Document:

<PAGE>   1
                                                                    EXHIBIT 10.1

                       EMPLOYMENT AND SEVERANCE AGREEMENT

         THIS AGREEMENT is entered into as of the 24th day of January, 2000 by
and between Whitehall Jewellers, Inc., a Delaware corporation, and Jon Browne
("Executive").

                               W I T N E S S E T H

         WHEREAS, the Company desires to employ the Executive as an Executive
Vice President and the Executive desires to accept such employment, upon the
conditions set forth herein;

         WHEREAS, in this capacity Executive will be a key employee of the
Company and his services and knowledge are valuable to the Company;

         WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to secure Executive's
services, and to encourage Executive's full attention and dedication to the
Company, the Board has authorized the Company to enter into this Agreement.

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

         1. Definitions. As used in this Agreement, the following terms shall
have the respective meanings set forth below:

         (a) "Board" means the Board of Directors of the Company.

         (b) "Cause means (1) the commission by Executive of a felony involving
moral turpitude or (2) any material breach of any statutory or common law duty
to the Company or any subsidiary involving wilful malfeasance.

         (c) "Change in Control" means:

         (1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial
ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act,
of 25% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of

<PAGE>   2

a conversion or exchange privilege in respect of outstanding convertible or
exchangeable securities), (B) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (C) any acquisition by an Exempt Person, or (D) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation involving the Company, if, immediately after such reorganization,
merger or consolidation, each of the conditions described in clauses (i), (ii)
and (iii) of subsection (3) of this Section (1)(c) shall be satisfied;

         (2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of the
Company subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed to have
been a member of the Incumbent Board; and provided further, that no individual
who was initially elected as a director of the Company as a result of an actual
or threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board shall be deemed to have been a member of the Incumbent
Board;

         (3) approval by the stockholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined voting
power of the then outstanding securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation and in substantially the same
proportions relative to each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled by the
Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 25%
or more of the then outstanding shares of common stock of such corporation or
25% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or

         (4) approval by the stockholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or

                                       2

<PAGE>   3

substantially all of the assets of the Company other than to a corporation with
respect to which, immediately after such sale or other disposition, (A) more
than 60% of the then outstanding shares of common stock thereof and more than
60% of the combined voting power of the then outstanding securities thereof
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such sale or other disposition and in substantially the same
proportions relative to each other as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person (other
than the Company, any employee benefit plan (or related trust) sponsored or
maintained by the Company or such corporation (or any corporation controlled by
the Company) and any Person which beneficially owned, immediately prior to such
sale or other disposition, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 25% or more of
the then outstanding shares of common stock thereof or 25% or more of the
combined voting power of the then outstanding securities thereof entitled to
vote generally in the election of directors and (C) at least a majority of the
members of the board of directors thereof were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition.

         (d) "Code" means the Internal Revenue Code of 1986, as amended.

         (e) "Company" means Whitehall Jewellers, Inc., a Delaware corporation.

         (f) "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or Executive, as the case may be, to the other, delivered
pursuant to Section 12 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.

         (g) "Exempt Person" means each of Hugh M. Patinkin, John R. Desjardins,
Matthew M. Patinkin and any Affiliate (as such term is defined in Rule 12b-1
under the Securities Exchange Act of 1934, as in effect on the date hereof,
"Affiliate") thereof.

         (h) "Good Reason" means, without Executive's express written consent,
the occurrence of any of the following events:

              (1) any of (i) the assignment to Executive of any duties
     materially lower in responsibility than Executive's responsibilities with
     the Company as of the date Executive commences employment with the Company
     or, if a Change in Control has occurred, immediately prior to such Change
     in Control, (ii) a change in Executive's title or office as "Executive Vice
     President" (other than additions thereto) or in Executive's reporting
     responsibilities with the Company as in effect on the date of this
     Agreement or, if a Change in Control has occurred, immediately prior to
     such Change in Control or (iii) any removal or involuntary termination of
     Executive from the Company otherwise than as expressly permitted by this
     Agreement or any failure to re-elect Executive to any position with the
     Company held by Executive as of the commencement of Executive's

                                       3

<PAGE>   4

     employment or, if a Change of Control has occurred, immediately prior to
     such Change in Control;

