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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MARKS BROS. JEWELERS, INC.
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(Name of issuer)
COMMON STOCK, PAR VALUE OF $.001 PER SHARE
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(Title of class of securities)
570698 10 0
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(CUSIP number)
Hugh M. Patinkin
Marks Bros. Jewelers, Inc.
155 North Wacker Drive
Suite 500
Chicago, IL 60606
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(Name, address and telephone number of person authorized to receive notices and
communications)
March 8, 1997
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Note: Six copies of this statement, including all exhibits, should
be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
(Continued on following pages)
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CUSIP NO. 570698 10 0 13D Page 2 of 5 Pages
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1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Hugh M. Patinkin
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
PF/OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e)[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
NUMBER OF
497,812
SHARES ---------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
282,982
OWNED BY ---------------------------------------------------------
9 SOLE DISPOSITIVE POWER
EACH
497,812
REPORTING ---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH
282,982
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
780,794
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.8%
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14 TYPE OF REPORTING PERSON
IN
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CUSIP No. 570698 10 0 13D Page 3 of 6 Pages
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Item 1. Security and Issuer.
The title and class of equity securities to which this
statement relates is the common stock, par value $.001 per share (the "Common
Stock"), of MARKS BROS. JEWELERS, INC., a Delaware corporation (the "Company").
The Company's principal executive offices are located at 155 North Wacker
Drive, Suite 500, Chicago, Illinois 60606.
Item 2. Identity and Background.
Hugh M. Patinkin's business address is Marks Bros. Jewelers,
Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606. Mr. Patinkin
is the Chairman, President and Chief Executive Officer of the Company, which is
the issuer of securities to which this statement relates. The Company is a
specialty retailer of fine jewelry.
Mr. Patinkin has not, during the last five years, (i) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to Federal
or State securities laws or finding any violation with respect to such laws.
Mr. Patinkin is a United States Citizen.
Item 3. Source and Amount of Funds or Other Consideration.
On May 7, 1996, Hugh M. Patinkin was granted a nonqualified
option (the "1996 Option") to purchase 312,835 shares of the Company's Common
Stock under the Company's 1996 Long-Term Incentive Plan. The Option vests
one-quarter each on the first, second, third and fourth anniversaries of the
date of grant. One-quarter of the shares (or 78,208 shares) subject to the
1996 Option will become exercisable on May 7, 1997. With regard to this
"acquisition," no funds are being paid.
Mr. Patinkin was also granted on September 28, 1995 an option
(the "1995 Option") to purchase 228,337 shares of the Company's Common Stock
under the Company's 1995 Executive Incentive Stock Option Plan. The 1995
Option became exercisable with respect to two hundred twenty two thousand two
hundred twenty two (222,222) of the shares subject to the 1995 Option prior to
the date on which the Company registered any of it securities under Section 12
of the Securities Exchange Act of 1934, as amended, 72,800 of which were
exercised before any of the Company's securities were registered. Since the
Company registered its Common Stock in connection with its initial public
offering on May 7, 1996, (i) the 1995 Option became exercisable with respect to
the remaining 6,115 shares of Common Stock subject to the 1995 Option and
(ii) Mr. Patinkin acquired 136,000 shares of Common Stock through the exercise
of a portion of his 1995 Option. Mr. Patinkin purchased the 136,000 shares of
Common Stock with personal funds.
The vesting of the 6,115 shares of Common Stock under the 1995
Option, the exercise of 136,000 shares of Common Stock under the 1995 Option
and the vesting of 78,208 shares of Common Stock under the 1996 Option requires
the filing of this Schedule 13D because taken together, Mr. Patinkin is deemed
to have acquired greater than 2% of the outstanding shares of Common Stock of
the Company during a twelve month period.
<PAGE> 4
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CUSIP No. 570698 10 0 13D Page 4 of 6 Pages
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Item 4. Purpose of Transaction.
Mr. Patinkin acquired beneficial ownership of securities as
described in Item 3 as compensation in his capacity as Chairman, President &
Chief Executive Officer of the Company and he exercised a portion of his
options for general investment purposes.
Item 5. Interest in Securities of the Issuer.
(a) As of March 4, 1997, Mr. Patinkin beneficially owned in
the aggregate 780,794 shares of the Company's Common Stock. Based upon the
number of shares outstanding as of the close of business on March 4, 1997, as
reported by the Company's registrar and transfer agent to be 10,059,142, such
shares constitute approximately 7.8% of the outstanding shares of the Company's
Common Stock.
(b) Mr. Patinkin has sole voting and dispositive power with
respect to 497,812 shares of the Company's Common Stock. Mr. Patinkin shares
voting and dispositive power with Sheila C. Patinkin and Robert Bergman with
respect to 212,035 shares of Common Stock held by the Hugh M. Patinkin 1994
Family Trust U/A/D 11/18/94.
