Exhibit 4.1
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of January 24,
2003, among J. Crew Group, Inc. (the "Company"), TPG Partners II, L.P. (the
"Majority Stockholder") and Xxxxxxx X. Xxxxxxx (the "Stockholder").
WHEREAS, the Stockholder serves as the Executive Chairman and Chief
Executive Officer of the Company and J. Crew Operating Corp., a wholly-owned
subsidiary of the Company (the "Subsidiary"), and in such capacity is on the
date hereof being granted shares of restricted stock of the Company ("Restricted
Shares") and is being granted certain options (the "Options") to purchase shares
of Common Stock, in each case pursuant to the Company's 2003 Equity Incentive
Plan (the "Equity Plan"), and may be granted additional shares of Common Stock
or rights to purchase Common Stock in the future in connection with the
performance of services; and
WHEREAS, the Stockholder, the Company and the Majority Stockholder
desire to enter this Agreement and to have this Agreement apply to all shares of
Common Stock owned directly or indirectly by the Stockholder (including shares
of Common Stock acquired through TPG-MD Investment, LLC ("TPG-MD LLC") and
Xxxxxxx X. Xxxxxxx, Inc., to be purchased by or granted to the Stockholder
pursuant to the Equity Plan and related grant agreements, to any shares of
Common Stock acquired after the date hereof by the Stockholder and pursuant to
the Credit Agreement, to be entered into by and among TPG-MD LLC, the Company,
the Subsidiary and the subsidiary guarantors named therein (the "Credit
Agreement"), or any other source, subject to any future agreement between the
parties to the contrary (in the aggregate, the "Shares").
NOW THEREFORE, in consideration of the premises hereinafter set forth,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows.
1. Investment. The Stockholder represents that the Shares are being
acquired for investment and not with a view toward the distribution thereof.
2. Issuance of Shares. The Stockholder acknowledges and agrees that
all certificates for the Shares shall bear the following legends (except that
the second paragraph of this legend shall not be required after the Shares have
been registered under the Securities Act of 1933 and except that the first
paragraph of this legend shall not be required after the termination of this
Agreement):
The shares represented by this certificate are subject to the terms and
conditions of a Stockholders' Agreement dated as of January 24, 2003 and
may not be sold, transferred, hypothecated, assigned or encumbered, except
as may be permitted by the aforesaid Agreement. A copy of the Stockholders'
Agreement may be obtained from the Secretary of the Company.
The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired for investment
and may not be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement for the shares under the Securities Act
of 1933 or an opinion of counsel for the Company (or an opinion of counsel
for the holder,
which opinion of counsel is reasonably satisfactory to the Company) that
registration is not required under said Act.
Upon the termination of this Agreement, or upon registration of the
Shares under the Securities Act of 1933, as amended (the "Securities Act"), the
Stockholder shall have the right to exchange any Shares containing the above
legend (i) in the case of the registration of the Shares, for Shares legended
only with the first paragraph described above and (ii) in the case of the
termination of this Agreement, for Shares legended only with the second
paragraph described above.
3. Transfer of Shares. Except as otherwise specifically agreed by the
Company and the Majority Stockholder, the Stockholder agrees that he will not
cause or permit the Shares or his interest in the Shares to be sold,
transferred, hypothecated, assigned or encumbered except as expressly permitted
by this Section 3; provided, however, that the Shares or any such interest may
be transferred (i) on the Stockholder's death by bequest or inheritance to the
Stockholder's executors, administrators, testamentary trustees, legatees or
beneficiaries or (ii) to a trust or partnership or LLC or custodianship the
beneficiaries or partners or members of which may include only the Stockholder,
the Stockholder's spouse or the Stockholder's lineal descendants (by blood or
adoption) (each person or entity described in clauses (i) or (ii) above, the
"Stockholder Permitted Transferee"), subject in any such case to the agreement
by each Stockholder Permitted Transferee in writing to be bound by the terms of
this Agreement as if such Stockholder Permitted Transferee had been an original
signatory hereto and provided in any such case that no such transfer that would
cause the Company to be required to register the Common Stock under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
shall be permitted.