              (2) a reduction by the Company in Executive's rate of annual base
     salary as in effect on the date of this Agreement or, if a Change in
     Control has occurred, immediately prior to such Change in Control, or as
     the same may be increased from time to time thereafter;

              (3) any requirement of the Company that Executive (i) be based
     anywhere other than at the facility where the Executive is located on the
     date of this Agreement (or a new headquarters facility within a 30-mile
     radius of the Company's current headquarters) or (ii) travel on Company
     business to an extent substantially more burdensome than the travel
     obligations of Executive as of the commencement of Executive's employment
     or, if a Change of Control has occurred, immediately prior to such Change
     in Control;

              (4) the failure of the Company to (i) continue in effect any
     employee benefit plan or compensation plan in which Executive is
     participating as of the commencement of Executive's employment or (or as of
     the expiration of any applicable waiting period), if a Change in Control
     has occurred, prior to such Change in Control, unless Executive is
     permitted to participate in other plans providing Executive with
     substantially comparable benefits in the aggregate, or the taking of any
     action by the Company which would adversely affect Executive's
     participation in or materially reduce Executive's benefits under any such
     plan, (ii) provide Executive and Executive's dependents welfare benefits
     (including, without limitation, medical, prescription, dental, disability,
     salary continuance, employee life, group life, accidental death and travel
     accident insurance plans and programs) in accordance with the most
     favorable plans, practices, programs and policies of the Company and its
     affiliated companies in effect for Executive as of the commencement of
     Executive's employment (or as of the expiration of any applicable waiting
     period) or, if a Change in Control has occurred, prior to such Change in
     Control or, or if more favorable to Executive, as in effect generally at
     any time thereafter with respect to other peer executives of the Company
     and its affiliated companies, (iii) provide fringe benefits in accordance
     with the most favorable plans, practices, programs and policies of the
     Company and its affiliated companies in effect for Executive as of the
     commencement of Executive's employment (or as of the expiration of any
     applicable waiting period) or, if a Change in Control has occurred, prior
     to such Change in Control or, if more favorable to Executive, as in effect
     generally at any time thereafter with respect to other peer executives of
     the Company and its affiliated companies, (iv) provide an office or offices
     of a size and with furnishings and other appointments, together with
     personal secretarial and other assistance, at least equal to the most
     favorable of the foregoing provided to Executive by the Company and its
     affiliated companies as of the commencement of Executive's employment or,
     if a Change in Control has occurred, prior to such Change in Control or, if
     more favorable to Executive, as provided generally at any time thereafter
     with respect to other peer executives of the Company and its affiliated
     companies, (v) provide Executive with paid vacation (with respect to which
     there shall be no waiting period) in accordance with the most favorable
     plans, policies, programs and practices of the Company and its affiliated
     companies as in

                                       4

<PAGE>   5

     effect for Executive as of the commencement of Executive's employment or,
     if a Change in Control has occurred, prior to such Change in Control or, if
     more favorable to Executive, as in effect generally at any time thereafter
     with respect to other peer executives of the Company and its affiliated
     companies, or (vi) reimburse Executive promptly for all reasonable
     employment expenses incurred by Executive in accordance with the most
     favorable policies, practices and procedures of the Company and its
     affiliated companies in effect for Executive as of the commencement of
     Executive's employment or, if a Change in Control has occurred, prior to
     such Change in Control, or if more favorable to Executive, as in effect
     generally at any time thereafter with respect to other peer executives of
     the Company and its affiliated companies; or

              (5) the failure of the Company to obtain the assumption agreement
     from any successor as contemplated in Section 11(b).

         For purposes of this Agreement, any good faith determination of Good
Reason made by Executive shall be conclusive; provided, however, that an
isolated, insubstantial and inadvertent action taken in good faith and which is
remedied by the Company promptly after receipt of notice thereof given by
Executive shall not constitute Good Reason.

         (i) "Nonqualifying Termination" means a termination of Executive's
employment (1) by the Company for Cause, (2) by Executive for any reason other
than a Good Reason, (3) as a result of Executive's death or (4) by the Company
due to Executive's absence from his duties with the Company on a full-time basis
for at least 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness; provided, however, that a termination of Executive's
employment for any reason whatsoever during the "Window Period" (hereinafter
defined) shall not constitute a Nonqualifying Termination.

