Exhibit 10.32

 

AUDIOEYE, INC.

STOCK OPTION AGREEMENT

FOR

[·]

 

Agreement

 

1.          Grant of Option. AudioEye, Inc., a Delaware corporation (the
“Company”), hereby grants, as of the effective date of this Agreement specified
on Schedule I hereof beside the caption “Date of Grant” (“Date of Grant”), to
[·] (the “Optionee”) an option (the “Option”) to purchase an aggregate number of
shares set forth on Schedule I hereof beside the caption “Number of Optioned
Shares” (such number being subject to adjustment as provided in Section 10(c) of
the Plan) of the Company’s common stock, $.00001 par value per share (the
“Shares”), at an exercise price per share set forth on Schedule I hereof beside
the caption “Exercise Price” (such exercise price being subject to adjustment as
provided in Section 10(c) of the Plan)(the “Exercise Price”). The Option shall
be subject to the terms and conditions set forth herein. The Option is being
issued pursuant to the AudioEye, Inc. [·] Incentive Compensation Plan (the
“Plan”), which is incorporated herein for all purposes. This Option is
designated on Schedule I as either an Incentive Stock Option or a Non-Qualified
Stock Option. If designated on Schedule I hereof as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code, and this Agreement shall be interpreted accordingly.

 

2.          Definitions. Unless otherwise provided herein, terms used herein
that are defined in the Plan and not defined herein shall have the meanings
attributed thereto in the Plan.

 

3.          Exercise Schedule. Except as otherwise provided in Sections 6 or 10
of this Agreement, or in the Plan, the Option is exercisable in installments as
specified on Schedule I hereof beside the caption “Vesting”, which shall be
cumulative. To the extent that the Option has become exercisable with respect to
a percentage of Shares as provided on Schedule I hereof beside the caption
“Vesting” on each date (the “Vesting Date”) upon which the Optionee shall be
entitled to exercise the Option with respect to the percentage of Shares granted
as indicated for each Vesting Date (provided that the Continuous Service of the
Optionee continues through and on the applicable Vesting Date), the Option may
thereafter be exercised by the Optionee, in whole or in part, at any time or
from time to time prior to the expiration of the Option as provided herein.
Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in the periods prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon the
termination of the Optionee’s Continuous Service, any unvested portion of the
Option shall terminate and be null and void.

 

4.          Method of Exercise.

 

(a)          General. The vested portion of this Option shall be exercisable in
whole or in part in accordance with the exercise schedule set forth in Section 3
hereof, by delivery, in person or by certified mail, of the form attached hereto
as Exhibit A to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised after both (a) receipt by the Company of such written notice
accompanied by the Exercise Price and (b) arrangements that are satisfactory to
the Committee in its sole discretion have been made for Optionee’s payment to
the Company of the amount, if any, that is necessary to be withheld in
accordance with applicable Federal or state withholding requirements. No Shares
shall be issued pursuant to the Option unless and until such issuance and such
exercise shall comply with all relevant provisions of applicable law, including
the requirements of any stock exchange upon which the Shares then may be traded.

 

 

 

 

(b)          Cashless Exercise. Notwithstanding the foregoing, the vested
portion of this Option shall be exercisable in whole or in part in accordance
with the exercise schedule set forth in Section 3 hereof, by delivery of the
form attached hereto as Exhibit A, which shall state the election to exercise
the Option through a cashless exercise (such exercise, a “Cashless Exercise”).
Such written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. Upon a Cashless
Exercise, the Company shall issue to the Optionee the number of Shares
determined as follows:

 

X = Y (A-B)/A

where:

 

X = the number of Shares to be issued to the Optionee.

Y = the number of Shares subject to Cashless Exercise.

A = the average of the closing sale price of the Shares for the five (5) trading
days immediately prior to the date of exercise (if the Shares are not then
publicly traded, then the fair market value per share of the Shares (as
determined by the Company’s Board of Directors)).

B = the Exercise Price.

 

5.          Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee: (a)
cash; (b) check; (c) to the extent permitted by the Committee or as provided on
Schedule I hereof beside the caption “Permission to Pay with Shares”, with
Shares owned by the Optionee, or the withholding of Shares that otherwise would
be delivered to the Optionee as a result of the exercise of the Option, or
pursuant to the “cashless exercise” procedure set forth in Section 4(b), or (d)
such other consideration or in such other manner as may be determined by the
Committee in its absolute discretion.

