SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
ANNTAYLOR STORES CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AnnTaylor
Stores Corporation, a Delaware corporation (the "Company"), will be held at 9:00
a.m on Wednesday, June 18, 1997, at The Equitable Center, 787 Seventh Avenue,
54th floor, New York, New York, for the following purposes:
1. To elect two Class III Directors of the Company, each to serve for a
term of three years;
2. To approve an amendment to the Company's 1992 Stock Option and
Restricted Stock and Unit Award Plan to (i) increase by 1,500,000 the number
of shares available for option grants under the Plan and (ii) establish a
maximum number of shares with respect to which options, restricted stock
awards and restricted unit awards may be granted to any employee;
3. To approve an amendment and restatement of the Company's Management
Performance Compensation Plan that will, among other things, (i) increase
the amount of the maximum individual award payable in any performance period
and (ii) expand the types of corporate business criteria that the
Compensation Committee may consider in establishing each performance
period's performance goals;
4. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 1997; and
5. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 21, 1997 are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments or postponements thereof. A list of stockholders entitled to vote
at the meeting will be available for inspection at the office of the Secretary
of the Company, 142 West 57th Street, New York, New York, for at least ten days
prior to the meeting, and will also be available for inspection at the meeting.
By Order of the Board of Directors,
Jocelyn F.L. Barandiaran
SECRETARY
New York, New York
May 2, 1997
YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE
ENCLOSED PROXY TO THE COMPANY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT
PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU SO
DESIRE.
[LOGO]
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
PROXY STATEMENT
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This Proxy Statement is being furnished to the stockholders of AnnTaylor
Stores Corporation, a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use at
the Annual Meeting of Stockholders of the Company, to be held at 9:00 a.m. on
Wednesday, June 18, 1997, at The Equitable Center, 787 Seventh Avenue, 54th
floor, New York, New York, and at any and all adjournments or postponements
thereof. At the Annual Meeting, the stockholders of the Company are being asked
to consider and vote upon (i) the election of two Class III Directors, each to
serve for a term of three years; (ii) a proposal to approve an amendment (the
"Option Plan Amendment") to the Company's 1992 Stock Option and Restricted Stock
and Unit Award Plan (the "Stock Option Plan") (a) to increase by 1,500,000 the
number of shares available for option grants under the Stock Option Plan and (b)
to establish a maximum number of shares with respect to which options,
restricted stock awards and restricted unit awards may be granted to any
employee; (iii) a proposal to approve an amendment (the "Performance Plan
Amendment") and restatement of the Company's Management Performance Compensation
Plan that will, among other things, (a) increase the amount of the maximum
individual award payable in any performance period and (b) expand the types of
corporate business criteria that the Compensation Committee may consider in
establishing each performance period's performance goals and (iv) a proposal to
ratify the appointment of the Company's independent auditors for fiscal year
1997.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about May 2, 1997.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.0068 per
share ("Common Stock"), at the close of business on April 21, 1997 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. At the close
of business on the Record Date, there were 25,585,976 shares of Common Stock
outstanding. The presence, either in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding on the Record Date is
necessary to constitute a quorum at the Annual Meeting. All abstentions and
broker non-votes will be included as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the meeting.
Each stockholder will be entitled to one vote per share, in person or by
proxy, for each share of Common Stock held in such stockholder's name as of the
Record Date on any matter submitted to a vote of stockholders at the Annual
Meeting. The Class III Directors will be elected by the affirmative vote of
holders of a plurality of the shares of Common Stock represented and voting in
person or by proxy and entitled to vote at the Annual Meeting. Approval of the
Option Plan Amendment will require the affirmative vote of holders of a majority
of the shares of Common Stock represented and voting in person or by proxy,
provided that the total number of votes cast on this proposal represents more
than 50% of the shares of Common Stock entitled to vote thereon at the Annual
Meeting. Approval of the Performance Plan Amendment and ratification of the
appointment of the Company's independent auditors for the Company's 1997 fiscal
year will require the affirmative vote of holders of a majority of the shares of
Common Stock represented in person or by proxy and entitled to vote at the
Annual Meeting. In determining whether each of the proposals submitted to a vote
of the stockholders has received the requisite number of affirmative votes, (i)
abstentions will not be counted as votes cast in connection with determining the
plurality required to elect a director and will have no effect on the outcome of
that vote,
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(ii) abstentions will not be counted as votes cast in connection with approving
the Option Plan Amendment, but will be counted in determining whether the votes
cast represent 50% of the shares entitled to vote and will reduce the likelihood
that this proposal will receive the required vote and (iii) abstentions will be
counted and will have the same effect as a vote against approval of the
Performance Plan Amendment and the ratification of the appointment of the
Company's independent auditors. In addition, proxies for which the broker does
not have discretionary authority and has not received voting instructions from
the beneficial owners ("broker non-votes") will be disregarded and will have no
effect on the outcome of any of the proposals.
Shares of Common Stock represented by properly executed proxies received in
time for voting at the Annual Meeting will, unless such proxy has previously
been revoked, be voted in accordance with the instructions indicated thereon. In
the absence of specific instructions to the contrary, the persons named in the
accompanying form of proxy intend to vote all properly executed proxies received
by them (i) FOR the election of the Board of Directors' nominees as Class III
Directors, (ii) FOR the Option Plan Amendment, (iii) FOR the Performance Plan
Amendment and (iv) FOR the ratification of Deloitte & Touche LLP as the
Company's independent auditors for the Company's 1997 fiscal year. No business
other than as set forth in the accompanying Notice of Annual Meeting is expected
to come before the Annual Meeting, but should any other matter requiring a vote
of stockholders be properly brought before the Annual Meeting, it is the
intention of the persons named in the enclosed form of proxy to vote such proxy
in accordance with their best judgment on such matters.
For information with respect to advance notice requirements applicable to
stockholders who wish to propose any matter for consideration or nominate any
person for election as a director at an annual meeting, see "Stockholder
Proposals for 1998 Annual Meeting".
Under applicable Delaware law, none of the holders of Common Stock is
entitled to appraisal rights in connection with any proposal to be acted on at
the Annual Meeting.
Execution of the enclosed proxy will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked at
any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy bearing a later date to the Secretary of the
Company, 142 West 57th Street, New York, New York 10019, or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
however, in and of itself constitute a revocation of a proxy.
This solicitation is being made by the Company. The cost of this
solicitation will be borne by the Company. Solicitation will be made by mail,
and may be made personally or by telephone by officers and other employees of
the Company who will not receive additional compensation for solicitation.
The principal executive offices of the Company are located at 142 West 57th
Street, New York, New York 10019.
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
The Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III, serving staggered three-year terms.
The Company's Certificate of Incorporation requires that such classes be as
nearly equal in number of directors as possible. The terms of the Company's two
current Class III Directors, Gerald S. Armstrong and Hanne M. Merriman, expire
at the Annual Meeting. There is currently a vacancy on the Board due to the
resignation of Paul E. Francis, effective February 14, 1997.
At the Annual Meeting, two Class III Directors are to be elected to serve
three-year terms ending in the year 2000 or until their respective successors
are elected and qualified or their earlier death, resignation or removal. The
Board of Directors has nominated Mr. Armstrong and Ms. Merriman for re-election
as Class III Directors. Each of the two nominees has consented to serve as a
Director if elected at the Annual Meeting and, to the best knowledge of the
Board of Directors, each of such nominees is and
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will be able to serve if so elected. In the event that either of these nominees
should be unavailable to stand for election before the Annual Meeting, the
persons named in the accompanying proxy intend to vote for such other person, if
any, as may be designated by the Board of Directors, in the place of a nominee
unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE COMPANY'S
NOMINEES AS CLASS III DIRECTORS.
Set forth below is a brief biography of each nominee for election as a Class
III Director and of all other members of the Board of Directors who will
continue in office.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
TERM EXPIRING 2000
GERALD S. ARMSTRONG, AGE 53. Mr. Armstrong has been a Director of the
Company and its wholly owned operating subsidiary, AnnTaylor, Inc. ("Ann
Taylor"), since February 1989. He has been a partner of Stonington Partners,
Inc., a private investment firm ("Stonington Partners"), since November 1993,
and a director of Stonington Partners since August 1993. He was a partner of
Merrill Lynch Capital Partners, Inc. ("ML Capital Partners"), a private
investment firm associated with Merrill Lynch & Co., Inc. ("ML&Co."), from May
1993 through June 1994, and was an executive vice president of ML Capital
Partners from November 1988 through April 1993. Mr. Armstrong was a managing
director of the Investment Banking Division of ML&Co. from November 1988 through
June 1994. Since June 1994 Mr. Armstrong has served as a consultant to ML
Capital Partners. Mr. Armstrong is also a director of First USA, Inc., Blue Bird
Corporation, Goss Graphic Systems, Inc. and World Color Press, Inc.
HANNE M. MERRIMAN, AGE 55. Ms. Merriman has been a Director of the Company
and Ann Taylor since December 1993. She has been the principal in Hanne Merriman
Associates, retail business consultants, since January 1992, and from February
1990 to December 1990. From January 1991 to June 1992, Ms. Merriman was
president and chief operating officer of Nan Duskin, Inc., a specialty women's
apparel retailer, and from December 1988 to January 1990 was president and chief
executive officer of Honeybee, Inc., a women's apparel retail catalog business
and a division of Spiegel, Inc. Ms. Merriman is also a director of USAir Group,
Inc., CIPSCO, Inc., Central Illinois Public Service Company, State Farm Mutual
Automobile Insurance Company, The Rouse Company and T. Rowe Price Mutual Funds.
She is a member of the National Women's Forum and a trustee of the
American-Scandinavian Foundation.
INCUMBENT CLASS I DIRECTORS
TERM EXPIRING 1998
ROBERT C. GRAYSON, AGE 52. Mr. Grayson has been a Director of the Company
and Ann Taylor since April 1992. He has been president of Robert C. Grayson &
Associates, Inc., a retail marketing consulting firm, since February 1992. He
also has served as chairman of BGA, Inc., a management consulting firm, since
June 1995. He was a vice chairman of the board of Tommy Hilfiger Corp., a men's
apparel manufacturer and retailer, and chairman of the board of Tommy Hilfiger
Retail, a subsidiary of such company, from June 1994 to March 1996. From June
1985 to February 1992, Mr. Grayson was the president and chief executive officer
of Lerner New York, a specialty women's apparel retailer and a division of The
Limited, Inc., a specialty retailer. Mr. Grayson is also a director of Sunglass
Hut International, Inc. and Kenneth Cole Productions, Inc.