         (j) "Termination Period" means the period of time beginning with the
date hereof and ending on the earliest to occur of (1) Executive's death and (2)
three years following a Change in Control.

         (k) "Window Period" means the 30-day period commencing six months after
the date of a Change in Control.

         2. Position; Responsibilities. The Company shall employ Executive
initially as an Executive Vice President -- commencing January 24, 2000 (the
"Commencement Date"). Executive shall perform such executive and administrative
duties as the chief executive officer of the Company (the "Company CEO") or
Board may assign to Executive from time to time. While an employee of the
Company Executive shall perform faithfully the duties assigned Executive to the
best of Executive's abilities and devote Executive's full and undivided business
time and attention to the transaction of the Company's business and not engage
in any other business activities except with the approval of the Company CEO.
The Company or Executive may terminate Executive's employment at any time
provided that the other provisions of this agreement are complied with.

                                       5

<PAGE>   6

         3.   Compensation; Options. (a) Base Salary. As compensation for
Executive's services hereunder, the Company shall pay to Executive base salary
at an annual rate of $220,000 or such higher salary as may be established by the
Company from time to time.

         (b)  Bonus. Executive shall be entitled to participate in the Company's
Management Bonus Plan or other bonus plan made available to elected officers of
the Company generally.

         (c)  Benefits. Executive shall be entitled to all fringe benefits made
available to elected officers of the Company generally (currently including
vacation days, health benefits, life insurance coverage, automobile benefits and
reimbursement of expenses) from time to time. In addition, if the Executive is
subject to a "waiting period" with respect to any welfare benefits applicable to
Executive or Executive's dependents, the Company will reimburse Executive for
premiums paid by Executive for health insurance during such waiting period to
the extent that the Company would have reimbursed or paid for premiums under the
Company's welfare benefit plans if no waiting period had applied.

         (d)  Options. Executive shall be granted stock options under one or
more of the Company's stock option plans effective as of the Commencement Date
for 50,000 shares of the Company's common stock at an exercise price per share
equal to the average of the high and low transaction prices of a share of such
common stock on the New York Stock Exchange on the Commencement Date (the
"Exercise Price"). Such options (the "Options") shall be issued pursuant to the
stock option agreement attached hereto as Exhibit A. The Options shall be
incentive stock options for purposes of Section 422 of the Code, to the extent
permitted by law and as provided in the stock option agreement covering such
options. All of the Options other than those that are incentive stock options
shall be nonqualified stock options.

         4.   Payments Upon Termination of Employment.

         (a)  If during the Termination Period the employment of Executive shall
terminate, other than by reason of a Nonqualifying Termination, then the Company
shall pay to Executive (or Executive's beneficiary or estate) within 30 days
following the Date of Termination, as compensation for services rendered to the
Company:

              (1) a lump sum cash amount equal to the sum of (i) Executive's
     full annual base salary from the Company and its affiliated companies
     through the Date of Termination, to the extent not theretofore paid, (ii)
     Executive's annual bonus in an amount at least equal to the higher of (x)
     one-half of the maximum bonus the Executive could earn during the fiscal
     year during which such Change in Control occurs and (y) the average of the
     Executive's annual bonus (annualized for any fiscal year consisting of less
     than 12 full months) with respect to which bonus paid or payable, including
     by reason of any deferral, to Executive by the Company and its affiliated
     companies in respect of the two fiscal years of the Company (or such
     portion thereof during which Executive performed services for the Company
     if Executive shall have been employed by the Company for less than such two
     fiscal year period) immediately preceding the fiscal year in which the
     Change in Control occurs, multiplied by a fraction, the numerator of which
     is the number of days in the fiscal year in which the Change in Control
     occurs through

                                       6

<PAGE>   7

     the Date of Termination and the denominator of which is 365 or 366, as
     applicable, and (iii) any compensation previously deferred by Executive
     (together with any interest and earnings thereon) and any accrued vacation
     pay, in each case to the extent not theretofore paid; plus

