Document:

SECURITIES PURCHASE AGREEMENT

 Exhibit 10.21 
  
 AXTIVE CORPORATION 
  
 SECURITIES PURCHASE AGREEMENT 
  
 July 30, 2004 

 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of July 30, 2004, by and between
AXTIVE CORPORATION, a Delaware corporation (the “Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the “Purchaser”). 
  
 RECITALS 
  
 WHEREAS, the Company has authorized the sale to the Purchaser of a Convertible Term Note in the aggregate principal amount of Four Million Dollars
($4,000,000) (the “Note”), which Note is convertible into shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”) at an initial fixed conversion price of $ 0.40 per share of Common Stock
(“Fixed Conversion Price”); 
  
 WHEREAS, the Company
wishes to issue a warrant to the Purchaser to purchase up to 750,000 shares of the Company’s Common Stock (subject to adjustment as set forth therein) in connection with Purchaser’s purchase of the Note; 
  
 WHEREAS, Purchaser desires to purchase the Note and the Warrant (as defined
in Section 2) on the terms and conditions set forth herein; and 
  
 WHEREAS, the Company desires to issue and sell the Note and Warrant to Purchaser on the terms and conditions set forth herein. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set forth in this Agreement, on the Closing Date (as
defined in Section 3), the Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Company, a Note in the aggregate principal amount of Four Million Dollars $4,000,000 convertible in accordance with the terms
thereof into shares of the Company’s Common Stock in accordance with the terms of the Note and this Agreement. The Note purchased on the Closing Date shall be known as the “Offering.” A form of the Note is annexed hereto as Exhibit A.
The Note will mature on the Maturity Date (as defined in the Note). Collectively, the Note and Warrant and Common Stock issuable in payment of the Note, upon conversion of the Note and upon exercise of the Warrant are referred to as the
“Securities.” 
  
 2. Fees and
Warrant. On the Closing Date: 
  
 (a) The
Company will issue and deliver to the Purchaser a Warrant to purchase up to 750,000 shares of Common Stock in connection with the Offering (the “Warrant”) pursuant to Section 1 hereof. The Warrant must be delivered on the Closing 

  

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Date. A form of Warrant is annexed hereto as Exhibit B. All the representations, covenants, warranties, undertakings, and indemnification, and other rights
made or granted to or for the benefit of the Purchaser by the Company are hereby also made and granted in respect of the Warrant and shares of the Company’s Common Stock issuable upon exercise of the Warrant (the “Warrant Shares”).

  
 (b) Subject to the terms of Section 2(d)
below, the Company shall pay to Laurus Capital Management, LLC, the manager of the Purchaser, a closing payment in an amount equal to three and one-half percent (3.50%) of the aggregate principal amount of the Note. The foregoing fee is referred to
herein as the “Closing Payment.” 
  
 (c) The Company shall reimburse the Purchaser for its reasonable fees and expenses for services rendered to the Purchaser in preparation of this Agreement and the Related Agreements (as hereinafter defined), and expenses incurred in
connection with the Purchaser’s due diligence review of the Company and its Subsidiaries (as defined in Section 6.8) and all related matters. Amounts required to be paid under this Section 2(c) will be paid on the Closing Date and shall be
$39,500 for expenses incurred with respect to the preparation and negotiation of this Agreement and the Related Agreements (as defined below) and while performing due diligence inquiries on the Company and its Subsidiaries. Additional expenses of
the type referred to in this clause (c) in excess of $39,500 shall be approved by the Company in advance of expenditure by the Purchaser. 
  
 (d) The Closing Payment, the expenses referred to in the preceding clause (c) (net of deposits previously paid by the Company) shall be
paid at closing out of funds held pursuant to a Funds Escrow Agreement of even date herewith among the Company, Purchaser, and an Escrow Agent (the “Funds Escrow Agreement”) and a disbursement letter (the “Disbursement Letter”).

  
 3. Closing, Delivery and Payment.

  
 3.1 Closing. Subject to the terms and
conditions herein, the closing of the transactions contemplated hereby (the “Closing”), shall take place on the date hereof, at such time or place as the Company and Purchaser may mutually agree (such date is hereinafter referred to as the
“Closing Date”). 
  
 3.2
Delivery. Pursuant to the Funds Escrow Agreement in the form attached hereto as Exhibit D, at the Closing on the Closing Date, the Company will deliver to the Purchaser, among other things, a Note in the form attached as Exhibit A
representing the aggregate principal amount of Four Million Dollars ($4,000,000) and a Warrant in the form attached as Exhibit B in the Purchaser’s name representing 750,000 Warrant Shares and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Disbursement Letter by certified funds or wire transfer (it being understood that $3,833,500 of the proceeds of the Note will be deposited in the Restricted Account (as defined in the Restricted Account
Agreement referred to below)). 
  

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 4. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser as follows (which representations and warranties are supplemented by the Company’s Annual Report on Form 10-KSB for its fiscal year ended December 31, 2003 and its Quarterly Report on Form 10-QSB for its fiscal
quarter ended March 31, 2004, under the Securities Exchange Act of 1934, as amended (collectively, the “Exchange Act Filings”), copies of which have been provided to the Purchaser): 
  
 4.1 Organization, Good Standing and Qualification.
Each of the Company and each of its active Subsidiaries is a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each of
the Company and each of its Subsidiaries has the corporate power and authority to own and operate its properties and assets, to execute and deliver (i) this Agreement, (ii) the Note and the Warrant to be issued in connection with this Agreement,
(iii) the Restricted Account Security Agreement dated as of the date hereof between the Company and the Purchaser (as amended, modified or supplemented from time to time, the “Restricted Account Security Agreement”), (iv) the Registration
Rights Agreement relating to the Securities dated as of the date hereof between the Company and the Purchaser (as amended, modified or supplemented from time to time, the “Registration Rights Agreement”), (v) the Restricted Account
Agreement dated as of the date hereof among the Company, the Purchaser and North Fork Bank (as amended, modified or supplemented from time to time, the “Restricted Account Agreement”), (vi) the Restricted Account Side Letter, dated the
date hereof, relating to the amounts set forth in the Restricted Account referred to in the Restricted Account Agreement (as amended, modified or supplemented from time to time, the “Restricted Account Side Letter”), (vii) the Escrow
Agreement dated as of the date hereof among the Company, the Purchaser and the escrow agent referred to therein and (viii) all other agreements related to this Agreement and the Note referred to herein (including, without limitation, any security
agreement, pledge agreement or guaranty executed by the Company or any of its Subsidiaries after the date hereof) (the preceding clauses (ii) through (viii), collectively, the “Related Agreements”), to issue and sell the Note and the
shares of Common Stock issuable upon conversion of the Note (the “Note Shares”), to issue and sell the Warrant and the Warrant Shares, and to carry out the provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. Each of the Company and each of its Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign corporation, partnership or limited liability company, as the case may be, in
all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so has not, or could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business, assets, liabilities, condition (financial or otherwise), properties, operations or prospects of the Company and it Subsidiaries, taken individually and as a whole (a
“Material Adverse Effect”). 
  
 4.2
Subsidiaries. Each direct and indirect Subsidiary of the Company, the direct owner of such Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a “Subsidiary” of
any person or entity means (i) a corporation or other entity whose shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other persons or entities performing similar functions for such person or entity, are owned, 

  

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directly or indirectly, by such person or entity or (ii) a corporation or other entity in which such person or entity owns, directly or indirectly, more than
50% of the equity interests at such time. 
  
 4.3
Capitalization; Voting Rights. 
  
 (a)
The authorized capital stock of the Company, as of the date hereof consists of 105,000,000 shares, of which 100,000,000 are shares of Common Stock, par value $0.01 per share, 41,867,660 shares of which are issued and outstanding , and 5,000,000 are
shares of preferred stock, par value $0.01 per share, none of which shares of preferred stock are issued and outstanding. The authorized capital stock of each Subsidiary of the Company is set forth on Schedule 4.3. 
  
 (b) Except as disclosed on Schedule 4.3, other than: (i)
the shares reserved for issuance under the Company’s stock option plans; and (ii) shares which may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Company of any of its securities. Except as disclosed on Schedule 4.3, neither the
offer, issuance or sale of any of the Note or the Warrant, or the issuance of any of the Note Shares or Warrant Shares, nor the consummation of any transaction contemplated hereby will result in a change in the price or number of any securities of
the Company outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities. 
  
 (c) All issued and outstanding shares of the Company’s Common Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. 
  
 (d) The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Company’s
Certificate of Incorporation (the “Charter”). The Note Shares and Warrant Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the Company’s Charter, the
Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed. 
  
