchase.

A. Pursuant to the Equity Exchange Agreement, a copy of which is
attached hereto, within 10 days after the Effective Date, TW shall issue to 24/7
4,300,000 shares of preferred stock of TW with a market value of $30,100,000
(based on a pre-investment fully diluted value of TW of approximately
$150,000,000). The number of all shares issued shall represent approximately
19.8% of outstanding stock of TW after issuance.

B. On the effective date of the Equity Exchange Agreement, TW shall
deliver to 24/7 shares of preferred stock of TW with a value of $22,850,000 and
shall hold the remainder in escrow (the "First Closing"). As consideration for
this issue, on the effective date of the Equity Exchange Agreement, 24/7 shall
deliver to TW, pursuant to a separate Equity Exchange Agreement, shares of 24/7
with a fair market value of $22,850,000, with such fair market value to be
determined by reference to the closing price per share of common stock of 24/7
reported by Nasdaq for the five trading days preceding the date of this
agreement.

C. Should 24/7 complete its public offering of shares of common stock
currently in registration or prior to May 14, 1999 (which date may be extended
by mutual consent), then within five business days of the closing of such public
offering, 24/7 shall transfer to TW the sum of $5,000,000 and shall receive in
exchange $5,000,000 worth of preferred stock of TW (based on the valuation on
the date of this agreement ) held in escrow. Should 24/7 not complete such
public offering prior to May 14, 1999, then 24/7 and TW shall promptly schedule
a second closing at which 24/7 shall issue to TW shares of common stock of 24/7
with a market value of $5,000,000 (based on the closing price for the five
trading days preceding the date of this agreement) and TW shall issue to 24/7
shares of preferred stock of TW with a market value of $5,000,000 (based on the
valuation on the date of this agreement).

D. Promptly after the execution hereof, 24/7 and TW shall commence due
diligence and negotiations of an acquisition of Card Secure, Inc. (a majority
owned subsidiary of 24/7) by TW. By May 31, 1999, TW and 24/7 shall determine
whether or not the transaction shall occur and the relevant terms. Should the
parties agree not to consummate the Card Secure transaction or consummate it
with an agreed upon valuation for 24/7's interest in Card Secure of less than
$2,250,000, then TW shall issue to 24/7 shares of preferred stock of TW with a
market value of $2,250,000 (based on the valuation on the date of this
agreement) and 24/7 shall issue to TW shares of common stock of 24/7 with a
market value of $2,250,000 (based on the closing price for the five trading days
preceding the date of this agreement) minus the agreed upon valuation of Card
Secure, Inc. in any transaction.

E. In addition, TW shall issue to 24/7 five-year warrants to purchase
shares of common stock of TW equal to 20% of the shares of common stock issuable
upon conversion of the preferred stock that it receives pursuant to paragraphs
B, C and D hereof at an exercise price equal to the conversion price per share.
Such warrants shall contain a "net exercise" feature.

F. 24/7 Media, upon the execution of the Equity Exchange Agreement,
achieving an ownership interest in TW, 24/7 Media will receive one (1) seat on
the TW Board of Directors.

10. Intellectual Property Ownership.

<PAGE>

In the event any inventions, methods, techniques, works of authorship, computer
software, computer upgrades, computer programs, service providers, vendor
information, training materials, telemarketing scripts, e-mail scripts, computer
screens, reports, data, any other proprietary or confidential information is
made, created, developed or written hereunder and other intellectual property
created, developed or written in accordance with the activities contemplated
hereunder ("Developed Material") is, (i) fully paid for by 24/7, such Developed
Material shall be deemed the sole property of 24/7 and any use thereof by TW
shall require consent thereto by 24/7; (ii) is substantially paid for by 24/7
and TW has had material creative or developmental input therein (including
without limitation provision of proprietary or confidential information), then
such Developed Material shall be deemed the property of 24/7 with TW having a
perpetual non-exclusive, royalty-free right of use thereof; (iii) is
substantially paid for by TW and 24/7 has had material creative or developmental
input therein (including without limitation provision of proprietary or
confidential information), then such Developed Material shall be deemed the
property of TW with 24/7 having a perpetual non-exclusive, royalty-free right of
use thereof; and (iv) is fully paid for by TW then such Developed Material shall
be deemed the sole property of TW and any use thereof by 24/7 shall require
consent thereto by TW. Nothing herein shall be construed to restrict, impair or
deprive TW or 24/7 of any of their respective rights or proprietary interests in
technology or products that existed prior to and independent of the performance
of their respective obligations hereunder.

