SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 ss.240.14a-11(c) or ss.240.14a-12
ANN TAYLOR
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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 the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(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
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid: N/A
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(3) Filing Party: N/A
(4) Date Filed: N/A
ANNTAYLOR
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2001
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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 Thursday, May 3, 2001, at The Peninsula Hotel, 700 Fifth Avenue, New
York, New York, for the following purposes:
1. To elect three Class I Directors of the Company, each to serve for a
term of three years;
2. To ratify the appointment by the Company of Deloitte & Touche LLP as
the Company's independent auditors for fiscal 2001; and
3. 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 March 28, 2001 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, 1372 Broadway, 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
April 5, 2001
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YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
ENCOURAGED TO VOTE BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD,
AND MAILING IT TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE. ALTERNATIVELY, YOU MAY VOTE BY TELEPHONE OR ELECTRONICALLY IF YOU
CHOOSE. INSTRUCTIONS FOR VOTING BY TELEPHONE OR ELECTRONICALLY ARE INCLUDED WITH
THE ENCLOSED PROXY CARD. VOTING VIA PROXY, BY TELEPHONE OR ELECTRONICALLY WILL
NOT PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU SO
DESIRE.
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ANNTAYLOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2001
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
Thursday, May 3, 2001, at The Peninsula Hotel, 700 Fifth Avenue, 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: (1) the election of three Class I Directors, each to serve for a term of
three years; and (2) a proposal to ratify the appointment of the Company's
independent auditors for fiscal year 2001.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about April 5, 2001.
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 March 28, 2001 (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 28,889,631 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 is entitled to one vote per share, in person or by proxy,
for each share of Common Stock held of record 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 I 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.
Ratification of the appointment of the Company's independent auditors for
the Company's 2001 fiscal year requires 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 directors and will have no effect on the outcome of
that vote, and (ii) abstentions will be counted as shares present and entitled
to vote and will have the same effect as a vote against the ratification of the
appointment of the Company's independent auditors.
Shares of Common Stock that are represented by properly executed proxies
and received in time for voting at the Annual Meeting (that have not been
revoked) will be voted in accordance with the instructions indicated on the
proxy. 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:
(1) FOR the election of the Board of Directors' nominees for Class I
Directors; and
(2) FOR the ratification of Deloitte & Touche LLP as the Company's
independent auditors for the Company's 2001 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 the 2002 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.
Stockholders who execute the enclosed proxy or who vote by telephone or
electronically may still attend the Annual Meeting and vote 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 by giving a later-voted written, telephone
or electronic proxy to the Secretary of the Company, 1372 Broadway, New York,
New York 10018, 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 or an earlier vote.
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 I 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.
At the Annual Meeting, three Class I Directors are to be elected to serve
three-year terms ending in the year 2004, or until their respective successors
are elected and qualified, or their earlier death, resignation or removal. The
Board of Directors has nominated Robert C. Grayson, Rochelle B. Lazarus, and J.
Patrick Spainhour for re-election as Class I Directors. Each of the three
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 will be able to serve if so elected. In the event that any 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 I DIRECTORS.
Set forth below is a brief biography of each nominee for election as a
Class I Director and of all other members of the Board of Directors who will
continue in office.
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NOMINEES FOR ELECTION AS CLASS I DIRECTORS
TERM EXPIRING 2004
ROBERT C. GRAYSON, AGE 56. Mr. Grayson has been a Director of the Company
and its wholly owned operating subsidiary, AnnTaylor, Inc. ("Ann Taylor"), since
April 1992. He has been president of Robert C. Grayson & Associates, Inc., a
retail marketing consulting firm, since February 1992. He has also served as
chairman of Berglass-Grayson, a management consulting firm, since June 1995. He
was a vice chairman of the board of Tommy Hilfiger Corp., an apparel
manufacturer and retailer, and chairman of the board of Tommy Hilfiger Retail, a
subsidiary of such company, from June 1994 to March 1996. Mr.Grayson is also a
director of Sunglass Hut International, Inc., Kenneth Cole Productions, Inc. and
Frisby Technologies Inc.
ROCHELLE B. LAZARUS, AGE 53. 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, and also
chairman of Ogilvy & Mather Worldwide since March 1997. She was president and
chief operating officer of Ogilvy & Mather Worldwide from December 1995 to
September 1996.
