Sample Business Contracts

Severance Agreement - J Crew Operating Corp. and Walter Killough

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                                  March 7, 2003

Walter Killough
6 Garden Court
Mahwah, NJ  07430

Dear Walter:

     This letter will confirm our understanding of the arrangements under which
your employment with J.Crew is terminated as set forth below:

          1.   The parties hereby acknowledge and confirm that your employment
               with the Company is terminated effective as of March 14, 2003
               (the "Termination Date").

          2.   Subject to this Agreement becoming effective (as described in
               Paragraph 17 hereof), the Company will continue to pay you your
               base salary of $390,000 per annum for the twelve (12) month
               period beginning on the day immediately following the Termination
               Date ("Severance Period"), payable in accordance with the
               Company's regular payroll practices for its employees. At your
               election, the Company will also reimburse you for Cobra premiums
               paid by you during the Severance Period. The foregoing payments
               shall be reduced by any required tax withholdings and shall not
               be taken into account as compensation and no service credit shall
               be given after the Termination Date for purposes of determining
               the benefits payable under any other plan, program, agreement or
               arrangement of the Company. Notwithstanding anything herein to
               the contrary, your right to receive the foregoing payments shall
               terminate effective immediately upon the date that you become
               employed as a full-time employee with a new employer; provided
               that if the base salary you receive pursuant to such new
               employment ("New Salary") is less than $390,000 per annum, the
               Company will continue to pay you an incremental amount during the
               remaining Severance Period such that the New Salary payments you
               receive together with such incremental amount will equal $390,000
               on an annualized basis. In addition, upon request, outplacement
               services will be provided in accordance with the Company's
               policy. You acknowledge that, except for the foregoing payments,
               you are not entitled to any payment by the Company in the nature
               of either severance or termination pay or other compensation of
               any kind.

          3.   As of the Termination Date, you have vested options to purchase
               (i) 31,400 shares of Common Stock ("Common Stock") of J. Crew
               Group, Inc. ("Parent") at $6.82 exercise price per share, (ii)
               11,160 shares of Common Stock at a $10.00 exercise price per
               share, and (iii) 5,000 shares of Common Stock at a $10.65
               exercise price per share (collectively, the "Vested Options").
               You acknowledge that (i) your right to exercise the Vested
               Options shall expire 90 days immediately following the
               Termination Date (i.e. June 12, 2003) and (ii) all of your other
               options which have not yet vested (totaling options to purchase
               27,400 shares of Common Stock) terminate effective immediately,
               in accordance with the


               provisions of your stock option agreements with Parent and the J.
               Crew Group, Inc. 1997 Stock Option Plan, as amended (the "Option

          4.   By signing this Agreement, you agree that in exchange for the
               consideration set forth herein, you hereby voluntarily, fully and
               unconditionally release and forever discharge the Company,
               Parent, their present and former parent corporation(s),
               subsidiaries, divisions, affiliates and otherwise related
               entities and their respective incumbent and former employees,
               directors, plan administrators, officers and agents, individually
               and in their official capacities (collectively, the "Releasees"),
               from any and all charges, actions, causes of action, demands,
               debts, dues, bonds, accounts, covenants, contracts, liabilities,
               or damages of any nature whatsoever, whether now known or
               claimed, to whomever made, which you have or may have against any
               or all of the Releasees for or by reason of any cause, nature or
               thing whatsoever, up to the present time, arising out of or
               related to your employment with the Company or the termination of
               such employment, including, by way of examples and without
               limiting the broadest application of the foregoing, any actions,
               causes of action, or claims under any contract or federal, state
               or local decisional law, statues, regulations or constitutions,
               any claims for notice, pay in lieu of notice, wrongful dismissal,
               breach of contract, defamation or other tortious conduct,
               discrimination on the basis of actual or perceived disability,
               age, sex, race or any other factor (including, without
               limitation, any claim pursuant to Title VII of the Civil Rights
               Act of 1964, Americans with Disabilities Act of 1990, the Age
               Discrimination in Employment Act of 1967, as amended, the Family
               and Medical Act of 1993, the Equal Pay Act of 1963, the Fair
               Labor Standards Act, the State, City and local laws of New York,
               and the equal employment law or laws of the state and/or city in
               which you work), any claim pursuant to any other applicable
               employment standards or human rights legislation or for severance
               pay, salary, bonus, incentive or additional compensation,
               vacation pay, insurance, other benefits, interest, and/or
               attorney's fees.

