Exhibit 10.36
EXECUTION COPY
SECOND AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT, dated as of the 20th day of October, 2005
(this “ Agreement ”), among J.Crew Group, Inc.,
a Delaware Corporation (the “ Parent ”) and its
operating subsidiary J.Crew Operating Corp. (collectively with the
Parent, the “ Company ”), with offices at 770
Broadway, New York, New York 10003 and Millard S. Drexler (the
“ Executive ”).
1. Purpose and Effective Date;
Term; Position and Responsibilities; Company Headquarters and
Executive Work Location .
(a) Purpose and Effective
Date . This Agreement is being entered into for the limited
purpose of documenting compliance with Section 409A of the
Internal Revenue Code of 1986, as amended (the “ Code
”), as more fully set forth in Section 15(m) hereof.
This Agreement shall amend and restate the Amended and Restated
Employment Agreement entered into on October 20, 2005, and,
except as otherwise specifically provided in Section 15(m),
shall be effective as of the same date (the “ Effective
Date ”).
(b) Term . Except as
specifically provided herein, this Agreement shall amend and
replace the Service Agreement, dated January 24, 2003. As of
the Effective Date, the Company and the Executive extended the
original term of this Agreement that commenced on January 27,
2003 (as provided in the prior Services Agreement), so that it ends
on August 31, 2008, unless terminated earlier pursuant to
Section 4 hereof. The Agreement shall thereafter be deemed to
be automatically extended, upon the same terms and conditions, for
successive periods of one year each, unless either party, at least
ninety (90) days prior to the expiration of the term or any
extended term, gives written notice to the other of its intention
not to renew such term (the term of this Agreement, as extended,
being the “Term of Employment”). The parties agree that
any references in any Stock Option Grant Agreements, Restricted
Stock Grant Agreements or other agreements between the Company and
the Executive to the “Services Agreement” or
“Services” or the “Principal” shall
hereafter be deemed to refer to this Agreement, the Term of
Employment and the Executive, respectively.
(c) Position and
Responsibilities . During the Term of Employment, the Company
shall continue to engage the Executive on the terms, and subject to
the conditions of this Agreement, and agrees to cause the Executive
to be elected as Chairman of Board of Directors of the Company (the
“ Board ”) and to employ the Executive as the
Company’s Chief Executive Officer and in such other position
or positions with the Company as the Board and the Executive may
agree from time to time. During the Term of Employment, the
Executive shall perform the duties and responsibilities that are
customarily assigned to individuals serving in such position or
positions and such other duties and responsibilities commensurate
with such positions as the Board may reasonably specify from time
to time, including but not limited to recruitment and retention of
key personnel of the Company, hiring and terminating senior
executives of the Company, establishment and execution of brand
vision, and direct responsibility for assembling and guiding
product, merchandising and marketing functions, and oversight of
and accountability for the financial and strategic performance of
the Company and all of its subsidiaries, affiliates and business
units. The Executive shall report solely to the Board.
(d) During the Term of Employment,
excluding any periods of vacation to which the Executive is
entitled and periods of illness or disability, (i) the
Executive shall devote substantially all of his working time and
attention to the performance of his duties and responsibilities
hereunder, and (ii) the Executive may not, without the prior
written consent of the Company, operate, participate in the
management, operations or control of, or act as an employee,
officer, consultant, agent or representative of, any type of
business or service (other than as Chairman and Chief Executive
Officer of the Company), provided that it shall not be a violation
of the foregoing
for the Executive to (A) act or serve as a
director, trustee, committee member or principal of any type of
business or civic or charitable organization, and (B) manage
his personal, financial and legal affairs, (provided that the
activities described in clauses (A) and (B) do not
interfere with the performance of the Executive’s duties and
responsibilities to the Company as provided hereunder).
(e) Company Headquarters;
Principal Work Location . Unless otherwise mutually agreed
upon, the Company’s headquarters shall be the New York
metropolitan area. The Executive shall travel as reasonably
required to carry out his duties and obligations
hereunder.
