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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into
October
31, 2005, between Whitehall Jewellers,
Inc., a Delaware corporation (the
"Company"), and Robert L. Baumgardner (the
"Executive").
WHEREAS, the Company desires to employ the Executive to serve as
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 or
before November 15, 2005 (the actual first
day of work being 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. The Company shall employ the Executive
during the Employment Period as its Chief
Executive Officer, and Executive will
have such authority and responsibilities
and will perform such executive duties
as may be assigned to Executive by the
Board of Directors of the Company (the
"Board"). 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, 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 6, 7 or 8 hereof.
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3.
COMPENSATION.
(a) Signing Bonus.
Within 5 business days following the Effective
Date, the Company shall pay to the
Executive a one-time, lump-sum payment in the
amount of $500,000.
(b) Base Salary.
During the Employment Period, 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. Such Base Salary shall be reviewed
from time to time and shall be
subject to such increases, if any, as
determined by the Compensation Committee
of the Board (the "Compensation
Committee").
(c) Annual Bonus. The
Executive shall be eligible to participate in
the Company's Management Cash Bonus Plan or
other annual cash bonus plan made
available to elected officers of the
Company generally ("Annual Bonus") and
shall be eligible to receive an Annual
Bonus of up to 50% of Executive's Base
Salary (the "Target Bonus").
Notwithstanding the foregoing, Executive shall
receive an Annual Bonus for the Fiscal Year
ending January 31, 2007, of no less
than $125,000, which shall be paid to
Executive in March, 2007.
(d) 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(d). Each of these options shall be an
employment inducement award under
Section 303A.08 of the New York Stock
Exchange Listed Company Manual or any
similar rule of an exchange or quotation
service on which the Company's common
stock may be listed or quoted. The
Executive shall be granted an award of
options for 325,235 shares of the Company's
common stock on the Effective Date.
This award of options shall have an
exercise price equal to the higher of (i)
Fair Market Value (as defined in the
Company's 1997 Long-Term Incentive Plan
(the "LTIP")) on the Effective Date or (ii)
$0.75 per share. The Company shall
also grant Executive an additional award
for options on the closing of the sale
of convertible notes (the "Notes") under
the Securities Purchase Agreement dated
as of October 3, 2005 among the Company,
and the investors listed therein for a
number of shares equal to 2% of the number
of shares of the Company's common
stock for which the Notes would then be
convertible. This second award of
options shall have an exercise price equal
to the Fair Market Value (as so
defined) on the date of grant. Each of the
option awards under this Section 3(d)
shall (i) provide for vesting in three
equal annual installments commencing on
the first anniversary of the date of grant
(but will vest fully, if not already
vested, upon a Change in Control ), (ii)
expire on the tenth anniversary of the
date of grant and (iii) be subject to the
same terms and conditions (including,
without limitation, as to forfeiture but
with vesting on Change of Control
determined under clause (i) of this Section
3(d) rather than the change in
control definition in the LTIP) as if
granted under the LTIP.
(e) Other Benefits.
During the Employment Period, the Executive shall
be entitled to participate in the Company's
employee benefit plans generally
available to executives of the Company
(such benefits 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, and
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participation in a 401(k) plan). In
addition, the Company shall (i) provide
Executive an automobile allowance in an
amount not to exceed $1,200 per month,
and (ii) pay premiums (not to exceed $9,300
per year) related to Executive's Met
Life Insurance Policy of $1,500,000 in
effect for the Executive prior to the
Effective Date.
(f) Relocation. The
Executive shall be entitled to (i) reimbursement
of relocation expenses up to $25,000 in
connection with Executive's relocation
from Florida to the Chicago metropolitan
area, (ii) payment of reasonable hotel
or apartment accommodations until
Executive's relocation to the Chicago
metropolitan area (not to exceed six
months), and (iii) one round trip flight to
Executive's home in Florida per month until
Executive's relocation to the
Chicago metropolitan area (not to exceed
six months).
(g) 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.
(h) 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.
4.
TERMINATION.
(a) Death. Upon the
death of the Executive, this Agreement shall
automatically terminate 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:
(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
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reasonable accommodation, required of the
Executive hereunder for a period of
six (6) consecutive months or for an
aggregate period of nine (9) months in any
twenty-four (24) consecutive 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. The Executive shall submit
to appropriate medical examinations for
purposes of such determination.
(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. The Cause Notice shall state
the action(s) or
inaction(s) giving rise to termination for Cause in
reasonable
detail. The Executive shall have twenty (20) business 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 to the
satisfaction of
the Board, in its good faith discretion, 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) Executive's continued failure substantially to perform
Executive's duties (other than as a result of total or partial
incapacity due to physical or mental illness);
(B) an act or acts on Executive's part constituting (x) a
felony under the laws of the United States or any state thereof or
(y)
a misdemeanor involving moral turpitude;
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(C) Executive's willful malfeasance or willful misconduct in
connection with Executive's duties hereunder or any willful act
or
omission that is materially injurious to the financial condition
or
business reputation of the Company or any of its subsidiaries
or
affiliates; or
(D) any breach by the Executive of any one or more of the
covenants contained in Sections 6, 7 or 8 hereof.
(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
the Executive
shall be entitled to the payments and benefits specified in
Sections 4(b)(i)
and 4(b)(iii) hereof.
(d) Termination
Without Cause; Termination for Good Reason by
Executive.
(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, except that the Executive
shall be
entitled to:
(A) the payments and benefits specified in Sections 4(b)(i)
through 4(b)(iii) hereof, inclusive;
(B) the continuation of payment of amounts equal to the Base
Salary and Target Bonus that otherwise would have been payable
hereunder had the Executive's employment hereunder not been
terminated
pursuant to this Section 4(d) for a period of 12 months from the
date
of termination; and
(C) continuation of health and dental coverage for the
Executive for a period of twelve (12) months, which may include
reimbursement of the cost of continuation coverage of group
health
coverage pursuant to the Consolidated Omnibus Budget
Reconciliation
Act of 1986 to the extent Executive elects such continuation
coverage
and is eligible and subject to the terms of the plan and the
law.
Notwithstanding
Section 4(d)(i)(B), the amounts payable to the Executive
under such
Section 4(d)(i)(B) shall be reduced by the amount of salary,
bonus or other
compensation which the Executive receives from a subsequent
employer during
the period of time that amounts are payable to the
Executive under
such Section 4(d)(i)(B). The Executive shall use reasonable
efforts to seek
other comparable employment for this purpose.
The Company
shall have no obligation to provide the payments or benefits in
Section 4(d)(i)
in the event Executive breaches the provisions of Sections
6, 7, or 8.
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(ii) The Executive may, at Executive's option, terminate the
Executive's
employment under this Agreement upon written notice to the
Company for Good
Reason. If the Executive terminates employment for Good
Reason, all
obligations of the Company hereunder shall cease immediately,
except that the
Executive shall be entitled to receive the payments and
benefits
specified in Section 4(d)(i)(A) above and, provided that the
Executive
executes a mutual release and non-disparagement agreement, in
form and
substance reasonably satisfactory to the Company, the payments
and
benefits set
forth in Sections 4(d)(i)(B) and (C) above, in each case on
the terms and
conditions set forth therein. For purposes hereof, the term
"Good Reason"
shall mean the occurrence of any of the following without
Executive's
express written consent that is not cured by the Company within
thirty (30) days
following the Company's receipt of written notice from the
Executive
describing the event constituting Good Reason: (A) a
substantial
diminution in
Executive's position or duties; (B) any reduction in
Executive's Base
Salary; (C) failure of the Company to pay compensation
when due; or (D)
a Change in Control, as defined hereinafter.
(iii) "Change in Control" shall mean:
(A) The acquisition on or after the Effective Date, by any
individual,
entity or group (a "Person"), including any "person"
within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities
Exchange Act of 1934, as amended (the "Exchange Act") but
excluding
any Exempt Person (an "Exempt Person" being Prentice Capital
Management L.P., Holtzman Opport
