Exhibit 10.10

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is
made and entered into as of the 25th day of February, 2019, to be effective as
of January 1, 2019 (the “Effective Date”), by and between AudioEye, Inc., a
Delaware corporation with an address at 5210 E Williams Circle, Suite 750,
Tucson, Arizona 85711 (the “Company”), and Todd Bankofier, a natural person
(“Executive”).

 

WITNESSETH:

 

WHEREAS, Executive is employed by the Company as its Chief Executive Officer
(the “Position”) and the Company desires to continue to employ Executive in such
capacity, while updating Executive’s January 1, 2018 Executive Employment
Agreement;

 

NOW, THEREFORE, in consideration of the foregoing recitals and the respective
covenants and agreements of the parties contained in this document, the Company
and Executive hereby agree as follows:

 

1.         Employment and Duties. The Company agrees to employ and Executive
agrees to serve in the Position. The duties and responsibilities of Executive
shall include the duties and responsibilities set forth in Executive’s Job
Description, attached as Attachment A, and those the Board of Directors of the
Company (the “Board”) may from time to time reasonably assign to Executive.

 

Executive shall devote such amount of his time, attention, and energies to the
business of the Company as the Company and Executive shall reasonably and
mutually agree is necessary for Executive to fulfill the duties and
responsibilities of the Position. Provided that none of the additional
activities materially interfere with the performance of the duties and
responsibilities of Executive, nothing in this Section 1 shall prohibit
Executive from (a) serving as a director or member of a committee of, making
investments in, or consulting or working with entities that do not, in the good
faith determination of the Board, compete directly with the Company or otherwise
create, in the good faith determination of the Board, a conflict of interest
with the business of the Company; (b) delivering lectures, fulfilling speaking
engagements, and any writing or publication relating to Executive’s area of
expertise; (c) serving as a director or trustee of any governmental, charitable
or educational organization; or (d) engaging in additional activities in
connection with personal investments and community affairs; provided that such
activities are not inconsistent with Executive’s duties under this Agreement and
do not violate the terms of Section 13. For the avoidance of doubt, Executive
agrees that this is a full-time position with the Company, and any such
additional activities will not interfere with the fulfillment of the duties and
responsibilities of the Position.

 

2.         Term. The term of this Agreement shall be the same as was established
in Executive’s January 1, 2018 Executive Employment Agreement, which commenced
on January 1, 2018, for a period of two (2) years from January 1, 2018, through
December 31, 2019. This Agreement shall be automatically renewed for successive
one (1) year periods, beginning on January 1, 2020, thereafter unless either
party provides the other party with written notice of his, her or its intention
not to renew this Agreement at least four (4) months prior to the expiration of
the initial term or any renewal term of this Agreement, as applicable. In the
event the Company fails to provide Executive with written notice of its
intention not to renew this Agreement at least four (4) months prior to the
expiration of the initial term or any renewal term of this Agreement, then the
term of this Agreement automatically shall be extended until the date which is
six (6) months after the date such notice is given, during which time Executive
may seek alternative employment while still being employed by the Company.
“Employment Period” shall mean the initial two (2) year term plus renewal
periods, if any.

 

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3.         Place of Employment. Executive’s job site shall be at an office
sublet to Audio Eye in Scottsdale, Arizona and at 5210 E Williams Circle, Suite
750, in Tucson, Arizona (the “Job Site”). Executive shall primarily work from
the Scottsdale office location, and shall work occasionally from the Tucson
office location. The parties acknowledge, however, that Executive may be
required to travel in connection with the performance of his duties hereunder.

 

4.         Base Salary. For all services to be rendered by Executive pursuant to
this Agreement, the Company agrees to pay Executive during the Employment Period
a base salary (the “Base Salary”) at a minimum annual rate of $250,000 during
2018 and of $300,000 during the remainder of the Employment Period. The Base
Salary shall be paid in periodic installments in accordance with the Company’s
regular payroll practices. The parties shall meet at least annually to discuss
increases to the Base Salary.

 

5.         Bonuses. During each year in the Employment Period, Executive shall
be eligible to receive an annual bonus (each, a “Bonus”) in an amount (the
“Annual Bonus Amount”) to be determined by the Compensation Committee of the
Board (the “Compensation Committee”) (or by the independent members of the
Board, if there is no Compensation Committee) if the Company and Executive meets
or exceeds criteria adopted by the Compensation Committee (or by the independent
members of the Board, if there is no Compensation Committee) for earning the
Bonuses. The Bonus normally will be paid in cash; provided, however, that the
Company and Executive can mutually agree that any particular Bonus can be paid
in equity of the Company or a combination of cash and equity of the Company.
Payment of each Bonus, if any, will be made within fifteen (15) days after the
Audit Committee of the Company’s Board approves the Company’s annual financial
statements for the applicable fiscal year but in no event later than the last
day of the fiscal year immediately following the applicable fiscal year. The
Compensation Committee (or the independent members of the Board, if there is no
Compensation Committee) may provide for additional bonus payments for Executive
upon achievement of additional criteria established or determined from time to
time by the Compensation Committee (or by the independent members of the Board,
if there is no Compensation Committee).

