Exhibit 10.7
J. Crew Operating Corp.l
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
February 18, 2000
Ms. Xxxxx Xxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxxxxx 00X
Xxx Xxxx, XX 00000
Dear Xxxxx,
We are delighted that you have decided to return to J. Crew Operating Corp.
(the "Company"). We thought it would be useful to lay out the terms and
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conditions of our agreement in this letter agreement ("Agreement") for both
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parties to sign.
1. Employment.
During the Employment Period (as defined below), you will be employed as
President of the Company and shall report to the Chief Executive Officer of the
Company or to another officer serving in the capacity of Chief Executive
Officer. You will be required to devote your full time and best efforts,
attention and energy to the performance of your responsibilities and duties to
the Company, and you may be required to serve as an officer of certain of the
Company's subsidiaries or affiliates as the Company may determine. The
"Employment Period" shall commence on February 27, 2000 (the "Effective Date")
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and shall terminate on the third anniversary of such Effective Date, unless
sooner terminated as provided in Section 3 hereof.
2. Compensation and Benefits.
(a) During the Employment Period, your annual base salary (the "Base
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Salary") shall be $500,000 and shall be paid pursuant to regular company payroll
practices.
(b) In addition to the Base Salary, in each fiscal year during the
Employment Period, starting with the fiscal year beginning on February 1, 2000,
you will have the opportunity to earn an annual bonus ("Annual Bonus") with the
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target Annual Bonus set at fifty percent (50%) of Base Salary and the stretch
Annual Bonus set at one hundred percent (100%) of Base Salary, in each case,
based upon and subject to the Company achieving certain performance objectives
(which will be determined by the Company for each such fiscal year). The
performance objectives will be determined in a manner that is generally
consistent with the other executive officers of the Company. The Annual Bonus
will be paid no later than May 1 following the
fiscal year for which it relates and such Annual Bonus will be paid only if you
are actively employed with the Company and not in breach of this Agreement on
such date of disbursement.
(c) On the payroll date immediately following the Effective Date, the
Company will pay you a one-time signing bonus in the amount of $275,000 (the
"Signing Bonus"), provided that you will be required to immediately pay back a
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pro-rata portion of such Signing Bonus in the event that you voluntarily
terminate your employment with the Company prior to the second anniversary of
the Effective Date.
(d) You will be eligible to participate in the 1997 J. Crew Stock Option
Plan (the "Option Plan"). As soon as practicable after the Effective Date and
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subject to approval of the Compensation Committee of the Board of Directors of
J. Crew Group, Inc. (the "Parent") and the shareholders of the Parent, the
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Company will cause the Parent to grant to you two stock options (each an
"Option") to purchase a specified number of shares of common stock of the Parent
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under the Option Plan. The first Option (the "First Option") will provide you
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with the opportunity to purchase 37,600 shares of common stock of the Parent at
an exercise price of $6.82 per share, and shall become exercisable on the same
vesting schedule that applied to the options that were previously granted to you
under the Option Plan during your previous employment with the Company (the
"Prior Option Grants"), it being understood that any portion of the First Option
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that would have been exercisable as of the date of grant under the Prior Option
Grants shall become immediately exercisable, and provided that you are actively
employed by the Company on each subsequent vesting date. The second Option (the
"Second Option") will provide you with the opportunity to purchase 32,400 shares
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of common stock of the Parent at an exercise price of $10.00 per share, which
shall become exercisable as follows: 6,480 shares on each of January 31, 2001,
January 31, 2002, January 31, 2003, January 31, 2004 and January 31, 2005,
provided that you are actively employed by the Company on each such date. Each
Option shall be subject to the terms and condition set forth in the Stock Option
Plan and shall be evidenced by a separate stock option grant agreement. Each
Option shall become exercisable in full upon a Change in Control as defined in
the Stock Option Plan.
(e) During the Employment Period, you will be entitled to the benefit
package made available generally to the employees of the Company. Currently,
the Company provides a paid time off plan, which in your case will include four
weeks paid vacation, as well as life insurance, medical insurance, long term
disability, 401(k) tax deferred savings plan, a health flexible spending
account, and an employee discount. The Company reserves the right to change
these benefits at any time in its sole discretion.
