Form Of Share Escrow Agreement

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"), HOWARD ODZER ("Odzer") and Baer Marks & Upham 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 Baer Marks & Upham 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 Howard Odzer, 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:


Howard Odzer
c/o Preferred Employers Holdings, Inc.
10800 Biscayne Blvd., Penthouse
Miami, FL 33161
Telephone: (305) 893-4040
Telecopy: (305)


with copies to:


Steel Hector & Davis LLP
200 South Biscayne Blvd.
Miami, FL 33131
Attn: Thomas R. McGuigan, P.A.
Telephone: (305) 577-2850
Telecopy: (305) 577-7001


(b) If to the Company, to:


Preferred Employers Holdings, Inc.
10800 Biscayne Blvd., Penthouse
Miami, FL 33161
Attn: Mel Harris
Telephone: (305) 893-4040
Telecopy: (305)


with copies to:


Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Donald J. Bezahler, Esq.


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Telephone: (212) 702-5700
Telecopy: (212) 702-5941


(c) If to Escrow Agent, to:


Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Donald J. Bezahler, Esq.
Telephone: (212) 702-5700
Telecopy: (212) 702-5941


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:
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Name:
Title:


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HOWARD ODZER


BAER MARKS & UPHAM LLP, as Escrow Agent


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