Exhibit 10.08
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") is entered into as of
December 9, 1997 (the "EFFECTIVE DATE") between Keynote Systems Incorporated, a
California corporation with its principal offices located at Xxx Xxxx Xxxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx (the "COMPANY"), and Xxxxx Xxxxx, a resident of
California ("EMPLOYEE").
R E C I T A L S
A. Company is preparing to commence seeking significant equity
funding in order to secure additional capital to finance its operations and
believes that its ability to achieve its financing and operational objectives
will be enhanced by adding an experienced chief executive officer to its
management team.
B. Employee has substantial experience as the chief executive officer of
early stage technology companies and is willing to serve as the Company's Chief
Executive Officer on the terms and conditions set forth herein.
NOW THEREFORE, IN CONSIDERATION OF THE PROMISES AND THE TERMS AND
CONDITIONS SET FORTH IN THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS:
1. POSITION. During the Term (as defined in Section 4) of this
Agreement, Company will employ Employee, and Employee will serve Company in the
capacity of Chairman, President and Chief Executive Officer. Employee will
report directly to the Company's Board of Directors.
2. DUTIES. During the Term, Employee will have full responsibility
for managing the Company, including responsibility for firing and hiring
employees of the Company.
3. DEDICATION OF TIME AND EFFORT. Employee will devote to the
business and affairs of the Company such portion of his working time and efforts
as is reasonably necessary to manage the Company's business and affairs, but not
less than 75% of his working time and efforts during the Term. Employee may
devote up to 25% of his working time and efforts to other business activities
that are not competitive with the present or contemplated business of
the Company.
4. TERM OF EMPLOYMENT. The Term of this Agreement shall commence on
the Effective Date and expire as provided in Section 7. The Company agrees to
continue Employee's employment as President and Chief Executive Officer, and
Employee agrees to remain in the employ of the Company as President and Chief
Executive Officer, during the Term unless Employee's employment is earlier
terminated pursuant to the provisions of this Agreement.
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY. The Company agrees to pay Employee an annual
salary of Two Hundred Thousand Dollars ($200,000.00), or in the event of any
portion of a year, a pro rata amount of such annual salary; provided, however,
that Employee's salary shall be at an annualized rate of One Hundred Fifty
Thousand Dollars ($150,000.00) for so long as Employee is devoting not less than
75% of his time to managing the Company's business and affairs, subject to a
good faith adjustment by the Board of Directors in the event the aggregate
amount of time devoted by Employee to managing the Company's business and
affairs exceeds, or is reasonably likely to exceed, 75% of his working time.
Employee's salary will be payable as earned in accordance with Company's
customary payroll practice.
5.2 BONUS. Employee will be eligible to receive an annual
bonus, commensurate with industry standards for persons in similar or
equivalent positions, in the discretion of the Board of Directors.
5.3 ADDITIONAL BENEFITS. Employee will be eligible to
participate in Company's employee benefit plans of general application, in
accordance with the rules established for individual participation in any
such plan. Employee shall be entitled each year to similar vacation benefits
as are generally made available to other employees. Employee shall also be
entitled to reasonable holidays and illness days with full pay in accordance
with the Company's policy from time to time in effect.
5.4 STOCK OPTION.
(a) Effective December 9, 1997, Employee shall be
granted, under the Company's Stock Option Plan, an incentive stock
option (the "OPTION") to purchase Three Million Five Hundred
Thousand (3,500,000) shares of Common Stock (the "Option Shares")
at an exercise price of $0.10 per share, the fair market value as
determined by the Company's Board of Directors on such date.
Employee may acquire the Option Shares through the payment of cash
and, for an amount not to exceed 80% of the exercise price, by
delivery of a full recourse promissory note (with a term of five
years and interest at the minimum rate necessary to avoid the
imputation of interest under applicable Internal Revenue Service
regulations). The Option shall be immediately exercisable subject
to a right in favor of the Company to repurchase the Option Shares
at cost upon termination of Employee's employment as President and
Chief Executive Officer (the "RIGHT OF REPURCHASE"). Option
Shares as to which the Right of Repurchase has expired are "Vested
Shares"; Option Shares as to which the Right of Repurchase has
not expired are "Unvested Shares." In the event Employee acquires
Option Shares by delivery of a full recourse promissory note and
Company does not exercise its Repurchase Option, Employee may
require the Company to repurchase such shares at cost plus
interest accrued from the date of purchase.
