Document:

Unassociated Document

    
      

    

    EXHIBIT
D – For Filing

     

    INTELLECTUAL
PROPERTY SECURITY AGREEMENT

     

    This
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this “Agreement”), dated as of April ___, 2008, is made by AXIS TECHNOLOGIES, INC., a Delaware corporation
(the “Grantor”), in favor of GEMINI STRATEGIES, LLC, as
collateral agent (“Agent”) for the holder(s) of 10% Senior Secured Convertible Notes issued
or to be issued in the original aggregate principal amount of up to $1,500,000 (the “Notes”) by Axis Technologies
Group, Inc., a Delaware
corporation (“Company”), pursuant to the Purchase Agreement
(as defined below) (collectively, together with their endorsees, transferees and
assigns, the “Lenders”).

     

    W I T N E
S S E T H:

     

    WHEREAS, the Company and the Lenders are
party to that certain Securities Purchase Agreement, dated on or about
on or about the date hereof (“Purchase
Agreement”),
pursuant to which the
Company issued or is issuing the Notes, among other things;

     

    WHEREAS, the Grantor is a wholly-owned
subsidiary of the Company and will benefit from the issuance of the Notes
pursuant to the Purchase Agreement;

     

    WHEREAS,
pursuant to that certain Subsidiary Guarantee, dated as of the date hereof
(“Guarantee”),
the Grantor has agreed to
guarantee and act as surety for payment of the Notes;

    

    WHEREAS, contemporaneously herewith the
Grantor and the Company are entering into a Security Agreement (“Security
Agreement”), pursuant to which the Grantor has
granted a security interest in its assets and properties to secure the
satisfaction of the Company’s obligations under the Notes and the Grantor’s obligations under the
Guarantee, among other things;
and

     

    WHEREAS, the Grantor is obligated under
the Security Agreement to take such further actions as the collateral Agent
requests to further perfect the Lenders’ security interest granted under the
Security Agreement, including without limitation with respect to intellectual
property;

     

    NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor hereby agrees as
follows:

     

    DEFINED
TERMS.

     

    (a)           Certain Defined
Terms.  As used in this Agreement, the following terms shall
have the meanings set forth below:

     

    “Copyrights”
means copyrights and copyright registrations, including without limitation the
copyright registrations and recordings listed on Schedule I attached
hereto, if any, and (i) all reissues, continuations, extensions or renewals
thereof, (ii) all income, royalties, damages and payments now and hereafter due
and/or payable under and with respect thereto, subject to payment to any
co-owner of its, his or her share thereof, including without limitation payments
under all licenses entered into in connection therewith and damages and payments
for past or future infringements thereof, (iii) the right to sue for past,
present and future infringements thereof, and (iv) all of the Grantor’s rights
corresponding thereto throughout the world.

    
      
         

      

      
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    “Intellectual
Property Licenses” means rights under or interest in any Patent,
Trademark, Copyright or other intellectual property under a license agreement,
whether verbal or in writing, regardless of whether Debtor is a licensee or
licensor under any such license agreement, including without limitation all the
intellectual property licenses listed on Schedule I attached
hereto, if any, and also including without limitation software license
agreements with any other party, and  also including all of the
Debtor’s rights corresponding to Debtor’s Intellectual Property Licenses
throughout the world.

     

    “Patents”
means patents and patent applications, including without limitation the patents
and patent applications listed on Schedule I hereto and
all continuations, divisionals, provisionals, continuations in part, or reissues
of applications related to patents thereon, and (i) all renewals thereof, (ii)
all income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, subject to payment to any co-owner or inventor
of its, his or her share thereof, including without limitation payments under
all licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements thereof, and (iv) all of the Grantor’s
rights corresponding thereto throughout the world.

     

    “Trademarks”
means trademarks, trade names, trade styles, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, including without limitation the registered trademarks listed on
Schedule I
hereto, and (i) all renewals thereof, (ii) all income, royalties, damages and
payments now and hereafter due and/or payable under and with respect thereto,
subject to payment to any co-owner of its, his or her share thereof, including
without limitation payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and
dilutions thereof, (iv) the goodwill of the Grantor’s business symbolized by the
foregoing and connected therewith, and (v) all of the Grantor’s rights
corresponding thereto throughout the world.

     

    (b)           Terms Defined in the
Purchase Agreement.  Capitalized terms used in this Agreement
and not otherwise defined herein have the meanings ascribed to them in the
Purchase Agreement.

     

    2.    
        GRANT OF SECURITY INTEREST
IN INTELLECTUAL PROPERTY COLLATERAL.  Grantor hereby grants to
the Agent, as collateral agent for the Lenders, a continuing and perfected first
priority security interest (as set forth in the Security Agreement) in all of
Grantor’s right, title and interest in, to and under all of Grantor’s
Intellectual Property (as defined in the Security Agreement), including without
limitation the following, whether presently existing or hereafter created or
acquired (collectively, the “Intellectual Property
Collateral”):

    
      
         

      

      
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    (a)           all
of Grantor’s Patents and Grantor’s rights under all Patent Intellectual Property
Licenses to which it is a party, including those patents referred to on Schedule I hereto,
including:

     

    
      	
               
      

            	
              (i)

            	
              all
      registrations and applications in respect of the foregoing, including
      continuations, divisionals, provisionals, continuations in part, or
      reissues of applications and patents issuing thereon;
  and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              all
      products and proceeds of the foregoing, including without limitation any
      claim by Grantor against third parties for past, present or future
      infringement of any Patent or any Patent licensed under any Intellectual
      Property License;

            

    

     

    (b)           all
of Grantor’s Trademarks and Grantor’s rights under all Trademark Intellectual
Property Licenses to which it is a party, including those trademarks referred to
on Schedule I
hereto, including:

     

    
      	
               
      

            	
              (i)

            	
              all
      registrations, applications, and renewals in respect of the
      foregoing;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              all
      goodwill of the business connected with the use of, and symbolized by,
      each Trademark and each Trademark licensed under an Intellectual Property
      License; and

            

    

     

    
      	
               
      

            	
              (iii)

            	
              all
      products and proceeds of the foregoing, including without limitation any
      claim by Grantor against third parties for past, present or future (i)
      infringement or dilution of any Trademark or any Trademark licensed under
      any Intellectual Property License or (ii) injury to the goodwill
      associated with any Trademark or any Trademark licensed under any
      Intellectual Property License; and

            

    

     

    (c)           all
of Grantor’s Copyrights and Grantor’s rights under all Copyright Intellectual
Property Licenses to which it is a party, including those referred to on Schedule I hereto,
including:

     

    
      	
               
      

            	
              (i)

            	
              all
      registrations, applications, and renewals in respect of the foregoing;
      and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              all
      products and proceeds of the foregoing, including without limitation any
      claim by Grantor against third parties for past, present or future
      infringement of any Copyright or any Copyright licensed under any
      Intellectual Property License.

            

    

     

    3.   
         SECURITY
AGREEMENT.  The security interests granted pursuant to this
Agreement are granted in conjunction with the security interests granted to
Lenders pursuant to the Security Agreement.  Grantor hereby
acknowledges and affirms that the rights and remedies of Lenders with respect to
the security interest in the Intellectual Property Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.

    
      
         

      

      
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    4.       
     AUTHORIZATION TO
SUPPLEMENT.  If Grantor shall obtain rights to any new
Intellectual Property (as defined in the Security Agreement), the provisions of
this Agreement shall automatically apply thereto.  Grantor shall give
Lenders prompt written notice with respect to any such new Intellectual
Property.  Grantor represents that Schedule I is
substantially accurate and complete but reserves the right from time to time to
correct inaccuracies and/or omissions by giving Lenders written notice
thereof.  Without limiting Grantor’s obligations under this Section 4, Grantor
hereby authorizes the Agent and Lenders unilaterally to modify this Agreement by
amending Schedule
I to include any such corrections and other modifications and any such
new Intellectual Property of Grantor.  Notwithstanding the foregoing,
no failure to so modify this Agreement or amend Schedule I shall in
any way affect, invalidate or detract from Lenders’ continuing security interest
in all Intellectual Property Collateral, whether or not listed on Schedule
I.

     

    5.      
      COUNTERPARTS.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such separate counterparts shall together
constitute but one and the same instrument.  In proving this Agreement
in any judicial proceedings, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom enforcement is
sought.  Any signatures delivered by a party by facsimile transmission
or by e-mail transmission shall be deemed an original signature
hereto.

     

    6.       
     GOVERNING LAW;
JURISDICTION.  This Agreement shall be governed by and
construed under the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.  Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City and County of New York for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.

     

    7.       
     SUCCESSORS AND
ASSIGNS.  The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties.  Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.  A Lender may assign its rights
hereunder in connection with any private sale or transfer of its Notes, in which
case the term “Lender” shall be deemed to refer to such transferee as though
such transferee were an original signatory hereto.  Grantor may not
assign its rights or obligations under this Agreement.

     

    [Signature Pages
Follow]

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Grantor has caused this Intellectual Property Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

     

    
      	 
      	
              AXIS
      TECHNOLOGIES, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	 /s/
      Jim Erickson
	 
      	
              Name:

            
	 
      	
              Title:

            

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    SCHEDULE
I

    to

    INTELLECTUAL PROPERTY
SECURITY AGREEMENT

    

     

    
      	
              TRADEMARK

            	 	
              COUNTRY

            	 	
              FILING DATE

            	 	
              APPLICATION/ SERIAL NO.

            	 	
              ISSUANCE DATE

            	 	
              STATUS

            	 	
              REG. NO.

            
	
              The
      Future of Florescent Lighting

            	 	
              United
      States

            	 	
              6/17/2004

            	 	
              78-437,293

            	 	
              9/27/2005

            	 	
              Registered

            	 	
              3,001,415

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              PATENT

            	 	
              COUNTRY

            	 	
              FILING DATE

            	 	
              APPLICATION/ SERIAL NO.

            	 	
              ISSUANCE DATE

            	 	
              STATUS

            	 	
              REG. NO.

            
	
              Method
      and Apparatus for Dimming Control of Electronic Ballasts

            	 	
              United
      States

            	 	
              06/29/2004

            	 	
              10/707,982

            	 	
              11/29/2005

            	 	
              Registered

            	 	
              US
      6,969,955 B2

            

    

     

     

     6ex10_3.htm

    
      

    

    SUBSIDIARY
GUARANTEE

    

    SUBSIDIARY
GUARANTEE, dated as of April 25, 2008 (this “Guarantee”), made by
Axis Technologies, Inc., a Delaware corporation (together with any other entity
that may become a party hereto as provided herein, the “Guarantor”, and
together with the Company (as defined below), the “Debtors”), in favor
of the purchaser(s) (including such purchaser’s(s’) successors, transferees and
assigns, the “Purchasers”)
signatory to the Purchase Agreement (as defined below).

     

    

    W
I T N E S S E T H:

    

    WHEREAS,
pursuant to that certain Securities Purchase Agreement (“Purchase Agreement”)
dated as of April 25, 2008 by and between Axis Technologies Group, Inc., a
Delaware corporation (the “Company”), and the
Purchasers, the Company has agreed to sell and issue to the Purchasers, and the
Purchasers have agreed to purchase from the Company the Company’s 10% Senior
Secured Convertible Notes (the “Notes”), subject to
the terms and conditions set forth therein;

    

    WHEREAS,
Guarantor is a direct or indirect Subsidiary of the Company, and as a condition
to the Closing of the transactions contemplated by the Purchase Agreement, and
in order to induce the Purchasers to enter into and consummate the transactions
contemplated by the Purchase Agreement (including without limitation purchasing
the Notes and making the loans evidenced thereby), the Company has agreed that
the Guarantor would guaranty the Company’s obligations under the Notes, Purchase
Agreement and other Transaction Documents  in accordance with the
terms set forth in this Guaranty, the Notes, the Purchase Agreement and other
Transaction Documents; and