J. PATRICK SPAINHOUR, AGE 51. 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.
INCUMBENT CLASS II DIRECTORS
TERM EXPIRING 2002
JAMES J. BURKE, JR., AGE 49. Mr. Burke has been a Director of the Company
and Ann Taylor since February 1989. He has been a partner of Stonington
Partners, Inc. ("Stonington Partners"), a private investment firm, since
November 1993, and a director of that firm since August 1993. Mr.Burke also
served as a consultant to Merrill Lynch Capital Partners, Inc., a private
investment firm associated with Merrill Lynch & Co., Inc. ("Merrill Lynch"),
from 1994 through 2000. Mr.Burke is also the chairman of a restaurant company
that recently filed for bankruptcy protection. Mr.Burke is also a director of
Education Management Corp., as well as several privately held companies.
RONALD W. HOVSEPIAN, AGE 40. Mr. Hovsepian has been a Director of the
Company and Ann Taylor since June 1998. He has been managing director of
Internet Capital Group, an internet company engaged in business to business
e-commerce through a network of partner companies, since March 2000. He was vice
president of business development of International Business Machines Corporation
("IBM"), a supplier of advanced information processing products and services,
from January 1999 to 2000; general manager of IBM's global retail and
distribution industry solutions organization in 1998; and from 1996 to 1997 he
was vice president, supply chain solutions at IBM.
INCUMBENT CLASS III DIRECTORS
TERM EXPIRING 2003
GERALD S. ARMSTRONG, AGE 57. Mr. Armstrong has been a Director of the
Company and Ann Taylor since February 1989. He has been a managing director of
Arena Capital Partners, LLC, a private investment firm, since January 1998. Mr.
Armstrong was a partner of Stonington Partners from November 1993 to December
1997, and a director of that firm from August 1993 to December 1997. Since June
1994, Mr. Armstrong has also served as a consultant to Merrill Lynch Capital
Partners, Inc.
WESLEY E. CANTRELL, AGE 66. Mr. Cantrell has been a Director of the Company
and Ann Taylor since November 1998. He has been chief executive officer of
Lanier WorldWide, Inc. ("Lanier"), a supplier of automated office imaging
equipment and systems, since March 1987, and was the chairman of the board of
directors of Lanier from November 1999 to January 2001. He is also a director of
Environmental Design
3
International, Ltd., a private company, and of Impact Ministries, a
not-for-profit organization, and is a member of the advisory board of First
Union National Bank of Atlanta.
HANNE M. MERRIMAN, AGE 59. 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. Ms. Merriman is
also a director of USAirways Group, Inc., The Rouse Company, State Farm Mutual
Automobile Insurance Company, Ameren Corp., Central Illinois Public Service
Company, T. Rowe Price Mutual Funds, and Finlay Enterprises, Inc. She also
serves as a director of the Children's Hospital Foundation (part of the
Children's National Medical Center), and is a member of the National Women's
Forum.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Company's Board of Directors held nine meetings in fiscal 2000. Each
Director attended at least 75% of the total number of Board meetings and
meetings of Board committees on which such Director served, except Ms. Lazarus,
who attended 71% of such meetings. The Board of Directors has established
standing Audit, Compensation and Governance 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 the Company's independent auditors and reviewing the terms of their
engagement; conferring with the Company's independent auditors regarding the
scope and results of their audit of the Company's financial statements, the
Company's internal accounting controls and other matters; conferring with the
Company's director of internal audit regarding planned activities of the
Company's internal audit department and reviewing the results of such 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 six meetings in fiscal 2000. The members of the Audit Committee are Mr.
Armstrong (Chairman), Mr. Burke, Mr. Hovsepian and Ms. Merriman.
COMPENSATION COMMITTEE: The principal functions of the Compensation
Committee are to establish the Company's executive compensation practices; to
review and approve or make recommendations regarding the compensation of the
executive officers of the Company; and to administer certain of the Company's
benefit plans, including its stock option plans and other incentive compensation
plans. The Compensation Committee held five meetings in fiscal 2000. The members
of the Compensation Committee are Mr. Armstrong, Mr. Cantrell, Mr. Grayson
(Chairman) and Ms. Lazarus.
GOVERNANCE COMMITTEE: The principal functions of the Governance Committee
are to make recommendations to the Board of Directors on matters concerning
corporate governance and directorship practices. This Committee advises the
Board on the size and composition of the Board and its Committees, including
qualification of directors. The Governance Committee will consider nominees
recommended by stockholders. To be considered, such recommendations should be
submitted in writing to the Secretary of the Company and should include a
description of the proposed nominee's qualifications, other relevant
biographical data, and the written consent of the proposed nominee to serve, if
elected. In addition, the Company's By-Laws provide procedures under which
stockholders may directly nominate persons for election as directors. See
"Stockholder Proposals for the 2002 Annual Meeting". The Governance Committee
also recommends schedules for Board meetings and makes recommendations to the
Company of matters for Board review. The Governance Committee held one meeting
in fiscal 2000. The members of the Governance Committee are Mr. Burke, Mr.
Cantrell, Mr. Grayson and Ms. Merriman (Chairman).
COMPENSATION OF DIRECTORS AND RELATED MATTERS
Directors who are employees of the Company do not receive any compensation
for serving on the Board of Directors of the Company or Ann Taylor. All other
Directors (referred to below as "non-employee Directors") receive an annual
retainer of $20,000, plus $1,000 for each meeting of the Board or Committee of
the Board that they attend. Committee chairs also receive an annual stipend of
$3,000
4
for their service as such. In addition, each non-employee Director receives an
annual grant of an option to purchase 2,000 shares of Common Stock. Any new
non-employee Director joining the Board also receives at the time of election an
initial grant of an option to purchase 7,500 shares of Common Stock.
All stock option grants to Directors are made under the AnnTaylor Stores
Corporation 1992 Stock Option and Restricted Stock and Unit Award Plan (as
restated and amended, the "Stock Option Plan"), have an exercise price equal to
the Fair Market Value (as defined under the Stock Option Plan) of a share of
Common Stock on the date of grant, and have a term of ten years. Directors'
rights to exercise stock options vest on the first anniversary of the date of
grant.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has reappointed the firm of Deloitte & Touche LLP
("Deloitte"), Certified Public Accountants, as independent auditors to make an
examination of the accounts of the Company for fiscal 2001. Deloitte has served
as the independent auditors of the Company since January 1989.
AUDIT FEES--During fiscal 2000, Deloitte billed the Company $340,000 for
professional services rendered for the audit of the Company's consolidated
financial statements for fiscal 2000, and for the review during fiscal 2000 of
the financial statements included in the Company's Quarterly Reports on Form
10Q.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES--During fiscal
2000, Deloitte did not perform any services for the Company relating to
Financial Information Systems Design and Implementation, as such services are
described in Regulation S-X, promulgated under the Securities Act of 1933, as
amended.
ALL OTHER FEES--During fiscal 2000, Deloitte billed the Company $213,000
for other professional services.
The Audit Committee has considered the non-audit services rendered by
Deloitte for the Company and has determined that such services do not compromise
Deloitte's independence.
Although action by stockholders is not required by law, the Board of
Directors has determined that it is desirable to request stockholder
ratification of the selection of the Company's independent auditors. If
stockholders do not approve ratification of the selection of such auditors, the
Board of Directors will reconsider the selection. Ratification requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS FOR THE COMPANY FOR FISCAL YEAR 2001.
Representatives of Deloitte 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.
AUDIT COMMITTEE REPORT
INTRODUCTION
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities with respect to the Company's audit,
accounting and financial reporting processes in order to support the integrity
of the Company's financial statements and reports and other accounting
functions. It fulfills its responsibilities by monitoring the Company's
accounting and financial reporting practices and the Company's system of
internal controls; reviewing the financial information and related disclosures
5
provided to stockholders; and communicating regularly with management and the
Company's independent auditors regarding such matters.
STRUCTURE AND MEMBERSHIP
The Audit Committee is governed by a Charter, a copy of which is attached
as Exhibit A. Under the terms of this Charter, the Audit Committee shall consist
of at least three members of the Board of Directors, one of whom shall chair the
Committee, and it shall meet at least four times annually. The Charter requires
that each member of the Committee be independent of the Company and its
management. The Committee reports to the Board of Directors periodically with
respect to its activities and its recommendations.
The Audit Committee currently consists of four directors, all of whom are
independent as such term is defined by Sections 303.01(B)(2)(a) and (3) of the
New York Stock Exchange listing standards. No member of the Committee is an
officer of the Company, nor has any member of the Committee been an officer of
the Company within the past three years. No member of the Audit Committee has
any relationship with the Company that, in the opinion of the Board of
Directors, would interfere with his or her independence from management and the
Company. Each member of the Audit Committee is, in the judgment of the Board,
financially literate, and at least one member of the Committee has accounting or
related financial management experience.
COMMITTEE ACTIVITIES
In discharging its oversight responsibilities for fiscal 2000, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management and with the Company's independent auditors; (2) discussed with the
Company's independent auditors the material required to be discussed by
Statement on Auditing Standards No. 61, promulgated by the Accounting Standards
Board of the American Institute of Certified Public Accountants; and (3)
reviewed the written disclosures and the letter from the independent auditors
required by the Independence Standards Board's Standard No. 1, and discussed
with the independent auditors any relationships that may affect the auditor's
objectivity and independence.
