ANNTAYLOR STORES CORPORATION
MANAGEMENT PERFORMANCE COMPENSATION PLAN
Effective as of August 7, 1992 the Board adopted the
Management Performance Compensation Plan (the "Prior Plan"). The
Prior Plan, as amended and restated hereby (the "Plan") is
effective as of the beginning of the Fall 1994 Season, subject to
the approval of the stockholders of the Company at the 1994
Annual Meeting of Stockholders of the Company.
1. PURPOSE. This Plan is an integral part of the
Company's over-all compensation strategy which is aimed at
attracting and retaining in the employ of the Company and its
Subsidiaries highly motivated, results-oriented personnel of
experience and ability, by basing such personnel's compensation,
in part, on their contributions to the growth and profitability
of the Company, thereby giving them incentive to remain with the
Company and its Subsidiaries and to continue to make
contributions to the Company in the future. Further, the purpose
of the Plan is to serve as a qualified performance based
compensation program under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
2. DEFINITIONS. As used in this Plan, the following
capitalized terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the
Company.
(b) "Budget" means the Company's operating budget
for a six-month Season.
(c) "Committee" means the Compensation Committee
of the Board, as appointed by the Board from time to time and
consisting of not less than two directors, at least two of whom
must be an "outside director" within the meaning of Section
162(m) of the Code. All actions taken by the Committee under
this Plan with respect to Executive Officers shall be taken
solely by those members of the Committee who are "outside
directors", even if less than a majority of the Committee. No
member of the Committee shall be eligible for selection as a
Participant at any time while such person is serving on the
Committee.
(d) "Company" means AnnTaylor Stores Corporation.
(e) "Eligible Associate" means a person who is
eligible to participate in this Plan pursuant to Section 3 below.
(f) "Executive Officer" means an officer of the
Company who, as of the beginning of a Season, is an "executive
officer" within the meaning of Rule 3b-7 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act").
(g) "Operating Profit" has the meaning assigned
thereto in Section 5(b) hereof.
(h) "Participant" means an Eligible Associate who
has been designated as a Participant by the Committee in
accordance with Section 4 of this Plan.
(i) "Performance Compensation" means the cash
amount payable to a Participant pursuant to this Plan.
(j) "Performance Percentage" and "Performance
Ratio" have the meanings assigned thereto in Section 5(a) hereof.
(k) "Plan" means this AnnTaylor Stores
Corporation Management Performance Compensation Plan.
(l) "Season" means the Company's fiscal six-month
Spring or Fall season.
(m) "Subsidiary" means any corporation of which
the Company owns, directly or indirectly, at least a majority of
the outstanding voting capital stock.
3. ELIGIBILITY. Any salaried associate in the employ
of the Company or any of its Subsidiaries (including officers and
directors, but excluding persons who are directors only) shall be
eligible to become a Participant and receive Performance
Compensation under this Plan.
4. SELECTION OF PARTICIPANTS.
(a) As promptly as possible after the Company's
Budget for a Season shall have become available, and after having
received the input of the Company's Chief Executive Officer
pursuant to Section 4(b) below, the Committee shall designate
from among all Eligible Associates those who shall be
Participants under this Plan for such Season.
(b) Prior to the beginning of a Season and as
promptly as possible after the Company's Budget for a Season
shall have become available, the Chief Executive Officer of the
Company shall submit to the Committee a list of the names,
titles, salaries and suggested Performance Percentages of those
Eligible Associates who the Chief Executive Officer recommends
that the Committee designate as Participants under this Plan for
such Season.
(c) The Committee shall have the authority to
designate from time to time prior to the commencement of as well
as during a Season additional Eligible Associates as Participants
under this Plan for such Season.
(d) In selecting from among all Eligible
Associates those who shall become Participants in any Season and
in determining the Performance Percentages of such Participants
for such Season, the Committee shall consider the position and
responsibilities of the Eligible Associates, the value of their
services to the Company and such other factors as the Committee
deems relevant.
5. FORMULA FOR DETERMINING AMOUNT OF PERFORMANCE
COMPENSATION.
(a) At the time the Committee selects Participants
under this Plan for a Season, or within such other time period
which may comply with Section 162(m) of the Code, the Committee
shall:
(i) assign to each Participant such Participant's
individual "Performance Percentage" for such Season;
and
(ii) establish a matrix in the form of the sample appended
hereto as Exhibit A, assigning a "Performance Ratio" to
various levels of Operating Profit which the Company
might achieve for such Season.
(b) As used in this Plan, "Operating Profit" means
the consolidated earnings of the Company and its Subsidiaries
before interest, taxes, non-operating income and expenses, and
amortization of goodwill, but after taking into account
Performance Compensation which would be payable under this Plan
if such Operating Profit were achieved.
(c) Subject to adjustment pursuant to Section 5(d)
below, a Participant's Performance Compensation for the Season
for which he or she was designated by the Committee as a
Participant pursuant to Section 4 hereof, shall be equal to the
product of (i) the Participant's annual base salary for the
fiscal year of which such Season is a part (prorated, as to any
Participant who shall have become an Eligible Associate and
designated as a Participant after the commencement of such fiscal
year), multiplied by (ii) the Performance Percentage assigned to
such Participant for such Season pursuant to Section 5(a)(i)
above, multiplied by (iii) the Performance Ratio achieved by the
Company for such Season. An illustration of how Performance
Compensation would be calculated is included in Exhibit A to this
Plan.