               If you have made or should hereafter make any complaint, charge,
               claim, allegation or demand, or commence or threaten to commence
               any action, complaint, charge, claim or proceeding, against any
               or all of the Releasees for or by reason of any cause, matter or
               thing whatsoever existing up to the present time, this Agreement
               may be raised as and shall constitute a complete bar to any such
               action, complaint, charge, claim, allegation or proceeding, and,
               subject to a favorable ruling by a tribunal of final
               jurisdiction, the Releasees shall recover from you, and you shall
               pay to the Releasees, all costs incurred by them, including their
               attorneys' fees, as a consequence of any such action, complaint
               charge, claim, allegation or proceeding; provided, however, that
               this shall not limit you from enforcing your rights under this
               Agreement and in the event any action is commenced to enforce
               your rights under this Agreement, each party shall bear its own
               legal fees and expenses; and provided further, however, that this
               is not intended to interfere with your right to file a charge
               with the Equal Employment Opportunity Commission ("EEOC") in
               connection with any claim you believe you may have against any
               Releasee. However, by signing this Agreement, you agree to waive
               any right to recover in any proceeding you may bring before the
               EEOC (or any state human rights commission) or in any proceeding
               brought by the EEOC (or any state human rights commission) on
               your behalf.



               You specifically release all claims under the Age Discrimination
               in Employment Act ("ADEA") relating to your employment and its

          5.   You acknowledge that the payments and benefits described in
               Section 2 above that you are receiving in connection with the
               foregoing release is in accordance with the provisions of your
               letter agreement, dated March 14, 2000 ("Letter Agreement").

          6.   You hereby agree and acknowledge that you shall be bound by and
               comply with the restrictive covenants provided in the Letter
               Agreement (the "Restrictive Covenants"), and that such
               Restrictive Covenants are hereby made part of this Agreement as
               if specifically restated herein and that the payments described
               in Section 2 above that you are receiving are subject to and
               contingent upon your compliance with Restrictive Covenants.

          7.   You acknowledge and agree that, notwithstanding any other
               provision of this Agreement, if you breach any of your
               obligations under this Agreement or any Restrictive Covenant, (a)
               you will forfeit your right to receive the payments and benefits
               described in Section 2 above (to the extent the payments were not
               theretofore paid) and the Company shall be entitled to recover
               any payments already made to you or on your behalf, (b) the
               Vested Options shall expire as of the date of such breach to the
               extent not theretofore exercised and, if exercised as of the date
               of such breach, you shall immediately reimburse the Company for
               the profit upon exercise (such profit calculated as the
               difference between the (i) greater of either the Fair Market
               Value (as defined in the Option Plan) of a share of Common Stock
               on the date of exercise or the amount paid by the Company to you
               per share of Common Stock for the purchase of the shares acquired
               upon exercise, and (ii) exercise price, times the number of
               options exercised).

          8.   You agree that, in the event that you are served with legal
               process or other request purporting to require you to testify,
               plead, respond or defend and/or produce documents at a legal
               proceeding, threatened proceeding, investigation or inquiry
               involving the Releasees, you will: (1) refuse to provide
               testimony or documents absent a subpoena, court order or similar
               process from a regulatory agency: (2) within three (3) business
               days or as soon thereafter as practical, provide oral
               notification to the Company's Executive Vice-President of Human
               Resources of your receipt of such process or request to testify
               or produce documents; and (3) provide to the Company's Executive
               Vice-President of Human Resources by overnight delivery service a
               copy of all legal papers and documents served upon you. You
               further agree that in the event you are served with such process,
               you will meet and confer with the Company's designee(s) in
               advance of giving such testimony or information. You also agree
               to cooperate fully with the Releasees in connection with any
               existing or future litigation against the Releasees, whether
               administrative, civil or criminal in nature, in which and to the
               extent the Releasees deem your cooperation necessary. The Company
               agrees to reimburse you for your reasonable out-of-pocket
               expenses incurred in connection with the performance of your
               obligations under this Section 8.