    

    WHEREAS, Guarantor will directly
benefit from the extension of credit to the Company represented by the issuance
of the Notes;

    

    NOW, THEREFORE, in consideration of the
premises and to induce the Purchasers to enter into the applicable Purchase
Agreement and to carry out the transactions contemplated thereby, Guarantor
hereby agrees with the Purchasers as follows:

    

    1.      
     Definitions. Unless
otherwise defined herein, initially capitalized terms defined in the Purchase
Agreement and used herein shall have the meanings given to them in the Purchase
Agreement.  The words “hereof,” “herein,” “hereto” and “hereunder” and
words of similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this Guarantee, and
Section and Schedule references are to this Guarantee unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.  The
following terms shall have the following meanings:

    

    “Guarantee” means this
Subsidiary Guarantee, as the same may be amended, supplemented or otherwise
modified from time to time.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Obligations” means,
in addition to all other costs and expenses of collection incurred by Purchasers
in enforcing any of such Obligations and/or this Guarantee, all of the
liabilities and obligations (primary, secondary, direct, contingent, sole, joint
or several) due or to become due, or that are now or may be hereafter contracted
or acquired, or owing, of any Debtor to the Purchasers, including without
limitation all obligations under the Purchase Agreement, the Notes, the
Warrants, this Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from any of the
Purchasers as a preference, fraudulent transfer or otherwise, as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include without limitation: (i) principal of, and
interest on, the Notes and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with the Purchase Agreement, the Notes, the
Warrants, this Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith; and
(iii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving any
Debtor.

    

    2.         
   Guarantee.

    

    (a)           Guarantee.

    

    (i)           The
Guarantor hereby, jointly and severally, absolutely, unconditionally and
irrevocably, guarantees to the Purchasers and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.  The Guarantor’s
liability under this Guarantee shall be unlimited, open and continuous for so
long as this Guarantee remains in force.

    

    (ii)           Anything
herein or in any other Transaction Document to the contrary notwithstanding, the
maximum liability of Guarantor hereunder and under the other Transaction
Documents shall in no event exceed the amount which can be guaranteed by the
Guarantor under applicable federal and state laws, including laws relating to
the insolvency of debtors, fraudulent conveyance or transfer or laws affecting
the rights of creditors generally (after giving effect to the right of
contribution set forth in Section 2(b)).

    

    (iii)           Guarantor
agrees that the Obligations may at any time and from time to time exceed the
amount of the liability of the Guarantor hereunder without impairing the
guarantee contained in this Section 2 or affecting the rights and remedies of
the Purchasers hereunder.

    
      
         

      

      
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    (iv)           The
guarantee contained in this Section 2 shall remain in full force and effect
until all the Obligations and the obligations of Guarantor under the guarantee
contained in this Section 2 shall have been satisfied by payment in
full.

    

    (v)           No
payment made by the Company, the Guarantor, any other guarantor or any other
Person or received or collected by the Purchasers from the Company, the
Guarantor, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by the Guarantor in respect of the Obligations or any payment received or
collected from the Guarantor in respect of the Obligations), remain liable for
the Obligations up to the maximum liability of the Guarantor hereunder until the
Obligations are paid in full.

    

    (vi)           Notwithstanding
anything to the contrary in this Guarantee, with respect to any defaulted
non-monetary Obligations the specific performance of which by the Guarantor is
not reasonably possible (e.g. the issuance of the Company's Common Stock), the
Guarantor shall only be liable for making the Purchasers whole on a monetary
basis for the Company's failure to perform such Obligations in accordance with
the Transaction Documents.

    

    (b)           Right of
Contribution.  Guarantor hereby agrees that to the extent that
a Guarantor shall have paid more than its proportionate share of any payment
made hereunder, the Guarantor shall be entitled to seek and receive contribution
from and against any other Guarantor hereunder which has not paid its
proportionate share of such payment.  Guarantor's right of
contribution shall be subject to the terms and conditions of Section
2(c).  The provisions of this Section 2(b) shall in no respect limit
the obligations and liabilities of the Guarantor to the Purchasers, and
Guarantor shall remain liable to the Purchasers for the full amount guaranteed
by the Guarantor hereunder.

    

    (c)           No
Subrogation.  Notwithstanding any payment made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the
Purchasers, no Guarantor shall be entitled to be subrogated to any of the rights
of the Purchasers against the Company or any other Guarantor or any collateral
security or guarantee or right of offset held by the Purchasers for the payment
of the Obligations, nor shall the Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect
of payments made by the Guarantor hereunder, until all amounts owing to the
Purchasers by the Company on account of the Obligations are paid in
full.  If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations have not been paid in
full, such amount shall be held by the Guarantor in trust for the Purchasers,
segregated from other funds of the Guarantor, and shall, promptly following
receipt by the Guarantor, be turned over to the Purchasers in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Purchasers, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Purchasers may determine.

    

    (d)           Amendments, Etc. With
Respect to the Obligations.  Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor, any demand
for payment of any of the Obligations made by the Purchasers may be rescinded by
the Purchasers and any of the Obligations continued, and the Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Purchasers, and
the Purchase Agreement, the Notes and the other Transaction Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Purchasers may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Purchasers for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The
Purchasers shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by them as security for the Obligations or for the
guarantee contained in this Section 2 or any property subject
thereto.

    
      
         

      

      
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    (e)           Guarantee Absolute and
Unconditional.  Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Purchasers upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between the
Company and the Guarantor, on the one hand, and the Purchasers, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2.  Guarantor
waives, to the fullest extent permitted by law, diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Company or
the Guarantor with respect to the Obligations.  Guarantor understands
and agrees that the guarantee contained in this Section 2 shall be construed as
a continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Purchase Agreement, the Notes or any
other Transaction Document, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Purchasers, (b) any defense, set-off or
counterclaim (other than a defense of payment and performance in full of the
Obligations) which may at any time be available to or be asserted by the Company
or any other Person against the Purchasers, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Company or the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Company for the Obligations, or of the Guarantor under
the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against the Guarantor, the Purchasers may, but shall be under
no obligation to, make a similar demand on or otherwise pursue such rights and
remedies as they may have against the Company, any other Guarantor or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by the Purchasers to
make any such demand, to pursue such other rights or remedies or to collect any
payments from the Company, any other Guarantor or any other Person or to realize
upon any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Company, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
the Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Purchasers against the Guarantor.  For the
purposes hereof, “demand” shall include without limitation the commencement and
continuance of any legal proceedings.

    
      
         

      

      
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    (f)           Reinstatement.  The
guarantee contained in this Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or the Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or the Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been
made.

    

    (g)           Payments.  Guarantor
hereby guarantees that payments hereunder will be paid to the Purchasers without
set-off or counterclaim in U.S. dollars at the address set forth or referred to
in the Purchase Agreement.

    

    3.        
    Representations and
Warranties. Guarantor hereby makes the following representations and
warranties to the Purchasers as of the date hereof:

    

    (a)           Organization and
Qualification. The Guarantor is a corporation, duly incorporated, validly
existing and in good standing under the laws of the applicable jurisdiction set
forth on Schedule 1, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Guarantor has no subsidiaries other than those identified as such
on the Disclosure Schedules to the Purchase Agreement.  The Guarantor
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, (x) adversely affect the legality, validity or
enforceability of any of this Guaranty in any material respect, (y) have a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Guarantor, or (z) adversely impair in any material
respect the Guarantor's ability to perform fully on a timely basis its
obligations under this Guaranty (a “Material Adverse
Effect”).

    

    (b)           Authorization;
Enforcement.  The Guarantor has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Guaranty, and otherwise to carry out its obligations
hereunder.  The execution and delivery of this Guaranty by the
Guarantor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of the
Guarantor.  This Guaranty has been duly executed and delivered by the
Guarantor and constitutes the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its
terms.

    

    (c)           No Conflicts. The
execution, delivery and performance of this Guaranty by the Guarantor and the
consummation by the Guarantor of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of its Certificate of
Incorporation or By-laws or (ii) conflict with, constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Guarantor
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Guarantor is subject (including federal and state
securities laws and regulations), or by which any material property or asset of
the Guarantor is bound or affected, except in the case of each of clauses (ii)
and (iii) such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.  The business of the
Guarantor is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, do not have a Material Adverse
Effect.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (d)           Consents and
Approvals.  The Guarantor is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local, foreign or other governmental
authority or other person in connection with the execution, delivery and
performance by the Guarantor of this Guaranty.

    

    (e)           Purchase
Agreement.  The representations and warranties of the Company
set forth in the Purchase Agreement as they relate to the Guarantor, each of
which is hereby incorporated herein by reference, are true and correct as of
each time such representations are deemed to be made pursuant to the Purchase
Agreement, and the Purchasers shall be entitled to rely on each of them as if
they were fully set forth herein, provided that each reference in each such
representation and warranty to the Company's knowledge shall, for the purposes
of this Section 3, be deemed to be a reference to the Guarantor's
knowledge.

    

    (f)           Company’s
Request.  This Guarantee is executed at the Company’s request
and not at the request of the Purchasers.

    

    (g)           Obtaining Company
Information.  The Guarantor has established adequate means of
obtaining from the Company on a continuing basis information regarding the
Company’s financial condition.

    

    (h)           Solvency.  As
of the date hereof and after giving effect to the transactions contemplated
hereby (a) the property of the Guarantor, at a fair valuation, will exceed its
debt; (b) the capital of the Guarantor will not be unreasonably small to conduct
its business; (c) the Guarantor will not have incurred debts, or have intended
to incur debts, beyond its ability to pay such debts as they mature; and (d) the
present fair salable value of the assets of the Guarantor will be greater than
the amount that will be required to pay its probable liabilities (including
debts) as they become absolute and matured.  For purposes of this
subsection (i), “debt” means any liability on a claim, and “claim” means (i) the
right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, undisputed, legal,
equitable, secured or unsecured, or (ii) the right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, undisputed, secured or
unsecured.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    4.        
     Covenants.

    

    (a)         Actions.  Guarantor
covenants and agrees with the Purchasers that, from and after the date of this
Guarantee until the Obligations shall have been paid in full, the Guarantor
shall take, and/or shall refrain from taking, as the case may be, each
commercially reasonable action that is necessary to be taken or not taken, as
the case may be, so that no Event of Default is caused by the failure to take
such action or to refrain from taking such action by the Guarantor.

    

    (b)         Insurance.  So
long as any Notes remain outstanding, the Guarantor shall have in full force and
effect (a) insurance reasonably believed by the Guarantor to be adequate on all
assets and activities, covering property damage and loss of income by fire or
other casualty, and (b) insurance reasonably believed to be adequate protection
against all liabilities, claims and risks against which it is customary for
companies similarly situated as the Guarantor to insure.

    

    (c)         Compliance with
Laws.  So long as any Notes remain outstanding, Guarantor will
use reasonable efforts to comply with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities, except to the extent
non-compliance (in one instance or in the aggregate) would not have a Material
Adverse Effect.

    

    (d)         Corporate Existence; Merger
and Consolidation.  So long as any Notes remain outstanding,
the Guarantor shall maintain their corporate existence.  The Guarantor
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, except to the same extent
that the Company is so permitted, and in accordance with the same provisions
applicable to the Company, in the Purchase Agreement or the Notes (with the
assumption of obligations applying to the assumption of the obligations under
this Guarantee).

    

    (e)         Taxes.  The
Guarantor shall pay, and shall cause each of its subsidiaries to pay, prior to
delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Guarantor or the Purchasers.

    

    (f)         Stay, Extension and Usury
Laws.  The Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Guarantee; and the Guarantor (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any right herein granted to
the Purchasers, but shall suffer and permit the execution of every such right as
though no such law has been enacted.