11. Intellectual Property Infringement.

Each party agrees to defend and/or handle at its own expense, any claim or
action against the other party or its affiliates (including without limitation,
its parent, subsidiaries, officers and directors) for any actual or alleged
infringement of any intellectual or industrial property right, including,
without limitation, trademarks, service marks, patents, copyrights,
misappropriation of trade secrets or any similar proprietary rights, based upon
the Agreement or any portion thereof furnished or utilized by such party or
based on the other party's use thereof. Each party further agrees to indemnify
and hold the other party and its affiliates harmless from and against any and
all liabilities, losses, costs, damages and expenses (including reasonable
attorneys' fees) associated with any such claim or action. Each indemnifying
party shall have the sole right to conduct the defense of any such claim or
action and all negotiations for its settlement or compromise, unless otherwise
mutually agreed to in writing.

12. Publicity. Except as may be required by law, no party hereto shall issue
advertising, promotional activity, press or publicity release relating to this
Agreement without securing the prior written consent of such other party.

13. Confidentiality. 24/7 and TW covenant to each other that neither party shall
disclose to any third party (other than its employees and directors, in their
capacity as such, and the employees and directors of any affiliate on a need to
know basis so long as they are bound by the terms of this Agreement) any
information regarding the terms and provisions of this Agreement or any
confidential information which has been identified as such by the other Party
hereto except (i) to the extent necessary to comply with any law or valid order
of a court of competent jurisdiction (or any regulatory or administrative
tribunal), in which event the party so complying shall so notify the others as
promptly as practicable (and, if possible, prior to making any disclosure) and
shall seek confidential treatment of such information, if available; (ii) as
part of its normal reporting or review procedure to its auditors or its
attorneys, as the case may be, so long as they are notified of the provisions of
this Agreement; (iii) in order to enforce its rights pursuant to this Agreement;
(iv) in connection with any filing with any governmental body or as otherwise
required by law, including the federal securities laws and any applicable rules
and

7
<PAGE>

regulations of any stock exchange or quotation system; and (v) in a confidential
disclosure made in connection with a contemplated financing, merger,
consolidation or sale of capital stock of 24/7 or TW. Information which is or
should be reasonably understood to be confidential or proprietary includes, but
is not limited to, information about the 24/7 Network, sales, cost and other
unpublished financial information, product and business plans, projections,
marketing data, and sponsors but shall not include information (a) already
lawfully known to or independently developed by a party, (b) disclosed in
published materials other than through a breach of these confidentiality
provisions, (c) generally known to the public other than through a breach of
these confidentiality provisions, (d) lawfully obtained from any third party or
(e) required to be disclosed by law.

14. Indemnification. TW shall indemnify and hold harmless 24/7, its advertisers
and other suppliers and any related third parties, against and in respect of any
and all claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities, and
legal and other expenses (including reasonable legal fees and expenses of
attorneys chosen by 24/7) as and when incurred, arising out of or based upon any
act or omission or alleged act or alleged omission by TW in connection with the
acceptance of, or the performance or non-performance by TW of, any of its duties
under this Agreement or arising from the breach by TW of its warranties,
representations or covenants contained in this Agreement. 24/7 shall indemnify
and hold harmless the TW, against and in respect of any and all claims, suits,
actions, proceedings (formal and informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, and legal and other expenses
(including reasonable legal fees and expenses of attorneys chosen by TW) as and
when incurred, arising out of or based upon any act or omission or alleged act
or alleged omission by 24/7 in connection with the acceptance of, or the
performance or non-performance by 24/7 of, any of its duties under this
Agreement or arising from the breach by 24/7 of its warranties, representations
or covenants contained in this Agreement.

15. Representations, Warranties & Covenants

A. Each party hereto represents and warrants that it has full power and
authority to execute this Agreement and to take all actions required by, and to
perform the agreements contained in, this Agreement, and that the each party's
respective obligations under this Agreement do not conflict with its obligations
under any other agreement by which the such party is bound.

B. Each party represents, warrants and covenants that the performance of its
respective obligations under this Agreement complies and will comply with all
applicable federal, state, local and foreign laws and regulations.

