exv10w5



 







EXHIBIT 10.5





April 12, 2006



Mr. Krishna Khadloya

777 Mariners Island Blvd.

San Mateo, CA 94404




Dear Krishna:




     I write to confirm our discussions of last week regarding your position of Vice President
Engineering of Keynote Systems, Inc. This letter embodies the terms of your promotion which
occurred effective April 1, 2006.



     You will report to Umang Gupta, Chief Executive Officer and effective April 1, 2006 your base
salary has been adjusted to $7,500.00, paid semi-monthly. In addition, you are eligible for a 20%
MBO bonus based on quarterly objectives.



     In anticipation and recognition of your important future contribution to the growth of
Keynote, on April 4th 2006, you received an incentive stock option grant for 50,000
shares of common stock. You will receive incentive stock options to the extent permitted under the
law, which currently allows the grant during any one year of incentive stock options with a fair
market value at the date of grant of up to $100,000.00. If the value of the shares exceeds
$100,000.00, that amount in excess will be granted as non-qualified stock options. The grant date
of your option was April 4, 2006 the date designated by the Board by a written resolution. Fair
market value on such date was the closing price per share on the NASDAQ National Market. Consistent
with our employee stock option plan, vesting relates to exercisability not “ownership”, these
shares will vest as to 1/4th of the total number of shares on your first anniversary of the
effective date of this promotion with an additional 1/48th of the total shares vesting at the end
of months 13 through 48 of your continued employment with Keynote. The terms of your stock option
grant are set forth more fully in our Stock Option Plan agreements.



     As an employee, you may terminate employment at any time and for any reason whatsoever with
notice to Keynote Systems, Inc. We require that, in the event of resignation, you give at least
three (3) months notice. Similarly, Keynote Systems may terminate your employment at any time and
for any reason whatsoever, with or without cause, with three (3) months notice, or three (3) months
of base salary plus quarterly incentive compensation as averaged over the previous year, provided
that in order to receive any separation benefits you must first sign, date and deliver to the
Company, and allow to become effective, a general release of all known and unknown claims in the
form provided to you by the Company; and further provided that you will not be required to release
any right to indemnification you may have under applicable law, the Company’s Certificate of
Incorporation, the Company’s bylaws or any indemnity agreement between you and the Company.



     Furthermore, this letter agreement supersedes all our prior written or oral communication with
you and can only be modified by written agreement signed by you and an officer of Keynote Systems.



I look forward to working with you in this new role!



Sincerely,



\s\ Umang Gupta




Umang Gupta

Chairman & CEO




	 	 	 	 	 
	Accepted:

	 	     \s\ Krishna Khadloya
 

           Krishna Khadloya
	 	 






Date: April 13, 2006