Severance Agreement - J Crew Operating Corp. and Chief Executive Officer (CEO)
April 29, 2002
**** *******
Dear ****:
This letter will confirm our understanding of the arrangements under
which your Employment Agreement ("Employment Agreement"), dated May 3, 1999,
with the Company (as modified by your letter agreement ("Letter Agreement"),
dated January 15, 2002, with the Company) is terminated. The terms and
conditions of the termination of your employment with the Company are set out
below.
1. The parties hereby acknowledge and confirm that your employment
with the Company is terminated effective as of April 30, 2002
(the "Termination Date") and that such termination shall
constitute a Qualifying Termination (as defined in the Letter
Agreement). In addition, the parties hereby acknowledge and
confirm that your resignation as a Director of J. Crew Group,
Inc. ("Parent") is also effective as of the Termination Date.
2. Subject to this Agreement becoming effective (as described in
Paragraph 18 hereof), the Company will pay you a lump-sum amount
equal to two (2) times your base salary on the Termination Date.
You will also be entitled to receive the following benefits. The
Company shall continue to provide medical plan coverage
substantially similar to the medical plan coverage that it
provides its active employees, as it may be amended from time to
time, until the earlier of (i) the second anniversary of the
Termination Date (i.e. April 30, 2004), (ii) the date that you
become employed as a full-time employee with a new employer or
(iii) the date that you become eligible to be covered by
comparable plan of a subsequent employer, provided that the
Company shall provide such coverage by paying your COBRA
continuation coverage for the COBRA coverage period and
thereafter, the Company shall only provide such coverage to the
extent that the monthly cost of such coverage does not exceed
the cost of your monthly COBRA premiums as in effect on the last
month of your COBRA continuation period. In order to receive the
foregoing medical coverage you shall cooperate with the
reasonable requests of the Company, including without limitation
any request to submit to medical examinations and elect COBRA
continuation coverage. The Company shall also provide you with
life insurance coverage equivalent to the coverage provided
immediately prior to the Termination Date (namely two-times your
base salary as of the Termination Date) under the same terms as
it provides such coverage to its active employees under its life
insurance plan, as it may be amended from time to time, until
the earlier of (i) the twenty-four month anniversary of the date
of the Letter Agreement (i.e. January
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15, 2004), (ii) the date that you become employed as a full-time
employee with a new employer or (iii) the date that you become
eligible to be covered by comparable plan of a subsequent
employer. 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. 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.
3. As of the Termination Date, you have vested options to purchase
108,800 shares of Common Stock of Parent ("Common Stock") at
$10.00 per share. In addition, the Company hereby agrees that
options to purchase an additional 54,400 shares of Common Stock
at $10.00 per share shall vest and become exercisable on May 10,
2002 (such additional options together with the options vested
as of the Termination Date are collectively referred to as the
"Vested Options"). Notwithstanding anything to the contrary, all
of the Vested Options shall remain exercisable until the third
anniversary of the Termination Date (i.e. April 30, 2005),
subject in all other respects to the provisions of your stock
option agreement with Parent and the J. Crew Group, Inc. 1997
Stock Option Plan ("Option Plan"). All other unvested options
(totaling 108,800 options to purchase Common Stock at $10.00 per
share) shall terminate effective as of the Termination Date. All
shares of Common Stock acquired by you pursuant to the Vested
Options shall be subject to the Stockholders' Agreement attached
to the Option Plan as Exhibit B and Section 2(f) of the
Employment Agreement relating to your put right.
In consideration of the extension relating to the Vested Options
described above and notwithstanding anything in the
Stockholders' Agreement to the contrary, however, you hereby
agree that the Company (or its designated assignee) shall have
the right, during the 120 day period immediately following the
expiration of the six month period after any shares of Common
Stock are acquired by you, to purchase from you all or any
portion of such shares at a per share price equal to the Fair
Market Value (as defined in the Option Plan) of a share of
Common Stock determined as of the date as of which such right is
exercised.
4. The parties acknowledge and agree that you shall repay in full
the principal amount of the Company Loan (as defined in the
Letter Agreement) (currently $850,000 principal balance still
outstanding) on the earliest of (i) June 1, 2005, (ii) the date
that you sell or otherwise dispose of your primary residence
located at 7 Fox Run, Purchase, New York, and (iii) the one year
anniversary of the date that you commence full time continuous
employment with any subsequent employer. Notwithstanding the
foregoing, you agree that any and all proceeds generated from
the sale or disposition of all or any portion of your shares of
Common Stock (less the amount you paid to the Company for such
shares) shall be immediately applied to the payment of the
outstanding principal amount of the Company Loan. In the event
of a repurchase of Common Stock by the Company, you authorize
the Company to withhold any payments for such Common Stock and
apply such proceeds to the repayment of the Company Loan.