ROCHELLE B. LAZARUS, AGE 49. Ms. Lazarus has been a Director of the Company
and Ann Taylor since April 1992. She has been chief executive officer of Ogilvy
& Mather Worldwide, an advertising agency, since September 1996. She was
president and chief operating officer of Ogilvy & Mather Worldwide from December
1995 to September 1996, and was president of Ogilvy & Mather North America from
April 1994 to December 1995. From June 1991 to April 1994, Ms. Lazarus was
president of Ogilvy & Mather New York.
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J. PATRICK SPAINHOUR, AGE 47. Mr. Spainhour has been Chairman and Chief
Executive Officer of the Company and Ann Taylor since August 1996 and a Director
of the Company and Ann Taylor since February 1996. From February 1996 to August
1996, he was President and Chief Operating Officer of the Company and Ann
Taylor. From August 1994 to February 1996, Mr. Spainhour was executive vice
president and chief financial officer of The Donna Karan Company, a designer
apparel company. From February 1993 to July 1994, he was executive vice
president, finance and operations of the Stride Rite Corporation, a footwear
company, and from August 1988 to January 1993, he was senior vice president,
sourcing of The Gap, Inc., a specialty apparel retailer.
INCUMBENT CLASS II DIRECTORS
TERM EXPIRING IN 1999
JAMES J. BURKE, JR., AGE 45. Mr. Burke has been a Director of the Company
and Ann Taylor since February 1989. He has been managing partner of Stonington
Partners since November 1993, and a director of Stonington Partners since August
1993. He was a partner of ML Capital Partners, a private investment firm
associated with ML&Co., from May 1993 through June 1994, and was president and
chief executive officer of ML Capital Partners from January 1987 through April
1993. Mr. Burke was a first vice president of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") from July 1988 through June 1994 and was a
managing director of the Investment Banking Division of ML&Co. from April 1985
through June 1994. Since June 1994 Mr. Burke has served as a consultant to ML
Capital Partners. Mr. Burke is also a director of Borg-Warner Security
Corporation, Pathmark Stores, Inc., Supermarkets General Holdings Corporation
and United Artists Theatre Circuit, Inc.
PATRICIA DEROSA, AGE 44. Ms. DeRosa has been President, Chief Operating
Officer and a Director of the Company and Ann Taylor since December 1996. From
August 1995 to November 1996, she was executive vice president, business
development of Charming Shoppes, Inc., a women's specialty apparel retailer.
From 1975 to 1981 and from 1983 to August 1995, she served in various capacities
at The Gap, Inc., a specialty apparel retailer, including from 1993 to 1995 as
president of the GapKids division, and from 1991 to 1993 as executive vice
president of the Gap division.
Messrs. Armstrong and Burke serve on the Board of Directors of the Company
and Ann Taylor as representatives of ML&Co. and certain of its affiliates which,
as of the Record Date, beneficially owned an aggregate of 24% of the Common
Stock. See "Compensation of Directors and Related Matters", "Compensation
Committee Interlocks and Insider Participation" and "Beneficial Ownership of
Common Stock".
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Company's Board of Directors held 14 meetings in fiscal 1996. Each
Director attended at least 80% of the total number of Board meetings and
meetings of Board committees on which such Director served, except for Ms.
Lazarus, who attended 70% of all such meetings. The Board of Directors has
established standing Audit, Compensation and Nominating Committees. The
membership and functions of the standing committees of the Board of Directors
are as follows:
AUDIT COMMITTEE: The principal functions of the Audit Committee include
recommending independent accountants; conferring with the Company's independent
auditors regarding the scope and results of their audit of the Company's
financial statements, and the Company's internal accounting controls and other
matters; reviewing the fees of the Company's independent auditors and other
terms of their engagement; conferring with the Company's internal auditor
regarding planned audit activities and results of his audits; and reviewing the
adequacy of internal accounting controls and the results of fiscal policies and
financial management of the Company. The Audit Committee held three meetings in
fiscal 1996. The current members of the Audit Committee are Mr. Grayson
(Chairman), Ms. Lazarus and Ms. Merriman.
COMPENSATION COMMITTEE: The principal functions of the Compensation
Committee are to review and make recommendations regarding the compensation of
the executive officers of the Company and to
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administer the Company's benefit plans, including its stock option plans and
management performance compensation plan. The Compensation Committee held nine
meetings in fiscal 1996. The Compensation Committee also makes recommendations
to the Board and senior management regarding Company compensation programs. The
current members of the Compensation Committee are Mr. Armstrong, Mr. Burke, Ms.
Lazarus (Chairman) and Ms. Merriman.
NOMINATING COMMITTEE: This Committee was formed in April 1997. The principal
function of the Nominating Committee is to make recommendations to the Board of
Directors with respect to qualified candidates to be nominated by the Board to
serve as Directors of the Company. The current members of the Nominating
Committee are Gerald S. Armstrong, Robert C. Grayson and Hanne M. Merriman
(Chairman).
COMPENSATION OF DIRECTORS AND RELATED MATTERS
Directors who are employees of the Company, and Directors serving on the
Board as representatives of ML&Co. and certain of its affiliates, do not receive
any compensation for serving on the Board of Directors of either the Company or
Ann Taylor. Directors who are not employees of the Company or representatives of
ML&Co. or its affiliates receive $20,000 in compensation annually, plus $750 for
each meeting of the Board or committee of the Board in which they participate.
Mr. Armstrong and Mr. Burke serve on the Boards of Directors of the Company
and Ann Taylor as representatives of ML&Co and certain of its affiliates. In
1993, Messrs. Armstrong and Burke, together with other colleagues from ML
Capital Partners, founded Stonington Partners, formerly known as First Capital
Partners, Inc. In July 1994, Messrs. Armstrong and Burke left the employment of
ML&Co., although each has continued to serve as a director of certain companies,
including the Company and Ann Taylor, in which ML&Co. or certain of its
affiliates have equity investments. In this connection, each of Messrs.
Armstrong and Burke entered into a consulting agreement with ML Capital Partners
which provides, among other things, for his continued availability to serve on
the Boards of Directors of the Company, Ann Taylor and such other companies,
unless requested to resign by ML Capital Partners, and for his compensation by
ML Capital Partners for serving in such capacities and for other consulting
services.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company as of April 1, 1997:
NAME POSITION AND OFFICES
- -------------------------------------------------------- --------------------------------------------------------
J. Patrick Spainhour.................................... Chairman, Chief Executive Officer and Director of the
Company and Ann Taylor
Patricia DeRosa......................................... President, Chief Operating Officer and Director of the
Company and Ann Taylor
Barry I. Shapiro........................................ Executive Vice President--General Manager-- Ann Taylor
Loft division of Ann Taylor
Walter J. Parks......................................... Senior Vice President--Chief Financial Officer and
Treasurer of the Company and Ann Taylor
Jocelyn F.L. Barandiaran................................ Senior Vice President--General Counsel and Secretary of
the Company and Ann Taylor
James M. Smith.......................................... Vice President--Controller and Assistant Treasurer of
the Company and Ann Taylor
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Information regarding Mr. Spainhour and Ms. DeRosa is set forth above under
"Incumbent Class I Directors" and "Incumbent Class II Directors", respectively.
BARRY I. SHAPIRO, AGE 42. Mr. Shapiro has been Executive Vice
President--General Manager-- AnnTaylor Loft division of Ann Taylor, since
February 1996. He has been employed by Ann Taylor since 1990 and has held
various positions, including Vice President of Merchandise Administration from
October 1991 to March 1993, Senior Vice President--General Manager--Ann Taylor
Factory Stores from March 1993 to February 1995, and Senior Vice
President--General Manager--Ann Taylor Loft from March 1995 to February 1996.
WALTER J. PARKS, AGE 38. Mr. Parks has been Senior Vice President--Chief
Financial Officer of the Company and Ann Taylor since February 1997, and was
Senior Vice President--Finance of the Company and Ann Taylor from February 1995
to February 1997. He has been employed by Ann Taylor since 1988 and has held
various positions, including General Accounting Manager, Director of Financial
Reporting and, from 1992 to 1995, Vice President of Financial Reporting.
JOCELYN F.L. BARANDIARAN, AGE 36. Ms. Barandiaran has been Senior Vice
President--General Counsel and Secretary of the Company and Ann Taylor since
October 1996. She served as Vice President--General Counsel and Secretary of the
Company and Ann Taylor from May 1992 to September 1996.
JAMES M. SMITH, AGE 35. Mr. Smith has been Vice President--Controller and
Assistant Treasurer of the Company since March 1997, and has been Vice
President--Controller and Assistant Treasurer of Ann Taylor since February 1995.
From February 1993 to January 1995, Mr. Smith was Director of Financial
Reporting for Ann Taylor. From July 1983 to January 1993, Mr. Smith was employed
by Deloitte & Touche, an accounting firm, including as senior manager for the
last two of those years.
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EXECUTIVE COMPENSATION
The following table sets forth information regarding the annual and
long-term compensation awarded or paid for each of the last three fiscal years
to the Chief Executive Officer and the four other most highly compensated
executive officers of the Company and Ann Taylor as of February 1, 1997, as well
as information regarding compensation to the Company's former Chairman who
resigned during fiscal 1996 (collectively, the "named executives"). Mr.
Spainhour was not employed by the Company prior to fiscal year 1996;
accordingly, no information is set forth in the table with respect to him for
prior years.
TABLE I
SUMMARY OF COMPENSATION TO CERTAIN EXECUTIVE OFFICERS
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------
-------------------------------------------- RESTRICTED SECURITIES ALL OTHER
FISCAL OTHER ANNUAL STOCK AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(A) COMPENSATION ($) ($) OPTIONS (#) ($)(B)
- --------------------------- ----------- ----------- ------------ ----------------- ------------ ------------- -------------
J. Patrick Spainhour (c)... 1996 $ 556,074 $ 295,000 $ -- $1,293,750(d) 175,000 $ --
Chairman and Chief 1995 -- -- -- -- -- --
Executive Officer 1994 -- -- -- -- -- --
Barry I. Shapiro........... 1996 285,000 68,400 -- -- 7,500 2,294
Executive Vice 1995 250,000 -- -- -- 15,000 3,604
President-- General 1994 175,000 63,000 -- -- 50,000 2,250
Manager--Ann Taylor Loft
Walter J. Parks............ 1996 215,000 32,250 -- -- 7,500 2,312
Senior Vice President-- 1995 165,000 -- -- -- 10,000 3,686
Chief Financial Officer 1994 114,432 30,225 -- 7,500 1,989
Jocelyn F.L. Barandiaran... 1996 215,000 32,250 -- -- 5,000 --
Senior Vice President-- 1995 200,000 -- -- -- 7,500 --
General Counsel and 1994 175,725 76,200 15,000 --
Secretary
Sally Frame Kasaks (e)..... 1996 454,313 -- 59,215(f) -- -- 1,041,074(g)
Former Chairman and Chief 1995 780,000 -- 8,924(h) -- 50,000 12,275(i)
Executive Officer 1994 750,000 450,000 -- -- 170,000 2,375
Paul E. Francis (j)........ 1996 335,000 80,400 -- -- -- 1,988
Former Executive Vice 1995 335,000 -- -- -- 30,000 3,479
President--Finance and 1994 325,000 156,000 -- -- 80,000 1,625
Administration
- ------------------------
(a) Bonus awards were paid pursuant to the Company's Management Performance
Compensation Plan, except that a portion of the bonus amount indicated for
Mr. Spainhour for 1996 was a guaranteed bonus paid to Mr. Spainhour in
accordance with the terms of his employment agreement with the Company.
(b) Except as otherwise indicated, represents contributions made by the Company
on behalf of the named executives to its 401(k) Savings Plan.
(c) Mr. Spainhour joined the Company as President and Chief Operating Officer in
February 1996 and was promoted to Chairman and Chief Executive Officer
effective August 23, 1996.
(d) Represents the market value, on February 1, 1997, of 75,000 restricted
shares of Common Stock granted to Mr. Spainhour on December 13, 1996 in
connection with his promotion to Chairman and Chief Executive Officer of the
Company. Mr. Spainhour's rights to these shares vest with respect to
one-third of the grant per year on each of the first three anniversaries of
the effective date of his promotion, subject to his continued employment by
the Company. Mr. Spainhour would be entitled to receive dividends on these
restricted shares if any dividends are paid by the Company on its Common
Stock.
(e) Ms. Kasaks resigned from her position as Chairman and Chief Executive
Officer of the Company and Ann Taylor effective August 23, 1996.
(f) Includes a payment of $57,530 in respect of taxes owed on the forgiveness of
interest relating to the $500,000 loan from the Company.
(g) Pursuant to the terms of Ms. Kasaks' employment agreement and in connection
with her resignation from the Company, includes (i) $440,802 of severance
compensation, (ii) forgiveness by the Company of the $500,000 loan to Ms.
Kasaks, (iii) forgiveness of interest of $58,987 on the $500,000 loan and
(iv) $40,000 paid in lieu of outplacement services and for financial
planning services.
(h) Represents a payment in respect of taxes owed on the forgiveness of interest
relating to the $500,000 loan from the Company.
(i) Includes forgiveness of interest of $9,150 on the $500,000 loan from the
Company.
(j) Mr. Francis resigned from his positions with the Company and Ann Taylor
effective February 14, 1997.
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The following table sets forth certain information with respect to stock
options awarded during fiscal year 1996 to the named executives listed in Table
I above. These option grants also are reflected in Table I. In accordance with
Securities and Exchange Commission ("Commission") rules, the hypothetical
realizable values for each option grant are shown based on compound annual rates
of stock price appreciation of 5% and 10% from the grant date to the expiration
date. The assumed rates of appreciation are prescribed by the Commission and are
for illustrative purposes only; they are not intended to predict future stock
prices, which will depend upon market conditions and the Company's future
performance and prospects.
TABLE II
STOCK OPTIONS GRANTED IN FISCAL YEAR 1996
POTENTIAL REALIZABLE
VALUE AT ASSUMED
# OF % OF TOTAL # ANNUAL RATES OF STOCK
SECURITIES OF OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(A)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL 1996 ($/SHARE) DATE 5%($) 10% ($)
- ------------------------------------------- -------------- --------------- ----------- ----------- --------- ----------
J. Patrick Spainhour....................... 100,000(b) 23.0% 14.500 2/19/06 913,000 2,313,000
75,000(c) 17.2% 18.625 12/12/06 880,125 2,226,375
Barry I. Shapiro........................... 7,500(d) 1.7% 17.125 5/1/06 80,663 204,713
Walter J. Parks............................ 7,500(d) 1.7% 17.125 5/1/06 80,663 204,713
Jocelyn F.L. Barandiaran................... 5,000(d) 1.2% 17.125 5/1/06 53,775 136,475
Sally Frame Kasaks......................... -- -- -- -- -- --
Paul E. Francis............................ -- -- -- -- -- --
- ------------------------
(a) These columns show the hypothetical realizable value of the options at the
end of the ten-year term of the options, assuming that the market price of
the Common Stock subject to the options appreciates in value at the annual
rate indicated in the table, from the date of grant to the end of the option
term.
(b) These options vest 50% on each of February 19, 1997 and February 19, 1998
and are subject to accelerated vesting in accordance with the Stock Option
Plan, as described in footnote (d) below.
(c) These options are "performance vesting" options which vest on the terms
applicable to "performance vesting" options described in footnote (d) below,
including the accelerated vesting provisions of the Stock Option Plan
described in footnote (d).
(d) One-third of the options granted to each of these named executives are "time
vesting" options that vest 25% per year on each of the first through fourth
anniversaries of the date of grant. The remaining two-thirds of these
options are "performance vesting" options that become fully exercisable upon
the earliest to occur of: (i) the ninth anniversary of the date of grant,
(ii) the date on which the closing price of the Common Stock on the New York
Stock Exchange is at least $35.00 per share, provided that this occurs
before the fifth anniversary of the date of grant, and (iii) the date on
which the Company's aggregate consolidated net income before extraordinary
items for four consecutive quarters equals at least $1.50 per share,
provided that this occurs before the fifth anniversary of the date of grant.
If the Company achieves 80% of either of the performance measures described
in (ii) or (iii) above by the fifth anniversary of the date of grant, then a
portion of the performance vesting options becomes exercisable, equal to 25%
of the number of shares included in the grant plus 3.75% for every
percentage point by which performance exceeds 80% of the measure. Upon the
occurrence of one of the following "Acceleration Events," all options will
become vested: (i) any person (excluding certain specified persons) becomes
the owner of at least 20% of the Common Stock, (ii) a majority of the Board
of Directors changes, or (iii) a merger or other specified event occurs.
8
The following table shows the number of all vested (exercisable) and
unvested (not yet exercisable) stock options held by each such officer at the
end of fiscal year 1996, and the value of all such options that were "in the
money" (i.e., the market price of the Common Stock was greater than the exercise
price of the options) at the end of fiscal year 1996. None of the named
executives exercised any stock options during the 1996 fiscal year.
TABLE III
FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED $ VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT END OF FISCAL 1996 AT END OF FISCAL 1996
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(A)
- ----------------------------------- ----------------------------- --------------------------
J. Patrick Spainhour............... 0/175,000 $0/$275,000
Barry I. Shapiro................... 21,382/64,618 $0/$937
Walter J. Parks.................... 7,553/22,917 $4,912/$937
Jocelyn F.L. Barandiaran........... 26,125/26,375 $0/$625
Sally Frame Kasaks................. 359,758/0 $0/$0
Paul E. Francis.................... 71,833/108,167 $0/$0
- ------------------------
(a) Calculated based on the closing market price of the Common Stock of $17.25
on January 31, 1997, the last trading day in fiscal year 1996, less the
amount required to be paid upon exercise of the option.
PENSION PLAN. Ann Taylor adopted, as of July 1, 1989, a defined benefit
retirement plan for the benefit of employees of Ann Taylor and its wholly owned
subsidiaries (the "Pension Plan"). The Pension Plan is a "cash balance pension
plan" intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"). An account balance is established for each
participant, which is credited with a benefit equal to 3% of compensation during
each of the participant's first ten years of service, 4% of compensation during
each of the participant's next five years of service, and 5% of compensation
during each of the participant's years of service in excess of fifteen.
Compensation for this purpose includes salary, bonus and certain other benefits.
The Code limits the compensation that may be taken into account under the
Pension Plan for any participant. Participants' accounts are credited with
interest quarterly, at a rate equal to the average one-year Treasury bill rate.
Retirement benefits are determined by dividing the amount of a participant's
account by a specified actuarial factor, subject, however, to the limitation
imposed by the Code. Participants are fully vested in their accounts after
completion of five years of service. Participants receive credit for service
with Ann Taylor prior to July 1, 1989 for purposes of vesting and determining
the percentage of compensation that will be credited to their accounts.
As of February 1, 1997, the credited years of service under the Pension Plan
for Mr. Shapiro was 5.0 years; Mr. Parks 7.25 years; Ms. Barandiaran 3.75 years;
Ms. Kasaks 10 years; and Mr. Francis 2.75 years. Mr. Spainhour was not a
participant in the Pension Plan during fiscal year 1996. The estimated monthly
retirement benefit, payable as a single life annuity, that would be payable to
each of the executives named in Table I above who were participants in the plan
during fiscal year 1996, assuming retirement as of December 31, 1996, the
commencement of payments at age 65 and annual interest at the rate of 7%, is as
follows: Mr. Shapiro, $707; Mr. Parks, $1,005; Ms. Barandiaran, $778; Ms.
Kasaks, $537; and Mr. Francis, $429. These benefits would not be subject to any
reduction for social security benefits or other offset amounts.
The estimated supplemental annual retirement benefit to which Ms. Kasaks
would be entitled pursuant to the employment agreement between Ms. Kasaks and
the Company described below, beginning at age 55, would be approximately
$164,000 after taking into account offsets for other pension benefits.
9
EMPLOYMENT AGREEMENTS. Pursuant to an employment agreement effective
February 1, 1994 (the "Kasaks Agreement"), Ms. Sally Frame Kasaks was employed
as Chairman of the Board and Chief Executive Officer of the Company. The
agreement provided for an initial term of three years, subject to annual
renewal. Under the terms of the Kasaks Agreement, Ms. Kasaks was entitled to an
annual base salary of not less than $750,000, and was entitled to participate in
the Company's annual bonus and stock option plans as well as other Company
benefit programs. Ms. Kasaks resigned from her employment with the Company and
Ann Taylor effective August 23, 1996. Pursuant to the terms of the Kasaks
Agreement, Ms. Kasaks is receiving severance compensation for 18 months
following her separation, at an annual rate equal to the sum of her base salary
at the time of separation plus the average of annual bonuses earned by her
during the previous three years. In fiscal 1996, these severance payments
totaled $440,802. The Kasaks Agreement also provided for a loan to Ms. Kasaks of
$500,000, the principal and interest on which were forgiven upon Ms. Kasaks'
separation of employment. See "Indebtedness of Management". In addition, the
Company paid Ms. Kasaks $40,000 in satisfaction of its obligation to provide
outplacement and financial planning services to Ms. Kasaks under the Kasaks
Agreement.
The Kasaks Agreement also provided Ms. Kasaks with a supplemental retirement
benefit (the "SERP") equal to 50 percent of her "final average compensation"
(the highest average of her annual salary and bonus over a period of three
consecutive fiscal years, except that the maximum bonus to be taken into account
for any year could not exceed Ms. Kasaks' salary for that year), reduced by
social security benefits and amounts payable under any Company pension plan. In
accordance with the terms of the Kasaks Agreement, Ms. Kasaks' rights in the
SERP became fully vested (although subject to reduction to reflect actual and
deemed service of less than 15 years) upon Ms. Kasaks' separation of employment.
The SERP provides a 50% survivor benefit to Ms. Kasaks' spouse for his life.
Payment of the SERP benefits is subject to Ms. Kasaks' continued compliance with
certain noncompete and nonsolicitation provisions contained in the Kasaks
Agreement. The estimated supplemental annual retirement benefit which Ms. Kasaks
is entitled to receive pursuant to the SERP, beginning at age 55, is
approximately $164,000, after taking into account offsets for other pension
benefits.
Effective as of February 19, 1996, the Company and Mr. J. Patrick Spainhour
entered into an employment agreement in connection with his commencement of
service as an employee of the Company. This agreement was amended as of August
23, 1996 (as amended, the "Spainhour Agreement") in connection with Mr.
Spainhour's promotion to Chairman and Chief Executive Officer of the Company.
The Spainhour Agreement provides for Mr. Spainhour's employment as Chairman and
Chief Executive Officer of the Company for a term of three years, which term is
automatically extended on an annual basis for one additional year unless either
party provides six months' notice that it does not wish to extend the term (a
"Nonrenewal Notice"). Under the terms of the Spainhour Agreement, Mr. Spainhour
currently is entitled to an annual base salary of not less than $650,000, and,
as of January 1, 1998, is entitled to an annual base salary of not less than
$725,000. Mr. Spainhour also is entitled to participate in the Company's annual
bonus and stock option plans, as well as other Company benefit programs.
Pursuant to the terms of the Spainhour Agreement, Mr. Spainhour was granted
under the Stock Option Plan an option to purchase 100,000 shares of Common Stock
at an exercise price equal to the fair market value of the Common Stock on the
date Mr. Spainhour commenced employment with the Company. These options vest 50%
on each of the first two anniversaries of the date of grant and are subject to
accelerated vesting and termination in accordance with the terms of the Stock
Option Plan. In addition, in connection with his promotion to Chairman and Chief
Executive Officer of the Company, Mr. Spainhour received (i) a performance
vesting option to purchase 75,000 shares of Common Stock under the Stock Option
Plan at an exercise price equal to the fair market value of the Common Stock on
the date of grant, which option vests on the ninth anniversary of the date of
grant, subject to earlier vesting upon the occurrence of certain performance
criteria and subject to accelerated vesting and termination in accordance with
the terms of the Stock Option Plan; and (ii) 75,000 restricted shares of Common
Stock, one-third of which shall vest on each of the first three anniversaries of
the effective date of the amendment
10
to the Spainhour Agreement, subject to accelerated vesting, or upon the
termination of Mr. Spainhour's employment for other than Cause or by Mr.
Spainhour for Good Reason (as such terms are defined in the Stock Option Plan).
In the event of termination of Mr. Spainhour's employment by the Company
without Cause, or by Mr. Spainhour for Good Reason, or in the event of the
expiration of the term of the Spainhour Agreement by reason of a Nonrenewal
Notice provided by the Company, Mr. Spainhour shall be entitled, among other
things, to receive, for the longer of one year or the remaining term of the
Spainhour Agreement, an amount representing his salary plus the average of his
last three annual bonuses, subject to Mr. Spainhour's compliance with the
noncompete and nonsolicitation provisions of the Spainhour Agreement. If any
payments or benefits received by Mr. Spainhour would be subject to the "golden
parachute" excise tax under the Code, the Company has agreed to pay Mr.
Spainhour such additional amounts as may be necessary to place him in the same
after-tax position as if the payments had not been subject to such excise tax.
Effective as of December 9, 1996, the Company and Ms. Patricia DeRosa
entered into an employment agreement (the "DeRosa Agreement") in connection with
her commencement of service as an employee of the Company. The DeRosa Agreement
provides for Ms. DeRosa's employment as President and Chief Operating Officer of
the Company for a term of three years. Under the terms of the DeRosa Agreement,
Ms. DeRosa is entitled to an annual base salary of not less than $600,000 and is
entitled to participate in the Company's annual bonus and stock option plans, as
well as other Company benefit programs.
Pursuant to the terms of the DeRosa Agreement, Ms. DeRosa was granted under
the Stock Option Plan an option to acquire 100,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on November
25, 1996. One half of these options are "time vesting options," one-third of
which become exercisable on each of the first three anniversaries of the
commencement of Ms. DeRosa's employment. The other half of the options are
"performance vesting options" which vest on the ninth anniversary of Ms.
DeRosa's employment, subject to earlier vesting upon the occurrence of certain
performance criteria and subject to accelerated vesting and termination in
accordance with the terms of the Stock Option Plan. In addition, Ms. DeRosa
received 30,000 restricted shares of Common Stock and 20,000 restricted units
which represent the right to receive a cash payment based on the closing price
of the Common Stock on the trading date immediately preceding the date the
restrictions lapse. One-third of each of the restricted shares and restricted
units vest on each of the first three anniversaries of the effective date of the
DeRosa Agreement.
In the event of termination of Ms. DeRosa's employment by the Company
without Cause or by Ms. DeRosa for Good Reason, Ms. DeRosa shall be entitled,
among other things, to receive (i) for the longer of one year or the remaining
term of the DeRosa Agreement, an amount representing her base salary and (ii)
the bonus for the season in which the date of termination occurs pro rated to
reflect the number of days in such season through Ms. DeRosa's date of
termination, subject to Ms. DeRosa's compliance with the noncompete and
nonsolicitation provisions of the DeRosa Agreement. If any payments or benefits
received by Ms. DeRosa would be subject to the "golden parachute" excise tax
under the Code, the Company has agreed to pay Ms. DeRosa such additional amounts
as may be necessary to place her in the same after-tax position as if the
payments had not been subject to such excise tax.
In connection with Mr. Paul E. Francis' resignation, effective February 14,
1997, the Company and Mr. Francis entered into a Separation Agreement (the
"Francis Agreement"), pursuant to which Mr. Francis will receive cash
compensation of up to $335,000, less taxes, which amount shall be payable in
semi-monthly installments until the earlier of February 14, 1998 or Mr. Francis'
procurement of other full-time employment. Pursuant to the Francis Agreement,
all "performance vesting options" and certain "time vesting options" granted to
Mr. Francis pursuant to the Company's Stock Option Plan shall remain outstanding
and eligible for vesting and exercise pursuant to their terms until February 28,
1999, at which time all unexercised or unvested options shall be canceled.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The aim of the Company's compensation practices is to attract and retain
highly motivated, results-oriented executives of experience and ability. In
1996, executive compensation generally had two principal components: (i) cash
compensation, consisting of both a base salary and a variable performance-based
portion that is dependent upon short-term Company operating profits, and (ii)
stock option grants, the value of which is dependent upon the long-term
performance of the Company. This structure was established in order to provide
executives with incentive to remain with the Company and to direct their efforts
towards building the long-term profitability of the Company and the value of its
stock.
The Company may also make grants of shares of restricted stock when deemed
necessary in order to attract or provide incentive to key executive officers, or
to provide an incentive to, or reward outstanding performance by, junior level
management associates, when it believes these grants will be more effective
incentive tools than stock option grants.
In determining an individual executive's compensation, consideration is
given to, among other things, the executive's experience and historical and
anticipated contribution to the Company. Consideration also is given to the
amount and forms of compensation paid to like executives by other companies in
the Company's industry, including companies among the Dow Jones Specialty
Apparel Retailers Index, to the extent that such information is available. No
specific weight is given to any of these considerations.
CASH COMPENSATION
An executive's total annual cash compensation is intended to compensate the
executive fairly. In the view of the Company, "fair" compensation is generally
at the middle to upper end of the range for the industry, taking into
consideration the individual executive's experience and historical and expected
contribution to the Company. The Company has found that, in attracting
executives from other companies, in many instances it has had to offer annual
cash compensation (base salary plus performance compensation) that is at the
upper end of the industry range.
The executive's base salary is set at an amount that is less than the
executive's targeted total cash compensation level; in order to attain the
targeted compensation level, the executive is dependent upon earning the
variable, performance-based component that is provided for under the Company's
Management Performance Compensation Plan (the "Performance Compensation Plan").
Under the Performance Compensation Plan, the Compensation Committee establishes
operating profit targets each Spring and Fall season. If the Company achieves
these targets, performance compensation is paid and, when added to the
executive's base compensation, should result in the executive achieving his or
her targeted "fair" compensation level. If the Company performs exceptionally
well, the executive's contribution to this performance would also be reflected
by a greater performance compensation payment under the plan. Similarly, failure
of the Company to reach its objectives would result in the executive's
performance compensation, and thus total cash compensation, being less than the
targeted level. This cash compensation structure is intended to provide
executives with a balance between compensation security and appropriate
incentives to use their best efforts to cause the Company to achieve and exceed
its profit objectives.
LONG-TERM INCENTIVE COMPENSATION
The other principal component of executives' compensation is stock options,
which are intended as a tool to attract, provide incentive to and retain those
executives and senior management-level associates who make the greatest
contribution to the business, and who can have the greatest effect on the
long-term profitability of the Company. The exercise price of stock options is
set at a price equal to or greater than the market price of the Common Stock at
the time of the grant. The options, therefore, do not have any value to the
executive unless the market price of the Common Stock rises. At least a portion
of the stock options granted to senior executives typically are "performance
vesting" options, which do not vest for at
12
least five years unless specified earnings or Common Stock trading price targets
are met (see Table II above and "Analysis of 1996 Compensation of Chief
Executive Officer" below). The Committee believes that these options more
closely align the executives' interests with those of its stockholders, and
focus management on building profitability and long-term stockholder value.
Stock options are often awarded as part of an individualized compensation
package developed for a newly hired executive. The Compensation Committee also
believes it is appropriate to make periodic grants of stock options,
approximately annually, in order to provide continuing incentives to management
and to remain competitive with industry peers and leaders. In making periodic
stock option grants to executives, the Committee also considers the amount of
stock options previously granted to them.
ANALYSIS OF 1996 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee typically takes action with respect to executive
compensation at the commencement of the fiscal year. In light of the Company's
disappointing financial performance in fiscal 1995, the Compensation Committee
did not deem it appropriate to award any increase in compensation to the
Company's then-Chairman and Chief Executive Officer, Sally Frame Kasaks, for
fiscal 1996, nor did it make any grant of stock options to her. Ms. Kasaks'
performance compensation percentage under the Performance Compensation Plan was
set at 25% for each of the Spring and Fall seasons in 1996 (50% on an annualized
basis). Because the Company did not meet the operating income targets set for
the Spring 1996 season, Ms. Kasaks did not receive any performance compensation
for that season. Ms. Kasaks left the Company before the completion of the Fall
1996 season and, accordingly, she did not receive any performance compensation
for that season either.
Following Ms. Kasaks' separation of employment in August 1996, the Board of
Directors promoted the Company's then-President and Chief Operating Officer, J.
Patrick Spainhour, to the position of Chairman and Chief Executive Officer. In
connection with such promotion, Mr. Spainhour's base compensation was increased
from $525,000 to $650,000. The Committee had awarded to Mr. Spainhour in
connection with his initial hiring a time-vesting option to purchase 100,000
shares of Common Stock. In connection with his promotion to Chairman and Chief
Executive Officer, the Committee awarded Mr. Spainhour a performance-vesting
option to purchase 75,000 shares of Common Stock and also awarded him 75,000
shares of restricted Common Stock. These stock-based awards were intended to
provide Mr. Spainhour with appropriate incentive to improve the Company's
long-term financial performance. The terms of these awards are described above
under "Employment Agreements". Mr. Spainhour's performance compensation
percentage under the Performance Compensation Plan was set at 20% for the Spring
1996 season (40% on an annualized basis) and, following his promotion, was
increased to 25% for the Fall 1996 season (50% on an annualized basis). In
determining Mr. Spainhour's compensation as Chairman and Chief Executive
Officer, the Committee took into consideration the greater responsibilities of
Mr. Spainhour's new office, the compensation of his immediate predecessor, and
competitive salaries and incentives awarded to other chief executives in the
Company's industry, among other things. Although the Company did not meet the
operating income target set for the Spring 1996 season under the Performance
Compensation Plan, Mr. Spainhour received a guaranteed $100,000 bonus for the
Spring season pursuant to his original employment agreement with the Company.
The Company exceeded the operating profit target established by the Committee
for the Fall 1996 season, and Mr. Spainhour received a bonus under the
Performance Compensation Plan of $195,000 for the Fall season.
COMPENSATION REVIEW
Under the direction of the Compensation Committee, in Spring 1997 the
Company engaged an independent, nationally recognized compensation consultant to
evaluate the Company's compensation practices. The compensation consultant has
been asked to evaluate the competitiveness of the Company's compensation
programs and to propose revisions to these programs to provide more effective
incentives to
13
executives and to tie at least a portion of executive incentive compensation
directly to achievement of individual performance objectives, in addition to
overall Company performance.
Although the compensation consultant's review is not yet complete, the
consultant has recommended that the Performance Compensation Plan be amended to
provide the Compensation Committee with more flexibility in establishing
performance targets under the plan, so that the Committee would have the ability
to establish different performance targets for different participants, to better
reflect individual participants' roles in the Company, their scope of influence
on corporate results, and the achievement of individual performance objectives.
The Board of Directors has adopted the Performance Plan Amendment in order to
implement this recommendation. In order for the Performance Compensation Plan to
continue to satisfy the requirements of Section 162(m) of the Code regarding the
tax deductibility of executive compensation, this amendment requires stockholder
approval. Determination of employee participation in the Performance
Compensation Plan and individual performance criteria for the Fall 1997 season
and subsequent periods will be made by the Compensation Committee in the context
of the ultimate compensation structure approved by the Compensation Committee
and the Board of Directors, following conclusion of the compensation
consultant's study and evaluation of their recommendations.
The Compensation Committee expects that the compensation consultant's
analysis of the Company's compensation programs will be completed in June 1997.
The Compensation Committee expects that, following the consultant's report, the
Compensation Committee will recommend to the Board of Directors and senior
management modifications to some or all of the Company's current compensation
programs and practices, to be implemented commencing with the Fall 1997 season.
ROCHELLE B. LAZARUS (CHAIRMAN)
GERALD S. ARMSTRONG
JAMES J. BURKE, JR.
HANNE M. MERRIMAN
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the Record Date, ML&Co. and certain of its affiliates beneficially
owned an aggregate of approximately 24% of the outstanding Common Stock. Messrs.
Armstrong and Burke serve on the Boards of Directors of the Company and Ann
Taylor as representatives of ML&Co. and its affiliates. Accordingly, ML&Co. and
its affiliates are in a position to influence the management of the Company.
Messrs. Armstrong and Burke are also members of the Compensation Committee of
the Board of Directors of the Company.
In connection with the sale in April and May 1996 of an aggregate of
$100,625,000 of 8 1/2% Company-Obligated Mandatorily Redeemable Convertible
Preferred Securities by the Company's financing vehicle, AnnTaylor Finance
Trust, ML&Co. and Merrill Lynch received $1,207,500 in connection with services
as placement agents for this transaction. The Company agreed to indemnify ML&Co.
and Merrill Lynch, as placement agents, against certain liabilities under the
federal securities laws, in connection with this transaction.
STOCK PERFORMANCE GRAPH
The following graph compares the percentage changes in the Company's
cumulative total stockholder return on the Company's Common Stock for the
five-year period ended February 1, 1997, with the cumulative total return on the
Standard & Poor's 500 Stock Index ("S&P 500") and the Dow Jones Specialty
Apparel Retailers Index ("DJ Apparel") for the same period. In accordance with
the rules of the Commission, the returns are indexed to a value of $100 at
January 31, 1992 and assume that all dividends were reinvested.
14
COMPARISON OF FIVE-YEAR ANNUAL CUMULATIVE TOTAL RETURN
ANN TAYLOR, S&P 500 INDEX, AND DJ APPAREL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DJ
DATE ANN TAYLOR STORES S&P 500 RETAILERS-SPECIALTY-APPAREL
2/1/92 100 100 100
1/30/93 97 111 95
1/29/94 99 125 88
1/28/95 155 125 79
2/3/96 52 174 92
2/1/97 78 220 110
INDEBTEDNESS OF MANAGEMENT
As of the date of her separation from the Company, Ms. Kasaks owed the
Company the principal amount of $500,000 pursuant to a promissory note executed
pursuant to the Kasaks Agreement. In connection with Ms. Kasaks' separation of
employment, in accordance with the terms of the Kasaks Agreement, the Company
forgave the $500,000 loan, plus interest of $58,987 on this loan, and paid
$57,530 in respect of taxes owed by Ms. Kasaks on such interest.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and certain officers to file
with the Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of the
Company's Common Stock. Copies of all such Section 16(a) reports are required to
be furnished to the Company. These filing requirements also apply to holders of
more than ten percent of the Company's Common Stock. To the Company's knowledge,
based solely on a review of the copies of Section 16(a) reports furnished to the
Company during the fiscal year ended February 1, 1997, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, all transactions were reported on a timely basis, except that (i)
small purchases of Common Stock were made by Mr. Francis during fiscal 1996
through monthly payroll deductions under the Company's Associate Stock Purchase
Plan; although Form 4 filings aggregating these purchases were not made, the
information required on these reports was included in Mr. Francis' Fiscal 1996
Form 5 filing; and (ii) Ms. DeRosa's initial report on Form 3 following her
joining the Company in December 1996 was filed one month late.
15
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
As of the April 21, 1997 Record Date, the outstanding Common Stock was held
of record by 760 stockholders. The following table sets forth certain
information as of the Record Date concerning the beneficial ownership of Common
Stock by each stockholder who is known by the Company to own beneficially in
excess of 5% of the outstanding Common Stock, by each director, by the named
executives listed in Table I above, and by all directors and executive officers
as a group. Except as otherwise indicated, all persons listed below have (i)
sole voting power and investment power with respect to their shares of Common
Stock, except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to their shares of
Common Stock.
NO. OF
SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT
- -------------------------------------------------------------------------------------- --------------- -----------
Merrill Lynch & Co., Inc. and certain affiliates (a).................................. 6,159,018 24.1%
FMR Corp. (b)......................................................................... 3,769,045 14.7%
Massachusetts Financial Services Company (c).......................................... 2,584,500 10.1%
The Capital Group Companies, Inc. (d)................................................. 1,855,900 7.3%
T. Rowe Price Associates, Inc. (e).................................................... 1,309,300 5.1%
Gardner Lewis Asset Management, L.P. (f).............................................. 1,285,400 5.0%
J. Patrick Spainhour (g).............................................................. 125,000 *
Barry I. Shapiro (g).................................................................. 31,246 *
Walter J. Parks (g)................................................................... 9,636 *
Jocelyn F.L. Barandiaran (g).......................................................... 32,416 *
Sally Frame Kasaks (g)................................................................ 410,758 1.6%
Paul E. Francis (g)................................................................... 145,430 *
Gerald S. Armstrong (h),(i)........................................................... 10,964 *
James J. Burke, Jr. (h)............................................................... 52,920 *
Robert C. Grayson..................................................................... 15,000 *
Rochelle B. Lazarus (j)............................................................... 600 *
Hanne M. Merriman..................................................................... 200 *
All executive officers and directors as a group (11 persons) (k)...................... 313,141 1.2%
- ------------------------
* Less than 1%
(a) Pursuant to a Schedule 13G dated February 11, 1997 and filed with the
Commission by ML&Co., its subsidiary Merrill Lynch Group, Inc. ("ML Group")
and certain of their affiliates (collectively, the "Merrill Lynch
Entities"), ML&Co. and ML Group are deemed to beneficially own an aggregate
of 6,159,018 shares of Common Stock, including 6,155,118 shares beneficially
owned by them and the other Merrill Lynch Entities. ML Group may be deemed
to beneficially own an aggregate of 6,159,018 shares as a result of its
control of its wholly-owned subsidiaries (i) Merrill Lynch Capital Partners,
which is the general partner of (A) MLCP Associates L.P. No. I that owns of
record 29,834 shares, and (B) Merrill Lynch LBO Partners No. B-I, L.P., a
limited partnership that acts as general partner of Merrill Lynch Capital
Appreciation Partnership No. B-II that owns of record 3,010,249 shares and
ML Offshore LBO Partners No. B-II that owns of record 1,756,892 shares; (ii)
KECALP Inc. and Merrill Lynch MBP Inc., each of which acts as general
partners of limited partnerships that are record owners of shares (no such
limited partnership is the record holder of more than 5% of the outstanding
Common Stock); and (iii) ML IBK Positions, Inc. that owns of record 851,656
shares. In addition, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, a
wholly owned subsidiary of ML&Co. and a registered broker-dealer, may be
deemed to beneficially own shares as a result of acting as a sponsor of five
unit investment trusts, none of which individually or together owns more
than 5% of the Common Stock. The Merrill Lynch Entities are deemed to have
shared voting and investment power with other ML&Co. affiliates with respect
to the shares of Common Stock deemed to be beneficially owned by them. The
address for ML&Co. and ML IBK Positions, Inc. is 250 Vesey Street, World
16
Financial Center, North Tower, New York, New York 10281. The address for ML
Offshore LBO Partnership No. B-II is P.O. Box 25, Roseneath, The Grange, St.
