Document:

EXHIBIT 4.01

 

THE OFFER AND SALE OF THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES; PROVIDED THAT IN CONNECTION WITH ANY FORECLOSURE OR TRANSFER OF THE SECURITIES, THE TRANSFEROR SHALL COMPLY WITH THE PROVISIONS HEREIN AND IN THE SECURITIES PURCHASE AGREEMENT, AND UPON FORECLOSURE OR TRANSFER OF THE SECURITIES, SUCH FORECLOSING PERSON OR TRANSFEREE SHALL COMPLY WITH ALL PROVISIONS CONTAINED HEREIN AND IN THE SECURITIES PURCHASE AGREEMENT.

 

AUDIOEYE, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

	
Warrant   No. 2014-B-[             ]
    	
Original Issue   Date:                , 201  
    

 

AudioEye, Inc., a Delaware corporation (the “Company”), hereby certifies that, for value received,            , or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company, subject to the terms and conditions set forth herein, up to a total of            shares of common stock, $0.00001 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price equal to $0.60 per share (as adjusted from time to time as provided in Section 9 herein, the “Exercise Price”), at any time and from time to time on or after the date hereof (the “Original Issue Date”) and through and including 5:00 P.M., Tucson, Arizona time, on the five (5) year anniversary of the Original Issue Date (the “Expiration Date”).

 

This Warrant to Purchase Common Stock (this “Warrant”) is one of a series of similar warrants (collectively, the “Warrants”) issued pursuant to, and has been issued to the Holder in connection with, the private placement of securities offered by the Company pursuant to that certain: (i) Securities Purchase Agreement and (ii) this Warrant (collectively, the “Transaction Documents”).  The Holder takes this Warrant subject to the terms and restrictions set forth in the Transaction Documents and shall be entitled to certain rights and privileges as set forth in the Transaction Documents.

 

1.             Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement.

 

2.             Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the

 

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registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

3.             Registration of Transfers. Subject to compliance with all applicable securities laws, the Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached as Schedule 2 hereto duly completed and signed, to the Company at its address specified in the Securities Purchase Agreement and (x) delivery, at the request of the Company, of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws and (y) delivery by the transferee of a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act and making the representations and certifications set forth in Sections 3.2 of the Securities Purchase Agreement, to the Company at its address specified in the Securities Purchase Agreement. Upon any such registration or transfer, a new Warrant to purchase Common Stock in substantially the form of this Warrant (any such new Warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. The Company shall prepare, issue and deliver at its own expense any New Warrant under this Section 3.

 

4.             Exercise and Duration of Warrants.

 

(a)           All or any part of this Warrant shall be exercisable by the registered Holder in any manner permitted by Section 10 of this Warrant at any time and from time to time on or after the Original Issue Date and through and including 5:00 P.M., Tucson, Arizona time, on the Expiration Date, subject to the conditions and restrictions contained in this Warrant. At 5:00 P.M., Tucson, Arizona time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.

 

(b)           The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 10 below). The date on which the Exercise Notice is delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.”  The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price, except to the extent this Warrant is exercised by a “cashless” exercise pursuant to Section 10 hereto, as provided above shall constitute the Holder’s certification to the Company that its representations contained in Section 3.2 of the Securities Purchase Agreement are true and correct as of the Exercise Date as if remade in their entirety (or, in the case of any transferee Holder that is not a party to the Securities Purchase Agreement, such transferee Holder’s certification to the Company that such representations are true and correct as to such transferee Holder as of the Exercise Date). The Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Exercise Notice is delivered to the Company. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares, if any. “Trading Day” means a day on which exchanges in the United States are open for the buying and selling of securities.

 

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5.             Delivery of Warrant Shares.  Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (provided that, if the Holder directs the Company to deliver a certificate for the Warrant Shares in a name other than that of the Holder or an Affiliate of the Holder, it shall deliver to the Company on the Exercise Date an opinion of counsel reasonably satisfactory to the Company to the effect that the issuance of such Warrant Shares in such other name may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws), (i) a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends, or (ii) an electronic delivery of the Warrant Shares to the Holder’s account at the Depository Trust Company (“DTC”) or a similar organization, unless in the case of clause (i) and (ii) a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant Shares are not freely transferable without volume and manner of sale restrictions pursuant to Rule 144 under the Securities Act, in which case such Holder shall receive a certificate for the Warrant Shares issuable upon such exercise with appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date with respect thereto. If the Warrant Shares can be issued without restrictive legends, the Company shall, upon the written request of the Holder, use its commercially reasonable efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through DTC or another established clearing corporation performing similar functions, if available.