(b) The Right of Repurchase shall expire with respect to
1/48 of the total number of Option Shares each month during the
Term. In the event of any
sale or other disposition of all or substantially all of the
assets of the Company, or any merger or consolidation of the
Company with or into any other corporation or corporations or
other entity, or any other corporate reorganization in which more
than 50% of the Company's voting power is transferred (a "Sale of
the Company") during the Term, the Right of Repurchase shall
expire with respect to ALL of the then Unvested Shares if (i)
Employee is not the Chief Executive Officer of the resulting
combined entity, AND (ii) Employee does not terminate employment
in a Voluntary Termination during the three (3) months following
consummation of the Sale of the Company.
5.5 WARRANT.
(a) WARRANT. The Company agrees to grant to Employee a
warrant (with a "net issue exercise" feature that becomes
effective one year after the Effective Date) to purchase Five
Hundred Thousand (500,000) shares of the Company's Series C
Preferred Stock (the "WARRANT SHARES") at the price per share at
which such shares are issued in the Company's next round of
preferred stock financing (the "WARRANT"). The Company agrees to
include the Warrant Shares as Registrable Securities under its
Information and Registration Rights Agreement.
(b) EXPIRATION. The Warrant shall be exercisable until
the earlier to occur of (i) the closing of an initial public
offering of the Company's Common Stock, and (ii) three (3) years
after the Effective Date; provided, however, that upon the earlier
termination of Employee's status as Chairman in a Voluntary
Termination or a Termination For Cause (including a Voluntary
Termination as Chief Executive Officer during the Initial Term
prior to the closing of a Qualifying Equity Financing), the
Warrant shall expire thirty (30) days thereafter. For purposes of
this Agreement, a "Qualifying Equity Financing" shall be a
preferred stock investment in the Company by (i) a venture capital
firm generally recognized as being of national standing, or (ii) a
corporation, or similar business entity, determined by the Board
of Directors to be a "strategic" investor, in either case in an
amount sufficient under the circumstances to put the Company on a
sound financial footing.
(c) WARRANT ADJUSTMENTS. The Warrant shall contain
equivalent anti-dilution protection, and conditions to such
protection (e.g. "pay to play"), as are provided to the Series C
Investors, provided, however, that any "pay to play" or other
conditions based on shareholdings shall be based only on
employee's holdings of Series B Preferred Stock. Notwithstanding
the foregoing, no such adjustment shall be provided if Employee's
employment as Chief Executive Officer terminates in a Voluntary
Termination prior to the closing of a Qualifying Equity Financing.
5.6 EXPENSES. The Company will reimburse Employee for all
reasonable and necessary expenses incurred by Employee in connection with the
Company's business provided
that such expenses are in accordance with applicable policy set by the Board
from time to time and are properly documented and accounted for in accordance
with the policy of the Company.
6. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee
Invention Assignment and Confidentiality Agreement with the Company in
substantially the form attached hereto as EXHIBIT B.
7. TERMINATION.
7.1 EVENTS OF TERMINATION. Employee's employment with the
Company shall terminate upon any one of the following:
(a) Upon the effective date of a written notice
sent to Employee stating the Company's determination made
in good faith that it is terminating Employee for "Cause"
as defined under Section 7.2 below
("TERMINATION FOR CAUSE"), PROVIDED, that if the "Cause"
for termination is defined in Section 7.2(c), then the
Company will give Employee written notice of such failure
(a "CAUSE NOTICE"), and if Employee fails to cure such
failure to the reasonable satisfaction of the Board of
Directors within thirty (30) days after the Company gives
the Cause Notice, then the Company may immediately
terminate Employee's employment, and such termination will
be deemed to be for "Cause" hereunder; or
(b) thirty (30) days after the effective date of
a written notice sent to Employee stating the Company's
determination made in good faith that, due to a mental or
physical incapacity, Employee has been unable to perform
his duties under this Agreement for a period of not less
than six (6) consecutive months
("TERMINATION FOR DISABILITY"); or
(c) Employee's death ("TERMINATION UPON DEATH");
or
(d) the effective date of a written notice sent
to the Company from Employee stating Employee's
determination made in good faith of "Constructive
Termination" by the Company, as defined under Section 7.3
below ("CONSTRUCTIVE TERMINATION"); or
(e) the effective date of a notice sent to
Employee from the Company stating that the Company is
terminating his employment, without cause, which notice can
be given by the Company at any time for any reason or for
no reason ("TERMINATION WITHOUT CAUSE"); or
(f) the effective date of a notice sent to the
Company from Employee stating that Employee is electing to
terminate his employment with the Company
("VOLUNTARY TERMINATION").
7.2 "CAUSE" DEFINED. For purposes of this Agreement, "Cause"
for Employee's termination will exist at any time after the happening of one or
more of the following events:
(a) any willful act or acts of dishonesty
undertaken by Employee and intended to result in
substantial gain or personal enrichment of Employee at the
expense of the Company;
(b) any willful act of gross misconduct which is
materially and demonstrably injurious to the Company; or
(c) the willful and continued failure to
substantially perform Employee's duties with the Company
(other than incapacity due to physical or mental illness).
