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Exhibit 10.8
STOCK OPTION
AGREEMENT
THIS STOCK OPTION AGREEMENT (the “Agreement”)
is made effective as of July 20, 2007 (the “Grant
Date”) between Whitehall Jewelers, Inc., a Delaware
corporation (the “Company”), and Edward Dayoob (the
“Participant”).
R E C I T A L S
WHEREAS, the Company has adopted the 2007 Whitehall
Jewelers, Inc. Stock Incentive Plan (the “Plan”), which
Plan is incorporated herein by reference and made a part of this
Agreement. A copy of the Plan as presently in effect is attached to
this Agreement as Annex A
. Capitalized terms not otherwise defined herein
shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in
the best interests of the Company and its stockholders to grant the
stock option award provided for herein to the Participant pursuant
to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as
follows:
1. Grant of Option . Subject to
the terms and conditions of the Plan and the additional terms and
conditions set forth in this Agreement, the Company hereby grants
to the Participant an option (the “Option”) to purchase
4,853 Shares (the “Option Shares”) at an option
exercise price of $850 per Share (the “Option
Price”), which is not less than the Fair Market Value of a
Share on the Grant Date; provided, however, if the Company
consummates an equity financing on or prior to August 31, 2007 in
which it raises at least $25,000,000 in gross proceeds at a per
share price in excess of the Option Price (including in connection
with any financing pursuant to a reverse merger transaction), then
the Option Price shall automatically be increased to the fair
market value at such time based upon the price per share at which
capital was raised in such financing. This Option is not intended
to be an ISO. For the avoidance of doubt, the Option Shares and the
Option Price are after giving effect to the Stock Split.
2. Vesting .
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Subject to the Participant
continuing to be Engaged (as defined below) by the Company, the
Option Shares shall vest and become nonforfeitable over a
three-year period as follows: 12/36 ths of the Option
Shares are immediately vested on the date hereof and 1/36
th of the Option Shares shall vest and become
nonforfeitable commencing on August 17, 2007 (the “Initial
Monthly Vesting Date”) and on each monthly anniversary of the
Initial Monthly Vesting Date until such time as all of the Option
Shares shall vest and become nonforfeitable. In the event the above
vesting schedule results in the vesting of any fractional Option
Shares, such fractional Option Shares shall not be deemed vested
hereunder but shall vest and become nonforfeitable when such
fractional Option Shares aggregate whole Option Shares. |
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Notwithstanding anything
contained herein to the contrary, (A) if the Executive is Engaged
by the Company immediately prior to the consummation of a Change of
Control (as defined in the Employment Agreement), all unvested
Options Shares shall immediately vest upon consummation of such
Change of Control or (B) if (i) |
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Executive is requested, in
writing, by the Company to resign from the Board in connection with
the Company becoming a public company (provided that Executive has
not previously voluntarily terminated his employment with the
Company prior to the Expiration Date in his Employment Agreement or
been terminated for Cause[as defined herein]) or (ii) Executive is
not re-elected to serve on the Board after the Expiration Date in
his Employment Agreement (provided that Participant has not
previously voluntarily terminated his employment with the Company
prior to the Expiration Date in his Employment Agreement or been
terminated for Cause), then all unvested Option Shares shall, to
the extent not then vested and not previously forfeited,
immediately become fully vested upon such resignation from, or
failure to re-elect Participant to, the Board. At such time as the
Participant ceases to be Engaged by the Company, all unvested
Option Shares shall cease to be subject to the aforementioned
vesting schedule (and the accelerated vesting schedule set forth in
Section 2(b) below and, except as set forth in clause (B) of the
immediately preceding sentence, the Option Shares shall, to the
extent not then vested, be forfeited by the Participant without
consideration. For purposes of this Agreement, the Executive shall
be considered “Engaged” by the Company during any time
in which he is (i) employed by the Company, (ii) engaged as
consultant to the Company, or (iii) serving as a member of the
Board. |
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| (b)
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Subject to the
Participant's continuing to be Engaged by the Company, beginning
with the Company’s fiscal year 2007 (which ends January 31,
2008), in addition to the vesting schedule reflected in paragraph
(a) above, the Options shall vest and become exercisable according
to the following schedule: |
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(i)
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One-fourth (1/4) of the Options
shall vest if EBITDA (as defined below) equals or exceeds
$5,000,000 at the end of any fiscal year; |
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(ii)
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One-half (1/2) of the Options
shall vest if EBITDA equals or exceeds $15,000,000 at the end of
any fiscal year; |
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(iii)
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Three-fourths (3/4) of the
Options shall vest if EBITDA equals or exceeds $25,000,000 at the
end of any fiscal year; and |
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(iv)
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Any unvested portion of the
Options shall vest if EBITDA equals or exceeds $35,000,000 at the
end of any fiscal year. |
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For purposes of
this Agreement, “EBITDA” shall mean the sum of the
Company’s earnings from its operations, after eliminating
therefrom all non-cash extraordinary non-recurring items of income
(including gains on the sale of assets and earnings from the sale
of discontinued business lines) and after all expenses (excluding
all extraordinary non-recurring items of expense) and other proper
charges, but before payment or provision for interest, taxes,
depreciation and amortization in accordance with GAAP, consistent
with the Company’s past practices and as determined by the
Company’s independent accountants. |
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| (c)
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Intentionally
Omitted. |
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| (d)
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Intentionally
Omitted. |
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3. Repurchase . Any Shares held
by the Participant from the exercise of the Options shall be
repurchasable by the Company, at its option, within the 120-day
period following the termination of, or the voluntary resignation
by the Participant of, the Participant’s employment, at (i)
80% of the Fair Market Value on the date of repurchase if such
termination is for Cause (as defined in Section 4 below) or due to
the Participant’s voluntary resignation of his employment
with the Company, or (ii) 100% of Fair Market Value on the date of
repurchase if such termination is for a reason other than for Cause
or due to the Participant’s voluntary resignation of his
employment with the Company, in the case of clauses (i) and (ii),
according to the following terms: the repurchase price will be paid
by the Company over a 2-year period in equal installments on the
first day of each calendar quarter following the repurchase
closing; provided, however, payments may be deferred to the extent
required to avoid any penalty tax imposed under Section 409A of the
Code. Notwithstanding the above, Participant’s obligation to
allow the Company to repurchase Shares shall terminate upon the
earlier of (x) two years following the grant date of the Options or
(y) such time when 50% or more of the outstanding common stock of
the Company entitled to vote generally in the election of directors
of the Company has been registered for resale.
4. Period of Exercise . Subject to the provisions
of the Plan and this Agreement, the Participant may exercise all or
any part of the vested Option Shares at any time prior to
the earliest to occur of:
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(a)
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the fifth anniversary of the
Grant Date; |
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(b)
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one year following the date of
the Participant’s termination of employment due to death or
Disability; |
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(c)
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ninety days following the date
of which Participant ceases to be Engaged by the Company;
and |
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(d)
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the date of the
Participant’s termination of employment by the Company for
Cause. |
Notwithstanding
the foregoing, the Participant shall not exercise any part of the
vested Option Shares for a period of ninety (90) days following the
Grant Date.
For purposes of this
Agreement, “Cause” shall mean “Cause” as
defined in any employment agreement then in effect between the
Participant and th
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