10KSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission file number: 0-20995

AXTIVE CORPORATION

(Exact name of small business issuer as specified in its charter)

DELAWARE	13-3778895
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1445 ROSS AVENUE, SUITE 4500, DALLAS, TEXAS 75202

(Address of principal executive offices)

(214) 397-0200

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

COMMON STOCK, PAR VALUE $0.01 PER SHARE

REDEEMABLE WARRANTS, EACH TO PURCHASE ONE SHARE OF COMMON STOCK

(Title of Class)

Check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨

The issuer’s revenue for its most recent fiscal year from continuing operations was approximately $2.4 million.

The aggregate market value of the issuer’s common stock, $0.01 par value, held by non-affiliates as of July 10, 2003, based on the average bid and asked price of the common stock was approximately $2.1 million.

As of July 10, 2003, the issuer had 21,956,445 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

TABLE OF CONTENTS

			Page
Part I
	Item 1.	Description of Business	1
	Item 2.	Description of Property	13
	Item 3.	Legal Proceedings	14
	Item 4.	Submission of Matters to a Vote of Security Holders	16
Part II
	Item 5.	Market for Common Equity and Related Stockholder Matters	17
	Item 6.	Management’s Discussion and Analysis or Plan of Operation	21
	Item 7.	Financial Statements	25
	Item 8.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	48
Part III
	Item 9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	49
	Item 10.	Executive Compensation	51
	Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
	Item 12.	Certain Relationships and Related Transactions	57
	Item 13.	Exhibits and Reports on Form 8-K	61
	Item 14.	Controls and Procedures	63
Signatures			64

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

In this Annual Report on Form 10-KSB, we will refer to Axtive Corporation, a Delaware corporation, as “Axtive,” “Company, “ “we,” “us” and “our. “ Prior to October 28, 2002, the Company was known as Edge Technology Group, Inc. Throughout this Annual Report where prior reports included a reference to “Edge” in a historical context, the reference to Edge has been changed to “Axtive.”

Axtive Corporation was incorporated in Delaware in July 1994 and commenced operations in January 1995. Axtive is a publicly traded company (OTC:AXTV.PK). Our business model is to acquire software-related technology companies that deliver software products and related information technology services to middle-market companies. We currently offer products and services that improve the utilization of business information for middle-market companies within the United States. We expect that our current and prospective customers will benefit from integrated business process applications that are delivered on a fully outsourced basis through portal technology or, if needed, as traditional licensed products. Our acquisitions target companies with existing strategic relationships with Oracle, IBM or Microsoft that will allow us to take advantage of partnership opportunities available only to those select parties. The technology companies targeted for acquisition are those that operate within the following business sectors and operating business units: (1) Information Technology (“IT”) Professional Services; (2) Business Application Software (“BAS”) comprised of six product groups; and (3) Application Services and Management.

Initial development of our business model has involved the acquisition of IT Professional Services and Application Services and Management firms that have existing relationships with numerous middle-market customers. Subsequent acquisitions are expected to target software products with common data structures (such as Oracle, IBM and Microsoft) that are designed for the application service delivery channel. We expect that some synergistic relationships will develop between the acquired companies. We also expect that funding for operating business unit-specific projects will be provided through public and private offerings of Axtive securities. Nearly all operations are expected to continue within each operating business unit while a small corporate staff will interface with the capital markets, formulate and manage our overall strategic objectives and oversee all mergers and acquisitions.

Prior to the development of our current business model, Axtive’s business consisted primarily of developing, marketing and selling personalized videotape golf lessons featuring One-on-One golf video instruction (“One-on-One”) by leading professional golfer Greg Norman, sold under the name “One-on-One with Greg Norman.” We developed video production technology that digitally combined actual video footage of a golfer’s swing with a synchronized “split-screen” comparison to Greg Norman’s golf swing to produce a One-on-One golf lesson. The assets of the One-on-One business were sold to members of Axtive’s prior management in September 2001.

BUSINESS STRATEGY

Our business strategy is to bring together complementary software-related companies to offer our customers a complete end-to-end solution for their information technology needs. Our targeted customers are an estimated 150,000 middle-market companies with software and consulting needs. We will initially focus on markets primarily within the U.S.

PRODUCT AND SERVICE OFFERINGS

IT Professional Services

IT Professional Services consist of implementation, integration and development of custom technology applications. In 2002, IT Professional Services generated $536 billion in global revenue and approximately $224

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billion in U.S. revenue.¹ Market research firm Yankee Group projects a 6% annual growth rate for 2003,² and International Data Corporation (“IDC”) predicts a growth rate for the sector of 9% for 2004.³ This is a highly fragmented market with industry leader IBM Global Services controlling 7.5%, the five largest market participants controlling less than 20%, the top 400 global corporations controlling less than 50% and over 14,000 small-to-medium sized firms controlling the remaining market share of over 50%.⁴

The IT Professional Services sector is currently experiencing a period of significant change, which may create immense opportunity for proactive entrepreneurial companies. After a multi-year period of record-setting sales through 2000, the sector is still projected to grow, but at a slower pace. Many participants were not prepared for decelerating growth and a changing environment.

We will continue to serve the needs of middle-market businesses, initially within the United States. Our management estimates that U.S. middle-market companies were responsible for $62 billion of the U.S. revenue in this sector. We generally define middle-market companies as those that generate between $10 million and $2 billion in annual revenue and typically employ between 100 and 10,000 persons. Of the approximately three million middle-market companies in the United States, based on 1997 data, there are approximately 150,000 that we plan to target as potential customers. In addition, because of the fragmented market for these services, thousands of medium-sized market participants are both our potential competitors for the $62 billion in revenue from U.S. middle-market customers and potentially acquisition targets.

Axtive provides IT project and staffing solutions that include planning, design, deployment, consulting and integration and support services based upon industry-leading Oracle, IBM / Informix and Microsoft database technologies to meet the needs of middle market customers. In addition to database consulting, we offer technology training, system services and product sales that augment our core IT professional services practices.

Business Application Software

Business application software companies develop, publish and support specific software applications and suites of applications. AMR Research reports that enterprise software buyers spent $41 billion in 2002 and will spend $46 billion in 2003.⁵ Additionally, the market for certain types of BAS is changing significantly. In 2001, customer relationship management software (“CRM”) spending accounted for 29% of BAS spending and will account for 38% of BAS spending by 2006.⁶ Supply-chain and product life-cycle management software accounted for 20% of BAS spending in 2001 and is expected to increase to 30% by 2006.⁷ Spending for enterprise resource planning (“ERP”) made up 47% of the BAS market in 2001, but is expected to shrink to 27% by 2006.⁸ IDC predicts worldwide sales of database software, relational and object-relational database management systems to reach $20 billion by 2006.⁹

A new term and application for software, enterprise performance management (or “EPM”), has recently been introduced by AMR Research and described as the application of the future. EPM is the convergence of existing application areas toward improving the overall performance of the company.¹⁰ Axtive views this convergence as integral to its business strategy because customers will be able to connect disparate systems in order to draw valuable business conclusions.

Axtive’s value proposition for BAS is similar to IT Professional Services in that both involve integration, implementation and scale to middle-market segments. BAS products typically fall into one of three categories: strategic; operational; or transactional. The typical challenge experienced across all segments of the middle market

¹ “IT Services Market Declines,” TechWeb News, May 13, 2003.

² “IT Consulting, Integration Expected to Grow,” TechWeb News, March 18, 2003.

³ “IT services Outlook Improves,” VARBusiness, January 7, 2003.

⁴ “IT Services Market Declines,” TechWeb News, May 13, 2003.

⁵ Study Finds Growth In Enterprise Software Market, InformationWeek, May 31, 2002.

⁶ Ibid.

⁷ Ibid.

⁸ Ibid.

⁹ UPDATE—IDC: Database software market heading to $20 billion, ITWorld, May 23, 2002.

¹⁰ Software is HOT – Highlights from AMR’s Spring Conference in the Desert, USBancorp Piper Jaffery, May 31, 2002.

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is that disparate software applications utilized across all three product categories do not communicate with one another.

Axtive has identified six middle-market business application software product categories that the Company expects to pursue through the course of future acquisitions and partnerships consisting of Enterprise Operations, Enterprise Intelligence, E-Business Applications, Collaborative Applications, Content and Knowledge Management and Internet Services. These categories are designed to meet the needs of six targeted industries: financial services; healthcare; light manufacturing; energy/utilities; and wholesale/retail and services.

• Enterprise Operations – consisting of accounting, human resources management, benefits management, workforce management, contract and revenue management, aggregation services and professional service automation services. The Axtive model focuses on the ability to take these disparate but common Enterprise Operations systems and use all data sources as efficiently as possible by minimizing the duplication of entries. Streamlining these data operations allows companies to reduce overhead costs associated with redundant systems and the staffing required for those systems.

• Enterprise Intelligence – consisting of on-line analytical processing, database (multidimensional and relational), data processing, data mining, costing, budgeting and forecasting products. With the data input and stored by the Enterprise Operations product category, retrieval and presentation of that data falls in the realm of Enterprise Intelligence products. Because this use of data is the critical component in the guidance and direction of business processes and decisions, Axtive expects to sell and deliver applications that allow companies to make timely decisions and share the information necessary for proper profit management.

• E-Business Applications – consisting of customer relationship management, sales force automation, commerce analysis, order taking, transactional back-office, commerce-enabled portals and procurement applications. Axtive plans to use these applications to help customers track their sales activities, make customer service more efficient and implement effective marketing campaigns, for example. The primary focus of CRM is customer service, with issues ranging from order fulfillment to customer support. All customer interaction touch points are maintained in the CRM system with the sole intent of providing positive customer interaction and thereby increasing customer loyalty. With fierce competition on the web, Axtive will allow companies to set themselves apart by providing a personalized web browsing experience. Today, a page that includes status information for pending orders and shipments will welcome corporate buyers. eProcurement programs help companies buy everyday items such as paper, office machinery and cleaning supplies via the web and help manufacturers support a supply chain system with timely refills of required parts.

• Collaborative Applications – consisting of voice, fax and video over IP, scheduling, calendaring, integrated messaging, whiteboard conferencing, project management and document editing applications. These applications facilitate both internal and external communication. Axtive expects to use collaborative applications, for example, to assist a company and its partners in speeding product design and making manufacturing more efficient. This allows product development to occur in far-flung locations via the sharing of documents in virtual workspaces. Project managers are able to use virtual workspaces for design work and hold project meetings via digital conference rooms. Supply chain processes are aided by the ability to link employees, customers and suppliers and provide real-time communication during the ordering process. These products also help manage the general communication of events, calendaring and document tracking for internal process. Externally, these products can be used to expedite customer service and sales presentations.

• Content and Knowledge Management – consisting of “spidering,” digital rights management, data security, encryption, authentication library services and push technology applications. Content and knowledge management applications are expected to provide Axtive’s customers with the ability to maintain online catalogs and other mission-critical data for internal and external consumption. Digitalization of legacy content allows prior-period investments to be brought into the current web environment and thereby extend the useful life of that data. Electronic content is vulnerable to piracy and misuse at the instant content is downloaded and accessed. Digital rights management strategies and tools extend protection beyond the firewall restricting who can do what to the electronic content. Protecting intellectual property through

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digital rights management is a core requirement of e-business infrastructure. Axtive expects to employee these technologies to facilitate the efficient sharing of digital information in order to increase productivity for customers.

• Internet Services – consisting of portals, email, facsimile and wireless services. These services provide much of the content delivered in a website portal. These items are typically generic, informative and time-sensitive. The sources of the content may be the company itself or external feeds such as news agencies or stock markets. In addition, with the introduction of advanced wireless technologies, mobile customers are well positioned to access content and services anytime, anywhere. Axtive expects to create value for customers through enabling the use of these technologies for use within customer organizations. A key to a company successfully using such services is the ability to control or push the content from specific providers selected by management, for example, the Vice President of Marketing may want all sales people to have content pushed to them from specific publications as their main source of industry news so as to maintain a standard of information provided. Or the company may establish a portal with content from specific providers for outside services such as travel, shipping and banking.

Application Services and Management

IDC expects steady growth in worldwide spending on application service provider (or “ASP”) services from $11.1 billion in 2001 to over $20 billion by 2006.¹¹ This growth is attributable to companies of all sizes looking to outsource maintenance and competitive IT management activities in order to focus on more strategic activities.¹² Axtive’s strategic vision is to use its ASP delivery mechanism to implement IT solutions for all segments of the middle market. Axtive delivers BAS products either through an ASP or on-site, linking end-users to applications with significantly lower cost by accessing them through a universal external point. Axtive also offers third-party software and applications through both an ASP and license agreement. Axtive’s professional services operating business units generate recurring revenue by providing ASP hosting contracts as part of their ongoing maintenance and upgrades for customers.

MARKETING AND DISTRIBUTION

Through our acquired companies, we market our IT Professional Services, Business Application Software and Application Services and Management outsourcing to middle-market businesses. We believe that products and services we may develop or acquire should be marketed with the goal of improving utilization of business information. We intend that these product and service offerings will offer professional services and software applications that support business intelligence systems, enterprise information performance and improved knowledge management throughout our customers’ business operations. We will target middle-market companies that have requirements for IT professional services, business application software and application service and management.

We believe this model will enable middle-market companies to access integrated business process applications that can be delivered on a fully outsourced basis through portal technology or, if needed, delivered as a traditional licensed product. This entails the integration, deployment, hosting and ongoing management of, and network access to, remotely hosted business process applications like e-commerce, accounting, scheduling and messaging. We intend to provide products and services to middle-market customers that trade the difficulties of purchasing software, managing software implementation risk, staffing an internal information technology department and suffering from unpredictable budgets for a single interface, an interoperable data structure, access to applications that complete the end-to-end solution for business processes and a selection of pricing structures.

We believe that it will be necessary for the success of our business plan to have multiple sales models for generating revenue. We intend to use the two basic sales models in the industry, software application sales and service sales.

The software application sales model that we intend to deploy consists of:

¹¹ ASP, App Management Markets to Reach $20 Billion by 2006, IDC, March 28, 2002.

¹² Ibid.

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• License – a one-time fee charged to the customer for a software application which they install and use;

• Maintenance – a recurring annual fee charged to the customer for software upgrades, fixes and repairs;

• Development and Customization – fees earned for making modifications to existing proprietary software or developing extensions and new functionality;

• Royalty – a fee charged to co-developers on a single or recurring basis for product usage or installation;

• Subscription Service – fees charged to the customer to use a software application on a contracted time, per user, per transaction basis or some other formula; and

• Transactional or Usage Fees – a fee based on a specified number of uses of software applications charged by computer time, bandwidth, task completion or other metrics.

The service sales model that we use consists of:

• Project-Based Contracts – variable- or fixed-fee contracts for implementation and deployment of application offerings and related training;

• Support Contracts – fees charged for online, phone or on-site support of generic applications assessed on a per-call or contracted basis;

• Development Fees –fees charged for writing new software code for generic applications and implementations; and

• ASP/Hosting Contracts – monthly fees paid in advance for rack space, monitoring, bandwidth and application usage.

COMPETITION

The markets for our products and services are highly fragmented. There are relatively few barriers to entry into our markets and we have faced, and expect to continue to face, competition from new entrants into our markets. Our IT Professional Services, Business Application Software and Application Services and Management businesses are likely to face competition from four primary categories of businesses: top-tier consulting firms and software consulting divisions; best-of-breed software companies; packaged software sellers; and resellers.

Top-tier consulting firms make up the closest group of competitors in terms of the breadth of their product offerings. Companies such as Accenture and EDS provide many of the same services, but their focus is on Global 2500 customers instead of the middle-market customer. Similarly, Oracle, IBM and Computer Associates all field professional services divisions that implement their solutions, but also focus on large companies. Typically, many middle-market customers are not often given the opportunity to work with these companies.

Best-of-breed software companies such as Seibel, PeopleSoft, SAP and others offer specific products to their customers, but, in most cases, these companies focus on a single offering, intending to be the best in their product category. Axtive’s middle-market customers may require implementation and integration of these types of products from time to time. Several of Axtive’s subsidiaries are qualified to provide those services for these companies’ products.

Packaged software sellers such as Intuit, Great Plains and Lotus offer limited off-the-shelf applications targeted primarily at the small-office and home-office segment of the middle market, where customer requirements can be satisfied with a standard package and self-installation and support.

Resellers such as JamCracker and WebMethods resell integrated hardware and software products with thin margins. Many of these resellers are attempting to expand their business offerings by including professional services in an attempt to sell additional generic applications. These companies face several challenges including the common customer perception that their recommendations are driven by their own product margins instead of the customer’s needs.

Our competitors generally have greater financial, technical and marketing resources than we do and, as a result, may be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the development, promotion and sales of their products and services.

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We can give no assurance that we will be able to compete successfully with existing or new competitors or that competition will not have a material adverse effect on our business, financial condition, operating results and liquidity.

DEPENDENCE ON MAJOR CUSTOMERS

Certain customers account for a significant portion of our revenues. In 2002, our six largest customers represented approximately 50% of our total revenues, and our largest customer accounted for approximately 15%. No other customer accounted for more than 4% of total revenues in 2002. Some of our significant customers include: Aegis Communications Group, Blue Cross Blue Shield of Florida, IBM – Data Management Division, Hilton Hotels Corporation and Equifax Credit Information Services. We seek to develop long-term relationships with our customers. Although a typical individual customer assignment ranges from two to four months in duration, some of our customer relationships have continued for more than four years. However, if any significant customer terminates its relationship with us or substantially decreases its use of our services, it could have a material adverse effect on our business, financial condition and results of operations.

Typically our customers may cancel their contracts on short notice or may reduce their use of our services. Because of this, we do not characterize our engagements as backlog.

ACQUISITIONS

We have expanded our customer base and added to our technical expertise and service offerings through business combinations. Given the highly fragmented nature of the IT services industry, we intend to continue to pursue business combinations as part of our growth and operation strategy. The success of this strategy depends not only upon our ability to identify and acquire businesses on a cost-effective basis, but also upon our ability to integrate acquired operations into our organization effectively, to retain and motivate personnel and to retain customers of acquired or merged companies. In reviewing potential business combinations, we consider, among other factors, the target company’s geographic reach, cultural fit, capabilities in specific technical services, customer base, expected financial performance, valuation expectations and the abilities of management, sales and recruiting personnel. Since January 1, 2002, we have completed the following business combinations:

Acquisition of Media Resolutions, Inc.

In April 2002, we acquired Media Resolutions, Inc., an ASP and website hosting company located in Dallas, Texas. We paid $330,000 in cash and notes (see Note 5 to our consolidated financial statements included elsewhere in this report) and 500,000 restricted shares of our common stock valued at $313,000 in exchange for all the outstanding shares of Media Resolutions.

The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of Media Resolutions were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition of Media Resolutions totaled approximately $479,000 and was allocated to goodwill.

Acquisition of The Visionary Group, Inc.

In April 2002, we acquired The Visionary Group, Inc., a professional services firm providing IT Professional Services related to Oracle applications software. Headquartered in Dallas, Texas, The Visionary Group had operations in Dallas and Austin, Texas. We paid $910,000 in cash and notes (see Note 5 to our consolidated financial statements included elsewhere in this report) and satisfied approximately $70,000 of existing debt in exchange for all the outstanding shares of The Visionary Group.

The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of The Visionary Group were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition of The Visionary Group totaled approximately $906,000 and was allocated to goodwill.

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Following its acquisition, revenues for The Visionary Group fell below acceptable levels. We believe the decline resulted from an overall decline in the market and the delay or elimination of several significant projects resulting from general economic conditions. Despite aggressive steps to rebuild the business including installing new management and producing new product offerings, we were not successful and the company ceased operations in December 2002. Of the approximate $906,000 of goodwill recorded in the acquisition of The Visionary Group, $600,000 was written off in September 2002, and the balance was written off in December 2002.

Acquisition of Universal Data Technology, Inc.

In May 2002, our newly created and wholly owned subsidiary, UDT Consulting, Inc., acquired the assets of Universal Data Technology, Inc., an IT Professional Services practice headquartered in Dallas, Texas with additional operations in Arkansas and Florida. Our total purchase price for substantially all of Universal Data Technology’s assets was the sum of a minimum purchase price of $1,127,750 and the product of multiplying two times UDT’s adjusted earnings before interest, taxes depreciation and amortization for the 12 months immediately following the closing date of the acquisition (the “Measurement Period”). Through December 31, 2002, UDT had cumulative adjusted earnings relevant to the acquisition of approximately $150,000. The calculation of the purchase price is subject to certain deductions and offset provisions. An initial payment of $227,750 and the forgiveness of a $150,000 promissory note from Universal Data Technology to Axtive were applied toward the purchase price as of the date of the closing. The remainder of the purchase price may, under certain conditions, be paid monthly pursuant to a pay-out schedule, with any remaining payments to be delivered after the end of the 12-month period. Amounts due attributable to the minimum purchase price are included in Short-term note payable in our consolidated financial statements included elsewhere in this report.

The acquisition was accounted for using the purchase method of accounting. The assets acquired from Universal Data Technology were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition of the assets totaled approximately $1.05 million and was allocated to goodwill.

Payments on the pay-out schedule through December 31, 2002, as applied to the minimum purchase price, have totaled $48,000. No additional amounts have been paid pursuant to the pay-out schedule since December 31, 2002. In July 2003, Axtive, UDT, and Universal Data Technology entered into a settlement agreement to resolve all outstanding obligations of the parties arising from the acquisition. We paid Universal Data Technology $310,000 in full and final payment of the purchase price for the acquisition.

Acquisition of Virtually There, Inc.

In May 2002, we acquired Virtually There, Inc., an ASP and website hosting company located in Fort Worth, Texas. In exchange for the outstanding shares of Virtually There, we paid $120,000 in notes (see Note 5 to our consolidated financial statements included elsewhere in this report), issued 1,153,846 shares of our restricted common stock valued at $455,000 to the shareholders of Virtually There, and assumed approximately $185,000 of the existing liabilities of Virtually There as of the date of closing.

The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of Virtually There were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition of Virtually There totaled approximately $719,000 and was allocated to goodwill. The value allocated to goodwill exceeded the stated purchase price due to the assumption of liabilities at acquisition.

Recent Developments—Acquisition of ThinkSpark Corporation

In May 2003, we acquired ThinkSpark Corporation and its subsidiaries (“ThinkSpark”), a professional services firm providing IT Professional Services related to Oracle database software, in a merger transaction. ThinkSpark is headquartered in Dallas, Texas with additional offices in Austin, Texas, San Antonio, Texas, Oklahoma City, Oklahoma, Houston, Texas and Las Vegas, Nevada. ThinkSpark generated revenues of approximately $21.3 million in 2002 and incurred a net loss of approximately $6.4 million, including non-recurring charges of approximately $3.2 million. Such non-recurring charges resulted primarily from ThinkSpark’s closing offices, reducing headcount and ceasing operations in the United Kingdom, all during the fourth quarter of 2002.

In exchange for all the outstanding shares of ThinkSpark, we paid approximately $107,000 in cash and notes, ThinkSpark shareholders satisfied approximately $121,000 in debt due to ThinkSpark, and Axtive assumed

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$5.0 million of long-term debt from ThinkSpark’s secured creditor, Merrill Lynch Business Financial Services, Inc. The debt assumed is secured by $1.0 million of accounts receivable of ThinkSpark and is guaranteed by the remaining subsidiaries of Axtive. We also issued Merrill Lynch warrants to acquire 5,000,000 shares of Axtive’s common stock in exchange for Merrill Lynch’s assignment to Axtive of an additional $1.9 million of debt due from ThinkSpark. The warrants have an exercise price of $0.01 per share and can be exercised anytime prior to the 10th anniversary of their issuance in May 2013. As a result of the warrants, Merrill Lynch could acquire a significant equity interest in Axtive.

The acquisition will be accounted for using the purchase method of accounting. As such, the assets and liabilities of ThinkSpark will be recorded at their estimated fair value and the results of operations will be included in our consolidated results of operations from the date of acquisition. We have not completed the allocation of purchase price to assets acquired. We expect a significant amount of goodwill to result from the acquisition.

PATENTS, TRADEMARKS, ETC.

We currently have no patents. We acquired the “Axtive” trademark and logo in June 2002. SeeItem 12, “Certain Relationships and Related Transactions—Acquisition of ‘Axtive’ Name.”

EMPLOYEES

As of December 31, 2002, we employed two executive officers, nine full time employees within the corporate office and a total of 32 full time employees within our subsidiaries. We had 18 billable consultants as December 31, 2002. None of our employees are subject to a collective bargaining arrangement. We have employment agreements with our executive officers. We believe our relations with our employees are good.

WEBSITE INFORMATION

The Internet address of our website is www.axtive.com. We make available, free of charge through our website, access to our Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K, any amendments to those reports and other filings with the SEC as soon as reasonably practical after filing with the SEC. Our reports filed with or furnished to the SEC are also available directly from the SEC’s website at www.sec.gov.

HISTORY

Axtive was originally organized in Delaware in July 1994 under the name Golf Vision, Inc. The Company changed its name to Edge Technology Group, Inc. in September 2000 and to Axtive Corporation in October 2002.

RISK FACTORS

Readers of this report should carefully consider the following risk factors, in addition to the other information contained in this report. This report contains statements of a forward-looking nature relating to future events or the future financial performance of Axtive within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and which are intended to be covered by the safe harbors created by those statutory provisions. Readers are cautioned that such statements are only predictions and that actual events or results may differ substantially. In evaluating those statements, readers should specifically consider the various factors identified in this report, including the matters set forth below, which could cause actual results to differ substantially from those indicated by the forward-looking statements.

Risks Relating to Our Business

We have experienced significant and continuing losses.

The Company has suffered recurring losses from operations and has an accumulated deficit of approximately $44.6 million at December 31, 2002. Of this amount, approximately $33.5 million had accumulated

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through March 31, 2001, and is attributable to the Company’s former One-on-One golf video business. Another approximately $6.2 million reflects impairment charges and bad debts stemming from investments and loans made prior to the Company’s creation of its current business plan. For the year ended December 31, 2002, we incurred a net loss of approximately $2.2 million including impairment charges related to goodwill of approximately $907,000.

We believe we will continue to incur losses until we are able to generate sufficient revenues to offset the operating costs associated with executing our new business plan. These losses could limit our ability to grow and to raise new funds and could ultimately jeopardize our ability to remain in business.

We need additional financing.

We do not currently maintain a credit facility with any bank or financial institution. We believe that our ability to raise additional financing, either as debt or equity, is further hindered by our continuing operating losses, the low market price of our common stock and the lack of a listing for our stock on a national exchange.

We may not be able to carry out our acquisition strategy.

Our business strategy is dependent upon making additional acquisitions of software-related technology companies. To be suitable for acquisition by us, these companies must be small enough to be affordable yet profitable. Acquisition candidates may be few in number and may attract offers from companies with greater financial resources than us. Acquisitions involve numerous risks, including, among others, loss of key personnel of the acquired company, difficulties associated with assimilating the personnel and operations of the acquired company, potential disruption of our ongoing business and the maintenance of uniform standards, controls, procedures and policies. While we believe our past acquisitions are compatible with our business plan, we can provide no assurance that we will be able to locate other suitable acquisition targets or that we will be able to complete additional acquisitions. Our business plan will succeed only if we are able to identify, acquire and manage additional acquisitions. There can be no assurance that we will be able to implement our business plan, and failure to effectively implement our business plan will have a material adverse effect on us.

Our current financial condition prevents us from financing an acquisition independently.

Our current financial condition will not allow us to finance additional acquisitions independently. We cannot assure you that Axtive will be able to obtain financing in addition to that secured in connection with the issuance of the offering of our series A convertible preferred stock (“Series A Preferred Stock”) in April 2002 and May 2003, on acceptable terms or at all. If we cannot obtain additional financing, we will not be able to complete any future acquisitions and will consequently not be able to successfully implement our business plan.

We depend on major customers.

A small number of our customers account for a significant portion of our revenues. In 2002, our six largest customers represented approximately 50% of our total revenues, and our largest customer accounting for approximately 15%. No other customer accounted for more than 4% of total revenues in 2002. Our typical customer assignments are short in duration due to the nature of our products and services. Our customers may cancel their contracts on short notice or may reduce their use of our products or services. If any significant customer terminates its relationship with us or substantially decreases its use of our products or services, it could have a material adverse effect on our business, financial condition and results of operations.

We depend on our officers and key personnel.

Our prospects depend on the personal efforts of Graham C. Beachum II, our President and Chief Executive Officer, Graham C. “Scooter” Beachum III, our Executive Vice President and General Manager, and other key personnel throughout Axtive and its acquired companies to implement our acquisition and operating strategies. The loss of the services of these executives could have a material adverse effect on our business and prospects because of their knowledge and experience of, and contacts within, our industry.

Our success depends, to a significant extent, on the continued contributions, experience and knowledge of our senior management team and key technical and marketing personnel and the key personnel of our acquired

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companies. Our success also depends upon our ability to identify, attract, hire, train, retain and motivate highly skilled technical, managerial, sales and marketing personnel. No assurance can be given that we will be able to successfully attract, assimilate or retain a sufficient number of qualified personnel. The failure to do so could have a material adverse effect on our business, results of operation and financial condition.

If we fail to manage our growth and integrate our acquired businesses, our business will be adversely affected.

If the business strategy discussed in this report results in significant growth of our operations, we will be required to implement and improve our operating and financial systems and controls, and expand, train and manage our employee base to manage this growth. To the extent that our management is unable to manage the growth and integration effectively, our business, results of operations and financial condition could be adversely affected. In addition, the integration of the acquired entities and their operations will require our management to make and implement a number of strategic operational decisions. The timing and manner of the implementation of these decisions could materially impact our business operations.

We must attract and retain qualified consultants.

Our future success depends, in part, on our ability to attract and retain adequately trained personnel who can address the changing and increasingly sophisticated technology needs of our customers. While the current employment conditions have lessened our risk somewhat in attracting high caliber consultants, there can be no assurance that such conditions will continue and we will be successful in attracting and retaining the personnel we require to conduct and expand our operations in the future.

We do not rely on long-term contracts.

Although we have many long-standing relationships with our customers, our business depends upon those relationships remaining positive and our ability to develop new customers rather than upon long term contracts. If any significant customer terminates its relationship with us or substantially decreases its use of our services, it could have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon our relationship with Oracle.

We have a significant relationship with Oracle as an implementation partner. In the event Oracle products become less desirable or competitive in the marketplace, the need for our implementation services would lessen and we could suffer a material adverse effect.

Our services are provided in the form of projects.

We provide and intend to continue to provide project services to our customers. Projects are distinguishable from the provision of other professional services by the level of responsibility we assume. In a typical project, we assume major responsibility for the management of the project and/or the design and implementation of specific deliverables based upon customer-defined requirements. As our project engagements become larger and more complex and often must be completed in increasingly shorter time frames, it becomes more difficult to manage the project, increasing the likelihood of mistakes. In addition, our projects often involve applications that are critical to our customer’s business. Our failure to timely and successfully complete a project and meet our customer’s expectations could have a material adverse effect on our business, results of operations or financial condition. Such adverse effects may include delayed or lost revenues, additional services being provided at no charge and a negative impact to our reputation. In addition, claims for damages may be brought against us, regardless of our responsibility, and our insurance may not be adequate to cover such claims. Our contracts generally limit our liability for damages that may arise in rendering our services. However, we cannot be sure these contractual provisions will successfully protect us from liability if we are sued. We sometimes undertake projects on a fixed-fee basis or cap the amount of fees we may bill on a time and materials basis. Any increased or unexpected costs or unanticipated delays could make such projects less profitable or unprofitable and could have a material adverse effect on our business, results of operations and financial condition.

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The market for our services is competitive.

We operate in a competitive industry. We believe that we currently compete principally with IT professional services firms, technology vendors and internal information systems groups. Many of the companies that provide services in our markets have significantly greater financial, technical and marketing resources than we do. In addition, there are relatively few barriers to entry into our markets and we have faced, and expect to continue to face, competition from new entrants into our markets. There can be no assurance that we will be able to continue to compete successfully with existing or future competitors or that competition will not have a material adverse effect on our business, results of operations and financial condition.

Our operating results may be difficult to predict.

Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly revenues or operating results generally include:

• costs relating to the expansion of our business;

• the extent and timing of business acquisitions;

• our ability to obtain new and follow-on customer engagements;

• the timing of assignments from customers;

• our consultant utilization rate, including our ability to transition employees quickly from completed assignments to new engagements;

• the seasonal nature of our business due to variations in holidays and vacation schedules;

• the introduction of new services by us or our competitors;

• price competition or price changes; and

• our ability to manage costs and economic and financial conditions specific to our customers.

Quarterly sales and operating results can be difficult to forecast, even in the short term. Due to all of the foregoing factors, it is possible that our revenues or operating results in one or more future quarters will fail to meet or exceed the expectations of security analysts or investors. In such event, the price of our common stock would likely be materially adversely affected.

We may be subject to potential liabilities (known and unknown) for acts and omissions of our acquired companies.

Although the Company takes reasonable steps including, among others, conducting due diligence, obtaining indemnification protection from sellers, withholding of consideration to ensure compliance with representations and warrants of the selling shareholders, requiring audits from a recognized independent accounting firm and maintaining a protective legal structure, to protect itself, liabilities could arise that were unknown and obligations stemming from known liabilities could expand, either of which could have a material negative impact on the Company.

Risks Related to Our Common Stock

The shares eligible for future sale may further decrease the price of our Common Stock.

If our stockholders sell substantial amounts of their common stock in the public market, including shares issued upon the exercise of outstanding options, the market price of our common stock could fall. As of December 31, 2002, there were a substantial number of outstanding options and warrants to purchase shares of our common stock. Since the end of 2002, we have granted a substantial number of additional stock options to employees of the Company and issued a substantial number of additional warrants in connection with a preferred stock financing and an acquisition. The exercise of any of these options or warrants would also have a dilutive effect on our stockholders. Furthermore, holders of such options or warrants are more likely to exercise them at times when we could obtain additional equity capital on terms that are more favorable to us than those provided in the options or warrants. As a result, exercise of the options or warrants may adversely effect the terms of future financings and would require us to issue significant amounts of our common stock at the time of exercise. The sale of a substantial

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number of shares of our common stock may adversely affect the prevailing price of our common stock in the public market and may impair our ability to raise capital through the sale of our equity securities.

We anticipate that holders of our Series A Preferred Stock, including the holders of shares of Series A Preferred Stock issued in May 2003 (see Item 6, “Management’s Discussion and Analysis or Plan of Operation—Liquidity and Capital Resources—2003 Series A Preferred Financing”), will be entitled to payment-in-kind dividends, which will dilute holders of common stock. Additionally, because holders of Series A Preferred Stock have the right to additional shares if subsequent issuances include terms more favorable than their terms, additional dilution is possible.

Our common stock is not listed on any exchange or automated quotation system, which adversely affects its liquidity and market price.

Our common stock currently trades on the Over-the-Counter Pink Sheets. Although we intend to file an application to list our shares on one of the national exchanges or automated quotation systems at some point in the future (for example, American Stock Exchange or Nasdaq SmallCap), we may be unable to obtain such a listing for any number of reasons. The lack of a listing adversely affects the liquidity and market price of our common stock.

Our common stock is subject to the “penny stock” rules, which may make it a less attractive investment.

Our common stock is currently subject to the “penny stock” rules. The SEC has adopted rules that define a “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules impose additional sales practice requirements on broker-dealers who sell these securities to persons other than established customers and accredited investors. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for the purchaser, must have received the purchaser’s written consent to the transaction prior to the sale, must disclose the commissions payable to both the broker-dealer and the registered representative and must provide current quotations for the securities. Additionally, if the broker-dealer is selling the securities as a market maker, the broker-dealer must disclose that fact and that the broker-dealer is presumed to exercise control over the market. Finally, a monthly statement must be sent to the account holder disclosing recent price information and information on the limited market in the particular stock.

As a result of the additional suitability requirements, additional disclosure requirements and additional sales practices imposed by the penny stock rules, both the willingness and ability of a broker-dealer to sell our common stock and the ability of holders of our common stock to sell their securities in the secondary market may be adversely effected.

A small number of stockholders could exercise control over Axtive, which may raise conflicts of interest.

A small number of stockholders, some of which comprise an affiliated group, own a sufficient amount of our common stock to exercise significant control over our business and our policies and affairs and, in general, determine the outcome of any corporate transaction or other matters submitted to the stockholders for approval, all in a manner that could conflict with the interests of other stockholders. The interests of these holders could conflict with the interests of the holders of our common stock.

Our right to issue preferred stock and anti-takeover provisions under Delaware law could make a third party acquisition of us difficult.

Our certificate of incorporation provides that our board of directors may issue preferred stock without stockholder approval. The issuance of preferred stock could make it more difficult for a third party to acquire us without the approval of our board of directors. Additionally, Delaware corporate law imposes certain restrictions on corporate control transactions that could make it more difficult for a third party to acquire us without the approval of our board of directors.

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ITEM 2. DESCRIPTION OF PROPERTY

We lease our office space, and each of the office locations and property details are set forth in the following table:

Description	Address	Square Feet	Lease Expiration
Axtive Corporate Office	1445 Ross Avenue, Suite 4500 Dallas, TX 75202	6,500	July 2004
Media Resolutions / UDT Consulting	16415 Addison Road, Suite 610 Addison, TX 75001	3,900	March 2004
Virtually There	513 Main Street, Suite 300 Fort Worth, Texas 76102	4,750	September 2006
ThinkSpark	4835 LBJ Freeway, Suite 1100 Dallas, TX 75244	18,000	April 2006
	3305 Northland Dr., Suite 402 Austin, TX 78731	1,857	February 2006
	613 NW Loop 410 Suite 520, San Antonio, TX 78216	6,439	August 2004
	1601 NW Expressway, Suite 850 Oklahoma City, OK 73118	5,028	February 2006
	500 North Rainbow Blvd., Suite 300 Las Vegas, NV 89108	3,521	Month-to-Month
TERMINATING LEASES (1)
Houston, Texas		5,959	December 2006
Fort Worth, Texas		5,132	December 2003
Cleveland		6,219	December 2003
Atlanta		5,223	August 2005
Dayton		3,138	January 2004

(1) Terminating leases represent properties acquired as part of the ThinkSpark acquisition but are no longer needed. The Company is currently in negotiations with the respective landlords and intends to settle any remaining obligations at less than full value. Settlements totaling $155,000 have been agreed to by two landlords but have not yet been finalized and we can give no assurances that the settlements will be finalized. If these two settlements are finalized, the remaining obligations that have not yet been resolved under terminating leases would total approximately $759,000.

We believe our facilities are generally in good condition and are adequate for our current level of operations. We believe that suitable additional or alternative space will be available as needed.

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ITEM 3. LEGAL PROCEEDINGS

PROCEEDINGS WITH DEBTORS

In September 2000, we made an unsecured loan of $1.4 million to Hencie, Inc., a Texas-based IT Services business. The loan was guaranteed by a related company, Hencie Consulting Services, Inc. and personally guaranteed by Hencie’s CEO. The loan to Hencie matured in November 2001, and went into default. Due to the uncertainty surrounding collection of the note, no interest was accrued in 2001 or 2002 and, during the fourth quarter of 2001, the note was fully reserved to reflect our estimate of its net realizable value.

In May 2002, we entered into a Settlement Agreement and Release with Hencie and the guarantors whereby we received an agreed judgment in the amount of $1.65 million, subject to reduction, and would receive monthly payments of principal and interest through April 2004 totaling approximately $1.3 million. The amounts due under the Settlement Agreement and Release were guaranteed by Hencie’s CEO and secured by shares of Alternate Marketing Networks, Inc. (Nasdaq Small Cap: ALTM), the parent company of Hencie. Because of uncertainties regarding collection of amounts due under the agreement and the lack of liquidity in the collateral, the Company did not record a gain on settlement. Payments received were to be recorded as a recovery of the bad debts previously written off.

In September 2002, all rights and amounts due to Axtive under the settlement with Hencie were sold without recourse to an unrelated third-party in exchange for $802,500. Prior to its sale, the company had received payments totaling $235,000. Such payments, together with the sale proceeds, totaled $1,037,500 and were recorded as a recovery of bad debts.

PROCEEDINGS AGAINST THE VISIONARY GROUP

In June 2002, we were notified that The Visionary Group and Axtive had been sued in the District Court of Dallas County, Texas for non-payment of approximately $110,000 due to former sub-contractors of The Visionary Group. In order to limit our costs to defend the matter, Axtive agreed to a partial summary judgment pursuant to which Axtive admitted the liability of The Visionary Group, but retained our defenses on the third-party beneficiary claim against Axtive. Trial has been set for August 2003.

The Visionary Group ceased operations in December 2002. The company has no employees and no assets and identified liabilities totaling, including the $110,000 non-payment discussed above, of approximately $190,000. Accordingly, we do not expect that an adverse judgment against The Visionary Group in this lawsuit would have a material impact on Axtive.

With respect to any exposure directly against Axtive Corporation, we believe we have meritorious defenses, but an adverse judgment against Axtive could have a material negative impact on our business.

In April 2003, a judgment was entered against The Visionary Group in the amount of approximately $3,000 for failure to pay the business related expenses of a former employee. The judgment remains outstanding.

PROCEEDINGS AGAINST THINKSPARK

In 2002, a former customer obtained a final judgment against ThinkSpark. The former customer filed a collection suit against ThinkSpark with respect to the judgment in the amount of $940,000, including attorneys’ fees. The former customer also filed a lawsuit against certain of ThinkSpark’s then directors and stockholders with respect to alleged improper repurchases of stock from certain stockholders. Effective with Axtive’s acquisition of ThinkSpark, ThinkSpark entered into a settlement agreement and a tolling agreement with the former customer. ThinkSpark agreed to make a cash payment of $18,000 to the former customer and issue a promissory note for $150,000. The promissory note bears interest at 6% per year and is payable on a monthly basis amortized over 12 months. In exchange, the former customer agreed not to seek to enforce the judgment, to dismiss with prejudice the separate lawsuit, and upon payment in full of the promissory note, to fully release ThinkSpark and the individual defendants from all claims.

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In October 2002, a former employee filed a suit against ThinkSpark, certain of its subsidiaries, and certain of its directors and shareholders seeking damages in the amount of $612,000 for breach of a severance agreement. Effective with Axtive’s acquisition of ThinkSpark, ThinkSpark entered into a mutual release agreement with the former employee. In exchange for mutual releases of all claims, ThinkSpark agreed to issue to the former employee a promissory note in the amount of $169,000, a portion of which represented the merger consideration payable to the former employee. The promissory note bears interest at 6% per year and is payable on a monthly basis amortized over 18 months. The former employee agreed to then abate his lawsuit and, upon payment in full of the promissory note, to dismiss all claims against ThinkSpark and the other defendants.

In January 2001, a United Kingdom subsidiary of ThinkSpark entered into a lease for office space in London for a 15-year term. ThinkSpark was required to be a surety on this lease agreement. In October 2002, the ThinkSpark subsidiary ceased operations in the United Kingdom and consequently breached the lease agreement. The United Kingdom subsidiary is now in liquidation. The landlord filed suit against ThinkSpark in the United Kingdom. In May 2003, ThinkSpark and the landlord entered into a settlement agreement. Pursuant to the terms of the settlement agreement, and in consideration of the terms of the settlement, Axtive executed a promissory note in favor of the landlord for $200,000. The promissory note bears interest at 6% per year and is payable over 12 months. Axtive issued 1,219,149 restricted shares of our common stock to the landlord as security for the promissory note. Pursuant to the settlement agreement and the promissory note, the shares will be returned to us at various stages based upon payments made on the promissory note. Assuming the promissory note is paid in full pursuant to its terms, all of the shares will be returned. All returned shares will be held by us as treasury shares. If there is a default on the promissory note, the landlord has the right to keep all or part of the shares to satisfy any remaining obligation.

ThinkSpark was sued in state court in Cuyahoga County, Ohio, for breach of a November 1998 lease agreement for office space in Cleveland, Ohio, which has been vacated by ThinkSpark. The landlord obtained a judgment in March 2003 for approximately $203,000 plus 10% per year until paid and all costs, including collection costs. The landlord has filed in state court in Texas an authenticated copy of a judgment for domestication under the Uniform Enforcement of Foreign Judgments Act, and ThinkSpark has been served with post-judgment discovery. The ThinkSpark subsidiary is in discussions with the landlord to settle the judgment; however, we can give you no assurance that ThinkSpark will be able to enter into a settlement.

A subsidiary of ThinkSpark was sued in state court in Tarrant County, Texas for breach of an October 1998 lease agreement for office space in Fort Worth, Texas, which has been vacated by the ThinkSpark subsidiary. The landlord seeks damages for past due rent, utilities and other sums due under the lease, future rents, brokerage commissions paid by the landlord at the commencement of the lease, and unreimbursed tenant improvement expenses in the total amount of approximately $212,000, plus attorneys’ fees. The ThinkSpark subsidiary is in discussions with the landlord to settle the claims; however, we can give you no assurance that the ThinkSpark subsidiary will be able to enter into a settlement or otherwise successfully defend against the landlord’s claims.

A subsidiary of ThinkSpark was sued in state court in Fulton County, Georgia for breach of a June 2000 lease agreement for office space in Atlanta, Georgia, which has been vacated by the ThinkSpark subsidiary. The landlord seeks damages for past due rent of approximately $12,000 per month since August 2002. The action as originally filed claimed past due rent from August-November 2002; however, the landlord has indicated its intent to seek the full remaining obligation under the lease from November 2002 of approximately $420,000. The ThinkSpark subsidiary is in discussions with the landlord to settle the claims; however, we can give you no assurance that the ThinkSpark subsidiary will be able to enter into a settlement or otherwise successfully defend against the landlord’s claims.

OTHER LEGAL PROCEEDINGS

Currently, the Company has three judgments totaling approximately $75,000 pending against us. We are in negotiations to reduce the amounts payable under the judgments. Depending on the success or failure of such negotiations, an unfavorable outcome could have a material negative impact on our business.

Axtive and its subsidiaries are involved in other legal proceedings arising in the ordinary course of business. We believe that none of these other legal proceedings will have a material adverse effect on our financial condition or results of operations.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders during the fourth quarter of 2002.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY

AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

Our common stock is traded on the Over-The-Counter (OTC) Pink Sheets under the symbol “AXTV.PK”. Prior to May 23, 2003, our common stock was traded on the OTC Bulletin Board.

The following table sets forth, for the period from January 1, 2001 through June 30, 2003, the range of high and low closing bid prices for the common stock reported on the OTC Bulletin Board or with respect to the OTC Pink Sheets. The quotations from the OTC Bulletin Board or OTC Pink Sheets reflect interdealer prices without retail mark-up, markdown or commission, and may not represent actual transactions.

