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SHARE ESCROW AGREEMENT
This SHARE ESCROW AGREEMENT, dated as of February 5, 1997 (the
"Agreement"), is entered into by and among PREFERRED EMPLOYERS HOLDINGS, INC.,
a Delaware corporation (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and ▇▇▇▇ Marks &
▇▇▇▇▇ LLP, a New York limited liability partnership, as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, Odzer is the beneficial owner of 1,111,765 shares of Common
Stock, par value $.01 per share, of the Company ("Common Stock"); and
WHEREAS, Odzer agrees to place 300,000 shares of Common Stock (the
"Shares") in escrow with the Escrow Agent for issuance upon the exercise of
certain stock options which will be granted by him pursuant to the terms and
subject to the conditions hereof (the "Stock Options") to certain executives and
officers of the Company as designated by the Compensation Committee (the
"Committee") of the Board of Directors of the Company.
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements contained herein, the parties hereto, intending legally to be bound,
agree as follows:
1. ESCROW OF SHARES. (a) Concurrently with the execution and delivery
hereof, Odzer shall deliver to the Escrow Agent certificates representing the
Shares, duly endorsed for transfer (the "Certificates"), to be held for so long
as any Stock Options remain outstanding and such Certificates shall be retained
in escrow pursuant to the terms and subject to the conditions hereof.
(b) The Escrow Agent agrees to hold the Shares in accordance with the
terms and conditions of this Agreement and for the uses and purposes stated
herein.
(c) Odzer and the Company shall deliver to the Escrow Agent the Form of
Stock Option Agreement, attached hereto as Annex A (the "Form Option
Agreement"), to be retained in escrow in accordance with the terms and
conditions of this Agreement and for the uses and purposes stated herein.
(d) It is understood and agreed that the Escrow Agent's sole duties
hereunder are as indicated herein and that the Escrow Agent in the performance
of its duties hereunder shall incur no liability except for willful malfeasance
and shall not be liable or responsible for anything done or omitted to be done
in good faith as herein provided. The Company agrees to indemnify and save the
Escrow Agent harmless from any claims, liabilities, judgments, attorneys' fees
and other expenses of every kind and nature, which may be incurred by the
Escrow Agent by reason
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of its acceptance of, and its performance under, this Agreement, except such as
may arise because of the Escrow Agent's willful misconduct in performing the
specified duties as Escrow Agent. The parties hereby agree that in no event
shall any claim be made with respect to any conflict of interest in connection
with ▇▇▇▇ Marks & ▇▇▇▇▇ LLP's acting in its capacity of Escrow Agent and
counsel to the Company. All reasonable expenses of the Escrow Agent incurred in
connection with the exercise of its duties hereunder shall be borne by the
Company.
(e) The Escrow Agent may resign at any time upon giving the parties hereto
thirty (30) days' prior written notice; in such event, the successor Escrow
Agent shall be such person, firm or corporation as shall be selected by the
Company and approved by Odzer in his reasonable discretion. It is understood and
agreed that such resignation shall not be effective until a successor agrees to
act hereunder.
(f) Upon the receipt of a notice and a certified or bank cashier's check
for an amount equal to the full purchase price for the Shares from an optionee
of the exercise of any Stock Option pursuant to Section 3(b) of such optionee's
respective Option Agreement (as defined hereinafter), the Company shall promptly
give written notice thereof to the Escrow Agent and the Escrow Agent shall,
within 10 business days of its receipt of such notice, release and deliver to
the Company Certificates representing such number of Shares as shall be set
forth in such notice against payment by the Company to Odzer for the Shares.
2. TERMS OF STOCK OPTIONS. (a) Odzer hereby agrees that he shall
grant Stock Options to purchase all of the Shares upon the direction of, and to
those executives and officers of the Company designated by, the Committee in
accordance with the terms and subject to the conditions of this Agreement.
(b) In no event shall the exercise price of any Stock Option granted
pursuant to this Agreement be less than $7.25, the initial public offering price
of the Common Stock on a per share basis).
(c) The exercise of the Stock Options must occur, if at all, prior to
February 5, 2002 (the "Expiration Date"). Odzer shall receive all proceeds
received from the exercise of any Stock Options.
(d) Upon the Expiration Date, the balance of the Shares held in escrow
pursuant to the terms of this Agreement, shall revert back and be delivered by
the Escrow Agent to Odzer and such Shares shall no longer be subject to the
provisions hereof.
