EXHIBIT 10.27
July 2, 1997
PERSONAL AND CONFIDENTIAL
-------------------------
Xxxx Xxxx
0 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Dear Xxxx:
The Board of Directors of the Company has approved an agreement for your
services upon the terms set forth in this offer. On behalf of the Board of
Directors, I am pleased to submit to you the following offer:
1. TITLE AND POSITION. You will have the position of President and
Chief Executive Officer and you will report to the Board of Directors. We
will elect you to the Board of Directors promptly upon your acceptance of
this offer; and, upon your request, you will be elected as Chairman of the
Board. The position shall be located at the offices of the Company, except
as travel to other locations may be necessary to fulfill your
responsibilities.
2. DUTIES AND OBLIGATIONS. During your employment, you shall devote
your full time, interest and effort to the performance of the duties of the
position.
3. COMMENCEMENT. It is anticipated that you will commence employment
no later than July __, 1997.
4. COMPENSATION AND BENEFITS.
(a) SALARY. The Company shall pay you for all services to be
performed by you at a monthly salary of $ 41,667, adjusted as provided in
Section 4(g) below, payable in periodic semi-monthly installments according
to the Company's practice, subject to any applicable withholding taxes. Your
base salary will be reviewed on an annual basis by the Board of Directors or
its Compensation Committee. The first such review will occur no later than
February, 1999.
(b) STOCK PURCHASE RIGHT. At the Company's Board of Directors
meeting following the start of your employment, the Board will grant you a
stock award to purchase two million five hundred thousand (2,500,000) shares
of the Company Common Stock under the Company's 1996 Stock Plan (the
"Shares"). The purchase and/or exercise price for this right will be the
then-current fair market value of the Company Common Stock at the date of
grant or such other price as is consistent
with the terms of the Company's 1996 Stock Plan. The vesting of the options
to purchase Shares (and the lapsing of the Company's repurchase right, in the
case of Shares purchased pursuant to a "restricted stock purchase agreement)
will commence on the date of your full time employment with the Company. In
the case of an option(s), twenty-five percent (25%) of the options to
purchase Shares will be fully vested upon the date of grant, Shares issued
pursuant to any options will not be subject to any right of repurchase, other
than the right of first refusal as provided under the terms of the 1996 Stock
Plan and/or the agreements issued thereunder. In the case of Shares purchased
pursuant to a restricted stock agreement, 625,000 Shares will not be subject
to any right of repurchase (other than the right of first refusal, as
provided under the terms of the 1996 Stock Plan and/or the agreements issued
thereunder). The balance of the options to purchase Shares will begin
vesting and/or the repurchase right will lapse, in the case of a restricted
stock purchase agreement, one (1) year after your start date at the rate of
1/36th of the aggregate number of options to purchase Shares (or Shares in
the case of a restricted stock purchase) per month at the close of each month
while you remain employed with the Company, over the remainder of the four
(4) year vesting term. Upon the fourth anniversary of your start date, all
of the options to purchase Shares shall be fully vested and, in the case of a
restricted stock purchase, the Company's repurchase right will have lapsed in
its entirety.
The Board will respect your decision as to what portion of the Shares you
wish to obtain in the form of: (i) an immediate purchase, subject to the
Company's right of repurchase which lapses over time, with the right to make
an election under Section 83 (b) of the Internal Revenue Code; (ii) an
Incentive Stock Option, subject to the applicable rules and limitations under
the Internal Revenue Code; and (iii) a Non-Qualified Option. An attorney from
the Company's outside law firm of Xxxxxx, Xxxxxxx will be available to assist
you in evaluating the tax benefits of these different stock and option
programs. You have indicated that you want the above option in the form of
an Incentive Stock Option to the extent of the annual limitation contained in
section 422(d) of the Code, and to the extent the options exceed such limit
in a calendar year the excess will be a Non-Qualified Option and subject to
all terms of Non-Qualified Options, including price and time of exercise.