 4.4 Authorization; Binding Obligations. All corporate, partnership or limited liability company, as the case may be, action on the
part of the Company and each of its Subsidiaries (including the respective officers and directors) necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company and its Subsidiaries
hereunder and under the other Related Agreements at the Closing and, the authorization, sale, issuance and delivery of the Note and Warrant has been taken or will be taken prior to the Closing. This Agreement and the other Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid and binding 

  

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obligations of each of the Company and each of its Subsidiaries, enforceable against each such person in accordance with their terms, except: 
  
 (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and 
  
 (b) general principles of equity that restrict the availability of equitable or legal remedies. 
  
 The sale of the Note and the subsequent conversion of the Note into Note Shares are not and
will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. The issuance of the Warrant and the subsequent exercise of the Warrant for Warrant Shares are not and will not be subject to
any preemptive rights or rights of first refusal that have not been properly waived or complied with. 
  
 4.5 Liabilities. Neither the Company nor any of its Subsidiaries has any contingent liabilities, except current liabilities
incurred in the ordinary course of business and liabilities disclosed in any Exchange Act Filings. 
  
 4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed in any Exchange Act Filings: 
  
 (a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which the Company or any of its Subsidiaries is a party or by which it is bound which may involve: (i) obligations (contingent or otherwise) of, or payments to, the Company in
excess of $50,000 (other than obligations of, or payments to, the Company arising from purchase or sale agreements entered into in the ordinary course of business); or (ii) the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the purchase of “off the shelf” or other standard products); or (iii) provisions restricting the development, manufacture or distribution of the Company’s
products or services; or (iv) indemnification by the Company with respect to infringements of proprietary rights. 
  
 (b) Since December 31, 2003, neither the Company nor any of its Subsidiaries has: (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans or advances to any person not in excess, individually or in the aggregate, of $100,000, other than ordinary course
advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. 
  
 (c) For the purposes of subsections (a) and (b) above, all indebtedness, liabilities, agreements,
understandings, instruments, contracts and proposed transactions 

  

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involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such subsections. 
  
 4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7, there are no obligations of the Company or any of its Subsidiaries to officers, directors, stockholders or employees of the Company or
any of its Subsidiaries other than: 
  
 (a) for
payment of salary for services rendered and for bonus payments; 
  
 (b) reimbursement for reasonable expenses incurred on behalf of the Company and its Subsidiaries; 
  
 (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company); and 
  
 (d) obligations listed in the Company’s financial statements or disclosed in any of its Exchange Act Filings. 
  
 Except as described above or set forth on Schedule 4.7, none of the officers, directors or,
to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company, individually or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may compete with the Company. Except as described above, no officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or proposed transactions are contemplated between the Company and any such person. Except as set forth on Schedule 4.7, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. 
  
 4.8 Changes. Since December 31, 2003, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or to any of the Related Agreements, there has not been: 
  
 (a) any change in the business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects of the Company or any of its Subsidiaries, which individually or in the aggregate has had, or could reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; 
  
 (b) any resignation or
termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries; 
  

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 (c) any material change, except in the ordinary course of business, in the contingent
obligations of the Company or any of its Subsidiaries by way of guaranty, endorsement, indemnity, warranty or otherwise; 
  
 (d) any damage, destruction or loss, whether or not covered by insurance, has had, or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; 
  
 (e) any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it; 
  
 (f) any direct or indirect loans made by the Company or any of its Subsidiaries to any stockholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the ordinary course of business; 
  
 (g) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder of the Company
or any of its Subsidiaries; 
  
 (h) any
declaration or payment of any dividend or other distribution of the assets of the Company or any of its Subsidiaries; 
  
 (i) any labor organization activity related to the Company or any of its Subsidiaries; 
  
 (j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business; 
  
 (k) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other
intangible assets owned by the Company or any of its Subsidiaries; 
  
 (l) any change in any material agreement to which the Company or any of its Subsidiaries is a party or by which either the Company or any of its Subsidiaries is bound which either individually or in the aggregate has
had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; 
  
 (m) any other event or condition of any character that, either individually or in the aggregate, has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or 
  
 (n) any arrangement or commitment by the Company or any of its Subsidiaries to do any of the acts described in subsection (a) through (m) above. 
  
 4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on Schedule 4.9, each of the
Company and each of its Subsidiaries has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: 
  
 (a) those resulting from taxes which have not yet become
delinquent; 
  

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 (b) minor liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company or any of its Subsidiaries; and 
  
 (c) those that have otherwise arisen in the ordinary course of business. 
  
 All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company and its Subsidiaries are
in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used. Except as set forth on Schedule 4.9, the Company and its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound. 
  
 4.10 Intellectual Property. 
  
 (a) Each of the Company and each of its Subsidiaries owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and
processes necessary for its business as now conducted and to the Company’s knowledge, as presently proposed to be conducted (the “Intellectual Property”), without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the
shelf” or standard products. 
  
 (b)
Neither the Company nor any of its Subsidiaries has received any communications alleging that the Company or any of its Subsidiaries has violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company or any of its Subsidiaries aware of any basis therefor. 
  
 (c) The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company or any of its Subsidiaries, except for inventions, trade secrets or proprietary information that have been rightfully assigned to the Company or any of its Subsidiaries. 
  
 4.11 Compliance with Other Instruments. Except as set
forth in Schedule 4.11, neither the Company nor any of its Subsidiaries is in violation or default of (x) any term of its Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage, indenture, contract, agreement or instrument to which
it is party or by which it is bound or of any judgment, decree, order or writ, which violation or default, in the case of this clause (y), has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance with this 

  

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Agreement and the Related Agreements to which it is a party, and the issuance and sale of the Note by the Company and the other Securities by the Company
each pursuant hereto and thereto, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term or provision, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or any of its Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets or properties. 
  
 4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or investigation pending or, to
the Company’s knowledge, currently threatened against the Company or any of its Subsidiaries that prevents the Company or any of its Subsidiaries from entering into this Agreement or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or any change in the current equity ownership of the Company or any of its
Subsidiaries, nor is the Company aware that there is any basis to assert any of the foregoing. Neither the Company nor any of its Subsidiaries is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company or any of its Subsidiaries currently pending or which the Company or any of its Subsidiaries intends to initiate. 
  
 4.13 Tax Returns and Payments. Each of the Company
and each of its Subsidiaries has timely filed all tax returns (federal, state and local) required to be filed by it or have requested an extension with respect thereto and such extension is in effect. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the Company or any of its Subsidiaries on or before the Closing, have been paid or will be paid prior to the time they become delinquent. Except as set forth on Schedule 4.13,
neither the Company nor any of its Subsidiaries has been advised: 
  
 (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof; or 
  
 (b) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. 
  
 The Company has no knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for. 
  
 4.14 Employees. Except as set forth on Schedule 4.14, neither the Company nor any of its Subsidiaries has any collective bargaining agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company’s knowledge, threatened with respect to the Company or any of its Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule 4.14, neither the Company nor any of its Subsidiaries is a party
to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company’s knowledge,
no employee 

  

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of the Company or any of its Subsidiaries, nor any consultant with whom the Company or any of its Subsidiaries has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company or any of its Subsidiaries because of the nature of the business to be
conducted by the Company or any of its Subsidiaries; and to the Company’s knowledge the continued employment by the Company or any of its Subsidiaries of its present employees, and the performance of the Company’s and its
Subsidiaries’ contracts with its independent contractors, will not result in any such violation. Neither the Company nor any of its Subsidiaries is aware that any of its employees is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has received any notice alleging that any such violation has occurred. Except for employees who have a current effective employment agreement with the Company or any of its Subsidiaries, no employee of the Company or any of its
Subsidiaries has been granted the right to continued employment by the Company or any of its Subsidiaries or to any material compensation following termination of employment with the Company or any of its Subsidiaries. Except as set forth on
Schedule 4.14, the Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company or any of its Subsidiaries, nor does the Company or any of its Subsidiaries have a
present intention to terminate the employment of any officer, key employee or group of employees. 
  
 4.15 Registration Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings,
neither the Company nor any of its Subsidiaries is presently under any obligation, and neither the Company nor any of its Subsidiaries has granted any rights, to register any of the Company’s or its Subsidiaries’ presently outstanding
securities or any of its securities that may hereafter be issued. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of the Company or any of its Subsidiaries has
entered into any agreement with respect to the voting of equity securities of the Company or any of its Subsidiaries. 
  
 4.16 Compliance with Laws; Permits. Neither the Company nor any of its Subsidiaries is in violation of any applicable statute,
rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other Related Agreement and the issuance of any of the Securities, except such as has been duly and validly obtained or filed, or with respect to any filings that must be made after
the Closing, as will be filed in a timely manner. Each of the Company and its Subsidiaries has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of
which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
  

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 4.17 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or any of its Subsidiaries or, to the Company’s knowledge, by any
other person or entity on any property owned, leased or used by the Company or any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials” shall mean: 
  
 (a) materials which are listed or otherwise defined as
“hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the
control of hazardous wastes, or other activities involving hazardous substances, including building materials; or 
  
 (b) any petroleum products or nuclear materials. 
  