(e) The terms and conditions of the Stock Options shall be more fully set
forth in each of the respective option agreements which shall be executed and
delivered by Odzer and each optionee in substantially the form of the Form
Option Agreement (the "Option Agreements").
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3. ADMINISTRATION. (a) Odzer hereby appoints each of the Committee and
the Board of Directors as his attorney-in-fact with the power to designate the
executives and officers of the Company to whom Stock Options shall be granted
by Odzer.
(b) The administration of this Agreement and the Stock Options to be
granted pursuant to the terms hereof, shall be the sole responsibility of the
Committee, whose construction and interpretation of the terms and provisions
hereof and thereof shall be final and conclusive; provided, however, that the
Committee shall not be entitled to make a unilateral construction or
interpretation of any term or provision of this Agreement which adversely
affects the rights and obligations to which Odzer is entitled or subject
pursuant to the terms hereof without the consent of Odzer which consent shall
not be unreasonably withheld. The Committee shall in its sole discretion
designate the executives and officers to whom the Stock Options shall be
granted by Odzer and shall oversee the issuance of the Shares upon exercise of
such Stock Options as provided herein. The Committee shall have authority,
subject to the express provisions hereof, to construe this Agreement and the
respective Option Agreements, to be executed and delivered pursuant to the
terms hereof to prescribe, amend and rescind rules and regulations relating to
this Agreement and the issuance of the Shares upon exercise of such Stock
Options as provided herein; to determine the terms and provisions of the
respective Option Agreements to be executed and delivered pursuant to the terms
hereof, which need not be identical but which in all cases shall be consistent
with the terms of this Agreement and the Form Option Agreement; and to make
all other determinations in the judgment of the Committee necessary or
desirable for the administration of the provisions hereof; provided, however,
that the Committee shall not be entitled to make a unilateral construction or
interpretation of any term or provision of this Agreement which adversely
affects the rights and obligations to which Odzer is entitled or subject
pursuant to the terms hereof without the consent of Odzer which consent shall
not be unreasonably withheld. The Committee may correct any defect or supply
any omission or reconcile any inconsistency contained herein and in the
respective Option Agreements to be executed and delivered pursuant to the
terms hereof, in the manner and to the extent it shall deem expedient to carry
out the purposes and intent of this Agreement and it shall be the sole and
final judge of such expediency; provided, however, the Committee shall not be
entitled to make any correction, change or determination which adversely
affects the rights and obligations to which Odzer is entitled or subject,
without the consent of ▇▇▇▇▇▇ ▇▇▇▇▇, which consent shall be not unreasonably
withheld. No director or person acting pursuant to authority delegated by the
Board of Directors or the Committee shall be liable for any action or
determination under this Agreement made in good faith and consistent with the
express terms of this Agreement.
4. FURTHER ASSURANCES. Odzer shall do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, certificates, notices,
transfers and assurances as the Escrow Agent or the Company may reasonably
require in order to effect the purposes and intention of, or facilitate the
performance of the terms and conditions contained in, this Agreement, or to
enable the Company or any grantee of a Stock Option to comply with any
applicable federal or state law, provided, however, that any such further
action which Odzer
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may be requested to undertake will be without cost or expense to Odzer and
shall not adversely affect the rights and obligations to which Odzer is
entitled or subject.
5. NOTICES. All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or made as of the date delivered, mailed or transmitted, and shall
be effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses or sent by electronic transmission to the telecopier
number specified below:
(a) If to Odzer, to:
▇▇▇▇▇▇ ▇▇▇▇▇
c/o Preferred Employers Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (305)
with copies to:
Steel ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.A.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to:
Preferred Employers Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (305)
with copies to:
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to Escrow Agent, to:
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom the notice is to be given may
have previously furnished to the other in writing in the manner set forth above.
6. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise provided herein, this Agreement shall not be
assignable by the Escrow Agent without the prior written consent of the other
parties and shall not be assignable by either the Company or Odzer without the
consent of the other.
7. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains all the terms
agreed upon by the parties, and supersede any prior agreements, with respect to
the subject matter hereof. This Agreement may be amended only by a written
instrument signed by the parties against which enforcement of any waiver,
change, modification, extension or discharge is sought.
