**EXHIBIT 10.1**

 

STOCK OPTION GRANT AGREEMENT

 

THISAGREEMENT, made as of this 12th day of May, 2004 between J.CREW GROUP INC. (the“Company”) and Millard S. Drexler (the “Participant”).

 

WHEREAS, theCompany has adopted and maintains and the shareholders of the Company haveapproved the J.Crew Group, Inc. 2003 Equity Incentive Plan (the “Plan”)to promote the interests of the Company and its stockholders by providing theCompany’s key employees and others with an appropriate incentive to encouragethem to continue in the employ of the Company and to improve the growth andprofitability of the Company;

 

WHEREAS, thePlan provides for the Grant to Participants in the Plan of Non-Qualified StockOptions to purchase shares of Common Stock of the Company;

 

NOW, THEREFORE,in consideration of the premises and the mutual covenants hereinafter setforth, the parties hereto hereby agree as follows:

 

1.               Grantof Options.  Pursuant to, andsubject to, the terms and conditions set forth herein and in the Plan, theCompany hereby Grants to the Participant the following NON-QUALIFIED STOCKOPTIONS (collectively, the “Options”):

 

(a)          PremiumOption Tranche 1.  An Option withrespect to 836,889 shares of Common Stock of the Company (the “PremiumOption Tranche 1”); and

 

(b)         PremiumOption Tranche 2.  An Option withrespect to 836,889 shares of Common Stock of the Company (the “PremiumOption Tranche 2” and together with the Premium Option Tranche 1, the “PremiumOptions”).

 

2.               GrantDate.  The Grant Date of the Optionshereby granted is March 26, 2004.

 

3.               Incorporationof the Plan; Modification of Specific Sections of the Plan.

 

(a)          Incorporationof the Plan.  Except as otherwiseprovided herein, all terms, conditions and restrictions of the Plan areincorporated herein and made part hereof as if stated herein.  Notwithstanding anything to the contrary inthe Plan, if there is any conflict between the terms and conditions of the Planand this Agreement, the terms and conditions of this Agreement, as interpretedby the Committee, shall govern.  Unlessotherwise indicated herein, all capitalized terms used herein shall have themeanings given to such terms in the Plan. Notwithstanding anything to the contrary in the Plan, the Committeeshall interpret the Plan and this Agreement in a manner consistent with theterms of the Plan and this Agreement and such interpretation and determinationshall be final and binding on all parties.

 

(b)         Modificationof Sections 5.11 and 5.12 of the Plan.

 

(i)             Section 5.11.  The last sentence of Section 5.11 ofthe Plan shall not apply to the Options, unless the Participant provides hisprior written consent to such application.

 

(ii)          Section 5.12.  The last sentence of Section 5.12 ofthe Plan shall not apply to the Options, unless the Participant provides hisprior written consent to such application. The remaining provisions of Section 5.12 of the Plan shall beapplicable to the Options only to the extent that the rights in suchSection are being exercised in connection with the exercise of and in accordancewith the terms of Sections 5(a) or 5(b) of the Stockholders’ Agreement, datedas of January 24, 2003, between the Company, the Participant and TPGPartners II, L.P. (the “Stockholders’ Agreement”).

 

4.               ExercisePrice.  The exercise price of each shareunderlying the Options are as follows:

 

(a)          PremiumOption Tranche 1.  $15.00 per share;and

 

(b)         PremiumOption Tranche 2.  $25.00 per share.

 

5.               VestingDate.  The Options shall becomeexercisable as follows:  25% of theshares of Common Stock underlying each Option shall vest on January 27,2005; 25% of the shares of Common Stock underlying each Option shall vest onJanuary 27, 2006; 25% of the shares of Common Stock underlying each Optionshall vest on January 27, 2007; and 25% of the shares of Common Stockunderlying each Option shall vest on January 27, 2008; provided that theService Period (as defined in the

 

----

 

Services Agreement, dated as ofJanuary 24, 2003, between the Company, J. Crew Operating Corp., theParticipant and Millard S. Drexler, Inc. (the “Services Agreement”)) hasnot terminated as of each such applicable Vesting Date.  Notwithstanding the foregoing, (i) in theevent that the Company terminates the Services without Cause (as each term isdefined in the Services Agreement) or the Participant terminates the Servicesfor Good Reason (as defined in the Services Agreement) prior to theconsummation of a Change in Control (as defined in the Plan), that portion ofeach Option that would have become vested and exercisable on the next succeedingVesting Date shall vest and become immediately exercisable and any remainingportion of each Option that has not become vested and exercisable shallimmediately expire and be forfeited, (ii) in the event that, within the two**-**year period following the consummation ofa Change in Control, the Company terminates the Services without Cause or theParticipant terminates the Services for Good Reason, all or any portion of eachOption that has not yet become exercisable shall vest and become immediately exercisable,or (iii) if the Service Period terminates for any other reason, any portion ofeach Option which has not become exercisable on the date of termination of theServices shall immediately expire and be forfeited.  For the avoidance of doubt, the last sentence ofSection 2(d) of the Plan does not apply to this Agreement.

 

6.               ExpirationDate.  Subject to the provisions ofthe Plan and this Agreement, with respect to the Options (or any portionsthereof) which have not become exercisable, the Options shall expire on thedate the Services are terminated for any reason, and with respect to theOptions (or any portions thereof) which have become exercisable, the Optionsshall expire on the earlier of (A) the tenth anniversary of the date of Grant,(B) the commencement of business on the date the Services are terminated forCause, (C) ninety days after the Services are terminated by the Participantwithout Good Reason, or (D) the second anniversary of the date the Services areterminated (x) on account of the Participant’s death or Disability,  (y) by the Company without Cause, or (z) bythe Participant for Good Reason.

 

7.               Rightto Quarterly Reports.  Following atermination of the Participant’s Employment, as soon as reasonably practicablefollowing its receipt of a written request from the Participant, the Companyshall provide the Participant with a quarterly valuation of the Fair MarketValue per share of Common Stock.

 

8.               Delaysor Omissions.  No delay or omissionto exercise any right, power, or remedy accruing to any party hereto upon anybreach or default of any party under this Agreement, shall impair any suchright, power or remedy of such party nor shall it be construed to be a waiverof any such breach or default, or an acquiescence therein, or of or in anysimilar breach or default thereafter occurring nor shall any waiver of anysingle breach or default be deemed a waiver of any other breach or defaulttheretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on thepart of any party of any breach or default under this Agreement, or any waiveron 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 setforth in such writing.

 

9.               Limitationon Transfer.  During the lifetime ofthe Participant, the Options shall be exercisable only by the Participant and aPermitted Transferee under this Section 9.  The Options shall not be Transferred otherwise than in accordancewith the terms and conditions of Section 5.6 of the Plan and Sections 5(a)or 5(b) of the Stockholders’ Agreement. In the event of any such Transfer, such trust or custodianship ortransferee shall be subject to all the restrictions, obligations, and responsibilitiesas apply to the Participant under the Plan and this Agreement and shall beentitled to all the rights of the Participant under the Plan.  All shares of Common Stock obtained pursuantto the Options granted herein shall not be Transferred except as provided inthe Plan and, where applicable, the Stockholders’ Agreement.  In the event of any purported Transfer ofany portion of the Options in violation of the provisions of the Plan and thisAgreement, such purported Transfer shall, to the extent permitted by applicablelaw, be void and of no effect.

 

10.         Integration.  This Agreement, the Plan and theStockholders’ Agreement, and the other documents referred to herein ordelivered pursuant hereto which form a part hereof contain the entire understandingof 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 hereofother than those expressly set forth herein, in the Plan, the ServicesAgreement and the Stockholders’ Agreement. This Agreement, the Plan, the Services Agreement and the Stockholders’Agreement supersede all prior agreements and understandings between the partieswith respect to its subject matter.

 

11.         Counterparts.  This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original, but all of whichshall constitute one and the same instrument.

 

12.         GoverningLaw.  This Agreement shall begoverned by and construed and enforced in accordance with the laws of the Stateof NEW YORK, without regard to the provisions governing conflict of laws.

 

13.         ParticipantAcknowledgment.  The Participanthereby acknowledges receipt of a copy of the Plan.  The Participant hereby acknowledges that all decisions,determinations and interpretations of the Committee in respect of the Plan,this Agreement and the Option shall be final and conclusive.

 

----

 

IN WITNESSWHEREOF, the Company has caused this Agreement to be duly executed by its dulyauthorized officer and said Participant has hereunto signed this Agreement onthe Participant’s own behalf, thereby representing that the Participant hascarefully read and understands this Agreement and the Plan as of the day andyear first written above.

 
|   | J.CREW GROUP  INC.                        |
|--------|-------------------------------------------|
|   |                                      |
|   |                                      |
|   |   /s/  Amanda Bokman            |   |
|   | By:  Amanda  Bokman             |
|   | Title:Chief  Financial Officer            |
|   |                                      |
|   |                                      |
|   |    /s/  Millard S. Drexler |   |
|   | Millard S.  Drexler                       |

 

----