Exhibit 10.1


 


NOTE AND WARRANT PURCHASE AGREEMENT


 


This Note and Warrant
Purchase Agreement (this “Agreement”) is made and entered into as of October 9, 2015, by and among AudioEye,
Inc., a Delaware corporation (the “Company”), and the investors set forth on Exhibit A attached
hereto (each an “Investor” and collectively, the “Investors”).


 


RECITALS


 


The Company desires
to sell to the Investors, and the Investors desire to purchase from the Company, (i) Secured Convertible Promissory Notes (the
“Notes”), in the form attached as Exhibit B hereto, in the aggregate principal amount (including
in respect of any additional Notes that may be purchased by the Investors at their election in accordance with Section 1.4(b))
of up to $3,750,000 on the terms and conditions set forth in this Agreement and (ii) Warrants to purchase the Company’s Common
Stock (as defined below) (the “Warrants”), in the form attached as Exhibit C hereto (the “Financing”).


 


AGREEMENT


 


In consideration of
the foregoing recitals and the mutual promises set forth in this Agreement, the parties to this Agreement agree as follows:


 


Section 1.          AUTHORIZATION
AND SALE.


 


1.1  Authorization.  The
Company has duly authorized the issuance and sale, pursuant to the terms of this Agreement, of the Notes and Warrants against payment
of the purchase price therefor.


 


1.2  Subscription.  Upon
the terms and subject to the conditions set forth in this Agreement, each Investor, severally and not jointly, hereby irrevocably
subscribes for and agrees to purchase, and the Company hereby agrees to issue and sell to the Investors, at the Closing (as defined
below), Notes in the aggregate principal amount indicated opposite such Investor’s name on Exhibit A in the column
captioned “Principal Amount” (the “Investor’s Commitment”) and Warrants with an aggregate
exercise price equal to the Principal Amount opposite such Investor’s name on Exhibit A.  Each Investor
shall pay the Investor’s Commitment in full by wire transfer of immediately available funds to the Company at the Closing.  Notwithstanding
anything in this Agreement to the contrary, the Company shall have no obligation to issue any Notes or Warrants, or shares of common
stock, $0.00001 par value per share, of the Company (“Common Stock”) into which the Notes are convertible
or the Warrants are exercisable (collectively, the “Issuable Shares,” and together with the Notes and
Warrants, the “Securities”) to any person who is a resident of a jurisdiction in which the issuance of
any of the Securities would constitute a violation of the securities, “blue sky” or other similar laws of such jurisdiction
(collectively referred to as the “State Securities Laws”).


 


1.3  Closing.  The
initial closing of the purchase and sale of the Notes and Warrants hereunder (the “Initial Closing”)
shall take place at the offices of DLA Piper LLP (US), 401 Congress Avenue, Suite 2500, Austin, Texas 78701, on or about the date
hereof, or at such other time and place as the Company and the Investors mutually agree upon (which time and place are referred
to in this Agreement as the “Initial Closing Date”).


 


1.4  Additional
Closings.  


 


(a)          From
and after the Initial Closing, the Company shall have the right to sell up to the balance of the remaining Notes and Warrants pursuant
to this Agreement at one or more additional closings occurring within 30 days of the Initial Closing Date (each, an “Additional
Closing”), and to add additional entities and persons as “Investors” hereunder and as parties hereto.


 






     


     


    

 


(b)          Upon
the election of any Investor within the three-year period immediately following the Initial Closing, any Investor may purchase
an additional Note in the principal amount equal to the “Option Principal Amount” set forth opposite such Investor’s
name on Exhibit A and an additional Warrant with an aggregate exercise price equal to such Investor’s Option Principal
Amount.  Any such optional sale and issuance (each, an “Option Closing”) must take place on
or before the three-year anniversary of the Initial Closing (the date of any such Closing, an “Option Closing Date”).


