24/7 MEDIA INC, S-1/A, 1999-03-19

24/7 MEDIA INC
S-1/A, 1999-03-19
ADVERTISING

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Registration No. 333-70857

===============================================================================
SECURITIES AND EXCHANGE COMMISSION

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

Amendment No. 1
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:

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

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

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 March __, 1999

PROSPECTUS

4,000,000 Shares

[24/7 Logo]

Common Stock
----------------

24/7 Media, Inc. is offering 2,000,000 shares of common stock and selling
stockholders are offering 2,000,000 shares. Our shares are traded on the Nasdaq
National Market under the symbol "TFSM." The last reported sale price of our
common stock on March 18, 1999 was $40 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 600,000 shares from
the selling stockholders 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
----------------

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>

[ARTWORK]
<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 ............................................................................. 23
Management ........................................................................... 33
Transactions between the Company and Officers, Directors and Principal Stockholders .. 41
Principal and Selling Stockholders ................................................... 43
Description of Capital Stock ......................................................... 45
Shares Eligible for Future Sale ...................................................... 47
Underwriting ......................................................................... 48
Legal Matters ........................................................................ 50
Experts .............................................................................. 50
Where You Can Find More Information .................................................. 50
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 50% of all Internet users in December 1998. 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 872,000 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 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.

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 .............................. 2,000,000 shares
Total offering ........................... 4,000,000 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, 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 2,010,408 shares of common stock issuable upon
exercise of stock options outstanding at February 28, 1999 granted under
our 1998 stock incentive plan (of which 53,233 are vested and exercisable
at February 28, 1999) and approximately 660,637 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 $14.82 per share. Also excludes approximately 3,177,985
shares of common stock issuable upon exercise of outstanding warrants at
February 28, 1999. Such warrants have a weighted average exercise price of
$9.20 per share.

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 $108,583
Working capital ......................................................... 32,226 106,826
Goodwill, net ........................................................... 10,935 10,935
Total assets ............................................................ 62,716 137,316
Obligations under capital leases, excluding current installments ........ 34 34
Total stockholders' equity .............................................. 51,946 126,546
</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 $74,600,000 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 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 such 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 to expand our sales and marketing organization
and to develop and integrate our Profilz technology. 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.

We are transitioning to a single ad serving solution and we currently depend on
third party ad serving technology
We currently use several ad serving technologies to deliver advertisements
to our networks, including our Adfinity system, the AdForce service from
AdForce, Inc., and our own proprietary system for the ContentZone. We intend to
migrate all of our Affiliated Web sites to a single ad serving technology
during 1999 and this transition will create a risk of business disruption and
loss of Affiliated Web sites. Adfinity is our proprietary ad serving technology
system that serves ads to many of our Affiliated Web sites. We are currently
enhancing Adfinity to enable it to serve as our sole ad serving solution but we
are also evaluating third party alternatives. To complete the transition to
Adfinity, we must, among other things, ensure that the Adfinity system will
function properly at high volumes, assimilate our current sales and reporting
functions into the Adfinity model and work with existing Affiliated Web sites
to modify such Web sites to accept advertising from Adfinity.

Unless and until the integration of Adfinity is complete, we will be
dependent upon AdForce or any other third party service that we may employ to
deliver ads to the 24/7 Network and to produce frequent operational reports. If
such service becomes unavailable or fails to serve our advertisements or
effectively deliver our reports, our business would be materially adversely
affected. Additionally, the use of multiple systems requires us to employ a
significant amount of effort to prepare information for financial reporting.
This causes difficulties in preparing financial statements and reporting
information on a timely basis. We are in the process of upgrading our systems
to integrate newly developed and purchased modules with our ad serving
technology to improve our accounting, control and reporting methods. Our
inability to add additional software and hardware or to further develop and
upgrade our existing technologies, systems or network infrastructure may cause
unanticipated delays in delivering our customers' advertisements and providing
timely reporting of accurate 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
Adfinity and of services we employ from third parties, including AdForce and
other ad serving technologies. Adfinity's computer hardware and software is
housed at GlobalCenter, Inc., a third party provider of Internet communication
services. See "Business--Facilities and Systems." Any Adfinity 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

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 --% 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 and the 4,000,000 shares to be sold in this offering generally
will be eligible for

11
<PAGE>

immediate sale in the public market without restriction. The remaining
10,882,244 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 and officers and holders of 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 ____shares may be eligible for sale upon the expiration of their
respective one-year holding periods which for a majority of these shares
will occur on April 9, 1999; and

o ____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 2,010,408 shares of
common stock, 240,304 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 3,177,985 shares of common stock,
____ of which may be eligible for sale upon the expiration of their respective
one-year holding periods, which for all of these shares will occur on April 9,
1999. ____ 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 8,000,000 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 $74,600,000 based
on an assumed offering price of $40 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.

High Low
--------- --------
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 (through March 18, 1999) ......... $41 1/2 $23 1/4

On March 18, 1999, the last reported sale price for our common stock on the
Nasdaq National Market was $40. As of March 18, 1999, there were approximately
300 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 ............................................. 90,438 165,018
Deferred stock compensation ............................................ (345) (345)
Accumulated deficit .................................................... (38,304) (38,304)
--------- ---------
Total stockholders' equity ............................................ 51,946 126,546
--------- ---------
Total capitalization ................................................. $ 51,980 $ 126,580
========= =========
</TABLE>
- ------------
(1) Excludes approximately 2,010,408 shares of common stock issuable upon
exercise of stock options outstanding at February 28, 1999 granted under
our 1998 stock incentive plan (of which 53,233 are vested and exercisable
at February 28, 1999) and approximately 660,637 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 $14.82 per share. Also excludes approximately 3,177,985
shares of common stock issuable upon exercise of outstanding warrants at
February 28, 1999. Such warrants have a weighted average exercise price of
$9.20 per share.

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 $115,595,000 in the
aggregate, or $6.52 per share. This represents an immediate increase in net
tangible book value of $3.91 per share to existing shareholders and an
immediate dilution in net tangible book value of $33.48 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 ....................................... $ 40.00
Net tangible book value per share before the offering ............... $ 2.61
Increase in net tangible book value per share attributable
to new investors ................................................... 3.91
-------
Net tangible book value per share after the offering .................. 6.52
--------
Dilution in net tangible book value per share to new investors ........ $ 33.48
========
</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 $108,583
Working capital (deficit) .................... (9) (235) (6) (1,165) 32,226 106,826
Goodwill, net ................................ -- -- -- -- 10,935 10,935
Total assets ................................. 29 497 3,951 1,039 62,716 137,316
Long-term debt ............................... -- -- -- 2,317 -- --
Obligations under capital leases, excluding
current installments ........................ -- -- -- -- 34 34
Total stockholders' equity (deficit) ......... 9 204 1,751 (2,728) 51,946 126,546
</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 $74,600,000 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 eCommerce 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 in order to expand our sales and marketing organization and to
develop, integrate and scale our Profilz technology.

Results of Operations

Quarterly Results of Operations
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 the Adfinity 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.

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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 CardSecure 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
CardSecure.

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

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<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 November 2000. 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

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<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.

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. To the extent that we purchase significant ad serving 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 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.

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

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<PAGE>

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.

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.

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<PAGE>

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.

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.

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BUSINESS
Overview

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 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 December 1998 we delivered an aggregate of approximately
one billion impressions and, according to Media Metrix, our networks reached
50% of all 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 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 database targeting. We
leverage our media sales and technology expertise to maximize the value of ad
campaigns for both advertisers and Affiliated Web sites.

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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 3 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

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<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 1998, Forrester Research
estimated that the nine largest Web sites accounted for 15% of total Web page
views and 59% 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 December 1998, we delivered an
aggregate of approximately one billion impressions and, according to Media
Metrix, our networks reached 50% of all 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

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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.

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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:

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

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.

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Channels on the Networks
The 24/7 Network's and the ContentZone's Affiliated Web sites are
currently organized into the following 21 topical channels:

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 International o Travel
o ISP/Portal o Women/Family
o Kids

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.

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Advertising Agencies

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 Daylek Electronics Corp. o Preview Travel
o Deja News o Prodigy
o Dell o the Globe.com
o Ford

Technology

Adfinity
Our Adfinity ad serving technology is designed to allow Web sites to
deliver and track a high volume of advertisements to Internet viewers without
degrading the performance of the Web site or causing a delay in ad delivery.
Adfinity's targeting engine is designed to enable advertisers and direct
marketers to target advertisements and Internet content to individuals or
audience segments using flexible, advertiser-defined demographic profiles.
Advertisers can control the advertisement delivered, the user groups targeted,
and the frequency of ad delivery. Adfinity is designed to integrate
information, such as a user's online response rate to advertisements, name,
address, age, or e-mail address, with third-party databases to generate a
comprehensive demographic profile of the Internet user.

We currently use several ad serving technologies to deliver advertisements
to our network, including Adfinity, the AdForce service from AdForce, Inc. and
our own proprietary system for the ContentZone. We intend to migrate all of our
Affiliated Web sites to a single ad serving technology during 1999.

We are currently enhancing Adfinity to enable it to serve as our sole ad
serving technology, but we are also evaluating third-party alternatives. To
complete the transition to Adfinity, we must, among other things, ensure that
the Adfinity system functions properly at high volumes, assimilate our current
sales and reporting functions into the Adfinity model and work with existing
Affiliated Web sites to modify such Web sites to accept advertising from
Adfinity.

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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 the IntelliQuest High-tech Household
file which 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, Adfinity 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,

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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.

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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 Adfinity 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.

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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 46 Director
Jack L. Rivkin 57 Director
Arnie Semsky 52 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.

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<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.

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<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.

35
<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

36
<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.

37
<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
---------------------------------------------------------------
Percent of Potential Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Appreciation
Options Employees in Exercise for Option Term
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.

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<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.

39
<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.

40
<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

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<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."

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<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 as a group.

<TABLE>
<CAPTION>
Ownership Prior to Offering (1)
---------------------------------------
Number of Shares Being
Beneficial Owner Shares Percentage Offered
- ---------------------------- ----------- ------------ --------------
<S> <C> <C> <C>
Executive Officers and
Directors:
David J. Moore (4) (5) 994,893 6.1%
R. Theodore Ammon (6) 1,751,703 10.7
Jacob I. Friesel (4) (7) 787,078 4.8
C. Andrew Johns (4) (8) 27,000 *
John F. Barry III (9) 1,750,703 10.2
Jack L. Rivkin (10) 2,576,540 15.0
Arnie Semsky (4) 0 *
Charles W. Stryker (11) 9,375 *
All directors and executive
officers as a group (8
persons) 7,897,292 48.4
Other 5% Stockholders:
Yale R. Brown (12) 865,759 5.2
All other Selling
Stockholders:

<CAPTION>
Ownership After
Offering and
Ownership After Over-Allotment
Offering (2) Option (3)
------------------------ ----------------------
Number of Shares Being Number of
Beneficial Owner Shares Percentage Offered Shares Percentage
- ---------------------------- ----------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Executive Officers and
Directors:
David J. Moore (4) (5)
R. Theodore Ammon (6)
Jacob I. Friesel (4) (7)
C. Andrew Johns (4) (8)
John F. Barry III (9)
Jack L. Rivkin (10)
Arnie Semsky (4)
Charles W. Stryker (11)
All directors and executive
officers as a group (8
persons)
Other 5% Stockholders:
Yale R. Brown (12)
All other Selling
Stockholders:
</TABLE>

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

(1) Applicable percentage ownership is based on 16,432,244 shares of common
stock outstanding as of February 28, 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 February 28, 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
600,000 shares is not exercised.
(3) Assumes that the underwriters' over-allotment option to purchase 600,000
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 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

43
<PAGE>
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) Includes options to acquire 4,375 shares. 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.

Our company and all of our selling stockholders except for David J. Moore,
Jacob I. Friesel, Mark A. Burchill, Garret P. Cecchini, Scott E. Cohen, and
Jason Drago 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."

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<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 8,000,000 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.

45
<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.

46
<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 and the 4,000,000 shares sold in this offering
will generally be freely tradable without restriction or further registration
under the Securities Act. The remaining 10,882,244 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 a majority
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 shares may be eligible for sale upon expiration of the lock-up agreements
90 days after the date of this prospectus; and

o shares may be eligible for sale upon the expiration of their respective
one-year holding periods which for a majority of such shares occurs on
April 9, 1999.

In addition, there are outstanding options to purchase 2,010,408 shares of
common stock, 240,304 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 1,831,124 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 3,177,985 shares of common stock, of
which will be eligible for sale in the public market upon expiration of their
one-year holding periods, generally occuring on April 9, 1999, and 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 184,322 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.

47
<PAGE>
UNDERWRITING

General
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Allen & Company
Incorporated, CIBC Oppenheimer Corp., J.P. Morgan Securities Inc. and
PaineWebber Incorporated 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 .............
---------
Total ........................... 4,000,000
=========
</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.

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 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
$____.

Over-allotment Option
The selling stockholders 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 600,000 shares of common stock at the

48
<PAGE>

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.

49
<PAGE>
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) 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.

50
<PAGE>
24/7 MEDIA, INC. (Successor Company to Interactive Imaginations, Inc.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Page
----
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-34
Notes to Unaudited Pro Forma Consolidated Financial Information ..................... F-35
INTERACTIVE HOLDINGS, LLC (Successor to Petry Interactive, Inc.)
Independent Auditors' Report ........................................................ F-36
Balance Sheet ....................................................................... F-37
Statements of Operations ............................................................ F-38
Statements of Cash Flows ............................................................ F-39
Notes to Financial Statements ....................................................... F-40
INTELLIGENT INTERACTIONS CORPORATION
Report of Independent Public Accountants ............................................ F-44
Balance Sheets ...................................................................... F-45
Statements of Operations ............................................................ F-46
Statements of Stockholders' Equity .................................................. F-47
Statements of Cash Flows ............................................................ F-48
Notes to Financial Statements ....................................................... F-49
CLIQNOW!
Report of Independent Public Accountants ............................................ F-56
Balance Sheets ...................................................................... F-57
Statements of Operations and Changes in Parent Company's Investment and Advances .... F-58
Statements of Cash Flows ............................................................ F-59
Notes to Financial Statements ....................................................... F-60
</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 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 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 -- $ --
======== ========= ========== ======== ======== =========

<PAGE>
<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 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 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.

(c) Use of Estimates
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.

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

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 1.2 Class C

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

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 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.

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

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
eCommerce enabling technology as well as Web site hosting services, through a
$500,000 cash investment. 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
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 approximated their fair values.
The following summarizes the purchase price allocation for each of the
respective acquisitions:

<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>

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).

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 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

December 31,
-----------------------
1997 1998
--------- -----------
Prepaid operating lease ......... $ -- $101,000
Prepaid insurance ............... -- 142,000
Other prepaid ................... 15,000 294,000
------- --------
$15,000 $537,000
======= ========

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

December 31,
----------------------------
1997 1998
----------- --------------
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
======== ===========

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.

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, 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.

F-21
<PAGE>
24/7 MEDIA, INC.

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

During the third quarter of 1998, certain investors in the II Merger
exchanged 185,159 warrants for 92,230 shares of Common Stock as provided for in
the original terms of the II Merger Agreement. The Company exchanged one equity
security (common shares) for another equity security (warrants) of equivalent
value which 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.

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, 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.

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

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
=========
Vested at December 31, 1998 .............................. 181,008
=========
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 September, 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.

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
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.

F-31
<PAGE>
24/7 MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(13) Subsequent Events--Unaudited --Continued

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.

On March 8, 1999, the Company acquired Sift, Inc., a provider of e-mail
based direct marketing services, in exchange for approximately 872,000 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 ......... $ (3.87) $ (3.23) $ (2.46)
============ ============ =============
</TABLE>

F-32
<PAGE>
24/7 MEDIA, INC.
(Successor Company to Interactive Imaginations, Inc.)

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

OVERVIEW

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 (see note 2 to 24/7 Media, Inc.'s consolidated financial statements
for further details) with the results of operations of 24/7 Media for the year
ended December 31, 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 24, 1998.

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-33
<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-34

<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 Acquired Entities to arrive at the pro forma
consolidated financial information.

(A) To record amortization expense related to goodwill of the Acquired
Entities, 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 to three years.

(B) To give effect to the cumulative dividends at a rate of $0.04 per
share per annum on all of the Mandatorily Redeemable Convertible Preferred
Stock, as if it had been outstanding as of January 1, 1998.

(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 were as
follows: Intelligent Interactions' 949,242 shares, as if the acquisition
occurred on January 1, 1998; 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. 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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-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)

(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-43
<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-44
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION
(A Development Stage Company)

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1997
------------- ---------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................... $ 531,100 $ 423,548
Accounts receivable ................................................................. -- 23,768
Other current assets ................................................................ 100 7,169
---------- -------------
Total current assets .............................................................. 531,200 454,485
---------- -------------
Property and equipment, at cost:
Computer equipment .................................................................. 93,243 151,163
Furniture and fixtures .............................................................. 2,329 16,648
Software ............................................................................ 2,656 22,714
---------- -------------
98,228 190,525
Less--Accumulated depreciation ...................................................... (11,537) (46,073)
---------- -------------
86,691 144,452
---------- -------------
Total assets ...................................................................... $ 617,891 $ 598,937
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................................... $ 27,298 $ 100,542
Accrued expenses .................................................................... 36,184 121,991
Line of credit ...................................................................... -- 19,583
Note payable to officer ............................................................. 86,446 --
Convertible notes payable ........................................................... -- 450,000
---------- -------------
Total current liabilities ......................................................... 149,928 692,116
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
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
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
Series AAA-1; 78,304 shares authorized; none issued or outstanding .................. -- --
---------- -------------
Total convertible, redeemable preferred stock value 1,209,075 3,390,878
---------- -------------
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
Additional paid-in capital .......................................................... 142,290 142,290
Treasury stock ...................................................................... (6,600) (6,600)
Deficit accumulated during the development stage .................................... (879,214) (3,622,159)
---------- -------------
Total stockholders' deficit ....................................................... (741,112) (3,484,057)
---------- -------------
Total liabilities and stockholders' deficit ....................................... $ 617,891 $ 598,937
========== =============

<CAPTION>
March 31,
---------------
1998
---------------
ASSETS (unaudited)
<S> <C>
Current assets:
Cash and cash equivalents ........................................................... $ 3,675
Accounts receivable ................................................................. 87,499
Other current assets ................................................................ 13,568
-------------
Total current assets .............................................................. 104,742
-------------
Property and equipment, at cost:
Computer equipment .................................................................. 151,163
Furniture and fixtures .............................................................. 16,648
Software ............................................................................ 22,714
-------------
190,525
Less--Accumulated depreciation ...................................................... (61,074)
-------------
129,451
-------------
Total assets ...................................................................... $ 234,193
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................................... $ 121,801
Accrued expenses .................................................................... 183,102
Line of credit ...................................................................... 17,195
Note payable to officer ............................................................. --
Convertible notes payable ........................................................... 450,000
-------------
Total current liabilities ......................................................... 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) ............................. 1,327,085
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) ...................................... 1,076,447
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)......................... 1,050,949
Series AAA-1; 78,304 shares authorized; none issued or outstanding .................. --
-------------
Total convertible, redeemable preferred stock value 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
Additional paid-in capital .......................................................... 142,290
Treasury stock ...................................................................... (6,600)
Deficit accumulated during the development stage .................................... (4,130,488)
-------------
Total stockholders' deficit ....................................................... (3,992,386)
-------------
Total liabilities and stockholders' deficit ....................................... $ 234,193
=============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-45
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION
(A Development Stage Company)

STATEMENTS OF OPERATIONS

<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>
Revenues:
Consulting and license
fees and support ............... $ -- $ -- $ 65,432
Cost of revenues ................ -- -- --
---------- ---------- ------------
Gross profit ................. -- -- 65,432
Operating expenses:
Sales and marketing ............. -- 254,515 1,249,910
Product development ............. 21,964 92,280 327,995
General and
administrative ................. 133,238 350,368 1,055,589
---------- ---------- ------------
Total operating expenses ......... 155,202 697,163 2,633,494
---------- ---------- ------------
Loss from operations ............. (155,202) (697,163) (2,568,062)
Interest income (expense),
net ............................. 473 (1,438) 6,861
Other income ..................... -- 3,085 --
---------- ---------- ------------
Net loss ......................... (154,729) (695,516) (2,561,201)
Less dividends on
preferred stock ................. -- (28,969) (181,744)
---------- ---------- ------------
Net loss applicable to
common stock .................... $ (154,729) $ (724,485) $ (2,742,945)
========== ========== ============

<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>
Revenues:
Consulting and license
fees and support ............... $ -- $ 88,362 $ 153,794
Cost of revenues ................ -- 13,200 13,200
---------- ---------- ------------
Gross profit ................. -- 75,162 140,594
Operating expenses:
Sales and marketing ............. 182,043 226,548 1,730,973
Product development ............. 91,386 66,738 508,977
General and
administrative ................. 250,165 221,168 1,760,363
---------- ---------- ------------
Total operating expenses ......... 523,594 514,454 4,000,313
---------- ---------- ------------
Loss from operations ............. (523,594) (439,292) (3,859,719)
Interest income (expense),
net ............................. 460 (5,434) 462
Other income ..................... -- -- 3,085
---------- ---------- ------------
Net loss ......................... (523,134) (444,726) (3,856,172)
Less dividends on
preferred stock ................. (23,602) (63,603) (274,316)
---------- ---------- ------------
Net loss applicable to
common stock .................... $ (546,736) $ (508,329) $ (4,130,488)
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-46
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION
(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
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-47
<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-48
<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-49
<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-50
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION

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-51
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION

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-52
<PAGE>
INTELLIGENT INTERACTIONS CORPORATION

<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-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)

(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-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)

(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-55
<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-56
<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-57
<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-58
<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-59
<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-60
<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-61
<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-62
<PAGE>
===============================================================================
4,000,000 Shares

[Logo of 24/7]

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

, 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 872,000 shares of common stock to former stockholders of
Sift. We relied on the exemptions provided by Regulation D for the issuance of
these shares.

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>
<CAPTION>
<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.
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.
</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.
+ 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

KNOW ALL MEN BY THESE PRESENT, that each person or entity whose signature
appears below constitutes and appoints David J. Moore, C. Andrew Johns and Mark
E. Moran, and each of them, its true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for it and in its name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement on Form S-1
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as it might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes may
lawfully do or cause to be done by virtue thereof.

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. 1 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 March 19, 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. 1 to Registration Statement has been signed below on March 19, 1999 by the
following persons in the capacities indicated:

<TABLE>
<CAPTION>
Signature Title
- --------------------------- ------------------------------------------------
<S> <C>
/s/ David J. Moore Chief Executive Officer and Director
- -------------------------
David J. Moore (Principal Executive Officer)

/s/ R. Theodore Ammon Chairman of the Board
- -------------------------
R. Theodore Ammon
* Executive Vice President and Director
- -------------------------
Jacob I. Friesel
* Director
- -------------------------
John F. Barry
/s/ Jack L. Rivkin Director
- -------------------------
Jack L. Rivkin
Director
- -------------------------
Arnie Semsky
* Director
- -------------------------
Charles W. Stryker, Ph.D.
/s/ C. Andrew Johns Executive Vice President, Treasurer & Chief
- -------------------------
C. Andrew Johns Financial Officer (Principal Financial Officer)

* Senior Vice President and Controller
- -------------------------
Stuart D. Shaw (Principal Accounting Officer)

* = By /s/ Mark E. Moran
-------------------
Mark E. Moran
Attorney-in-fact

</TABLE>

II-7
<PAGE>
Exhibits and Financial Statement Schedule/Index

<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.
10.20 +Senior Convertible Note with Warrants Purchase Agreement, dated as of June 11, 1997,
between Interactive Imaginations, Inc. and The Travelers Insurance Company.
</TABLE>
II-8
<PAGE>

<TABLE>
<CAPTION>
<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.
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.
</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.
+ 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-9

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.