2. Compensation; Expenses;
Benefits and Perquisites . As compensation for the performance
of duties and responsibilities hereunder, during the Term of
Employment and until February 1, 2006, the Executive shall
continue to be entitled to the compensation, benefits and
perquisites provided in Section 2 of the Services Agreement
(except as provided in Section 3 below) instead of the
provisions of this Section 2, provided that in the event an
initial public offering (the “ IPO ”) of
Parent’s common stock registered under the Securities Act of
1933, as amended, becomes effective (the “ IPO Date
”) on or prior to April 15, 2006, then the provisions of
this Section 2 shall apply effective as of February 1,
2005. Commencing on February 1, 2006 (or earlier as provided
in the immediately preceding sentence) and thereafter during the
Term of Employment, as compensation for the performance of the
duties and responsibilities hereunder, the Executive shall be
entitled to the following compensation from the Company:
(a) Base Salary . The Company
shall pay the Executive, not less than once a month pursuant to the
Company’s normal and customary payroll procedures, a base
salary at the rate of $200,000 per annum (the “ Base
Salary ”). The Board or a committee thereof shall
annually reevaluate the Executive’s Base Salary and bonus
opportunities for increase based on the Company’s performance
and the Executive’s contributions to the Company for the
preceding fiscal year.
(b) Annual
Bonus . In addition to the Base Salary, the Executive shall
have an opportunity to earn an annual bonus (the “
Bonus ”) in respect of each fiscal year in accordance
with the terms of the J.Crew Operating Corp. Performance Incentive
Plan then existing for such fiscal year based on the achievement of
performance objectives as may be established from time to time by
the Board or a committee thereof; provided, however, that, except
as otherwise provided herein, the Bonus for any fiscal year shall
be payable to the Executive only if the Executive is employed by
the Company on the date on which such Bonus is paid and in no event
later than the 15 th day of the third month following
the close of the fiscal year to which the Bonus relates. The
Executive’s target annual bonus opportunity shall be $800,000
(“ Target Bonus ”), based on the achievement of
performance objectives (i) if this provision becomes effective
February 1, 2005, currently in place for the other senior
executives at the Company as determined by the Board or a committee
thereof and (ii) for fiscal year 2006 and thereafter, as
determined by the Board or a committee thereof. The actual Bonus
payable may be greater or lesser than the Target Bonus and shall be
determined by the Board or a committee thereof, in its sole
discretion, based on such factors as it shall determine.
(c) Business Expenses . The
Company shall promptly reimburse the Executive for all reasonable
business expenses incurred by the Executive in connection with the
performance of the Executive’s employment hereunder,
including without limitation airfare, upon the presentation of
statements of such expenses in accordance with the Company’s
policies and procedures now in force or as such policies and
procedures may be modified with respect to all senior executive
officers of the Company; provided that such reimbursement shall
occur no later than the last day of the calendar year following the
calendar year in which Executive incurred the reimbursable
expense.
(d) Employee Benefits . The
Executive shall be eligible to participate in the employee benefit
plans and programs maintained by the Company from time to time and
generally available to senior executives of the Company, including,
to the extent maintained by the Company, medical, dental,
accidental and disability insurance plans and profit sharing,
pension, retirement, deferred compensation and savings plans, to
the extent permitted by and in accordance with the terms and
conditions of the applicable plan and applicable law in effect from
time to time.
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(e) Vacation . The Executive
shall be entitled to twenty-five days of paid time off per annum
pursuant to the Company’s Paid Time Off Policy, without
carryover accumulation, which may be taken at the Executive’s
sole discretion.
3. Relocation . The Company
shall reimburse the Executive for up to $250,000 (inclusive of
relocation expenses already reimbursed by the Company) of moving
expenses in connection with his relocation from California to New
York. The reimbursement of such relocation expenses shall be
excluded from the $700,000 cap provided in Section 2 of the
Services Agreement.
4. Grant of Stock Options and
Restricted Stock .
