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EXHIBIT 3
WHITEHALL JEWELLERS, INC.
INCENTIVE STOCK OPTION AGREEMENT
FOR EMPLOYEES
Whitehall Jewellers, Inc., a Delaware corporation (the "Company"),
hereby grants to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Optionee") as of June 8, 1999 (the
"Option Date"), pursuant to the provisions of the Whitehall Jewellers, Inc. 1997
Long-Term Incentive Plan (the "Plan"), an option to purchase from the Company
(the "Option") 115,583 shares of its Common Stock, $.001 par value ("Stock"), at
the price of $17.19 per share upon and subject to the terms and conditions set
forth below. References to employment by the Company shall include employment by
a subsidiary of the Company. Capitalized terms not defined herein shall have the
meanings specified in the Plan.
1. Designation as Incentive Stock Option and Option Subject to
Acceptance of Agreement. The Option is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). To the extent the Option is exercised pursuant to
its terms after the period set forth in Section 422(a) of the Code or exceeds
the limitation set forth in Section 422(d) of the Code or otherwise does not
meet the requirements for an incentive stock option under Section 422 of the
Code, the Option shall not be treated as an incentive stock option under such
Section 422. The Option shall be null and void unless the Optionee shall accept
this Agreement by executing it in the space provided below and returning such
original execution copy to the Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be exercised,
in whole or in part, after the tenth anniversary of the Option Date (the
"Expiration Date").
2.2. Exercise of Option During Employment. (a) Except as otherwise
provided in this Section 2.2, Section 2.3 or pursuant to any acceleration
provisions of the Plan, the Option shall become exercisable on the ninth
anniversary of the Option Date.
(b) The Option shall become exercisable prior to the ninth
anniversary of the Option Date to the extent the Company satisfies annual
performance goals established by Committee prior to the beginning of each of the
fiscal years of the Company ending January 31, 2000, January 31, 2001 and
January 31, 2002.
(i) If the Company's level of performance for the fiscal year of
the Company ending January 31, 2000 is at least 90 percent of the target
level of performance designated by the Committee for such year, then the
Option shall become exercisable, as of the date the Committee determines
the actual level of performance for such year, with respect to one-sixth of
the number of shares initially subject to the Option, multiplied by the
Applicable Percentage, as defined below.
(ii) If the Company's cumulative level of performance for the
fiscal years of the Company ending January 31, 2000 and January 31, 2001 is
at
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least 90 percent of the cumulative target levels of performance designated
by the Committee for such years, then the Option shall become exercisable,
as of the date the Committee determines the actual cumulative level of
performance for such years, with respect to the excess of one-half of the
number of shares initially subject to the Option over the number of the
shares with respect to which the Option became exercisable pursuant to
clause (i), multiplied by the Applicable Percentage.
(iii) If the Company's cumulative level of performance for the
fiscal years of the Company ending January 31, 2000, January 31, 2001 and
January 31, 2002 is at least 90 percent of the cumulative target levels of
performance designated by the Committee for such years, then the Option
shall become exercisable, as of the date the Committee determines the
actual cumulative level of performance for such years, with respect to the
excess of the full number of shares initially subject to the Option over
the number of shares with respect to which the Option became exercisable
pursuant to clauses (i) and (ii), multiplied by the Applicable Percentage.
The "Applicable Percentage" for purposes of this Section 2.2(b) shall be the
percentage corresponding to the level of the Company's performance for the
applicable year as a percentage of the target level of performance for such
year, as set forth in the following table:
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Company Performance as a Percentage of
Target Level of Performance Applicable Percentage
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less than 90% 0%
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90% 50%
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91% 55%
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92% 60%
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93% 65%
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94% 70%
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95% 75%
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96% 80%
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97% 85%
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98% 90%
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99% 95%
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100% or more 100%
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(c) Notwithstanding the foregoing, the Option shall become fully
exercisable, to the extent not so already exercisable, upon a "Change in
Control," as that term is defined in the Optionee's Severance Agreement with the
Company dated May 7, 1996 (the "Severance Agreement").
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2.3. Exercise of Option Following Termination of Employment.