8. ATTORNEYS' FEES. If any action, suit or proceeding is brought by any of
the parties hereto arising out of or relating to this Agreement or its breach,
the successful or prevailing party in any such action, suit or proceeding, shall
be entitled to the full amount of its reasonable expenses, including all court
costs and attorneys' fees paid or incurred in connection therewith, in addition
to such other relief as such party shall be entitled to.
9. INTERPRETATION. The articles and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
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10. GOVERNING LAW. This Agreement and the legal relations of the parties
hereto shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any conflict or choice of law.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their duly authorized officers as of the 5th day of February, 1997.
PREFERRED EMPLOYERS HOLDINGS, INC.
By: /s/ ???
----------------------------
Name:
Title:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ MARKS & ▇▇▇▇▇ LLP,
as Escrow Agent
/s/ ▇▇▇▇ Marks & ▇▇▇▇▇ LLP
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LETTER AGREEMENT OF ADDITIONAL TERMS REGARDING ESCROW AGREEMENT
This Letter Agreement of Additional Terms Regarding Escrow Agreement, dated
as of January __, 1997 (the "Agreement") is entered into by and between
Preferred Employers Holdings, Inc., a Delaware corporation (the "Company") and
▇▇▇▇▇▇ ▇▇▇▇▇ ("Odzer").
RECITALS
1. The parties to this Agreement, and ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, a New York
limited liability partnership, are parties to an Escrow Agreement of even date
herewith pursuant to which Odzer agrees to place in escrow 300,000 shares of the
Company's common stock (the "Shares") for issuance upon the exercise of certain
stock options which will be granted by Odzer pursuant to the terms and subject
to the conditions of the Escrow Agreement and the "Form Option Agreement" (as
defined in the Escrow Agreement) (the "Stock Options") to certain executives and
officers of the Company.
2. The parties to this Agreement desire to incorporate certain additional
terms and conditions which will govern the relationship between the parties
regarding the implementation and operation of the Escrow Agreement, the Form
Option Agreement, and the exercise of any options thereunder.
AGREEMENT
1. Tax Indemnification.
(A) Upon the exercise of any option to purchase Shares subject to
the Escrow Agreement, the Company agrees to pay to Odzer an amount equal to the
additional federal, state and local taxes to which Odzer will be subject if the
income recognized by Odzer upon the exercise of an option to purchase any Shares
subject to the Escrow Agreement (or any additional shares which become subject
to the Escrow Agreement pursuant to the provisions of Section 9 of the Form
Option Agreement) is taxable to Odzer at a rate higher than the rate that would
have been applicable if the gain had been characterized as and taxable as a
"capital gain" and not as "ordinary income". The amount of the payment which
Odzer will be entitled to receive from the Company and which the Company will be
obligated to pay Odzer pursuant to this Section 1.(A) upon each exercise of an
option to purchase Shares will be equal to the product of the (i) amount of
income recognized or to be recognized by Odzer upon each exercise of an option
to purchase Shares (ii) multiplied by the difference between the maximum
statutory rate of tax to which Odzer is or would be subject on ordinary income
and the maximum statutory rate of tax to which Odzer is or would be subject on
capital gains for the year in which the option is exercised (determined
separately for each federal, state and local income tax to which Odzer is or may
become subject). In addition, to the extent that a payment or right to payment
under this Section 1 is included or subject to inclusion in Odzer's income for
income tax purposes, the amount of the payment shall be "grossed" up for the
payment of the income tax payable in respect of the payment and in respect of
the gross up so that the benefit to Odzer of all payments to which he is
entitled under this Section 1 shall be on an "after tax" basis. The amount of
the payment to
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which Odzer will be entitled for the indemnification and "gross up" to
compensate Odzer for the differential between the capital gains and ordinary
income tax rates will be calculated as follows:
I = OP times ((1-CG/1-OIG) - 1)
where,
"I" means the total indemnification payment to which Odzer is
entitled upon the exercise of any option to purchase Shares subject
to the Escrow Agreement,
"OP" means the amount paid to Odzer upon the exercise of any option
to purchase Shares subject to the Escrow Agreement;
"CG" means the maximum statutory rate of tax to which Odzer is or
would be subject on capital gains (determined separately for each
federal, state and local income tax to which Odzer is or may become
subject), and
"OIG" means the maximum statutory rate of tax to which Odzer is or
would be subject on ordinary income (determined separately for each
federal, state and local income tax to which Odzer is or may become
subject).