4. Directors of the Company.
(a) As soon as reasonably practicable following the date of this
Agreement, there shall be eleven members of the Board of Directors of the
Company (the "Board"), who shall be appointed as follows: (i) the Stockholder
shall be entitled to appoint three members of the Board, and to appoint any
successors to any such member; (ii) the Majority Stockholder shall be entitled
to appoint three members of the Board, and to appoint any successors to any such
member; (iii) Xxxxx Xxxxx shall be entitled to (A) serve as a member of the
Board and (B) appoint one additional member of the Board, such additional member
currently being Xxxxxx Xxxxx, and to appoint any successors to any such
additional member, in each case, as set forth in the Stockholders' Agreement,
dated October 17, 1997, as amended (the "Xxxxx Stockholders' Agreement"), by and
among the Company, the Majority Stockholder and Xx. Xxxxx; (iv) the Stockholder
and the Majority Stockholder shall mutually agree on the appointment of the
remaining three members of the Board and their successors; and (v) in the event
that any person appointed to the Board pursuant to clause (iii) of this Section
4(a) is no longer serving on the Board, and no successor is to be appointed
pursuant to clause (iii) of this Section 4(a), then the Stockholder and the
Majority Stockholder shall mutually agree on the appointment of any successor(s)
to such person.
(b) The Company shall not take any action, and the Stockholder shall
cause the members of the Board appointed by the Stockholder pursuant to clause
(i) of Section 4(a) not to vote or take any action, with respect to any
incurrence of indebtedness by the Company, issuance of any securities of the
Company or any other financings or refinancings by the
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Company without prior consent of the Majority Stockholder or the members of the
Board appointed by the Majority Stockholder pursuant to clause (ii) of Section
4(a).
(c) The Company shall not take any action, and the Stockholder and the
Majority Stockholder shall each cause the members of the Board appointed by the
Stockholder or the Majority Stockholder, as applicable, not to vote or take any
action with respect to the approval of the Company's annual operating and
capital budget without prior consent of both the Stockholder and the Majority
Stockholder or the members of the Board appointed by the Stockholder and the
Majority Stockholder.
(d) Notwithstanding the foregoing, the parties hereto agree that,
subject to the Xxxxx Stockholders' Agreement, the Majority Stockholder shall
have the right to replace, remove or discharge any member of the Board of
Directors of the Company for any reason; provided, however, in the event that
the Majority Stockholder (i) replaces, removes or discharges any member of the
Board appointed by the Stockholder pursuant to clause (i) of Section 4(a), or
(ii) without the Stockholder's consent, replaces any member of the Board not
appointed by the Majority Stockholder pursuant to clause (ii) of Section 4(a)
above with any person that is employed by, or otherwise associated with, the
Majority Stockholder or any of its affiliates, the Stockholder shall have the
right to terminate the Services Agreement, dated as of January 24, 2003 among
the Company, the Subsidiary, the Stockholder and Xxxxxxx X. Xxxxxxx, Inc. (the
"Services Agreement") and such termination shall be deemed to be for "Good
Reason" (as defined in the Services Agreement).
(e) The Stockholder and the Majority Stockholder shall vote their
respective shares of Common Stock in a manner consistent with this Section 4.
(f) The rights provided to the Stockholder in Section 4(a) above shall
expire on the date the Services (as defined in the Services Agreement) terminate
for any reason.
5. Certain Rights.
(a) Drag Along Rights. If the Selling Stockholder (as defined below)
desires to sell all or substantially all of its shares of Common Stock
(including shares it acquires or holds through TPG-MD LLC) to a good faith
independent purchaser or purchasers (hereinafter referred to as a "Purchaser")
(other than any other investment partnership, limited liability company or other
entity established for investment purposes and controlled by the principals of
the Majority Stockholder or any of its affiliates, hereinafter a "Permitted
Transferee") and said Purchaser desires to acquire all or substantially all of
the issued and outstanding shares of Common Stock (or all or substantially all
of the assets of the Company) upon such terms and conditions as agreed to with
the Selling Stockholder, the Stockholder agrees to sell all or a Pro Rata
Portion (as defined below) of his Shares to said Purchaser (or to vote all of
his Shares in favor of any merger or other transaction which would effect a sale
of such shares of Common Stock or assets of the Company) at the same price per
share of Common Stock and pursuant to the same terms and conditions with respect
to payment for the shares of Common Stock as agreed to by the Selling
Stockholder. For purposes of this Agreement, but only with respect to a sale of
shares of Common Stock, "substantially all" shall mean at least 80% of the
shares of Common Stock then owned by the Majority Stockholder and all Permitted
Transferees, taken as a whole. In such case, the Selling Stockholder shall give
written notice of such sale to the Stockholder at least 45 days prior to the
consummation of such sale, setting forth (i) the consideration to be received by
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the holders of shares of Common Stock, (ii) the identity of the Purchaser, (iii)
any other material items and conditions of the proposed transfer and (iv) the
date of the proposed transfer.