 

6.        Severance Compensation. If, at any time prior to the expiration of the
Employment Period, the Company terminates Executive without Cause (as defined
below) or Executive terminates his employment with Good Reason (as defined
below), then the Company shall pay or provide all of the following to Executive:

 

(a)       Executive shall be entitled to (1) reimbursement of any and all
business expenses paid or incurred by Executive through the termination date,
pursuant to Section 9 below, (2) receipt of any accrued but unused paid time off
through the termination date in accordance with Company policy, as in effect as
of the date of termination, (3) receipt of any earned but unpaid Base Salary
accrued through Executive’s last date of employment with the Company, and (4)
receipt of an amount equal to a portion of the Executive’s Base Salary, as set
forth in Section 6(c) below (all of these payments are collectively the
“Separation Payment”), provided that to be eligible to be paid the Base Salary
portion of the Separation Payment described in Section 6(a)(4), Executive must
execute an agreement releasing Company and its affiliates from any liability
associated with this Agreement in form and terms satisfactory to the Company and
that all time periods imposed by law permitting cancellation or revocation of
such release by Executive shall have passed or expired; and

 

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(b)      Subject to Executive’s timely election of continuation coverage under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)
with respect to the Company’s group health insurance plans in which the Employee
participated immediately prior to the termination date (“COBRA Continuation
Coverage”), the Company will pay the cost of COBRA Continuation Coverage for
Executive and his eligible dependents until the earliest of (i) Executive and
his eligible dependents, as the case may be, ceasing to be eligible under COBRA,
or (ii) twelve (12) months following the termination date (the benefits provided
under this Section 6(b), the “Medical Continuation Benefits”) or until such time
as Executive shall obtain reasonably equivalent benefits for him and his
eligible dependents from subsequent employment or spousal benefits.

 

(c)       The Base Salary portion of the Separation Payment described in Section
6(a)(4) above shall be the remaining salary that would otherwise be paid to
Executive for the remainder of the Employment Period, but in no event shall this
amount be less than twelve (12) months of Executive’s Base Salary (at the rate
that was in effect at the time of termination). Such Base Salary portion shall
be paid at such time and in such manner as such Base Salary would have been paid
had Executive remained employed in accordance with the customary payroll
practices of the Company, except that, to the extent Executive becomes entitled
to a Separation Payment on account of a separation from service that occurs
within 120 days after a Change of Control (to the extent such Change of Control
meets the requirements for a change in control event under Section 409A), the
Base Salary portion of such Separation Payment shall be payable in a lump sum
within 60 days following such separation from service subject to all other terms
and conditions herein. Notwithstanding anything herein to the contrary, in the
event that the period in which a release agreement could be considered and
become irrevocable spans two taxable years, any Separation Payment that becomes
payable hereunder shall be paid or commence in the later of the two taxable
years, subject to all other terms and conditions herein.

 

7.         Equity Awards. Executive shall be eligible for such grants of awards
at the discretion of the Compensation Committee (or the Board, if there is no
Compensation Committee) may from time to time determine (the “Share Awards”).
Awards shall be subject to the applicable Plan terms and conditions; provided,
however, that Awards shall be subject to any additional terms and conditions as
are provided herein or in any award certificate(s), which shall supersede any
conflicting provisions governing Share Awards provided under the Plan. Subject
to the approval by the Board or Compensation Committee, Executive would receive
a grant of restricted stock units in an amount equal to approximately $75,000,
which would be subject to vesting requirements as determined by the Board or
Compensation Committee, as applicable.

 

