Exhibit 10.2


 


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT
is made as of October 9, 2015 by AudioEye, Inc., a Delaware corporation having its principal office at 5210 E Williams Cir, Tucson,
Arizona 85711 (the “Debtor”) in favor of [__________________________] (in such capacity, the “Agent”)
as security agent for the parties listed on Exhibit A attached hereto (together with the Agent, each individually a “Secured
Party” and collectively, the “Secured Parties”).


 


RECITALS


 


A.           Simultaneously
with the execution of this Security Agreement, the Secured Parties have loaned the Debtor an aggregate of the principal sum of
up to ($3,750,000.00) pursuant to those certain secured convertible promissory notes dated as of the date hereof (the “Notes”)
issued pursuant to that certain Note and Warrant Purchase Agreement by and among the Debtor and the Secured Parties, dated as of
the date hereof (the “Purchase Agreement”).


 


B.           It
is a condition to the willingness of each of the Secured Parties to enter into the aforesaid loan transaction that Debtor shall
have granted to the Agent for the benefit of the Secured Parties the liens and security interests contemplated by this Security
Agreement. 


 


AGREEMENT


 


NOW, THEREFORE,
in order to induce each of the Secured Parties to enter into the aforesaid loan transaction and to make said loan to the Debtor
and in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Debtor hereby covenants and agrees as follows:


 


Section
1.          Definitions. All capitalized terms used herein or in
any certificate, report or other document delivered pursuant hereto shall have the meanings assigned to them below (unless otherwise
defined). Except as otherwise defined, terms defined in the Uniform Commercial Code shall have the meanings set forth therein.
Terms not otherwise defined but used herein shall have the meanings ascribed to them in the Purchase Agreement.


 


“Collateral”
shall have the meaning set forth in Section 2 hereof.


 


“Obligations”
shall mean (i) the performance of all obligations, indebtedness and liabilities of the Debtor under the Transaction Agreements;
(ii) the due and punctual payment of all amounts due under the Notes and/or the Purchase Agreement, including, without limitation,
principal and all interest payable thereon, at the interest rates provided in the Notes, regardless of the extent allowed as a
claim in any proceeding in respect of the bankruptcy, reorganization or insolvency of the Debtor (a “Reorganization”);
(iii) the payment and performance of all indebtedness, liabilities and obligations of the Debtor under this Security Agreement;
and (iv) the payment of all other future advances with respect to the Transaction Agreements, including, without limitation, any
future loans and advances made to the Debtor by any of the Secured Parties prior to, during or following any Reorganization, and
any and all other indebtedness, liabilities and obligations of the Debtor to the Secured Party of every kind and description, direct,
indirect or contingent, now or hereafter existing under the Transaction Agreements.


 




     


     


    

 


“Permitted
Liens” means the following: (a) statutory liens for current taxes or other governmental charges not yet due and payable
or the amount or validity of which is being contested in good faith, (b) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for amounts which are not delinquent or which are being
contested by appropriate proceedings, (c) zoning, entitlement, building and other land use regulations imposed by governmental
authorities having jurisdiction over such person's owned or leased real property, which are not violated by the current use and
operation of such real property, (d) covenants, conditions, restrictions, easements and other similar non-monetary matters of record
affecting title to such person's owned or leased real property, which do not materially impair the occupancy or use of such real
property for the purposes for which it is currently used in connection with such Person's businesses, (e) any right of way or easement
related to public roads and highways, which do not materially impair the occupancy or use of such real property for the purposes
for which it is currently used in connection with such Person's businesses, (f) liens arising under workers' compensation, unemployment
insurance, social security, retirement and similar legislation, (g) licenses of Intellectual Property to third parties, (h) non-consensual
liens arising by operation of law, arising in the ordinary course of business, and for amounts that are not overdue for a period
of more than 30 days or that are being contested in good faith by appropriate proceedings, and (i) liens created pursuant to this
agreement.


 


“Uniform
Commercial Code” shall mean the Uniform Commercial Code as in effect in the State of Delaware, as amended from time to
time.