 4.18 Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser
contained in this Agreement, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. 
  
 4.19 Full Disclosure. Each of the Company and each of its Subsidiaries has provided the Purchaser with all information requested by
the Purchaser in connection with its decision to purchase the Note and Warrant, including all information the Company and its Subsidiaries believe is reasonably necessary to make such investment decision. Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document delivered by the Company or any of its Subsidiaries to Purchaser or its attorneys or agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. Any
financial projections and other estimates provided to the Purchaser by the Company or any of its Subsidiaries were based on the Company’s and its Subsidiaries’ experience in the industry and on assumptions of fact and opinion as to future
events which the Company or any of its Subsidiaries, at the date of the issuance of such projections or estimates, believed to be reasonable. 
  
 4.20 Insurance. Each of the Company and each of its Subsidiaries has general commercial, product liability, fire and casualty
insurance policies with coverages which the Company believes are customary for companies similarly situated to the Company and its Subsidiaries in the same or similar business. 
  
 4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has filed all proxy statements,
reports and other documents required to be filed by it 

  

 11 

 
under the Securities Exchange Act 1934, as amended (the “Exchange Act”). The Company has furnished the Purchaser with copies of: (i) its Annual
Reports on Form 10-KSB for its fiscal year ended December 31, 2003; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarter ended March 31, 2004, and the Form 8-K filings which it has made after March 31, 2004 to date (collectively, the
“SEC Reports”). Except as set forth on Schedule 4.21, each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the
notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. 
  
 4.22 Quotation. The Company’s Common Stock is quoted for trading on the NASD OTC Bulletin Board (“NASD BB”) and satisfies all requirements for the continuation of such quotation. The Company has
not received any notice that its Common Stock will no longer be eligible for quotation on the NASD BB or that its Common Stock does not meet all requirements for quotation on the NASD BB. 
  
 4.23 No Integrated Offering. Neither the Company, nor
any of its Subsidiaries or affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be integrated with prior offerings by the Company for purposes of the Securities Act and, as a result, would prevent the Company from selling the Securities pursuant to
Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or Subsidiaries take any action or steps that would cause the offering of the Securities to be
integrated with other offerings. 
  
 4.24 Stop
Transfer. The Securities are restricted securities as of the date of this Agreement. Neither the Company nor any of its Subsidiaries will issue any stop transfer order or other order impeding the sale and delivery of any of the Securities at
such time as the Securities are registered for public sale or an exemption from registration is available, except as required by state and federal securities laws. 
  
 4.25 Dilution. The Company specifically acknowledges that its obligation to issue the shares of
Common Stock upon conversion of the Note and exercise of the Warrant is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company. 
  
 4.26 Patriot Act. The Company certifies that, to the
best of Company’s knowledge, neither the Company nor any of its Subsidiaries has been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, the Company hereby represents, warrants and agrees that: (i) none of the cash or property that the Company or any
of its Subsidiaries will pay or will contribute to the Purchaser has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and 

  

 12 

 
(ii) no contribution or payment by the Company or any of its Subsidiaries to the Purchaser, to the extent that they are within the Company’s and/or its
Subsidiaries’ control shall cause the Purchaser to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001. The Company shall promptly notify the Purchaser if any of these representations ceases to be true and accurate regarding the Company or any of its Subsidiaries. The Company agrees to provide the Purchaser any
additional information regarding the Company or any of its Subsidiaries that the Purchaser deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities. The Company understands and
agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or regulation related to money laundering similar activities, the Purchaser may undertake appropriate
actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of the Purchaser’s investment in the Company. The Company further understands that the Purchaser may release confidential
information about the Company and its Subsidiaries and, if applicable, any underlying beneficial owners, to proper authorities if the Purchaser, in its sole discretion, determines that it is in the best interests of the Purchaser in light of
relevant rules and regulations under the laws set forth in subsection (ii) above. 
  
 4.27 Judgments. No money judgment, writ or similar final process exists in respect of, or has been entered or filed against, the
Company or any of its Subsidiaries, or any of their respective properties or other assets, for more than $100,000, except (x) to the extent set forth on Schedule 4.27 or (y) to the extent any such judgment, writ or similar final process has been
vacated, stayed or been bonded prior to the date hereof. 
  
 5. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows (such representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement): 
  
 5.1 No Shorting. The Purchaser or any of its affiliates and investment partners has not, will not and will not cause any person or entity, directly or indirectly, to engage in “short sales” of the
Company’s Common Stock as long as the Note shall be outstanding. 
  
 5.2 Requisite Power and Authority. The Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Related Agreements and to carry out
their provisions. All corporate action on Purchaser’s part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except: 
  
 (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights; and 
  

 13 

 (b) as limited by general principles of equity that restrict the availability of
equitable and legal remedies. 
  
 5.3
Investment Representations. Purchaser understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in the
Agreement, including, without limitation, that the Purchaser is an “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it has
received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Note and the Warrant to be purchased by it under this Agreement and the Note Shares and the
Warrant Shares acquired by it upon the conversion of the Note and the exercise of the Warrant, respectively. The Purchaser further confirms that it has had an opportunity to ask questions and receive answers from the Company regarding the
Company’s and its Subsidiaries’ business, management and financial affairs and the terms and conditions of the Offering, the Note, the Warrant and the Securities and to obtain additional information (to the extent the Company possessed
such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Purchaser or to which the Purchaser had access. 
  
 5.4 Purchaser Bears Economic Risk. The Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser
must bear the economic risk of this investment until the Securities are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration is available with respect to such sale. 
  
 5.5 Acquisition for Own Account. The Purchaser is
acquiring the Note and Warrant and the Note Shares and the Warrant Shares for the Purchaser’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution.

  
 5.6 Purchaser Can Protect Its
Interest. The Purchaser represents that by reason of its, or of its management’s, business and financial experience, the Purchaser has the capacity to evaluate the merits and risks of its investment in the Note, the Warrant and the
Securities and to protect its own interests in connection with the transactions contemplated in this Agreement and the other Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements. 
  
 5.7 Accredited Investor. Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. 
  

 14 

 5.8 Legends. 
  
 (a) The Note shall bear substantially the following legend: 
  
 “THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXTIVE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”

  
 (b) The Note Shares and the Warrant Shares,
if not issued by DWAC system (as hereinafter defined), shall bear a legend which shall be in substantially the following form until such shares are covered by an effective registration statement filed with the SEC: 
  
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXTIVE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 (c) The Warrant shall bear substantially the following legend: 
  
 “THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXTIVE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.” 
  

 15 

 6. Covenants of the Company. The Company covenants and agrees with the Purchaser
as follows: 
  
 6.1 Stop-Orders. The
Company will advise the Purchaser, promptly after it receives notice of issuance by the Securities and Exchange Commission (the “SEC”), any state securities commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.

  
 6.2 Listing and Quotation. The Company
shall, as applicable, promptly (x) secure the listing of the shares of Common Stock issuable upon conversion of the Note and upon the exercise of the Warrant or (y) insure that the shares of Common Stock issuable upon conversion of the Note and upon
the exercise of the Warrant, in each case, on the trading market (the “Principal Market”) upon which shares of Common Stock are listed (subject to official notice of issuance) or quoted, as the case may be, and shall maintain such listing
or quotation, as the case may be, so long as any other shares of Common Stock shall be so listed or quoted. The Company will maintain the listing of its Common Stock on the Principal Market, and will comply in all material respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers (“NASD”) and such exchanges, as applicable. 
  
 6.3 Market Regulations. The Company shall notify the SEC, NASD and applicable state authorities, in
accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Purchaser and promptly provide copies thereof to the Purchaser. 
  
 6.4 Reporting Requirements. So long as the Note and/or the Warrant is outstanding or the Purchaser is a holder of the Common Stock,
the Company will timely file with the SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination. 
  
 6.5 Use of Funds. The Company agrees that it will use the proceeds of the sale of the Note and the Warrant for (x) the acquisition of business (each such business, an “Acquired Business”) approved by
the Purchaser (such acquisitions, a “Permitted Acquisition”) and (y) general working capital purposes (it being understood that $3,833,500 of the proceeds of the Note will be deposited in the Restricted Account (as defined in the
Restricted Account Agreement referred to below)). 
  
 6.6 Access to Facilities. Each of the Company and each of its Subsidiaries will permit any representatives designated by the Purchaser (or any successor of the Purchaser), upon reasonable notice and during normal business hours, at
such person’s expense and accompanied by a representative of the Company, to: 
  
 (a) visit and inspect any of the properties of the Company or any of its Subsidiaries; 
  

 16 

 (b) examine the corporate and financial records of the Company or any of its
Subsidiaries (unless such examination is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and 
  
 (c) discuss the affairs, finances and accounts of the Company or any of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries. 
  
 Notwithstanding the
foregoing, neither the Company nor any of its Subsidiaries will provide any material, non-public information to the Purchaser unless the Purchaser signs a confidentiality agreement and otherwise complies with Regulation FD, under the federal
securities laws. 
  
 6.7 Taxes. Each of
the Company and each of its Subsidiaries will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or
business of the Company and its Subsidiaries; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company and/or
such Subsidiary shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company and its Subsidiaries will pay all such taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor. 
  
 6.8 Insurance. Each of the Company and its Subsidiaries will keep its assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in similar business similarly situated as the Company and its Subsidiaries; and the Company and its
Subsidiaries will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner which the Company reasonably believes is customary for
companies in similar business similarly situated as the Company and its Subsidiaries and to the extent available on commercially reasonable terms. The Company, and each of its Subsidiaries will jointly and severally bear the full risk of loss from
any loss of any nature whatsoever with respect to the assets pledged to the Purchaser as security for its obligations hereunder and under the Related Agreements. At the Company’s and each of its Subsidiaries’ joint and several cost and
expense in amounts and with carriers reasonably acceptable to Purchaser, the Company and each of its Subsidiaries shall (i) keep all its insurable properties and properties in which it has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s
including business interruption insurance; (ii) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s insuring against larceny, embezzlement
or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have 

  

 17 

 
access to the assets or funds of the Company or any of its Subsidiaries either directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (iv) maintain all such worker’s compensation or similar
insurance as may be required under the laws of any state or jurisdiction in which the Company or the respective Subsidiary is engaged in business; and (v) furnish Purchaser with (x) copies of all policies and evidence of the maintenance of such
policies at least thirty (30) days before any expiration date, (y) excepting the Company’s workers’ compensation policy, with respect to such policies that cover property or operations of the Acquired Businesses, endorsements to such
policies naming Purchaser as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance satisfactory to Purchaser, naming Purchaser as loss payee, and (z) with respect to such policies
that cover the property or operations of the Acquired Businesses, evidence that as to Purchaser the insurance coverage shall not be impaired or invalidated by any act or neglect of the Company or any Subsidiary and the insurer will provide Purchaser
with at least thirty (30) days notice prior to cancellation. To the extent that the foregoing insurance policies cover the property or operations of the Acquired Businesses, the Company shall instruct, or cause the respective Acquired Business to
instruct, the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to the Company and/or the Subsidiary and Purchaser jointly. In the event that as of the date of receipt of each such loss
recovery upon any such insurance, the Purchaser has not declared an event of default with respect to this Agreement or any of the Related Agreements, then the Company and/or such Subsidiary shall be permitted to direct the application of such loss
recovery proceeds toward investment in property, plant and equipment that would comprise “Collateral” secured by Purchaser’s security interest pursuant to its security agreement, with any surplus funds to be applied toward payment of
the obligations of the Company to Purchaser. In the event that Purchaser has properly declared an event of default with respect to this Agreement or any of the Related Agreements, then all loss recoveries received by Purchaser upon any such
insurance thereafter may be applied to the obligations of the Company hereunder and under the Related Agreements, in such order as the Purchaser may determine. Any surplus (following satisfaction of all Company obligations to Purchaser) shall be
paid by Purchaser to the Company or applied as may be otherwise required by law. Any deficiency thereon shall be paid by the Company or the Subsidiary, as applicable, to Purchaser, on demand. 
  
 6.9 Intellectual Property. Each of the Company and
each of its Subsidiaries shall maintain in full force and effect its existence, rights and franchises and all licenses and other rights to use Intellectual Property owned or possessed by it and reasonably deemed to be necessary to the conduct of its
business. 
  
 6.10 Properties. Each of the
Company and each of its Subsidiaries will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and each of the Company and each of its Subsidiaries will at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
  

 18 

 6.11 Confidentiality. The Company agrees that it will not disclose, and will not
include in any public announcement, the name of the Purchaser, unless expressly agreed to by the Purchaser or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Company may disclose Purchaser’s identity and the terms of this Agreement to its current and prospective debt and equity financing sources. 
  
 6.12 Required Approvals. For so long as twenty-five percent (25%) of the principal amount of the Note
is outstanding, the Company, without the prior written consent of the Purchaser, shall not: 
  
 (a) directly or indirectly declare or pay any dividends, other than dividends paid to the Company or any of its wholly-owned
Subsidiaries, (ii) issue any preferred stock that is manditorily redeemable by the holder thereof prior to the one year anniversary of the Maturity Date or (iii) redeem any of its preferred stock or other equity interests; 
  
 (b) liquidate, dissolve or effect a material reorganization
(it being understood that in no event shall the Company dissolve, liquidate or merge with any other person or entity (unless the Company is the surviving entity); 
  
 (c) become subject to (including, without limitation, by way of amendment to or modification of) any
agreement or instrument which by its terms would (under any circumstances) restrict the Company’s or any of its Subsidiaries right to perform the provisions of this Agreement, any other Related Agreement or any of the agreements contemplated
hereby or thereby; 
  
 (d) materially alter or
change the scope of the business of the Company and its Subsidiaries taken as a whole; 
  
 (e) (i) create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) per annum of the fair market value of the Company’s assets) whether secured or unsecured other than (x) the Company’s indebtedness to Laurus, (y) indebtedness set forth on Schedule
6.12(e) attached hereto and made a part hereof and any refinancings or replacements thereof on terms no less favorable to the Purchaser than the indebtedness being refinanced or replaced, and (z) any debt incurred in connection with the purchase
of assets in the ordinary course of business, or any refinancings or replacements thereof on terms no less favorable to the Purchaser than the indebtedness being refinanced or replaced; (ii) cancel any debt owing to it in excess of $50,000 in the
aggregate during any 12 month period; (iii) assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except the endorsement of negotiable instruments by the Company for
deposit or collection or similar transactions in the ordinary course of business or guarantees of indebtedness otherwise permitted to be outstanding pursuant to this clause (e); and 
  

 19 

 (f) create or acquire any Subsidiary after the date hereof unless (i) such Subsidiary is
a wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes party to the Master Security Agreement, the Stock Pledge Agreement and the Subsidiary Guaranty (either by executing a counterpart thereof or an assumption or joinder agreement
in respect thereof) and, to the extent required by the Purchaser, satisfies each condition of this Agreement and the Related Agreements as if such Subsidiary were a Subsidiary on the Closing Date. 
  
 6.13 Reissuance of Securities. The Company agrees to
reissue certificates representing the Securities without the legends set forth in Section 5.8 above at such time as: 
  
 (a) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or 
  
 (b) upon resale subject to an effective registration
statement after such Securities are registered for resale under the Securities Act. 
  
 The Company agrees to cooperate with the Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive reasonably
requested representations from the selling Purchaser and broker, if any. 
  
 6.14 Opinion. On the Closing Date, the Company will deliver to the Purchaser an opinion acceptable to the Purchaser substantially in the form of Exhibit C from the Company’s external legal counsel. The
Company will provide, at the Company’s expense, such other legal opinions in the future as are deemed reasonably necessary by the Purchaser (and acceptable to the Purchaser) in connection with the conversion of the Note and exercise of the
Warrant. 
  
 6.15 Margin Stock. The
Company will not permit any of the proceeds of the Note or the Warrant to be used directly or indirectly to “purchase” or “carry” “margin stock” or to repay indebtedness incurred to “purchase” or
“carry” “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 
  
 6.16 Additional Investment. Following the agreement
by the Company and the Purchaser, the Purchaser shall have the opportunity to issue an additional note to the Company on the same terms and conditions (including, without limitation, the same interest rate, the Fixed Conversion Price (as defined in
the Note) then in effect, proportionate warrant coverage (at the same exercise prices), a proportionate amortization schedule, etc.) set forth in, and pursuant to substantially similar documentation as, this Agreement and the Related Agreements.

  
 6.17 Restricted Cash Disclosure. The
Company agrees that, to the extent that the Company is required pursuant to the disclosure requirements of the Securities Act, the Exchange Act and/or the SEC to disclose the transactions contemplated by this Agreement and the Related Agreements
(such report, the “Laurus Transaction 8-K”), it will disclose that 

  

 20 

 
$3,833,500 (or such lesser amount as is set forth in such restricted cash account) of the proceeds of the Note issued by the Company to the Purchaser has
been placed in a restricted cash account under the sole dominion and control of the Purchaser, and the release of the proceeds set forth in such restricted cash account is subject to the approval of the Purchaser. 
  
 7. Covenants of the Purchaser. The Purchaser
covenants and agrees with the Company as follows: 
  
 7.1 Confidentiality. The Purchaser agrees that it will not disclose, and will not include in any public announcement, the name of the Company, unless expressly agreed to by the Company or unless and until such disclosure is required
by law or applicable regulation, and then only to the extent of such requirement. 
  
 7.2 Non-Public Information. The Purchaser agrees not to effect any sales in the shares of the Company’s Common Stock while in
possession of material, non-public information regarding the Company if such sales would violate applicable securities law. 
  
 8. Covenants of the Company and Purchaser Regarding Indemnification. 
  
 8.1 Company Indemnification. The Company agrees to indemnify, hold harmless, reimburse and defend the
Purchaser, each of the Purchaser’s officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Purchaser which results, arises out of or is based upon: (i) any misrepresentation by the Company or any of its Subsidiaries or breach of any warranty by the Company or any of its Subsidiaries in this Agreement, any
other Related Agreement or in any exhibits or schedules attached hereto or thereto; or (ii) any breach or default in performance by Company or any of its Subsidiaries of any covenant or undertaking to be performed by Company or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement entered into by the Company and/or any of its Subsidiaries and Purchaser relating hereto or thereto. 
  
 8.2 Purchaser’s Indemnification. Purchaser agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company’s officers, directors, agents, affiliates, control persons and principal shareholders, at all times against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon: (i) any misrepresentation by Purchaser or breach of any warranty by Purchaser in this Agreement or in any exhibits or schedules attached
hereto or any Related Agreement; or (ii) any breach or default in performance by Purchaser of any covenant or undertaking to be performed by Purchaser hereunder, or any other agreement entered into by the Company and Purchaser relating hereto.

  

 21 

 9. Conversion of Convertible Note. 
  
 9.1 Mechanics of Conversion. 
  
 (a) Provided the Purchaser has notified the Company of the
Purchaser’s intention to sell the Note Shares and the Note Shares are included in an effective registration statement or are otherwise exempt from registration when sold: (i) upon the conversion of the Note or part thereof, the Company shall,
at its own cost and expense, take all necessary action (including the issuance of an opinion of counsel reasonably acceptable to the Purchaser following a request by the Purchaser) to assure that the Company’s transfer agent shall issue shares
of the Company’s Common Stock in the name of the Purchaser (or its nominee) or such other persons as designated by the Purchaser in accordance with Section 9.1(b) hereof and in such denominations to be specified representing the number of Note
Shares issuable upon such conversion; and (ii) the Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that after the Effectiveness Date (as
defined in the Registration Rights Agreement) the Note Shares issued will be freely transferable subject to the prospectus delivery requirements of the Securities Act and the provisions of this Agreement, and will not contain a legend restricting
the resale or transferability of the Note Shares. 
  
 (b) Purchaser will give notice of its decision to exercise its right to convert the Note or part thereof by telecopying or otherwise delivering an executed and completed notice of the number of shares to be converted to the Company (the
“Notice of Conversion”). The Purchaser will not be required to surrender the Note until the Purchaser receives a credit to the account of the Purchaser’s prime broker through the DWAC system (as defined below), representing the Note
Shares or until the Note has been fully satisfied. Each date on which a Notice of Conversion is telecopied or delivered to the Company in accordance with the provisions hereof shall be deemed a “Conversion Date.” Pursuant to the terms of
the Notice of Conversion, the Borrower will issue instructions to the transfer agent accompanied by an opinion of counsel within one (1) business day of the date of the delivery to Borrower of the Notice of Conversion and shall cause the transfer
agent to transmit the certificates representing the Conversion Shares to the Holder by crediting the account of the Purchaser’s prime broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system within three (3) business days after receipt by the Company of the Notice of Conversion (the “Delivery Date”). 
  
 (c) The Company understands that a delay in the delivery of the Note Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event that the Company fails to direct its transfer agent to deliver the Note Shares to the Purchaser via the DWAC system within the time frame set forth in Section 9.1(b) above
and the Note Shares are not delivered to the Purchaser by the Delivery Date, as compensation to the Purchaser for such loss, the Company agrees to pay late payments to the Purchaser for late issuance of the Note Shares in the form required pursuant
to Section 9 hereof upon conversion of the Note in the amount equal to the greater of: (i) $500 per business day after the Delivery Date; or 

  

 22 

 
(ii) the Purchaser’s actual damages from such delayed delivery. Notwithstanding the foregoing, the Company will not owe the Purchaser any late payments
if the delay in the delivery of the Note Shares beyond the Delivery Date is solely out of the control of the Company and the Company is actively trying to cure the cause of the delay. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand and, in the case of actual damages, accompanied by reasonable documentation of the amount of such damages. Such documentation shall show the number of shares of Common Stock the Purchaser is forced to purchase
(in an open market transaction) which the Purchaser anticipated receiving upon such conversion, and shall be calculated as the amount by which (A) the Purchaser’s total purchase price (including customary brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note, for which such Conversion Notice was not timely honored. 
  
 Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts owed by the Company to a Purchaser and thus refunded to the Company. 
  
 10. Registration Rights. 
  
 10.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser pursuant to a Registration Rights
Agreement dated as of even date herewith between the Company and the Purchaser. 
  
 10.2 Offering Restrictions. Except as previously disclosed in the SEC Reports or in the Exchange Act Filings, or stock or stock
options granted to employees or directors of the Company (these exceptions hereinafter referred to as the “Excepted Issuances”), neither the Company nor any of its Subsidiaries will issue any securities with a continuously
variable/floating conversion feature which are or could be (by conversion or registration) free-trading securities (i.e. common stock subject to a registration statement) prior to the full repayment or conversion of the Note (together with all
accrued and unpaid interest and fees related thereto) (the “Exclusion Period”). 
  
 10.3 Restricted Cash Account. At Closing, the Company will place $3,833,500 in a restricted account at Northfork Bank, and, subject
to the terms and conditions of the Restricted Account Side Letter, maintain such amount in the restricted account for as long as the Purchaser shall hold the Note. The account shall be pledged to Purchaser as security for the performance of the
Company’s obligations. 
  
 11.
Miscellaneous. 
  
 11.1 Governing
Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD 

  

 23 

 
TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH
RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW,
THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT. 
  
 11.2 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby to the extent provided therein. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 
  
 11.3 Successors. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a
holder of the Securities from time to time, other than the holders of Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an effective registration statement. Purchaser may not assign its rights hereunder to a competitor of the
Company. 
  
 11.4 Entire Agreement. This
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and
no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 
  
 11.5 Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  

 24 

 11.6 Amendment and Waiver. 
  
 (a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser. 
  
 (b) The obligations of the Company and the rights of the Purchaser under this Agreement may be waived only with the written consent of the Purchaser. 
  

(c) The obligations of the Purchaser and the rights of the Company under this Agreement may be waived only with the written consent of
the Company. 
  
 11.7 Delays or Omissions.
It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement or the Related Agreements, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement or
the Related Agreements, by law or otherwise afforded to any party, shall be cumulative and not alternative. 
  
 11.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: 
  
 (a) upon personal delivery to the party to be notified;

  
 (b) when sent by confirmed facsimile if sent
during normal business hours of the recipient, if not, then on the next business day; 
  
 (c) three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or

  
 (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. 
  
 All communications shall be sent as follows: 
  

			
	If to the Company, to:	  	 Axtive Corporation
 5001 LBJ Freeway Suite
275
 Dallas, Texas 75244
 Attention: President
 Facsimile: (972) 560-6383

		
	 	  	with a copy to:
	 	  	 Gardere Wynne Sewell LLP
 1601 Elm Street, Suite
3000
 Dallas, Texas 75201-4761

	 	  	 Attention: Randall G. Ray, Esq.
 Facsimile: (214)
999-3544

  

 25 

			
	If to the Purchaser, to:	  	 Laurus Master Fund, Ltd.
 c/o Ironshore Corporate
Services ltd.
 P.O. Box 1234 G.T.
 Queensgate House, South Church
Street
 Grand Cayman, Cayman Islands
 Facsimile:
345-949-9877

		
	 	  	with a copy to:
	 	  	 John E. Tucker, Esq.
 825 Third Avenue 14th
Floor
 New York, NY 10022
 Facsimile:
212-541-4434

  
 or at such other address as the
Company or the Purchaser may designate by written notice to the other parties hereto given in accordance herewith. 
  
 11.9 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 
  
 11.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement. 
  
 11.11 Facsimile Signatures; Counterparts. This Agreement may be executed by facsimile signatures and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

  
 11.12 Broker’s Fees. Except as
set forth on Schedule 11.12 hereof, each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or
finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 11.12 being untrue. 
  
 11.13 Construction. Each party acknowledges that its legal counsel participated in the preparation of this Agreement and the Related Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Agreement to favor any party against the other. 
  

 26 

 IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE AGREEMENT as of the date set
forth in the first paragraph hereof. 
  

									
	 COMPANY:
	 	 	 	 PURCHASER:

			
	 AXTIVE CORPORATION
	 	 	 	 LAURUS MASTER FUND, LTD.

					
	By:	 	 /s/ Graham C. Beachum III
	 	 	 	By:	 	 /s/ David Grin

	 Name:
	 	 Graham C. Beachum III
	 	 	 	 Name:
	 	 David Grin

	 Title:
	 	 President and Chief Operating Officer
	 	 	 	 Title:SECURED CONVERTIBLE TERM NOTE

 Exhibit 10.22 
  
 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXTIVE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 SECURED CONVERTIBLE TERM NOTE 
  
 FOR VALUE RECEIVED, AXTIVE CORPORATION, a Delaware corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the “Holder”) or its registered assigns or successors in interest, on order, the sum of
FOUR MILLION AND NO/100 DOLLARS ($4,000,000), together with any accrued and unpaid interest hereon, on July 30, 2007 (the “Maturity Date”) if not sooner paid. The principal amount of this Note plus accrued interest thereon and fees
with respect thereto is subject to conversion rights into the Common Stock of the Borrower in accordance with the terms hereof. 
  
 Capitalized terms used herein without definition shall have the meanings ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (as the same may be amended, restated, modified and/or supplemented from time to time, the “Purchase Agreement”). 
  
 The following terms shall apply to this Note: 
  
 ARTICLE I 
 INTEREST & AMORTIZATION 
  
 1.1 (a)
Interest Rate. Subject to Sections 1.1(b), 4.12 and 5.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to the “prime rate” published in The Wall Street Journal
from time to time, plus two percent (2.0%). The prime rate shall be increased or decreased as the case may be for each increase or decrease in the prime rate in an amount equal to such increase or decrease in the prime rate; each change to be
effective as of the day of the change in such rate. Subject to Section 1.1(b) hereof, the Interest Rate shall not be less than six percent (6.0%). Interest shall be calculated on the basis of a 360 day year. Interest shall accrue but not be payable
during the period commencing on the date hereof and ending on July 31, 2004. Interest on the Principal Amount shall be payable monthly, in arrears, commencing on September 1, 2004 and on the first business day of each consecutive calendar month
thereafter (each, a 

  

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“Repayment Date”) and on the Maturity Date, whether by acceleration or otherwise. In the event that the portion of the Monthly Amount
consisting of interest accrued on the Non-Amortizing Principal Amount (the “Non-Amortizing Interest”) cannot be converted into Common Stock by virtue of the conversion limitations set forth in Sections 2.1, 2.2 and/or 3.2 of this Note,
such Non-Amortizing Interest that cannot be converted into Common Stock shall be deemed to accrue and not be due and payable until the earlier of (x) first business day of the next succeeding calendar month (or such later date when such
Non-Amortizing Interest may be converted in to Common Stock in accordance with this Note) and (y) the Maturity Date. 
  
 1.1 (b) Interest Rate Adjustment. If on the last business day of each month hereafter until the Maturity Date (each a “Determination
Date”) (i) the Borrower shall have registered under the Securities Act of 1933, as amended (the “Securities Act”), the shares of Common Stock underlying each of the conversion of any portion of the principal balance of this
Note (together with any interest and fees related thereto) and the exercise of the Warrant, pursuant to a registration statement declared effective by the Securities and Exchange Commission (the “SEC”), and (ii) the market price (the
“Market Price”) of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined below) for the twenty (20) consecutive trading days immediately preceding such Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for the succeeding calendar month shall automatically be reduced by 200 basis points (200 b.p.) (2.0.%) for each incremental twenty five percent (25%) increase in the Market
Price of the Common Stock above the then applicable Fixed Conversion Price. If on any Determination Date (i) the Borrower shall not have registered under the Securities Act the shares of Common Stock underlying each of the conversion of any portion
of the principal balance of this Note (together with any interest and fees related thereto) and the exercise of the Warrant, pursuant to a registration statement declared effective by the SEC or the Borrower shall have registered such shares under
the Securities Act but on such Determination Date the related registration statement is not effective, and (ii) the Market Price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five (5) consecutive trading days
immediately preceding such Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty five percent (25%), the Interest Rate for the succeeding calendar month shall automatically be decreased by 100 basis points (100
b.p.) (1.0.%) for each incremental twenty five percent (25%) increase in the Market Price of the Common Stock above the then applicable Fixed Conversion Price. Notwithstanding the foregoing (and anything to the contrary contained in herein), in no
event shall the Interest Rate be less than zero percent (0%).  
  
 1.2 Minimum Monthly Principal Payments. Amortizing payments of the original aggregate principal amount outstanding under this Note (the “Principal Amount”) that is not required to be placed in the Restricted Account
on the Closing Date (the “Initial Released Amount”) and the original aggregate principal amount outstanding under this Note that has been released to the Borrower for the purpose of making an acquisition approved by the Holder
(each, a “Permitted Acquisition”; the date on which any such Permitted Acquisition is consummated, a “Permitted Acquisition Closing Date”) is hereinafter referred to as the “Amortizing Principal
Amount” and the remaining outstanding principal amount of this Note is hereinafter referred to as the “Non-Amortizing Principal Amount”. Amortizing payments of the Amortizing Principal Amount shall 

  

 2 of 15 

 
begin with respect to the portion of the Amortizing Principal Amount released pursuant to each Permitted Acquisition (which for the purpose of the first
Permitted Acquisition consummated after the date hereof shall include the Initial Released Amount) on the (a) fourth Repayment Date immediately following any Permitted Acquisition Closing Date if the Permitted Acquisition Closing Date shall have
occurred prior to the first anniversary of the date of this Note and (b) second Repayment Date immediately following any Permitted Acquisition Closing Date if the Permitted Acquisition Closing Date shall have occurred thereafter, and, in each case,
such amortizing payments shall continue on each succeeding Repayment Date thereafter until the Amortizing Principal Amount has been repaid in full, whether by the payment of cash or by the conversion of such principal into Common Stock pursuant to
the terms hereof. Subject to Section 2.1 and Article 3 below, on each Repayment Date, the Borrower shall make payments to the Holder in an amount equal to (x) the aggregate Amortizing Principal Amount outstanding at such time for which amortization
payments are required to be made in accordance with the immediately preceding sentence divided by (y) the the sum of (I) the number of Repayment Dates (including such Repayment Date) remaining until the Maturity Date plus (II) one (such amount, the
“Monthly Principal Amount”), together with (a) any accrued and unpaid interest then due on such Amortizing Principal Amount, (b) any accrued and unpaid interest on the Non-Amortizing Principal Amount (subject to the
provisions of Section 1.1(a)), and (c) any and all other amounts which are then owing under this Note that have not been paid (the Monthly Principal Amount, together with any amounts referred to in the preceding clauses (a) through (c), inclusive,
collectively, the “Monthly Amount”). Any Principal Amount that remains outstanding on the Maturity Date shall be due and payable on the Maturity Date, together with any and all accrued and unpaid interest and fees related thereto.

  

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 ARTICLE II 
 CONVERSION REPAYMENT 
  
 2.1 (a) Payment of Monthly Amount in Cash or Common Stock. Not later than the fifth (5th) business
day prior to each Repayment Date (the “Notice Date”), the Holder may deliver to Borrower a written notice in the form of Exhibit B attached hereto directing the Borrower to pay the Monthly Amount payable on the next Repayment Date
in either cash or Common Stock, or a combination of both (each, a “Repayment Notice”). If a Repayment Notice is not delivered by the Holder on or before the applicable Notice Date for such Repayment Date, then, subject to Section
2.1(b), the Borrower shall pay the Monthly Amount due on such Repayment Date in cash. In the event the Borrower shall be required to pay any portion of the Monthly Amount in respect of principal in cash, the Borrower shall pay to the Holder in
respect to such payment an amount equal to 101% of such principal amount. If the Holder elects to convert all or a portion of any Monthly Amount into shares of Common Stock as provided herein, the number of such shares to be issued by the Borrower
to the Holder on such Repayment Date shall be the number determined by dividing (x) the portion of the Monthly Amount to be paid in shares of Common Stock, by (y) the then applicable Fixed Conversion Price. For purposes hereof, the initial
“Fixed Conversion Price” means $0.40. [To be filled in on Closing Date and equal to 102% of the average closing price for the ten (10) trading days immediately prior to the date of this Note, provided however, that the Fixed
Conversion Price shall not exceed 105% of the closing price of the Common Stock on the trading day prior to the date hereof]. 
  