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8.         Clawback Rights. All amounts paid to Executive by the Company during
the Employment Period and any time thereafter (other than Executive’s Base
Salary, Bonuses, accrued but unused paid time off, reimbursement of expenses
pursuant to Section 9 hereof, Medical Continuation Benefits, and the Separation
Payment) and any and all stock based compensation (such as options and equity
awards) granted during the Employment Period and any time thereafter
(collectively, the “Clawback Benefits”) shall be subject to “Clawback Rights” as
follows: during the period that Executive is employed by the Company and upon
the termination or expiration of Executive’s employment and for a period of
three (3) years thereafter, if any of the following events occur, Executive
agrees to repay or surrender to the Company the Clawback Benefits if a
restatement (a “Restatement”) of any financial results from which any Clawback
Benefits to Executive shall have been determined (such restatement resulting
from material non-compliance of the Company with any financial reporting
requirement under the federal securities laws and shall not include a
restatement of financial results resulting from subsequent changes in accounting
pronouncements or requirements which were not in effect on the date the
financial statements were originally prepared), then Executive agrees to
immediately repay or surrender upon demand by the Company any Clawback Benefits
which were determined by reference to any Company financial results which were
later restated, but only to the extent the Clawback Benefits amounts paid exceed
the Clawback Benefits amounts that would have been paid, based on the
restatement of the Company’s financial information. All Clawback Benefits
amounts resulting from such Restatements shall be retroactively adjusted by the
Compensation Committee (or the Board, if there is no Compensation Committee) to
take into account the restated results and if any excess portion of the Clawback
Benefits resulting from such restated results is not so repaid or surrendered by
Executive within ninety (90) days of the revised calculation being provided to
Executive by the Company following a publicly announced restatement, the Company
shall have the right to take any and all action to effectuate such adjustment.

 

The Clawback Rights shall terminate following a Change of Control, subject to
applicable law, rules and regulations. The amount of Clawback Benefits to be
repaid or surrendered to the Company shall be determined by the Compensation
Committee (or the Board, if there is no Compensation Committee) in accordance
with applicable law, rules and regulations. All determinations by the
Compensation Committee (or the Board, if there is no Compensation Committee)
with respect to the Clawback Rights shall be final and binding on the Company
and Executive. The parties acknowledge it is their intention that the foregoing
Clawback Rights as relates to Restatements conform in all respects to the
provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (the “Dodd Frank Act”) and requires recovery of all “incentive-based”
compensation, pursuant to the provisions of the Dodd Frank Act and any and all
rules and regulations promulgated thereunder from time to time in effect.
Accordingly, the terms and provisions of this Agreement shall be deemed
automatically amended from time to time to assure compliance with the Dodd Frank
Act and such rules and regulation as hereafter may be adopted and in effect.

 

9.         Expenses. Executive shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by Executive while employed (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in the performance of his duties and responsibilities under this
Agreement; provided, that Executive shall properly account for such expenses in
accordance with Company policies and procedures.

 

10.       Other Benefits; Vacation. During the Employment Period, Executive
shall be eligible to participate in incentive, stock purchase, savings,
retirement (401(k)), and welfare benefit plans, including, without limitation,
health, medical, dental, vision, life (including accidental death and
dismemberment) and disability insurance plans (collectively, “Benefit Plans”),
in substantially the same manner and at substantially the same levels as the
Company makes such opportunities available to the Company’s managerial or
salaried executive employees. During the term of this Agreement, Executive shall
be entitled to accrue, on a pro rata basis, twenty (20) paid vacation days per
year, which if not taken, will accrue and be carried forward into the next year.
No carry forward of vacation past the second year will be granted without the
approval of the Compensation Committee of the Board. Vacation shall be taken at
such times as are mutually convenient to Executive and the Company and no more
than twenty (20) consecutive days shall be taken at any one time without the
advance approval of the Board.

 

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11.       Termination of Employment.

 

(a)       Death. If Executive dies during the Employment Period, this Agreement
and Executive’s employment with the Company shall automatically terminate and
the Company shall have no further obligations to Executive or his heirs,
administrators or executors with respect to compensation and benefits accruing
thereafter, except for the obligation to pay to Executive’s spouse if living
(and in the event she predeceases Executive, then to his heirs, administrators
or executors): (i) any earned but unpaid Base Salary accrued through the date of
death, (ii) reimbursement of any and all business expenses paid or incurred by
Executive through the termination date, pursuant to Section 9 above, (iii) any
accrued but unused paid time off through the termination date in accordance with
Company policy, and (iv) an amount equal to three (3) months of Executive’s Base
Salary (at the rate that was in effect at the time of death) to be paid within
10 days of Executives' death. The Company shall deduct, from all payments made
hereunder, all applicable taxes, including income tax, FICA and FUTA, and other
deductions required by law. In addition, Executive’s spouse and minor children
shall be entitled to Medical Continuation Benefits.