"24/7 MEDIA - ASIA NETWORK"

MARKETING, DEVELOPMENT,
LICENSE
and
SOFTWARE
AGREEMENT

THE "24/7 MEDIA - ASIA NETWORK" MARKETING, DEVELOPMENT, LICENSE AND
SOFTWARE AGREEMENT, dated October 23, 1998 (the "Agreement"), is made between
24/7 Media, Inc., a Delaware corporation, China Internet Corporation, a Bermuda
corporation, and China.com Corporation, a Cayman Islands company.

WHEREAS, 24/7 Media (as defined below), an Internet advertising and
marketing firm, has developed the brand name "24/7 Media" in the United States.

WHEREAS, China.com (as defined below) wishes to establish a
collaboration with 24/7 Media for the development and marketing of the 24/7
Media - Asia Network (as defined below) in the Territory (as defined below), and
24/7 Media wishes to enter into such a collaboration on the terms and conditions
set forth below.

WHEREAS, contemporaneously with the execution and delivery of this
Agreement, 24/7 Media, Intelligent Interactions Corporation, an affiliate of
24/7 Media, and China.com are entering into a Software License and Services
Agreement pursuant to which 24/7 Media will provide to China.com a nonexclusive
license to use 24/7 Media's Adfinity System to serve advertisements on the
Internet and support services in connection with the Adfinity System, on the
terms set forth therein.

WHEREAS, contemporaneously with the execution and delivery of this
Agreement, 24/7 Media and China.com are entering into a Trademark License
Agreement pursuant to which 24/7 Media will provide to China.com an exclusive
license to use the "24/7 Media" trademark in the Territory in connection with
the 24/7 Media - Asia Network, on the terms set forth therein.

-1-
<PAGE>

THEREFORE, in consideration of the premises and of the covenants
herein contained, 24/7 Media, China.com and CIC (as defined below) agree as
follows:

ARTICLE I.
DEFINITIONS

For purposes of this Agreement, the following terms shall have the
meanings specified below.

"Adfinity System" shall mean the Adfinity(TM) software and
internet ad serving system owned by Intelligent Interactions Corporation, an
Affiliate of 24/7 Media, and licensed to China.com in connection with the 24/7
Media - Asia Network as provided in the Software License Agreement.

"Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with a party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls at least
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint fifty percent (50%) or more of
the members of the governing body of the corporation or other entity.

"Affiliated Web Sites" shall mean all Web sites that have
authorized China.com to sell advertising on their behalf, including Co-Branded
Web Sites.

"Aggregate Minimum Revenue Target" shall mean $ * of Sales
Revenue generated by the 24/7 Media - Asia Network, provided, however, that if
the Equity Exchange is not consummated pursuant to Section 3.1 below, such
amount shall be $ * .

"Asian-based Advertising" shall mean advertising sold by
China.com or its Affiliates directed at internet users in the Territory.

"Base Revenue Target" shall mean $100,000 of Sales Revenue
generated by the 24/7 Media - Asia Network in a calendar month period.

"China.com" shall mean China.com Corporation, a Cayman Islands
corporation, together with any Designated Subsidiary.

"CIC" shall mean China Internet Corporation, a Bermuda
corporation, and its Affiliates.

- -------------------------------
* Confidential treatment requested.

-2-
<PAGE>

"Co-Branded Web Sites" shall mean all Web sites now or in the
future operated on a joint or otherwise cooperative basis by China.com and
another person or entity under their joint names or under the name of the other
person or entity.

"Designated Subsidiary" shall mean a wholly-owned subsidiary
of China.com Corporation formed solely for the purpose of operating the 24/7
Media - Asia Network and exercising its rights under each of the Trademark
License Agreement and the Software License Agreement.

"Effective Date" shall mean the date first written above.

"Equity Exchange" shall mean the exchange of equity interests
in 24/7 Media and China.com on the terms set forth in Article III hereof.

"Interim Revenue Target" shall mean the lower of (i) the
cumulative Sales Revenue of $20 million generated by the 24/7 Media - Asia
Network or (ii) the dollar amount represented by the product of (A) 24/7 Media's
percentage share of the U.S. Internet advertising market and (B) the total
dollar value of the Asian-based Internet advertising market. As used in this
definition, the total dollar value of the U.S. Internet advertising market and
the total dollar value of the Asian-based Internet advertising market shall be
measured by Jupiter Communications (or, if Jupiter Communications is
unavailable, a similar third party provider of Internet market statistical
information mutually agreed upon by the parties).

"Initial Revenue Target" shall mean the lower of (i) the
cumulative Sales Revenue of $7.5 million generated by the 24/7 Media - Asia
Network or (ii) the dollar amount represented by the product of (A) 24/7 Media's
percentage share of the U.S. Internet advertising market and (B) the total
dollar value of the Asian-based Internet advertising market. As used in this
definition, the total dollar value of the U.S. Internet advertising market and
the total dollar value of the Asian-based Internet advertising market shall be
measured by Jupiter Communications (or, if Jupiter Communications is
unavailable, a similar third party provider of Internet market statistical
information mutually agreed upon by the parties).

"Joint Marketing Agreement" shall mean the Joint Marketing and
Advertising Agreement, dated June 17, 1998 between 24/7 Media and CIC attached
hereto as Exhibit D.

"Mutual Non-Disclosure Agreement" shall mean the Mutual
Non-Disclosure Agreement, dated September 9, 1998 between 24/7 Media and
China.com attached hereto as Exhibit C.

"Net Revenue" shall mean all Sales Revenue generated by
China.com and its Affiliates, minus (i) commissions paid to Affiliated Web Sites
and (ii) the imputed Web site fee set forth in Section 5.2(a)(2) below.

"Permitted Rights" shall mean the rights of China.com's
Co-Branded Web Site partners to sell their own inventory pursuant to China.com's
agreements with such partners.

-3-
<PAGE>

"Proprietary Web Sites" shall mean all Websites currently or
in the future owned and operated by China.com or its Affiliates, including but
not limited to the Websites located at the URLs www.China.com., www.Taiwan.com
and www.Hongkong.com, but excluding the China Wide Web (www.cww.com).

"Royalty Term" shall mean the period of seven years commencing
on the last day of the month in which China.com first achieves the Base Revenue
Target, unless extended pursuant to Section 7.1(a) below.

"Sales Revenue" shall mean all revenue generated from
advertising sales, net of commissions retained or paid to advertising agencies.

"Software License Agreement" shall mean the Software License
and Services Agreement of even date herewith between 24/7 Media, Inc. and
China.com. attached hereto as Exhibit A.

"Systems Personnel" shall mean those employees of 24/7 Media
or its Affiliates whose primary function is to support the Adfinity System.

"Territory" shall mean the Asian territories or countries of
Mainland China, Taiwan, Hong Kong, Singapore, Asean Nations, Australia, Korea
and Japan.

"Trademark License Agreement" shall mean the Trademark License
Agreement of even date herewith between 24/7 Media and China.com. attached
hereto as Exhibit B.

"Trademark License" shall mean the limited exclusive license
of the "24/7 Media" trademark to China.com pursuant to the Trademark License
Agreement.

"24/7 Media" shall mean 24/7 Media, Inc., a Delaware
corporation.

"24/7 Media - Asia Network" shall mean the Proprietary Web
Sites, the Affiliated Web Sites and Co-Branded Web Sites.

"24/7 Media - U.S. Network" shall mean the 24/7 Network of Web
sites operated by 24/7 Media in the United States.

"U.S.-based Advertising" shall mean advertising sold by 24/7
Media and its Affiliates directed at U.S. Internet users.

-4-
<PAGE>

ARTICLE II.
SCOPE AND STRUCTURE OF THE COLLABORATION

2.1. General. 24/7 Media and China.com wish to establish a collaborative
alliance to develop and market the 24/7 Media - Asia Network in the Territory.
During the course of this collaboration, 24/7 Media and China.com shall
communicate regularly and shall have the respective rights and responsibilities
described herein for the development and marketing of the 24/7 Media - Asia
Network in the Territory.

2.2. License of 24/7 Media Name. Simultaneously with the execution of this
Agreement, 24/7 Media is granting to China.com a limited exclusive license of
the "24/7 Media" name for use by China.com in the Territory solely in connection
with the 24/7 Media - Asia Network on the terms set forth in the Trademark
License Agreement.

2.3. Adfinity System. Simultaneously with the execution of this Agreement,
24/7 Media is granting to China.com a non-exclusive license of the Adfinity
System to China.com and providing support services in respect thereof upon the
terms set forth in the Software License Agreement.

2.4. Sale of Ad Inventory. Each of 24/7 Media and China.com shall sell ad
inventory for the 24/7 Media - Asia Network in accordance with Article V hereof.

2.5. Equity Exchange. As mutual consideration for this Agreement, the
parties shall acquire an equity interest in one another in accordance with
Article III hereof.

ARTICLE III.
EQUITY EXCHANGE

3.1. Equity Exchange. (a) Within 45 days after the Effective Date,
China.com shall issue to 24/7 Media shares of common stock of China.com
representing ten percent (10%) of the issued and outstanding capital stock of
China.com, and 24/7 Media shall issue to China.com shares of 24/7 Media common
stock with an equivalent fair market value. Each party covenants to use its best
efforts to consummate the Equity Exchange within 45 days after the Effective
Date.

(b) 24/7 Media shall have the right to substitute up to $3 million
of cash in lieu of a portion of the 24/7 Media common stock, valued at the then
fair market value; the proceeds of any such cash investment shall be dedicated
by China.com solely to the development and enhancement of the 24/7 Media - Asia
Network.

(c) The parties acknowledge that the Equity Exchange is a material
inducement to each party's willingness to enter into this Agreement. Within 30
days after the Effective Date, China.com shall obtain a valuation as of the
Effective Date of the capital stock of China.com from Merrill Lynch & Co., which
determination shall be binding on all parties. Each party hereto

-5-
<PAGE>

understands and acknowledges that Merrill Lynch has provided investment banking
services to each of China.com and 24/7 Media, and that the expenses and fees of
Merrill Lynch incurred in connection with such valuation shall be shared equally
between the parties hereto.

(d) The fair market value of 24/7 Media's common stock shall be
the average closing price per share quoted on the Nasdaq National Stock Market
for the fifteen trading days prior to the date on which the fair market value
per share of capital stock of China.com corporation is fixed.

(e) The parties agree to enter into a mutually acceptable exchange
agreement to consummate the Equity Exchange that contains customary and
appropriate representations and warranties, covenants and other provisions, and
otherwise reflects the terms of this Article 3.

ARTICLE IV.
DEVELOPMENT OF THE 24/7 MEDIA - ASIA NETWORK

4.1. Development of 24/7 Media - Asia Network.

(a) Web sites in the 24/7 Media - Asia Network. China.com shall
include in the 24/7 Media - Asia Network its Proprietary Web Sites and other
properties on the following basis:

(i) Proprietary Web Sites: All Proprietary Web Sites will be
added to the 24/7 Media - Asia Network on an exclusive agency license
basis, subject only to the right of Xinhua News, an Affiliate of
China.com, to sell inventory, on the terms set forth on Exhibit F attached
hereto.

(ii) Co-Branded Web Sites: Co-Branded Web Sites will be added
to the 24/7 Media - Asia Network on an exclusive agency license basis,
subject to the terms of China.com's agreements with, and the consent of,
its co-branding partners. Such Co-Branded Web Sites and co-branding
partners shall retain the right to sell their own ad inventory.

(b) Continual Recruitment of Web sites, Advertisers and Sales
Force. China.com covenants to use its best efforts to continually recruit Web
sites, advertisers and sales force and sell Asian-based advertising in order to
enhance, develop and promote the 24/7 Media - Asia Network for as long as the
Trademark License remains in effect.

(c) Continual Development of Network. Each of the parties
covenants to use its best efforts to develop, enhance and promote the 24/7 Media
- - Asia Network. In connection therewith, each party and its respective
Affiliates agree that they shall not take any action to compete with, or to
establish a network of Web sites to compete with, the 24/7 Media - Asia Network
in the Territory.

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<PAGE>

4.2. Sales Duties of China.com. China.com shall have the following duties
and responsibilities in connection with the 24/7 Media - Asia Network:

(a) Sales of Advertising. China.com shall sell all Asian-based
Advertising on the 24/7 Media - Asia Network and shall collect payments from
Customers and distribute appropriate payments to Affiliated Web Sites.

(b) Size of Sales Staff. China.com shall maintain a technically
competent and experienced sales force assigned to market the 24/7 Media - Asia
Network and devoted to maintaining accounts with Customers and developing new
accounts for sale of ad inventory.

(i) Collect from Customers, to the extent required by law or
regulation, any customs and like charges, and sales, value added tax, if
any, and other taxes;

(ii) Comply in all respects with all applicable laws,
regulations and approvals governing the sale of ad inventory and the
operation of the 24/7 Media - Asia Network, and conduct itself in a
professional manner in accordance with industry standards so as not to
cause disrepute or ill favor to 24/7 Media or the 24/7 Media - Asia
Network;

(iii) Not enter into any agreements in respect of the
Proprietary Web Sites that would or might adversely impact the potential
benefits to be realized by 24/7 Media in connection with the 24/7 Media -
Asia Network or the provisions of this Agreement, the Software License
Agreement or the Trademark License Agreement;

(iv) Maintain the highest standards of quality and use its
best efforts to continually promote and protect the integrity of the 24/7
Media - Asia Network and the Trademark License, and continue to employ and
maintain the "24/7 Media" name and trademark in connection with all
marketing, promotion and sales of advertising related to the Web sites
included in the 24/7 Media - Asia Network as long as the Trademark License
remains in effect; and

(v) Promptly investigate and immediately report to 24/7
Media all customer complaints or reports of incidents or governmental
action relating to the 24/7 Media - Asia Network of which it has knowledge
and cooperate with 24/7 Media in the handling of such complaints, reports
of incidents and governmental action; and, during the Term of this
Agreement and for a period of five years thereafter, maintain records of
all sales of ad inventory.

4.3. Duties of 24/7 Media. (a) 24/7 Media shall provide consulting advice
on

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<PAGE>

the development of the 24/7 Media - Asia Network. In particular, 24/7 Media will
provide the following:

(i) documentation and advice on recruitment of Web sites,
advertisers and sales force to the 24/7 Media - Asia Network,

(ii) advice in respect of development of marketing materials
and establishment of rate cards, and

(iii) other advice or documentation reasonably requested by
China.com or that 24/7 Media otherwise deems appropriate.

(b) 24/7 Media shall also have the following duties and
responsibilities in connection with the 24/7 Media - Asia Network:

(i) Maintain the highest standards of quality and use its
best efforts to continually promote and protect the integrity of the 24/7
Media - Asia Network and the Trademark License; and

(ii) Comply in all respects with all applicable laws,
regulations and approvals governing the 24/7 Media - Asia Network, and
conduct itself in a professional manner in accordance with industry
standards so as not to cause disrepute or ill favor to the 24/7 Media -
Asia Network.

ARTICLE V.
SALES REVENUE; SALE OF AD
INVENTORY; EXPENSES

5.1. Net Revenue. (a) Subject to Section 5.2 below, China.com shall pay to
24/7 Media * of the Net Revenue generated during the Royalty Term. The remaining
* of Net Revenue shall be retained by China.com.

(b) China.com shall pay all amounts due to 24/7 Media via wire
transfer of immediately available funds to an account at a bank in the United
States designated by 24/7 Media, or through other payment methods approved in
writing in advance by both China.com and 24/7 Media. Any payment shall be
payable to 24/7 Media monthly with the delivery of the financial reports
required by Section 5.6. All payments shall be made in U.S. dollars. China.com
shall prepare and deliver to 24/7 Media the financial reports required by
Section 5.6.

- -------------------------------
* Confidential treatment requested.

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<PAGE>

5.2. Sale of Advertising Inventory. For purposes of Section 5.1(a) above,
the following shall apply:

(a) Sales on Proprietary Web Sites.

(i) All sales of advertising on Proprietary Web Sites shall
be sold exclusively by China.com, except for sales by 24/7 Media pursuant
to Section 5.4(a) below and subject only to the right of Xinhua News as
provided in Exhibit F attached hereto;

(ii) Net Revenue from advertising sales on Proprietary Web
Sites shall be adjusted by subtracting an imputed Web site fee of * of
such Net Revenue to be retained by China.com; the Net Revenue allocable to
the 24/7 Media - Asia Network after such deduction shall be subject to
Section 5.1.

(b) Sales on Co-Branded Web Sites.

(i) All sales of advertising on Co-Branded Web Sites shall
be sold exclusively by China.com, except for sales by 24/7 Media pursuant
to Section 5.4 (a) below and any Permitted Rights;

(ii) Net Revenue from advertising sales on Co-Branded Web
Sites shall be adjusted by subtracting all agency and royalty
splits/payments between the Co-Branded Web Site and China.com; the New
Revenue allocable to the 24/7 Media - Asia Network after such deduction
shall be subject to Section 5.1.

5.3. Prior Sales Agreement. The parties hereto are parties to the Joint
Marketing Agreement attached hereto as Exhibit D. The parties agree that the
Joint Marketing Agreement is hereby terminated.

5.4. Sales by 24/7 Media on the 24/7 Media - Asia Network.

(a) 24/7 Media shall have the exclusive agency to sell U.S.-based
Advertising on the 24/7 Media - Asia Network. 24/7 Media shall use its best
efforts to collect all amounts due from the sale of advertising by 24/7 Media on
the 24/7 Media - Asia Network.

(b) 24/7 Media shall pay to China.com * of the Sales Revenue that
24/7 Media collects from the sale of U.S.-based Advertising on the 24/7 Media -
Asia Network. The remaining * of such Sales Revenue shall be retained by 24/7
Media. 24/7 Media shall pay to China.com all amounts due hereunder via wire
transfer of immediately available funds to an account at a bank in Hong Kong
designated by China.com, or through other payment methods approved in writing in
advance by both China.com and 24/7 Media. Any payment shall be payable

- -------------------------------
* Confidential treatment requested.

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<PAGE>

to China.com monthly with delivery of the financial reports required by Section
5.6. All payments shall be made in U.S. dollars. 24/7 Media shall prepare and
deliver to China.com the financial reports required by Section 5.6.

(c) In connection with sales pursuant to (a) above, 24/7 Media
shall maintain a technically competent and experienced sales force assigned to
the sale of U.S.-based Advertising on the 24/7 Media - Asia Network and devoted
to maintaining accounts with Customers and developing new accounts for sale of
ad inventory on the 24/7 Media - Asia Network. In particular, 24/7 Media shall
dedicate the following numbers of sales personnel to the sale of U.S.-based
Advertising on the 24/7 Media - Asia Network in accordance with the following
schedule:

(i) 1999: 1.5 full-time equivalent sales personnel,

(ii) 2000: 2 full-time equivalent sales personnel, and

(iii) 2001 and subsequent years: 3.5 full-time equivalent
sales personnel.

5.5. Sales by China.com on the 24/7 Media - U.S. Network.

(a) China.com shall have the exclusive agency to sell all
Asian-based Advertising on the 24/7 Media - U.S. Network. China.com shall use
its best efforts to collect all amounts due from the sale of advertising by
China.com on the 24/7 Media - U.S. Network.

(b) China.com shall pay to 24/7 Media * of the
Sales Revenue that China.com collects from the sale of Asian-based advertising
on the 24/7 Media - U.S. Network. The remaining * of such Sales
Revenue shall be retained by China.com. China.com shall pay to 24/7 Media all
amounts due hereunder via wire transfer of immediately available funds to an
account at a bank in the U.S. designated by 24/7 Media, or through other payment
methods approved in writing in advance by both China.com and 24/7 Media. Any
payment shall be payable to 24/7 Media monthly with delivery of the financial
reports required by Section 5.6. All payments shall be made in U.S. dollars.
China.com shall prepare and deliver to 24/7 Media the financial reports required
by Section 5.6.

(c) In connection with sales on the 24/7 Media - U.S. Network,
China.com shall dedicate the following numbers of sales personnel to the sale of
Asian-based Advertising on the 24/7Media - U.S. Network in accordance with the
following schedule:

(i) 1999: 2 full-time equivalent sales personnel,

(ii) 2000: 3 full-time equivalent sales personnel, and

(iii) 2001 and subsequent years: 5 full-time equivalent sales
personnel.

- -------------------------------
* Confidential treatment requested.

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<PAGE>

5.6. Financial Reports; Audit Rights.

(a) During the term of this Agreement, each of 24/7 Media and
China.com shall within thirty (30) days after each calendar month furnish to the
other party a written monthly report showing: (a) the Sales Revenue of the 24/7
Media - Asia Network sold by each such party and its respective Affiliates
during the reporting period and the calculation of Net Revenue from such Sales
Revenue; (b) the Sales Revenue by China.com on the 24/7 Media - U.S. Network
during the reporting period and the calculation of Net Revenue from such Sales
Revenue; (c) withholding taxes, if any, required by law to be deducted in
respect of such sales; and (d) the exchange rates used in determining the amount
of United States dollars. Each of 24/7 Media and China.com shall keep complete
and accurate records in sufficient detail to properly reflect all gross sales
and net sales.

(b) Upon the written request, each of 24/7 Media and China.com
shall permit an independent public accountant, mutually selected and approved by
both 24/7 Media and China.com, to have reasonable access during normal business
hours to the financial records and reports of each party as may be reasonably
necessary in connection with the Net Revenue calculations required by Section
5.1 and to verify the accuracy of the reports described in (a) above, in respect
of any fiscal year ending not more than thirty-six (36) months prior to the date
of such request. All such verifications shall be conducted upon reasonable prior
notice and not more than once in each calendar year. Each party agrees that all
information subject to review under this Section 5.6 is confidential and that it
shall cause its representatives to retain all such information in confidence in
accordance with the Mutual Non-Disclosure Agreement.

5.7. Reimbursement for Out-of-Pocket Travel Expenses of 24/7 Media.
China.com shall reimburse 24/7 Media's travel expenses for those employees
described in (a) and (b) below in accordance with the China.com Corporate Travel
Expense Reimbursement Policy, as set forth in Exhibit E hereto.

(a) Systems Personnel of 24/7 Media. China.com shall pay all
out-of-pocket expenses for 24/7 Media Systems Personnel to travel between the
United States and the Territory or otherwise in respect of the establishment,
development or support of the 24/7 Media - Asia Network.

(b) Non-Systems Personnel of 24/7 Media. Each of China.com and
24/7 Media shall pay one-half (1/2) of the out-of-pocket travel expenses for
24/7 Media Non-Systems Personnel to travel between the United State and the
Territory or otherwise in respect of the establishment, development or support
of the 24/7 Media - Asia Network.

5.8. Other Out-of-Pocket Expenses of 24/7 Media. China.com shall pay all
out-of-pocket expenses for all hardware, bandwith and all other non-software
requirements in respect of the 24/7 Media - Asia Network in accordance with the
estimate of such expenses set forth on Schedule 5.5 attached hereto.

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<PAGE>

ARTICLE VI.
REPRESENTATIONS AND WARRANTIES

6.1. Representations and Warranties of each Party. Each party represents
and warrants to the other that it has the legal right and power to enter into
this Agreement, to extend the rights and licenses granted to the other in this
Agreement, and that the performance of such obligations will not conflict with
its charter documents or any agreements, contracts or other arrangements to
which it is a party.