Mr. Patinkin shares voting and dispositive power with Sheila
C. Patinkin with respect to 23,376 shares of Common Stock held by various
trusts for the benefit of his children.
Mr. Patinkin shares voting and dispositive power with Sheila
C. Patinkin and Harold Patinkin with respect to 11,120 shares of Common Stock
held by various trusts for the benefit of his children.
Mr. Patinkin shares voting and dispositive power with Matthew
M. Patinkin and Mark A. Patinkin with respect to 36,451 shares of Common Stock
held by the Patinkin 1994 Grandchildren's Trust U/A/D 11/18/94.
Sheila C. Patinkin is a Physician and practices at Lutheran
General Hospital, Yackman Pavilion, 1675 Dempster Street, Park Ridge, IL
60068; Harold Patinkin is retired and resides at 5000 S. East End, Chicago, IL
60615; Mark A. Patinkin is a journalist for Providence Journal located at 75
Fountain Street, Providence, RI 02902. None of these persons with whom Mr.
Hugh Patinkin shares voting and dispositive power with respect to Common Stock
beneficially owned by him have ever been convicted in a criminal proceeding or
been subject to a civil proceeding as described in Item 2 above. Further, all
of these persons are United States Citizens.
(c) Mr. Patinkin purchased 24,000 shares and 100,000 shares
on 1/6/97 and 1/16/97, respectively, through the exercise of a portion of his
1995 Option.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangement, Understanding or Relationships with Respect to
Securities of the Issuer.
See Item 3.
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CUSIP No. 570698 10 0 13D Page 5 of 6 Pages
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Item 7. Material to be Filed as Exhibits.
Exhibit Number Description
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1 Incentive Stock Option Agreement dated as of September
28, 1995 between Hugh M. Patinkin and the Company.
2 Nonqualified Stock Option Agreement dated as of May 7,
1996 between Hugh M. Patinkin and the Company.
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CUSIP No. 570698 10 0 13D Page 6 of 6 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
March 5, 1997
-------------------------------------
(Date)
/s/ Hugh M. Patinkin
-------------------------------------
(Signature)
Hugh M. Patinkin
-------------------------------------
(Name)
<PAGE> 1
EXHIBIT 99.1
Exhibit A
September 28, 1995
Mr. Hugh Patinkin
c/o Marks Bros. Jewelers, Inc.
155 North Wacker Drive
Chicago, Illinois 60606
Re: Incentive Stock Option
Dear Mr. Patinkin:
Marks Bros. Jewelers, Inc., a Delaware corporation (the "Company"), desires to
grant to you the incentive stock option described below under the following
terms and conditions:
1. Definitions
For purposes of this letter agreement, the following terms shall have the
meanings specified below:
"Affiliate" shall mean with respect to any Person, any other Person
which controls, is controlled by or is under common control with such Person;
provided, however, that a Person shall not be deemed to be an Affiliate of
another Person solely by reason of stock ownership of such Person, by such
Person or of each commonly controlled Person, unless such stock ownership in
each instance exceeds 50%.
"Award Shares" shall mean shares of Common Stock of the class
described in clause (i) of the definition of "Common Stock" below. Award
Shares shall be made available for purposes of this letter agreement from
authorized but unissued, or reacquired, shares of Common Stock. All Award
Shares held by a Participant or former Participant issued pursuant to the Plan
shall be held subject to the terms of the Stockholders Agreement, to the extent
the Participant is a party thereto.
"Cause" shall have the same meaning ascribed to such term in your
Employment Agreement, or if such Employment Agreement shall terminate prior to
the termination of this letter agreement, such meaning shall be deemed
incorporated herein by reference, notwithstanding such termination.
"Change of Control" shall mean any transaction which results in a
change in beneficial ownership of Common Stock of the Company such that the
stockholders of the Company as of the date immediately prior to such
transaction are no longer entitled following consummation of such transaction
to elect a majority of the Board of Directors of the Company (or its successor)
or
<PAGE> 2
otherwise control (through contract or otherwise) the Company or such successor
entity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean any or all of the following: (i) shares of
common stock of the Company, par value $0.001 per share; (ii) shares of Class B
common stock of the Company, par value $1.00 per share; (iii) shares of Class C
common stock of the Company, par value $0.001 per share; (iv) shares of Class D
common stock of the Company, par value $0.001 per share; and (v) any other
shares or capital stock or securities of the Company now or hereafter
authorized having (or convertible into) the right to share in distributions
either of earnings or assets of the Company without limit as to amount.
"Date of Grant" means the date which is designated in Section 2 as the
date of grant of your Incentive Stock Option.
