EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of
October 31, 1997, by and between Telegen, a California corporation (the
"Company"), and Fred Kashkooli (the "Executive").
WHEREAS, the Company desires to employ the Executive as of November 3,
1997, or such other date as the Executive shall first be employed by the Company
(the "Effective Date"), and the Executive desires to accept employment with the
Company on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. Employment and Duties. The Executive will serve as the President and
Chief Executive Officer of the Company. The duties and responsibilities of the
Executive shall include the duties and responsibilities for the Executive's
corporate offices and positions as set forth in the Company's Bylaws from time
to time in effect and such other duties and responsibilities as the board of
directors of the Company (the "Board of Directors") may from time to time
reasonably assign to the Executive, in all cases to be consistent with the
Executive's corporate offices and positions. The Executive shall report to the
Board at large. The Executive shall perform faithfully the executive duties
assigned to him to the best of his ability. At the next meeting of the Board of
Directors, the Executive will be nominated to serve as a director of the
Company, and, when elected or appointed thereafter, the Executive shall serve in
such capacity without additional compensation.
2. Employment Period.
(a) Basic Rule. The employment period shall begin upon the
Effective Date and shall continue thereafter until terminated by the Company or
the Executive. The Executive acknowledges and agrees that his employment with
the Company is "at will" and may be terminated by either party at any time,
subject only to the terms of this Agreement.
(b) Early Termination. The Company may terminate the
Executive's employment at any time for any reason or no reason. Except with
respect to for-Cause termination as defined in paragraph 2(d) below, the Company
shall provide the Executive with thirty (30) days' advance notice in writing of
such termination. The Executive may terminate his employment by giving the
Company thirty (30) days' advance written notice. Upon termination of the
Executive's employment with the Company, the Executive's rights under any
applicable benefit plans shall be determined under the provisions of those
plans. Any waiver of notice shall be valid only if it is made in writing and
expressly refers to the applicable notice requirement of this paragraph 2(b).
(c) Death. The Executive's employment will terminate in the
event of his death. The Company shall have no obligation to pay or provide any
compensation or benefits under this Agreement on account of the Executive's
death, or for periods following the Executive's death, other than the Company's
obligations applicable under such circumstance under paragraph 13. The
Executive's rights
under the benefit plans of the Company in the event of the Executive's death
will be determined under the provisions of those plans.
(d) Cause. The Company may terminate the Executive's
employment for cause by giving the Executive notice in writing. For all purposes
under this Agreement, "Cause" shall mean (i) willful failure by the Executive to
perform his duties hereunder and not to cure such willful failure by the
Executive, thirty (30) days after receipt of written notice by the Company of
such willful failure, other than a failure resulting from the Executive's
complete or partial incapacity due to physical or mental illness or impairment
(provided that impairment as a result of substance abuse shall be deemed willful
failure hereunder), (ii) a willful act by the Executive which constitutes gross
misconduct and which is demonstrably injurious to the Company, (iii) a willful
breach by the Executive of a material provision of this Agreement, or (iv) a
material and willful violation by the Executive of a federal or state law or
regulation applicable to the business of the Company. No act, or failure to act,
by the Executive shall be considered "willful" unless committed without good
faith or without a reasonable belief that the act or omission was in the
Company's best interest. No compensation or benefits will be paid or provided to
the Executive under this Agreement on account of a termination for Cause or for
periods following the date when such a termination of employment is effective.
The Executive's rights under the benefit plans of the Company shall be
determined under the provisions of those plans.
(e) Disability. The Company may terminate the Executive's
employment for Disability by giving the Executive thirty (30) days' advance
notice in writing. For all purposes under this Agreement, "Disability" shall
mean that the Executive, at the time notice is given, has been unable to
substantially perform his duties under this Agreement for a period of not less
than ninety (90) days due to physical or mental illness. The determination of
the Executive's Disability hereunder shall be made by a two-thirds (2/3)
majority of the then current members of the Company's Board of Directors
(excluding the Executive) and shall be based upon advice from such medical
professionals and upon such medical and other records as the Company's Board of
Directors may deem appropriate. In the event that the Executive resumes the
performance of substantially all of his duties hereunder before the termination
of his employment under this paragraph 2(e) becomes effective, the notice of
termination shall automatically be deemed to have been revoked. No compensation
or benefits will be paid or provided to the Executive under this Agreement on
account of termination for Disability, or for periods following the date when
such a termination of employment is effective, other than the Company's
obligations applicable under such circumstance under paragraph 13. The
Executive's rights under the benefit plans of the Company shall be determined
under the provisions of those plans.