 

6.             Charges, Taxes and Expenses. Issuance and delivery of the Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of the Warrant Shares, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of Warrant Shares or the Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liabilities that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.             Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new warrant (“New Warrant”), but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity and surety bond, if requested by the Company. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

 

8.             Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are initially issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price (or upon a “cashless exercise” pursuant to Section 10) in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will

 

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take all commercially reasonable actions as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

 

9.             Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 

(a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case, the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustments made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

 

(b)           Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph) or (iii) rights or Warrants to subscribe for or purchase any security, or (iv) any other asset, including cash dividends (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date without regard to any limitation on exercise contained therein. Notwithstanding anything herein to the contrary, the foregoing provisions in this Section 9(b) shall not apply to, or be triggered by, any rights issued by the Company (either separately or that attach to any securities of the Company) in connection with any stockholders rights agreement, poison pill or other similar anti-takeover provision under the Company’s certificate of incorporation, bylaws or other documents.

 

(c)           Fundamental Transactions.

 

(i)            It shall be a condition to the Company’s entry into a Fundamental Transaction that (i) if the Successor Entity (or the Successor Entity’s Parent Entity) is a publicly traded entity whose common stock is quoted on or listed for trading on an U.S. national securities exchange, the Successor Entity (or Parent Entity, if applicable) assumes in writing (or remains bound by) all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 9(c), including agreements (if necessary) to deliver to each holder of the Warrants in exchange for such Warrants a security of the Successor Entity (or Parent Entity, if applicable) evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted (if necessary) exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and (ii) if the Successor Entity is not a publicly traded entity whose common stock is quoted on or listed for trading on an U.S. national securities exchange (a “Trading Market”), the Successor assumes in

 

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writing (or remains bound by) all of the obligations of the Company under this Warrant pursuant to written agreements, including (if necessary) agreements to deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant exercisable for the consideration that would have been issuable in the Fundamental Transaction in respect of the Warrant Shares had this Warrant been exercised immediately prior to the consummation of the Fundamental Transaction. Upon the occurrence of any such Fundamental Transaction, the Successor Entity (or Parent Entity, if applicable) shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity (or Parent Entity, if applicable)), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity (or Parent Entity, if applicable) had been named as the Company herein. The provisions of this paragraph (c) shall similarly apply to subsequent Fundamental Transactions.

 

(ii)           For purposes of this Section 9(c), the following definitions shall apply:

 

“Fundamental Transaction” means that (A) the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) another Person completes a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) or (B) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock.

 

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common shares or common stock or equivalent equity security is quoted or listed on a Trading Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

“Successor Entity” means, if applicable, the Person formed by, resulting from or surviving any Fundamental Transaction or, for the purposes of Section 9(c)(ii), the Person with which such Fundamental Transaction shall have been entered into.

 

(d)           Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon

 

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exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

(e)           Calculations. All calculations under this Section 9 shall be rounded down to the nearest whole cent or the nearest whole share, as applicable.

 

(f)            Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.

 

(g)           Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or Warrants to subscribe for or purchase any capital stock of the Company, (ii) enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice of such transaction at least fifteen (15) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

 

10.          Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds by wire transfer to an account designated by the Company or the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

 

X = Y [(A-B)/A]

 

where:

 

“X” equals the number of Warrant Shares to be issued to the Holder;

 

“Y” equals the total number of Warrant Shares with respect to which this Warrant is being exercised;

 

“A” equals the arithmetic average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five (5) consecutive Trading Days ending on the date immediately preceding the Exercise Date (the “Fair Market Value”); and

 

“B” equals the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

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For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the Principal Trading Market for such security, as reported by Bloomberg Financial Markets, or, if such Principal Trading Market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00 P.M., New York City time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Company. The Board of Directors’ determination shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

11.          Rule 144. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a “cashless exercise” transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the Original Issue Date of this Warrant (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise).

 

12.          No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the Closing Sale Price) for any such fractional shares.

 

13.          Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Securities Purchase Agreement prior to 5:00 P.M., Tucson, Arizona time, on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Securities Purchase Agreement on a day that is not a Trading Day or later than 5:00 P.M., Tucson, Arizona time, on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, and (iv) upon actual receipt by the Person to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a Person for such notices or communications shall be as set forth in the Securities Purchase Agreement unless changed by such Person by three (3) Trading Days’ prior written notice to the other Persons in accordance with this Section 13.