The Company will cooperate with you in this allocation. Your stock award
will be evidenced by Stock Option Agreement(s) (and/or a Restricted Stock
Purchase Agreement, in the event that you decide to have a portion of your
stock grant pursuant to a restricted stock purchase arrangement) subject to
the terms of the Company's 1996 Stock Plan and consistent with the forms of
agreements issued under the Company's 1996 Stock Plan. The terms of the Stock
Option agreements shall be amended by the Board at such meeting to provide
that Stock Option Agreements issued under the 1996 Stock Plan shall be
exercisable for a period of ninety (90) days following the date of
termination of employment rather than the Company's current thirty (30) day
period. The terms of these agreements permit you to transfer the Shares
which are not subject to a repurchase right or for which such right has
lapsed, to a trust for the benefit of your immediate family or to a member of
your immediate family. You shall have the right to exercise your options for
any consideration which is permissible under the terms of the 1996 Stock
Plan, including for shares of the Company's stock.
(c) ADDITIONAL STOCK PURCHASE RIGHT. The Company has granted you
the right to purchase up to one million (1,000,000) shares of the Company's
Series B Preferred Stock (the "Series B Shares") and upon such purchase you
shall become a party to the Company's Investors' Rights Agreement which shall
grant you registration rights with respect to your Series B Shares. The
2
purchase price for such shares will be two dollars ($2.00) per share. The
Company shall allow you to purchase two hundred and fifty thousand (250,000)
of the Series B Shares, on the same terms and conditions as the Company's
Series B investors, in exchange for a non-interest bearing promissory note
payable in twelve (12) equal monthly installments. The Company shall apply
the net amount of your compensation pursuant to Section 4(a) above to the
payment of this Note and you shall pay the balance of any monthly
installments to the Company. The Note shall be in a form and on terms which
are acceptable to the Company and to you. The Company shall allow you to
purchase seven hundred and fifty thousand (750,000) shares of the Series B
Shares (the "Restricted Series B Shares") pursuant to, at your option: (i)
a restricted stock purchase agreement in consideration for a full recourse
note which is adequately secured by the collateral of your choice, which may
include the Series B Shares; or (ii) a warrant with an exercise price of two
dollars ($2.00) per share and a term of three (3) years. At your option,
following the first anniversary of your employment with the Company, the
second note can be repaid or the warrant can be exercised in periodic
installments by applying your net compensation to make periodic payments to
such Note or exercises of the Warrant, in accordance with terms and
conditions which are acceptable to you and the Company. The Restricted
Series B Shares will be subject to the Company's assignable repurchase right
which shall lapse with respect to 1/24th of the Restricted Series B Shares
per month during the period in which you continue to be employed by the
Company, commencing upon the start date of your employment. In the event
that that your employment is terminated for any reason, the note shall become
due and payable. The Company's outside counsel shall be made available to
discuss with you the legal and tax issues with respect to these options in
order to assist you in deciding which option to select.
(d) BENEFITS. Commencing with full time employment, you will be
entitled to all medical, life insurance, disability insurance and other
benefits as are provided to the Company's employees. Medical benefits will
provide coverage with health care providers located in Austin, Texas. In
your position, we would expect you to review and design the Company's
benefits packages.
(e) BUSINESS EXPENSES. The Company will reimburse you for all
reasonable business expenses incurred on behalf of the Company upon
submission of appropriate documentation in accordance with the Company's
general policies, as they may be amended from time to time during the course
of your employment.
(f) MOVING EXPENSES. The Company acknowledges that neither you
nor your family will be able to move to the San Francisco Bay area at any
time prior to June 1998. Notwithstanding the foregoing, the Company will
reimburse you for your reasonable and customary moving expenses incurred with
respect to your move to the San Francisco bay area whether prior to June 1998
or otherwise. You agree that you will repay such reimbursed expenses in the
event that you voluntarily terminate your employment prior to the one (1)
year anniversary date of your family's move to California.
