Exhibit 10.1
E MPLOYMENT A GREEMENT
T HIS E MPLOYMENT A GREEMENT (the “ Agreement ”) is made
and entered into, effective as of December 13, 2005 (the
“ Effective Date ”), by and between
C ALL
W AVE , I NC ., a
Delaware corporation (the “ Company ”), and
J OSHUA
F RASER (“ Employee ”), with
reference to the following facts:
R ECITALS :
The parties have agreed to execute
this Agreement in order to memorialize the terms and conditions on
which the Company shall employ Employee.
A GREEMENTS :
N OW ,
T HEREFORE
, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1. P OSITION AND D UTIES
1.1 P OSITION AND T ITLE . The
Company hereby hires Employee to serve as Vice President of
Business Development of the Company.
(a) L IMITS ON A UTHORITY . Employee shall perform his duties as Vice
President of Business Development of the Company pursuant to this
Agreement in compliance with applicable law and consistent with
such budgets as the Company’s Board of Directors adopts and
modifies from time to time. In such position, Employee shall
(i) supervise the Company’s business development
functions, and (ii) be responsible for negotiating the
Company’s distribution contracts with companies providing
indirect distribution of the Company’s services.
(b) A NNUAL R EVIEWS . Within thirty (30) days after each annual
anniversary of the Effective Date of this Agreement, the Company
shall review Employee’s performance of his duties pursuant to
this Agreement and advise Employee of the results of that review.
In connection with each such review, the Company shall evaluate
whether any increase in Employee’s compensation under
Section 2, below, is appropriate.
(c) R EPORTING AND A UTHORITY . Employee shall report to the Company’s
Chief Executive Officer or, to the extent directed by the Chief
Executive Officer, to the Company’s Chief Operating Officer
or President. Employee shall render such business and professional
services in the performance of his duties hereunder as are
consistent with the Employee’s position within the Company
and as shall be reasonably assigned to him from time to time by the
Company’s Chief Executive Officer, Chief Operating Officer or
President.
1.2 A CCEPTANCE . Employee hereby accepts employment by the
Company in the position set forth in Section 1.1, above, and
agrees to perform the duties of such position from and after the
Effective Date of this Agreement in a diligent, efficient,
trustworthy, and businesslike manner. Employee agrees that, to the
best of the Employee’s ability and experience, Employee at
all times shall loyally and conscientiously discharge all of the
duties and responsibilities assigned to Employee pursuant to this
Agreement.
1.3 B USINESS T IME .
Employee shall devote the time necessary to faithfully perform his
duties under this Agreement, but in all events not less than his
exclusive business time.
1.4 L OCATION . Employee shall perform his duties under this
Agreement from the Company’s principal offices in Santa
Barbara, California. Employee acknowledges and agrees that from
time to time he shall be required to travel (at the cost and
expense of the Company) to other locations outside of Santa
Barbara, California, in order to discharge his duties under this
Agreement.
1.5 T ERM . Subject to sooner termination pursuant to
Section 3, below, the term of this Agreement (a) shall
commence as of the Effective Date and (b) shall expire on
December 31, 2008.
2. C OMPENSATION . The
Company shall compensate Employee for his services pursuant to this
Agreement as follows:
2.1 S ALARY . Effective November 11, 2005, the Company
shall pay to Employee an annual salary in the amount of One Hundred
Eighty Thousand Dollars ($180,000) (“ Base
Compensation ”), subject to such periodic increases, as
the Company, in its discretion, shall determine to be appropriate,
provided that the minimum annual increase in
Employee’s Base Compensation shall be at least equal to ten
percent (10%) of the amount of Employee’s Base
Compensation in effect under this Section 2.1 in the
immediately preceding year. For purposes of this Section 2.1,
the term “year” shall refer to periods of twelve
(12) consecutive months commencing on each annual anniversary
of the Effective Date of this Agreement. The Base Compensation
shall be paid periodically in accordance with the Company’s
normal payroll practices in effect from time to time, and shall be
subject to applicable wage tax and income tax
withholding.
