Severance Agreement - J Crew Operating Corp. and Trudy Sullivan
July 12, 2001
Ms. Trudy Sullivan
544 E. 86th St., Apt. 12W
New York, NY 10028
Dear Trudy:
This letter will confirm our understanding of the arrangements under
which the Employment Agreement between you (the "Executive") and J. Crew
Operating Corp. (the "Company") dated February 18, 2000 (the "Employment
Agreement") 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 the
Executive's employment with the Company has terminated
effective as of June 15, 2001 (the "Termination Date"). During
the two-month period immediately following the Termination
Date (the "Consulting Period"), the Executive shall provide
such consulting services to the Company as the Company may,
from time to time, request. In full payment for the consulting
services provided hereunder, the Company will pay the
Executive a fee at the rate of $41,666 per month, payable no
less frequently than twice per month. The Company will also
reimburse the Executive for reasonable travel expenses
incurred by her that are authorized in advance by the Company,
upon presentation of appropriate documentation in accordance
with the Company's expense report policy.
2. Subject to this Agreement becoming effective (as described in
Paragraph 18 hereof), the Company will continue to pay the
Executive her base salary of $500,000 per annum for the
12-month period beginning on the day immediately following the
end of the Consulting Period (the "Severance Period"), payable
in accordance with the Company's regular payroll policies for
its employees. The Executive will also continue to have
medical coverage during both the Consulting Period and the
Severance Period on the same terms and conditions as medical
coverage is then made available to employees of the Company.
3. The consulting and severance payments described in Paragraphs
1 and 2 above 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. The Executive acknowledges that,
except for the payments described herein, she is not entitled
to any payment in the nature of severance or termination pay
from the Company.
4. The Executive currently has vested options to purchase 22,560
shares of Common Stock of J. Crew Group, Inc. ("Common Stock")
at $6.82 per share and vested options to purchase 6,480 shares
of Common Stock at $10.00 per share. The Company hereby agrees
that notwithstanding the provisions of the stock option
agreements with the Executive (a) options to purchase an
additional 7,520
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shares of Common Stock at $6.82 per share and options to
purchase and additional 6,480 shares of Common Stock at $10.00
per share shall vest and become exercisable on January 31,
2002 (such additional options together with the options
vested on the Termination Date are collectively referred to
as the "Vested Options"), (b) the expiration date of the
Vested Options shall be the tenth anniversary of the grant
date of such options, and (c) the Executive shall have the
right to exercise the Vested Options in accordance with the
provisions of the stock option agreements until such
expiration date. All other unvested options (totaling 7,520
options to purchase Common Stock at $6.82 per share and 19,440
options to purchase Common Stock at $10.00 per share) shall
terminate effective on the Termination Date.
5. By signing this Agreement, the Executive agrees that in
exchange for the additional consideration set forth herein,
the Executive hereby voluntarily, fully and unconditionally
releases and forever discharges the Company, its 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 the Executive has 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 her 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 Family Medical
Leave Act of 1993, the Age Discrimination in Employment Act of
1967, as amended, or the New York State equal employment
laws), 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. The Executive acknowledges 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 the Executive has 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 the Executive,
and the Executive 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 the Executive from enforcing her rights under this
Agreement and in the event any action is commenced to enforce
her rights under this Agreement, each party shall bear its own
legal fees and expenses.
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6. The Executive acknowledges that the payments and the
additional vesting of options to purchase shares of common
stock she is receiving in connection with the foregoing
release is in addition to anything of value to which she
already is entitled from the company
7. The Executive hereby agrees and acknowledges that she shall be
bound by and comply with the restrictive covenants provided in
Section 4 of the Employment Agreement other than the
non-compete restrictive covenant set forth in Section
4(a)(ii)(1) of the Employment Agreement which the Company
hereby waives (the "Restrictive Covenants"), that such
Restrictive Covenants are hereby made part of this Agreement
as if specifically restated herein and that all payments,
medical insurance, additional vesting of stock options and
continued extension of the expiration date of the Vested
Options are subject to and contingent upon the Executive's
compliance with Restrictive Covenants.
8. The Executive acknowledges and agrees that, notwithstanding
any other provision of this Agreement, if the Executive
breaches any of her obligations under this Agreement or the
Restrictive Covenants under the Employment Agreement (a) she
will forfeit her right to receive the payments under
paragraphs 1 and 2 above and to have the stock options vest on
January 31, 2001 (to the extent the payments were not
theretofore paid or the options had not vested as of the date
of such breach), (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, the Executive
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 per share of
Common Stock on the date of exercise or the amount paid by the
Company to the Executive 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. The Executive hereby agrees that a breach of the Restrictive
Covenants contained in Section 4 of the Employment Agreement
may, depending on the circumstances, cause the Company to
suffer irreparable harm for which money damages would not be
an adequate remedy and therefore, if the Executive breaches
any of the Restrictive Covenants, 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.
10. This Agreement does not constitute an admission of liability
or wrongdoing of any kind by the Executive or the Company or
its affiliates.
11. The terms of this Agreement shall be binding on the parties
hereto and their respective successors and assigns.
12. This Agreement constitutes the entire understanding of the
Company and the Executive 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 the Executive 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.
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13. This Agreement shall be construed, enforced and interpreted in
accordance with and governed by the laws of the State of New
York.
14. 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.
15. 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.
16. The Executive acknowledges that, by the Executive's free and
voluntary act of signing below, the Executive agrees to all of
the terms of this Agreement and intends to be legally bound
thereby.
17. The Executive acknowledges that she has received this
Agreement on or before June 20, 2001. The Executive
understands that she may consider whether to agree to the
terms contained herein for a period of twenty-one days after
the date hereof. However, the operation of the provisions of
the paragraph 1 (other than the first sentence thereof) and
paragraphs 2 through 5 above may be delayed until this
Agreement is executed by the Executive, returned to the
Company and becomes effective as provided below. The Executive
acknowledges that she has consulted with an attorney prior to
her execution of this Agreement or has determined by her own
free will not to consult with an attorney.
18. This Agreement will become effective, enforceable and
irrevocable seven days after the date on which it is executed
by the Executive (the "Effective Date"). During the seven-day
period prior to the Effective Date, the Executive may revoke
her agreement to accept the terms hereof by indicating in
writing to the Company her intention to revoke. If the
Executive exercises her right to revoke hereunder, she shall
forfeit her right to receive any of the benefits provided for
herein, and to the extent such payments have already been
made, the Executive
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agrees that she will immediately reimburse the Company for the
amounts of such payment.
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: /s/ MARK SARVARY
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Mark Sarvary
Chief Executive Officer
Agreed to and accepted:
By: /s/ Trudy Sullivan
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Trudy Sullivan
Dated: July 23, 2001
Acknowledgment
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STATE OF )
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ss:
COUNTY OF )
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On the day of , 2001, before me personally came Trudy Sullivan who,
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being by me duly sworn, did depose and say that she resides at
and did acknowledge and represent that she has had
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an opportunity to consult with attorneys and other advisers of her choosing
regarding the Termination Agreement attached hereto, that she has reviewed all
of the terms of the Termination Agreement and that she fully understands all of
its provisions, including without limitation, the general release and waiver set
forth therein.
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Notary Public
Date:
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