    

    (g)         Negative
Covenants.  So long as any of the Obligations are outstanding,
unless Purchasers holding at least 67% of the aggregate principal amount of the
then outstanding Notes shall otherwise consent in writing, Guarantor will not
directly or indirectly on or after the date of this Guarantee:

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    i.           other than Permitted Indebtedness
(as defined in the Notes), enter into,
create, incur, assume or suffer to exist any indebtedness for borrowed money of
any kind, including but not limited to, a guarantee, on or with respect to any
of its property or assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom;

    

    ii.           other than Permitted Liens (as defined in the Notes), enter into,
create, incur, assume or suffer to exist any liens of any kind, on or with
respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or
profits therefrom;

    

    iii.          amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchasers
hereunder;

    

    iv.          repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its securities or debt obligations;

    

    v.           repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
other than regularly scheduled principal and interest payments as such terms are
in effect as of the Closing Date;

    

    vi.          pay
cash dividends or distributions on any equity securities of the
Guarantor;

    

    vii.         enter
into any transaction with any Affiliate of the Guarantor which would be required
to be disclosed in any public filing of the Company with the Commission, unless
such transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

    

    viii.         enter
into any agreement with respect to any of the foregoing;

    

    provided, however,
that the Guarantor shall not be prohibited from undertaking any of the actions
described above that the Company is permitted to undertake pursuant to the terms of the
Purchase Agreement, Notes and any and all other agreements or other documents
entered into in connection with the financings contemplated by the Purchase Agreement.

    

    5.           Miscellaneous.

    

    (a)           Amendments in
Writing.   None of the terms or provisions of this
Guarantee may be waived, amended, supplemented or otherwise modified except in
writing by Purchasers holding 67% of the principal amount of Notes then
outstanding, provided that no amendment affecting any security interest granted
in collateral by the Guarantor to the Purchasers may be effected without the
prior written consent of all the Purchasers.

    

    (b)           Notices.  All
notices, requests and demands to or upon the Purchasers or the Guarantor
hereunder shall be effected in the manner provided for in the Purchase
Agreement, provided that any such notice, request or demand to or upon the
Guarantor shall be addressed to the Guarantor at its notice address set forth on
Schedule
1.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (c)           No Waiver by Course of
Conduct; Cumulative Remedies. The Purchasers shall not by any act (except
by a written instrument pursuant to Section 5(a)), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default under the Transaction Documents or Event of
Default.  No failure to exercise, nor any delay in exercising, on the
part of the Purchasers any right, power or privilege hereunder shall operate as
a waiver thereof.  No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.  A waiver by the
Purchasers of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Purchasers would otherwise
have on any future occasion.  The rights and remedies provided herein
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.

    

    (d)           Enforcement Expenses;
Indemnification.

    

    (i)           Guarantor
agrees to pay, or reimburse the Purchasers for, all costs and expenses incurred
in collecting against the Guarantor under the guarantee contained in Section 2
or otherwise enforcing or preserving any rights under this Guarantee and the
other Transaction Documents to which the Guarantor is a party, including without
limitation the reasonable fees and disbursements of counsel to the
Purchasers.

    

    (ii)           Guarantor
agrees to pay, and to save the Purchasers harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any and all stamp,
excise, sales or other taxes which may be payable or determined to be payable in
connection with any of the transactions contemplated by this
Guarantee.

    

    (iii)          Guarantor
agrees to pay, and to save the Purchasers harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Guarantee to the extent the Company would be required to do so pursuant to the
Purchase Agreement.

    

    (iv)         The
agreements in this Section shall survive repayment of the Obligations and all
other amounts payable under the Purchase Agreement, the Notes and the other
Transaction Documents.

