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EXHIBIT 1
MARKS BROS. JEWELERS, INC.
STOCK OPTION AGREEMENT
FOR EMPLOYEES
Marks Bros. Jewelers, Inc., a Delaware corporation (the
"Company"), hereby grants to Xxxx X. Xxxxxxxx (the "Optionee") as of May 7,
1996 (the "Option Date"), pursuant to the provisions of the Marks Bros.
Jewelers, Inc. 1996 Long-Term Incentive Plan (the "Plan"), a non-qualified
option to purchase from the Company (the "Option") 312,835 shares of its Common
Stock, $.001 par value ("Stock"), at the price of $14.00 per share upon and
subject to the terms and conditions set forth below. References to employment
by the Company shall include employment by a subsidiary of the Company.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Option Subject to Acceptance of Agreement. The
Option shall be null and void unless the Optionee shall accept this Agreement
by executing it in the space provided below and returning such original
execution copy to the Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option
be exercised, in whole or in part, after the tenth anniversary of the Option
Date (the "Expiration Date").
2.2. Exercise of Option. (a) The Option shall become
exercisable (i) on the first anniversary of the Option Date with respect to
one-fourth of the number of shares of Stock subject to the Option on the Option
Date, (ii) on the second anniversary of the Option Date with respect to an
additional one-fourth of the number of shares of Stock subject to the Option on
the Option Date, (iii) on the third anniversary of the Option Date with respect
to an additional one-fourth of the number of shares of Stock subject to the
Option on the Option Date, (iv) on the fourth anniversary of the Option Date
with respect to the remaining one-fourth of the shares of Stock subject to the
Option on the Option Date and (v) as otherwise provided herein or pursuant to
any acceleration provisions of the Plan. Notwithstanding the foregoing the
Option shall become fully exercisable, to the extent not so already
exercisable, upon (x) any termination of Optionee's employment with the Company
unless such termination of employment constitutes a "Nonqualifying
Termination," as such term is defined in Optionee's Severance Agreement with
the Company dated May 7, 1996 (the "Severance Agreement"), or (y) upon a
"Change in Control" as that term is defined in the Severance Agreement (a
"Change in Control").
(b) If the Optionee's employment by the Company terminates by
reason of retirement other than for Good Reason (as defined in the Severance
Agreement, "Good Reason") on or after age 65, the Option shall be exercisable
only to the extent it is exercisable on the effective date of the Optionee's
termination of employment and may thereafter be exercised by the Optionee or
the Optionee's Legal Representative or Permitted Transferees until and
including the earliest to occur of (i) the date which is six months after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date.
(c) If the Optionee's employment by the Company terminates by
reason of death or Disability, the Option shall be exercisable only to the
extent it is exercisable on the date of death and shall become exercisable on
the date of death or, in the case of Disability, the effective date of the
Optionee's termination of employment by reason of Disability (the "Disability
Termination Date") and shall become exercisable on the date of death or the
Disability Date, as the case may be, for an additional number of shares equal
to one-third of the shares of Stock subject to the Option as to which the
Option was not exercisable immediately prior to the Optionee's death or the
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Disability Termination Date, and may thereafter be exercised by the Optionee or
the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until and including the earliest to occur of (i) the date which is one year
after the date of death or the Disability Termination Date and (ii) the
Expiration Date.
(d) If the Optionee's employment with the Company is
terminated by the Company for Cause, the Option shall terminate automatically
on the effective date of Optionee's termination of employment.
(e) If the Optionee's employment with the Company is
terminated by the Optionee for any reason other than Good Reason, retirement on
or after age 65 other than for Good Reason, death or Disability or terminated
by the Company for Cause, the Option shall be exercisable only to the extent it
is exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative or Permitted Transferees until and including the earliest
to occur of (i) the date which is three months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.
(f) Upon a termination of the Optionee's employment with the
Company, unless such termination constitutes a Nonqualifying Termination under
the Severance Agreement (a "Nonqualifying Termination") the Option shall be
fully exercisable until the earlier of (i) the Expiration Date, (ii) two years
after such termination of employment and (iii) the date the Option is
surrendered and canceled for cash or other consideration pursuant to Section
6.8 of the Plan.