Peter Port, Guernsey, The Channel Islands. The address for each of the other
Merrill Lynch Entities is 225 Liberty Street, New York, New York 10080.
(b) Pursuant to Schedule 13-G dated March 7, 1997 filed with the Commission by
FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson, FMR Corp. had sole
voting power with respect to 7,400 shares and sole dispositive power with
respect to 3,769,045 shares. The address for FMR Corp. is 82 Devonshire
Street, Boston, MA 02109.
(c) Pursuant to a Schedule 13-G dated February 24, 1997 filed with the
Commission by Massachusetts Financial Services Company ("MFS"), MFS had sole
voting power with respect to 2,444,000 shares and sole dispositive power
with respect to 2,584,500 shares. The address for MFS is 500 Boylston
Street, Boston, MA 02116.
(d) The Capital Group Companies, Inc. ("The Capital Group") is the parent
holding company of a group of investment management companies that hold
investment power and, in some cases, voting power over securities reported.
The investment management companies and several investment advisers provide
investment advisory and management services for their respective clients
which include registered investment companies and institutional accounts.
The Capital Group does not have investment power or voting power over any of
the securities reported; however, it may be deemed to "beneficially own"
such securities under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Pursuant to a Schedule 13-G dated February 14, 1997 filed
with the Commission by The Capital Group and its subsidiary, Capital
Research and Management Company ("Capital Research"). The Capital Group is
deemed to beneficially own and have sole voting power with respect to
289,500 shares, and sole dispositive power with respect to 1,855,900 shares,
and Capital Research is deemed to beneficially own and have sole dispositive
power with respect to 1,270,000 shares as a result of acting as an
investment adviser to various investment companies. Each of The Capital
Group and Capital Research disclaims beneficial ownership of the shares
deemed to be beneficially owned by them under the Exchange Act. The address
for The Capital Group and Capital Research is 333 South Hope Street, Los
Angeles, California 90071.
(e) Pursuant to a Schedule 13-G dated February 14, 1997 filed with the
Commission by T. Rowe Price Associates, Inc. ("T. Rowe Price"), T. Rowe
Price has sole voting power with respect to 1,900 shares and sole
dispositive power with respect to 1,309,300 shares. The shares reported as
beneficially owned by T. Rowe Price are owned by various individual and
institutional investors to which T. Rowe Price serves as investment adviser
with power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Exchange Act, T. Rowe
Price is deemed to be a beneficial owner of such securities; however T. Rowe
Price expressly disclaims that it is, in fact, the beneficial owner of such
securities. The address for T. Rowe Price Associates is 100 E. Pratt Street,
Baltimore, MD 21202.
(f) Pursuant to Schedule 13-G dated February 13, 1997 filed with the Commission
by Gardner Lewis Asset Management, L.P. ("Gardner Lewis"), Gardner Lewis had
sole voting power with respect to 1,124,200 shares, shared voting power with
respect to 22,200 shares, and sole dispositive power with respect to
1,285,400 shares. The address for Gardner Lewis is 285 Wilmington -- West
Chester Pike, Chadds Ford, PA 19317.
(g) The shares listed include shares subject to options exercisable within 60
days of April 21, 1997 as follows: Mr. Spainhour, 50,000 shares; Mr.
Shapiro, 29,123 shares; Mr. Parks, 9,636 shares; Ms. Barandiaran, 30,416
shares; Ms. Kasaks, 339,758 shares; Mr. Francis, 95,000 shares.
(h) James J. Burke, Jr. and Gerald S. Armstrong serve on the Board of Directors
of the Company and Ann Taylor as designees of ML&Co. and certain of its
affiliates, and are directors of ML Capital Partners. Each of Messrs. Burke
and Armstrong disclaims beneficial ownership of shares beneficially owned by
the Merrill Lynch Entities.
(i) 3,000 of these shares are held by Mr. Armstrong's wife, as Custodian for
their children. Mr. Armstrong disclaims beneficial ownership of these
shares.
(j) Shares are held in a pension fund of which Ms. Lazarus' husband is the sole
beneficiary. Ms. Lazarus has no voting or investment power with respect to
these shares.
(k) The shares listed include 124,174 shares subject to options exercisable
within 60 days of April 21, 1997.
17
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO
THE COMPANY'S 1992 STOCK OPTION
AND RESTRICTED STOCK AND UNIT AWARD PLAN
The Company maintains the AnnTaylor Stores Corporation 1992 Stock Option and
Restricted Stock and Unit Award Plan (as amended and restated as of February 23,
1994, the "Stock Option Plan"). In March 1997, the Board of Directors adopted an
amendment to the Stock Option Plan that would increase by 1,500,000 the number
of shares of Common Stock available for the grant of options, and in April 1997,
the Board of Directors adopted an additional amendment (together with the March
1997 amendment, the "Amendment") that would establish a maximum number of shares
with respect to which options, restricted stock awards and restricted unit
awards may be granted to any employee during any fiscal year.
Subject to approval by stockholders, the Amendment will be effective as of
February 20, 1997. If the Amendment is not approved by stockholders, the Stock
Option Plan will continue in effect without the additional number of available
shares and under its current terms.
The following description of the Amendment and the Stock Option Plan is not
intended to be complete and is qualified in its entirety by the complete text of
the Amendment, attached to this Proxy Statement as Exhibit A, and by the Stock
Option Plan which was filed as Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1997, filed with the Commission
on May 1, 1997. Capitalized terms used and not defined herein have the meanings
assigned to them in the text of the Stock Option Plan.
REASONS FOR THE AMENDMENT
INCREASE IN NUMBER OF AUTHORIZED SHARES. Under the Stock Option Plan, as
adopted by the Company's stockholders on June 3, 1992 and as subsequently
amended and restated and approved by the stockholders on June 1, 1994, 1,600,000
shares were authorized for issuance in connection with the grant of Options. As
of February 1, 1997, Options outstanding under the Stock Option Plan covered a
total of 1,346,443 shares of Common Stock and 110,157 shares remained available
for grant. On February 20, 1997, the Compensation Committee of the Board of
Directors approved the grant under the Stock Option Plan of Options to purchase
an aggregate of 495,000 shares of Common Stock as follows: the named executives
listed in Table I, 48,000 shares; all Executive Officers as a group (consisting
of 6 persons), 55,500 shares; all other officers as a group (consisting of 40
persons), 294,500; and all other employees as a group (consisting of
approximately 106 persons), 145,000 shares. These grants were made contingent
upon obtaining stockholder approval of the increase in shares available for
issuance of Options at the 1997 Annual Meeting of Stockholders. The Board of
Directors believes that the proposed increase in the number of shares available
for issuance of Options under the Stock Option Plan is necessary in order to
meet the Company's objectives of attracting, motivating and retaining officers
and other employees with experience and ability and increasing the officers' and
other employees' identity of interest with the Company's stockholders. The Board
of Directors also believes the availability of stock options is essential for
the Company to compete with other companies offering similar plans in attracting
and retaining experienced and qualified employees.
Approval of a stock option plan amendment that increases the number of
shares available for issuance pursuant to Options is no longer required by Rule
16b-3 under the Exchange Act. However, approval of the Amendment to the Stock
Option Plan is being sought in accordance with (i) the requirements of paragraph
312.03(a) of the NYSE Listed Company Manual, which requires, as a prerequisite
to listing on the NYSE, stockholder approval of an increase in the number of
shares available under a stock option plan
18
pursuant to which stock may be acquired by officers or directors, (ii) Section
162(m) of the Code and (iii) the terms of the Stock Option Plan.
LIMITATION ON THE MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY
INDIVIDUAL. The Stock Option Plan is intended to qualify for the
performance-based exclusion from the deduction limitation of Section 162(m) of
the Code. One requirement of such exclusion is that an option plan contain, and
stockholders approve, a maximum number of shares with respect to which options
may be granted to any employee in any fiscal year. The Stock Option Plan has
heretofore complied with this requirement by virtue of the special transition
relief provided under the regulations issued under Section 162(m) for previously
approved plans. Inasmuch as this relief expires as of the date of the 1997
Annual Meeting of Stockholders, the Amendment includes a prohibition on the
grant to any employee during any fiscal year of stock options covering more than
400,000 shares of Common Stock or the grant of Restricted Stock Awards or
Restricted Unit Awards (constituting performance based compensation within the
meaning of Section 162(m) of the Code) covering more than 50,000 shares of
Common Stock (in each case, subject to any adjustments pursuant to Section 6(i)
of the Stock Option Plan).
DESCRIPTION OF PRINCIPAL FEATURES OF THE STOCK OPTION PLAN
PURPOSE OF THE STOCK OPTION PLAN. The Stock Option Plan is intended to
encourage stock ownership by employees of the Company and its subsidiaries, so
that they may acquire or increase their proprietary interest in the Company, and
to encourage such employees to remain in the employ of the Company and its
subsidiaries and to put forth maximum efforts for the success of the Company's
business.
STOCK AVAILABLE FOR GRANTS AND AWARDS. The proposed Amendment increases the
maximum number of shares reserved for options granted under the Stock Option
Plan from 1,600,000 to 3,100,000, an increase of 1,500,000 shares. In addition,
the Stock Option Plan reserves 67,000 shares of Common Stock for issuance in
connection with Restricted Stock Awards under the Stock Option Plan and reserves
for award a maximum of 33,000 Restricted Units under the Stock Option Plan. No
change is proposed with respect to the number of Restricted Shares or Restricted
Units available for awards under the Stock Option Plan.
The available number of shares, as well as the number of shares subject to
outstanding Options and Restricted Stock Awards and the exercise price of
outstanding Options, are subject to adjustment in the event of certain changes
in the Common Stock that would either dilute or enlarge the rights of holders of
Options, Restricted Stock and Restricted Units. Shares subject to Options that
cease to be exercisable, and Restricted Shares and Restricted Units that are
forfeited, are subsequently available for purposes of future grants or awards
under the Stock Option Plan.
The Common Stock is listed and traded on the New York Stock Exchange. The
closing sale price of a share of Common Stock on April 21, 1997 was $23.00.
ADMINISTRATION. The Stock Option Plan is administered by the Compensation
Committee of the Company's Board of Directors. The Committee consists of two or
more directors, at least two of whom must be both "outside directors" within the
meaning of Section 162(m) of the Code and "nonemployee directors" within the
meaning of Rule 16b-3 of the Exchange Act. All action taken under the Stock
Option Plan with respect to Executive Officers is taken solely by such outside
directors. All grants and awards under the Stock Option Plan are made at the
discretion of the Committee; the size of grants and awards to be received by any
person or group of persons under the Stock Option Plan is therefore not
determinable. Option Grants made to the named executives in fiscal year 1996 are
set forth in Table II above. The number of stock options granted under the Stock
Option Plan in the aggregate during the 1996 year were as follows: all Executive
Officers as a group (consisting of 6 persons), 300,000 shares; all other
officers as a group (consisting of 19 persons), 135,000 shares; and no other
employees received stock options during fiscal year 1996.