6.2. Representations of China.com. China.com represents and warrants to,
and covenants with, 24/7 Media that:

(a) China.com is a corporation duly organized and validly existing
under the applicable laws of the Cayman Islands and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement;

(b) upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of China.com
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);

(c) the execution, delivery and performance of this Agreement, the
Trademark License Agreement and the Software License Agreement, the consummation
by China.com of the transactions contemplated hereby and thereby will not (i)
require the consent, license, permit, waiver, approval or other action of any
court or governmental authority, or any other individual, partnership,
corporation or other association, (ii) violate or conflict with any provision of
the Certificate of Incorporation or by-laws (or their equivalent) of China.com
as in effect immediately prior to and immediately after the Effective Date, or
(iii) constitute a default under, violate or conflict with, give rise to a right
of termination, cancellation, acceleration or modification under or result in a
loss of a material benefit under, any law, contract, rights related to
intellectual property to which China.com or its properties are bound;

(d) China.com has disclosed to 24/7 Media all material facts and
information known to China.com concerning China.com, its condition and this
Agreement or otherwise, and has not made any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
contained herein not misleading; and

(e) China.com represents that it owns and controls the Proprietary
Web Sites and has the authority to include such Proprietary Web Sites in the
24/7 Media - Asia Network on the basis described in this Agreement.

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<PAGE>

6.3. Representations of 24/7 Media. 24/7 Media represents and warrants to,
and covenants with, China.com that:

(a) 24/7 Media is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement;

(b) upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of 24/7 Media
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);

(c) the execution, delivery and performance of this Agreement, the
Trademark License Agreement and the Software License Agreement, the consummation
by 24/7 Media of the transactions contemplated hereby and thereby will not (i)
require the consent, license, permit, waiver, approval or other action of any
court or governmental authority, or any other individual, partnership,
corporation or other association, (ii) violate or conflict with any provision of
the Certificate of Incorporation or by-laws of 24/7 Media as in effect
immediately prior to and immediately after the Effective Date, or (iii)
constitute a default under, violate or conflict with, give rise to a right of
termination, cancellation, acceleration or modification under or result in a
loss of a material benefit under, any law, contract, rights related to
intellectual property to which 24/7 Media or its properties are bound; and

(d) 24/7 Media has disclosed to China.com all material facts and
information known to 24/7 Media concerning 24/7 Media, its condition and this
Agreement or otherwise, and has not made any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
contained herein not misleading.

ARTICLE VII.
TERM AND TERMINATION

7.1. Term. The term of this Agreement shall be as follows:

(a) Term. Unless earlier terminated pursuant to Section 7.2 or
Section 7.3 below, the term of this agreement shall commence on the Effective
Date and end on the last day of the Royalty Term (as it may be extended pursuant
to Section 7.1(b)).

(b) Royalty Term Extended. The Royalty Term shall be extended upon
either of the following events:

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<PAGE>

(i) Aggregate Minimum Target Not Achieved. If China.com
fails to achieve the Aggregate Minimum Revenue Target within seven (7)
years from the Effective Date, then the Royalty Term shall be extended
until the earlier of (A) the last day of the month in which the Aggregate
Minimum Revenue Target is achieved or (B) ten (10) years from the
Effective Date.

(ii) Equity Exchange Not Consummated. If the Equity Exchange
is not consummated as provided in Section 3.1, the Royalty Term shall be
extended until the earlier of (A) the last day of the month in which the
Aggregate Minimum Target Revenue (as adjusted) is achieved or (B) twenty
(20) years from the Effective Date.

7.2. Termination by Either Party. This Agreement may be terminated by
either party on 90 days' prior written notice to the other party upon the
occurrence of any of the following:

(a) a material breach by either party of any covenant, duty or
undertaking herein, which 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;

(b) the failure of the 24/7 Media - Asia Network to achieve the
Initial Revenue Target within 18 months after the Effective Date.

(c) a material breach by either party of the Trademark License
Agreement or the Software License Agreement, which 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.

7.3. Termination by 24/7 Media. This Agreement may be terminated by 24/7
Media on 90 days' prior written notice to China.com upon the occurrence of any
of the following:

(a) the failure of the 24/7 Media - Asia Network to achieve the
Base Revenue Target within one (1) year after the Effective Date; or

(b) the failure of the 24/7 Media - Asia Network to achieve the
Interim Revenue Target within 36 months after the Effective Date.

7.4. Effect of Termination.

(i) If this Agreement is terminated by 24/7 Media pursuant
to Section 7.2 or 7.3 above, all licenses and rights granted to China.com
hereunder, under the Trademark License Agreement and the Software License
Agreement shall terminate and China.com will immediately cease to sell
advertising for the 24/7 Media - Asia Network; and 24/7 Media shall be
entitled to claim from China.com all damages which would be due to 24/7
Media under law and equity.

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<PAGE>

(ii) If this Agreement is terminated by China.com pursuant to
Section 7.2 above, 24/7 Media will immediately cease to sell advertising
for the 24/7 Media - Asia Network; and China.com shall be entitled to
claim from 24/7 Media all damages which would be due to China.com under
law and equity.

7.5. Obligation to Pay Survives Termination. The termination of this
Agreement shall not affect either party's obligation to pay the other any
amounts due from the sale of advertising on the 24/7 Media - Asia Network or the
24/7 Media - U.S. Network sold prior to the termination hereof.

ARTICLE VIII.
INTELLECTUAL PROPERTY RIGHTS

8.1. No Other Technology Rights. Except as otherwise expressly provided in
this Agreement, the Trademark License Agreement or the Software License
Agreement, under no circumstances shall a party hereto, as a result of this
Agreement, obtain any ownership interest in or other right to any technology,
trade secrets, know-how, trademarks, pending patent and trademark applications,
products, or other matters of any other party, including items owned, controlled
or developed by the other party, or transferred by the other party to such
party, at any time pursuant to this Agreement.

ARTICLE IX.
INDEMNITY

9.1. China.com Indemnity Obligations. China.com agrees to defend,
indemnify and hold 24/7 Media, its Affiliates and their respective employees,
officers, directors, counsel and agents harmless from all claims, losses,
damages or expenses (including, without limitation, reasonable attorneys' fees
and expenses and costs of investigation) arising as a result of: (a) the breach
by China.com of any covenant, representation or warranty contained in this
Agreement; (b) actual or asserted violations of any applicable law or regulation
by China.com or its Affiliates in connection with the sale of advertising on the
24/7 Media - Asia Network; (c) claims for bodily injury or property damage
attributable to the sale of advertising by China.com or its Affiliates; or (d)
any negligent act or omission of China.com or its Affiliates in the promotion,
marketing and sale of any advertisement on the 24/7 Media - Asia Network or any
other activity conducted by China.com or its Affiliates under this Agreement
which is the proximate cause of injury or property damage to a third party.

9.2. 24/7 Media Indemnity Obligations. 24/7 Media agrees to defend,
indemnify and hold China.com, its Affiliates, and their respective employees,
officers, directors, counsel and agents harmless from all claims, losses,
damages or expenses (including, without limitation, reasonable attorneys' fees
and expenses, and costs of investigation) arising as a result of: (a) the breach
by 24/7 Media of any covenant, representation or warranty contained in this
Agreement; (b) actual or asserted

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<PAGE>

violations of any applicable law or regulation by 24/7 Media or its Affiliates
in connection with the sale of advertising on the 24/7 Media - Asia Network; (c)
claims for bodily injury or property damage attributable to the sale of
advertising by 24/7 Media or its Affiliates; or (d) any negligent act or
omission of 24/7 Media or its Affiliates in the promotion, marketing and sale of
any advertisement on the 24/7 Media - Asia Network or any other activity
conducted by 24/7 Media or its Affiliates under this Agreement which is the
proximate cause of injury or property damage to a third party.

9.3. Procedure. A party or any of its Affiliates or their respective
employees, officers, directors, counsel or agents (the "Indemnitee") that
intends to claim indemnification under this Article 9 shall promptly notify the
other party (the "Indemnitor") of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceedings. The indemnity agreement in this Article 9 shall not
apply to amounts paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of the Indemnitor,
which consent shall not be withheld unreasonably. The Indemnitor may not settle,
or otherwise consent to an adverse judgment with respect to, any loss, claim,
liability or action without the consent of the Indemnitee, which consent shall
not be withheld unreasonably. The failure to deliver notice to the Indemnitor
within a reasonable time after the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such Indemnitor
of any liability to the Indemnitee under this Article 9 to the extent of such
prejudice, but the omission so to deliver notice to the Indemnitor will not
relieve it of any liability that it may have to any Indemnitee otherwise than
under this Article 9. The Indemnitee, its employees and agents, shall cooperate
fully with the Indemnitor and its legal representatives in the investigation of
any action, claim or liability covered by this indemnification. In the event
that each party claims indemnity from the other and one party is finally held
liable to indemnify the other, the Indemnitor shall additionally be liable to
pay the reasonable legal costs and attorneys' fees incurred by the Indemnitee in
establishing its claim for indemnity.

ARTICLE X.
MISCELLANEOUS

10.1. Further Assurances. Each of the parties hereto has the right from
time to time to request a meeting with the other party to review and in good
faith renegotiate, if appropriate, the revenue targets set forth herein. Each
such request must be reasonably based upon a material adverse event that has
affected or will reasonably be expected to affect either party or the U.S. or
Asian Internet advertising markets. The meeting must be mutually consented to
upon by each party, whose consent shall not be unreasonably withheld.

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10.2. Non-Disclosure Obligations. The parties agree to be bound by the
Mutual Non- Disclosure Agreement attached hereto as Exhibit C.

10.3. 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 commotions,
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.

10.4. Sublicense and Assignment. Neither party may sublicense and/or
assign any rights or obligations under this Agreement without the prior written
consent of the other party; provided, however, that no such consent shall be
required if the sublicensee or assignee is an entity controlled by, in control
of, or under common control with, the party purporting to sublicense or assign a
right or obligation hereunder. Any such sublicensee or assignee shall agree in
writing to be bound by the terms of this Agreement applicable to the sublicense
or assignment, and the assigning or sublicensing party shall remain responsible
to the other party for the performance of such sublicensee's or assignee's
obligations under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assignees and sublicensees.

10.5. 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.

10.6. Notices. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given under this Section 10.5):

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<PAGE>

If to 24/7 Media:
-----------------

24/7 Media, Inc.
1250 Broadway, 27th Floor
New York, New York 10001
Attention: Mark E. Moran
Fax: (212) 629-7173

with a copy to:
---------------

Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Attn: Ronald R. Papa, Esq.
Fax: (212) 969-2900

If to China.com:
----------------

China Internet Corporation
16/F Guardian House
32 Oi Kwan Road
Wanchai, Hong Kong
China
Attention: Mr. Peter Yip
Facsimile No.: (852) 2893-5245

with a copy to:
---------------

Rogers & Wells LLP
Jardine House, 8th Floor
One Connaught Place
Hong Kong, China
Attention: Thomas M. Britt, Esq.
Facsimile No.: (852) 2844-3555

All such notices and communications shall be deemed received upon (a) actual
receipt by the addressee, (b) actual delivery to the appropriate address or (c)
in the case of a facsimile transmission, upon transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming that the
number of pages constituting the notice have been transmitted without error. In
the case of notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.

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<PAGE>

10.7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of laws provisions thereof.

10.8. Dispute Resolution, Choice of Forum. Any disputes arising between
the parties relating to, arising out of or in any way connected with this
Agreement or any term or condition hereof, or the performance by either party of
its obligations hereunder, whether before or after the expiration of this
Agreement, shall be promptly presented to the Chief Executive Officer of 24/7
Media and the President of China.com for resolution and if they or their
designees cannot promptly resolve such disputes, then either party shall have
the right to bring an action to resolve such dispute under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrator in accordance with the said rules, as follows:

(a) Each of the parties shall designate its arbitrator within
fifteen (15) days from notification by registered letter. The two arbitrators
thus designated shall designate a third arbitrator within 30 days from
designation of the second arbitrator, such third arbitrator shall preside over
the arbitration court. Arbitration shall be held in London.

10.9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof. All
express or implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of this Agreement. This
Agreement may be amended, or any term hereof modified, only by a written
instrument duly executed by both parties.

10.10. Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.

10.11. Independent Contractors. China.com and 24/7 Media shall each act as
independent contractors. Neither party shall exercise control over the
activities and operations of the other party accordingly, each party shall be
responsible for paying all applicable social security, withholding, other
employment and income taxes for itself and its employees. China.com and 24/7
Media shall bear all expenses incurred in their sales endeavors, except those
for which the other party agrees in writing to pay. China.com and 24/7 Media
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.

10.12. Waiver. The waiver by either party hereto of any right hereunder or
of the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

-19-
<PAGE>

10.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

-20-
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.

CHINA.COM CORPORATION

By: /S/ Peter Yip
--------------------------------
Name: Peter Yip
Title: Vice Chairman

CHINA INTERNET CORPORATION

By: /S/ Peter Yip
--------------------------------
Name: Peter Yip
Title: Vice Chairman

24/7 MEDIA, INC.

By: /S/ Mark E. Moran
--------------------------------
Name: Mark E. Moran
Title: Senior Vice President and
General Counsel

-21-

JOINT MARKETING
AGREEMENT

WHEREAS, American Cities Studios, Inc. and Cybernet International
Corporation (collectively, "Cybernet"), among other things, provide Web site
design, hosting, maintenance and marketing services to a collection of Web sites
and continuously recruit additional Web sites for such services;

WHEREAS, 24/7 Media, Inc. ("24/7"), a Delaware corporation with an address
at 1250 Broadway, 27th floor, New York, NY 10001, operates networks of internet
web sites for which it solicits advertisers, advertising agencies, buying
services or others regarding the placement of advertising banners and similar
devices and sponsorships for display on Web sites;

WHEREAS, 24/7 and Cybernet wish to enter into this Agreement and the
Affiliation Agreement (as defined below) to provide a framework for their joint
marketing of their respective services to Web sites in the Category (as defined
below) and otherwise;

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. Agreement to Jointly Market.

A. 24/7 and Cybernet hereby agree to jointly market their respective
services to Web sites owned by major league sports franchises, major league
organizations, and athletic departments of colleges and universities (the
"Category") as well as to other Web sites. Each Web site to be covered by this
Agreement shall, with the written consent of each of 24/7 and Cybernet, become a
party to the 24/7 Media / Cybernet Network Affiliation Agreement (the
"Affiliation Agreement") attached hereto.

B. Cybernet hereby agrees to use its best efforts to cause Web sites in
the Category and outside the Category to become a party to the Affiliation
Agreement.

C. Subject to the following clause, 24/7 agrees to enter into the
Affiliation Agreement with each Web site in the Category that Cybernet
recommends be made a party, provided, however, that 24/7 retains the right in
its sole discretion to refuse to enter into the Affiliation Agreement with any
Web site whose content, in the sole judgment of 24/7, is not in accordance with
24/7's content standards.

2. Exclusivity

<PAGE>

A. 24/7 hereby agrees not to sell internet advertising for Web sites
included in the Category other than pursuant to the Affiliation Agreement;
provided, however, that 24/7 may continue its existing, active relationship with
all Web sites in the Category or otherwise currently affiliated with 24/7 or
with companies that are acquired by 24/7 subsequent to the execution of this
Agreement, so long as not more than 50% of such acquired companies' revenues are
derived from Web sites in the Category.

B. Cybernet agrees not to jointly market its services with any other
internet advertising sales firm to Web sites included in the Category.

3. Principal Contact

24/7 acknowledges and agrees that persons associated with Cybernet shall
be the principal contact for communications between 24/7 and each Web site
introduced by Cybernet to 24/7 for inclusion in the Affiliation Agreement, and
that 24/7 shall not regularly communicate directly with representatives of such
Web sites without the consent of Cybernet.

4. Term. The term of this Agreement (the "Term") shall commence on the
Effective Date (as defined below) and terminate on December 31, 2001; provided,
however, that Cybernet shall have the option to terminate the Agreement at any
time after February 28, 2000 if 24/7 shall fail to achieve in the 12 months then
ended a gross cost per thousand impressions ("CPM") across all internet
advertising inventory covered by this Agreement of $5.00; it being agreed that
advertising inventory in respect of a new Web site added to this Agreement shall
not be deemed to be covered by this Agreement for purposes of calculating the
gross CPM until the first day of the third full month following the initial
inclusion of such Web site; and provided, further, that 24/7 shall have the
option to terminate the Agreement at any time after February 28, 2000 if the
number of advertising impressions covered by this Agreement shall average fewer
than 50,000,000 advertising impressions per month in the 12 months then ended.
Termination will be effective thirty days after the date on which written notice
is given, as determined under the provisions of Section 9 below, to the other
party.

5. Confidentiality. 24/7 and Cybernet 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
non-public 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 regulations of any stock

2
<PAGE>

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 Cybernet. 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, (c)
generally known to the public, (d) lawfully obtained from any third party or (e)
required to be disclosed by law.

6. No Poaching. Cybernet agrees that, 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.

7. No Waiver. This Agreement shall not be waived, modified, assigned or
transferred except by a written consent to that effect signed by Cybernet and
24/7. 24/7 hereby acknowledges that Cybernet is expected to be acquired by Mpact
Immedia and consents to such acquisition and agrees to consent to the assignment
of this Agreement to an affiliate of Mpact Immedia if so requested. Each of
Cybernet and 24/7 agrees that if it assigns or transfers this Agreement, it
shall cause such successor, assignee, or transferee to assume all of Cybernet's
obligations hereunder. Any assignment, transfer, or assumption shall not relieve
Cybernet of liability hereunder.

8. 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.

9. 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.

10. 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.

11. 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.

3
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this
30th day of September, 1998 (the "Effective Date").

24/7 MEDIA, INC.

By: /s/ David J. Moore
-----------------------
Name: David J. Moore
Title: Chief Executive Officer

E-mail address: [email protected]

AMERICAN CITIES STUDIOS, INC.

By: /s/ Ted Silverman
-----------------------
Name: Ted Silverman
Title: Chief Executive Officer

E-mail address: [email protected]

CYBERNET INTERNATIONAL CORPORATION

By: /s/ Ted Silverman
-----------------------
Name: Ted Silverman
Title: President

E-mail address: [email protected]

DATED 20 January 1999

INTERAD HOLDINGS LIMITED

INTERADVENTURES LIMITED

GORDON WALLACE SIMPSON

XAVIER JANE CALBET

AND

24/7 MEDIA INC

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

SUBSCRIPTION AGREEMENT

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

Boyes Turner & Burrows
10 Duke Street
Reading
RG1 4RX
Tel: 0118 959 7711
Fax: 0118 952 7248
DX 54741 READING 2
Ref: RAB/30078

<PAGE>

THIS SUBSCRIPTION AGREEMENT is made on 20 January 1999, BETWEEN (1) InterAd
Holdings Ltd (company number 3491347) ("the Company") (2) Interadventures
Limited (company number [ ]) whose registered office is at 10 Duke Street,
Reading, Berkshire, RG1 4RX ("the Continuing Investor") (3) Gordon Wallace
Simpson of Fairways, Burtons Lane, Little Chalfont, Chalfont St Giles, Bucks,
England and Xavier Jane Calbet of Gualta 3, (El Serrat) 08480, L'Ametilla del
Valles, Spain (individually an "Executive" and collectively the "Executives")
and 24/7 Media Inc. Of 1013 Center Road, Wilmington, County of New Castle,
Delaware, USA the ("Purchaser"). The Company, the Continuing Investor, the
Executives and the Purchaser are referred to individually as a "Party"" and
collectively as the "Parties". Capitalised terms used herein are defined in
Section 25, if not defined when first used herein.

The Parties agree as follows:

1. Subscription of Ordinary Shares

1.1 Subscription of Ordinary Shares. Subject to the terms and conditions
herein set forth, the Purchaser hereby agrees to subscribe for
ordinary shares of(pound)1 each in the Company ("the Ordinary
Shares") and the Company hereby agrees to allot and issue to the
Purchaser free from any Security Interest 26,584 Ordinary Shares
ranking pari passu with the existing Ordinary Shares of the Company.
The aggregate subscription price of the Ordinary Shares to be
subscribed hereunder (the "Subscription Price") shall be $1,900,000
US or the pound sterling equivalent on the date of this Agreement.

1.2 Costs of Issue of Ordinary Shares. The subscription of Ordinary
Shares and the issue of certificates for Ordinary Shares pursuant to
this Subscription Agreement shall be without charge, tax or other
cost to the Purchaser (except for payment of the subscription price
for such Ordinary Shares pursuant to the terms hereof).

2. The Closing. The Closing of the transactions contemplated in Section 1
(the "Closing") shall take place on the signing of this Agreement ("the
Closing Date").

2.1 Deliveries by the Purchaser. At or before the Closing the Purchaser
shall deliver to the Company the following:

(a) a subscription letter in respect of its subscription for
26,584 Ordinary Shares in the capital of the Company together
with $1,900,000 US in payment of the Subscription Price in
cash by wire or bank transfer of immediately available funds
to the account designated by the Company on the Closing Date;

(b) a shareholders' agreement in the agreed form (the
"Shareholders' Agreement"), duly executed by the Purchaser;

1
<PAGE>

2.2 Deliveries by the Company, the Continuing Investor and the
Executives. At or before the Closing, the Company, the Continuing
Investor and the Executives shall deliver to the Purchaser the
following documents:

(a) a share certificate evidencing all the Ordinary Shares
registered in the Purchaser's name;

(b) the Shareholders' Agreement, duly executed by the Company, the
Continuing Investor and the Executives;

(c) deeds of variation of the service agreements of the Executives
in the agreed form, duly executed by the Company and the
Executives;

(d) copies of resolutions of the directors of the Company and the
Continuing Investor authorising their execution of this
Subscription Agreement.

3. Representations and Warranties of the Continuing Investor and the
Shareholders. The Continuing Investor and each Executive (each a
"Warrantor" and collectively the "Warrantors") hereby jointly and
severally represent and warrant to the Purchaser that, subject to the
exceptions fairly disclosed in the disclosure letter delivered by the
Company to the Purchaser prior to the execution and delivery of this
Subscription Agreement (the "Disclosure Letter"), the statements contained
in this Section 3 are true and correct as of the Closing Date.

3.1 Organisation and Standing. Each of the Company and the Continuing
Investor is duly organised validly existing and in good standing as
a private limited company organised under the Laws of England with
all requisite corporate power and authority to conduct its business
as currently conducted and proposed to be conducted, and to perform
its obligations under this Subscription Agreement.

3.2 Subsidiaries. Neither the Company nor the Continuing Investor has
any Subsidiaries and any equity investment or other interest in any
corporation, association, partnership, joint venture or other
entity, except as set forth in Schedule 2. Each Subsidiary is a
corporation validly existing under the Laws of the jurisdiction of
its organisation, with all requisite corporate power and authority
to conduct its business as currently conducted and proposed to be
conducted.

3.3 Licenses. The Company and the Subsidiaries possess all licenses,
consents, permits and other authorisations necessary for the conduct
of their respective businesses (the "Company Licenses") except for
such Company Licenses for which the failure to obtain would not have
a

2
<PAGE>

material adverse effect on its operations, earnings or financial
condition (collectively "the Condition"). The Company and the
Subsidiaries are materially in compliance with all Company Licenses.
No suspension, cancellation, revocation, modification, complaint,
proceeding, order or investigation of or with respect to any Company
License is pending or, to the Knowledge of the Warrantors,
threatened.

3.4 No Default. Neither the Company nor any Subsidiary is in violation
of or default under, nor has it breached, its memorandum and
articles of association or other constitutional documents, or to the
Knowledge of the Warrantors any Agreements to which it is a party.