 (b) Monthly Amount Conversion Guidelines. (i) Subject to Sections 2.1, 2.2 and 3.2 hereof, on each Repayment Date, the Holder shall
convert the Monthly Amount due on such Repayment Date into shares of Common Stock if the average closing price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the twenty (20) consecutive trading days immediately
preceding such Notice Date is greater than or equal to 110% of the Fixed Conversion Price; provided that in no event shall the Holder be required to convert any such Monthly Amount pursuant to this Section 2.1(b)(i) if the amount of any such
conversion exceeds twenty five percent (25%) of the aggregate dollar trading volume of the Common Stock for the twenty two (22) trading day period immediately preceding such Notice Date. 
  
 (ii) Furthermore, subject to Sections 2.1, 2.2 and 3.2 hereof, the Holder shall convert the Monthly Amount
due on such Repayment Date into shares of Common Stock if the average closing price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the twenty (20) consecutive trading days immediately preceding such Notice Date is
less than one hundred ten percent (110%) of the Fixed Conversion Price; provided that (x) the Fixed Conversion Price applicable to the conversion of such Monthly Amount shall be equal to ninety percent (90%) of the average of the five lowest closing
prices of the Common Stock during the twenty (20) trading days immediately prior to the date of conversion and (y) in no event shall the Holder be required to convert any such Monthly Amount pursuant to this Section 2.1(b)(ii) if (A) the Fixed
Conversion Price as determined pursuant to the immediately preceding clause (x) would be less than $0.25 or (B) the amount of any such conversion exceeds twenty five percent (25%) of the aggregate dollar trading volume of the Common Stock for the
twenty two (22) trading day period immediately preceding such Notice Date. 
  

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 (iii) Any part of the Monthly Amount due on a Repayment Date that the Holder is not
required to convert into shares of Common Stock pursuant to either or clauses (i) or (ii) of this Section 2.1(b) shall be paid by the Borrower in cash on such Repayment Date (unless otherwise specifically provided herein). Any part of the Monthly
Amount due on such Repayment Date which must be paid in cash shall be paid in cash at the rate of 101% of the Monthly Amount otherwise due on such Repayment Date, within three (3) business days of the applicable Repayment Date. 
  
 (c) Application of Conversion Amounts. Any amounts
converted by the Holder pursuant to Section 2.1(b) shall be deemed to constitute payments of, or applied against, (i) first, outstanding fees, (ii) second, accrued and unpaid interest on the Amortizing Principal Amount, (iii) third, accrued and
unpaid interest on the Non-Amortizing Principal Amount and (iv) fourth, the Amortizing Principal Amount. 
  
 2.2 No Effective Registration. Notwithstanding anything to the contrary herein, no amount payable hereunder may be converted into Common Stock
unless (a) either (i) an effective current Registration Statement (as defined in the Registration Rights Agreement) covering the shares of Common Stock to be issued in satisfaction of such obligations exists, or (ii) an exemption from registration
of the Common Stock is available pursuant to Rule 144 of the Securities Act, and (b) no Event of Default hereunder exists and is continuing, unless such Event of Default is cured within any applicable cure period or is otherwise waived in writing by
the Holder in whole or in part at the Holder’s option. 
  
 2.3 Optional Redemption of Amortizing Principal Amount. The Borrower will have the option of prepaying the outstanding Amortizing Principal Amount (“Optional Amortizing Redemption”), in whole or in part, by paying to
the Holder a sum of money equal to one hundred thirty percent (130%) of the Amortizing Principal Amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under
this Note, the Purchase Agreement or any Related Agreement (the “Amortizing Redemption Amount”) on the day written notice of redemption (the “Notice of Amortizing Redemption”) is given to the Holder. The Notice of
Amortizing Redemption shall specify the date for such Optional Amortizing Redemption (the “Amortizing Redemption Payment Date”), which date shall be not less than seven (7) business days after the date of the Notice of Amortizing
Redemption (the “Redemption Period”). A Notice of Amortizing Redemption shall not be effective with respect to any portion of the Amortizing Principal Amount for which the Holder has a pending election to convert pursuant to Section
3.1, or for conversions initiated or made by the Holder pursuant to Section 3.1 during the Redemption Period. The Amortizing Redemption Amount shall be determined as if such Holder’s conversion elections had been completed immediately prior to
the date of the Notice of Amortizing Redemption. On the Amortizing Redemption Payment Date, the Amortizing Redemption Amount shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Amortizing Redemption Amount on the
Amortizing Redemption Payment Date as set forth herein, then such Notice of Amortizing Redemption will be null and void. 
  
 2.4 Optional Redemption of Non-Amortizing Principal Amount. The Borrower will have the option of repaying the outstanding Non-Amortizing Principal
Amount (“Optional Non-Amortizing Redemption”), in whole or in part, by paying the Holder a sum of money equal to one 

  

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hundred twenty percent (120%) of the Non-Amortizing Principal Amount to be redeemed, together with accrued but unpaid interest thereon (the
“Non-Amortizing Redemption Amount”) on the day written notice of redemption (the “Notice of Non-Amortizing Redemption”) is giving to the Holder; provided, however, that (notwithstanding anything contained herein or
in the Purchase Agreement or the Related Agreements) if none of the original principal amount has been released from the Restricted Account for the purpose of making a Permitted Acquisition, then, on or before the 90th day after the date hereof, the
Borrower will have the option of prepaying the outstanding Non-Amortizing Principal Amount (as well as prepaying the outstanding Amortizing Principal Amount, which relates solely to the original principal amount not required to be placed in the
Restricted Account on the Closing Date), in whole, by paying to the Holder a sum of money equal to one hundred percent (100%) of the Non-Amortizing Principal Amount (and such Amortizing Principal Amount), together with accrued and unpaid interest
thereon, and without payment of any prepayment penalty of any kind. The Notice of Non-Amortizing Redemption shall specify the date for such Optional Non-Amortizing Redemption (the “Non-Amortizing Redemption Date”), which date shall
be not less than seven (7) business days after the date of the Notice of Non-Amortizing Redemption (the “Non-Amortizing Redemption Period”). A Notice of Non-Amortizing Redemption shall not be effective with respect to any portion of
the Non-Amortizing Principal Amount for which the Holder has a pending election to convert pursuant to Section 3.1, or for conversions initiated or made by the Holder pursuant to Section 3.1 during the Non-Amortizing Redemption Period. The
Non-Amortizing Redemption Amount shall be determined as if the Holder’s conversion elections had been completed immediately prior to the date of the Notice of Non-Amortizing Redemption. On the Non-Amortizing Payment Date, the Non-Amortizing
Redemption Amount shall be paid (i) in good funds to the Holder, (ii) by furnishing the Holder written direction to notify the bank holding the Restricted Account to release from the Restricted Account and deliver to the Holder a sum of money equal
to the Non-Amortizing Redemption Amount, or (iii) if the amount on deposit in the Restricted Account is less than the Non-Amortizing Redemption Amount, by furnishing the Holder written direction to notify the bank holding the Restricted Account to
release all amounts on deposit in the Restricted Account to the Holder and delivering to the Holder good funds in an amount equal to the balance of the Non-Amortizing Redemption Amount. 
  
 ARTICLE III 
 CONVERSION RIGHTS 
  
 3.1 Holder’s
Conversion Rights. Subject to Section 2.2, the Holder shall have the right, but not the obligation, to convert all or any portion of the then aggregate outstanding Principal Amount of this Note, together with interest and fees due hereon, into
shares of Common Stock, subject to the terms and conditions set forth in this Article III. The Holder may exercise such right by delivery to the Borrower of a written Notice of Conversion pursuant to Section 3.3. 
  
 3.2 Conversion Limitation. Notwithstanding anything contained herein
to the contrary, the Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares which would exceed the difference between the number of shares of Common Stock
beneficially owned by such Holder or issuable upon exercise of Warrants held by such Holder and 4.99% of the outstanding shares of Common Stock. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in

  

 6 of 15 

 
accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Holder may void the Conversion Share limitation described in this
Section 3.2 upon 75 days prior notice to the Borrower or without any notice requirement upon the occurrence and during the continuance of an Event of Default. 
  

3.3 Mechanics of Holder’s Conversion. (a) In the event that the Holder elects to convert any amounts outstanding under this Note into
Common Stock, the Holder shall give notice of such election by delivering an executed and completed notice of conversion (a “Notice of Conversion”) to the Borrower, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount,
accrued interest and fees as entered in its records and shall provide written notice thereof to the Borrower within two (2) business days after the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to the Borrower
in accordance with the provisions hereof shall be deemed a “Conversion Date”. A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A. 
  
