STOCK OPTION GRANT AGREEMENT
THIS AGREEMENT, made as of this 17th day of October,
1997 between J. CREW GROUP INC. (the "Company") and Xxxxx Xxxxx (the
"Participant").
WHEREAS, the Company has adopted and maintains the J.
Crew Group 1997 Stock Option Plan (the "Plan") to promote the
interests of the Company and its stockholders by providing the
Company's key employees with an appropriate incentive to
encourage them to continue in the employ of the Company and to
improve the growth and profitability of the Company;
WHEREAS, the Plan provides for the grant to
Participants in the Plan of Non-qualified Stock Options to
purchase the Securities (as such term is hereinafter defined).
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto
hereby agree as follows.
1. Grant of Options. Pursuant to, and subject to, the
terms and conditions set forth herein and in the Plan, the
Company hereby grants to the Participant a NON-QUALIFIED STOCK
OPTION (the "Option") with respect to the Securities.
2. Grant Date. The Grant Date of the Option hereby
granted is October 17, 1997.
3. Incorporation of Plan. All terms, conditions and
restrictions of the Plan are incorporated herein and made part
hereof as if stated herein, except as specifically stated herein
and except that references to the interpretation and findings of
the Committee being final and binding, including such reference
in Section 3.2 of the Plan, shall not apply to this Stock Option
Grant Agreement. If there is any conflict between the terms and
conditions of the Plan or this Agreement, the terms and
conditions of this Agreement shall govern except as specifically
provided herein. All capitalized terms used herein and not
otherwise defined shall have the meaning given to such terms in
the Plan unless it is specified that such term shall have the
meaning given such term in the Employment Agreement between the
Participant, J. Crew Group Inc. and J. Crew Operating Corp.,
dated October 17, 1997. Sections 3.4, 4.12(a) and 4.13 of the
Plan shall not apply to the Option granted hereunder.
4. Exercise Price and Vesting Date. The Option shall be
divided into five equal tranches, each of which shall relate to a
pro rata portion of each separately identifiable security
constituting the Securities, as set forth in the table below. The
exercise of any portion of the Option shall require the purchase
of a pro rata portion of each separately identifiable security
constituting the Securities subject to the Option.
Tranche Date First
Number % of Grant Exercisable Exercise Price
------ ---------- ----------- --------------
1 20% of Securities October 17, 1998 125% of TPG II's Price
subject to the Option
2 20% of Securities October 17, 1999 156.25% of TPG II's Price
subject to the Option
3 20% of Securities October 17, 2000 195.31% of TPG II's Price
subject to the Option
4 20% of Securities October 17, 2001 244.14% of TPG II's Price
subject to the Option
5 20% of Securities October 17, 2002 305.18% of TPG II's Price
subject to the Option
Notwithstanding the foregoing, the Option shall become
immediately exercisable upon the occurrence of any of the
following: (i) the Participant's employment is terminated by the
Company without Cause or by the Participant for Good Reason, (ii)
the Participant's employment is terminated by reason of death or
Disability, or (iii) a Change in Control of the Company. The
terms "Cause," "Good Reason," and "Disability" shall have the
meaning set forth in the Employment Agreement.
5. Definition of Securities. For purposes of this Stock
Option Grant Agreement, the term "Securities" shall mean (i) 820
shares of Common Stock and (ii) a number of shares of preferred
stock ("Preferred Stock") of the Company the purchase price for
which (at TPG II's Price) bears the same ratio to the aggregate
purchase price for such number of shares of Common Stock (at TPG
II's Price) as the ratio of the aggregate purchase price paid by
TPG II for the purchase of Preferred Stock at the Closing bears
to the aggregate purchase price paid by TPG II for Common Stock
at the Closing. If, subsequent to the Closing, TPG II sells all
or any portion of the Preferred Stock acquired by it at the
Closing, the amount of Preferred Stock included in the definition
of Securities shall thereafter be reduced by replacing in clause
(ii) above, (I) the aggregate purchase price paid by TPG II for
the purchase of the Preferred Stock at the Closing with (II) the
aggregate purchase price paid by TPG II for the purchase of such
reduced amount of Preferred Stock as is held by TPG II after such
sale; provided, that no such sale shall have any retroactive
effect with respect to or related to any portion of the Option
exercised by the Participant prior to such sale. For purposes of
this Stock Option Grant Agreement, "TPG II's Price" shall mean
the per share price paid for the Securities at the Closing
multiplied by the number of shares or units of the applicable
Security and the term "Closing" shall have the meaning set forth
in the Employment Agreement.
6. Exercise of the Option. The Participant may exercise
the Option, or any portion thereof, to the extent exercisable
pursuant to Section 4 herein, by complying with the method of
exercise procedures described in Section 4.10 of the Plan;
provided, that prior to the existence of a Public Market, the
term "Fair Market Value" under the Plan shall be replaced with
the term "Appraised Value" within the meaning of, and as
determined pursuant to, the Stockholders' Agreement; and provided,
further that, if at the time of exercise the Participant
2
also exercises her put right pursuant to Section 3(b) of the
Stockholders' Agreement between the Company, the Participant and
TPG Partners II, L.P. ("TPG II"), dated October 17, 1997 (the
"Stockholders' Agreement"), the Participant may make such
exercise contingent upon the Appraised Value (as determined under
the Stockholders' Agreement) for each share of Common Stock being
greater than the per share Exercise Price provided herein. Upon
the Participant's request, the Company shall withhold a portion
of the shares of Common Stock underlying the Option that would
otherwise be distributed to the Participant to satisfy the
applicable federal, state and local withholding taxes incurred by
the Participant as a result of the exercise of the Option.
7. Option Expiration Date. Subject to the provisions of
the Plan, the Option shall expire and be canceled on the tenth
anniversary of the Grant Date; provided, that the Option shall
expire prior to the tenth anniversary of the Grant Date as
follows: (i) to the extent the Option is not exercisable on the
date the Participant's Employment terminates for any reason
(taking into account any acceleration event occurring on such
date of termination), such Option shall expire and be canceled on
the date the Employment terminates; and (ii) to the extent the
Option is exercisable on the date the Participant's Employment
terminates, the Option shall expire and be canceled (A) two years
after termination of the Participant's Employment by reason of
death or Disability (but not later than the tenth anniversary of
the Grant Date), (B) on the commencement of business on the date
the Participant's Employment is, or is deemed to have been,
terminated by the Company for Cause or by the Participant without
Good Reason, or (C) the end of the full ten-year term upon any
other termination of Employment. The terms "Cause", "Good Reason"
and "Disability" shall have the meaning set forth in the
Employment Agreement. If, within one year after the date of the
Participant's termination of Employment, it is discovered that
the Participant's Employment could have been terminated for
Cause, the Participant's Employment shall, at the election of the
Committee, be deemed to have been terminated for Cause
retroactively to the date the events giving rise to Cause
occurred.
8. Adjustment to Option. In the event of a merger,
consolidation, liquidation, stock split, reverse stock split,
stock dividend or distribution, spin-off, recapitalization, share
exchange, reorganization, extraordinary dividend, non-arm's
length transaction with TPG II or its affiliates other than
customary management and advisory fees or any other similar
corporate transaction, the Company shall adjust the number of
shares of Common Stock and/or kind of securities subject to the
Option, the Exercise Price per share of Common Stock or the terms
of the Option to prevent the enlargement or dilution of the
value, rights and benefits of the Option and it shall be a
condition to any such transaction that adequate provision shall
have been so made.
9. Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any party hereto upon any
breach or default of any party under this Agreement, shall impair
any such right, power or remedy of such party nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent
or approval of any kind or character on the part of any party of
any breach or
3
default under this Agreement, or any waiver on the part of any
party or any provisions or conditions of this Agreement, shall be
in writing and shall be effective only to the extent specifically
set forth in such writing.
10. Limitation on Transfer. During the lifetime of
the Participant, the Option shall be exercisable only by the
Participant. The Option shall not be assignable or transferable
otherwise than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the Participant may
assign her rights with respect to the Option granted herein to a
trust, partnership, LLC or custodianship the beneficiaries,
partners or members of which may include only the Participant,
the Participant's spouse, or the Participant's lineal descendants
(by blood or adoption). In the event of any such assignment, such
trust or custodianship shall be subject to all the restrictions,
obligations and responsibilities as apply to the Participant
under the Plan and this Stock Option Grant Agreement and shall be
entitled to all the rights of the Participant under the Plan. All
Securities obtained pursuant to the Option granted herein shall
be subject to any limitations on transfer provided in the
Stockholders' Agreement.
11. Integration. This Agreement, and the other documents
referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with
respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than
those expressly set forth herein. This Agreement, including
without limitation the Plan, supersedes all prior agreements and
understandings between the parties with respect to its subject
matter.
12. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
13. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of New York, without regard to the provisions governing
conflict of laws.
14. Participant Acknowledgment. The Participant hereby
acknowledges receipt of a copy of the Plan.
4
IN WITNESS WHEREOF, the Company has caused this Agreement
to be duly executed by its duly authorized officer and said
Participant has hereunto signed this Agreement on her own behalf,
thereby representing that she has carefully read and understands
this Agreement and the Plan as of the day and year first written
above.
J. CREW GROUP INC.
By:
------------------------------
------------------------------
Xxxxx Xxxxx
5