19
ELIGIBILITY. Options, Restricted Stock Awards and Restricted Unit Awards
may be granted to officers and other employees of the Company and its
subsidiaries, totaling approximately 6,400 people. In determining the persons to
whom Options, Restricted Stock Awards and Restricted Unit Awards are granted and
the number of shares or units to be covered by each Option, Restricted Stock
Award and Restricted Unit Award, the Committee takes into account the
recommendations of senior management, the duties of the respective persons,
their present and potential contributions to the success of the Company and such
other factors as the Committee deems relevant in connection with accomplishing
the purpose of the Stock Option Plan. Under the terms of the Amendment, no
employee would be granted during any fiscal year Options covering more than
400,000 shares of Common Stock, or Restricted Stock Awards or Restricted Unit
Awards (constituting performance based compensation within the meaning of
Section 162(m) of the Code) covering more than 50,000 shares of Common Stock, in
any fiscal year (subject to any adjustments pursuant to Section 6(i) of the
Stock Option Plan).
GRANT AND EXERCISE OF OPTIONS. The Stock Option Plan provides for the
granting of nonqualified stock options ("NSOs"). Each Option granted pursuant to
the Stock Option Plan is evidenced by a written Option Agreement between the
Company and the Optionee, which provides the number of shares subject to such
Option, the Option Price, the medium of payment for shares to be received upon
exercise of the Option, the term of the Option (which may not exceed ten years),
and any related performance criteria of the Option. Options may be exercised
over such period, in cumulative installments or otherwise, or upon the
satisfaction of such performance goals, as the Committee may determine. Options
may be exercised for a period of up to ten years after the date of the grant.
The exercise price of any Option granted must be at least 100 percent of the
Fair Market Value of the Common Stock on the date of grant. The Stock Option
Plan provides that the exercise price must be paid at the time of exercise
through one of the following methods: (i) cash, (ii) delivery of already owned
shares of Common Stock, (iii) a combination of cash and shares of Common Stock,
or (iv) in the discretion of the Committee, a cashless exercise procedure
through a broker. Subsequent to termination of employment with the Company, an
Optionee may exercise Options only as follows: (i) in the case of termination by
death or disability, for one year after termination with respect to Options
exercisable on the date of such termination, or at such later time as the
Committee may in its discretion determine but not beyond the date on which the
Option would otherwise expire; (ii) in the case of termination other than by
death, disability or cause, for three months after termination with respect to
Options exercisable on the date of such termination, or at such later time as
the Committee may in its discretion determine but not beyond the date on which
the Option would otherwise expire. If an Optionee's employment is terminated for
Cause, all unexercised Options held by such Optionee immediately terminate.
Options granted under the Stock Option Plan are not transferable otherwise than
by will or by the laws of descent and distribution, and Options may be
exercised, during the lifetime of the Optionee, only by the Optionee or by his
or her guardian or legal representative.
Upon the occurrence of certain "Acceleration Events" constituting a change
in control of the Company, all Options not yet exercisable will become
exercisable in full and the Company may cancel each such Option in exchange for
a cash payment to each respective option holder in an amount per share equal to
the difference between the per share exercise price of the Option and the Fair
Market Value of a share of Common Stock, determined as of the date during the
prior 60-day period that produces the highest Fair Market Value.
AWARD OF RESTRICTED SHARES AND RESTRICTED UNITS. The Stock Option Plan
provides for the grant of Restricted Stock Awards, which are awards of shares of
Common Stock that may not be disposed of, except by will or the laws of descent
and distribution, for a period of five years from the date on which the award is
granted ("restricted period"), or such shorter period as the Committee
determines. In addition, participants may be granted awards of Restricted Units,
which entitle such participant to receive on the date on which the restricted
period lapses an amount in cash equal, with respect to each such unit, to the
Fair Market Value of one share of Common Stock on such date. Each award is
evidenced by a Restricted Award Agreement between the Grantee and the Company.
The Committee may provide that, with respect
20
to Restricted Shares and Restricted Units, restrictions will lapse with respect
to specified percentages of the awarded shares and units on successive
anniversaries of the date of the award. The Committee may also impose such other
conditions and restrictions on the Grants as it deems appropriate. During the
restricted period, with respect to Restricted Shares, the employee is entitled
to receive dividends and to vote the shares. If during the restricted period,
the employee's continuous employment terminates for any reason, any Restricted
Shares and any Restricted Units remaining subject to restrictions will be
forfeited by the employee and transferred, at no cost, to the Company. The
Committee has the authority to cancel any or all outstanding restrictions prior
to the end of the restricted period. Upon the occurrence of certain
"Acceleration Events" constituting a change in control of the Company, all
restrictions outstanding with respect to Restricted Stock Awards and Restricted
Unit Awards will automatically expire.
AMENDMENT AND TERMINATION. The Board of Directors may amend or terminate
the Stock Option Plan at any time. Unless sooner terminated by the Board of
Directors, the Stock Option Plan will continue in effect until January 31, 2002.
While the Board of Directors may amend or terminate the Stock Option Plan,
stockholder approval is required for any amendment that would materially
increase the aggregate number of shares of Common Stock that may be available
for Grants under the Stock Option Plan (except for adjustments in the event of
certain changes in the capital structure of the Company), materially increase
the benefits accruing to participants under the Stock Option Plan or materially
modify the requirements as to eligibility for participation in the Stock Option
Plan (each within the meaning of Rule 16b-3) and, in the discretion of the
Committee, any amendment that requires stockholder approval in order for the
Stock Option Plan to comply with Section 162(m) of the Code.
FEDERAL TAX WITHHOLDING. When a Grantee or other person is entitled to
receive shares of Common Stock pursuant to the exercise of an Option or the
lapse of restrictions with respect to Restricted Shares, the Company will have
the right to require the Grantee or such other person to pay to the Company the
amount of any taxes that the Company may be required to withhold before delivery
to such Grantee or other person of a certificate or certificates representing
such shares. The Stock Option Plan provides that a participant may pay such
amount in the form of cash or previously owned shares, by authorizing the
withholding of otherwise issuable shares or cash payments, or a combination of
cash and shares.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion of certain relevant federal income tax effects
applicable to Options granted under the Stock Option Plan is a brief summary
only, and reference should be made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax provisions.
STOCK OPTIONS. In the case of an NSO, an employee generally will not be
taxed upon the grant of such an Option. Rather, at the time of exercise of such
NSO, the employee will generally recognize ordinary income for federal income
tax purposes in an amount equal to the excess of the then fair market value of
the shares purchased over the option price. The Company will generally be
entitled to a tax deduction at the time, and in the amount, that the employee
recognizes ordinary income.
An employee who pays the option price upon exercise of an Option, in whole
or in part, by delivering shares of the Company's Common Stock already owned,
will generally not recognize gain or loss on the shares surrendered at the time
of such delivery. Rather, such gain or loss recognition will generally occur
upon disposition of the shares acquired in substitution for the shares
surrendered.
STOCKHOLDER APPROVAL
Approval of the Amendment requires the affirmative vote of a majority of the
votes cast by holders of Common Stock on this proposal, provided that the total
number of votes cast on this proposal represents more than 50% of the shares of
Common Stock entitled to vote thereon at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
21
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
MANAGEMENT PERFORMANCE COMPENSATION PLAN
The Company has maintained the AnnTaylor Stores Corporation Management
Performance Compensation Plan (the "Performance Compensation Plan") since 1992.
In 1994, the Board of Directors adopted, and stockholders approved, an amendment
and restatement of the Performance Compensation Plan in order to comply with the
provisions of Section 162(m) of the Code. In April, 1997, the Board of Directors
adopted, subject to stockholder approval, a further amendment and restatement of
the Performance Compensation Plan (the "Restated Performance Compensation Plan")
in order to, among other things, (i) increase the amount of the maximum
individual award payable in any performance period and (ii) expand the types of
corporate business criteria that the Committee may consider in establishing each
performance period's performance goals.
Section 162(m) limits the deductibility of certain compensation in excess of
$1 million per year paid by a publicly traded corporation to the following
individuals who are employed as of the end of the corporation's tax year: the
chief executive officer and the four other executive officers named in the
summary compensation table of the corporation's proxy statement ("Covered
Employees"). Compensation that qualifies as "performance-based" compensation is,
however, exempt from the $1 million deductibility limitation. In order for
compensation granted pursuant to the Restated Performance Compensation Plan to
qualify for this exemption, among other things, the material terms under which
the compensation is to be paid must be disclosed to and approved by stockholders
in a separate vote prior to payment, and the compensation must be paid solely on
account of the attainment of preestablished, objective performance goals.
Accordingly, the Restated Performance Compensation Plan is being submitted to
stockholders for approval at the 1997 Annual Meeting of Stockholders so that the
Restated Performance Compensation Plan may take effect for the Company's
six-month Fall 1997 Season.
The following description of the Restated Performance Compensation Plan is
not intended to be complete and is qualified in its entirety by the complete
text of the Restated Performance Compensation Plan, attached hereto as Exhibit
B. Defined terms that are used herein have the meanings assigned to them in the
text of the Restated Performance Compensation Plan. If the Restated Performance
Compensation Plan is not approved by stockholders, it will be of no force and
effect and the Performance Compensation Plan will continue in full force and
effect.
DESCRIPTION OF PRINCIPAL FEATURES OF THE RESTATED PERFORMANCE COMPENSATION PLAN
The Restated Performance Compensation Plan is intended, as part of the
Company's over-all compensation strategy, to attract and retain in the employ of
the Company and its subsidiaries highly motivated, results-oriented officers and
key employees of experience and ability, by basing such persons' 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.
The Restated Performance Compensation Plan is administered by the
Compensation Committee of the Company's Board of Directors (the "Committee").
The Committee consists of two or more persons, at least two of whom are "outside
directors" within the meaning of Section 162(m) of the Code. As amended, the
Restated Performance Compensation Plan provides that the Committee may delegate
to one or more officers its authority with respect to Participants who are
neither executive officers of the Company nor members of its Executive
Committee.
22
As amended, the Restated Performance Compensation Plan provides that a
performance period may consist of a six-month season or such longer period of up
to twelve months as may from time to time be selected by the Committee
("performance period").
