Document:

Exhibit 3.1

Exhibit 10.1

FOOT LOCKER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Amended and Restated as of January 1, 2005)

1. Purpose.

     The purpose of this Plan is to provide supplemental retirement, death and disability benefits to, or in respect of, certain corporate
officers and certain other key employees of the Company and its Affiliates as part of an integrated executive compensation program which is intended to assist the Company and its Affiliates in attracting, motivating and retaining key employees of
superior ability, industry and loyalty. Benefits under this Plan are based on incentive awards relating to Company performance against target goals. This Plan was originally effective for fiscal years of the Company commencing on or after January
28, 1996 and is amended and restated in the current form as of January 1, 2005 to among other things, comply with the requirements of Code Section 409A and the guidance issued thereunder. 

2. Definitions.

     Unless the context requires otherwise, the following words as used in the Plan shall have the meanings ascribed to each below: 

	
     (a)     	
"Account" shall mean an unfunded bookkeeping account maintained for the Participant under the Plan.

	
	 
	
     (b)     	
"Affiliate" shall mean the Company and any entity affiliated with the Company within the meaning of Code Section 414(b) with respect to controlled group of corporations, Code
Section 414(c) with respect to trades or businesses under common control with the Company, Code Section 414(m) with respect to affiliated service groups, and any other entity required to be aggregated with the Company under Section 414(o) of the
Code. No entity shall be treated as an Affiliate for any period during which it is not part of the controlled group, under common control or otherwise required to be aggregated under Code Section 414.

	
	 
	
     (c)     	
"Award" shall mean the total annual incentive award as determined by a percentage of Salary and Bonus, depending upon the Company's actual performance measured against targeted
performance.

	
	 
	
     (d)     	
"Beneficiary" shall mean the individual designated by the Participant, on a form acceptable by the Committee, to receive benefits payable under this Plan in the event of
Participant's death. If no Beneficiary is designated, the Participant's Beneficiary shall be his or her spouse, or if the Participant

	
	 

	 	
is not married or is not survived by a spouse, the Participant's estate.

	
	 
	
     (e)     	
"Board" shall mean the Board of Directors of the Company.

	
	 
	
     (f)     	
"Bonus" shall mean an amount equal to the bonus earned by a Participant for a Plan Year under the Company's Annual Incentive Compensation Plan or such other annual bonus plan or
program that may then be applicable to a Participant and shall exclude any amounts paid pursuant to a severance program or policy of the Employer. Nothing herein guarantees a Bonus payment to a Participant. The determination of a Participant's Bonus shall be governed by the policies of the Employer.

	
	 
	
     (g)     	
"Cause" shall mean (with regard to the Participant's Termination of Employment with the Control Group): (i) with regard to any member of the Control Group or any of such member's
assets or business, the refusal or willful failure by the Participant to substantially perform his or her duties, (ii) with regard to any member of the Control Group or any of such member's assets or business, the Participant's dishonesty, willful
misconduct, misappropriation, breach of fiduciary duty or fraud, or (iii) the Participant's conviction or plea of guilty or nolo contendre of a felony (other than a traffic violation) or any
other crime involving, in the sole discretion of the Committee, moral turpitude.

	
	 
	
     (h)     	
"Change in Control" shall mean the occurrence of any of the following:

	
	 
	 	
          (A) the merger or consolidation of the Company with, or the sale or disposition of all or Substantially All of the Assets of the Company to, any person or entity or group of associated persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the “Exchange Act”)) (a “Person”) other than (a) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving or parent entity) fifty percent (50%) or more of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation; or (b) a merger or capitalization effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly (as
determined under Rule 13d-3 promulgated under the Exchange Act), of securities representing more than the amounts set forth in (B) below;

	
	 
	 	
          (B) the acquisition of direct or indirect beneficial ownership (as determined under Rule 13d-3 promulgated under the Exchange Act), in the aggregate, of securities of the Company representing thirty-five percent (35%) or more of the total combined voting power of the

	
	 

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Company’s then issued and outstanding voting securities by any Person (other than the Company or any of its subsidiaries, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or
any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company) acting in concert; or 
	 
	 	
          (C) during any period of not more than twelve (12) months, individuals who at the beginning of such period constitute the Board, and any new director whose election by the Board or nomination for
election by the Company’s shareholders was approved by a vote of at least two-thirds   (2/3) of the directors then still in office who either were directors  at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof.

	
	 
	
     (i)     	
"Code" shall mean the Internal Revenue Code of 1986, as amended and as hereafter amended from time to time.

	
	 
	
     (j)     	
"Committee" shall mean the Compensation and Management Resources Committee of the Board.

	
	 
	
     (k)     	
"Company" shall mean Foot Locker, Inc., a New York corporation, and any successor by merger, consolidation or transfer of assets.

	
	 
	
     (l)     	
"Competition" shall mean the (i) participating, directly or indirectly, as an individual proprietor, stockholder, officer, employee, director, joint venturer, investor, lender, or
in any capacity whatsoever (within the United States of America, or in any country where any of the Participant's former Employing Members (as defined below) of the Control Group does business) in a business in competition with any business
conducted by any member of the Control Group for, or with regard to, which the Participant worked, or had confidential information with regard to, at any time (the "Employing Member"), provided, however, that such participation shall not include (A)
the mere ownership of not more than one percent (1%) of the total outstanding stock of a publicly held company; (B) the performance of services for any enterprise to the extent such services are not performed, directly or indirectly, for a business
in which any of a Participant's Employing Members of the Control Group is engaged; or (C) any activity engaged in with the prior written approval of the Board or the Committee; or (ii) intentional recruiting, soliciting or inducing, of any employee
or employees of the Control Group to terminate their employment with, or otherwise cease their relationship with the former employing members of the Control Group where such employee or employees do in fact so terminate their employment. If the
restriction set forth in this subsection is found by any court of competent jurisdiction to

	
	 

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be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend over the maximum period of time, range
of activities or geographic area as to which it may be enforceable.

	
	 
	
     (m)     	
"Confidentiality" shall mean a Participant's requirement not to communicate or disclose to any unauthorized person, or use for the Participant's own account, without the prior
written consent of the Board, any proprietary processes, or other confidential information of the Employer concerning their business or affairs, accounts or customers, it being understood, however, that the obligations of this section shall not
apply to the extent that the aforesaid matters (a) are disclosed in circumstances in which the Participant is legally required to do so and the Participant gives the Company prior written notice before doing so, or (b) become generally known to and
available for use by the public other than by the Participant's wrongful act or omission.

	
	 
	
     (n)     	
"Control Group" shall mean the Company and its Affiliates.

	
	 
	
     (o)     	
"Disability" shall mean a medically determinable physical or mental impairment which can be expected to result in the Participant’s death or can be expected to last for a
continuous period of not less than twelve (12) months, for which the Participant is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer.

	
	 
	
     (p)     	
"Employee" shall mean any officer, member of senior management or other key employee employed by an Employer.

	
	 
	
     (q)     	
"Employer" shall mean the Company and any Affiliate which has adopted this Plan.

	
	 
	
     (r)     	
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

	
	 
	
     (s)     	
"Individual Target Award" shall mean the targeted incentive award for a Plan Year specified by the Committee as provided in Section 4 hereof.