 


(c)          The
aggregate principal amount of Notes issued in any Additional Closings that are not Option Closings shall not exceed the amount
equal to the difference of $2,500,000 minus the aggregate principal amount of Notes sold by the Company in the Initial Closing
and all previous Additional Closings (the “Remaining Principal Amount”).  Each Additional Closing
shall take place at the offices of DLA Piper LLP (US), 401 Congress Avenue, Suite 2500, Austin, Texas 78701, on a date or dates
determined by the Company and the Investors purchasing additional Notes and Warrants at such Additional Closing (each such date,
an “Additional Closing Date”).  Any Notes and Warrants issued pursuant to this Section 1.4
shall be deemed to be “Notes” and “Warrants,” respectively, for all purposes under this Agreement.  The
Initial Closing, each Option Closing and each Additional Closing shall constitute and be treated as a “Closing”
hereunder, and the Initial Closing Date, each Option Closing Date  and each Additional Closing Date shall constitute
and be treated as a “Closing Date” hereunder.  At the Initial Closing, each Option Closing
and each Additional Closing, the Company shall deliver to the Investors participating in such Closing the Notes and the Warrants,
each registered in the name of such Investors, against payment to the Company of the purchase price therefor.  


 


1.5  Separate
Sales.  The Company’s agreement with each of the Investors is a separate agreement, and the sale of the
Notes and the Warrants to each of the Investors is a separate sale.


 


1.6  Use
of Proceeds. The Company shall use the proceeds from the sale of the Notes and Warrants set forth herein solely for working
capital and other general corporate purposes.


 


Section 2.          REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company represents and warrants to each of the Investors that:


 


2.1  Organization,
Good Standing and Qualification.  The Company has been duly incorporated and organized, and is validly existing
and in good standing, under the laws of the State of Delaware.  The Company has all requisite corporate power and authority
to execute, deliver, and perform its obligations under this Agreement, the Notes, the Warrants, the Security Agreement (as defined
below) (this Agreement, the Notes, the Warrants and the Security Agreement are referred to collectively in this Agreement as the
“Transaction Agreements”), and any other agreements contemplated by Transaction Agreements, to own and
operate its properties and assets, and to carry on its business as currently conducted and as presently proposed to be conducted.  The
Company is presently qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the Company’s assets or financial condition.


 


2.2  Due
Authorization.  All corporate action on the part of the Company, its directors and stockholders necessary for
the authorization, execution, delivery, and performance of all obligations of the Company under the Transaction Agreements, the
authorization, issuance, reservation for issuance, and delivery of all of the Issuable Shares has been taken or shall be taken
prior to the Closing, and this Agreement constitutes, and the Notes when executed and delivered shall constitute, valid and legally
binding obligations of the Company, enforceable in accordance with their respective terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization, or other laws of general application relating to or affecting the enforcement of creditors’
rights generally and (ii) the effect of rules of law governing the availability of equitable remedies, and shall be free of any
liens, encumbrances, or restrictions on transfer (other than those created or contemplated by the Transaction Agreements or under
applicable state and/or federal securities laws).


 






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2.3  Valid
Issuance of Securities.  The Notes and Warrants, when issued and paid for as provided in this Agreement, shall
be duly authorized and validly issued, fully paid, and nonassessable.  The Issuable Shares have been duly and validly
reserved for issuance, and upon issuance in accordance with the Notes and Warrants, shall be duly authorized and validly issued,
fully paid, and nonassessable.  


 


2.4  Governmental
Consents.  No consent, approval, order, or authorization of or registration, qualification, designation, declaration,
or filing with, any federal, state, or local governmental authority is required on the part of the Company in order to enable the
Company to execute, deliver, and perform its obligations under the Transaction Agreements except for such qualifications or filings
under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement, which qualifications
or filings have been made or will be made promptly following the applicable Closing Date, in accordance with applicable law .  


 


2.5  Noncontravention.  The
execution, delivery, and performance of the Transaction Agreements and the consummation of the transactions contemplated by this
Agreement and by the Transaction Agreements shall not result in any such violation or default or be in conflict with or result
in a violation or breach of, with or without the passage of time or the giving of notice or both, the Company’s certificate
of incorporation or bylaws, any judgment, order, or decree of any court or arbitrator to which the Company is a party or is subject,
any agreement or contract of the Company, or, to the Company’s knowledge, a violation of any statute, law, regulation, or
order, or an event which results in the creation of any lien, charge, or encumbrance upon any asset of the Company.