16. No Poaching. TW agrees that, during the Term and for a period of one year
from the end of the Term, neither it nor its affiliates will solicit or recruit
the services of any 24/7 employees, or hire any such employees. 24/7 agrees
that, during the Term and for a period of one year from the end of the Term,
neither it nor its affiliates will solicit or recruit the services of any TW
employees, or hire any such employees

17. No Waiver. This Agreement shall not be waived, modified, assigned or
transferred except by a written consent to that effect signed by TW and 24/7. TW
agrees that if it assigns or transfers this Agreement, it shall cause such
successor, assignee, or transferee to assume all of the TW's obligations
hereunder. Any assignment, transfer, or assumption shall not relieve the TW of
liability hereunder.

8
<PAGE>

18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed therein, without regard to principles of conflicts of laws.

19. Notices. All notices required or permitted to be given hereunder shall be in
writing and either hand-delivered, telecopied, mailed by certified first class
mail, postage prepaid, or sent via electronic mail to the other party or parties
hereto at the address(es) set forth below. A notice shall be deemed given when
delivered personally, when the telecopied notice is transmitted by the sender,
three business days after mailing by certified first class mail, or on the
delivery date if delivered by electronic mail.

20. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.

21. Force Majeure. Neither party shall be held liable or responsible to the
other party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including but not limited to fire, floods,
failure of communications systems or networks, embargoes, war, acts of war
(whether war is declared or not), insurrections, riots, civil commotion,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority or the other party; provided,
however, that the party so affected shall use reasonable commercial efforts to
avoid or remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed. Either
party shall provide the other party with prompt written notice of any delay or
failure to perform that occurs by reason of force majeure. The parties shall
mutually seek a resolution of the delay or the failure to perform as noted
above.

22. Severability. Should one or more provisions of this Agreement be or become
invalid, the parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their economic
effect are sufficiently similar to the invalid provisions that it can be
reasonably assumed that the parties would have entered into this Agreement with
such valid provisions. In case such valid provisions cannot be agreed upon, the
invalidity of one or several provisions of this Agreement shall not affect the
validity of this Agreement as a whole, unless the invalid provisions are of such
essential importance to this Agreement that it is to be reasonably assumed that
the parties would not have entered into this Agreement without the invalid
provisions.

23. Dispute Resolution. Any controversy or claim arising out of or relating to
the Agreement, or the breach thereof, shall the subject of resolution efforts by
the Chief Executive Officers and General Counsels of each party for at least 30
days prior to any action being commenced. Any unresolved disputes shall be
settled exclusively by arbitration. Such arbitration shall be conducted before a
single arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. If arbitration is commenced by
24/7, it shall take place in Seattle, Washington. If arbitration is commenced by
TW, it shall take place in New York, New York. Judgment may be entered on the
arbitrator's award in any court having jurisdiction, and the parties irrevocably
consent to the jurisdiction of the courts of Washington and New York for that
purpose. The parties waive personal service in connection with any such
arbitration; any process or other papers under this provision may be served
outside Washington or New York by registered mail, return receipt requested, or
by personal service, provided a reasonable time for appearance or response is
allowed. All decisions

9
<PAGE>

of the arbitrator shall be final and binding on the parties. The parties shall
equally divide all costs of the American Arbitration Association and the
arbitrator. Each party shall bear its own legal fees in any dispute. The
arbitrator may grant injunctive or other relief.

24. Independent Contractors. 24/7 Media and TW shall each act as independent
contractors. Neither party shall exercise control over the activities and
operations of the other party. 24/7 Media and TW shall each conduct all of its
business in its own name and as it deems fit, provided it is not in derogation
of the other's interests. Neither party shall engage in any conduct inconsistent
with its status as an independent contractor, have authority to bind the other
with respect to any agreement or other commitment with any third party, nor
enter into any commitment on behalf of the other.

25. Headings: Headings stated in this Agreement are for convenience of reference
only and are not intended as a summary of such sections and do not affect,
limit, modify, or construe the contents thereof.

26. Audit Rights. Upon request from any party, such requesting party shall be
given reasonable access and audit and verification documentation as the
requesting party may reasonably request on not less than 30 days' notice in
order to assure the other party's compliance with the terms of this Agreement.
Such requests shall be limited to the scope of this Agreement and shall not be
made more frequently than twice in any twelve-month period.

27. Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements of the Parties with respect to the transactions
set forth herein and, except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder.

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this
__ day of April 5, 1999 (the "Effective Date").

24/7 MEDIA, INC.