	
	 
	
     (t)     	
"Participant" shall mean any Employee determined by the Committee to be eligible to participate in the Plan.

	
	 
	
     (u)     	
"Plan" shall mean the Foot Locker Supplemental Executive Retirement Plan.

	
	 
	
     (v)     	
"Plan Year" shall mean a fiscal year of the Company.

	
	 

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     (w)     	
"Retirement" shall mean separation from service with the Control Group on or after the date that the Participant’s age added together with his or her Years of Service equals or
exceeds the sum of sixty-five (65).

	
	 
	
     (x)     	
"Salary" shall mean a Participant's base monthly cash compensation rate for services paid by the Employer to the Participant at the time of his or her Termination of Employment.
Salary shall not include commissions, bonuses, overtime pay, incentive compensation, amounts paid pursuant to a severance program or policy of the Employer, benefits paid under any qualified plan, any group medical, dental or other welfare benefit
plan, noncash compensation or any other additional compensation, but shall include amounts reduced pursuant to a Participant's salary reduction agreement under Sections 125, 132(f) or 401(k) of the Code (if any) or a nonqualified elective deferred
compensation arrangement to the extent that in each such case the reduction is to base salary.

	
	 
	
     (y)     	
“Section 409A” shall mean Section 409A of the Code including the regulations issued thereunder by the Department of the Treasury.

	
	 
	
     (z)     	
“Specified Employee” shall have the meaning set forth in Section 409A as determined on the date of Termination of Employment in accordance with procedures established by
the Company and consistent with Section 409A.

	
	 
	
     (aa)     	
“Substantially All of the Assets of the Company” shall mean at least 66 percent of the total gross fair market value of the assets of the Company immediately prior to the
acquisition by a non-related third party, determined without regard to any liabilities associated with such assets.

	
	 
	
     (bb)     	
"Termination of Employment" shall mean separation from service with the Control Group in accordance with Section 409A for any reason, including, but not limited to Retirement,
death, Disability, resignation or dismissal with or without Cause; provided, however, that if an Employer is no longer a member of the Control Group and the Participant is transferred in connection with the sale of the assets of an Employer and the
successor assumes the obligations hereunder in accordance with Section 16 hereof, a Termination of Employment shall not occur until termination of employment with the new control group.

	
	 
	
     (cc)     	
"Year of Service" shall mean each twelve (12) consecutive month period commencing on the Employee's date of hire by the Employer and each anniversary thereof in which the Employee
is paid by the Employer for the performance of full-time services as an Employee. For purposes of this section, full-time services shall mean that the Employee is employed for at least thirty (30) hours per week. A Year of Service shall include any
period during which an Employee is not working due to disability, leave

	
	 

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of absence or layoff so long as he or she is being paid by the Employer (other than through any employee benefit plan). A Year of Service also shall include service in any branch of the armed forces of the United States by any
person who is an Employee on the date such service commenced, but only to the extent required by applicable law.

	
	 

3. Eligibility and Participation.

     No person shall be entitled to any Award under this Plan for any Plan Year unless the Committee sets an Individual Target Award for such person for that Plan Year. The Committee may determine those
Employees who shall be Participants at any time and from time to time, in its sole discretion and, at any time, the Committee, subject to the provisions of Section 18, may exclude any Participant from further participation in the Plan. 

4. Individual Target Award.

     For each Participant for each Plan Year, the Committee may specify a targeted incentive award. The Individual Target Award consists of a percentage of Salary and Bonus. Such percentage shall be based
on Company performance against target. Achievement of target shall result in an eight percent (8%) credit to the Participant's Account. Such percentage shall decrease in direct proportion to the percentage of Company performance below target, but
not below four percent (4%), and increase in direct proportion to Company performance above target, but not above twelve percent (12%). Establishment of an Individual Target Award for an Employee for a Plan Year shall not imply or require that the
same level Individual Target Award (if any such award is established by Committee for the relevant Employee) be set for any subsequent Plan Year. 

5. Calculation of Benefit.

     The Award credited on a Participant's behalf, calculated in accordance with Section 4 hereof, shall be credited to the Participant's Account. A Participant's Account shall accrue simple interest at a
rate of six percent (6%) per annum. 

6. Payment. 

     (a) Payment of an Award under the Plan is based on the Company's unfunded obligation to pay. If a Participant incurs a Termination of Employment for Cause, the Participant shall not receive any
payments under this Plan. Subject to the preceding sentence and Sections 6(c), 7 and 8 hereof, payment of an Award shall be made as follows: 

           (i) Retirement. In the event of the Participant’s Retirement, amounts credited to a Participant's Account shall be paid in twelve (12)
quarterly substantially equal installments in arrears on the first day of each calendar quarter commencing as 

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soon as administratively feasible following such Participant’s Retirement. Notwithstanding the foregoing, amounts payable pursuant to this Section 6(a)(i) to a Participant who is a Specified Employee during the first six (6)
months following such Participant’s Retirement shall be delayed during the six (6) month period following such Participant’s Retirement and shall commence to be paid on the first day of the calendar quarter which occurs following such six
(6) month period and the first such payment shall include any quarterly installment delayed due to the foregoing provision. Amounts payable pursuant to this Section 6(a)(i) after the six (6) month period following a Specified Employee’s
Retirement shall be paid as originally scheduled without regard to the six (6) month delay. 

     In the event a Participant becomes
entitled to the payment of an Award under the Plan upon Retirement on or after
August 13, 2007, the Participant shall be entitled to medical and dental insurance
benefits substantially the same as those to which senior executives of the Company
are entitled under the medical and dental plans of the Company applicable to
actively employed senior executives, less any benefits such Participant or his
or her covered dependents may receive from Medicare. The Participant shall be
responsible for the payment of the insurance premiums applicable to actively
employed senior executives, including any subsequent increases in such premiums.
The medical and dental insurance coverage provided for herein shall cease in
the event the Participant engages in Competition during the one-year period following
his Retirement or becomes a participant in a new employer’s medical and
dental plan. 

     No Participant shall be entitled to the benefits described in the preceding paragraph unless (i) the Participant, the Participant’s spouse and other covered dependents, as applicable, were enrolled at the time of the
Participant’s Retirement in the medical and/or dental insurance plan (as applicable) applicable to actively employed senior executives, and (ii) the Participant, the Participant’s spouse and other covered dependents, as applicable, are, as
soon as eligible, enrolled in Medicare, including Part B. 

           (ii) Change in Control. In the event that the Plan is terminated upon a Change in Control as contemplated under Section 18(b)(1) hereof,
amounts credited as of the date of termination of the Plan to the Accounts of all Participants, whether or not in pay status, shall be made in a lump sum in accordance with Section 18(b) hereof and the requirements of Section 409A. For purposes of
this section, the Participants’ Accounts shall include the Individual Target Award for the year in which the Plan termination occurs based on Company performance at target, prorated to the Plan termination date.

           (iii) Other Plan Terminations. In the event that the Plan is terminated for the reasons set forth in Section 18(b)(ii), (iii) or (iv)
hereof, payment shall be made in a lump sum to the Participants in accordance with Section 18(b) hereof and the requirements of Section 409A.

     (b) A Participant shall only be entitled to receive the remainder of any installment payments payable on his or her behalf, if the Participant does not engage in Competition during employment or
during the one (1) year period following his or her 

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Retirement and does not violate his or her obligation with regard to Confidentiality at any time. The remainder of a Participant's installment payments shall be immediately forfeited in the event of the Participant's Competition
during employment or during the one (1) year period following his or her Retirement or violation of his or her obligation with regard to Confidentiality at any time. 

          (c) Solely with respect to 2005, the Committee, in its sole discretion, may select one (or more) Participants who have attained at least age 55 and whose Termination of Employment occurs during 2005
to be eligible to receive payment. All distributions shall be made solely during 2005 and shall be subject to such terms and conditions as the Committee may specify consistent with the requirements of the Plan, Section 409A and Internal Revenue
Service Notice 2005-1 (as permitted by proposed Treasury regulations issued under Section 409A). The Committee shall be permitted to adopt such rules and regulations as it may, in its discretion, deem necessary or desirable to administer the
provisions of this Section 6(c). A Participant who terminates participation in this Plan pursuant to this Section 6(c) shall not be permitted to recommence participation in this Plan. 

7. Death or Disability of a Participant. 

          (a) In the event of the death of a Participant, whether before or after Retirement, the balance, if any, of the Participant's Account shall be paid to the Participant's Beneficiary in a lump sum as
soon as administratively feasible following the Participant's death. 

          (b) In the event of the Disability of a Participant prior to Participant's Retirement, the balance, if any, of the Participant's Account shall be distributed to the Participant in a lump sum as soon
as administratively feasible following the determination of such Disability. 

8. Termination of Employment Before Retirement. 

     Subject to Section 18(c) hereof, in the event a Participant incurs a Termination of Employment prior to his or her Retirement, the Participant shall not receive any payments under this Plan and shall
forfeit his or her right to any benefits hereunder. 

9. Claims Procedure.

     Any claim by a Participant or Beneficiary ("Claimant") with respect to eligibility, participation, contributions, benefits or other aspects of the operation of the Plan shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from time to time for such purpose. If the designated person receiving a claim believes, following consultation with the Chairman of the Committee, that the claim should be
denied, he or she shall notify the Claimant in writing of the denial of the claim within ninety (90) days after his or her receipt thereof (this period may be extended an additional ninety (90) days in special circumstances and, in such event, the
Claimant 

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shall be notified in writing of the extension). Such notice shall (a) set forth the specific reason or reasons for the denial making reference to the pertinent provisions of the Plan or of Plan documents on which the denial is
based, (b) describe any additional material or information necessary to perfect the claim, and explain why such material or information, if any, is necessary, (c) inform the Claimant of his or her right pursuant to this Section 9 to request review
of the decision, and (d) a statement of the Claimant’s right to bring a civil action under Section 502(a) of the ERISA following an adverse determination on review. 

     A Claimant may appeal the denial of a claim by submitting a written request for review to the Committee, within sixty (60) days after the date on which such denial is received. Such period may be
extended by the Committee for good cause shown. The claim will then be reviewed by the Committee. A Claimant or his or her duly authorized representative may (i) upon request and free of charge, be provided with reasonable access to, and copies of,
relevant documents, records and other information relevant to the Claimant’s claim, and (ii) submit written comments, documents, records and other information relating to the claim. The review of the claim determination shall take into account
all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial claim determination. If the Committee deems it appropriate,
it may hold a hearing as to a claim. If a hearing is held, the Claimant shall be entitled to be represented by counsel. The Committee shall decide whether or not to grant the claim within sixty (60) days after receipt of the request for review, but
this period may be extended by the Committee for up to an additional sixty (60) days in special circumstances. Written notice of any such special circumstances shall be sent to the Claimant. The decision on review shall be in writing and shall
include (i) the specific reason or reasons for the decision, with references to the specific Plan provisions on which the determination is based, (ii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant to the claim and (iii) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA. Any claim not decided upon in the required time
period shall be deemed denied. All interpretations, determinations and decisions of the Committee with respect to any claim shall be made in its sole discretion based on the Plan and other relevant documents and shall be final, conclusive and
binding on all persons. 

10. Construction of Plan.

     Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Employer
and the Participants, their Beneficiaries or any other person. Any funds which may be invested under the provisions of this Plan shall continue for all purposes to be part of the general funds of the Employer and no person other than the Employer
shall by virtue of the provisions of this Plan have any interest in such funds. To the extent that any person acquires a right to receive payments from the Employer under this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Employer. If the Company decides to establish any advance 

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accrued reserve on its books against the future expense of benefits payable hereunder, or if the Company is required to fund a trust under this Plan, such reserve or trust shall not under any circumstances be deemed to be an asset
of the Plan. 

11. Minors and Incompetents.

     In the event that the Committee finds that a Participant is unable to care for his or her affairs because of illness or accident, then benefits payable hereunder, unless claim has been made therefor
by a duly appointed guardian, committee, or other legal representative, shall be paid at such time or times as would otherwise be paid to the Participant pursuant to the terms of the Plan to such person or persons as the Committee shall determine in
its sole discretion is or are appropriate and such payment shall be a complete discharge of all liability for any payments or benefits to which such Participant was or would have been otherwise entitled under this Plan. Any payments to a minor from
this Plan may be paid by the Committee in its sole and absolute discretion (a) directly to such minor; (b) to the legal or natural guardian of such minor; or (c) to any other person, whether or not appointed guardian of the minor, who shall have the
care and custody of such minor. The receipt by such individual shall be a complete discharge of all liability under the Plan therefor. 

12. Administration of the Plan.

     The Plan shall be administered by the Committee. The Committee (or its delegate) shall have the exclusive right, power, and authority, in its sole and absolute discretion, to administer, apply and
interpret the Plan and any other Plan documents and to decide all matters arising in connection with the operation or administration of the Plan. Without limiting the generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with respect to the eligibility for, and the amount of, benefits payable under the Plan; (b) to formulate, interpret and apply rules, regulations and policies necessary to
administer the Plan in accordance with its terms; (c) to decide questions, including legal or factual questions, relating to the calculation and payment of benefits under the Plan; (d) to resolve and/or clarify any ambiguities, inconsistencies and
omissions arising under the Plan or other Plan documents; (e) to decide for purposes of paying benefits hereunder, whether, based on the terms of the Plan, a Termination of Employment is for Cause; and (f) except as specifically provided to the
contrary in Section 9, to process and approve or deny benefit claims and rule on any benefit exclusions. All determinations made by the Committee (or any delegate) with respect to any matter arising under the Plan and any other Plan documents shall
be final, binding and conclusive on all parties. 

     Decisions of the Committee shall be made by a majority of its members attending a meeting at which a quorum is present (which meeting may be held telephonically) or by written action in accordance
with applicable law. All decisions of the Committee on any question concerning the interpretation and administration of the Plan shall be final, conclusive and binding upon all parties. 

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     No member of the Committee and no officer, director or employee of the Company or any other Affiliate shall be liable for any action or inaction with respect to his or her functions under the Plan
unless such action or inaction is adjudged to be due to gross negligence, willful misconduct or fraud. Further, no such person shall be personally liable merely by virtue of any instrument executed by him or her or on his or her behalf in connection
with the Plan. 