3.5 Authority; Binding Obligation. Each of the Company and the
Continuing Investor has full legal right, power and authority
(including full corporate power and authority) to execute and
deliver this Subscription Agreement and the other documents
contemplated hereby, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this
Subscription Agreement by each of the Company and the Continuing
Investor and the consummation by each of them of the transactions
contemplated hereby have been duly authorised by all necessary
corporate action. This Subscription Agreement has been duly executed
and delivered by the Company and the Continuing Investor and
constitutes a valid and legally binding instrument of each of them,
enforceable in accordance with its terms.

3.6 No Conflict; Required Filings and Consents. The execution, delivery
and performance by each of the Company and the Continuing Investor
of this Subscription Agreement and the other documents contemplated
hereby, and the fulfilment of and the compliance with the terms
hereof and thereof, do not and will not (a) conflict with, result in
a breach or violation of, or constitute a default under, the
memorandum and articles of association or other constitutional
documents of the Continuing Investor, the Company or any Subsidiary,
(b) conflict with, result in a breach of, constitute a default (or
an event which, with the giving of notice, lapse of time, or the
happening or occurrence of any other event would constitute a
default) under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any
notice under any Agreement to which the Continuing Investor, the
Company or any Subsidiary is a party or by which any of them is
bound or to which any of their respective assets or properties are
subject, or (c) conflict with, or result in a breach or violation of
any Law applicable to the Continuing Investor, the Company or any
Subsidiary. There are no Agreements, Laws or other restrictions of
any kind to which the Continuing Investor, the Company or any
Subsidiary is party or subject that would prevent or restrict the
execution, delivery or performance of this Subscription Agreement.
No consent, approval, authorisation, permit, order registration,
filing,

3
<PAGE>

notification or qualification of or with any Person not party to
this Subscription Agreement is required for the valid authorisation,
execution, delivery and performance by the Parties of this
Subscription Agreement and the other documents contemplated hereby,
and the compliance by the Parties with the terms hereof and thereof,
except such as are described in the Disclosure Letter.

3.7 Share Capital of the Company. Following the passing of a written
resolution of the Company on the date of this Agreement and the
subscription pursuant to it, and the purchase of shares from
Rundfunk the authorised share capital of the Company will be (pound)
130,000 divided into 130,000 Ordinary Shares of (pound)1 each, of
which 32,500 Ordinary Shares of (pound)1 each fully paid are held by
the Continuing Investor, 48,750 by the Purchaser and 48,750 Ordinary
Shares are unissued and subject to a warrant issued by the Company
in favour of the Purchaser.

3.8 Financial Information. Management accounts of the Company for the
period from 1 March 1998 to 30 November 1998 the "Financial
Statements" have been delivered to the Purchaser. The Financial
Statements, give a fair view of the affairs and the financial
position of the Company as at the dates indicated and have been
prepared in conformity with generally accepted accounting principles
and practices. The Financial Statements have been prepared on a
consistent basis, make full provision for all known Liabilities and
unless otherwise stated therein are not affected by any unusual or
non-recurring items and do not give a misleading view of the
Company's or the Subsidiaries' affairs.

3.9 Absence of Certain Changes or Events. Since 31 December 1998, (a) to
the Knowledge of the Warrantors, no event, occurrence or development
has occurred with respect to the Company or any Subsidiary that,
individually or in the aggregate, has had or could reasonably be
expected to have, a material adverse effect on the Condition of the
Company or any Subsidiary, whether or not arising in the Ordinary
Course of Business and (b) the Company and the Subsidiaries have
conducted their respective businesses substantially in the manner
theretofore conducted and only in the Ordinary Course of Business.

3.10 Capitalisation.

(a) As of the Closing Date, the authorised share capital of the
Company will consist of 130,000 Ordinary Shares.

(b) Schedule 2 sets forth the authorised share capital or other
equity interests of each Subsidiary and the percentage of the
issued share capital or other equity interests of each
Subsidiary directly or indirectly owned by the Company. All of
the issued share capital and other equity interests of the
Subsidiaries have been duly authorised and validly issued and
are fully paid.

4
<PAGE>

(c) There are no outstanding or authorised options, warrants,
purchase rights, subscription rights, conversion rights,
exchange rights, registration rights, redemption rights, calls
or other Agreements that could require the Company or any
Subsidiary to allot, issue, sell, transfer, cause to be
issued, or otherwise dispose of any of the share capital or
other securities of the Company or any Subsidiary (other than
those created by or pursuant to this Subscription Agreement).
There are no outstanding or authorised share appreciation,
phantom share, profit participation, or similar rights with
respect to the Company or any Subsidiary.

(d) All of the issued share capital or other securities of the
Subsidiaries owned, directly or indirectly, by the Company are
registered in its name and owned beneficially by the Company
directly, or indirectly through wholly owned Subsidiaries,
free and clear of any restrictions on transfer (other than
restrictions under applicable securities Laws), Taxes,
Security Interests, options, warrants, purchase rights,
Agreements, equities, claims and demands. The names and the
number of shares or other securities held by, all holders of
share capital or other securities of the Company and the
Subsidiaries are set forth in Schedule 2. Such Persons are the
registered owners of, and own beneficially, all of the issued
share capital or other securities of the Company and the
Subsidiaries indicated in the Disclosure Letter, free and
clear of any restrictions on transfer (other than restrictions
under applicable securities Laws and the constitutional
documents of such companies), Taxes, Security Interests,
options, warrants, purchase rights, Agreements, equities,
claims, and demands. At the Closing, the Purchaser will be the
registered owner of, and own beneficially, 48,750 of the
issued Ordinary Shares free and clear of any restrictions on
transfer (other than restrictions under applicable securities
Laws and the constitutional documents of such companies),
Taxes, Security Interests, options, warrants, purchase rights,
Agreements, equities, claims and demands.

(e) There are no obligations, contingent or otherwise, of the
Company or any Subsidiary to provide funds to, make any
investment (in the form of a loan, capital contribution or
otherwise) in, or provide any guarantee or other Security
Interest with respect to, any other Person.

3.11 Compliance with Law. The Company and the Subsidiaries have
conducted, and are currently conducting, their businesses so as to
comply in all material respects with all applicable Laws. To the
Knowledge of the Warrantors, all returns, reports, statements and
other documents required to be filed by the Company or any
Subsidiary with any governmental, quasi-governmental or regulatory
authority have

5
<PAGE>

been filed and complied with and are true, correct and complete in
all material respects.

3.12 Brokers' Fees. Neither the Company nor any Subsidiary has any
Liability or obligation to pay any fees or commissions to any
broker, finder, investment banker or agent with respect to the
transactions contemplated by this Subscription Agreement.

3.13 Absence of Bankruptcy Proceedings. There are no bankruptcy,
insolvency, liquidation, reorganisation or arrangement proceedings
pending against, contemplated by, or to the Knowledge of the
Warrantors threatened against, the Company or any Subsidiary.

3.14 Title to Assets. The Company and the Subsidiaries have good, valid
and marketable title to, or a valid leasehold interest in, all
assets and properties (including the Real Property) used by them or
granted to them in the Ordinary Course of Business. The assets and
properties are not subject to any Security Interest. All assets and
properties (including Real Property) used by the Company or the
Subsidiaries comprise all the assets and properties (including Real
Property) necessary for the continuation of the business of the
Company or the Subsidiaries as previously carried on.

3.15 Undisclosed Liabilities. To the Knowledge of the Warrantors, neither
the Company nor any Subsidiary has any Liabilities which together
exceed in aggregate $50,000 (and there is no Basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to
Liabilities), except for Liabilities incurred in the Ordinary Course
of Business and Liabilities that are not material to the Company or
any Subsidiary and have not resulted in a material adverse effect on
the Condition of the Company or any Subsidiary.

3.16 Tax Matters.

(a) The Company and the Subsidiaries have duly filed all Tax
Returns required to be filed by the Company or any Subsidiary
with respect to all applicable Taxes.

(b) There is no current action, suit, proceeding, audit,
investigation or claim or, to the Knowledge of the Warrantors,
threatened in respect of any Taxes for which the Company or
any Subsidiary is or may become liable, nor has any deficiency
or claim for any such Taxes, been proposed, asserted or, to
the Knowledge of the Warrantors, threatened.

(c) All Taxes due and owing by the Company or any Subsidiary have
been paid in full or proper provision made in the Financial
Statements.

6
<PAGE>

3.17 Real Property.

(a) There are no disputes relating to the Real Property or their
use or occupation and there are no pending or anticipated
disputes, actions, claims or demands in respect of the Real
Property.

(b) The Company and its Subsidiaries have a good and marketable
title (legal and beneficial) or a valid leasehold interest in
to the Real Property which is vested in the Company or its
Subsidiaries (as appropriate) without exception or
reservation.

(c) The Company or any Subsidiary is absolutely entitled to the
entire proceeds of sale of any Real Property without deduction
or set-off.

3.18 Intellectual Property.

(a) The Company and the Subsidiaries own or have the right to use
pursuant to a valid license, sublicense or other Agreement all
Intellectual Property used in the operation of the businesses
of the Company and the Subsidiaries as currently conducted and
as currently proposed to be conducted.

(b) To the Knowledge of the Warrantors, the Company and the
Subsidiaries have not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any third party. There are no
actual or, to the Knowledge of the Warrantors, threatened
claims against the Company or any Subsidiary alleging that the
conduct of the Company's or any Subsidiary's business
infringes or conflicts with the Intellectual Property rights
of any third parties. To the Knowledge of the Warrantors, no
third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with the
Intellectual Property rights of the Company or any Subsidiary.

(c) To the Knowledge of the Warrantors, the Company and the
Subsidiaries will not be materially adversely affected by (i)
any failure of the Company's and the Subsidiaries' computer
software, to be Year 2000 Compliant; or (ii) the cost and/or
disruption to normal activities caused by work to be carried
out to ensure such computer software is Year 2000 Compliant.

(d) The Company and the Subsidiaries have received no notice of
breach or infringement pursuant to the Data Protection Act
1984.

3.19 Tangible Assets. All tangible assets of the Company and the
Subsidiaries are in sufficient operating condition and repair and
are

7
<PAGE>

suitable and adequate for the uses for which they are currently
being used.

3.20 Contracts and Leases. Except as detailed in the Disclosure Letter
there is no Agreement to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound, and which
is:

(a) an Agreement concerning a partnership, joint venture or
other profit-sharing arrangement;

(b) a mortgage, indenture, note, guarantee or other Agreement for
or relating to borrowed money;

(c) a profit-sharing, bonus, share or share option, share
purchase, share appreciation, deferred compensation,
severance, insurance, pension, retirement or other plan or
arrangement for the benefit of its current or former
directors, officers, and employees;

(d) a distributor, dealer, sales representative, sales agency,
advertising, property management or brokerage Agreement
involving an annual payment in excess of $50,000;

(e) an Agreement for the future purchase or lease of materials,
supplies, services, merchandise, equipment or other assets or
property involving payments of more than $50,000 over its
remaining term (including, without limitation, periods covered
by any option to renew);

(f) an Agreement for the sale of any asset or property (including
Real Property)or the grant of any preferential rights to
purchase any asset or property, other than in the Ordinary
Course of Business.

(g) an Agreement which is not terminable at anytime by the Company
or its Subsidiaries giving 60 days notice or less.

3.21 Litigation.

(a) Except as disclosed in of the Disclosure Letter, neither the
Company nor any Subsidiary has been engaged or is currently
engaged in any actions, suits, claims, arbitrations,
proceedings or investigations. And there are no current
actions, suits, claims, arbitrations, proceedings, or
investigations or, to the Knowledge of the Warrantors,
threatened against, affecting or involving the Company or any
Subsidiary or their respective businesses, assets or
properties (including the Real Property), or the transactions
contemplated by this Subscription Agreement.

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<PAGE>

3.22 Employee Matters.

(a) Except as detailed in the Disclosure Letter there are no
directors, officers and employees of the Company and the
Subsidiaries ("the Employees"). The Disclosure Letter lists
each person's name, position, and current annual remuneration.

(b) There are no strikes, work stoppages, union organisation
efforts or other controversies (other than grievance
proceedings for which the Company or its Subsidiaries has no
Liability) between the Company or any Subsidiary and any
Employees or former employees of the Company or any Subsidiary
and there are no Labour Disputes pending or threatened.

(c) Except in relation to the Executives (whose current Service
Agreements are attached to the Disclosure Letter) there are no
Employment Agreements between the Company or any Subsidiary
and any of their respective employees not terminable at will
on three months notice or less without giving rise to a claim
for damages or compensation (other than a statutory redundancy
payment or statutory compensation for unfair dismissal). The
consummation of the transactions contemplated hereby will not
cause the Company or any Subsidiary to incur or suffer any
Liability relating to, or obligation to pay, severance,
termination or other such payments to any Person.

(d) Neither the Company nor any Subsidiary is under an obligation
nor has it made any provision or given any of its Employees or
directors any indication that it intends to increase the
aggregate remuneration payable to them.

(e) Neither the Company nor its Subsidiaries has ever been a party
to any Agreement or arrangement for a Company pension plan.
Except as disclosed in the Disclosure Letter there is no
obligation for the Company or any Subsidiary to contribute to
any personal pension scheme of any Employee of former
employee.

3.23 Guarantees. Neither the Company nor any Subsidiary is a guarantor of
any Liability or obligation (including indebtedness) of any Person
other than in the Ordinary Course of Business full particulars of
which are disclosed in the Disclosure Letter..

3.24 Environmental Matters. There are no pending or, to the Knowledge of
the Warrantors, threatened actions, suits, orders, claims, legal
proceedings or other proceedings based on any violation of
Environmental Laws at any part of the Real Property or otherwise
arising from the Company's or any Subsidiary's activities.

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<PAGE>

3.25 Certain Business Relationships.

(a) Neither Executive and no Affiliate of either Executive owns,
directly or indirectly, any interest in, or is a shareholder,
partner, other holder of equity interests, director, officer
employee, consultant or agent of any Person whether or not
that person is a competitor or customer of, or supplier of
goods or services to, the Company or any Subsidiary:

(b) Neither Executive and no Affiliate of either Executive or to
the knowledge of the Warrantors and no employee or any
consultant: owns, directly or indirectly, in whole or in
party, any assets or properties which the Company or any
Subsidiary currently uses in its business;

(c) Neither Executive and no Affiliate of either Executive or to
the knowledge of the Warrantors and no employee or any
consultant: has any cause of action or other suit, action or
claim whatsoever against, or owes any amount to, the Company
or any Subsidiary, except for claims arising in the Ordinary
Course of Business from any such Person's service to the
Company or any Subsidiary as a director, officer or employee.

3.26 Customers. During the twelve (12) months prior to the Closing Date,
no material customer of the Company or any Subsidiary which
accounted for more than 10% of the 1998 revenue of the Company
during such period has cancelled or otherwise terminated its
relationship with the Company or any Subsidiary.

3.27 Certain Business Practices. Neither the Company, nor any Subsidiary,
nor any of their current respective officers or directors or, to the
Knowledge of the Warrantors, any of their employees or agents) have
paid, given or received or have offered or promised to pay, give or
receive, any bribe or other unlawful payment of money or other thing
of value, any unlawful extraordinary discount, or any other unlawful
inducement, to or from any Person in connection with or in
furtherance of the business of the Company or any Subsidiary.

3.28 Transfer of Title. Upon payment for the Ordinary Shares to be
subscribed in the capital of the Company pursuant to the terms of
this Subscription Agreement, the Purchaser will acquire good, valid
and marketable title thereto, free and clear of all Security
Interests.

3.29 Competition and Fair Trading. To the Knowledge of the Warrantors,
neither the Company nor any Subsidiary is a party to or liable under
any Agreement or arrangement which infringes any competition,
anti-trust or equivalent legislation of any jurisdiction.

3.30 Borrowing. With the exception of the sums owed to Rundfunk and the
Purchaser (which will be repaid on Closing) neither the Company

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<PAGE>

nor any Subsidiary has any borrowings, loans or other facility
outstanding.

3.31 Insurance. Both the Company's and its Subsidiaries' assets and Real
Property which are of an insurable nature have at all times been and
are insured to their full reinstatement or replacement value against
all such risks that companies carrying on in a similar business as
the Company and its Subsidiaries would be expected to cover by
insurance. All premiums due on any insurance policies have been duly
and punctually paid and all such insurance policies are valid and
enforced and neither the Company nor any Subsidiary has done
anything or admitted to do anything which might make any of the
insurance policies void or voidable. No claims are outstanding under
any of the insurance policies and no circumstances exist which might
give rise to such a claim.

3.32 Insolvency. In relation to the Company and each Subsidiary no
resolution has been passed (and no meeting has been convened and no
written resolution has been circulated with a view to any
resolution), no petition has been presented and no order has been
made for administration or winding up or for the appointment of a
receiver or provisional liquidator. Neither the Company nor any
Subsidiary has stopped paying its creditors, is insolvent and is
unable to pay its debts for the purposes of section 123 of the
Insolvency Act 1986.

3.33 Information.

(a) The facts set out in the Schedules of this Subscription
Agreement and the Disclosure Letter and the information
contained in, attached to or referred to in the Disclosure
Letter are at the date hereof and will at Closing be true,
complete and accurate in all respects and not misleading.

(b) Neither the Company nor any Subsidiary does not have any if
its records, systems or data recorded or operated or otherwise
wholly or partly dependent on, or held by, any means
(including any electronic, mechanical or photographic process
whether computerised or not) which (including all means of
access to it and from it) are not under the exclusive
ownership and direct control of the Company.

(c) All title deeds relating to the assets and constitution of the
Company and its Subsidiaries and an executed copy of all
agreements to which the Company and its Subsidiaries is a
party or by which it is bound and the original copies of all
other documents which are owned by, or which ought to be in
the possession of the Company are in the possession or under
the control of the Company.

11
<PAGE>

3.34 The Continuing Investor has not traded and has no assets other than
32,500 Ordinary Shares each in the capital of the Company. The
Shareholders of the Continuing Investor and their holdings of
Ordinary Shares are set out in the Disclosure Letter, together with
details of its officers and registered office. The authorised share
capital of the Continuing Investor is (pound)100,000 divided into
100,000 of (pound)1 each and the issued share capital
is(pound)40,000

4. Further Representations and Warranties of the Warrantors Each of the
Warrantors hereby jointly and severally represents and warrants to the
Purchaser as of the Closing Date as follows:

4.1. Authority; Binding Obligation. It or he has full legal right,
capacity, power and authority to execute and deliver this
Subscription Agreement and the other documents contemplated hereby,
to perform its or his obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. This
Subscription Agreement has been duly executed and delivered by it or
him and constitutes a valid and legally binding obligation
enforceable in accordance with its terms.

4.2. No Conflict. The execution, delivery and performance by it or him of
this Subscription Agreement and the other documents contemplated
hereby, and the fulfilment of and compliance with the terms hereof
and thereof, do not and will not (a) conflict with, or result in a
breach or violation of, any applicable Law (b) conflict with, result
in a breach or violation of, or constitute a default under any
Agreement to which it or he is a party, or (c) in the case of the
Continuing Investor conflict with, result in a breach or violation
of, or constitute a default under, its memorandum and articles of
association.

4.3 Litigation. The Warrantors have not during the twelve months
preceding the date of this Subscription Agreement been engaged in
any civil, criminal, administrative or arbitration claim,
proceedings or enquiries and there are no such proceedings or
enquiries pending or threatened by or against the Warrantors or any
director of the Warrantors or any person whose acts or defaults the
Warrantors may be vicariously liable and there is no matter or fact
in existence which might gave rise to the same. No officer of the
Continuing Investor or the Executives has been convicted of any
offence or of any act or failed to do any act which reflects upon
his suitability to hold his position as a director of a company.

4.4 Insolvency. In relation to the Warrantors no resolution has been
passed, no petition has been presented and no order has been made
for administration, winding up, for the appointment of a receiver,
provisional liquidator or trustee in bankruptcy. Neither of the
Warrantors is insolvent or unable to pay is debts for the purposes
of section 123 of the Insolvency Act 1986.

12
<PAGE>

5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company, the Continuing
Investor and the Executives as of the Closing Date as follows:

5.1 Organisation and Standing. The Purchaser is a corporation duly
organised, validly existing and in good standing under the Laws of
the place of its incorporation with the power and authority to
perform its obligations under this Subscription Agreement.

5.2. Authority; Binding Obligation. The execution, delivery and
performance of this Subscription Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated
hereby have been duly authorised by all necessary corporate action
of the Purchaser. This Subscription Agreement has been duly executed
and delivered by the Purchaser and constitutes a valid and legally
binding instrument of the Purchaser, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganisation, moratorium and similar Laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.

5.3. No Conflict. The execution, delivery and performance by the
Purchaser of this Subscription Agreement and the other documents
contemplated hereby, and the fulfilment of and compliance with the
terms hereof and thereof do not and will not materially conflict
with, or result in a material breach or violation of, or constitute
a material default under, the certificate of incorporation or bylaws
of the Purchaser, any Agreement to which the Purchaser is a party or
by which any of the Purchaser's assets or properties are bound, or
any applicable Law.

5.4. Brokers' Fees. The Purchaser has taken no action which would entitle
anyone to a broker's or finder's fee or other compensation in
connection with the transactions contemplated hereby.

6. Other Agreements.

6.1. Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any of the proceeds from the issue of Ordinary
Shares pursuant to this Subscription Agreement for any purpose other
than capital expenditure and working capital requirements included
in its 1999 budget to be agreed with the Purchaser.

6.2. Protection of the Company's Business

For and in consideration of the benefits derived directly and
indirectly from this Subscription Agreement each of the Executives'
covenants and agrees with the Purchaser as follows:

(a) he shall not (in the case of section 6.2(a)(i) for a period of
one year from the date of termination of his employment with
the

13
<PAGE>

Company and in the case of section 6.2(a)(iv) for a period of
6 months from such date) and in the case of sections
6.2(a)(ii) and 6.2(a)(iii) without limitation in time (either
personally or through an agent) without the prior consent of
the Purchaser:

(i) induce, or attempt to induce, any officer or employee
(being an employee involved in an executive, senior
managerial, technical, research or sales capacity) of
the Company or any of the Subsidiaries to leave his or
her employment with it; or

(ii) make use of any information of a secret or confidential
nature relating to the business of affairs of the
Company or any of the Subsidiaries or their customers;

(iii) use or (insofar as it or he can reasonably do so) allow
to be used any trade name used by the Company or any of
the Subsidiaries or any other name calculated or likely
to be confused with such a trade name;

(iv) carry on or be in any way engaged concerned or
interested in (except passive investments in up to 5% of
the equity share capital of listed companies), or be an
employee or officer of, or provide consultancy or other
services to, any business or part of any business which
comprises the marketing or sale of internet advertising
products or services within the European Union or the
European Economic Area, or seeks with the Executive's
involvement, to do so.

(b) that the covenants contained in clause 6.2(a) are no more
extensive than is reasonable to protect the Purchaser;

(c) each of the restrictions contained in this clause 6.2 is
intended to be separate and severable. In the event that any
of the restrictions shall be held void but would be valid and
enforceable if part of the wording thereof were deleted such
restriction shall apply as if such wording were deleted

7. Survival of Representations, Warranties, Indemnities and Agreements.
Notwithstanding any investigation, audit or inspection made by any Party,
all covenants, Agreements, representations, warranties and indemnities
made by the Company, the Continuing Investor, the Executives and the
Purchaser herein shall survive the Closing hereunder until eighteen months
after the Closing Date (the "survival period").

8. Warranty Claims.

8.1. Warranty Claims of the Purchaser. Each of the Warrantors
acknowledges that the Purchaser has been induced to enter into this

14
<PAGE>

Agreement and to subscribe for shares in the Company on the basis of
the representations and warranties set forth in Section 3 (the
"Section 3 Warranties") and the representations and warranties set
forth in Section 4 (the "Section 4 Warranties" and together with the
Section 3 Warranties, the "Warranties").