 

(b)       Disability. In the event that, during the term of this Agreement,
Executive shall be prevented from performing, with or without reasonable
accommodation, his essential duties and responsibilities as Chief Executive
Officer by reason of Disability (as defined below), this Agreement and
Executive’s employment with the Company shall automatically terminate and the
Company shall have no further obligations or liability to Executive or his
heirs, administrators or executors with respect to compensation and benefits
accruing thereafter, except for the obligation to pay Executive or his spouse if
living (and in the event she predeceases Executive, then his heirs,
administrators or executors): (i) any earned but unpaid Base Salary accrued
through Executive’s last date of employment with the Company, (ii) reimbursement
of any and all business expenses paid or incurred by Executive through the
period ending on the termination date, pursuant to Section 9 above, and (iii)
any accrued but unused paid time off through the termination date in accordance
with Company policy. The Company shall deduct, from all payments made hereunder,
all applicable taxes, including income tax, FICA and FUTA, and other deductions
required by law. In addition, Executive’s spouse and minor children shall be
entitled to Medical Continuation Benefits. For purposes of this Agreement,
“Disability” shall mean a physical or mental disability that prevents the
performance by Executive, with or without reasonable accommodation, of the
essential duties of his job as Chief Executive Officer for a period of not less
than an aggregate of three (3) months during any twelve (12) consecutive months.
The Company shall provide reasonable accommodations to Executive in accordance
with applicable federal, state and local law.

 

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(c)       Cause.

 

(1)       At any time during the Employment Period, the Company may terminate
this Agreement and Executive’s employment hereunder for Cause. For purposes of
this Agreement, “Cause” shall mean: (a) the willful and continued failure of
Executive to perform substantially his duties and responsibilities for the
Company (other than any such failure resulting from Executive’s death or
Disability) after a written demand by the Board for substantial performance is
delivered to Executive by the Company, which specifically identifies the manner
in which the Board believes that Executive has not substantially performed his
duties and responsibilities, which willful and continued failure is not cured by
Executive within thirty (30) days of his receipt of such written demand; (b) the
conviction of, or plea of guilty or nolo contendere to, a felony, or (c) fraud,
dishonesty or gross misconduct which is materially and demonstratively injurious
to the Company. Termination under clauses (b) or (c) of this Section 11(c)(1)
shall not be subject to cure.

 

(2)       For purposes of this Section 11(c), no act, or failure to act, on the
part of Executive shall be considered “willful” unless done, or omitted to be
done, by him in bad faith and without reasonable belief that his action or
omission was in, or not opposed to, the best interest of the Company. Prior to
any termination for Cause, Executive will be given five (5) business days
written notice specifying the alleged Cause event and will be entitled to appear
(with counsel) before the full Board to present information regarding his views
on the Cause event, and after such hearing, there is at least a majority vote of
the full Board (other than Executive) to terminate him for Cause. After
providing the notice in foregoing sentence, the Board may suspend Executive with
full pay and benefits until a final determination pursuant to this Section 11(c)
has been made.

 

(3)       Upon termination of this Agreement for Cause, the Company shall have
no further obligations or liability to Executive or his heirs, administrators or
executors with respect to compensation and benefits thereafter, except for the
obligation to pay Executive (i) any earned but unpaid Base Salary accrued
through Executive’s last date of employment with the Company, (ii) reimbursement
of any and all business expenses paid or incurred by Executive through the
period ending on the termination date, pursuant to Section 9 above, and (iii)
any accrued but unused paid time off through the termination date in accordance
with Company policy. The Company shall deduct, from all payments made hereunder,
all applicable taxes, including income tax, FICA and FUTA, and other deductions
required by law.

 

(d)       Good Reason and Without Cause.

 

(1)       At any time during the term of this Agreement, subject to the
conditions set forth in Section 11(d)(2) below, Executive may terminate this
Agreement and Executive’s employment with the Company for “Good Reason.” For
purposes of this Agreement, “Good Reason” shall mean the occurrence of any of
the following events: (A) the assignment, without Executive’s written consent,
to Executive of duties that are significantly different from, and that result in
a substantial diminution of, the duties that he had on the Effective Date as set
forth in Attachment A (including reporting to anyone other than the Executive
Chairman or to the Board); (B) the assignment, without Executive’s written
consent, to Executive of a title that is different from and subordinate to the
Position title; provided, however, for the absence of doubt following a Change
of Control, should Executive cease to retain either the title or
responsibilities he had on the Effective Date, or Executive is required to serve
in a diminished capacity or lesser title in a division or unit of another entity
(including the acquiring entity), such event shall constitute Good Reason
regardless of the title of Executive in such acquiring company, division or
unit; (C) the occurrence of a Change of Control; (D) material breach by the
Company of this Agreement; or (E) the re-location of Executive to an office
other than the Job Site.

 

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(2)       Except with respect to subparagraph “(C)” in Section 11(d)(1) above,
Executive shall only be entitled to terminate this Agreement for Good Reason if:
(i) he shall have delivered written notice to the Company within one hundred and
eighty (180) days of the date upon which the facts giving rise to Good Reason
occurred (the “Good Reason Date”) of his intention to terminate this Agreement
and his employment with the Company for Good Reason, which notice specifies in
reasonable detail the circumstances claimed to provide the basis for such
termination for Good Reason, (ii) the Company shall not have eliminated the
circumstances constituting Good Reason within thirty (30) days of its receipt
from Executive of such written notice; and (iii) Executive’s employment with the
Company ends within two hundred and forty (240) days after the Good Reason Date.