3. Place of Employment. The Executive's services shall be performed at
the Company's principal executive offices at 101 Saginaw Drive, Redwood City,
California. The parties acknowledge, however, that some travel may be required
in connection with the performance of the Executive's duties hereunder.
4. Base Salary. For all services to be rendered by the Executive
pursuant to this Agreement, the Company agrees to pay the Executive an annual
base salary (the "Base Salary") of $220,000 from the date hereof until the first
anniversary of this Agreement and a Base Salary of $275,000 for the period
between the first anniversary and second anniversary of this Agreement.
Thereafter, for each annual
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period beginning on or after the second anniversary of the Effective Date, the
Base Salary shall be determined by the Board of Directors prior to each such
anniversary. The Base Salary shall be paid in periodic installments in
accordance with the Company's regular payroll practices. The payment of such
Base Salary to the extent not paid by the Company shall be guaranteed by Telegen
subject to the limitations set forth in paragraph 28.
5. Bonus. During the first year of his employment, the Executive shall
be eligible to receive an annual cash bonus (the "Bonus") of $110,000. This
first year Bonus shall be paid in four (4) quarterly installments of $27,500 at
the end of each three (3) month period after the Effective Date. Upon the second
anniversary of his employment the Executive shall be eligible to receive a
lump-sum cash Bonus of $125,000 on such date. Receipt of the second Bonus will
be based upon certain criteria to be agreed upon by the Executive and the Board
of Directors including revenue and profitability targets and other
organizational milestones (the "Critical Performance Targets"). On or before the
first anniversary the Executive shall prepare and submit to the Board of
Directors for approval a management bonus program (the "Program") that will
include the Critical Performance Targets and any other terms and conditions of
the Executive's Bonus opportunity for the year following such anniversary. The
payment of such Bonuses to the extent not paid by the Company shall be
guaranteed by Telegen subject to the limitations set forth in paragraph 28.
6. Stock Option.
(a) Initial Options. Effective as of the Company's first Board
of Director's meeting hereafter, the Company shall grant the Executive two
options (the "Executive Options") to purchase shares of the Company's Common
Stock at fair market value per share.* The number of shares subject to the first
option shall be for one hundred twenty thousand (120,000)(the "First Option")
and number of shares subject to the second option shall be for six hundred
thousand (600,000) (the "Second Option"). The Executive Options shall vest as
described in paragraph 6(b) below and shall be subject to such other terms and
conditions as are described in paragraph 6(c) below.
(b) Vesting. The First Option shall vest over a twenty-four
(24) month period beginning on the first month anniversary of the Effective Date
and ending on the second (2nd) anniversary of the Effective Date, to the extent
the Executive is employed by the Company. The Second Option shall vest and
become exercisable monthly over a forty eight (48) month period beginning on the
first month anniversary of the Effective Date and ending on the fourth (4th)
anniversary of the Effective Date, to the extent the Executive is employed by
the Company. In the event of a Change of Control (as defined below), the then
unvested portion of the Executive Options shall automatically become vested, and
the Executive shall have the right to exercise all or any portion of the
Executive Options, in addition to any portion of the Executive Options
exercisable prior to such event. For purposes of this Agreement,
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*For the purpose of this agreement, the Telegen Common Stock fair
market value shall mean the value determined by the average of the closing
market price on the NASDAQ for the five working days prior to November 25, 1997.
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the term "Change of Control" shall mean the occurrence of any of the following
events subsequent to the Effective Date:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Telegen,
representing fifty percent (50%) or more of the total voting power represented
by Telegen's, as the case may be, then outstanding voting securities (except in
a transaction or transactions in which Telegen or its affiliates or successors
have, maintain or accumulate securities representing more than fifty percent
(50%) of the voting power of the Company);
(ii) A merger or consolidation of Telegen with any
other corporation, other than a merger or consolidation that would result in the
voting securities of Telegen, as the case may be, outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities of Telegen,
as the case may be, or such surviving entity outstanding immediately after such
merger or consolidation; or
(iii) the shareholders of Telegen approve a plan of
complete liquidation of Telegen, as the case may be, or an agreement for the
sale or disposition by Telegen, as the case may be, of all or substantially all
Telegen's assets, as the case may be.