(a) Each of the Warranties is a separate and independent
representation and warranty and the Purchaser shall have a
separate claim and right of action in respect of every breach.
The Warranties shall continue in full force and effect after
Closing subject to Section 7.

(b) Each of the Warranties is given subject to the matters fairly
disclosed in the Disclosure Letter but is otherwise subject to
no qualification.

8.2. Certain Limitations. Save for claims in respect of any breach of any
of the Warranties arising (or any delay in the discovery of which
arises) as a result of fraud on the part of the relevant Warrantor:

(a) The aggregate liability of the Warrantors for all claims
pursuant to the Warranties shall be limited to
(pound)2,000,000 (plus the reasonable costs of recovery of any
damages for breach of any of the Warranties incurred by or on
behalf of the Purchaser); provided, however, that the
aggregate liability of the Executives for breach of the
Warranties shall be limited to (pound)100,000.

(b) No liability in respect of any claim for breach of any of the
Warranties shall arise unless the amount of such claim when
aggregated with all other claims exceed (pound)50,000, but
then the liability shall be in respect of the whole amount of
all such claims (and not merely the excess).

(c) No Warrantor shall be liable in respect of any claim unless
such Warrantor shall have been given written notice of such
claim within the survival period set forth in Section 7 and
legal proceedings regarding such claim are commenced within
six (6) months after the end of the survival period.

(d) The Warrantors shall have no liability in respect of any claim
for breach of Warranties:

(i) to the extent that such claim arises or is increased as
a result of an increase in rates of taxation after 30
November 1998 or the passing of any legislation (or
making of any subordinate legislation) with
retrospective effect or any provision or reserve in the
Financial Statement at 30 November 1998 being
insufficient by reason of any increase in rates of
taxation after that date;

15
<PAGE>

(ii) to the extent that such claim provided was for or
included as a Liability in the Financial Statements, or
(B) any Liability for taxation arising in the Ordinary
Course of Business after 30 November 1998;

(iii) to the extent that such claim arises as a result of any
change in the accounting policy or practice or in the
accounting reference date of the Company after Closing
at the direction of the Purchaser;

8.3 Purchaser Remedies

(a) The Warrantors hereby agree to indemnify and keep the
Purchaser indemnified in respect of all its costs, claims,
charges, demands and expenses and any other liabilities of any
nature whatsoever (including but not limited to all legal and
other professional fees and expenses) which the Purchaser may
incur either before or after the commencement of any action in
connection with:

(i) the settlement of any claim that any of the Warranties
are untrue or misleading or that the Warranties or any
other terms of this Subscription Agreement have been
breached;

(ii) any legal proceedings in which the Purchaser claims that
any of the Warranties are untrue or misleading or that
any of the Warranties or any of the terms of this
Subscription Agreement have been breached and in which
judgement is given for the Purchaser; or

(iii) the enforcement of any settlement or judgement.

(b) Notwithstanding any other provision of this Subscription
Agreement the Warrantors hereby agree to indemnify and keep
indemnified the Purchaser against any loss, liability or cost
of any nature whatsoever or which the Purchaser may suffer or
incur whether directly or indirectly a result of any breach of
any of the Warranties or any other term of this Subscription
Agreement.

(c) In respect of any Settled Claim the Continuing Investor and
Executives hereby acknowledge that the Purchaser shall be
entitled to;

(i) cause the Executives to immediately transfer to the
Purchaser all Ordinary Shares owned by them up to the
value of the Settled Claim pursuant to clause (d) below;
and

16
<PAGE>

(ii) deduct from the Executives' salary or other remuneration
payable by the Company the amount of the Settled Claim.

(d) If a claim for breach of Warranty is settled the Purchaser
may, in its discretion, serve a notice on the Continuing
Investor and the Company requiring the Continuing Investor to
transfer shares in the Company to the Purchaser in whole or
partial discharge of the liability (a "Share Sale Notice").

On receipt of the Share Sale Notice, the Purchaser and the
Continuing Investor will negotiate in good faith to determine
the value shares held by the Continuing Investor and, in
default or agreement, the value shall be the Fair Value,
defined in the Shareholders' Agreement as determined by the
auditor (acting as experts and not as arbitrators) on the
basis of a sale between a willing buyer and a willing seller
but without limitation adjusted to take into account the
consequential breach of Warranty concerned.

The Continuing Investor shall, once the value of its shares
has been determined, transfer to the Purchaser such number of
shares as do not exceed the Settled Liability in whole or
partial discharge of that liability.

(e) The rights and remedies available to the Purchaser under this
Subscription Agreement are in addition to and not exclusive of
all other rights or remedies available at law to the Purchaser

8.4. Other Provisions.

(a) Upon the Purchaser becoming aware that matters have arisen
which will or are likely to give rise to a claim, the
Purchaser shall (i) notify the Warrantors in writing as soon
as reasonably practicable of any claim setting out reasonably
details of the claim; and (ii) not make any admission of
liability, agreement or compromise with any person, body or
authority in relation to the potential claim without prior
consultation with the Warrantors.

(b) Nothing herein shall in any diminish the Purchaser's common
law duty to mitigate its loss for any claims to be made under
this Agreement.

9. Executives' Waiver.

Indemnification of the Purchaser. The Executives hereby irrevocably waive
any and all rights to recourse against the Company or any Subsidiary with
respect to any representation, warranty, indemnity or other Agreement or
acts

17
<PAGE>

that have been made or taken by or pursuant to this Subscription
Agreement. The Executives shall not be entitled to contribution from,
subrogation to or recovery against the Company or any Subsidiary with
respect to any liability of the Executives that may arise under or
pursuant to this Subscription Agreement or the transactions contemplated
hereby.

10. Notices.

All notices, demands, requests, or other communications which may be or
are required to be given, served, or sent by any Party to any other Party
pursuant to this Subscription Agreement shall be in writing and shall be
faxed or mailed by first-class, registered or certified air mail, postage
prepaid, or transmitted by hand delivery or courier, addressed as follows:

If to the Company

The Directors, InterAd Holdings Ltd, 49-51 Carnaby Street, London W1V
1PF, Fax No. 0171 437 0780

If to Gordon Wallace Simpson

G W Simpson, Fairways, Burtons Lane, Little Chalfont, Chalfont St
Giles, Bucks HP8 4BB

If to Xavier Jane Calbet

Xavier Jane Calbet, Apartado de Correos 52 (El Serrat), 08480 L'Ametlla
del Valles, Spain

Agent for service: Boyes Turner & Burrows of 10 Duke Street, Reading,
Berkshire, RG1 4RX, Fax No. 0118 952 7248

If to the Continuing Investor

The Directors, Interadventures Ltd, 10 Duke Street, Reading, RG1 4RX,
No 0118 952 7248

If to the Purchaser

24/7 Media Inc, of Corporation Service Company 1013 Centre Road,
Wilmington, County of New Castle, Delaware, 19805 USA

Agent for service: Irwin Mitchell of St Peter's House, Hartshead,
Sheffield, S1 2EL, Fax No. 0114 275 3306

Each Party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request or communication which shall
be mailed, delivered or transmitted in the manner described above shall be

18
<PAGE>

deemed sufficiently given, served, sent or received for all purposes at
such time as it is delivered to the addressee or at such time as delivery
is refused by the addressee upon presentation.

11. Agent for Service. Xavier Jane Calbet and the Purchaser each hereby
appoints the person under his or its name and address above as his or its
agent for the service of proceedings in England such appointments are
irrevocable except that the appointing Party may by notice irrevocably
appoint another person resident in England as such agent.

12. Binding Effect. This Subscription Agreement shall be binding upon, and
shall inure solely to the benefit of, each of the Parties hereto, and each
of their respective heirs, executors, administrators, successors and
permitted assigns, and no other Person shall acquire or have any right
under or by virtue of this Subscription Agreement.

13. Law and Jurisdiction. This Subscription Agreement shall be governed by,
and construed in accordance with the Laws of England and hereby submit to
the jurisdiction of the English Courts.

14. Entire Agreement; Amendment. This Subscription Agreement (together with
the Disclosure Letter and the other documents attached to it) represents
the entire understanding of the Parties with respect to the matters
addressed herein and supersedes all prior written and oral understandings
concerning the subject matter hereof. No amendment, modification or
discharge of this Subscription Agreement shall be valid or binding unless
set forth in writing and duly executed and delivered by the Party against
whom enforcement of the amendment, modification or discharge is sought.

15. Assignment. No party shall assign its rights and obligations under this
Subscription Agreement, in whole or in part, whether by operation of Law
or otherwise, without the prior written consent of the other Parties
hereto, and any such assignment contrary to the terms hereof shall be null
and void and of no force and effect; provided, however, that the Purchaser
shall have the right to assign the benefit in whole or in part of its
rights and obligations under this Subscription Agreement, in whole or in
part, to a Purchaser Affiliate or to designate any Purchaser Affiliates to
receive directly any of the Ordinary Shares to be subscribed and purchased
hereunder or to exercise any of the rights of the Purchaser, or to perform
any of its obligations (provided that Purchaser shall cause such Purchaser
Affiliate to reassign this Subscription Agreement to Purchaser in the
event that such Purchaser Affiliate ceases to be a Purchaser Affiliate).

16. Successors. This Subscription Agreement shall inure to the benefit of and
be binding upon the Company, the Purchasers and their respective
successors and permitted assigns. Nothing expressed herein is intended or
shall be construed to give any Person other than the Persons referred to
in the preceding sentence any legal or equitable right, remedy or claim
under or in respect of this Subscription Agreement.

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<PAGE>

17. Expenses. Except as provided by this Subscription Agreement each Party
will pay its own expenses incident to this Subscription Agreement and the
transactions contemplated hereby (including, without limitation, legal,
accounting and consulting fees and expenses).

18. Severability of Provisions. If any part of any provision of this
Subscription Agreement is invalid or unenforceable in any respect, such
part shall be ineffective to the extent of such invalidity or
unenforceability, without in any way affecting the remaining parts of such
provision or the remaining provisions of this Subscription Agreement.

19. Waiver. No delay or failure on the part of any Party hereto in exercising
any right, power or privilege under this subscription Agreement or under
any other document furnished in connection with or pursuant to this
subscription Agreement shall impair any such right, power or privilege or
be construed as a waiver of any default or any acquiescence therein. No
single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. No waiver shall be valid
against any Party unless made in writing and signed by the Party against
whom enforcement of such waiver is sought, and then only to the extent
expressly specified therein.

20. Execution in Counterparts. This Subscription Agreement may be executed and
delivered in any number of counterparts, each of which counterparts when
so executed and delivered shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.

21. Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of
this Subscription Agreement without the prior written approval of the
other Parties, which approval shall not be unreasonably withheld;
provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable Law or any listing or
trading agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its best efforts to advise the other Parties
prior to making the disclosure).

22. No Third Party Beneficiaries. This Subscription Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.

23. Further Assurances. Each of the Continuing Investor and the Executives
hereby waives any rights of pre-emption in respect of the allotment and
issue of any shares of the Company to the Purchaser pursuant to this
Subscription Agreement.

24. Headings. Section headings contained in this Subscription Agreement are
inserted for convenience of reference only, shall not be deemed to be a
part of this Subscription Agreement for any purpose, and shall not in any
way define or affect the meaning, construction or scope of any provision
hereof.

20
<PAGE>

25. Certain Definitions.

"Affiliate" means: (a) with respect to an individual, any member of such
individual's family; (b) with respect to a corporate entity, any officer,
director, shareholder, partner or investor of or in such entity or of or
in any Affiliate of such entity; and (c) with respect to a person or
entity, any person or entity which directly or indirectly, through one or
more intermediaries, Controls, is Controlled by, or is under common
Control with such person or entity.

"Agreement" means any concurrence of understanding and intention between
two or more Persons with respect to their relative rights and/or
obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the
requirements of contract), including, without limitation, contract,
leases, promissory notes, covenants, easements, rights of way,
commitments, arrangements and understandings.

"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms, or could reasonably be expected
to form, the basis for any specified consequence.

"Board" means the board of directors of the Company.

"Business Day" means a day other than a Saturday, a Sunday or any other
day on which commercial banks in London, England or in the State of New
York, USA are authorised or obligated to be closed.

"Control" (including the terms "Controlled by" and "under common Control
with" means, as used with respect to any Person, possession, directly or
indirectly or as a trustee or executor, of power to direct or cause the
direction of management or policies of such Person (whether through
ownership of voting securities, as trustee or executor, by Agreement or
otherwise).

"Environmental Laws" means any Laws, including any plans, other criteria,
or guidelines promulgated pursuant to such Laws, now or hereafter in
effect relating to the generation, production, use, storage, treatment,
transportation or disposal of hazardous materials, or noise control, or
the protection of human health or the environment.

"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade derivations and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in

21
<PAGE>

connection therewith, (c) all copyrightable works, all copyrights, all
rights to database information and all applications, registrations, and
renewals in connection therewith, (d) all moral rights, including all
rights of paternity and integrity, all rights to claim authorship of
copyrightable works, to object to a modification of copyrightable works,
and all similar rights existing under the judicial or statutory Law of any
country in the world or under any treaty, regardless of whether or not
such right is denominated or generally referred to as a "moral right", (e)
all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical date, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (f) all
computer software (including date and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium) existing in any part of the world.

"Knowledge" will be deemed to be present with respect to any Person when
the matter in question was known based upon performance of such Person's
duties as an employee or officer, was brought to the attention of or, if
based on normal investigation for the purposes of giving these Warranties
that a competent manager would have undertaken, would have been brought to
the attention of, such Person by any officer or responsible employee of
such Person or in the employment of the Company or any Subsidiary.

"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, tariffs,
determinations, writs, injunctions, awards (including, without limitation,
awards of any arbitrator), judgements and decrees applicable to the
specified Person and to the businesses and assets thereof.

"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due to become due), including any liability for Taxes.

"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and normal business practice (including with
respect to quantity and frequency) for the type of business carried on by
the Company and its Subsidiaries.

"Person" means an individual, partnership, corporation, firm,
association, joint stock company, trust, joint venture, unincorporated
organisation, or governmental, quasi-governmental or regulatory authority
(or any department, agency, or political subdivision thereof), or any
other legally recognised entity.

"Pound sterling" of "(pound)" means pounds sterling, the lawful currency
for the time being of the United Kingdom.

"Purchaser Affiliate" means a company or corporate entity in the same
group as the Purchaser within the meaning attributed thereto by Section
171(9), Taxation of Chargeable Gains Act, 1992.

22
<PAGE>

"Real Property" means the real property (other than easements and rights
of way) owned or used by the Company and the Subsidiaries as of 31
December 1998, and any additional real property (other than easements and
rights of way) owned or used since that date.

"Rundfunk" means Rundfunkmedia Runkfunkprogrammanbieter Und Werbe GmbH.

"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
claim, easement, restriction, or other security interest.

"Settled Claims" means in respect of any claim for breach of or indemnity
under this Subscription Agreement the earlier of; (a) an order for damages
in respect of the claim is awarded by the High Court of England and Wales
or other court of competent jurisdiction; (b) the claim is settled or
compromised by agreement between such of the Warrantors who are parties to
the claim and the Purchaser.

"Subsidiary" means a corporation, partnership, joint venture or other
entity of which the Company owns, directly or indirectly, at least 50% of
the issued securities or other interests of the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body or otherwise exercise Control of such entity.

"Taxes" means all domestic and foreign taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage
withholding taxes) and instalments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or
description imposed by any governmental, quasi-governmental or regulatory
authority, and any interest, penalties or additions to tax imposed thereon
in connection therewith.

"Year 2000 Compliant" means that neither performance nor functionality is
affected by dates prior to, during or after the year 2000; in particular
(i) no value for current date will cause any interruption in operation;
(ii) data-based functionality must behave consistently for dates before,
during and after the year 2000; (iii) in all interfaces and date storage,
the century in any date is specified either explicitly or by unambiguous
algorithms or inferencing rules; and (iv) the year 2000 must be recognised
as a leap year.

IN WITNESS WHEREOF each of the Parties has executed this Subscription Agreement
on the day and year first above written.

23
<PAGE>

SCHEDULE 1
----------

INFORMATION ON THE COMPANY
--------------------------

The Company

1. Registered number: 03491347

2. Date of incorporation: 12th January 1998

3. Place of incorporation: England and Wales

4. Address of registered 49-51 Carnaby Street, London, W1A 4UG
office:

5. Class of company: Private/Limited

6. Authorised share capital: (pound)130,000 divided into 130,000 Ordinary
Shares of (pound)1 each

7. Issued share capital: Interadventures Limited - 32,500 Ordinary
Shares
24/7 Media Inc - 22,166 Ordinary Shares

8. Authorised loan capital: None

9. Issued loan capital: None

10. Accounting reference date: 31st December

11. Auditor: Horwath Clark Whitehill

12. Tax residence: United Kingdom

13. VAT registration no: 713 8568 19

14. Bank Accounts - details: Barclays Bank Plc, Portman Square Group
9 Portman Square, London, W1A 3AL
Sort Code: 20-69-17
Account: InterAd Holdings Limited
Account Number: 00494976

15: Loan facilities: None

16: There are no mortgages, charges or other Security Interests created by the
Company.

17. Neither the Company nor any Subsidiary has an Associated Company or
Subsidiary Undertaking except as listed in Schedule 2.

18. The Company's directors are: Xavier Jane Calbet,
Gordon Wallace Simpson

19. The Company's secretary is: Gordon Wallace Simpson

24
<PAGE>

SCHEDULE 2
----------

PARTICULARS OF SUBSIDIARIES
---------------------------

<TABLE>
<CAPTION>
Name and company Date and Authorised Shares Shares Loan Directors Secretary Accounting
---------------- -------- ---------- ------ ------ ---- --------- --------- ----------
registration place of share beneficially registered capital Reference Date
------------ -------- ----- ------------ ---------- ------- --------------
number incorporation capital owned by in the name
------ ------------- ------- -------- -----------
the Company of the
----------- ------
Company
-------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interad UK Ltd 12 January (pound)100 2 2 None Gordon Gordon 31st December
3491215 1998, Wallace Wallace
England Simpson Simpson
and Wales Xavier Jane
Calbet

Interad 2nd March 500,000 500,000 500,000 None Gordon Sergio 31st December
Iberoamerica S.L. 1998, Peseta Wallace Gimenez
B-07871791 Spain Simpson Binder
Xavier Jane (stated to be
Calbet Proxy)

Interad Sales 4th 100,000 100,000 100,000 None Gordon 31st December
Network SARL September francs Wallace
420096588 1998, Simpson
France
</TABLE>

25
<PAGE>

INTERAD HOLDINGS LIMITED

By: /s/ Gordon Wallace Simpson
--------------------------------

Name: Gordon Wallace Simpson

Title: Director

INTERADVENTURES LIMITED

By: /s/ Gordon Wallace Simpson
--------------------------------

Name: Gordon Wallace Simpson

Title: Director

/s/ Gordon Wallace Simpson
- ------------------------------------

GORDON WALLACE SIMPSON

/s/ Xavier Jane Calbet
- ------------------------------------

XAVIER JANE CALBET

24/7 MEDIA INC

By: /s/ Mark E. Moran
--------------------------------

Name: Mark E. Moran

Title: Senior Vice President & General Counsel

AGREEMENT AND PLAN OF MERGER
By and Among
24/7 Media, Inc.
Factor K Acquisition Corporation
and
Sift, Inc.

<PAGE>

AGREEMENT AND PLAN OF MERGER, dated as of March 8, 1999 (this
"Agreement"), among 24/7 Media, Inc., a Delaware corporation ("24/7"), Factor K
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
24/7 (the "Subsidiary"), and Sift, Inc. (the "Company"), a California
corporation.

WHEREAS, the Boards of Directors of 24/7, the Subsidiary, and the
Company have each approved the merger (the "Merger") of the Company with and
into the Subsidiary, in accordance with the Corporations Code of the State of
California ("California Law") and the General Corporation Law of the State of
Delaware ("Delaware Law") and upon the terms and subject to the conditions set
forth herein; and

WHEREAS, for federal income tax purposes, it is intended that the
Merger, as defined herein, shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and

WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a pooling of interests; and

WHEREAS, each shareholder of the Company is the owner of such
number and classes of shares of capital stock (the "Shares") of the Company as
is set forth in Schedule 1 hereto (the "Ownership Table"), such Shares
collectively represent 100% of the issued and outstanding shares of capital
stock of the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, 24/7, the Subsidiary and the Company hereby agree as follows:

1. The Merger.

(a) The Merger At the Effective Time (as defined in Section 1(b))
and subject to and upon the terms and conditions of this Agreement, Delaware Law
and California Law, the Company shall be merged with and into the Subsidiary,
the separate corporate existence of the Company shall cease, and the Subsidiary
shall continue as the surviving corporation. The Subsidiary as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation." In connection with the Merger, the Surviving
Corporation shall change its name to "Sift, Inc."

(b) Effective Time; Closing. (i) As promptly as practicable after
the Closing (as defined in paragraph (ii) below), the parties hereto shall cause
the Merger to be consummated by (A) filing an, agreement of merger and any other
required documents with the Secretary of State of the State of California, in
such forms as required by, and executed in accordance with the relevant
provisions of, California Law and (B) filing a certificate of merger and any
other required documents with the Secretary of State of the State of Delaware,
in such forms as required by, and executed in

<PAGE>

accordance with the relevant provisions of, Delaware Law. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Merger shall be filing with and acceptance from the State of Delaware.

(ii) The Closing of the transactions contemplated by
this Agreement (the "Closing"), shall be held at the offices of Proskauer Rose
LLP, 1585 Broadway, New York, New York 10036, at 1:00 P.M., New York time, on a
date designated by 24/7 upon two business days' prior notice of the satisfaction
or waiver of the conditions set forth in Sections 6 and 7 (the "Closing Date"),
but in no event later than March 15, 1999, unless the parties shall agree upon a
later date.

(c) Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of California Law
and Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the rights, privileges, powers, franchises,
and property of the Company shall vest in the Surviving Corporation, and all
restrictions, disabilities, duties, debts, and liabilities of the Company shall
become the restrictions, disabilities, duties, debts, and liabilities of the
Surviving Corporation.

(d) Certificate of Incorporation; By-Laws. At the Effective Time,
the Certificate of Incorporation of the Subsidiary shall be the Certificate of
Incorporation of the Surviving Corporation, except that the name of the
Surviving Corporation shall be "Sift, Inc." and the By-Laws of the Subsidiary
shall be the By-Laws of the Surviving Corporation and shall continue in full
force and effect until thereafter amended.

(e) Directors and Officers. The directors and officers set forth
on Schedule 1(e) hereto shall be the directors and officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.