 

(3)       In the event that Executive terminates this Agreement and his
employment with the Company for Good Reason or the Company terminates this
Agreement and Executive’s employment with the Company without Cause, the Company
shall pay or provide to Executive (or, following his or her death, to
Executive’s spouse if living; but in the event she predeceases Executive, then
to his heirs, administrators or executors) the Separation Payment amount and
Medical Continuation Benefits, pursuant to Section 6 above; provided, however,
that in the event Executive elects to terminate this Agreement for Good Reason
in accordance with subparagraph “(C)” in Section 11(d)(1), such election must be
made and termination of employment occur within one hundred and twenty (120)
days of the occurrence of the Change of Control and Executive shall be entitled
to receive the Separation Payment in one lump sum cash payment within sixty (60)
days after the termination date (to the extent the Change of Control meets the
requirements under Section 409A). The Company shall deduct, from all payments
made hereunder, all applicable taxes, including income tax, FICA and FUTA, and
other deductions required by law.

 

(4)       Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
or business or by profits earned by Executive from any other source at any time
before and after the termination date. The Company’s obligation to make any
payment pursuant to, and otherwise to perform its obligations under, this
Agreement shall not be affected by any offset, counterclaim or other right that
the Company may have against Executive for any reason.

 

(e)       Without “Good Reason” by Executive. At any time during the term of
this Agreement, Executive shall be entitled to terminate this Agreement and
Executive’s employment with the Company without Good Reason by providing prior
written notice of at least thirty (30) days to the Company. Upon termination by
Executive of this Agreement or Executive’s employment with the Company without
Good Reason, the Company shall have no further obligations or liability to
Executive or his heirs, administrators or executors with respect to compensation
and benefits thereafter, except for the obligation to pay Executive (i) any
earned but unpaid Base Salary accrued through Executive’s last date of
employment with the Company, (ii) reimbursement of any and all business expenses
paid or incurred by Executive through the period ending on the termination date,
pursuant to Section 9 above, and (iii) any accrued but unused paid time off
through the termination date in accordance with Company policy. The Company
shall deduct, from all payments made hereunder, all applicable taxes, including
income tax, FICA and FUTA, and other deductions required by law.

 

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(f)       Change of Control. For purposes of this Agreement, “Change of Control”
shall mean the occurrence of any one or more of the following: (i) the
accumulation (if over time, in any consecutive twelve (12) month period),
whether directly, indirectly, beneficially or of record, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended) of 50.1% or more of the shares of
the outstanding common stock of the Company, whether by merger, consolidation,
sale or other transfer of shares of Company common stock (other than a merger or
consolidation where the stockholders of the Company prior to the merger or
consolidation are the holders of a majority of the voting securities of the
entity that survives such merger or consolidation), (ii) a sale of all or
substantially all of the assets of the Company, or (iii) during any period of
twelve (12) consecutive months, the individuals who, at the beginning of such
period, constitute the Board, and any new director whose election by the Board
or nomination for election by the Company’s stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the 12-month period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board; provided, however, that the
following acquisitions shall not constitute a Change of Control for the purposes
of this Agreement: (A) any acquisitions of Company common stock or securities
convertible, exercisable or exchangeable into Company common stock directly from
the Company, or (B) any acquisition of Company common stock or securities
convertible, exercisable or exchangeable into Company common stock by any
employee benefit plan (or related trust) sponsored by or maintained by the
Company.

 

(g)       Any termination of Executive’s employment by the Company or by
Executive (other than termination by reason of Executive’s death) shall be
communicated by written Notice of Termination to the other party of this
Agreement. For purposes of this Agreement, a “Notice of Termination” shall mean
a written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated, provided, however, failure to
provide timely notification shall not affect the employment status of Executive.

 

12.       Confidential Information.

 

