FORM OF SHARE ESCROW AGREEMENT
This SHARE ESCROW AGREEMENT, dated as of _______________________, 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 _________ 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 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 $________ (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
________, 2001 (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
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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:
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 day
of , 1997.
PREFERRED EMPLOYERS HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
--------------------------------------
XXXXXX XXXXX
XXXX MARKS & XXXXX LLP, as Escrow Agent
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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;
(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
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accordance with that 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
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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.
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
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Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
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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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 Xxxxxx Xxxxx ("Xxxxx").
Recitals
1. The parties to this Agreement, and Xxxx Marks & Xxxxx 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
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 the 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 calender quarter within which any option is exercised, and
(ii) within 5 business days after such date.
2. Securities Laws Disclosure 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 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.
(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 Eacrow 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:
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, LLF
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.
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.
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.
9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all off 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 offices as of the date first
above written.
PREFERRED EMPLOYERS HOLDINGS, INC.
By:
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Name:
Title:
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XXXXXX XXXXX