"Disability" -- you will be considered "Disabled" if (i) on account of
physical or mental disability, you no longer are capable of performing the
duties assigned to you under your Employment Agreement and in the opinion of a
qualified physician, such disability is likely to be permanent and continuous,
or (ii) you are otherwise determined to be Disabled in accordance with the
terms of your Employment Agreement, as then in effect. Except as otherwise
provided in your Employment Agreement, if a difference of opinion shall arise
between the Company and you as to whether you are Disabled, such difference
shall be resolved as follows:
(a) You shall be examined at the Company's expense by a physician
selected by the Company and at your expense by a physician selected by you.
(b) If the two physicians shall disagree as to whether you are
"Disabled" in accordance with this definition, that question shall be submitted
to a third physician, who shall be selected by the two physicians.
(c) The medical opinion of the third physician, after examination
of you and consultation with the two other physicians (the expense of such
examination and consultation being shared equally between the Company and you),
shall decide whether you are "Disabled".
"Employment Agreement" means your written employment agreement with
the Company dated September 11, 1992, as such agreement may be amended from
time to time.
"Fair Market Value" is defined in Section 6.
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"Good Reason" shall have the same meaning ascribed to such term in the
Employment Agreement, or if such Employment Agreement shall terminate prior to
the termination of this letter agreement, such meaning shall be deemed
incorporated herein by reference, notwithstanding such termination.
"Incentive Stock Option" means the incentive stock option within the
meaning of Section 422 of the Code granted to you in Section 2.
"Institutional Investor" shall mean, collectively, (i) Continental
Illinois Venture Corporation; (ii) William Blair Venture Partners III Limited
Partnership; (iii) Frontenac Venture V Limited Partnership; and (iv) Harris
Trust and Savings Bank, not individually but solely as Master Trustee for the
Teachers' Retirement System of the State of Illinois.
"Key Employee Group Representative" shall mean Hugh Patinkin, who
shall act as such representative until such time as he is unwilling or unable
to act as the Key Employee Group Representative, at which time a replacement
Key Employee Group Representative (who shall be an individual having an
interest under this letter agreement or any similar agreement with the Company)
shall be designated by a majority of Hugh Patinkin, John Desjardins and Matthew
Patinkin (or their heirs or legal representatives, if applicable) while such
person (or his heirs or legal representatives) is a party to (or has succeeded
to an interest in) this letter agreement or any similar agreement with the
Company.
"Person" shall mean any association, unincorporated organization,
corporation, individual, partnership, sole proprietorship, joint venture,
limited liability corporation, trust, government (including any
instrumentality, department, division, agency or other body thereof) or any
other entity.
"Plan" shall mean the Marks Bros. Jewelers, Inc. Senior Management
Incentive Stock Option Plan, as amended and supplemented from time to time.
"Qualifying Public Offering" shall mean any sale by the Company of
common stock in any underwritten public offering of such stock or securities in
which (i) the investment banking firm acting as lead underwriter thereof is a
nationally recognized investment banking and underwriting firm or a recognized
regional investment banking and underwriting firm, and (ii) aggregate gross
proceeds to the Company and the selling shareholders from such public offering
are not less than $15,000,000.
"Restricted Stock" means Award Shares which are subject to a
substantial risk of forfeiture.
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"Senior Loan Agreement" shall mean: (i) the Restated and Amended
Revolving Credit and Term Loan Agreement dated as of October 31, 1992 by and
among the Company, Citibank, N.A., as agent for the banks thereunder, and the
banks and financial institutions parties thereto, as amended, modified or
supplemented and in effect from time to time; and/or (ii) any loan agreement or
credit agreement entered into by the Company in connection with the
replacement, refinancing or restructuring of the indebtedness of the Company
under the Restated and Amended Revolving Credit and Term Loan Agreement
referred to in clause (i) of this definition.
"Stockholders Agreement" shall mean that certain Amended and Restated
Stockholders Agreement dated as of November 16, 1990, as the same has been or
may be amended, modified or supplemented and in effect from time to time.
"Subordinated Notes" shall mean, as of the date of determination
thereof, any and all outstanding promissory notes of the Company issued
pursuant to: (i) that certain Note and Warrant Purchase Agreement dated as of
November 6, 1989 between the Company and Harris Trust and Savings Bank, not
individually but solely as Master Trustee for the Teachers' Retirement System
of the State of Illinois, as of the same has been or may be amended, modified
or supplemented and in effect from time to time, and that certain Term Loan
Agreement dated as of March 5, 1993 also between the Company and Harris Trust
and Savings Bank, not individually but solely as Master Trustee for the
Teachers' Retirement System of the State of Illinois, as the same has been or
may be amended, modified or supplemented and in effect form time to time;
and/or (ii) any loan agreement or credit agreement entered into by the Company
in connection with the replacement, refinancing or restructuring of the
indebtedness of the Company under either or both of the Note and Warrant
Purchase Agreement or the Term Loan Agreement referred to in clause (i) of this
definition.