2.2 A NNUAL P ERFORMANCE B ONUS .
For each calendar year during the term of this Agreement, Employee
will be eligible to receive a cash bonus, which shall be based one
hundred percent (100%) upon Employee’s achievement of
Employee’s individual and corporate objectives as specified
by the Chief Executive Officer after consultation with the Employee
(the “ Annual Bonus ”).
(a) P AYMENT . Consistent with Company policy, the payment of
the Annual Bonus shall be subject to the final discretion of the
Compensation Committee of the Company’s board of directors.
Such Annual Bonus shall be payable in increments in accordance with
meeting performance criteria determined under the first sentence of
Section 2.2, above.
(b) T ARGET A NNUAL B ONUS .
Subject to the foregoing, the target ( i.e., maximum) Annual
Bonus payable for each calendar year shall be two hundred twenty
five percent (225%) of Employee’s Base Compensation. The
target Annual Bonus shall be payable in two components as
follows:
(i) 20%: C
ORPORATE
O BJECTIVES . Twenty percent (20%) of such target
Annual Bonus compensation will be payable based upon
Employee’s performance against corporate objectives;
and
(ii) 80%: P
OTENTIAL
S UBSCRIBERS FROM I NDIRECT C ONTRACTS . Eighty percent (80%) of such target
Annual Bonus compensation will be payable in increments from time
to time during each year, upon the Company’s execution of new
indirect distribution contracts at any time during the year, with
such 80% component payable at a rate of Ten Thousand Dollars
($10,000) for each one hundred thousand (100,000) potential
subscribers for the Company’s services to whom the
Company’s services are made available because of a
distribution contract (without regard to how many of those
potential subscribers actually subscribe to the Company’s
services). The portion of the bonus payable under this
Section 2.2(b)(ii) shall be payable from time to time in
periodic increments of $10,000, as the Company achieves access,
through such indirect distribution contracts, to each block of
100,000
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additional potential subscribers. The provisions
of this Section 2.2(b)(ii) can be illustrated by the following
examples:
(A) Example 1 . Pursuant to
Employee’s efforts, the Company signs an indirect
distribution contract with Party X, which has 5,000,000 customers
that are potential subscribers to the Company’s services.
Under the indirect distribution contract, Party X and the Company
agree only to a trial phase in which Party X allows the
Company’s services to be made available to 100,000 of Party
X’s customers. Upon execution of that Agreement, Employee is
entitled to a bonus of $10,000 because that indirect distribution
contract enables the Company’s services to be made available
to only 100,000 of Party X’s customers. Notwithstanding the
foregoing, should Party X expand the trial phase to allow the
Company’s services to be made available to 4,000,000 of Party
X’s customers, Employee is entitled to a bonus of
$400,000.
(B) Example 2 . Pursuant to
Employee’s efforts, the Company on March 1
st
signs with Party Y an
indirect distribution contract with Party Y, which has 2,000,000
customers to whom the Company’s services are permitted to be
marketed pursuant to the indirect distribution contract. The
indirect distribution contract requires the parties’
technical teams to work together to implement the distribution of
the Company’s services to Party Y’s customers, and the
parties contemplate that such distribution will begin within six
months of the execution of the contract. There is no assurance that
any of Party Y’s 2,000,000 customers will actually subscribe
for the Company’s services. As of the date on which the
Company signs the contract on March 1 st , Employee has earned a bonus of
$200,000 ( i.e., $10,000/100,000 potential subscribers x
2,000,000 potential subscribers from Party Y = $200,000). Neither
the delayed distribution of the Company’s services, nor the
actual “uptake” rates by Party Y’s customers,
affects Employee’s right to receive payment of the bonus that
accrues under Section 2.2(b)(ii) upon execution of the
indirect distribution contract with Party Y.
2.3 E QUITY G RANTS .
Employee shall be eligible for the “Initial Option”
described in Section 2.3(a), below, and the “Future
Options” described in Section 2.3(b), below
(collectively, the “ Options ”).
(a) I NITIAL G RANT . Promptly following the execution of this
Agreement, and subject to approval of the Company’s Board of
Directors, the Company shall grant to Employee an option for the
purchase of one hundred thousand (100,000) shares of the
Company’s common stock (the “ Initial Option
”), which Initial Option shall (a) to the extent
possible under the applicable rules of the Internal Revenue Code of
1986, as amended, be an incentive stock option, (b) be issued
under and subject to the terms and conditions of the
Company’s 2004 Stock Incentive Plan, (c) be exercisable
at a price per share equal to the fair market value of the
Company’s common stock on the date on which the Board of
Directors approves such Option (such date, the “ grant
date ”), (d) be subject to vesting, subject to
Employee’s continuous employment with the Company, as
follows: (x) 25% of the shares subject to the Initial Option
shall vest after six (6) months of continuous employment
following the grant date, and (y) one-twenty-fourth
(1/24 th ) of the shares subject to the
Initial Option shall vest monthly thereafter, so that the Option
will be fully vested and exercisable two (2) years from the
date of grant), and (e) be subject to acceleration upon any
termination of Employee’s employment by the Company following
a Change of Control as set forth in Section 3.3,
below.
(b) F UTURE O PTIONS . On the date of the first meeting of the
Company’s board of directors following the completion of the
Employee’s first full year of employment with the Company,
and each subsequent year thereafter, the Company will grant to
Employee an option (each, a “ Future Option ”)
to purchase a minimum of twenty-five thousand (25,000) shares
of the Company’s common stock, which Future Option shall
(a) to the extent possible under the applicable rules of the
Internal
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Revenue Code of 1986, as amended, be an
incentive stock option, (b) be issued under and subject to the
terms and conditions of the Company’s 2004 Stock Incentive
Plan, (c) be exercisable at a price per share equal to the
fair market value of the Company’s common stock on the date
on which the Board of Directors approves such Option (such date,
the “ grant date ”), (d) be subject to
vesting, subject to Employee’s continuous employment with the
Company, as follows: (x) 25% of the shares subject to the
Initial Option shall vest after six (6) months of continuous
employment following the grant date, and (y) one-twenty-fourth
(1/24 th ) of the shares subject to the
Initial Option shall vest monthly thereafter, so that the Option
will be fully vested and exercisable two (2) years from the
date of grant).
2.4 F RINGE B ENEFITS /V ACATION . Subject to the Company’s vacation accrual
limits and policies, Employee shall accrue three
(3) weeks’ paid vacation in each period of twelve
(12) consecutive months of employment during the term of this
Agreement. Any unused vacation days from any annual period shall
rollover and be available for use by Employee in subsequent periods
of employment. Employee shall be eligible for such other fringe
benefits as are provided to the Company’s senior Employee
level employees generally from time to time.
2.5 R EIMBURSEMENT OF E XPENSES . The
Company shall reimburse Employee for authorized business expenses
incurred by Employee in the performance of his duties in accordance
with the Company’s policy for reimbursement of employee
business expenses, as in effect from time to time.
3. T ERMINATION .
3.1 D EFINITIONS . For purposes of this Agreement, the
term:
(a) “C
HANGE OF C ONTROL ” shall mean the occurrence of one of the
following events:
(i) Any transaction or series of related
transactions by which any “ person ” (as such
term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “ Exchange Act
”)), including all affiliates of such person, is or becomes
the “ beneficial owner ” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly of securities
of the Company representing 50% or more of the combined voting
power of the Company’s then outstanding securities other than
(A) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (B) any affiliate, or
any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company, or (C) Peter V. Sperling or
any affiliate thereof.
(ii) The date of the consummation of a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 50% of the combined voting power of the voting securities
of the Company (or such surviving entity) outstanding immediately
after such merger or consolidation; or
(iii) The date of the consummation of a plan of
complete liquidation of the Company or the sale or disposition by
the Company of all or substantially all of the Company’s
assets. For purposes
