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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This
Employment Agreement (this "Agreement") is entered into effective
as
of August 10, 2005 (the "Effective Date"),
between Whitehall Jewellers, Inc., a
Delaware corporation (the "Company"), and
Beryl Raff (the "Executive").
WHEREAS,
the Company desires to employ the Executive to serve as its
Chief
Executive Officer of the Company, and the
Executive desires to be employed by
the Company, upon the terms and subject to
the conditions set forth herein.
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements
contained herein, the Company and the
Executive hereby agree as follows:
1. EMPLOYMENT. The
Company hereby agrees to employ the Executive and
the Executive hereby agrees to be employed
by the Company upon the terms and
subject to the conditions contained in this
Agreement. The term of employment of
the Executive by the Company pursuant to
this Agreement shall commence on the
Effective Date and shall end on the third
annual anniversary of the Effective
Date (such date or any successive date to
which the term thereof has been
extended pursuant to the succeeding
sentence, the "Expiration Date"). Such term
shall be automatically extended for
successive one-year periods unless either
the Executive or the Company gives notice
that such term shall not be so
extended no later than 60 days prior to the
then current Expiration Date or
unless earlier terminated pursuant to
Section 4 hereof. The term of employment
as prescribed in the preceding sentence is
hereinafter called the "Employment
Period." From and after the end of the
Employment Period, unless earlier
terminated hereunder, the Executive's
employment with the Company shall be at
will, not for any specified term and
without any payment guarantees, and either
the Executive or the Company may terminate
the employment relationship at any
time.
2.
POSITION
AND DUTIES; RESPONSIBILITIES. The Company shall employ the
Executive during the Employment Period as
its Chief Executive Officer with
duties and responsibilities customarily
associated with that position. The
Executive shall report to and be subject to
direction from the Company's Board
of Directors (the "Board"). The Executive
shall be nominated for the Board
effective on the first day on which she
reports for active employment with the
Company, which shall be as soon as
practicable after the Effective Date, and,
for so long as she is elected to the Board,
shall serve as a director of the
Company at no additional compensation.
During the Employment Period, the
Executive shall perform faithfully and
loyally and to the best of the
Executive's abilities the duties assigned
to the Executive hereunder and shall
devote the Executive's full business time,
attention and effort to the affairs
of the Company and its subsidiaries and
shall use the Executive's reasonable
best efforts to promote the interests of
the Company and its subsidiaries. The
Executive may engage in charitable, civic
or community activities and, with the
prior approval of the Board of Directors of
the Company (the "Board"), which may
be granted or denied in its sole
discretion, may serve as a director (but not a
lead director) of any other business
corporation, provided that such activities
or service do not interfere with the
Executive's duties hereunder or violate the
terms of any of the covenants contained in
Sections 7 or 8 hereof. Upon any
termination of employment, Executive shall
be deemed to have resigned all
appointments and positions with the
Company
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and its affiliates and employee benefit
plans, including any Board or Committee
appointment or election and shall execute
any documents necessary or desirable
to reflect such resignation.
3.
COMPENSATION.
(a) Base Salary. Commencing on the first day on which she
reports
for active
employment with the Company, which shall be as soon as
practicable after the Effective Date, during her employment under
this
Agreement,
the Company shall pay to the Executive a base salary at the
rate of
not less than $500,000 per annum ("Base Salary"), payable in
accordance
with the Company's executive payroll policy.
(b) Annual Bonus. Beginning for the fiscal year ending January
31,
2006, the
Executive shall be eligible for an annual cash bonus ("Annual
Bonus")
under an arrangement approved by the compensation committee of
the
Board (the
"Compensation Committee"). Such bonus arrangement shall provide
for a
target bonus of not less than 35% of Base Salary (40% for the
fiscal
years
ending January 31, 2007 and January 31, 2008) and a maximum
bonus
opportunity of not less than 120% of Base Salary, provided,
however, that,
subject to
Section 4, the Annual Bonus for the fiscal year ended January
31, 2006,
shall not be less than $175,000 and the sum of the Annual Bonus
and Base
Salary for each of the fiscal years ending January 31, 2007,
and
January
31, 2008, shall not be less than $675,000.
(c) Equity-Based Compensation. As a material inducement to the
Executive's entrance into this Agreement and employment by the
Company,
the
Executive shall be granted the awards of stock options described
in
this
Section 3(c) and in Section 3(h) below. The Executive shall be
granted an
award of 175,000 stock options on the Effective Date, which
such grant
shall be an employment inducement award under Section 303A.08
of the New
York Stock Exchange Listed Company Manual. As of the first
anniversary of the Effective Date, the Executive shall be granted
an
additional
award of 125,000 stock options pursuant to the terms of the
Company's
1997 Long-Term Incentive Plan, as amended, or any successor
thereto
(the "LTIP"). In the case of the award of stock options granted
on
the
Effective Date, the options shall have a strike price equal to
the
greater of
(i) the Fair Market Value (as defined in the LTIP) on the date
of grant
or (ii) the average closing price of the Company's common
stock,
par value
$.001 per share (the "Common Stock"), for the 30 trading days
preceding
the Effective Date, as reported on the New York Stock Exchange
Composite
Trading report. In the case of the award of stock options
granted on
the first anniversary of the Effective Date, the options shall
have a
strike price equal to the Fair Market Value on the date of
grant.
In each
case the options shall provide for vesting in three equal
annual
installments commencing on the first anniversary of the date of
grant. All
options
granted on the Effective Date shall be subject to the same
terms
and
conditions as if granted under the LTIP. In addition to the
foregoing
option
grants, the Executive shall, in the sole discretion of the
Compensation Committee, be eligible during the Employment Period to
be
granted
stock options, restricted stock and/or other equity-based
compensation awards.
(d) Other Benefits. During the Employment Period, the Executive
shall be
entitled to participate in the Company's employee benefit plans
(other
than severance
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plans)
generally available to executives of the Company (such
benefits,
together
with the benefits referred to in (c) above, being hereinafter
referred
to as the "Employee Benefits"). The Executive shall be entitled
to take
time off for vacation or illness in accordance with the
Company's
policy for
executives and to receive all other fringe benefits as are from
time to
time made generally available to executives of the Company
(currently
including vacation days of not less than four weeks annually,
medical,
dental, long term disability and life insurance, participation
in
a 401(k)
plan, automobile benefits and reimbursement of expenses).
(e)
Expense Reimbursement. During the Employment Period, the
Company
shall
reimburse the Executive, in accordance with the Company's
policies
and
procedures, for all proper expenses incurred by the Executive in
the
performance of the Executive's duties hereunder. The Company
shall
reimburse
Executive's legal fees incurred in connection with the
negotiation of this Agreement subject to a maximum reimbursement
of
$25,000.
(f) Right to Change Plans. Nothing in this Agreement shall be
construed
to limit, condition or otherwise encumber the rights of the
Company to
amend, discontinue, substitute or maintain any benefit plan,
program or
perquisite, and no such amendment, discontinuance, substitution
or
maintenance or failure to maintain any benefit plan, program or
perquisite
shall be construed as a breach of this Agreement.
(g) Temporary Living and Travel Expenses. The Executive's
duties
shall be
performed at the Company's headquarters in Chicago Illinois.
Until the
Executive relocates to the Chicago metropolitan area, the
Company
shall reimburse her for reasonable travel and temporary living
expenses,
provided that any such expenses which exceed $5,000 in any
month
shall be
subject to Compensation Committee approval. The Company shall
reimburse
the Executive for the reasonable costs of relocating to the
Chicago
metropolitan area on a basis consistent with its prior policies
for executive officers.