"Triggering Event" is defined in Section 6.
2. Incentive Stock Option
(a) Grant of Option. You are hereby granted the option to
purchase 6,446.40 Award Shares, at a purchase price per share of 110% of the
Fair Market Value on the Date of Grant equal to $34.95 (determined by Houlihan
Lokey Howard & Zukin), subject to the terms and conditions of this letter
agreement. The "Date of Grant" shall be the date of this letter agreement.
Your Incentive Stock Option shall expire on September 28, 2000.
(b) Exercisability. After the Date of Grant and prior to the
expiration date, your Incentive Stock Option shall become exercisable to the
maximum extent permitted under paragraph (c) below. Common Stock acquired by
you upon exercise of the Incentive Stock Option shall be Restricted Stock
subject to the provisions of
<PAGE> 5
Section 3, unless the risk of forfeiture has lapsed pursuant to Section 3(c).
(c) Maximum Amount. The aggregate Fair Market Value (determined
as of the Date of Grant) of the shares of Common Stock with respect to which
your Incentive Stock Option or any other incentive stock option under Section
422 of the Code otherwise granted under the Plan (and all other plans of the
Company) becomes exercisable for the first time by you during each calendar
year (including the calendar year which includes the date hereof) shall not
exceed $100,000. To the extent that you do not exercise the Incentive Stock
Option granted to you hereunder in the calendar year (including the calender
year which includes the date hereof) in which such option is exercisable for
the first time for the full $100,000 Fair Market Value of Common Stock
(determined as of the Date of Grant) allowable in such calendar year, such
option shall remain exercisable by you in subsequent calendar years, subject to
the other provisions of this letter agreement, for any such remaining Common
Stock, without regard to the $100,000 annual limitation described in the first
sentence of this paragraph.
(d) Notice of Disposition. You shall give prompt notice to the
Company of any disposition of shares acquired upon exercise of your Incentive
Stock Option if such disposition occurs within either two years after the Date
of Grant or one year after your receipt of such shares.
(e) Payment For Stock. Payment for Award Shares purchased upon
the exercise (in whole or in part) of your Incentive Stock Option shall be made
in cash, in shares of Common Stock (valued at the then Fair Market Value),
which may be shares of Common Stock acquired upon exercise of the Incentive
Stock Option, or by a combination of cash and Common Stock.
(f) Termination of Employment. If your employment terminates for
any reason (including death) such that you are not employed by the Company or
by any corporation which is a parent corporation or a subsidiary corporation
with respect to the Company (as defined in Section 424(e) and (f) of the Code),
the Incentive Stock Option and all rights thereunder may, unless earlier
terminated in accordance with its terms, be exercised by you or such other
person who acquired the right to exercise such option until the following date
and to the following extent:
(i) if termination is due to death, the Incentive Stock
Option may be exercised until the option expiration date to the extent of
one-third of the total number of Award Shares to which you would otherwise have
been entitled;
(ii) if such termination is due to Disability, the
Incentive Stock Option may be exercised up to one year after the date your
employment terminates to the extent of one-third of the
<PAGE> 6
total number of Award Shares to which you would otherwise have been entitled;
(iii) if your employment terminates for any reason other than
death, Disability or a reason set forth in paragraph (iv) below, or if the
Company does not continue your employment on terms substantially similar to
those in effect on the date of Grant for any reason whatsoever (including
expiration of the Employment Agreement in accordance with its terms, but
specifically excluding termination for Cause), the Incentive Stock Option may
be exercised up to three months after the date your employment terminates to
the extent of the total number of Award Shares to which you would otherwise
have been entitled;
(iv) if your employment is terminated due to voluntary
termination without Good Reason prior to the expiration of your Employment
Agreement or involuntary termination for Cause, the Incentive Stock Option
shall be terminated immediately;
but in all events the Incentive Stock Option shall terminate on the expiration
date. In the event your employment terminates for a reason set forth in
paragraph (iii) above and the Incentive Stock Option is not exercised within
three months of such date, such option shall no longer qualify as an incentive
stock option under Section 422 of the Code, but shall continue to be
exercisable until its expiration date to the extent provided in paragraph (iii)
above.
If the Incentive Stock Option may be exercised by you after your
employment is terminated, such option may be exercised in whole or in part.
In the event of your death, the person or persons to whom your
Incentive Stock Option shall have been transferred by will or the laws of
descent and distribution shall have the right (during the appropriate period
determined under this section) to exercise such option in whole or in part.
3. Restricted Stock
(a) Vesting. You shall be fully vested in Restricted Stock
acquired pursuant to Section 2(b), subject to the risk of forfeiture described
in paragraphs (b) and (d) below.
