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EXHIBIT
10.11
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 Robert B. Nachwalter
(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 402 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 .
| (a)
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Subject to the Participant's
continued employment with the Company, the Option Shares shall vest
and become nonforfeitable over a three-year period as follows:
14/36 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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| (b)
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Subject to the Participant's
continued employment with the Company, beginning with the
Company’s fiscal year 2007 (which ends January 31, 2008), in
addition to |
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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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If the Participant's employment
with the Company is terminated for any reason, the Option Shares
shall, to the extent not then vested, be forfeited by the
Participant without consideration. |
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| (d)
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Notwithstanding any other
provision of this Agreement to the contrary, in the event of a
Change of Control (as defined in the Employment Agreement) the
Option Shares shall, to the extent not then vested and not
previously forfeited, immediately become fully vested. |
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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.
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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:
| (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 the Participant’s termination of employment by the Company
without Cause or by the Participant for any reason; and |
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| (d)
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the date of the
Participant’s termination of employment by the Company for
Cause. |
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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 the Company or if not defined therein or, if there
shall be no such agreement then in effect, (i) Participant's
engagement in misconduct which is materially injurious to the
Company or its Affiliates, (ii) Participant’s continued
failure to substantially perform his duties to the Company, (iii)
Participant's repeated dishonesty in the performance of his duties
to the Company, (iv) Participant's commission of an act or acts
constituting any (x) fraud against, or misappropriation or
embezzlement from the Company or any of its Affiliates, (y) crime
involving moral turpitude, or (z) offense that could result in a
jail sentence of at least 30 days or (v) Participant's material
breach of any confidentiality or non-
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