     Each Employer shall indemnify, to the full extent permitted by law and its Certificate of Incorporation and By-laws (but only to the extent not covered by insurance) its officers and directors (and
any employee involved in carrying out the functions of such Employer under the Plan) and each member of the Committee against any expenses, including amounts paid in settlement of a liability, which are reasonably incurred in connection with any
legal action to which such person is a party by reason of his or her duties or responsibilities with respect to the Plan (other than as a Participant), except with regard to matters as to which he or she shall be adjudged in such action to be liable
for gross negligence, willful misconduct or fraud in the performance of his or her duties. 

13. Limitation of Rights.

     Nothing contained herein shall
be construed as conferring upon an Employee the right to continue in the employ
of the Employer as a Participant or in any other capacity or to interfere with
the  Employer's right to discharge him or her at any time for any reason whatsoever. 

14. Payment Not Salary.

     Any amounts payable under this Plan shall not be deemed Salary or other compensation to the Employee for the purposes of computing benefits to which he or she may be entitled under any pension plan or
other arrangement of the Employer for the benefit of its Employees. 

15. Withholding.

     The Employer shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred
by reason of payments or accrual pursuant to this Plan. In lieu thereof, the Employer shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Employer to the Participant upon such terms and
conditions as the Committee may prescribe. 

16. Assignment.

     This Plan shall be binding upon and inure to the benefit of the Employer, its successors and assigns and the Participants and their heirs, executors, administrators and legal representatives. In
addition to any obligations imposed by law upon any successor of the Employer, the Employer shall require any successor (whether direct or indirect, by

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purchase, merger, consolidation or otherwise) to all or substantially all of the business or all or Substantially All of the Assets of the Employer to expressly assume and agree in writing to assume the obligations under this Plan
to the same extent that the Employer would be responsible if no such succession had taken place. In the event that the Employer sells all or Substantially All of the Assets of its business and the acquiror of such assets assumes the obligations
hereunder, the Employer shall be released from any liability imposed herein and shall have no obligation to provide any benefits payable hereunder. 

17. Non-Alienation of Benefits.

     The benefits payable under this Plan shall not be subject to alienation, transfer, assignment, garnishment, execution or levy of any kind, and any attempt to cause any benefits to be so subjected
shall not be recognized. 

18. Amendment or Termination of Plan. 

     (a) The Board may amend this plan from time to time in any respect.

     (b) The Board may terminate the Plan in its entirety and make payment to the Participants following termination of the Plan only in the following circumstances:

          (i) within the thirty (30) days preceding or the twelve (12) months following a Change in Control of the Company, to the extent required by Section 409A, if and only if all other nonqualified deferred compensation plans (as
determined under Section 409A) maintained by the Employer are terminated and that all participants under such plans are required to receive all amounts deferred under such plans within twelve (12) months of the date of termination of the plans;

          (ii) no earlier than twelve (12) months and no later than twenty-four (24) months following termination of the Plan, to the extent required by Section 409A, if and only if all other nonqualified deferred compensation plans (as
determined under Section 409A) maintained by the Employer are terminated and no such plan is adopted within the three (3) year period following such plan termination; 

          (iii) within the twelve (12) month period following a bankruptcy court’s approval of a petition for bankruptcy under Chapter 11 of the United States Bankruptcy Code, subject to the requirements of Section 409A; or

          (iv) such other event permitted under Section 409A.

In the event of termination of the Plan under this Section 18(b), the Employer shall distribute to each Participant the balance of his or her Account as of the date of termination in accordance with the provisions of Section
6(a)(ii) or (iii) hereof and shall have no further obligation hereunder.

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     (c) At any time other than the circumstances set out in Section 18(b)(i)-(iv) above, the Board may terminate the Plan. In such event, the Accounts of any Participant who is eligible for Retirement, as defined herein, at the time
of the Plan's termination shall be frozen and, following such Participant’s Termination of Employment, the balance of his or her Account shall be distributed to him or her in accordance with the payment provisions of Section 6(a)(i) hereof, and
the Employer shall have no further obligation hereunder. In the event of the Plan's termination under this Section 18(c), the Account of any Participant who is not eligible for Retirement at the time of the Plan’s termination shall be
forfeited, and such Participant shall have no rights hereunder.

     (d) At any time, the Board may exclude any Participant from further participation in the Plan. Any such action by the Board with respect to the Plan shall be binding on the Employer and Employee. Except as otherwise specifically
provided herein, in no event shall any termination, amendment or change of the Plan reduce the Account balance hereunder accrued through the date of such termination, amendment or change, based on service and compensation through such date of
termination, amendment or change. 

19. Non-Exclusivity.

     The adoption of the Plan by the Employer shall not be construed as creating any limitations on the power of the Employer to adopt such other supplemental retirement income arrangements as it deems
desirable, and such arrangements may be either generally applicable or limited in application. 

20. Severability.

     Should any provisions of the Plan be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions of the Plan unless such determination shall render impossible or
impracticable the functioning of the Plan, and in such case, an appropriate provision or provisions shall be adopted so that the Plan may continue to function properly. If it is determined by a court of competent jurisdiction in any state that any
restriction herein with respect to Competition or Confidentiality is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended
by the court to render it enforceable to the maximum extent permitted by applicable state law. 

21. Section 409A.

     The Plan is intended to comply with Section 409A and all provisions hereof shall be construed in a manner to so comply.

13

22. Headings and Captions.

     The headings and captions herein are provided for reference and convenience only. They shall not be considered part of the Plan and shall not be employed in the construction of the Plan. 

23. Governing Law.

     This Plan is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees of the Employer within the meaning of Section
201(2) of ERISA and shall be construed, interpreted and governed by ERISA. To the extent not governed by ERISA, this Plan shall be governed by the laws of the State of New York (without regard to conflict of law provisions). 

14c49868_8k.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

          This
     Employment Agreement (this “Agreement”)
is entered into as of August 14, 2007, between Whitehall Jewelers, Inc., a Delaware
corporation (the
“Company”),
 and Peter Michielutti (the “Executive”). 

          WHEREAS, the
Company desires to employ the Executive to serve as Executive Vice President,
Chief Financial Officer and Treasurer for the Company, and the Executive desires
to be employed by the Company, upon the terms and subject to the conditions set
forth herein. 

          NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein, the Company and the Executive hereby agree as follows: 

          1.   Employment. Subject to Executive’s
satisfactory completion of all of the Company’s pre-employment requirements, the
Company hereby agrees to employ the Executive and the Executive hereby agrees to
be employed by the Company upon the terms and subject to the conditions
contained in this Agreement. The term of employment of the Executive by the
Company pursuant to this Agreement shall commence on or before August 20, 2007
(the actual first day of work being the “Effective Date”) and shall end on the
first annual anniversary of the Effective Date (such date or any successive date
to which the term thereof has been extended pursuant to the succeeding sentence,
the “Expiration Date”). Such term shall be automatically extended for successive
one-year periods unless either the Executive or the Company gives notice that
such term shall not be so extended no later than 60 days prior to the then
current Expiration Date or unless earlier terminated pursuant to Section 4
hereof. The term of employment as prescribed in the preceding sentence is
hereinafter called the “Employment
Period”. From and after the end of the
Employment Period, unless earlier terminated hereunder, the Executive’s
employment with the Company shall be at will, not for any specified term and
without any payment guarantees, and either the Executive or the Company may
terminate the employment relationship at any time. 