(b) Forfeiture Upon Termination of Employment. If your employment
with the Company terminates prior to a Triggering Event, you shall forfeit
Restricted Stock acquired pursuant to Section 2(b) to the following extent:
(i) If your employment terminates due to death or
Disability, you, your personal representative or heirs shall forfeit two-thirds
of such shares of Restricted Stock, and you
<PAGE> 7
shall remain vested in the remaining shares acquired pursuant to Section 2(b).
(ii) If (A) your employment is terminated by the Company
for reasons not constituting Cause, (B) the Company does not continue your
employment on terms substantially similar to those in effect on the Date of
Grant for any reason whatsoever (including expiration of the Employment
Agreement in accordance with its terms, but specifically excluding termination
for Cause), or (C) you terminate employment with the Company for Good Reason,
you shall remain vested in all of such shares of Restricted Stock, and no such
shares shall be forfeited.
(iii) If your employment is terminated due to voluntary
termination without Good Reason prior to the expiration of the term of your
Employment Agreement, or because your employment is terminated by the Company
for Cause, all such shares of Restricted Stock shall thereupon be forfeited.
(c) Lapse Upon Triggering Event. Upon the occurrence of a
Triggering Event prior to May 31, 2001, the risk of forfeiture provided in
paragraph (b) above on restricted Stock acquired pursuant to Section 2(b) shall
lapse to the following extent:
(i) if the Fair Market Value determined as of the date of
such Triggering Event is less than $282, the number of shares with respect to
which the risk of forfeiture shall lapse shall be zero;
(ii) if the Fair Market Value determined as of the date of
such Triggering Event is $282 or more, but less than $465, the number of shares
with respect to which the risk of forfeiture shall lapse shall be equal to the
total number of such shares of Restricted Stock or the result of the following
formula, whichever is less:
(A) 2,865 (the "Base Award"), plus
(B) the difference between 6,446.40 (the "Maximum
Award") and the Base Award, multiplied by a fraction, the numerator of which is
the difference between the Fair Market Value and $282, and the denominator of
which is $183, less
(C) the number of such shares of Restricted
Stock, if any, with respect to which the risk of forfeiture previously lapsed
in accordance with this section on account of the occurrence of Triggering
Events described in Section 5(d) or (e);
(iii) if the Fair Market Value determined as of the date of
such Triggering Event is $465 or more, the number of shares with respect to
which the risk of forfeiture shall lapse shall be equal
<PAGE> 8
to the total number of such shares of Restricted Stock or the result of the
following formula, whichever is less:
(A) the Maximum Award, less
(B) the number of such shares of Restricted
Stock, if any, with respect to which the risk of forfeiture previously lapsed
in accordance with this section on account of the occurrence of Triggering
Events described in Section 5(d) or (e).
Prior to May 31, 2001, each time a Triggering Event occurs under
Section 5(d) or (e), the Fair Market Value shall be determined and the risk of
forfeiture shall lapse with respect to additional shares, if any, acquired
pursuant to Section 2(b) if required under this Section. If, upon a later
Triggering Event, the Fair Market Value is less than it was upon a prior
Triggering Event, you shall not be required to return or forfeit any shares
with respect to which the risk of forfeiture lapsed under this Section 3(c).
(d) Forfeiture on May 31, 2001. Any Restricted Stock, held by you
on May 31, 2001, for which the risk of forfeiture has not lapsed pursuant to
Section 3(c) above, shall be forfeited.
(e) Transfer to the Company. Any Restricted Stock forfeited shall
automatically be transferred to, and be required by, the Company in return for
the amount paid for such Restricted Stock under Section 2(e) hereof.
(f) Delivery. All Restricted Stock shall be issued to you as soon
as reasonably practicable, but in no event later than 15 days, after the date
acquired hereunder.
4. Antidilution
The number of Award Shares granted hereunder shall be adjusted from time to
time as provided in this Section 4. In the event of (a) any reorganization,
recapitalization, stock split, stock combination or reverse stock split with
respect to Common Stock; (b) any dividend or other distribution with respect to
Common Stock payable in shares of Common Stock or securities convertible into
shares of Common Stock or any non-cash distributions or dividend with respect
to shares of Common Stock; or (c) any other event similar to the events
described in clauses (a) and (b) above but to which such clauses are not
strictly applicable, the number and type of Award Shares granted hereunder
shall be equitably adjusted.
