EXHIBIT 10.6.1
AMENDMENT #1 TO EMPLOYMENT AGREEMENT
------------------------------------
This AMENDMENT #1 (this "Amendment") is entered into as of the 16th
day of February, 2000, by and between ANNTAYLOR STORES CORPORATION (the
"Company") and PATRICIA DEROSA ("Executive"), and amends the Employment
Agreement between the Company and the Executive, dated November 25, 1996 (the
"Employment Agreement").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and Executive agree as
follows:
1. All capitalized terms used and not defined herein shall have the
meanings ascribed to them in the Employment Agreement.
2. (a) The Term of Executive's employment by the Company provided for in
Section 2 of the Employment Agreement, is hereby extended to February 28, 2003.
(b) The first sentence of Section 3 of the Employment Agreement is
hereby amended to read as follows: "The Executive shall serve as President and
Chief Operating Officer of the Company with, in addition to her other duties,
responsibility and direct reporting relationships for management of the "Ann
Taylor" brand, including marketing, merchandising, sourcing, product
development, product design and store design, and shall have such
responsibilities, duties and authority consistent with such positions as may
from time to time be determined by the Board of Directors of the Company."
3. Section 5(a)(i) of the Employment Agreement is hereby amended to
provide that, commencing April 1, 2000, Executive's annual base salary shall be
increased to a rate of $750,000.
4. The fourth sentence of Section 5(a)(ii) of the Employment Agreement is
hereby amended to read as follows: "Commencing with the Fiscal Year 2000
Performance Period under the Performance Plan, the Executive's Performance
Percentage (as that term is defined in such Plan) shall be established at 60%
per annum during the Term." Section 5(a)(ii) is hereby further amended by adding
the following at the end thereof: "Executive also shall participate in the Long
Term Cash Incentive Compensation Plan currently maintained by the Company, and
her Target Award (as defined in such Plan) shall be 40%."
- --------------------------------------------------------------------------------
5. The second sentence of Section 6(a)(iv) of the Employment Agreement is
hereby amended to read as follows: "For purposes of this Agreement, the
Executive shall have "Good Reason" to terminate her employment hereunder (1)
upon a failure by the Company to comply with any material provision of this
Agreement which has not been cured within ten (10) business days after notice of
such compliance has been given by the Executive to the Company, (2) upon action
by the Company resulting in a diminution of the Executive's title or authority,
(3) upon the Company's relocation of the Executive's principal place of
employment outside the New York City Metropolitan Area, or (3) one year after a
Change in Control."
6. Section 6(e)(ii) of the Employment Agreement is hereby amended to read
as follows: "(ii) (A) unless clause (B) below applies, then following the Date
of Termination and for the longer of twelve (12) months thereafter or the
balance of the Term, but in no event greater than twenty-four (24) months, the
Company shall pay to the Executive monthly an amount ("Severance Payments")
equal to the quotient of (1) the Executive's annual base salary at the rate in
effect as of the Date of Termination (the "Base Salary"), divided by (2) the
number twelve (12), or (B) in the event the Date of Termination occurs following
a Change in Control, then, within five (5) days after the Date of Termination,
the Company shall pay to the Executive in a lump sum an amount equal to the
product of (1) the sum of the Executive's Base Salary and the average of the
annual bonuses earned by the Executive in the three fiscal years of the Company
ended immediately prior to the Date of Termination (or, if higher, in the three
fiscal years of the Company ended immediately prior to the Change in Control)
multiplied by (2) the number of full and partial years remaining in the Term
(but in no event less than the number one (1)). For purposes of this subsection
(ii): (I) if the Date of Termination occurs prior to the occurrence of a Change
in Control but during the pendency of a Potential Change in Control (as
hereinafter defined), such Date of Termination shall be deemed to have occurred
following a Change in Control and (II) a "Potential Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
clauses shall have occurred:
(1) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(2) the Company or any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof (a "Person"), except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities,
or (iv) a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of
stock of the Company) publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
- --------------------------------------------------------------------------------
(3) any Person becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 15% of or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the Company's
then outstanding securities (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company); or
(4) the Board adopts a resolution to the effect that, for purposes of
this subsection (ii), a Potential Change in Control has occurred.
For purposes of this Agreement, the period during or with respect to which
Executive is entitled to receive payments hereunder is referred to as the
"Severance Period";"
7. Section 6(e)(iii) is hereby amended by changing the word "season" to
"fiscal year" each time such word occurs in such Section.
8. Executive is hereby awarded fifty thousand (50,000) restricted shares
of Company Common Stock under the Company's 1992 Stock Option and Restricted
Stock and Unit Award Plan (the "Option Plan"). Executive's rights to such shares
shall vest, and the restrictions thereon shall lapse, (i) as to 16,666 shares,
on February 28, 2001, provided that the Company shall have achieved at least
110% of the net income provided for in the Company's fiscal year 2000 operating
budget as approved by the Board of Directors of the Company in the ordinary
course, (ii) as to 16,667 shares, on February 28, 2002, provided that the
Company shall have achieved at least 110% of the net income provided for in the
Company's fiscal year 2001 operating budget as approved by the Board of
Directors of the Company in the ordinary course, and (iii) as to the remaining
16,667 shares, on February 28, 2003, provided that the Company shall have
achieved at least 110% of the net income provided for in the Company's fiscal
year 2002 operating budget as approved by the Board of Directors of the Company
in the ordinary course. If any of the restricted shares do not vest on the date
specified in any of clauses (i), (ii) or (iii) as a result of the failure of the
Company to achieve at least 110% of budgeted net income for the fiscal year
referenced in such clause, then Executive's rights to such unvested restricted
shares shall automatically be forfeited by Executive on such date and such
shares shall be canceled.
The Company shall enter into a Restricted Stock Award Agreement with
Executive for the above grant of restricted shares, incorporating the vesting
terms set forth above and otherwise on the terms and conditions set forth in the
form of Restricted Stock Award Agreement previously approved by the Compensation
Committee of the Board of Directors for restricted stock awards under the Option
Plan, including, but not limited to, terms providing for accelerated
exercisability upon the occurrence of an Acceleration Event (as defined in the
Option Plan).
9. Executive is hereby awarded a non-qualified performance-vesting stock
- --------------------------------------------------------------------------------
option to purchase 100,000 shares of Common Stock under the Option Plan, having
an exercise price equal to the Fair Market Value of the Common Stock on the date
of this Amendment. Such option shall become exercisable in accordance with the
vesting schedule set forth in Exhibit A to this Amendment and shall be treated
as a Performance Option within the meaning of Section 6(e)(vii) of the
Employment Agreement.
The Company shall enter into a Stock Option Agreement with the Executive
for the above stock option grant, incorporating the vesting terms set forth on
Exhibit A and the provisions of Section 6(e)(vii) of the Employment Agreement
and otherwise substantially on the terms and conditions set forth in the form of
the Company's standard Stock Option Agreement applicable to "performance
vesting" options previously approved by the Compensation Committee of the Board
of Directors, including, but not limited to, terms providing for accelerated
exercisability upon the occurrence of an Acceleration Event (as defined in the
Option Plan).
10. From and after the date hereof, the term "Agreement" as used in the
Employment Agreement, shall mean the Employment Agreement as amended by this
Amendment, and the Employment Agreement, as so amended, shall continue in full
force and effect.
[Continued Next Page]
- --------------------------------------------------------------------------------
11. Sections 11 through 15 of the Employment Agreement are hereby made a
part of, and are incorporated by this reference into, this Amendment.
12. IN WITNESS WHEREOF, the parties have executed this Amendment this 16th
day of February, 2000.
ANNTAYLOR STORES CORPORATION EXECUTIVE
By: /s/ J. Patrick Spainhour /s/ Patricia DeRosa
----------------------------------- -------------------
J.Patrick Spainhour, Chairman and PATRICIA DEROSA
Chief Executive Officer
- --------------------------------------------------------------------------------
EXHIBIT A
STOCK OPTION VESTING SCHEDULE
Total Grant: 100,000
Grant Date: February 16, 2000
Exercise Price: Fair Market Value of the Common Stock on February 16,
2000 (i.e., closing market price of the Common Stock on the
NYSE on February 15, 2000).
Vesting Schedule:
1. On each Vesting Date set forth in Column A below, if for the fiscal year
set forth in Column C corresponding to such date:
(i) the Company shall have achieved net income per share equal to or more
than the target net income amount set forth in Column F for such fiscal
year, then on that Vesting Date, the option shall vest and become
exercisable with respect to 100% of the corresponding number of shares set
forth in column B;
(i) the Company shall have achieved net income per share that is less than
the amount set forth in Column F for such fiscal year, but equal to or
more than the minimum net income per share amount set forth in Column E
for such fiscal year, then on that Vesting Date the option shall vest and
become exercisable with respect to a percentage of the corresponding
number of shares set forth in column B determined in accordance with the
following formula:
% Vesting = Actual Net Income minus Col. D Budgeted Net Income
-----------------------------------------------------------
Col. F Target Net Income minus Col. D Budgeted Net Income
See example set forth below table.
- ---------------:-------------:--------:-------------:-------------:------------
: : : : :
Column A : B : C : D : E : F
- ---------------:-------------:--------:-------------:-------------:------------
Vesting Date :# of Shares : Fiscal : Budgeted : Minimum Net : Target
: Subject to : Year : Net Income : Income Per : Net Income
: Vesting : : Per Share : Share : Per Share
- ---------------:-------------:--------:-------------:-------------:------------
2/28/01 : 33,333 : 2000 : $[****]*: $[****]* : $[****]*
- ---------------:-------------:--------:-------------:-------------:------------
2/28/02 : 33,333 : 2001 : $[****]*: $[****]* : $[****]*
- ---------------:-------------:--------:-------------:-------------:------------
2/28/03 : 33,334 : 2002 : $[****]*: $[****]* : $[****]*
- ---------------:-------------:--------:-------------:-------------:------------
3-Year : : : : : $[****]*
Aggregate : : : : :
- ---------------:-------------:--------:-------------:-------------:------------
EXAMPLE: If the Company earns net income per share for fiscal year 2000 of
$[****]*, options to purchase 23,666 shares (71% of the 33,333) shall vest and
become exercisable on 2/28/01.
- ----------------
* Confidential Treatment Requested by AnnTaylor Stores Corporation.
- --------------------------------------------------------------------------------
2. If the Company shall have achieved cumulative net income per share
aggregating at least $[****]* for the three fiscal year period from fiscal
2000 through fiscal 2002, then any options that did not vest pursuant to
Section 1 above shall vest and become exercisable on February 28, 2003.
3. Any options that have not vested by February 28, 2003 pursuant to Section
1 or Section 2 above, shall be automatically be terminated and canceled on
such date, without becoming exercisable.
4. For purposes of this Exhibit A:
(a)a "fiscal year" of the Company shall mean the fiscal year commencing
on the Sunday closest to January 31 in the year mentioned (for example,
"fiscal year 2000" means the fiscal year that began on January 30, 2000
and ends on February 3, 2001);
(b)"net income" shall mean that net income set forth on the Company's
audited consolidated operating statement for the fiscal year in
question, and "net income per share" shall mean the net income per
share, on a diluted basis, set forth on the Company's audited
consolidated operating statement for the fiscal year in question.
- ----------------
* Confidential Treatment Requested by AnnTaylor Stores Corporation.