 


2.6  SEC
Documents. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by
the Company with the SEC since January 1, 2014, pursuant to Sections 13(a), 14(a) and 15(d) of the of the Securities and Exchange
Act of 1934, as amended (the “Exchange Act”) (collectively, the “SEC Documents”).  As
of its respective filing date, each SEC Document complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to such SEC Document, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.  Except to the extent that information
contained in any SEC Document has been revised or superseded by a later filed SEC Document, none of the SEC Documents as of the
date hereof contains any untrue statement of a material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  As
of the date of this Agreement, to the knowledge of the Company, none of the SEC Documents is the subject of any ongoing review
by the SEC.  The audited consolidated financial statements and the unaudited quarterly financial statements (including,
in each case, the notes thereto) of the Company included in the SEC Documents when filed complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, have been prepared in all material respects in accordance
with United States generally accepted accounting principles (except, in the case of unaudited quarterly statements, as permitted
by Form 10-Q of the SEC or other rules and regulations of the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end adjustments).


 






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Section 3.          REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS.  Each Investor represents and warrants to, and agrees with the Company, severally
and not jointly and only with respect to itself, that:


 


3.1  Authorization.  The
Investor has full power and authority to enter into this Agreement and this Agreement constitutes the Investor’s valid and
legally binding obligation, enforceable in accordance with its terms except (i) as may be limited by applicable bankruptcy, insolvency,
reorganization, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally,
and (ii) as may be limited by the effect of rules of law governing the availability of equitable remedies.


 


3.2  Purchase
for Own Account.  The Securities shall be acquired for investment for the Investor’s own account, not as
a nominee or agent, and not with a view to the public resale or distribution of the Securities within the meaning of the Securities
Act of 1933, as amended (the “Securities Act”) and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same.  If other than an individual, the Investor also represents
that it has not been formed for the specific purpose of acquiring the Securities.


 


3.3  Exempt
Offering.  The Investor acknowledges that the Securities have not been registered under the Securities Act and
are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon the representations
of the Investors contained in this Agreement.


 


3.4  Disclosure
of Information.  The Investor believes that it has received all the information it considers necessary or appropriate
for deciding whether to purchase any Notes or Warrants pursuant to this Agreement.  The Investor has had an opportunity
to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Notes and the Warrants
and the business, properties, prospects, and financial condition of the Company 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 Investor or to which the Investor had access.  


 


3.5  Investment
Experience.  The Investor has experience as an investor in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Securities, and has such knowledge
and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the
Notes and the Warrants.


 


3.6  Accredited
Investor Status.  The Investor is an “accredited investor” within the meaning of Securities and Exchange
Commission (“SEC”) Rule 501 of Regulation D, as presently in effect.


 


3.7  Restricted
Securities.  The Investor understands that the Securities are characterized as “restricted securities”
under the Securities Act inasmuch as they are being (or shall be) acquired from the Company in a transaction not involving a public
offering and that under the Securities Act and applicable regulations under the Securities Act such Securities may be resold without
registration under the Securities Act only in certain limited circumstances.  In this connection, the Investor represents
that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed by SEC Rule 144 and
by the Securities Act.  The Investor understands that the Company is under no obligation to register any of the Securities
sold under this Agreement except as provided pursuant to Section 5.1.  The Investor understands that no market
now exists for any of the Securities, and that it is uncertain whether a market, public or otherwise, shall ever exist for the
Securities.


 






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3.8  Further
Limitations on Disposition.  Without in any way limiting the representations set forth above, the Investor further
agrees not to make any disposition of all or any portion of the Securities unless and until:


 


(a)          there
is then in effect a Registration Statement (as defined below) covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or


 


(b)          the
Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and, if reasonably requested by the Company, the Investor shall, at the expense
of the Investor or its transferee, furnish the Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition shall not require registration of such Securities under the Securities Act.