    

    (e)           Successor and
Assigns. This Guarantee shall be binding upon the successors and assigns
of Guarantor and shall inure to the benefit of the Purchasers and their
respective successors and assigns; provided that no Guarantor may assign,
transfer or delegate any of its rights or obligations under this Guarantee
without the prior written consent of the Purchasers.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (f)           Set-Off.  Guarantor
hereby irrevocably authorizes the Purchasers at any time and from time to time
while an Event of Default under any of the Transaction Documents shall have
occurred and be continuing, without notice to the Guarantor or any other
guarantor, any such notice being expressly waived by Guarantor, to set-off and
appropriate and apply any and all deposits, credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Purchasers to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
the Purchasers may elect, against and on account of the obligations and
liabilities of the Guarantor to the Purchasers hereunder and claims of every
nature and description of the Purchasers against the Guarantor, in any currency,
whether arising hereunder, under the Purchase Agreement, any other Transaction
Document or otherwise, as the Purchasers may elect, whether or not the
Purchasers have made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured.  The Purchasers
shall notify the Guarantor promptly of any such set-off and the application made
by the Purchasers of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.  The rights of the Purchasers under this Section are in
addition to other rights and remedies (including without limitation other rights
of set-off) which the Purchasers may have.

    

    (g)           Counterparts.  This
Guarantee may be executed by one or more of the parties to this Guarantee on any
number of separate counterparts (including by fax or PDF), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

    

    (h)           Severability.  Any
provision of this Guarantee which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

    

    (i)           Section
Headings.  The Section headings used in this Guarantee are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

    

    (j)           Integration.  This
Guarantee and the other Transaction Documents represent the agreement of the
Guarantor and the Purchasers with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Purchasers relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Transaction
Documents.

    

    (k)           Governing
Law.  This guarantee shall be governed by, and construed and
interpreted in accordance with, the law of the state of New York without regard
to any principles of conflicts of laws.

    

    (l)           Submission to
Jurisdictional; Waiver. Guarantor hereby irrevocably
and unconditionally:

    

    (i)           submits
for itself and its property in any legal action or proceeding relating to this
Guarantee and the other Transaction Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
located in New York County, New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any
thereof;

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (ii)           consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

    

    (iii)           agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Guarantor at its address referred
to in Schedule 1 below or at such other address of which the Purchasers shall
have been notified pursuant thereto;

    

    (iv)           agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

    

    (v)           waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.

    

    (m)           Acknowledgements.  Guarantor
hereby acknowledges that:

    

    (i)           it
has been advised by counsel in the negotiation, execution and delivery of this
Guarantee and the other Transaction Documents to which it is a
party;

    

    (ii)     
    the Purchasers have no fiduciary relationship with or
duty to the Guarantor arising out of or in connection with this Guarantee or any
of the other Transaction Documents, and the relationship between the Guarantor,
on the one hand, and the Purchasers, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and

    

    (iii)         no
joint venture is created hereby or by the other Transaction Documents or
otherwise exists by virtue of the transactions contemplated hereby between the
Guarantor and the Purchasers.

    

    (n)           Release of Guarantor.
Subject to Section 2, Guarantor will be released from all liability hereunder
concurrently with the repayment in full of all amounts owed under the Purchase
Agreement, the Notes and the other Transaction Documents.

    

    (o)           Seniority. The
Obligations of the Guarantor hereunder rank senior in priority to any other
Indebtedness (as defined in the Purchase Agreement) of the
Guarantor.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (p)           Waiver of Jury
Trial.  GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF,
THE PURCHASERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY
COUNTERCLAIM THEREIN.

    

    (q)           Security.  The
Obligations and Guarantor’s obligations hereunder and under the other
Transaction Documents are secured by the assets of the Guarantor pursuant to the
terms of the Security Documents.

    

    

    *****************

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.

     

    
      	 
      	
              AXIS
      TECHNOLOGIES, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	 /s/
      Jim Erickson 
	 
      	
              Name:

            
	 
      	
              Title:

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    SCHEDULE
1

    

    GUARANTOR

    

    The
following are the names, notice addresses, jurisdiction of organization and
percentage ownership of Guarantor by the Company.

    

    

    
      	
              NAME

            	
              ADDRESS
      FOR NOTICE

            	
              JURISDICTION
      OF INCORPORATION

            	
              PERCENTAGE
      OWNED BY COMPANY

            
	
              Axis
      Technologies, Inc.

            	
              2055
      S Folsom Street, Lincoln, NE 68522

            	
              Delaware

            	
              100%

            

    

     

     

    14

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