              (2) a lump-sum cash amount (subject to any applicable payroll or
     other taxes required to be withheld pursuant to Section 6) in an amount
     equal to (i) 2.5 times (1.0 times if a Change in Control has not occurred)
     Executive's highest annual base salary from the Company and its affiliated
     companies in effect during the 12-month period prior to the Date of
     Termination plus (ii) 2.5 times ([1.0 times if a Change in Control has not
     occurred) Executive's highest annualized (for any fiscal year consisting of
     less than 12 full months or with respect to which Executive has been
     employed by the Company for less than 12 full months), bonus paid or
     payable, including by reason of any deferral, to Executive by the Company
     and its affiliated companies in respect of the five fiscal years of the
     Company (or such portion thereof during which Executive performed services
     for the Company if Executive shall have been employed by the Company for
     less than such five fiscal year period) immediately preceding the fiscal
     year in which the Change in Control occurs; provided however, that any
     amount paid pursuant to this Section 4(a)(2) shall be paid in lieu of any
     other amount of severance relating to salary or bonus continuation to be
     received by Executive upon termination of employment of Executive under any
     severance plan, policy or arrangement of the Company.

         (b) For a period of 2.5 years (12 months if a Change in Control has not
occurred) commencing on the Date of Termination, the Company shall continue to
keep in full force and effect all policies of medical, accident, disability and
life insurance with respect to Executive and his dependents with the same level
of coverage, upon the same terms and otherwise to the same extent as such
policies shall have been in effect immediately prior to the Date of Termination
or, if more favorable to Executive, as provided generally with respect to other
peer executives of the Company and its affiliated companies, and the Company and
Executive shall share the costs of the continuation of such insurance coverage
in the same proportion as such costs were shared immediately prior to the Date
of Termination.

         (c) If during the Termination Period the employment of Executive shall
terminate by reason of a Nonqualifying Termination, then the Company shall pay
to Executive within 30 days following the Date of Termination, a cash amount
equal to the sum of (1) Executive's full annual base salary from the Company
through the Date of Termination, to the extent not theretofore paid and (2) any
compensation previously deferred by Executive (together with any interest and
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid.

         5. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment, benefit or distribution by the Company or its affiliated
companies to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any successor provision, or any interest or
penalties are incurred by Executive

                                       7

<PAGE>   8

with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

         (b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
public accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive shall appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 5, shall be paid by the Company to Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made, including subsequent interest, taxes and penalties ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5(c) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.

         (c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30-day period following the date
on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:

                                       8

<PAGE>   9

         (1) give the Company any information reasonably requested by the
Company relating to such claim,

         (2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

         (3) cooperate with the Company in good faith in order effectively to
contest such claim, and

         (4) permit the Company to participate in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 5(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and provided
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

         (d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 5(c), Executive becomes entitled to receive, and
receives, any refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section 5(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an amount advanced by the Company pursuant to Section 5(c), a determination is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and

                                       9

<PAGE>   10
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

         6.  Withholding Taxes. The Company may withhold from all payments due
to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.

         7.  Reimbursement of Expenses. (a) If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company (which shall be deemed to include, without limitation, issues
relating to Executive's stock options) or involving the failure or refusal of
the Company to perform fully in accordance with the terms hereof, the Company
shall reimburse Executive, on a current basis, for all legal fees and expenses,
if any, incurred by Executive in connection with such contest or dispute,
together with interest at a rate equal to the base rate of The First National
Bank of Boston from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for such fees and
expenses through the date of payment thereof; provided, however, that in the
event the resolution of any such contest or dispute includes a finding denying,
in total, Executive's claims in such contest or dispute, Executive shall be
required to reimburse the Company, over a period of 12 months from the date of
such resolution, for all sums advanced to Executive pursuant to this Section 7;
provided, further, that no such reimbursement shall be required if Executive had
a reasonable basis for the position taken by Executive with respect to such
claims.

         (b) The Company shall reimburse Executive for reasonable legal fees and
expenses incurred by Executive for the review and/or negotiation by legal
counsel of this Agreement.