(a) Equity Grants . During
the Term of Employment, the Executive shall continue to be eligible
to receive grants of options, restricted stock and other equity
securities of the Company at such times and in such amounts as the
Compensation Committee of the Board shall determine, in its sole
discretion. Prior grants shall continue to be governed by the terms
and conditions of the plans and grant agreements pursuant to which
they were made. All future grants shall be governed by the terms
and conditions of the plans and grant agreements pursuant to which
they are made. All equity grants made in connection with or since
the commencement of the original Term of Employment shall be
subject to equitable adjustment on the same basis and shall be
appropriately adjusted in the event of extraordinary cash
dividends.
(b) Stockholders’
Agreement . Unless otherwise specified in such
Stockholders’ Agreement, all shares of Common Stock and all
other securities issued in connection with this Agreement or the
original Agreement or acquired by the Executive or any entity
controlled by the Executive under this or the original Agreement or
otherwise shall be subject to the Stockholders’ Agreement,
dated January 24, 2003.
5. Termination of Employment
.
The Term of Employment may be
terminated prior to August 31, 2008, or any extension of the
term established pursuant to Section 1(b) hereof (the “
Scheduled Termination Date ”), upon the earliest to
occur of the following events (at which time the Executive’s
employment provided hereunder shall be terminated):
(a) Death . The
Executive’s employment hereunder shall terminate upon the
Executive’s death.
(b) Disability . The Company
shall be entitled to terminate the Executive’s employment
hereunder by reason of the Executive’s “
Disability ” if, as a result of the Executive’s
incapacity due to physical or mental illness, the Executive shall
have been unable to perform his duties hereunder for a period of
six (6) consecutive months or for 180 days within any 365-day
period, and within 30 days after written Notice of Termination (as
defined below) for Disability is given following such 6-month or
180-day period, as the case may be, the Executive shall not have
returned to the performance of his duties in accordance with this
Agreement.
(c) Cause . The Company may
terminate the Executive’s employment hereunder for Cause. For
purposes of this Agreement, the term “ Cause ”
shall mean: (1) the willful and continued failure of the
Executive substantially to perform the Executive’s duties
under this Agreement (other than as a result of physical or mental
illness or injury), after the Board delivers to the Executive a
written demand for substantial performance that specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive’s
duties; (2) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company; and (3) a breach of any of the
obligations under Sections 9, 10 and 11 or any of the
representations and covenants contained in Section 13 hereof.
Any act or failure to act that is based upon authority given
pursuant to a resolution duly adopted by the Board, or the advice
of counsel for the Company, shall not constitute Cause. Cause shall
not exist unless and until the Company has delivered to the
Executive a copy of a resolution duly adopted by a majority of the
Board at a meeting of the Board called and held for such purpose
(after reasonable but in no event less than thirty
(30) days’ notice to the Executive and an opportunity
for the Executive, together with his counsel, to be heard before
the Board), finding that, in the good
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faith opinion of the Board, the Executive was
guilty of the conduct set forth above and specifying the
particulars thereof in detail. This Section 5(c) shall not
prevent the Executive from challenging in any court of competent
jurisdiction the Board’s determination that Cause exists or
that the Executive has failed to cure any act (or failure to act)
that purportedly formed the basis for the Board’s
determination.
(d) Good Reason. The
Executive may terminate his employment hereunder for “
Good Reason ,” for any of the following reasons
enumerated in this Section 5(d): (i) the diminution of,
or appointment of anyone other than the Executive to serve in or
handle, the Executive’s positions, authority, duties or
responsibilities from the positions, authority, duties or
responsibilities set forth in Section 1 of this Agreement
without the Executive’s consent; (ii) any purported
termination of the Term of Employment by the Company for a reason
or in a manner not expressly permitted by this Agreement;
(iii) relocation of the Executive’s principal work
location to more than fifty (50) miles from the
Executive’s principal work location, (iv) any failure by
the Company to comply with Sections 2, 3 or 4 of this Agreement, or
any other material breach of this Agreement, including
without limitation Section 15(e)(ii), or (v) the
removal of the Executive or any of the Executive’s nominees
as directors under Section 4(d) of the Stockholders’
Agreement prior to the date such provision expires pursuant to the
terms of the Stockholders’ Agreement. Termination pursuant to
this Section 5(d) shall not be effective until the Executive
delivers to the Board a written notice specifically identifying the
conduct of the Company which he believes constitutes a reason
enumerated in this Section 4(d) and the Executive provides the
Board at least thirty (30) days to remedy such conduct and
then provides an additional Notice of Termination in the event the
Company does not cure such conduct.