          2.   Position and Duties.

          (a) The
Company shall employ the Executive during the Employment Period as its Executive
Vice President, Chief Financial Officer and Treasurer. During the Employment
Period, the Executive shall perform faithfully and loyally and to the best of
the Executive’s abilities the duties assigned to the Executive hereunder and
shall devote the Executive’s full business time, attention and effort to the
affairs of the Company and its subsidiaries and shall use the Executive’s
reasonable best efforts to promote the interests of the Company and its
subsidiaries. The Executive may engage in charitable, civic or community
activities and, with the prior approval of the Board of Directors (the
“Board”),
which may be granted or denied in its sole discretion, may serve as a director
(but not a lead director) of any other business corporation, provided that such
activities or service do not interfere with the Executive’s duties hereunder or
violate the terms of any of the covenants contained in Sections 6, 7 or 8
hereof. 

          (b)
Responsibilities. Subject to the powers, authority and responsibilities vested in the
Board, the Chairman of the Board and duly constituted committees of the Board,
the President and the Chief Executive Officer, the Executive shall have the
authority and responsibility as the Executive Vice President, Chief Financial
Officer and Treasurer. The Executive shall also perform such other duties (not
inconsistent with the position of Executive Vice President, Chief Financial
Officer and Treasurer) on behalf of the Company and its subsidiaries as may from
time to be authorized by the Board, the Chairman, the Chief Executive

Officer or the President. Executive will
not issue any communication, written or otherwise, that disparages, criticizes
or otherwise reflects adversely or encourages any adverse action against the
Company or the individual or entities that are owners, stockholders, agents,
directors, officers, employees, representatives, attorneys, divisions, parents,
subsidiaries, predecessors, successors or assigns of the Company. 

          3.   Compensation.

           (a) Base
Salary. During the Employment Period, the Company shall pay to the Executive a base salary at the
rate of not less than $325,000 per annum (“Base Salary”), payable in accordance
with the Company’s executive payroll policy. Such Base Salary shall be reviewed
from time to time and shall be subject to such increases, if any, as determined
by the Compensation Committee of the Board (the “Compensation Committee”).

           
  (b) Annual
Bonus. The Executive shall be eligible to
participate in the Company’s Management Cash Bonus Plan or other annual cash
bonus plan made available to elected officers of the Company generally
(“Annual Bonus”) with target bonus opportunity which shall be no less than 35% of
annual base salary (contingent upon the Company meeting certain performance
criteria set by the Board of Directors (the “Board”)) provided, that, the minimum Annual Bonus that
Executive shall receive for the fiscal year ended February 2, 2008 shall be no
less than $30,000.

          (c)
  Equity-Based Compensation. Pursuant to the terms of the BTHC VII, Inc.
  (“BTHC”) equity compensation plan (the “Plan”), the Company
  shall arrange for a grant to the Executive (the date of grant being referred
  to herein as the “Grant
   Date”), of 500,000 stock options (the “Options”)
  of common stock of BTHC (“Common
  Stock”) with a per share exercise price equal
  to the fair market of the Common Stock as of the Grant Date. Such grant to
  be  memorialized in an option agreement (the “Option Agreement”)
  to be executed  between BTHC and the Executive. The fair market value
  of a share of  Common Stock shall be determined in accordance with the terms
  of the Plan;  provided, however, such determination shall be made in a manner
  consistent with  Section 409A of the Internal Revenue Code, as amended (the “Code”),
  and official  guidance thereunder (“FMV”).

          (1)
Vesting.
The Options shall vest over a forty-eight (48) month period with the first
one-eighth (1/8) of the Options vesting on the six (6) month anniversary of the
Grant Date and an additional one-forty-eighth (1/48) of the Options vesting on
each subsequent monthly anniversary of the Grant Date (until such Options are
fully vested); provided, that, the Executive is continuously employed with the
Company during such vesting period. Notwithstanding the foregoing sentence, if
the Executive is employed by the Company immediately prior to the consummation
of a Change of Control (as defined below), all unvested Options shall
immediately vest upon consummation of such Change of Control. At such time as
the Executive’s employment with the Company terminates, all unvested Options
shall cease to be subject to the aforementioned vesting schedule (and the
accelerated vesting schedule set forth in Section 3(c)(4) and shall be forfeited
by the Executive. Upon termination of the Executive’s employment with the
Company or the voluntary resignation by the Executive, any vested Options shall
remain exercisable for a period of ninety (90) days after the date of
termination or resignation, except in the case of a termination for Cause (as
defined in Section 4(c)(ii)), in which event any vested and
unexercised

Options shall immediately be forfeited and
canceled upon the Executive’s termination for Cause. Notwithstanding anything to
the contrary, upon any termination of the Executive’s employment or any
resignation by Executive, any and all unvested Options shall immediately be
forfeited and canceled.

          (2)
  Repurchase.
  Any shares of stock held by the Executive from the exercise of the Options
  shall  be re-purchasable by the Company or BTHC, at its option, within the
  120-day period following the termination of, or the voluntary resignation by
  the Executive of, the Executive’s employment, at (i) 80% of the FMV on
  the date of repurchase if such termination is for Cause or due to the Executive’s
  voluntary resignation of  his employment with the Company, or (ii) 100% of
  FMV on the date of repurchase  if such termination is for a reason other than
  for Cause or the Executive’s
  voluntary resignation of his employment with the Company. In the case of clauses
   (i) and (ii) above, repurchases shall be made according to the following terms:
   the repurchase price will be paid by the Company or BTHC over a 2-year period
  in equal installments on the first day of each calendar quarter following the
  repurchase  closing; provided, however, payments may be deferred to the extent
  required to  avoid any penalty tax imposed under Section 409A of the Code.
  The Options shall  be subject to such other terms and conditions as are set
  forth in the Option  Agreement.

         (3)
  Change in Control. A “Change of Control” shall mean
  (i) any Person (as such term is used for purposes of Section 13(d) or 14(d)
  of the Securities Exchange Act of 1934, as amended, (or any successor section
  thereto)) or group, other than affiliates of Prentice Capital Management, LP,
  becomes the beneficial owner of 50% or more of the outstanding Common Stock
  of BTHC; (ii) the sale, lease, transfer, conveyance or other disposition in
  one or a series of related transactions, of all or substantially all of the
  assets of BTHC; or (iii) the consummation of: (x) a
   merger, consolidation or reorganization (a “Merger”) as a
   result of which the  individuals and entities who were the respective beneficial
   owners of the Common  Stock of BTHC immediately before such Merger
   do not beneficially own,  immediately after such Merger, directly or indirectly,
   more than 50% of the  Common Stock of BTHC resulting from such Merger
   (or its parent  corporation), or (y) a plan relating to the liquidation of
   BTHC.

In the discretion of the Board or a
    committee thereof, Executive shall be eligible to participate in further equity
    awards commensurate with his position with the Company and on terms thereof
    substantially similar to those of the Company’s other senior
    executives.

          (d)
Other Benefits. During the Employment Period, the Executive shall be entitled to
participate in the Company’s employee benefit plans generally available to
executives of the Company (such benefits being hereinafter referred to as the
“Employee Benefits”). The Executive shall be entitled to take time off for vacation or
illness in accordance with the Company’s policy for executives and to receive
all other fringe benefits as are from time to time made generally available to
executives of the Company

          (e)
Temporary Living Expenses. The Executive shall be entitled to payment of reasonable
hotel or apartment accommodations until Executive’s relocation to the Chicago
metropolitan area (not to exceed 60 days).