         8.  Intentionally Omitted.

         9.  Scope of Agreement. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its subsidiaries.

         10. Directors and Officers Liability Insurance; Indemnification. The
Company agrees that, notwithstanding a Termination of Executive's employment
with the Company, the Company shall, for at least three years after the Date of
Termination, use all reasonable efforts to have Executive included as a named
insured or otherwise covered for actions or failures to act by Executive in his
capacity as a director or officer of the Company to at least the same extent as
other executive officers or directors, as the case may be, of the Company under
any directors and officers liability insurance policies maintained by the
Company; provided that the additional cost of providing coverage with a
retroactive date including Executive's period of service or with an extended
reporting period or a combination of both does not materially increase the cost
of the Company's directors and officers insurance. The Company agrees that it
will not alter the indemnification provisions in its charter or by-laws so as to
give Executive less protection thereunder with respect to periods during which
Executive serves or served the Company as an executive officer or other employee
as is afforded other executive officers or peer employees, as the case may be,
with respect to periods during which they serve the Company.

                                       10

<PAGE>   11

         11. Successors; Binding Agreement.

         (a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company is or is not the surviving or
resulting corporation or as a result of any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.

         (b) The Company agrees that concurrently with any merger, consolidation
or transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder. Failure of the Company to obtain such
assumption prior to the effectiveness of any such merger, consolidation or
transfer of assets shall be a breach of this Agreement and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control other than by reason of
a Nonqualifying Termination. For purposes of implementing the foregoing, the
date on which any such merger, consolidation or transfer becomes effective shall
be deemed the Date of Termination.

         (c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is so
appointed, to Executive's estate.

         12. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage prepaid,
addressed (1) if to the Executive, to Jon Browne, 2322 Maple Avenue, Northbrook,
Illinois 60062, and if to the Company, to Whitehall Jewellers, Inc., 155 N.
Wacker Drive, Chicago, Illinois 60606, attention: Secretary, or (2) to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

         (b) A written notice of Executive's Date of Termination by the Company
or Executive, as the case may be, to the other, shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than 15 days after the giving of such notice). The failure by Executive or
the Company to set forth in such notice any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
Executive or the Company hereunder or preclude Executive or the

                                       11

<PAGE>   12

Company from asserting such fact or circumstance in enforcing Executive's or the
Company's rights hereunder.

         13. Full Settlement; Resolution of Disputes. (a) The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any of the provisions of this
Agreement and, such amounts shall not be reduced whether or not Executive
obtains other employment.

         (b) If there shall be any dispute between the Company and Executive in
the event of any termination of Executive's employment (which shall be deemed to
include, without limitation, issues relating to Executive's options), then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause, that the
determination by Executive of the existence of Good Reason was not made in good
faith, or that the Company is not otherwise obligated to pay any amount or
provide any benefit to Executive and his dependents or other beneficiaries, as
the case may be, under paragraphs (a) and (b) of Section 4, the Company shall
pay all amounts, and provide all benefits, to Executive and his dependents or
other beneficiaries, as the case may be, that the Company would be required to
pay or provide pursuant to paragraphs (a) and (b) of Section 4 as though such
termination were by the Company without Cause or by Executive with Good Reason;
provided, however, that the Company shall not be required to pay any disputed
amounts pursuant to this paragraph except upon receipt of an undertaking by or
on behalf of Executive to repay all such amounts to which Executive is
ultimately adjudged by such court not to be entitled.

         14. Governing Law; Validity. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.

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

         16. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including, without limitation, the right of Executive to terminate employment
for Good Reason, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement. The rights of, and benefits
payable to, Executive, his estate or his beneficiaries pursuant to this
Agreement are in addition to any rights of, or benefits payable to, Executive,
his estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company.

                                       12

<PAGE>   13
         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.

                                   WHITEHALL JEWELLERS, INC.

                                   By:
                                        ----------------------------------------
                                             Hugh M. Patinkin
                                             Chairman, President and
                                             Chief Executive Officer

                                   By:
                                        ----------------------------------------
                                          Jon Browne

                                       13<PAGE>   1
                                                                    EXHIBIT 10.2

                            WHITEHALL JEWELLERS, INC.

                        INCENTIVE STOCK OPTION AGREEMENT

                                  FOR EMPLOYEES

         Whitehall Jewellers, Inc., a Delaware corporation (the "Company"),
hereby grants to Jon Browne (the "Optionee") as of January 24, 2000 (the "Option
Date"), pursuant to the provisions of the Whitehall Jewellers, Inc. 1997
Long-Term Incentive Plan (the "Plan"), an option to purchase from the Company
(the "Option") 50,000 shares of its Common Stock, $.001 par value ("Stock"), at
the price of $26.625 per share upon and subject to the terms and conditions set
forth below. References to employment by the Company shall include employment by
a subsidiary of the Company. Capitalized terms not defined herein shall have the
meanings specified in the Plan.