(c) Option Provisions. The Executive Options shall be granted
under the Company's 1996 Stock Option Plan (the "Stock Plan") and, except as
expressly provided otherwise in this paragraph 6, shall be subject to the terms
and conditions of the Stock Plan and form of option agreement; provided,
however, that the Company's Board of Directors may, in its discretion, grant the
Executive Options outside of the Stock Plan, and any such option shall include
such other terms as the Board of Directors may specify that are not inconsistent
with the terms hereof, including (i) the ability to exercise the Executive
Options for one (1) year after the termination of the Executive's employment or
one (1) year after the death or disability of the Executive and (ii) the ability
of the Executive to exercise by cash or full recourse promissory note or a
combination thereof all or part of the Executive Options as to both vested and
unvested shares upon execution of a stock restriction agreement providing for
substantially similar vesting restrictions contained in paragraph 6(b) hereof as
to such unvested shares.
(d) Buy-Back Election. If after the third anniversary from the
date hereof, the Company is not a reporting company under the Exchange Act of
1934, trading on an automated quotation system or a national exchange, the
Executive shall have the right to engage a professional appraiser, at his
expense, to estimate the fair market value, on a net exercise basis (the "Equity
Value") of the vested portion of the Executive Options and give the Company
written notice (the "Notice") of (i) his commitment to exercise his buy-back
election hereunder and (ii) the date he will exercise his buy- back election
hereunder (the "Buy Back Date"), such date not to be less than thirty (30) days
prior to, nor more than forty-five (45) days from the date the Notice is
received by the Company. Without receipt of the Notice by the Company, Telegen
Corporation, a California corporation, shall not be required to
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effectuate the provisions of this paragraph. Upon receipt of the Notice, the
parties to this Agreement shall be bound to perform the provisions of this
paragraph 6(d).
On the Buy Back date, Telegen shall purchase the Equity Value
from the Executive through the issuance of a number of Telegen common shares
equal to the Equity Value divided by the Telegen common stock fair market value
(the "Telegen Common Stock FMV"). A fractional share resulting from this
calculation, if any, shall be rounded down to zero. The Telegen Common Stock FMV
shall mean the value determined at Telegen's election of the average closing
market price on any exchange, for the five days prior to the Buy Back Date, or
the fair market value of the Telegen common stock as determined by a certified
appraiser.
7. Board Seat. As soon as practicable and in connection with this
Agreement, the Board of Directors of the Company shall duly appoint the
Executive to the Board of Directors of the Company and shall solicit the
shareholders of the Company for their approval, to the extent necessary.
8. Expenses. The Executive shall be entitled to reimbursement by the
Company for all reasonable, ordinary, and necessary travel, entertainment, and
other expenses incurred by the Executive during the term of this Agreement (in
accordance with the policies and procedures established by the Company for its
senior executive officers) in the performance of his duties and responsibilities
under this Agreement; provided, however, that the Executive shall properly
account for such expenses in accordance with the Company's policies and
procedures.
9. Legal Expenses. The legal expenses incurred by the Executive in
connection with the review of and counsel with respect to this Agreement shall
be paid by the Company, up to $2,500.
10. Personal Life Insurance; Other Benefits. The Company shall maintain
and pay for a personal term life insurance policy for the Executive, with a face
value amount of up to $500,000, with the beneficiary of such policy to be
designated by the Executive. The Executive shall be entitled to participate in
employee benefit plans or programs of Telegen, to the extent that his position,
tenure, salary, age, health, and other qualifications make him eligible to
participate, subject to the rules and regulations applicable thereto.
11. Vacations and Holidays. The Executive shall be entitled to paid
vacation time and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
12. Other Activities. The Executive shall devote substantially all of
his working time and efforts during the Company's normal business hours to the
business and affairs of the Company and its subsidiaries and to the diligent and
faithful performance of the duties and responsibilities duly assigned to him
pursuant to this Agreement, except for vacations, holidays, and sickness. The
Executive may, however, devote a reasonable amount of his time to civic,
community, or charitable activities and, with the prior written approval of the
Board of Directors, to serve as a director of other corporations and to other
types of business or public activities not expressly mentioned in this
paragraph. No prior Board
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of Director's approval will be required for the Executive to serves as a
director of other corporations or entities on which the Executive already serves
as a director as of the date hereof.
