Exhibit 10.3
WHITEHALL JEWELLERS, INC.
NON QUALIFIED STOCK OPTION AGREEMENT
Whitehall Jewellers, Inc., a Delaware corporation (the "Company"), hereby
grants to Xxxxx Xxxx (the "Optionee") as of August 10, 2005 (the "Option Date"),
a non-qualified option to purchase from the Company (the "Option") 325,000
shares of its Common Stock, $.001 par value ("Stock"), at the price of $6.63 per
share upon and subject to the terms set forth below.
I. INTRODUCTION
1.1 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.
1.2 CERTAIN DEFINITIONS.
"AGREEMENT" shall mean this agreement evidencing the award of the Option.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall have the meaning set forth in the Employment Agreement.
"CHANGE IN CONTROL" shall have the meaning set forth in the Employment
Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Committee designated by the Board, consisting
of two or more members of the Board, each of whom shall be (a) a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act and (b) an
"outside director" within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.
"DISABILITY" shall have the meaning set forth in the Employment Agreement.
"EMPLOYMENT AGREEMENT" shall mean the Employment Agreement effective as of
August 10, 2005 between the Company and the Optionee, as the same shall be
amended from time to time.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" shall mean August 10, 2010.
"FAIR MARKET VALUE" shall mean the average of the high and low transaction
prices of a share of Stock as reported on The New York Stock Exchange on the
date as of which such value is being determined, or, if the Stock is listed on
another national securities exchange, the average of the high and low
transaction prices of a share of Stock on the principal national stock exchange
on which the Stock is traded on the date as of which such value is being
determined, or, if there shall be no reported transactions for such date, on the
next preceding date for which transactions were reported; provided, however,
that if Fair Market Value for any date cannot be so determined, Fair Market
Value shall be determined by the Committee by whatever means or method as the
Committee, in the good faith exercise of its discretion, shall at such time deem
appropriate.
"GOOD REASON" shall have the meaning set forth in the Employment
Agreement.
"LEGAL REPRESENTATIVE" shall mean an executor, administrator, legal
representative, guardian or similar person.
"PERSON" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of any of
the forgoing.
"TAX DATE" shall have the meaning set forth in Section 6.5.
II. EXERCISE OF OPTION.
2.1 EXERCISE.
(a) Exercise. The Option shall become exercisable (i) on or after the
first anniversary of the Option Date with respect to one-third of the number of
shares of Stock subject to the Option on the Option Date, (ii) on or after the
second anniversary of the Option Date with respect to an additional one-third
(two-thirds on a cumulative basis) of the shares of Stock subject to the Option
on the Option Date, (iii) on or after the third anniversary of the Option Date
with respect to the remaining one-third (all shares on a cumulative basis) of
the shares of Stock subject to the Option on the Option Date and (iv) as
otherwise provided herein. An exercisable option, or portion thereof, may be
exercised in whole or in part only with respect to whole shares of Stock.
Notwithstanding the foregoing, the Option shall become fully exercisable, to the
extent not so already exercisable, upon (x) any termination by the Optionee of
the Optionee's employment with the Company for Good Reason or (y) upon a Change
in Control.
(b) Disability. Subject to paragraph (a), if the employment of the
Optionee terminates by reason of Disability, the Option shall be exercisable
only to the extent that it is exercisable on the effective date of the
Optionee's termination of employment or service and may thereafter be exercised
by the Optionee or the Optionee's Legal Representative 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 or service and (ii) the Expiration
Date.
(c) Retirement. Subject to paragraph (a), if the employment or service
with the Company of the Optionee terminates by reason of retirement on or after
age 65 with the consent of the
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Company, the Option shall be exercisable only to the extent that it is
exercisable on the effective date of the Optionee's termination of employment or
service and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative 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 or service and (ii) the Expiration Date.
(d) Death. Subject to paragraph (a), if the employment or service with the
Company of the Optionee terminates by reason of death, the Option shall be
exercisable only to the extent that it is exercisable on the date of the
Optionee's death, and may thereafter be exercised by the Optionee's Legal
Representative 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.
(e) Other Termination. If the employment or service with the Company of
the Optionee is terminated by the Company for Cause, this Option shall terminate
automatically on the effective date of the Optionee's termination of employment
or service.
Subject to paragraph (a), if the employment or service with the Company of
the Optionee terminates for any reason other than Disability, retirement on or
after age 65 with the consent of the Company, death, Good Reason or Cause, this
Option shall be exercisable only to the extent that it is exercisable on the
effective date of the Optionee's termination of employment or service and may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
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 or service
and (ii) the Expiration Date.
(f) Death Following Termination of Employment or Service. Subject to
paragraph (a), if the holder of an option dies during the three-month period
following termination of employment or service by reason of Disability, or if
the holder of an option dies during the three-month period following termination
of employment or service by reason of retirement on or after age 65 with the
consent of the Company, or if the holder of an option dies during the
three-month period following termination of employment or service for any reason
other than Disability or retirement on or after age 65 with the consent of the
Company, each option held by such holder shall be fully exercisable and may
thereafter be exercised by the holder's executor, administrator, legal
representative, beneficiary or similar person, 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 of the term of such option.