         1. Designation as Incentive Stock Option and Option Subject to
Acceptance of Agreement. The Option is intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). To the extent the Option is exercised pursuant to
its terms after the period set forth in Section 422(a) of the Code or exceeds
the limitation set forth in Section 422(d) of the Code or otherwise does not
meet the requirements for an incentive stock option under Section 422 of the
Code, the Option shall not be treated as an incentive stock option under such
Section 422. The Option shall be null and void unless the Optionee shall accept
this Agreement by executing it in the space provided below and returning such
original execution copy to the Company.

         2. Time and Manner of Exercise of Option.

         2.1. Maximum Term of Option. In no event may the Option be exercised,
in whole or in part, after the tenth anniversary of the Option Date (the
"Expiration Date").

         2.2. Exercise of Option During Employment. (a) Except as otherwise
provided in this Section 2.2, Section 2.3 or pursuant to any acceleration
provisions of the Plan, the Option shall become exercisable on the ninth
anniversary of the Option Date.

         (b) The Option shall become exercisable prior to the ninth anniversary
of the Option Date to the extent the Company satisfies annual performance goals
established by Committee prior to the beginning of each of the fiscal years of
the Company ending January 31, 2001, January 31, 2002 and January 31, 2003.

              (i) If the Company's level of performance for the fiscal year of
     the Company ending January 31, 2001 is at least 90 percent of the target
     level of performance designated by the Committee for such year, then the
     Option shall become exercisable, as of the date the Committee determines
     the actual level of performance for such year, with respect to one-sixth of
     the number of shares

<PAGE>   2

     initially subject to the Option, multiplied by the Applicable Percentage,
     as defined below.

              (ii) If the Company's cumulative level of performance for the
     fiscal years of the Company ending January 31, 2001 and January 31, 2002 is
     at least 90 percent of the cumulative target levels of performance
     designated by the Committee for such years, then the Option shall become
     exercisable, as of the date the Committee determines the actual cumulative
     level of performance for such years, with respect to the excess of one-half
     of the number of shares initially subject to the Option over the number of
     the shares with respect to which the Option became exercisable pursuant to
     clause (i), multiplied by the Applicable Percentage.

              (iii) If the Company's cumulative level of performance for the
     fiscal years of the Company ending January 31, 2001, January 31, 2002 and
     January 31, 2003 is at least 90 percent of the cumulative target levels of
     performance designated by the Committee for such years, then the Option
     shall become exercisable, as of the date the Committee determines the
     actual cumulative level of performance for such years, with respect to the
     excess of the full number of shares initially subject to the Option over
     the number of shares with respect to which the Option became exercisable
     pursuant to clauses (i) and (ii), multiplied by the Applicable Percentage.

The "Applicable Percentage" for purposes of this Section 2.2(b) shall be the
percentage corresponding to the level of the Company's performance for the
applicable year as a percentage of the target level of performance for such
year, as set forth in the following table:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
         Company Performance as a
         Percentage of
         Target Level of Performance                                  Applicable Percentage
-------------------------------------------------------------------------------------------------
<S>                                                                   <C>
less than 90%                                                                  0%
-------------------------------------------------------------------------------------------------
                  90%                                                          50%
-------------------------------------------------------------------------------------------------
                  91%                                                          55%
-------------------------------------------------------------------------------------------------
                  92%                                                          60%
-------------------------------------------------------------------------------------------------
                  93%                                                          65%
-------------------------------------------------------------------------------------------------
                  94%                                                          70%
-------------------------------------------------------------------------------------------------
                  95%                                                          75%
-------------------------------------------------------------------------------------------------
                  96%                                                          80%
-------------------------------------------------------------------------------------------------
                  97%                                                          85%
-------------------------------------------------------------------------------------------------
                  98%                                                          90%
-------------------------------------------------------------------------------------------------
                  99%                                                          95%
-------------------------------------------------------------------------------------------------
                  100% or more                                                 100%
-------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>   3

         (c) Notwithstanding the foregoing, the Option shall become fully
exercisable, to the extent not so already exercisable, upon a "Change in
Control," as that term is defined in the Optionee's Employment and Severance
Agreement with the Company dated as of January 24, 2000, (the "Severance
Agreement").