(g) If the Optionee dies during the period set forth in
Section 2.2(b) following termination of employment by reason of retirement on
or after age 65 other than for Good Reason, or if the Optionee dies during the
period set forth in Section 2.2(c) following termination of employment by
reason of Disability, or if the Optionee dies during the period set forth in
Section 2.2(e) following termination of employment for any reason other than
retirement on or after age 65 other than for
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Good Reason, Disability or termination by the Company for Cause, the Option
shall be exercisable only to the extent it is exercisable on the date of death
and may thereafter be exercised by the Optionee's Legal Representative or
Permitted Transferees, as the case may be, until and including the earliest to
occur of (i) the date which is one year after the date of death and (ii) the
Expiration Date.
2.3 Method of Exercise. Subject to the limitations set
forth in this Agreement, the Option may be exercised in whole or in part by the
Optionee (1) by giving written notice to the Company specifying the number of
whole shares of Stock (provided that if the then exercisable portion of the
Option is for less than one share, then for all of such portion) to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by
delivery of previously owned whole shares of Stock (which the Optionee has held
for at least six months prior to the delivery of such shares or which the
Optionee purchased on the open market and for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market
Value, determined as of the date of exercise, equal to the aggregate purchase
price payable pursuant to the Option by reason of such exercise, (iii) by
authorizing the Company to withhold whole shares of Stock which would otherwise
be delivered upon exercise of the Option having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iv) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (v) a combination of (i), (ii) and (iii), and
(2) by executing such documents as the Company may reasonably request. So long
as the Stock is quoted on NASDAQ or quoted or listed on any recognized
quotation service or national securities exchange, the Committee shall have
discretion to disapprove (but only in the case of clause (ii) if such
disapproval is reasonable and if imposition of a reasonableness standard with
respect to disapproval of clause (iii) does not prevent withholding
transactions pursuant to clause (iii) from complying with the applicable
conditions of Rule 16b-3 under the Exchange Act, only in the case of clause
(iii) if such disapproval is reasonable) of an election pursuant to clauses
(ii) or (iii). Any fraction of a share of Stock which would be required to pay
such purchase price shall be disregarded and the remaining amount due shall be
paid in cash by the Optionee. No certificate representing a share of Stock
shall be delivered until the full purchase price therefor has been paid.
2.4 Termination of Option. (a) In no event may the
Option be exercised after it terminates as set forth in this Section 2.4. The
Option shall terminate, to the extent not exercised pursuant to Section 2.3 or
earlier terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, canceled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the
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Company for full or partial cancellation, as the case may be. Such
cancellation shall be effective regardless of whether the Optionee returns this
Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 days of the Optionee's delivery
of this Agreement to the Company, either (i) xxxx this Agreement to indicate
the extent to which the Option has expired or been exercised, canceled or
forfeited or (ii) issue to the Optionee a substitute option agreement
applicable to such rights, which agreement shall otherwise be at least as
favorable to the Optionee as this Agreement in form and substance.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the Option is exercisable only by the Optionee or the Optionee's Legal
Representative. Except to the extent permitted by the foregoing, the Option
may not be sold, transferred, assigned, pledged, hypothecated, encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the
Option, the Option and all rights hereunder shall immediately become null and
void.
3.2. Investment Representation. The Optionee hereby
represents and covenants that (a) any share of Stock purchased upon exercise of
the Option will be purchased for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; and (c) if requested by the
Company, the Optionee shall submit a written statement, in form satisfactory to
the Company, to the effect that such representation (x) is true and correct as
of the date of purchase of any shares hereunder or (y) is true and correct as
of the date of any sale of any such shares, as applicable. As a further
condition precedent to any exercise of the Option, the Optionee shall comply
with all regulations and requirements of any regulatory authority having
control of or supervision over the issuance or delivery of the shares and, in
connection therewith, shall execute any documents which the Board or the
Committee shall in its reasonable judgment deem necessary or advisable to
comply with the Securities Act, applicable state securities laws or the
regulations or requirements of any such regulatory authority. The Company
agrees to use reasonable efforts, so long as it is required to file periodic
reports under Section 13 of the Exchange Act to register the Stock issuable to
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Optionee pursuant to the Option on Form S-8 or a successor form and maintain
the effectiveness of such registration.
3.3. Withholding Taxes. (a) As a condition precedent to
the delivery of Stock upon exercise of the Option, the Optionee shall, upon
request by the Company, pay to the Company in addition to the purchase price of
the shares, such amount of cash as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to withhold and
pay over as income or other withholding taxes (the "Required Tax Payments")
with respect to such exercise of the Option. If the Optionee shall fail to
advance the Required Tax Payments after request by the Company, the Company
may, in its discretion, deduct any Required Tax Payments from any amount then
or thereafter payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation
to advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free
and clear of all liens and encumbrances) having a Fair Market Value, determined
as of the date the obligation to withhold or pay taxes first arises in
connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) authorizing the Company to withhold whole shares of Stock which
would otherwise be delivered to the Optionee upon exercise of the Option having
a Fair Market Value, determined as of the Tax Date, equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (5) any
combination of (1), (2) and (3). So long as the Stock is quoted on NASDAQ or
quoted or listed on any recognized quotation service or a national securities
exchange, the Committee shall have sole discretion to disapprove (but only in
the case of clause (2) if such disapproval is reasonable and if imposition of a
reasonableness standard with respect to disapproval of clause (3) does not
prevent withholding transactions pursuant to clause (3) from complying with the
applicable conditions of Rule 16b-3 under the Exchange Act, only in the case of
clause (3) if such disapproval is reasonable) of an election pursuant to
clauses (2) or (3). Shares of Stock to be delivered or withheld may have a
Fair Market Value in excess of the minimum amount of the Required Tax Payments,
but not in excess of the amount determined by applying the Optionee's maximum
marginal tax rate. Any fraction of a share of Stock which would be required to
satisfy any such obligation shall be disregarded and the remaining amount due
shall be paid in cash by the Optionee. No certificate representing a share of
Stock shall be delivered until the Required Tax Payments have been satisfied in
full.
3.4 Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or
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any distribution to holders of Stock other than a regular cash dividend, the
number and class of securities subject to the Option and the purchase price per
security shall be appropriately adjusted by the Committee (such adjustment to
be made reasonably and in good faith by the Committee) without an increase in
the aggregate purchase price. If any adjustment would result in a fractional
security being subject to the Option, the Company shall pay the Optionee, in
connection with the first exercise of the Option, in whole or in part,
occurring after such adjustment, an amount in cash determined by multiplying
(i) the fraction of such security (rounded to the nearest hundredth) by (ii)
the excess, if any, of (A) the Fair Market Value on the exercise date over (B)
the exercise price of the Option. Such a decision of the Committee regarding
any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is
subject to the condition that if the listing, registration or qualification of
the shares subject to the Option upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
purchase or delivery of shares hereunder, the Option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained, free of any conditions not
approved by the Company (which approval will not be unreasonably withheld. The
Company agrees to use all reasonable efforts to effect or obtain any such
listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.7. Option Confers No Rights as Stockholder. The
Optionee shall not be entitled to any privileges of ownership with respect to
shares of Stock subject to the Option unless and until purchased and delivered
upon the exercise of the Option, in whole or in part, and the Optionee becomes
a stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In
no event shall the granting of the Option or its acceptance by the Optionee
give or be deemed to give the Optionee any right to continued employment by the
Company or any affiliate of the Company.
3.9. Decisions of Board or Committee. Subject to the last
sentence of this Section 3.9, the Board or the Committee shall have the right
to resolve all questions and make all
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determinations which may arise in connection with the Option or its exercise
(which rights the Committee shall exercise reasonably and in good faith), and
any interpretation, determination or other action so made or taken by the Board
or the Committee regarding the Plan or this Agreement shall be final, binding
and conclusive. Notwithstanding the foregoing, the determination of "Good
Reason," "Change in Control" and "Nonqualifying Termination" shall be
determined by mutual agreement of the Board or the Committee, on the one hand,
and the Optionee, on the other hand, or failing such agreement by a court of
competent jurisdiction.
3.10. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. This Agreement is
subject to the provisions of the Plan and shall be interpreted in accordance
therewith. The Optionee hereby acknowledges receipt of a copy of the Plan.
3.12. Section 16. The Company shall use all reasonable
efforts to cooperate with Optionee (if Optionee is subject to Section 16 of the
Exchange Act) to assure that any cash payment in accordance with Section 6.8(a)
of the Plan is made in compliance with such Section 16 and the rules and
regulations thereunder.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option
is hereby designated as not constituting an "incentive stock option" within
meaning of section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"); this Agreement shall be interpreted and treated consistently with such
designation.
4.2. Meaning of Certain Terms. (a) As used herein,
employment by the Company shall include employment by a corporation which is a
"subsidiary corporation" of the Company, as such term is defined in section 424
of the Code. References in this Agreement to sections of the Code shall be
deemed to refer to any successor section of the Code or any successor internal
revenue law.
(b) As used herein, the term "Legal Representative" shall
include an executor, administrator, legal representative, guardian or similar
person and the term "Permitted Transferee" shall include any transferee
pursuant to a transfer permitted under the Plan and Section 3.1 hereof.
4.3. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of
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the Optionee, acquire any rights hereunder in accordance with this Agreement or
the Plan.
4.4. Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the Company,
to Marks Bros. Jewelers, Inc., 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000, Attention: Secretary, and if to the Optionee, to Xxxx X.
Xxxxxxxx, Marks Bros. Jewelers, Inc., 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxx 00000. All notices, requests or other communications
provided for in this Agreement shall be made in writing either (a) by personal
delivery to the party entitled thereto, (b) by facsimile with confirmation of
receipt, (c) by mailing in the United States mails to the last known address of
the party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile transmission or upon
receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication is not received during regular business hours, it shall be deemed
to be received on the next succeeding business day of the Company.
4.5. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the
extent not governed by the laws of the United States, shall be governed by the
laws of the State of Delaware and construed in accordance therewith without
giving effect to principles of conflicts of laws.
4.6. Fair Market Value Determinations. If a determination of
Fair Market Value is being made under the Option with respect to a period
during which the Stock is neither quoted on NASDAQ nor quoted or listed on a
recognized quotation service or a national securities exchange, and the
Representative (as hereinafter defined) gives notice that it disagrees with the
Committee's determination of Fair Market Value within ten days following the
Optionee's receipt of written notice of the Committee's determination of Fair
Market Value, the determination of Fair Market Value shall be made by a
nationally recognized investment banking firm acceptable to the Representative
and the Committee. If the Committee and the Representative are unable to agree
within five days on the choice of an investment banking firm to perform the
valuation, each of the Committee and the Representative shall promptly choose
one investment banking firm and the two firms so chosen shall choose a third
investment banking firm which shall alone determine Fair Market Value. If no
third independent investment banking firm can be agreed upon by the first two
independent investment banking firms within fifteen days, such third
independent investment banking firm shall be selected promptly by an arbitrator
chosen in accordance with the rules for commercial arbitration of the American
Arbitration Association then in effect. The investment banking firm shall
submit its determination of Fair Market Value to the Committee and the Optionee
as soon as reasonably possible, but in no event later than sixty days after the
date such investment banking firm is selected as provided above. The
determination of
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Fair Market Value by the investment banking firm shall be final and binding on
both the Committee and the Optionee. The Company shall bear all costs and
expenses incurred in connection with the determination by such investment
banking firm of Fair Market Value. The investment banking firm may use
whatever valuation methods it deems relevant or appropriate under the
circumstances. Fair Market Value shall be determined based upon the investment
banking firm's opinion as follows: (i) if such opinion expresses the Fair
Market Value in terms of a range of values, the mean of such range shall be
deemed to be Fair Market Value or (ii) if such opinion expresses Fair Market
Value as an absolute number, such number shall be deemed to be the Fair Market
Value. For purposes of this Section 4.6 the term "Representative" shall mean
Xxxx Xxxxxxxx until such time as he is unwilling or unable to so act, at which
time a new Representative (who shall be an individual having an interest under
the Option, a similar option granted under the Plan or any similar agreement
with the Company) designated by a majority of Xxxx Xxxxxxxx, Xxxx Xxxxxxxxxx,
Xxxxxxx Xxxxxxxx, and Xxxx Xxxxxxxxx (or their legal representatives or
permitted transferees, if applicable) while such persons (or such
representatives or transferees) are a party to (or have succeeded to an
interest in) this Option or such a similar option or agreement.
4.7 Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
MARKS BROS. JEWELERS, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Executive Vice
President, Finance &
Administration
Accepted this 7th day of May, 1996
/s/ Xxxx X. Xxxxxxxx
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Optionee
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