          (f)
  Signing Bonus. Within ten (10) business days following the Effective Date, the Company
  shall pay to the Executive a one-time, lump-sum payment in the amount of
  $38,850. In the event Executive voluntarily terminates his employment or is
  terminated for Cause prior to the first anniversary of the Effective Date,
  Executive shall be required to repay a pro-rata portion based on months
  remaining to have been worked in the first year any relocation expenses
  previously paid by the Company.

          (g)
  Expense Reimbursement. During the Employment Period, the Company shall reimburse
  the Executive, in accordance with the Company’s policies and procedures, for all
  proper expenses incurred by the Executive in the performance of the Executive’s
  duties hereunder.

          (h)
  Right to Change Plans. Nothing in this Agreement shall be construed to limit,
  condition or otherwise encumber the rights of the Company to amend, discontinue,
  substitute or maintain any benefit plan, program or perquisite, and no such
  amendment, discontinuance, substitution or maintenance or failure to maintain
  any benefit plan, program or perquisite shall be construed as a breach of this
  Agreement.

          4.   Termination.

          (a)
Death. Upon
the death of the Executive, this Agreement shall automatically terminate and all
rights of the Executive and the Executive’s heirs, executors and administrators
to compensation and other benefits under this Agreement shall cease immediately,
except that the Executive’s heirs, executors or administrators, as the case may
be, shall be entitled to:

          (i) accrued Base Salary through
and including the Executive’s date of death;

          (ii)
other Employee Benefits to
which the Executive was entitled on the date of death in accordance with the
terms of the plans and programs of the Company.

          (b)
Disability.
The Company may, at its option, terminate this Agreement upon written notice to
the Executive if the Executive, because of physical or mental incapacity or
disability, fails to perform the essential functions of the Executive’s
position, with or without reasonable accommodation, required of the Executive
hereunder for a period of six (6) consecutive months or for an aggregate period
of nine (9) months in any 12-month period. Upon such termination, all
obligations of the Company hereunder shall cease immediately, except that the
Executive shall be entitled to:

           (i) accrued
  Base Salary through and including the effective date of the Executive’s
  termination of employment; and 

           (ii) other
Employee Benefits to which the Executive is entitled upon termination of
employment in accordance with the terms of the plans and programs of the
Company. 

          In the event of any dispute regarding the
existence of the Executive’s incapacity or disability hereunder, the matter
shall be resolved by the determination of a physician selected by the Board. The
Executive shall submit to appropriate medical examinations for purposes of such
determination. 

          (c) Cause.

                (i) The Company may, at its
    option, terminate the Executive’semployment under this Agreement for Cause
(as hereinafter defined) upon written notice to the Executive (the
“Cause Notice”). Any such termination for Cause shall be authorized by the Board. The
Cause Notice shall state the action(s) or inaction(s) giving rise to termination
for Cause in reasonable detail. The Executive shall have five (5) business days
after the Cause Notice is given to cure the particular action(s) or inaction(s),
to the extent a cure is possible. If the Executive so effects a cure to the
satisfaction of the Board, in its good faith discretion, the Cause Notice shall
be deemed rescinded and of no force or effect.

                 (ii) As
  used in this Agreement, the term “Cause” shall mean any one or more of
  the following:

                 (A) any
  refusal by the Executive to perform the Executive’s duties under this Agreement
  or to perform specific directives of the Board, the Chairman of the Board or the
  Chief Executive Officer which are consistent with the scope and nature of the
  Executive’s duties and responsibilities as set forth herein;

                 (B) any
  intentional act of fraud, embezzlement or theft by the Executive in connection
  with the Executive’s duties hereunder or in the course of the Executive’s
  employment hereunder or any prior employment, or the Executive’s admission or
  conviction of a felony or a crime involving moral turpitude, fraud,
  embezzlement, theft or misrepresentation;

                 (C) any
  willful malfeasance or willful misconduct of the Executive or any willful act or
  omission by the Executive that is materially injurious to the financial
  condition or business reputation of the Company or any of its subsidiaries or
  affiliates;

                 (D) any
  material violation of a written Company policy by the Executive or Company has
  reasonable and good faith belief that a Company policy has been violated after
  investigation;

                 (E)
        any material breach by the Executive of this
Agreement; or

                  (F) any violation of any statutory or common law duty of loyalty to the
  Company or any of its subsidiaries. 

      Notwithstanding
          the above, the definition of “Cause” in this Section 4(c)(ii) shall not apply to Executive’s
refusal to perform any specific action that would be unlawful. 

           (iii) The
exercise of the right of the Company to terminate this Agreement pursuant to
this Section 4(c) shall not abrogate the rights or remedies of the Company in
respect of the breach giving rise to such termination. 

           (iv) If the
Company terminates the Executive’s employment for Cause, all obligations of the
Company hereunder shall cease, except that the Executive shall be entitled to
the payments and benefits specified in Sections 4(b)(i) and 4(b)(ii) hereof.

          (d) Termination Without Cause; Termination for
     Good Reason by Executive.

          (i) The Company may, at its option, terminate
      the Executive’s employment under this Agreement upon
written notice to the Executive for a reason other than a reason set forth in
Section 4(a), 4(b) or 4(c). Any such termination shall be authorized by the
Board. If the Company terminates the Executive’s employment for any such
reason, all obligations of the Company hereunder shall cease immediately, except
that the Executive shall be entitled to: 

                    (A) the payments and
benefits specified in Sections 4(b)(i) and 4(b)(ii); 

                    (B) the
continuation of payment of amounts equal to the Base
Salary that otherwise would have been  payable hereunder had the Executive’s
employment hereunder not been terminated  pursuant to this Section 4(d) for a
period of 12 months from the date of  termination; and

                    (C)
    retain  any vested and unexercised Options for a period of ninety (90) days following
     the date of termination.

 Notwithstanding Section 4(d)(i)(B), the
    amounts payable to the Executive under such Section 4(d)(i)(B) shall be reduced
     by the amount of salary, bonus or other compensation which the Executive
    receives from a subsequent employer or other employment or engagement during
    the  period of time that amounts are payable to the Executive under such Section
     4(d)(i)(B).

 The Company shall have no obligation to
    provide the payments or benefits in Section 4(d)(i) in the event Executive
    breaches the provisions of Sections 6, 7, or 8. 
    

          (ii) The
Executive may, at Executive’s option, terminate the Executive’s employment under
this Agreement upon written notice to the Company for Good Reason. If the
Executive terminates employment for Good Reason, all obligations of the Company
hereunder shall cease immediately, except that the Executive shall be entitled
to receive the payments and benefits specified in Section 4(d)(i)(A) above and,
provided that the Executive executes a mutual release and non-disparagement
agreement, in form and substance reasonably satisfactory to the Company, the
payments and benefits set forth in Sections 4(d)(i)(B) and (C) above, in each
case on the terms and conditions set forth therein. For purposes hereof, the
term “Good Reason” shall mean the occurrence of any of the following without
Executive’s express written consent that is not cured by the Company within
thirty (30) days following the Company’s receipt of written notice from the
Executive describing the event constituting Good Reason: (A) a
reduction

 in Executive’s Base Salary
    by more than fifteen 15%; or (B) Executive is required to relocate outside
    of Chicago. 