	High		Low
2001
First Quarter	$	2.06	$	0.75
Second Quarter		1.56		0.53
Third Quarter		2.10		0.54
Fourth Quarter		0.75		0.41
2002
First Quarter		1.00		0.50
Second Quarter		0.78		0.35
Third Quarter		0.51		0.11
Fourth Quarter		0.40		0.12
2003
First Quarter		0.27		0.17
Second Quarter		0.25		0.01

HOLDERS OF COMMON STOCK

As of July 10, 2003, the last reported closing bid price of the common was $0.20 per share, and there were 101 holders of record of our common stock.

DIVIDENDS

We have not paid cash dividends on our common stock since the inception of the Company, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Instead, we intend to retain our earnings, if any, to finance the further implementation of our business plan and for general corporate purposes. Any payment of future dividends will be at the discretion of our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions and other factors that our board of directors deems relevant. In addition, the payment of cash dividends on our shares of common stock is prohibited by the terms of our Series A Preferred Stock.

Holders of our Series A Preferred Stock are entitled to receive an 8% cumulative dividend payable, when and if declared by the board of directors, in cash or in additional shares of stock. As of December 31, 2002, accrued but unpaid dividends payable to holders of the Series A Preferred Stock totaled approximately $261,444.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATIONS PLANS

Equity Compensation Plan Information

(as of December 31, 2002)

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders (1996 Stock Incentive Plan)	850,000	2.31	0
Equity compensation plans approved by security holders (2002 Stock Incentive Plan)	3,575,886	1.48	13,424,114
Equity compensation plans not approved by security holders	2,400,000	0.86	N/A
Total	6,825,886	1.37	13,424,114

1996 Employee Stock Option Plan

In April 1996, we adopted the 1996 Stock Option Plan, which was amended most recently in August 2000. The 1996 Plan provides for the granting to directors, officers, key employees and consultants of up to 500,000 shares of common stock in a year. Grants of options may be incentive stock options or non-qualified stock options and will be at such exercise prices, in such amounts, and upon such terms and conditions, as determined by the board of directors or the compensation committee of the board of directors. The term of any option may not exceed ten years. In August 2000, the 1996 Plan was amended to increase the number of shares reserved for issuance to 1,000,000 shares of our outstanding common stock.

During 2000 and 2001, stock option grants were made by the board of directors that would cause the number of options issued under the 1996 Plan to exceed the number authorized under the plan. As described below, such grants were transferred to the 2002 Stock Incentive Plan and were approved by the stockholders. As of December 31, 2002, there were options exercisable for 850,000 shares of common stock outstanding under the 1996 Plan and none available for future grants.

2002 Stock Incentive Plan

In June 2002, the Company adopted the 2002 Stock Incentive Plan, which provides for the issuance of non-qualified stock options and incentive stock options as well as restricted stock awards, unrestricted stock awards, performance stock awards, dividend equivalent rights, stock appreciate rights (in connection with options) and long-term performance awards to eligible employees, officers, independent consultants and directors of the Company and its subsidiaries. Under the terms of the 2002 Plan, options to purchase common stock are generally granted at not less than fair market value, become exercisable as established by the administering committee of the board of directors and generally expire ten years from the date of grant. If any shares reserved for an award are forfeited, repurchased or any such award otherwise terminates without a payment being made to the participant in the form of stock, such shares underlying such award will also become available for future awards under the 2002 Plan.

In July 2002, a majority of our shares entitled to vote approved the adoption of the 2002 Plan by written consent. A Schedule 14C Information Statement reflecting this action was mailed to our stockholders and filed with the SEC in October 2002. The stockholder approval of the adoption of the 2002 Plan was effective 20 days after the mailing of the Information Statement to our stockholders.

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For administrative convenience and to provide that all options outstanding for current employees are under a single plan, 2,910,000 options previously granted pursuant to the 1996 Stock Option Plan, but in excess of the number of shares authorized under the plan (the “Transferred Options”), were transferred to the 2002 Plan. The administrative transfer did not change the number of option shares, the vesting schedule or the exercise price of the options previously granted under the 1996 Plan. As a result, there was no accounting impact to the Company.

In May 2003, our board of directors approved an amendment of the 2002 Plan to increase the number of shares authorized for issuance under the 2002 Plan from the original number of 12,000,000 to 17,000,000 shares. In addition, the amendment provides that upon the effectiveness of a 1-for-10 reverse stock split announced by the Company, the number of shares authorized for issuance under the 2002 Plan will be reduced to 5,000,000 shares. The amendment was immediately effective, but is subject to approval by our stockholders. In May 2003, a majority of our shares entitled to vote approved the adoption of amendment by written consent. We are in the process of preparing a Schedule 14C Information Statement to mail to our stockholders reflecting this action. The stockholder approval of the adoption of the amendment will be effective 20 days after the mailing of the Information Statement to our stockholders.

As of December 31, 2002, there were options for 3,575,886 shares of our common stock outstanding under the 2002 Plan (which includes the Transferred Options), of which 1,108,011 were vested. As of July 10, 2003, there were options for 15,018,500 shares outstanding, of which 9,722,735 were vested, and 1,981,500 shares of our common stock were available for future awards under the 2002 Plan.

To date, the Company has not issued any restricted or unrestricted stock awards, stock appreciation rights, dividend equivalents rights or long-term performance awards under the 2002 Plan.

Stand-Alone Agreements

During 2002 we issued 2,150,000 stock options in conjunction with employment agreements to the key management of the acquired companies under stand-alone stock option agreements. The exercise prices on these options ranged from $0.42 to $0.77 per share with a weighted average price of $0.69 per share. Vesting periods ranged from immediately upon grant to three years with a weighted average vesting period of approximately nine months. All stand-alone options granted in 2002 were not intended to be incentive stock options under the Internal Revenue Code of 1986, as amended. The Company recorded no expense related to the grant of options pursuant to stand-alone agreements.

RECENT SALES OF UNREGISTERED SECURITIES

Issuance of Series A Preferred Stock

On May 23, 2003, we issued 2,335 shares of our Series A Preferred Stock in a private offering to new and existing private, accredited investors at $1,000 per share. We received gross proceeds of $2.3 million, consisting of $2.25 million in cash and $84,000 in satisfaction of debt owed by Axtive to a stockholder and to an executive officer. Of the net cash proceeds, after $224,000 in legal expenses related to the issuance of Series A Preferred Stock, the acquisition of ThinkSpark and the preparation of the management agreement regarding Demand Aggregation Solutions, LLC, we have used or expect to use $500,000 to satisfy current liabilities arising from prior acquisitions and $61,000 in cash merger consideration for the ThinkSpark acquisition. The balance is available for working capital and general corporate purposes.

Each new share of our Series A Preferred Stock carries an 8% cumulative dividend and is convertible into shares of our common stock at an initial conversion price of $0.10 per share. The new shares of Series A Preferred Stock were immediately convertible upon issuance. Each new purchaser was also granted warrants to purchase 20 shares of our common stock for each 100 shares of common stock the investor was initially entitled to receive upon conversion of the Series A Preferred Stock. The warrants are exercisable at a price of $0.20 per share. We issued warrants to acquire 4,670,000 shares of common stock in connection with the new financing.

The initial issuance of Series A Preferred Stock in 2002 provided that subsequent issuances of the shares on terms more favorable than those provided to the original investors in the Series A Preferred would automatically adjust the terms and conditions on the outstanding Series A Preferred Stock to the more favorable terms and

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conditions. As a result, the initial conversion price on all shares of Series A Preferred Stock issued in 2002 was reduced from $0.75 to $0.10 per share, and the exercise price of the warrants issued in 2002 was reduced from $1.15 per share to $0.20 per share. Each purchaser of Series A Preferred Stock in 2002 was issued a restated warrant exercisable for additional shares as a result of the decrease in the initial conversion price. The restated warrants are exercisable for a total of 7,696,002 additional shares of common stock. In addition, the holders of the Series A Preferred Stock were given the right elect one member of our board of directors.

In July 2003, we issued an additional 50 shares of Series A Preferred Stock in a private offering to a purchaser in the May 2003 offering, G.C. “Scooter” Beachum, who is also one of our executive officers. This issuance was pursuant to an irrevocable subscription agreement executed by the purchaser at the time of the issuance of Series A Preferred Stock in May 2003. The terms were identical to the May 2003 sale of Series A Preferred Stock. The Company received gross proceeds of $50,000 in cash. Net proceeds of the sale will be used for general corporate purposes. As part of this subsequent issuance, we issued additional warrants exercisable for 100,000 shares of our common stock.

We paid no commissions in connection with issuance of the new shares of Series A Preferred Stock in 2003. The new shares of Series A Preferred Stock and warrants to purchase common stock were issued by the Company in reliance upon an exemption from registration pursuant to Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933. A Form D was filed with the SEC.

Other Issuances

In connection with the settlement of a lease dispute involving a United Kingdom subsidiary of ThinkSpark Corporation, ThinkSpark entered into a settlement agreement with the landlord. See Item 3, “Legal Proceedings—Proceedings Against ThinkSpark.” Pursuant to the terms of the settlement agreement, we issued 1,219,149 restricted shares of our common stock to the landlord as security for a promissory note from Axtive for $200,000. Pursuant to the settlement agreement and the promissory note, the shares will be returned to us at various stages based upon payments made on the promissory note. Assuming the promissory note is paid in full pursuant to its terms, all of the shares will be returned. All returned shares will be held by us as treasury shares. If there is a default on the promissory note, the landlord has the right to keep all or part of the shares to satisfy any remaining obligation. The issuance of the restricted shares of common stock did not involve a public offering. The restricted shares were issued by the Company in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act.

Effective May 1, 2003, we entered into a new services agreement with Atlas Capital Services, LLC. Pursuant to the agreement, in exchange for financial advisory services as described in the agreement Atlas was entitled to an advisory fee consisting of (1) 1,115,000 restricted shares of our common stock, (2) 250,000 restricted shares of our common stock to be issued directly to Leeb Brokerage Services for Leeb’s introduction of Atlas to us, (3) warrants to purchase 1,250,000 restricted shares of our common stock, and (4) a monthly cash fee. The warrants were issued effective June 26, 2003, upon the same terms as the warrants issued to the purchasers of Series A Preferred Stock in May 2003. The restricted shares of common stock were issued in July 2003. The issuance of the restricted shares of common stock and warrants did not involve a public offering. The restricted shares and warrants were issued by the Company in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act.

On July 1, 2003, we issued 297,674 restricted shares of our common stock to TSTC International Holding Company, formerly known as Axtive Software Corporation. These shares constituted an additional payment due to TSTC in connection with our June 2002 purchase of certain intangible assets, including the name “Axtive,” and certain tangible assets. We were obligated to issue the additional restricted shares if the market price of our common stock had not been at or above $0.75 within the one-year period after our purchase. G.C. “Scooter” Beachum, our Executive Vice President and General Manager, is the sole shareholder and director of TSTC. The issuance of the restricted shares of common stock did not involve a public offering. The restricted shares were issued to TSTC by the Company in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act.

20

ITEM 6. MANAGEMENT’S DISCUSSION AND

ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in Item 7 of this report. This discussion and analysis contains certain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in our filings with the SEC and, specifically, the risk factors set forth in Item 1, “Description of Business—Risk Factors.”

GENERAL

Axtive’s business model is to acquire software related technology companies that deliver software products and related information technology services to middle-market companies. We offer products and services that improve the utilization of business information for middle-market companies, initially within the United States. We expect that customer organizations will benefit from integrated business process applications that are delivered on a fully outsourced basis through portal technology or, if needed, as traditional licensed products. Our acquisition targets are companies with existing strategic relationships with Oracle, IBM or Microsoft that will allow us to take advantage of partnership opportunities available only to select parties. The technology companies targeted for acquisition are those that operate within the following business sectors and operating business units: (1) IT Professional Services; (2) Business Application Software, comprised of six product groups; and (3) Application Services and Management.

Initial development of our business model has involved the acquisition of IT Professional Services and Application Services and Management firms that have existing relationships with numerous middle-market customers. Subsequent acquisitions are expected to target software products with common data structures (such as Oracle, IBM and Microsoft) designed for the application service delivery channel. We expect that synergistic relationships will develop between the acquired companies and that funding for operating business unit-specific projects will be provided through public and private offerings of Axtive securities. Nearly all operations are expected to continue within each operating business unit while a small corporate staff will interface with the capital markets, formulate and manage our overall strategic objectives and oversee all mergers and acquisitions.

Prior to our emphasis on IT Professional Services, Business Application Software and Application Services and Management, the business consisted primarily of developing, marketing and selling personalized videotape golf lessons featuring One-on-One golf video instruction by leading professional golfer Greg Norman, sold under the name “One-on-One with Greg Norman.” In September 2001, we sold all the assets related to our One-on-One business to Visual Edge, Inc., a newly created company formed by certain members of our previous management. Visual Edge, Inc. is not related to us. The results of operations generated by the One-on-One business have been presented as “discontinued operations” in our consolidated financial statements because One-on-One represented a separate segment of our business.

RESULTS OF OPERATIONS

Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

Net Sales. As a result of our acquisitions in 2002, sales from continuing operations for the year ended December 31, 2002 were $2.4 million. Results from operations of each subsidiary were included only during the portion of the period that Axtive owned that subsidiary. As a result, no revenues were recorded during the first three months of the year. Gross margins across all businesses averaged 43.0% and reflected month-over-month improvements over the nine-month period in which the Company recorded revenues.

General and Administrative Expenses. General and administrative expenses from continuing operations increased $1.7 million, or 123.8%, to $3.1 million in 2002 from $1.4 million in 2001. This includes a decrease in professional fees of $282,000, an increase in salary expense of $1.3 million due primarily to the acquisitions in 2002, and an increase in other expenses of $682,000.

21

In 2001, general and administrative expenses from continuing operations consisted primarily of $700,000 of salary expense (including non-cash charges of $260,000) and legal, accounting and other professional fees totaling $700,000.

Marketing Expenses. Marketing expenses for 2002 were $183,000 as compared to $81,000 for 2001. The 2002 increase in expenses was primarily related to salaries of internal sales and marketing personnel related to the acquisitions in 2002.

Bad Debt. Bad debt expenses in 2002 reflected the $1,037,500 recovery of amounts written off in 2001 with respect to the Hencie loan. See Item 3, “Legal Proceedings—Proceedings with Debtors” and Note 8 to our consolidated financial statements included elsewhere in this report. In 2001, bad debt expense was comprised of a $1.4 million reserve for the Hencie loan.

Impairment of Assets. Impairment of assets for the year ended December 31, 2002, reflects the write-off of goodwill recorded as part of the 2002 acquisition of The Visionary Group. In 2001, impairment charges related to our investment in PurchasePooling Solutions, Inc.

Interest Expense. Interest expense for the year ended December 31, 2002, decreased $52,000, or 44.2%, to $66,000 in 2002 from $118,000 in 2001. Interest in the prior year was attributable to certain loans that were converted into equity in April 2002 with the issuance of Series A Preferred Stock. See “—Liquidity and Capital Resources—Preferred Stock Financings” and Note 11 to our consolidated financial statements included elsewhere in this report. Interest expense in the year ended December 31, 2002, reflects primarily the cost of factoring receivables by our subsidiary, UDT Consulting.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, we had cash and cash equivalents of $444,000 and a working capital deficit of $1.4 million, compared to cash and cash equivalents of $83,000 and a working capital deficit of $589,000 on December 31, 2001. During 2002, net cash used in operating activities was $1.02 million, net cash used in investing activities was $1.55 million and net cash provided by financing activities was $2.93 million for a total decrease in cash and cash equivalents for the year of $362,000. We do not maintain a bank credit facility.

At May 31, 2003, we had cash and cash equivalents of $1.3 million and a working capital surplus of $50,000.

We expect our liquidity to remain tight throughout 2003. We will look to our current cash reserves, cash reserves created by our additional issuance of shares of Series A Convertible Preferred Stock in May 2003 and cash flows generated by our acquired companies to meet current liquidity requirements. While we have a level of comfort as to the projected cash flows generated by our acquired companies, we are relying on projections based upon assumptions and forecasts, including factors beyond our control. Actual results could vary from our projections and such variance could have a significant adverse effect on our liquidity.

We have historically financed our operations primarily through the sale of equity securities or instruments convertible into equity securities. There can be no assurance that future financings can be completed.

    Series A Preferred Financings

In April 2002, we issued 4,200 shares of Series A Preferred Stock in a private offering to new and existing private, accredited investors at $1,000 per share. We received gross proceeds of $4.2 million, consisting of $2.7 million in cash and $1.5 million in satisfaction of debt owed by Axtive to one of our stockholders. Net proceeds of the sale were used for to acquire Media Resolutions, Inc., The Visionary Group, Inc., Virtually There, Inc. and the assets of Universal Data Technology, Inc. and for general corporate purposes.

The Series A Preferred shares carry an 8% cumulative dividend and became convertible at the option of the holder into shares of our common stock any time after one year at an initial conversion price of $0.75 per share. The Series A Preferred Stock has voting rights pari pasu with our common stock and as a separate class on certain matters. The shares also have an antidilution provision whereby the price and number of shares issuable upon conversion adjusts for stock splits, stock dividends and future share issuances below the conversion price of the

22

Series A Preferred Stock. The Series A Preferred Stock also has demand registration rights beginning one year following closing of the initial issuance of the shares, as well as the right to elect one member of our board of directors.

In connection with the issuance of the Series A Preferred Stock, each purchaser received warrants entitling the holder to purchase 20 shares of our common stock for each 100 shares of common stock the purchaser was initially entitled to receive upon conversion of the Series A Preferred Stock. The warrants, which initially had an exercise price of $1.15 per share, become exercisable on the second anniversary of the issuance of the related shares of Series A Preferred Stock and, unless exercised earlier, will expire on the fourth anniversary of the issuance. We issued warrants exercisable for a total of 1,119,998 shares of common stock in the April 2002 offering of Series A Preferred Stock.

In July and August 2002, we issued an additional 240 shares of Series Preferred Stock in private offerings to accredited investors with identical terms to the April 2002 sale of Series A Preferred Stock. The Company received gross proceeds of $240,000 in cash. Net proceeds of the sale were used to repay short-term notes of $48,000 and for general corporate purposes. As part of this subsequent issuance, we issued additional warrants exercisable for 64,000 shares of our common stock.

On May 23, 2003, we issued 2,335 shares of our Series A Preferred Stock in a private offering to new and existing private, accredited investors at $1,000 per share. We received gross proceeds of $2.3 million, consisting of $2.25 million in cash and $84,000 in satisfaction of debt owed by Axtive to a stockholder and to an executive officer. Of the net cash proceeds, after $224,000 in legal expenses related to the issuance of Series A Preferred Stock, the acquisition of ThinkSpark and the preparation of the management agreement regarding Demand Aggregation Solutions, LLC, we have used or expect to use $500,000 to satisfy current liabilities arising from prior acquisitions and $61,000 in cash merger consideration for the ThinkSpark acquisition. The balance is available for working capital and general corporate purposes.

The additional shares were issued on similar terms and conditions as the 2002 issuances of Series A Preferred Stock, including the issuance of warrants to purchase common stock, except the initial conversion price of the new shares of Series A Preferred was $0.10 per share and the exercise price of the warrants was $0.20 per share. The new shares of Series A Preferred Stock were immediately convertible upon issuance. We issued warrants to acquire 4,670,000 shares of common stock in connection with the new financing.

The initial issuance of Series A Preferred Stock in 2002 provided that subsequent issuances of the shares on terms more favorable than those provided to the original investors in the Series A Preferred would automatically adjust the terms and conditions on the outstanding Series A Preferred Stock to the more favorable terms and conditions. As a result, the initial conversion price on all shares of Series A Preferred Stock issued in 2002 was reduced from $0.75 to $0.10 per share, and the exercise price of the warrants issued in 2002 was reduced from $1.15 per share to $0.20 per share. Each purchaser of Series A Preferred Stock in 2002 was also issued a restated warrant exercisable for additional shares as a result of the decrease in the initial conversion price. The restated warrants are exercisable for a total of 7,696,002 additional shares of common stock. In addition, the holders of the Series A Preferred Stock were given the right elect one member of our board of directors.

In July 2003, we issued an additional 50 shares of Series A Preferred Stock in a private offering to a purchaser in the May 2003 offering, G.C. “Scooter” Beachum, who is also one of our executive officers. This issuance was pursuant to an irrevocable subscription agreement executed by the purchaser at the time of the issuance of Series A Preferred Stock in May 2003. The terms were identical to the May 2003 sale of Series A Preferred Stock. The Company received gross proceeds of $50,000 in cash. Net proceeds of the sale will be used for general corporate purposes. As part of this subsequent issuance, we issued additional warrants exercisable for 100,000 shares of our common stock.

23

SEASONALITY

We experience a moderate amount of seasonality. Typically our billable hours, which directly affect our revenues, are reduced in the second half of the year, especially during the fourth quarter, due to the large number of holidays and vacation time taken by our employees and our customers. As a result, our operating income as a percentage of revenues is generally the lowest in the fourth quarter of each calendar year.

THIRD PARTY REPORTS AND PRESS RELEASES

We do not make financial forecasts or projections nor do we endorse the financial forecasts or projections of third parties or comment on the accuracy of third-party reports. We do not participate in the preparation of the reports or the estimates given by analysts. Analysts who issue financial reports are not privy to non-public financial information. Any purchase of our securities based on financial estimates provided by analysts or third parties is done entirely at the risk of the purchaser.

We periodically issue press releases to update stockholders on new developments at Axtive and our business. These releases may contain certain statements of a forward-looking nature relating to future events or our future financial performance within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and which are intended to be covered by the safe harbors created by those statutory provisions. Readers are cautioned that such statements are only predictions and that actual events or results may differ substantially. Our actual results and the timing of certain events could differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in our filings with the SEC and, specifically, the risk factors set forth in Item 1, “Description of Business—Risk Factors.”

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ITEM 7. FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Certified Public Accountants	26
Consolidated Balance Sheets as of December 31, 2001 and 2002	27
Consolidated Statements of Operations for the Years Ended December 31, 2001 and 2002	28
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2001 and 2002	28
Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2001 and 2002	29
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001 and 2002	30
Notes to Consolidated Financial Statements	31

25

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors

of Axtive Corporation

We have audited the accompanying consolidated balance sheets of Axtive Corporation (formerly Edge Technology Group, Inc.) (the “Company”), as of December 31, 2001 and 2002, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit) and cash flows for the years 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 audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Axtive Corporation as of December 31, 2001 and 2002, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company incurred a net loss of approximately $2.2 million during the year ended December 31, 2002, and, as of that date, the Company’s current liabilities exceeded its current assets by approximately $1.4 million. These factors, among others, as discussed in Note 2 to the financial statements, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

GRANT THORNTON LLP

Dallas, Texas

July 1, 2003

26

AXTIVE CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,
	2001			2002
CURRENT ASSETS
Cash and cash equivalents	$	82,567		$	444,275
Marketable securities		—			26,873
Accounts receivable, net of allowance for doubtful accounts of $58,618 as of December 31, 2002)		—			392,043
Other current assets		20,339			121,984
Total current assets		102,906			985,175
NON-CURRENT ASSETS
Property and equipment, net		35,385			301,388
Note receivable, net of allowance of $1,400,000 as of December 31, 2001		—			—
Goodwill		—			2,247,714
Intangible assets, net		—			361,476
Other assets		—			8,853
TOTAL ASSETS	$	138,291		$	3,904,606
CURRENT LIABILITIES
Accounts payable	$	451,993		$	408,187
Accrued expenses		239,489			322,380
Short-term note payable		—			995,619
Other current liabilities		—			666,333
Total current liabilities		691,482			2,392,519
NON-CURRENT LIABILITIES
Notes payable—related parties		1,639,000			—
Other liabilities		—			69,195
Total non-current liabilities		1,639,000			69,195
TOTAL LIABILITIES		2,330,482			2,461,714
COMMITMENTS AND CONTINGENCIES		—			—
STOCKHOLDERS’ EQUITY / (DEFICIT)
Series A convertible preferred stock, $.01 par value, 5,000,000 shares authorized, none issued and outstanding at December 31, 2001 and 4,440 issued and outstanding at December 31, 2002, net of discount; liquidation preference of $4,440,000		—			3,925,572
Common stock, $.01 par value, 100,000,000 shares authorized, 16,488,139 issued and outstanding at December 31, 2001 and 19,039,622 issued and outstanding at December 31, 2002		164,881			190,396
Additional paid in capital		40,048,615			41,924,284
Accumulated deficit		(42,405,687	)		(44,586,502	)
Accumulated other comprehensive income (loss)		—			(10,858	)
TOTAL STOCKHOLDERS’ EQUITY / (DEFICIT)		(2,192,191	)		1,442,892
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY / (DEFICIT)	$	138,291		$	3,904,606

The accompanying notes are an integral part of these financial statements.

27

AXTIVE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the year ended December 31,
	2001			2002
Net sales	$	8,672		$	2,386,526
Cost of sales		—			(1,360,047	)
Gross profit		8,672			1,026,479
Operating expenses
General and administrative		1,385,580			3,101,284
Marketing		80,850			183,135
Bad debt (recoveries), net		1,400,000			(978,882	)
Depreciation and amortization		41,226			134,116
Impairment of assets		5,175,954			906,653
Total operating expenses		8,083,610			3,346,306
Operating loss		(8,074,938	)		(2,319,827	)
Other income (expense)
Interest income		3,111			8,336
Interest expense		(118,245	)		(65,940	)
Loss on sale of property and equipment		(10,415	)		(16,776	)
Gain on sale of securities		—			11,569
Income—other		190,000			220,189
Expenses—other		(2,848	)		(18,366	)
Amortization of deferred financing fees		(8,225	)		—
Total other income (expense)		53,378			139,012
Loss from continuing operations		(8,021,560	)		(2,180,815	)
Loss from discontinued operations		(680,671	)		—
Loss on sale from discontinued operations		(570,287	)		—
Loss from discontinued operations		(1,250,958	)		—
Net loss		(9,272,518	)		(2,180,815	)
Provision for preferred stock dividends		—			(261,444	)
Amortization of discount on preferred stock		—			(284,066	)
Net loss attributed to common stockholders	$	(9,272,518	)	$	(2,726,325	)
Basic and diluted loss per share
From continuing operations	$	(0.49	)	$	(0.15	)
From discontinued operations		(0.08	)		—
Net loss per share, basic and diluted	$	(0.57	)	$	(0.15	)
Weighted average common shares outstanding, basic and diluted		16,279,316			18,080,253
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$	(9,272,518	)	$	(2,180,815	)
Unrealized loss on available for sale securities		—			(10,858	)
Comprehensive loss	$	(9,272,518	)	$	(2,191,673	)

The accompanying notes are an integral part of these financial statements.

28

AXTIVE CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In Thousands except Shares of Common Stock)

	Common Stock			Preferred Stock			Additional Paid in Capital			Deferred Compensation Expense			Accumulated Other Comprehensive Income (loss)			Accumulated Deficit			Total Stockholders Equity (Deficit)
	Shares	Amount
Balance December 31, 2000	16,016,335	$	160	$	—		$	37,979		$	(317	)	$	—		$	(33,133	)	$	4,689
—  Investment in PurchasePooling	268,789		3		—			185			—			—			—			188
—  Issuance of Shares for Legal Settlement	100,000		1		—			53			—			—			—			54
—  Issuance of Option to Infinity	—		—		—			600			—			—			—			600
—  Amortization of Deferred Compensation	—		—		—			—			317			—			—			317
—  Amortization of Compensatory Stock Options	—		—		—			1,119			—			—			—			1,119
—  Issuance of Shares for Services	11,920		—		—			23			—			—			—			23
—  September 2000 Corporate Reorganization— adjustment	91,095		1		—			90			—			—			—			91
—  Net Loss	—		—		—			—			—			—			(9,273	)		(9,273	)
Balance December 31, 2001	16,488,139		165		—			40,049			—						(42,406	)		(2,192	)
—  Issuance of Series A Preferred Stock and Warrants, Net of Offering Costs of $38	—		—		4,022			380			—			—			—			4,402
—  Value of Beneficial Conversion Feature of Series A Preferred Stock	—		—		(380	)		380			—			—			—			—
—  Amortization Of Preferred Stock Beneficial Conversion Factor	—		—		284			(284	)		—			—			—			—
—  Issuance of Option to Infinity	—		—		—			200			—			—			—			200
—  Acquisition of Media Resolutions, Inc.	500,000		5		—			308			—			—			—			313
—  Acquisition of VirtuallyThere, Inc.	1,153,846		11		—			444			—			—			—			455
—  Acquisition of “Axtive” Name and Other Assets	400,000		4		—			164			—			—			—			168
—  Issuance of Shares for Services	100,000		1		—			31			—			—			—			32
—  Conversion of Infinity Loans	397,637		4		—			253			—			—			—			257
—  Change in fair value of marketable securities	—		—		—			—			—			(11	)		—			(11	)
—  Net loss	—		—		—			—			—			—			(2,181	)		(2,181	)
Balance December 31, 2002	19,039,622		190		3,926			41,925			—			(11	)		(44,587	)		1,443

The accompanying notes are an integral part of this financial statement.

29

AXTIVE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2001			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(9,272,518	)	($	2,180,815	)
Adjustments to reconcile net loss to net cash used in operating activities:
Discontinued operations, net		1,250,958			—
Bad debt expense		1,400,000			58,618
Amortization of deferred compensation		316,696			—
Non-cash stock and stock option compensation expense		479,653			32,000
Depreciation and amortization		41,226			134,116
Impairment of assets		5,175,954			906,653
Loss on disposal of fixed assets		—			16,776
Gain on sale of securities		—			(11,569	)
Change in assets and liabilities:
Decrease (increase) in accounts receivable		13,504			(247,954	)
Decrease in prepaid expenses—advance royalties		5,024			—
Decrease in inventory		9,096			—
Decrease (increase) in other current assets		65,050			(85,938	)
(Increase) in other assets		—			(5,544	)
(Decrease) increase in accounts payable		61,002			(361,719	)
Increase (decrease) in accrued expenses		(486,193	)		81,103
Increase (decrease) in other current liabilities		(73,496	)		623,522
Increase in other liabilities		—			18,807
Net cash used in operating activities	$	(1,014,044	)	$	(1,021,944	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(87,929	)		(85,080	)
Purchase of securities		—			(54,124	)
Acquisition of subsidiaries, net of cash acquired of $140,116		—			(1,499,846	)
Proceeds from the sale of fixed assets		14,694			—
Proceeds from the sale of securities		—			103,385
Purchase of Axtive name		—			(9,638	)
Investment in related party		(400,000	)		—
Loan to related party		(75,000	)		—
Repayment of loan to related party		75,000			—
Net cash used in investing activities		(473,235	)		(1,545,303	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of preferred stock and warrants		—			2,871,382
Proceeds from note payable, net		800,000			—
Repayment of short-term notes payable		—			(123,000	)
Principal payments under capital leases		—			(19,427	)
Issuance of option to Infinity		600,000			200,000
Net cash provided by financing activities		1,400,000			2,928,955
NET CHANGE IN CASH AND CASH EQUIVALENTS		(87,279	)		361,708
Cash and cash equivalents, beginning of period		169,846			82,567
Cash and cash equivalents, end of period	$	82,567		$	444,275
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	1,388		$	33,126
Cash paid for taxes	$	2,848		$	8,615

The accompanying notes are an integral part of these financial statements.

30

AXTIVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001 AND 2002

1. COMPANY OPERATIONS

Axtive Corporation (“Axtive” or “Company”), formerly Edge Technology Group, Inc. was incorporated in Delaware in July 1994 and commenced operations in January 1995. We changed the name of our company to Axtive Corporation in October 2002 to better reflect our current business operations and business strategy.

Axtive’s business model is to acquire software related technology companies that deliver software products and related information technology services to middle-market companies. We offer products and services that improve the utilization of business information for middle-market companies, initially within the United States. We expect that customer organizations will benefit from integrated business process applications that are delivered on a fully outsourced basis through portal technology or, if needed, as traditional licensed products. Our acquisitions will target companies with existing strategic relationships with Oracle, IBM or Microsoft that will additionally allow us to take advantage of partnership opportunities available only to select parties. The technology companies targeted for acquisition are those that operate within the following business sectors and operating business units: (1) IT Professional Services, (2) Business Application Software comprised of six product groups and (3) Application Services and Management.

Initial development of our business model has involved the acquisition of IT Professional Services and Application Services and Management firms that have existing relationships with numerous middle-market customers. Prior to our emphasis on IT Professional Services, Business Application Software and Application Services and Management, the business consisted primarily of developing, marketing and selling personalized videotape golf lessons featuring One-on-One golf video instruction (“One-on-One”) by leading professional golfer Greg Norman, sold under the name “One-on-One with Greg Norman.” We developed video production technology that digitally combined actual video footage of a golfer’s swing with a synchronized “split-screen” comparison to Greg Norman’s golf swing to produce a One-on-One golf lesson. The assets of the One-on-One business were sold to members of its prior management in September 2001.

2. GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that Axtive will continue as a going concern. We incurred a net loss of approximately $2.2 million during the year ended December 31, 2002, and, as of that date, our current liabilities exceeded our current assets by approximately $1.4 million. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our plans in this regard are to continue fundraising efforts and to implement our new business plan discussed in Note 1. We expect our liquidity to remain tight throughout 2003. We will look to our current cash reserves, cash reserves created by additional offerings of Axtive Series A Convertible Preferred Stock and cash flows generated by our acquired companies to meet current liquidity requirements. While we have a level of comfort as to the projected cash flows generated by our newly acquired companies, we are relying on projections based upon assumptions and forecasts, including factors beyond our control. Actual results could vary from our projections and such variance could have a significant adverse effect on our liquidity.

We have historically financed our operations primarily through the sale of equity securities or instruments convertible into equity securities. There can be no assurance that future financings can be completed.

The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 periods. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are considered to include bank demand deposits, money market funds and other highly liquid investments with original maturities of three months or less at the date of purchase.

Marketable Securities

Marketable equity securities are classified as available-for-sale and are recorded at fair market value determined based on quoted market prices. The net unrealized gain or loss of marketable securities is included in accumulated other comprehensive income in the equity section of the Consolidated Balance Sheet. Realized gains and losses and declines in market value determined to be other than temporary are included in other income. Realized gains and losses are based on the average cost of shares acquired. At December 31, 2002, we owned approximately 900 shares of Overture Services, which were acquired as part of our acquisition of Media Resolutions, Inc. in April 2002 (see Note 5 “Business Combinations”). These shares are pledged to the selling shareholders of Media Resolutions to secure the payment of merger consideration withheld at closing to secure representations and warranties made by the selling shareholders in that acquisition.

Property and Equipment

Property and equipment, comprised primarily of computer equipment, software and office equipment, are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets that range from 3 to 5 years.

We have adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Under the provisions of this statement, we have evaluated our long-lived assets for financial impairment, and will continue to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.

We evaluate the recoverability of long-lived assets and certain identifiable intangibles assets to be held and used by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values, less cost to sell.

Revenue Recognition

Although we provide consulting services under both time-and-material and fixed-price contracts, the majority of our service revenues are recognized under time-and-material contracts as hours and costs are incurred. Revenues include reimbursable expenses billed to customers. Deposits received from customers in advance of the delivery of product or provision of service are included in Other Current Liabilities in the Consolidated Balance Sheet.

Principles of Consolidation

The Company’s consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and intercompany transactions have been eliminated in consolidation.

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Goodwill and Other Intangible Assets

Effective January 1, 2002, we adopted SFAS No, 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and also specifies the criteria for the recognition of intangible assets separately from goodwill. Under the new rules, goodwill is no longer amortized but is subject to an impairment test at least annually or more frequently if impairment indicators arise. In accordance with SFAS No. 142, we performed an annual impairment test of goodwill in the third quarter of 2002. Of the approximate $906,000 of goodwill recorded in the acquisition of The Visionary Group, $600,000 was written off in September 2002, and the balance was written off in December 2002.

Intangible assets consist of the following as of December 31, 2002:

	Gross Carrying Value		Accumulated Amortization
Amortizable intangible assets:
Non-compete agreements	$	249,248	$	50,410
Intangible assets not subject to amortization:
Tradename	$	162,638	$	0
Goodwill		2,247,714		0
Total	$	2,410,352	$	0

Amortization expense related to the intangible assets totaled $50,410 for the twelve months ended December 31, 2002. The aggregate estimated amortization expense for intangible assets remaining as of December 31, 2002 is as follows:

2003	$	84,896
2004		50,823
2005		26,486
2006		26,485
2007		10,148
TOTAL	$	198,838

Income Taxes

In accordance with SFAS No. 109, “Accounting for Income Taxes,” deferred tax assets or liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability from period to period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is established to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance would be included in the provision for deferred income taxes in the period of change.

Due to the continuing losses experienced by Axtive, we continue to fully reserve the tax benefit on these losses due to the uncertainty surrounding their recoverability.

Management Fees—Related Party

In December 2000, we entered into a management agreement with PurchasePooling Solutions, Inc., (“PurchasePooling”) in which PurchasePooling pays us a management fee ranging from $15,000 to $30,000 per month in return for the services provided by our President and other Axtive employees. We collected $230,000 and $240,000 in management fees from PurchasePooling during 2002 and 2001, respectively. Of such amounts,

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$50,000 is reflected as a reduction in “General and administrative” expenses, with the balance reflected as “Income—other” in the Statements of Operations in each of the two years.

Subsequent Event

In October 2001, we participated in the amount of $400,000 in a syndicated loan to PurchasePooling in the amount of $1,600,000. (see Note 7 “Related Party Transactions”). In February 2003, the lenders to PurchasePooling (including Axtive) declared the loan to PurchasePooling in default and foreclosed upon the assets of the company. The previous lenders formed a new entity, Demand Aggregation Solutions, LLC (“DAS”), to hold the assets, and Axtive, under a management agreement, has agreed to manage the affairs of DAS in exchange for a management fee of $25,000 per month beginning in May 2003. Stemming from Axtive’s participation in the loan, the Company has a 25% membership interest in DAS that is subject to forfeiture if Axtive breaches its obligations under the management agreement. Additionally, the management agreement with DAS obligates Axtive to fund DAS’s working capital needs at a rate not exceeding, on average, $50,000 per month up to a maximum of $1.2 million over the three year life of the agreement.

In connection with the formation of DAS and Axtive’s agreement to manage its affairs, DAS participated in the 2003 Series A Preferred Financing (see Note 17 “Subsequent Events”) investing $1.2 million of the $2.3 million raised.

Major Customers

During 2002, one customer accounted for approximately 15% of our total revenues. No other customer accounted for more than 10%.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, investments, note receivable, notes payable, accounts receivable and accounts payable as reflected in the accompanying Balance Sheets approximate fair value due to the short-term maturity of these instruments.

Loss per Share

Basic loss per share is calculated by dividing loss attributed to common stockholders by the weighted average number of shares of common stock outstanding during each period.

As of December 31, 2002 and 2001, due to our net losses, all shares of Common Stock issuable upon conversion of convertible stock, convertible debt and the exercise of outstanding options and warrants have been excluded from the computation of diluted loss per share in the accompanying consolidated statements of operations as their impact would be antidilutive.

Accounting for Stock Based Compensation

Under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” companies can either measure the compensation cost of equity instruments issued to employees using a fair value based method, or can continue to recognize compensation cost using the intrinsic value method under the provisions of Accounting Principles Board Opinion No. 25 (“APB 25”). We recognize compensation costs, where appropriate, under the provisions of APB 25.

At December 31, 2002, we had stock-based employee compensation plans, which are further described in Note 14. We apply APB 25 in accounting for our stock plans. The following table illustrates the effect had we determined compensation cost based on fair value at the grant date for our stock options under SFAS No. 123:

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	As of December 31,
	2001		2002
Net loss attributed to common stockholders
As reported	($9,272,518	)	($2,726,325	)
Pro forma comprehensive expense	(927,482	)	(1,814,827	)
Pro forma	($10,200,000	)	($4,541,152	)
Basic and diluted loss per share
As reported	($0.57	)	($0.15	)
Pro forma	($0.63	)	($0.25	)

The assumptions used in determining the fair value of options granted for purposes of the proceeding pro forma disclosures are included in Note 14.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation

4. DISCONTINUED OPERATIONS—SALE OF “ONE-ON-ONE” ASSETS

On September 10, 2001, we closed the sale of assets related to our One-on-One business to a newly formed entity Visual Edge, Inc. Visual Edge is not a related party; however, the President of Visual Edge is a former CEO of our Company. Results of this operation have been classified as discontinued and prior periods have been restated.

In the sale, we received (a) an initial cash payment of $300,000 (offset by $53,000 by Visual Edge for One-on-One business expenses paid); (b) a promissory note in the amount of $250,000 payable October 24, 2001, and bearing an interest rate of 8% per annum, secured by all of the assets of Visual Edge; and (c) future royalties not to exceed $3.0 million, payable as an increasing percentage of revenues. We recognized approximately $5,100 and $8,700 in royalties in 2002 and 2001, respectively. The loss of the sale of the One-on-One business was $570,000.

The operating results of the discontinued operation for 2001 through the date of sale are as follows :

Sales	$	104,526
Net loss from discontinued operations	$	(680,671	)

As of October 24, 2001, the promissory note and royalty payments were in default. The note and royalty payments were renegotiated in December 2001 to extend payment terms and, currently, all payments are in default under the renegotiated terms. The note was written off in its entirety and was recorded as part of the loss on sale of the One-on-One assets in 2001.

5. BUSINESS COMBINATIONS

The acquisitions described below were made pursuant to our business model as discussed in Note 1 “Company Operations.” The purchase price for each acquisition was generally based upon a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for certain non-recurring costs deemed to be unique to the particular company or situation. Since the acquired companies are technology service companies with minimal tangible or intangible assets, the purchases resulted in payments characterized as goodwill.

Acquisition of Media Resolutions, Inc.

On April 11, 2002, we closed the acquisition of Media Resolutions, Inc., an Application Service Provider (“ASP”) and website hosting company located in Dallas, Texas. We paid $330,000 in cash and notes and 500,000 restricted shares of our $.01 par value common stock (“Common Stock”) valued at $313,000 in exchange for all the outstanding shares of Media Resolutions.

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The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of Media Resolutions were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition of Media Resolutions totaled approximately $479,000 and was allocated to goodwill.

Acquisition of The Visionary Group, Inc.

On April 8, 2002, we acquired The Visionary Group, Inc., a professional services firm providing IT Professional Services related to Oracle applications software. Headquartered in Dallas, Texas, The Visionary Group has operations in Dallas and Austin, Texas. We paid $910,000 in cash and notes and paid approximately $70,000 of existing debt in exchange for all the outstanding shares of The Visionary Group. The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of The Visionary Group were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition.

Following its acquisition, revenues for The Visionary Group fell below acceptable levels. We believe the decline resulted from an overall decline in the market and the delay or elimination of several significant projects resulting from general economic conditions. Despite aggressive steps to rebuild the business including installing new management and producing new product offerings, we were not successful and the company ceased operations in December 2002. Of the approximate $906,000 of goodwill recorded in the acquisition of The Visionary Group, $600,000 was written off in September 2002, and the balance was written off in December 2002.

Acquisition of Universal Data Technology, Inc.

On May 31, 2002, our newly created and wholly owned subsidiary, UDT Consulting, Inc., acquired the assets of Universal Data Technology, Inc., an IT Professional Services practice headquartered in Dallas, Texas with additional operations in Arkansas and Florida. Our total purchase price for substantially all of Universal Data Technology’s assets will be the sum of $1,127,750 (“Minimum Purchase Price”) and the product of multiplying two times UDT Consulting’s adjusted earnings before interest, taxes depreciation and amortization, as defined in the acquisition agreement, for the twelve months immediately following the closing date of the acquisition (the “Measurement Period”). The calculation of the purchase price is subject to certain deductions and offset provisions. An initial payment of $227,750 and the forgiveness of a $150,000 promissory note from Universal Data Technology to Axtive were applied toward the purchase price as of the date of the closing. The remainder of the purchase price will be paid monthly pursuant to a pay-out schedule, with any remaining payments to be delivered after the end of the Measurement Period. Amounts due attributable to the Minimum Purchase Price are included in Short-term note payable. Payments on the pay-out schedule through December 31, 2002, as applied to the minimum purchase price, have totaled $48,000.

The acquisition was accounted for using the purchase method of accounting. The assets acquired from Universal Data Technology were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the tangible and intangible net assets acquired in the acquisition totaled approximately $1.05 million and was allocated to goodwill .

Acquisition of Virtually There, Inc.

In May 2002, we acquired Virtually There, Inc., an ASP and website hosting company located in Fort Worth, Texas. In exchange for the outstanding shares of Virtually There, Inc., we issued $120,000 in notes, issued 1,153,846 shares of our restricted Common Stock valued at $455,000 to the shareholders of Virtually There, and assumed approximately $185,000 of Virtually There’s existing liabilities as of the date of closing.

The acquisition was accounted for using the purchase method of accounting. As such, the assets and liabilities of Virtually There were recorded at their estimated fair value and the results of operations are included in our consolidated results of operations from the date of acquisition. The excess purchase price over the fair value of the identifiable assets acquired in the above transactions combined totaled approximately $719,000 and was

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allocated to goodwill. The value allocated to goodwill exceeded the stated purchase price due to the assumption of liabilities at acquisition.

Allocation of Purchase Price

Following is a summary of the amounts assigned to the assets and liabilities of the acquired businesses:

Net Assets Acquired
Cash	$	140,116
Accounts receivable		202,707
Property and equipment		240,907
Goodwill and intangibles		3,403,615
Other assets		94,439
Total assets acquired	$	4,081,784
Accounts payable and accrued expenses		469,749
Other liabilities		85,839
Total liabilities assumed		555,588
Net assets acquired	$	3,526,196

Approximately $1.05 million of goodwill is deductible for tax purposes.

Pro Forma Results

The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions had occurred at the beginning of 2001 and 2002, respectively.

	For the Year Ended December 31,
	2001			2002
Sales	$	10,360,132		$	4,604,695
Net loss attributed to common stockholders	$	(10,164,313	)	$	(3,191,242	)
Net loss per share attributed to common stockholders, basic and diluted	$	(0.57	)	$	(0.17	)
Weighted average shares outstanding, basic and diluted		17,933,162			18,689,932

6. PROPERTY AND EQUIPMENT

Property and equipment, including equipment acquired under capital leases, consist of the following:

	As of December 31,						Lives (Years)
	2001			2002
Machinery and computer equipment	$	—		$	264,982		5
Computer software		—			77,559		3-5
Office furniture and equipment		45,061			52,102		5
		45,061			394,643
Less: accumulated depreciation		(9,676	)		(93,255	)
Property and equipment, net	$	35,385		$	301,388

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7. RELATED PARTY TRANSACTIONS

Investment in PurchasePooling Solutions, Inc.

