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 .
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(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:
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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 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-competition covenant entered
into between the Participant and the Company.
5. Manner of Exercise and Payment
. Subject to the terms and
conditions of this Agreement and the