(e) Without Cause . The
Company may terminate the Executive’s employment hereunder
without Cause.
(f) Without Good Reason . The
Executive may terminate his employment hereunder without Good
Reason, provided that the Executive provides the Company with
notice of intent to terminate without Good Reason at least three
months in advance of the Date of Termination. The Executive and the
Company shall mutually agree on the time, method and content of any
public announcement regarding the termination of Executive’s
employment hereunder and neither the Executive nor the Company
shall make any public statements which are inconsistent with the
information mutually agreed upon by the Company and the Executive
and the parties hereto shall cooperate with each other in refuting
any public statements made by other persons, which are inconsistent
with the information mutually agreed upon between the Executive and
Company as described above.
6. Termination Procedure
.
(a) Notice of Termination .
Any termination of the Executive’s employment hereunder by
the Company or by the Executive during the Term of Employment
(other than termination pursuant to Section 5(a)) shall be
communicated by written notice of termination (“ Notice of
Termination ”) to the other party hereto in accordance
with Section 15(a).
(b) Date of Termination .
“ Date of Termination ” shall mean (i) if
the Executive’s employment is terminated by reason of the
Executive’s death, the date of his death, (ii) if the
Executive’s employment is terminated pursuant to
Section 5(b), thirty (30) days after Notice of
Termination (provided that the Executive shall not have returned to
the substantial performance of his duties in accordance with this
Agreement during such thirty (30) day period), (iii) if
the Executive’s employment is terminated pursuant to
Section 5(f), a date specified in the Notice of Termination
which is at least three months from the date of such notice as
specified in such Section 5(f); and (iv) if the
Executive’s employment is terminated for any other reason,
the date on which a Notice of Termination is given or any later
date (within thirty (30) days (or any alternative time period
agreed upon by the parties) after the giving of such notice) set
forth in such Notice of Termination.
7. Termination Payments
.
(a) Without Cause or for Good
Reason . In the event of the termination of the
Executive’s employment during the Term of Employment by the
Company without Cause or by the Executive, for Good Reason, the
Executive shall be entitled to (i) a payment, within ten
(10) days following the Date of Termination, of
Base
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Salary through the Date of Termination (to the
extent not theretofore paid), for any accrued vacation pay, and any
unreimbursed expenses under Sections 2(c), (d) and
(f) hereof, (collectively, the “ Accrued
Obligations ”) and (ii) subject to the
effectiveness, within 60 days following the Date of Termination, of
the Executive’s execution of a general release and waiver of
all claims against the Company, its affiliates and their respective
officers and directors related to the Executive’s employment,
in the form annexed as Exhibit A (but excluding (1) his rights
to receive the benefits provided under this Agreement or under any
and all equity agreements entered into in connection herewith or in
connection with the predecessor of this Agreement and, to the
extent then in effect, the Stockholders’ Agreement,
(2) his rights with respect to related investments in the
Company and (3) his rights to be indemnified in accordance
with the provisions of the Company’s charter and bylaws and
to receive any benefits to which he is entitled under the
Company’s directors’ and officers’ liability
insurance policies, all in accordance with Section 8 hereof
(collectively, the “ Excluded Obligations ”)),
and subject to the Executive’s compliance with the terms
and conditions contained in this Agreement, (A) a payment
equal to one year’s Base Salary and Target Bonus, one-half of
such payment will be paid on the first business day that is six
months and one day following the Date of Termination and the
remaining one-half of such payment will be paid in six equal
monthly installments commencing on the first business day of the
seventh calendar month following the Date of Termination;
(B) a payment equal to the product of (x) the last Bonus
the Executive received prior to the date of termination, and
(y) a fr