 

6.          Termination of Option.

 

(a)          General. Any unexercised portion of the Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:

 

(i)          unless the Committee otherwise determines in writing in its sole
discretion, three months after the date on which the Optionee’s Continuous
Service is terminated other than by reason of (A) by the Company or a Related
Entity for Cause, (B) a Disability of the Optionee as determined by a medical
doctor satisfactory to the Committee, or (C) the death of the Optionee;

 

 

 

 

(ii)         immediately upon the termination of the Optionee’s Continuous
Service by the Company or a Related Entity for Cause;

 

(iii)        twelve months after the date on which the Optionee’s Continuous
Service is terminated by reason of a Disability as determined by a medical
doctor satisfactory to the Committee;

 

(iv)        twelve months after the date of termination of the Optionee’s
Continuous Service by reason of the death of the Optionee; or

 

(v)         the tenth anniversary of the date as of which the Option is granted
(or, if a different date is shown on Schedule I hereof beside the caption
“Termination Date”, such date).

 

(b)          Cancellation. To the extent not previously exercised, (i) the
Option shall terminate immediately in the event of (A) the liquidation or
dissolution of the Company, or (B) any reorganization, merger, consolidation or
other form of corporate transaction in which the Company does not survive or the
Shares are exchanged for or converted into securities issued by another entity,
or an affiliate of such successor or acquiring entity, unless the successor or
acquiring entity, or an affiliate thereof, assumes the Option or substitutes an
equivalent option or right pursuant to Section 10(c) of the Plan, and (ii) the
Committee in its sole discretion may by written notice (“cancellation notice”)
cancel, effective upon the consummation of any transaction that constitutes a
Change in Control, the Option (or portion thereof) that remains unexercised on
such date. The Committee shall give written notice of any proposed transaction
referred to in this Section 6(b) a reasonable period of time prior to the
closing date for such transaction (which notice may be given either before or
after approval of such transaction), in order that the Optionee may have a
reasonable period of time prior to the closing date of such transaction within
which to exercise the Option if and to the extent that it then is exercisable
(including any portion of the Option that may become exercisable upon the
closing date of such transaction). The Optionee may condition his exercise of
the Option upon the consummation of a transaction referred to in this Section
6(b).

 

7.          Transferability. Unless (i) transfers are expressly permitted in the
language appearing beside the caption “Expanded Rights to Transfer Option” on
Schedule I hereof or (ii) otherwise determined by the Committee, the Option
granted hereby is not transferable otherwise than by will or under the
applicable laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee, or the Optionee’s
guardian or legal representative. In addition, the Option shall not be assigned,
negotiated, pledged or hypothecated in any way (whether by operation of law or
otherwise), and the Option shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate the Option, or in the event of any levy upon the Option by reason of
any execution, attachment or similar process contrary to the provisions hereof,
the Option shall immediately become null and void. The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.

 

8.          No Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any Shares
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date on which the Shares are issued.

 

 

 

 

9.           Acceleration of Exercisability of Option.

 

(a)          Acceleration Upon Certain Terminations or Cancellations of Option.
This Option shall become immediately fully exercisable in the event that, prior
to the termination of the Option pursuant to Section 6 hereof, (i) the Option is
terminated pursuant to Section 6(b)(i) hereof, or (ii) the Company exercises its
discretion to provide a cancellation notice with respect to the Option pursuant
to Section 6(b)(ii) hereof.

 

(b)          Acceleration Upon Change in Control. This Option shall become
immediately fully exercisable in the event that, prior to the termination of the
Option pursuant to Section 6 hereof, and during the Optionee's Continuous
Service, there is a “Change in Control”, as defined in Section 9(b) of the Plan.

 

10.         No Right to Continuous Service. Neither the Option nor this
Agreement shall confer upon the Optionee any right to Continuous Service with
the Company or any Related Entity.

 

11.         Information Confidential. As partial consideration for the granting
of the Option, the Optionee agrees with the Company to keep confidential all
information and knowledge that the Optionee has relating to the manner and
amount of the Optionee’s participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Optionee’s spouse, the Optionee’s tax and financial advisors, or
financial institutions to the extent that such information is necessary to
secure a loan.

 

12.         Interpretation / Provisions of Plan Control. This Agreement is
subject to all the terms, conditions and provisions of the Plan, including,
without limitation, the amendment provisions thereof, and to such rules,
regulations and interpretations relating to the Plan adopted by the Committee as
may be in effect from time to time. If and to the extent that this Agreement
conflicts or is inconsistent with the terms, conditions and provisions of the
Plan, the Plan shall control, and this Agreement shall be deemed to be modified
accordingly. The Optionee accepts the Option subject to all of the terms and
provisions of the Plan and this Agreement. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions arising under the Plan and this Agreement, unless
shown to have been made in an arbitrary and capricious manner.

 

13.         Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be personally delivered, delivered by
facsimile or courier service, or mailed, certified with first class postage
prepaid to the address specified by the person who is to receive the same. Each
such notice, request, demand, or other communication hereunder shall be deemed
to have been given (whether actually received or not) on the date of actual
delivery thereof, if personally delivered or delivered by facsimile transmission
(if receipt is confirmed at the time of such transmission by telephone or
facsimile-machine-generated confirmation), or on the third day following the
date of mailing, if mailed in accordance with this Section, or on the day
specified for delivery to the courier service (if such day is one on which the
courier service will give normal assurances that such specified delivery will be
made). Any notice, request, demand, or other communication given otherwise than
in accordance with this Section shall be deemed to have been given on the date
actually received. Each such notice, request, demand, or other communication
hereunder shall be addressed, in the case of the Company, to the Company’s
Secretary at AudioEye, Inc., 5210 E. Williams Circle, Suite 750 Tucson, Arizona
85711, or if the Company should move its principal office, to such principal
office, and, in the case of the Optionee, to the Optionee’s last permanent
address as shown on the Company’s records, subject to the right of either party
to designate some other address at any time hereafter in a notice satisfying the
requirements of this Section. Any person entitled to any notice, request,
demand, or other communication hereunder may waive the notice, request, demand,
or other communication.

 

 

 

 

14.        Section 409A.

 

(a)          It is intended that the Option awarded pursuant to this Agreement
be exempt from Section 409A of the Code (“Section 409A”) because it is believed
that (i) the Exercise Price may never be less than the Fair Market Value of a
Share on the Date of Grant and the number of shares subject to the Option is
fixed on the original Date of Grant, (ii) the transfer or exercise of the Option
is subject to taxation under Section 83 of the Code and Treas. Reg. 1.83-7, and
(iii) the Option does not include any feature for the deferral of compensation
other than the deferral of recognition of income until the exercise of the
Option. The provisions of this Agreement shall be interpreted in a manner
consistent with this intention, and the provisions of this Agreement may not be
amended, adjusted, assumed or substituted for, converted or otherwise modified
without the Optionee’s prior written consent if and to the extent that the
Company believes or reasonably should believe that such amendment, adjustment,
assumption or substitution, conversion or modification would cause the award to
violate the requirements of Section 409A. In the event that either the Company
or the Optionee believes, at any time, that any benefit or right under this
Agreement is subject to Section 409A, then the Committee may (acting alone and
without any required consent of the Optionee) amend this Agreement in such
manner as the Committee deems necessary or appropriate to be exempt from or
otherwise comply with the requirements of Section 409A (including without
limitation, amending the Agreement to increase the Exercise Price to such amount
as may be required in order for the Option to be exempt from Section 409A).

 

(b)          Notwithstanding the foregoing, the Company does not make any
representation to the Optionee that the Option awarded pursuant to this
Agreement is exempt from, or satisfies, the requirements of Section 409A, and
the Company shall have no liability or other obligation to indemnify or hold
harmless the Optionee or any Beneficiary for any tax, additional tax, interest
or penalties that the Optionee or any Beneficiary may incur in the event that
any provision of this Agreement, or any amendment or modification thereof or any
other action taken with respect thereto, that either is consented to by the
Optionee or that the Company reasonably believes should not result in a
violation of Section 409A, is deemed to violate any of the requirements of
Section 409A.

 

15.         Incentive Stock Option Treatment. If designated on Schedule I hereof
as an Incentive Stock Option: (a) the terms of this Option shall be interpreted
in a manner consistent with the intent of the Company and the Optionee that the
Option qualify as an Incentive Stock Option under Section 422 of the Code; (b)
if any provision of the Plan or this Agreement shall be impermissible in order
for the Option to qualify as an Incentive Stock Option, then the Option shall be
construed and enforced as if such provision had never been included in the Plan
or the Option; and (c) if and to the extent that the number of Options granted
pursuant to this Agreement exceeds the limitations contained in Section 422 of
the Code on the value of Shares with respect to which this Option may qualify as
an Incentive Stock Option, this Option shall be a Non-Qualified Stock Option.

 

 

 

 

16.        Section Headings. The Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

17.        Governing Law and Venue. THIS AGREEMENT SHALL AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS LOCATED IN THE STATE OF
ARIZONA AND AGREES THAT ANY LITIGATION BETWEEN THE PARTIES WILL BE FILED IN
COURTS LOCATED IN TUSCON, ARIZONA.

 

18.        Arbitration. By execution hereof, the parties hereto expressly agree
that upon the request of any party, whether made before or after the institution
of any legal proceeding, any action, dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or equitable,
arising between the parties in any way arising out of any of the provisions
contained in this Agreement shall be resolved by binding arbitration
administered by the American Arbitration Association (the “AAA”) and in Tucson,
Arizona. Such arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA and, to the maximum extent applicable, the Federal
Arbitration Act (Title 9 of the United States Code) except as otherwise
specified herein. Judgment upon the award rendered by the arbitrator may be
entered in any court having competent jurisdiction. The arbitrator shall resolve
all disputes in accordance with the applicable substantive law. A single
arbitrator shall be chosen and shall decide the dispute, unless the amount
sought in the dispute exceeds $100,000, in which case a panel of three
arbitrators shall decide the dispute. In all arbitration proceedings in which
the amount of any award exceeds $100,000, in the aggregate, the arbitrator(s)
shall make specific, written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount of any award exceeds $100,000, in
the aggregate, the parties shall have, in addition to the limited statutory
right to seek a vacation or modification of an award pursuant to applicable law,
the right to vacation or modification of any award that is based, in whole or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for a
vacation or modification of such an award based on an incorrect ruling of law
must be filed in a court having jurisdiction over the dispute within 15 days
from the date the award is rendered. The findings of fact of the arbitrator(s)
shall be binding on all parties and shall not be subject to further review
except as otherwise allowed by applicable law. No provision of this Agreement
nor the exercise of any rights hereunder shall limit the right of any party, and
any party shall have the right during any dispute, to seek, use, and employ
ancillary or preliminary remedies, such as injunctive relief (including, without
limitation, specific performance), from a court having jurisdiction before,
during, or after the pendency of any arbitration. The institution and
maintenance of any action for judicial relief or pursuit of provisional or
ancillary remedies shall not constitute a waiver of the right of any party to
submit any dispute to arbitration nor render inapplicable the compulsory
arbitration provisions hereof.

 

 

 

 

19.        Attorney’s Fees. If any action is brought to enforce or interpret the
terms of this Agreement (including through arbitration), the prevailing party
shall be entitled to reasonable attorneys’ fees, costs, and necessary
disbursements in addition to any other relief to which such party may be
entitled.

 

20.         Counterparts. This Agreement may be executed in any number of
counterparts and shall be effective when each party hereto has executed at least
one counterpart, with the same effect as if all signing parties had signed the
same document. All counterparts will be construed together and evidence only one
agreement, which, notwithstanding the actual date of execution of any
counterpart, shall be deemed to be dated the day and year first written above.
In making proof of this Agreement, it shall not be necessary to account for a
counterpart executed by any party other than the party against whom enforcement
is sought or to account for more than one counterpart executed by the party
against whom enforcement is sought.

 

21.         Execution by Facsimile. The manual signature of any party hereto
that is transmitted to any other party by facsimile or in portable document
format (PDF) shall be deemed for all purposes to be an original signature.

 

Remainder of page intentionally left blank; signature page follows.

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the [·]
day of [·].

 

  COMPANY:       AudioEye, Inc.       By:       Name:     Title:

 

The Optionee acknowledges receipt of a copy of the Plan and represents that he
or she has reviewed the provisions of the Plan and this Agreement in their
entirety, is familiar with and understands their terms and provisions, and
hereby accepts this Option subject to all of the terms and provisions of the
Plan and this Agreement. The Optionee further represents that he or she has had
an opportunity to obtain the advice of counsel prior to executing this
Agreement.

 

Dated:     OPTIONEE:                       Name: [·]               Address:  
[·]         [·]

 

 

 

 

SCHEDULE I

 

NAME OF OPTIONEE:   [·] DATE OF GRANT:   [·] TYPE OF OPTION:   [·]       NUMBER
OF OPTIONED SHARES:   [·] EXERCISE PRICE:   $[·] per Share TERMINATION DATE:  
5th year anniversary of Date of Grant VESTING:  

(i) 50% of the shares subject to the Option (the “Option Shares”) shall vest in
equal monthly installments beginning on [·] and continuing on the first day of
each month through [·]; (ii) 25% of the Option Shares shall vest in equal
monthly installments beginning on [·] and continuing on the first day of each
month through [·]; and (iii) 25% of the Option Shares shall vest in equal
monthly installments beginning on [·] and continuing on the first day of each
month, through [·], in each case, subject to the Continuous Service (as defined
in the Plan) of the holder of such Option on such vesting date.

 

PERMISSION TO PAY WITH SHARES:   _   Granted  __________ Denied EXPANDED RIGHTS
TO TRANSFER OPTION:   None

 

 

 

 

Exhibit A

 

¨ Incentive Stock Option Participant:   ¨ Nonstatutory Stock Option       Date:
 

 

STOCK OPTION EXERCISE NOTICE

 

AudioEye, Inc.

Attention:Todd Bankofier, Chief Executive Officer

Address:5210 East Williams Circle, Suite 750, Tucson, Arizona 85711

 

Ladies and Gentlemen:

 

1.       Option. I was granted an option (the “Option”) to purchase shares of
the common stock (the “Shares”) of AudioEye, Inc. (the “Company”) pursuant to
the Company’s [YEAR] Incentive Compensation Plan (the “Plan”) and my Stock
Option Agreement (the “Option Agreement”) as follows:

 

Date of Grant:           Number of Option Shares:           Exercise Price per
Share: $  

 

2.       Exercise of Option. I hereby elect to exercise the Option to purchase
the following number of Shares, all of which are Vested Shares, in accordance
with the Option Agreement:

 

Total Shares Purchased:       Total Exercise Price (Total Shares  X  Price per
Share)  

 

3.       Payments. I enclose payment in full of the total exercise price for the
Shares in the following form(s), as authorized by my Option Agreement:

 

¨ Cash: $         ¨ Check: $         ¨ Cashless Exercise: N/A

 

4.       Tax Withholding. I authorize payroll withholding and otherwise to make
adequate provision for the federal, state, local and foreign tax withholding
obligations of the Company, if any, in connection with the Option. If I am
exercising a Nonstatutory Stock Option, I enclose payment in full of my
withholding taxes, if any, as follows:

 

¨ Cash: $         ¨ Check: $  

 

 

 

 

5.           Participant Information.

 

My address is:       

 

My Social Security Number is:    ______

 

6.           Notice of Disqualifying Disposition. If the Option is an Incentive
Stock Option, I agree that I will promptly notify the Chief Executive Officer or
other officer as designated by the Company if I transfer any of the Shares
within one (1) year from the date I exercise all or part of the Option or within
two (2) years of the Date of Grant.

 

7.           Binding Effect. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement and the Plan, to all of which I hereby expressly assent. This
Agreement shall inure to the benefit of and be binding upon my heirs, executors,
administrators, successors and assigns.

 

8.           Transfer. I understand and acknowledge that the Shares have not
been registered under the Securities Act of 1933, as amended (the “Securities
Act”), and that consequently the Shares must be held indefinitely unless they
are subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or
Rule 701 under the Securities Act. I further understand and acknowledge that the
Company is under no obligation to register the Shares. I understand that the
certificate or certificates evidencing the Shares will be imprinted with legends
which prohibit the transfer of the Shares unless they are registered or such
registration is not required in the opinion of legal counsel satisfactory to the
Company.

 

I am aware that Rule 144 under the Securities Act, which permits limited public
resale of securities acquired in a nonpublic offering, is not currently
available with respect to the Shares and, in any event, is available only if
certain conditions are satisfied. I understand that any sale of the Shares that
might be made in reliance upon Rule 144 may only be made in limited amounts in
accordance with the terms and conditions of such rule and that a copy of
Rule 144 will be delivered to me upon request.

 

I understand that I am purchasing the Shares pursuant to the terms of the Plan
and my Option Agreement, copies of which I have received and carefully read and
understand.

 

  Very truly yours,           (Signature)

 

 

 

 

Receipt of the above is hereby acknowledged.

 

AUDIOEYE, INC.           By:  Todd Bankofier   Title:  Chief Executive Officer  

 

Dated: