` Exhibit 10.18
ANNTAYLOR STORES CORPORATION
SPECIAL SEVERANCE PLAN
AnnTaylor Stores Corporation, a Delaware corporation (the
"Company"), hereby adopts the AnnTaylor Stores Corporation Special Severance
Plan (the "Plan") for the benefit of certain employees of the Company and its
subsidiaries, on the terms and conditions hereinafter stated.
The Plan, as set forth herein, is intended to help retain qualified
employees, maintain a stable work environment and provide economic security to
certain employees of the Company in the event of a Qualifying Termination (as
defined herein). The Plan, as a "severance pay arrangement" within the meaning
of Section 3(2)(B)(i) of ERISA, is intended to be excepted from the definitions
of "employee pension benefit plan" and "pension plan" set forth under Section
3(2) of ERISA, and is intended to meet the descriptive requirements of a plan
constituting a "severance pay plan" within the meaning of regulations published
by the Secretary of Labor at Title 29, Code of Federal Regulations, ss.
2510.3-2(b).
SECTION 1. DEFINITIONS. As hereinafter used:
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1.1 "Affiliate" shall mean any corporation, directly or indirectly,
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through one or more intermediaries, controlling, controlled by or under common
control with the Company.
1.2 "Annual Compensation" shall mean (i) the Severed Employee's
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current rate of base salary (determined immediately prior to the Qualifying
Termination and without regard to any decrease in such salary constituting Good
Reason), plus (ii) the average of the Severed Employee's annual bonuses earned
in respect of the three full fiscal years (or the number of full years worked
with the Company, if fewer than three) immediately preceding the year in which
the Change in Control occurs or, if higher, in which the Qualifying Termination
occurs.
1.3 "Board" shall mean the Board of Directors of the Company.
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1.4 "Cause" shall mean, with respect to a termination of the
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Employee's employment with the Company, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties with the Company
(other than by reason of physical or mental incapacity) or (ii) the conviction
of the Employee for the commission of a felony involving moral turpitude.
1.5 "Change in Control" shall be deemed to have occurred if:
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(I) any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act, other than (A) the Company, (B)
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or (C) any
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corporation owned, directly or indirectly, by the
stockholders of the Company (in substantially the same
proportion as their ownership of shares), (a "Person") is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
voting securities;
(II) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute
the Board, and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect a transaction described in
clause (I), (III) or (IV) of this Section 1.5) whose
election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute at least a majority thereof;
(III) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
beneficial owner (as defined in clause (I) above), directly or
indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then
outstanding securities; or
(IV) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
1.6 "Code" shall mean the Internal Revenue Code of 1986, as it may
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be amended from time to time.
1.7 "Committee" shall mean the Compensation Committee of the Board.
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1.8 "Company" shall mean AnnTaylor Stores Corporation, a Delaware
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corporation, or any successor thereto.
1.9 "Disability" shall mean a physical or mental condition causing
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the Employee to be unable to substantially perform his or her duties with the
Company, including, without limitation, such condition entitling him or her to
benefits under any sick pay or disability income policy or program of the
Company.
1.10 "Effective Date" shall mean January 1, 2000.
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1.11 "Employee" shall mean any employee of the Company or any direct
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or indirect subsidiary of the Company who is a Level I, Level II, Level III or
Level IV Employee.
1.12 "ERISA" shall mean the Employee Retirement Income Security Act
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of 1974, as it may be amended from time to time.
1.13 "Exchange Act" shall mean the Securities Exchange Act of 1934,
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as amended.
1.14 "Good Reason" shall mean any of the following acts or omissions
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that take place on or after the occurrence of a Change in Control: (i) the
material diminution in the Employee's duties or authority; (ii) a change of the
Employee's place of employment by more than fifty (50) miles; or (iii) a
reduction in the Employee's salary or bonus opportunity; provided, however, that
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clause (i) above shall only be applicable to an Employee who is as a Level I or
Level II Employee.
1.15 "Level I Employee" shall mean an Employee who has the title of
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Executive Vice President of the Company or any direct or indirect subsidiary of
the Company.
1.16 "Level II Employee" shall mean an Employee who has the title of
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Senior Vice President of the Company or any direct or indirect subsidiary of the
Company.
1.17 "Level III Employee" shall mean an Employee who has the title
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of Vice President of the Company or any direct or indirect subsidiary of the
Company.
1.18 "Level IV Employee" shall mean an Employee who is a
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Director-level employee of the Company or any direct or indirect subsidiary of
the Company (including District Managers and Merchandising Managers).
1.19 "Person" shall mean any individual, entity or group, within the
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meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
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1.20 "Plan Administrator" shall mean the person or persons
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designated by the Committee or by the Board to administer the Plan.
1.21 "Potential Change in Control" shall be deemed to occur in the
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event that, after the Effective Date, the Company enters into an agreement, the
consummation of which would result in a Change in Control or the Company, or any
Person publicly announces an intention to take or to consider taking action
which, if consummated, would constitute a Change in Control.
1.22 "Qualifying Termination" shall mean a termination of an
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Employee's employment following a Change in Control and on or before such
Employee's Qualifying Termination Date, either (i) by the Company without Cause
or (ii) by the Employee for Good Reason. Severance Benefits will not be paid in
the event of termination of an Employee's employment by reason of retirement or
death, by the Company for Cause or Disability or by the Employee without Good
Reason. A termination of employment will not be deemed to have occurred upon (1)
the transfer of the Employee to employment with an Affiliate of the Company if
the Affiliate assumes the Company's responsibilities under the Plan with respect
to the Employee or (2) the divestiture of a business with which the Employee is
primarily associated if the Employee is offered comparable employment by the
successor company and such successor company assumes the Company's
responsibilities under the Plan with respect to such Employee.
1.23 "Qualifying Termination Date" shall mean the date occurring
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twenty-four (24) months following a Change in Control.
1.24 "Severance Benefits" shall mean the payments and benefits
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provided to Severed Employees pursuant to Section 2.1 and 2.2 hereof.
1.25 "Severance Date" shall mean the date on which an Employee
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incurs a Qualifying Termination.
1.26 "Severance Multiple" shall mean:
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(a) with respect to Level I Employees, two and one-half;
(b) with respect to Level II employees, two;
(c) with respect to Level III Employees, one and one-half; and
(d) with respect to Level IV Employees, one.
1.27 "Severed Employee" shall mean an Employee who has incurred a
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Qualifying Termination.
Additional definitions are set forth within the Plan and shall have the meanings
ascribed to them in the Plan.
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SECTION 2. BENEFITS.
2.1 Subject to Section 2.4 hereof, each Severed Employee shall be
entitled to receive from the Company an amount equal to the product of (i) the
Severed Employee's Annual Compensation and (ii) the Severed Employee's Severance
Multiple (the "Severance Amount"). The Severance Amount shall be paid to such
Severed Employee in a lump sum as soon as practicable but no later than ten days
following the first date on which the Release referred to in Section 2.5 hereof
is no longer revocable. The Severance Amount that a Severed Employee receives
under this Plan shall not be taken into account for purposes of determining
benefits under any other qualified or nonqualified plans of the Company.
2.2 Subject to Section 2.4 hereof, commencing on the date
immediately following the Severed Employee's Severance Date and continuing for
the period set forth below (the "Welfare Benefit Continuation Period"), the
Company shall provide each Severed Employee and anyone entitled to claim under
or through such Severed Employee with all Company-paid benefits under any group
health plan and life insurance plan of the Company (as in effect immediately
prior to the such Severed Employee's Severance Date or, if more favorable to the
Severed Employee, immediately prior to the Change in Control) for which
employees of the Company and its subsidiaries are eligible, to the same extent
as if such Severed Employee had continued to be an employee of the Company or
any subsidiary thereof during the Welfare Benefit Continuation Period. To the
extent that the Severed Employee's participation in Company benefit plans is not
practicable, the Company shall arrange to provide, at the Company's sole
expense, the Severed Employee and anyone entitled to claim under or through such
Severed Employee with equivalent health and life insurance benefits under an
alternative arrangement during the Welfare Benefit Continuation Period. The
coverage period for purposes of the group health continuation requirements of
Section 4980B of the Code shall commence at the expiration of the Welfare
Benefit Continuation Period. For purposes of this Section 2.2, the Welfare
Benefit Continuation Period shall be the product of (a) the Severed Employee's
Severance Multiple and (b) twelve months.
2.3 In the event of a claim by an Employee as to the amount or
timing of any payment or benefit under the Plan, such Employee shall present the
reason for his or her claim in writing to the Plan Administrator. The Plan
Administrator shall, within thirty (30) days after receipt of such written
claim, send a written notification to the Employee as to its disposition. In the
event the claim is wholly or partially denied, such written notification shall
(i) state the specific reason or reasons for the denial, (ii) make specific
reference to pertinent Plan provisions on which the denial is based, (iii)
provide a description of any additional material or information necessary for
the Employee to perfect the claim and an explanation of why such material or
information is necessary, and (iv) set forth the procedure by which the Employee
may appeal the denial of his or her claim. In the event an Employee wishes to
appeal the denial of his or her claim, he or she may request a review of such
denial by making application in writing to the Plan Administrator within fifteen
(15) days after receipt of such denial. Such Employee (or his or her duly
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authorized legal representative) may, upon written request to the Plan
Administrator, review any documents pertinent to his or her claim, and submit in
writing issues and comments in support of his or her position. Within thirty
(30) days after receipt of a written appeal (unless special circumstances, such
as the need to hold a hearing, require an extension of time, but in no event
more than thirty (30) days after such receipt), the Plan Administrator shall
notify the Employee of the final decision. The final decision shall be in
writing and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based.
2.4 No Employee shall be eligible to receive Severance Benefits
unless he or she first executes a Release (substantially in the form of Exhibit
A hereto) in favor of the Company and others set forth on said Exhibit A,
relating to all claims or liabilities of any kind relating to his or her
employment with the Company or a subsidiary thereof and the termination of the
Employee's employment.
2.5 The Company shall pay to each Employee all reasonable legal fees
and expenses incurred by such Employee in seeking in good faith to obtain or
enforce any right or benefit provided under this Plan (other than any such fees
and expenses incurred in pursuing any claim determined to be frivolous by an
arbitrator or by a court of competent jurisdiction).
2.6 (a) In the event that any payment or benefit received or to be
received hereunder by a Severed Employee who is a Level I Employee or a Level II
Employee (a "Severed Executive") would be subject (in whole or in part) to the
tax (the "Excise Tax") imposed under Section 4999 of the Code, the Company shall
pay to the Severed Executive such additional amounts (the "Gross-Up Payment") as
may be necessary to place the Severed Executive in the same after-tax position
in which he or she would have been had no portion of the Total Payments (as
hereinafter defined) been subject to the Excise Tax. For purposes of the Plan,
"Total Payments" shall mean any payments made or benefits provided in connection
with a Change in Control of the Company or the termination of the Severed
Executive's employment, whether such payments or benefits are received pursuant
to the terms of this Plan or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control of the Company
or any person affiliated with the Company or such person.
(b) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder, the Severed Executive
shall repay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to the reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment being repaid by the Severed Executive to the extent that
such repayment results in a reduction in Excise Tax and/or federal, state or
income tax deduction) plus interest on the amount of such repayment at the rate
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provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder (including by
reason of any payment the existence of which cannot be determined as the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Severed Executive with respect of such excess) at the time that the amount of
such excess if finally determined. The Severed Executive and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments.
SECTION 3. PLAN ADMINISTRATION.
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3.1 The Plan shall be interpreted, administered and operated by the
Plan Administrator, which shall have complete authority, in its sole discretion
subject to the express provisions of the Plan, to determine who shall be
eligible for Severance Benefits, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable for the administration of the Plan.
3.2 All questions of any character whatsoever arising in connection
with the interpretation of the Plan or its administration or operation shall be
submitted to and settled and determined by the Plan Administrator in an
equitable and fair manner in accordance with the procedure for claims and
appeals described in Section 2.3 hereof.
3.3 The Plan Administrator may delegate any of its duties hereunder
to such person or persons from time to time as it may designate.
3.4 The Plan Administrator is empowered, on behalf of the Plan, to
engage accountants, legal counsel and such other personnel as it deems necessary
or advisable to assist it in the performance of its duties under the Plan. The
functions of any such persons engaged by the Plan Administrator shall be limited
to the specified services and duties for which they are engaged, and such
persons shall have no other duties, obligations or responsibilities under the
Plan. Such persons shall exercise no discretionary authority or discretionary
control respecting the management of the Plan. All reasonable expenses thereof
shall be borne by the Company.
SECTION 4. PLAN MODIFICATION OR TERMINATION.
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The Plan may be amended or terminated by the Board at any time;
provided, however, that (i) no termination or amendment of the Plan may reduce
the Severance Benefits payable under the Plan to an Employee if the Employee's
termination of employment with the Company has occurred prior to such
termination of the Plan or amendment of its provisions and (ii) during the
pendency of a Potential Change in Control and following a Change in Control, the
Plan may not be terminated and may not be amended without the consent of each
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affected Employee, if such amendment would be adverse to the interests of any
Employee.
SECTION 5. GENERAL PROVISIONS.
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5.1 Except as otherwise provided herein or by law, none of the
payments, benefits or rights of any Employee shall be subject to any claim of
any creditor, and, in particular, to the fullest extent permitted by law, all
such payments, benefits and rights shall be free from attachment, garnishment,
trustee's process, or any other legal or equitable process available to any
creditor of such Employee. No Employee shall have the right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or payments
which he or she may expect to receive, contingently or otherwise, under this
Plan.
5.2 Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund, trust or account, nor the payment of any
benefits shall be construed as giving any Employee, or any person whomsoever,
the right to be retained in the service of the Company or any subsidiary
thereof, and all Employees shall remain subject to discharge to the same extent
as if the Plan had never been adopted.
5.3 If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.
5.4 This Plan shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties, including each Employee,
present and future, and any successor to the Company.
5.5 The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
5.6 The Plan shall not be funded. No Employee shall have any right
to, or interest in, any assets of the Company which may be applied by the
Company to the payment of benefits or other rights under this Plan.
5.7 Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of giving a receipt therefor shall
be deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Company, its subsidiaries, the Plan Administrator and
all other parties with respect thereto. If a Severed Employee dies prior to the
payment of all benefits due such Severed Employee, such unpaid amounts shall be
paid to the executor, personal representative or estate of such Employee.
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5.8 Any notice or other communication required or permitted pursuant
to the terms hereof shall have been duly given when delivered or mailed by
United States mail, first class, postage prepaid, addressed to the intended
recipient at his, her or its last known address.
5.9 This Plan shall be construed and enforced according to the laws
of the State of Delaware, without giving effect to its principles of conflicts
of law, to the extent not preempted by federal law, which shall otherwise
control.
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EXHIBIT A
RELEASE AGREEMENT
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In consideration of the payments and benefits provided for in the
annexed AnnTaylor Stores Corporation Special Severance Plan (the "Plan"), and
the release from [insert employee's name] (the "Employee") set forth herein,
AnnTaylor Stores Corporation (the "Company") and the Employee agree to the terms
of this Release Agreement. Capitalized terms used and not defined in this
Release Agreement shall have the meanings assigned thereto in the Plan.
1. The Employee acknowledges and agrees that the Company is under no
obligation to offer the Employee the payments and benefits set forth in the
annexed Plan, unless the Employee consents to the terms of this Release
Agreement. The Employee further acknowledges that he/she is under no obligation
to consent to the terms of this Release Agreement and that the Employee has
entered into this agreement freely and voluntarily.
2. The Employee voluntarily, knowingly and willingly releases and
forever discharges the Company and its Affiliates, together with its and their
respective officers, directors, partners, shareholders, employees and agents,
and each of its and their predecessors, successors and assigns (collectively,
"Releasees"), from any and all charges, complaints, claims, promises,
agreements, controversies, causes of action and demands of any nature whatsoever
that the Employee or his/her executors, administrators, successors or assigns
ever had, now have or hereafter can, shall or may have against Releasees by
reason of any matter, cause or thing whatsoever arising prior to the time of
signing of this Release Agreement by the Employee. The release being provided by
the Employee in this Release Agreement includes, but is not limited to, any
rights or claims relating in any way to the Employee's employment relationship
with the Company or any its Affiliates, or the termination thereof, or under any
statute, including the federal Age Discrimination in Employment Act of 1967,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1990, the
Americans with Disabilities Act of 1990, the Employee Retirement Income Security
Act of 1974, the Family and Medical Leave Act of 1993, each as amended, and any
other federal, state or local law or judicial decision.
3. The Employee acknowledges and agrees that he/she shall not,
directly or indirectly, seek or further be entitled to any personal recovery in
any lawsuit or other claim against the Company or any other Releasee based on
any event arising out of the matters released in paragraph 2.
4. Nothing herein shall be deemed to release (i) any of the
Employee's rights under the Plan or (ii) any of the vested benefits that the
Employee has accrued prior to the date this Release Agreement is executed by the
Employee under the employee benefit plans and arrangements of the Company or any
of its Affiliates.
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5. In consideration of the Employee's release set forth in paragraph
2, the Company knowingly and willingly releases and forever discharges the
Employee from any and all charges, complaints, claims, promises, agreements,
controversies, causes of action and demands of any nature whatsoever that the
Company now has or hereafter can, shall or may have against him/her by reason of
any matter, cause or thing whatsoever arising prior to the time of signing of
this Release Agreement by the Company, provided, however, that nothing herein is
intended to release any claim the Company may have against the Employee for any
illegal conduct.
6. The Employee acknowledges that the Company has advised him/her to
consult with an attorney of his/her choice prior to signing this Release
Agreement. The Employee represents that, to the extent he/she desires, he/she
has had the opportunity to review this Release Agreement with an attorney of
his/her choice.
7. The Employee acknowledges that he/she has been offered the
opportunity to consider the terms of this Release Agreement for a period of at
least forty-five (45) days, although he/she may sign it sooner should he/she
desire. The Employee further shall have seven additional days from the date of
signing this Release Agreement to revoke his/her consent hereto by notifying, in
writing, the General Counsel of the Company. This Release Agreement will not
become effective until seven days after the date on which the Employee has
signed it without revocation.
Dated: ____________________ _______________________________
[Employee Name]
ANNTAYLOR STORES CORPORATION
By:
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Title: