Exhibit 10.7

EXECUTION COPY

THIRD AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIRD 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 shall amend and restate the
Second Amended and Restated Employment Agreement entered into on December 29,
2008, and, except as otherwise specifically provided in Section 15(m), shall be
effective as of October 20, 2005 (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.

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(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 15th 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

 

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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.

(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

 

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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 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

 

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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.

 

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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
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 Bonus, if any, that the Executive would
have earned based on the actual achievement of applicable performance objectives
in the performance year in which the Date of Termination occurs had Executive’s
employment with the Company not been terminated, and (y) a fraction, the
numerator of which is the number of days from the beginning of such year through
the Date of Termination, and the denominator of which is 365, which will be paid
when annual bonuses are generally paid to employees of the Company, but in no
event later than the date that is 2.5 months following the end of the year in
which the Date of Termination occurs; (C) the immediate vesting of such portion
of the Company restricted stock granted to the Executive as provided in and
pursuant to the terms of the Restricted Stock Agreements between the Parent and
the Executive under the Company’s 2003 Equity Incentive Plan as it may be
amended from time to time (the “Equity Plan”) and (D) the immediate vesting of
such portion of the options granted to the Executive as provided in and pursuant
to the terms of the Stock Option Grant Agreements between the Parent and the
Executive under the Equity Plan. The Company shall have no additional
obligations under this Agreement, but the Executive shall retain all rights with
respect to the Excluded Obligations in accordance with the terms of the
agreements under which such obligations are provided.

In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced, regardless of whether the Executive obtains other employment or is
engaged to perform other services.

 

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(b) Cause. Death, Disability, Without Good Reason. Failure to Renew. If the
Executive’s Employment is terminated during the Term of Employment by the
Company for Cause, by the Executive without Good Reason, by either party serving
a notice not to renew pursuant to Section 1(b) herein (such notice, a “Failure
to Renew”), or as a result of the Executive’s death or Disability, the Company
shall pay the Accrued Obligations to the Executive within thirty (30) days
following the Date of Termination. The Company shall have no additional
obligations under this Agreement, but the Executive shall retain all rights with
respect to the Excluded Obligations in accordance with the terms of the
agreements under which such obligations are provided.

(c) Other Rights and Benefits. In the event of the termination of the Term of
Employment for any reason, the Executive shall retain his rights under all
employee benefit plans, including the Equity Plan, in accordance with the terms
and conditions of such plans, provided that in no event will the Executive be
entitled to any payments in the nature of severance or termination payments
except as specifically provided herein.

8. Indemnification.

The Company agrees that if the Executive is made a party or threatened to be
made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “Proceeding”), other than any Proceeding
initiated by the Executive or the Company related to any contest or dispute
between the Executive and the Company or any of its affiliates with respect to
this Agreement or the employment of the Executive hereunder, by reason of the
fact that the Executive is or was a director or officer of the Company, or any
subsidiary of the Company or is or was serving at the request of the Company, as
a director, officer, member, employee or agent of another corporation or a
partnership, joint venture, trust or other enterprise, the Executive shall be
indemnified and held harmless by the Company to the fullest extent authorized by
applicable law from and against any and all liabilities, costs, claims and
expenses, including all costs and expenses incurred in defense of any Proceeding
(including attorneys’ fees). Costs and expenses incurred by the Executive in
defense of such Proceeding (including attorneys’ fees) shall be paid by the
Company in advance of the final disposition of such litigation upon receipt by
the Company of (a) a written request for payment, (b) appropriate documentation
evidencing the incurrence, amount and nature of the costs and expenses for which
payment is being sought, and (c) an undertaking adequate under applicable law
made by or on behalf of the Executive to repay the amounts so paid if it shall
ultimately be determined that the Executive is not entitled to be indemnified by
the Company under this Agreement. The Company and the Executive will consult in
good faith with respect to the conduct of any Proceeding. If the Company or any
of its successors or assigns consolidates with or merges into any other entity
or transfers all or substantially all of its properties or assets, then in each
such case, proper provisions shall be made so that the successors or assigns of
the Company shall assume all of the obligations set forth in this Section 8.

During the Term of Employment and for a term of six years thereafter, the
Company, or any successor to the Company shall purchase and maintain, at its own
expense, directors and officers liability insurance providing coverage for
Executive in the same amount as the other executive officers and directors of
the Company.

 

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During the Term of Employment and for a term of six years thereafter, the
Company shall provide Executive with copies of all binders and policies issued
in connection with any directors and officers liability insurance affording
coverage to Executive, within 30 days following the Executive’s request for such
documents.

9. Non-Solicitation.

During the Term of Employment and for a period of two years following the Date
of Termination, the Executive hereby agrees not to, directly or indirectly, for
his own account or for the account of any other person or entity, (i) solicit or
hire or assist any other person or entity in soliciting or hiring any employee
of the Company or any of its subsidiaries or affiliates to perform any services
for any entity (other than the Company or their respective subsidiaries or
affiliates), attempt to induce any such employee to leave the employ of the
Company or any affiliates of the Company, or otherwise interfere with or
adversely modify such employee’s relationship with the Company or any of its
subsidiaries or affiliates, or (ii) induce any employee of the Company who is a
member of management to engage in any activity which the Executive is prohibited
from engaging in under any of Sections 9, 10 or 11 of this Agreement. For
purposes of this Agreement, “employee” shall mean any natural person anywhere in
the world who is employed by or otherwise engaged to perform services for the
Company or any of its affiliates on the Date of Termination or during the
one-year period preceding the Date of Termination.

10. Non-Compete.

In connection with the employment of the Executive under this Agreement and in
recognition that the Executive shall be a significant stockholder in the
Company, and except as specifically provided in Section 1(d) above, the
Executive hereby agrees that, during the Term of Employment and for the one year
period following any termination of the Executive’s employment (other than a
termination without Cause, for Good Reason or Failure to Renew as described in
Sections 5(d), 5(e) and 7(b) above), the Executive shall not become associated
with any entity, whether as a principal, partner, employee, consultant or
shareholder (other than as a holder of a passive investment of not in excess of
5% of the outstanding voting shares of any publicly traded company), that is
actively engaged in retail apparel business in any geographic area in which the
Company or any of its subsidiaries or affiliates are engaged in such business.

11. Confidentiality; Non-Disclosure.

(a) The Executive hereby agrees that, during the Term of Employment and
thereafter, he will hold in strict confidence any proprietary or Confidential
Information related to the Company and its affiliates. For purposes of this
Agreement, the term “Confidential Information” shall mean all information of the
Company or any of its affiliates (in whatever form) which is not generally known
to the public, including without limitation any inventions, processes, methods
of distribution or customers’ or trade secrets.

(b) The Executive hereby agrees that, upon the termination of the Term of
Employment, he shall not take, without the prior written consent of the Company,
any drawing,

 

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blueprint, 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 formulas or secret processes and will
return any such information (in whatever form) then in his possession.

12. Injunctive Relief

It is impossible to measure in money the damages that will accrue to the Company
in the event that the Executive breaches any of the restrictive covenants
provided in Sections 9, 10 or 11 hereof. In the event that the Executive
breaches any such restrictive covenant, the Company shall be entitled to an
injunction restraining the Executive from violating such restrictive covenant.
If the Company shall institute any action or proceeding to enforce any such
restrictive covenant, the Executive hereby waives the claim or defense that the
Company has an adequate remedy at law and agrees not to assert in any such
action or proceeding the claim or defense that the Company has an adequate
remedy at law. The foregoing shall not prejudice the Company’s right to require
the Executive to account for and pay over to the Company, and the Executive
hereby agrees to account for and pay over, the compensation, profits, monies,
accruals or other benefits derived or received by the Executive, directly or
indirectly, as a result of any transaction constituting a breach of any of the
restrictive covenants provided in Sections 9, 10 or 11 of this Agreement.

13. Representations and Covenants; Certain Reimbursements.

(a) The Executive and the Company hereby represent to each other that they have
full power and authority to enter into this Agreement on behalf of themselves
and that the execution of, and performance of duties or obligations under, this
Agreement shall not constitute a breach of or otherwise violate any other
agreement to which the Executive or the Company, as applicable, is a party.

(b) The Executive hereby represents and covenants to the Company that he will
not utilize or disclose any confidential information obtained by the Executive
in connection with his former employment with respect to his duties and
responsibilities hereunder and the Company, and the Company covenants that it
will not ask the Executive to do so.

14. Additional Payments.

In the event that, following a Change in Control IPO (as defined below), any
payment, right or benefit made or provided to the Executive under this Agreement
and under any other plan, program or agreement of the Company or any of its
affiliates (collectively, the “Aggregate Payment”) become subject to any tax
(the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), the Company shall pay to the Executive an
additional amount (the “Excise Tax Payment”) such that the net amount retained
by the Executive with respect to the Aggregate Payment, after deduction of any
Excise Tax on the Aggregate Payment and any Federal, state and local income and
employment tax and Excise Tax on the Excise Tax Payment (and any interest and
penalties thereon), but before deduction for any Federal, state or local income
or employment tax withholding on such Aggregate Payment, shall be equal to the
amount of the Aggregate Payment. The Company shall

 

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pay the Excise Tax Payment to the Executive no later than the end of Executive’s
taxable year next following Executive’s taxable year in which the Excise Tax
(and any income or other related taxes or interest or penalties thereon) on the
Aggregate Payment are remitted to the Internal Revenue Service or any other
applicable taxing authority.

The determination of whether the Aggregate Payment will be subject to the Excise
Tax and, if so, the amount to be paid to the Executive and the time of payment
pursuant to this Section 14 shall be made by the Auditor (as defined below),
subject to a different determination by the Internal Revenue Service. All fees
and expenses of the Auditor shall be borne solely by the Company.

For purposes of determining the amount of any additional payments hereunder, the
Executive shall be deemed to pay: (i) Federal income taxes at the highest
applicable marginal rate of Federal income taxation for the calendar year in
which such payments are to be made, and, (ii) any applicable state and local
income taxes at the highest applicable marginal rate of taxation for the
calendar year in which such payments are to be made, net of the maximum
reduction in Federal incomes taxes that could be obtained from the deduction of
such state or local taxes if paid in such year.

For purposes of this Agreement, the following definitions shall have the
following meanings:

(a) “Auditor” shall mean a nationally recognized United States public accounting
firm, jointly selected by the Company and the Executive, which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company. If the Executive and the Company cannot agree on the firm to serve
as the Auditor, then the Executive and the Company shall each select one
accounting firm and those two firms shall jointly select the accounting firm to
serve as the Auditor.

(b) “Change in Control IPO” shall mean the Company has equity securities that
are readily tradable on an established securities market or otherwise within the
meaning of Q&A 6 of Treasury Regulation 1.280G-1.

In the event that, prior to a Change in Control IPO, any Aggregate Payment
becomes subject to the Excise Tax, the Executive will have the option (to be
exercised in his sole discretion) to waive any portion of any payments or
benefits due hereunder or under any other plan, program or agreement of the
Company or any of its affiliates in order to avoid any such Excise Tax. The
Company shall, in conformity with the requirements set forth at Q&A 7 of Treas.
Reg. Section 1.280G-1, use its best efforts to seek approval from the
stockholders of the Company of payment of such payments or benefits.

 

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15. Miscellaneous.

(a) Any notice or other communication required or permitted under this Agreement
shall be effective only if it is in writing and delivered personally or sent by
registered or certified mail, postage prepaid, addressed as follows (or if it is
sent through any other method agreed upon by the parties):

If to the Company:

J. Crew Group, Inc.

770 Broadway

New York, NY 10003

Attention: Board of Directors and Secretary

with a copy to:

Paul Shim, Esq.

Cleary, Gottlieb, Steen & Hamilton

One Liberty Plaza

New York, NY 10006

If to the Executive:

To the address on file with the Company,

with a copy to:

David Rubinsky, Esq.

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019-6099

or to such other address as any party hereto may designate by notice to the
others, and shall be deemed to have been given upon receipt.

(b) The Company shall reimburse the Executive for reasonable legal fees incurred
by the Executive in connection with the negotiation of this Agreement and any
related agreements.

(c) This Agreement and the prior grant agreements and plans referenced herein
constitute the entire agreement among the parties hereto with respect to the
employment of the Executive.

(d) 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.

 

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(e) (i) This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by the Company or the Executive.

(ii) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
have been required to perform it if no such succession had taken place. As used
in the Agreement, the “Company” shall mean both the Company as defined above and
any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.

(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 as broad as is enforceable.

(g) The Company may withhold from any amounts payable to the Executive 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) This Agreement shall be governed by and construed in accordance with the
laws of the State of NEW YORK, without reference to its principles of conflicts
of law.

(i) Any disagreement, dispute, controversy or claim arising out of or relating
to this Agreement or the interpretation hereof or any agreements relating hereto
or contemplated herein or the interpretation, breach, termination, validity or
invalidity hereof shall be settled exclusively and finally by arbitration;
provided that the Company shall not be required to submit claims for injunctive
relief to enforce the covenants contained in Sections 8, 9 or 10 of this
Agreement to arbitration. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules (the “Rules”) of the American Arbitration
Association (the “AAA”), except as amplified or otherwise varied hereby. The
Company and the Executive jointly shall appoint one individual to act as
arbitrator within thirty (30) days of initiation of the arbitration. If the
parties shall fail to appoint such arbitrator as provided above, such arbitrator
shall be appointed by the President of the Association of the Bar of the City of
New York and shall be a person who maintains his or her Executive place of
business in the New York metropolitan area and shall be an attorney, accountant
or other professional licensed to practice by the State of New York who has
substantial experience in employment and executive compensation matters. All
fees and expenses of such arbitrator shall be shared equally by the Company and
the Executive. The situs of the arbitration shall be New York City. Any decision
or award of the arbitral tribunal shall be final and binding upon the parties to
the arbitration proceeding. The parties hereto hereby waive to the extent
permitted by law any rights to appeal or to seek review of such award by any
court or tribunal. The arbitration award shall be paid within thirty (30) days
after the award has been made. Judgment upon the award may be entered in any
federal or state court having jurisdiction over the parties and shall be final
and binding. Each party shall be required to keep all proceedings related to any
such arbitration and the final award and judgment strictly confidential;
provided that either party may disclose such award as necessary to enter the
award in a court of competent jurisdiction or to enforce the award, and to the
extent required by law, court order, regulation or similar order.

 

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(j) 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.

(k) 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.

(1) Notwithstanding anything in this Agreement to the contrary, (i) all
reimbursement and in-kind benefits provided under this Agreement shall be made
or provided in accordance with the requirements of Section 409A of the Code to
the extent that such reimbursements or in-kind benefits are subject to
Section 409A of the Code; (ii) all expenses or other reimbursements paid
pursuant to this Agreement that are taxable income to the Executive shall in no
event be paid later than the end of the calendar year next following the
calendar year in which the Executive incurs such expense or pays such related
tax; and (iii) with regard to any provision in this Agreement that provides for
reimbursement of costs and expenses or provision of in-kind benefits, except as
permitted by Section 409A of the Code, (A) the right to reimbursement or in-kind
benefits shall not be subject to liquidation or exchange for another benefit and
(B) the amount of expenses eligible for reimbursement, or in-kind benefits
provided, during any taxable year shall not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year.

(m) This Agreement is intended to comply with Section 409A of the Code. In
determining the time for payment of any amounts which are treated as
nonqualified deferred compensation, the Agreement shall be interpreted so that
all references therein to a “termination”, or a “termination of employment”, or
like terms are treated as instead referring to a “separation from service”, as
such term is defined in Section 409A of the Code. All provisions of the
Agreement are meant to be exempt from compliance with Section 409A of the Code,
to the maximum extent permitted, and otherwise to comply with Section 409A of
the Code. Accordingly, all provisions of the Agreement shall be construed in a
manner consistent with avoiding taxes or penalties under Section 409A of the
Code. The amendments made by this Agreement to Sections 2(b), 2(c), 7(a), 14,
15(1) and 15(m) hereof shall be effective as of December 31, 2008.

 

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IN WITNESS WHEREOF, J. Crew Group, Inc. and J. Crew Operating Corp. have each
caused their respective names to be ascribed to this Third Amended and Restated
Employment Agreement by a duly authorized representative and the undersigned,
Millard S. Drexler, has executed this Amendment, on or before this 13 day of
July, 2010.

 

J. CREW GROUP, INC.

/s/ James S. Scully

Name:   James S. Scully Title:   Chief Administrative Officer and Chief
Financial Officer J. CREW OPERATING CORP.

/s/ James S. Scully

Name:   James S. Scully Title:   Chief Administrative Officer and Chief
Financial Officer

/s/ Millard S. Drexler

Millard S. Drexler

 

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Exhibit A

FORM OF GENERAL RELEASE

GENERAL RELEASE OF CLAIMS

1. Millard S. Drexler (the “Executive”), for himself and his family, heirs,
executors, administrators, legal representatives and their respective successors
and assigns, in exchange for the consideration contained in Section 6(a)(ii) of
the Amended and Restated Employment Agreement to which this release is attached
as Exhibit A (the “Employment Agreement”), which the Executive acknowledges is
in addition to any amounts to which he would have otherwise been entitled but
for the Employment Agreement and execution of this General Release of Claims,
does hereby release and forever discharge J. Crew Group, Inc. (“Parent”) and its
operating subsidiary J. Crew Operating Corp. (together with Parent, the
“Company”) and their respective subsidiaries or affiliated companies, and their
respective current or former directors, officers, employees, shareholders or
agents in such capacities (collectively with the Company, the “Released
Parties”) from any and all actions, causes of action, suits, controversies,
claims and demands whatsoever, for or by reason of any matter, cause or thing
whatsoever, whether known or unknown, arising under or in connection with the
Principal’s employment or the termination of such employment with the Company,
whether for tort, breach of express or implied employment contract, wrongful
discharge, intentional infliction of emotional distress, or defamation or
injuries incurred on the job or incurred as a result of the termination of the
employment. The Executive acknowledges that the Company encouraged him to
consult with an attorney of his choosing, and through this General Release of
Claims encourages him to consult with his attorney with respect to possible
claims under the Age Discrimination in Employment Act (“ADEA”) and that he
understands that the ADEA is a Federal statute that, among other things,
prohibits discrimination on the basis of age in employment and employee benefits
and benefit plans. Without limiting the generality of the release provided
above, the Executive expressly waives any and all claims under ADEA that he may
have as of the date hereof. The Executive further understand that by signing
this General Release of Claims he is in fact waiving, releasing and forever
giving up any claim under the ADEA as well as all other laws within the scope of
this paragraph 1 that may have existed on or prior to the date hereof.
Notwithstanding anything in this paragraph 1 to the contrary, this General
Release of Claims shall not apply to (i) any actions to enforce rights arising
under, or any claim for benefits that may be due the Executive pursuant to any
vested benefits under any employee benefit plan, or vested rights under any and
all equity agreements entered into in connection with the Employment Agreement
or the predecessor of the Employment Agreement and, to the extent in effect, the
Stockholders’ Agreement, (ii) any actions to enforce the Executive’s rights with
respect to his related investments in the Company, and (iii) any indemnification
rights the Executive may have as a former officer or director of the Company or
its subsidiaries or affiliated companies in accordance with the Company’s
charter and bylaws and any claims to receive any benefits to which he is
entitled under the Company’s directors’ and officers’ liability policies, all in
accordance with Section 8 of the Employment Agreement.

2. The Executive represents that he has not filed against the Released Parties
any complaints, charges, or lawsuits arising out of his employment, or any other
matter arising on or prior to the date of this General Release of Claims, and
covenants and agrees that he will

 

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never individually or with any person to file, or commence the filing of, any
charges, lawsuits, complaints or proceedings with any governmental agency, or
against the Released Parties with respect to any of the matters released by the
Executive pursuant to paragraph 1 hereof.

3. The Executive hereby acknowledges that the Company has informed him that he
has up to twenty-one (21) days to sign this General Release of Claims and he may
knowingly and voluntarily waive that twenty-one (21) day period by signing this
General Release of Claims earlier. The Executive also understands that he shall
have seven (7) days following the date on which he signs this General Release of
Claims within which to revoke it by providing a written notice of his revocation
to the Company.

4. The Executive acknowledges that this General Release of Claims will be
governed by and construed and enforced in accordance with the internal laws of
the State of NEW YORK applicable to contracts made and to be performed entirely
within such State.

5. The Executive acknowledges that he has read this General Release of Claims,
that he has been advised that he should consult with an attorney before he
executes this general release of claims, and that he understands all of its
terms and executes it voluntarily and with full knowledge of its significance
and the consequences thereof.

6. This General Release of Claims shall take effect on the eighth day following
the Executive’s execution of this General Release of Claims unless the
Executive’s written revocation is delivered to the Company within seven (7) days
after such execution.

 

 

Millard S. Drexler                     , 20        

The parties understand and agree that the release of claims provided in this
form of general release shall be entered into by the parties to the Employment
Agreement in connection with termination of the Executive’s employment pursuant
to a separation agreement or arrangement, which shall state, among other things,
the consideration the Executive is entitled to receive in connection with such
termination.

 

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