(a)       Disclosure of Confidential Information. Executive recognizes,
acknowledges and agrees that he has had and will continue to have access to
non-public, secret, and confidential information regarding the Company, its
subsidiaries and their respective businesses (“Confidential Information”),
including but not limited to, its products, methods, formulas, software code,
patents, sources of supply, customer dealings, data, know-how, trade secrets and
business plans, provided such information is not in or does not hereafter become
part of the public domain, or become known to others through no fault of
Executive. Executive acknowledges that such information is of great value to the
Company, is the sole property of the Company, and has been and will be acquired
by him in confidence. In consideration of the obligations undertaken by the
Company herein, Executive will not, at any time, during or after his employment
hereunder, reveal, divulge or make known to any person, any Confidential
Information acquired by Executive during the course of his employment, which is
treated as confidential by the Company, and not otherwise in the public domain
or publicly accessible. Nothing in this Section 12 prohibits Executive from
disclosing Confidential Information, in the course and scope of his employment,
to employees and/or agents of the Company who have a need to know and/or receive
such Confidential Information to perform their duties on behalf of the Company.
The provisions of this Section 12 shall survive the termination of Executive’s
employment hereunder for a period of three (3) years. Information will not be
deemed to be Confidential Information if: (i) the information was in Executive’s
possession or within Executive’s knowledge before the Company disclosed it to
Executive; (ii) the information was or became generally known to those who could
take economic advantage of it; (iii) Executive obtained the information from a
third party that was not known by Executive to be bound by a confidentiality
agreement or other obligation of confidentiality to the Company or any other
party with respect to such information; or (iv) Executive is required to
disclose the information pursuant to legal process (e.g. a subpoena), provided
that Executive notifies the Company promptly upon receiving or becoming aware of
such legal process.

 

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(b)       Executive affirms that he will not rely upon the protected trade
secrets or confidential or proprietary information of any prior employer(s) in
providing services to the Company or its subsidiaries.

 

(c)       In the event that Executive’s employment with the Company terminates
for any reason, Executive shall deliver forthwith to the Company any and all
originals and copies, including those in electronic or digital formats, of
Confidential Information; provided, however, Executive shall be entitled to
retain (i) papers and other materials of a personal nature, including, but not
limited to, photographs, correspondence, personal diaries, calendars and
rolodexes, personal files and phone books, (ii) information showing his
compensation or relating to reimbursement of expenses, (iii) information that he
reasonably believes may be needed for tax purposes, and (iv) copies of plans,
programs and agreements relating to his employment, or termination thereof, with
the Company.

 

13.       Non-Competition and Non-Solicitation.

 

(a)       Executive agrees and acknowledges that the non-competition
restrictions set forth herein are reasonable and necessary and do not impose
undue hardship or burdens on Executive. Executive also acknowledges that the
products and services developed or provided by the Company, its affiliates
and/or its clients or customers are or are intended to be sold, provided,
licensed and/or distributed to customers and clients primarily in and throughout
the United States (the “Territory”) (to the extent the Company comes to operate,
either directly or through the engagement of a distributor or joint or
co-venturer, or sell a significant amount of its products and services to
customers located, in areas other than the United States during the term of the
Employment Period, the definition of Territory shall be automatically expanded
to cover such other areas), and that the Territory, scope of prohibited
competition, and time duration set forth in the non-competition restrictions set
forth below are reasonable and necessary to maintain the value of the
Confidential Information of, and to protect the goodwill and other legitimate
business interests of, the Company, its affiliates and/or its clients or
customers. The provisions of this Section 13 shall survive the termination of
Executive’s employment hereunder.

 

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(b)       Executive hereby agrees and covenants that he shall not without the
prior written consent of the Company, directly or indirectly, in any capacity
whatsoever, including, without limitation, as an employee, employer, consultant,
principal, partner, shareholder, officer, director or any other individual or
representative capacity (other than (i) as a holder of less than ten (10%)
percent of the outstanding securities of a Company whose shares are traded on
any national securities exchange or (ii) as a limited partner, passive minority
interest holder in a venture capital fund, private equity fund or similar
investment entity which holds or may hold an equity or debt position in
portfolio companies that are competitive with the Company; provided however,
that Executive shall be precluded from serving as an operating partner, general
partner, manager or governing board designee with respect to such portfolio
companies), or whether on Executive’s own behalf or on behalf of any other
person or entity or otherwise, during the “Non-Competition and Non-Solicitation
Period” (as defined below) and within the Territory:

 

(1)       Engage, own, manage, operate, control, be employed by, consult for, or
participate in the ownership, management, operation or control of any business
in competition with the business of the Company.

 

(2)       Recruit, solicit or hire, or attempt to recruit, solicit or hire, any
employee, or independent contractor of the Company to leave the employment (or
independent contractor relationship) thereof, whether or not any such employee
or independent contractor is party to an employment agreement, for the purpose
of competing with the business of the Company;

 

(3)       Attempt in any manner to solicit from any customer of the Company,
with whom Executive had significant contact during Executive’s employment by the
Company (whether under this Agreement or otherwise), business that is
competitive with the business done by the Company, or to persuade or attempt to
persuade any such customer to cease to do business or to reduce the amount of
business which such customer has customarily done with the Company, or if any
such customer elects to move its business to a person other than the Company,
provide any services of the kind or competitive with the business of the Company
for such customer, or have any discussions regarding any such service with such
customer, on behalf of such other person; or

 

(4)       Interfere with any relationship, contractual or otherwise, between the
Company and any other party, including, without limitation, any supplier,
distributor, co-venturer or joint venturer of the Company, for the purpose of
soliciting such other party to discontinue or reduce its business with the
Company.