Salaried associates in the employ of the Company or any of its subsidiaries
(including officers and directors, but excluding persons who are directors only)
are eligible to become participants and receive performance compensation under
the Restated Performance Compensation Plan. In selecting from among all eligible
associates those who will become participants in any performance period and in
determining their potential performance compensation for such period, the
Committee considers 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.
Prior to the beginning of each performance period (or within such other
period as may be permitted by Section 162(m) of the Code), the Committee assigns
to each participant an individual "Performance Percentage" for such period and
establishes a matrix assigning a "Performance Ratio" to various levels of
performance that might be achieved for such period. The Performance Percentage
is a factor that ranges from one percent to one hundred percent. The Performance
Ratio is a factor that causes the amount of performance compensation to increase
based on specified increases in level of performance, pursuant to a
preestablished schedule. A participant's performance compensation for the
performance period will 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,
multiplied by (ii) the Performance Percentage assigned to such participant for
such performance period, multiplied by (iii) the Performance Ratio achieved for
such performance period. As amended, the Restated Performance Compensation Plan
provides that the Committee may, but need not, use this formula.
As amended, the Restated Performance Compensation Plan provides that the
Committee is to establish performance goals expressed in terms of the
achievement of any of 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 delineation; appreciation in the
price of the Company's Common Stock; total stockholder 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 objective or subjective
individual 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 will be made and levels of performance at which specified
percentages of the target award will be paid, and may also include a maximum
level of performance above which no additional award will be paid. Each of the
foregoing performance goals will be determined in accordance with generally
accepted accounting principles and will be subject to certification by the
Committee. The performance goals established by the Committee may be different
with respect to different Performance Periods and different goals may be
applicable to different Participants. The Committee is authorized to make
equitable adjustments to the performance goals in recognition of unusual or
nonrecurring events affecting the Company or its financial statements, in
response to changes in applicable laws or regulations, or to account for items
of gain, loss or expense determined to be
23
extraordinary or unusual in nature or infrequent in occurrence or related to the
disposition of a segment of a business or related to a change in accounting
principles.
For any performance period, the Board may establish a ceiling on the
aggregate amount that 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 will be reduced pro rata. In addition,
as amended, the Restated Performance Compensation Plan provides that no
participant who is an executive officer of the Company at the beginning of the
performance period may receive an amount of performance compensation, with
respect to a performance period, in excess of $1,500,000 per twelve-month
performance period, to be reduced proportionately for performance periods of
shorter duration.
Performance compensation will be paid by the Company or the subsidiary
employing the participant promptly following the end of the performance period
to which it relates and the availability of the Company's final consolidated
financial results for such performance period. With respect to executive
officers, no payment may be made until the applicable performance results have
been certified by the Committee. A participant will not be entitled to receive
payment of performance compensation unless such participant is still in the
employ of the Company or one of its subsidiaries at the time the performance
compensation is actually paid.
The Board at any time and from time to time may modify, amend, suspend or
terminate the Restated Performance Compensation Plan, without notice; provided
that no amendment that requires stockholder approval in order for the Restated
Performance Compensation Plan to continue to comply with Section 162(m) will be
effective unless approved by the requisite vote of the stockholders of the
Company.
Inasmuch as benefits under the Restated Performance Compensation Plan will
be determined by the Committee and performance goal criteria may vary from year
to year and from participant to participant, benefits to be paid under the
Restated Performance Compensation Plan are not determinable. Awards paid to
Covered Employees in respect of the 1996 fiscal year, however, are noted in the
Summary Compensation Table on page 7.
STOCKHOLDER APPROVAL
Approval of this proposal will require the affirmative vote of the holders
of a majority of the Common Stock present in person or by proxy and entitled to
vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has reappointed
the firm of Deloitte & Touche LLP, Certified Public Accountants, as independent
auditors to make an examination of the accounts of the Company for the fiscal
year 1997. Deloitte & Touche LLP has served as the independent auditors of the
Company since January 1989.
Ratification will require the affirmative vote of the holders of a majority
of the Common Stock present in person or by proxy and entitled to vote at the
meeting.
24
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH
RATIFICATION.
One or more representatives of Deloitte & Touche LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire to do so and will be available to respond to questions.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In accordance with Rule 14a-8 under the Exchange Act, any stockholder
proposals intended to be presented at the 1998 Annual Meeting of Stockholders
must be received by the Company no later than January 2, 1998 in order to be
considered for inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting.
Section 9 of Article II of the Company's By-Laws provides that, in order for
a stockholder to nominate a person for election to the Board of Directors at an
annual meeting of the Company, such stockholder must be a stockholder of record
on the date the notice described below is given and on the record date for the
annual meeting, and must have given timely prior written notice to the Secretary
of the Company. To be timely for the 1998 Annual Meeting of Stockholders, notice
must be received by the Company not less than sixty days nor more than ninety
days prior to June 18, 1998, which will be the anniversary date of the prior
year's meeting (or if the meeting date for the 1998 Annual Meeting is not within
thirty days before or after the anniversary date of the prior year's meeting,
then not later than the tenth day following the day on which the notice of the
date of the meeting was mailed or public disclosure thereof is made). Such
notice must contain certain information about the person whom the stockholder
proposes to nominate and the stockholder giving the notice, including the name,
age, address, occupation, and class and number of shares of Common Stock
beneficially owned by the proposed nominee and the name, address and class and
number of shares of Common Stock beneficially owned by such stockholder.
In addition, Section 10 of Article II of the Company's By-Laws provides
that, in order for a stockholder to propose any matter for consideration at an
annual meeting of the Company, such stockholder must have given timely prior
written notice to the Secretary of the Company of such stockholder's intention
to bring such business before the meeting. To be timely for the 1998 Annual
Meeting of Stockholders, notice must be received by the Company not less than
sixty days nor more than ninety days prior to June 18, 1998, which is the
anniversary date of the prior year's meeting (or if the meeting date for the
1998 Annual Meeting is not within thirty days before or after the anniversary
date of the prior year's meeting, then not later than the tenth day following
the day on which the notice of the date of the meeting was mailed or public
disclosure thereof is made). Such notice must contain certain information about
such business and the stockholder who proposes to bring the business before the
meeting, including a brief description of the business the stockholder proposes
to bring before the meeting, the reasons for conducting such business at the
annual meeting, the name and address of the stockholder, the class and number of
shares of Common Stock beneficially owned by such stockholder, and any material
interest of such stockholder in the business so proposed.
ADDITIONAL INFORMATION
Copies of the Company's 1996 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders of the Company
with this Proxy Statement. Additional copies are available without charge on
request. Requests should be addressed to the Secretary, AnnTaylor Stores
Corporation, 142 West 57th Street, New York, New York 10019.
ANNTAYLOR STORES CORPORATION
NEW YORK, NEW YORK
May 2, 1997
25
EXHIBIT A
FIRST AMENDMENT TO
THE ANNTAYLOR STORES CORPORATION
1992 STOCK OPTION AND
RESTRICTED STOCK AND UNIT AWARD PLAN, AS
AMENDED AND RESTATED AS OF FEBRUARY 23, 1994
The AnnTaylor Stores Corporation 1992 Stock Option and Restricted Stock and
Unit Award Plan, as amended and restated as of February 23, 1994 (the "Plan"),
is hereby amended, effective as of February 20, 1997, subject to the approval of
stockholders, as set forth below.
1. The first clause of the second sentence of Section 5 of the Plan is
hereby amended and restated in its entirety as follows:
The aggregate number of shares of Common Stock as to which Options may
be granted from time to time under this Plan shall not exceed 3,100,000.
2. The last sentence of the first paragraph of Section 5 is hereby amended
and restated in its entirety as follows:
No single employee may be granted Options covering more than 400,000
shares of Common Stock, or Restricted Stock Awards or Restricted Unit Awards
(constituting performance based compensation within the meaning of Section
162(m) of the Code) covering more than 50,000 shares of Common Stock,
(subject to any adjustments pursuant to Section 6(i) below) during any
fiscal year of the Company.
Except as set forth above, the Plan is hereby ratified and affirmed in all
respects.
A-1
EXHIBIT B
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 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 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
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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 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.
(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 who 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 COMPENSATION.
(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
B-2
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 accepted 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 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 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.
B-3
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 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 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 designed and intended to
comply with Section 162(m), and all provisions hereof shall be construed in a
manner to so comply.
B-4
ANNTAYLOR STORES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF ANNTAYLOR STORES CORPORATION
FOR THE ANNUAL MEETING TO BE HELD ON JUNE 18, 1997
The undersigned hereby appoints J. Patrick Spainhour and Patricia DeRosa,
and either of them, proxies of the undersigned with full power of substitution
to vote all shares of Common Stock, par value $.0068 per share, of AnnTaylor
Stores Corporation (the "Company") owned or held by the undersigned at the
Annual Meeting of Stockholders of the Company to be held at The Equitable
Center, 787 Seventh Avenue, 54th floor, New York, New York, on June 18, 1997 at
9:00 a.m. local time and at any adjournment or postponement thereof.
Such proxies are directed to vote as set forth on the reverse side hereof.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR all nominees" in (a), "FOR" the proposals in (b),
(c) and (d), and in accordance with the judgment of such proxies upon such other
matters as may properly come before the Annual Meeting.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN (A) AND "FOR" THE PROPOSALS IN (B) (C) AND (D).
(a) ELECTION OF THE (b) PROPOSAL TO (c) PROPOSAL TO (d) PROPOSAL TO (e) IN THEIR
FOLLOWING NOMINEES AMEND THE AMEND THE RATIFY THE JUDGMENT, UPON
AS CLASS III COMPANY'S STOCK COMPANY'S MAN- APPOINTMENT OF SUCH OTHER MAT-
DIRECTORS: Gerald S. OPTION PLAN as AGEMENT PERFORM- DELOITTE & TOUCHE TERS AS MAY
Armstrong and Hanne described in the ANCE COMPENSATION LLP as PROPERLY COME
M. Merriman (for Proxy Statement. PLAN as described independent BEFORE THIS
terms to expire at in the Proxy auditors for the ANNUAL MEETING.
the 2000 annual Statement. Company for
meeting). fiscal year 1997.
FOR ALL AUTHORITY WITHHELD
NOMINEES FOR ALL NOMINEES FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / / / / / / / / / / / /
AUTHORITY WITHHELD FOR THE FOLLOWING NOMINEE ONLY: (WRITE THE
NAME OF SUCH NOMINEE IN THE SPACE PROVIDED BELOW)
----------------------------------------
Dated
---------------------------------------- ,
1997
----------------------------------------
----------------------------------------
(Signature)
Please mark, date, sign and return this
proxy in the enclosed envelope. Please
sign as names appear at left. When
signing as agent, attorney, or
fiduciary, or for a corporation or
partnership, indicate the capacity in
which you are signing. Shares registered
in joint names should be signed by each
joint tenant or trustee.