 

14.          Warrant Agent. The Company shall serve as Warrant agent under this Warrant. Upon fifteen (15) days’ notice to the Holder, the Company may appoint a new Warrant agent. Any corporation into which the Company or any new Warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new Warrant agent shall be a party or any corporation to which the Company or any new Warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor Warrant agent under this Warrant without any further act. Any such successor Warrant agent shall promptly cause notice of its succession as Warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

 

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15.          Miscellaneous.

 

(a)           No Rights as a Stockholder. The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (except upon exercise of this Warrant) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

(b)           Authorized Shares. (i) The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all commercially reasonable actions as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

(ii)           Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

(c)           Successors and Assigns.  Subject to the restrictions on transfer set forth in this Warrant and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company without the written consent of the Holder except to a Successor Entity in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the Company and the Holder and their respective successors and permitted assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.

 

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(d)           Amendment and Waiver. Except as otherwise provided herein, the provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder of this Warrant.

 

(e)           Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

(f)            Governing Law; Jurisdiction.  ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.

 

(g)           Headings.  The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 

(h)           Severability. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the Company and the Holder will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

 

	
 
    	
AUDIOEYE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Nathaniel T. Bradley
    
	
 
    	
 
    	
Chief Executive Officer
    

 

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SCHEDULE 1

 

FORM OF EXERCISE NOTICE

 

[To be executed by the Holder to purchase shares of Common Stock under the Warrant.]

 

Ladies and Gentlemen:

 

(1)           The undersigned is the Holder of Warrant No.            (the “Warrant”) issued by AudioEye, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

 

(2)           The undersigned hereby exercises its right to purchase            Warrant Shares pursuant to the Warrant.

 

(3)           The Holder intends that payment of the Exercise Price shall be made as (check one):

 

o            Cash Exercise

 

o            “Cashless Exercise” under Section 10 of the Warrant

 

(4)           If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $            in immediately available funds to the Company in accordance with the terms of the Warrant.

 

(5)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.

 

 

	
Dated:
    	
 
    	
 
    
	
 
    
	
Name of Holder:
    	
 
    	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
						

 

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

 

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SCHEDULE 2

 

FORM OF ASSIGNMENT

 

[To be completed and executed by the Holder only upon transfer of the Warrant.]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                              (the “Transferee”) the right represented by the within Warrant to purchase           shares of Common Stock of AudioEye, Inc., a Delaware corporation (the “Company”), to which the within Warrant relates and appoints                                attorney to transfer said right on the books of the Company with full power of substitution in the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:

 

(a)                                 the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States;

 

(b)                                 the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;

 

(c)                                  the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and

 

(d)                                 the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States.

 

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
(Signature must conform   in all respects to name of holder as specified on the face of the Warrant)
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Address of Transferee:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
In the presence of:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

12Exhibit 10.1

 

CONSULTING AGREEMENT

 

This CONSULTING AGREEMENT (the “Agreement”) is made and entered into on December 31, 2014 and effective as of the 1st day of January 2015, by and between Ventas, Inc., a Delaware corporation (the “Company”), and Richard A. Schweinhart (the “Consultant”).

 

R E C I T A L S:

 

WHEREAS, on April 22, 2014, Consultant notified the Company of his intention to retire at the end of 2014;

 

WHEREAS, in connection with his planned retirement, Consultant ceased to be the Company’s Executive Vice President and Chief Financial Officer and Acting Chief Accounting Officer effective October 27, 2014 and became Senior Advisor to the Chief Executive Officer and Merger Integration Leader for the period through December 31, 2014;

 

WHEREAS, the Company desires to continue to have Consultant provide certain services, as described below, on the terms and for the consideration set out below; and

 

WHEREAS, the Consultant and the Company desire to embody in this Agreement the terms and conditions of the Consultant’s engagement by the Company, which terms and conditions shall supersede all prior oral and written agreements, arrangements and understandings relating to the Consultant’s services.

 

NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is hereby agreed as follows:

 

1.                                      ENGAGEMENT:  The Company hereby agrees to engage the Consultant, and the Consultant does hereby accept the engagement with the Company to serve the Company, in the capacities, for the term, and subject to the terms and conditions, as herein contained.

 

2.                                      TERM:  The consulting services to be provided by the Consultant to the Company pursuant to this Agreement shall commence as of January 1, 2015 and shall continue through March 31, 2015, subject to earlier termination as provided for in Section 7 hereof ( the “Term”).

 

3.                                      DUTIES:

 

(a)                                 During the Term of this Agreement, subject to the limitation set forth in Section 3(b), the Consultant agrees to provide financial and accounting assistance as requested by the Company, including, without limitation, with respect to the preparation of the Company’s financial statements for 2014 (the “Project”).

 

(b)                                 The Company will make available to the Consultant normal technical support and equipment to enable him to perform the Project and to the extent Consultant’s services are necessary to be performed at the Company’s offices, the Company will provide Consultant with a guest office at the Company’s offices in Louisville, Kentucky.  Travel times to locations outside of Louisville, Kentucky, if necessary, shall count as hours of service.  The Consultant shall report directly to the Company’s Chief Executive Officer.

 

 

4.                                      CONSULTING FEE:  The Company shall pay the Consultant, and the Consultant hereby agrees to accept as payment for all consulting services rendered hereunder (the “Consulting Fee”), an amount equal to four hundred dollars ($400.00) per hour for approved work on the Project.  Every other Friday commencing January 9, 2015, the Consultant shall provide to the Company detailed itemization of the hours worked and the services performed during the prior two weeks.

 

5.                                      EXPENSES:  Upon presentation of expense statements or vouchers and such other supporting information as the Company may reasonably request, and in accordance with such policies set forth by the Company for its employees, the Company shall pay or reimburse the Consultant for all reasonable out-of-pocket travel, lodging and other expenses incurred by the Consultant for travel and other appropriate business expenses in connection with the performance of services under this Agreement.

 

6.                                      INDEPENDENT CONTRACTOR STATUS:  The Consultant will perform the obligations and duties under this Agreement solely as an independent contractor performing work for the Company, doing so in the manner determined by the Consultant, subject to applicable objectives set by the Company, and not as an agent or employee of, or joint venturer with, the Company.  The Consultant shall not, by reason of this Agreement, acquire any benefits, privileges or rights under any benefit plan maintained by the Company or its subsidiaries or affiliates for the benefit of their employees including, without limitation, (a) any pension or profit-sharing plans or (b) any plans providing medical, dental, disability or life insurance protection; provided that this sentence does not limit the rights that the Consultant has under any such plans with respect to the period while the Consultant was an employee or any COBRA rights that Consultant or his family may have because of his termination of employment from the Company.  The Consultant shall be solely responsible for the payment of any federal, state and local taxes applicable to the fees and expenses paid or payable by the Company in connection with the Consultant’s engagement.  The Consultant hereby agrees to indemnify and hold the Company harmless against any liability, cost or expense incurred by the Company for failure to satisfy any payment of any federal, state and local taxes applicable to the fees and expenses paid or payable by the Company in connection with this Agreement.

 

7.                                      TERMINATION:  This Agreement and the engagement of the Consultant hereunder shall terminate on the first to occur of the following events or conditions:

 

(a)                                 The expiration of the Term specified in Section 2.

 

(b)                                 The Consultant’s death or total and permanent disability.

 

8.                                      RESTRICTIVE COVENANTS:

 

(a)                                 CONFIDENTIALITY:  The Consultant shall not, unless written permission is granted by the General Counsel of the Company, disclose to or communicate in any manner with the press or any other media about the Consultant’s services (consulting or employment) to the Company, the terms of this Agreement or any other service agreement, the termination of the Consultant’s employment with the Company or services under this Agreement, the businesses or affairs of the Company, the officers, directors, employees and/or consultants of the Company, or any matter related to any of the foregoing.

 

The Consultant will maintain as secret and confidential all information and techniques acquired, developed, possessed or used by the Company relating to their business, operations, actual or

 

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potential products, strategies, assets, liabilities, potential assets and liabilities, employees, customers, tenants, operators, borrowers, managers, business partners, communities, buildings and facilities and proposed or prospective customers, tenants, operators, borrowers, managers, business partners, communities, buildings and facilities (including without limitation: information protected by the Company’s attorney/client work product, or tax advisor/audit privileges; tax matters and information; financial analysis and models; the Company’s strategic plans; current or potential products; negotiations with third parties; methods, policies, processes, formulas, techniques, know-how and other knowledge; trade practices, trade secrets, or financial matters; lists of customers or customers’ purchases; lists of suppliers, representatives or other distributors; lists of and information (business, financial and otherwise) about tenants, operators, borrowers, managers and customers and their respective businesses and operations; requirements for systems, programs, machines, or their equipment; information regarding the Company’s bank accounts, credit agreement or financial projections, results or information; information regarding the Company’s present or former employees, directors or officers or their personal affairs; information related to the Company’s plans, ideas, strategies and efforts to expand its business into international markets; the identity, contact and other information of business contacts, (including, but not limited to, potential partners, investors, managers, owners, lenders, vendors and others), with whom the Company and/or Consultant communicated with or planned to communicate with concerning or as part of the Company’s international expansion plans; the nature of, identity of and information concerning business investment opportunities outside of the United States that Consultant is aware the Company has considered or discussed) whether or not any such information or any of the material described above is explicitly designated or marked as “confidential” (“Confidential Information”).  “Confidential Information” shall not include information that (A) is or becomes generally available to the public other than as a result of a disclosure by the Consultant in violation of this Agreement, (B) was available to the Consultant on a non-confidential basis prior to the Consultant’s employment with the Company, or (C) is compelled to be disclosed by any law, regulation or order of a court or governmental agency, provided that prior written notice is given to the Company and the Consultant cooperates with the Company in any efforts by the Company to limit the scope of such obligation and/or to obtain confidential treatment of any material disclosed pursuant to such obligation.  The Consultant recognizes that all such Confidential Information is the sole and exclusive property of the Company and that disclosure of Confidential Information would cause damage to the Company.  The Consultant shall not disclose, directly or indirectly, any Confidential Information obtained during the Consultant’s services to the Company, and will take all necessary precautions to prevent disclosure, to any unauthorized individual or entity inside or outside the Company, and will not use the Confidential Information or permit its use for the benefit of the Consultant or other third party other than the Company.  These obligations shall continue for so long as the Confidential Information remains Confidential Information.

 

(b)                                 OTHER COVENANTS:  The Consultant hereby acknowledges and reaffirms the covenants in Section 9 of the Amended and Restated Employment Agreement dated as of December 31, 2004 and amended as of March 19, 2007 and December 31, 2008 by and between the Company and the Consultant (collectively, the “Employment Agreement), which includes, without limitation, those covenants set forth in Section 9(b), 9(c), 9(d), 9(e), 9(g) and 9(h) of the Employment Agreement; provided, however, solely during the Term, the per hourly fee for approved work on the Project shall be the Consulting Fee set forth in Section 4 of this

 

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Agreement rather than the hourly rate set forth for assistance in Section 9(h) of the Employment Agreement.

 

(c)                                  REASONABLENESS OF RESTRICTIVE COVENANTS: The Consultant acknowledges that the covenants contained in this Section 8 and the covenants contained in Section 9 of the Employment Agreement are reasonable in the scope of the activities restricted, the geographic area covered by the restrictions, and the duration of the restrictions, and that such covenants are reasonably necessary to protect the Company’s legitimate interests in its Confidential Information, its reputation, and in its relationships with its employees, customers, and suppliers.  The Company has consulted, and the Consultant has had an opportunity to, consult with their respective legal counsel and to be advised concerning the reasonableness and propriety of such covenants.  The Consultant acknowledges that the observance of the covenants contained herein and in the Employment Agreement will not deprive the Consultant of the ability to earn a livelihood or to support his dependents.  If any provision or portion of Section 8 of this Agreement or Section 9 of the Employment Agreement is held to be unenforceable because of the scope, duration, territory, or terms thereof, Consultant agrees that the court making such determination shall have the power to and shall reduce the scope, duration, territory and/or terms of such provision, so that the provision is enforceable by the court to afford the maximum protection to the Company under the law, and such provision as amended shall be enforced by the court.

 

(d)                                 RIGHT TO INJUNCTION:  In recognition of the confidential nature of the Confidential Information, and in recognition of the necessity of the limited restrictions imposed by Section 8 of this Agreement and Section 9 of the Employment Agreement, the Consultant and the Company agree that it would be impossible to measure solely in money the damages which the Company would suffer if the Consultant were to breach any of his obligations hereunder or in the Employment Agreement.  The Consultant acknowledges that any breach of any provision of this Agreement or the Employment Agreement would irreparably injure the Company.  Accordingly, the Consultant agrees that if the Consultant breaches any of the provisions of this Section 8 or Section 9 of the Employment Agreement, the Company shall be entitled, in addition to any other remedies to which the Company may be entitled under this Agreement, the Employment Agreement or otherwise, to an injunction to be issued by a court of competent jurisdiction, to restrain any breach, or threatened breach, of any provision of this Section 8 or Section 9 of the Employment Agreement, and the Consultant hereby waives any right to assert any claim or defense that the Company has an adequate remedy at law for any such breach or to require the Company to post bond or other security during the pendency of such injunctions.

 

(e)                                  RETURN OF PROPERTY AND INFORMATION:  After termination of the engagement, the Consultant shall return to the Company all Company property and proprietary information of the Company.

 

(f)                                   SURVIVAL:  The provisions of this Section 8 of this Agreement and Section 9 of the Employment Agreement shall survive the termination of this Agreement and the termination of the Employment Agreement, as applicable.

 

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9.                                      CONSULTANT REPRESENTATIONS:

 

(a)                                 In the event the Consultant becomes aware of any restriction or limitation on the Consultant’s ability to provide the consulting services contemplated under this Agreement, the Consultant shall immediately notify the Company of such restriction or limitation and provide the Company with any supporting information relevant to the restriction or limitation.

 

(b)                                 The representations and warranties of the Consultant contained in this Section 9 shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

10.                               SUCCESSORSHIP AND COMPANY:  This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including any corporate successor by merger or consolidation. As used in this Agreement, including, without limitation, Section 8, the term “Company” shall include such successors or assigns, and any subsidiary or affiliate of the Company.  The services to be provided by the Consultant under this Agreement are personal to Company and shall not be assignable by the Consultant without the prior written consent of the Company.

 

11.                               ENTIRE AGREEMENT:  The parties agree that the Employment Agreement shall continue to apply and control for all matters contained and addressed in the Employment Agreement.  This Agreement contains the entire agreement of the parties relating to and supersedes all prior oral or written agreements relating to the consulting subject matter hereof, and the parties hereto have no agreements, representations or warranties relating to the consulting subject matter of this Agreement which are not set forth herein.  No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto.

 

12.                               NOTICE:  Any notice or request required or permitted under this Agreement shall be in writing and given or made by postage paid, registered or certified mail, return receipt requested, or by overnight courier, with confirmation of receipt and prepaid, addressed to the Company or the Consultant at the then principal place of business, or the Consultant at the address last given to the Company, or to any party hereto at such other address or addresses as such party may from time to time specify for such purposes in a notice similarly given to the other parties.

 

13.                               DISPUTES.  Any dispute or controversy arising under, out of, or in connection with this Agreement shall, at the election and upon written demand of the Company, be finally determined and settled by binding arbitration in the City of Chicago, Illinois, in accordance with the commercial arbitration rules and procedures of JAMS, and judgment upon the award may be entered in any court having jurisdiction thereof.  Each party shall bear its own costs, legal fees and other expenses respecting such arbitration; provided, however, if one party shall prevail in the claims in such arbitration as determined by the arbitrator, the non-prevailing party shall pay the prevailing party’s costs, legal fees and other expenses respecting such arbitration. The parties agree that for any dispute for which the Company does not make the arbitration election and demand, the exclusive jurisdiction and venue will be in the federal or state courts located in Cook County, Illinois.

 

14.                               APPLICABLE LAWS:  This Agreement is made and is to be performed in the State of Illinois and shall be construed and enforced in accordance with the laws of the State of Illinois.  The Consultant hereby consents to jurisdiction in the State of Illinois.

 

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15.                               SECURITIES WARNING:  The Consultant acknowledges that the Consultant is aware that federal and many state securities laws prohibit any person who has received from an issuer material, non-public information, from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.  The Consultant agrees to comply with the terms of the Company’s Amended and Restated Securities Trading Policy.

 

IN WITNESS WHEREOF, the Company and the Consultant have each caused this Agreement to be executed as of the day and year written below.

 

 

	
 
    	
 
    	
VENTAS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/ T. Richard Riney
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: T. RICHARD RINEY
    
	
 
    	
 
    	
 
    
	
Date:
    	
12/31/14
    	
 
    	
Its: EXECUTIVE VICE   PRESIDENT
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
RICHARD A. SCHWEINHART
    
	
 
    	
 
    	
 
    
	
Date:
    	
12/31/14
    	
 
    	
/s/ Richard A.   Schweinhart
    

 

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