5. Triggering Event
A "Triggering Event" is any of the following events:
<PAGE> 9
(a) Any liquidation of the Company or any consolidation or merger
of the Company with or into any other Person, or any similar transaction
(regardless of the consideration received by the Company's shareholders in such
transaction);
(b) a sale or other disposition, in one or a series of
transactions, of all or substantially all of the assets of the Company to any
Person;
(c) a Qualifying Public Offering;
(d) the sale or other disposition, in one or a series of
transactions, of 50% or more of the Common Stock held in the aggregate by the
Institutional Investors as of the Date of Grant, which also results in the
transfer by each Institutional Investor of 50% or more of the shares of Common
Stock held by such Institutional Investor as of the Date of Grant, provided,
however, that for purposes of determining a Triggering Event under this
paragraph (d), sales or other transfers of shares to other Institutional
Investors shall be disregarded; and
(e) the sale or other disposition, in one or a series of
transactions, of 50% or more of the Common Stock held in the aggregate by the
Institutional Investors as of any date immediately following a Triggering Event
occurring under paragraph (d) above or this paragraph (e), which also results
in the transfer by each Institutional Investor of 50% or more of the shares of
Common Stock held by such Institutional Investor as of the day immediately
following such Triggering Event, provided, however, that for purposes of
determining a Triggering Event under this paragraph (e), sales or other
transfers of shares to other Institutional Investors shall be disregarded.
Notwithstanding anything to the contrary herein contained, a Triggering Event
shall not be deemed to have occurred under paragraph (a) above in the event of
(i) a merger or other similar transaction (a "Transaction") in which the
shareholders of the Company immediately prior to the Transaction receive voting
securities of the surviving entity in such Transaction enabling them to elect a
majority of the Board of Directors of such surviving entity or otherwise
control (by contract or otherwise) the election of a majority of the Board of
Directors of such surviving entity, or (ii) any other transaction, the
principal purpose of which is related to tax, internal, or administrative
considerations and which does not result in a Change of Control of the Company.
6. Fair Market Value
(a) "Fair Market Value" shall mean an amount equal to:
<PAGE> 10
(i) the Market Value of the Company (determined in
accordance with this section), divided by
(ii) the number of shares of Common Stock outstanding as
of the date of such determination (excluding both (a) shares of Common Stock
issuable upon conversion of those certain Zero Coupon Notes referred to in that
certain Restated and Amended Revolving Credit and Term Loan Agreement dated as
of October 31, 1992 by and among the Company, Citibank N.A., as agent for the
banks thereunder, and the banks and financial institutions which are parties
thereto, unless and until conversion thereof into shares of Common Stock and
and until conversion thereof into shares of Common Stock, and (b) shares of
Common Stock issued or issuable (I) under any incentive stock option granted
under the Plan or any other incentive stock option (including incentive stock
options granted under the Marks Bros. Jewelers, Inc. 1995 Incentive Stock
Option Plan) or (II) as restricted Common Stock that is nontransferable or
subject to a substantial risk of forfeiture under Code Section 83). Fair
Market Value shall be determined without regard to the restrictions contained
in Sections 2(b) and 3(b).
(b) Intentionally omitted.
(c) The "Market Value of the Company" on any date other than the
date of a Triggering Event shall be an amount equal to the aggregate fair value
of the Company to its stockholders determined as of such date (i) as agreed to
by you and the Company; or (ii) if there is no such agreement, then as
determined by an independent appraiser acceptable to you and the Company.
(d) The "Market Value of the Company" on the date of a Triggering
Event shall be an amount equal to the aggregate fair value of the Company to
its stockholders determined as of such date, taking into account the facts of
such Triggering Event, as further described below in this Section 6. Any such
determination made pursuant to a sale or disposition of assets by the Company
shall include appropriate adjustments for any liabilities of the Company which
are not assumed by the purchaser (including, without limitation, liabilities
for taxes and liabilities then outstanding under the Senior Loan Agreement
and/or under the Subordinated Notes). With respect to any Triggering Event
involving a transaction in which any consideration received by the Company or
any of its stockholders is property (other than cash), the value of such
property shall be the fair market value thereof as of the date immediately
prior to the occurrence of such Triggering Event, as determined in the same
manner as Market Value of the Company.
(e) When determining Market Value of the Company, the Company and
the Key Employee Group Representatives shall first attempt to mutually agree on
the Market Value of the Company. If the Company and the Key Employee Group
Representative are unable to agree on the Market Value of the Company within 15
days following the
<PAGE> 11
occurrence of the Triggering Event, the determination of the Market Value of
the Company shall be made by a nationally recognized investment banking firm
acceptable to both the Company and the Key Employee Group Representative. If
the Company and the Key Employee Group Representative are unable to agree on
the choice of investment banking firm to perform the valuation within 30 days
following the date of the Triggering Event, each of the Company and the Key
Employee Group 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 the Market Value of the Company. If no third independent
investment banking firm can be agreed upon by the first two independent
investment banking firms within 45 days following such Triggering Event, 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 Arbitration Association then in effect.
The investment banking firm shall submit its determination of the
Market Value of the Company to the Company and the Key Employee Group
Representative as soon as reasonably possible, but in no event later than 60
days after the date such investment banking firm is selected as provided above.