By: /s/ C. Andrew Johns
-------------------------------
Name: C. Andrew Johns
Title: EVP & CFO

E-mail address: [email protected]
-------------------------------

TECHWAVE INC.:

By: /s/ Alan Koslov
-------------------------------
Name: Alan Koslov
Title: EVP Finance/General Counsel

E-mail address: [email protected]
-------------------------------

Exhibit 11.1

Computation of net loss per share

Years ended December 31,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Basic:
Net loss $(6,796,000) $(5,306,000) $(24,723,000)

Cumulative Dividends on manditorily
convertible preferred stock 0 0 (276,000)
---------- ---------- ------------
Net loss applicable to common
stockholders $(6,796,000) $(5,306,000) $(24,999,000)
========== ========== ============
Basic weighted average shares
outstanding 1,049,432 1,086,614 9,533,056
========== ========== ============

Basic net loss per common share $ (6.48) $ (4.88) $ (2.62)
========== ========== ============

Diluted:
Net loss applicable to common
stockholders $(6,796,000) $(5,306,000) $(24,999,000)
========== ========== ============
Basic weighted average shares
outstanding 1,049,432 1,086,614 9,533,056

Net effect of dilutive securities 0 0 0
---------- ---------- ------------

Diluted weighted average shares
outstanding 1,049,432 1,086,614 9,533,056
========== ========== ============
Diluted net loss per common share $ (6.48) $ (4.88) $ (2.62)
========== ========== ============
</TABLE>

Exhibit 23.1

ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULE

The Board of Directors
24/7 Media, Inc.:

The audits referred to in our report dated March 2, 1999 included the
related financial statement schedules of 24/7 Media, Inc. as of December 31,
1997 and 1998, and for each of the years in the three-year period ended December
31, 1998, included in the registration statement (or incorporated by reference
in the registration statement). These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedule based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

We consent to the use of our reports included herein related to the audits
of 24/7 Media, Inc. (successor company to Interactive Imaginations, Inc.) and
Interactive Holdings, LLC (successor to Petry Interactive, Inc.) and to the
reference to our firm under the heading "Experts" in the prospectus.

KPMG LLP
/s/ KPMG LLP
New York, New York
April 14, 1999

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our
report dated May 13, 1998 on the Intelligent Interactions Corporation financial
statements and to all references to our Firm included in or made a part of this
24/7 Media, Inc. Form S-1/A Registration Statement No. 333-70857.

Arthur Andersen LLP
/s/ Arthur Andersen LLP
Washington, D.C.
April 12, 1999

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our
report dated June 12, 1998 on the CliqNow! division of K2 Design, Inc. financial
statements and to all references to our Firm included in or made a part of this
24/7 Media, Inc. Form S-1/A registration statement.

Arthur Andersen LLP
/s/ Arthur Andersen LLP
Roseland, NJ
April 13, 1999

SCHEDULE 24/7 MEDIA, INC.
VALUATION AND QUALIFYING ACCOUNTS--
ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED END
OF PERIOD TO EXPENSE DEDUCTIONS OF PERIOD
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996 ......... $10,000 $ 66,000 $ 10,000 $ 66,000
Year ended December 31, 1997 ......... $66,000 $ -- $ 2,000 $ 64,000
Year ended December 31, 1998 ......... $64,000 $347,000 $143,000 $268,000
</TABLE>

S-1

<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted
from the consolidated balance sheet as of December 31, 1998 and
and 1997 and the consolidated statement of operations for the
year ended December 31, 1998 and 1997.
</LEGEND>
<MULTIPLIER> 1000

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 33,983 94
<SECURITIES> 0 0
<RECEIVABLES> 8,710 240
<ALLOWANCES> 268 64
<INVENTORY> 0 0
<CURRENT-ASSETS> 42,962 285
<PP&E> 2,923 972
<DEPRECIATION> 901 381
<TOTAL-ASSETS> 62,716 1,039
<CURRENT-LIABILITIES> 10,736 1,450
<BONDS> 0 2,317
0 0
0 2
<COMMON> 157 11
<OTHER-SE> 51,789 (2,715)
<TOTAL-LIABILITY-AND-EQUITY> 62,716 1,039
<SALES> 19,744 1,467
<TOTAL-REVENUES> 19,863 3,148
<CGS> 15,970 1,655
<TOTAL-COSTS> 29,287 6,703
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 215 114
<INCOME-PRETAX> (24,723) (5,306)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (24,723) (5,306)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (24,723) (5,306)
<EPS-PRIMARY> (2.62) (4.88)
<EPS-DILUTED> (2.62) (4.88)

</TABLE>