(d) For any Season, the Board may establish a
ceiling on the aggregate amount which may be paid out in
Performance Compensation for such Season, expressed as a
percentage of the actual Operating Profit of the Company for such
Season. In the event that such a limit is established for any
Season, the Performance Compensation otherwise payable to all
Participants for such Season pursuant to Section 5(c) above shall
be reduced pro rata. Notwithstanding any other provision of the
Plan, no participant who is an Executive Officer may receive
Performance Compensation for a Season in excess of $500,000.
(e) Performance Compensation shall be paid by the
Company or the Subsidiary employing the Participant promptly
following the end of the Season to which it relates and the
availability of the Company's final consolidated financial
results for such Season. The foregoing notwithstanding, no
payment of Performance Compensation for a Season may be made to
an Executive Officer until the Company's Operating Profit
performance results for that Season are certified by the
Committee. A Participant shall not be entitled to receive
payment of Performance Compensation unless such Participant is
still in the employ of (and shall not have delivered notice of
resignation to) the Company or one of its Subsidiaries at the
time the Performance Compensation is actually paid.
6. FINALITY OF DETERMINATIONS. The Committee shall
administer this Plan and construe its provisions. Any
determination by the Committee in carrying out, administering or
construing this Plan shall be final and binding for all purposes
and upon all interested persons and their respective heirs,
successors, and legal representatives.
7. LIMITATIONS.
(a) No person shall at any time have any right to
receive Performance Compensation hereunder, unless such person
shall have been designated as a Participant by the Committee
pursuant to Section 4 hereof and the other terms and conditions
of this Plan shall have been satisfied. No person shall have
authority to enter into any agreement for the inclusion of anyone
as a Participant or the awarding of Performance Compensation
hereunder or to make any representation or warranty with respect
thereto. Designation of an Eligible Associate as a Participant
in any Season shall not guarantee or require that such Eligible
Associate be designated as a Participant in any later Season.
(b) No action of the Company or the Board in
establishing this Plan, nor any action taken by the Company, the
Board or the Committee under this Plan, nor any provision of this
Plan, shall be construed as conferring upon any associate any
right to continued employment for any period by the Company or
any of its Subsidiaries, or shall interfere in any way with the
right of the Company or any Subsidiary to terminate such
employment.
8. AMENDMENT AND TERMINATION OF PLAN. The Board at
any time and from time to time may modify, amend, suspend or
terminate this Plan, without notice, provided that no amendment
which requires stockholder approval in order to comply with
Section 162(m) of the Code shall be effective unless the same
shall be approved by the requisite vote of stockholders of the
Company.
9. COMPLIANCE WITH CODE SECTION 162(m). The Plan is
designed and intended to comply with Section 162(m) of the Code,
and all provisions hereof shall be construed in a manner to so
comply.
Exhibit A to Management Performance Compensation Plan
SAMPLE MATRIX
1. Pursuant to the Plan, the Committee shall establish a matrix
for possible actual Operating Profit levels, and set a
Performance Ratio for these various levels of Operating
Profit. Following is a sample matrix for a Season. The
levels of Operating Profit and Performance Ratios set forth
below are for illustrative purposes only and shall not be
binding on the Committee.
Operating Profit (in '000s) Performance
Ratio (to 1)
$50,001 and above . . . . . . . . . . . . . .2.0
$49,001 to $50,000 . . . . . . . . . . . . . . 1.9
$48,001 to $49,000 . . . . . . . . . . . . . . 1.8
$47,001 to $48,000 . . . . . . . . . . . . . 1.7
$46,001 to $47,000 . . . . . . . . . . . . . 1.6
$45,001 to $46,000 . . . . . . . . . . . . . 1.5
$44,001 to $45,000 . . . . . . . . . . . . . 1.4
$43,001 to $44,000 . . . . . . . . . . . . . 1.3
$42,001 to $43,000 . . . . . . . . . . . . . 1.2
$41,001 to $42,000 . . . . . . . . . . . . . 1.1
$40,001 to $41,000 . . . . . . . . . . . . . 1.0
$39,001 to $40,000 . . . . . . . . . . . . . 0.9
$38,001 to $39,000 . . . . . . . . . . . . . 0.8
$37,001 to $38,000 . . . . . . . . . . . . . 0.7
$36,001 to $37,000 . . . . . . . . . . . . . 0.6
$35,001 to $36,000 . . . . . . . . . . . . . 0.5
$34,001 to $35,000 . . . . . . . . . . . . . 0.4
$33,001 to $34,000 . . . . . . . . . . . . . 0.3
$32,001 to $33,000 . . . . . . . . . . . . . 0.2
$31,001 to $32,000 . . . . . . . . . . . . . 0.1
Below $31,001 . . . . . . . . . . . . . . . . 0.0
2. An example of how the Performance Compensation award
would be calculated for a Participant selected by the
Committee, based on the above matrix, follows:
a. Assume the Committee has selected Eligible Associate
"Smith", whose annual salary is $100,000, to be a
Participant, and has assigned Smith a Performance
Percentage of 10% for the Season.
b. Assume the Company achieves actual Operating Profit for
the Season of $42,500,000, resulting in a Performance
Ratio of 1.2.
c. Smith's Performance Compensation award for the Season
would be equal to the product of (i) $100,000 x (ii)
.10 x (iii) 1.2 (i.e., $12,000).