(f) Consideration; Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the part of 24/7, the
Subsidiary or the Company,

(i) each share of common stock of the Company held in the
treasury of the Company shall be cancelled and retired without payment of any
consideration therefor and cease to exist; and

(ii) each share of capital stock of the Company shall be
exchanged for validly issued, fully paid and non-assessable shares of common
stock, par value $.01 per share, of 24/7 ("24/7 Common Stock") as follows (the
"Merger Consideration"):

(A) each share of common stock of the Company shall be
converted into the right to receive 0.54753537 shares of 24/7
Common Stock,

(B) each share of Series A Preferred Stock of the Company
shall be converted into the right to receive 0.54753537 shares of
24/7 Common Stock,

<PAGE>
(C) each share of Series B Preferred Stock of the Company
shall be converted into the right to receive 0.54753537 shares of
24/7 Common Stock, and

(D) (1) the Company's obligations with respect to each
outstanding option, as set forth on Schedule 2(c) hereto, to
purchase shares of common stock of the Company issued pursuant to
the Company's 1994 Equity Incentive Plan and pursuant to non-plan
stock options (the "Options") , whether vested or unvested,
shall, by virtue of this Agreement and without any further action
of the Company, 24/7 or the holder of any Option, be assumed by
24/7. Unless otherwise elected by 24/7 prior to the Effective
Time, 24/7 shall make such assumption in such manner that (i)
24/7 is a corporation "assuming a stock option in a transaction
to which Section 424(a) applies" within the meaning of Section
424 of the Code or (ii) to the extent that Section 424 of the
Code does not apply to such Option, 24/7 would be such a
corporation were Section 424 of the Code applicable to such
Option; and, if not so otherwise elected, after the Effective
Time, all references to the Company in the Company's 1994 Equity
Incentive Plan and the applicable stock option agreements shall
be deemed to refer to 24/7, which shall have assumed the
Company's 1994 Equity Incentive Plan and such non-plan stock
option agreements as of the Effective Time by virtue of this
Agreement and without any further action.

(2) Each Option so assumed by 24/7 under this Agreement
shall continue to have, and be subject to, the same terms and
conditions set forth in the Company's 1994 Equity Incentive Plan
and the applicable stock option agreements as in effect
immediately prior to the Effective Time, except that (i) such
Option will be exercisable for that number of shares of 24/7
Common Stock equal to the product of the number of shares of
common stock of the Company that were purchasable under such
Option immediately prior to the Effective Time multiplied by the
quotient determined by dividing the fair market value of the
common stock of the Company by the fair market value of the 24/7
Common Stock, rounded to the nearest whole number of shares of
24/7 Common Stock and (ii) the per share exercise price for the
shares of 24/7 Common Stock issuable upon exercise of such
assumed Option will be equal to the exercise price per share of
common stock of the Company at which such Option was exercisable
immediately prior to the Effective Time multiplied by the
quotient determined by dividing fair market value of 24/7 Common
Stock by the fair market value of the common stock of the
Company, and rounding the resulting exercise price up to the
nearest whole cent. For purposes of this Section 1(f)(iii)(D),
the fair market value of 24/7 Common Stock is based on the
closing price per share on the trading day immediately following
(but not including) the Closing Date, as reported in The Wall
Street Journal.

(3) As soon as reasonably practicable after the Effective Time,
the Company will deliver to Option holders appropriate notices
setting forth such holders' rights pursuant to the Company's 1994
Equity Incentive Plan and the applicable stock option agreements
evidencing the Options and confirming that the Company's 1994

<PAGE>
Equity Incentive Plan and the Options have been assumed by 24/7
in accordance with the terms and conditions required by this
Section 1(f)(iii)(D). 24/7 hereby agrees to register such Options
with the Securities and Exchange Commission on Form S-8 within a
reasonable period subsequent to the Effective Time.

(g) Surrender and Payment.

(i) Except as set forth in Section 1(h) below, each holder
of Shares that have been converted into a right to receive the Merger
Consideration, upon surrender at Closing of a certificate or certificates
representing such Shares, together with properly executed stock powers and stock
transfer stamps covering such Shares, will be entitled to receive the Merger
Consideration payable in respect of such Shares, which Merger Consideration
shall be delivered at the Closing.

(ii) All certificates representing Shares outstanding
prior to the Closing Date shall continue to evidence ownership of shares of 24/7
Common Stock until such Shares are surrendered and exchanged as provided herein.
All certificates representing Shares outstanding prior to the Closing Date shall
be presented to 24/7 at the Closing and shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Agreement. The Merger Consideration delivered upon the surrender
for exchange of the Shares in accordance with the terms hereof shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
Shares, and after the Effective Time, there shall be no further registration or
transfers of Shares outstanding prior to the Closing Date.

(iii) No fractional shares of 24/7 Common Stock shall be
issued upon conversion of Shares. In lieu of any fractional share of 24/7 Common
Stock to which the holder of Shares would otherwise be entitled, 24/7 shall
round to the nearest whole share of 24/7 Common Stock.

(h) Escrow Indemnity Account. Promptly after the Closing Date,
24/7 shall deliver to the escrow agent (the "Escrow Agent") under the escrow
agreement dated the Closing Date, substantially in the form of Exhibit A hereto
(the "Escrow Indemnity Agreement"), a certificate representing a number of
shares of 24/7 Common Stock equal to ten percent (10%) of the Merger
Consideration, to be held pursuant to the provisions of Section 13(d) of this
Agreement and the Escrow Indemnity Agreement to be held in an escrow account
(the "Escrow Indemnity Account") pursuant to the terms of the Escrow Indemnity
Agreement.

(i) Dissenter's Rights. The holders of Shares as to which
dissenter's rights shall have been duly demanded under applicable law
("Dissenting Shares"), if any, shall be entitled to payment by the Surviving
Corporation only of the fair value of such shares plus accrued interest to the
extent permitted by and in accordance with the provisions of applicable law;
provided, however, that (i) if any holder of the Dissenting Shares shall, under
the circumstances permitted by applicable law, subsequently deliver a written
withdrawal of such holder's demand or (ii) if any holder fails to establish such
holder's entitlement to rights to payment as provided under applicable law, such
holder or holders

<PAGE>
(as the case may be) shall forfeit such right to payment for such shares and
such shares shall thereupon be deemed to have been converted into 24/7 Common
Stock as of the Effective Time.

2. Representations and Warranties of the Company. The Company
represents, warrants and agrees that:

(a) Ownership and Delivery of the Shares and Execution and
Effect of Agreement.
(i) The Company has all necessary rights, power and
authority to enter into and to deliver this Agreement and to perform the
obligations hereunder and to consummate the transactions contemplated hereby, as
well as all other agreements, certificates and documents exe cuted or delivered,
or to be executed or delivered, by the Company in connection herewith, including
the agreements listed pursuant to Section 6(c) hereof (collectively, with this
Agreement, the "Company Documents"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. Each of the Company Documents have been duly and validly
executed and delivered by the Company, and, assuming the due authorization,
execution and delivery of this Agreement by 24/7 and the Subsidiary, are (or
when executed and delivered will be) legal, valid and binding obligations of the
Company.

(ii) The board of directors of the Company (A) has declared
that this Agreement, the Merger and the other transactions contemplated hereby
and thereby are advisable and in the best interests of the shareholders of the
Company, (B) has authorized, approved and adopted this Agreement, the Merger and
the other transactions contemplated hereby and thereby, and (C) has taken
appropriate action, pursuant to California Law and Delaware Law, to cause the
Merger to become effective at the Effective Time.

(iii) This Agreement, the Merger and the other
transactions contemplated hereby and thereby have been authorized, approved and
adopted by more than a majority of the shareholders of the Company.

(b) Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the requisite power and authority to own, lease and
operate its assets and properties and to conduct its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business and is in good standing under the laws of those jurisdictions listed
on Schedule 2(b) hereto, constituting each jurisdiction in which the conduct of
its business or the ownership or leasing of its assets requires such
qualification. The copies of the Company's Articles of Incorporation, as amended
(certified by the Secretary of State of California), and By-Laws (certified by
the Secretary of the Company) that have been previously delivered to 24/7 are
correct and complete.

<PAGE>
(c) Capitalization. Immediately prior to the Closing, the
authorized capital stock of the Company will consist of the following:

(i) Common Stock: 20,000,000 shares of common stock, no
par value per share, of which 7,704,161 shares will be issued and outstanding.

(ii) Preferred Stock: a total of 9,445,926 shares of
preferred stock, no par value per share, of which 3,445,926 shares have been
designated Series A Preferred Stock and 6,000,000 shares have been designated
Series B Preferred Stock. Of the authorized shares of preferred stock listed
above, 3,361,167 shares of Series A Preferred Stock and 2,870,426 shares of
Series B Preferred Stock are issued and outstanding.

(iii) Options and Reserved Shares: as set forth on
Schedule 2(c) hereto, Options to purchase 1,996,778 shares of common stock of
the Company, all issued to employees and contractors of the Company pursuant to
the Company's 1994 Equity Incentive Plan and non-plan stock options, are
outstanding. Schedule 2(c) sets forth the exercise price, vesting dates, dates
of grant and expiration dates of such Options and whether such Options are
nonqualified stock options or "incentive stock options" within the meaning of
Section 422(b) of the Code. No shares of restricted stock have been granted
under the 1994 Equity Incentive Plan or outside such plan.

All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued and outstanding, fully paid and nonassessable. Except
as set forth in this Section 2(c), there are no out standing shares of capital
stock or other equity or debt securities of the Company. Except as set forth in
this Section 2(c) and in Schedule 2(c), as of the Closing Date there will be no
existing option, warrant, call, commitment or other agreement requiring the
issuance or sale of any additional shares of stock or other equity or debt
securities of the Company and no shares of stock or other equity or debt
securities of the Company are reserved for issuance for any purpose, and there
will be no agreements, commitments or restrictions relating to ownership or
voting of any shares of stock or other securities of the Company, other than
those agreements addressed in Section 4(e).

(d) Subsidiaries and Affiliates. The term "affiliate" shall mean
any person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company. The Company has no subsidiaries or affiliates and has no equity
interest in any corporation, partnership, joint venture or other entity. The
Company has conducted its business only through the Company.

(e) Financial Statements. The Company has previously delivered
to 24/7 (i) the balance sheets of the Company as at August 31, 1997, and the
related audited statements of operations and retained earnings and changes in
financial position for the fiscal year then ended, as examined by Ireland, San
Filippo, LLP; the Company's balance sheet as at August 31, 1997 is hereinafter
referred to as the "Audited Balance Sheet" and, together with the related
statements of operations and retained earnings and changes in financial position
for the fiscal year then ended, the "Audited Financials") and (ii) the unaudited
balance sheet of the Company as at November 30, 1998 (the "Unaudited Balance
Sheet"), and the related unaudited statements of operations and retained
earnings for the fifteen months then ended (together with the Unaudited Balance
Sheet, the

<PAGE>
"Unaudited Financials"). Each of the foregoing financial statements is complete
and correct, is in accordance with the Company's books and records, has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP"), and presents fairly the fin ancial position,
results of operations and changes in financial position of the Company as at the
dates and for the fiscal years indicated, subject, in the case of the Unaudited
Balance Sheet, to year-end adjustments and notes required by generally accepted
accounting principles.

(f) Liabilities. All liabilities of the Company (whether
accrued, unmatured, contingent, or otherwise and whether due or to become due,
but not including the Company's obligations to perform under contracts other
than by the payment of money) are set forth or ade quately reserved against on
the face of the Audited Balance Sheet and the Unaudited Balance Sheet, in each
case in accordance with generally accepted accounting principles consistently
applied, except for liabilities incurred since August 31, 1997 (with respect to
the Audited Balance Sheet), or since November 30, 1998 (with respect to the
Unaudited Balance Sheet) in the ordinary course of business as theretofore
conducted, which are not materially adverse to the operations or prospects of
the Company's business. The Company does not know of any basis for the assertion
against the Company of any other loss contingency of a nature defined by GAAP.

(g) No Adverse Change. To the Company's knowledge, since
November 30, 1998, the Company has operated its business consistent with
ordinary commercial business practices and only in the ordinary course of
business as theretofore conducted, and consistent with a development stage
company, there has been no:

(i) amendments or changes to the Articles of Incorporation
or By-Laws of the Company;

(ii) material adverse change in the business, properties,
assets, liabilities, commitments, earnings, financial condition or prospects of
the Company;

(iii) damage or destruction to property or assets of the
Company resulting in a loss or cost to the Company of more than $50,000 in the
aggregate, whether or not covered by insurance; or

(iv) act or omission which, if taken or omitted after the
date of this Agreement and before the Closing would conflict with Section 6(a).

(h) Taxes. The Company has properly filed all federal, foreign,
state, local and other tax returns and reports which are required to be filed by
it. All such tax returns were true, correct and complete, and all taxes,
interest and penalties due and payable as shown on such returns or claimed to be
due by any taxing authority have been timely paid. All unpaid federal, foreign,
state, local and other taxes, fees, assessments, duties and other similar
governmental charges payable by the Company or which will, with the passage of
time, become payable by the Company (including interest and penalties) whether
or not disputed (x) with respect to any period prior to August 31, 1997, have
been adequately reserved against in accordance with generally accepted

<PAGE>
accounting principles on the face of the Audited Balance Sheet, and (y) with
respect to any period prior to November 30, 1998 have been adequately reserved
against in accordance with generally accepted accounting principles on the face
of the Unaudited Balance Sheet. There are no outstanding waivers or extensions
of time with respect to the assessment or audit of any tax or tax return of the
Company, or audits, examinations or claims now pending or matters under
discussion with any taxing authority in respect of any tax of the Company. The
Company has furnished to 24/7 true copies of the federal, foreign, state and
local tax returns of the Company for the fiscal years ended on August 31 for the
years 1995 through 1997, which tax returns have been filed with the relevant
taxing authorities. The Company has not at any time consented to have the
provisions of Section 341(f)(2) of the Code apply to it. All taxes to be
collected or withheld by the Company have been duly collected or withheld and
any such amounts that were required to be remitted to any taxing authority have
been duly remitted. There are no tax rulings, requests for ruling, closing
agreements or changes of accounting method relating to the Company that could
affects its tax liability for any period after the Effective Time. There will
not be includible in the Company's gross income for a taxable period after the
Effective Time any amount attributable to a prior tax period, as a result of any
of the following methods of accounting: installment, completed contract,
long-term contract, cash, or as a result of the application of Section 481 of
the Code or comparable provisions of state, local or foreign tax law. For
purposes of this Agreement, "tax" or "taxes" means taxes of any kind, levies or
other like assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, occupation or other governmental taxes imposed
or payable to the United States, or any state, local, or foreign government or
subdivision or agency thereof, and in each instance such term shall include any
interest, penalties or additions to tax attributable to any such tax.

(i) Title to Properties; Absence of Encumbrances. The Company
has good and marketable title to or, in the case of leases and licenses, valid
and subsisting leasehold interests or licenses in, all of its properties and
assets of whatever kind (whether real or personal, tangible or intangible),
including, without limitation, all properties and assets that are shown on the
Audited Balance Sheet or the Unaudited Balance Sheet (except for assets sold in
the ordinary course of business since August 31, 1997, and November 30, 1998,
respectively) and to properties and assets that are shown on any schedule
hereto, in each case free and clear of any and all liens, mortgages, pledges,
security interests, restrictions, prior assignments, claims and encumbrances of
any kind whatsoever, except as may be set forth in Schedule 2(i) hereto and
except for liens for current taxes and assessments not yet due and payable
(which the Company will promptly pay when due if due prior to the Closing Date).
All assets, properties and rights relating to the Company's business are held
by, and all agreements, obligations and transactions relating to the Company's
business have been entered into, incurred and conducted by, the Company.

(j) Real and Personal Property. Schedule 2(j) hereto contains a
complete and correct list of all real property (including buildings and
structures) owned or leased by the Company and all interests therein (including
a brief description of the property, the record title holder, the location and
the improvements thereon). To the Company's knowledge, all such real property,
buildings and structures, and the equipment therein, and the operations and
maintenance thereof,

<PAGE>
comply with any applicable agreements and restrictive covenants and conform to
all applicable legal requirements including those relating to the environment,
health and safety, land use and zoning, and all work required to be done by the
Company as landlord or tenant has been duly performed. No condemnation or other
proceeding is pending or, to the knowledge of the Company, after due investi
gation, threatened, which would affect the use of any such property by the
Company. Schedule 2(j) hereto contains a complete and correct list and brief
description of all equipment, machinery, computers, furniture, leasehold
improvements, vehicles and other personal property owned or leased by the
Company and all interests therein. The Company's buildings and other structures,
equipment and other assets (whether leased or owned) are in good operating
condition and repair, subject to ordinary wear and tear.

(k) Patents, Trademarks and Copyrights. A list and brief
description of all trademarks, service marks, trade names, brands, copyrights
and patents which are presently being used or have been used in the Company's
business, all applications for registration and registrations for such
trademarks, copyrights and patents, and all mask works, trade secrets,
confidential and proprietary information, compositions of matter, formulas,
designs, proprietary rights, know-how and processes (all of the foregoing
collectively hereinafter referred to as the "Proprietary Assets") and all
licenses, contracts, rights and arrangements with respect to the foregoing, are
set forth in Schedule 2(k) hereto. The Company has furnished to 24/7 true and
complete copies of each of the foregoing. Except as set forth in Schedule 2(k),
the Company owns the entire, unencumbered right, title and interest to all such
properties free and clear of all claims, and, except as set forth in Schedule
2(k), no rights or licenses to others have been granted with respect to any of
such prop erties. Except as set forth in Schedule 2(k), all filings and other
action necessary to perfect the full legal right of the Company in the United
States to the foregoing have been effected. Except as set forth in Schedule
2(k), the Company owns or possesses the right to use all the trademarks, service
marks, trade names, brands, copyrights, patents, franchises, permits and
licenses and rights with respect to the foregoing, necessary for the conduct of
its business as now conducted, without any conflict with or infringement of the
rights of others. Except as set forth in Schedule 2(k), the Company has not
received notice of any claimed conflict with respect to any of the foregoing.
The Company has no knowledge of any default or alleged default which with notice
or lapse of time or both would constitute a default on the part of any party in
the performance of any obligation to be performed or paid by any party under any
licenses, contracts, agreements or arrangements referred to in or submitted as a
part of Schedule 2(k). The Company has taken, and until the Closing Date, the
Company will use its best efforts to take, all steps reasonably necessary to
preserve its legal rights in, and the secrecy of, all its Proprietary Assets,
except those for which disclosure is required for legitimate business or legal
reasons. All intellectual property rights to all processes, systems and
techniques used by the Company that were developed by any employee of the
Company engaged in research or product development while such employee was
employed by the Company have, by virtue of an invention assignment agreement,
been assigned to the Company. In addition, all intellectual property rights to
all processes, systems and techniques used by the Company or which the Company
currently intends to use in its business which were developed by any of its
employees at any time have been assigned by such employees to the Company.

(l) Contracts, Leases and Commitments. The Company has furnished
to 24/7 true copies of the material contracts, leases and commitments listed in
Schedule 2(l) hereto, includ-

<PAGE>
ing summaries of the terms of any unwritten commitments. Except as set forth in
Schedule 2(l):

(i) the Company, and to the knowledge of the Company, the
other parties thereto, have complied in all material respects with such
contracts, leases and commitments, all of which are valid and enforceable;

(ii) such contracts, leases and commitments are in full
force and effect and there exists no event or condition which with or without
notice or lapse of time would be a default thereunder, give rise to a right to
accelerate or terminate any provision thereof or give rise to any lien, claim,
encumbrance or restriction on any of the assets or properties of the Company;
and

(iii) all of such contracts, leases and commitments have
been entered into on an arm's-length basis, and none is materially burdensome to
the Company's business.

The Company is not a party, nor is any of its assets or business subject, to any
contract, lease or commitment not listed in Schedule 2(l) (including without
limitation, purchase or sales commitments, financing or security agreements or
guaranties, repurchase agreements, agency agree ments, manufacturers
representative agreements, commission agreements, employment or collective
bargaining agreements, pension, bonus or profit-sharing agreements, group
insurance, medical or other fringe benefit plans, and leases of real or personal
property), other than contracts terminable without penalty on not more than 30
days' notice that do not involve, individually or in the aggregate, the receipt
or expenditure of more than $50,000 in any one year. The Company is en gaged in
no material disputes with customers or suppliers. To the knowledge of the
Company, no customer or supplier is considering termination, non-renewal or any
adverse modification of its ar rangements with the Company, and the Company has
not received any written notice that the transactions contemplated by this
Agreement would have a material adverse effect on the Company's relationship
with any of its suppliers or customers.

(m) No Conflicts, Required Filings or Consents; Permits;
Compliance with Laws.

(i) Except as set forth in Schedule 2(m) , the execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, (A) conflict with or violate the Articles of
Incorporation or By-Laws of the Company, (B) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or by
which its properties are bound or affected or (C) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any contracts material
to the business of the Company or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or its properties are bound or affected.

<PAGE>
(ii) The execution and delivery of this Agreement by the
Company will not require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental entity, except (A) for
applicable requirements, if any, of the Securities Act of 1933, as amended (the
"Act"), the Exchange Act, the Blue Sky Laws and the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended and (B) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent the Company from performing its obligations under this
Agreement.

(iii) The Company holds the governmental licenses, permits
and authoriza tions listed in Schedule 2(m) hereto. Except as set forth in
Schedule 2(m), such licenses, permits and authorizations are valid and
unimpaired, will be unaffected by a transfer of all of the Shares to 24/7, and
constitute all of the licenses, permits and authorizations required for the
ownership or occupancy of its properties and assets and the operation of its
business. The Company's business is and has been operated in compliance
therewith and all laws and regulations (federal, state, local and foreign)
applicable to it, and all required reports and filings with governmental
authorities have been properly made.

(n) Employees. Schedule 2(n) hereto contains a list of the
names, office locations, compensation and years of credited service for
severance, vacation and pension plan purposes of all full- and part-time
employees of the Company as at February 15, 1999. The Company does not know of
any efforts within the last three years to attempt to organize the Company's
employees, and no strike or labor dispute involving the Company has occurred
during the last three years or, to the knowledge of the Company, is threatened.
No key employee of the Company has indicated that he is considering terminating
his employment. The Company has complied with applicable wage and hour, equal
employment, safety and other legal requirements relating to its employees.

(o) Employee Benefit Plans.

(i) Except as set forth on Schedule 2(o) hereto, neither the
Company nor any entity that would be deemed a "single employer" with the Company
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (an "ERISA
Affiliate") maintains, sponsors, contributes to, or has or has had an obligation
to, or otherwise participated in or participates in or in any way, directly or
indirectly, has or has had any liability with respect to any "employee benefit
plan," as defined in Section 3(3) of ERISA, or any other bonus, profit sharing,
pension, deferred compensation, incentive, stock option, fringe benefit, health,
welfare, change in control, or other plan, agreement, policy, trust fund, or
arrangement, whether written or unwritten, insured or self-insured (each a
"Plan"). None of the Company, any ERISA Affiliate or any of their respective
predecessors has ever contributed to, contributes to, has ever been required to
contribute to, or otherwise participated in or participates in or in any way,
directly or indirectly, has any liability with respect to any plan subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including,
without limitation, any "multiemployer plan" (within the meaning of Sections
(3)(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), or any single
employer pension plan (within the meaning of Section 4001(a)(15)

<PAGE>
of ERISA). No amounts payable under the Company's 1994 Equity Incentive Plan
will fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code. The consummation of the transactions contemplated by this
Agreement will not give rise to any liability of the Company for severance pay
or termination pay or accelerate the time of payment or vesting or increase the
amount of compensation or benefits due to an employee, director, shareholder or
beneficiary of the Company (whether current, former or restricted) or their
beneficiaries solely by reason of such transactions or by reason of a
termination of employment following such transactions. No event, condition or
circumstance exists that would prevent the amendment or termination of any Plan.
Schedule 2(o) hereto contains a list of all Plans, benefits or perks of the
Company and a description of the Company's severance pay policy. A copy of each
such Plan has previously been delivered by the Company to 24/7.