13. Termination Benefits. In the event the Executive's employment
terminates, then the Executive shall be entitled to receive severance and other
benefits as follows:
(a) Base Salary.
(i) Involuntary Termination Without Cause. If the
Company terminates the Executive's employment without Cause, then in lieu of any
severance benefits to which the Executive may otherwise be entitled under any
Company severance plan or program, the Executive shall be entitled on such date
to a lump-sum payment of his Base Salary for one year from the date of such
termination at the rate applicable on such date;
(ii) Other Termination. In the event the Executive's
employment terminates for any reason other than as described in paragraph
13(a)(i) above, then the Executive shall be entitled to receive severance and
any other benefits only as may then be established under the Company's existing
severance and benefit plans and policies at the time of such termination.
(b) Options.
(i) Involuntary Termination Without Cause. In the
event the Executive's employment is terminated as described in paragraph
13(a)(i), the Executive Options shall be deemed vested as to all the shares
under the First Option, whether vested or not as of such termination date;
vested only as to the vested shares under the Second Option as of such
termination date; and, the Executive shall lose all vesting rights as to any
additional unvested shares under the Second Option.
(ii) Other Termination. In the event the Executive's
employment is terminated for any reason other than as described in paragraph
13(a)(i), then the Executive Options shall be deemed vested only as to the
vested shares as of such date, and shall lose all vesting rights as to any
additional unvested shares under the Executive Options.
(c) Bonuses.
(i) Involuntary Termination Without Cause.
(1) In the event the Executive's employment
is terminated as described in paragraph 13(a)(i) prior to the end of one year
from the Effective Date, then the Executive shall be entitled to receive the
Bonus described in paragraph 5 to the extent he would have been entitled to such
Bonus had he remained an employee of the Company through the end of the first
year following the Effective Date;
(2) In the event the Executive's employment
is terminated as described in paragraph 13(a)(i) on or after one year form the
Effective Date and prior to two years from the
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Effective Date, then the Executive shall be entitled to receive a pro-rated
portion of the Bonus described in paragraph 5 as if he had remained an employee
of the Company through the end of the second year following the Effective Date
and achieved one hundred percent (I 00%) of the Critical Performance Targets;
provided, however that if the Board of Directors and the Executive had agreed on
interim Critical Performance Targets (whether monthly, quarterly, or
semi-annual), prior to the termination of the Executive, then the assumption
regarding the Executive's achievement will be adjusted to the extent of the
Executive's success in meeting such interim Critical Performance Targets.
(ii) Other Termination. In the event the Executive's
employment is terminated by reason other than as described in 13(a)(i), then the
Executive shall not be entitled to any Bonus which has not accrued as of such
date.
(d) Additional Definition of Involuntary Termination Without
Cause. To the extent the Executive's duties shall be materially reduced in
nature, character or responsibility from those contemplated in paragraph 1, the
Executive shall have the option for thirty (30) days from such date, to (i),
terminate his employment with the Company or (ii) enter into an agreement with
the Company, specifying the Executive's revised duties. To the extent the
Executive terminates his employment under 13(d)(i) or the Executive and the
Company cannot come to an agreement under 13(d)(H), such termination shall be
deemed to be for the purposes of this paragraph 13 to be "Involuntary
Termination Without Cause."
The Executive shall not have the obligation to mitigate damages to receive the
termination benefits under paragraphs 13(a)(i), 13(b)(i), or 13(c)(i).
Notwithstanding any of the above provisions of this paragraph 13, to the extent
the Executive breaches either paragraph 14 or 15 hereunder, he shall not be
entitled to any termination benefits under this paragraph 13.
14. Proprietary Information. The Executive shall not, without the prior
written consent of the Board of Directors, disclose or use for any purpose
(except in the course of his employment under this Agreement and in furtherance
of the business of the Company or any of its affiliates or subsidiaries) any
confidential information or proprietary data of the Company. As an express
condition of the Executive's employment with the Company, the Executive agrees
to execute confidentiality agreements as requested by the Company, including but
not limited to the Company's standard form of proprietary information agreement.