 


Notwithstanding the
provisions of Subsections (a) and (b) above, no such Registration Statement or opinion of counsel shall be required
for:  any transfer of any Securities by an Investor (i) pursuant to a transaction exempt from the registration requirements
of the Securities Act or (ii) to any affiliate of such Investor, to a family member of such Investor, or to any trust, partnership,
limited liability company or custodianship established for estate-planning purposes for the primary benefit of such Investor or
his or her family members; provided that in each of the foregoing cases the transferee shall, prior to giving effect to
such transfer, agree in writing to be subject to the terms of this Section to the same extent as if the transferee were an original
Investor under this Agreement.


 


3.9  Legends.  It
is understood that the instruments evidencing the Securities shall bear legends substantially similar to the legends set forth
below (in addition to any legend required under applicable state securities laws):


 


(a)          “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE
TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR
STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE COMPANY, TO BE
EVIDENCED BY AN OPINION OF SHAREHOLDER’S COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.”


 


(b)          Any
other legends required by State Securities Laws applicable to any individual Investor or under any agreement to which the Investor
is a party to with the Company.


 


(c)          The
legend set forth in Section 3.9(a) shall be removed and the Company shall issue a certificate (or issue in an uncertificated
form) without such legend or any other legend to the Investors if (a) such Securities are sold pursuant to an effective Registration
Statement (provided that each of the Investors agrees to only sell such Securities during such time that the Registration Statement
is effective and not withdrawn or suspended, and only as permitted by the Registration Statement), (b) such Securities are sold
or transferred pursuant to, and in accordance with all requirements of, Rule 144 (including, if applicable, the volume, manner-of-sale
and notice filing provisions of Rule 144), or (c) such Securities are eligible for sale under Rule 144, without the requirement
for the Company to be in compliance with the current public information required under Rule 144 as to such Securities and without
volume or manner-of-sale restrictions. The Company shall bear all costs incurred by it or an Investor relating to the removal of
the legend in accordance with this Section 3.9(c), provided that the Company shall not be liable for any transfer taxes
relating to the issuance of a new certificate or statement in the name of any person other than the relevant Investor and its affiliates.


 






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Section 4.          CONDITIONS.  


 


4.1  Conditions
to the Obligations of the Investors at Closing.  The obligation
of each of Investor to purchase a Note and Warrant at any Closing is subject to the fulfillment, or the waiver by such Investor,
of the following conditions on or before such Closing.


 


(a)          The
representations and warranties in Section 2 shall be true at and as of the Closing in all material respects with the same
effect as though such representations and warranties had been made on and as of the date of the Closing.


 


(b)          The
Company shall have performed and complied with all agreements and conditions in this Agreement required to be performed or complied
with by the Company prior to or at the Closing.


 


(c)          All
corporate and other proceedings in connection with the transactions contemplated in this Agreement and the Transaction Agreements
and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Investor,
or counsel to the Investors, and the Investor or its special counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.


 


(d)          Approvals
of the appropriate governing authority of each Investor necessary for performance of the transactions contemplated by the Transaction
Agreements shall have been obtained.


 


(e)          The
Company shall have executed and delivered the (i) the Notes, (ii) the Warrants, and (iii) the Security Agreement in the form attached
hereto as Exhibit D (the “Security Agreement”).


 


(f)          No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by this Agreement.


 


(g)          The
Common Stock shall not have been suspended, as of such Closing Date, by the SEC.


 


(h)          There
shall have been no material adverse effect on the Company.


 


4.2  Conditions
to the Obligations of the Company at Closing.  The obligations
of the Company to issue and sell Notes and Warrants to an Investor at any Closing are subject to the fulfillment, or the waiver
by the Company, of the following condition on or before such Closing.


 






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(a)          The
representations and warranties of the Investors in Section 3 shall be true at and as of the Closing in all material respects
with the same effect as though such representations and warranties had been made on and as of the date of the Closing.


 


(b)          The
Company shall have obtained all necessary permits and qualifications, or shall have the availability of exemptions therefrom, required
by any state for the offer and sale of the Securities.


 


(c)          Approvals
of the Board (as defined below) necessary for performance of the transactions contemplated by the Transaction Agreements shall
have been obtained.