 


Section
2.          Grant. To secure the payment and performance of the
Obligations, the Debtor hereby assigns and pledges to the Agent, for the benefit of the Secured Parties all of the Debtor's rights,
title and interest in, and grants to the Agent, for the benefit of the Secured Parties a continuing security interest in, the following
described property, all whether now owned or existing or hereafter arising or acquired (hereinafter collectively called the “Collateral”):


 


All tangible and
intangible personal property and all fixtures of the Debtor, whether now owned or hereafter acquired by the Debtor or in which
the Debtor may now have or hereafter acquire an interest, and wherever located, including without limitation:


 


(a)          all
properties and assets of every type used or useful in connection with the ownership or operation of the Debtor, whether now owned
or hereafter acquired by the Debtor or in which the Debtor may now have or hereafter acquire an interest;


 


(b)          all
equipment (as defined in the Uniform Commercial Code) including, without limitation, all machinery, manufacturing equipment, data
processing equipment, computers, office equipment, furniture, furnishings, appliances, fixtures and tools, whether now owned or
hereafter acquired by the Debtor or in which the Debtor may now have or hereafter acquire an interest;


 


(c)          all
accounts, bank deposits, deposit accounts, checking accounts, certificates of deposit, cash, money, accounts receivable, intercompany
receivables, payment intangibles, other receivables, rights to proceeds of letters of credit, letter-of-credit rights, rights to
receive payments of money, commercial tort claims, chattel paper, electronic chattel paper and supporting obligations of every
type and description, whether now owned or hereafter acquired by the Debtor or in which the Debtor may now have or hereafter acquire
an interest;


 


(d)          all
general intangibles, payment intangibles and software, whether now owned or hereafter acquired by the Debtor or in which the Debtor
may now have or hereafter acquire an interest, including, without limitation:


 


(i)          all
contracts, contract rights, leases, policies and certificates of insurance, agreements, instruments and indentures in any form,
and portions thereof, as the same may from time to time be amended, supplemented or otherwise modified;


 


(ii)         all
goodwill, going concern value, blueprints, designs, product lines, research and development;


 




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(iii)        all
intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation,
(1) all copyrights, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof,
and all applications in connection therewith, the right to obtain all renewals thereof, any written agreement naming the Debtor
as licensor or licensee, granting any right under any copyright, including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any copyright (collectively, “Copyrights”), (2) all
patents, all reissues and extensions thereof and all goodwill associated therewith, all patent applications, continuations and
continuations-in-part and all rights to obtain any reissues or extensions of the foregoing, all agreements, whether written or
oral, providing for the grant by or to the Debtor of any right to manufacture, use or sell any invention covered in whole or in
part by a patent, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right
to receive all proceeds and damages therefrom (collectively, “Patents”), and (3) all trademarks, trade
names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other
source or business identifiers, and all goodwill associated therewith, all registrations and recordings thereof, and all applications
in connection therewith, all common-law rights related thereto, the right to obtain all renewals thereof, and any agreement, whether
written or oral, providing for the grant by or to the Debtor of any right to use any of the foregoing (collectively, “Trademarks”,
and together with Copyrights and Patents, “Intellectual Property”);


 


(iv)        all
of the Debtor’s rights under all present and future licenses heretofore or hereafter granted or assigned to the Debtor by
the any public utilities commission or any other public governmental authority for the operation and ownership of the Debtor (excluding,
however, such licenses to the extent, and only to the extent, it is unlawful to grant a security interest in such licenses pursuant
to the applicable laws, but including within the definition of Collateral, to the maximum extent permitted by law, all rights incident
or appurtenant to such licenses, including, without limitation, the right to receive all proceeds derived or arising from or in
connection with the sale, assignment or transfer of such licenses);


 


(v)         all
rights of Debtor to receive moneys due and to become due to it under or in connection with any of the foregoing, including, without
limitation, all insurance proceeds, insurance premium refunds, unearned premiums, choses in action, refunds of any tax assessed
against or paid by Debtor, loss or carryback tax refunds, and all of the Debtor’s rights to receive payments of money as
a tenant under any and all leases; all rights of the Debtor to damages arising under any of the foregoing; and all rights of the
Debtor to perform and to exercise all remedies under any of the foregoing;


 


(e)          all
investment property, securities, securities entitlements, securities accounts and all equity interests now or hereafter held by
or issued to the Debtor, including, without limitation, all shares of stock, warrants, participations, options, investment contracts,
interests in trusts, partnership interests and membership interests in limited liability companies, including without limitation
(i) all rights of the Debtor as a stockholder, limited partner, general partner or member to participate in the operation or management
of any corporation, any partnership or limited liability company in which the Debtor holds an equity interest, (ii) all rights
of the Debtor to the property, assets, partnership interests, membership interests, stockholder interests and distributions under
the applicable partnership agreement, limited liability company agreement, operating agreement, by-laws or other organizational
documents, (iii) all present and future rights of the Debtor to receive payment of money or other distributions or payments arising
out of or in connection with any such equity interests of the Debtor and its rights under all articles or certificates of incorporation,
partnership agreements, operating agreements, and other constituent documents governing or establishing such business entities,
and (iv) all other general intangibles relating thereto and proceeds resulting therefrom, whether now owned or hereafter acquired
by the Debtor or in which the Debtor may now have or hereafter acquire an interest;