         2.3. Exercise of Option Following Termination of Employment.

         (a) If the Optionee's employment by the Company terminates by reason of
retirement other than for Good Reason, as defined in the Severance Agreement
("Good Reason"), on or after age 65, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative or Permitted Transferees until and including the earlier to
occur of (i) the date which is six months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.

         (b) If the Optionee's employment by the Company terminates by reason of
death or Disability, the Option shall be exercisable to the extent it is
exercisable on the date of death or, in the case of Disability, the effective
date of the Optionee's termination of employment by reason of Disability (the
"Disability Termination Date") and shall become exercisable on the date of death
or the Disability Termination Date, as the case may be, for an additional number
of shares equal to one-third of the shares of Stock subject to the Option as to
which the Option was not exercisable immediately prior to the Optionee's death
or the Disability Termination Date, and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative or Permitted Transferees, as the
case may be, until and including the earlier to occur of (i) the date which is
one year after the date of death or the Disability Termination Date and (ii) the
Expiration Date.

         (c) If the Optionee's employment with the Company is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of Optionee's termination of employment.

         (d) If the Optionee's employment with the Company is terminated by the
Optionee for any reason other than Good Reason, retirement on or after age 65
other than for Good Reason, death or Disability or is terminated by the Company
for any reason other than Cause, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative or Permitted Transferees until and including the earlier to
occur of (i) the date which is three months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.

         (e) Notwithstanding the foregoing, upon a termination of the Optionee's
employment with the Company that does not constitute a Nonqualifying Termination
under the Severance Agreement (a "Nonqualifying Termination") the Option shall
become fully exercisable and remain exercisable until the earliest of (i) the
Expiration Date, (ii) two years after such termination of employment and (iii)
the date the Option is surrendered and canceled for cash or other consideration
pursuant to Section 6.8 of the Plan. To the extent that this provision conflicts
with the Plan as a result of the Option being an Incentive Stock Option, the
Option shall

                                       3
<PAGE>   4

be treated as a non-qualified stock option but only with respect to that portion
of the Option that is accelerating pursuant to this subparagraph (e).

         (f) If the Optionee dies during the period set forth in Section 2.3(a)
following termination of employment by reason of retirement on or after age 65
other than for Good Reason, or if the Optionee dies during the period set forth
in Section 2.3(b) following termination of employment by reason of Disability,
or if the Optionee dies during the period set forth in Section 2.2(d) following
termination of employment for any reason other than retirement on or after age
65 other than for Good Reason, Disability or termination by the Company for
Cause, then the Option shall be exercisable only to the extent it is exercisable
on the date of death and may thereafter be exercised by the Optionee's Legal
Representative or Permitted Transferees, as the case may be, until and including
the earlier to occur of (i) the date which is one year after the date of death
and (ii) the Expiration Date.

         2.4 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised in whole or in part by the Optionee (1)
by giving written notice to the Company specifying the number of whole shares of
Stock (provided that if the then exercisable portion of the Option is for less
than one share, then for all of such portion) to be purchased and accompanied by
payment therefor in full (or arrangement made for such payment to the Company's
satisfaction) either (i) in cash, (ii) by delivery of previously owned whole
shares of Stock (which the Optionee has held for at least six months prior to
the delivery of such shares or which the Optionee purchased on the open market
and for which the Optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable pursuant to the Option by reason
of such exercise, (iii) by authorizing the Company to withhold whole shares of
Stock which would otherwise be delivered upon exercise of the Option having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable pursuant to the Option by reason of such exercise, (iv)
in cash by a broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (v) a combination of (i), (ii)
and (iii), and (2) by executing such documents as the Company may reasonably
request. So long as the Stock is quoted on NASDAQ or quoted or listed on any
recognized quotation service or national securities exchange, the Committee
shall have discretion to disapprove (but only in the case of clause (ii) if such
disapproval is reasonable and if imposition of a reasonableness standard with
respect to disapproval of clause (iii) does not prevent withholding transactions
pursuant to clause (iii) from complying with the applicable conditions of Rule
16b-3 under the Exchange Act, only in the case of clause (iii) if such
disapproval is reasonable) of an election pursuant to clauses (ii) or (iii). Any
fraction of a share of Stock which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid in cash by the
Optionee. No certificate representing a share of Stock shall be delivered until
the full purchase price therefor has been paid.