 


(d)          With
respect to the Initial Closing, the aggregate Investor Commitments shall be at least $2,000,000.


 


Section 5.          POST-CLOSING
COVENANTS.


 


5.1  Registration
Rights. The Company will use its reasonable best efforts to prepare and file with the SEC registration statements, including
the prospectuses, for offerings to be made on a continuous basis pursuant to Rule 415 of the Securities Act, on Form S-3 (or on
such other form appropriate for such purpose) (collectively, the “Registration Statements”) (a) by the
90th day following each Closing Date covering the resale by the Investors of the Issuable Shares, and (b) by the 90th
day following the Initial Closing Date covering the resale by the Investors of (i) any Common Stock previously issued to the Investors,
and (ii) any Common Stock into which any convertible promissory notes previously issued to the Investors are convertible or any
warrants to purchase Common Stock previously issued to the Investors are exercisable (the securities set forth in clauses (a) and
(b), the “Shares”), and, in each case set forth in clauses (a) and (b), naming the Investors as “Selling
Stockholders” therein.  The Company will use its reasonable best efforts to cause the Registration Statements to
be declared effective under the Securities Act as soon as possible but, in any event, no later than the 120th day following
each Closing Date, and shall use its reasonable best efforts to keep the Registration Statements continuously effective during
their respective entire Effectiveness Periods.  For purposes hereof, an “Effectiveness Period”
shall mean the period commencing on the date on which a Registration Statement is first declared effective by the SEC (the “Effective
Date”) and ending on the earliest to occur of (a) the second anniversary of such Effective Date, (b) such time as
all of the Shares covered by such Registration Statement have been publicly sold by the Investors pursuant to such Registration
Statement, or (c) such time as all of the Shares covered by such Registration Statement may be sold by the Investors without volume
restrictions pursuant to Rule 144 of the Securities Act, in each case as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected Investors.  


 


5.2  Indemnification
of Investors.  The Company will indemnify and hold each Investor and its shareholders, members, partners, direct
and indirect investors, directors, managers, officers, employees, affiliates and agents (and any other persons with a functionally
equivalent role of a person holding such titles notwithstanding a lack of such title or any other title), each person who controls
such Investor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the shareholders,
members, partners, direct and indirect investors, directors, managers, officers, employees, affiliates and agents (and any other
persons with a functionally equivalent role of a person holding such titles notwithstanding a lack of such title or any other title)
of such controlling persons (each, a “Investor Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and disbursements and costs of investigation,
defending or preparing to defend  that any such Investor Party may suffer or incur (irrespective of whether any such
Investor Party is a party to the action, claim, suit, investigation or proceeding (including, without limitation, an investigation
or partial proceeding, such as a deposition), whether commenced or threatened (each, a “Proceeding”)
for which indemnification hereunder is sought) as a result of or relating to (a) any misrepresentation or any breach of any of
the representations, warranties, obligations, covenants or agreements made by the Company in this Agreement or in any other Transaction
Agreement and (b) any Proceeding instituted against an Investor in any capacity, or any of them or their respective affiliates,
with respect to any of the transactions contemplated by the Transaction Agreements (unless such Proceeding is based upon a misrepresentation
by such Investor or a breach of such Investor’s representations, warranties, obligations, covenants or agreements under any
Transaction Agreement or any agreements or understandings such Investor may have with any such shareholder or any violations by
such Investor of state or federal securities laws or any conduct by such Investor which constitutes fraud, gross negligence or
willful misconduct).  The indemnity agreements contained herein shall not be an exclusive remedy but shall be in addition
to any cause of action or similar right in law or in equity of any Investor Party against the Company or others, and any liabilities
the Company may be subject to pursuant to law.