2.2 METHOD OF EXERCISE. Subject to the limitations set forth in this
Agreement, the Option may be exercised 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,
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(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. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (v). 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.
2.3 TERMINATION OF OPTION.
(a) In no event may the Option be exercised after it terminates as set
forth in this Section 2.3. The Option shall terminate, to the extent not
exercised pursuant to Section 2.2 or earlier terminated pursuant to Section 2.1,
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 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 substantially similar to this Agreement in
form and substance.
III. GENERAL
3.1 NON-TRANSFERABILITY OF STOCK OPTIONS. The Option may not be
transferred by the Optionee other than by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. 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
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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 sole discretion deem necessary or advisable.
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). The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (2)-(5) and if the Optionee is subject to Section 16 of the
Exchange Act, the Company may require that the method of making such payment be
in compliance with Section 16 and the rules and regulations thereunder. 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 any distribution to holders of Stock other than
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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 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 acceptable to
the Company. The Company agrees to use 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 A 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. The Board or the Committee shall
have the right to resolve all questions and make all determinations which may
arise in connection with the Option or its exercise. 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.
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
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its authorized but unissued shares of Stock, the full number of shares subject
to the Option from time to time.
3.11 CHANGE IN CONTROL.
(a) Notwithstanding any provision in this Agreement, in the event of a
Change in Control pursuant to Section 4(e) of the Employment Agreement, the
Option shall immediately become exercisable in full. If, in connection with such
Change in Control, holders of Stock receive solely shares of common stock that
are registered under Section 12 of the Exchange Act, there shall be substituted
for each share of Stock subject to the Option, the number and class of shares
into which each outstanding share of Stock shall be converted pursuant to such
Change in Control. If, in connection with such Change in Control, holders of
Stock receive solely cash and shares of common stock that are registered under
Section 12 of the Exchange Act, this Agreement shall be surrendered to the
Company by the Optionee, and the Option shall immediately be canceled by the
Company, and the Optionee shall receive, within ten days of the occurrence of
such Change in Control, a proportionate amount of cash in the manner provided in
Section 3.11(b) below, and there shall be substituted for this Agreement a
similar agreement reflecting a proportionate number of the class of shares into
which each outstanding share of Stock shall be converted to such Change in
Control. In the event of any such substitution, the proportion of cash and
common stock, the purchase price per share and any other terms of this Agreement
shall be appropriately adjusted by the Committee; provided, that, the proportion
of cash and common stock substituted for the Option shall reflect the
approximate proportion of cash and common stock received by holders of Stock in
such Change in Control. If, in connection with a Change in Control, holders of
Stock receive any portion of the consideration in a form other than cash or
shares of common stock that are registered under Section 12 of the Exchange Act,
each share of Stock subject to the Option shall be substituted or surrendered
for such proportion of common stock, cash or other consideration as shall be
determined by the Committee.
(b) Notwithstanding any provision in this Agreement, in the event of a
Change in Control pursuant to Section 4(e)(i) of the Employment Agreement, or in
the event of a Change in Control pursuant to Section 4(e)(ii) or (iii) of the
Employment Agreement in connection with which the holders of Stock receive cash,
this Agreement shall be surrendered to the Company by the Optionee, and the
Option shall immediately be canceled by the Company, and the holder shall
receive, within ten days of the occurrence of a Change in Control pursuant to
Section 4(e)(i) or within ten days of the approval of the stockholders of the
Company contemplated by Section 4(e)(ii) or (iii), a cash payment from the
Company in an amount equal to (1) the number of shares of Stock then subject to
the Option, multiplied by the excess, if any, of the greater of (A) the highest
per share price offered to holders of Stock of the Company in any transaction
whereby the Change in Control takes place or (B) the Fair Market Value of a
share of Stock on the date of occurrence of the Change in Control, over the
purchase price per share of Stock subject to the Option. The Company may, but is
not required to, cooperate with any person who is subject to Section 16 of the
Exchange Act to assure that any cash payment in accordance with the foregoing to
such person is made in compliance with Section 16 and the rules and regulations
thereunder.
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3.12 REPRICING. The exercise price hereunder shall not be changed after
the Option Date without the affirmative vote of a majority of the voting power
of the shares of capital stock of the Company represented at a meeting in which
the change to such exercise price or base price is considered for approval.
IV. 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. 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 the Optionee, acquire any rights hereunder in
accordance with this Agreement.
4.4. Notices. All notices, requests or other communications provided for
in this Agreement shall be made, if to the Company, to Whitehall Jewellers,
Inc., 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, Attention:
Secretary, and if to the Optionee, to 000 000-0000. 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, and all determinations made and
actions taken pursuant thereto, to the extent not otherwise governed by the Code
or 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 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.
WHITEHALL JEWELLERS, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Chairman
Accepted this 10th day of August, 2005.
/s/ Xxxxx Xxxx
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Xxxxx Xxxx
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