         2.5 Termination of Option. (a) In no event may the Option be exercised
after it terminates as set forth in this Section 2.5. The Option shall
terminate, to the extent not exercised pursuant to Section 2.4 or earlier
terminated pursuant to Section 2.3, on the Expiration Date.

                                       4
<PAGE>   5

         (b) In the event that rights to purchase all or a portion of the shares
of Stock subject to the Option expire or are exercised, canceled or forfeited,
the Optionee shall, upon the Company's request, promptly return this Agreement
to the Company for full or partial cancellation, as the case may be. Such
cancellation shall be effective regardless of whether the Optionee returns this
Agreement. If the Optionee continues to have rights to purchase shares of Stock
hereunder, the Company shall, within 10 days of the Optionee's delivery of this
Agreement to the Company, either (i) 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
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

                                       5
<PAGE>   6

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 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.

                                       6
<PAGE>   7

         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 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.

                                       7
<PAGE>   8

         3.12. Section 16. The Company shall use all reasonable efforts to
cooperate with Optionee (if Optionee is subject to Section 16 of the Exchange
Act) to assure that any cash payment in accordance with Section 6.8(a) of the
Plan is made in compliance with such Section 16 and the rules and regulations
thereunder.

         4. Miscellaneous Provisions.

         4.1. Meaning of Certain Terms. (a) As used herein, employment by the
Company shall include employment by a corporation which is a "subsidiary
corporation" of the Company, as such term is defined in section 424 of the Code.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.

         (b) As used herein, the term "Legal Representative" shall include an
executor, administrator, legal representative, guardian or similar person and
the term "Permitted Transferee" shall include any transferee pursuant to a
transfer permitted under the Plan and Section 3.1 hereof.

         4.2. Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.

         4.3. Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to Whitehall Jewellers,
Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606, Attention:
Secretary, and if to the Optionee, to Jon Browne, 2322 Maple Avenue, Northbrook,
Illinois 60062. All notices, requests or other communications provided for in
this Agreement shall be made in writing either (a) by personal delivery to the
party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by
mailing in the United States mails to the last known address of the party
entitled thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication is not received during
regular business hours, it shall be deemed to be received on the next succeeding
business day of the Company.

         4.4. Governing Law. This Agreement, the Option and all determinations
made and actions taken pursuant hereto and thereto, to the extent not governed
by the laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.

         4.5. Fair Market Value Determinations. Fair Market Value shall mean the
average of the high and low transaction prices of a share of Common Stock as
reported in the National Association of Securities Dealers Automated Quotation
National Market System on the date as of which such value is being determined,
or, if the Common Stock is listed on a national securities exchange, the average
of the high and low transaction prices of a share of Common Stock on the
principal national stock exchange on which the Common Stock is traded on the
date

                                       8
<PAGE>   9

as of which such value is being determined, or, if there shall be no reported
transactions for such date, on the next preceding date for which transactions
were reported. 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 Fair Market Value by the investment banking
firm shall be final and binding on both the Committee and the Optionee. The
Company shall bear all costs and expenses incurred in connection with the
determination by such investment banking firm of Fair Market Value. The
investment banking firm may use whatever valuation methods it deems relevant or
appropriate under the circumstances. Fair Market Value shall be determined based
upon the investment banking firm's opinion as follows: (i) if such opinion
expresses the Fair Market Value in terms of a range of values, the mean of such
range shall be deemed to be Fair Market Value or (ii) if such opinion expresses
Fair Market Value as an absolute number, such number shall be deemed to be the
Fair Market Value. For purposes of this Section 4.5 the term "Representative"
shall mean 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.

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

                                       9
<PAGE>   10

              [SIGNATURE PAGE TO JON BROWNE STOCK OPTION AGREEMENT]

                                   WHITEHALL JEWELLERS, INC.

         By:
            ----------------------------
                                      Name:
                                      Title:

Accepted this      day of
              ----
                  , 2000
-----------------
    Optionee

                                       10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}]]