(ii) With respect to each of the Plans on Schedule 2(o):

(A) each Plan intended to qualify under Section 401(a) of
the Code has been qualified since its inception and has received a
determination letter from the Internal Revenue Service ("IRS") to the
effect that the Plan is qualified under Section 401 of the Code and any
trust maintained pursuant thereto is exempt from federal income taxation
under Section 501 of the Code and nothing has occurred or is expected to
occur through the date of the Closing that caused or could cause the
loss of such qualification or exemption or the imposition of any penalty
or tax liability;

(B) all payments required by any Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or intercompany
charges) with respect to all periods through the date of the Closing
shall have been made prior to the Closing (on a pro rata basis where
such payments are otherwise discretionary at year end) or provided for
by the Company as applicable, by full accruals as if all targets
required by such Plan had been or will be met at maximum levels) on its
financial statements;

(C) no claim, lawsuit, arbitration or other action has
been threatened, asserted, instituted, or anticipated against the Plans
(other than non-material routine claims for benefits, and appeals of
such claims), any trustee or fiduciaries thereof, the Company, any ERISA
Affiliate, any director, officer, or employee thereof, or any of the
assets of any trust of the Plans;

(D) the Plan complies in all material respects and has
been maintained and administered at all times in accordance with its
terms and all applicable laws, rules and regulations, including, without
limitation, ERISA and the Code;

(E) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is
expected to occur with respect to the Plan (and the consummation of the
transactions contemplated by this Agreement will not constitute or
directly or indirectly result in a "prohibited transaction");

<PAGE>
(F) no Plan is or is expected to be under audit or
investigation by the IRS, Department of Labor, or any other governmental
authority and no such completed audit, if any, has resulted in the
imposition of any tax or penalty;

(G) with respect to each Plan that is funded mostly or
partially through an insurance policy, neither the Company nor any ERISA
Affiliate has any liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring on or
before the Closing.

(iii) Neither the Company nor any ERISA Affiliate
maintains, contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal Social
Security Act, or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee. Neither the Company nor any ERISA
Affiliate has any unfunded liabilities pursuant to any Plan that is not intended
to be qualified under Section 401(a) of the Code.

(p) Insurance. Schedule 2(p) sets forth the Company's general
liability, fire and casualty insurance policies and liability insurance
providing coverage in such amounts as is customary in the industry for a similar
company. Such policies are in full force and effect, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed.

(q) Litigation. Schedule 2(q) hereto contains a complete and
correct list of all actions, suits, proceedings, claims or governmental
investigations pending or, to the knowledge of the Company, threatened against,
the Company or any of its assets, or, in connection with the Company's business,
or any of the Company's officers, directors or employees. Except as set forth on
Schedule 2(q) hereto, neither the Company nor, in connection with the Company's
business, any of the Company's officers, directors or employees is subject or
party to any judgment, order, or other direction of or stipulation with any
court or other governmental authority or tribunal, or in violation of any other
legal requirements (as defined below), and the Company does not know of any
reasonable basis for a claim that such a violation exists. The Company is
unaware of any proposed legal requirement that might adversely affect in any
material respect the operation or prospects of the Company's business.
Notwithstanding the foregoing, the Company is aware that there have been various
proposals to enact federal and state laws directed at regulating Internet
advertising.

(r) Environmental Matters. (i) The Company's business, assets
and properties are and have been operated and maintained in compliance with all
applicable federal, state and local environmental protection laws and
regulations (the "Environmental Laws"). No event has occurred or condition
exists which, with or without the passage of time or the giving of notice, or
both, would constitute a non-compliance by the Company with, or a violation by
the Company of, the Environmental Laws. To the Company's knowledge, no real
property owned, leased, occupied or used by the Company contains any underground
storage tanks, asbestos, polychlorinated biphenyls, hazardous wastes or other
hazardous substances, as such terms are defined in the Environmental Laws. To
the Company's knowledge, neither the Company nor any of its predecessor
companies has caused or permitted to exist, as a result of an intentional or
unintentional act or omission, a

<PAGE>
disposal, discharge or release of solid wastes, hazardous wastes, pollutants or
hazardous substances, as such terms are defined in the Environmental Laws, on or
from any site which currently is or formerly was owned, leased, occupied or used
by the Company or any predecessor company, except where such disposal, discharge
or release was pursuant to and in compliance with the conditions of a permit
issued by the appropriate federal, state and/or local governmental agency or
otherwise in compliance with Environmental Laws.

(s) Restrictions on Business Activities. Other than this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon the Company which has or could reasonably be expected to have the
effect of prohibiting or impairing any material business of the Company as
currently conducted.

(t) Transactions with Affiliates. Except as set forth in
Schedule 2(t) hereto and except for ordinary dealings with its employees, since
August 31, 1997, the Company has had no direct or indirect dealings with any
shareholder of the Company or with any key employee of the Company or with any
of their affiliates, associates or relatives. Except as set forth in Schedule
2(t) and except for employment arrangements with its employees, the Company has
no obligation to or claim against any shareholder of the Company or any key
employee of the Company, or any of their affiliates, associates or relatives,
and no such person or entity has any obligation to or claim against the Company.
Schedule 2(t) reasonably describes the nature and extent of any products,
services or benefits provided to the Company by any such person or entity
without a corresponding charge equal to the fair market value of such products,
services or benefits. Neither the shareholders of the Company, any key employee
of the Company, nor any of their affiliates, associates or relatives has any
direct or indirect interest of any kind in any business or entity which is
competitive with the Company.

(u) Books and Records. The books and records of the Company are
complete and correct in all material respects and have been maintained in
accordance with good business practices. The minute books of the Company, as
previously made available to 24/7, contain com plete and accurate records of all
meetings and accurately reflect all other corporate action of the shareholders
and board of directors of the Company. The books and record of the Company for
the period from February 15, 1998 to the Closing Date have been delivered to
24/7.

(v) Improper Payments. The Company and its officers and agents
have not made any illegal or improper payments to, or provided any illegal or
improper benefit or inducement for, any governmental official, supplier,
customer or other person, in an attempt to influence any such person to take or
to refrain from taking any action relating to the Company.

(w) Officers and Directors; Bank Accounts, etc. Schedule 2(w)
hereto lists all officers, directors and fiduciaries of the Company; all bank
accounts and safe deposit boxes maintained by the Company and all authorized
signatories therefor, specifying their respective authority; and all credit
cards under which employees of the Company may incur liability, and the persons
holding such cards. No person or entity holds any general or special power of
attorney from the Company.

<PAGE>
(x) Disclosure. No representation, warranty or other written
statement by the Company herein or in any other of the Company Documents or made
in connection with the Company Documents, contains or will contain an untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading. The
Company has no knowledge of any matter that could reasonably be expected to have
a materially adverse effect on the Company's business or prospects that has not
been disclosed in writing to 24/7.

(y) Legends. (i)The Company, on behalf of each shareholder of
the Company, understands that the certificates evidencing the Merger
Consideration will bear the following legend:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH SECURITIES ACT OR SUCH LAWS AND THE RULES
AND REGULATIONS THEREUNDER."

(ii) The certificates shall not be required to bear such
legend if an opinion of counsel reasonably satisfactory to 24/7 is delivered to
24/7 to the effect that neither the legend nor the restrictions on transfer
contained in this Agreement are required to insure compliance with the
Securities Act. 24/7 will bear the reasonable costs and expenses in connection
with such opinion where such opinion relates to compliance with Rule 144 under
the Securities Act. Whenever, pursuant to the preceding sentence, any
certificate is no longer required to bear the foregoing legend, 24/7 may, and if
requested by the holder thereof, shall, issue to the holder, at 24/7's expense,
a new certificate not bearing the foregoing legend.

3. Representations and Warranties of 24/7. 24/7 and Subsidiary
each hereby represents and warrants to the Company that:

(a ) Organization and Qualification. (i) Each of 24/7 and
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
conduct its business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and approvals would not have a material adverse effect on the business, results
of operations or financial condition of 24/7 and its subsidiaries, taken as a
whole (a "24/7 Material Adverse Effect"). Each of 24/7 and Subsidiary is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the conduct of its business or the
ownership or leasing of its properties requires such qualification, except for
such failures to be so duly qualified or licensed and in good standing that
would not have a 24/7 Material Adverse Effect.

(ii) 24/7 has heretofore furnished to the Company a
complete and correct copy of 24/7's and Subsidiary's Certificate of
Incorporation and By-Laws, each as amended to date.

<PAGE>
Such Certificates of Incorporation and By-Laws are in full force and effect.
Neither 24/7 nor the Subsidiary is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws, except for any such violations as would
not have a 24/7 Material Adverse Effect.

(b) Authority Relative to this Agreement. (i) Each of 24/7 and
Subsidiary has all necessary right, power and authority to enter into and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by 24/7 and Subsidiary and the consummation by 24/7 and
Subsidiary of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of 24/7 and Subsidiary,
and no other corporate proceedings on the part of 24/7 and Subsidiary are
necessary to authorize this Agreement or to consummate the transactions so
contemplated hereby. This Agreement has been duly and validly executed and
delivered by 24/7 and Subsidiary and, assuming the due authorization, execution
and delivery of this Agreement by the Company, constitutes a legal, valid and
binding obligation of 24/7 and Subsidiary.

(ii) The board of directors of 24/7 (A) has declared that
this Agreement, the Merger and the other transactions contemplated hereby and
thereby are advisable and in the best interests of the stockholders of 24/7, (B)
has authorized, approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby and thereby, and (C) has taken appropriate
action, pursuant to California Law and Delaware Law, to cause the Merger to
become effective at the Effective Time.

(c) No Conflict, Required Filings and Consents. (i) The
execution and delivery of this Agreement by 24/7 and Subsidiary do not, and the
performance of this Agreement by 24/7 and Subsidiary will not, (A) conflict with
or violate the Certificate of Incorporation or By-Laws of 24/7 or the
Certificate of Incorporation or By-Laws of Subsidiary, (B) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to 24/7
or any of its subsidiaries or by which its or their respective properties are
bound or affected or (C) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or impair 24/7's or Subsidiary's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any contracts material to the business of 24/7
and Subsidiary taken as a whole or result in the creation of a lien or
encumbrance on any of the properties or assets of 24/7 and Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which 24/7 and Subsidiary
is a party or by which 24/7 and Subsidiary or its or any of their respective
properties are bound or affected, except in any such case for any such breaches,
defaults or other occurrences that would not have a 24/7 Material Adverse
Effect.

(ii) The execution and delivery of this Agreement by 24/7
and Subsidiary will not require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental entity except (A) for
applicable requirements, if any, of the Securities Act, the Exchange Act, the
Blue Sky Laws and the Hart Scott Rodino Antitrust Improvements Act of 1976, as
amended and (B) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger,

<PAGE>
or otherwise prevent 24/7 and Subsidiary from performing their respective
obligations under this Agreement, and would not have a 24/7 Material Adverse
Effect.

(d) Capitalization. (i) The authorized capital stock of 24/7 as
of January 15, 1999 consisted of (1) 70,000,000 shares of common stock, par
value $.01 per share, of which 16,282,835 shares were issued and outstanding,
2,155,305 shares will be issuable to key employees, officers and directors of
24/7 under stock options that have been granted pursuant to 24/7's 1998 Stock
Incentive Plan, and 721,400 shares have been reserved for issuance pursuant to
future grants under 24/7's 1998 Stock Incentive Plan; and (2) 10,000,000 shares
of preferred stock, par value $.01 per share, none of which are outstanding.
24/7 also has 3,177,985 shares of common stock issuable upon exercise of
outstanding warrants at January 15, 1999. The authorized capital stock of
Subsidiary consists of 1,000 shares of common stock, par value $.01 per share,
100 shares of which are issued and outstanding.

(ii) All of the outstanding shares of 24/7's and
Subsidiary's respective capital stock have been duly authorized and validly
issued and are fully paid and non-assessable. The shares of 24/7 Common Stock to
be issued in the Merger have been duly authorized and, when so issued in
accordance with the terms hereof, such shares will be validly issued, fully paid
and non-assessable and (assuming the due execution and accuracy of certificates
or representations of the holders of the Company's common stock in respect of
the private placement rules of applicable securities laws) in compliance with
all applicable securities laws.

(iii) Except as set forth in this Section 3(d) and except
for those options granted pursuant to 24/7's 1998 Stock Incentive Plan, there
are no existing options, warrants, calls, commitments or other agreements
requiring the issuance or sale of any additional shares of stock or other equity
or debt securities of 24/7 and no shares of stock or other equity or debt
securities of 24/7 are reserved for issuance for any purpose.

(f) SEC Filings, Financial Statements. (i) 24/7 has filed all
forms, reports and documents required to be filed by it with the SEC since
September 30, 1998. 24/7 has heretofore delivered to the Company, in the form
filed with the SEC, (A) its Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1998, (B) all other reports or registration statements
(other than Reports on Form 10-Q and Reports on Form 3, 4 or 5 filed on behalf
of affiliates of 24/7) filed by 24/7 with the SEC since September 30, 1998 and
(C) all amendments and supplements to all such reports and registration
statements filed by 24/7 with the SEC (collectively, the "24/7 SEC Reports").
The 24/7 SEC Reports (1) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be and (2) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

(ii) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the 24/7 SEC
Reports was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the

<PAGE>
notes thereto) and each fairly presents in all material respects the
consolidated financial position of 24/7 and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments and
such statements do not contain notes thereto.

(iii) 24/7 has heretofore furnished to the Company a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by 24/7 with the
SEC pursuant to the Securities Act or the Exchange Act.

(g) No Adverse Change. Except as set forth in the 24/7 SEC
Reports, since September 30, 1998, 24/7 has conducted its business in the
ordinary course and there has not occurred any:

(i) amendments or changes to the Certificate of
Incorporation or By-Laws of 24/7;

(ii) material adverse change in the business, properties,
assets, liabilities, commitments, earnings, financial condition or prospects of
24/7;

(iii) damage or destruction to property or assets of 24/7
resulting in a loss or cost to 24/7 of more than $50,000 in the aggregate,
whether or not covered by insurance; or

(iv) act or omission which, if taken or omitted after the
date of this Agreement and before the Closing would conflict with Section 7(a).

(h) Restrictions on Business Activities. Other than this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon 24/7 and Subsidiary which has or could reasonably be expected to
have the effect of prohibiting or impairing any material business of 24/7 and
Subsidiary as currently conducted.

(i) Compliance, Permits. 24/7 and its subsidiaries hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities necessary for the operation
of the business of 24/7 and its subsidiaries taken as a whole (collectively, the
"24/7 Permits"), except to the extent that failure to have any such 24/7 Permit
would not have a 24/7 Material Adverse Effect. 24/7 and its subsidiaries are in
compliance with the terms of the 24/7 Permits, except where the failure so to
comply would not have a 24/7 Material Adverse Effect. Except for such conflicts,
defaults and violations as have not had and would not have a 24/7 Material
Adverse Effect, neither 24/7 nor any of its subsidiaries is in conflict with, or
in default or violation of, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which 24/7 or any of its subsidiaries is a party or by which 24/7 or any of
its subsidiaries or its or any of their respective properties is bound or
affected.

<PAGE>
(j) Liabilities. Except as disclosed in the 24/7 SEC Reports,
24/7 does not have any liabilities (absolute, accrued, contingent or otherwise)
of the type that are required to be disclosed in financial statements, including
the notes thereto, prepared in accordance with GAAP which are, in the aggregate,
material to the business, operations or financial condition of 24/7 and its
subsidiaries taken as a whole, except liabilities (i) adequately provided for or
referred to in 24/7's balance sheet and the related notes thereto as of
September 30, 1998 (the "September 30, 1998 Balance Sheet"), (ii) incurred in
the ordinary course of business and not required under GAAP to be reflected on
the September 30, 1998 Balance Sheet or (iii) incurred since September 30, 1998
in the ordinary course of business and consistent with past practice, and
liabilities incurred in connection with this Agreement.

(k) Litigation. Except as disclosed in the 24/7 SEC Reports
filed prior to the date of this Agreement, as of the date hereof, there are no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of 24/7, threatened against 24/7 or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
court, arbitrator or governmental entity that is reasonably likely to have a
24/7 Material Adverse Effect.

(l) Environmental Matters. 24/7's business, assets and
properties are and have been operated and maintained in compliance in all
material respects with Environmental Laws. No event has occurred or condition
exists which, with or without the passage of time or the giving of notice, or
both, would constitute a material non-compliance by 24/7 with, or material
violation by 24/7 of, the Environmental Laws. To the knowledge of 24/7, no real
property owned, leased, occupied or used by 24/7 contains any underground
storage tanks, asbestos, polychlorinated biphenyls, hazardous wastes or other
hazardous substances, as such terms are defined in the Environmental Laws. To
the knowledge of 24/7, neither 24/7 nor any of its predecessor companies has
caused or permitted to exist, as a result of an intentional or unintentional act
or omission, a disposal, discharge or release of solid wastes, hazardous wastes,
pollutants or hazardous substances, as such terms are defined in the
Environmental Laws, on or from any site which currently is or formerly was
owned, leased, occupied or used by 24/7 or any predecessor company, except where
such disposal, discharge or release was pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state and/or local
governmental agency or otherwise in compliance with Environmental Laws.

4. Covenants of the Company. The Company covenants and agrees
that between the date hereof and the Effective Time:

(a) Actions. The Company will not voluntarily take any action
that would cause any of the representations and warranties made by it in the
Company Documents not to be true and correct in all material respects on and as
of the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date.

(b) Access by 24/7. 24/7 and its representatives and advisers
shall have free and full access during normal business hours to the Company's
assets, premises, books and records, key employees and accountants, including
the audit work papers of Ireland, San Filippo, LLP and the

<PAGE>
work papers of the Company's accountants relating to the Audited Financials and
the Unaudited Financials, respectively, and the Company shall furnish 24/7 with
such information and copies of such documents as 24/7 may reasonably request.
The Company shall promptly furnish to 24/7 all financial statements of the
Company that are prepared in the ordinary course of business, including without
limitation monthly reports of sales, revenue and cash flow and quarterly balance
sheets.

(c) Conduct of Business. The business of the Company shall be
conducted only in the ordinary course, consistent with the present conduct of
its business, and the Company shall use commercially reasonable efforts to
maintain, preserve and protect the assets and goodwill of the Company. The
Company shall not, without the prior written consent of 24/7, take or commit to
take any of following actions:

(i) amend its By-Laws or Articles of Incorporation,

(ii) issue any additional shares of capital stock or
issue, sell or grant any option or right to acquire or otherwise dispose of any
of its authorized but unissued capital stock or other corporate securities,

(iii) declare or pay any dividends or make any other
distribution in cash or property on its capital stock,

(iv) repurchase or redeem any shares of its capital stock,

(v) incur, or perform, pay or otherwise discharge, any
obligation or liability (absolute or contingent), except for current obligations
and liabilities incurred in the ordinary course of business consistent with past
practice,

(vi) enter into any employment agreement with or increase
the compensation or benefits of, any of its officers, directors or employees, or
grant any severance pay or termination or establish, adopt or enter into any
Plan,

(vii) sell, transfer or acquire any properties or assets,
tangible or intangible, other than in the ordinary course of business,

(viii) make any material changes in its customary method
of operations, including marketing, selling and pricing policies and maintenance
of business premises, fixtures, furniture and equipment,

(ix) modify, amend or cancel any of its existing leases or
enter into any contracts, agreements, leases or understandings other than in the
ordinary course of business or enter into any loan agreements,

(x) make any investments other than in certificates of
deposit or short-term commercial paper, or

<PAGE>
(xi) take any other action that would cause any of the
representations and warranties made by the Company in the Company Documents not
to be true and correct in all material respects on and as of the Effective Time
with the same force and effect as if such representations and warranties had
been made on and as of the Effective Time.

(d) Notification of Certain Matters. The Company shall give
prompt notice to 24/7 of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Company materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 4(d) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.

(e) Termination of Agreements. The Company shall cause all
provisions of all purchase agreements, stockholder agreements, registration
rights agreements, investors' rights agreements, co-sale agreements, rights of
first refusal, and similar agreements between any shareholder of the Company and
the Company to terminate and be of no further force and effect upon consummation
of the Closing. A list of such agreements is set forth on Schedule 4(e) hereto.

(f) Further Action. Upon the terms and subject to the conditions
hereof, the Company shall use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all other things necessary,
proper, or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to obtain in a timely manner
all necessary waivers, consents, and approvals and to effect all necessary
registrations and filings.

(g) Public Announcements. The Company shall consult with 24/7
before issuing any further press release or otherwise making any public
statements with respect to the Merger and it shall not issue any such press
release or make any such public statement, except as may be required by law,
without the prior consent of 24/7.

(h) Government Compliance. The Company agrees promptly to effect
all necessary registrations, filings, applications, and submissions of
information required or requested by governmental authorities.

(i) Tax Free Reorganization. The Company agrees to use
reasonable commercial efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code, including, but not
limited to, the execution of tax representation certificates documenting the
facts associated with the Merger which support a conclusion that Merger will be
treated as a reorganization within the meaning of Section 368 of the Code, and
will not (either before or after consummation of the Merger) take any actions
which could prevent the Merger from being treated as a reorganization within the
meaning of Section 368 of the Code.

5. Covenants of 24/7.

<PAGE>
(a) Actions. 24/7 covenants and agrees that between the date
hereof and the Effective Time, 24/7 will not take any action which would cause
any of the representations and warranties made by it herein not to be true and
correct in all material respects on and as of the Effective Time with the same
force and effect as if such representations and warranties had been made on and
as of the Effective Time.

(b) Notification of Certain Matters. 24/7 shall give prompt
notice to the Company of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of 24/7 materially to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5(b) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.

(c) Further Action. Upon the terms and subject to the conditions
hereof, and subject to the exercise by the board of directors of 24/7 of their
fiduciary obligations, 24/7 shall use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all other things
necessary, proper, or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to obtain in a
timely manner all necessary waivers, consents, and approvals and to effect all
necessary registrations and filings.

(d) Public Announcements. 24/7 shall consult with the Company
before issuing any further press release or otherwise making any public
statements with respect to the Merger and neither shall issue any such press
release or make any such public statement, except as may be required by law,
without the prior consent of the Company.

(e) Government Compliance. 24/7 agrees promptly to effect all
necessary registrations, filings, applications, and submissions of information
required or requested by governmental authorities.

(f) Merger Consideration. 24/7 agrees to pay the Merger
Consideration as provided in Sections 1(f) and 1(g).

(g) Tax Free Reorganization. 24/7 agrees to use reasonable
commercial efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368 of the Code, including, but not limited to, the
execution of tax representation certificates documenting the facts associated
with the Merger which support a conclusion that Merger will be treated as a
reorganization within the meaning of Section 368 of the Code, and will not
(either before or after consummation of the Merger) take any actions which could
prevent the Merger from being treated as a reorganization within the meaning of
Section 368 of the Code.

6. Conditions Precedent to Obligations of 24/7 and the
Subsidiary. The obligations of 24/7 and the Subsidiary to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Effective Time, of each of the following

<PAGE>
conditions, any of which may be waived by 24/7 and the Subsidiary in writing,
and the Company shall use commercially reasonable efforts to cause such
conditions to be fulfilled:

(a) Representations and Warranties. Each of the representations
and warranties of the Company in the Company Documents shall be true and correct
in all material respects on and as of the date hereof, and, except to the extent
such representations and warranties speak as of an earlier date, as of the
Effective Time as though made at and as of the Effective Time.

(b) Performance of the Company. The Company shall have performed
and complied in all material respects with all agreements, covenants and
conditions required by the Company Documents to be performed or complied with by
the Company at or before the Effective Time.

(c) Employment Agreements. Jack Zoken, Jeff Wilkins and Prashant
Devdhar each shall have entered into an Employment Agreement with 24/7 in the
form attached hereto as Exhibit B and a Non-Competition and Non-Disclosure
Agreement with 24/7 in the form attached hereto as Exhibit C (collectively, the
"Employment Agreements") and each other employee of the Company shall have
entered into a Non-Disclosure Agreement in the form attached hereto as Exhibit D
(the "Non-Disclosure Agreements").