          9.   This Agreement does not constitute an admission of liability or
               wrongdoing of any kind by you or the Company or its affiliates.



          10.  The terms of this Agreement shall be binding on the parties
               hereto and their respective successors, assigns, heirs and

          11.  This Agreement, together with your stock option agreements with
               Parent and the Option Plan, constitute the entire understanding
               of the Company and you with respect to the subject matter hereof
               and supersedes all prior understandings, written or oral. The
               terms of this Agreement may be changed, modified or discharged
               only by an instrument in writing signed by the parties hereto. A
               failure of the Company or you to insist on strict compliance with
               any provision of this Agreement shall not be deemed a waiver of
               such provision or any other provision hereof. If any provision of
               this Agreement is determined to be so broad as to be
               unenforceable, such provision shall be interpreted to be only so
               broad as is enforceable.

          12.  This Agreement shall be construed, enforced and interpreted in
               accordance with and governed by the laws of the State of New

          13.  The parties hereto acknowledge and agree that each party has
               reviewed and negotiated the terms and provisions of this
               Agreement and has contributed to its revision. Accordingly, the
               rule of construction to the effect that ambiguities are resolved
               against the drafting party shall not be employed in the
               interpretation of this Agreement. Rather, the terms of this
               Agreement shall be construed fairly as to both parties hereto and
               not in favor or against either party.

          14.  This Agreement may be executed in any number of counterparts and
               by different parties on separate counterparts, each of which
               counterpart, when so executed and delivered, shall be deemed to
               be an original and all of which counterparts, taken together,
               shall constitute but one and the same Agreement.

          15.  You acknowledge that, by your free and voluntary act of signing
               below, you agree to all of the terms of this Agreement and intend
               to be legally bound thereby.

          16.  You acknowledge that you have received this Agreement on or
               before March 7, 2003. You understand that you may consider
               whether to agree to the terms contained herein for a period of
               forty-five (45) days after the date hereof. However, the
               operation of the provisions of Sections 2 through 4 above may be
               delayed until you execute this Agreement and return it to the
               Company and it becomes effective as provided below. You
               acknowledge that you have consulted with an attorney prior to
               your execution of this Agreement or have determined by your own
               free will not to consult with an attorney.

          17.  This Agreement will become effective, enforceable and irrevocable
               seven days after the date on which it is executed by you (the
               "Effective Date"). During the seven-day period prior to the
               Effective Date, you may revoke your agreement to accept the terms
               hereof by indicating in writing to the Executive Vice-President
               of Human Resources your intention to revoke. If you exercise your
               right to revoke hereunder, you shall forfeit your right to
               receive any of the payments and other benefits provided for
               herein, and to the extent such payments or benefits have already
               been made, you agree that you will immediately reimburse the
               Company for the value of such payments and benefits.



     If the foregoing correctly reflects our understanding, please sign the
enclosed copy of this letter agreement, whereupon it will become a binding
agreement between us.

                                        J. CREW OPERATING CORP.

                                        By: _______________________
                                            Name: David F. Kozel
                                            Title: Executive Vice-President,
                                                   Human Resources

Agreed to and accepted:

   Walter Killough

Dated:     _________, 2003


STATE OF _________________)


COUNTY OF _______________)

On the __ day of _______, 2003, before me personally came Walter Killough who,
being by me duly sworn, did depose and say that he resides at 6 Garden Court,
Mahwah, New Jersey 07430, and did acknowledge and represent that he has had an
opportunity to consult with attorneys and other advisers of his choosing
regarding the Agreement set forth above, that he has reviewed all of the terms
of the Agreement and that he fully understands all of its provisions, including
without limitation, the general release and waiver set forth therein.

Notary Public