The determination of the Market Value of the Company by the investment banking
firm shall be final and binding on both the Company and all Participants. The
Company shall bear all costs and expenses incurred in connection with the
determination by such investment banking firm of the Market Value of the
Company. Except to the extent any valuation methods are set forth in the Plan,
the investment banking firm may use whatever valuation methods it deems
relevant or appropriate under the circumstances.
(f) The Market Value of the Company shall be determined based upon
the independent investment banking firm's opinion as follows:
(i) if such opinion expresses the Market Value of the
Company in terms of a range of values, the mean of such range shall be deemed
to be the Market Value of the Company; or
(ii) if such opinion expresses the Market Value of the
Company as an absolute number, such number shall be deemed to be the Market
Value of the Company.
Notwithstanding anything to the contrary herein contained, if, at the time of a
Triggering Event the Common Stock is actively traded on a public market, the
Fair Market Value shall equal the Current Market Price (defined below) of a
share of Common Stock.
The "Current Market Price" of a share of Common Stock shall mean, if
shares of Common Stock are listed or admitted to trading on any exchange or
quoted through the National Association of
<PAGE> 12
Securities Dealers Automated Quotation Systems or any similar organization, the
average of the daily closing prices per share of the Common Stock for the ten
consecutive trading days immediately preceding the day as of which Current
Market Price is being determined. The closing price for each day shall be the
last sale price regular way or, in case no sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case on the
New York Stock Exchange, or if shares of the Common Stock are not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the shares are listed or admitted for trading, or
if the shares are not so listed or admitted to trading, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ or through a
similar organization if NASDAQ is no longer reporting such information.
(g) If the Triggering Event requiring determination of the Market
Value of the Company is a Qualifying Public Offering, the Market Value of the
Company upon such Triggering Event shall be equal to the product of (i) the
total number of shares of Common Stock multiplied by (ii) the mean of the
so-called "range" of offering prices set forth on the cover page of the
preliminary prospectus filed with the Securities and Exchange Commission for
such Qualifying Public Offering.
(h) Notwithstanding anything to the contrary herein contained, if
a Triggering Event occurs under Section 5(d) or (e) Fair Market Value
determined in connection with such Triggering Event shall be equal to the
weighted average of the purchase price per share received by the Institutional
Investors pursuant to such Triggering Event.
7. Miscellaneous Provisions
(a) Assignment and Transfer. Your Incentive Stock Option shall
not be transferable other than by will or the laws of descent and distributions
and it may be exercised or otherwise realized, during your lifetime, only by
you or by your guardian or legal representative.
(b) Employment and Stockholder Status. This letter agreement does
not constitute a contract of employment, and does not give you the right to be
retained in the employ of the Company. The terms of this letter agreement
shall not confer upon you any rights as a stockholder of the Company prior to
the date on which you exercise your Incentive Stock Option.
(c) Successors. This letter agreement shall be binding upon and
inure to the benefit of the Company, its successors and
<PAGE> 13
assigns, you, your estate, heirs and legal representatives. For purposes of
the foregoing, successors to the Company shall include any Affiliate of the
Company to which all or substantially all of the assets of the Company are sold
or otherwise transferred.
(d) Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the United States of America and, to the extent not
inconsistent therewith, by the laws of the State of Illinois.
(e) Section 83(b) Election. You may file an election with the
Internal Revenue Service under Section 83(b) of the Code with respect to
Restricted Stock within 30 days after exercise of your Incentive Stock Option
with respect to such Restricted Stock.
8. Notice of Certain Events
The Company shall give you (i) at least 15 days' prior written notice of any
date on which the books of the Company shall close or a record shall be taken
for any dividend or distribution to be made on, or subscription rights to be
issued in respect of, shares of Common Stock of the Company, or for determining
rights to vote in respect of any reorganization, reclassification,
consolidation, merger, sale of assets, dissolution, liquidation or winding up
or involving the Company, or any other proposed transaction which would result
in a Triggering Event hereunder (each of the foregoing being hereinafter
referred to as a "Significant Transaction") and (ii) at least 15 days' prior
written notice of the closing date of such Significant Transaction or the date
when the same shall take place, as the case may be. Notwithstanding anything
to the contrary herein contained, at your option, any Award Shares to be issued
to you in respect of a Triggering Event shall be issued not later than the
closing date of the sale or other transaction which is deemed the Triggering
Event, it being understood that you may, to the extent he is otherwise
entitled, participate in such transaction as if you held such shares prior to
the closing date.
9. Termination of 1993 Incentive Stock Compensation Plan.
You and the Company hereby agree that all of your rights under the
Incentive Stock Compensation Plan of the Company which was originally effective
as of September 8, 1993 are hereby terminated as of the effective date of this
agreement.
<PAGE> 14
If you agree with the terms set forth in this letter agreement, please
signify your agreement by signing below where indicated.
Sincerely,
MARKS BROS. JEWELERS, INC.
By: /s/ Rodney Goldstein
---------------------------
Its:
--------------------------
ACCEPTED AND AGREED as
of the date set forth above:
/s/ Hugh Patinkin
- -----------------------------
<PAGE> 1
Exhibit 99.2
MARKS BROS. JEWELERS, INC.
STOCK OPTION AGREEMENT
FOR EMPLOYEES
Marks Bros. Jewelers, Inc., a Delaware corporation (the
"Company"), hereby grants to Hugh M. Patinkin (the "Optionee") as of May 7,
1996 (the "Option Date"), pursuant to the provisions of the Marks Bros.
Jewelers, Inc. 1996 Long-Term Incentive Plan (the "Plan"), a non-qualified
option to purchase from the Company (the "Option") 312,835 shares of its Common
Stock, $.001 par value ("Stock"), at the price of $14.00 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. Option Subject to Acceptance of Agreement. 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. (a) The Option shall become
exercisable (i) on the first anniversary of the Option Date with respect to
one-fourth of the number of shares of Stock subject to the Option on the Option
Date, (ii) on the second anniversary of the Option Date with respect to an
additional one-fourth of the number of shares of Stock subject to the Option on
the Option Date, (iii) on the third anniversary of the Option Date with respect
to an additional one-fourth of the number of shares of Stock subject to the
Option on the Option Date, (iv) on the fourth anniversary of the Option Date
with respect to the remaining one-fourth of the shares of Stock subject to the
Option on the Option Date and (v) as otherwise provided herein or pursuant to
any acceleration provisions of the Plan. Notwithstanding the foregoing the
Option shall become fully exercisable, to the extent not so already
exercisable, upon (x) any termination of Optionee's employment with the Company
unless such termination of employment constitutes a "Nonqualifying
Termination," as such term is defined in Optionee's Severance Agreement with
the Company dated May 7, 1996 (the "Severance Agreement"), or (y) upon a
"Change in Control" as that term is defined in the Severance Agreement (a
"Change in Control").
(b) 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
<PAGE> 2
the Optionee's Legal Representative or Permitted Transferees until and
including the earliest 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.
(c) If the Optionee's employment by the Company terminates by
reason of death or Disability, the Option shall be exercisable only to the
extent it is exercisable on the date of death and shall become 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 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 earliest 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.
(d) 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.
(e) 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 terminated
by the Company for 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 earliest
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.
(f) Upon a termination of the Optionee's employment with the
Company, unless such termination constitutes a Nonqualifying Termination under
the Severance Agreement (a "Nonqualifying Termination") the Option shall be
fully exercisable until the earlier 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.
(g) If the Optionee dies during the period set forth in
Section 2.2(b) 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 2.2(c) following termination of employment by
reason of Disability, or if the Optionee dies during the period set forth in
Section 2.2(e) following termination of employment for any reason other than
retirement on or after age 65 other than for
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<PAGE> 3
Good Reason, Disability or termination by the Company for Cause, 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 earliest to
occur of (i) the date which is one year after the date of death and (ii) the
Expiration Date.
2.3 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.
2.4 Termination of Option. (a) In no event may the
Option be exercised after it terminates as set forth in this Section 2.4. The
Option shall terminate, to the extent not exercised pursuant to Section 2.3 or
earlier terminated pursuant to Section 2.2, 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
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<PAGE> 4
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) mark 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 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
-4-
<PAGE> 5
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.
(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
-5-
<PAGE> 6
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 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
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<PAGE> 7
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. Designation as Nonqualified Stock Option. The Option
is hereby designated as not constituting an "incentive stock option" within
meaning of section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"); this Agreement shall be interpreted and treated consistently with such
designation.
4.2. 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 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.
4.3. 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
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<PAGE> 8
the Optionee, acquire any rights hereunder in accordance with this Agreement or
the Plan.
4.4. Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the Company,
to Marks Bros. Jewelers, Inc., 155 North Wacker Drive, Suite 500, Chicago,
Illinois 60606, Attention: Secretary, and if to the Optionee, to Hugh M.
Patinkin, Marks Bros. Jewelers, Inc., 155 North Wacker Drive, Suite 500,
Chicago, Illinois 60606. 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.
4.5. 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.
4.6. 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
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
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<PAGE> 9
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 4.6 the term "Representative" shall mean
Hugh Patinkin 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 Hugh Patinkin, John Desjardins,
Matthew Patinkin, and Lynn Eisenheim (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.
4.7 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.
MARKS BROS. JEWELERS, INC.
By: /s/ John R. Desjardins
----------------------
Name: John R. Desjardins
Title: Executive Vice
President, Finance &
Administration
Accepted this 7th day of May, 1996
/s/ Hugh M. Patinkin
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Optionee
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