(d) Opinion of Counsel to the Company. The Company shall have
delivered to 24/7 an opinion of Fenwick & West LLP, counsel to the Company,
dated the Closing Date, substantially in the form attached hereto as Exhibit E.

(e) Certificate. 24/7 shall have received a certificate executed
by the Company dated the Closing Date, certifying, in such detail as 24/7 may
reasonably request, as to the fulfillment of the conditions set forth in
Sections 6(a), 6(b) and 6(c).

(f) Consents. The Company shall have obtained or, to the
reasonable satisfaction of 24/7 obviated the need to obtain, all consents,
approvals or waivers from regulatory authorities and third parties necessary for
the execution, delivery and performance of the Company Documents and the
transactions contemplated thereby, all without cost or other adverse
consequences to the Company.

(g) Litigation. No action or proceeding shall be pending or
threatened before any court, tribunal or governmental body, and no claim or
demand shall have been made against 24/7 or the Company, seeking to restrain or
prohibit or to obtain damages or other relief in connection with the
consummation of the transactions contemplated by the Company Documents or this
Agreement, or which might materially affect the business of the Company, which
in the reasonably exercised opinion of 24/7 makes it inadvisable to consummate
such transactions.

(h) Proceedings. All actions, proceedings, instruments, and
documents required to carry out the transactions contemplated hereby or
incidental hereto and all other related legal matters shall have been reasonably
satisfactory to and approved by counsel of 24/7 and such counsel

<PAGE>
shall have been furnished with such certified copies of such corporate actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.

(i) No Violation. There shall not have been any action taken, or
any statute, rule, regulation, or order enacted, promulgated, or issued or
deemed applicable to the Merger by any Federal or state government or
governmental authority or court, which would (i) prohibit the Surviving
Corporation's ownership or operation of all or a material portion the Company's
business or assets, or compel the Surviving Corporation or Company to dispose of
or hold separate all or a material portion of the Company's business or assets,
as a result of the Merger; (ii) render the Company unable to consummate the
Merger; (iii) make such consummation illegal; or (iv) impose or confirm material
limitations on the ability of 24/7 effectively to exercise full rights of
ownership of shares of the capital stock of the Surviving Corporation, including
without limitation, the right to vote any such shares on all matters properly
presented to the shareholders of the Surviving Corporation, and no such action
shall have been taken or any such statute, rule, regulation, or order enacted,
promulgated, issued, or deemed applicable to the Merger which in the reasonable
judgment of 24/7 will produce such result.

(j) Certificate. 24/7 shall have received a certificate of the
Company, dated the Closing Date, signed by the Chief Executive Officer of the
Company, as to such other matters as may be reasonably requested by 24/7,
including, but not limited to, certificates with respect to the Company's
Articles of Incorporation, By-laws, board of directors' resolutions relating to
the transactions contemplated hereby and the incumbency and signatures of each
of the officers of the Company who shall execute on behalf of the Company any
document delivered on the Closing Date.

(k) Material Adverse Change. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the business,
results of operations or financial condition of the Company having or reasonably
likely to have a material adverse effect on the Company.

(l) Indemnity Escrow Agreement. 24/7 shall have received from
the Company, on behalf of all of the shareholders of the Company, an executed
copy of the Indemnity Escrow Agreement dated the Closing Date in the form of
Exhibit A hereto.

(m) Tax Certificate. 24/7 shall have received a certificate of
the Company, dated the Closing Date, signed by the Chief Executive Officer of
the Company, as to the treatment of the Merger as a reorganization within the
meaning of Section 368 of the Code.

7. Conditions Precedent to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Effective Time, of
each of the following conditions, any of which may be waived by the Company in
writing, and 24/7 and the Subsidiary shall use their best efforts to cause such
conditions to be fulfilled:

<PAGE>
(a) Representations and Warranties. The representations and
warranties of 24/7 and the Subsidiary herein shall be true and correct in all
material respects on and as of the date hereof, and, except to the extent such
representations and warranties speak as of an earlier date, as of the Effective
Time as though made at and as of the Effective Time.

(b) Performance by 24/7 and the Subsidiary. 24/7 and the
Subsidiary shall have performed and complied in all material respects with the
agreements, covenants and conditions required by this Agreement to be performed
or complied with by them at or before the Effective Time.

(d) Opinion of 24/7's Counsel. 24/7 and the Subsidiary shall
have delivered to the Company an opinion of Proskauer Rose LLP, counsel to 24/7
and the Subsidiary, dated the Closing Date, substantially in the form attached
hereto as Exhibit F.

(e) Certificate. The Company shall have received a certificate
executed by 24/7, dated the Closing Date, certifying, in such detail as the
Company may reasonably request, as to the fulfillment of the conditions set
forth in Sections 7(a) and 7(b).

(f) Litigation. No action or proceeding shall be pending or
threatened before any court, tribunal or governmental body, and no claim or
demand shall have been made against 24/7, the Subsidiary or the Company, seeking
to restrain or prohibit or to obtain damages or other relief in connection with
the consummation of the transactions contemplated hereby or the Company
Documents which in the reasonably exercised opinion of the Company makes it
inadvisable to consummate such transaction.

(g) Material Adverse Change. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the business,
results of operations or financial condition of 24/7 having or reasonably likely
to have a material adverse effect on 24/7.

(h) Tax Certificate. The Company shall have received a
certificate of 24/7, dated the Closing Date, signed by the Senior Vice President
of 24/7, as to the treatment of the Merger as a reorganization within the
meaning of Section 368 of the Code.

8. Closing Deliveries.

(a) Deliveries of the Company. At the Closing, the Company shall
deliver, or shall cause to be delivered, to 24/7 and the Subsidiary the
following:

(i) Certificates representing the Shares, as 24/7 may
designate, with any required stock transfer tax stamps affixed and canceled and
all taxes on such transfer, if any, paid

<PAGE>
in full, all at the expense of the Company. Such Shares shall be delivered to
24/7 free and clear of all claims;

(ii) The Employment Agreements and the Non-Disclosure
Agreements;

(iii) The opinion of Fenwick & West LLP, counsel to the
Company;

(iv) The certificates referred to in Sections 6(e), 6(j)
and 6(m), duly executed;

(v) Duly executed resignations of such directors and
fiduciaries of the Company as 24/7 shall designate; and

(vi) The Indemnity Escrow Agreement referred to in Section
6(l).

(b) 24/7 and Subsidiary Deliveries. At the Closing, 24/7 and the
Subsidiary shall deliver or cause to be delivered to the Company the following:

(i) The Employment Agreements and the Non-Disclosure
Agreements;

(ii) The opinion of Proskauer Rose LLP, counsel to 24/7
and the Subsidiary;

(iii) The certificates referred to in Section 7(e) and
7(h) hereof, duly executed; and

9. Restrictive Covenant; Confidentiality. (i) The Company shall
never use or divulge any trade secrets, customer or supplier lists, pricing
information, marketing arrangements or strategies, business plans, internal
performance statistics, training manuals or other information concerning 24/7 or
its affiliates that is competitively sensitive or confidential; provided,
however, that this prohibition shall not apply to any information that (A) is
publicly available as of the date hereof, (B) becomes publicly available other
than as a result of prohibited disclosure by the Company, (C) is disclosed to
the Company by any person or entity that is not subject to any confidentiality
restrictions imposed by 24/7 or (D) the Company is required to disclose by law
or by order of any court of competent jurisdiction, but, in the case of (D), the
Company shall first give 24/7 notice of such law or court order and an
opportunity to object, if permitted by such law or court order. Because the
breach or attempted or threatened breach of this restrictive covenant will
result in immediate and irreparable injury to 24/7 for which 24/7 will not have
an adequate remedy at law, 24/7 shall be entitled, in addition to all other
remedies, to a decree of specific performance of this covenant and to a
temporary and permanent injunction enjoining such breach, without posting bond
or furnishing similar security. The provisions of this Section 9 are in addition
to and independent of any agreements or covenants contained in any employment,
consulting or other agreement between 24/7 or the Company and any shareholder of
the Company.

<PAGE>
(ii) To the extent that any of the information furnished to
the Company would constitute material, nonpublic information for purposes of the
Securities Exchange Act of 1934, as amended, the Company covenants that it will
not engage in any purchase or sale of 24/7's securities while in possession of
such information and prior to the time that such information is made generally
known to the public and that the Company shall inform its agents and
representatives, who have been given access to such material, nonpublic
information, of such requirements. The obligations in this Section 9 shall
survive termination of this Agreement.

10. Brokers. Each party represents to the other that it has had
no dealings with any broker or finder in connection with the transactions
contemplated by this Agreement. Should any claim be made for a broker's,
finder's or similar fee, on account of any actions or dealings by a party or its
agents, such party shall indemnify and hold the other party harmless from and
against any and all liability and expenses, including reasonable attorneys' fees
incurred by reason of any claim made by such broker.

11. Indemnification by the shareholders of the Company. To the
extent solely of the shares of 24/7 Common Stock deposited in the Escrow
Indemnity Account, each shareholder of the Company shall severally, and not
jointly, and only in proportion to such shareholder's pro-rata share of
ownership of the Company immediately preceding the Closing Date, indemnify,
defend and hold harmless 24/7 and its affiliates (including the Subsidiary and
the Company), promptly upon demand at any time and from time to time, against
any and all losses, liabilities, claims, actions, damages and expenses
(including without limitation, reasonable attorneys' fees and disbursements)
(collectively, "Losses"), arising out of or in connection with any of the
following: (i) any material misrepresentation or breach of any warranty made by
the Company or any shareholder of the Company in any of the Company Documents;
(ii) any material breach or nonfulfillment of any covenant or agreement made by
the Company or any shareholder of the Company in any of the Company Documents;
or (iii) the claims of any broker or finder engaged by the Company or any
shareholder of the Company.

12. Indemnification By 24/7. 24/7 shall indemnify, defend and
hold harmless the shareholders of the Company, promptly upon demand at any time
and from time to time, against any and all Losses arising out of or in
connection with any of the following: (i) any misrepresentation or breach of any
warranty made by 24/7 herein; (ii) any breach or nonfulfillment of any covenant
or agreement made by 24/7 herein; and (iii) the claims of any broker or finder
engaged by 24/7.

13. Further Provisions Regarding Indemnification.

(a) Survival. All representations, warranties, indemnities,
covenants and agreements made by the Company or the shareholders of the Company
in the Company Documents or by 24/7 herein shall survive the Closing for a
period of one year after the Effective Date, notwith standing any examination or
investigation made by or for any party.

(b) Limitations. Notwithstanding the foregoing,

<PAGE>

(i) the indemnification provided for in Section 11 above
shall be paid solely out of the shares of 24/7 Common Stock held in the Escrow
Indemnity Account in accordance with Section 13(d) below and the Escrow
Indemnity Agreement and such indemnification shall be the exclusive remedy of
24/7 with respect to claims for Losses.

(ii) the indemnification provided for in Section 12 above
shall be limited to an amount equal to ten percent (10%) of the Merger
Consideration.

(iii) the indemnification provided for in Sections 11 and
12 above shall not be required unless and until the total amount of Losses
otherwise subject to indemnification under Sections 11 and 12 exceeds an
aggregate amount of fifty thousand dollars ($50,000), in which event the
indemnified party or parties will be entitled to indemnification for the full
amount of their Losses; and

(iv) neither the Company nor any shareholder of the
Company, on the one hand, nor 24/7, on the other (such shareholders, on the one
hand, and 24/7 on the other, each is sometimes hereinafter referred to in this
Section 13 as a "party") shall be entitled to indemnification for Losses arising
out of matters referred to in Sections 11 or 12, as applicable, unless it shall
have given written notice to the other party, setting forth its claim for
indemnification in reasonable detail, within one year after the Closing Date;
provided, however, that the foregoing limitations on each party's
indemnification obligation shall not apply to Losses arising out of or in
connection with any material misrepresentation made in Section 2(c), Section 10
and Paragraph (a) of the Letter Agreement of the Shareholders of the Company
attached as Exhibit G hereto.

(v) An indemnified party shall promptly give written
notice to the indemnifying party after the indemnified party has knowledge that
any legal proceeding has been instituted or any claim has been asserted in
respect of which indemnification may be sought under the provisions of Sections
11 or 12. If the indemnifying party, within 10 days after the indemnified party
has given such notice (or within such shorter period of time as an answer or
other responsive motion may be required), shall have acknowledged in writing his
or its obligation to indemnify and shall have furnished to the indemnified party
a bond, letter of credit, escrow or similar arrangement in an amount equal to
the total amount demanded in such claim or proceeding, then the indemnifying
party shall have the right to control the defense of such claim or proceeding,
and the indemnified party shall not settle or compromise such claim or
proceeding without the written consent of the indemnifying party. The
indemnified party may in any event participate in any such defense with his or
its own counsel and at his or its own expense.

(vi) The indemnified party shall be kept fully informed by
the indemnifying party of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The indemnifying party shall, at
the indemnifying party's expense, make available to the indemnified party and
its attorneys and accountants all books and records of the indemnifing party
relating to such proceedings or litigation, and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.

<PAGE>
(c) Escrow Indemnity Procedures. Notwithstanding the foregoing
and in accordance with the provisions of the Escrow Indemnity Agreement, the
Company shall from time to time, direct the Escrow Agent to deliver to 24/7 the
number of shares of 24/7 Common Stock having a value equal to the Losses of 24/7
as to which 24/7 is entitled to be indemnified pursuant to Section 11 above, all
as more specifically set forth in the Escrow Indemnity Agreement. For purposes
of this Section 13(c), the value of 24/7 Common Stock shall be the value on the
Closing Date.

14. Registration Rights.

(a) Incidental Registration. After (i) receipt by 24/7 of a
written request from one or more parties to registration rights agreements to
which 24/7 is a party on the date hereof ("Existing Holders"), requesting that
24/7 effect the registration of shares of 24/7 Common Stock under the Securities
Act (a "Registration Request") or (ii) 24/7 proposes (but without obligation to
do so) to register any of its stock under the Securities Act in connection with
a public offering of such securities solely for cash (other than a registration
on Form S-8 or Form S-4) (a "Company Registration"), 24/7 shall promptly notify
the shareholders of the Company in writing of the receipt of such Registration
Request or the Company Registration and such shareholders may elect (by written
notice sent to 24/7 within five days from the date of such shareholder's receipt
of the aforementioned notice from 24/7) to have all or any of the 24/7 Common
Stock owned by the shareholders of the Company (the "Shareholder's Shares")
included in such registration thereof pursuant to this Section 14(a). If a
managing underwriter of any proposed underwritten public offer ing shall advise
24/7 in writing that, in its opinion, the distribution of Shareholder's Shares
requested to be included in a registration statement concurrently with any
securities being registered by 24/7 would materially and adversely affect the
distribution by 24/7, 24/7 may limit the number (to zero if necessary) of
Shareholder's Shares to be registered in order to reduce the total number of
shares in such registration to the number of shares recommended by the
underwriter. 24/7 shall have no obligation under this Section 14(a) to make any
offering of its securities, or to complete an offering of its securities that it
proposes to register, and shall incur no liability to any shareholder of the
Company for its failure to do so. Notwithstanding the foregoing, such
shareholders' rights to registration granted in this Section 14(a) are junior to
and subject to any superior registration rights of Existing Holders.

(b) Registration Procedure. If 24/7 is required to effect the
registration of any Shareholder's Shares under the Securities Act, then 24/7
will use it best efforts to take such actions as are reasonably required in
order to expedite or facilitate the disposition of such Shareholder's Shares and
shall furnish to such shareholders such number of copies of a prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such shareholders may reasonably request. It shall be a condition
precedent to the obligation of 24/7 to take any action pursuant to this Section
14 on behalf of a shareholder that any such shareholder shall furnish to 24/7
such information regarding the Shareholder's Shares and the intended method of
disposition thereof as 24/7 shall reasonably request.

<PAGE>
(c) Expenses of Registrations; Indemnification. The Company
shall bear and pay all expenses incurred in connection with any registration
with respect to registration pursuant to Section 14(a), excluding underwriting
discounts and commissions relating to the Shareholder's Shares. Such
shareholders shall be entitled to the same indemnification from 24/7 as the
Existing Holders requesting registration pursuant to the existing registration
rights agreement with such Existing Holders.

15. Further Assurances. The parties shall cooperate and take
such actions, and execute such other documents, at the Closing or subsequently,
as either may reasonably request in order to carry out the provisions or purpose
of this Agreement.

16. Notices. All notices or other communications in connection
with this Agreement shall be in writing and shall be considered given when
personally delivered or when mailed by registered or certified mail, postage
prepaid, return receipt requested, or by overnight courier as follows:

If to the Company:
Sift, Inc.
155-A Moffet Park Drive
Suite 210
Sunnyvale, CA 94089

with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attn: Robert B. Dellenbach

If to 24/7:
24/7 Media, Inc.
1250 Broadway, 27th Floor
New York, NY 10001
Attn: General Counsel

with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Ronald R. Papa, Esq.

17. Termination. (i) This Agreement may be terminated at any
time prior to the Effective Date by action by the respective Boards of Directors
of the Company and 24/7 by mutual written consent of the Company and 24/7, or

<PAGE>
(ii) This Agreement shall terminate if the Merger shall
have not been declared effective and consummated by April 30, 1999.

18. Year 2000. (i) In addition to any other warranties and
representations provided by either party hereto, whether pursuant to this
Agreement, by law, equity, or otherwise, each party represents and warrants
that:

(A) the computer systems of each party (including
without limitation all software, hardware, workstations and related
components, automated devices, products consisting of or containing one
or more thereof; and any and all enhancements, upgrades, customizations,
modifications or maintenance, embedded chips and other date sensitive
equipment such as security systems, alarms, elevators and other systems)
("Computer Systems") are Year 2000 Compliant (as defined below) or will
be Year 2000 Compliant by December 31, 1999;

(B) each party's supply of services through its
Computer Systems to the other Party shall not be interrupted, delayed,
decreased, or otherwise affected by dates/times prior to, on, after or
spanning January 1, 2000;

(C) each party's Computer Systems have the ability
to properly interface and will continue to properly interface with
internal and external applications and systems of third parties with
whom the company and its subsidiaries exchange data electronically
(including without limitation customers, clients, suppliers, service
providers, subcontractors, processors, converters, shippers,
warehousemen, outsourcers, data processors, regulatory agencies and
banks) whether or not they have achieved Year 2000 Compliance; and

(D) each party has inquired of all such third parties
whose lack of Year 2000 Compliance would be materially or significantly
adverse to it.

For purposes of this Agreement, "Year 2000 Compliant" means that (1) the
Computer Systems (1) are capable of recognizing, processing, managing,
representing, interpreting, and manipulating correctly date related data for
dates earlier and later than January 1, 2000, including, but not limited to,
calculating, comparing, sorting, storing, tagging and sequencing, without
resulting in or causing logical or mathematical errors or inconsistencies in any
user-interface functionalities or otherwise, including data input and retrieval,
data storage, data fields, calculations, reports, processing, or any other input
or output, (2) have the ability to provide date recognition for any data element
without limitation (including, but not limited to, date-related data represented
without a century designation, date-related data whose year is represented by
only two digits and date fields assigned special values), (3) have the ability
to automatically function into and beyond the year 2000 without human
intervention and without any change in operations associated with the advent of
the year 2000, (4) have the ability to correctly interpret data, dates and time
into and beyond the year 2000, (5) have the ability not to produce noncompliance
in existing information, nor otherwise corrupt such data into and beyond the
year 2000, (6) have the ability to correctly process after January 1, 2000 data

<PAGE>
containing dates before that date, (7) have the ability to recognize all "leap
years," including February 29, 2000.

(ii) No obligation of a party under this Agreement shall
be excused by reason of the failure of the other party's or any other person's
Computer Systems to be Year 2000 Compliant, nor shall such occurrence(s) be
deemed a force majeure event.

19. Entire Agreement. This Agreement (which includes the
schedules and exhibits hereto) sets forth the parties' final and entire
agreement with respect to its subject matter and supersedes any and all prior
understandings and agreements. This Agreement can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of any such amendment, supplement, change or waiver is sought.

20. Successors. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns;
provided, however, that neither this Agreement nor any right or obligation
hereunder may be assigned or transferred, except that 24/7 or Subsidiary may
assign this Agreement and its rights hereunder to any direct or indirect
wholly-owned subsidiary of 24/7.

21. Paragraph Headings. The paragraph or section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

22. Other Discussions. Unless this Agreement shall have been
terminated, the Company (nor any representatives of the Company) shall not,
directly or indirectly, initiate, solicit, encourage, consider, entertain or
otherwise consider any other offers for or inquiries about or hold discussions
with any person regarding, the acquisition of any assets or capital stock of the
Company. The Company (nor any representatives of the Company) will not, directly
or indirectly, engage in any negotiations concerning, to provide any
confidential information or data to, or have any discussions with, any person
relating to the acquisition of any assets or capital stock of the Company,
whether initiated before or after this Agreement. The Company (and any
representatives of the Company) will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to the acquisition of any assets or capital
stock of the Company. The Company will notify 24/7 immediately of any such
inquiries, proposals or negotiations and the name of such person and the
material terms and conditions of any proposals or offers.

23. Legal Fees and Expenses. If the Closing occurs, the
reasonable legal costs, fees and expenses solely and directly related to this
Agreement and the Merger within the meaning of the Internal revenue Service Rev.
Rul. 73-54 incurred by the Company shall be borne by 24/7. If the Closing does
not occur pursuant to the terms of this Agreement, each party will be
responsible for those expenses incurred directly by them in connection with this
Agreement and the Merger.

<PAGE>
24. Severability. If any provision of this Agreement shall be
held by any court of competent jurisdiction to be illegal, invalid or
unenforceable, such provision shall be construed and enforced as if it had been
more narrowly drawn so as not to be illegal, invalid or unenforceable, and such
illegality, invalidity or unenforceability shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement.

25. Governing Law and Consent to Jurisdiction. This Agreement
shall be gov erned by and construed and interpreted in accordance with the
internal law of the State of New York (without reference to its rules as to
conflicts of law). The state courts of the State of California in Santa Clara
County and, if the jurisdictional prerequisites exist at the time, the United
States District Court for the Northern District of California, shall have sole
and exclusive jurisdictions to hear and determine any dispute or controversy
arising under or concerning this Agreement. In any action or proceeding
concerning such dispute or controversy, the parties consent to jurisdiction and
waive personal service of any summons, complaint or other process; a summons or
complaint in any such action or proceeding may be served by mail in accordance
with Section 15.

26. Counterparts. This Agreement may be executed by facsimile
and in one or more counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.

<PAGE>
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the date first above written.

24/7 MEDIA, INC.

By: /s/David J. Moore
---------------------
Name: David J. Moore
Title: Chief Executive Officer

By: /s/Mark E. Moran
---------------------
Name: Mark E. Moran
Title: Senior Vice President

FACTOR K ACQUISITION CORPORATION

By: /s/David J. Moore
---------------------
Name: David J. Moore
Title: Chief Executive Officer

By: /s/Mark E. Moran
---------------------
Name: Mark E. Moran
Title: Senior Vice President

SIFT, INC.

By: /s/Jack Zoken
---------------------
Name: Jack Zoken
Title: Chief Executive Officer

By: /s/Jeff Wilkins
---------------------
Name: Jeff Wilkins
Title: President, Chief Financial Officer and Secretary

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
March 18, 1999

<PAGE>

SCHEDULE
24/7 MEDIA, INC.
VALUATION AND QUALIFYING ACCOUNTS--
ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

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.
March 18, 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
March 17, 1999

<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> 9,078 240
<ALLOWANCES> 636 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> 1,593 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>