(g) LIVING AND COMMUTING EXPENSES. The Company will pay all of
the reasonable and customary living expenses incurred with respect to your
living accommodations in the San Francisco bay area, including housing, meals
and automobile expenses. The Company will also pay all commuting expenses for
weekend trips to visit your family in Austin, Texas. In the event any of the
3
expenses advanced under this provision result in additional taxable income to
you, the Company will "gross up" your salary to compensate you for additional
state and Federal taxes and taxes on the increased salary.
(h) 83(b) ELECTION. With respect to any Shares issued pursuant
to this letter, to the extent allowable by law, upon your request, the
Company will assist you in preparing an election under section 83(b) of the
Internal Revenue Code of 1986.
5. CHANGE OF CONTROL. In the event that the Company is acquired by
or merged into another company, if you are not offered a position with
similar responsibility in the surviving company and if you decide to
voluntarily terminate your employment with Healtheon at any time prior to the
effective time of any such merger or acquisition, options to purchase 625,000
Shares shall immediately vest or in the case of Shares subject to repurchase,
the Company will waive the Company's right of repurchase with respect to an
aggregate of 625,000 of the Shares, and 500,000 of the Restricted Series B
Shares. This provision shall not be applicable in the event of your
termination for any reason other than in connection with a change of control
and this waiver and/or vesting shall be in addition to any Shares or options
to purchase Shares which have already vested and/or the Company's repurchase
right has lapsed.
6. EMPLOYMENT RELATIONSHIP. Should you decide to accept our offer,
you will be an at-will employee of the Company, which means the employment
relationship can be terminated by either of us for any reason at any time.
Further, your participation in any stock incentive or benefit program is not
to be regarded as assuring you of continuing employment for any particular
period of time. However, in the event of the Company's termination of your
employment without cause, you would receive six (6) months base salary,
payable in semi-monthly installments and options to purchase 625,000 Shares
would immediately vest and the Company would waive the Company's right of
repurchase with respect to 625,000 of the Shares (if Shares are issued
subject to a repurchase right) and 500,000 of the Restricted Series B Shares.
This vesting and waiver shall be in addition to any options and/or Shares
which have already vested and/or the Company's repurchase right has lapsed.
Any assignment of the Company's Repurchase rights shall be subject to the
waivers of such rights described in Sections 5 and 6 so that all assignees
shall be bound by such waivers. For purposes of this Agreement, the term
"cause" shall mean (i) willful and repeated failure to comply with the
lawful directions of the Board of Directors, (ii) gross negligence or willful
misconduct in the performance of duties to the Company, (iii) commission of
any act of fraud with respect to the Company, or (iv) conviction of a felony
or a crime causing material harm to the standing and reputation of the
Company, in each case as determined in good faith by the Board of Directors.
The number of Shares and Restricted Shares shall be subject to adjustment, in
accordance with the terms of the Company's 1996 Stock Plan and/or Certificate
of Incorporation, as applicable, in the event of certain "dilutive"
issuances of stock and the Share and Restricted Share numbers set forth
herein and in Sections 4 and 5, above shall be adjusted accordingly in the
event of any such "dilutive" stock issuance.
7. PROPRIETARY INFORMATION. As an employee of the Company, you will
have access to Company confidential information and you may during the course
of your employment develop certain information or inventions which will be
the Company's property. As a condition of your employment,
4
you will be required to enter into the Company's Employee Inventions and
Confidentiality Agreement. This agreement exists to assure the Company and
its investors that the Company's valuable intellectual property is protected.
We wish to impress upon you that we do not want you to bring with you any
confidential or proprietary material of any former employer or third party or
to violate any other obligation which you may have to any of your former
employers or any third parties.
8. ENTIRE AGREEMENT. This Letter Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements,
arrangements, and communications, whether oral or written, between the
parties, including all prior employment agreements. No amendment to this
Letter Agreement may be made except by a writing signed by the Company and
you.
If you find this offer acceptable, please sign the enclosed copy of this
letter in the space indicated and return it to us.
Very truly yours,
__________________________________
Xxxx Xxxxx
On behalf of the Board of Directors
Healtheon Corporation
Accepted and Agreed:
______________________________
Dated: _______________________
5