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5. By signing this Agreement, you agree that in exchange for the
additional 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. You acknowledge that this general
release is not made in connection with an exit incentive or
other employment termination program offered to a group or class
of employees.
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 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
termination.
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This release shall not apply to any claims you may have relating
to the Company's performance of its obligations under this
Agreement or under the Ancillary Documents (as defined in
Section 13). In the event any action is commenced to enforce
your rights under this Agreement or under any Ancillary
Document, each party shall bear its own legal fees and expenses.
6. You acknowledge that the payments and other considerations
described in Sections 2, 3 and 4 above that you are receiving in
connection with the foregoing release is in addition to anything
of value to which you already are entitled from the Company.
7. You hereby agree and acknowledge that you shall be bound by and
comply with the restrictive covenants provided in Sections 7, 8
(as modified by clause (e) of the Letter Agreement), 9 and 10 of
the Employment 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 and other considerations described in Sections 2, 3 and
4 above that you are receiving are subject to and contingent
upon your compliance with Restrictive Covenants. You also
acknowledge that your receipt of certain benefits hereunder are
affected by you obtaining subsequent employment and therefore
you agree to notify the Executive Vice President of Human
Resources in writing prior to the effective date of any
full-time employment with a new employer or, if earlier, the
effective date you become eligible to be covered by a comparable
plans of a subsequent employer, as described in Section 2.
8. You acknowledge and agree that, notwithstanding any other
provision of this Agreement, if you breach any of your
obligations under this Agreement or a Restrictive Covenant, (a)
you will forfeit your right to receive the payment and other
considerations described in Sections 2, 3 and 4 above (to the
extent the payment was not theretofore paid) and the Company
shall be entitled to recover any payments 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).
9. You hereby agree that the breach of a Restrictive Covenant may
cause the Company to suffer irreparable harm for which money
damages would not be an adequate remedy and therefore, if you
breach a Restrictive Covenant, the Company would be entitled to
temporary and permanent injunctive relief in any court of
competent jurisdiction (without the need to post any bond)
without prejudice to any other remedies under this Agreement or
otherwise.
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10. The Company affirms its obligation to indemnify, defend and hold
you harmless, to the extent permitted by law, from and against
all claims made by third parties against you arising out of
actions taken by you in your capacity as an officer and director
of the Company. You also agree to cooperate fully with the
Company and the Releasees in connection with any existing or
future litigation or proceedings involving the Company or any
Releasee to the extent necessary and to notify the Company
promptly upon receipt of any legal process or other request
requiring you to testify, plead, respond, defend and/or produce
documents relating to the Company or any Releasee.
The Company represents that, as of the date of this Agreement,
the Board of Directors is not aware of any claims that it has
against you arising out of your employment with the Company;
provided, however, that this shall not bar the Company from
making any claims, charges or demands against you at any time in
the future based on facts, circumstances or matters of which it
may hereafter become aware regardless of when they occurred or
to what time period they relate.
11. This Agreement does not constitute an admission of liability or
wrongdoing of any kind by you or the Company or its affiliates.
12. The terms of this Agreement shall be binding on the parties
hereto and their respective successors, assigns, heirs and
representatives.
13. This Agreement, together with the documents relating to the
Vested Options and the Company Loan (collectively referred to as
the "Ancillary Documents"), 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.
14. This Agreement shall be construed, enforced and interpreted in
accordance with and governed by the laws of the State of New
York.
15. 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.
16. 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.
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17. 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.
18. You acknowledge that you have received this Agreement on or
before April 30, 2002. You understand that you may consider
whether to agree to the terms contained herein for a period of
twenty-one (21) days after the date hereof. However, the
operation of the provisions of Sections 2 through 5 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.
19. 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 considerations
provided for herein, and to the extent such payments have
already been made, you agree that you will immediately reimburse
the Company for the amounts of such payments.
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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:
Title:
Agreed to and accepted:
By:_______________________
**** *******
Dated: _________, 2002
Acknowledgment
STATE OF _________________)
ss:
COUNTY OF _______________)
On the __ day of _______, 2002, before me personally came Mark Savary who, being
by me duly sworn, did depose and say that he resides at 7 Fox Run, Purchase, New
York, 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
Date:____________________
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