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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
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(c)
On February 25, 2020,
the Board of Directors (the “Board”) of AudioEye, Inc. (the “Company”) appointed Heath Thompson as the
Company’s Chief Executive Officer, effective upon the commencement of his employment with the Company. Mr. Thompson,
age 60, will join the Company on March 23, 2020.
Since November 2019,
Mr. Thompson has served as General Manager, Security Awareness, for SANS Institute, a cybersecurity company. From August
2015 to July 2019, Mr. Thompson held various positions at Forcepoint, a cybersecurity company, including Senior Vice President,
Business Development, Corporate Development & Strategy, from November 2018 to July 2019, General Manager, Enterprise Security,
from December 2017 to November 2018, General Manager, Data & Insider Threat, from December 2016 to December 2017, and Executive
Vice President, Products, from August 2015 to December 2016. From August 2009 until August 2015, Mr. Thompson held various positions
at Landis+Gyr, a provider of integrated energy management solutions for the utility sector, most recently serving as Global Chief
Technology Officer and Senior Vice President.
There are no arrangements
or understandings between Mr. Thompson and any other person pursuant to which Mr. Thompson was selected as an officer of the Company.
There are no family relationships between Mr. Thompson and any director or executive officer of the Company. Mr. Thompson
is not and has not been a party to any transaction required to be disclosed herein pursuant to Item 404(a) of Regulation S-K.
On February 25, 2020,
the Company and Mr. Thompson also entered into an Executive Employment Agreement (the “Employment Agreement”), effective
as of March 23, 2020 (the “Effective Date”), pursuant to which the Company will employ Mr. Thompson as its Chief Executive
Officer on the terms and conditions set forth therein. The Employment Agreement provides for an initial one-year term (the “Initial
Term”), with automatic renewals for a one-year term (the “Subsequent Term”) immediately following the Initial
Term, and automatic renewals for successive one-year terms (each, an “Additional Term”) immediately following the Subsequent
Term, unless the Employment Agreement is terminated as provided therein or either party provides a non-renewal notice at least
30 days prior to the expiration of the then-current term. Mr. Thompson’s principal place of employment will be in the Atlanta,
Georgia metropolitan area.
Under the Employment
Agreement, Mr. Thompson will receive a base annual salary of $400,000, subject to mutually agreed upon modifications for any Additional
Term(s). Mr. Thompson will receive a one-time cash sign-on bonus of $150,000, subject to repayment by Mr. Thompson if he is terminated
by the Company for “cause” (as defined in the Employment Agreement) at any time or if Mr. Thompson resigns without
“good reason” (as defined in the Employment Agreement) within less than 12 full months after the Effective Date.
During the Initial
Term, Mr. Thompson will be eligible to receive two cash performance bonuses, each worth a target value of $75,000, the first of
which will be based on performance from the Effective Date through the end of the second quarter of calendar year 2020, and the
second of which will be based on performance throughout all of calendar year 2020. During the Subsequent Term, if any, Mr. Thompson
would be eligible to receive two performance bonuses, each worth a target value of $125,000, the first of which would be based
on performance during the first and second quarters of calendar year 2021, and the second of which would be based on performance
throughout all of calendar year 2021. Such performance bonuses, if earned, will be paid in a combination of cash and Restricted
Stock Units (“RSUs”) of the Company, with such combination to be determined by the Compensation Committee of the Board
(the “Compensation Committee”). For each Additional Term, if any, Mr. Thompson would be eligible to receive one performance
bonus worth a target value of $250,000, which would be based on performance throughout the entire applicable calendar year. Such
performance bonuses, if earned, would be paid in a combination of cash and RSUs of the Company, with such combination to be determined
by the Compensation Committee. To receive any of the foregoing performance bonuses, the Company and Mr. Thompson must meet or exceed
the performance targets adopted by the Compensation Committee for the applicable performance period, and Mr. Thompson must be employed
by the Company, as applicable, either as of the last day of the applicable performance period or as of the first day following
the conclusion of the applicable performance period.
If Mr. Thompson’s
employment is (x) terminated by the Company for any reason other than his death, “disability” or “cause”
(as “disability” and “cause” are defined in the Employment Agreement) or (y) Mr. Thompson resigns his employment
for “good reason” (as defined in the Employment Agreement), then the Company will pay or provide each of the following,
subject to the terms and conditions of the Employment Agreement: (i) reimbursement of any and all reasonable business expenses
incurred through the termination date; (ii) accrued but unused vacation through the termination date; (iii) earned but unpaid base
salary accrued through the termination date; and (iv) subject to the execution and delivery of a release of claims by Mr. Thompson,
an amount equal to six months of his base salary (at the rate that was in effect at the time of termination), less any base salary
paid to Mr. Thompson for any portion of the period of time prior to the termination date that Mr. Thompson is directed by the Company
not to work (all of these payments listed in clauses (i) through (iv) are collectively the “Separation Payment”).
The Employment Agreement
further provides that the Company will recommend to the Compensation Committee that Mr. Thompson be granted RSUs with respect to
88,766 shares of the Company’s common stock under the AudioEye, Inc. 2019 Equity Incentive Plan (the “2019 Plan”).
The Employment Agreement provides that the RSUs will vest annually in equal installments over a three-year period from the date
the RSUs are awarded, subject to Mr. Thompson’s continued employment on each vesting date and subject to the terms of the
2019 Plan relating to any change in control with respect to any unvested RSUs.
All amounts paid to
Mr. Thompson under the Employment Agreement (other than his base salary, the sign-on bonus, the performance bonuses described above,
accrued but unused vacation, certain reimbursement of expenses, and any Separation Payment) and any and all stock-based compensation
granted to Mr. Thompson during his employment shall be subject to “clawback” rights in favor of the Company upon the
occurrence of certain restatements of the Company’s financial information, subject to the terms and conditions described
in the Employment Agreement. Mr. Thompson will also be subject to confidentiality, non-competition, non-solicitation and other
restrictive covenants during, and in some cases following, his employment with the Company.
The Company also intends
to enter into an indemnification agreement with Mr. Thompson in substantially the same form as the indemnification agreements entered
into by the Company with each of its other executive officers.
The foregoing description
of the Employment Agreement is qualified in its entirety by the terms and conditions of the Employment Agreement, a copy of which
is filed as Exhibit 10.1 to this Form 8-K and incorporated herein by reference.