(h) Transition Compensation. Subject to Section 4, in
consideration
of
compensation which the Executive will forego at her present
employer
and as an
inducement to accept employment with the Company, the Executive
shall
receive the following additional compensation:
(i) $1,950,000 payable as follows:
(A) such amount shall be payable in four equal
installments of $487,500 on each of the August 12, 2005,
February 1, 2006, February 1, 2007 and February 1, 2008,
provided that the Company makes the initial payment on August
12, 2005 and obtains a letter of credit on or before the 8th
business day after the Effective Date from LaSalle Bank N.A.or
a comparable bank providing for payment, without limitation,
on behalf of the Company of its obligations under this Section
3(h)(i) and Section 4 with respect to the installment payments
due February, 1, 2006, February 1, 2007 and February 1, 2008,
or
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(B) if the Company does not receive a letter of credit
as described in paragraph A above, such amount shall be
payable in three installments: $487,500 on August 12, 2005,
$487,500 on the 9th business day after the Effective Date, and
$975,000 on February 1, 2006. In the event that the Executive
voluntarily terminates her employment pursuant to Section
4(f), in the event of termination by reason of death or
Disability in accordance with Section 4(a) or (b), or if the
Board of Directors of the Company terminates Executive's
employment by reason of acts of Executive set forth in
Sections 4(c)(ii)(B), (C), (D), or (E), but for no other
reason, the Executive shall be required to repay the following
amounts to the Company within 15 days of such termination: (i)
if the termination occurs prior to February 1, 2006, $487,500,
(ii) if the termination occurs on or after February 1, 2006
but before February 1, 2007, $975,000, and (iii) if the
termination occurs on or after February 1, 2007 and prior to
February 1, 2008, $487,500; provided that any repayment under
this sentence shall be reduced by the amount if any of any
installment that was payable prior to termination of
employment but not actually paid to the Executive; provided,
however, that this repayment obligation shall apply only with
respect to payments under this Section 3(h)(i)(B).
(ii) The Executive shall be granted an additional 150,000
stock options as of the Effective Date, which such stock
options
shall be an employment inducement award under Section 303A.08 of
the
New York Stock Exchange Listed Company Manual . Such options
shall
have a
strike price equal to the greater of (i) the Fair Market
Value on the date of grant or (ii) the average closing price of
the
Common Stock for the 30 trading days preceding the Effective
Date,
as reported on the New York Stock Exchange Composite Trading
report
and shall provide for vesting in three equal annual
installments
commencing on the first anniversary of the Effective Date.
Options
granted under this Section 3(h)(ii) shall be subject to the
same
terms and conditions as granted under the LTIP.
(iii) The Company shall reimburse the Executive for her COBRA
costs with respect to her prior employer's health insurance plans
to
the extent
that they exceed the costs paid by her while a full-time
employee of such prior employer until she is covered by the
Company's health insurance plans
(iv) The Company shall pay the Executive $15,000 on August 12,
2005.
4.
TERMINATION.
(a) Death. Upon the death of the Executive, this Agreement
shall
automatically terminate any and all rights of the Executive and
the
Executive's heirs, executors and administrators to compensation and
other
benefits
under this Agreement shall cease immediately, except that the
Executive's heirs, executors or administrators, as the case may be,
shall
be
entitled to:
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(i) accrued Base Salary through and including the Executive's
date of death;
(ii) accrued Annual Bonus through and including the
Executive's date of death (determined on a pro rata basis for
the
number of days of the fiscal year for which the Executive was
employed by the Company), such Annual Bonus to be paid following
the
Compensation Committee's determination of the Executive's
Annual
Bonus, if any, for the fiscal year in which the Executive's date
of
death so occurred, which determination may be made at the same
time
that the Compensation Committee determines annual bonuses, if
any,
for executive officers of the Company in general; and
(iii) other Employee Benefits to which the Executive was
entitled on the date of death in accordance with the terms of
the
plans and programs of the Company.
(b) Disability. The Company may, at its option, terminate this
Agreement
upon written notice to the Executive if the Executive, because
of
physical or mental incapacity or disability, fails to perform
the
essential
functions of the Executive's position, with or without
reasonable
accommodation, required of the Executive hereunder for a
continuous
period of 60 days or any 120 days within any 12-month period.
Upon such
termination, all obligations of the Company hereunder shall
cease immediately,
except that the Executive shall be entitled to:
(i) accrued Base Salary through and including the effective
date of the Executive's termination of employment;
(ii) accrued Annual Bonus through and including the effective
date of the Executive's termination of employment (determined on
a
pro rata basis for the number of days of the fiscal year for
which
the Executive was employed by the Company), such Annual Bonus to
be
paid following the Compensation Committee's determination of
the
Executive's Annual Bonus, if any, for the fiscal year in which
the
Executive's termination of employment so occurred, which
determination may be made at the same time that the
Compensation
Committee determines annual bonuses, if any, for executive
officers
of the Company in general; and
(iii) other Employee Benefits to which the Executive is
entitled upon termination of employment in accordance with the
terms
of the plans and programs of the Company.