 


(f)          all
instruments and documents of title, whether now owned or hereafter acquired by the Debtor or in which the Debtor may now have or
hereafter acquire an interest;


 




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(g)          all
goods and all inventory, including, without limitation, all merchandise, raw materials, work in process, finished goods and supplies,
whether now owned or hereafter acquired by the Debtor or in which the Debtor may now have or hereafter acquire an interest;


 


(h)          all
books, records, documents, computer tapes and discs relating to all of the foregoing, whether now owned or hereafter acquired by
the Debtor or in which the Debtor may now have or hereafter acquire an interest; and


 


(i)          
all accessions, additions or improvements to, all replacements, substitutions and parts for, and all proceeds and products of,
and all distributions and dividends relating to, all of the foregoing, including without limitation proceeds of insurance, whether
now owned or hereafter acquired by the Debtor or in which the Debtor may now have or hereafter acquire an interest.


 


Section
3.          Representations, Warranties and Covenants.
The Debtor hereby (a) makes the following representations and warranties and (b) agrees to the following covenants, each of which
representations, warranties and covenants shall be continuing and in force so long as this Security Agreement is in effect:


 


3.1           Name; Debtor/Collateral Location; Changes.


 


(a)          The
name of the Debtor set forth on the first page hereof is the true and correct legal name of the Debtor, and within the last five
years the Debtor has not done business as or used any other name other than AudioEye, Inc., a Delaware corporation.


 


(b)          The
address of the Debtor set forth in the Preamble to this Agreement is the Debtor's chief executive office, principal place of business
and the place where its business records are kept. All tangible Collateral other than securities and items in transit in the ordinary
course of business is located at such address.


 


(c)          The
Debtor will not change its jurisdiction of incorporation, name, identity or organizational structure or chief executive office
or place where its business records are kept, or move any tangible Collateral (other than securities and items in transit in the
ordinary course of business) to a location other than those set forth in Section 3.1(b) hereof, or merge into or consolidate
with any other entity, unless consented to by the Agent.


 


3.2           Ownership of Collateral; Absence of Liens and
Restrictions. The Debtor is, and in the case of property acquired after the date hereof, will be, the sole legal and equitable
owner of the Collateral, holding good and marketable title to the same free and clear of all encumbrances except for the security
interests granted hereunder and Permitted Liens, and has good right and legal authority to assign, deliver, and create a security
interest in the Collateral in the manner herein contemplated.


 


3.3           Security
Interest. This Security Agreement, together with the filing of Uniform Commercial Code financing statements in the appropriate
offices, create in favor of the Agent, for the benefit of the Secured Parties, a valid and continuing lien on and perfected security
interest in the Collateral (except for property located in the United States in which a security interest may not be perfected
by filing under the Uniform Commercial Code), and, subject to Permitted Liens, such security interest is prior to all other encumbrances,
and is enforceable as such against creditors of the Debtor. Except as set forth on Exhibit B, no financing statement under
the Uniform Commercial Code of any state or other instrument evidencing an encumbrance that names the Debtor as debtor is on file
in any jurisdiction and the Debtor has not signed any such document or any agreement authorizing the filing of any such financing
statement or instrument. 


 




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3.4           Maintenance;
Taxes; Sales; Encumbrances; Insurance. Other than expressly consented to by the Agent, such consent not to be unreasonably
withheld or delayed, the Debtor will: (a) keep the Collateral in good order and repair, ordinary wear and tear excepted; (b) not
use the Collateral in violation of law or any policy of insurance thereon; (c) pay promptly when due all taxes and assessments
on the Collateral or on its use or operation; (d) other than Permitted Liens, not sell, grant, assign or transfer any interest
in, or permit to exist any encumbrances on, any of the Collateral; and (e) defend its title to, and the Agent’s interest
in, the Collateral against all claims and take any action necessary to remove any encumbrances and defend the right, title and
interest of the Agent in and to any of the Debtor's rights in the Collateral.


 


3.5           Further Assurances.
Upon the written request of the Agent, and at the sole expense of the Debtor, the Debtor will promptly execute and deliver such
further instruments and documents and take such further actions as the Agent may reasonably deem desirable to obtain the full benefits
of this Security Agreement and of the rights and powers herein granted, including, without limitation, filing of any financing
statement under the Uniform Commercial Code; all in form and substance reasonably satisfactory to the Agent; and transfer of Collateral
to the Secured Party possession to the extent necessary to perfect the same. The Debtor authorizes the Secured Party to file any
such financing statement without the signature of the Debtor to the extent permitted by applicable law. The Debtor hereby further
authorizes the Agent to file filings with the United States Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country), including this Agreement, or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the security interest granted by the Debtor hereunder, without the signature of
the Debtor, and naming the Debtor, as debtor, and the Agent, for the benefit of the Secured Parties, as secured party.


 


3.6           Insurance.
The Debtor will maintain valid policies of insurance with respect to the Collateral of the kinds and in the amounts not less than
is customarily obtained by corporations of established reputation engaged in the same or similar business and similarly situated,
including, without limitation, insurance against loss, damage, fire, theft, public liability and other risks.


 


3.7           Further
Identification of Collateral. The Debtor shall, as soon as reasonably practicable, furnish to the Agent, for the benefit of
the Secured Parties, such statements and schedules further identifying and describing the Collateral, and such other reports in
connection with the Collateral, as the Agent may from time to time reasonably request.


 


3.8           Instruments;
Documents of Title; Chattel Paper. As soon as reasonably practicable upon request from time to time by the Agent, the Debtor
shall deliver to the Agent, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance
as the Agent may reasonably request, any and all instruments, documents of title and chattel paper included in or relating to the
Collateral as the Agent may specify in its request.


 


3.9           Control
Agreements. The Debtor shall deliver to the Agent any and all security certificates any and all such documents, agreements,
instruments and other materials as may be required from time to time to give the Agent control over any investment property or
deposit accounts that form a part of the Collateral.


 


3.10         Partnerships,
Limited Liability Companies. The Debtor shall ensure that the terms of any interest in a partnership or limited liability company
that is Collateral shall expressly provide that such interest is a “security” for the purposes of the UCC.


 


3.11         Future
Subsidiaries. In the event that the Debtor establishes any subsidiaries from time to time, the Debtor shall cause such subsidiaries
to deliver to the Agent, for the benefit of the Secured Parties, a guarantee of the Obligations, and a security agreement in substantially
the form hereof.


 


3.12         Inspection
and Audit. Upon five (5) business days’ advance notice, the Debtor shall give the Secured Parties and their agents and
advisor(s) reasonable access during normal business hours to its premises to inspect the Collateral.


 




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Section
4.          General Authority. To the extent permitted
by law, the Debtor hereby appoints the Agent, for the benefit of the Secured Parties, as the Debtor’s lawful attorney in
fact, with full power of substitution, in the name of the Debtor, the Secured Parties, or otherwise, for the sole use and benefit
of the Secured Parties, but at the Debtor’s expense, to exercise, all or any of the following powers with respect to all
or any of the Collateral during the occurrence of any Event of Default (which power shall be in addition and supplemental to any
powers, rights and remedies of the Secured Parties described herein or otherwise available to the Secured Parties under applicable
law):


 


(a)          to
demand, sue for, collect, receive and give acquittance for any and all monies due or to become due;


 


(b)          to
receive, take, endorse, assign and deliver all checks, note, drafts, documents and other negotiable and non-negotiable instruments
and chattel paper taken or received by the Agent or any Secured Party;


 


(c)          to
settle, compromise, initiate, prosecute or defend any action or proceeding with respect thereto;


 


(d)          to
sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof or any related goods securing the
Collateral, as fully and effectually as if the Secured Party was the absolute owner thereof;


 


(e)          to
extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; and


 


(f)          to
discharge any taxes, liens, security interests or other encumbrances at any time placed thereon.


 


Such appointment as
attorney is irrevocable and coupled with an interest.


 


 


Section
5.          Agent’s Rights and Remedies. All
rights granted to the Agent pursuant to this Section 5 shall be exercised by the Agent on behalf of the Secured Parties.


 


(a)          So
long as any Event of Default shall have occurred and be continuing, the Agent shall have all of the rights and remedies listed
below in this Section 5(a).


 


(i)          The
Agent may, at its option, without notice or demand, cause all of the Obligations to become immediately due and payable and take
immediate possession of the Collateral, and for that purpose the Agent may, so far as the Debtor can give authority therefor, enter
upon any premises on which any of the Collateral is situated and remove the same therefrom or remain on such premises and in possession
of such Collateral for purposes of conducting a sale or enforcing the rights of the Agent and the Secured Parties.


 


(ii)         The
Debtor will, upon demand, assemble the Collateral and make it available to the Agent at such places and times designated by the
Agent that are reasonably convenient to both parties.


 


(iii)        The
Agent may collect and receive all income and proceeds in respect of the Collateral and exercise all rights of the Debtor with respect
thereto.


 




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(iv)        The
Agent may sell, lease or otherwise dispose of the Collateral at a public or private sale, with or without having the Collateral
at the place of sale, and upon such terms and in such manner as the Agent may determine, and the Secured Parties may purchase any
Collateral at any such sale. Unless the Collateral threatens to decline rapidly in value or is of the type customarily sold on
a recognized market, the Agent shall send to the Debtor prior written notice (which, if given within ten days of any sale, shall
be deemed to be reasonable) of the time and place of any public sale of the Collateral or of the time after which any private sale
or other disposition thereof is to be made. The Debtor agrees that upon any such sale the Collateral shall be held by the purchaser
free from all claims or rights of every kind and nature, including any equity of redemption or similar rights, and all such equity
of redemption and similar rights are hereby expressly waived and released by the Debtor. In the event any consent, approval or
authorization of any governmental agency is necessary to effectuate any such sale, the Debtor shall execute all applications or
other instruments as may be required.


 


(v)         In
any jurisdiction where the enforcement of its rights hereunder is sought, the Agent shall have, in addition to all other rights
and remedies, the rights and remedies of a secured party under the Uniform Commercial Code.


 


(b)          So
long as any Event of Default shall have occurred and be continuing, prior to any disposition of Collateral pursuant to this Security
Agreement, the Agent may, at its option, cause any of the Collateral to be repaired or reconditioned (but not upgraded unless mutually
agreed) in such manner and to such extent as to make it salable.


 


(c)          So
long as any Event of Default shall have occurred and be continuing, the Agent shall be entitled to retain and to apply the proceeds
of any disposition of the Collateral, first, to its reasonable expenses of retaking, holding, protecting and maintaining, and preparing
for disposition and disposing of, the Collateral, including reasonable attorneys' fees and other legal expenses incurred by it
in connection therewith; and second, to the payment of the Obligations and any other obligations under other issued and outstanding
note in such order of priority as the Agent shall determine in good faith. Any surplus remaining after such application shall be
paid to the Debtor or to whomever may be legally entitled thereto, provided that in no event shall the Debtor be credited with
any part of the proceeds of the disposition of the Collateral until such proceeds shall have been received in cash by the Agent.
The Debtor shall remain liable for any deficiency to the extent provided under applicable law.


 


Section
6.          Waivers. The Debtor waives presentment, demand, notice,
protest, notice of acceptance of this Security Agreement, notice of any loans made, credit or other extensions granted, collateral
received or delivered or any other action taken in reliance hereon and all other demands and notices of any description,. With
respect to both the Obligations and the Collateral, the Debtor assents to any extension or postponement of the time of payment
or any other forgiveness or indulgence, to any substitution, exchange or release of Collateral, to the addition or release of any
party or person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromise or
adjustment of any thereof, all in such manner and at such time or times as the Agent may deem advisable. Upon the occurrence of
an Event of Default that remains continuing, Agent, for the benefit of the Secured Parties, may exercise its rights with respect
to the Collateral without resorting, or regard, to other among collateral or sources of reimbursement for Obligations. The Secured
Parties shall not be deemed to have waived any of their rights with respect to the Obligations or the Collateral unless such waiver
is in writing and signed by the Secured Parties. No delay or omission on the part of the Secured Parties in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not bar or waive the exercise of
any right on any future occasion. All rights and remedies of the Secured Parties in the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, are cumulative and not exclusive of any remedies provided by law or any
other agreement, and may be exercised separately or concurrently. Neither the execution and delivery of this Agreement nor the
provision of any financial accommodation by any Secured Party shall oblige any Secured Party to make any financial accommodation
or further financial accommodation available to the Debtor or any other person or entity.


 






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Section
7.          Expenses.





 


(a)          The
Debtor shall, on demand, pay or reimburse the Secured Parties for all reasonable expenses (including reasonable attorneys’
fees of outside counsel paid by the Secured Parties in connection with the enforcement of this Security Agreement, and any other
amounts permitted to be expended by the Secured Parties hereunder, including such expenses as are incurred to preserve the value
of the Collateral and the validity, perfection, priority and value of any security interest created hereby, the collection, sale
or other disposition of any of the Collateral or the exercise by the Secured Parties of any of the rights conferred upon them hereunder).