No act, or failure to act, by Employee shall be considered
"willful" if done, or omitted to be done, by him in good faith and in the
reasonable belief that his act or omission was in the best interest of the
Company and/or required by applicable law.
7.3 "CONSTRUCTIVE TERMINATION" DEFINED. "Constructive
Termination" shall mean:
(a) a material reduction in Employee's salary or
benefits not agreed to by Employee;
(b) a material change in Employee's
responsibilities not agreed to by Employee; or
(c) a Sale of the Company.
7.4 NATURAL TRANSITION. Company and Employee also wish to
provide for their respective rights and obligations should they mutually agree
in connection with a Voluntary Termination or a Termination Without Cause
occurring after completion of a Qualifying Equity Financing to engage Employee
in the process of recruiting a successor Chief Executive Officer and assisting
in that person's transition into his or her responsibilities as the Company's
CEO (a "Natural Transition"). Employee's responsibilities in any Natural
Transition would include (i) assisting in the identification, selection, and
recruitment of a successor CEO, (ii) working with the Board of Directors and
successor CEO to design and implement a transition process that is optimal for
the Company, and (iii) during such period of up to twelve (12) months after
termination of employment as may be mutually agreed by the Company and Employee
(the "Transition Period") making himself available on a mutually acceptable
schedule for, and providing, such assistance and guidance, strategic and
otherwise, as the Company or the successor CEO may request (but not to exceed
25% of his working time during such period considered in the aggregate and
exclusive of Employee's duties and responsibilities as Chairman) in such areas
as operations, marketing, competition, sales, investor relations, and the like.
Notwithstanding anything to the contrary suggested by the preceding sentences of
this Section 7.4, neither Employee nor Company shall have any obligation to
engage in a Natural Transition.
8. EFFECT OF TERMINATION.
8.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the
event of any termination of Employee's employment pursuant to Section 7.1(a), or
Section 7.1(f) including a Voluntary Termination that is a Natural Transition,
the Company shall pay to Employee the compensation and benefits otherwise
payable to Employee under Sections 5.1, 5.3, and 5.6 through the date of
termination, and after the date of termination the Company shall continue to pay
to Employee benefits payable under Section 5.6 but, except as provided in the
following sentence of this Section 8.1, shall have no further obligations to
Employee under Sections 5.1 and 5.3. Employee's rights under the Company's
benefit plans of general application shall be determined under the provisions of
those plans.
8.2 TERMINATION FOR DISABILITY. In the event of termination of
employment pursuant to Section 7.1(b),
(a) the Company shall pay to Employee the compensation
and benefits otherwise payable to Employee under Sections 5.1,
5.3, and 5.6 through the date of termination, and
(b) for three (3) months after the termination of
Employee's employment, the Company shall continue to pay
Employee his salary under Section 5.1 above at Employee's
then-current salary, less applicable withholding taxes,
payable on the Company's normal payroll dates during that
period, and (B) shall continue his benefits under Sections
5.3 and 5.6 above.
(c) Employee shall receive other severance and
disability payments as provided in the Company's standard
benefit plans.
8.3 TERMINATION UPON DEATH. In the event of termination of
employment pursuant to Section 7.1(c), all obligations of the Company and
Employee shall cease, except (a) the Company shall pay to Employee (or to
Employee's estate) the compensation and benefits otherwise payable to Employee
under Sections 5.1, 5.3, and 5.6 through the date of termination, and (b) the
Company shall provide to Employee's estate the benefits described in Section
8.4(b).
8.4 CONSTRUCTIVE TERMINATION OR TERMINATION WITHOUT CAUSE. In
the event of any termination of this Agreement pursuant to Section 7.1(d) or
Section 7.1(e) including a Termination Without Cause that is a Natural
Transition,
(a) the Company shall pay to Employee the
compensation and benefits otherwise payable to Employee
under Sections 5.1, 5.3, and 5.6 through the date of
termination, and
(b) for the longer of (i) six (6) months after
the termination of Employee's employment, or (ii) twelve
(12) months after the Effective Date, the Company (A) shall
continue to pay Employee his salary under Section 5.1 above
at Employee's then-current salary (as adjusted to include
a ratable portion of any bonus paid to Employee with respect
to the preceding year), less applicable withholding taxes,
payable on the
Company's normal payroll dates during that period, and (B) shall
continue his benefits under Section 5.3 above.
