ANNTAYLOR STORES CORPORATION
MANAGEMENT PERFORMANCE COMPENSATION PLAN
Effective as of August 7, 1992 the Board adopted
the Management Performance Compensation Plan and, effective
as of the beginning of the Fall 1994 Performance Period,
amended and restated such plan (the "Prior Plan"). The
Prior Plan, as amended and restated hereby (the "Plan") is
effective as of the beginning of the Fall 1997 Performance
Period, subject to the approval of the stockholders of the
Company at the 1997 Annual Meeting of the stockholders of
the Company.
1. PURPOSE. This Plan is an integral part of the
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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) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS. As used in this Plan, the following
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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 Performance Period.
(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 "outside directors" within the meaning of
Section 162(m). 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,
and such members shall constitute a subcommittee for
purposes of Section 162(m). With respect to Eligible
Associates who are neither Executive Officers nor members of
the Executive Committee of the Company, the Committee may,
in its discretion, delegate to one or more officers of the
Company its duties hereunder.
(d) "Company" means AnnTaylor Stores Corporation.
(e) "Eligible Associate" has the meaning assigned
thereto in Section 3 hereof.
(f) "Executive Officer" means an officer of the
Company who, as of the beginning of a Performance Period, is
an "executive officer" within the meaning of Rule 3b-7
promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act").
(g) "Participant" means an Eligible Associate who
has been designated as a Participant by the Committee in
accordance with Section 4 of this Plan.
(h) "Performance Compensation" means the cash
amount payable to a Participant pursuant to this Plan.
(i) "Performance Goals" has the meaning assigned
thereto in Section 5(b) hereof.
(j) "Performance Percentage" and "Performance
Ratio" have the meanings assigned thereto in Section 5(a)
hereof.
(k) "Performance Period" means a period
designated by the Committee during which Performance
Compensation will be earned. A Performance Period may range
in length from the six-month period that coincides with the
Company's fiscal six-month Spring or Fall season to the
twelve-month period that coincides with the Company's fiscal
year.
(l) "Plan" means this AnnTaylor Stores
Corporation Management Performance Compensation Plan.
(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
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of the Company or any of its Subsidiaries (including
officers and directors, but excluding persons who are
directors only or who are members of the Committee) shall be
eligible (an "Eligible Associate") to become a Participant
and receive Performance Compensation under this Plan.
4. SELECTION OF PARTICIPANTS.
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(a) As promptly as possible after the Company's
Budget for a Performance Period shall have become available,
and after having received the recommendations 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 Performance Period.
(b) Prior to the beginning of a Performance
Period, or by such later date permissible under Section
162(m), and after the Company's Budget for a Performance
Period 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 whom the Chief
Executive Officer recommends that the Committee designate as
Participants under this Plan for such Performance Period.
(c) The Committee shall have the authority to
designate from time to time prior to the commencement of as
well as during a Performance Period additional Eligible
Associates as Participants under this Plan for such
Performance Period.
(d) In selecting from among all Eligible
Associates those who shall become Participants in any
Performance Period and in determining the Performance
Percentages of such Participants for such Performance
Period, 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
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COMPENSATION.
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(a) At the time the Committee selects
Participants under this Plan for a Performance Period, or
within such other time period which may comply with Section
162(m), the Committee shall, for each Participant:
(i) assign to such Participant their individual
"Performance Percentage" for such Performance
Period; and
(ii) establish a matrix, assigning a "Performance
Ratio" to various levels of Performance Goals
which might be achieved for such Performance
Period.
(b) As used in this Plan, "Performance Goals"
means the specific objectives established by the Committee
for each Participant for a Performance Period. In setting
these objectives, the Committee shall consider one or more
of the following business criteria: revenue; net or gross
sales; comparable store sales; gross margin; operating
profit; earnings before all or any of interest, taxes,
depreciation and/or amortization; cash flow; working
capital; return on equity, assets, capital or investment;
market share; sales (net or gross) measured by store,
product line, territory, operating or business unit,
customers, or other category; earnings or book value per
share; earnings from continuing operations; net worth;
turnover in inventory; levels of expense, cost or liability
by store, product line, territory, operating or business
unit or other category; appreciation in the price of shares
of the Company's common stock; total shareholder return
(stock price appreciation plus dividends); and
implementation of critical projects or processes. Where
applicable, the Performance Goals may be expressed in terms
of attaining a specified level of the selected criterion or
the attainment of a percentage increase or decrease in the
selected criterion, or may be applied to the performance of
the Company relative to a market index, a group of other
companies or a combination thereof, all as determined by the
Committee. Such Performance Goals may relate to the
performance of a store, business unit, product line,
division, territory, the Company or an individual or any
combination thereof. With respect to Participants who are
not Executive Officers, Performance Goals may also include
such individual objective or subjective performance criteria
as the Committee may, from time to time, establish.
Performance Goals may include a threshold level of
performance below which no award payment shall be made and
levels of performance at which specified percentages of the
target award shall be paid, and may also include a maximum
level of performance above which no additional award shall
be paid. Each of the foregoing Performance Goals shall be
determined in accordance with generally acceptable
accounting principles and, for Executive Officers and
Executive Committee members, shall be subject to
certification by the Committee. The Performance Goals
established by the Committee may be different with respect
to different Participants, different Performance Periods
and/or different operations.
The Committee shall have the authority to make
equitable adjustments to the Performance Goals in
recognition of unusual or nonrecurring events affecting the
Company, its financial statements or its shares, in response
to changes in applicable laws or regulations, or to account
for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in
occurrence or related to the acquisition, disposition or
discontinuance of a business or a segment of a business, or
related to a change in accounting principles, or to reflect
capital changes.
(c) Subject to adjustment pursuant to Section
5(d) below, unless otherwise determined by the Committee, a
Participant's Performance Compensation for the Performance
Period 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 Performance Period 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 Performance Period pursuant to Section 5(a)(i) above,
multiplied by (iii) the Performance Ratio achieved by the
Company for such Performance Period.
(d) For any Performance Period, the Board may
establish a ceiling on the aggregate amount which may be
paid out in Performance Compensation for such Performance
Period. In the event that such a limit is established for
any Performance Period, the Performance Compensation
otherwise payable to all Participants for such Performance
Period 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 twelve-month Performance
Period in excess of $1,500,000, such amount to be reduced
proportionately for Performance Periods of shorter duration.
(e) Performance Compensation shall be paid by the
Company or the Subsidiary employing the Participant promptly
following the end of the Performance Period to which it
relates. The foregoing notwithstanding, no payment of
Performance Compensation for a Performance Period may be
made to an Executive Officer until the performance results
for that Performance Period 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
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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.
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(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
Performance Period shall not guarantee or require that such
Eligible Associate be designated as a Participant in any
later Performance Period.
(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
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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 SECTION 162(m). The Plan is
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designed and intended to comply with Section 162(m), and all
provisions hereof shall be construed in a manner to so
comply.