(a) If the Optionee's employment by the Company terminates by reason
of retirement other than for Good Reason, as defined in the Severance Agreement
("Good Reason"), on or after age 65, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative or Permitted Transferees until and including the earlier to
occur of (i) the date which is six months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.
(b) If the Optionee's employment by the Company terminates by reason
of death or Disability, the Option shall be exercisable to the extent it is
exercisable on the date of death or, in the case of Disability, the effective
date of the Optionee's termination of employment by reason of Disability (the
"Disability Termination Date") and shall become exercisable on the date of death
or the Disability Termination Date, as the case may be, for an additional number
of shares equal to one-third of the shares of Stock subject to the Option as to
which the Option was not exercisable immediately prior to the Optionee's death
or the Disability Termination Date, and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative or Permitted Transferees, as the
case may be, until and including the earlier to occur of (i) the date which is
one year after the date of death or the Disability Termination Date and (ii) the
Expiration Date.
(c) If the Optionee's employment with the Company is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of Optionee's termination of employment.
(d) If the Optionee's employment with the Company is terminated by the
Optionee for any reason other than Good Reason, retirement on or after age 65
other than for Good Reason, death or Disability or is terminated by the Company
for any reason other than Cause, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative or Permitted Transferees until and including the earlier to
occur of (i) the date which is three months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.
(e) Upon a termination of the Optionee's employment with the Company
that does not constitute a Nonqualifying Termination under the Severance
Agreement (a "Nonqualifying Termination") the Option shall become fully
exercisable and remain exercisable until the earliest of (i) the Expiration
Date, (ii) two years after such termination of employment and (iii) the date the
Option is surrendered and canceled for cash or other consideration pursuant to
Section 6.8 of the Plan.
(f) If the Optionee dies during the period set forth in Section 2.3(a)
following termination of employment by reason of retirement on or after age 65
other than for Good Reason, or if the Optionee dies during the period set forth
in Section 2.3(b) following termination of employment by reason of Disability,
or if the Optionee dies during the period set forth in Section 2.2(d) following
termination of employment for any reason other than retirement
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on or after age 65 other than for Good Reason, Disability or termination by the
Company for Cause, then the Option shall be exercisable only to the extent it is
exercisable on the date of death and may thereafter be exercised by the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until and including the earlier to occur of (i) the date which is one year after
the date of death and (ii) the Expiration Date.
2.4 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised in whole or in part by the Optionee (1)
by giving written notice to the Company specifying the number of whole shares of
Stock (provided that if the then exercisable portion of the Option is for less
than one share, then for all of such portion) to be purchased and accompanied by
payment therefor in full (or arrangement made for such payment to the Company's
satisfaction) either (i) in cash, (ii) by delivery of previously owned whole
shares of Stock (which the Optionee has held for at least six months prior to
the delivery of such shares or which the Optionee purchased on the open market
and for which the Optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable pursuant to the Option by reason
of such exercise, (iii) by authorizing the Company to withhold whole shares of
Stock which would otherwise be delivered upon exercise of the Option having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable pursuant to the Option by reason of such exercise, (iv)
in cash by a broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (v) a combination of (i), (ii)
and (iii), and (2) by executing such documents as the Company may reasonably
request. So long as the Stock is quoted on NASDAQ or quoted or listed on any
recognized quotation service or national securities exchange, the Committee
shall have discretion to disapprove (but only in the case of clause (ii) if such
disapproval is reasonable and if imposition of a reasonableness standard with
respect to disapproval of clause (iii) does not prevent withholding transactions
pursuant to clause (iii) from complying with the applicable conditions of Rule
16b-3 under the Exchange Act, only in the case of clause (iii) if such
disapproval is reasonable) of an election pursuant to clauses (ii) or (iii). Any
fraction of a share of Stock which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid in cash by the
Optionee. No certificate representing a share of Stock shall be delivered until
the full purchase price therefor has been paid.