(B) Odzer shall consult with his tax advisors as to the
characterization of income to be recognized by Odzer upon an exercise of an
option to purchase the Shares pursuant to the Escrow Agreement and the Form
Option Agreement, and the tax advisor's characterization of the income shall be
notified by Odzer to the Company and be binding upon both the Company and Odzer
for purposes of this Agreement. Odzer agrees to report the characterization
reported to the company consistently on all federal, state and local income tax
returns which he files.
(C) The Company shall pay to Odzer in cash the amount of each payment
to which he is entitled pursuant to this Section 1 on the later of the (i) last
day of each calendar quarter within which any option is exercised, and (ii)
within 5 business days after such date.
2. SECURITIES LAWS DISCLOSURES AND COMPLIANCE
(A) The Company agrees that it will be responsible for and will comply
with all laws, rules and regulations pertaining to the sale and transfer of the
Shares and all other responsibilities of the Company with respect to the options
to be granted under the Escrow Agreement and the Form Option Agreement, and the
Shares, including but not limited to all laws, rules and regulations pertaining
to the federal and state securities laws to which the grant of the option and
the sale or transfer of the Shares is or will at the time of exercise of the
option be subject, and the Company agrees to comply with and make all
disclosures, filings and registrations required under all state and federal
securities laws to which the options and the Shares are subject.
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(B) The Company will, to the extent permitted by law, indemnify and hold
harmless Odzer, against all losses, claims, demands, damages or liabilities, to
which Odzer may become subject under any federal or state securities laws or
otherwise, and with respect to all claims asserted against Odzer by any
"Optionee" (as defined in the Form Option Agreement) insofar as the losses,
claims, demands, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon any filing, statement or disclosure
made by the Company or failed to be made by the Company or arise out of or are
based upon the Escrow Agreement, the Form Option Agreement or the actual option
agreement (which must be substantially in the same form as the Form Option
Agreement) executed by any Optionee, other than losses, claims, demands,
damages or liabilities which are attributable to Odzer's failure to deliver the
Shares to the Escrow Agent pursuant to the Escrow Agreement or to transfer the
Shares to an Optionee in accordance with the terms of the Form Option
Agreement; and the Company will reimburse Odzer for all legal or other expenses
reasonably incurred by him in connection with investigating or defending any
such loss, claim, demand, damage, liability, action or proceeding for which the
Company is liable to reimburse or hold Odzer harmless. This indemnity shall
remain in full force and shall survive the transfer of Shares upon the exercise
of an Option.
3. NOTICES. All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or made as of the date delivered, mailed or transmitted, and shall
be effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses or sent by electronic transmission to the Telecopier
number specified below:
(A) If to Odzer, to:
▇▇▇▇▇▇ ▇▇▇▇▇
c/o Preferred Employers Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (305)
With copies to:
Steel ▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.A.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to the Company, to:
Preferred Employers Holdings, Inc.
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (305)
With copies to:
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom the notice is to be given may
have previously furnished to the other in writing in the manner set forth above.
4. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise provided herein or pursuant to an assignment
permitted in the Escrow Agreement, this Agreement shall not be assignable by
either the Company or Odzer without the consent of the other.
5. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains all the terms
agreed upon by the parties, and supersede any prior agreements, with respect to
the subject matter hereof. This Agreement may be amended only by a written
instrument signed by the parties against which enforcement of any waiver,
change, modification, extension or discharge is sought. The parties acknowledge
and agree that this Agreement modifies the Escrow Agreement.
6. ATTORNEYS' FEES. If any action, suit or proceeding is brought by any of
the parties hereto arising out of or relating to this Agreement or its breach,
the successful or prevailing party in any such action, suit or proceeding, shall
be entitled to the full amount of its reasonable expenses, including all court
costs and attorneys' fees paid or incurred in connection therewith, in addition
to such other relief as to which such party shall be entitled.
7. INTERPRETATION. The articles and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
8. GOVERNING LAW. This Agreement and the legal relations of the parties
hereto shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any conflict or choice of law.
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9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
PREFERRED EMPLOYERS HOLDINGS, INC.
By: /s/
-------------------------------
Name:
Title:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