(f) During the Employment Period, you will receive a monthly automobile
allowance in the amount of $675.00 per month.
3. Termination from Employment.
(a) If the Company terminates your employment for other than death,
Disability (as defined below) or Cause (as defined below) or if you terminate
your employment for Good Reason (as defined below), you shall be entitled to any
earned but unpaid Base Salary as of the date of termination and the Company will
continue your base salary and medical benefits for a period of twelve months;
provided that (i) you are in compliance with the restrictive covenants
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provided in this Agreement and (ii) you execute a general release and waiver,
waiving all claims you may have against the Company, its affiliates, officers,
employees and directors. If, however, you resign (other than for Good Reason as
provided above), become Disabled (as defined below), die, or are terminated for
Cause, no salary continuation will be paid. Except as provided in this Section
3(a), no further compensation shall be due upon your termination of employment.
(b) For purposes of this Agreement, "Cause" shall mean (i) the commission
of a felony, (ii) willful misconduct or gross negligence in connection with the
performance of your duties as an employee of the Company, (iii) a material
breach of this Agreement, (iv) a fraudulent act or omission by you adverse to
the reputation of the Company or any affiliate, and (v) the disclosure by you of
any Confidential Information (as defined in Section 4(b) hereof) to persons not
authorized to know such information. If subsequent to your termination of
employment, it is discovered that your employment could have been terminated for
Cause, your employment shall, at the election of the Company, in its sole
discretion, be deemed to have been terminated for Cause. In addition, for
purposes of this Agreement, "Disability" shall mean a disability entitling you
to benefits under the Company's long-term disability plan., and "Good Reason"
shall mean (i) a material adverse change in the terms and conditions of your
employment, (ii) a decrease in your Base Salary or Bonus opportunity, or (iii)
the failure of the Parent to grant to you the stock options described in Section
2(d) hereof within a reasonable period of time after the Effective Date, in
each case, provided that you serve the Company with notice specifying the events
or circumstances which you believe give rise to Good Reason within sixty days
after the occurrence of such events and provide the Company with a reasonable
period of time (not to exceed thirty days) to cure such adverse change, decrease
or failure.
4. Restrictive Covenants.
(a) As additional consideration for the Company entering into this
Agreement and agreeing to make the salary continuation payments described in
Section 3(a) hereof, you agree that during the Employment Period and for a
period of one (1) year after your employment with the Company terminates, you
shall not:
(i) solicit or hire or assist any other person or entity in soliciting or
hiring any employee of the Company or of any of its subsidiaries to perform
services for any entity (other than the Company or any of its subsidiaries), or
attempt to induce any such employee to leave the employ of the Company or any of
its subsidiaries;
(ii) (1) engage (either as owner, investor, partner, member, shareholder,
employer, employee, consultant or director) in or otherwise perform services for
any Competitive Business (as defined below) which operates within a 50 mile
radius of the location of any store of the Company or any of its affiliates or
in the same area that the Company directs its mail order operations, provided
that such restriction shall not prohibit you from owning a passive investment
of not more than 5% of the total outstanding securities of any publicly-traded
company and shall not prohibit you from performing services for an entity that
engages in a Competitive Business as well as other non-competitive businesses if
your services are solely related to such entity's non-competitive businesses and
(2) solicit or cause another to solicit any customers or suppliers of the
Company or any of its subsidiaries to terminate or otherwise
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adversely modify their relationship with the Company or any such subsidiary. The
term "Competitive Business" means the retail, mail order and/or internet adult
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apparel and/or accessories business and/or any other substantial business of the
Company or its affiliates on the date of termination.
(b) During your Employment Period and thereafter, you will hold in strict
confidence any proprietary or Confidential Information (as defined below)
related to the Company and its affiliates. For the purposes of this Agreement,
the term "Confidential Information" shall mean all information of the Company or
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any of its affiliates (in whatever form) which is not generally known to the
public, including without limitation any inventions, designs, store plans,
processes, methods of distribution, customer lists or customers' or the
Company's trade secrets;
(c) Upon termination from employment, you shall not take, without the
prior written consent of the Company, any drawing, specification or other
document (in whatever form) of the Company or its affiliates, which is of a
confidential nature relating to the Company or its affiliates, or, without
limitation, relating to its or their methods of distribution, or any description
of any source or pricing information and will return any such information (in
whatever form) then in your possession;
(d) You agree not to defame or disparage the Company, its affiliates and
their officers, directors, members or employees. You agree to cooperate with
the Company in refuting any defamatory or disparaging remarks by any third party
made in respect of the Company or its affiliates or their directors, members,
officers or employees. The Company agrees to use its reasonable efforts to
prevent its senior executive officers from making any defamatory or disparaging
remarks about you and agrees to cooperate with in refuting any defamatory or
disparaging remarks by any third party made in respect of you.
(e) You also agree that breach of the confidentiality or employee non-
solicitation, non-competition and non-disparagement provisions provided in
paragraphs (a), (b), (c) and (d) of this Section 4 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 you breach any of the
Restrictive Covenants provided herein, in addition to all other remedies which
the Company may have at law or equity, the Company would be entitled to
temporary and permanent injunctive relief in any court of competent jurisdiction
(without the need to post any bond).
(f) You agree not to disclose any information regarding the existence or
substance of this Agreement to any third party, without the prior written
consent of the Company except as may be required by law, during any legal
proceeding relating to this Agreement or with your professional advisers for
purposes of discussing the subject matter hereof and, with respect to such
professional advisers, you agree to inform them of your obligations hereunder
and take all reasonable steps to ensure that such professional advisers do not
disclose the existence or substance hereof.
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5. Representations.
(a) You and the Company represent that they each have the authority to
enter into this Agreement, and you hereby represent to the Company that the
execution of, and performance of duties under, this Agreement shall not
constitute a breach of or otherwise violate any other agreement to which you are
a party other than any notice provisions.
(b) You hereby represent to the Company that you will not utilize or
disclose any confidential information obtained by you in connection with your
former employment with respect of the duties and responsibilities hereunder.
6. Miscellaneous.
(a) This Agreement shall inure to the benefit of and be an obligation of
the Company's assigns and successors; however you may not assign your duties and
obligations hereunder to any other party.
(b) This Agreement and all amendments thereof shall, in all respects, be
governed by and construed and enforced in accordance with the internal laws
(without regard to principles of conflicts of law) of the State of New York.
Each party hereto hereby agrees to and accepts the exclusive jurisdiction of any
court in New York County or the U.S. District Court for the Southern District of
New York in that County in respect of any action or proceeding relating to the
subject matter hereof, expressly waiving any defense relating to jurisdiction or
forum non conveniens.
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(c) Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and shall be deemed to be
given when delivered personally or three days after it is sent by registered or
certified mail, postage prepaid, or one day after it is sent by a reputable
overnight carrier service (next-day service), and, in each case, addressed as
follows: To you, at the address appearing at the beginning of this Agreement,
and to the Company at 000 Xxxxxxxx, Xxx Xxxx, XX 00000, Attention General
Counsel.
(d) This Agreement constitutes the entire agreement among the parties
hereto with respect to your services hereunder, and supersedes and is in full
substitution for any and all prior understandings or agreements with respect to
your services hereunder.
(e) This Agreement may be amended only by an instrument in writing signed
by the parties hereto, and any provision hereof may be waived only by an
instrument in writing signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of any party hereto at any
time to require the performance by any other party hereto of any provision
hereof shall in no way affect the full right to require such performance at any
time thereafter, nor shall the waiver by any party hereto of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or a waiver of the provision itself or a waiver of any other
provision of this Agreement.
(f) If any provision of this Agreement or portion thereof is so broad, in
scope or duration, so as to be unenforceable, such provision or portion thereof
shall be interpreted to be only so broad as is enforceable.
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(g) The Company may withhold from any amounts payable to you hereunder all
federal, state, city or other taxes that the Company may reasonably determine
are required to be withheld pursuant to any applicable law or regulation.
(h) 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.
(i) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. A facsimile of a signature shall be deemed to be and shall be
treated as an original signature hereto.
(j) The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning of
any provision hereof.
If the terms of this letter Agreement meet with your approval, please sign
and return one to me.
Sincerely,
_______________________
Xxxx Xxxxxxx
Chief Executive Officer
Agreed to and Accepted:
______________________
Xxxxx Xxxxxxxx Date
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