The Executive's obligations under this paragraph 14 shall also be in full force
in effect as to Telegen.
15. Non-Solicit. The Executive covenants and agrees with the Company
that during his employment with the Company and for a period expiring three (3)
years after the date of termination of such employment, he will not solicit any
of the Company's then-current employees to terminate their employment with the
Company or to become employed by any firm, Company, or other business enterprise
with which the Executive may then be connected.
16. Right to Advice of Counsel. The Executive acknowledges that he has
consulted with counsel and is fully aware of his rights and obligations under
this Agreement.
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17. Successors. The Company and Telegen will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Telegen would be required to perform it if no such
succession had taken place. Failure of Telegen to obtain such assumption
agreement prior to the effectiveness of any such succession shall entitle the
Executive to the benefits described in paragraphs 13(a)(i), 13(b)(i) and
13(c)(i) of this Agreement, subject to the terms and conditions therein.
18. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be Settled exclusively by arbitration in
San Mateo County, California, in accordance with the rules of the American
Arbitration Association then in effect, with the right of discovery limited to
five (5) depositions, thirty-five (35) interrogatories, and reasonable request
for documents, by any party, by an arbitrator selected by both parties within
ten (10) days after either party has notified the other in writing that it
desires a dispute between them to be settled by arbitration. In the event the
parties cannot agree on such arbitrator within such ten- (10-) day period, each
party shall select an arbitrator and inform the other party in writing of such
arbitrator's name and address within five (5) days after the end of such ten-
(10-) day period and the two arbitrators so selected shall select a third
arbitrator within fifteen (15) days thereafter; provided, however, that in the
event of a failure by either party to select an arbitrator and notify the other
party of such selection within the time period provided above, the arbitrator
selected by the other party shall be the sole arbitrator of the dispute. Each
party shall pay its own expenses associated with such arbitration, including the
expense of any arbitrator selected by such party and the Company will pay the
expenses of the jointly selected arbitrator. The decision of the arbitrator or a
majority of the panel of arbitrators shall be binding upon the parties and
judgment in accordance with that decision may be entered in any court having
jurisdiction thereover. Punitive damages shall not be awarded.
19. Absence of Conflict. The Executive represents and warrants that his
employment by the Company as described herein shall not conflict with and will
not be constrained by any prior employment or consulting agreement or
relationship.
20. Assignment. This Agreement and all rights under this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees, successors
and assigns. This Agreement is personal in nature, and neither of the parties to
this Agreement shall, without the written consent of the other, assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity; except Telegen may assign this Agreement to any of its
affiliates or wholly-owned subsidiaries, provided, however that such assignment
will not relieve Telegen of its obligations hereunder. If the Executive should
die while any amounts are still payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other designee
or, if there be no such designee, to the Executive's estate.
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21. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be in writing and shall be
delivered personally or sent by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: Fred Kashkooli
10830 Santa Teresa Drive
Cupertino, CA 95014
If to the Company: Telegen Corporation
101 Saginaw Drive
Redwood City, CA 94063
Attn: Chairman of the Board
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this paragraph. Such notices or other communications shall be effective upon
delivery or, if earlier, three (3) days after they have been mailed as provided
above.
22. Integration. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.
23. Waiver. Failure or delay on the part of either party hereto to
enforce any right, power, or privilege hereunder shall not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party or a breach
of any promise hereof by the other party shall not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.
24. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction.
25. Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
26. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California as applied to agreements
between California residents entered into and to be performed entirely within
California.
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27. Counterparts. This Agreement may be executed in one or more
counterparts, none of which need contain the signature of more than one party
hereto, and each of which shall be deemed to be an original, and all of which
together shall constitute a single agreement.
28. Termination of Obligations of Telegen. Any obligations of Telegen
hereunder shall cease upon the fifth anniversary of the Effective Date.
IN WITNESS WHEREOF, each of the parties has executed this Employment
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
"COMPANY" TELEGEN CORPORATION
By:______________________________________
Gilbert Decker, Chairman of the Board
_________________________________________
"EXECUTIVE" Fred Kashkooli
[Employment Agreement Signature Page]
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