 






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5.3  Indemnification
of the Company.  Each Investor, severally and not jointly with the other Investor, will indemnify and hold harmless
the Company, and its officers, directors, controlling persons, agents, advisors, representatives and employees (each, a “Company
Party”), from any and losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges,
contingencies, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and disbursements and costs of investigation, defending or preparing to defend that any such Company Party may suffer or incur
(irrespective of whether any such Company Party is a party to the Proceeding for which indemnification hereunder is sought) as
a result of or relating to any misrepresentation or any breach of any of the representations, warranties, obligations, covenants
or agreements made by such Investor in this Agreement or in any other Transaction Agreement to which it is a party. The indemnity
agreements contained herein shall not be an exclusive remedy but shall be in addition to any cause of action or similar right in
law or in equity of the Company against such Investor or others and any liabilities such Investor may be subject to pursuant to
law.


 


5.4  Furnishing
of Information.  In order to enable the Investors to sell the Securities under Rule 144, for a period of twelve
(12) months from each Closing Date, the Company shall use its commercially reasonable efforts to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. During such twelve (12) month periods, if the Company is not required to file reports pursuant
to the Exchange Act, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Securities under Rule 144.


 


5.5  Securities
Laws Disclosure; Publicity; Confidentiality.  By 5:30 P.M., New York City time, on or prior to the fourth (4th)
trading day immediately following the date hereof, the Company shall issue a press release (the “Press Release”)
disclosing all material terms of the transactions contemplated hereby and file a Current Report on Form 8-K with the SEC describing
the terms of the Transaction Agreements.  Each Investor, severally and not jointly with the other Investors, covenants
that until such time as the transactions contemplated by this Agreement are required to be publicly disclosed by the Company as
described in this Section 5.5, such Investor will maintain the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction).


 


5.6  Board
of Directors. If the Company increases the size of its Board of Directors (the “Board”) to seven
or more members prior to the Maturity Date (as defined in the Notes), the Company shall use its reasonable best efforts to cause
the Board to, by the vote of a majority of the Board fill one vacancy thereby created on the Board with a designee of [__________________].


 






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Section 6.          GENERAL
PROVISIONS.


 


6.1  Successors
and Assigns.  Except as otherwise provided in this Agreement, the provisions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and permitted assigns of the parties to this Agreement (including
permitted transferees of any Securities).  


 


6.2  Third
Parties.  Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the
parties to this Agreement and their respective successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.


 


6.3  Governing
Law.  This Agreement shall be governed by and construed exclusively in accordance with the internal laws of the
State of Delaware.


 


6.4  Counterparts.  This
Agreement may be executed in two or more counterparts (including, without limitation, facsimile counterparts), each of which shall
be deemed an original, but all of which together shall constitute one and the same agreement.


 


6.5  Headings.  The
headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting
this Agreement.  All references in this Agreement to sections, subsections, exhibits, and schedules shall, unless otherwise
provided, refer to sections and subsections of this Agreement and exhibits and schedules attached to this Agreement, all of which
exhibits and schedules are incorporated in this Agreement by this reference.


 


6.6  Notices.  All
notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered personally
or by facsimile transmission or by nationally recognized overnight delivery service or by first class certified or registered mail,
return receipt requested, postage prepaid:


 


If to the Company,
at 5210 E Williams Circle, Tucson, Arizona 85711, Attention: Chief Executive Officer, or at such other address or addresses as
may have been furnished by giving five days advance written notice to all other parties, with a copy (which shall not constitute
notice) to DLA Piper LLP (US), 401 Congress Avenue, Suite 2500, Austin, Texas 78701, Attention: Paul Hurdlow.


 


If to an Investor,
at its address set forth on Exhibit A, or at such other address or addresses as may have been furnished to the Company
by giving five days advance written notice.


 


Notices provided in
accordance with this Section shall be deemed delivered upon personal delivery (including confirmed facsimile) or three business
days after deposit in the mail.


 


6.7  No
Finder’s Fees.  Each party represents that it neither is nor shall be obligated for any finder’s
or broker’s fee or commission in connection with the transactions contemplated by this Agreement.  Each Investor,
severally and not jointly, agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation
in the nature of a finder’s or broker’s fee (and any asserted liability) for which such Investor or any of its officers,
partners, employees, or representatives is responsible.  The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted
liability) in connection with this Financing for which the Company is responsible.