(b) Tag Along Rights. (i) Subject to paragraph (iii) of this Section
5(b), if the Selling Stockholder proposes to transfer any of its shares of
Common Stock (including shares it acquires or holds through TPG-MD LLC) to a
Purchaser (other than a Permitted Transferee), then the Selling Stockholder
shall give written notice of such proposed transfer to the Stockholder (the
"Selling Stockholder's Notice") at least 45 days prior to the consummation of
such proposed transfer, and shall provide notice to all other stockholders of
the Company to whom the Majority Stockholder has granted similar "tag-along"
rights (such stockholders, together with the Stockholder, referred to herein as
the "Other Stockholders") setting forth for each class of shares (A) the number
of shares offered, (B) the consideration to be received for such shares by such
Selling Stockholder, (C) the identity of the Purchaser, (D) any other material
items and conditions of the proposed transfer and (E) the date of the proposed
transfer.
(ii) Subject to paragraph (iii) of this Section 5(b), upon delivery
of the Selling Stockholder's Notice, the Stockholder may elect to sell up to the
sum of (A) the Pro Rata Portion and (B) the Excess Pro Rata Portion (as defined
below) of the Shares, at the same price per share and pursuant to the same terms
and conditions with respect to payment as agreed to by the Selling Stockholder,
by sending written notice to the Selling Stockholder within 20 days of the date
of the Selling Stockholder's Notice, indicating his election to sell up to the
sum of the Pro Rata Portion plus the Excess Pro Rata Portion of his Shares in
the same transaction. Following such 20-day period, the Selling Stockholder and
each Other Stockholder shall be permitted to sell to the Purchaser on the terms
and conditions set forth in the Selling Stockholder's Notice the sum of (X) the
pro rata portion and (Y) the excess pro rata portion of its shares.
(iii) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 5(b) shall not apply to any sale or transfer by the
Majority Stockholder of shares of Common Stock unless and until the Majority
Stockholder, after giving effect to the proposed sale or transfer, shall have
sold or transferred in the aggregate (other than to Permitted Transferees)
shares of Common Stock, representing 7.5% of shares of Common Stock owned by the
Majority Stockholder on the date hereof.
(c) Piggyback Registration Rights.
(i) Notice to the Stockholder. If the Company determines that it
will file a registration statement under the Securities Act, other than a
registration statement on Form S-4 or Form S-8 or any successor form, for an
offering which includes shares of Common Stock held by the Majority Stockholder
or any Permitted Transferee, then the Company shall give prompt written notice
to the Stockholder that such filing is expected to be made (but in no event less
than 30 days nor more than 60 days in advance of filing such registration
statement), the jurisdiction or jurisdictions in which such offering is expected
to be made, and the underwriter or underwriters (if any) that the Company (or
the person requesting such registration) intends to designate for such offering.
If the Company, within 15 days after giving such notice, receives a written
request for registration of any Shares from the Stockholder, then the Company
shall include in the same registration statement the number of Shares to be sold
by the Stockholder as shall have been specified in his request, except that the
Stockholder shall not be permitted to register more than the Pro Rata Portion
plus the Excess Pro Rata portion of his Shares. The Company shall bear all costs
of preparing and filing the registration statement, and shall indemnify and hold
harmless, to the extent customary and reasonable, pursuant to
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indemnification and contribution provisions to be entered into by the Company at
the time of filing of the registration statement, the seller of any shares of
Common Stock covered by such registration statement.
Notwithstanding anything herein to the contrary, the Company, on prior
notice to the participating Stockholder, may abandon its intention to file a
registration statement under this Section 5(c) at any time prior to such filing.
(ii) Allocation. If the managing underwriter shall inform the Company
in writing that the number of shares of Common Stock requested to be included in
such registration exceeds the number which can be sold in (or during the time
of) such offering within a price range acceptable to TPG, then the Company shall
include in such registration such number of shares of Common Stock which the
Company is so advised can be sold in (or during the time of) such offering. All
holders of shares of Common Stock proposing to sell shares of Common Stock shall
share pro rata in the number of shares of Common Stock to be excluded from such
offering, such sharing to be based on the respective numbers of shares of Common
Stock as to which registration has been requested by such holders.
(iii) Permitted Transfer. Notwithstanding anything to the contrary
contained herein, sales of Shares pursuant to a registration statement filed by
the Company may be made without compliance with any other provision of this
Agreement.
(d) Definitions. For purposes of this Agreement:
(i) "Stockholder" shall include the Stockholder and, except for
purposes of Section 8(d) and where the context clearly otherwise requires, any
Stockholder Permitted Transferee and Xxxxxxx X. Xxxxxxx, Inc., a Delaware
Corporation;
(ii) "Selling Stockholder" shall include the Majority Stockholder and
any Permitted Transferee who serves notice of its intent to sell, or otherwise
intends to sell, its shares of Common Stock pursuant to Section 5 of this
Agreement;
(iii) "Pro Rata Portion", with respect to Shares owned by the
Stockholder (including Shares acquired and held through TPG-MD LLC), shall equal
the number of Shares that is proportional to the number of shares of Common
Stock that the Selling Stockholder is proposing to sell pursuant to Sections
5(a), 5(b) or 5(c), as applicable, as compared to the total number of shares
owned by the Stockholder and Selling Stockholder. The foregoing calculation (A)
shall be made after taking into account the pro rata portion of shares of Common
Stock that Other Stockholders (excluding the Stockholder) may sell in such
transaction which shall be calculated after giving effect to the Shares acquired
by the Stockholder pursuant to the exercise of Eligible Options as described
below, (B) shall be based on all of the shares of Common Stock owned by the
Stockholder (whether or not subject to vesting) and all options to purchase
Shares (whether or not currently exercisable) held by the Stockholder with an
exercise price that is less than the price per share being paid by the Purchaser
or expected to be received by the Selling Stockholder in the case of Section
5(c) (the "Eligible Options"), and (C) shall require the Stockholder to exercise
the number of Eligible Options such that, immediately prior to the consummation
of the applicable transaction, the Stockholder then owns the total number of
Shares that he is required or permitted to sell under Sections 5(a), 5(b) or
5(c), as applicable. While the calculation will be performed without regard to
whether the Shares are vested or the Eligible Options are exercisable, the
Stockholder shall satisfy his obligation to deliver Shares in any applicable
transaction in the following order: First -- fully owned and vested Shares;
Second
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-- unvested Restricted Shares; Third -- Shares acquired through the exercise of
Eligible Options that were or were scheduled to become exercisable on the date
the applicable transaction is consummated; and Fourth -- Eligible Options that
were not exercisable or scheduled to become exercisable on the date the
applicable transaction is consummated. (See Exhibit I attached hereto for an
example of the foregoing calculation). Notwithstanding anything to the contrary
in the Service Agreement, the Equity Plan or any related grant agreements, the
Stockholder shall be permitted to exercise any portion of an Eligible Option and
to transfer any unvested Restricted Shares and any Shares acquired pursuant to
the exercise of Eligible Options in any applicable transaction in which such
exercise and transfer is necessary to fulfill his Pro Rata Portion, and the
Company shall cooperate with the Stockholder so that the exercise of such
Eligible Options can occur contemporaneously with the closing of the sale to the
Purchaser. In the event the Other Stockholders do not elect to sell their entire
pro rata portion, the "Excess Pro Rata Portion", with respect to Shares owned by
the Stockholder (including Shares acquired and held through TPG-MD LLC, shall be
determined in the same manner as the Pro Rata Portion.
(e) Demand Registration Right. Following the first anniversary of the
existence of Public Market for the Common Stock, the Stockholder shall have the
right to deliver a written request to the Company to file a registration
statement(s) as may be necessary to permit the Stockholder to sell in the Public
Market the number of Shares as shall have been specified in the Stockholder's
written request and, upon receipt by the Company of such written request, the
Company shall use all commercially reasonable efforts to file, as soon as
practicable, such registration statement(s) with the Securities and Exchange
Commission (it is agreed that at any time when the Company is eligible to file a
registration statement on Form S-3 (or any successor form), the Stockholder may
request that the Company file a registration statement on Form S-3 (or any
successor form) to permit the offering of the Shares on a delayed or continuous
basis) and to cause such registration statement(s) to become effective as soon
as practicable thereafter and to remain effective until all Shares registered
thereunder have been sold; provided that a Public Market for the Common Stock
continues to exist and, in the event that the Company files a registration
statement on Form S-3, the Company continues to be eligible to file a
registration statement on Form S-3 (or any successor form), in each case, during
the period such registration statement(s) would be in effect; and provided,
further, that the Stockholder understands and agrees that this Section 5(e)
shall not be deemed to impose any obligations upon the Company to undertake any
action that, in the good faith opinion of the Board, would be reasonably likely
to delay or hinder any material transaction involving the Company, including but
not limited to any of the Company's debt or equity financings, or that would be
reasonably likely to be deemed to be a default or violation of any of the
Company's contracts in regard to any of such financings, including but not
limited to any "blackout" periods imposed by the Company's underwriters or
generally imposed by the Company on its executive officers. In the event that
the filing or effectiveness of any registration statement(s) requested pursuant
to this Section 5(e) is delayed pursuant to any of the provisos in the
immediately preceding sentence, the Company shall promptly file and/or cause
such registration statement(s) to become effective, as applicable, promptly
following the time that the circumstance(s) described in such proviso(s) that
necessitated such delay are no longer applicable. In the event the Company files
any registration statement on Form S-8 in respect of the Equity Plan, the
Company shall include the shares of Common Stock subject to purchase by the
Stockholder with respect to the unexercised options held by the Stockholder to
the extent permitted by applicable law.
(f) Consent Rights. For the period commencing on the date of this
Agreement and ending on January 31, 2004, the Company shall not issue shares of
Common Stock (including any securities or other rights convertible into, or
exchangeable or exercisable
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for, shares of Common Stock) to any entity or person other than (i) pursuant to
the Company's 1997 Stock Option Plan and the Equity Plan or (ii) to the members
of the Boards of Directors of the Company and the Subsidiary as compensation for
their services on such Boards, without the prior written consent of the
Stockholder, which consent shall not be unreasonably withheld; provided,
however, that this Section 5(d) shall not apply to any issuances of shares of
Common Stock (or any securities or other rights convertible into, or
exchangeable or exercisable for, shares of Common Stock) at a purchase price (or
conversion price, exchange price or exercise price, as the case may be) equal to
or greater than $6.82 per share of Common Stock (such minimum per share purchase
price (or conversion price, exchange price or exercise price, as the case may
be) being adjusted to the extent the "Exercise Price" (as defined in the Credit
Agreement) is adjusted pursuant to Section 7.02 of the Credit Agreement).
(g) Co-Investment Rights. For the period commencing on February 1,
2004 and ending on January 31, 2005, in the event the Company issues shares of
Common Stock (including any securities or other rights convertible into, or
exchangeable or exercisable for, shares of Common Stock) to any entity or
person, the Stockholder shall have the right to purchase up to such number of
shares of Common Stock (or any securities or other rights convertible into, or
exchangeable or exercisable for shares of Common Stock) equal to the Pro Rata
Ownership of the Stockholder immediately prior to such issuance at the same
purchase price (or conversion price, exchange price or exercise price, as the
case may be) paid by such entity or person, as would cause the Stockholder's Pro
Rata Ownership immediately following completion of such issuance to be equal to
the Stockholder's Pro Rata Ownership immediately prior to such issuance. As used
herein, "Pro Rata Ownership" shall be a fraction, the numerator of which shall
equal the number of Shares owned by the Stockholder immediately prior to such
issuance (whether or not subject to vesting, and including all shares issuable
upon exchange of the Tranche B Note (as defined in the Credit Agreement) and all
Shares subject to purchase by the Stockholder upon the exercise of all options
(whether or not currently exercisable) held by the Stockholder), and the
denominator of which shall equal the total number of shares of Common Stock
outstanding immediately prior to such issuance (exclusive of any treasury shares
but inclusive of any shares of Common Stock subject to purchase upon exercise of
any outstanding options (whether or not exercisable) and inclusive of all shares
issuable upon exchange of the Notes (as defined in the Credit Agreement).