    

  Notwithstanding the forgoing, the amounts payable to the Executive
  under such Section 4(d)(ii) shall be reduced by the amount of salary, bonus
  or other compensation which the Executive receives from a subsequent employer
  during the period of time that amounts are payable to the Executive under
  such Section 4(d)(ii).

  

  The Company shall have no obligation to provide the
  payments or benefits in Section 4(d)(ii) in the event Executive breaches
  the provisions of Sections 6, 7, or 8.
  
    

          (e)
Voluntary Termination. Upon 60 days prior written notice to the Company (or such
shorter period as may be permitted by the Board), the Executive may voluntarily
terminate the Executives employment with the Company for any reason. If the
Executive voluntarily terminates the Executive’s employment pursuant to this
Section 4(e), all obligations of the Company hereunder shall cease immediately,
except that the Executive shall be entitled to the payments specified in
Sections 4(b)(i) and 4(b)(ii) hereof and shall be entitled to retain any vested
and unexercised Options for a period of ninety (90) days following the date of
resignation. 

          (f) Removal from any Boards and Position.
    If the Executive's employment is terminated for any reason under this Agreement,
    he shall be deemed to resign (i) if a member, from the Board or board of
    directors of any subsidiary of the Company or any other board to which he
    has been appointed or nominated by or on behalf of the Company and (ii) from
    any position with the Company or any subsidiary of the Company, including,
    but not limited to, as an officer of the Company and any of its subsidiaries. 

          5.
  Federal and State
  Withholding. The Company shall deduct from the amounts payable to the
  Executive pursuant to this Agreement the amount of all required federal, state
  and local withholding taxes in accordance with the Executive’s Form W-4 on file
  with the Company, and all applicable federal employment taxes. 

          6. Noncompetition; Nonsolicitation.

          (a)
  General.
  The Executive acknowledges that in the course of the Executive’s employment with
  the Company the Executive has and will become familiar with trade secrets and
  other confidential information concerning the Company and its subsidiaries and
  that the Executive’s services will be of special, unique and extraordinary value
  to the Company and its subsidiaries. 

            (b)
  Non-competition. The Executive agrees that during the period of the Executive’s
  employment with the Company, and the period, if any, during which the Executive
  is receiving payments from the Company pursuant to Section 4(d) (the
“Non-competition Period”) the Executive shall not in any manner, directly or
  indirectly, through any person firm or corporation, alone or as a member of a
  partnership or as an officer, director, stockholder, investor or employee of or
  consultant to any other corporation or enterprise or otherwise, engage or be
  engaged, or assist any other person, firm, corporation or enterprise in engaging
  or being engaged in operating retail jewelry stores in North America.

          (c)
Non-solicitation or Hire. During the Employment Period and for a period of twelve (12)
months following the termination of the Executive's employment for
any

reason, the Executive shall not directly
or indirectly, (a) solicit or attempt to solicit or induce any supplier to the
Company or any subsidiary to terminate, reduce or alter negatively its
relationship with the Company or any subsidiary or in any manner interfere with
any agreement or contract between the Company or any subsidiary and such
supplier or (b) solicit or attempt to solicit or induce any employee of the
Company or any of its subsidiaries or any person who was an employee of the
Company or any of its subsidiaries during the twelve (12) month period
immediately prior to the date the Executive's employment terminates (a
“Former Employee”) to terminate such employee's employment relationship with the
Protected Parties (as defined below) in order, in either case, to enter into a
similar relationship with the Executive, or any other person or entity or hire
any employee of the Company or any of its subsidiaries or any Former Employee on
Executive's own behalf or on behalf of any other person or entity. 

          (d)
Property.
The Executive acknowledges that all originals and copies of materials, records
and documents generated by him or coming into his possession during his
employment by the Company or its subsidiaries are the sole property of the
Company and its subsidiaries (“Company
Property”). During the Employment Period, and
at all times thereafter, the Executive shall not remove, or cause to be removed,
from the premises of the Company or its subsidiaries, copies of any record,
file, memorandum, document, computer related information or equipment, or any
other item relating to the business of the Company or its subsidiaries, except
in furtherance of his duties under the Agreement. When the Executive's
employment with the Company terminates, or upon request of the Company at any
time, the Executive shall promptly deliver to the Company all copies of Company
Property in his possession or control. 

          (e)
Reformation. If, at any time of enforcement of this Section 6, a court or an
arbitrator holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court or
arbitrator shall be allowed to revise the restrictions contained herein to cover
the maximum period, scope and area permitted by law. 

          7. Confidentiality.

          (a) During the course of the
      Executive's employment by the Company, the Executive has had and will have access to certain
trade secrets and confidential information relating to the Company and its
subsidiaries (the “Protected
Parties”) which is not readily available from
sources outside the Company. The confidential and proprietary information and
trade secrets of the Protected Parties are among their most valuable assets,
including but not limited to, their customer, supplier and vendor lists,
databases, competitive strategies, computer programs, frameworks, or models,
their marketing programs, their sales, financial, marketing, training and
technical information, their product development (and proprietary product data)
and any other information, whether communicated orally, electronically, in
writing or in other tangible forms concerning how the Protected Parties create,
develop, acquire or maintain their products and marketing plans, target their
potential customers and operate their retail and other businesses. The Protected
Parties invested, and continue to invest, considerable amounts of time and money
in their process, technology, know-how, obtaining and developing the goodwill of
their customers, their other external relationships, their data systems and data
bases, and all the information described above (hereinafter collectively
referred to as “Confidential
Information”), and any misappropriation or
unauthorized disclosure of Confidential Information in any form would
irreparably harm the Protected Parties. The Executive acknowledges that such
Confidential Information constitutes valuable, highly confidential, special and
unique property of the Protected Parties. The Executive shall hold in a
fiduciary capacity for the benefit of the

Protected Parties all Confidential
Information relating to the Protected Parties and their businesses, which shall
have been obtained or prepared by the Executive during the Executive's
employment by the Company or its subsidiaries and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement or acts of third parties in violation
of similar agreements with the Company). Except as required by law or an order
of a court or governmental agency with jurisdiction, the Executive shall not,
during the period the Executive is employed by the Company or its subsidiaries
or at any time thereafter, disclose any Confidential Information, directly or
indirectly, to any person or entity for any reason or purpose whatsoever, nor
shall the Executive use any Confidential Information in any way, except in the
course of the Executive's employment with, and for the benefit of, the Protected
Parties or to enforce any rights or defend any claims hereunder or under any
other agreement to which the Executive is a party, provided that such disclosure
is relevant to the enforcement of such rights or defense of such claims and is
only disclosed in the formal proceedings related thereto provided that the
Executive must give the Company prior written notice and an opportunity to
obtain a protective order. The Executive shall take all reasonable steps to
safeguard the Confidential Information and to protect it against disclosure,
misuse, espionage, loss and theft. The Executive understands and agrees that the
Executive shall acquire no rights to any such Confidential Information.

          (b) All
files, records, documents, drawings, specifications, data, computer programs,
evaluation mechanisms and analytics and similar items relating thereto or to the
Business, as well as all customer lists, specific customer information,
compilations of product research and marketing techniques of the Company and its
subsidiaries, whether prepared by the Executive or otherwise coming into the
Executive's possession, shall remain the exclusive property of the Company and
its subsidiaries, and the Executive shall not remove any such items from the
premises of the Company and its subsidiaries, except in furtherance of the
Executive's duties hereunder.