2.5 Termination of Option. (a) In no event may the Option be exercised
after it terminates as set forth in this Section 2.5. The Option shall
terminate, to the extent not exercised pursuant to Section 2.4 or earlier
terminated pursuant to Section 2.3, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the
shares of Stock subject to the Option expire or are exercised, canceled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of
this Agreement to the Company, either (i) ▇▇▇▇ this Agreement to indicate the
extent to which the Option has expired or been exercised, canceled or forfeited
or (ii) issue to the Optionee a
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substitute option agreement applicable to such rights, which agreement shall
otherwise be at least as favorable to the Optionee as this Agreement in form and
substance.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be transferred
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to
the extent permitted by the foregoing sentence, during the Optionee's lifetime
the Option is exercisable only by the Optionee or the Optionee's Legal
Representative. Except to the extent permitted by the foregoing, the Option may
not be sold, transferred, assigned, pledged, hypothecated, encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the
Option, the Option and all rights hereunder shall immediately become null and
void.
3.2. Investment Representation. The Optionee hereby represents and
covenants that (a) any share of Stock purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and any
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of purchase of any shares
hereunder or (y) is true and correct as of the date of any sale of any such
shares, as applicable. As a further condition precedent to any exercise of the
Option, the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of or supervision over the issuance or
delivery of the shares and, in connection therewith, shall execute any documents
which the Board or the Committee shall in its reasonable judgment deem necessary
or advisable to comply with the Securities Act, applicable state securities laws
or the regulations or requirements of any such regulatory authority. The Company
agrees to use reasonable efforts, so long as it is required to file periodic
reports under Section 13 of the Exchange Act to register the Stock issuable to
Optionee pursuant to the Option on Form S-8 or a successor form and maintain the
effectiveness of such registration.
3.3. Withholding Taxes. (a) As a condition precedent to the delivery
of Stock upon exercise of the Option, the Optionee shall, upon request by the
Company, pay to the Company in addition to the purchase price of the shares,
such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
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(b) The Optionee may elect to satisfy his or her obligation to advance
the Required Tax Payments by any of the following means: (1) a cash payment to
the Company pursuant to Section 3.3(a), (2) delivery to the Company of
previously owned whole shares of Stock (which the Optionee has held for at least
six months prior to the delivery of such shares or which the Optionee purchased
on the open market and for which the Optionee has good title, free and clear of
all liens and encumbrances) having a Fair Market Value, determined as of the
date the obligation to withhold or pay taxes first arises in connection with the
Option (the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the
Company to withhold whole shares of Stock which would otherwise be delivered to
the Optionee upon exercise of the Option having a Fair Market Value, determined
as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (5) any combination of (1), (2) and (3). So
long as the Stock is quoted on NASDAQ or quoted or listed on any recognized
quotation service or a national securities exchange, the Committee shall have
sole discretion to disapprove (but only in the case of clause (2) if such
disapproval is reasonable and if imposition of a reasonableness standard with
respect to disapproval of clause (3) does not prevent withholding transactions
pursuant to clause (3) from complying with the applicable conditions of Rule
16b-3 under the Exchange Act, only in the case of clause (3) if such disapproval
is reasonable) of an election pursuant to clauses (2) or (3). Shares of Stock to
be delivered or withheld may have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments, but not in excess of the amount determined
by applying the Optionee's maximum marginal tax rate. Any fraction of a share of
Stock which would be required to satisfy any such obligation shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee.
No certificate representing a share of Stock shall be delivered until the
Required Tax Payments have been satisfied in full.
3.4 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
(such adjustment to be made reasonably and in good faith by the Committee)
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. Such a decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not approved by the
Company (which approval will not be
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unreasonably withheld). The Company agrees to use all reasonable efforts to
effect or obtain any such listing, registration, qualification, consent or
approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company or
any affiliate of the Company.
3.9. Decisions of Board or Committee. Subject to the last sentence of
this Section 3.9, the Board or the Committee shall have the right to resolve all
questions and make all determinations which may arise in connection with the
Option or its exercise (which rights the Committee shall exercise reasonably and
in good faith), and any interpretation, determination or other action so made or
taken by the Board or the Committee regarding the Plan or this Agreement shall
be final, binding and conclusive. Notwithstanding the foregoing, the
determination of "Good Reason," "Change in Control" and "Nonqualifying
Termination" shall be determined by mutual agreement of the Board or the
Committee, on the one hand, and the Optionee, on the other hand, or failing such
agreement by a court of competent jurisdiction.
3.10. Company to Reserve Shares. The Company shall at all times prior
to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. This Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
3.12. Section 16. The Company shall use all reasonable efforts to
cooperate with Optionee (if Optionee is subject to Section 16 of the Exchange
Act) to assure that any cash payment in accordance with Section 6.8(a) of the
Plan is made in compliance with such Section 16 and the rules and regulations
thereunder.
4. Miscellaneous Provisions.
4.1. Meaning of Certain Terms. (a) As used herein, employment by the
Company shall include employment by a corporation which is a "subsidiary
corporation" of the
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Company, as such term is defined in section 424 of the Code. References in this
Agreement to sections of the Code shall be deemed to refer to any successor
section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall include an
executor, administrator, legal representative, guardian or similar person and
the term "Permitted Transferee" shall include any transferee pursuant to a
transfer permitted under the Plan and Section 3.1 hereof.
4.2. Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.
4.3. Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to Whitehall Jewellers,
Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Secretary, and if to the Optionee, to c/o the Company. All notices, requests or
other communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by facsimile
with confirmation of receipt, (c) by mailing in the United States mails to the
last known address of the party entitled thereto or (d) by express courier
service. The notice, request or other communication shall be deemed to be
received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
4.4. Governing Law. This Agreement, the Option and all determinations
made and actions taken pursuant hereto and thereto, to the extent not governed
by the laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.
4.5. Fair Market Value Determinations. If a determination of Fair
Market Value is being made under the Option with respect to a period during
which the Stock is neither quoted on NASDAQ nor quoted or listed on a recognized
quotation service or a national securities exchange, and the Representative (as
hereinafter defined) gives notice that it disagrees with the Committee's
determination of Fair Market Value within ten days following the Optionee's
receipt of written notice of the Committee's determination of Fair Market Value,
the determination of Fair Market Value shall be made by a nationally recognized
investment banking firm acceptable to the Representative and the Committee. If
the Committee and the Representative are unable to agree within five days on the
choice of an investment banking firm to perform the valuation, each of the
Committee and the Representative shall promptly choose one investment banking
firm and the two firms so chosen shall choose a third investment banking firm
which shall alone determine Fair Market Value. If no third independent
investment banking firm can be agreed upon by the first two independent
investment banking firms within fifteen days, such third independent investment
banking firm shall be selected promptly by an arbitrator chosen in accordance
with the rules for commercial arbitration of the American
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Arbitration Association then in effect. The investment banking firm shall submit
its determination of Fair Market Value to the Committee and the Optionee as soon
as reasonably possible, but in no event later than sixty days after the date
such investment banking firm is selected as provided above. The determination of
Fair Market Value by the investment banking firm shall be final and binding on
both the Committee and the Optionee. The Company shall bear all costs and
expenses incurred in connection with the determination by such investment
banking firm of Fair Market Value. The investment banking firm may use whatever
valuation methods it deems relevant or appropriate under the circumstances. Fair
Market Value shall be determined based upon the investment banking firm's
opinion as follows: (i) if such opinion expresses the Fair Market Value in terms
of a range of values, the mean of such range shall be deemed to be Fair Market
Value or (ii) if such opinion expresses Fair Market Value as an absolute number,
such number shall be deemed to be the Fair Market Value. For purposes of this
Section 4.5 the term "Representative" shall mean ▇▇▇▇ ▇▇▇▇▇▇▇▇ until such time
as he is unwilling or unable to so act, at which time a new Representative (who
shall be an individual having an interest under the Option, a similar option
granted under the Plan or any similar agreement with the Company) designated by
a majority of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇▇▇
▇▇▇▇▇▇▇▇▇ (or their legal representatives or permitted transferees, if
applicable) while such persons (or such representatives or transferees) are a
party to (or have succeeded to an interest in) this Option or such a similar
option or agreement.
4.6 Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
WHITEHALL JEWELLERS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President -
Finance and Administration
Accepted this 10th day of
June, 1999.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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