6. Termination. This Agreement shall terminate immediately following
the existence of a Public Market for the Common Stock except that (i) the
requirements contained in Section 2 hereof shall survive the termination of this
Agreement and (ii) the provisions contained in Sections 3 and 5 hereof shall
continue with respect to each Share during such period of time, if any, as the
Stockholder is precluded from selling such Shares pursuant to Rule 144 of the
Securities Act.
7. Distributions With Respect To Shares. As used herein, the term
"Shares" includes securities of any kind whatsoever distributed with respect to
the Common Stock acquired by the Stockholder pursuant to the Equity Plan, the
Credit Agreement or otherwise or any such securities resulting from a stock
split, stock dividend, merger, consolidation, classification or similar
transaction involving such Common Stock.
8. Representations and Warranties and Certain Obligations.
(a) The Company, the Stockholder and the Majority Stockholder each
hereby severally represents and warrants to each of the other parties as
follows:
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(i) Authority; Enforceability. Such party has the legal capacity
or corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. Such party, if not an individual, is duly organized
and validly existing under the laws of its jurisdiction of organization, and the
execution of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary action. No other
act or proceeding, corporate or otherwise, on its part is necessary to authorize
the execution of this Agreement or the consummation of any of the transactions
contemplated hereby. This Agreement has been duly executed by such party and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with the terms of this Agreement, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or of
equity).
(ii) No Breach. Neither the execution of this Agreement nor the
performance by such party of its obligations hereunder nor the consummation of
the transactions contemplated hereby does or will:
(1) conflict with or violate its articles of incorporation,
bylaws or other organizational documents;
(2) violate, conflict with or result in the breach or
termination of, or otherwise give any other person the right to accelerate,
re-negotiate or terminate or receive any payment, or constitute a default or an
event of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default) under the terms of, any contract or
agreement to which it is a party or by which it or any of its assets or
operations are bound or affected;
(3) constitute a violation by such party of any laws, rules or
regulations of any governmental, administrative or regulatory authority or any
judgments, orders, rulings or awards of any court, arbitrator or other judicial
authority or any governmental, administrative or regulatory authority; or
(4) constitute a violation of any agreement to which such party
is a party.
(b) The Majority Stockholder represents and warrants to the
Company and the Stockholder that the Majority Stockholder will own, immediately
prior to the issuance of any shares pursuant to the Credit Agreement or the
reservation of any shares under the Equity Plan, 7,313,797 shares of Common
Stock of the Company, free and clear of any and all liens, claims and
encumbrances.
(c) The Company represents and warrants to the Majority
Stockholder and the Stockholder that, prior to the issuance of any shares
pursuant to the Credit Agreement or the reservation of any shares under the
Equity Plan, the total number of outstanding shares of common stock of the
Company on a fully diluted basis is 13,776,107 shares.
(d) In the event that Xxxxxxx X. Xxxxxxx is terminated for Cause
or resigns without Good Reason (each pursuant to and as defined in the
Employment Agreement between the Company and Xxxxxxx X. Xxxxxxx, dated as of
January 24, 2003 (the "Xxxxxxx Agreement") or that Xxxxxxx is terminated without
Cause with the Stockholder's consent or resigns for Good Reason as a result of
actions that were approved by or consented to by the Stockholder (collectively
referred to herein as a "Covered Termination"), in each case, prior to the
second anniversary of Xxxxxxx'x Commencement Date (as defined in the Xxxxxxx
Agreement), the Stockholder shall be personally responsible to pay the Company
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$1,000,000, plus in the case of a termination without Cause or for Good Reason
under the Xxxxxxx Agreement, the excess of (i) $480,000 (reduced by two times
the amount of any increase in Xxxxxxx'x annual Base Salary since Xxxxxxx'x
Commencement Date over (ii) the pro-rata bonus that Xxxxxxx would be entitled to
under Section 6(a) of the Xxxxxxx Agreement within ten (10) days of Xxxxxxx'x
Date of Termination (as defined in the Xxxxxxx Agreement). In addition, in Date
of the event of a Covered Termination after the first anniversary and prior to
the second anniversary of Xxxxxxx'x Commencement Date, the Stockholder shall be
personally responsible to pay the Company the amount of any Long-Term Incentive
(not to exceed $400,000) paid to Xxxxxxx pursuant to Section 2(d) of the Xxxxxxx
Agreement.
9. Capitalized Terms. All capitalized terms used herein and
otherwise not defined herein shall have the meaning ascribed to such terms in
the Equity Plan.
10. Amendment; Assignment. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by authorized representatives of the parties
or, in the case of a waiver, by an authorized representative of the party
waiving compliance. No such written instrument shall be effective unless it
expressly recites that it is intended to amend, supersede, cancel, renew or
extend this Agreement or to waive compliance with one or more of the terms
hereof, as the case may be. Except for the Stockholder's right to assign his
rights under Section 3 to a Stockholder Permitted Transferee and the Majority
Stockholder's right to assign its rights under Section 5 to a Permitted
Transferee, no party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto, other than by will or the laws of descent and distribution.
11. Notices. All notices and other communications hereunder shall
be in writing, shall be deemed to have been given if delivered in person or by
certified mail, return receipt requested, and shall be deemed to have been given
when personally delivered or three (3) days after mailing to the following
address:
If to the Stockholder:
Xxxxxxx X. Xxxxxxx
c/o Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Esq.
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Esq.
If to the Company:
J. Crew Group, Inc.
000 Xxxxxxxx
Xxx Xxxx, XX 00000
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Attention: Board of Directors and Secretary
with a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
If to the Majority Stockholder:
TPG Partners II, L.P.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
with a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of NEW YORK.
14. Binding Effect. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the heirs, personal representatives,
successors and permitted assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement, or their respective heirs,
personal representatives, successors or assigns, any legal or equitable rights,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
15. Entire Agreement. This Agreement, along with the Stock Option
Grant Agreement and the Restricted Stock Grant Agreement, to be entered into by
and between the Company and the Stockholder pursuant to the terms of the Equity
Plan, constitute the entire agreement between the parties hereto with respect to
the subject matter hereof.
16. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10
17. Miscellaneous. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * * *
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
J. CREW GROUP, INC.
/s/ Xxxxx X. Xxxxx
-----------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P
By: TPG Advisors II, Inc.
/s/ Xxxx Xxxxx
-----------------------------
Name: Xxxx Xxxxx
Title: Partner
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx
EXHIBIT I
Example of Pro Rata Portion Calculation
Assumptions:
SHARE OWNERSHIP
Selling Stockholder 600 Shares
Stockholder 100 Shares Restricted Stock - 25% vested
300 Shares underlying Eligible Options - 25% vested
Other Stockholders 200 Shares
The Selling Stockholder proposes to sell 500 Shares.
All Stockholders elect to sell the maximum number of shares.
To determine the number of Shares that the Stockholder must exercise, apply the
following formula:
[(OS/AGG+Y) * PUR]+(MDO + Y)+ [(MDO + Y) * SSTS/MDT] = PUR
where
OS = Other Stockholders' (excluding the Stockholder) outstanding shares
AGG = Aggregate outstanding shares excluding Eligible Options
PUR = Number of shares to be sold to a third party purchaser
MDO = Stockholder's outstanding Shares excluding Eligible Options
MDT = Stockholder's total Shares including Eligible Options
SSTS = Selling Stockholder's total shares
Y = The number of Eligible Options the Stockholder must exercise
[(200/(900+Y)) * 500] + (100 + Y) + [(100 + Y) * (600/400)] = 500
(100,000/(900 + Y)) + (100 + Y) + (6,000 + (600Y/400)) = 500
(100,000/900 + Y) + 100 + Y + 150 + 1.5Y = 500
100,000/900 + Y = 250 - 2.5Y
100,000 = (250 - 2.5Y)(900 + Y)
100,000 = 225,000 + 250Y - 2,250Y - 2.5Y/2/
2.5Y/2/ - 250Y + 2,250Y = 125,000
2.5Y/2/ + 2000Y = 125,000
Y = 58.25
The Stockholder must acquire 58 Shares pursuant to the exercise of Eligible
Options.
Total Sales:
Selling Stockholder 238 Shares
Stockholder 158 Shares
Other Stockholders 104 Shares
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Total 500 Shares
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