 

With respect to the activities described in Paragraphs (1), (2), (3) and (4)
above, the restrictions of this Section 13(b) shall continue during the
Employment Period and until one (1) year after the termination of Executive’s
employment with the Company (hereinafter the “Non-Competition and
Non-Solicitation Period”); provided, however, that if this Agreement or
Executive’s employment is terminated by Executive for Good Reason or by the
Company without Cause, then the restrictions of this Section 13 shall terminate
concurrently with the termination and shall be of no further effect.

 

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14.       Inventions. All systems, inventions, discoveries, apparatus,
techniques, methods, know-how, formulae or improvements made, developed or
conceived by Executive during Executive’s employment by the Company that (i) are
directly relevant to the Company’s business as then constituted, (ii) are
developed as a part of the tasks and assignments that are the duties and
responsibilities of Executive, and (iii) were created using substantially the
Company’s resources, such as time, materials and space, shall be and continue to
remain the Company’s exclusive property, without any added compensation or any
reimbursement for expenses to Executive (except expenses pursuant to Section 9
must be paid to Executive), and upon the conception of any and every such
invention, process, discovery or improvement during the Employment Period and
without waiting to perfect or complete it, Executive promises and agrees that
Executive will immediately disclose it to the Company and to no one else and
thenceforth will treat it as the property and secret of the Company. Executive
will also execute any instruments requested from time to time by the Company to
vest in it complete title and ownership to such invention, discovery or
improvement and will, at the request of the Company, do such acts and execute
such instruments as the Company may require, but at the Company’s expense to
obtain patents, trademarks or copyrights in the United States and foreign
countries, for such invention, discovery or improvement and for the purpose of
vesting title thereto in the Company, all without any reimbursement for expenses
(except as provided in Section 9 or otherwise) and without any additional
compensation of any kind to Executive.

 

15.       Section 409A.

 

The provisions of this Agreement are intended to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) and any final regulations
and guidance promulgated thereunder (“Section 409A”) and shall be construed in a
manner consistent with the requirements for avoiding taxes or penalties under
Section 409A. The Company and Executive agree to work together in good faith to
consider amendments to this Agreement and to take such reasonable actions which
are necessary, appropriate or desirable to avoid imposition of any additional
tax or income recognition prior to actual payment to Executive under Section
409A.

 

To the extent that Executive will be reimbursed for costs and expenses or
in-kind benefits, except as otherwise permitted by Section 409A, (a) the right
to reimbursement or in-kind benefits is not subject to liquidation or exchange
for another benefit, (b) the amount of expenses eligible for reimbursement, or
in-kind benefits, provided during any taxable year shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other
taxable year; provided that the foregoing clause (b) shall not be violated with
regard to expenses reimbursed under any arrangement covered by Section 105(b) of
the Code solely because such expenses are subject to a limit related to the
period the arrangement is in effect and (c) such payments shall be made on or
before the last day of the taxable year following the taxable year in which you
incurred the expense.

 

A termination of employment shall not be deemed to have occurred for purposes of
any provision of this Agreement providing for the payment of any amounts or
benefits upon or following a termination of employment unless such termination
constitutes a “Separation from Service” within the meaning of Section 409A and,
for purposes of any such provision of this Agreement references to a
“termination,” “termination of employment” or like terms shall mean Separation
from Service.

 

Each installment payable hereunder shall constitute a separate payment for
purposes of Treasury Regulation Section 1.409A-2(b), including Treasury
Regulation Section 1.409A-2(b)(2)(iii). Each payment that is made within the
terms of the “short-term deferral” rule set forth in Treasury Regulation Section
1.409A-1(b)(4) is intended to meet the “short-term deferral” rule. Each other
payment is intended to be a payment upon an involuntary termination from service
and payable pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii), et.
seq., to the maximum extent permitted by that regulation, with any amount that
is not exempt from Code Section 409A being subject to Code Section 409A.

 

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Notwithstanding anything to the contrary in this Agreement, if Executive is a
“specified employee” within the meaning of Section 409A, any payment otherwise
due to Executive on or within the six (6) month period following Executive’s
termination will accrue during such six (6) month period and will become payable
in one lump sum cash payment on the date six (6) months and one (1) day
following the date of Executive’s termination of employment, to the extent
required to avoid any adverse tax consequences under Section 409A. Any remaining
payment(s) will be payable in accordance with the payment schedule applicable to
each payment or benefit. Notwithstanding anything herein to the contrary, if
Executive dies following termination but prior to the six (6) month anniversary
of Executive’s termination date, then any payments delayed in accordance with
this paragraph will be payable in a lump sum upon the date of Executive’s death
and all other amounts will be payable in accordance with the payment schedule
applicable to each payment or benefit, to the extent and in a manner consistent
with Section 409A.