 


(b)          The
Debtor shall indemnify the Secured Parties against, and hold the Secured Parties harmless from, any and all losses, claims, cost
recovery actions, damages, expenses and liabilities of whatsoever nature or kind and all reasonable out-of-pocket expenses and
all applicable taxes to which any Secured Party may become subject arising out of or in connection with (i) the execution or delivery
of this Agreement and the performance by the Debtor of its obligations hereunder, (ii) any actual claim, litigation, investigation
or proceeding relating to this Agreement or the Obligations, whether based on contract, tort or any other theory, to which the
Secured Party is a party, or (iii) the enforcement of the Secured Parties’ rights hereunder and any related investigation,
defence, preparation of defence, litigation and enquiries; provided that such indemnity shall not, as to any Secured Party, be
available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross negligence (it being acknowledged that ordinary
negligence does not necessarily constitute gross negligence) or wilful misconduct of or material breach of this Agreement by such
Secured Party.


 


(c)          The
Debtor shall not assert, and hereby waives (to the fullest extent permitted by applicable law), (i) any claim against any Secured
Party (or any director, officer or employee thereof), on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, and (ii)
all of the rights, benefits and protections given by any present or future statute that imposes limitations on the rights, powers
or remedies of a secured party or on the methods of, or procedures for, realization of security, including any “seize or
sue” or “anti-deficiency” statute or any similar provision of any other statute.


 


(d)          All
amounts due under this Section shall be payable to the Agent for the benefit of the applicable Secured Parties not later than three
(3) business days after written demand therefor.


 


Section
8.          Rights of Agent; Limitations on Agent’s Obligations.


 


(a)          Limitations
on Liability of Secured Parties. Neither the Agent nor any Secured Party shall be liable to the Debtor or any other person
or entity for any failure or delay in exercising any of the rights of the Debtor under this Agreement (including any failure to
take possession of, collect, sell, lease or otherwise dispose of any Collateral, or to preserve rights against prior parties).
Neither the Agent, any other Secured Party, any receiver, nor any agent thereof (including any sheriff) is required to take, or
shall have any liability for any failure to take or delay in taking, any steps necessary or advisable to preserve rights against
other persons under any Collateral in its possession. Neither the Agent, any other Secured Party, any receiver, nor any agent thereof
shall be liable for any, and the Debtor shall bear the full risk of all, loss or damage to any and all of the Collateral (including
any Collateral in the possession of the Agent, any other Secured Party, any receiver, or any agent thereof) caused for any reason
other than the gross negligence or wilful misconduct of the Agent, such other Secured Party, such receiver or such agent thereof.


 




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(b)          Debtor
Remains Liable under Accounts and Contracts. Notwithstanding any provision of this Agreement, the Debtor shall remain liable
under each of the documents giving rise to the Accounts of the Debtor and under each of its contracts to observe and perform all
the conditions and obligations to be observed and performed by the Debtor thereunder, all in accordance with the terms of each
such document and contract. Neither the Agent nor any other Secured Party shall have any obligation or liability under any account
of the Debtor (or any document giving rise thereto) or any contract of the Debtor by reason of or arising out of this Agreement
or the receipt by the Agent of any payment relating to such account or contract pursuant hereto, and in particular (but without
limitation), neither the Agent nor any other Secured Party shall be obligated in any manner to perform any of the obligations of
the Debtor under or pursuant to any account (or any document giving rise thereto) or under or pursuant to any contract of the Debtor
to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency
of any performance by any party under any Account (or any document giving rise thereto) or under any contract, to present or file
any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned
to it or to which it may be entitled at any time.


 


(c)          Collections
on Accounts and Contracts. The Debtor shall be authorized to, at any time that an Event of Default is not continuing and has
not been continuing for 30 days, collect its Accounts and payments under the contracts of the Debtor in the normal course of the
business of the Debtor and for the purpose of carrying on the same. At the Agent’s request, so long as any Event of Default
shall have occurred and be continuing, the Debtor shall deliver to the Agent any documents evidencing and relating to the agreements
and transactions which gave rise to its accounts and contracts, including all original orders, invoices and shipping receipts.


 


(d)          Use
of Agents. The Agent may perform any of its rights or duties under this Agreement by or through agents and is entitled to retain
counsel and to act in reliance on the advice of such counsel concerning all matters pertaining to its rights and duties under this
Agreement.


 


(e)          Realization
Standards. To the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable
manner and without prejudice to the ability of the Agent to dispose of the Collateral in any such manner, the Debtor acknowledges
and agrees that it is not commercially unreasonable for the Agent to (or not to) (a) incur expenses reasonably deemed significant
by the Agent to prepare the Collateral for disposition or otherwise to complete raw material or work in process into finished goods
or other finished products for disposition, (b) fail to obtain third party consents for access to the Collateral to be disposed
of, (c) fail to exercise collection remedies against account debtors or other persons obligated on the Collateral or to remove
liens against the Collateral, (d) exercise collection remedies against account debtors and other persons obligated on the Collateral
directly or through the use of collection agencies and other collection specialists, (e) dispose of Collateral by way of public
auction, public tender or private contract, with or without advertising and without any other formality, (f) contact other persons,
whether or not in the same business of the Debtor, for expressions of interest in acquiring all or any portion of the Collateral,
(g) hire one or more professional auctioneers to assist in the disposition of the Collateral, whether or not the Collateral is
of a specialized nature or an upset or reserve bid or price is established, (h) dispose of the Collateral by utilizing internet
sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing
so, or that match buyers and sellers of assets, (i) dispose of assets in wholesale rather than retail markets, (j) disclaim disposition
warranties, such as title, possession or quiet enjoyment, (k) purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of the Collateral or to provide to the Agent a guaranteed return from the collection or
disposition of the Collateral, (l) to the extent deemed appropriate by the Agent, obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral, (m)
dispose of Collateral in whole or in part, (n) to dispose of Collateral to a customer of the Agent, and (o) establish an upset
or reserve bid price with respect to Collateral.


 


(f)          Pledged
Shares. Following the occurrence of an Event of Default that is continuing, the Agent may, in respect of any investment property
that forms a part of the Collateral (i) cause such investment property to be registered in the name of the agent; (ii) vote and
exercise other rights in respect of such investment property; (iii) receive dividends in respect of such investment property for
the benefit of the Secured Parties, and (iv) transfer such investment property.


 




    	- 9 -



     


    

 


(g)          Dealings
by Agent. The Agent shall not be obliged to exhaust its recourse against the Debtor or any other person or against any other
security it may hold with respect to the Obligations or any part thereof before realizing upon or otherwise dealing with the Collateral
in such manner as the Agent may consider desirable. The Agent and the other Secured Parties may grant extensions of time and other
indulgences, take and give up security, accept compositions, grant releases and discharges and otherwise deal with the Debtor and
any other person, and with any or all of the Collateral, and with other security and sureties, as they may see fit, all without
prejudice to the Obligations or to the rights and remedies of the Agent under this Agreement. The powers conferred on the Agent
under this Agreement are solely to protect the interests of the Agent in the Collateral and shall not impose any duty upon the
Agent to exercise any such powers.


 


Section
9.          Merger. If the Debtor is a corporation, the Debtor
acknowledges that if it merges with any other corporation or corporations, then (i) the Collateral and the security interests established
hereby shall extend to and include all the property and assets of the surviving corporation and to any property or assets of the
surviving corporation thereafter owned or acquired, (ii) the term “Debtor”, where used in this Agreement, shall extend
to and include the surviving corporation, and (iii) the term “Obligations”, where used in this Agreement, shall extend
to and include the Obligations of the surviving corporation.


 


Section
10.         Notices. All notices, demands, requests or other communications
given hereunder or in connection herewith shall be in writing and either mailed, sent by nationally recognized overnight courier
service, or personally delivered, addressed to the party to receive such notice at its address set forth below or at such other
address as such party may hereafter designate by notice given in like fashion:


 


If to a Secured Party,
at their address as set forth on Exhibit A attached hereto.


 


If to the Agent:


 


_____________________


_____________________


 


If to the Debtor:


 


AudioEye,
Inc.


5210 E Williams
Cir, Tucson, AZ 85711


Attn: Chief
Executive Officer


Facsimile:
_____________________


 


with a copy
which shall not constitute notice to:


 


DLA Piper LLP (US)


401 Congress Avenue, Suite 2500


Austin, Texas 78701


Attn: Paul Hurdlow


Facsimile: (512) 457-7001


 


or, as to each party, at such other address
as shall be designated by such parties in a written notice to the other party complying as to delivery with the terms of this Section
10. All such notices, requests, demands and other communication shall be deemed given upon receipt by the party to whom such
notice is directed.


