EXHIBIT 6
PREFERRED EMPLOYERS HOLDINGS, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "AGREEMENT"), dated as of August 20, 1997,
between PREFERRED EMPLOYERS HOLDINGS, INC., a Delaware corporation (the
"COMPANY"), having an address at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxx,
Xxxxxxx 00000 and Xxx Xxxxxx, having an address at 0000 X. Xxx Xxxx, Xxxxx, XX
00000 (the "GRANTEE").
In accordance with the Preferred Employers Holdings, Inc. 1996 Stock Option
Plan (the "PLAN"), the Company hereby grants to the Grantee an incentive stock
option (the "OPTION") to purchase all or any part of an aggregate of 275,000
shares of the Company's common shares, $.01 par value per share (the "SHARES").
To evidence the Option and to set forth its terms, the Company and the
Grantee agree as follows:
1. CONFIRMATION OF GRANT. The Company hereby evidences and confirms its
grant of the Option to the Grantee on the date of this Agreement.
2. NUMBER OF SHARES. This Option shall be for an aggregate of 275,000
Shares.
3. EXERCISE PRICE. The exercise price shall be $7 3/4 per share for a
total of $2,131,250.
4. MEDIUM AND TIME OF PAYMENT. The exercise price of the Option shall be
paid in cash or by certified or bank cashiers check payable to the order of the
Company at the time of exercise. In addition, the Company shall accept full or
partial payment in Shares having a fair market value on the date of exercise
equal to the portion of the exercise price being so paid.
Payment in full shall be required before the issuance of any Shares
pursuant to this Option. In addition, before or concurrently with delivery to
the Grantee of a Certificate representing such Shares, the Grantee shall pay any
amount necessary to satisfy applicable federal, state, or local tax
requirements.
5. TERM AND EXERCISE OF THE OPTION. The Option shall expire seven years
from the date of this Agreement and may be exercised at the times and for the
number of Shares as follows:
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(a) on or after the date which is one year after the date hereof, up
to 20% (ignoring fractional shares) of the total number of Shares subject to
this Option;
(b) on or after the date which is two years after the date hereof, up
to 20% (ignoring fractional Shares) of the total number of Shares subject to
this Option;
(c) on or after the date which is three years after the date hereof,
up to 20% (ignoring fractional Shares) of the total number of Shares subject to
this Option;
(d) on or after the date which is four years after the date hereof,
up to 20% (ignoring fractional Shares) of the total number of Shares subject to
this Option; and
(e) on or after the date which is five years after the date hereof,
the remaining Shares subject to this Option; provided that the Option may be
exercised for such remaining Shares within 90 days after such date.
This Option may be exercised only by written notice to the Company
indicating the number of Shares which are being purchased. Such notice must be
signed by the Grantee and be accompanied by full payment of the exercise price.
6. NONTRANSFERABILITY. The Option may be transferred only by will or the
laws of descent and distribution, and the Option may be exercised during the
Grantee's lifetime only by the Grantee or by the Grantee's legal representative.
7. RIGHTS IN THE EVENT OF THE GRANTEE'S DISABILITY. If the Grantee's
employment with the Company or any parent or subsidiary corporation (within the
meaning of Section 424(e) and (f) of the Internal Revenue Code of 1986, as
amended (the "CODE"), ("AFFILIATES")) is terminated on account of permanent and
total disability (as defined in Code Section 22(e)(3)), the Grantee or the
Grantee's legal representative (or the Grantee's estate if the Grantee dies
after termination of employment) may exercise the Option, to the extent
exercisable on the date of the Grantee's termination of employment, at any time
within one year after termination of employment but in no event after the
expiration of the term of the Option. The Grantee's "ESTATE" means the
Grantee's legal representative or any person who acquires the right to exercise
the Option by reason of the Grantee's death.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH. If the Grantee dies while
an employee of the Company or any Affiliate (or within three months after the
Grantee ceases to be such an employee) but while he still has the right to
exercise this Option, his estate may exercise the Option, to the extent
exercisable at the date of the Grantee's death, any time within one year after
the Grantee's death, but in no event after the expiration of the term of the
Option.
9. RIGHTS IN THE EVENT OF TERMINATION OF EMPLOYMENT. If Grantee's
employment with the Company or any Affiliate is terminated involuntarily for
"CAUSE" the Grantee's Option shall expire as of the date of termination of
employment. "Cause" under this
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Agreement shall mean (i) if Grantee has persistently and wilfully failed to
devote substantially all of his working time to the operations of the Company,
after specific notice to Grantee of such alleged failure and a 20 day
opportunity to cure, (ii) if Grantee has been convicted of (whether or not
subject to appeal) or plead "nolo contendere" or has made any similar plea to
any criminal offense involving a violation of federal or state securities laws
or regulations, embezzlement, fraud, wrongful taking or misappropriation of
property, theft, or any other crime involving dishonesty, (iii) if Grantee has
violated or materially breached any material provision of his Employment
Agreement with the Company, after specific notice to Grantee of such alleged
violation or breach and a 20 day opportunity to cure, (iv) if Grantee takes any
action which directly or indirectly causes the Company or any of its
subsidiaries to have any license, permit or other authorization necessary for
the operations of its business (a "License") to be suspended or revoked, (v) if
the Company receives any notice from any governmental or other agency which
regulates the operations of the Company or its subsidiaries which indicates that
Grantee's employment with the Company could have an adverse effect on the
ability of the Company or its subsidiaries to retain or obtain any License or to
otherwise conduct its operations in the manner then conducted, or (vi) failure
of Grantee to comply with the terms of the business plan to be annexed hereto as
Exhibit A. If the Grantee's employment is terminated for any reason other than
death, disability, or as described in the preceding sentences of this Section,
the Grantee (or the Grantee's estate, if the Grantee dies after the termination)
may exercise the Option, to the extent exercisable before the termination,
within three months after the termination, but in no event after the expiration
of the term of the Option.
10. ADJUSTMENT IN THE SHARES. If the Shares, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise) or if the number of Shares shall be
increased through the payment of a share dividend, the Grantee shall receive
upon exercise of the Option the number and kind of shares or other securities
into which each outstanding Share shall be so changed, or for which each such
Share shall be exchanged, or to which each such Share shall be entitled, as the
case may be. The exercise price and other terms of the Option shall be
appropriately amended to reflect the foregoing events. If there shall be any
other change in the number or kind of the outstanding Shares, or of any shares
or other securities into which the Shares shall have been changed, or for which
the Shares shall have been exchanged, then, if the Board of Directors shall, in
its sole discretion, determine that such change equitably requires an adjustment
in the Option, such adjustment shall be made in accordance with that
determination. Notice of any adjustment shall be given by the Company to the
Grantee.
11. EFFECT OF TERMINATION OR AMENDMENT OF PLAN. No suspension,
termination, modification, or amendment of the Plan may, without the express
written consent of the Grantee, adversely affect the rights of the Grantee under
this Option.
12. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of this Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassifications,
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or changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate, sell, or transfer all or any part of its business or
assets.
13. RIGHTS AS A SHAREHOLDER. The Grantee shall have the rights of a
shareholder with respect to the Shares covered by the Option only upon becoming
the holder of record of those Shares.
14. COMPLIANCE WITH APPLICABLE LAW. (a) This Option has not been, and the
Shares issuable upon exercise of this Option will not be, registered under the
Securities Act of 1933, as amended, or any state securities laws, and neither
this Option nor the Shares issuable upon exercise of this Option may be offered,
sold, transferred, pledged or otherwise disposed of except pursuant to an
effective registration statement under such act and such laws, or in accordance
with an exemption from such registration.
(b) Notwithstanding anything herein to the contrary, the Company
shall not be obligated to cause to be issued or delivered any certificates for
Shares pursuant to the exercise of the Option, unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority, and
the requirements of any exchange upon which Shares are traded. The Company
shall in no event be obligated to register any securities pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) or to take any
other action in order to cause the issuance and delivery of such certificates to
comply with any such law, regulation or requirement. The Board of Directors may
require, as a condition of the issuance and delivery of such certificates and in
order to ensure compliance with such laws, regulations, and requirements, that
the Grantee make such covenants, agreements, and representations as the Board of
Directors, in its sole discretion, considers necessary or desirable.
15. NO OBLIGATION TO EXERCISE OPTION. The granting of the Option shall
impose no obligation upon the Grantee to exercise the Option.
16. AGREEMENT NOT A CONTRACT OF EMPLOYMENT. This Agreement is not a
contract of employment, and the terms of employment of the Grantee or the
relationship of the Grantee with the Company or any Affiliate shall not be
affected in any way by this Agreement except as specifically provided herein.
The execution of this Agreement shall not be construed as conferring any legal
rights upon the Grantee for a continuation of employment or relationship with
the Company or any Affiliate, nor shall it interfere with the right of the
Company or any subsidiary thereof to discharge the Grantee and to treat him
without regard to the effect which that treatment might have upon him as a
Grantee.
17. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered, or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered personally or, if mailed, four days after the
date of deposit in the United States mails, to each
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party at its address set forth above or to such other address as may be
designated in a notice given in accordance with this Section.
18. GOVERNING LAW. Except to the extent preempted by Federal law, this
Agreement shall be construed and enforced in accordance with, and governed by,
Delaware law.
19. RECEIPT OF PLAN. Grantee acknowledges receipt of a copy of the Plan,
and represents that he is familiar with the terms and provisions thereof, and
hereby accepts this Option subject to all the terms and provisions of this
Option and of the Plan. Grantee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board of Directors of the
Company or the Committee, as defined in the Plan, upon any questions rising
under the Plan.
IN WITNESS WHEREOF, the Company and the Grantee have duly executed this
Agreement as of the date first written above.
PREFERRED EMPLOYERS
HOLDINGS, INC.
/s/ Xxxxx Xxxx By: /s/ Xxx Xxxxxx
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Witness Its:
/s/ Xxxxx Xxxx /s/ Xxx Xxxxxx
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Witness Xxx Xxxxxx
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