 






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6.8  Attorneys’
Fees and Expenses.  Each party to this Agreement agrees to pay its own fees and expenses arising in connection
with the negotiation and execution of this Agreement and consummation of the transactions contemplated in this Agreement; provided,
however, that the Company shall reimburse the lead investor for the lead investor’s fees and expenses (including attorneys’
fees), such reimbursement amount not to exceed $15,000 in the aggregate. If any action, suit, or other proceeding is instituted
concerning or arising out of this Agreement or any transaction contemplated under this Agreement, the prevailing party shall recover
all of such party’s costs and attorneys’ fees incurred in each such action, suit, or other proceeding, including any
and all appeals or petitions from such action, suit or other proceeding.


 


6.9  Amendments
and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent
of the Company and the Investors holding a majority in interest of the aggregate principal amount of the Notes.  Any
amendment or waiver effected in accordance with this Section shall be binding upon each Investor and the Company.


 


6.10 Severability.  If
one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and shall be
enforceable in accordance with its terms.


 


6.11 Entire
Agreement.  This Agreement, together with all exhibits and schedules to this Agreement, constitutes the entire
agreement and understanding of the parties with respect to the subject matter of this Agreement and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties, or obligations between the parties with respect to the subject
matter of this Agreement.


 


6.12 Further
Assurances.  From and after the date of this Agreement, upon the request of the Investors or the Company, the
Company and the Investors shall execute and deliver such instruments, documents, or other writings as may be reasonably necessary
or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.


 


6.13 Delays
or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to any Investor upon any
breach or default of the Company under this Agreement shall impair any such right, power, or remedy of such Investor nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default therefore
or thereafter occurring.  Any waiver, permit, consent, or approval of any kind or character on the part of any Investor
of any breach or default under this Agreement or any waiver on the part of any Investor of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing.  All
remedies, either under this Agreement or by law or otherwise afforded to any Investor, shall be cumulative and not alternative.


 


6.14 Confidentiality.  Except
as required by law, each Investor agrees that it shall keep confidential and shall not disclose or divulge any confidential, proprietary,
or secret information which such Investor may obtain from the Company pursuant to financial statements, reports, and other materials
submitted by the Company to such Investor pursuant to this Agreement or otherwise, or pursuant to visitation or inspection rights
granted under this Agreement or in the Transaction Agreements, unless such information is known, or until such information becomes
known, to the public, other than as a result of the failure by any Investor to comply with this provision; provided that
an Investor may disclose such information to its attorneys, accountants, and financial advisors to the extent necessary to obtain
their services in connection with its investment in the Company.


 






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6.15 Survival.
The representations, warranties and covenants contained herein shall continue and survive the execution of this Agreement.


 


[Signature Pages Follow]


 




    	11 



     


    

 


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


 


	 	AUDIOEYE, INC.
	 	 
	 	By:	                        
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 


 





Signature
Page to AudioEye, Inc.

Note and Warrant Purchase Agreement


 




     


     


    

 


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


 





 


	 	INVESTOR	 
	 	 	 
	 	If Entity:	 
	 	 	 
	 	Entity Name: 	 


 


	 	By:	 
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 


 


	 	If Individual:
	 	 	 
	 	Name: 	 
	 	 	 
	 	Signature:	 







 


Purchase Amount: $____________________


 


Signature
Page to AudioEye, Inc.

Note and Warrant Purchase Agreement


 




     


     


    

 


EXHIBIT A


 


SCHEDULE OF INVESTORS


 


Initial Closing


 


	INVESTORS	 	 	Principal Amount 	 	 	 	Option Principal

 Amount	 
	 	 	 	 	 	 	 	 	 
	 	 	 	$________	 	 	 	$_________	 
	 	 	 	 	 	 	 	 	 
	Total:	 	 	$________	 	 	 	$_________	 



 




     


     


    

 


EXHIBIT B


 


FORM OF CONVERTIBLE PROMISSORY NOTE


 




     


     


    

 


EXHIBIT C


 


FORM OF WARRANT


 




     


     


    

 


EXHIBIT D


 


FORM OF SECURITY AGREEMENT