Beginning in September 2000, we made a series of investments in PurchasePooling Solutions, Inc., a start up web-based demand aggregator working toward enabling government and educational entities to save significantly on large-ticket capital items by combining their purchasing power nationwide and globally. Based on a valuation obtained on PurchasePooling in July 2001, we determined that the investment was impaired. Accordingly, we recorded an impairment charge of $2,495,954.

In October 2001, we participated in the amount of $400,000 in a syndicated loan to PurchasePooling in the amount of $1,600,000. The loan, structured as a Convertible Note with Warrants, bore interest at 15% per annum, and if not converted earlier, would mature in October 2003. Because PurchasePooling was in its development stage and was not generating any cash flows, we had no expectation for repayment of the loan. As such, we considered the investment to be an equity investment and we carried the loan as a part of our investment in PurchasePooling. We did not accrue interest on the note.

Based upon the ongoing evaluation of our investment in PurchasePooling, we determined in April 2002, that our investment was not recoverable. As a result, we wrote off the remaining $2,680,000 of our investment in PurchasePooling as of December 31, 2001. The write off for the year 2001 was $5,175,954 and such amount is included in “Impairment of assets” in the Consolidated Statement of Operations.

Subsequent Event

In February 2003, the lenders to PurchasePooling (including Axtive) declared the loan to PurchasePooling in default and foreclosed upon the assets of the company. The previous lenders formed a new entity, Demand Aggregation Solutions, LLC (“DAS”), to hold the assets, and Axtive, under a management agreement, has agreed to manage the affairs of DAS in exchange for a management fee of $25,000 per month beginning in May 2003. Stemming from Axtive’s participation in the loan, the Company has a 25% membership interest in DAS that is subject to forfeiture if Axtive breaches its obligations under the management agreement. Additionally, the management agreement with DAS obligates Axtive to fund DAS’s working capital needs at a rate not exceeding, on average, $50,000 per month up to a maximum of $1.2 million over the three year life of the agreement.

In connection with the formation of DAS and Axtive’s agreement to manage its affairs, DAS participated in the 2003 Series A Preferred Financing (see Note 17 “Subsequent Events”) investing $1.2 million of the $2.3 million raised.

Acquisition of “Axtive” Name

In June 2002, the Company acquired the name “Axtive” and its related logo and trademark and certain tangible assets including furniture and fixtures, signage and office supplies from Axtive Software Corporation, as represented by it sole shareholder, G.C. “Scooter” Beachum III, our Executive Vice President and General Manager. The assets were acquired in exchange for an initial grant of 400,000 restricted shares of Axtive’s common stock, which was valued at approximately $168,000 at the time of acquisition. This amount was allocated between relative fair values of the intangible ($153,000) and tangible assets ($15,000) purchased by us.

Subsequent Event

On July 1, 2003, we issued 297,674 restricted shares of our common stock to TSTC International Holding Company, formerly known as Axtive Software Corporation. These shares constituted an additional payment due to TSTC in connection with our June 2002 purchase of certain intangible assets, including the name “Axtive,” and certain tangible assets. We were obligated to issue the additional restricted shares, not in excess of 297,674 shares, if the market price of our common stock had not been at or above $0.75 within the one-year period after our purchase. G.C. “Scooter” Beachum, our Executive Vice President and General Manager, is the sole shareholder and director of TSTC. The issuance of the restricted shares of common stock did not involve a public offering.

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8. NOTE RECEIVABLE

On September 22, 2000, we made an unsecured loan of $1.4 million to Hencie, Inc., a Texas-based IT Services business. The loan was guaranteed by a related company, Hencie Consulting Services, Inc. (collectively “Hencie”) and personally guaranteed by Hencie’s CEO.

The loan to Hencie matured November 22, 2001, and went into default. Due to the uncertainty surrounding collection of the note, no interest was accrued in 2001 or 2002 and, during the fourth quarter of 2001, the note was fully reserved to reflect our estimate of its net realizable value.

On May 22, 2002, we entered into a Settlement Agreement and Release with Hencie and the guarantors whereby we received an agreed judgment in the amount of $1.65 million, subject to reduction, and would receive monthly payments of principal and interest through April 2004 totaling approximately $1.3 million. The amounts due under the Settlement Agreement and Release were guaranteed by Hencie’s CEO and secured by shares of Alternate Marketing Networks, Inc. (NASDAQ Small Cap: ALTM), the parent company of Hencie. Because of uncertainties regarding collection of amounts due under the agreement and the lack of liquidity in the collateral, the Company did not record a gain on settlement. Payments received were recorded as a recovery of the bad debts previously written off.

On September 20, 2002, all rights and amounts due to Axtive under the settlement with Hencie were sold without recourse to an unrelated third-party in exchange for $802,500. Prior to its sale, the company had received payments totaling $235,000. Such payments, together with the sale proceeds, totaled $1,037,500 and were recorded as a recovery of bad debts.

9. ACCRUED EXPENSES

Accrued expenses are summarized as follows:

	As of December 31,
	2001		2002
Professional fees	$	58,000	$	59,632
Interest		115,805		—
Salaries and bonuses		65,684		223,806
Other		—		38,942
	$	239,489	$	322,380

10. OTHER CURRENT LIABILITIES

Other current liabilities are summarized as follows:

	As of December 31,
	2001		2002
Current portion of capital lease obligations	$	—	$	41,522
Judgements		—		377,969
Amounts due on receivables sold				151,089
Customer deposits		—		39,941
Deferred revenue		—		37,707
Other		—		18,105
	$	—	$	666,333

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11. FINANCING TRANSACTIONS

2000 Infinity Loans

During 2000, Infinity, a related party, made certain loans to us for working capital purposes. These loans totaled approximately $219,000 and bear interest at a rate equal to 8.5% per annum. As part of the reorganization of Axtive effective September 1, 2000, Infinity became entitled to the repayment of these loans. The loan agreement was renegotiated in April 2001 and again in January 2002 to extend the due date to March 31, 2002. As of December 31, 2001, there was $219,000 in principal outstanding. Upon maturity, as of April 1, 2002, Infinity elected to convert the outstanding principal and interest totaling $258,464 into $0.01 par value Common Stock at $0.65 per share resulting in 397,637 shares issued by us.

Catalyst Loan

On December 13, 2000, we entered into a loan agreement with Catalyst Master Fund, L.P. (“Catalyst”), a related party, to borrow $620,000 (the “Catalyst Loan”). The Catalyst Loan was originally due on June 30, 2001, and bears interest at a rate equal to eight percent (8%) per annum. We used the proceeds of the Catalyst Loan to purchase 2,214,285 shares of Series C Convertible Preferred Stock of PurchasePooling. Catalyst Master Fund L.P. is a stockholder of ours and certain of our directors are officers of an entity that manages Catalyst.

The Catalyst Loan was convertible, at the option of Catalyst, into Axtive Common Stock at a conversion price of $1.50 per share and was secured by a pledge of substantially all of our assets. Effective April 16, 2001, we entered into an amended loan agreement with Catalyst that increased the borrowings available under the original loan agreement from $620,000 to a total of $2,120,000. Under the amended loan agreement, we could draw down amounts under the loan agreement as we had a need for funds, subject to Axtive being in compliance with the covenants contained in that loan agreement. The amended loan agreement bears interest at eight percent (8%) per annum and was due March 31, 2002. The additional amount available under the amended loan agreement was also convertible into Axtive Common Stock at a conversion price of $1.50 per share and was secured by a pledge of substantially all of our assets. On December 31, 2001 the principal balance outstanding on the Catalyst Loan was $1,420,000.

On December 28, 2001, Catalyst assigned the Catalyst Loan, and its rights thereunder, to Sandera Partners, L. P. (“Sandera”) as part of a redemption of Sandera’s limited partnership interest in Catalyst. Certain of our directors are officers of an entity that manages Sandera.

On April 1, 2002, Sandera converted all principal and interest due under the note (a total of $1,530,124) and contributed an additional amount of approximately $470,000 in cash in exchange for 2,000 shares of Series A Preferred Stock (see “2002 Series A Convertible Preferred Stock” below).

Infinity Option

On May 31, 2001, we sold an option to Infinity Investors Limited in return for Infinity’s payment of $1.0 million payable in five equal payments of $200,000 commencing on May 31, 2001 (“Infinity Option”). Pursuant to the Infinity Option, Infinity could elect on May 31, 2002, to exercise its option by assigning to Axtive its interest in a note receivable of $10.0 million in exchange for 3,333,333 shares of Axtive Common Stock. We received $600,000 during 2001 and $200,000 in 2002, which were recorded as paid in capital.

In March 2002, Infinity and Axtive mutually agreed to terminate the option.

2002 Series A Convertible Preferred Stock

On April 1, 2002, we issued 4,200 shares of Series A Convertible Preferred Stock (“Series A Preferred”) at $1,000 per share providing proceeds to us of $2,631,382 calculated as $4,200,000, less $1,530,124 of the pre-existing Sandera debt converted to Series A Preferred and $38,494 of issuance costs. The Series A Preferred shares carry an 8% cumulative dividend and are convertible, at the option of the holder, into shares of Common Stock any time after one year at an initial conversion price of $0.75 per share. As discussed below, the purchasers also received warrants to purchase Common Stock. The preferred shares have voting rights pari pasu with the Common Stock and as a separate class on certain matters. The shares also have an antidilution provision whereby the price and number of shares issuable upon conversion adjusts for stock splits, stock dividends and future share issuances below the conversion price of the Series A Preferred. The Series A Preferred have demand registration rights after one year following closing of the financing transaction and the right to elect one member to our Board of Directors. The issuance of warrants

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resulted in a beneficial conversion feature of the Series A Preferred valued at $370,000. Such amount was reflected as a discount to the Series A Convertible Preferred Stock in the Consolidated Balance Sheet and is being amortized to the date the shares first become convertible, April 1, 2003.

In connection with the issuance of Series A Preferred, each purchaser received warrants entitling the holder to purchase 20 shares of Common Stock for each 100 shares of Common Stock the holder is entitled to receive upon conversion. The warrants entitle the holder to purchase common shares at the price of $1.15 per share. The warrants become exercisable on the second anniversary of the issuance of the Series A Preferred and, unless exercised earlier, will expire on the fourth anniversary of the issuance. The warrants were valued at $370,000 using the Black-Scholes option pricing model and such amount is reflected in additional paid in capital in the Consolidated Balance Sheet. We issued warrants exercisable for a total of 1,119,998 shares of Common Stock in the offering.

We paid no commissions in connection with issuance of Series A Preferred but did incur approximately $38,000 in other issuance costs. Such amount is reflected as a reduction to additional paid in capital in the Consolidated Balance Sheet. Proceeds from the offering were used to acquire Media Resolutions, Inc., The Visionary Group, Inc., Virtually There, Inc. and the assets of Universal Data Technology, Inc. and for general corporate purposes.

In July and August 2002, the Company raised additional funds under the Series A Preferred offering by issuing 240 shares of Series A Preferred at $1,000 per share providing proceeds to us of $240,000. The terms for the issuance of the Series A Preferred were identical to those investors who had invested in April 2002. In particular, we issued additional warrants exercisable for a total of 64,000 shares of Common Stock in the offering. The proceeds from the offering were used for general corporate purposes. The Company paid no issuance costs in connection with these subsequent issuances, and using the same methodology described above, valued the warrants and the conversion feature at $10,000 each. Such amounts were accounted for as described above.

As of December 31, 2002, there had been no dividends declared on the Series A Preferred stock. Undeclared but cumulative dividends on the preferred shares as of that date totaled approximately $261,000.

Receivables Factoring

One of the Company’s subsidiaries, UDT Consulting, Inc., has engaged with a third-party to factor certain of its receivables. The receivables are purchased by the factor with recourse to UDT Consulting, and amounts due under the Factoring and Security Agreement are secured by a pledge of receivables and other assets of UDT Consulting, and are guaranteed by Axtive. Under the agreement, UDT Consulting receives approximately 80% of the face amount of the receivable, pays interest at a rate of prime plus 2% and is subject to additional fees in certain circumstances. At December 31, 2002, UDT Consulting had approximately $151,000 of receivables sold under the agreement. The related liability to the factor is included in Other Current Liabilities in the Consolidated Balance Sheet.

12. COMMON STOCK

In April 2002, we issued 397,637 shares of our $0.01 par value Common Stock (“Common Stock”) in connection with the conversion of the 2000 Infinity Loans (see Note 11 “Financing Transactions” above).

In April 2002, we issued 500,000 shares of our Common Stock in connection with the acquisition of Media Resolutions, Incorporated. The shares were valued at $313,000.

In May 2002, we issued 1,153,846 shares of our Common Stock in connection with the acquisition of Virtually There, Inc. The shares were valued at $455,000.

In June 2002, we issued 400,000 shares of our Common Stock in connection with the acquisition of the name “Axtive” and the related trademark and logo and certain furniture and fixtures. The shares were valued at $168,000.

In August 2002, we issued 100,000 shares of our Common Stock in exchange for advisory services related to mergers and acquisitions and financing. The shares were valued at $32,000.

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13. INCOME TAXES

Temporary differences between the financial reporting and tax basis of assets and liabilities that give rise to deferred income tax assets and liabilities are as follows:

	As of December 31,
	2001			2002
Deferred tax assets (liabilities)
Net operating loss carryforwards	$	8,656,667		$	8,835,171
Property and equipment		304,373			300,262
Accounts receivable		107,489			133,115
Asset impairment		2,171,669			2,171,669
Other		(3,784	)		75,788
Net deferred tax assets		11,236,414			11,516,005
Valuation allowance		(11,236,414	)		(11,516,005	)
	$	—		$	—

Income tax expense differs from the statutory rate as follows:

	As of December 31,
	2001			2002
Income tax benefit at statutory rate	$	3,152,000		$	741,000
Goodwill impairment		—			(308,000	)
Change in valuation allowance, including companies acquired in 2002		(3,151,000	)		(374,000	)
Other		(1,000	)		(59,000	)
	$	—		$	—

At December 31, 2002, we had net operating loss carryforwards (NOL’s) of approximately $26.0 million, which will expire in 2012 through 2022. However, because of changes in ownership of our common stock, use of these NOL’s is limited to approximately $115,000 per year.

14. STOCK OPTION PLANS

In April 1996, we adopted the 1996 Stock Option Plan (the “1996 Plan”), which was amended most recently in August 2000. The 1996 Plan provides for the granting to directors, officers, key employees and consultants of up to 500,000 shares of common stock in a year. Grants of options may be incentive stock options or non-qualified stock options and will be at such exercise prices, in such amounts, and upon such terms and conditions, as determined by the board of directors or the compensation committee of the board of directors. The term of any option may not exceed ten years. In August 2000, the 1996 Plan was amended to increase the number of shares reserved for issuance to 1,000,000 shares of our outstanding common stock.

During 2000 and 2001, stock option grants were made by the board of directors that would cause the number of options issued under the 1996 Plan to exceed the number authorized under the plan. As described below, such grants were transferred to the 2002 Stock Incentive Plan and were approved by the stockholders. As of December 31, 2002, there were options outstanding for 850,000 shares of common stock under the 1996 Plan and none available for future grants under the 2002 Stock Incentive Plan

In June 2002, the Company adopted the 2002 Stock Incentive Plan (the “2002 Plan”), which provides for the issuance of non-qualified stock options and incentive stock options as well as restricted stock awards, unrestricted stock awards, performance stock awards, dividend equivalent rights, stock appreciate rights (in

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connection with options) and long-term performance awards to eligible employees, officers, independent consultants and directors of the Company and its subsidiaries. Under the terms of the 2002 Plan, options to purchase common stock are generally granted at not less than fair market value, become exercisable as established by the administering committee of the board of directors and generally expire ten years from the date of grant. If any shares reserved for an award are forfeited, repurchased or any such award otherwise terminates without a payment being made to the participant in the form of stock, the shares underlying such award will also become available for future awards under the 2002 Plan.

In September 2002, a majority of our shares entitled to vote approved the adoption of the 2002 Plan by written consent. The stockholder approval of the adoption of the 2002 Plan was effective 20 days after the mailing of the Information Statement to our stockholders. For administrative convenience and to provide that all options outstanding for current employees are under a single plan, 2,910,000 options previously granted pursuant to the 1996 Stock Option Plan, but in excess of the number of shares authorized under the plan (the “Transferred Options”) were transferred to the 2002 Plan.

As of December 31, 2002, there were options for 3,575,886 shares of our common stock outstanding under the 2002 Plan (which includes the Transferred Options), of which 1,108,011 were vested. To date, the Company has not issued any restricted or unrestricted stock awards, stock appreciation rights, dividend equivalents rights or long-term performance awards under the 2002 Plan.

Stand-Alone Stock Option Agreements

During 2002 we issued 2,150,000 stock options in conjunction with employment agreements to the key management of the acquired companies under stand-alone stock option agreements. As of December 31, 2002, 2,400,000 remained outstanding. The exercise prices on these options ranged from $0.42 to $0.77 per share with a weighted average price of $0.69 per share. Vesting periods ranged from immediately upon grant to three years with a weighted average vesting period of nine months. All stand-alone options granted in 2002 were not intended to be incentive stock options under the Internal Revenue Code of 1986, as amended. The Company recorded no expense related to the grant of options pursuant to stand-alone agreements.

Stock option activity during the periods is indicated as follows:

	Number of Shares		Weighted Average Exercise Price
Balance at January 1, 2001	1,530,603		$	2.32
Granted	3,420,000			1.50
Exercised	—
Forfeited	(1,090,603	)		2.20
Balance at December 31, 2001	3,860,000			1.69
Granted	3,486,900			0.94
Exercised	—
Forfeited	(521,014	)		0.93
Balance at December 31, 2002	6,825,886		$	1.37

At December 31, 2001 and 2002, there were 1,056,800 and 3,314,677 options exercisable, respectively. At December 31, 2002, the weighted-average exercise price and weighted-average remaining contractual life of outstanding options was as follows:

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	Outstanding		Exercisable
Exercise Price	Number of Options	Weighted Average Remaining Contractual Life (years)	Number of Options
$    0.42	453,500	7.87	140,000
$    0.75	1,000,000	9.35	500,000
$    0.77	500,000	9.20	500,000
$    1.50	4,022,386	6.63	1,608,011
$    2.31	850,000	7.56	566,666
	6,825,886	7.52	3,314,677

As of December 31, 2002, we had 2,038,331 warrants outstanding at an average exercise price of $1.82.

In determining the fair value of options granted for purposes of the SFAS No. 123 pro forma disclosures in Note 3, the Company used the Black-Scholes option pricing model with the weighted-average assumptions: risk-free interest rates of 5.0% in 2002 and 6.0% in 2001; dividend yield of zero; volatility of 706.1% in 2002 and 110.0% in 2001; and expected option lives of three years in 2002 and 2001.

The weighted average fair value of options granted during 2001 and 2002 was $0.79 and $0.52 respectively.

15. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office space and office equipment under operating leases expiring through 2006. Expense recorded for these leases for the years ended December 31, 2002 and 2001 was approximately $96,000 and $0, respectively. Minimum rental commitments under noncancellable operating leases are as follows:

2003	$	202,920
2004	$	116,346
2005	$	66,657
2006	$	50,328
2007	$	—
Thereafter	$	—

Legal Proceedings

Proceedings with Debtors

On September 22, 2000, we made an unsecured loan of $1.4 million to Hencie, Inc., a Texas-based IT Services business. The loan was guaranteed by a related company, Hencie Consulting Services, Inc. (collectively “Hencie”) and personally guaranteed by Hencie’s CEO.

The loan to Hencie matured November 22, 2001, and went into default. Due to the uncertainty surrounding collection of the note, no interest was accrued in 2001 or 2002 and, during the fourth quarter of 2001, the note was fully reserved to reflect our estimate of its net realizable value.

On May 22, 2002, we entered into a Settlement Agreement and Release with Hencie and the guarantors whereby we received an agreed judgment in the amount of $1.65 million, subject to reduction, and would receive monthly payments of principal and interest through April 2004 totaling approximately $1.3 million. The amounts due under the Settlement Agreement and Release were guaranteed by Hencie’s CEO and secured by shares of Alternate Marketing Networks, Inc. (NASDAQ Small Cap: ALTM), the parent company of Hencie. Because of uncertainties regarding collection of amounts due under the agreement and the lack of liquidity in the collateral, the

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Company did not record a gain on settlement. Payments received were recorded as a recovery of the bad debts previously written off.

On September 20, 2002, all rights and amounts due to Axtive under the settlement with Hencie were sold without recourse to an unrelated third-party in exchange for $802,500. Prior to its sale, the company had received payments totaling $235,000. Such payments, together with the sale proceeds, totaled $1,037,500 and were recorded as a recovery of bad debts.

Proceedings Against The Visionary Group

In June 2002, we were notified that The Visionary Group and Axtive had been sued in the District Court of Dallas County, Texas for non-payment of approximately $110,000 due to former sub-contractors of The Visionary Group. In order to limit our costs to defend the matter, Axtive agreed to a partial summary judgment pursuant to which Axtive admitted the liability of The Visionary Group, but retained our defenses on the issue of third-party beneficiary against Axtive. Trial has been set for August 2003.

The Visionary Group ceased operations in December 2002. The company has no employees and no assets and identified liabilities of approximately $190,000 including the $110,000 discussed here. Accordingly, we do not expect that an adverse judgment against The Visionary Group in this lawsuit would have a material impact on Axtive.

With respect to any exposure directly against Axtive Corporation, we believe we have meritorious defenses, but an adverse judgment against Axtive could have a material negative impact on our business.

In April 2003, a judgment was entered against The Visionary Group in the amount of approximately $3,000 for failure to pay the business related expenses of a former employee. The judgment remains outstanding.

Other Legal Proceedings

The Company is involved in other legal proceedings arising in the ordinary course of business and has three judgments totaling approximately $75,000 pending against it. We are in negotiations to reduce amounts payable under the judgments. We do not expect the ultimate outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows of the Company as a whole. However, depending on the amount and timing, an unfavorable outcome of any such matters could possibly materially affect our future results of operations or cash flow in any particular period.

Employment Agreements

Graham C. Beachum II

In January 2001, we entered into an employment agreement with Mr. Graham C. Beachum II to serve as our President and Chief Executive Officer. Mr. Beachum has assembled other personnel to develop and expand our business plan. The employment agreement expires on January 2, 2005, unless terminated earlier. Under the employment agreement, Mr. Beachum is entitled to receive an annual base salary of $100,000 that shall be increased to $240,000 upon the successful conclusion of an equity offering by Axtive of at least $10 million. The annual base salary shall be increased by 5% each fiscal year. In addition, Mr. Beachum was granted options to purchase 1,500,000 shares of Axtive’s Common Stock at an exercise price of $1.50 per share, of which 25% vested upon the grant date and the remainder vesting at the rate of 18.75% on January 2 of each successive year. Pursuant to the employment agreement, Mr. Beachum will also be eligible to receive a bonus based on our performance, as determined by the Board of Directors or its Compensation Committee. In the event that Mr. Beachum is terminated without cause, including a change of control (as defined in the employment agreement), he will be entitled to receive as severance the amount of his base salary for (i) the remainder of his term of employment, or (ii) six months, whichever period is shorter. The employment agreement also contains customary nondisclosure and non-competition covenants, as well as an assignment of inventions. We were not required to record any compensation expense in 2001 as a result of the grant of these options.

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G. C. “Scooter” Beachum III

In January 2001, we entered into an employment agreement with Mr. G. C. “Scooter” Beachum III to serve as our Vice President and General Manager. The employment agreement expires on January 2, 2005, unless terminated earlier. Under the employment agreement, Scooter Beachum is entitled to receive an annual base salary of $95,000 that shall be increased to $165,000 upon the successful conclusion of an equity offering by Axtive of at least $10 million. The annual base salary shall be increased by 5% each fiscal year. Mr. Beachum is currently paid $150,000 annually. In addition, Scooter Beachum was granted options to purchase 750,000 shares of Axtive’s Common Stock at an exercise price of $1.50 per share, of which 25% vested upon the grant date and the remainder vesting at the rate of 18.75% on January 2 of each successive year. Pursuant to the employment agreement, Scooter Beachum will also be eligible to receive a bonus based on our performance, as determined by the Board of Directors or its Compensation Committee. In the event that Scooter Beachum is terminated without cause, including a change of control (as defined in the employment agreement), he will be entitled to receive as severance the amount of his base salary for (i) the remainder of his term of employment, or (ii) six months, whichever period is shorter. The employment agreement also contains customary nondisclosure and non-competition covenants, as well as an assignment of inventions. We were not required to record any compensation expense in 2001 as a result of the grant of these options. Scooter Beachum is the son of our Chief Executive Officer, Graham C. Beachum II.

16. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Acquisitions

In April 2002, we exchanged 500,000 restricted shares of our common stock valued at $313,000 in partial exchange for all the outstanding shares of Media Resolutions. In May 2002, we exchanged 1,153,846 restricted shares of our common stock valued at $455,000 in partial exchange for all the outstanding shares of Virtually There. Liabilities related to companies acquired in 2002, including notes issued by us, were approximately $1.7 million. See Note 5, “Business Combinations.”

Acquisition of “Axtive” Name

In June 2002, we issued 400,000 restricted shares of Axtive’s common stock valued at approximately $168,000 for the name “Axtive” and its related logo and trademark and certain tangible assets. See Note 7, “Related Party Transactions.”

Capital Leases

During 2002, we acquired $25,498 of property and equipment through capital leases

Conversion of 2000 Infinity Loans

Upon maturity, as of April 1, 2002, Infinity elected to convert the outstanding principal and interest totaling $258,464 into $.01 par value Common Stock at $.65 per share resulting in 397,637 shares issued by us. We claimed an exemption for this issuance under section 4(2) of the Securities Act of 1933.

Conversion of Catalyst Loan

On December 28, 2001, Catalyst Master Fund, L. P. assigned the Catalyst Loan, and its rights thereunder, to Sandera Partners, L. P. (“Sandera”) as part of a redemption of Sandera’s limited partnership interest in Catalyst.

As part of the April 2002 Series A Convertible Preferred Stock (see Note 11 “Financing Transactions” above), Sandera converted all outstanding principal and interest due on the loan (total of $1,530,124) and contributed an additional amount of approximately $470,000 in cash in exchange for 2,000 shares of Series A Convertible Preferred Stock.

17. SUBSEQUENT EVENTS (unaudited)

Acquisition of ThinkSpark Corporation

In May 2003, we acquired ThinkSpark Corporation and its subsidiaries (“ThinkSpark”), a professional services firm providing IT Professional Services related to Oracle database software. ThinkSpark is headquartered in Dallas, Texas with additional offices in Austin, San Antonio, Oklahoma City, Houston Texas and Las Vegas, Nevada.

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In exchange for all the outstanding shares of ThinkSpark, we paid approximately $107,000 in cash and notes, ThinkSpark shareholders satisfied approximately $121,000 in debt due to ThinkSpark, and Axtive assumed $5.0 million of long-term debt from ThinkSpark’s secured creditor, Merrill Lynch Business Financial Services, Inc. The debt assumed is secured by $1.0 million of accounts receivable of ThinkSpark and is guaranteed by the remaining subsidiaries of Axtive. We also issued Merrill Lynch warrants to acquire 5,000,000 shares of Axtive’s common stock in exchange for Merrill Lynch’s assignment to Axtive of an additional $1.9 million of debt due from ThinkSpark. The warrants have an exercise price of $0.01 per share and can be exercised anytime prior to the 10th anniversary of their issuance in May 2013. As a result of the warrants, Merrill Lynch could acquire a significant equity interest in Axtive.

The acquisition will be accounted for using the purchase method of accounting. As such, the assets and liabilities of ThinkSpark will be recorded at their estimated fair value and the results of operations will be included in our consolidated results of operations from the date of acquisition. We have not completed the allocation of purchase price to assets acquired. We expect a significant amount of goodwill to result from the acquisition.

2003 Series A Preferred Financing

On May 23, 2003, we issued $2.3 million worth of additional Series A Preferred shares to new and previous investors in exchange for cash. The additional shares were issued on similar terms and conditions as the 2002 issuances except the initial conversion price is $0.10 per share. We issued warrants to acquire 4.8 million shares of Common Stock at $0.20 per share in connection with the transaction. Demand Aggregation Solutions, LLC (“DAS”) purchased $1.2 million of the Series A Preferred Stock. See Note 1 regarding our obligation to provide up to $1.2 million in funding to DAS.

The 2002 issuances of Series A Preferred provided that subsequent issuances of such securities on terms more favorable than those provided to the original investors in the Series A Preferred would automatically adjust the terms and conditions on the outstanding Series A Preferred to the more favorable terms and conditions (“Superior Rights”). As a result, the initial conversion price on all Series A Preferred outstanding prior to the 2003 issuance was reduced from $0.75 to $0.10 per share and the exercise price of the warrants was reduced from $1.15 per share to $0.20 per share. We issued warrants to acquire 4,670,000 shares of Common Stock in connection with the new financing.

Acquisition of Universal Data Technology, Inc. Update

In July 2003, Axtive, UDT, and Universal Data Technology entered into a settlement agreement to resolve all outstanding obligations of the parties arising from the acquisition. We paid Universal Data Technology $310,000 in full and final payment of the purchase price for the acquisition.

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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

Name	Age	Position
Directors
Graham C. Beachum II	55	Chairman of the Board, President and Chief Executive Officer (1)
Ron Beneke	59	Director (1)(2)
Paul L. Morris	61	Director (1)
Brad A. Thompson	38	Director (1)(2)
Alan W. Tompkins	42	Director (1)(2)
Executive Officers
David N. Pilotte	45	Executive Vice President, Chief Financial Officer and Secretary
G.C. “Scooter” Beachum III	33	Executive Vice President and General Manager
Stanley D. Strifler	44	President, ThinkSpark Corporation
Key Employees
Kerry S. Osborne	43	Chief Technology Officer, ThinkSpark Corporation

(1) Member of the interim audit committee

(2) Member of the compensation committee

Set forth below is a description of the backgrounds of each of our directors, executive officers and key employees.

Graham C. Beachum II has been a director and the Chairman of the Board, President and Chief Executive Officer of Axtive since January 2001. From January 2000 to December 2000, Mr. Beachum was a private investor. From September 1996 to January 2000, Mr. Beachum was the Chairman and Chief Executive Officer of Axtive Software Corporation, a maker of customer relationship management software that was sold to Remedy Corporation in 2000. Mr. Beachum is the father of G.C. “Scooter” Beachum III, our Executive Vice President and General Manager.

Ron Beneke became a director of Axtive in May 2003 in connection with our additional sale of shares of Series A Preferred Stock. Since he founded the company in April 1992 Mr. Beneke has served as President of Beneke Companies, Inc., of Dallas, which is the general partner of Beneke/Krieg Company, a national real estate partnership whose primary business is the acquisition of apartment projects financed with tax-exempt housing bonds. Mr. Beneke’s 27 years of experience in the real estate industry include ten years in legal practice. He spent six years as managing partner of a forty-lawyer firm of which he was a founding member. Mr. Beneke is a member of the Management Committee of Demand Aggregation Solutions, LLC and a member of the Board of Directors of NetLink Transaction Services, LLC.

Paul L. Morris became a director of Axtive in May 2003 in connection with our additional sale of shares of Series A Preferred Stock. Mr. Morris has been President and CEO of Wagner & Brown, Ltd., a large, closely-held independent oil and gas company headquartered in Midland, Texas since 1994. Prior to joining Wagner & Brown, Mr. Morris served as President of Banner Energy and in management positions with Columbia Gas System. Mr.

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Morris currently holds Board positions with the Rawls College of Business at Texas Tech University, Memorial Hospital and Medical Center (Midland) and the Petroleum Museum of Midland, where he is President. He is a past President of the Permian Basin Petroleum Association and has served on the Boards of the Midland Chamber of Commerce and United Way. Mr. Morris is the father-in-law of G.C. “Scooter” Beachum III, our Executive Vice President and General Manager.

Brad A. Thompson became a director of Axtive in May 2003 in connection with our additional sale of shares of Series A Preferred Stock. Mr. Thompson, of St. Croix, U.S. Virgin Islands, has been the Chief Investment Officer and Chief Financial Analyst of Global Capital Advisors, LLC, a fund management firm that is the exclusive advisor to a Bermuda exempt investment fund and a licensed small business investment company, since 1998. Mr. Thompson is the former President of Time Plus of Athens, Georgia, a payroll and accounting firm, and he was also previously the Chief Financial Officer of AAPG, Inc., a specialty retail sporting goods firm. Mr. Thompson began his career with SunTrust, and has also held financial consulting and financial analyst positions with Merrill Lynch and SAFECO Insurance Company of America.

Alan W. Tompkins became a director of Axtive in May 2003 in connection with our additional sale of shares of Series A Preferred Stock. Mr. Tompkins has been Vice President and General Counsel of Unity Hunt, Inc. in Dallas since March 2003. In 2002, Mr. Tompkins practiced law for the firm of Hance Scarborough Wright Ginsberg & Brusilow LLP. Between 1997 and 2001, Mr. Tompkins served as associate general counsel to Richmont Corporation / Mary Kay Holding Corporation. Mr. Tompkins practiced law in Dallas for more than six years at firms including Weil Gotshal & Manges, with a focus on corporate merger and acquisition transactions, venture capital and private equity investments. Mr. Tompkins has extensive experience in the merchant banking business, where he worked primarily with companies in the manufacturing, distribution, financial and broadcast industries. Mr. Tompkins is a Certified Public Accountant and a former adjunct professor of business law at the Edwin L. Cox School of Business at SMU. He presently serves on the board of directors of the USA Film Festival and on the Judicial Nominating Commission for the City of Dallas.

David N. Pilotte has been Executive Vice President, Chief Financial Officer and Secretary of Axtive since July 2001. From June 1998 until after its sale in November 2000, Mr. Pilotte was Vice President and Corporate Controller of American Pad & Paper Company, a publicly held converter of paper products with revenues approaching $700 million annually. From April 1997 to April 1998 and prior to its sale to National Semiconductor, Mr. Pilotte was Corporate Controller of Cyrix Corporation, a publicly held company designing microprocessors for personal computers. From February 1992 to October 1996, Mr. Pilotte had Treasurer responsibilities for Baldor Electric Company, a publicly held manufacturer of industrial electric motors and drives. Mr. Pilotte has also served as an advisor to small and mid-sized businesses effecting financial and operational restructurings, raising private capital and serving as interim CFO.

G.C. “Scooter” Beachum III served as our Vice President and General Manager from January 2001 to June 2003. In June 2003, he was appointed as Executive Vice President and General Manager and designated an executive officer. Mr. Beachum began his career as the founder of “StreetSmart,” a technology product and pricing report that provided competitive intelligence to Dell Computer Corporation, IBM Corporation, Digital Equipment Corporation and other personal computer companies. In 1993, he sold his first entrepreneurial venture and shortly thereafter founded Axtive Software Corporation, with the development of “ART,” an embedded customer relationship solution that captures customer registration data and initiates ongoing licensing, marketing and service relationships. The “ART” product line was followed by “e.Monogram,” an E-business personalization application suite for business-to-business enterprises. After supporting customer organizations such as IBM and Lotus Development, Axtive Software Corporation’s technology and development operations were acquired by Remedy Corporation in 2000. Mr. Beachum is the son of Graham C. Beachum II and the son-in-law of Paul L. Morris.

Stanley D. Strifler has been the President of ThinkSpark Corporation since October, 2002 and was designated an executive officer of Axtive in June 2003. From 1999 to 2002, Mr. Strifler served as President and CEO of ePartners. Under his leadership, ePartners grew its team from 50 professionals and $17.0 million in revenue to more than 650 professionals with a revenue stream of $110.0 million. During this tenure, ePartners became the leading Microsoft Business Solutions partner in the world. From 1995 to 1999, Mr. Strifler served as Senior Vice President of Technology Solutions Company and was responsible for 550 professionals and $100 million in annual revenue. In 1984, Mr. Strifler founded The Strifler Group, growing it to 50 professionals and $8.0 million in revenue by 1992. Mr. Strifler began his career in 1977 at IBM as a systems engineer and worked for Ernst & Whinney as a senior consultant from 1981 to 1984.

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Kerry S. Osborne has been the Chief Technology Officer of ThinkSpark since May 2003 in connection with our acquisition of ThinkSpark. Mr. Osborne was a founder of ThinkSpark in 1987. Prior to starting ThinkSpark, Mr. Osborne worked for Standard Oil of Ohio as a Computer Geologist and Master Hospital Systems as an Oracle database consultant.

ELECTION OF DIRECTORS

Effective with our issuance of Series A Preferred Stock in May 2003, our board of directors was expanded from three to seven members. At the same time, two members of our board, J. Keith Benedict and John A. Wagner, resigned from the board and four new members were appointed to fill the new vacancies. There are currently two vacancies on the board of directors.

Pursuant to the terms and conditions of the Series A Preferred Stock, the holders of Series A Preferred Stock generally have the right to elect two members of our board of directors. The holders of shares of Series A Preferred Stock issued before May 1, 2003, as long as shares with a liquidation preference of at least $2.0 million, remain outstanding, have the right, voting separately as a class, to elect one member of the board of directors. The holders of shares of Series A Preferred Stock issued after May 1, 2003, as long as shares with a liquidation preference of at least $1.0 million remain outstanding, have the right, voting separately as a class.

In May 2003, the principal holders of Series A Preferred Stock, consisting of Sandera Partners, L.P., Global Capital Funding Group, L.P., GCA Strategic Investment Fund Limited and Demand Aggregation Solutions, LLC, entered into a Stockholders and Voting Agreement to exercise their rights to elect a total of two members of the board of directors by voting their shares of Axtive capital stock to elect independent directors to the board. For this purpose, an independent director is an individual who is not (1) an officer or director of the voting stockholder, the Company or any affiliate of either, (2) the holder of more than 10% of the voting power of the voting Stockholder, the Company or any Affiliate of either or (iii) a relative (as defined in the Stockholders and Voting Agreement) of the voting stockholder or any person described in the preceding clauses. These principal holders also agreed to vote their shares of Axtive capital stock to elect the individuals currently serving as directors to our board of directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports. Based solely on our review of copies of the reports filed with the SEC and written representations of our directors and executive offers, we believe that all persons subject to reporting filed the required reports on time in 2002.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The following table provides summary information concerning compensation paid by us to our Chief Executive Officer and our executive officers in 2002, if any, who earned more than $100,000 in salary and bonus for all services rendered in all capacities during the fiscal year ended December 31, 2002. We refer to the executive officers listed below as named executive officers. For a list of our current executive officers, see Item 9, “Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act—Directors, Executive Officers and Key Employees.”

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	Year	Annual Compensation		Long-term compensation awards	All other compen- sation
Name and Principal Position(s)		Salary		Securities underlying options (#)
Graham C. Beachum II	2002	$	100,000	—	$	—
President and Chief Executive Officer	2001		95,833	1,500,000		—
	2000		—	—		—
David N. Pilotte	2002	$	119,583	—	$	—
Executive Vice President,	2001		38,231	300,000		—
Chief Financial Officer and Secretary	2000		—	—		—
G. C. “Scooter” Beachum, III	2002	$	111,042	—	$	—
General Manager and Vice President	2001		91,041	750,000		—
	2000		—	—		—

In accordance with the rules of the SEC, other compensation in the form of perquisites and other personal benefits has been omitted for the named executive officers listed in the table above because the aggregate amount of these perquisites and other personal benefits was less than the lesser of $50,000 or 10% of the total of annual salary and bonuses for the named executive officer in 2002.

No restricted stock awards have been made to the named executive officers listed in the table above.

STOCK OPTIONS GRANTED DURING THE YEAR ENDED DECEMBER 31, 2002

There were no stock options granted to the named executive officers or significant employees in 2002.

OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

None of the named executive officers exercised any stock options during the year ended December 31, 2002. The following table provides information regarding the number of shares covered by both exercisable and unexercisable stock options as of December 31, 2002, and the values of “in-the-money” options, which values represent the positive spread between the exercise price of any such option and the fiscal year end value of our common stock.

	Number of securities underlying unexercised options at fiscal year-end		Value of the unexercised in-the-money options at fiscal year-end
Name	Exercisable	Unexercisable	Exercisable	Unexercisable
	#	#	$	$
Graham C. Beachum II	656,250	843,750	—	—
David N. Pilotte	103,125	196,875	—	—
Graham C. “Scooter” Beachum III	328,125	421,875	—	—

DIRECTOR COMPENSATION

Currently, our directors who are not our employees receive no compensation for their service as directors.

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EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS

Graham C. Beachum II. In January 2001, we entered into an employment agreement with Mr. Beachum to serve as our President and Chief Executive Officer. The agreement expires on January 2, 2005, unless terminated earlier. Under the agreement, Mr. Beachum is entitled to receive an annual base salary of $100,000, which will be increased to $240,000 upon the successful conclusion of an equity offering by Axtive of at least $10 million. The annual base salary will be increased by 5% each fiscal year. In addition, Mr. Beachum was granted options to purchase 1,500,000 shares of Axtive’s common stock at an exercise price of $1.50 per share, of which 25% vested upon the grant date and the remainder vests at the rate of 18.75% on January 2 of each successive year. Pursuant to the agreement, Mr. Beachum will also be eligible to receive a bonus based on our performance, as determined by the board of directors or its compensation committee. In the event that Mr. Beachum is terminated without cause, including a change of control (as defined in the agreement), or terminates his employment for good reason (as defined in the agreement), he will be entitled to receive as severance the amount of his base salary for (1) the remainder of his term of employment or (2) six months, whichever period is shorter. The agreement also contains customary nondisclosure and non-competition covenants, as well as an assignment of inventions. Mr. Beachum is the father of G.C. “Scooter” Beachum III, our Executive Vice President and General Manager.

G.C. “Scooter” Beachum III. In January 2001, we entered into an employment agreement with Mr. Scooter Beachum to serve as our Vice President and General Manager. The agreement expires on January 2, 2005, unless terminated earlier. Under the agreement, Scooter Beachum is entitled to receive an annual base salary of $95,000, which will be increased to $165,000 upon the successful conclusion of an equity offering by Axtive of at least $10 million. The annual base salary shall be increased by 5% each fiscal year. In addition, Scooter Beachum was granted options to purchase 750,000 shares of Axtive’s common stock at an exercise price of $1.50 per share, of which 25% vested upon the grant date and the remainder vests at the rate of 18.75% on January 2 of each successive year. Pursuant to the agreement, Scooter Beachum will also be eligible to receive a bonus based on our performance, as determined by the board of directors or its compensation committee. In the event that Scooter Beachum is terminated without cause, including a change of control (as defined in the agreement), or terminates his employment for good reason (as defined in the agreement), he will be entitled to receive as severance the amount of his base salary for (1) the remainder of his term of employment or (2) six months, whichever period is shorter. The agreement also contains customary nondisclosure and non-competition covenants, as well as an assignment of inventions. Mr. Beachum is the son of Graham C. Beachum II and the son-in-law of Paul L. Morris, one of our directors.

David N. Pilotte. In July 2001, we entered into an employment letter with Mr. Pilotte to serve as our Executive Vice President and Chief Financial Officer. Under the employment letter, Mr. Pilotte is entitled to receive an annual base salary of $105,000, which will be increased to $225,000 upon the successful conclusion of an equity offering by Axtive of at least $10 million. In addition, Mr. Pilotte was granted options to purchase 300,000 shares of Axtive’s common stock at an exercise price of $1.50 per share, of which 25% vested after 30 days of employment and remainder vests at the rate of 9.375% upon the completion of each additional quarter of employment. Mr. Pilotte also agreed to customary nondisclosure and non-competition covenants, as well as an assignment of inventions.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of July 10, 2003 (the “Ownership Date”) with respect to the beneficial ownership of our common stock and our Series A Preferred Stock by:

• each of our directors and named executive officers;

• all of our executive officers and directors as a group; and

• each person or group of affiliated persons known to us to own beneficially more than 5% of our common stock or our Series A Convertible Preferred Stock.

Unless otherwise indicated in the footnotes to the table, and subject to community property laws where applicable, the following persons have sole voting and investment control with respect to the shares beneficially owned by them. In accordance with SEC rules, if a person has a right to acquire beneficial ownership of any shares

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of common stock, on or within 60 days of the Ownership Date, upon (1) conversion of shares of Series A Convertible Preferred Stock, (2) exercise of outstanding options, (3) the exercise of common stock purchase warrants or (4) otherwise, the shares are deemed beneficially owned by that person, are deemed to be outstanding solely for the purpose of determining the percentage of our shares that person beneficially owns and are reflected in the table. These shares are not included in the computations of percentage ownership for any other person.

	Shares of Common Stock Beneficially Owned			Shares of Series A Convertible Preferred Stock Beneficially Owned			Percentage of Voting Power (1)
Person or Group	Number	Percent		Number	Percent
Directors and Named Executive Officers (2):
Graham C. Beachum II (3)	4,967,500	18.5	%	—	—		—
Ron Beneke (4)	12,000,000	35.3	%	1,200	17.7	%	13.4	%
Paul Morris (5)	1,058,500	4.6	%	100	1.5	%	1.2	%
Alan W. Tompkins	—	—		—	—		—
Bradley A. Thompson (6)	12,500,000	36.3	%	1,250	18.5	%	13.9	%
G.C. “Scooter” Beachum III (7)	5,666,424	21.0	%	300	4.4	%	3.6	%
David N. Pilotte (8)	1,087,500	4.7	%	—	—		—
All executive officers and directors as a group (8 persons) (9)	38,221,424	64.3	%	2,850	42.1	%	33.1	%
Beneficial Owners of 5% or More of Our Outstanding Common Stock or our Series A Convertible Preferred Stock:
Atlas Capital Services LLC (10)	1,250,000	5.7	%	—	—		1.4	%
Beachum Investments, LLC (11)(12)	3,600,000	14.1	%	360	5.3	%	4.0	%
IPL Management Company (11)(12)(13)	3,600,000	14.1	%	360	5.3	%	4.0	%
W. Robert Dyer, Jr. (11)(12)(13)	3,600,000	14.1	%	360	5.3	%	4.0	%
Demand Aggregation Solutions, LLC (14)	12,000,000	35.3	%	1,200	17.7	%	13.4	%
GCA Strategic Investment Fund Limited (15)	17,107,787	53.5	%	1,000	14.8	%	19.1	%
Global Capital Funding Group, L.P. (16)	12,500,000	36.3	%	1,250	18.5	%	14.0	%
Junerose Management Limited (17)	1,219,149	5.6	%	—	—		1.4	%
Kerry Osborne (18)	1,500,000	6.4	%	150	1.9	%	1.7	%
Merrill Lynch Business Financial Services, Inc. (19)	5,000,000	18.6	%	—	—		—
Sandera Partners, L.P. (20)(21)	26,037,036	57.1	%	2,250	33.2	%	27.7	%
Summit Capital Limited (20)	1,156,679	5.3	%	—	—		1.3	%

(1) Holders of common stock are entitled to one vote per share. Holders of Series A Preferred Stock are entitled to vote on an “as converted” basis. Conversion is determined by dividing the liquidation price with respect to the Series A Preferred Stock (which is equal to the issuance price of $1,000 per share plus any accrued, but unpaid dividends) by the conversion price, which is currently $0.10 per share. Assuming no accrued, but unpaid dividends, each share of Series A Preferred Stock is effectively convertible into 10,000 shares of common stock as of the Ownership Date. As of the Ownership Date, there were 21,956,445 shares of common stock and 6,775 shares of Series A Preferred Stock outstanding as of the Ownership Date. Therefore, as of the Ownership Date, for purposes of calculating the percentage of voting power held by any person or entity identified in the table, the total voting power outstanding was equal to 89,706,445, which is the sum of the total voting power attributable to the common stock (21,956,445) and the total voting power attributable to the Series A Preferred Stock (67,750,000). For purposes of calculating the percentage of voting power, any shares deemed beneficially owned by a listed person upon the exercise of options or warrants or based on other rights to acquire shares have been excluded.

(2) The address of each executive officer and director is c/o Axtive Corporation, 1445 Ross Avenue, Suite 4500, Dallas, Texas 75202.

(3) Includes options to purchase 4,967,500 shares of common stock that were exercisable on or within 60 days of the Ownership Date.

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(4) Includes shares of Series A Preferred Stock that were convertible into 12,000,000 shares of common stock on or within 60 days of the Ownership Date. The shares of Series A Preferred Stock are directly owned by Demand Aggregation Solutions, LLC, for which Mr. Beneke is a member of the management committee and, therefore, may be deemed to share voting and investment power with respect to the shares of common stock and the shares of Series A Preferred Stock. This filing should not be construed as an admission by Mr. Beneke that he is the beneficial owner of the shares of common stock or the shares of Series A Preferred Stock.

(5) Includes shares of Series A Preferred Stock that were convertible into 1,000,000 shares of common stock on or within 60 days of the Ownership Date.

(6) Includes shares of Series A Preferred Stock that were convertible into 12,500,000 shares of common stock on or within 60 days of the Ownership Date. The shares of Series A Preferred Stock are directly owned by Global Capital Funding Group, L.P., of which Mr. Thompson is indirectly a limited partner.

(7) Includes (a) 697,674 shares of common stock owned by TSTC International Holding Company (“TSTC”) which is wholly owned by Mr. Scooter Beachum, (b) options to purchase 2,468,750 shares of common stock that were exercisable on or within 60 days of the Ownership Date and (c) shares of Series A Preferred Stock that were convertible into 2,500,000 shares of common stock on or within 60 days of the Ownership Date. Of the 300 shares of Series A Preferred Stock reflected in the table, (x) directly owns 125 shares, (y) has an indirect beneficial ownership interest in 125 shares as a result of his membership interest in Beachum Investments, LLC, and (z) is deemed to beneficially own an additional 50 shares, which he has a right to acquire on or within 60 days of the Ownership Date.

(8) Includes options to purchase 1,087,500 shares of common stock that were exercisable on or within 60 days of the Ownership Date.

(9) Includes (i) 400,000 indirectly owned, (ii) options to purchase a total of 8,495,625 shares of common stock that were exercisable on or within 60 days of the Ownership Date, (iii) shares of Series A Preferred Stock that were convertible into a total of 29,000,000 shares of common stock on or within 60 days of the Ownership Date, and (iv) 297,674 shares subject to a right to acquire from the Company.

(10) The address of Atlas Capital Services LLC is 405 Lexington Avenue, 47th Floor, New York, New York 10017.

(11) The address is 4209 Lakeside Drive, Dallas, Texas 75219.

(12) Includes shares of Series A Preferred Stock that were convertible into 3,600,000 shares of common stock on or within 60 days of the Ownership Date. The shares of Series A Preferred Stock are directly owned by Beachum Investments, LLC. Information regarding this entity has been obtained from the Schedule 13D filed by Beachum Investments, IPL Management Company, and Robert Dyer, Jr. with the SEC on June 23, 2003.

(13) Mr. Dyer is the sole director, president and sole shareholder of IPL Management Company. IPL Management Company is the sole manager of Beachum Investments, LLC. Both Mr. Dyer and IPL Management Company may be deemed to have sole voting and investment power with respect to the shares of common stock and the shares of Series A Preferred Stock This filing should not be construed as an admission by Mr. Dyer or IPL Management Company that either is the beneficial owner of the shares of common stock or the shares of Series A Preferred Stock. Information regarding IPL and Mr. Dyer has been obtained from the Schedule 13D filed by Beachum Investments, IPL, and Mr. Dyer with the SEC on June 23, 2003.

(14) Includes shares of Series A Preferred Stock that were convertible into 12,000,000 shares of common stock on or within 60 days of the Ownership Date. The address of Demand Aggregation Solutions, LLC is 8080 North Central Expressway, Suite 1580, Dallas, Texas 75206-1881.

(15) Includes shares of Series A Preferred Stock that were convertible into 10,000,000 shares of common stock on or within 60 days of the Ownership Date. Information regarding this entity has been obtained from the Amendment No. 1 to Schedule 13D filed by the entity with the SEC on June 24, 2003. The address of GCA Strategic Investment Fund Limited is c/o Prince Management Ltd. Mechanics Building 12 Church Street Hamilton Bermuda HM 11.

(16) Includes shares of Series A Preferred Stock that were convertible into 12,500,000 shares of common stock on or within 60 days of the Ownership Date. Information regarding this entity has been obtained from the Schedule 13D filed by the entity with the SEC on July 2, 2003. The address of Global Capital Funding Group, L.P is 106 Colony Park Drive, Suite 900, Cummings, Georgia 30040.

(17) The address for Junerose Management Limited is 9 Buckingham Place, London SW1E 6HX

(18) Includes shares of Series A Preferred Stock that were convertible into 1,500,000 shares of common stock on or within 60 days of the Ownership Date. The address of Mr. Osborne is c/o ThinkSpark Corporation, 4835 LBJ Freeway, Dallas, Texas 75244.

(19) Includes warrants to purchase 5,000,000 shares of common stock that were exercisable on or within 60 days of the Ownership Date. The address of Merrill Lynch Business Financial Services, Inc. is 2 World Financial Center, Floor 5, New York, New York 10281-1008.

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(20) Sandera Partners, L.P. may be deemed to share voting and investment control with respect to 1,156,679 shares of common stock held by Summit Capital Limited; however, Sandera disclaims beneficial ownership of the shares of common stock held by Summit. In addition, certain controlling persons of Sandera—Sandera Capital Management L.P., Sandera Capital, L.L.C., Clark K. Hunt, and Barrett Wissman—may be deemed to share voting and investment control with respect to the shares of common stock and Series A Preferred Stock beneficially owned by Sandera and Summit; however, each of these controlling persons disclaims beneficial ownership of these shares. Information regarding Sandera and Summit has been obtained from the Amendment No. 4 to Schedule 13D, filed by them on July 10, 2003. The address of each of the entities is 1601 Elm Street, Suite 4000, Dallas, Texas 75201.

(21) Includes shares of Series A Preferred Stock that were convertible into 22,500,000 shares of common stock on or within 60 days of the Ownership Date.

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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

FINANCINGS

Infinity Financing and Conversion

In June 1997, we arranged a three-year $7.5 million debt and convertible equity facility (the “Infinity Financing”) with a group of investment funds led by Infinity Investors Limited, a related party, which resulted in net proceeds to us of approximately $7.2 million. Under a Securities Purchase Agreement, as amended, we issued to the investment funds 1,039,388 shares of our common stock, 6,000 shares of Series A-2 Convertible Preferred Stock with a liquidation preference of $1,000 per share and 8.25% Convertible Notes in the original principal amount of $1.5 million.

Under the terms of the investment agreements, the investment funds were granted the right to convert their Series A-2 Convertible Preferred Stock and Convertible Notes into additional shares of our common stock, subject to our right to prepay or redeem any of those convertible instruments at any time. Because our common stock was delisted from the Nasdaq SmallCap Market, an event of default existed under the Infinity Financing. As a result, the investment funds attained the right to convert each share of Series A-2 Convertible Preferred Stock into a number of shares of common stock based on a formula using a percentage of the market price of the common stock. In August 1999, one of the investment funds delivered a notice to us to convert 1,627 of its 4,400 shares of our Series A-2 Convertible Preferred Stock into 2,398,714 shares of our common stock. The conversion was disputed, and litigation ensued in the Delaware Court of Chancery. In January 2000, the court dismissed the action stating that the claim relating to the conversion was moot because parties to the dispute had resigned from their positions with Axtive.

In addition, because of the existence of an event of default under the Infinity Financing, the investment funds also attained the right to convert the Convertible Notes into common stock based on the same formula used to convert the Series A-2 Convertible Preferred Stock into shares of common stock during an event of default. Dividends on the Series A-2 Convertible Preferred Stock began accruing on January 1, 2000, at the rate of 8.25% annually and were payable quarterly in cash or in shares of common stock. We paid no dividends on the Series A-2 Convertible Preferred Stock. The Convertible Notes matured in June 2000 and interest on the notes was due in cash. The Convertible Notes were secured by all of our significant assets.

In June 2000, we recognized Infinity’s conversion of 1,627 shares of its Series A-2 Convertible Preferred Stock into 2,398,714 shares of Axtive’s common stock and issued the shares of common stock to Infinity.

As part of the reorganization of Axtive in September 2000, Infinity, Glacier Capital Limited and Summit Capital Limited, which were the holders of the Convertible Notes and shares of Series A-2 Convertible Preferred Stock issued by Axtive, converted all their remaining convertible securities and accrued interest and dividends based on a formula of one share of common stock for each $1.00 of principal and interest outstanding under the Convertible Notes and for each $1.00 of liquidation amount of the Series A-2 Convertible Preferred Stock and unpaid dividends. The number of shares of common stock issued upon this conversion was 6,689,165. As a result of these actions, as of September 2000, Axtive had no shares of preferred stock outstanding and no outstanding Convertible Notes and was no longer in default under the documents governing the Convertible Notes and the Series A-2 Convertible Preferred Stock. In connection with these actions, we recognized a conversion loss and a provision for preferred stock dividends on the conversion of debt and preferred stock of $4.8 million in 2000.

In December 2001, we learned that $91,000 in preferred dividends and interest were not paid in the September 2000 corporate reorganization. As a result, as of December 31, 2001, we issued 91,095 shares of Axtive common stock to Infinity, Glacier Capital Limited and Summit Capital Limited on the original terms of one share of common stock for each $1.00 of principal and dividends and interest converted in satisfaction of the obligation.

Infinity Option

In May 2001, we sold an option to Infinity in return for Infinity’s payment of $1.0 million payable in five equal payments of $200,000 beginning on May 31, 2001 (“Infinity Option”). Pursuant to the Infinity Option,

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Infinity could elect on May 31, 2002, to exercise its option by assigning to Axtive its interest in a note receivable of $10.0 million in exchange for 3,333,333 shares of Axtive common stock. We received $600,000 during 2001, which was recorded as paid-in capital. In March 2002, Infinity and Axtive mutually agreed to terminate the option.

2000 Infinity Loans

During 2000, Infinity made certain loans to us for working capital purposes. These loans totaled approximately $219,000 and bore interest at a rate equal to 8.5% per annum. As part of the reorganization of Axtive in September 2000, Infinity became entitled to the repayment of these loans. The loan agreement was renegotiated in April 2001 and again in January 2002 to extend the due date to March 31, 2002. Upon maturity, Infinity elected to convert the outstanding principal and interest totaling $258,000 into common stock at $0.65 per share resulting in our issuance of 397,637 shares.

PurchasePooling Investment

In September 2000, we issued 2,644,841 shares of Axtive common stock to PurchasePooling Investment Fund in return for 9,593,824 shares of Series A Convertible Preferred Stock of PurchasePooling Solutions, Inc., a start up web-based demand aggregator working toward enabling government and educational entities to save significantly on large-ticket capital items by combining their purchasing power nationwide and globally. In December 2000, we invested an additional $620,000 in PurchasePooling in return for 2,214,285 shares of its Series C Convertible Preferred Stock. As a result, at December 31, 2000, we had an approximately 18% ownership interest in PurchasePooling. In 2000, we entered into an agreement to acquire from Odyssey Ventures Online S.A. 975,000 shares of Series A Convertible Preferred Stock of PurchasePooling in exchange for 268,808 shares of Axtive common stock. In April 2001, the agreement was finalized and the shares of Axtive common stock were issued.

Based on a valuation obtained on PurchasePooling in July 2001, we determined that the investment was impaired. Accordingly, we recorded an impairment charge of $2.5 million.

In October 2001, we participated in the amount of $400,000 in a syndicated loan to PurchasePooling in the amount of $1,600,000. The loan, structured as a Convertible Note with Warrants, bore interest at 15% per annum, and if not converted earlier, would mature in October 2003. Because PurchasePooling was in its development stage and was not generating any cash flows, we had no expectation for repayment of the loan. We did not accrue interest on the note.

Based upon the ongoing evaluation of our investment in PurchasePooling, we determined in April 2002, that our investment was not recoverable. As a result, we wrote off the remaining $2,680,000 of our investment in PurchasePooling as of December 31, 2001. The write-off for the year 2001 was $5.2 million.

Through February 2003, Graham C. Beachum II was the interim Chief Executive Officer of PurchasePooling. In February 2003, the lenders to PurchasePooling (including Axtive) declared the loan to PurchasePooling in default and foreclosed upon the assets of the company. The previous lenders formed a new entity, Demand Aggregation Solutions, LLC (“DAS”), to hold the assets, and Axtive, under a management agreement, has agreed to manage the affairs of DAS in exchange for a management fee of $25,000 per month. Stemming from Axtive’s participation in the loan, the Company has a 25% membership interest in DAS that is subject to forfeiture if Axtive breaches its obligations under the management agreement. Additionally, the management agreement with DAS obligates Axtive to fund DAS’s working capital needs at a rate not exceeding, on average, $50,000 per month up to a maximum of $1.2 million over the three year life of the agreement.

Catalyst Loan

In December 2000, we entered into a loan agreement with Catalyst Master Fund, L.P., a related party, to borrow $620,000 (the “Catalyst Loan”). The Catalyst Loan was originally due on June 30, 2001, and bore interest at a rate equal to 8% per year. We used the proceeds of the Catalyst Loan to purchase 2,214,285 shares of Series C Convertible Preferred Stock of PurchasePooling.

The Catalyst Loan was convertible, at the option of Catalyst, into Axtive common stock at a conversion price of $1.50 per share and was secured by a pledge of substantially all of our assets. Effective in April 2001, we

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entered into an amended loan agreement with Catalyst that increased the borrowings available under the original loan agreement from $620,000 to a total of $2,120,000. The additional amount available under the amended loan agreement was also convertible into Axtive common stock at a conversion price of $1.50 per share and was secured by a pledge of substantially all of our assets. On December 28, 2001, Catalyst assigned the Catalyst Loan, and its rights thereunder, to Sandera Partners, L. P. (“Sandera”) as part of a redemption of Sandera’s limited partnership interest in Catalyst.

As part of our April 2002 Series A Preferred Stock financing, Sandera converted all outstanding principal and interest due on the loan (a total of $1.5 million) and contributed an additional amount of approximately $470,000 in cash in exchange for 2,000 shares of Series A Preferred Stock. See Item 6, “Management’s Discussion and Analysis or Plan of Operation—Liquidity and Capital Resources—2003 Series A Preferred Financing.”

Acquisition of “Axtive” Name

In June 2002, the Company acquired the name “Axtive” (pronounced “active”) and its related logo and trademark and certain tangible assets including furniture and fixtures, signage and office supplies from Axtive Software Corporation, as represented by it sole shareholder, G.C. “Scooter” Beachum III, our Executive Vice President and General Manager. The assets were acquired in exchange for an initial grant of 400,000 restricted shares of Axtive’s common stock, which was valued at approximately $168,000 at the time of acquisition. This amount was allocated between relative fair values of the intangible ($153,000) and tangible assets ($15,000) purchased by us.

AFFILIATE RELATIONSHIPS IN FINANCING TRANSACTIONS

Until the end of May 2003, J. Keith Benedict and John A. Wagner served as members of our board of directors and were representatives of the investment manager (or its affiliates) of H.W. Capital L.P. Concurrent with the May 2003 financing activities, Alan W. Tompkins became a member of our board of directors. Mr. Tompkins is Vice President and General Counsel of Unity Hunt, Inc., a Texas corporation owned by several trusts. Those trusts hold limited partnership interests in Sandera, which is one of our stockholders. Sandera was also a purchaser of additional shares of Series A Preferred Stock in May 2003.

Concurrent with the May 2003 financing activities, Ron Beneke became a member of our board of directors. Mr. Beneke is a member of the management committee of DAS, one of the purchasers of shares of Series A Preferred Stock in May 2003.

Concurrent with the May 2003 financing activities, Brad A. Thompson became a member of our board of directors. Mr. Thompson is an officer of Global Capital Advisors, LLC, which is an affiliate of GCA Strategic Fund Limited, one of the purchasers of shares of Series A Preferred Stock in April 2002 and May 2003.

G.C. “Scooter” Beachum III, our Executive Vice President, and Stanley D. Strifler, President of ThinkSpark Corporation, are each members of Beachum Investments, LLC, one of the purchasers of shares of Series A Preferred Stock in May 2003.

EMPLOYMENT RELATIONSHIPS

We have entered into employment agreements or employment letters with each of Graham C. Beachum II, G.C. “Scooter” Beachum III, David N. Pilotte, Stanley D. Strifler and Kerry S. Osborne. See Item 10, “Executive Compensation—Employment Contracts and Change-in-Control Arrangements” with respect to the employment arrangements with named executive officers.

ACQUISITION OF THINKSPARK CORPORATION

Prior to our acquisition of ThinkSpark Corporation in May 2003, Stanley D. Strifler, President of ThinkSpark, had a right to purchase certain capital stock from ThinkSpark pursuant to an October 2002 employment agreement with ThinkSpark. In connection with our acquisition, Mr. Strifler agreed to new employment terms with the surviving corporation, which superseded the previous employment agreement. He also agreed to waive any right

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to purchase capital stock of ThinkSpark in consideration of a promissory note from ThinkSpark for $135,000. The promissory note bears interest at 6% per year and is payable in monthly installments amortized over a five-month period.

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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed as part of this report as required by Item 601 of Regulation S-B.

Exhibit No.	Description
3.1	Certificate of Incorporation of Edge Technology Group, Inc., as amended (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge Technology Group, Inc. (changing the name of the Company from Edge Technology Group to Axtive Corporation) (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2002 filed with the SEC on November 14, 2002).
3.3	Amended and Restated By-Laws of the Company (filed herewith).
4.1	Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996).
4.2	Form of Common Stock Purchase Warrant issued to Vision Financial Group, Inc. (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 1997 and filed with the SEC on November 14, 1997).
4.3	Form of Subscription and Securities Purchase Agreement, dated April 1, 2002, between Edge Technology Group, Inc. and Purchasers as named therein (incorporated by reference to Exhibit 4.9 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 17, 2002).
4.4	Letter Agreement, dated April 1, 2002 pertaining to conversion of promissory note to Infinity into shares of Axtive common stock (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
4.5	Subscription and Securities Purchase Agreement, dated as of May 22, 2003, by and among Axtive, Demand Aggregation Solutions, LLC, Beachum Investments, LLC, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Kerry Osborne, and Graham C. Beachum III (incorporated by reference to Exhibit 3 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).
4.6	First Restated Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock of Axtive Corporation, dated May 23, 2003 (filed herewith).
4.7	Acknowledgement of Discharge of Indebtedness, Release of Claims and Agreement, dated as of May 22, 2003, by and among Graham C. Beachum II, Graham C. Beachum III, and Axtive (incorporated by reference to Exhibit 1 to the Schedule 13D dated May 23, 2003 and filed by Graham C. Beachum II with the SEC on June 2, 2003).
4.8	Acknowledgement of Discharge of Indebtedness, Release of Claims and Agreement, dated as of May 22, 2003, by and among Sandera Partners, L.P. and Axtive (filed herewith).
4.9	Registration Rights Agreement, dated May 23, 2003, by and among Axtive, Demand Aggregation Systems, LLC, Beachum Investments, LLC, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Kerry Osborne and Graham C. Beachum III (filed herewith).
4.10	Stockholders and Voting Agreement, dated as of May 23, 2003, among Sandera Partners, L.P., Global Capital Funding Group, L.P., GCA Strategic Investment Fund Limited, and Demand Aggregation Solutions, LLC (incorporated by reference to Exhibit 4 the Schedule 13D dated May 23, 2003 and filed by Demand Aggregation Systems, LLC with the SEC on June 20, 2003).
4.11	Form of Warrant to Purchase Common Stock of Axtive Corporation, dated as of May 23, 2003, as issued to May 2003 purchasers of Series A Preferred Stock (incorporated by reference to Exhibit 5 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).

61

Exhibit No.	Description
4.12	Restated Registration Rights Agreement, dated May 23, 2002, by and among Axtive, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Global Capital Funding Group, L.P., Paul Morris, Jack Brown, Alex Rankin, U.S. Technology Investors, Inc. and Rex Jobe (filed herewith).
4.13	Form of Restated Warrant to Purchase Common Stock of Axtive Corporation, dated as of May 23, 2003, as issued to 2002 purchasers of Series A Preferred Stock (filed herewith).
4.14	Subscription Agreement, dated May 22, 2003, by and between Axtive and Graham C. Beachum III (incorporated by reference to Exhibit 4 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).
10.1	Registration Rights Agreement, dated as of June 13, 1997, among Edge Investors Limited, Infinity EmergingOpportunities Limited, Sandera Partners, L.P. and Lion CapitalPartners, L.P. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated June 13, 1997 and filed with the SEC on June 23, 1997).
10.2	Registration Rights Agreement, dated as of March 27, 1998, among Edge and Marion Interglobal, Ltd. (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and filed with the SEC on April 8, 1998).
10.3	Form of Warrant Certificate (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated February 6, 1998 and filed with the SEC on February 9, 1998).
10.4	Note and Security Agreement dated as of December 14, 2000 between Edge and Catalyst Master Fund, L.P. (incorporated by reference to Exhibit 10.22 to the Company’s Report of Form 10-KSB for the year ended December 31, 2000 and filed with the SEC on April 17, 2001).
*10.5	Amended and Restated 1996 Stock Option Plan (incorporated by reference to our 1996 definitive Proxy Statement filed on April 7, 1997).
*10.6	2002 Stock Incentive Plan, adopted effective June 25, 2002 (incorporated by reference to Exhibit 10.27 of the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2002 and filed with the SEC on August 19, 2002).
*10.7	Amendment No. 1 to 2002 Stock Incentive Plan, dated effective as of May 23, 2003 (filed herewith).
*10.8	Employment Agreement, dated as of January 2, 2001, between Edge and Graham C. Beachum II (filed herewith).
*10.9	Employment Agreement, dated as of January 2, 2001, between Edge and Graham C. Beachum III (filed herewith).
*10.10	Employment letter, dated June 24, 2001, between Edge and David N. Pilotte (filed herewith).
10.11	Management Services Agreement, dated as of February 14, 2003, by and between Axtive and Demand Aggregation Solutions, LLC (incorporated by reference to Exhibit 1 the Schedule 13D dated May 23, 2003 and filed by Demand Aggregation Systems, LLC with the SEC on June 20, 2003).
10.12	Agreement and Plan of Merger, dated April 8, 2002, among Edge, Visionary Acquisition Corp., The Visionary Group, Inc. and The Visionary Group Shareholders (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
10.13	Agreement and Plan of Merger, dated April 11, 2002, among Edge Technology Group, Inc., Media Resolutions Acquisition Corp., Media Resolutions, Incorporated and Media Resolutions Shareholders (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
10.14	Agreement and Plan of Merger, dated May 30, 2002, among Edge Technology Group, Inc., VT Acquisition Corp., Virtually There, Inc. and the shareholders of Virtually There, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 30, 2002 and filed with the SEC on June 14, 2002).

62

Exhibit No.	Description
10.15	Asset Purchase Agreement, dated as of May 31, 2002, by and among Universal Data Technology, Inc., its Shareholders, Edge Technology Group, Inc. and UDT Consulting, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 30, 2002 and filed with the SEC on June 14, 2002).
10.16	Agreement and Plan of Merger by and among Axtive Corporation, Axtive Acquisition Corp., ThinkSpark Corporation and Kerry Osborne dated as of May 23, 2003 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 23, 2003 and filed with the SEC on June 9, 2003).
10.17	Assignment and Assumption Agreement, dated as of May 27, 2003, among ThinkSpark Corporation, ThinkSpark, L.P., Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.18	Term Loan Agreement, dated as of May 27, 2003, between Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.19	Debt Exchange Agreement, dated as of May 27, 2003, by and among ThinkSpark Corporation, Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.20	Warrant to Purchase Common Stock of Axtive Corporation, dated May 27, 2003, and issued to Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.21	Bill of Sale and Asset Purchase Agreement, dated as of June 21, 2002, by and between Axtive Software Corporation and Edge (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002, and filed with the SEC on August 19, 2002).
10.22	Factoring and Security Agreement, dated June 24, 2002, between UDT Consulting, Inc., and Landry Marks Partners, LP (incorporated by reference to Exhibit 10.29 of the Company’s Form 10-QSB for the quarterly period ended June 30, 2002 and filed with the SEC on August 19, 2002).
21.1	Subsidiaries of Axtive (filed herewith).
99.1	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

*Indicates management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K.

On June 9, 2003, Axtive filed a Form 8-K announcing the acquisition of ThinkSpark Corporation and its subsidiaries on May 23, 2003.

ITEM 14. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of a date within 90 days prior to the date of the filing of this report, that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by Axtive in such reports is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

63

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AXTIVE CORPORATION

/s/ Graham C. Beachum II

Graham C. Beachum II

Chairman of the Board, President and Chief Executive Officer

(principal executive officer)

July 18, 2003

/s/ David N. Pilotte

David N. Pilotte

Executive Vice President, Chief Financial Officer and Secretary

(principal financial and accounting officer)

July 18, 2003

In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Name	Title	Date
/s/ Graham C. Beachum II Graham C. Beachum II	Chief Executive Officer, President and Director (principal executive officer)	July 18, 2003
/s/ David N. Pilotte David N. Pilotte	Executive Vice President, Chief Financial Officer and Secretary (principal financial and accounting officer)	July 18, 2003
/s/ Ron Beneke Ron Beneke	Director	July 18, 2003
/s/ Paul L. Morris Paul L. Morris	Director	July 18, 2003
/s/ Brad A. Thompson Brad A. Thompson	Director	July 22, 2003
/s/ Alan W. Tompkins Alan W. Tompkins	Director	July 18, 2003

64

CERTIFICATIONS

I, Graham C. Beachum II, certify that:

1. I have reviewed this annual report on Form 10-KSB of Axtive Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 18, 2003

/s/ Graham C. Beachum II

Graham C. Beachum II

Chairman of the Board, President and Chief Executive Officer

65

I, David N. Pilotte, certify that:

1. I have reviewed this annual report on Form 10-KSB of Axtive Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 18, 2003

/s/ David N. Pilotte

David N. Pilotte

Executive Vice President, Chief Financial Officer and Secretary

66

EXHIBIT INDEX

Exhibit No.	Description
3.1	Certificate of Incorporation of Edge Technology Group, Inc., as amended (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge Technology Group, Inc. (changing the name of the Company from Edge Technology Group to Axtive Corporation) (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2002 filed with the SEC on November 14, 2002).
3.3	Amended and Restated By-Laws of the Company (filed herewith).
4.1	Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-5193) effective July 24, 1996).
4.2	Form of Common Stock Purchase Warrant issued to Vision Financial Group, Inc. (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 1997 and filed with the SEC on November 14, 1997).
4.3	Form of Subscription and Securities Purchase Agreement, dated April 1, 2002, between Edge Technology Group, Inc. and Purchasers as named therein (incorporated by reference to Exhibit 4.9 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 17, 2002).
4.4	Letter Agreement, dated April 1, 2002 pertaining to conversion of promissory note to Infinity into shares of Axtive common stock (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
4.5	Subscription and Securities Purchase Agreement, dated as of May 22, 2003, by and among Axtive, Demand Aggregation Solutions, LLC, Beachum Investments, LLC, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Kerry Osborne, and Graham C. Beachum III (incorporated by reference to Exhibit 3 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).
4.6	First Restated Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock of Axtive Corporation, dated May 23, 2003 (filed herewith).
4.7	Acknowledgement of Discharge of Indebtedness, Release of Claims and Agreement, dated as of May 22, 2003, by and among Graham C. Beachum II, Graham C. Beachum III, and Axtive (incorporated by reference to Exhibit 1 to the Schedule 13D dated May 23, 2003 and filed by Graham C. Beachum II with the SEC on June 2, 2003).
4.8	Acknowledgement of Discharge of Indebtedness, Release of Claims and Agreement, dated as of May 22, 2003, by and among Sandera Partners, L.P. and Axtive (filed herewith).
4.9	Registration Rights Agreement, dated May 23, 2003, by and among Axtive, Demand Aggregation Systems, LLC, Beachum Investments, LLC, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Kerry Osborne and Graham C. Beachum III (filed herewith).
4.10	Stockholders and Voting Agreement, dated as of May 23, 2003, among Sandera Partners, L.P., Global Capital Funding Group, L.P., GCA Strategic Investment Fund Limited, and Demand Aggregation Solutions, LLC (incorporated by reference to Exhibit 4 the Schedule 13D dated May 23, 2003 and filed by Demand Aggregation Systems, LLC with the SEC on June 20, 2003).
4.11	Form of Warrant to Purchase Common Stock of Axtive Corporation, dated as of May 23, 2003, as issued to May 2003 purchasers of Series A Preferred Stock (incorporated by reference to Exhibit 5 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).

1

Exhibit No.	Description
4.12	Restated Registration Rights Agreement, dated May 23, 2002, by and among Axtive, Sandera Partners, L.P., GCA Strategic Investment Fund Limited, Global Capital Funding Group, L.P., Paul Morris, Jack Brown, Alex Rankin, U.S. Technology Investors, Inc. and Rex Jobe (filed herewith).
4.13	Form of Restated Warrant to Purchase Common Stock of Axtive Corporation, dated as of May 23, 2003, as issued to 2002 purchasers of Series A Preferred Stock (filed herewith).
4.14	Subscription Agreement, dated May 22, 2003, by and between Axtive and Graham C. Beachum III (incorporated by reference to Exhibit 4 the Schedule 13D dated May 23, 2003 and filed by G.C. “Scooter” Beachum III with the SEC on June 5, 2003).
10.1	Registration Rights Agreement, dated as of June 13, 1997, among Edge Investors Limited, Infinity EmergingOpportunities Limited, Sandera Partners, L.P. and Lion CapitalPartners, L.P. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated June 13, 1997 and filed with the SEC on June 23, 1997).
10.2	Registration Rights Agreement, dated as of March 27, 1998, among Edge and Marion Interglobal, Ltd. (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and filed with the SEC on April 8, 1998).
10.3	Form of Warrant Certificate (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated February 6, 1998 and filed with the SEC on February 9, 1998).
10.4	Note and Security Agreement dated as of December 14, 2000 between Edge and Catalyst Master Fund, L.P. (incorporated by reference to Exhibit 10.22 to the Company’s Report of Form 10-KSB for the year ended December 31, 2000 and filed with the SEC on April 17, 2001).
*10.5	Amended and Restated 1996 Stock Option Plan (incorporated by reference to our 1996 definitive Proxy Statement filed on April 7, 1997).
*10.6	2002 Stock Incentive Plan, adopted effective June 25, 2002 (incorporated by reference to Exhibit 10.27 of the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2002 and filed with the SEC on August 19, 2002).
*10.7	Amendment No. 1 to 2002 Stock Incentive Plan, dated effective as of May 23, 2003 (filed herewith).
*10.8	Employment Agreement, dated as of January 2, 2001, between Edge and Graham C. Beachum II (filed herewith).
*10.9	Employment Agreement, dated as of January 2, 2001, between Edge and Graham C. Beachum III (filed herewith).
*10.10	Employment letter, dated June 24, 2001, between Edge and David N. Pilotte (filed herewith).
10.11	Management Services Agreement, dated as of February 14, 2003, by and between Axtive and Demand Aggregation Solutions, LLC (incorporated by reference to Exhibit 1 the Schedule 13D dated May 23, 2003 and filed by Demand Aggregation Systems, LLC with the SEC on June 20, 2003).
10.12	Agreement and Plan of Merger, dated April 8, 2002, among Edge, Visionary Acquisition Corp., The Visionary Group, Inc. and The Visionary Group Shareholders (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
10.13	Agreement and Plan of Merger, dated April 11, 2002, among Edge Technology Group, Inc., Media Resolutions Acquisition Corp., Media Resolutions, Incorporated and Media Resolutions Shareholders (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001 and filed with the SEC on April 16, 2002).
10.14	Agreement and Plan of Merger, dated May 30, 2002, among Edge Technology Group, Inc., VT Acquisition Corp., Virtually There, Inc. and the shareholders of Virtually There, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 30, 2002 and filed with the SEC on June 14, 2002).

2

Exhibit No.	Description
10.15	Asset Purchase Agreement, dated as of May 31, 2002, by and among Universal Data Technology, Inc., its Shareholders, Edge Technology Group, Inc. and UDT Consulting, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 30, 2002 and filed with the SEC on June 14, 2002).
10.16	Agreement and Plan of Merger by and among Axtive Corporation, Axtive Acquisition Corp., ThinkSpark Corporation and Kerry Osborne dated as of May 23, 2003 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 23, 2003 and filed with the SEC on June 9, 2003).
10.17	Assignment and Assumption Agreement, dated as of May 27, 2003, among ThinkSpark Corporation, ThinkSpark, L.P., Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.18	Term Loan Agreement, dated as of May 27, 2003, between Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.19	Debt Exchange Agreement, dated as of May 27, 2003, by and among ThinkSpark Corporation, Axtive and Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.20	Warrant to Purchase Common Stock of Axtive Corporation, dated May 27, 2003, and issued to Merrill Lynch Business Financial Services, Inc. (filed herewith).
10.21	Bill of Sale and Asset Purchase Agreement, dated as of June 21, 2002, by and between Axtive Software Corporation and Edge (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002, and filed with the SEC on August 19, 2002).
10.22	Factoring and Security Agreement, dated June 24, 2002, between UDT Consulting, Inc., and Landry Marks Partners, LP (incorporated by reference to Exhibit 10.29 of the Company’s Form 10-QSB for the quarterly period ended June 30, 2002 and filed with the SEC on August 19, 2002).
21.1	Subsidiaries of Axtive (filed herewith).
99.1	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

*Indicates management contract or compensatory plan or arrangement.

3

EX-3.3

Exhibit 3.3

AMENDED AND RESTATED

BY-LAWS

OF

AXTIVE CORPORATION

ARTICLE I

Stockholders

SECTION 1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date, at such time and at such place within or without the State of Delaware as may be designated by the Board of Directors, for the purpose of electing Directors and for the transaction of such other business as may be properly brought before the meeting.

SECTION 2. Special Meetings. Except as otherwise provided in the certificate of incorporation of the Corporation and any certificates of designation filed therewith (collectively, the “Certificate of Incorporation”), a special meeting of the stockholders of the Corporation may be called at any time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer and shall be called by the Chairman of the Board, the Chief Executive Officer or the Secretary at the request in writing of stockholders holding together at least twenty-five percent of the number of shares of stock outstanding and entitled to vote at such meeting. Any special meeting of the stockholders shall be held on such date, at such time and at such place within or without the State of Delaware as the Board of Directors or the officer calling the meeting may designate. At a special meeting of the stockholders, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting unless all of the stockholders are present in person or by proxy, in which case any and all business may be transacted at the meeting even though the meeting is held without notice.

SECTION 3. Notice of Meetings. Except as otherwise provided in these By-Laws or by law, a written notice of each meeting of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of the Corporation entitled to vote at such meeting at his address as it appears on the records of the Corporation. The notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

SECTION 4. Quorum. At any meeting of the stockholders, the holders of a majority in number of the total outstanding shares of stock of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum of the stockholders for all purposes, unless the representation of a larger number of shares shall be required by law, by the Certificate of Incorporation or by these By-Laws, in which case the representation of the number of shares so required shall constitute a quorum; provided that at any meeting of the stockholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a larger number of shares of such class shall be required by law, by the Certificate of Incorporation or by these By-Laws.

SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present in person or represented at any meeting of the stockholders, the holders of a majority in number of the shares of stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting may adjourn from time to time; provided, however, that if the holders of any class of stock of the Corporation are entitled to vote separately as a class upon any matter at such meeting, any adjournment of the meeting in respect of action by such class upon such matter shall be determined by the holders of a majority of the shares of such class present in person or represented by proxy and entitled to vote at such meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the stockholders, or the holders of any class of stock entitled to vote separately as a class, as the case may be, may transact any business which might have been transacted by them at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting.

SECTION 6. Organization. The Chairman of the Board or, in his absence, the Chief Executive Officer, or, in the absence of both the Chairman of the Board and the Chief Executive Officer, the President shall call all meetings of the stockholders to order, and shall act as Chairman of such meetings. In the absence of the Chairman of the Board, the Chief Executive Officer and the President, the holders of a majority in number of the shares of stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting shall elect a Chairman.

The Secretary of the Corporation shall act as Secretary of all meetings of the stockholders; but in the absence of the Secretary, the Chairman may appoint any person to act as Secretary of the meeting. It shall be the duty of the Secretary to prepare and make, at least ten days before every meeting of stockholders, a complete list of stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held, for the ten days next preceding the meeting, to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, and shall be produced and kept at the time and place of the meeting during the whole time thereof and subject to the inspection of any stockholder who may be present.

SECTION 7. Voting. Except as otherwise provided in the Certificate of Incorporation or by law, each stockholder shall be entitled to one vote for each share of the capital stock of the Corporation registered in the name of such stockholder upon the books of the Corporation. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. When directed by the presiding officer or upon the demand of any stockholder, the vote upon any matter before a meeting of stockholders shall be by ballot. Except as otherwise provided by law or by the Certificate of Incorporation,

2

Directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the stockholders entitled to vote in the election and, whenever any corporate action, other than the election of Directors is to be taken, it shall be authorized by a majority of the votes cast at a meeting of stockholders by the stockholders entitled to vote thereon.

Shares of the capital stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.

SECTION 8. Inspectors. When required by law or directed by the presiding officer or upon the demand of any stockholder entitled to vote, but not otherwise, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided at any meeting of the stockholders by two or more Inspectors who may be appointed by the Board of Directors before the meeting, or if not so appointed, shall be appointed by the presiding officer at the meeting. If any person so appointed fails to appear or act, the vacancy may be filled by appointment in like manner.

SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken or which may be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of any such corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE II

Board of Directors

SECTION 1. Number and Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, none of whom need be stockholders of the Corporation. The number of Directors constituting the Board of Directors shall be fixed from time to time by resolution passed by a majority of the Board of Directors. The Directors shall, except as hereinafter otherwise provided for filling vacancies, be elected at the annual meeting of stockholders, and shall hold office until their respective successors are elected and qualified or until their earlier resignation or removal.

SECTION 2. Removal, Vacancies and Additional Directors. The stockholders may, at any special meeting the notice of which shall state that it is called for that purpose, remove, with or without cause, any Director and fill the vacancy; provided that whenever any Director shall have been elected by the holders of any class of stock of the Corporation voting separately as a class under the provisions of the Certificate of Incorporation, such Director may be removed and the vacancy filled only by the holders of that class of stock voting separately as a class. Vacancies caused by any such removal and not filled by the stockholders at the meeting at which

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such removal shall have been made, or any vacancy caused by the death or resignation of any Director or for any other reason, and any newly created directorship resulting from any increase in the authorized number of Directors, may be filled by the affirmative vote of a majority of the Directors then in office, although less than a quorum, and any Director so elected to fill any such vacancy or newly created directorship shall hold office until his successor is elected and qualified or until his earlier resignation or removal.

When one or more Directors shall resign effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office as herein provided in connection with the filling of other vacancies.

SECTION 3. Place of Meeting. The Board of Directors may hold its meetings in such place or places in the State of Delaware or outside the state of Delaware as the Board from time to time shall determine.

SECTION 4. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the Board from time to time by resolution shall determine. No notice shall be required for any regular meeting of the Board of Directors; but a copy of every resolution fixing or changing the time or place of regular meetings shall be mailed to every Director at least five days before the first meeting held in pursuance thereof.

SECTION 5. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by direction of the Chairman of the Board, the Chief Executive Officer, the President or by any two of the Directors then in office. Notice of the day, hour and place of holding of each special meeting shall be given by mailing the same at least two days before the meeting or by causing the same to be transmitted by telegraph, cable or wireless at least one day before the meeting to each Director. Unless otherwise indicated in the notice thereof, any and all business other than an amendment of these By-Laws may be transacted at any special meeting, and an amendment of these By-Laws may be acted upon if the notice of the meeting shall have stated that the amendment of these By-Laws is one of the purposes of the meeting. At any meeting at which every Director shall be present, even though without any notice, any business may be transacted, including the amendment of these By-Laws.

SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article II, a majority of the members of the Board of Directors in office (but, unless the Board shall consist solely of one Director, in no case less than one-third of the total number of Directors nor less than two Directors) shall constitute a quorum for the transaction of business and the vote of the majority of the Directors present at any meeting of the Board of Directors at which a quorum is present shall be the act of the Board of Directors. If at any meeting of the Board there is less than a quorum present, a majority of those present may adjourn the meeting from time to time.

SECTION 7. Organization. The Chairman of the Board or, in his absence, the Chief Executive Officer, or, in the absence of both the Chairman of the Board and the Chief Executive Officer, the President shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the Chief Executive Officer and the President, a Chairman shall be

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elected from the Directors present. The Secretary of the Corporation shall act as Secretary of all meetings of the Directors; but in the absence of the Secretary, the Chairman may appoint any person to act as Secretary of the meeting.

SECTION 8. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided by resolution passed by a majority of the whole Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and the affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these By-Laws; and unless such resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.

SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, the members of the Board of Directors or any committee designated by the Board, may participate in a meeting of the Board or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.

SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.

ARTICLE III

Officers

SECTION 1. Officers. The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a Chief Operating Officer, a President, one or more Vice Presidents, a Secretary and a Treasurer, and such additional officers, if any, as shall be elected by the Board of Directors pursuant to the provisions of Section 9 of this Article III. The Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer, the President, one or more Vice Presidents, the Secretary and the Treasurer shall be elected by the Board of Directors at its first

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meeting after each annual meeting of the stockholders. The failure to hold such election shall not of itself terminate the term of office of any officer. All officers shall hold office at the pleasure of the Board of Directors. Any officer may resign at any time upon written notice to the Corporation. Officers may, but need not, be Directors. Any number of offices may be held by the same person.

All officers, agents and employees shall be subject to removal, with or without cause, at any time by the Board of Directors. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. All agents and employees other than officers elected by the Board of Directors shall also be subject to removal, with or without cause, at any time by the officers appointing them.

Any vacancy caused by the death of any officer, his resignation, his removal, or otherwise, may be filled by the Board of Directors, and any officer so elected shall hold office at the pleasure of the Board of Directors.

In addition to the powers and duties of the officers of the Corporation as set forth in these By-Laws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board of Directors.

SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and at all meetings of the Board of Directors and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors.

SECTION 3. Powers and Duties of the Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of Chief Executive Officer. In the absence of the Chairman of the Board he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors.

SECTION 4. Powers and Duties of the Chief Operating Officer. The Chief Operating Officer shall be the chief operating officer of the Corporation and, subject to the control of the Board of Directors and the Chief Executive Officer, shall have general charge and control of all its operations, shall have all powers and shall perform all duties incident to the office of Chief Operating Officer and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws, by the Board of Directors or by the Chief Executive Officer.

SECTION 5. Powers and Duties of the President. In the absence of the Chairman of the Board and the Chief Executive Officer, the President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors and shall have such other powers and

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perform such other duties as may from time to time be assigned to him by these By-Laws, by the Board of Directors, by the Chairman of the Board or by the Chief Executive Officer.

SECTION 6. Powers and Duties of the Vice Presidents. Each Vice President shall have all powers and shall perform all duties incident to the office of Vice President and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

SECTION 7. Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the stockholders in books provided for that purpose; he shall attend to the giving or serving of all notices of the Corporation; he shall have custody of the corporate seal of the Corporation and shall affix the same to such documents and other papers as the Board of Directors, the Chief Executive Officer or the President shall authorize and direct; he shall have charge of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors, the Chief Executive Officer or the President shall direct, all of which shall at all reasonable times be open to the examination of any Director, upon application, at the office of the Corporation during business hours; and whenever required by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President shall render statements of such accounts; and he shall have all powers and shall perform all duties incident to the office of Secretary and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

SECTION 8. Powers and Duties of the Treasurer. The Treasurer shall have custody of, and when proper shall pay out, disburse or otherwise dispose of, all funds and securities of the Corporation which may have come into his hands; he may endorse on behalf of the Corporation for collection checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank or banks or depositary or depositaries as the Board of Directors may designate; he shall sign all receipts and vouchers for payments made to the Corporation; he shall enter or cause to be entered regularly in the books of the Corporation kept for the purpose full and accurate accounts of all moneys received or paid or otherwise disposed of by him and whenever required by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President shall render statements of such accounts; he shall, at all reasonable times, exhibit his books and accounts to any Director of the Corporation upon application at the office of the Corporation during business hours; and he shall have all powers and he shall perform all duties incident to the office of Treasurer and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

SECTION 9. Additional Officers. The Board of Directors may from time to time elect such other officers (who may but need not be Directors), including a Controller, Assistant Treasurers, Assistant Secretaries and Assistant Controllers, as the Board may deem advisable and such officers shall have such authority and shall perform such duties as may from time to time

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be assigned to them by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

The Board of Directors may from time to time by resolution delegate to any Assistant Treasurer or Assistant Treasurers any of the powers or duties herein assigned to the Treasurer; and may similarly delegate to any Assistant Secretary or Assistant Secretaries any of the powers or duties herein assigned to the Secretary.

SECTION 10. Giving of Bond by Officers. All officers of the Corporation, if required to do so by the Board of Directors, shall furnish bonds to the Corporation for the faithful performance of their duties, in such penalties and with such conditions and security as the Board shall require.

SECTION 11. Voting Upon Stocks. Unless otherwise ordered by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or in the name of the Corporation to execute proxies to vote, at any meeting of stockholders of any corporation in which the Corporation may hold stock, and at any such meeting shall possess and may exercise, in person or by proxy, any and all rights, powers and privileges incident to the ownership of such stock. The Board of Directors may from time to time, by resolution, confer like powers upon any other person or persons.

SECTION 12. Compensation of Officers. The officers of the Corporation shall be entitled to receive such compensation for their services as shall from time to time be determined by the Board of Directors.

ARTICLE IV

Indemnification of Directors and Officers

SECTION 1. Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall be limited to expenses (including attorneys’

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fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

SECTION 2. Successful Defense. To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article IV or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

SECTION 3. Determination that Indemnification is Proper. Any indemnification of a Director or officer of the Corporation under Section 1 of this Article IV (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the Director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Section 1. Any indemnification of an employee or agent of the Corporation under Section 1 (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1. Any such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders.

SECTION 4. Advance Payment of Expenses. Unless the Board of Directors otherwise determines in a specific case, expenses incurred by a Director or officer in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article IV. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the Corporation’s legal counsel to represent such Director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

SECTION 5. Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each Director, officer, employee and agent who serves in any such capacity at any time while these provisions as well

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as the relevant provisions of the Delaware General Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such Director, officer, employee or agent.

The indemnification provided by this Article IV shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The corporation may enter into an agreement with any of its Directors, officers, employees or agents providing for indemnification and advancement of expenses, including attorneys fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article IV.

SECTION 6. Severability. If this Article IV or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article IV that shall not have been invalidated and to the fullest extent permitted by applicable law.

SECTION 7. Subrogation. In the event of payment of indemnification to a person described in Section 1 of this Article IV, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery.

SECTION 8. No Duplication of Payments. The Corporation shall not be liable under this Article IV to make any payment in connection with any claim made against a person described in Section 1 of this Article IV to the extent such person has otherwise received payment (under any insurance policy, by-law or otherwise) of the amounts otherwise payable as indemnity hereunder.

ARTICLE V

Stock-Seal-Fiscal Year

SECTION 1. Certificates For Shares of Stock. The certificates for shares of stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be approved by the Board of Directors. All certificates shall be signed by the Chairman of the

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Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not be valid unless so signed.

In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer or officers of the Corporation.

All certificates for shares of stock shall be consecutively numbered as the same are issued. The name of the person owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the books of the Corporation.

Except as hereinafter provided, all certificates surrendered to the Corporation for transfer shall be cancelled, and no new certificates shall be issued until former certificates for the same number of shares have been surrendered and cancelled.

SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a certificate for shares of stock of the Corporation alleges that it has been lost, stolen or destroyed, he shall file in the office of the Corporation an affidavit setting forth, to the best of his knowledge and belief, the time, place and circumstances of the loss, theft or destruction, and, if required by the Board of Directors, a bond of indemnity or other indemnification sufficient in the opinion of the Board of Directors to indemnify the Corporation and its agents against any claim that may be made against it or them on account of the alleged loss, theft or destruction of any such certificate or the issuance of a new certificate in replacement therefor. Thereupon the Corporation may cause to be issued to such person a new certificate in replacement for the certificate alleged to have been lost, stolen or destroyed. Upon the stub of every new certificate so issued shall be noted the fact of such issue and the number, date and the name of the registered owner of the lost, stolen or destroyed certificate in lieu of which the new certificate is issued.

SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof, in person or by his attorney duly authorized in writing, upon surrender and cancellation of certificates for the number of shares of stock to be transferred, except as provided in Section 2 of this Article IV.

SECTION 4. Regulations. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation.

SECTION 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, as the case may be, the Board of Directors may fix, in advance, a record date, which shall

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not be (i) more than sixty (60) nor less than ten (10) days before the date of such meeting, or (ii) in the case of corporate action to be taken by consent in writing without a meeting, prior to, or more than ten (10) days after, the date upon which the resolution fixing the record date is adopted by the Board of Directors, or (iii) more than sixty (60) days prior to any other action.

If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is delivered to the Corporation; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 6. Dividends. Subject to the provisions of the Certificate of Incorporation, the Board of Directors shall have power to declare and pay dividends upon shares of stock of the Corporation, but only out of funds available for the payment of dividends as provided by law. Subject to the provisions of the Certificate of Incorporation, any dividends declared upon the stock of the Corporation shall be payable on such date or dates as the Board of Directors shall determine. If the date fixed for the payment of any dividend shall in any year fall upon a legal holiday, then the dividend payable on such date shall be paid on the next day not a legal holiday.

SECTION 7. Corporate Seal. The Board of Directors shall provide a suitable seal, containing the name of the Corporation, which seal shall be kept in the custody of the Secretary. A duplicate of the seal may be kept and be used by any officer of the Corporation designated by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be such fiscal year as the Board of Directors from time to time by resolution shall determine.

ARTICLE VI

Miscellaneous Provisions

SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board of Directors, countersigned by such officers of the Corporation and/or other persons as the Board of Directors from time to time shall designate.

Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Treasurer and/or such other officers or persons as the Board of Directors from time to time may designate.

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SECTION 2. Loans. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board of Directors. When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances.

SECTION 3. Contracts. Except as otherwise provided in these By-Laws or by law or as otherwise directed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed thereto by any of such officers or the Secretary or an Assistant Secretary. The Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President designated by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board or any such officer may be general or confined to specific instances.

SECTION 4. Waivers of Notice. Whenever any notice whatever is required to be given by law, by the Certificate of Incorporation or by these By-Laws to any person or persons, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

SECTION 5. Offices Outside of Delaware. Except as otherwise required by the laws of the State of Delaware, the Corporation may have an office or offices and keep its books, documents and papers outside of the State of Delaware at such place or places as from time to time may be determined by the Board of Directors or the Chairman of the Board.

ARTICLE VII

Amendments

These By-Laws and any amendment thereof may be altered, amended or repealed, or new By-Laws may be adopted, by the Board of Directors at any regular or special meeting by the affirmative vote of a majority of all of the members of the Board, provided in the case of any special meeting at which all of the members of the Board are not present, that the notice of such meeting shall have stated that the amendment of these By-Laws was one of the purposes of the meeting; but these By-Laws and any amendment thereof, may be altered, amended or repealed or new By-Laws may be adopted by the holders of a majority of the total outstanding stock of the Corporation entitled to vote at any annual meeting or at any special meeting, provided, in the

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case of any special meeting, that notice of such proposed alteration, amendment, repeal or adoption is included in the notice of the meeting.

CERTIFICATION

I, David N. Pilotte, Secretary of the Corporation, hereby certify that the foregoing is a true, accurate and complete copy of the Amended and Restated Bylaws of Axtive Corporation, adopted by its Board of Directors as of May 23, 2002.

           /s/ DAVID N. PILOTTE        

David N. Pilotte

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EX-4.6

Exhibit 4.6

FIRST RESTATED

CERTIFICATE OF DESIGNATION, PREFERENCE AND RIGHTS OF SERIES A

CONVERTIBLE PREFERRED STOCK OF AXTIVE CORPORATION

Dated: May 23, 2003

This First Restated Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock (this “Restated Certificate”) of Axtive Corporation (formerly known as Edge Technology Group, Inc.) amends and restates in its entirety that certain Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock of Edge Technology Group, Inc., filed March 25, 2002.

(A) Classes of Stock. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is one hundred and five million (105,000,000) shares, one hundred million (100,000,000) shares of which shall be Common Stock and five million (5,000,000) shares of which shall be Preferred Stock, which may be issued from time to time in one or more series with such rights, privileges, preferences, and restrictions as shall be stated and expressed in this Certificate of Designation or in any amendment hereto, or in a resolution duly adopted by the Board of Directors of the Corporation.

(B) Rights, Preferences and Restrictions of Series A Convertible Preferred Stock. The first series of Preferred Stock shall be designated “Series A Convertible Preferred Stock” and shall consist of Fifteen Thousand (15,000) shares, $0.01 par value per share, issued at a price of one thousand dollars ($1,000) per share (the “Issuance Price”). The rights, preferences, privileges, and restrictions granted to and imposed on the Series A Convertible Preferred Stock are as set forth below:

SERIES A CONVERTIBLE PREFERRED STOCK

1. Cumulative Dividend Provisions. The holders of shares of Series A Convertible Preferred Stock shall be entitled to receive cumulative dividends out of any assets legally available therefor, in cash or dividends in kind, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock of the Corporation, at the rate of eight percent (8%) per share (as adjusted for stock splits, stock dividends, reclassification and the like) per annum on each outstanding share of Series A Convertible Preferred Stock, payable quarterly as declared by the Board of Directors in accordance with applicable law, and such dividends shall be cumulative. Any dividends payable in kind shall be payable by issuing additional fully paid and nonassessable shares of Series A Convertible Preferred Stock at an annual rate of 0.08 of one share for each outstanding share of Series A Convertible Preferred Stock for which a dividend is payable. The issuance of such additional shares shall constitute full payment of such dividend.

2. Liquidation.

(a) Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Series A Convertible Preferred Stock

shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the Issuance Price (as adjusted for stock splits, stock dividends, reclassification of the Series A Convertible Preferred Stock and the like) for each share of Series A Convertible Preferred Stock then held by them, plus accrued but unpaid dividends (the “Liquidation Preference”). If, upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Convertible Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series A Convertible Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.

(b) Remaining Assets. Upon the completion of the distribution required by Section 2(a) above, if assets remain in the Corporation, the holders of the Common Stock of the Corporation shall receive all of the remaining assets of the Corporation.

(c) Certain Acquisitions.

(i) Deemed Liquidation. For purposes of this Section 2, a liquidation, dissolution or winding up of the Corporation shall be deemed to occur if the Corporation shall sell, convey, or otherwise dispose of all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation will not, immediately after such acquisition or transaction be held by the Corporation’s stockholders of record as constituted immediately prior to such acquisition or transaction, provided that this Section 2(c)(i) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Corporation.

(ii) Valuation of Consideration. In the event of a deemed liquidation as described in Section 2(c)(i) above, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

(A) Securities not subject to investment letter or other similar restrictions on free marketability:

(1) If traded on a securities exchange or The Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

(2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

(3) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Corporation.

(B) The method of valuation of securities subject to investment letter or other on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Section 2(c)(ii)(A) to reflect the approximate fair market value thereof, as determined in good faith by the Corporation.

(iii) Notice of Transaction. The Corporation shall give each holder of record of Series A Convertible Preferred Stock written notice of a deemed liquidation transaction as described in Section 2(c)(i) above (a “Notice of Liquidation Event”) not later than ten (10) days prior to the stockholders’ meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than ten (10) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series A Convertible Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least two-thirds (2/3) of the voting power of all then outstanding shares of such Series A Convertible Preferred Stock.

(iv) Effect of Noncompliance. In the event the requirements of this Section 2(c) are not complied with, the Corporation shall forthwith either cause the closing of the transaction to be postponed until such requirements have been complied with, or cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A Convertible Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the Notice of Liquidation Event.

(v) Conversion. Upon receipt of a Notice of Liquidation Event, each holder of Series A Convertible Preferred Stock shall have the right to elect to convert any or all of such holder’s shares of Series A Convertible Preferred Stock as provided for in Section 4 below in lieu of receiving the Liquidation Preference the holder is otherwise entitled to receive. The right to convert the shares of Series A Convertible Preferred provided for in this Section 2(c)(v) may be exercised irrespective of the prohibition on

conversion prior to the first anniversary of the Issuance Date provided for in Section 4, below.

3. Voting Rights.

(a) General Voting Rights. The holder of each share of Series A Convertible Preferred Stock shall have the right to one vote for each share of Common Stock into which such Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional voting shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series A Convertible Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Accordingly, the holders of shares of Series A Convertible Preferred Stock shall not be entitled to vote on any matter as a class except as expressly set forth in this instrument.

(b) Voting for Election of Directors. So long as shares of Series A Convertible Preferred Stock with an original issuance date prior to May 1, 2003 (including any Preferred Stock delivered at any time in substitution or exchange therefore, the “Series A-1 Stock”) having a Liquidation Preference in the aggregate of at least $2,000,000 remains outstanding, the holders of Series A-1 Stock, separately as a voting class, shall be entitled, by the affirmative vote of such holders representing a simple majority (greater than 50%) of such shares of Series A-1 Stock then outstanding, to elect one (1) individual to serve as a Director of the Corporation (with such holders of Series A-1 Stock, by like vote of holders representing a simple majority of such outstanding shares, having the right to remove and replace, with or without cause, such individual from the Board of Directors by written notice to the Corporation).

So long as shares of Series A Convertible Preferred Stock with an original issuance date after May 1, 2003 (including any Preferred Stock delivered at any time in substitution or exchange therefore, the “Series A-2 Stock”) having a Liquidation Preference in the aggregate of at least $1,000,000 remains outstanding, the holders of Series A-2 Stock, separately as a voting class, shall be entitled, by the affirmative vote of such holders representing a simple majority (greater than 50%) of such shares of Series A-2 Stock then outstanding, to elect one (1) individual to serve as a Director of the Corporation (with such holders of Series A-2 Stock, by like vote of holders representing a simple majority of such outstanding shares, having the right to remove and replace, with or without cause, such individual from the Board of Directors by written notice to the Corporation).

The provisions of this Section 3(b) may not be amended or otherwise modified without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least seventy-five percent (75%) of the then outstanding shares of such Series A Convertible Preferred Stock, voting together as a class.

4. Conversion. The holders of the Series A Convertible Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert. Subject to Section 4(c), each share of Series A Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the first anniversary of the date the first shares of Series A Convertible Preferred Stock have been issued (the “Issuance Date”), at the office of the Corporation or any transfer agent for such stock, into that number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Liquidation Preference by the Conversion Price applicable to such shares, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. As of the date of this Restated Certificate, the initial Conversion Price per share of Series A Convertible Preferred Stock shall be ten cents ($0.10). Such initial Conversion Price shall be subject to adjustment as set forth in Section 4(d).

(b) Automatic Conversion. Each share of Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Price at the time in effect for such share immediately upon the date specified by written consent or agreement of the holders of seventy-five percent (75%) of the then outstanding shares of Series A Convertible Preferred Stock.

(c) Mechanics of Conversion. Before any holder of Series A Convertible Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for Series A Convertible Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Convertible Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

(d) Conversion Price Adjustments for Certain Issuances, Splits and Combinations. The Conversion Price of the Series A Convertible Preferred Stock shall be subject to adjustment from time to time as follows:

(i) Stock Splits and Dividends. In the event the Corporation should at any time or from time to time after the Issuance Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series A Convertible Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on

conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time as provided in Section 4(d)(iii) below.

(ii) Reverse Stock Splits. If the number of shares of Common Stock outstanding at any time after the Issuance Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series A Convertible Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

(iii) The following provisions shall apply for purposes of this Section 4(d):

(A) The aggregate maximum number of shares of Common Stock deliverable upon conversion or exercise of Common Stock Equivalents (assuming the satisfaction of any conditions to convertibility or exercisability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) shall be deemed to have been issued at the time such Common Stock Equivalents were issued.

(B) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon conversion or exercise of such Common Stock Equivalents including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price of the Series A Convertible Preferred Stock, to the extent in any way affected by or computed using such Common Stock Equivalents, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.

(C) Upon the termination or expiration of the convertibility or exercisability of any such Common Stock Equivalents, the Conversion Price of the Series A Convertible Preferred Stock, to the extent in any way affected by or computed using such Common Stock Equivalents, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and Common Stock Equivalents which remain convertible or exercisable) actually issued upon the conversion or exercise of such Common Stock Equivalents.

(e) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 4(d)(i), then, in each such case for the purpose of this Section 4(e), the holders of Series A Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the

number of shares of Common Stock of the Corporation into which their shares of Series A Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.

(f) Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or Section 2) provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of such Series A Convertible Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of such Series A Convertible Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of such Series A Convertible Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(g) Conversion Price Adjustments; Below Conversion Price Issuances. In case at any time after the date of this Restated Certificate the Corporation issues any shares of Common Stock or debt or equity securities convertible into or exchangeable or exercisable for shares of Common Stock (hereinafter “Derivative Securities” and the number of shares so issued, or issuable upon conversion or exercise of such Derivative Securities, as applicable, being referred to as “Additional Shares of Common Stock”) for consideration less than the Conversion Price then in effect at the date of issuance of such shares of Common Stock or such Derivative Securities, in each such case the Conversion Price shall, concurrently with such issuance, be adjusted by multiplying the Conversion Price immediately prior to such event by a fraction: (i) the numerator of which shall be the number of shares of Common Stock calculated on a fully diluted basis giving effect to all derivative securities outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus the number of shares of Common Stock that the aggregate consideration received by the Corporation for the total number of such Additional Shares of Common Stock so issued would purchase at the then current Conversion Price and (ii) the denominator of which shall be the number of shares of Common Stock calculated on a fully diluted basis giving effect to all derivative securities outstanding immediately prior to the issuance of Additional Shares of Common Stock plus the number of such Additional Shares of Common Stock so issued or sold. Notwithstanding the foregoing, no adjustment to the Conversion Price shall be made under the terms of this Section 4(g) for the following issuances:

(i) any issuance of Additional Shares to employees, officers, contractors, consultants and directors pursuant to option grants, employment or consulting agreements or similar agreements pursuant to terms and conditions approved by the Board of Directors;

(ii) any issuance of a warrant or warrants representing less than one percent 1% of the issued and outstanding Common Stock of the Corporation issued to lenders, financing sources or bona fide vendors of the corporation; or

(iii) any issuance of Additional Shares as consideration of the acquisition by the Corporation of a target company, whether by merger, stock purchase, or a purchase of all or substantially all of the assets of such acquisition target.

(h) Conversion Price Adjustment Rules for Below Conversion Price Issuances. The following terms and procedures shall be applicable to adjustments to the Conversion Price made pursuant to this Section 4:

(i) no adjustment in the applicable Conversion Price shall be required unless such adjustment would result in a change of at least 1% in the applicable Conversion Price then in effect, provided, however, that any adjustments which, but for the provisions of this clause would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment;

(ii) if any event occurs of the type contemplated by the adjustment provisions of this Paragraph 4 but not expressly provided for by such provisions, the Corporation will give notice of such event as provided herein, and the Corporation’s board of directors will make an appropriate adjustment in the Conversion Price so that the rights of the holders of the applicable Security shall not be diminished by such event; and

(iii) if a dispute shall at any time arise with respect to any adjustment of the applicable Conversion Price, such dispute shall be conclusively determined by the auditors of the Corporation or, if they are unable or unwilling to act, by a firm of independent public accountants selected by the Directors and any such determination shall be binding upon the Corporation and the holders of the Series A Convertible Preferred Stock.

(i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation and/or this Certificate of Designation (except in accordance with Section 5 hereof and applicable law) or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Series A Convertible Preferred Stock against impairment.

(j) No Fractional Shares and Certificate as to Adjustments.

(i) No fractional shares shall be issued upon the conversion of any share or shares of the Series A Convertible Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. The number of shares issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Convertible Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

(ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series A Convertible Preferred Stock pursuant to this Section 4, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each

holder of such Series A Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for the Series A Convertible Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of the Series A Convertible Preferred Stock.

(k) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series A Convertible Preferred Stock, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(l) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Convertible Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Convertible Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Convertible Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series A Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Corporation’s Certificate of Incorporation and/or this Certificate of Designation.

(m) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series A Convertible Preferred Stock shall be deemed given if deposited in the United States mail, first class postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation.

5. Protective Provisions. So long as Series A Convertible Preferred Stock with a Liquidation Preference in the aggregate of at least $2,000,000 remains outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least two-thirds (2/3) of the voting power of all then outstanding shares of such Series A Convertible Preferred Stock (or such other approval as shall be required for any provision hereof by the express terms of such provision), voting together as a class:

(a) amend or repeal any provisions of the Corporation’s Certificate of Incorporation (including, without limitation, the provisions set forth in this Certificate of Designation) or Bylaws the

effect of which would adversely affect the rights, preferences, or privileges of the Series A Convertible Preferred Stock (provided, however, that (i) the issuance of an equity or derivative security which does not have a preference as to dividends or assets, whether in liquidation or otherwise, superior to the Series A Convertible Preferred Stock, or any amendment to the terms of this Certificate of Designation arising as the result of any adjustment made in accordance with the provisions of Section 4 or Section 8 hereof, would not be deemed to adversely affect the rights, preferences, or privileges of the Series A Convertible Preferred Stock, and (ii) any such amendment to or repeal of the terms of either Section 4, Section 8 or Section 3 of this Certificate of Designation shall not be made without the prior approval (by vote or written consent, as provided by law) of the holders of at least seventy-five percent (75%) of the then outstanding shares of Series A Convertible Preferred Stock); or

(b) redeem, purchase or otherwise acquire (or pay into or set funds aside for a sinking fund for such purpose) any share or shares of Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment, or through the exercise of any right of first refusal.

(c) In the event holders of at least two-thirds (2/3) of the voting power of all then outstanding shares of such Series A Convertible Preferred Stock agree to allow the Corporation to alter or change the rights, preferences or privileges of the shares of Series A Convertible Preferred Stock, in accordance with the provisions of subsection (a) above, so as to adversely affect the Series A Convertible Preferred Stock, then the Corporation will deliver notice of such approved change to the holders of the Series A Convertible Preferred Stock that did not agree to such alteration or change (the “Dissenting Holders”) and Dissenting Holders shall have the right for a period of ten (10) days to either (i) convert into Common Stock any and all shares of then held Series A Convertible Preferred Stock pursuant to the terms of this Certificate of Designation as in effect prior to such alteration or change, or (ii) continue to hold their shares of Series A Convertible Preferred Stock upon such amended terms following such amendment.

6. Redemption. The Corporation shall have no right to redeem the Series A Convertible Preferred Stock and the holders of Series A Convertible Preferred Stock shall have no right to require the Corporation to redeem such shares; provided, however, that the Corporation shall be entitled to receive any shares of Series A Convertible Preferred Stock that are distributed to the Corporation either (a) as a dividend or like distribution to the Corporation in its capacity as an equity holder of any legal entity, or (b) as a repayment of indebtedness to the Corporation, in its capacity as a creditor of any legal entity.

7. Status of Converted Stock. In the event any shares of Series A Convertible Preferred Stock shall be converted pursuant to Section 4 hereof (or received in accordance with the provisions of Section 6 hereof), the shares so converted (or received) shall be cancelled and shall not be issuable by the Corporation. Each of the Corporation’s Certificate of Incorporation and this Certificate of Designation shall be appropriately amended to effect the corresponding reduction in the Corporation’s authorized capital stock.

8. Effect of a Qualified Future Financing.

(a) Any transaction or series of transactions that the Corporation enters into whereby the Corporation raises capital through the issuance of additional Preferred Stock or a convertible debt instrument (each a “Financing Transaction”), until such time as the proceeds from all Financing Transactions entered into from the time of the filing of this Certificate of Designation, including the proceeds from all issuances of the Series A Convertible Preferred Stock, equals or exceeds, in the aggregate, FIFTEEN MILLION DOLLARS ($15,000,000) shall be referred to hereafter as a “Qualified Future Financing.”

(b) Any provision included in the terms of a Qualified Future Financing that grants rights to the holders of the instruments issued in connection with such Qualified Future Financing that are in addition to or superior to those granted to the holders of the Series A Convertible Preferred Stock, as evidenced by this Certificate of Designation or any subsequent amendment hereto, shall be referred to as a “Superior Right;” provided, however, that any terms which provide for a conversion price that is, whether expressly stated or calculated as a result of a formula, greater than or equal to the Conversion Price then in place for the Series A Convertible Preferred stock shall not be deemed to be a Superior Right.

(c) Upon the consummation of any Qualified Future Financing which contains a Superior Right, the terms and conditions of such Superior Right shall be automatically incorporated into the rights contained herein and shall supersede any provisions contained herein relating to such Superior Right that conflict with the exercise or application of such Superior Right, and the Corporation shall provide written notice thereof to all holders of record of the Series A Convertible Preferred Stock; provided, however, that the holders of seventy-five percent (75%) of the then outstanding shares of Series A Convertible Preferred Stock may waive the incorporation of any such Superior Right by providing written notice of such waiver to the Corporation.

(d) The provisions of this Section 8 will terminate at such time as the proceeds from all Financing Transactions entered into from the time of the original filing of this Certificate of Designation, including the proceeds from all issuances of the Series A Convertible Preferred Stock, equals or exceeds, in the aggregate, FIFTEEN MILLION DOLLARS ($15,000,000) (the “Superior Right Termination Date”).

9. Closing of Books. The Corporation will at no time close its transfer books against the transfer of any Series A Convertible Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series A Convertible Preferred Stock in any manner which interferes with the timely conversion of such Series A Convertible Preferred Stock, except as may otherwise be required to comply with applicable securities laws.

10. Loss, Theft, Destruction of Preferred Stock. Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of certificates representing shares of Series A Convertible Preferred Stock and, in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (which shall not include the posting of any bond), or, in the case of any such mutilation, upon surrender and cancellation of the Series A Convertible Preferred Stock certificate, the Corporation shall make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated certificates for Series A Convertible Preferred Stock, new certificates for Series A Convertible Preferred Stock of like tenor.

IN WITNESS WHEREOF, the undersigned has executed this First Restated Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock as of May 23, 2003.

By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	Executive Vice President, Chief Financial Officer and Secretary

EX-4.8

Exhibit 4.8

ACKNOWLEDGEMENT OF

DISCHARGE OF INDEBTEDNESS,

RELEASE OF CLAIMS

AND

AGREEMENT

Sandera Partners, L.P., a Texas limited partnership (“Sandera”), hereby acknowledges and agrees that all indebtedness and any other obligation owing from Axtive Corporation, a Delaware corporation (“Axtive”), to Sandera arising under or relating to either of (i) that certain Loan Agreement, dated April 23, 2003, by and between Axtive and Sandera, and (ii) that certain Promissory Note, dated April 23, 2003, in the original principal amount of $18,943.24 payable by Axtive to the order of Sandera (collectively, the “Loan Documents”) is hereby discharged in full, including, without limitation, any accrued and unpaid interest, fees, charges, and expenses relating to the Loan Documents (collectively, the “Indebtedness”).

Sandera hereby acknowledges and agrees that the discharge of Indebtedness contained herein is granted as partial consideration for Axtive’s issuance to Sandera of Two Hundred Fifty (250) shares of Axtive’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Preferred Shares”), pursuant to that certain Subscription and Securities Purchase Agreement, of even date herewith, to which each of Axtive and Sandera, among others, is a party (the “Stock Purchase Agreement”).

As additional consideration for such issuance, and subject to delivery of certificates evidencing the Preferred Shares to Sandera in accordance with the terms and provisions of the Stock Purchase Agreement, Sandera releases Axtive, its successors and assigns, and each of their respective officers, directors, employees and agents, from any and all claims, liability, losses and damages whatsoever with respect to any and all payment or other obligations, covenants or commitments of Axtive to or in favor of Sandera arising under or in relation to the Indebtedness; provided, however, that nothing contained in this paragraph shall be construed to release Axtive from any of representation, warranty, covenant or other obligation made to or in favor of Sandera and set forth in the Stock Purchase Agreement. SANDERA HEREBY ACKNOWLEDGES AND AGREES THAT AXTIVE’S SUCCESSORS AND ASSIGNS, AND EACH OF AXTIVE’S AND ITS SUCCESSORS AND ASSIGNS’ RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL BE DEEMED TO BE THIRD PARTY BENEFICIARIES OF THE RELEASE SET FORTH ABOVE IN THIS PARAGRAPH.

Each of Sandera and Axtive further hereby acknowledges, agrees and covenants that it shall promptly execute and deliver to the other party any and all instruments, agreements or other documents that shall be prepared and reasonably request to be so executed and delivered by such other party, and to take all other action reasonably requested by such other party that is consistent with the discharge of the Indebtedness and all other express purposes of this Acknowledgement of Discharge of Indebtedness, Release of Claims and Agreement.

This instrument may be executed in counterparts, each of which shall constitute an original but all of which shall constitute but one and the same instrument. One or more

counterparts of this instrument may be delivered via facsimile, with the intention that they shall have the same effect as an original counterpart hereof. THIS ACKNOWLEDGEMENT OF DISCHARGE OF INDEBTEDNESS, RELEASE OF CLAIMS AND AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT WOULD FRUSTRATE THE APPLICATION OF THE SUBSTANTIVE LAWS OF SUCH STATE.

SANDERA PARTNERS, L.P.,             a Texas limited partnership
By:	Sandera Capital Management, L.P., its sole general partner
	By: Sandera Capital, L.L.C.,                   its sole general partner

By:	/s/    J. KEITH BENEDICT
Name:	J. Keith Benedict
Title:	Vice President

AXTIVE CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	Executive Vice President, Chief Financial   Officer and Secretary

EX-4.9

Exhibit 4.9

REGISTRATION RIGHTS AGREEMENT

May 23, 2003

To Each of the Several Purchasers Party to the Series A Convertible Preferred Stock Subscription and Purchase Agreement of even date herewith

Gentlemen:

This will confirm that in consideration of your agreement on the date hereof to purchase an aggregate of 2,385 shares of Series A Convertible Preferred Stock, $0.01 par value per share, of Axtive Corporation, a Delaware corporation formerly known as Edge Technology Group, Inc. (the “Company”), pursuant to the Subscription and Securities Purchase Agreement of even date herewith (the “Purchase Agreement”) among the Company and each of you, and as an inducement to each of you to consummate the transactions contemplated by the Purchase Agreement, the Company covenants and agrees with each of you as follows:

1. Certain Definitions. Unless otherwise defined herein, each capitalized term used in this Registration Rights Agreement (this “Agreement”) shall have the meaning given to such term in the Purchase Agreement. The following terms shall have the following respective meanings:

“Conversion Shares” shall mean shares of Common Stock issued upon conversion of the Preferred Shares.

“Preferred Shares” shall mean at any time, the number of shares of Series A Convertible Preferred Stock of the Company which are then currently outstanding.

“Registration Expenses” shall mean the expenses so described in Section 5 of this Agreement.

“Restricted Stock” shall mean the Conversion Shares, excluding Conversion Shares which (a) have been registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with registration statement covering them or (b) have become eligible for public re-sale pursuant to Rule 144 under the Securities Act.

“Selling Expenses” shall mean the expenses so described in Section 5 of this Agreement.

2. Required Registration.

a. At the earlier of (i) any time after the first anniversary of the Closing Date (as such term is defined in the Purchase Agreement), or (ii) at the time at which a demand to register other restricted stock of the Company (other than employee stock options on Form S-8) is made by the holders thereof, then one or more holders of Restricted Stock constituting at least 40% of the total shares of Restricted Stock then outstanding may request the Company to register under the Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice. For purposes of this Section 2

and each of Sections 3, 10(a) and 10(d), the term “Restricted Stock” shall be deemed to include the number of shares of Restricted Stock which would be issuable to a holder of Preferred Shares upon conversion of all such Preferred Shares held by such holder at such time, provided, however, that the only securities which the Company shall be required to register pursuant to the terms of this Agreement shall be shares of the Company’s Common Stock. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to effect, nor to take any action to effect, any such registration requested pursuant to this Section 2 during the period starting with the date forty-five (45) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effectiveness of, any registration of the Company’s securities other than a requested registration under this Section 2 (including, without limitation, any Company-initiated registration under the Securities Act on Form S-1, S-2 or S-3, or on any other current or successor Form under the Securities Act), provided that the Company is actively employing in good faith all reasonable efforts to cause such other (non-Section 2) registration statement to become effective.

b. Following receipt of any notice properly given by one or more requesting holders of Restricted Stock under this Section 2, the Company shall immediately notify all holders of Restricted Stock from whom notice has not been received and shall use commercially reasonable efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from the requesting holder(s), the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within 30 days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering, the Company will designate the managing underwriter of such offering. The Company shall be obligated to register Restricted Stock pursuant to this Section 2 on one occasion only; provided, however, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received (and not subsequently rescinded) as aforesaid, for sale in accordance with the method of disposition specified by the requesting holder(s), shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto.

c. The Company and any other holders of Common Stock which the Company shall permit to participate shall be entitled to include in any registration statement referred to in this Section 2, for sale in accordance with the method of disposition specified by the requesting holder(s), shares of Common Stock to be sold by the Company or such other holders for their own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold.

3. Incidental Registration. If the Company at any time (other than pursuant to Section 2) proposes to register any of its Common Stock under the Securities Act for sale to the public, whether for its own account or for the account of its security holders or both (except with respect to registration statements on Forms S-4, S-8 or any other Form not available for registering the Restricted Stock for sale to the public), on each such occasion the Company will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within 10 Business Days after the giving of any such notice by the Company, to register any of its Restricted Stock (which request shall state the intended method of disposition

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thereof), the Company will use its commercially reasonable efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the lawful sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered. In the event that any registration pursuant to this Section 3 shall be, in whole or in part, an underwritten public offering of Common Stock, the number of shares of Restricted Stock to be included in such an underwriting may be reduced (pro rata among the requesting holders of Restricted Stock based upon the number of shares of Restricted Stock owned by such holders) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that such number of shares of Restricted Stock shall not be reduced if any shares are to be included in such underwriting for the account of any executive officer or director of the Company. Notwithstanding the foregoing provisions, the Company may at any time decline to file or withdraw any registration statement referred to in this Section 3 without thereby incurring any liability to the holders of the Restricted Stock.

4. Registration Procedures. If and whenever the Company is required by the provisions of Section 2 or Section 3 to use commercially reasonable efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, use commercially reasonable efforts to:

a. prepare and file with the Commission a registration statement with respect to such securities and use commercially reasonable efforts to cause such registration statement to become and remain effective for a period of not less than ninety (90) days, or such lesser time period as is necessary for the underwriter(s) in an underwritten offering to sell unsold allotments;

b. prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in Section 4(a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers’ intended method of disposition set forth in such registration statement for such period;

c. furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;

d. use commercially reasonable efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

e. use commercially reasonable efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

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f. immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

g. if the offering is underwritten and at the request of any seller of Restricted Stock, use commercially reasonable efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters, stating that such registration statement has become effective under the Securities Act and that (A) to the knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request; and

h. make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement.

In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.

In connection with each registration pursuant to Section 2 or Section 3 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company’s size and investment stature.

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5. Expenses. All expenses incurred by the Company in complying with Section 2 or Section 3, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and reasonable fees and disbursements of one counsel for the sellers of Restricted Stock, but excluding any Selling Expenses, are called “Registration Expenses”. All underwriting discounts and selling commissions applicable to the sale of Restricted Stock are called “Selling Expenses”. The Company will pay all Registration Expenses in connection with each registration statement under Section 2 or Section 3. All Selling Expenses in connection with each registration statement under Section 2 or Section 3 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.

6. Indemnification and Contribution.

a. In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Section 2 or Section 3, the Company will indemnify and hold harmless each seller of such Restricted Stock thereunder, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls any such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Section 2 or Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission so made in conformity with information furnished by any seller, any underwriter or any controlling person specifically for use in such registration statement or prospectus. It is agreed that the indemnity agreement contained in this Section 6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed).

b. In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Section 2 or Section 3, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise,

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insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Section 2 or Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished to the Company by such seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of each seller hereunder shall not in any event exceed the proceeds received by such seller from the sale of Restricted Stock covered by such registration statement. It is agreed that the indemnity agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of seller hereunder (which consent shall not be unreasonably withhold or delayed).

c. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 6 and shall only relieve it from any liability which it may have to such indemnified party under this Section 6 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interest of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.

d. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Restricted Stock exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for

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indemnification pursuant to this Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Restricted Stock offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Restricted Stock offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

7. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed.

8. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after 90 days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:

a. make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

b. use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

c. furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.

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9. Representations and Warranties of the Company. The Company represents and warrants to each of you as follows:

a. The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or there agency of government, the Charter or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any of its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.

b. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy or insolvency laws affecting creditors’ rights generally and to general principles of equity.

10. Miscellaneous.

a. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Preferred Shares or Restricted Stock), whether so expressed or not, provided, however, that registration rights conferred herein on the holders of Preferred Shares or Restricted Stock shall only inure to the benefit of a transferee of Preferred Shares or Restricted Stock if (i) there is transferred to such transferee at least 100 shares in the aggregate of Preferred Shares or 100,000 shares in the aggregate of Restricted Stock or (ii) such transferee is a partner, shareholder or affiliate of a party hereto.

b. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, addressed as follows:

if to the Company or any other party hereto, at the address of such party set forth in the Purchase Agreement;

if to any subsequent holder of Preferred Shares or Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder;

or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Preferred Shares or Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph.

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c. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.

d. This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of not less than two-thirds (2/3) of the outstanding Preferred Shares.

e. 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.

f. The obligations of the Company to register shares of Restricted Stock under Sections 2 or 3 shall terminate on the tenth anniversary hereof.

g. If the Company grants to any third party any registration rights more favorable in any material respect than any of those contained herein, then the registration rights under this Agreement shall automatically be amended without the requirement of further action by the Purchasers to be equivalent to such more favorable rights.

h. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers, as of the date first above written.

AXTIVE CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	EVP/CFO
Address:
1445 Ross Avenue, Suite 4500 Dallas, Texas 75202 Fax: 214-397-0228 Tel.: 214-397-0200
PURCHASERS:
DEMAND AGGREGATION SOLUTIONS, LLC,       a Texas limited liability company
	By:	/s/    RON BENEKE
	Name:	Ron Beneke
	Title:	Member of Management Committee
Address: 1445 Ross Avenue, Suite 4500 Dallas, Texas 75202 Fax: 214-397-0228 Tel.: 214-397-0200

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BEACHUM INVESTMENTS, LLC,       a Texas limited liability company
	By:	IPL Management Company,             a Texas corporation, its Manager
		By:	/s/    W. ROBERT DYER, JR.
		Name:	W. Robert Dyer, Jr.
		Title:	President
Address: 4209 Lakeside Drive Dallas, Texas 75219-2301
Fax:	(214) 999-3574
Tel.:	(214) 999-4574
SANDERA PARTNERS, L.P.,             a Texas limited partnership
	By:	Sandera Capital Management, L.P.,       its sole general partner
		By:	Sandera Capital, L.L.C.,     its sole general partner
			By:	/s/    J. KEITH BENEDICT
			Name:	J. Keith Benedict
			Title:	Vice President
Address:
1601 Elm Street, Suite 4000
Dallas, Texas 75201
Fax: 214-720-1612
Tel.: 214-720-1600

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GCA STRATEGIC INVESTMENT FUND LIMITED,             a Bermuda corporation
By:	/s/    LEWIS N. LESTER
Name:	Lewis N. Lester
Title:	Director
Address: 227 King Street Frederiksted, St. Croix, USVI 00840 Attn: Lewis N. Lester Fax: 340-719-3974 Tel.: 340-772-7772

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/s/ KERRY OSBORNE

Kerry Osborne

Address:

853 SHADY LANE

SOUTHLAKE, TX 76092

Fax: ###-##-####

Tel.: ###-##-####

/s/    Graham C. Beachum III

Graham C. Beachum III

Address:

8409 Pickwick Lane, #240

Dallas, Texas 75225

Fax: (214) 722-0194

Tel.: (214) 219-3525

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EX-4.12

Exhibit 4.12

RESTATED REGISTRATION RIGHTS AGREEMENT

May 23, 2003

To Each of the Undersigned Holders of Series A Convertible Preferred Stock of Axtive Corporation

Gentlemen:

This will confirm your agreement with Axtive Corporation, a Delaware corporation formerly known as Edge Technology Group, Inc. (the “Company”), to amend and restate your rights under those certain existing Registration Rights Agreements, executed and delivered to you by the Company prior to the date hereof (collectively, the “Original Rights Agreement”), which Original Rights Agreement was executed and delivered in connection with your respective purchases of shares of Series A Convertible Preferred Stock, $0.01 par value per share.

Each of you acknowledges, by your acceptance hereof, that this Replacement Registration Rights Agreement (this “Agreement”) amends and restates the Original Rights Agreement in its entirety, and that the Original Agreement shall be of no further force or effect. Each of you further acknowledges that your acceptance of this Agreement is made in consideration of those certain Restated Warrants issued by the Company to you on even date with this Agreement, and as at hereafter your acceptance of this in exchange for the registration rights set forth herein Accordingly, the Company covenants and agrees with each of you as follows:

1. Certain Definitions. Unless otherwise defined herein, each capitalized term used in this Agreement shall have the meaning given to such term in that certain Subscription and Securities Purchase Agreement, dated as of April 1, 2002, by and among the Company and Sandera Partners, L.P., Global Capital Funding Group, L.P., and GCA Strategic Investment Fund Limited (the “Purchase Agreement”). The following terms shall have the following respective meanings:

“Conversion Shares” shall mean shares of Common Stock issued upon conversion of the Preferred Shares.

“Preferred Shares” shall mean at any time, the number of shares of Series A Convertible Preferred Stock of the Company which are then currently outstanding.

“Registration Expenses” shall mean the expenses so described in Section 5 of this Agreement.

“Restricted Stock” shall mean the Conversion Shares, excluding Conversion Shares which (a) have been registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with registration statement covering them or (b) have become eligible for public re-sale pursuant to Rule 144 under the Securities Act.

“Selling Expenses” shall mean the expenses so described in Section 5 of this Agreement.

2. Required Registration.

a. At the earlier of (i) any time after the first anniversary of the Closing Date (as such term is defined in the Purchase Agreement), or (ii) at the time at which a demand to register other restricted stock of the Company (other than employee stock options on Form S-8) is made by the holders thereof, then one or more holders of Restricted Stock constituting at least 40% of the total shares of Restricted Stock then outstanding may request the Company to register under the Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice. For purposes of this Section 2 and each of Sections 3, 10(a) and 10(d), the term “Restricted Stock” shall be deemed to include the number of shares of Restricted Stock which would be issuable to a holder of Preferred Shares upon conversion of all such Preferred Shares held by such holder at such time, provided, however, that the only securities which the Company shall be required to register pursuant to the terms of this Agreement shall be shares of the Company’s Common Stock. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to effect, nor to take any action to effect, any such registration requested pursuant to this Section 2 during the period starting with the date forty-five (45) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effectiveness of, any registration of the Company’s securities other than a requested registration under this Section 2 (including, without limitation, any Company-initiated registration under the Securities Act on Form S-1, S-2 or S-3, or on any other current or successor Form under the Securities Act), provided that the Company is actively employing in good faith all reasonable efforts to cause such other (non-Section 2) registration statement to become effective.

b. Following receipt of any notice properly given by one or more requesting holders of Restricted Stock under this Section 2, the Company shall immediately notify all holders of Restricted Stock from whom notice has not been received and shall use commercially reasonable efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from the requesting holder(s), the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within 30 days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering, the Company will designate the managing underwriter of such offering. The Company shall be obligated to register Restricted Stock pursuant to this Section 2 on one occasion only; provided, however, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received (and not subsequently rescinded) as aforesaid, for sale in accordance with the method of disposition specified by the requesting holder(s), shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto.

c. The Company and any other holders of Common Stock which the Company shall permit to participate shall be entitled to include in any registration statement referred to in this Section 2, for sale in accordance with the method of disposition specified by the requesting holder(s), shares of Common Stock to be sold by the Company or such other holders for their own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold.

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3. Incidental Registration. If the Company at any time (other than pursuant to Section 2) proposes to register any of its Common Stock under the Securities Act for sale to the public, whether for its own account or for the account of its security holders or both (except with respect to registration statements on Forms S-4, S-8 or any other Form not available for registering the Restricted Stock for sale to the public), on each such occasion the Company will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within 10 Business Days after the giving of any such notice by the Company, to register any of its Restricted Stock (which request shall state the intended method of disposition thereof), the Company will use its commercially reasonable efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the lawful sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered. In the event that any registration pursuant to this Section 3 shall be, in whole or in part, an underwritten public offering of Common Stock, the number of shares of Restricted Stock to be included in such an underwriting may be reduced (pro rata among the requesting holders of Restricted Stock based upon the number of shares of Restricted Stock owned by such holders) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that such number of shares of Restricted Stock shall not be reduced if any shares are to be included in such underwriting for the account of any executive officer or director of the Company. Notwithstanding the foregoing provisions, the Company may at any time decline to file or withdraw any registration statement referred to in this Section 3 without thereby incurring any liability to the holders of the Restricted Stock.

4. Registration Procedures. If and whenever the Company is required by the provisions of Section 2 or Section 3 to use commercially reasonable efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, use commercially reasonable efforts to:

a. prepare and file with the Commission a registration statement with respect to such securities and use commercially reasonable efforts to cause such registration statement to become and remain effective for a period of not less than ninety (90) days, or such lesser time period as is necessary for the underwriter(s) in an underwritten offering to sell unsold allotments;

b. prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in Section 4(a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers’ intended method of disposition set forth in such registration statement for such period;

c. furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;

d. use commercially reasonable efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering,

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the managing underwriter reasonably shall request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

e. use commercially reasonable efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

f. immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

g. if the offering is underwritten and at the request of any seller of Restricted Stock, use commercially reasonable efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters, stating that such registration statement has become effective under the Securities Act and that (A) to the knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request; and

h. make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement.

In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them

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as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.

In connection with each registration pursuant to Section 2 or Section 3 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company’s size and investment stature.

5. Expenses. All expenses incurred by the Company in complying with Section 2 or Section 3, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and reasonable fees and disbursements of one counsel for the sellers of Restricted Stock, but excluding any Selling Expenses, are called “Registration Expenses”. All underwriting discounts and selling commissions applicable to the sale of Restricted Stock are called “Selling Expenses”. The Company will pay all Registration Expenses in connection with each registration statement under Section 2 or Section 3. All Selling Expenses in connection with each registration statement under Section 2 or Section 3 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.

6. Indemnification and Contribution.

a. In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Section 2 or Section 3, the Company will indemnify and hold harmless each seller of such Restricted Stock thereunder, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls any such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Section 2 or Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission so made in conformity with information furnished by any seller, any underwriter or any controlling person specifically for use in such registration statement or prospectus. It is agreed that the indemnity agreement contained in this Section 6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed).

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b. In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Section 2 or Section 3, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Section 2 or Section 3, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished to the Company by such seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of each seller hereunder shall not in any event exceed the proceeds received by such seller from the sale of Restricted Stock covered by such registration statement. It is agreed that the indemnity agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of seller hereunder (which consent shall not be unreasonably withhold or delayed).

c. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 6 and shall only relieve it from any liability which it may have to such indemnified party under this Section 6 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interest of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have

6

the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.

d. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Restricted Stock exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Restricted Stock offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Restricted Stock offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

7. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed.

8. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after 90 days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:

a. make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

b. use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

c. furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly

7

report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.

9. Representations and Warranties of the Company. The Company represents and warrants to each of you as follows:

a. The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or there agency of government, the Charter or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any of its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.

b. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy or insolvency laws affecting creditors’ rights generally and to general principles of equity.

10. Miscellaneous.

a. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Preferred Shares or Restricted Stock), whether so expressed or not, provided, however, that registration rights conferred herein on the holders of Preferred Shares or Restricted Stock shall only inure to the benefit of a transferee of Preferred Shares or Restricted Stock if (i) there is transferred to such transferee at least 100 shares in the aggregate of Preferred Shares or 100,000 shares in the aggregate of Restricted Stock or (ii) such transferee is a partner, shareholder or affiliate of a party hereto.

b. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, addressed as follows:

if to the Company or any other party hereto, at the address of such party set forth in the Purchase Agreement;

if to any subsequent holder of Preferred Shares or Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder;

or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Preferred Shares or Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph.

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c. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.

d. This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of not less than two-thirds (2/3) of the outstanding Preferred Shares.

e. 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.

f. The obligations of the Company to register shares of Restricted Stock under Sections 2 or 3 shall terminate on the tenth anniversary hereof.

g. If the Company grants to any third party any registration rights more favorable in any material respect than any of those contained herein, then the registration rights under this Agreement shall automatically be amended without the requirement of further action by the Purchasers to be equivalent to such more favorable rights.

h. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers, as of the date first above written.

AXTIVE CORPORATION
By:	/s/    GRAHAM C. BEACHUM II
Name:	Graham C. Beachum II
Title:	President and Chief Executive Officer
	Address: 1445 Ross Avenue, Suite 4500 Dallas, Texas 75202 Fax:214-397-0228 Tel.:214-397-0200
PURCHASERS:

SANDERA PARTNERS, L.P.,
	a Texas limited partnership
	By: Sandera Capital Management, L.P.,
		its sole general partner
		By: Sandera Capital, L.L.C.,
			its sole general partner
			By:	/s/    J. KEITH BENEDICT
			Name:	J. Keith Benedict
			Title:	Vice President

Address:

1601 Elm Street, Suite 4000

Dallas, Texas 75201

Fax: 214-720-1612

Tel.: 214-720-1600

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GLOBAL CAPITAL FUNDING GROUP, L.P.
	By:	GLOBAL CAPITAL MANAGEMENT SERVICES, INC.,
	its general partner
		By:	/s/    LEWIS N. LESTER
		Name:	Lewis N. Lester
		Title:	President
Address: 106 Colony Park Drive, Suite 900 Cumming, Georgia 30040 Attn: Brad A. Thompson Fax: 678-947-6499 Tel.: 678-947-0028

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GCA STRATEGIC INVESTMENT FUND LIMITED,
	a Bermuda corporation
By:	/s/    LEWIS N. LESTER
Name:	Lewis N. Lester
Title:	Director
Address:
227 King Street
Frederiksted, St. Croix, USVI 00840
Attn: Lewis N. Lester
Fax: 340-719-3974
Tel.: 340-772-7772
PAUL MORRIS
/s/    PAUL MORRIS
Paul Morris
Suite 110, The Summit
300 N. Marienfeld
Midland, TX 79701
Fax: 915.686.1563
Tel.: 915.686.5914
JACK E. BROWN
/s/    JACK E. BROWN
Jack E. Brown
Suite 110, The Summit
300 N. Marienfeld
Midland, TX 79701
Fax: 915.686.1563
Tel.: 915.686.5914

12

ALEXANDER C. RANKIN
/s/    ALEXANDER C. RANKIN
Alexander C. Rankin
Address:
10513 Waters Drive
Irving, Texas
Fax:	(972) 402-9654
Tel.:	(972) 402-9654
REX V. JOBE
/s/    REX V. JOBE
Rex V. Jobe
Address:
9612 ROCKBROOK DR.
DALLAS, TEXAS 75220
Fax:	214 6789776
Tel.:	214 6786500
U.S. TECHNOLOGY INVESTORS, LLC
By:	/s/    REX W. CANON
	Rex Canon
	its Authorized Representative
	Address: 2626 Cole Avenue, Suite 610 Dallas, Texas 75204 Fax.: 214-880-0005 Tel.: 214-880-0400

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EX-4.13

Exhibit 4.13

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAW, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM.

RESTATED WARRANT

To Purchase Common Stock of

AXTIVE CORPORATION

a Delaware corporation formerly known as

Edge Technology Group, Inc.

1. Issuance. This Restated Warrant, dated as of May 23, 2003, is issued to                             , a                      (“            ”), by Axtive Corporation, a Delaware corporation formerly known as Edge Technology Group, Inc. (hereinafter with its successors called the “Company”), in substitution of and exchange for that certain warrant originally issued on April 1, 2003 (the “Issuance Date”) to                      (the “Original Warrant”). This Restated Warrant amends and restates the Original Warrant in its entirety, and the holder of such Original Warrant, by its acceptance hereof, acknowledges and agrees that such Original Warrant shall be of no further force or effect whatsoever. The term “Warrant” as used herein shall include this Restated Warrant and any warrants delivered in substitution or exchange herefor or therefor as provided herein.

2. Exercise of Warrant.

(a) Exercise Price; Number of Shares. This Warrant represents the right to purchase from the Company              (        ) shares (the “Warrant Shares”) of the Company’s common stock, $0.01 par value (“Common Stock”) at an initial exercise price of Twenty Cents ($0.20) per share (the “Exercise Price”). Until such time as this Warrant is exercised in full or expires, the Exercise Price and the Warrant Shares are subject to adjustments pursuant to the procedures described in Section 8 below.

(b) Exercise Procedure. Subject to the terms and conditions of this Warrant, the registered holder of this Warrant (the “Holder”), is entitled to exercise this Warrant during the Exercise Period, in whole or in part, upon surrender of this Warrant together with payment of the Exercise Price and delivery of the subscription form (as annexed hereto as Addendum A, the “Subscription Form”) duly executed, to be presented at the office of the Company, 1445 Ross Avenue, Suite 4500, Dallas, Texas 75202, or such other office in the United States as the Company shall notify the Holder of in writing.

(c) Exercise Period. This Warrant may be exercised at any time after the second anniversary of the Issuance Date until the earlier of (i) the fourth anniversary of the Issuance Date or (ii) the date of a Deemed Liquidation, as defined below (the “Exercise Period”); provided, however, that the Company shall not effect a Deemed Liquidation without compliance with the provisions of Section 2(d) below.

(d) Deemed Liquidation. For purposes of this Warrant, a “Deemed Liquidation” shall mean (i) any liquidation, dissolution or winding up of the Company, (ii) any sale, conveyance or disposition of all or substantially all of its property or business, (iii) any merger or consolidation with any other corporation (other than a wholly owned subsidiary corporation) or (iv) any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company will not immediately after such acquisition or transaction be held by the company’s stockholders of record as constituted immediately prior to such acquisition or transaction, provided that a merger effected exclusively for the purpose of changing the domicile of the Company shall not constitute a Deemed Liquidation.

(i) Notice of Transaction. The Company shall give each Holder written notice of a Deemed Liquidation (a “Notice of Liquidation Event”) not later than 10 days prior to the stockholders’ meeting called to approve such transaction, or 10 days prior to the closing of such transaction, whichever is earlier, and shall also notify the Holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2(d), and the Company shall thereafter give such Holders prompt notice of any material changes. The transaction shall in no event take place sooner than 10 days after the Company has given the first notice provided for herein or sooner than 5 days after the Company has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of all of the Holders.

(ii) Effect of Noncompliance. In the event the requirements of this Section 2(d) are not complied with, the Company shall forthwith either cause the closing of the transaction to be postponed until such requirements have been complied with, or cancel such transaction.

(iii) Election to Exercise. Upon receipt of a Notice of Liquidation Event, the Holder shall have the right to elect to exercise this Warrant, in whole or in part, as provided for in this Section 2, notwithstanding the prohibition on exercise prior to the second anniversary of the Issuance Date set forth in Section 2(c) above.

3. Payment of Exercise Price. The Holder may make payment of the Exercise Price in cash or by certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to the account of the Company.

4. Cashless Exercise of Warrants.

(a) Notwithstanding the provisions of Section 3 above, if the Fair Market Value is greater than the Exercise Price (at the date of calculation, as set forth below), in lieu of exercising the Warrant as permitted in Section 2.1(b), the Holder may elect to receive shares of Common Stock equal to the value (as determined below) of the Warrant (or the portion thereof being canceled) by surrender of the Warrant, together with the Subscription Form duly executed, to the Company at its office referred to in Section 2(b) hereof, in which event the Company shall issue to the Holder that number of shares of Common Stock computed using the following formula:

Warrant – Page 2

CS = WCS x (FMV - EP)

FMV

Where:

CS equals the number of shares of Common Stock to be issued to the holder of the Warrant;

WCS equals the number of shares of Common Stock purchasable under the Warrant being exercised (at the date of such calculation);

FMV equals the Fair Market Value of one share of the Common Stock (at the date of such calculation); and

EP equals the Exercise Price (as adjusted to the date of such calculation).

(b) For purposes of Rule 144 under the Securities Act, 17 C.F.R. ss. 230.144, as amended, the parties hereto agree that the exercise of this Warrant in accordance with this Section 2.2 shall be deemed to be a conversion of such Warrant, pursuant to the terms of this Warrant, into Common Stock.

(c) For purposes of this Section 4, “Fair Market Value” shall mean with respect to every share of Common Stock on any date in question (i) the average of the closing bid prices per share of the Common Stock for the previous 15 consecutive trading days (A) on the principal securities exchange or trading market where the Common Stock is listed or traded or, if the foregoing does not apply, (B) in the over-the-counter market on the electronic bulletin board for the Common Stock or (ii), if, and only if, no trading price is reported for the Common Stock, then its Fair Market Value shall be as determined, in good faith by the board of directors of the Company. If the Holder shall object in writing within 5 days of notification of the determination of the Company’s board of directors, then the Fair Market Value shall be determined by an investment banking firm or appraisal firm (which firm shall own no securities of, and shall not be an affiliate, subsidiary or a related person of, the Company or any Holder) of recognized national standing retained by the Company and acceptable to the Holder.

5. Partial Exercise. This Warrant may be exercised in part, and the Holder shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant, covering the number of Warrant Shares in respect of which this Warrant shall not have been exercised.

6. Issuance Date. The person or persons in whose name or names any certificate representing Warrant Shares is issued hereunder shall be deemed to have become the holders of record of such shares represented thereby as at the close of business on the date this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed. As soon as practicable after the exercise of this Warrant, the Company at its expense (including the payment of any applicable taxes) will use its best lawful efforts to cause the Company’s transfer agent to issue and deliver to Holder a certificate for the number of fully paid nonassessable shares of Common Stock to which such Holder is entitled.

Warrant – Page 3

7. Reserved Shares; Valid Issuance. The Company covenants that it will reserve and keep available at all times from and after the date hereof such number of its authorized shares of Common Stock, free from all preemptive or similar rights therein, as will be sufficient to permit the exercise of this Warrant in full. The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.

8. Adjustment Provision.

(a) Subdivisions, Split-ups, Combinations and Stock Dividends. If after the Issuance Date the Company shall subdivide the Common Stock, by split up or otherwise, or combine such shares, or issue additional shares in payment of a stock dividend on such shares, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Exercise Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.

(b) Reclassifications. If after the Issuance Date there shall be any reclassification, capital reorganization or change of the Common Stock (other than as a result of a subdivision, combination or stock dividend provided for in Section 8 (a) hereof), then, as a condition of such reclassification, reorganization or change, lawful provisions shall be made, and duly executed documents evidencing the same from the Company shall be delivered to the Holder, so that the Holder shall thereafter have the right to purchase, at a total price not to exceed that payable upon the exercise of this Warrant in full, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization or change, by holders of the number of shares of Common Stock which might have been purchased by the Holder immediately prior to such reclassification, reorganization or change, and in such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Exercise Price and the number of shares issuable hereunder) shall thereafter be applicable in relation to any shares of stock or other securities and property thereafter deliverable upon exercise hereof.

9. Fractional Shares. In no event shall any fractional share of Common Stock be issued upon any exercise of this Warrant and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share.

10. Certificate of Adjustment. Whenever the Exercise Price or the number of shares issuable hereunder is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate of the Company’s Chief Financial Officer setting forth the number of shares issuable hereunder and the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

11. Notices of Record Date. In the event of:

(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other

Warrant – Page 4

distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right,

(b) any reclassification of the capital stock of the Company, capital reorganization of the Company, or

(c) any transaction which would constitute a Deemed Liquidation, then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which any such reclassification, reorganization, conveyance or Deemed Liquidation is to take place, and the time, if any is to be fixed, as of which the holders of record in respect of such event are to be determined. Such notice shall be mailed at least 10 days prior to the date specified in such notice on which any such action is to be taken.

12. Amendment. The terms of this Warrant may be amended, modified or waived only with the written consent of the Company and the Holder.

13. Warrant Register; Transfers.

(a) The Company will maintain a register containing the names and addresses of the registered holders of the Warrants. The Holder may change his or its address as shown on the warrant register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be given by certified mail or delivered to the Holder at his or its address as shown on the warrant register.

(b) Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Holder with respect to any or all of the Warrant Shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof (in form substantially similar to Addendum B annexed hereto) properly endorsed for transfer of this Warrant as an entirety by the Holder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed by the Holder for transfer with respect to a portion of the Warrant Shares purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Holder hereof, and shall issue to such Holder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred.

(c) In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction) and of indemnity reasonably satisfactory to the Company.

Warrant – Page 5

14. No Impairment. The Company will not, by amendment of its Charter or by-laws or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder.

15. Governing Law. The provisions and terms of this Warrant shall be governed by and construed in accordance with the internal laws of State of Texas, without giving effect to principles of conflicts law.

16. Successors and Assigns. This Warrant shall be binding upon the Company’s successors and assigns and shall inure to the benefit of each of the Holder’s successors, legal representatives and permitted assigns.

[Remainder of Page Intentionally Left Blank]

Warrant – Page 6

IN WITNESS WHEREOF, the Company has caused this Restated Warrant to be executed as an instrument under seal by its duly authorized officer as of the date first above written, but to be deemed to have an Issuance Date of April 1, 2002.

AXTIVE CORPORATION
By:
	Graham C. Beachum II
	President and Chief Executive Officer

Attest:

David N. Pilotte, Secretary

Warrant – Page 7

ADDENDUM A

(Form of Subscription)

Date:                    

The undersigned hereby subscribes for:

             shares of Common Stock covered by that certain Warrant issued by Axtive Corporation, dated                     , to the undersigned.

The certificate(s) for such shares shall be issued in the name of the undersigned or as otherwise indicated below:

Signature

Name for Registration

Mailing Address

Warrant – Page 8

ADDENDUM B

(Form of Assignment)

For value received                              hereby sells, assigns and transfers unto

__________________________________________________________________________________________________________

__________________________________________________________________________________________________________

(Please print or typewrite name and address of Assignee)

the within Warrant, and does hereby irrevocably constitute and appoint                                  its attorney to transfer the within Warrant on the books of the within named Company with full power of substitution in the premises.

Dated: _________________________

____________________________________

In the Presence of:

____________________________________

Warrant – Page 9

EX-10.7

Exhibit 10.7

AMENDMENT NO. 1

TO THE EDGE TECHNOLOGY GROUP, INC.

2002 STOCK INCENTIVE PLAN

Pursuant to Section 4.5 of the Edge Technology Group, Inc. 2002 Stock Incentive Plan (the “Plan”), the Plan is hereby amended as follows:

1. The name of the Plan is hereby amended to be: “Axtive Corporation 2002 Stock Incentive Plan”.

2. Section 3.1 of the Plan is hereby amended in its entirety to read as follows:

3.1. Number of Shares. The maximum number of shares of Common Stock reserved and available for issuance under this Plan shall be 17,000,000, subject to adjustment as set forth in Section 3.4.

3. Immediately upon the effectiveness of the 1-for-10 reverse stock split approved by the Board of Directors of Axtive Corporation as of the date hereof, and without any further action by any party, Section 3.1 of the Plan shall be further amended in its entirety to read as follows:

3.1. Number of Shares. The maximum number of shares of Common Stock reserved and available for issuance under this Plan shall be 5,000,000, subject to adjustment as set forth in Section 3.4.

4. The definition of Company in Section 13 of the Plan is hereby amended in its entirety to read as follows:

“Company” means Axtive Corporation, a Delaware corporation.

Except as amended by this Amendment No. 1, the Plan shall continue in full force and effect as originally executed and delivered. Any reference in the Plan to the “Plan” shall refer to the Plan as amended by this Amendment No. 1. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to those terms in the Plan.

IN WITNESS WHEREOF, the undersigned has executed this Amendment effective as of May 23, 2003.

AXTIVE CORPORATION
By:	/s/    DAVID N. PILOTTE
	David N. Pilotte, Executive Vice President and Chief Financial Officer

EX-10.8

Exhibit 10.8

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made effective as of the 2nd day of January, 2001 (the “Effective Date”) between Edge Technology Group, Inc. (formerly known as Visual Edge Systems Inc.), a Delaware corporation (the “Company”), and Graham C. Beachum II, an individual (“Executive”).

R E C I T A L S

WHEREAS, the Company wishes to secure the employment of Executive and Executive desires to enter into employment with the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows:

1. Employment. The Company hereby employs Executive and Executive accepts such employment for the Employment Term (as defined in Section 3 below). During the Employment Term, Executive shall be employed as President and Chief Executive Officer and shall have such powers and perform such executive duties customarily assigned to the President and Chief Executive Officer. The Company acknowledges that Executive’s primary place of business shall be in the Dallas, Texas area and Executive acknowledges that Executive shall be required to travel throughout the United States and the remaining world as necessary to perform his duties hereunder.

2. Performance. Executive will serve the Company faithfully and to the best of his ability and will devote substantially all of his time, energy, experience and talents during regular business hours and as otherwise reasonably necessary to such employment.

3. Employment Term. Except for earlier termination as provided in Section 6 hereof, Executive’s employment under this Agreement shall be for a four (4) year term commencing upon the Effective Date and ending four (4) years thereafter (the “Employment Term”).

4. Compensation.

(a) Salary. During the Employment Term, the Company shall pay Executive a base salary (the “Base Salary”) (as defined below) during each Fiscal Year (as defined below) of the Employment Term. The Base Salary shall be payable in accordance with the then applicable payroll procedures of the Company and shall be subject to applicable withholding for taxes. The first Fiscal Year of the Employment Term shall commence on the Effective Date, with the subsequent Fiscal Year commencing on the applicable anniversary date of the Effective Date (each, a “Fiscal Year”).

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As used herein, “Base Salary” shall mean (a) prior to a Financing Event, $100,000 annualized and (b) after a Financing Event, $240,000 per Fiscal Year, which shall be increased five percent (5%) each Fiscal Year after the first Fiscal Year. A “Financing Event” shall mean the closing by the Company on a transaction in which the Company issues common stock and which transaction provides gross cash proceeds for the Company of at least $10,000,000.

(b) Incentive Cash Compensation. For each Fiscal Year or portion thereof during the Employment Term, Executive shall be eligible for discretionary bonuses payable by the Company on such terms and conditions, and subject to such standards, as shall be determined from time to time in the sole discretion of the Board of Directors of the Company or, at the Board of Directors’ discretion, the compensation committee of the Company.

(c) Stock Options and Other Non-Cash Incentive Compensation.

(i) Stock Options. Executive will be granted options to purchase 1,500,000 shares of the Company’s common stock (the “Stock Options”), at an exercise price of $1.50 per share pursuant to the following vesting schedule.

Milestone	Amount of Vesting
(A) The grant date of the Stock Options	25% of the Stock Options
(B) Upon each successive anniversary of the Effective Date	18.75% of the Stock Options

(ii) Stock Option Plans. The Stock Options shall be granted pursuant to the current stock option grant form and stock option plan of the Company and shall be subject to all terms and conditions thereof, copies of which are attached hereto as Exhibit A.

(d) Medical and Dental Health and Other Benefits. During the Employment Term, Executive shall be entitled to medical and dental health and other benefits in accordance with the current procedures of the Company with respect to its executive level employees.

(e) Vacation; Sick Leave. During the Employment Term, Executive shall be entitled to up to three (3) weeks of vacation annually and shall be entitled to sick leave in accordance with the current procedures of the Company with respect to its executive level employees.

5. Expenses. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Board of Directors of the Company from time to time and upon receipt of appropriate documentation.

6. Termination. The employment of Executive hereunder may be terminated prior to the end of the Employment Term, under the following circumstances:

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(a) Death or Disability. The Employment Term shall terminate upon the death or Disability of Executive. For purposes of this Agreement, “Disability” occurs if Executive is unable to perform his duties, pursuant to this Agreement, on a full-time basis because of mental or physical incapacity, including, without limitation, alcoholism or drug abuse, which requires a leave of absence in excess of ninety (90) days during any Fiscal Year. In the event Executive is a “Qualified Individual with a Disability,” as such term is defined in the Americans with Disabilities Act, the Company shall not terminate Executive’s employment hereunder if Executive is able to perform the essential functions of Executive’s job with reasonable accommodation from the Company.

(b) With “Cause.” For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon the occurrence of any of the following: (i) embezzlement, theft or other misappropriation of any property of the Company or any of its subsidiaries by Executive, (ii) gross or willful misconduct by Executive resulting in substantial loss to the Company or any of its subsidiaries or substantial damage to the reputation of the Company or any of its subsidiaries, (iii) any act by Executive involving moral turpitude that results in a conviction of, or a pleading nolo contendere to, a felony or other crime involving moral turpitude, fraud or misrepresentation, (iv) willful and continued failure or neglect by Executive to substantially perform his assigned duties to the Company or any of its subsidiaries, (v) gross breach of Executive’s fiduciary obligations to the Company or any of its subsidiaries, (vi) any chemical dependence which materially affects the performance of Executive’s duties and responsibilities to the Company or any of its subsidiaries, or (vii) commission of a felony or a crime by Executive involving moral turpitude or the commission of any other significant act by Executive involving dishonesty, disloyalty or fraud with respect to the Company; provided, that in the case of the misconduct set forth in clauses (iv) and (vi) above, such misconduct shall continue for a period of five (5) days following written notice thereof by the Company to Executive.

(c) Without “Cause.” Notwithstanding any provisions of this Agreement to the contrary, the Company may terminate Executive’s employment hereunder for any reason other than those specified in the foregoing paragraphs (a) and (b), or for no reason, at any time during the Employment Term, effective upon delivery of two (2) day’s notice by the Company.

(d) Voluntary Resignation. Executive may terminate his employment hereunder at any time during the Employment Term subject only to the requirement that Executive shall provide the Company with a minimum of thirty (30) days prior written notice (a “Voluntary Resignation”).

(e) With “Good Reason.” Notwithstanding any provision of this Agreement to the contrary, Executive may terminate his employment hereunder for Good Reason, subject to the requirement that Executive shall provide the Company with a minimum of thirty (30) days prior written notice. For purposes of this Agreement, Executive shall have “Good Reason” to terminate his employment hereunder upon the occurrence, without Executive’s written consent, of any of the following: (i) a failure by the Company to pay to Executive any amounts due under this Agreement in accordance with the terms hereof, which failure is not cured within thirty (30) days following receipt by the Company of notice from Executive of such failure; or (ii) any other material breach by the Company of this Agreement that remains uncured for thirty (30) days after written notice thereof by Executive to the Company.

(f) Termination After Change of Control. Executive may terminate Executive’s employment and this Agreement for Good Reason within ninety (90) days of a Change of Control upon thirty (30) days’ written notice to the Company. For purposes of this Agreement, a “Change of Control” shall be deemed to exist upon the occurrence of any of

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the following:

(i) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (“Act”) (other than (a) Permitted Assignees, (b) the Company, (c) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, (d) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company, or (e) any entity holding non-participating shares of an entity which is a stockholder of the Company or which owns or controls, directly or indirectly, a stockholder of the Company) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing fifty percent (50 %) or more of the combined voting power of the Company’s then outstanding securities. “Permitted Assignees” shall mean the holders of the equity securities (whether or not voting) of any shareholder of the Company owning more than fifteen percent (15%) of the Company on the date of execution of this Agreement;

(ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board;

(iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities shall not constitute a Change of Control of the Company; and provided, further, a merger or consolidation in which the Company is the surviving entity (other than as a wholly owned subsidiary or another entity) and in which the Board of the Company after giving effect to the merger or consolidation is comprised of a majority of members who are either (x) directors of the Company immediately preceding the merger or consolidation, or (y) appointed to the Board of the Company by the Company (or its Board) as an integral part of such merger or consolidation, shall not constitute a Change of Control of the Company; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets other than (x) the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale or (y) pursuant to a dividend in kind or spin-off type transactions, directly or indirectly, of such assets to the stockholders of the Company.

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7. Compensation upon Termination. Executive shall be entitled to the following compensation from Company, in lieu of all other sums or benefits owed or payable to Executive hereunder, upon the termination of Executive’s employment during the Employment Term.

(a) Death or Disability. In the event of the death or Disability of Executive during the Employment Term of this Agreement, except for amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company and Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive or his estate, in accordance with the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates on account of death or Disability.

(b) With Cause. In the event that Executive’s employment is terminated by the Company for Cause, except for the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company and Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive, in accordance with the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates for Cause.

(c) Without Cause. In the event that Executive’s employment is terminated by the Company without Cause at any time during the Employment Term, Executive shall be entitled to receive (i) an amount equal to his Base Salary, then in effect, for the shorter of the remainder of the Employment Term or for six (6) months (the “Severance Period”), such amount to be payable in a lump sum within thirty (30) days of the date of termination, (ii) the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company pursuant to Section 4 and (iii) all the Stock Options shall be deemed fully vested as of the date of termination.

(d) Voluntary Resignation.

(i) Without Good Reason. In the event that Executive’s employment is terminated by Executive as a Voluntary Resignation pursuant to Section 6(d), except for amounts of Base Salary and accrued vacation earned by Executive as of the date of termination, but not yet paid by the Company pursuant to Section 4 and Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive, in accordance to the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates on account of Voluntary Resignation.

(ii) With Good Reason. Notwithstanding any provision of this Agreement to the contrary, if Executive’s employment with the Company terminates on account of Voluntary Resignation for Good Reason during the Employment Term, Executive shall be entitled to receive (A) an amount equal to his Base Salary, then in effect, for the Severance Period, such amount to be payable within in a lump sum within thirty (30) days of the date of termination, or ratably over the Severance Period, (B) the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company pursuant to Section 4 and (C) all the Stock Options shall be deemed fully vested as of the date of Executive’s Voluntary Resignation for Good Reason.

(e) Change of Control. If Executive’s employment and this Agreement is terminated during the Employment Term as a result of a Change of Control, the

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Company will pay Executive (i) his Base Salary in effect on the date of termination and accrued vacation through the date of termination, prorated for any partial payroll period and (ii) an amount equal to his Base Salary, then in effect, for the Severance Period. All the Stock Options shall be deemed fully vested as a result of a Change of Control.

8. Confidential Information—Non-disclosure.

(a) Recognition of the Company’s Rights: Nondisclosure. Executive understands that the Company possesses Proprietary Information (as defined below), which the Company agrees to disclose to Executive for the purpose of performing his duties under this Agreement.

(i) “Proprietary Information” shall mean Information (as defined below) of value to the Company that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by the Company including, for example, but not limited to, any trade secret, know-how, show-how and other proprietary information, irrespective of (A) whether in tangible or non-tangible form, (B) whether patentable or copyrighted or subject to confidentiality, (C) its media, (D) whether solely or jointly created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Executive and/or one or more other persons, or (E) whether created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned before, during, or after the Term. Proprietary Information does not include Information (as defined below) that Executive develops entirely on his own time without using the Company’s equipment, supplies, facilities, Proprietary Information or trade secret information except for such Information that either relates at the time of conception or reduction to practice of the Information to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or results from any work performed by Executive for the Company.

(ii) “Information” shall mean any list, schematic, diagram, circuitry, technology, inventory, invention, idea, discovery, improvement, design, concept, technique, algorithm, formula, method, process, configuration, tooling, mechanism, manufacture, assembly, installation, model, apparatus, product, device, system, network, data, plan, library, work of authorship, file, media, record, report, copy, pictorial work, graphic work, audiovisual work, hardware, firmware, computer interface (including for example but not limited to programming interfaces), computer language, computer protocol, computer software program or application (irrespective of whether source code or object code), flow chart, blueprint, drawing, photograph, chart, graph, notebook, book, computer disk, tape, storage media, printout, sound recording, note, memorandum, specification, paper, document (irrespective of whether printed, typewritten, handwritten or otherwise), information, material, account, business plan, business operation, business method, business practice, business strategy, research, development, marketing, revenue, sale, forecast, budget, finance, license, price, cost, salary, compensation, knowledge about suppliers, knowledge about available skills and knowledge about actual and/or prospective employees, clients and/or customers (including for example but not limited to their names, addresses and telephone numbers).

(iii) “Non-party Information” shall mean Information discovered, received, or learned by the Company from non-parties with respect to which the Company is subject to a duty to maintain confidentiality or to use only for certain limited purposes.

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(b) Executive Covenant. In consideration of the Company’s entering into this Agreement, the Company’s agreement to provide Executive with Proprietary Information, and the Company’s agreement to provide the Base Salary and other benefits to Executive, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive covenants as follows:

(i) Non-Disclosure of Proprietary Information and Non-Party Information. At all times during the Term and thereafter in perpetuity, Executive shall hold all Proprietary Information and Non-party Information in confidence and shall neither disclose (to anyone other than the Company personnel having a need to know such Information in connection with their activities for the Company) nor use (except insofar as required by Executive’s activities for the Company under this Agreement or in conducting the business of the Company) any Proprietary Information or any Non-party Information, unless: (A) Executive is expressly authorized in writing to the contrary by a duly authorized officer of the Company; (B) absent breach or violation of this Agreement, such Information is or becomes generally known to the public or available to the public, as evidenced by a printed publication or other equally conclusive evidence; (C) absent breach or violation of this Agreement, such Information is rightfully received absent any confidentiality obligation by Executive from a non-party outside of the Company, as evidenced by a dated and witnessed writing prepared in the normal course of business or other equally conclusive evidence; or (D) is required to be disclosed pursuant to a valid order by a court or other governmental body or otherwise required by law, provided that Executive informs the Company immediately upon Executive’s receipt of notice, in any form, that disclosure pursuant to this section may be required so that the Company may oppose any compelled disclosure of its Proprietary Information. Executive further agrees not to disclose any Proprietary Information pursuant to this section unless and until he is informed that the Company will not oppose such disclosure, or that the Company’s attempt to oppose such disclosure has been denied.

(ii) Trade Secrets. All trade secrets of the Company will be entitled to all of the protection and benefits under all applicable federal and state trade secrets law. If any information that the Company deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Proprietary Information for purposes of this Agreement.

(c) Assignment of Inventions.

(i) Definitions.

(A) “Moral Rights” shall mean (I) any right of paternity or integrity, (II) any right to claim authorship or require authorship identification, (III) any right to object to distortion, mutilation, or other modification of, or other derogatory action in relation to, a work of authorship, and (IV) any similar right existing under judicial or statutory law of the United States of America or any State thereof irrespective of whether such right is generally referred to as a “moral right.”

(B) “Proprietary Rights” shall mean any patent, trade secret, confidentiality protection, know-how right, show-how right, mask work right, copyright (e.g., including but not limited to any Moral Right), and any other intellectual property protection and intangible interests and legal rights of exclusion, of any and all countries, including for example but not limited to (I) any person’s publicity or privacy right, (II) any utility model or

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application therefor, (III) any industrial model or application therefor, (IV) any certificate of invention or application therefor, (V) any application for patent, including, for example, but not limited to, any provisional, divisional, reissue, reexamination or continuation application, (VI) any substitute, renewal or extension of any such application, and (VII) any right of priority resulting from the filing of any such application.

(C) “The Company Inventions” shall mean (I) any and all Proprietary Information that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Executive, either alone or jointly with one or more other persons, during the Term, and (II) any and all Proprietary Rights that may be available in such Proprietary Information or result therefrom.

(ii) Executive’s Covenant. Executive does hereby, without reservation, irrevocably:

(A) sell, assign, grant, transfer and convey to the Company (and the Company’s successors and assigns): Executive’s entire right, title and interest (present and future and throughout the world) in and to all the Company Inventions; provided, however, that, to the extent that any one or more the Company Inventions includes a work of authorship created by Executive (solely, or jointly with others), each such work of authorship shall automatically be deemed to be created as a “work made for hire” (as that term is defined in the United States Copyright Act (17 U.S.C. Section 101)) that is owned solely by the Company (as between Executive and the Company); and

(B) acknowledge and agree that, as between the Company and Executive, (I) all the Company Inventions shall be the sole and exclusive property of the Company, its successors and assigns, and (II) the Company, its successors and assigns shall be the sole and exclusive owner of all the Company Inventions.

(iii) Enforcement of Proprietary Rights.

(A) Executive will assist the Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end, Executive will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Executive will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Executive’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the Term, but the Company shall compensate Executive at a reasonable rate after his termination for the time actually spent by him at the Company’s request on such assistance which occurs after the end of the Term.

(B) Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that Executive now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

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(d) References to Company. All references to the Company set forth in this Section 8 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company.

9. Non-competition and Non-interference.

(a) Covenant of Executive. In consideration of the Company’s entering into this Agreement, the Company’s agreement to provide Executive with Proprietary Information and specialized training, and the Company’s agreement to provide the Base Salary and other benefits to Executive, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive covenants as follows:

(i) Non-Competition While Employed. While Executive is an employee of the Company, in the Restricted Area (as defined below) Executive will not, directly or indirectly, participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise (as defined below) nor shall Executive engage in any such other activities that conflict with Executive’s obligations to the Company.

(ii) Non-Competition After Employment. For a period commencing from the end of Executive’s employment with the Company and continuing for a period of twelve (12) months after the date that Executive ceases receiving compensation under Section 7(b) and 7(d)(i) of this Agreement (the period commencing on the Effective Date and ending on the date Executive ceases receiving compensation under either Section 4 or Section 7(b) and 7(d)(i) of this Agreement being referred to as the “Compensation Period”), in the Restricted Area Executive will not, directly or indirectly participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise.

(iii) The “Restricted Area” means all areas of the world in which the Company provides products, goods or services, determined at all times throughout the Compensation Period. A “Competing Enterprise” means any person, corporation, firm or other entity that provides products, goods or services similar to, or competitive with, directly or indirectly, the products, goods or services provided by the Company, determined at all times throughout the Compensation Period. Notwithstanding the foregoing, Executive is permitted to own up to five percent (5%) of any class of securities of any corporation that is traded on a national securities exchange or through Nasdaq.

(iv) Non-solicitation. During the Compensation Period and for a period of twelve (12) months thereafter, Executive shall not, either for himself or for any other person, firm, corporation, or other entity, directly or indirectly, or by action in concert with others:

(A) Individually or on behalf of any other person or entity, directly or indirectly, solicit or encourage any employee or contractor of the Company to terminate his or her employment or engagement with the Company or hire or solicit the employment services of any employee of the Company unless such employee’s employment has been terminated by the Company. This provision shall not preclude Executive from responding to or talking with such employee or contractor, provided Executive does not

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attempt to solicit or encourage Executive or contractor to terminate his or her employment or engagement with the Company.

(B) Take away or attempt to take away, or solicit or attempt to solicit, any existing or Potential Customer, as defined below, of the Company (whether or not such customer is actually a customer of the Company as of the date hereof, including without limitation any customer solicited by Executive or which became known by Executive prior to the date hereof) with the purpose of obtaining such person as an employee or customer for a business competitive with the Company’s business. This provision shall not preclude Executive from responding to or talking with such Potential Customer, provided Executive does not attempt to take away, or solicit or attempt to solicit the Potential Customer for, a business competitive with the Company’s business.

(C) For purposes of this Section, “Potential Customer” means any person, corporation, firm or other entity actually doing business with the Company at any time during the Compensation Period.

(v) Organizing Competitive Business. Without limiting any of the other provisions contained in this Section 9, during the Compensation Period, Executive shall not undertake planning for or organization of any business activity competitive with the business of the Company, or conspire with agents, employees, consultants or other representatives of the Company for the purpose of organizing any such competitive business activity.

(b) References to Company. All references to the Company set forth in this Section 9 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company.

10. Mediation. In the event a dispute arises under this Agreement, the parties agree, based upon good and valuable consideration, the sufficiency of which is hereby acknowledged, to mediate in Dallas, Texas, any and all disputes prior to the filing of any cause of action in state or federal court. The mediator shall be chosen by the presiding judge of the Dallas County Civil Judicial Courts, and the parties agree to use commercially reasonable efforts to resolve their issues. Costs for mediation shall be borne by the non-prevailing party.

11. Notice. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or when mailed, certified or registered mail, postage prepaid, to the following addresses:

If to Executive:

Graham C. Beachum II

3109 Knox Street, #204

Dallas, Texas 75205

If to the Company:

EDGE TECHNOLOGY GROUP, INC.

6611 Hillcrest Avenue

Suite 223

Dallas, Texas 75205-1301

12. General.

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(a) Construction and Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts that are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions that would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated therein.

(b) Assignability. Executive may not assign his interest in or delegate his duties under this Agreement. Notwithstanding anything else in this Agreement to the contrary, the Company may assign this Agreement to and all rights hereunder shall inure to the benefit of any person, firm or corporation succeeding to all or substantially all of the business or assets of the Company by purchase, merger or consolidation.

(c) Governing Law. This Agreement shall be governed in all respects, including as to validity, interpretation, construction, performance and effect, by the laws of the State of Texas applicable to contracts executed and to be performed entirely within said State. Venue shall be exclusively in Dallas County, Texas.

(d) Attorneys Fees. All legal fees and costs incurred in connection with the resolution of any dispute or controversy under or in connection with this Agreement shall be borne by the non-prevailing party.

(e) Binding Effect. This Agreement is for the employment of Executive, personally, and for the services to be rendered by him, which must be rendered by him and no other person. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

(f) Entire Agreement; Modification. This Agreement of the parties hereto with respect to the subject matter hereof and may not be modified or amended in any way except in a written instrument signed by the parties hereto.

(g) Duration. Notwithstanding the term of employment hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(h) Survival. The covenants set forth in Sections 7, 8 and 9 of this Agreement shall survive and shall continue to be binding upon Executive notwithstanding the termination of this Agreement for any reason whatsoever. The covenants set forth in Sections 7, 8 and 9 of this Agreement shall be deemed and construed as separate agreements independent of any other provision of this Agreement. The existence of any claim or cause of action by Executive against Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of any or all convenants. It is expressly agreed that the remedy at law for the breach or any such covenant is inadequate and that injunctive relief shall be available to prevent the breach or any threatened breach thereof.

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement the day and year first written above.

EDGE TECHNOLOGY GROUP, INC.

By:

Name:

  Title:

EXECUTIVE

Graham C. Beachum II            

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EXHIBIT A

[Attach Stock Option Grant Form and Stock Option Plan]

EX-10.9

Exhibit 10.9

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made effective as of the 2nd day of January, 2001 (the “Effective Date”) between Edge Technology Group, Inc. (formerly known as Visual Edge Systems Inc.), a Delaware corporation (the “Company”), and Graham C. Beachum III, an individual (“Executive”).

R E C I T A L S

WHEREAS, the Company wishes to secure the employment of Executive and Executive desires to enter into employment with the Company upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows:

1. Employment. The Company hereby employs Executive and Executive accepts such employment for the Employment Term (as defined in Section 3 below). During the Employment Term, Executive shall be employed as Vice President and General Manager and shall have such powers and perform such executive duties as may from time to time be assigned to him by the Chief Executive Officer or such other officer as the Chief Executive Officer may designate. The Company acknowledges that Executive’s primary place of business shall be in the Dallas, Texas area and Executive acknowledges that Executive shall be required to travel throughout the United States and the remaining world as necessary to perform his duties hereunder.

2. Performance. Executive will serve the Company faithfully and to the best of his ability and will devote substantially all of his time, energy, experience and talents during regular business hours and as otherwise reasonably necessary to such employment.

3. Employment Term. Except for earlier termination as provided in Section 6 hereof, Executive’s employment under this Agreement shall be for a four (4) year term commencing upon the Effective Date and ending four (4) years thereafter (the “Employment Term”).

4. Compensation.

(a) Salary. During the Employment Term, the Company shall pay Executive a base salary (the “Base Salary”) (as defined below) during each Fiscal Year (as defined below) of the Employment Term. The Base Salary shall be payable in accordance with the then applicable payroll procedures of the Company and shall be subject to applicable withholding for taxes. The first Fiscal Year of the Employment Term shall commence on the Effective Date, with the subsequent Fiscal Year commencing on the applicable anniversary date of the Effective Date (each, a “Fiscal Year”).

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As used herein, “Base Salary” shall mean (a) prior to a Financing Event, $95,000 annualized and (b) after a Financing Event, $165,000 per Fiscal Year, which shall be increased five percent (5%) each Fiscal Year after the first Fiscal Year. A “Financing Event” shall mean the closing by the Company on a transaction in which the Company issues common stock and which transaction provides gross cash proceeds for the Company of at least $10,000,000.

(b) Incentive Cash Compensation. For each Fiscal Year or portion thereof during the Employment Term, Executive shall be eligible for discretionary bonuses payable by the Company on such terms and conditions, and subject to such standards, as shall be determined from time to time in the sole discretion of the Board of Directors of the Company or, at the Board of Directors’ discretion, the compensation committee of the Company.

(c) Stock Options and Other Non-Cash Incentive Compensation.

(i) Stock Options. Executive will be granted options to purchase 750,000 shares of the Company’s common stock (the “Stock Options”), at an exercise price of $1.50 per share pursuant to the following vesting schedule.

Milestone	Amount of Vesting
(A) The grant date of the Stock Options	25% of the Stock Options
(B) Upon each successive anniversary of the Effective Date	18.75% of the Stock Options

(ii) Stock Option Plans. The Stock Options shall be granted pursuant to the current stock option grant form and stock option plan of the Company and shall be subject to all terms and conditions thereof, copies of which are attached hereto as Exhibit A.

(d) Medical and Dental Health and Other Benefits. During the Employment Term, Executive shall be entitled to medical and dental health and other benefits in accordance with the current procedures of the Company with respect to its executive level employees.

(e) Vacation; Sick Leave. During the Employment Term, Executive shall be entitled to up to three (3) weeks of vacation annually and shall be entitled to sick leave in accordance with the current procedures of the Company with respect to its executive level employees.

5. Expenses. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Board of Directors of the Company from time to time and upon receipt of appropriate documentation.

6. Termination. The employment of Executive hereunder may be terminated prior to the end of the Employment Term, under the following circumstances:

(a) Death or Disability. The Employment Term shall terminate upon the death or Disability of Executive. For purposes of this Agreement, “Disability” occurs if Executive is unable to perform his duties, pursuant to this Agreement, on a full-time basis

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because of mental or physical incapacity, including, without limitation, alcoholism or drug abuse, which requires a leave of absence in excess of ninety (90) days during any Fiscal Year. In the event Executive is a “Qualified Individual with a Disability,” as such term is defined in the Americans with Disabilities Act, the Company shall not terminate Executive’s employment hereunder if Executive is able to perform the essential functions of Executive’s job with reasonable accommodation from the Company.

(b) With “Cause.” For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon the occurrence of any of the following: (i) embezzlement, theft or other misappropriation of any property of the Company or any of its subsidiaries by Executive, (ii) gross or willful misconduct by Executive resulting in substantial loss to the Company or any of its subsidiaries or substantial damage to the reputation of the Company or any of its subsidiaries, (iii) any act by Executive involving moral turpitude that results in a conviction of, or a pleading nolo contendere to, a felony or other crime involving moral turpitude, fraud or misrepresentation, (iv) willful and continued failure or neglect by Executive to substantially perform his assigned duties to the Company or any of its subsidiaries, (v) gross breach of Executive’s fiduciary obligations to the Company or any of its subsidiaries, (vi) any chemical dependence which materially affects the performance of Executive’s duties and responsibilities to the Company or any of its subsidiaries, or (vii) commission of a felony or a crime by Executive involving moral turpitude or the commission of any other significant act by Executive involving dishonesty, disloyalty or fraud with respect to the Company; provided, that in the case of the misconduct set forth in clauses (iv) and (vi) above, such misconduct shall continue for a period of five (5) days following written notice thereof by the Company to Executive.

(c) Without “Cause.” Notwithstanding any provisions of this Agreement to the contrary, the Company may terminate Executive’s employment hereunder for any reason other than those specified in the foregoing paragraphs (a) and (b), or for no reason, at any time during the Employment Term, effective upon delivery of two (2) day’s notice by the Company.

(d) Voluntary Resignation. Executive may terminate his employment hereunder at any time during the Employment Term subject only to the requirement that Executive shall provide the Company with a minimum of thirty (30) days prior written notice (a “Voluntary Resignation”).

(e) With “Good Reason.” Notwithstanding any provision of this Agreement to the contrary, Executive may terminate his employment hereunder for Good Reason, subject to the requirement that Executive shall provide the Company with a minimum of thirty (30) days prior written notice. For purposes of this Agreement, Executive shall have “Good Reason” to terminate his employment hereunder upon the occurrence, without Executive’s written consent, of any of the following: (i) a failure by the Company to pay to Executive any amounts due under this Agreement in accordance with the terms hereof, which failure is not cured within thirty (30) days following receipt by the Company of notice from Executive of such failure; or (ii) any other material breach by the Company of this Agreement that remains uncured for thirty (30) days after written notice thereof by Executive to the Company.

(f) Termination After Change of Control. Executive may terminate Executive’s employment and this Agreement for Good Reason within ninety (90) days of a Change of Control upon thirty (30) days’ written notice to the Company. For purposes of this Agreement, a “Change of Control” shall be deemed to exist upon the occurrence of any of the following:

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(i) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (“Act”) (other than (a) Permitted Assignees, (b) the Company, (c) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, (d) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company, or (e) any entity holding non-participating shares of an entity which is a stockholder of the Company or which owns or controls, directly or indirectly, a stockholder of the Company) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing fifty percent (50 %) or more of the combined voting power of the Company’s then outstanding securities. “Permitted Assignees” shall mean the holders of the equity securities (whether or not voting) of any shareholder of the Company owning more than fifteen percent (15%) of the Company on the date of execution of this Agreement;

(ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board;

(iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities shall not constitute a Change of Control of the Company; and provided, further, a merger or consolidation in which the Company is the surviving entity (other than as a wholly owned subsidiary or another entity) and in which the Board of the Company after giving effect to the merger or consolidation is comprised of a majority of members who are either (x) directors of the Company immediately preceding the merger or consolidation, or (y) appointed to the Board of the Company by the Company (or its Board) as an integral part of such merger or consolidation, shall not constitute a Change of Control of the Company; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets other than (x) the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale or (y) pursuant to a dividend in kind or spin-off type transactions, directly or indirectly, of such assets to the stockholders of the Company.

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7. Compensation upon Termination. Executive shall be entitled to the following compensation from Company, in lieu of all other sums or benefits owed or payable to Executive hereunder, upon the termination of Executive’s employment during the Employment Term.

(a) Death or Disability. In the event of the death or Disability of Executive during the Employment Term of this Agreement, except for amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company and Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive or his estate, in accordance with the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates on account of death or Disability.

(b) With Cause. In the event that Executive’s employment is terminated by the Company for Cause, except for the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company and Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive, in accordance with the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates for Cause.

(c) Without Cause. In the event that Executive’s employment is terminated by the Company without Cause at any time during the Employment Term, Executive shall be entitled to receive (i) an amount equal to his Base Salary, then in effect, for the shorter of the remainder of the Employment Term or for six (6) months (the “Severance Period”), such amount to be payable in a lump sum within thirty (30) days of the date of termination, (ii) the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company pursuant to Section 4 and (iii) all the Stock Options shall be deemed fully vested as of the date of termination.

(d) Voluntary Resignation.

(i) Without Good Reason. In the event that Executive’s employment is terminated by Executive as a Voluntary Resignation pursuant to Section 6(d), except for amounts of Base Salary and accrued vacation earned by Executive as of the date of termination, but not yet paid by the Company pursuant to Section 4 and the Stock Options vested as of such date, the Company shall have no obligation to make payments to Executive, in accordance to the provisions of Section 4, for the periods after the date Executive’s employment with the Company terminates on account of Voluntary Resignation.

(ii) With Good Reason. Notwithstanding any provision of this Agreement to the contrary, if Executive’s employment with the Company terminates on account of Voluntary Resignation for Good Reason during the Employment Term, Executive shall be entitled to receive (A) an amount equal to his Base Salary, then in effect, for the Severance Period, such amount to be payable in a lump sum within thirty (30) days of the date of termination, or ratably over the Severance Period, (B) the amounts of Base Salary and accrued vacation time earned by Executive as of the date of termination but not yet paid by the Company pursuant to Section 4 and (C) all the Stock Options shall be deemed fully vested as of the date of Executive’s Voluntary Resignation for Good Reason.

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(e) Change of Control. If Executive’s employment and this Agreement is terminated during the Employment Term as a result of a Change of Control, the Company will pay Executive (i) his Base Salary in effect on the date of termination and accrued vacation through the date of termination, prorated for any partial payroll period and (ii) an amount equal to his Base Salary, then in effect, for the Severance Period. All the Stock Options shall be deemed fully vested as a result of a Change of Control.

8. Confidential Information—Non-disclosure.

(a) Recognition of the Company’s Rights: Nondisclosure. Executive understands that the Company possesses Proprietary Information (as defined below), which the Company agrees to disclose to Executive for the purpose of performing his duties under this Agreement.

(i) “Proprietary Information” shall mean Information (as defined below) of value to the Company that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by the Company including, for example, but not limited to, any trade secret, know-how, show-how and other proprietary information, irrespective of (A) whether in tangible or non-tangible form, (B) whether patentable or copyrighted or subject to confidentiality, (C) its media, (D) whether solely or jointly created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Executive and/or one or more other persons, or (E) whether created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned before, during, or after the Term. Proprietary Information does not include Information (as defined below) that Executive develops entirely on his own time without using the Company’s equipment, supplies, facilities, Proprietary Information or trade secret information except for such Information that either relates at the time of conception or reduction to practice of the Information to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or results from any work performed by Executive for the Company.

(ii) “Information” shall mean any list, schematic, diagram, circuitry, technology, inventory, invention, idea, discovery, improvement, design, concept, technique, algorithm, formula, method, process, configuration, tooling, mechanism, manufacture, assembly, installation, model, apparatus, product, device, system, network, data, plan, library, work of authorship, file, media, record, report, copy, pictorial work, graphic work, audiovisual work, hardware, firmware, computer interface (including for example but not limited to programming interfaces), computer language, computer protocol, computer software program or application (irrespective of whether source code or object code), flow chart, blueprint, drawing, photograph, chart, graph, notebook, book, computer disk, tape, storage media, printout, sound recording, note, memorandum, specification, paper, document (irrespective of whether printed, typewritten, handwritten or otherwise), information, material, account, business plan, business operation, business method, business practice, business strategy, research, development, marketing, revenue, sale, forecast, budget, finance, license, price, cost, salary, compensation, knowledge about suppliers, knowledge about available skills and knowledge about actual and/or prospective employees, clients and/or customers (including for example but not limited to their names, addresses and telephone numbers).

(iii) “Non-party Information” shall mean Information discovered, received, or learned by the Company from non-parties with respect to which the Company is

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subject to a duty to maintain confidentiality or to use only for certain limited purposes.

(b) Executive Covenant. In consideration of the Company’s entering into this Agreement, the Company’s agreement to provide Executive with Proprietary Information, and the Company’s agreement to provide the Base Salary and other benefits to Executive, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive covenants as follows:

(i) Non-Disclosure of Proprietary Information and Non-Party Information. At all times during the Term and thereafter in perpetuity, Executive shall hold all Proprietary Information and Non-party Information in confidence and shall neither disclose (to anyone other than the Company personnel having a need to know such Information in connection with their activities for the Company) nor use (except insofar as required by Executive’s activities for the Company under this Agreement or in conducting the business of the Company) any Proprietary Information or any Non-party Information, unless: (A) Executive is expressly authorized in writing to the contrary by a duly authorized officer of the Company; (B) absent breach or violation of this Agreement, such Information is or becomes generally known to the public or available to the public, as evidenced by a printed publication or other equally conclusive evidence; (C) absent breach or violation of this Agreement, such Information is rightfully received absent any confidentiality obligation by Executive from a non-party outside of the Company, as evidenced by a dated and witnessed writing prepared in the normal course of business or other equally conclusive evidence; or (D) is required to be disclosed pursuant to a valid order by a court or other governmental body or otherwise required by law, provided that Executive informs the Company immediately upon Executive’s receipt of notice, in any form, that disclosure pursuant to this section may be required so that the Company may oppose any compelled disclosure of its Proprietary Information. Executive further agrees not to disclose any Proprietary Information pursuant to this section unless and until he is informed that the Company will not oppose such disclosure or that the Company’s attempt to oppose such disclosure has been denied.

(ii) Trade Secrets. All trade secrets of the Company will be entitled to all of the protection and benefits under all applicable federal and state trade secrets law. If any information that the Company deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Proprietary Information for purposes of this Agreement.

(c) Assignment of Inventions.

(i) Definitions.

(A) “Moral Rights” shall mean (I) any right of paternity or integrity, (II) any right to claim authorship or require authorship identification, (III) any right to object to distortion, mutilation, or other modification of, or other derogatory action in relation to, a work of authorship, and (IV) any similar right existing under judicial or statutory law of the United States of America or any State thereof irrespective of whether such right is generally referred to as a “moral right.”

(B) “Proprietary Rights” shall mean any patent, trade secret, confidentiality protection, know-how right, show-how right, mask work

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right, copyright (e.g., including but not limited to any Moral Right), and any other intellectual property protection and intangible interests and legal rights of exclusion, of any and all countries, including for example but not limited to (I) any person’s publicity or privacy right, (II) any utility model or application therefor, (III) any industrial model or application therefor, (IV) any certificate of invention or application therefor, (V) any application for patent, including, for example, but not limited to, any provisional, divisional, reissue, reexamination or continuation application, (VI) any substitute, renewal or extension of any such application, and (VII) any right of priority resulting from the filing of any such application.

(C) “The Company Inventions” shall mean (I) any and all Proprietary Information that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Executive, either alone or jointly with one or more other persons, during the Term, and (II) any and all Proprietary Rights that may be available in such Proprietary Information or result therefrom.

(ii) Executive’s Covenant. Executive does hereby, without reservation, irrevocably:

(A) sell, assign, grant, transfer and convey to the Company (and the Company’s successors and assigns): Executive’s entire right, title and interest (present and future and throughout the world) in and to all the Company Inventions; provided, however, that, to the extent that any one or more the Company Inventions includes a work of authorship created by Executive (solely, or jointly with others), each such work of authorship shall automatically be deemed to be created as a “work made for hire” (as that term is defined in the United States Copyright Act (17 U.S.C. Section 101)) that is owned solely by the Company (as between Executive and the Company); and

(B) acknowledge and agree that, as between the Company and Executive, (I) all the Company Inventions shall be the sole and exclusive property of the Company, its successors and assigns, and (II) the Company, its successors and assigns shall be the sole and exclusive owner of all the Company Inventions.

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(iii) Enforcement of Proprietary Rights.

(A) Executive will assist the Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end, Executive will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Executive will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Executive’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the Term, but the Company shall compensate Executive at a reasonable rate after his termination for the time actually spent by him at the Company’s request on such assistance which occurs after the end of the Term.

(B) Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that Executive now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

(d) References to Company. All references to the Company set forth in this Section 8 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company.

9. Non-competition and Non-interference.

(a) Covenant of Executive. In consideration of the Company’s entering into this Agreement, the Company’s agreement to provide Executive with Proprietary Information and specialized training, and the Company’s agreement to provide the Base Salary and other benefits to Executive, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive covenants as follows:

(i) Non-Competition While Employed. While Executive is an employee of the Company, in the Restricted Area (as defined below) Executive will not, directly or indirectly, participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise (as defined below) nor shall Executive engage in any such other activities that conflict with Executive’s obligations to the Company.

(ii) Non-Competition After Employment. For a period commencing from the end of Executive’s employment with the Company and continuing for a period of twelve (12) months after the date that Executive ceases receiving compensation under Section 7(b) or 7(d)(i) of this Agreement (the period commencing on the Effective Date and ending on the date Executive ceases receiving compensation under either Section 4 or Section 7(b) or 7(d)(i) of this Agreement being referred to as the “Compensation Period”), in the Restricted Area Executive will not, directly or indirectly participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise.

Page 9

(iii) The “Restricted Area” means all areas of the world in which the Company provides products, goods or services, determined at all times throughout the Compensation Period. A “Competing Enterprise” means any person, corporation, firm or other entity that provides products, goods or services similar to, or competitive with, directly or indirectly, the products, goods or services provided by the Company, determined at all times throughout the Compensation Period. Notwithstanding the foregoing, Executive is permitted to own up to five percent (5%) of any class of securities of any corporation that is traded on a national securities exchange or through Nasdaq.

(iv) Non-solicitation. During the Compensation Period and for a period of twelve (12) months thereafter, Executive shall not, either for himself or for any other person, firm, corporation, or other entity, directly or indirectly, or by action in concert with others:

(A) Individually or on behalf of any other person or entity, directly or indirectly, solicit or encourage any employee or contractor of the Company to terminate his or her employment or engagement with the Company or hire or solicit the employment services of any employee of the Company unless such employee’s employment has been terminated by the Company. This provision shall not preclude Executive from responding to or talking with such employee or contractor, provided Executive does not attempt to solicit or encourage Executive or contractor to terminate his or her employment or engagement with the Company.

(B) Take away or attempt to take away, or solicit or attempt to solicit, any existing or Potential Customer, as defined below, of the Company (whether or not such customer is actually a customer of the Company as of the date hereof, including without limitation any customer solicited by Executive or which became known by Executive prior to the date hereof) with the purpose of obtaining such person as an employee or customer for a business competitive with the Company’s business. This provision shall not preclude Executive from responding to or talking with such Potential Customer, provided Executive does not attempt to take away, or solicit or attempt to solicit the Potential Customer for, a business competitive with the Company’s business.

(C) For purposes of this Section, “Potential Customer” means any person, corporation, firm or other entity actually doing business with the Company at any time during the Compensation Period.

(v) Organizing Competitive Business. Without limiting any of the other provisions contained in this Section 9, during the Compensation Period, Executive shall not undertake planning for or organization of any business activity competitive with the business of the Company, or conspire with agents, employees, consultants or other representatives of the Company for the purpose of organizing any such competitive business activity.

(b) References to Company. All references to the Company set forth in this Section 9 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company.

10. Mediation. In the event a dispute arises under this Agreement, the parties agree, based upon good and valuable consideration, the sufficiency of which is hereby acknowledged, to mediate in Dallas, Texas, any and all disputes prior to the

Page 10

filing of any cause of action in state or federal court. The mediator shall be chosen by the presiding judge of the Dallas County Civil Judicial Courts, and the parties agree to use commercially reasonable efforts to resolve their issues. Costs for mediation shall be borne by the non-prevailing party.

11. Notice. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or when mailed, certified or registered mail, postage prepaid, to the following addresses:

If to Executive:

Graham C. Beachum III

3109 Knox Street, #204

Dallas, Texas 75205

If to the Company:

EDGE TECHNOLOGY GROUP, INC.

6611 Hillcrest Avenue

Suite 223

Dallas, Texas 75205-1301

12. General.

(a) Construction and Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts that are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions that would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated therein.

(b) Assignability. Executive may not assign his interest in or delegate his duties under this Agreement. Notwithstanding anything else in this Agreement to the contrary, the Company may assign this Agreement to and all rights hereunder shall inure to the benefit of any person, firm or corporation succeeding to all or substantially all of the business or assets of the Company by purchase, merger or consolidation.

(c) Governing Law. This Agreement shall be governed in all respects, including as to validity, interpretation, construction, performance and effect, by the laws of the State of Texas applicable to contracts executed and to be performed entirely within said State. Venue shall be exclusively in Dallas County, Texas.

(d) Attorneys Fees. All legal fees and costs incurred in connection with the resolution of any dispute or controversy under or in connection with this Agreement shall be borne by the non-prevailing party.

(e) Binding Effect. This Agreement is for the employment of Executive, personally, and for the services to be rendered by him, which must be rendered by him and no other person. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

(f) Entire Agreement; Modification. This Agreement of the parties hereto with respect to the subject matter hereof and may not be modified or amended in any way except in a written

Page 11

instrument signed by the parties hereto.

(g) Duration. Notwithstanding the term of employment hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement.

(h) Survival. The covenants set forth in Sections 7, 8 and 9 of this Agreement shall survive and shall continue to be binding upon Executive notwithstanding the termination of this Agreement for any reason whatsoever. The covenants set forth in Sections 7, 8 and 9 of this Agreement shall be deemed and construed as separate agreements independent of any other provision of this Agreement. The existence of any claim or cause of action by Executive against Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of any or all convenants. It is expressly agreed that the remedy at law for the breach or any such covenant is inadequate and that injunctive relief shall be available to prevent the breach or any threatened breach thereof.

Page 12

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement the day and year first written above.

EDGE TECHNOLOGY GROUP, INC.

By:

Name:

  Title:

EXECUTIVE

Graham C. Beachum III

Page 13

EXHIBIT A

[Attach Stock Option Grant Form and Stock Option Plan]

EX-10.10

Exhibit 10.10

EDGE TECHNOLOGY GROUP, INC.

6611 HILLCREST AVENUE, No. 223

DALLAS, TEXAS 75205-1301

July 24, 2001

Mr. David N. Pilotte

4545 Crosstimber Drive

Plano, Texas 75093

Re: Offer of Employment

Dear David:

We are pleased to offer you the position of Executive Vice President and Chief Financial Officer of Edge Technology Group, Inc. (the “Company”). As Executive Vice President and Chief Financial Officer, you will receive an annual base salary in the amount of One Hundred Five Thousand and No/100 Dollars ($105,000.00), which shall increase to Two Hundred Twenty Five and No/100 ($225,000.00) upon the occurrence of a Financing Event (as defined herein). “Financing Event” shall mean the closing by the Company on a transaction in which the Company issues common stock and which transaction provides gross cash proceeds for the Company of at least $10,000,000. The base salary and any bonus shall be payable in accordance with the Company’s regular payroll practices. Your base salary and bonus compensation will be subject to statutory deductions and withholding. You will also be eligible for standard Company benefits and three (3) weeks paid vacation each year.

Subject to the approval of the Company’s Board of Directors, you will receive an option to purchase 300,000 shares of the Company’s stock (hereinafter the “Option”). The Option will vest over three years in accordance with the following vesting schedule: twenty-five percent (25%) shall vest upon your completion of thirty (30) days of employment with the Company, and the balance of the Option shall vest in eight (8) quarterly installments of nine and three hundred seventy-five thousandths percent (9.375%) upon your completion of each additional quarter of employment with the Company. The exercise price shall be equal to the fair market value of the Company’s common stock on the date of grant. The Option will be subject to the terms set forth in the Edge Technology Group, Inc. Amended and Restated 1996 Stock Option Plan.

The Company is an at-will employer, which means that your employment with the Company is for no specific period of time and may be terminated by the Company or you at any time, with or without prior notice and with or without cause. You will not be entitled to engage in or be an employee of any business that competes with the Company in any geographic location in which the Company is conducting or has written plans to conduct business. This is the full and complete agreement between you and the Company with respect to this term of employment, and it supersedes any prior representations or agreement, whether written or oral,

Mr. David N. Pilotte

July 24, 2001

Page 2

concerning your term of employment with the Company. The at-will nature of your employment may only be altered by written agreement signed by the Company’s Chief Executive Officer.

Your employment pursuant to this offer is contingent on your execution of the attached Confidentiality, Proprietary Information and Inventions Agreement. You will also be required to provide the Company with legally acceptable proof of your identity and authorization to work in the United States within three (3) days of your start date, and your failure to do so will render this offer of employment void and unenforceable.

This letter sets forth the entire agreement between you and the Company regarding the terms of your employment with the Company and supersedes any prior representations, agreements, and understandings between you and any employee or representative of the Company whether written or oral. This agreement shall be construed and interpreted in accordance with the laws of the state of Texas.

If this offer is acceptable to you, please sign one of the originals of this letter and the Confidentiality, Proprietary Information and Inventions Agreement and return them to the Company. The second original is for your files. This offer is subject to satisfactory reference checks and on receiving your signed acceptance not later than the close of business on August 6, 2001.

If you have any questions regarding this offer letter, please call Graham C. Beachum II at 214.999.2245. We look forward to having you join us at Edge Technology Group, Inc.

Sincerely,
EDGE TECHNOLOGY GROUP, INC.
By:	/s/    GRAHAM C. BEACHUM II
	Graham C. Beachum II
	Chief Executive Officer

I have read and accept this employment offer.

      /s/    DAVID N. PILOTTE

    David N. Pilotte

August 6, 2001

Date

Confidentiality, Proprietary Information and Inventions Agreement

In consideration of my employment by Edge Technology Group, Inc. (the “Company”), the Company’s promise to disclose to me its confidential and proprietary information (as defined below), the compensation now and hereafter paid to me, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agrees with the Company as follows:

1. Recognition of Company’s Rights; Nondisclosure.

At all times during the term of my employment and thereafter, I will hold in strictest confidence and will not disclose, discuss, transmit, use, lecture upon, or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, discussion, transmission, use, or publication may be required in connection with my work for the Company, or unless the President or the Board of Directors of the Company expressly authorizes such in writing. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns and that the Company and its assigns shall be the sole owner of all patent rights, copyrights, trade secret rights, and all other rights throughout the world (collectively, “Proprietary Rights”) in connection therewith.

The term “Proprietary Information” shall mean trade secrets, confidential knowledge, data, or any other proprietary information of the Company and each of its subsidiaries or affiliated companies. By way of illustration but not limitation, “Proprietary Information” includes (a) inventions, trade secrets, ideas, processes, formulas, data, lists, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques relating to the business or proposed business of the Company and that were learned or discovered by me during the term of my employment with the Company, (hereinafter, included Proprietary Information is collectively referred to as “Inventions”); (b) information regarding plans for research, development, new products and services, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers, customer lists and customers that were learned or discovered by me during the term of my employment with the Company; and (c) information regarding the skills and compensation of other employees of the Company.

2. Third Party Information. I understand, in addition, that the Company may from time to time receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times during the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose, discuss, transmit, use, lecture upon, or publish any Third Party Information, except as such disclosure, discussion, transmission, use, or publication may be required in connection with my work for the Company, or unless the President or the Board of Directors of the Company expressly authorizes such in writing.

3. Assignment of Inventions.

3.1 I hereby assign to the Company all my right, title, and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto), whether or not patentable or registrable under copyright or similar statutes, that were made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company.

3.2 I acknowledge that all original works of authorship that are made by me (solely or jointly with others) during the term of my employment with the Company and that are within the scope of my employment and protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C. § 101 (1994)). Inventions assigned to the Company by this Section 3 are hereinafter referred to as “Company Inventions.”

4. Enforcement of Proprietary Rights. I will assist the Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end I will execute, verify, and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify, and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph thereon with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, that I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

5. Obligation to Keep Company Informed. During the period of my employment, I will promptly disclose to the Company fully and in writing and will hold in trust for the sole right and benefit of the Company any and all Inventions. In addition, during the first three (3) years after termination of my employment with the Company, I will provide the Company with a complete copy of each patent application filed by me or that names me as an inventor or co-inventor.

6. Prior Inventions. Inventions, if any, patented or unpatented, that I made prior to the commencement of my employment with the Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed, or reduced to practice or caused to be conceived, developed, or reduced to practice prior to commencement of my employment with the Company, that I consider to be my property or the

property of third parties and that I wish to have excluded from the scope of this Agreement. If disclosure of any such Invention on Exhibit A would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Inventions in Exhibit A but am to inform the Company that all Inventions have not been listed for that reason.

7. Other Activities; Non-Competition; Non-Solicitation.

7.1 During the term of my employment with the Company, I will not, directly or indirectly, participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm, or other entity that competes in the State of Texas, or in any other state in the United States, or in any country in the world with the Company in the conduct of the business of the Company as conducted or as proposed to be conducted, nor shall I engage in any other activities that conflict with my obligations to the Company.

7.2 In consideration of the premises hereof and in further consideration of the Company’s promise to disclose to me confidential and Proprietary Information and trade secrets of the Company and the Company’s promise to provide me with immediate specialized training, and the experience I will gain throughout my employment with the Company, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, I hereby agree that for a period of one (1) year after the date that my employment with the Company is terminated, for any reason, I will not, directly or indirectly, (i) compete in the state of Texas, or in any other State of the United States, or in any country in the world where the Company engages in business, or proposes to engage in business, on the date of the termination of my employment with the Company, or (ii) participate in the ownership, management, operation, financing, or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm, or other entity that competes in the state of Texas, or in any other State of the United States, or in any country in the world with the Company in the conduct of the business of the Company as conducted and as proposed to be conducted on the date of termination of my employment. Notwithstanding the foregoing, I am permitted to own up to 5% of any class of securities of any corporation that is traded on a national securities exchange or through Nasdaq.

7.3 During the term of my employment and for a period of one (1) year after my employment with the Company is terminated for any reason, I will not, directly or indirectly, individually or on behalf of any other person, firm, partnership, corporation, or business entity of any type, solicit, assist or in any way encourage any current employee or consultant of the Company or any subsidiary of the Company to terminate his or her employment relationship or consulting relationship with the Company or subsidiary nor will I solicit the employment services of any former employee of the Company or any subsidiary of the Company whose employment has been terminated for less than six (6) months.

7.4 For a period of one (1) year after my employment with the Company is terminated for any reason, I will not, directly or indirectly, individually or on behalf of any other person, firm, partnership, corporation, or business entity of any type, take away or attempt to take away, solicit or attempt to solicit, contact, call upon, communicate with, or attempt to communicate with, any Customer of the Company. For purposes of this section, “Customer” shall mean any

company or business entity that the Company sells goods or services to or that I had contact with or performed services for during my employment with the Company.

8. No Improper Use of Materials

I understand that I shall not use the proprietary or confidential information or trade secrets of any former employer or any other person or entity in connection with my employment with the Company. During my employment by the Company, I will not improperly use or disclose any proprietary or confidential information or trade secrets, if any, of any former employer or any other person or entity to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person or entity to whom I have an obligation of confidentiality unless consented to in writing by that former employer, person, or entity.

9. No Conflicting Obligation.

I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement between me and any other employer, person or entity. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith.

10. Return of Company Documents.

When I leave the employ of the Company, I will deliver to the Company all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information, or Proprietary Information of the Company. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

11. Legal and Equitable Remedies.

Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance, or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

12. Authorization to Notify New Employer.

I hereby authorize the Company to notify my new employer about my rights and obligations under this Agreement following the termination of my employment with the Company.

13. Notices.

Any notices required or permitted hereunder shall be given to the appropriate party at the party’s last known address. Such notice shall be deemed given upon personal delivery to the last known address or if sent by certified or registered mail, three days after the date of mailing.

14. General Provisions.

14.1 Governing Law. This Agreement will be governed by and construed according to the laws of the State of Texas without regard to conflicts of law principles.

14.2 Exclusive Forum. I hereby irrevocably agree that the exclusive forum for any suit, action, or other proceeding arising out of or in any way related to this Agreement shall be in the state or federal courts in Texas, and I agree to the exclusive personal jurisdiction and venue of any court in Travis County, Texas.

14.3 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and myself relating to the subject matter hereof and supercedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary, or compensation will not affect the validity or scope of this Agreement. As used in this Agreement, the period of my employment includes any time during which I may be retained by the Company as a consultant.

14.4 Severability.

(a) I acknowledge and agree that each agreement and covenant set forth herein constitutes a separate agreement independently supported by good and adequate consideration and that each such agreement shall be severable from the other provisions of this Agreement and shall survive this Agreement.

(b) I understand and agree that Section 7 of this Agreement is to be enforced to the fullest extent permitted by law. Accordingly, if a court of competent jurisdiction determines that the scope and/or operation of Section 7 is too broad to be enforced as written, the Company and I intend that the court should reform such provision to such narrower scope and/or operation as it determines to be enforceable, provided, however, that such reformation applies only with respect to the operation of such provision in the particular jurisdiction with respect to which such determination was made. If, however, Section 7 is held to be illegal, invalid, or unenforceable under present or future law, and not subject to reformation, then (i) such provision shall be fully severable, (ii) this Agreement shall be construed and enforced as if such provision was never a part of this Agreement, and (iii) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.

14.5 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators, and other legal representatives and will be for the benefit of the Company, its successors and assigns.

14.6 Survival. The provisions of this Agreement shall survive the termination of my employment for any reason and the assignment of this Agreement by the Company to any successor in interest or other assignee.

14.7 Employment. I agree and understand that my employment with the Company is at will, which means that either I or the Company may terminate the employment relationship at any time, with or without prior notice and with or without cause. I further agree and understand that

nothing in this Agreement shall confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause.

14.8 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

14.9 Recovery of Attorney’s Fees. In the event of any litigation arising from or relating to this Agreement, the prevailing party in such litigation proceedings shall be entitled to recover, from the non-prevailing party, the prevailing party’s costs and reasonable attorney’s fees, in addition to all other legal or equitable remedies to which it may otherwise be entitled.

14.10 Headings. The headings to each section or paragraph of this Agreement are provided for convenience of reference only and shall have no legal effect in the interpretation of the terms hereof.

[Signature Page Follows]

I HAVE READ THIS CONFIDENTIALITY, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.

This Agreement shall be effective as of the first day of my employment with the Company, namely: Aug 6                       , 2001.

I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE DURING MY EMPLOYMENT, RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY’S CONFIDENTIAL AND PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT, AND PROHIBITS ME FROM COMPETING WITH THE COMPANY AND/OR FROM SOLICITING EMPLOYEES AND CUSTOMERS OF THE COMPANY FOR ONE (1) YEAR AFTER MY EMPLOYMENT WITH THE COMPANY IS TERMINATED FOR ANY REASON.

Dated: Aug 6, 2001	/s/    DAVID N. PILOTTE
	Signature of Employee
	David N. Pilotte
	Print Name of Employee
	4545 Crosstimber Drive Plano, TX 75093
	Address

ACCEPTED AND AGREED TO:

EDGE TECHNOLOGY GROUP, INC.

By:	/s/    GRAHAM C. BEACHUM II
Name:	Graham C. Beachum II
Title:	President & CEO

EXHIBIT A

Ladies and/or Gentlemen:

The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Edge Technology Group, Inc. (the “Company”) that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my employment by the Company that I desire to remove from the operation of the Company’s Confidentiality, Proprietary Information and Inventions Agreement.

        x       I have no inventions or improvements to disclose.

¨ I have inventions or improvements which I have disclosed on the attached Invention Disclosure form(s).

¨ Due to certain confidentiality obligations, I cannot disclose certain inventions that otherwise would be listed.

/s/    DAVID N. PILOTTE

Signature

Aug 6, 2001

Date

INVENTION DISCLOSURE

Invention Disclosure #                                

Inventors: 1.                                

2.                                    

3.                                    

Title of Invention:                                                                     

Problem solved by invention:                                                     

Invention Description:                                                                 

Add additional signed, dated sheets and drawings if necessary.

Has this invention been disclosed outside of the Company? Yes                     No                    

Inventor Signature:                                              Date:                                

EX-10.17

Exhibit 10.17

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (“Agreement”) is made as of May 27, 2003, among THINKSPARK CORPORATION, a Delaware corporation (successor by merger to ThinkSpark Corporation, a Texas corporation) and THINKSPARK, L.P., a Delaware limited partnership (collectively, “Assignor”), and AXTIVE CORPORATION, a Delaware corporation (“Assignee”).

RECITALS

A. Assignor has incurred indebtedness to Merrill Lynch Business Financial Services Inc. (“Lender”) pursuant to that certain WCMA Loan and Security Agreement No. 542-07C00 dated as of February 19, 1999 between Assignor, as borrower, and Lender (as amended, and as the same may be further amended, restated, extended, refinanced or otherwise modified from time to time, the “WCMA Loan Agreement”). As of the date hereof, the Assignor owes principal and accrued interest in the amount of $6,781,022.82 under the WCMA Loan Agreement.

B. Assignee is, concurrently herewith, purchasing all of the outstanding capital stock of Assignor pursuant to the Agreement and Plan of Merger dated as of May 23, 2003 among Assignor, Assignee Axtive Acquisition Corp. and Kerry Osborne (the “Merger”).

C. In connection with the Merger, Assignor now desires to assign Assignor’s rights and obligations under the WCMA Loan Agreement to Assignee (without releasing the continuing security interest in Assignor’s assets in favor of Lender thereunder), and Assignee desires to accept such assignment pursuant to the terms and conditions contained herein.

AGREEMENT

Now therefore, for and in consideration of the premises and the agreements contained herein, the parties agree as follows:

1. Assignment. Subject to obtaining the consent of Lender as required by the WCMA Loan Agreement, Assignor hereby assigns and transfers to Assignee all Assignor’s rights, title and interest in and to the WCMA Loan Agreement, to have and hold the same from the date hereof through the remainder of the term of the WCMA Loan Agreement. Notwithstanding the forgoing sentence, Assignee shall not be required to grant to the Lender a continuing security interest in its assets, provided that (a) Assignor executes such guaranty agreements as Lender may require to effectuate a continuing guarantee of payment and performance (and not of merely collection) of the indebtedness, obligations and liabilities assigned to Assignee hereunder, and (b) Assignor affirms the continuation of the Lender’s security interest under the WCMA Loan Agreement and executes such security agreements or other documents as Lender may require in connection with the continuation of such security interest.

ASSIGNMENT AND ASSUMPTION – Page 1

2. Assumption. Assignee hereby accepts assignment of the WCMA Loan Agreement and agrees to perform from the date hereof as its obligation, directly and to Lender, all of the terms, covenants and conditions of the WCMA Loan Agreement on the borrower’s part to be performed from and after the date hereof; provided that Assignee does not assume any requirement to provide, as security for the indebtedness under the WCMA Loan Agreement, a security interest in favor of Lender in and to Assignee’s assets.

3. Successors and Assigns. All of the covenants, terms and conditions set forth herein, shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, provided that any further assignment of the WCMA Loan Agreement must comply with the terms of the WCMA Loan Agreement.

ASSIGNMENT AND ASSUMPTION – Page 2

In Witness Whereof, this Agreement is executed and delivered as of the day and year first above written.

ASSIGNOR:
THINKSPARK CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	VP

THINKSPARK, L.P.
By:	ThinkSpark GP, LLC, its general partner
	By:	/s/    KERRY OSBORNE
	Name:	Kerry Osborne
	Title:	Member

ASSIGNEE:
AXTIVE CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	Member

ASSIGNMENT AND ASSUMPTION – Page 3

CONSENT OF LENDER

Reference is made to that certain Assignment and Assumption Agreement dated as of May 27, 2003, between ThinkSpark Corporation and ThinkSpark, L.P., as assignor (“Assignor”), and Axtive Corporation, as assignee (“Assignee”) (the “Assignment and Assumption Agreement”).

Subject to the terms and conditions of the Assignment and Assumption Agreement, Lender hereby consents to (a) the assignment by Assignor of its rights and obligations under the WCMA Loan Agreement (as defined in the Assignment and Assumption Agreement”) and (b) the assumption by Assignee of Assignor’s obligations, liabilities and indebtedness under the Loan Agreements.

Executed as of May 27, 2003.

LENDER:
MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.
By:	/s/    BILL KOCOLOWSKI
Name:	Bill Kocolowski
Title:	Vice President

ASSIGNMENT AND ASSUMPTION – Page 4

EX-10.18

Exhibit 10.18

[LOGO OF MERRILL LYNCH] TERM LOAN AGREEMENT

TERM LOAN AGREEMENT dated as of May 27, 2003, between AXTIVE CORPORATION, a corporation organized and existing under the laws of the State of Delaware having its principal office at 1445 Ross Avenue, Suite 4500, Dallas, TX 75202 (“Customer”), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 222 North LaSalle Street, Chicago, IL 60601 (“MLBFS”).

RECITALS:

A. ThinkSpark Corporation (f/k/a Database Consultants, Inc. d/b/a O-Corp.) and ThinkSpark, L.P. (collectively, “ThinkSpark”) and MLBFS are parties to (1) the WCMA Loan and Security Agreement dated February 19, 1999, as amended, and (2) the WCMA Reducing Revolver Loan Agreement No. 542-07C01 dated as of February 19, 1999, as amended (the “Existing Loan Agreements”).

B. Concurrently herewith, Customer is purchasing, through its wholly-owned subsidiary, all of the outstanding capital stock of ThinkSpark Corporation pursuant to that certain Agreement and Plan of Merger dated as of May 23, 2003 (the “Stock Purchase”).

C. In connection with the Stock Purchase, (1) Customer has agreed, pursuant to the Assignment and Assumption Agreement dated of even date herewith (the “Assignment and Assumption Agreement”), to assume $5,000,000 of debt of ThinkSpark outstanding under the Existing Loan Agreements, and (2) MLBFS has agreed to assign to the Customer the remaining balance of the debt of ThinkSpark outstanding under the Existing Loan Agreements in return for warrants to purchase shares of common stock in Customer in accordance with the terms and conditions set forth in the Debt Exchange Agreement and the Warrants dated as of even date herewith.

In consideration of the mutual covenants of the parties hereto, Customer and MLBFS hereby agree as follows:

Article I. DEFINITIONS

1.1 Specific Terms. In addition to terms defined elsewhere in this Loan Agreement, when used herein the following terms shall have the following meanings:

“Bankruptcy Event” shall mean any of the following: (i) a proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, liquidation, winding up or receivership law or statute shall be commenced, filed or consented to by any Credit Party; or (ii) any such proceeding shall be filed against any Credit Party and shall not be dismissed or withdrawn within sixty (60) days after filing; or (iii) any Credit Party shall make a general assignment for the benefit of creditors; or (iv) any Credit Party shall generally fail to pay or admit in writing its inability to pay its debts as they become due; or (v) any Credit Party shall be adjudicated a bankrupt or insolvent; or (vi) any Credit Party shall take advantage of any other law or procedure for the relief of debtors or shall take any action for the purpose of or with a view towards effecting any of the foregoing; or (vii) a receiver, trustee, custodian, fiscal agent or similar official for any Credit Party or for any substantial part of any of their respective property or assets shall be sought by such Credit Party or appointed.

“Business Day” shall mean any day other than a Saturday, Sunday, federal holiday or other day on which the New York Stock Exchange is regularly closed.

“Business Guarantor” shall mean every Guarantor that is not a natural person.

“Closing Date” shall mean the date upon which all conditions precedent to MLBFS’ obligation to make the Loan shall have been met to the satisfaction of MLBFS.

“Collateral” shall have the meaning set forth in the Security Agreements dated as of even date herewith executed by ThinkSpark in favor of MLBFS.

“Commitment Expiration Date” shall mean May 30, 2003.

“Credit Party” and “Credit Parties” shall mean, individually or collectively, the Customer, all Guarantors, and all Pledgors.

“Default” shall mean either an “Event of Default” as defined in Section 3.4 hereof, or an event which with the giving of notice, passage of time, or both, would constitute such an Event of Default.

“Default Rate” shall mean an annual interest rate equal to the lesser of: (i) two percentage points over the Interest Rate; or (ii) the highest interest rate allowed by applicable law.

“Event of Loss” shall mean the occurrence whereby any tangible Collateral is damaged beyond repair, lost, totally destroyed or confiscated.

“GAAP” shall mean the generally accepted accounting principles in effect in the United States of America from time to time.

“General Funding Conditions” shall mean each of the following conditions to each loan or advance by MLBFS hereunder: (i) no Default or Event of Default shall have occurred and be continuing or would result from the making of any such loan or advance hereunder by MLBFS; (ii) there shall not have occurred and be continuing any material adverse change in the business or financial condition of any Credit Party; (iii) all representations and warranties of all of the Credit Parties herein or in any of the Loan Documents shall then be true and correct in all material respects; (iv) MLBFS shall have received this Loan Agreement and all of the other Loan Documents, duly executed and filed or recorded where applicable, all of which shall be in form and substance satisfactory to MLBFS; (v) MLBFS shall have received, as and to the extent applicable, copies of invoices, bills of sale, loan payoff letters and/or other evidence satisfactory to it that the proceeds of the Loan will satisfy the Loan Purpose; and (vi) MLBFS shall have received evidence satisfactory to it as to the ownership of and the perfection and priority of MLBFS’ liens and security interests on any collateral for the Obligations furnished pursuant to any of the Loan Documents.

“Guarantor” shall mean each Person obligated under a guaranty, endorsement or other undertaking by which such Person guarantees or assumes responsibility in any capacity for the payment or performance of any of the Obligations.

“Loan” shall mean a two-year term installment loan in an amount equal to $5,000,000.00.

“Loan Agreement” shall mean this agreement as titled in the initial paragraph hereof and shall specifically include that number to be designated by MLBFS as the Customer’s “Loan No” in reference to this Loan Agreement, and which number and designation MLBFS shall provide to Customer upon the initial invoice generated by MLBFS. At all times thereafter, such numerical loan number shall be included and be deemed to be a part of the title of this Loan Agreement.

“Loan Documents” shall mean this Loan Agreement, any indenture, any guaranty of any of the Obligations and all other security and other instruments, assignments, certificates, certifications and agreements of any kind relating to any of the Obligations, whether obtained, authorized, authenticated, executed, sent or received concurrently with or subsequent to this Loan Agreement, or which evidence the creation, guaranty or collateralization of any of the Obligations or the granting or perfection of liens or security interests upon any Collateral or any other collateral for the Obligations, including any modifications, amendments or restatements of the foregoing.

“Loan Purpose” shall mean the purpose for which the proceeds of the Loan will be used; to wit: To restructure and settle the obligations owed by Thinkspark to MLBFS under the Existing Loan Agreements.

“Obligations” shall mean all liabilities, indebtedness and obligations of Customer to MLBFS, howsoever created, arising or evidenced, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary or joint or several, and, without limiting the generality of the foregoing, shall include principal, accrued interest (including without limitation interest accruing after the filing of any petition in bankruptcy), all advances made by or on behalf of MLBFS under the Loan Documents, collection and other costs and expenses incurred by or on behalf of MLBFS, whether incurred before or after judgment, and all present and future liabilities, indebtedness and obligations of Customer under the Note and the Loan Documents.

“Person” shall mean any natural person and any corporation, partnership (general, limited or otherwise), limited liability company, trust, association, joint venture, governmental body or agency or other entity having legal status of any kind.

“Pledgor” shall mean each Person who at any time provides collateral, or otherwise now or hereinafter agrees to grants MLBFS a security interest in any assets as security for Customer’s Obligations.

“UCC” shall mean the Uniform Commercial Code of Illinois as in effect in Illinois from time to time.

1.2 Other Terms. Except as otherwise defined herein, all terms used in this Loan Agreement which are defined in the UCC shall have the meanings set forth in the UCC; and (iii) accounting terms not defined herein shall have the meaning ascribed to them in GAAP.

Article II. THE LOAN

2.1 Commitment. Subject to the terms and conditions hereof, MLBFS hereby agrees to make the Loan to Customer for the Loan Purpose, and Customer agrees to borrow the Loan to satisfy the Loan Purpose from MLBFS. The entire proceeds of the Loan shall be disbursed on the Closing Date to MLBFS on account of the Loan Purpose.

2.2 Note. The Loan will be evidenced by and repayable in accordance with that certain Installment Note made by Customer payable to the order of MLBFS and issued pursuant to this Loan Agreement (the “Note”). The Note is hereby incorporated as a part hereof as if fully set forth herein.

2.3 Conditions of MLBFS’ Obligation. The Closing Date and MLBFS’ obligation to make the Loan on the Closing Date are subject to the prior fulfillment of each of the following conditions: (a) MLBFS shall have received a written request from Customer that the Loan be funded in accordance with the terms hereof, together with a written direction from Customer as to the method of payment and payee(s) of the proceeds of the Loan, which request and direction shall have been received by MLBFS not less than two Business Days prior to any requested funding date; (b) the Commitment Expiration Date shall not then have occurred; and (c) each of the General Funding Conditions shall then have been met or satisfied to the reasonable satisfaction of MLBFS.

2.4 Use of Loan Proceeds. The proceeds of the Loan shall be used by Customer solely for a Loan Purpose. Customer agrees that under no circumstances will the proceeds of the Loan be used: (a) for personal, family or household purposes of any person whatsoever, or (b) to purchase, carry or trade in securities, or repay debt incurred to purchase, carry or trade in securities, or (c) unless otherwise consented to in writing by MLBFS, to pay any amount to Merrill Lynch and Co., Inc. or any of its subsidiaries, other than Merrill Lynch Bank USA, Merrill Lynch Bank & Trust Co. or any subsidiary of either of them (including MLBFS and Merrill Lynch Credit Corporation).

Article III. GENERAL PROVISIONS

3.1 REPRESENTATIONS AND WARRANTIES

Customer represents and warrants to MLBFS that:

(a) Organization and Existence. Customer is a corporation, duly organized and validly existing in good standing under the laws of the State of Delaware and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary; and, where applicable, each Business Guarantor is duly organized, validly existing and in good standing under the laws of the state of its formation and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary.

(b) Execution, Delivery and Performance. Each Credit Party has the requisite power and authority to enter into and perform the Loan Documents. The Customer holds all necessary material permits, licenses, certificates of occupancy and other governmental authorizations and approvals required in order to own or operate the Customer’s business. The execution, delivery and performance by Customer of this Loan Agreement and by each of the other Credit Parties of such of the other Loan Documents to which it is a party: (i) have been duly authorized by all requisite action, (ii) do not and will not violate or conflict with any law, order or other governmental requirement, or any of the agreements, instruments or documents which formed or govern any of the Credit Parties, and (iii) do not and will not breach or violate any of the provisions of, and will not result in a default by any of the Credit Parties under, any other agreement, instrument or document to which it is a party or is subject.

(c) Notices and Approvals. Except as may have been given or obtained, no notice to or consent or approval of any governmental body or authority or other third party whatsoever (including, without limitation, any other creditor) is required in connection with the execution, delivery or performance by any Credit Party of such of this Loan Agreement, the Note and the other Loan Documents to which it is a party.

(d) Enforceability. The Loan Documents to which any Credit Party is a party are the respective legal, valid and binding obligations of such Credit Party, enforceable against it or them, as the case may be, in accordance with their respective

terms, except as enforceability may be limited by bankruptcy and other similar laws affecting the rights of creditors generally or by general principles of equity.

(e) Financial Statements. Except as expressly set forth in Customer’s or any Business Guarantor’s financial statements, all financial statements of Customer and each Business Guarantor furnished to MLBFS have been prepared in conformity with generally accepted accounting principles, consistently applied, are true and correct in all material respects, and fairly present the financial condition of it as at such dates and the results of its operations for the periods then ended (subject, in the case of interim unaudited financial statements, to normal year-end adjustments); and since the most recent date covered by such financial statements, there has been no material adverse change in any such financial condition or operation. All financial statements furnished to MLBFS of any Guarantor other than a Business Guarantor are true and correct in all material respects and fairly represent such Guarantor’s financial condition as of the date of such financial statements, and since the most recent date of such financial statements, there has been no material adverse change in such financial condition.

(f) Litigation; Compliance With All Laws. Except as set forth on Schedule 3.1(f) hereto, no litigation, arbitration, administrative or governmental proceedings are pending or, to the knowledge of Customer, threatened against any Credit Party, which would, if adversely determined, materially and adversely affect (i) such Credit Party’s interest in the Collateral or the liens and security interests of MLBFS hereunder or under any of the Loan Documents, or (ii) the financial condition of such Credit Party or its continued operations. Each Credit Party is in compliance in all material respects with all laws, regulations, requirements and approvals applicable to such Credit Party.

(g) Tax Returns. All federal, state and local tax returns, reports and statements required to be filed by any Credit Party have been filed (except if an extension of time to file has been granted by the appropriate governmental agency) with the appropriate governmental agencies and all taxes due and payable by any Credit Party have been timely paid (except to the extent that any such failure to file or pay will not materially and adversely affect (i) either the liens and security interests of MLBFS hereunder or under any of the Loan Documents, (ii) the financial condition of any Credit Party, or (iii) its continued operations).

(h) No Default. No “Default” or “Event of Default” (each as defined in this Loan Agreement or any of the other Loan Documents) has occurred and is continuing.

(i) No Outside Broker. Except for employees of MLBFS, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) or one of their affiliates, Customer has not in connection with the transactions contemplated hereby directly or indirectly engaged or dealt with, and was not introduced or referred to MLBFS by, any broker or other loan arranger.

Each of the foregoing representations and warranties: (i) has been and will be relied upon as an inducement to MLBFS to make the Loan, and (ii) is continuing and shall be deemed remade by Customer on the Closing Date.

3.2 FINANCIAL AND OTHER INFORMATION

(a) Customer shall furnish or cause to be furnished to MLBFS during the term of this Loan Agreement all of the following:

(i) Annual Financial Statements. Within 120 days after the close of each fiscal year of Customer, a copy of the annual audited financial statements of Customer, including in reasonable detail, a balance sheet and statement of retained earnings as at the close of such fiscal year and statements of profit and loss and cash flow for such fiscal year;

(ii) Interim Financial Statements. Within 60 days after the close of each fiscal quarter of Customer, a copy of the interim financial statements of Customer and each Business Guarantor for such fiscal quarter (including in reasonable detail both a balance sheet as of the close of such fiscal period, and statement of profit and loss for the applicable fiscal period);

(iii) A/R Agings. Within 15 days after the close of each fiscal month of Customer, a copy of the Accounts Receivable Aging of Thinkspark Corporation as of the end of such fiscal month;

(iv) SEC Reports. Customer shall make available, furnish or cause to be furnished to MLBFS not later than 10 days after the date of filing with the Securities and Exchange Commission (“SEC”), a copy of each 10-K, 10-Q and other report required to be filed with the SEC during the term hereof by Customer and AXTIVE CORPORATION; and

(v) Other Information. Such other information as MLBFS may from time to time reasonably request relating to Customer or any Credit Party.

(vi) General Agreements With Respect to Financial Information. Customer agrees that except as otherwise specified herein or otherwise agreed to in writing by MLBFS: (i) all annual financial statements required to be furnished by Customer to MLBFS hereunder will be audited by either the current independent accountants for Customer or other independent accountants reasonably acceptable to MLBFS, and (ii) all other financial information required to be furnished by Customer to MLBFS hereunder will be certified as correct in all material respects by the party who has prepared such information, and, in the case of internally prepared information with respect to Customer or any Business Guarantor, certified as correct in all material respects by their respective chief financial officer or equivalent financial officer.

3.3 OTHER COVENANTS

Customer further agrees during the term of this Loan Agreement that:

(a) Financial Records; Inspection. Each Credit Party (other than any Individual Guarantor) will: (i) maintain at its principal place of business complete and accurate books and records, and maintain all of its financial records in a manner consistent with the financial statements heretofore furnished to MLBFS, or prepared on such other basis as may be approved in writing by MLBFS; and (ii) permit MLBFS or its duly authorized representatives, upon reasonable notice and at reasonable times, to inspect its properties (both real and personal), operations, books and records.

(b) Taxes. Each Credit Party will pay when due all of its respective taxes, assessments and other governmental charges, howsoever designated, and all other liabilities and obligations, except to the extent that any such failure to file or pay will not materially and adversely affect either any liens and security interests of MLBFS under any Loan Documents , the financial condition of any Credit Party or its continued operations.

(c) Compliance With Laws and Agreements. No Credit Party will violate (i) any law, regulation or other governmental requirement, any judgment or order of any court or governmental agency or authority; (ii) any agreement, instrument or document which is material to its operations or to the operation or use of any Collateral, in each case as contemplated by the Loan Documents; or (iii) any agreement, instrument or document to which it is a party or by which it is bound, if any such violation will materially and adversely affect either any liens and security interests of MLBFS under any Loan Documents , the financial condition of any Credit Party, or its continued operations.

(d) No Use of Merrill Lynch Name. No Credit Party will directly or indirectly publish, disclose or otherwise use in any advertising or promotional material, or press release or interview, the name, logo or any trademark of MLBFS, MLPF&S, Merrill Lynch and Co., Incorporated or any of their affiliates, provided that Customer may include the name MLBFS if required to do so in filings made to the SEC.

(e) Notification By Customer. Customer shall provide MLBFS with prompt written notification of: (i) any Default; (ii) any material adverse change in the business, financial condition or operations of any Credit Party; (iii) any information which indicates that any financial statements of any Credit Party fail in any material respect to present fairly the financial condition and results of operations purported to be presented in such statements; (iv) any threatened or pending litigation involving any Credit Party; (v) any casualty loss, attachment, lien, judicial process, encumbrance or claim affecting or involving $100,000 or more of any Collateral; and (vi) any change in Customer’s outside accountants. Each notification by Customer pursuant hereto shall specify the event or information causing such notification, and, to the extent applicable, shall specify the steps being taken to rectify or remedy such event or information.

(f) Entity Organization. Each Credit Party which is an entity will (i) remain (A) validly existing and in good standing in the state of its organization and (B) qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary, and (ii) maintain all governmental permits, licenses and authorizations. Customer shall give MLBFS not less than 30 days prior written notice of any change in name (including any fictitious name) or chief executive office, place of business, or as applicable, the principal residence.

(g) Merger, Change in Business. Except upon the prior written consent of MLBFS, Customer shall not cause or permit any Credit Party to: (i) be a party to any merger or consolidation with, or purchase or otherwise acquire all or substantially all of the assets of, or any material stock, partnership, joint venture or other equity interest in, any Person, or sell, transfer or lease all or any substantial part of its assets; (ii) engage in any material business substantially different from its business in effect as of the date of application by Customer for credit from MLBFS, or cease operating any such material business; or (iii) cause or permit any other Person to assume or succeed to any material business or operations of such Credit Party.

3.4 EVENTS OF DEFAULT

The occurrence of any of the following events shall constitute an “Event of Default” under this Loan Agreement:

(a) Failure to Pay. Customer shall fail to pay when due any amount owing by Customer to MLBFS under the Note or this Loan Agreement, or shall fail to pay when due any other Obligations, and any such failure shall continue for more than five (5) Business Days after written notice thereof shall have been given by MLBFS to Customer.

(b) Failure to Perform. Any Credit Party shall default in the performance or observance of any covenant or agreement on its part to be performed or observed under this Loan Agreement, the Note or any of the other Loan Documents (not constituting an Event of Default under any other clause of this Section), and such default shall continue unremedied for ten (10) Business Days (i) after written notice thereof shall have been given by MLBFS to Customer, or (ii) from Customer’s receipt of any notice or knowledge of such default from any other source.

(c) Breach of Warranty. Any representation or warranty made by any Credit Party contained in this Loan Agreement, the Note or any of the other Loan Documents shall at any time prove to have been incorrect in any material respect when made.

(d) Default Under Other ML Agreement. A default or event of default by any Credit Party shall occur under the terms of any other agreement, instrument or document with or intended for the benefit of MLBFS, MLPF&S or any of their affiliates, and any required notice shall have been given and required passage of time shall have elapsed.

(e) Bankruptcy Event. Any Bankruptcy Event shall occur.

(f) Material Impairment. Any event shall occur which shall reasonably cause MLBFS to in good faith believe that the prospect of full payment or performance by the Credit Parties of any of their respective liabilities or obligations under this Loan Agreement, the Note or any of the other Loan Documents or such Guarantor is a party has been materially impaired. The existence of such a material impairment shall be determined in a manner consistent with the intent of Section 1-208 of the UCC.

(g) Default Under Other Agreements. Any event shall occur which results in any default of any material agreement involving any Credit Party or any agreement evidencing any indebtedness of any Credit Party of $100,000.00 or more.

(h) Contested Obligation. (i) Any of the Loan Documents shall for any reason cease to be, or are asserted by any Credit Party not to be a legal, valid and binding obligations of any Credit Party, enforceable in accordance with their terms; or (ii) the validity, perfection or priority of MLBFS’ first lien and security interest on any of the Collateral is contested by any Person; or (iii) any Credit Party shall or shall attempt to repudiate, revoke, contest or dispute, in whole or in part, such Credit Party’s obligations under any Loan Document.

(i) Judgments. A judgment shall be entered against any Credit Party in excess of $100,000 and the judgment is not paid in full and discharged, or stayed and bonded to the satisfaction of MLBFS within 30 days of the date of the judgment.

(j) Change in Control/Change in Management. (i) Any direct or indirect sale, conveyance, assignment or other transfer of or grant of a security interest in any ownership interest of any Credit Party which results, or if any rights related thereto were exercised would result, in any change in the identity of the individuals or entities previously in control of any Credit Party; or (ii) the owner(s) of the controlling equity interest of any Credit Party on the date hereof shall cease to own and control such Credit Party; or (iii) the Person (or a replacement who is satisfactory to MLBFS in its sole discretion) who is the chief executive officer or holds such similar position, or any senior manager of Customer on the date hereof shall for any reason cease to be the chief executive officer or senior manager of the Customer.

(k) Withdrawal, Death, etc. The incapacity, death, withdrawal, dissolution, or the filing for dissolution of: (i) any Credit Party; or (ii) any controlling shareholder, partner, or member of any Credit Party.

3.5 REMEDIES

(a) Remedies Upon Default. Upon the occurrence and during the continuance of any Event of Default, MLBFS may at its sole option do any one or more or all of the following, at such time and in such order as MLBFS may in its sole discretion choose:

(i) Termination. MLBFS may without notice terminate its obligation to extend any credit to or for the benefit of Customer (it being understood, however, that upon the occurrence of any Bankruptcy Event all such obligations shall automatically terminate without any action on the part of MLBFS).

(ii) Acceleration. MLBFS may declare the principal of and interest and any premium on the Note, and all other Obligations to be forthwith due and payable, whereupon all such amounts shall be immediately due and payable, without presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate or other notice or formality of any kind, all of which are hereby expressly waived; provided, however, that upon the

occurrence of any Bankruptcy Event all such principal, interest, premium and other Obligations shall automatically become due and payable without any action on the part of MLBFS.

(b) Set-Off. MLBFS shall have the further right upon the occurrence and during the continuance of an Event of Default to set-off, appropriate and apply toward payment of any of the Obligations, in such order of application as MLBFS may from time to time and at any time elect, any cash, credit, deposits, accounts, financial assets, investment property, securities and any other property of Customer which is in transit to or in the possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or MLPF&S. Customer hereby collaterally assigns and grants to MLBFS a continuing security interest in all such property as Collateral and as additional security for the Obligations. Upon the occurrence and during the continuance of an Event of Default, MLBFS shall have all rights in such property available to collateral assignees and secured parties under all applicable laws, including, without limitation, the UCC.

(c) Remedies are Severable and Cumulative. All rights and remedies of MLBFS herein are severable and cumulative and in addition to all other rights and remedies available in the Note, the other Loan Documents, at law or in equity, and any one or more of such rights and remedies may be exercised simultaneously or successively.

3.6 SECURITY

Customer shall cause ThinkSpark to execute such security agreements as MLBFS deems necessary to secure the payment and performance of the Obligations hereunder and under the other Loan Documents.

3.7 MISCELLANEOUS

(a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any right, power or remedy pursuant to this Loan Agreement, the Note or any of the other Loan Documents shall operate as a waiver thereof, and no single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. Neither any waiver of any provision of this Loan Agreement, the Note or any of the other Loan Documents, nor any consent to any departure by Customer therefrom, shall be effective unless the same shall be in writing and signed by MLBFS. Any waiver of any provision of this Loan Agreement, the Note or any of the other Loan Documents and any consent to any departure by Customer from the terms of this Loan Agreement, the Note or any of the other Loan Documents shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise expressly provided herein, no notice to or demand on Customer shall in any case entitle Customer to any other or further notice or demand in similar or other circumstances.

(b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of its affiliates, including without limitation MLPF&S, to at any time (whether or not an Event of Default shall have occurred) obtain from and disclose to each other any and all financial and other information about Customer, provided that all such information shall be deemed confidential. Customer further irrevocably authorizes MLBFS to contact, investigate, inquire and obtain consumer reports, references and other information on Customer from consumer reporting agencies and other credit reporting services, former or current creditors, and other persons and sources (including, without limitation, any Affiliate of MLBFS) and to provide to any references, consumer reporting agencies, credit reporting services, creditors and other persons and sources (including, without limitation, Affiliates of MLBFS) all financial, credit and other information obtained by MLBFS from such third parties relating to the Customer.

(c) Communications. Delivery of an agreement, instrument or other document may, at the discretion of MLBFS, be by electronic transmission. Except as required by law or otherwise provided herein or in a writing executed by the party to be bound, all notices demands, requests, accountings, listings, statements, advices or other communications to be given under the Loan Documents shall be in writing, and shall be served either personally, by deposit with a reputable overnight courier with charges prepaid, or by deposit in the United States mail by certified mail return receipt required. Notices may be addressed to Customer as set forth at its address shown in the preamble hereto, or to any office to which billing or account statements are sent; to MLBFS at its address shown in the preamble hereto, or at such other address designated in writing by MLBFS. Any such communication shall be deemed to have been given upon, in the case of personal delivery the date of delivery, one Business Day after deposit with an overnight courier, two (2) Business Days after deposit in the United States by certified mail (return receipt required), or receipt of electronic transmission (which shall be presumed to be three hours after the time of transmission unless an error message is received by the sender), except that any notice of change of address shall not be effective until actually received.

(d) Fees, Expenses and Taxes. Customer shall upon demand pay or reimburse MLBFS for: (i) all UCC, real property or other filing, recording and search fees and expenses incurred by MLBFS in connection with the verification, perfection or preservation of MLBFS’ rights hereunder or in any Collateral or any other collateral for the Obligations; (ii) any and all

stamp, transfer, mortgage, intangible, document, filing, recording and other taxes and fees payable or determined to be payable in connection with the borrowings hereunder or the execution, delivery, filing and/or recording of the Loan Documents and any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith; and (iii) all reasonable fees and out-of-pocket expenses (including reasonable attorneys’ fees and legal expenses) incurred by MLBFS in connection with the administration, collection, enforcement, protection, waiver or amendment of this Loan Agreement, or under any of the other Loan Documents and such other instruments or documents, and the rights and remedies of MLBFS thereunder and all other matters in connection therewith. The obligations of Customer under this paragraph shall survive the expiration or termination of this Loan Agreement and the discharge of the other Obligations.

(e) Right to Perform Obligations. If Customer shall fail to do any act or thing which it has covenanted to do under this Loan Agreement or any of the Loan Documents, or any representation or warranty on the part of Customer contained in this Loan Agreement or any of the Loan Documents shall be breached, MLBFS may, in its sole discretion, after 5 Business Days written notice is sent to Customer (or such lesser notice, including no notice, as is reasonable under the circumstances), do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by Customer upon demand, with interest at the “Interest Rate” (as that item is defined in the Note) during the period from and including the date funds are so expended by MLBFS to the date of repayment, and all such amounts shall be additional Obligations. The payment or performance by MLBFS of any of Customer’s obligations hereunder shall not relieve Customer of said obligations or of the consequences of having failed to pay or perform the same, and shall not waive or be deemed a cure of any Default.

(f) Late Charge. Any payment required to be made by Customer pursuant to this Loan Agreement or any of the Loan Documents not paid within ten (10) days of the applicable due date shall be subject to a late charge in an amount equal to the lesser of: (i) 5% of the overdue amount, or (ii) the maximum amount permitted by applicable law. Such late charge shall be payable on demand.

(g) Further Assurances. Customer agrees to do such further acts and things and to execute and deliver to MLBFS such additional agreements, instruments and documents as MLBFS may reasonably require or deem advisable to effectuate the purposes of this Loan Agreement, the Note or any of the other Loan Documents, or to establish, perfect and maintain MLBFS’ security interests and liens upon the Collateral.

(h) Binding Effect. This Loan Agreement, the Note and the other Loan Documents shall be binding upon, and shall inure to the benefit of MLBFS, Customer and their respective successors and assigns. MLBFS reserves the right, at any time while the Obligations remain outstanding, to sell, assign, syndicate or otherwise transfer or dispose of any or all of MLBFS’ rights and interests under the Loan Documents. MLBFS also reserves the right at any time to pool the Loan with one or more other loans originated by MLBFS or any other Person, and to securitize or offer interests in such pool on whatever terms and conditions MLBFS shall determine. Customer consents to MLBFS releasing financial and other information regarding Credit Parties, the Collateral and the Loan in connection with any such sale, pooling, securitization or other offering. Customer shall not assign any of its rights or delegate any of its obligations under this Loan Agreement, the Note or any of the other Loan Documents without the prior written consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by MLBFS, no such consent shall in any event relieve Customer of any of its obligations under this Loan Agreement, the Note or any of the other Loan Documents.

(i) Interpretation; Construction. (i) Captions and section and paragraph headings in this Loan Agreement are inserted only as a matter of convenience, and shall not affect the interpretation hereof; (ii) no provision of this Loan Agreement shall be construed against a particular Person or in favor of another Person merely because of which Person (or its representative) drafted or supplied the wording for such provision; and (iii) where the context requires: (a) use of the singular or plural incorporates the other, and (b) pronouns and modifiers in the masculine, feminine or neuter gender shall be deemed to refer to or include the other genders.

(j) Governing Law. This Loan Agreement, the Note and, unless otherwise expressly provided therein, each of the other Loan Documents, shall be governed in all respects by the laws of the State of Illinois, not including its conflict of law provisions.

(k) Severability of Provisions. Whenever possible, each provision of this Loan Agreement, the Note and the other Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law. Any provision of this Loan Agreement, the Note or any of the other Loan Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Loan Agreement, the Note and the other Loan Documents or affecting the validity or enforceability of such provision in any other jurisdiction.

(l) Term. This Loan Agreement shall become effective when accepted by MLBFS at its office in Chicago, Illinois, and subject to the terms hereof, shall continue in effect so long thereafter as there shall be any moneys owing hereunder or under the Note, or there shall be any other Obligations outstanding. Customer hereby waives notice of acceptance of this Loan Agreement by MLBFS.

(m) Exhibits. The exhibits to this Loan Agreement are hereby incorporated and made a part hereof and are an integral part of this Loan Agreement.

(n) Counterparts. This Loan Agreement may be executed in one or more counterparts which, when taken together, constitute one and the same agreement.

(o) Jurisdiction; Waiver. Customer acknowledges that this Loan Agreement is being accepted by MLBFS in partial consideration of MLBFS’ right and option, in its sole discretion, to enforce the Loan Documents in either the State of Illinois or in any other jurisdiction where Customer or any Collateral may be located. Customer irrevocably submits itself to jurisdiction in the State of Illinois and venue in any state or federal court in the County of Cook for such purposes, and Customer waives any and all rights to contest said jurisdiction and venue and the convenience of any such forum, and any and all rights to remove such action from state to federal court. Customer further waives any rights to commence any action against MLBFS in any jurisdiction except in the County of Cook and State of Illinois. Customer agrees that all such service of process shall be made by mail or messenger directed to it in the same manner as provided for notices to Customer in this Loan Agreement and that service so made shall be deemed to be completed upon the earlier of actual receipt or three (3) days after the same shall have been posted to Customer or Customer’s agent. Nothing contained herein shall affect the right of MLBFS to serve legal process in any other manner permitted by law or affect the right of MLBFS to bring any action or proceeding against Customer or its property in the courts of any other jurisdiction. Customer waives, to the extent permitted by law, any bond or surety or security upon such bond which might, but for this waiver, be required of MLBFS. Customer further waives the right to bring any non-compulsory counterclaims.

(p) Jury Waiver. MLBFS and Customer hereby each expressly waive any and all rights to a trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other party with respect to any matter relating to, arising out of or in any way connected with the Loan, the Obligations, this Loan Agreement, any of the other Loan Documents and/or any of the transactions which are the subject matter of this Loan Agreement.

(q) Integration. This Loan Agreement, together with the other Loan Documents, constitutes the entire understanding and represents the full and final agreement between the parties with respect to the subject matter hereof, and may not be contradicted by evidence of prior written agreements or prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements of the parties. Without limiting the foregoing, Customer acknowledges that: (i) no promise or commitment has been made to it by MLBFS, MLPF&S or any of their respective employees, agents or representatives to make any Loan on any terms other than as expressly set forth herein, or to make any other loan or otherwise extend any other credit to Customer or any other party; and (ii) except as otherwise expressly provided herein, this Loan Agreement supersedes and replaces any and all proposals, letters of intent and approval and commitment letters from MLBFS to Customer, none of which shall be considered a Loan Document. No amendment or modification of any of the Loan Documents to which Customer is a party shall be effective unless in a writing signed by both MLBFS and Customer.

(r) Survival. All representations, warranties, agreements and covenants contained in the Loan Documents shall survive the signing and delivery of the Loan Documents, and all of the waivers made and indemnification obligations undertaken by Customer shall survive the termination, discharge or cancellation of the Loan Documents.

(s) Customer’s Acknowledgments. The Customer acknowledges that the Customer: (i) has had ample opportunity to consult with counsel and such other parties as deemed advisable prior to signing and delivering this Loan Agreement and the other Loan Documents; (ii) understands the provisions of this Loan Agreement and the other Loan Documents, including all waivers contained therein; and (iii) signs and delivers this Loan Agreement and the other Loan Documents freely and voluntarily, without duress or coercion.

3.8 AMENDMENT AND RESTATEMENT

THIS AGREEMENT, IN CONJUNCTION WITH THE SECURITY AGREEMENTS EXECUTED BY THINKSPARK AND ANY AND ALL OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL CONSTITUTE AN AMENDMENT AND RESTATEMENT (BUT NOT A NOVATION) OF THE EXISTING INDEBTEDNESS OF THINKSPARK UNDER THE EXISTING LOAN AGREEMENTS. The Existing Loan Agreements are hereby amended and restated as set forth herein.

This Loan Agreement and the other Loan Documents are executed under seal and are intended to take effect as sealed instruments.

IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year first above written.

AXTIVE CORPORATION

By:	/s/    GRAHAM C. BEACHUM II	/s/    DAVID N. PILOTTE
	Signature (1)	Signature (2)
Graham C. Beachum		David Pilotte
Printed Name		Printed Name
Pres.		VP
Title		Title

Accepted at Chicago, Illinois:

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

By: /s/    BILL KOCOLOWSKI

EX-10.19

Exhibit 10.19

DEBT EXCHANGE AGREEMENT

DEBT EXCHANGE AGREEMENT, dated as of May 27, 2003 (this “Agreement”), by and among Thinkspark Corporation, a Delaware corporation (successor by merger to ThinkSpark Corporation, a Texas corporation) (the “Borrower”), Axtive Corporation, a Delaware corporation (the “Company”), and Merrill Lynch Business Financial Services Inc. (the “Purchaser”).

RECITALS

A. Borrower has incurred indebtedness to the Purchaser pursuant to (a) the WCMA Loan and Security Agreement No. 542-07C00 dated as of February 19, 1999 and (b) the WCMA Reducing Loan Agreement No. 542-070C01, dated as of February 19, 1999, each between Borrower, as borrower, and Purchaser, as lender (as amended, and as the same may be further amended, restated, extended, refinanced or otherwise modified from time to time, the “WCMA Loan Agreements”).

B. Pursuant to an Agreement and Plan of Merger dated as of May 23, 2003 by and among the Company, the Borrower and the other parties named therein (the “Merger Agreement”), a newly-formed wholly owned subsidiary of the Company will merge with and into Borrower, whereby all the outstanding common stock of the Borrower will be converted into cash and common stock of the Company (the “Merger”).

C. The Company has agreed that, (1) pursuant to this Agreement, it will issue to the Purchaser, in exchange for $1,970,269.40 of aggregate outstanding borrowings due under the WCMA Loan Agreements (the “Exchanged Debt”), warrants to purchase an aggregate of 5,000,000 shares of common stock, par value $0.01 per share, of the Company (the “Warrants” and the “Warrant Shares,” respectively), and (2) pursuant to the Assignment and Assumption Agreement dated of even date herewith the Company will assume $5,000,000 of aggregate outstanding borrowings under the WCMA Loan Agreements.

D. The parties desire to enter into this Agreement to set forth certain matters relating to such exchange.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows:

Article I.

Exchange

Section 1.1 Exchange of Exchanged Debt for Warrants. Upon the following terms and conditions, and in consideration of and in express reliance upon such terms and conditions and the representations, warranties and covenants of this Agreement, the Purchaser shall transfer to Company of all obligations owing in respect of the Exchanged Debt, and, in exchange therefor, the Company shall issue to the Purchaser the Warrants. The exchange described in this Section 1.1 is referred to herein as the “Exchange”.

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Section 1.2 Closing. The closing (the “Closing”) of the Exchange under this Agreement shall take place at the offices of Gardere Wynne Sewell LLP, 1601 Elm Street, Suite 3000, Dallas, Texas as soon as is practical following the satisfaction or waiver of all of the conditions set forth in this Agreement, or at such other time and place or on such date as the Purchaser and the Company may agree upon (such date on which the Closing occurs, the “Closing Date”). At the Closing, the Purchaser shall deliver or cause to be delivered to the Company the Exchanged Debt that the Purchaser is exchanging pursuant to the terms hereof, together with all appropriate instruments of transfer. At the Closing, the Company shall deliver the Warrants to the Purchaser.

Article II.

Representations and Warranties

Section 2.1 Representations and Warranties of the Company and the Borrower. The Borrower and the Company hereby jointly and severally represent and warrant to the Purchaser, as of the date hereof and the Closing Date, as follows:

(a) Organization, Good Standing and Power of the Company. The Company and the Borrower are corporations duly incorporated, validly existing and in good standing under the laws of the State of Delaware and have the requisite power to own, lease and operate their respective properties and assets and to conduct their respective businesses as they are now being conducted. The Company and the Borrower are duly qualified as foreign corporations to do business and are in good standing in every jurisdiction in which the nature of the business conducted or property owned by either of them makes such qualification necessary, except for any jurisdictions (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, “Material Adverse Effect” means any condition, circumstance, or situation that would prohibit or hinder the Company from executing this Agreement and/or performing any of its obligations hereunder in any material respect.

(b) Authorization; Enforcement. The Company and the Borrower each has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement by each of the Company and the Borrower have been duly and validly authorized by all necessary corporate action, and no further consent or authorization is required for either the Company or the Borrower to effect the transactions contemplated hereby. When executed and delivered by the Company and the Borrower, the Agreement shall constitute a valid and binding obligation of the Company and the Borrower, enforceable against them in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

(c) Issuance of Warrants. The Warrants and Warrant Shares have been duly authorized by all necessary corporate action and, when issued in accordance with the terms

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hereof upon surrender of the Exchanged Debt in the Exchange and the exercise of the Warrants, the Warrant Shares shall be validly issued and outstanding, fully paid and non-assessable, free of restrictions on transfer other than as described herein and under applicable state and federal securities laws, and assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 2.2 hereof, such Warrant Shares will have been issued in compliance with all applicable state and federal securities laws.

(d) No Conflicts. The execution, delivery and performance of this Agreement by each of the Company and the Borrower and the consummation by the Company and the Borrower of the transactions contemplated hereby does not and will not, with respect to each, (i) violate any provision of the Certificate of Incorporation or Bylaws, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which it is a party or by which any of its properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to it or by which any of its properties or assets are bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor the Borrower is required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or consummate the Exchange in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by the Company under applicable state and federal securities laws, rules or regulations prior to or subsequent to the Closing).

(e) Offering. No form of general solicitation or general advertising (as defined in Regulation D of the Securities Act of 1933, as amended) was used by the Company or the Borrower or any of their respective representatives in connection with the offer and sale of the Warrants hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or other meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Warrants or Warrant Shares have been issued and sold by the Company within the six-month period immediately prior to the date hereof.

Section 2.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date, as follows:

(a) Organization and Standing of the Purchaser. The Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware.

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(b) Authorization and Power. The Purchaser has the requisite power and authority to enter into and perform this Agreement and to consummate the Exchange. The execution, delivery and performance of this Agreement the Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization is required for the Purchaser to effect the transactions contemplated hereby. When executed and delivered by the Purchaser, this Agreement shall constitute valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

(c) No Conflict. The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby does not and will not (i) violate any provision of the Purchaser’s Certificate of Incorporation or Bylaws, each as amended to date, or (ii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser is bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (ii) (with respect to federal and state securities laws) above, except, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect Purchaser’s ability to perform its obligations hereunder.

(d) Acquisition for Investment. The Purchaser is acquiring the Warrants solely for its own account and not with a view to or for sale in connection with any distribution. The Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters that such Purchaser is capable of evaluating the merits and risks of such Purchaser’s investment in the Company (by virtue of its purchase of Warrants hereunder), (ii) is able to bear the financial risks associated with an investment in the Warrants and (iii) has been given full access to such records of the Company and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation with respect to the Warrants.

(e) No General Solicitation. The Purchaser acknowledges that the Warrants were not offered to the Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting to which the Purchaser was invited by any of the foregoing means of communications.

(f) Accredited Investor. The Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended).

(g) Legend. The Purchaser hereby acknowledges and agrees that the certificates or other documents representing the Warrants and the Warrant Shares may contain

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the following, or a substantially similar, legend, which legend shall be removed only upon receipt by the Company of an opinion of its counsel, which opinion shall be satisfactory to the Company, that such legend may be so removed:

THE SECURITIES REPRESENTED HEREBY (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR AXTIVE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

(h) Certain Fees. The Purchaser has not employed any broker or finder or incurred any liability for any brokerage, investment banking, commission, finders’, structuring or financial advisory fees or other similar fees in connection with this Agreement or the transactions contemplated hereby.

Article III.

Covenants of the Parties

Section 3.1 Covenants. The parties covenant with each other as follows, which covenants, as applicable, are for the benefit of such parties and their respective permitted assigns:

(a) Further Assurances. From and after the Closing Date, upon the request of the Purchaser, the Borrower or the Company, the parties shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, including, without limitation, authorizing the Company’s transfer agent to issue the Warrant Shares or the shares of the Company’s common stock to the purchasers of the Warrant Shares sold by the Purchaser.

(b) Commercially Reasonable Efforts. Each party will use commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable, consistent with applicable law, to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including without limitation, making all required regulatory and other filings required by applicable law as promptly as practicable after the date hereof.

(c) Inspection Rights. The Company will grant the Purchaser inspection rights equivalent to those available to stockholders under Delaware law.

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(d) Restrictions on Performance. The Company shall not at any time enter into an agreement or other instrument limiting in any manner its ability to perform its obligations under this Agreement or the Warrant, or making such performance of the issuance of Warrant Shares upon exercise of the Warrant a default under any such agreement or instrument.

(e) Modification of Other Equity Documents. The Company shall not amend, or consent to any modification, supplement or waiver of any provision of any other agreement, plan or document relating to the equity of the Company in a way which would (i) restrict the transferability of the Warrant or the Warrant Shares, (ii) restrict the transferability of the rights of the Purchaser in this Agreement to any transferee of all or a portion of the Warrant and/or Warrant Shares (including subsequent transferees), (iii) require any consent or other approval of any person to the exercise of the Warrant or the issuance of Warrant Shares upon such exercise or (iv) restrict the ability of the Company to perform its obligations under this Agreement.

(f) Reserve for Warrant Stock. The Company shall at all times on and after the issuance of the Warrant and prior to the Expiration Date (as defined in the Warrant Certificate attached as Exhibit A) of the Warrants, reserve and keep available out of its authorized but unissued shares of common stock constituting the Warrant Shares, for the purpose of effecting the exercise of the Warrant and otherwise complying with terms of this Agreement, such number of its duly authorized shares of common stock as shall be sufficient to effect the exercise of the Warrant from time to time outstanding or otherwise to comply with the terms of this Agreement. If, at any time, the number of authorized but unissued shares of common stock shall not be sufficient to effect the exercise of the Warrant or otherwise to comply with the terms of this Agreement, the Company shall forthwith use commercially reasonable efforts to take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Company shall use commercially reasonable efforts to obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable state securities laws in connection with the issuance of shares of common stock upon exercise of the Warrant.

Article IV.

Conditions

Section 4.1 Conditions Precedent to the Obligation of the Company and the Borrower to Close. The obligation hereunder of the Company to close and effect the Exchange at the Closing is subject to the satisfaction or waiver, at or before the Closing of the conditions set forth below:

(a) Accuracy of the Purchaser’s Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

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(b) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing.

(c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) Surrender of Exchanged Debt. The Purchaser shall have delivered to the Company such agreements, documents and instruments as the Company shall require to evidence the surrender of the Exchanged Debt.

Section 4.2 Conditions Precedent to the Obligation of the Purchaser to Close. The obligation hereunder of the Purchaser to close and effect the Exchange is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below:

(a) Accuracy of the Company’s and Borrower’s Representations and Warranties. Each of the representations and warranties of the Company and the Borrower in this Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date.

(b) Performance by the Company and the Borrower. The Company and the Borrower shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by them at or prior to the Closing.

(c) No Injunction, Statute or Rule. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) Transaction Documents. The Purchaser shall have received executed copies of the Merger Agreement and all agreements, documents and instruments required by the Purchaser in connection with the assumption by the Company of $5,000,000 of the indebtedness of the Borrower to the Purchaser.

(e) Certificates. The Company shall have delivered to the Purchaser certificates representing the Warrants (in such denominations as the Purchaser may request) being acquired by the Purchaser at the Closing.

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Article V.

Warrant Provisions

Section 5.1 Issuance of Warrant. At the Closing, the Company shall issue the Warrants to the Purchaser, in the form attached as Exhibit A. The Warrants shall be exercisable in whole or in part at any time or from time to time as set forth in the Warrant for the aggregate number of shares of common stock as is set forth in the Warrant. The number of shares that the Warrant may be exercisable for and the Exercise Price is subject to adjustment as provided in the Warrant.

Section 5.2 Exchange of Certificates for Warrants. Each certificate for Warrants may be exchanged, at the option of the holder thereof, and upon surrender of such certificate to the Company, for another certificate for Warrants, or other certificates for Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of shares of Warrant Shares. Any holder desiring to exchange a certificate(s) for Warrants shall make such request in a writing delivered to the Company, and must surrender the certificate(s) for Warrants to be so exchanged. Thereupon, the Company will execute and deliver to the holder a new certificate(s) for Warrants so requested. The certificate(s) for Warrants surrendered for exchange will be cancelled by the Company.

Article VI.

Miscellaneous

Section 6.1 Fees and Expenses. Each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

Section 6.2 Entire Agreement; Amendment. This Agreement contains the entire understanding and agreement (written or oral) of the parties with respect to the subject matter hereof and, except as specifically set forth herein, neither the Company, the Borrower nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by each party. Any amendment or waiver effected in accordance with this section shall be binding upon each such party and its permitted assigns.

Section 6.3 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon

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actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company or the Borrower:	Axtive Corporation
	1445 Ross Ave., Suite 4500
	Dallas, Texas 75205
	Attention: Chief Financial Officer
	Fax: 214-379-0228
with copies (which copies
shall not constitute notice) to:	Gardere Wynne Sewell LLP
	1601 Elm Street, Suite 3000
	Dallas, Texas 75201-4761
	Attention: Randall Ray, Esq.
	Phone: (214) 761-4475
	Fax: (214) 741-7139
If to the Purchaser:	Merrill Lynch Business Financial Services Inc.
	222 North LaSalle Street
	Chicago, Illinois 60601
	Attn: Bill Kocolowski
	Fax: (312) 499-3252
with copies (which copies
shall not constitute notice) to:	Jenkens & Gilchrist, a Professional Corporation
	1445 Ross Avenue, Suite 3200
	Dallas, TX 75202
	Attn: Leila Tredemeyer
	Fax.: (214) 855-4300

Any party may from time to time change its address for notices by giving written notice of such changed address to the other parties.

Section 6.4 Waivers. No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

Section 6.5 Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

Section 6.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. No party may assign its rights or obligations under this Agreement (by operation of law or otherwise) without the prior written

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consent of each other party, and any attempted assignment without such consent shall be void ab initio.

Section 6.7 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.

Section 6.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the choice of law provisions thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

Section 6.9 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.

Section 6.10 Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

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IN WITNESS WHEREOF, the parties have caused this Debt Exchange Agreement to be duly executed by their respective authorized officers as of the date first above written.

AXTIVE CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	VP

THINKSPARK CORPORATION
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	VP

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.
By:	/s/    BILL KOCOLOWSKI
Name:	Bill Kocolowski
Title:	Vice President

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EX-10.20

Exhibit 10.20

THE SECURITIES REPRESENTED HEREBY (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR AXTIVE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

5,000,000 Shares of Common Stock Warrant No. M1

WARRANT

To Purchase Common Stock of

Axtive Corporation, a Delaware corporation

1. Grant of Warrant. THIS IS TO CERTIFY THAT Merrill Lynch Business Financial Services Inc., a Delaware corporation, or its registered assigns (the “Holder”), is entitled to exercise this Warrant to purchase from Axtive Corporation, a Delaware corporation (the “Company”), up to an aggregate of 5,000,000 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”), subject to adjustment determined in accordance with Section 5, all on the terms and conditions and pursuant to the provisions hereinafter set forth. This Warrant is being granted pursuant to the terms of that certain Debt Exchange Agreement of even date herewith (the “Agreement”), by and among the Company, the Holder and the other parties named therein, and the Company and the Holder intend to be legally bound hereby and thereby. Any capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Agreement.

2. Exercise Price. The purchase price payable for each of the shares of Common Stock sold upon exercise of this Warrant shall be $0.01 (the “Exercise Price”).

3. Exercise. This Warrant may be exercised in whole or in part at any time or from time to time after the date hereof and on or before the 10th anniversary of the date hereof (the “Expiration Date”), unless otherwise extended pursuant to the terms of the Agreement. In order to exercise this Warrant, in whole or in part, the Holder hereof shall deliver to the Company at its principal offices, or at such other office as shall be designated by the Company pursuant to the Agreement:

(a) written notice of the Holder’s election to exercise this Warrant, which notice shall be substantially in the form of the attached “Subscription Form” and shall specify the number of shares of Common Stock to be purchased pursuant to such exercise;

(b) either (i) a wire transfer of immediately available funds to the Company or (ii) notice that the Exercise Price is satisfied by reduction of the number of shares to be received by the Holder upon exercise of this Warrant as provided in Section 4 below, with the amount of such reduction specified in such notice; in each case such wire transfer or reduction in the number of shares shall be in an amount equal to the aggregate purchase price for all shares of Common Stock to be purchased pursuant to such exercise; and

(c) this Warrant, properly endorsed.

Upon receipt thereof, the Company shall, as promptly as practicable, and in any event within 10 days thereafter, execute or cause to be executed and delivered to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise. The stock certificate or certificates so delivered shall be registered in the name of the Holder or such other name as shall be designated in said notice.

This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a Holder of record of such shares for all purposes, as of the date of that such notice, together with such payment and this Warrant, is delivered by the Holder as set forth above (the “Exercise Date”). Except as otherwise provided in the Agreement or this Warrant, the Holder of this Warrant shall not, by virtue of its ownership of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, that the Holder shall, for all purposes, be deemed to have become the Holder of record of such shares on the Exercise Date. If the exercise is for less than all of the shares of Common Stock issuable as provided in this Warrant, the Company shall issue a new Warrant of like tenor and date for the balance of such shares issuable hereunder to the Holder. The Holder of this Warrant, by its acceptance hereof, consents to and agrees to be bound by and to comply with all of the provisions of this Warrant.

4. “Cashless” Exercise. At the option of the Holder, the Holder may exercise this Warrant without a cash payment of the Exercise Price, by designating that the number of the shares of Common Stock issuable to the Holder upon such exercise shall be reduced by the number of shares having a Current Market Value (as defined below) as of the Exercise Date equal to the amount of the total Exercise Price for such exercise. In such instance, no cash or other consideration will be paid by the Holder in connection with such exercise other than the surrender of the Warrant itself, and no commission or other remuneration will be paid or given by the Holder or the Company in connection with such exercise. If such exercise results in only a partial exercise of this Warrant, then the Company shall deliver to the Holder a new Warrant evidencing the remaining rights under the Warrant, as provided in Section 3 above. For purposes of this Warrant, “Current Market Value” means, on any date, the average of the daily closing market prices for each day for five trading days commencing one trading day before such date as of which such a price can be established in the manner set forth below. The closing market price for each such trading day shall be the last sale price on such day as reported in the Consolidated Last Sale Reporting System or as quoted in the National Association of Securities

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Dealers Automated Quotation System, or if such last sale price is not available, the average of the closing bid and asked prices as reported in either such system, or in any other case the higher bid price quoted for such day as reported by The Wall Street Journal and the National Quotation Bureau pink sheets. If there is no active public market, the value shall be the fair market value thereof as reasonably determined in good faith by the Board of Directors of the Company.

5. Adjustments. The number and kind of securities or other property purchasable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence, after the date hereof, of any of the following events:

(a) Subdivisions and Combinations. If the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, (i) the number of shares purchasable under this Warrant shall be proportionately increased and, conversely, in case the Common Stock of the Company shall be combined into a smaller number of shares, the number of shares purchasable hereunder shall be proportionately reduced, and (ii) the Exercise Price shall be proportionately decreased in the case of a subdivision and proportionately decreased in the case of a combination..

(b) Dividends. If the Company shall declare a dividend on its Common Stock payable in stock or other securities of the Company or of any other corporation, or in cash or other property, to holders of record of Common Stock as of a date prior to the date of exercise of the Warrants, the Holder shall, without additional cost, be entitled to receive upon the exercise of the Warrants, in addition to the Common Stock to which the Holder is otherwise entitled upon such exercise, the number of shares of stock or other securities, cash or property that the Holder would have been entitled to receive if the Holder had been a holder of the number of shares of Common Stock that the Holder actually receives upon exercise of this Warrant on such record date.

(c) Reorganizations or Reclassifications. In case of any capital reorganization or reclassification of the Common Stock, or the consolidation or merger of the Company with or into another corporation, or any sale of all or substantially all of the Company’s property or assets, or any liquidation of the Company, the Holder, upon the exercise of this Warrant, shall receive, in lieu of any shares of Common Stock, the proportionate share of all stock, securities or other property issued, paid or delivered for or on all of the Common Stock as is allocable to the shares of Common Stock then exercisable under this Warrant.

(d) Notification. Whenever the number of shares of Common Stock or other securities purchasable upon exercise of a Warrant is adjusted as provided in this section, the Company will promptly, and in any case at least 10 days prior to the record date or effective date of such action, as applicable, deliver to holders of Warrants, by first-class, postage prepaid mail, a brief summary of the number and kind of securities or other property purchasable upon exercise of the Warrant as so adjusted, state that such adjustments in the number or kind of shares or other securities or property conform to the requirements of this section, and set forth a brief statement of the facts accounting for

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such adjustments; provided, however, that failure to file or to give any notice required under this subsection, or any defect therein, shall not affect the legality or validity of any such adjustments under this section.

(e) Definition of “Common Stock.” For the purpose of this section, the term “Common Stock” shall mean (i) the Common Stock or (ii) any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to this section, the holder of any Warrant thereafter surrendered for exercise shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this section, and all other provisions of this Warrant, with respect to the Common Stock, shall apply on like terms to any such other shares.

6. Replacement of Instruments. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any certificate or instrument evidencing any Warrants or Warrant Shares, and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the common stock is not at the time publicly traded and the owner of the same is the initial Holder or an institutional lender or investor, its own agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender or cancellation thereof, the Company, at its expense, shall execute, register and deliver, in lieu thereof, a new certificate or instrument for (or covering the purchase of) an equal number of Warrants or Warrant Shares.

7. Reduction of Exercise Price Below Par Value. Before taking any action that would cause an adjustment pursuant to Section 5 reducing the portion of the Exercise Price required to purchase one share of capital stock below the then par value (if any) of a share of such capital stock, the Company will use its best efforts to take any corporate action which, in the opinion of its counsel, may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such capital stock.

8. Taxes. The issuance of any Common Stock or other certificate upon the exercise of this Warrant shall be made without charge to the registered Holder hereof, or for any tax in respect of the issuance of such certificate, unless such tax is imposed by law upon the Holder (including, without limitation, Federal, state or local income taxes), in which case such taxes shall be paid by the Holder. The obligations of the parties under this section shall survive any redemption, repurchase or acquisition of this Warrant or the Common Stock issued upon exercise of this Warrant by the Company, and any cancellation or termination of this Warrant.

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9. Transfer. This Warrant and all rights hereunder are transferable, as to all or any part of the number of shares of Common Stock purchasable upon its exercise, by the Holder hereof in person or by its duly authorized attorney on the books of the Company upon surrender of this Warrant at the principal offices of the Company, together with the “Assignment Form” attached hereto duly executed. The Company shall deem and treat the registered Holder of this Warrant at any time as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary. If this Warrant is transferred in part, the Company shall, at the time of surrender of this Warrant, issue to the transferee a Warrant covering the number of shares of Common Stock transferred and to the transferor a Warrant covering the number of shares not transferred.

10. No Fractional Shares. No fractional shares of Common Stock shall be issued upon the exercise of this Warrant and, in lieu thereof, any fractional shares shall be rounded down to the nearest whole.

11. Applicable Law. THIS WARRANT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS THEREOF. EACH OF THE PARTIES HEREBY SUBMITS TO PERSONAL JURISDICTION AND WAIVES ANY OBJECTION AS TO VENUE IN THE STATE OF DELAWARE. SERVICE OF PROCESS ON THE PARTIES IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO THE PARTIES IN ACCORDANCE WITH SECTION 7.10 OF THE AGREEMENT. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER.

12. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of, and be binding upon, the successors and assigns of the Holder hereof and shall be enforceable by any such Holder. In the event this Warrant is sold, transferred or assigned, the transferor will give written notice to the Company within fifteen (15) days following such sale, transfer or assignment and in such notice designate the name and address of the transferee.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and issued on its behalf.

DATED as of May 27, 2003.

AXTIVE CORPORATION,
a Delaware corporation
By:	/s/    DAVID N. PILOTTE
Name:	David N. Pilotte
Title:	Vice President

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SUBSCRIPTION FORM

(To be executed only upon exercise of Warrant)

The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchases                  shares of Common Stock of Axtive Corporation, a Delaware corporation, purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to                                          whose address is                                              , and if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable thereunder to be delivered to the undersigned.

DATED:                     ,         

By:

Name:

Title:

Address:

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below:

Name and Address of Assignee No. of Shares Common Stock

and does hereby irrevocably constitute and appoint as Attorney                                  to register such transfer on the books of                                  maintained for the purpose, with full power of substitution in the premises.

DATED:                 ,         .             

By:

Name:

Title:

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever.

ACKNOWLEDGMENT BY ASSIGNEE

The undersigned Assignee hereby acknowledges receipt of the Warrant Agreement, and agrees to be bound by its terms.

By:

Name:

Title:

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF

AXTIVE CORPORATION

Name	State of Incorporation
UDT Consulting, Inc.	Texas
Media Resolutions, Incorporated	Texas
Virtually There, Inc.	Texas
The Visionary Group, Inc.	Texas
Visual Edge Systems, Inc.	Texas
ThinkSpark Corporation	Delaware

EX-99.1

EXHIBIT 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Axtive Corporation, (the “Company”) on Form 10-KSB for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, I, Graham C. Beachum II, Chief Executive Officer of Axtive Corporation, certify that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Graham C. Beachum II

Graham C. Beachum II

Chairman of the Board, President and Chief Executive Officer

July 18, 2003

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Axtive Corporation, (the “Company”) on Form 10-KSB for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, I, David N. Pilotte, Chief Financial Officer of Axtive Corporation, certify that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David N. Pilotte

David N. Pilotte

Executive Vice President, Chief Financial Officer and Secretary

July 18, 2003

A signed original of these written statements required by Section 906 has been provided to Axtive Corporation and will be retained by Axtive Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

These Certifications shall not be deemed to be “filed” or part of the referenced Annual Report on Form 10-KSB or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to such report.