 

16.       Miscellaneous.

 

(a)       Executive acknowledges that the services to be rendered by him under
the provisions of this Agreement are of a special, unique and extraordinary
character and that it would be difficult or impossible to replace such services.
Furthermore, the parties acknowledge that monetary damages alone would not be an
adequate remedy for any breach by Executive of Section 12 or Section 13 of this
Agreement. Accordingly, Executive agrees that any breach by Executive of Section
12 or Section 13 of this Agreement shall entitle the Company, in addition to all
other legal remedies available to it, to apply to any court of competent
jurisdiction to seek to enjoin such breach. The parties understand and intend
that each restriction agreed to by Executive hereinabove shall be construed as
separable and divisible from every other restriction, that the unenforceability
of any restriction shall not limit the enforceability, in whole or in part, of
any other restriction, and that one or more or all of such restrictions may be
enforced in whole or in part as applicable law allows. If any provision in this
Agreement is determined to be invalid or unenforceable by a court of competent
jurisdiction, the parties agree that the remaining provisions of the Agreement
will nevertheless continue to be valid and enforceable. The remedy of injunctive
relief herein set forth shall be in addition to, and not in lieu of, any other
rights or remedies that the Company may have at law or in equity.

 

(b)       Neither Executive nor the Company may assign or delegate any of their
rights or duties under this Agreement without the express written consent of the
other; provided, however, that the Company shall have the right to delegate its
obligation of payment of all sums due to Executive hereunder, provided that such
delegation shall not relieve the Company of any of its obligations hereunder.

 

(c)       During the term of this Agreement, the Company (i) shall indemnify and
hold harmless Executive and his heirs and representatives as, and to the extent,
provided in the Company’s bylaws and (ii) shall cover Executive under the
Company’s directors’ and officers’ liability insurance on the same basis as it
covers other senior executive officers and directors of the Company.

 

(d)       This Agreement constitutes and embodies the full and complete
understanding and agreement of the parties with respect to Executive’s
employment by the Company, supersedes all prior understandings and agreements,
whether oral or written, between Executive and the Company, and shall not be
amended, modified or changed except by an instrument in writing executed by the
party to be charged (it being understood that, pursuant to Section 7, Share
Awards shall govern with respect to the subject matter thereof). The invalidity
or partial invalidity of one or more provisions of this Agreement shall not
invalidate any other provision of this Agreement. No waiver by either party of
any provision or condition to be performed shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.

 

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(e)       This Agreement shall inure to the benefit of, be binding upon and
enforceable against, the parties hereto and their respective successors, heirs,
beneficiaries and permitted assigns.

 

(f)       The headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.

 

(g)       All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when personally delivered, sent by registered or certified mail,
return receipt requested, postage prepaid, or by reputable national overnight
delivery service (e.g. Federal Express) for overnight delivery to the Company at
its principal executive office or to Executive at his address of record in the
Company’s records, or to such other address as either party may hereafter give
the other party notice of in accordance with the provisions hereof. Notices
shall be deemed given on the sooner of the date actually received or the third
business day after deposited in the mail or one business day after deposited
with an overnight delivery service for overnight delivery.

 

(h)       This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Arizona without reference to principles of
conflicts of laws and each of the parties hereto irrevocably consents to the
jurisdiction and venue of the federal and state courts located in the County of
Pima, State of Arizona.

 

(i)        This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument. The parties hereto have
executed this Agreement as of the date set forth above.

 

(j)        Executive represents and warrants to the Company that he has the full
power and authority to enter into this Agreement and to perform his obligations
hereunder and that the execution and delivery of this Agreement and the
performance of his obligations hereunder will not conflict with any agreement to
which Executive is a party.

 

(k)       The Company represents and warrants to Executive that it has the full
power and authority to enter into this Agreement and to perform its obligations
hereunder and that the execution and delivery of this Agreement and the
performance of its obligations hereunder will not conflict with any agreement to
which the Company is a party.

 

[Remainder of page intentionally left blank; signature page follows.]

 

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IN WITNESS WHEREOF, Executive and the Company have caused this Executive
Employment Agreement to be executed as of the date first above written.

 

  THE COMPANY:       AUDIOEYE, INC.         By: /s/ Carr Bettis           Name:
Carr Bettis         Title: Executive Chairman       EXECUTIVE:       /s/ Todd A.
Bankofier       Todd Bankofier

 

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