 (b) Pursuant to the terms of a Notice of Conversion, the Borrower will issue instructions to the transfer
agent accompanied by an opinion of counsel, if so required by the Borrower’s transfer agent, within two (2) business days of the date of the delivery to Borrower of the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the account of the Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system within three (3) business days after receipt by the Borrower of the Notice of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Borrower of the Notice of Conversion. The Holder shall be treated for all
purposes as the record holder of such shares of Common Stock, unless the Holder provides the Borrower written instructions to the contrary. 
  
 3.4 Conversion Mechanics. 
  
 (a) The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of
the principal and interest and fees to be converted, if any, by the then applicable Fixed Conversion Price. In the event of any conversions of outstanding principal amount under this Note in part pursuant to this Article III, such conversions shall
be deemed to constitute conversions of outstanding principal amount applying to Monthly Amounts for the remaining Repayment Dates in chronological order. 
  

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 (b) The Fixed Conversion Price and number and kind of shares or other securities to be
issued upon conversion is subject to adjustment from time to time upon the occurrence of certain events, as follows: 
  
 A. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Fixed Conversion Price or the Conversion Price, as the case may be, shall be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common
Stock outstanding immediately prior to such event. 
  
 B. During the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. The
Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who
are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note. 
  
 C. Share Issuances. Subject to the provisions of this Section 3.4, if the Borrower shall at any time
prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock or securities convertible into Common Stock to a person other than the Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant to
options, warrants or other obligations to issue shares outstanding on the date hereof as disclosed to Holder in writing; or (iii) pursuant to options that may be issued under any employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower) for a consideration per share (the “Offer Price”) less than the Fixed Conversion Price in effect at the time of such issuance, then the Fixed Conversion Price shall be immediately reset to such lower Offer
Price at the time of issuance of such securities. 
  
 D. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid Principal
Amount and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change. 
  
 3.5 Issuance of Replacement Note. Upon any partial conversion of this Note, a replacement Note containing the same date and provisions of this Note shall, at the written request of the Holder, be issued by the Borrower to the Holder
for the outstanding Principal Amount of this Note and accrued interest which shall not have been converted or paid. Subject to the provisions of Article IV, the Borrower will pay no costs, fees or any other consideration to the Holder for the
production and issuance of a replacement Note. 
  

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 ARTICLE IV 
 EVENTS OF DEFAULT 
  
 4.1
Upon the occurrence and continuance of an Event of Default beyond any applicable grace period, the Holder may declare all sums of principal, interest and other fees then remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable. In the event of such an acceleration, within five (5) days after written notice from Holder to Borrower (each occurrence being a “Default Notice Period”) the Borrower shall pay to the Holder an amount equal to 120% of
the outstanding Principal Amount of this Note (plus accrued and unpaid interest and fees, if any) (the “Default Payment”). If, with respect to any Event of Default, the Borrower cures the Event of Default within any applicable grace
period, the Event of Default will be deemed to no longer exist and any rights and remedies of Holder pertaining to such Event of Default will be of no further force or effect. The Default Payment shall be applied first to any fees due and payable to
Holder pursuant to this Note or the Related Agreements, then to accrued and unpaid interest due on this Note and then to outstanding Principal Amount of this Note. 
  
 The occurrence of any of the following events set forth in Sections 4.1 through 4.10, inclusive, is an “Event of
Default”: 
  
 4.1 Failure to Pay Principal, Interest
or other Fees. The Borrower fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Borrower fails to pay when due any amount due under any other promissory note issued by Borrower, and in
any such case, such failure shall continue for a period of five (5) days following the date upon which any such payment was due. 
  
 4.2 Breach of Covenant. The Borrower breaches any covenant or any other term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any other term or condition of any Related Agreement in any material respect and, any such case, such breach, if subject to cure, continues for a period of thirty (30) days
after the occurrence thereof. 
  
 4.3 Breach of Representations
and Warranties. Any representation or warranty made by the Borrower in this Note or the Purchase Agreement, or by the Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such case, be false or misleading in any material
respect on the date that such representation or warranty was made or deemed made. 
  
 4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 
  
 4.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its Subsidiaries or any
of their respective property or other assets after the date of this Note for more than $100,000, and the same shall remain unvacated, unbonded or unstayed for a period of forty-five (45) days. 
  

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 4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any of its Subsidiaries. 
  

4.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for five (5) consecutive
days or five (5) days during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal Market, provided that the Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal Market within sixty (60) days of such notice. The “Principal Market” for the Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock, or any securities exchange or other securities market on
which the Common Stock is then being listed or traded. 
  
 4.8
Failure to Deliver Common Stock or Replacement Note. The Borrower shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note, and Section 9 of the Purchase Agreement, if such failure to
timely deliver Common Stock shall not be cured within two (2) business days or (ii) to deliver a replacement Note to Holder within ten (10) business days following the required date of such issuance pursuant to this Note, the Purchase Agreement or
any Related Agreement (to the extent required under such agreements). 
  
 4.9 Default Under Related Agreements or Other Agreements. The occurrence and continuance of any Event of Default (as defined in any Related Agreement) or any event of default (or similar term) under any other indebtedness.

  
 4.10 Change in Control. The occurrence of a change in
the controlling ownership of the Borrower. 
  
 DEFAULT RELATED
PROVISIONS 
  
 4.11 Payment Grace Period. Following the
occurrence and continuance of an Event of Default beyond any applicable cure period hereunder, the Borrower shall pay the Holder a default interest rate of two percent (2.0%) per month on all amounts due and owing under this Note, which default
interest shall be payable upon demand. 
  
 4.12 Conversion
Privileges. The conversion privileges set forth in Article III shall remain in full force and effect immediately from the date hereof and until this Note is paid in full. 
  
 4.13 Cumulative Remedies. The remedies under this Note shall be cumulative. 
  

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 ARTICLE V 
 MISCELLANEOUS 
  
 5.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c)
five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Borrower at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for such Holder and such Holder’s
counsel, or at such other address as the Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to the Purchase Agreement.

  
 5.3 Amendment Provision. The term “Note” and
all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented. 
  
 5.4
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of
the Purchase Agreement. This Note shall not be assigned by the Borrower without the consent of the Holder. 
  
 5.5 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York.
Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In
the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or
to enforce a judgment or other court in favor of the Holder. 
  

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 5.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment
of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of
such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 
  
 5.7 Security Interest. The Holder has been granted a security interest as more fully described in the Restricted Account Security Agreement dated
as of the date hereof and such other security agreements and pledge agreements as may be entered into after the date hereof. 
  
 5.8 Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. 
  
 5.9 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay to Holder reasonable
costs of collection, including reasonable attorney’s fees. 
  
 [Balance of page intentionally left blank; signature page follows.] 
  

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 IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note to be signed in its name
effective as of this 30th day of July, 2004. 
  

					
	AXTIVE CORPORATION
		
	 By:
	 	 /s/ Graham C. Beachum III

	 	 	 Name:
	 	 Graham C. Beachum III

	 	 	 Title:
	 	 President and Chief Operating
 Officer

  

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 EXHIBIT A 
  

NOTICE OF CONVERSION 
  
 (To be executed by the Holder in order to convert all or part of the Note into Common Stock) 
  
 [Name and Address of Holder] 
  
 The Undersigned hereby converts $                     of the
principal due on [specify applicable Repayment Date] under the Convertible Term Note issued by Axtive Corporation dated July 30, 2004 by delivery of Shares of Common Stock of Axtive Corporation on and subject to the conditions set forth in Article
III of such Note. 
  

					
	 1.      Date of Conversion
	  	                                      
              	  	 
			
	 2.      Shares To Be Delivered:
	  	                                      
              	  	 

  

			
		
	 By:
	 	 
	 Name:
	 	 
	 Title:
	 	 

  

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 EXHIBIT B 
  

CONVERSION NOTICE 
  
 (To be executed by the Holder in order to convert all or part of a Monthly Amount into Common Stock) 
  
 [Name and Address of Holder] 
  
 Holder hereby converts $                     of the Monthly
Amount due on [specify applicable Repayment Date] under the Convertible Term Note issued by Axtive Corporation dated July 30, 2004 by delivery of Shares of Common Stock of Axtive Corporation on and subject to the conditions set forth in Article III
of such Note. 
  

			
	 1.      Fixed Conversion Price:
	  	$                                      
      
		
	 2.      Amount to be paid:
	  	$                                      
      
	
	 3.      Shares To Be Delivered (2 divided by 1):        
                                        
    

	
	 4.      Cash payment to be made by Borrower :        
$                                        
        

  

									
	 Date:
                    
	 	 	 	 LAURUS MASTER FUND, LTD.

					
	 	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 Title:
	 	 

  

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