 




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Section
11.          General. This Agreement may not be amended or modified
except by a writing signed by the Debtor and the Agent, nor may the Debtor assign any of its rights hereunder. Section headings
are for convenience of reference only and are not a part of this Agreement. This Agreement shall be binding upon the Debtor, its
successors and assigns, and shall inure to the benefit of and be enforceable by each of the Secured Parties and the successors
and assigns. The Debtor may not assign this Agreement, or any of its rights or obligations under this Agreement. Upon prior written
notice to the Debtor, each Secured Party, including the Agent, may assign this Agreement and any of their rights and obligations
hereunder to any person or entity that replaces it in its capacity as such.


 


Section
12.         Governing Law; Consent To Jurisdiction; Waiver Of Trial By Jury.


 


(a)          THIS
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER SEAL AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE (WITHOUT GIVING REFERENCE TO ANY CONFLICTS OF LAW PROVISIONS THEREIN) EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF A SECURITY INTEREST GRANTED HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE REQUIRED
TO BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE.


 


(b)          THE
DEBTOR AND EACH OF THE SECURED PARTIES AGREE THAT NEITHER IT NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN DEBTOR AND THE SECURED PARTIES HEREUNDER OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION
IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE SECURED PARTIES NOR DEBTOR HAVE AGREED WITH OR REPRESENTED
TO ANY OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.


 


(c)          THE
DEBTOR AND EACH OF THE SECURED PARTIES EACH HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND THE UNITED
STATES DISTRICT COURT FOR THE STATE OF DELAWARE, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN
OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF
THE DEBTOR'S OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY
WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.


 


Section
13.         Paramountcy. In the event of any conflict or inconsistency
between the provisions of this Agreement and the provisions of the Note Purchase Agreement then, notwithstanding anything contained
in this Agreement, the provisions contained in the Note Purchase Agreement shall prevail to the extent of such conflict or inconsistency
and the provisions of this Agreement shall be deemed to be amended to the extent necessary to eliminate such conflict or inconsistency,
it being understood that the purpose of this Agreement is to add to, and not detract from, the rights granted to the Agent (for
its own benefit and for the benefit of the other Secured Parties) under the Purchase Agreement. If any act or omission of the Debtor
is expressly permitted under the Purchase Agreement but is expressly prohibited under this Agreement, such act or omission shall
be permitted. If any act or omission is expressly prohibited under this Agreement, but the Purchase Agreement does not expressly
permit such act or omission, or if any act is expressly required to be performed under this Agreement but the Purchase Agreement
does not expressly relieve the Debtor from such performance, such circumstance shall not constitute a conflict or inconsistency
between the applicable provisions of this Agreement and the provisions of the Note Purchase Agreement.


 




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Section
14.         Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such prohibition or unenforceability
and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.


 


Section
15.         Acknowledgment of Receipt/Waiver. The Debtor acknowledges
receipt of an executed copy of this Agreement.


 


Section
16.         Enforcement by Agent. This Agreement and the security interests
created hereby may be enforced only by the action of the Agent acting on behalf of the Secured Parties and no other Secured Party
shall have any rights individually to enforce or seek to enforce this Agreement or any of the security interests, it being understood
and agreed that such rights and remedies may be exercised by the Agent for the benefit of the Secured Parties upon the terms of
this Agreement and any intercreditor agreement between the Secured Parties.


 


Section
17.         Counterparts. This Security Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one and the same Security Agreement.
Delivery of an executed signature page hereof by facsimile transmission or .pdf shall be effective as an in-hand delivery of an
original executed counterpart hereof.


 


[Remainder of page intentionally left
blank]


 




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IN WITNESS WHEREOF,
the parties have caused this Security Agreement to be duly executed as an instrument under seal as of the date first written above.


 


	 	DEBTOR:
	 	AUDIOEYE, INC.
	 	 
	 	By:	 
	 	 	 
	 	Name:	 
	 	Title:	 


 




     


     


    

 


IN WITNESS WHEREOF,
the parties have caused this Security Agreement to be duly executed as an instrument under seal as of the date first written above.


 


	 	SECURED PARTY:
	 	 
	 	If Entity:
	 	 
	 	Entity Name: 	               


 


	 	By:	               
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 


 


	 	If Individual:
	 	 
	 	Name:	               
	 	 	 
	 	Signature:	 


 


Signature Page to Security Agreement


 




     


     


    

 


EXHIBIT A


 


[investor names and addresses]


 




     


     


    

 


EXHIBIT B


 


Liens


 


	
        Name of Secured 

        Party
	 	Address of Secured Party	 	File Number	 	File Date