EXHIBIT 5
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"), XXXXXX XXXXX ("Xxxxx") and Xxxx Marks &
Xxxxx 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
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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 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 Xxxx Marks & Xxxxx 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 Xxxxxx Xxxxx, 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 may
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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:
Xxxxxx Xxxxx
c/o Preferred Employers Holdings, Inc.
00000 Xxxxxxxx Xxxx., Xxxxxxxxx
Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (305)
with copies to:
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxx.
Xxxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxx, P.A.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to the Company, to:
Preferred Employers Holdings, Inc.
00000 Xxxxxxxx Xxxx., Xxxxxxxxx
Xxxxx, XX 00000
Attn: Xxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (305)
with copies to:
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
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Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) If to Escrow Agent, to:
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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/ Xxx Xxxxxx
----------------------------------
Name:
Title:
/s/ Xxxxxx Xxxxx
-------------------------------------
XXXXXX XXXXX
XXXX MARKS & XXXXX LLP, AS ESCROW AGENT
/s/ Xxxx Marks & Xxxxx LLP
-------------------------------------
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ANNEX A
Optionee:_____________________
Address:______________________
PREFERRED EMPLOYERS HOLDINGS, INC.
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of ___________, 19__ (the
"Agreement"), by and among PREFERRED EMPLOYERS HOLDINGS, INC., a Delaware
corporation (the "Company"), ________________ ("Optionee") and XXXXXX XXXXX
("Grantor"), is entered into pursuant to the Share Escrow Agreement, dated as of
November ___, 1996, by and among the Company, Grantor and Xxxx Marks & Xxxxx
LLP, a New York limited liability partnership, as Escrow Agent (the "Escrow
Agreement").
PURSUANT TO THE ESCROW AGREEMENT, it is agreed as follows:
1. GRANT OF OPTION. Grantor hereby grants to the Optionee on the date
hereof the right and option (the "Option") to purchase an aggregate of ______
shares of Common Stock, $.01 par value per share, of the Company (the "Shares"),
which are currently held in escrow by the Company on behalf of Grantor pursuant
to the terms of the Escrow Agreement.
2. PAYMENT; TERM. (a) The exercise price of the Option is $______ per
Share which shall be paid in cash or by certified or bank cashier's check
payable to the order of the Grantor at the time of exercise. 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 Optionee of a Certificate
representing such Shares, the Optionee shall pay to the Company any amount
necessary to satisfy applicable federal, state, or local tax requirements.
(b) The Option granted herein shall expire on ________ __, 2001. [the
fifth anniversary of the date of the prospectus filed with the Securities and
Exchange Commission on behalf of the Company in connection with the Company's
initial public offering].
3. EXERCISE OF OPTION. (a) Subject to Section 2(b) above, the Optionee
may exercise, on a cumulative basis, the Option granted hereby in accordance
with the following:
(i) on or after the date hereof, up to ___% (ignoring fractional
Shares) of the total number of Shares subject to this Option;
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(ii) on or after the date which is one year after the date hereof,
up to ___% (ignoring fractional Shares) of the total number of Shares
subject to this Option;
(iii) on or after the date which is two years after the date of the
grant, up to ___% (ignoring fractional Shares) of the total number of
Shares subject to this Option; and
(iv) on or after the date which is three years after the date of the
grant, the remaining Shares subject to this Option.
(b) The Optionee may exercise the Option (to the extent it is then
exercisable) by delivering to the Company a written notice duly signed by the
Optionee stating the number of Shares that the Optionee has elected to purchase
and accompanied by payment (by certified check or bank cashier's check) of an
amount equal to the full purchase price for the Shares to be purchased. Within
twenty days after receipt by the Company of such notice and payment, the Company
shall (subject to Section 12 of this Agreement) issue from escrow the Shares in
the name of the Optionee or assignee and deliver the certificate therefor to the
Optionee. No Shares shall be issued until full payment therefor has been made.
4. NON-TRANSFERABILITY OF OPTION; RESTRICTIONS ON EXERCISE. (a) The
Option may be transferred only by will or the laws of descent and distribution,
and the Option may be exercised during the Optionee's lifetime only by the
Optionee or by the Optionee's legal representative.
(b) If at any time during which the Option can be exercised, exercise of
the Option will constitute a sale of any of the Shares by the Grantor which is
subject to the short-swing trading provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Optionee agrees not to exercise, in whole
or in part, the Option until such time as the Grantor will not be required to
make any payment pursuant to Section 16(b) or the rules promulgated thereunder
by the Securities and Exchange Commission. To this end, the Optionee agrees
that the Grantor may, at his sole election, delay the closing of any requested
exercise under Section 3 to avoid the risk of such short-swing trading
liability, based upon any transaction, or planned transactions, by the Grantor.
5. TAX STATUS. It is not intended that this option qualify as an
incentive stock option within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended. In addition, the Optionee hereby agrees that
no representation has been made to him by the Company or the Grantor with
respect to the tax consequences of (i) the Option granted hereby, (ii) any
transfer of the Option granted hereby, (iii) the exercise of the Option granted
hereby or (iv) any transfer of the Shares.
6. RIGHTS IN THE EVENT OF THE OPTIONEE'S DISABILITY. If the Optionee's
employment with the Company or any parent or subsidiary corporation (within the
meaning of
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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 Optionee or the Optionee's
legal representative (or the Optionee's estate if the Optionee dies after
termination of employment) may exercise the Option, to the extent exercisable on
the date of the Optionee'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 as provided in Sections 2(b). The Optionee's "ESTATE" means
the Optionee's legal representative or any person who acquires the right to
exercise the Option by reason of the Optionee's death.
7. RIGHTS IN THE EVENT OF THE OPTIONEE'S DEATH. If the Optionee dies
while an employee of the Company or any Affiliate (or within three months after
the Optionee 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 Optionee's death, any time within one year after
the Optionee's death, but in no event after the expiration of the term of the
Option as provided in Section 2(b).
8. RIGHTS IN THE EVENT OF TERMINATION OF EMPLOYMENT. If Optionee's
employment with the Company or any Affiliate is terminated involuntarily for
"CAUSE" the Optionee's Option shall expire as of the date of termination of
employment. "Cause" under this Agreement shall mean (i) material misconduct by
the Optionee, (ii) any act by the Optionee that is materially adverse to the
Company or any Affiliate, or (iii) breach by the Optionee of any employment or
confidentiality or nondisclosure agreement with the Company or any Affiliate.
"Cause" also shall have the meaning given to that term, or any similar term,
under any employment agreement with the Company or any Affiliate. If the
Optionee's employment is terminated for any reason other than death, disability,
or as described in the preceding sentences of this Section, the Optionee (or the
Optionee's estate, if the Optionee 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 as provided in Section 2(b).
9. 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 Optionee 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 (or the
Compensation Committee thereof (the "Compensation Committee")) 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
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determination; provided, however, that, without the consent of Odzer, which
consent will not be unreasonably withheld, no adjustment, modification or other
change made pursuant to this Section 9 shall be inconsistent with the intent of
the Escrow Agreement or have an adverse effect on Odzer. Notice of any
adjustment shall be given by the Company to the Optionee.
10. 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, 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.
11. RIGHTS AS A SHAREHOLDER. The Optionee 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. Until the Optionee becomes the holder of
record of his respective Shares, Odzer shall retain all rights as a shareholder
with respect to such Shares, including, but not limited to, the right to receive
any dividends and other distributions with respect to the Shares, and to vote
such Shares for all purposes and all permissible methods, and nothing herein
shall be deemed or construed to limit such rights.
12. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to
the contrary, neither the Company nor the Grantor shall be obligated to cause to
be issued or delivered from escrow 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. Neither the Company nor the Grantor
shall in any 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 (or
the Compensation Committee) 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 Optionee make such covenants,
agreements, and representations as the Board of Directors (or the Compensation
Committee, as the case may be), in its sole discretion, considers necessary or
desirable.
13. NO OBLIGATION TO EXERCISE OPTION. The granting of the Option shall
impose no obligation upon the Optionee to exercise the Option.
14. AGREEMENT NOT A CONTRACT OF EMPLOYMENT. This Agreement is not a
contract of employment, and the terms of employment of the Optionee or the
relationship of the Optionee 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 Optionee for a continuation of employment or relationship with
the Company, the Grantor or any Affiliate, nor shall it interfere with the right
of the Company or any subsidiary thereof to discharge the Optionee and to treat
him without regard to the effect which that treatment might have upon him as a
Optionee.
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15. WITHHOLDING. Whenever Shares are to be delivered upon exercise of
this Agreement, the Company shall be entitled to require as a condition of
delivery that the Optionee remit to the Company an amount sufficient to satisfy
the Company's federal, state and local withholding tax obligations with respect
to the exercise of the Option granted hereby.
16. 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 Grantor, to:
Xxxxxx Xxxxx
c/o Preferred Employers Holdings, Inc.
00000 Xxxxxxxx Xxxx., Xxxxxxxxx
Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (305)
with copies to:
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxx.
Xxxxx, XX 00000
Attn: Xxxxxx X. XxXxxxxx P.A.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to the Company, to:
Preferred Employers Holdings, Inc.
00000 Xxxxxxxx Xxxx., Xxxxxxxxx
Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (305)
with copies to:
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
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Telecopy: (000) 000-0000
(c) If to Optionee, to address set forth above.
17. 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.
18. RECEIPT OF ESCROW AGREEMENT. Optionee acknowledges receipt of a copy
of the Escrow Agreement, 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 Escrow Agreement. Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board of Directors of the Company or the Compensation Committee, upon any
questions rising under the Escrow Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PREFERRED EMPLOYERS
HOLDINGS, INC.
__________________________ By:___________________________
Witness Its:
__________________________ _______________________________
Witness XXXXXX XXXXX, Grantor
__________________________ _______________________________
Witness , Optionee
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