CMO Employment Agreement - ADRIAN VAN HAAFTEN

EXHIBIT 10.1


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (the " Agreement" ) is made and entered into, effective as of January 26, 2005 (the " Effective Date" ), by and between CALLWAVE, INC. , a California corporation (the " Company" ), and ADRIAN VAN HAAFTEN (" Employee" and " Executive" ), with reference to the following facts:

RECITALS:

The parties have agreed to execute this Agreement in order to memorialize the terms and conditions on which the Company shall employ Employee.


AGREEMENTS:


NOW, THEREFORE , the parties hereto, intending to be legally bound, do hereby agree as follows:

1. POSITION AND DUTIES

1.1 POSITION AND TITLE. Subject to the Employee providing appropriate documents by the first day of employment to complete the I-9 form to provide eligibility for employment in the United States, the Company hereby hires Employee to serve as the Chief Marketing Officer of the Company.


(a) LIMITS ON AUTHORITY. Employee shall perform his duties as Chief Marketing Officer 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.

(b) ANNUAL REVIEWS. 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, provided, however, that Company may elect to conduct a partial-year performance review in order to synchronize Employee' s annual review date with that of the Company' s other executives. In connection with each such review, the Company shall evaluate whether any increase in Employee' s compensation under Section 2, below, is appropriate.


(c) REPORTING AND AUTHORITY. Employee shall report to the Company' s Chief Executive Officer. Employee shall render such business and professional services in the performance of his duties, consistent with the Employee' s position within the Company, as shall be reasonably assigned to him by the Company' s Chief Executive Officer.


1.2 ACCEPTANCE. Employee hereby accepts employment by the Company in the capacity 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 imposed upon Employee pursuant to this Agreement.


1.3 BUSINESS TIME. Employee shall devote his exclusive business time to the performance of his duties under this Agreement.

1.4 LOCATION. 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 TERM. Subject to such sooner term pursuant to Section 3 below, the term of this Agreement shall commence as of the Effective Date and shall expire upon termination pursuant to Section 3 of this Agreement.


2. COMPENSATION. The Company shall compensate Employee for his services pursuant to this Agreement as follows:


2.1 SALARY. The Company shall pay to Employee an annual salary in the amount of two hundred and twenty-five thousand dollars ($225,000) (" Base Compensation" ). Such annual salary shall be subject to periodic increases at the time of Employee' s annual review pursuant to Section 1.1(b), above, and such other times and in such amounts as the Company, in its discretion, shall determine to be appropriate. The Base Compensation will be paid periodically in accordance with the Company' s normal payroll practices and shall be subject to the usual, required withholding.


2.2 ANNUAL PERFORMANCE BONUS. For each full year during the term of this Agreement, (pro-rated for the first partial year of employment), Employee will be eligible to receive a bonus based upon the achievement of reasonable performance criteria. Fifty percent (50%) of such bonus shall be based upon the Company' s achievement of corporate objectives determined by the Chief Executive Officer, and the remaining fifty percent (50%) of such bonus shall be based upon Employee' s achievement of Employee' s individual objectives as specified by the Chief Executive Officer after consultation with the Employee (the " Annual Bonus" ). Consistent with Company policy, the payment of any performance-based bonus shall be subject to the final discretion of the Compensation Committee of the Company' s board of directors. Subject to the foregoing, the Target Annual Bonus payable for any calendar year shall be thirty percent (30%) of Base Compensation.


2.3 EQUITY GRANTS. On the first day of Employee' s employment with the Company hereunder, the Company will grant to Employee an option, which will be, to the extent possible under the $100,000 rule of Section 422(d) of the Code, an incentive stock option, to purchase fifty thousand (50,000) shares of the Company' s common stock with an exercise price per share equal to 100% of the fair market value of the underlying stock on the date of the approval of the grant by the Company' s board of directors, as determined by the board of directors or its committee, in their sole discretion (the " Initial Option Grant" ). The Initial Option Grant will vest


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as to 12.5% of the shares subject to the Option six months after the date of grant, and as to 1 / 48 th of the shares subject to the Option monthly thereafter, so that the Option will be fully vested and exercisable four (4) years from the date of grant, subject to Employee' s continued service to the Company on the relevant vesting dates.


On the date of the first meeting of the Company' s board of directors following the completion of Employee' s first full year of employment with the Company, the Company will grant to Employee an option, which will be, to the extent possible under the $100,000 rule of Section 422(d) of the Code, an incentive stock option, to purchase thirty thousand (30,000) shares of the Company' s common stock with an exercise price per share equal to 100% of the fair market value of the underlying stock on the date of the approval of the grant by the Company' s board of directors, as determined by the board of directors or its committee, in their sole discretion (the " First Year Grant" ). The First Year Grant will vest as to 16.67% of the shares subject to the Option six months after the date of grant, and as to 1 / 36 th of the shares subject to the Option monthly thereafter, so that the Option will be fully vested and exercisable three (3) years from the date of grant, subject to Employee' s continued service to the Company on the relevant vesting dates.


On the date of the first meeting of the Company' s board of directors following the completion of Employee' s second full year of employment with the Company, the Company will grant to Employee an option, which will be, to the extent possible under the $100,000 rule of Section 422(d) of the Code, an incentive stock option, to purchase ten thousand (10,000) shares of the Company' s common stock with an exercise price per share equal to 100% of the fair market value of the underlying stock on the date of the approval of the grant by the Company' s board of directors, as determined by the board of directors or its committee, in their sole discretion (the " Second Year Grant" ). The Second Year Grant will vest as to 25% of the shares subject to the Option six months after the date of grant, and as to 1 / 24 th of the shares subject to the Option monthly thereafter, so that the Option will be fully vested and exercisable two (2) years from the date of grant, subject to Employee' s continued service to the Company on the relevant vesting dates.

On the date of the first meeting of the Company' s board of directors following the completion of Employee' s third full year of employment with the Company, the Company will grant to Employee an option, which will be, to the extent possible under the $100,000 rule of Section 422(d) of the Code, an incentive stock option, to purchase ten thousand (10,000) shares of the Company' s common stock with an exercise price per share equal to 100% of the fair market value of the underlying stock on the date of the approval of the grant by the Company' s board of directors, as determined by the board of directors or its committee, in their sole discretion (the " Third Year Grant" ). The Third Year Grant will vest as to 25% of the shares subject to the Option six months after the date of grant, and as to 1 / 24 th of the shares subject to the Option monthly thereafter, so that the Option will be fully vested and exercisable two (2) years from the date of grant, subject to Employee' s continued service to the Company on the relevant vesting dates.

In combination, the Initial Option Grant, the First Year Grant, the Second Year Grant and the Third Year grant is intended to provide Employee with incentive stock options to purchase one


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hundred thousand (100,000) shares of the Com ...