FORM OF LETTER AGREEMENT BETWEEN XXXXXXX Exhibit 10.5
XXXXX AND J. CREW GROUP, INC. ------------
January 27, 1998
Xx. Xxxxxxx Xxxxx
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Matt,
This letter agreement ("Agreement") will supersede your
current employment agreement dated September 20, 1995
(countersigned by you on September 21, 1995) and the "Incentive
Award for Xxxx Xxxxx" dated January 29, 1997 as well as any other
agreements, arrangements, or understandings of any kind (written
or oral) pertaining to your relationship with J.Crew Group, Inc.
or any of its subsidiaries and affiliates (hereinafter "the
"Company"), including your employment, compensation, equity or
other incentive or transaction bonuses, plans or programs or any
other benefits or perquisites, except that you will be eligible
to participate in the 1997 J.Crew Stock Option Plan pursuant to
the terms and conditions of such plan.
You will be employed as President of Popular Club Plan
("PCP") and shall report to the Chief Executive Officer of J.Crew
Operating Corp. or to such other person or persons as the Chief
Executive Officer directs or that the Company may determine. You
will be required to devote your full time and best efforts,
attention, and energy to the performance of your duties to the
Company.
Your annual base salary shall be $475,000 and shall be paid
pursuant to regular company payroll practices.
You will continue to be eligible for an annual bonus in
fiscal year 1997 which will be determined in accordance with the
provisions of Appendix A to this Agreement. The Company will
present to you in 1998 a bonus schedule for fiscal year 1998. It
is Company policy to make bonus payments in mid-April after the
close of our fiscal year, and only to individuals actively
employed on the date of disbursement. Of course this policy shall
apply to all bonuses payable hereunder.
In addition, in the event of a sale of all the assets or
common stock of PCP during your employment hereunder, you will be
eligible for a transaction bonus (the "Transaction Bonus") based
on the gain from such sale, as described in Appendix B attached
to this Agreement. For this purpose, "gain" shall mean the
portion of the amount received by the Company in connection with
the sale of PCP in excess of the greater of (i) $50 million or
(ii)the twelve month average of the net book value of the assets
of PCP (i.e., total shareholder's equity). The portion of the
amount received by the Company shall be determined on a pre-tax
basis as follows: (i) 80% of the Transaction Bonus on the date of
the closing of the transaction, and (ii) an amount equal to (A)
100% of the Transaction Bonus, adjusted to reflect any
post-closing adjustments minus (B) the amount of Transaction
Bonus previously paid on the date of the closing of the
transaction, within thirty days after the post-closing
adjustments are finalized. If the amount determined pursuant to
the preceding sentence is a negative number, you will pay such
amount over to the Company within thirty days after the date the
Company notifies you of such amount. In no event will you be
required to pay to the Company an amount in excess of the amount
the Company paid to you on the closing of the transaction with
respect to the Transaction Bonus.
During your employment hereunder, the Company will continue
to provide you with a car per your current lease.
The Company's benefit package currently includes 3 weeks
vacation, 3 personal days, holidays, life insurance, medical
insurance, long term disability, 401K tax deferred savings plan,
a health flexible spending account, and the employee discount.
The Company reserves the right to change these benefits at any
time at its sole discretion.
In addition to the benefits stated above, the Company will
pay premiums on a life insurance policy at a cost not to exceed
$13,000 per year (the "Additional Life Insurance"). The life
insurance will be payable to the beneficiary or beneficiaries
that you designate.
If the Company terminates your employment for any reason
whatsoever other than death, disability, or cause (cause shall
include breach of this agreement, dishonesty, theft,
embezzlement, material dereliction in the performance of your
duties, insobriety or drug use while performing duties and
conviction of a crime other than traffic violations or minor
misdemeanors), or if you are not offered comparable employment
either by the Company or by the acquirer in the event of a sale
of PCP, the Company will continue your base pay, medical benefits
and the premium payments for the Additional Life Insurance for a
period of twelve months; provided that you are in compliance with
the restrictive covenants provided in this Agreement and that you
execute a general release and waiver, waiving all claims you may
have against the Company. During such twelve-month period, salary
continuation, medical benefits, and premium payments for the
Additional Life Insurance will be paid provided that you exercise
good faith efforts to promptly obtain new employment. The Company
shall have the right to terminate any salary and medical
continuation payments when you obtain new employment and to
offset your base pay continuation by the amount of compensation
that you earn during such twelve-month period from such new
employment. If, however, you resign, become disabled, die, or are
terminated for cause, no salary and benefit continuation will be
paid. Your relationship with the Company is one of employment at
will, and the payments described in this paragraph are the only
payments to which you will be entitled as a result of the
termination of your employment.
As additional consideration for the Company entering into
this agreement and agreeing to make the salary continuation
payments described above, you agree that during your employment
by the Company and for a period of twelve months after the later
of the date on which any employment or consulting relationship is
terminated or the date on which the last salary, salary
continuation, bonus, or other payment is made, you shall not
directly or indirectly solicit, hire, or seek to influence on
behalf of any person or entity any employee of the Company.
You agree that, while employed and thereafter, you will
hold in strict confidence any proprietary or confidential
information or material related to the Company. This includes but
is not limited to customer lists, trade practices, marketing
techniques, pricing structures and practices, research, trade
secrets, processes, systems, programs, methods, software,
merchandising, planning, inventory and financial control, store
design, staffing, etc. You also agree that breach of the
confidentiality or employee non-solicitation provisions
previously noted would cause the Company to suffer irreparable
harm for which money damages would not be an adequate remedy and
we would be entitled to temporary and permanent injunctive relief
in any Court of competent jurisdiction (without the need to post
any bond).
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 or with your professional advisors for the
purposes of discussing the subject matter hereof and, with
respect to such professional advisors, 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. Further, you agree not to directly
or indirectly disparage or defame the Company or any of its
directors, officers or employees.
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.
No provision of this Agreement may be amended or waived,
unless such amendment or waiver is specifically agreed to in
writing and signed by you and an officer of the Company duly
authorized to execute such amendment.
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, and
consents to service of process by U.S. certified or registered
mail in any action or proceeding with respect to this Agreement.
If the terms of this letter Agreement meet with your
approval, please sign and return one copy to me.
Sincerely,
Xxxxx Xxxxx
Chairman & CEO
Agreed to and Accepted:
-----------------------------------------
Xxxx Xxxxx Date
Exhibit A
---------
Xxxx Xxxxx
fy97 bonus ($k)
PCP
Fiscal Year Profit Before Taxes Annual Bonus
----------- ------------------- ------------
1997 less than 2,000 -0-
2,000 50
3,000 125
4,000 200
5,000 275
6,000 350
7,000 425
Exhibit B
---------
PCP Disposition Bonus - equals the sum of (i) 12% of gain, if any, from
$2.5 million to and including $5 million, plus
(ii) 15% of gain, if any, above $5 million.
Schedule
$k
--------------------
Award Gain Bonus
----- ---- -----
12% of gain <2,500 0
3,000 60
3,500 120
4,000 180
4,500 240
5,000 300
15 % of gain 5,500 375
6,000 450
6,500 525
7,000 600
7,500 675
8,000 750
8,500 825
9,000 900
9,500 925
10,000 1,050
15,000 1,800
20,000 2,550
30,000 4,050