8.5 EFFECT OF TERMINATION UPON STOCK RIGHTS. In the event of
any termination of this Agreement, Employee and Company shall have the following
rights and obligations with respect to the Option Shares:
(a) In the event of any termination of employment
pursuant to Section 7.1(a) or (b) the Company shall have a
Right of Repurchase with respect to all of the Option
Shares that are Unvested Shares;
(b) In the event of any termination of employment
pursuant to Section 7.1(f) that is not a Natural
Transition, the Company shall have a Right of Repurchase
with respect to all of the Option Shares that are Unvested
Shares and, if such Voluntary Termination occurs prior to
the closing of a Qualifying Equity Financing, the Company
shall have the right to repurchase all Option Shares that
are Vested Shares at the then fair market value of the
Company's Common Stock as determined in good faith by the
Board of Directors;
(c) In the event of any termination of employment
pursuant to Section 7.1 (c), (d), or (e) that is not a
Natural Transition, the Company's Right of Repurchase with
respect to the Option Shares shall continue to expire
during the applicable period set forth in Section 8.4(b)
and the Company shall have a Right of Repurchase with
respect to all Option Shares that are Unvested Shares after
the expiration of such period; and
(d) In the event of a Voluntary Termination or
Termination Without Cause that is a Natural Transition, the
Company's Right of Repurchase with respect to the Option
Shares shall continue to expire for twelve (12) months
after the termination of Employee's employment.
10. MISCELLANEOUS.
10.1 ARBITRATION. Employee and the Company shall submit to
mandatory binding arbitration in any controversy or claim arising out of, or
relating to, this Agreement or any breach hereof. Such arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association in effect at that time, and judgment upon the
determination or award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitrator is hereby authorized to award to
the prevailing party the costs (including reasonable attorneys' fees and
expenses) of any such arbitration.
10.2 SEVERABILITY. If any provision of this Agreement shall be
found by any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the extent that
it is found to be invalid or unenforceable and to the extent that to do so would
not deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the other
provisions continuing in full force and effect.
10.3 NO WAIVER. The failure by either party at any time to
require performance or compliance by the other of any of its obligations or
agreements shall in no way affect the right to require such performance or
compliance at any time thereafter. The waiver by either party of a breach of
any provision hereof shall not be taken or held to be a waiver of any preceding
or succeeding breach of such provision or as a waiver of the provision itself.
No waiver of any kind shall be effective or binding, unless it is in writing and
is signed by the party against whom such waiver is sought to be enforced.
10.4 ASSIGNMENT. This Agreement and all rights hereunder are
personal to Employee and may not be transferred or assigned by Employee at any
time. The Company may assign its rights, together with its obligations
hereunder, to any parent, subsidiary, affiliate or successor, or in connection
with any sale, transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee assumes the
Company's obligations hereunder.
10.5 WITHHOLDING. All sums payable to Employee hereunder shall
be reduced by all federal, state, local and other withholding and similar taxes
and payments required by applicable law.
10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
and only agreement between the parties relating to employment of Employee with
the Company, and this Agreement supersedes and cancels any and all previous
contracts, arrangements or understandings with respect thereto. The parties
contemplate that Section 5.4, and certain provisions of Section 8.5, of this
Agreement will be superseded by an Incentive Stock Option Agreement.
10.7 AMENDMENT. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended only by an agreement in writing
executed by both parties hereto.
10.8 NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing and hand delivered, sent by
telecopier, sent by registered first class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and other
communications shall be effective upon receipt if hand delivered or sent by
telecopier, five (5) days after mailing if sent by mail, and one (l) day after
dispatch if sent by express courier, to the following addresses, or such other
addresses as any party shall notify the other parties:
If to the Company: Keynote Systems Incorporated
Xxx Xxxx Xxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
If to Employee: Xxxxx Xxxxx
000 Xxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Telecopier: (000) 000-0000
10.9 BINDING NATURE. This Agreement shall be binding upon, and
inure to the benefit of, the successors and personal representatives of the
respective parties hereto.
10.10 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the plural, the
plural included the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
10.11 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement.
10.12 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereto shall be construed in accordance with the laws
of the State of California, without giving effect to the principles of conflict
of laws.
10.13 ATTORNEYS' FEES. In the event of any claim, demand or suit
arising out of or with respect to this Agreement, the prevailing party shall be
entitled to reasonable costs and attorneys' fees, including any such costs and
fees upon appeal.
10.14 MARKET STANDOFF. In consideration of the stock rights
granted pursuant to this Agreement, Employee agrees to the imposition of market
standoff restrictions on the shares of Common Stock he now holds, in form and
substance similar to the market standoff restrictions applicable to the shares
of Series B Preferred Stock owned by Employee.
IN WITNESS WHEREOF, the Company and Employee have executed this
Employment Agreement as of the date first above written.
KEYNOTE SYSTEMS INCORPORATED EMPLOYEE
By:
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Xxxxx Xxxxx
Title:
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