In the event of any dispute regarding the
existence of the Executive's
incapacity or disability hereunder, the
matter shall be resolved by the
determination of a physician selected by
the Board and reasonably acceptable to
the Executive or her representatives. The
Executive shall submit to appropriate
medical examinations for purposes of such
determination.
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(c) Cause.
(i) The Company may, at its option, terminate the Executive's
employment under this Agreement for Cause (as hereinafter
defined)
upon written notice to the Executive (the "Cause Notice"). Any
such
termination for Cause shall be authorized by the Board only
after
giving the Executive an opportunity to appear before the Board
with
counsel to address the actions or inactions which the Board
believes
may constitute grounds for termination for cause. The Cause
Notice
shall state the action(s) or inaction(s) giving rise to
termination
for Cause in reasonable detail. The Executive shall have in 20
days
after the Cause Notice is given to cure the particular action(s)
or
inaction(s), to the extent a cure is possible. If the Executive
so
effects a cure the Cause Notice shall be deemed rescinded and of
no
force or effect.
(ii) As used in this Agreement, the term "Cause" shall mean
any one or more of the following:
(A) any refusal by the Executive to substantially
perform the Executive's duties under this Agreement after
written demand is delivered by the Board to the Executive
identifying the manner in which the Executive has not
substantially performed her duties, or any refusal to perform
specific directives of the Board which are consistent with the
scope and nature of the Executive's duties and
responsibilities as set forth herein after written demand is
delivered
by the Board to the Executive identifying the manner
in which the Executive has refused to perform such specific
directions;
(B) any act of embezzlement or theft by the Executive in
connection with the Executive's duties hereunder or in the
course of the Executive's employment hereunder or any prior
employment, any act of fraud by the Executive against the
Company or the Executive's admission or conviction of a felony
or of any crime involving moral turpitude, fraud,
embezzlement, theft or misrepresentation;
(C) any use of alcohol by the Executive that interferes
with the performance of the Executive's duties or adversely
impacts the reputation of the Executive or of the Company or
any illegal use of a controlled substance by the Executive;
(D) any willful misconduct of the Executive which either
results in a material financial loss to the Company and its
subsidiaries, taken as a whole or requires disclosure by the
Company to the New York Stock Exchange, the Securities and
Exchange Commission or the U. S. Attorney's office; or
(E) any breach by the Executive of any one or more of
the covenants contained in Section 7 or 8 hereof.
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No act or omission will be deemed willful for purposes of this
Section if taken or omitted to be taken by the Executive in a
good
faith belief that such act or omission to act was in the best
interests of the Company. Failure to meet performance objectives
and
standards, by itself, does not constitute Cause.
(iii) The exercise of the right of the Company to terminate
this Agreement pursuant to this Section 4(c) shall not abrogate
the
rights or remedies of the Company in respect of the breach
giving
rise to such termination.
(iv) If the Company terminates the Executive's employment for
Cause, all obligations of the Company hereunder shall cease,
except
that (A) the Executive shall be entitled to the payments and
benefits specified in Sections 4(a)(i) and 4(a)(iii) hereof, and
(B)
unless the Executive's employment is terminated by the Board of
Directors of the Company by reason of any acts of Executive set
forth in Sections 4(c)(ii)(B), (C), (D), or (E) (but for no
other
reason, the Executive shall continue to receive installment
payments
of Transition Compensation under Section 3(h)(i).
(d) Termination Without Cause.
(i) The Company may, at its option, terminate the Executive's
employment under this Agreement upon written notice to the
Executive
for a reason other than a reason set forth in Section 4(a), 4(b)
or
4(c). Any such termination shall be authorized by the Board. If
the
Company terminates the Executive's employment for any such
reason,
all obligations of the Company hereunder shall cease
immediately;
provided, however, that, subject to Section 4(d)(ii):
(A) The Executive shall be entitled to her accrued Base
Salary through and including the date of termination and shall
be entitled to Employee Benefits to which she is entitled in
accordance with the terms of the plans and programs of the
Company.
(B) If the termination of the Executive's employment is
prior to the last day of the Employment Period and prior to a
Change in Control (as defined in Section 4(e)), the Executive
sh