          (c) As
requested by the Company and at the Company's expense, from time to time and
upon the termination of the Executive's employment with the Company for any
reason, the Executive will promptly deliver to the Company and its subsidiaries
all copies and embodiments, in whatever form, of all Confidential Information in
the Executive's possession or within his control (including, but not limited to,
memoranda, records, notes, plans, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information)
irrespective of the location or form of such material. If requested by the
Company, the Executive will provide the Company with written confirmation that
all such materials have been delivered to the Company as provided herein.

          8.
Inventions. The Executive hereby
assigns to the Company the Executive’s entire right, title and interest in and
to all discoveries and improvements, patentable or otherwise, trade secrets and
ideas, writings and copyrightable material, which may be conceived by the
Executive or developed or acquired by the Executive during the Employment
Period, which may pertain directly or indirectly to the business of the Company
or any of its subsidiaries. The Executive agrees to disclose fully all such
developments to the Company upon its request, which disclosure shall be made in
writing promptly following any such request. The Executive shall, upon the
Company’s request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable the
Company or any of its subsidiaries to file and prosecute applications for, and
to acquire, maintain and enforce, all patents, trademarks and copyrights in all
countries. In accordance with the Illinois Employee Patent Act, 765 ILCS 1060,
the Executive is hereby notified by the Company, and understands,

that the foregoing provisions do not apply
to an invention for which no equipment, supplies, facilities or trade secret
information of the Company was used and which was developed entirely on the
Executive’s own time, unless (i) the invention relates (A) to the business of
the Company or (B) to the Company’s actual or demonstrably anticipated research
and development, or (ii) the invention results from any work performed by the
Executive for the Company. 

          9. Enforcement. The parties hereto agree
that the Company and its subsidiaries would be damaged irreparably in the event
that any provision of Section 6, 7 or 8 of this Agreement were not performed in
accordance with its terms or were otherwise breached and that money damages
would be an inadequate remedy for any such nonperformance or breach.
Accordingly, the Company and its successors and permitted assigns shall be
entitled, in addition to other rights and remedies existing in their favor, to
an injunction or injunctions to prevent any breach or threatened breach of any
of such provisions and to enforce such provisions specifically (without posting
a bond or other security). The Executive agrees that the Executive will submit
to the personal jurisdiction of the courts of the State of Illinois in any
action by the Company to enforce an arbitration award against the Executive or
to obtain interim injunctive or other relief pending an arbitration decision.

          10.
Representations. The Executive represents
and warrants to the Company that (a) the execution, delivery and performance of
this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which the Executive
is bound, (b) the Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
person or entity which would prevent him from entering into and fully performing
his duties, responsibilities and obligations under this Agreement or would
otherwise limit the manner in which he may perform such duties, responsibilities
and obligations, and (c) upon the execution and delivery of this Agreement by
the Company, this Agreement shall be the valid and binding obligation of the
Executive, enforceable in accordance with its terms. 

          11.
Survival. Sections 6, 7, 8, 9 and
12 of this Agreement shall survive and continue in full force and effect in
accordance with their respective terms, notwithstanding any termination of the
Employment Period. 

          12.
Arbitration. Except as otherwise set
forth in Section 9 hereof, any dispute or controversy between the Company and
the Executive, whether arising out of or relating to this Agreement, the breach
of this Agreement, Executive’s employment with the Company or otherwise, shall
be settled by arbitration in Chicago, Illinois administered by the American
Arbitration Association, with any such dispute or controversy being so
administered in accordance with its Commercial Rules then in effect, and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitrator shall have the authority to award
any remedy or relief that a court of competent jurisdiction could order or
grant, including, without limitation, the issuance of an injunction. However,
either party may, without inconsistency with this arbitration provision, apply
to any court having jurisdiction over such dispute or controversy and seek
interim provisional, injunctive or other equitable relief until the arbitration
award is rendered or the controversy is otherwise resolved. Except as necessary
in court proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and the Executive. The Company and the
Executive acknowledge that this Agreement evidences a transaction involving
interstate commerce. Notwithstanding any choice of law provision
included

in this Agreement, the United States
Federal Arbitration Act shall govern the interpretation and enforcement of this
arbitration provision. 

          13.
Notices. All notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed given when (a) delivered personally or by overnight courier to the
following address of the other party hereto (or such other address for such
party as shall be specified by notice given pursuant to this Section) or (b)
sent by facsimile to the following facsimile number of the other party hereto
(or such other facsimile number for such party as shall be specified by notice
given pursuant to this Section), with the confirmatory copy delivered by
overnight courier to the address of such party pursuant to this Section 13:

If to the Company, to:

Whitehall Jewelers, Inc.

125 S. Wacker Drive 
Suite
2600 
Chicago, IL 60606 
Attn: General Counsel 

If to the Executive: 

Peter
Michielutti 
4081 Sunnyside Rd

Edina, Mn 55424 

          14.
Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other provision
of this Agreement or the validity, legality or enforceability of such provision
in any other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. 

          15.
Release. Notwithstanding any other
provision of this Agreement to the contrary, Executive acknowledges and agrees
that any and all payments to which Executive is entitled under Section
4(d)(i)(B) which are described as being subject to this Section 15 are
conditioned upon and subject to Executive’s execution of, and not having revoked
within any applicable revocation period, a general release and wavier in such
reasonable and customary form as shall be prepared by the Company, of all claims
Executive may have against the Company and its directors, officers, subsidiaries
and affiliates, except as to (i) matters covered by provisions of this Agreement
that expressly survive termination of this Agreement and (ii) rights to which
Executive is entitled by virtue of Executive’s participation in the employee
benefit plans, policies and arrangements of the Company. 

          16.
Entire Agreement. This Agreement
constitutes the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related in any manner to the subject matter
hereof.

          17.
Successors and
Assigns. This Agreement shall be enforceable by the Executive and the Executive’s
heirs, executors, administrators and legal representatives, and by the Company
and its successors and assigns. 

          18.
Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Illinois without regard to principles of conflict of laws.

          19.
Amendment and
Waiver. The provisions of this Agreement may be amended or waived only by the
written agreement of the Company and the Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement. 

          20.
Counterparts. This Agreement may be
executed in two counterparts, each of which shall be deemed to be an original
and both of which together shall constitute one and the same instrument.

          21.
Code Section 409A. It is intended that any amounts payable under this Agreement
and the Company’s and the Executive’s exercise of authority or discretion
hereunder shall comply with Section 409A of the Code (including the Treasury
regulations and other published guidance relating thereto) so as to not subject
the Executive to the payment of any interest of additional tax imposed under
Section 409A of the Code. To the extent any amount payable under this Agreement
would trigger the additional tax imposed by Code Section 409A, this Agreement
shall be modified to avoid such additional tax. 

          IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first
written above. 

	 	 	 
	 	 	WHITEHALL JEWELERS,
    INC.
	 	 	 
	 	 	 
	 	By:	/s/ Michael Don

	 	 	 
	 	Title:  	President
	 	 	 
	 	 	 
	 	 	PETER MICHIELUTTI
	 	 	 
	 	 	 
	 	 	/s/ Peter Michielutti

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