The Audit Committee has received written disclosure from Deloitte that
Deloitte is independent, as required by the Independence Standards Board's
Standard No. 1. Deloitte has informed the Audit Committee that it has disclosed
to the Audit Committee in writing all relationships between Deloitte and the
Company and its subsidiaries that, in Deloitte's professional judgment, may
reasonably be thought to bear on independence. Deloitte also has confirmed, in
writing, that, in its professional judgment, it is independent of the Company
within the meaning of the securities laws.
The Audit Committee also conferred periodically with the Company's director
of internal audit regarding planned activities of the Company's internal audit
department and reviewed the results of such audits. The Committee also reviewed
the findings of the Company's internal audit department and Deloitte on the
adequacy of the Company's internal accounting controls and the results of fiscal
policies and financial management of the Company.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements of the Company for the fiscal year ended February 3, 2001 be included
in the Company's Annual Report on Form 10-K for such fiscal year, for filing
with the Securities and Exchange Commission (the "Commission").
Gerald S. Armstrong (Chairman)
James J. Burke, Jr.
Ronald W. Hovsepian
Hanne M. Merriman
6
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 3, 2001, with the cumulative total return on the
Standard & Poor's 500 Stock Index ("S&P 500") and the Dow Jones Retail, Apparel
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 February 2, 1996 and
assume that all dividends were reinvested.
COMPARISON OF FIVE-YEAR ANNUAL CUMULATIVE TOTAL RETURN
ANN TAYLOR, S&P 500 Index, AND DJ APPAREL INDEX
[The table below represents line chart in the printed piece.]
Ann Taylor Dow Jones
Stores Corp. S & P 500 Retail, Apparel
------------ --------- ---------------
2/2/96 100 100 100
2/1/97 151.65 126.34 123.07
1/31/98 102.75 160.34 195.47
1/30/99 340.66 212.43 329.33
1/29/00 195.6 234.41 296.85
2/3/01 237.27 232.3 346.28
7
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
As of March 28, 2001, the Record Date, the outstanding Common Stock was
held of record by 593 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, below, under "Executive Compensation", 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
- ----------------------- -------------- -------
FMR Corp. and affiliates (a) ...................................... 4,326,058 15.0%
Mellon Financial Corp. and affiliates (b) ......................... 2,742,338 9.5%
Citigroup Inc. (c) ................................................ 1,808,512 6.3%
American Express Company and affiliates (d) ....................... 1,787,899 6.2%
Lord, Abbett & Co. (e) ............................................ 1,549,707 5.4%
Perkins, Wolf, McDonnell & Company (f) ............................ 1,475,675 5.1%
J. Patrick Spainhour (g)(h) ....................................... 264,000 *
Patricia DeRosa (g)(i) ............................................ 138,500 *
Barry Erdos (g) ................................................... 61,870 *
Jocelyn F.L. Barandiaran (g) ...................................... 17,768 *
James M. Smith (g) ................................................ 15,198 *
Gerald S. Armstrong (g)(j) ........................................ 14,964 *
James J. Burke, Jr. (g) ........................................... 56,920 *
Wesley E. Cantrell (g) ............................................ 11,500 *
Robert C. Grayson (g) ............................................. 38,500 *
Ronald W. Hovsepian (g) ........................................... 13,500 *
Rochelle B. Lazarus (g)(k) ........................................ 14,100 *
Hanne M. Merriman (g) ............................................. 13,700 *
All executive officers and directors as a group (13 persons) (l) .. 663,887 2.3%
- -----------
* Less than 1%
(a) Pursuant to an amended Schedule 13G dated February 13, 2001, and filed with
the Commission by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson
(collectively, the "FMR Group"), each of the members of the FMR Group had
beneficial ownership of 4,326,058 shares. Of such shares, FMR Corp. and
Edward C. Johnson, through their control of Fidelity Management & Research
Company, each had sole dispositive power with respect to 2,492,975 shares;
FMR Corp. and Edward C. Johnson, through their control of Fidelity
Management Trust Company, each had sole voting power with respect to
1,183,640 shares and sole dispositive power with respect to 1,240,940
shares; Fidelity International Limited had sole voting and dispositive power
with respect to 592,143 shares, as to which the reporting persons disclaim
beneficial ownership. According to the amended Schedule 13G, Edward C.
Johnson 3d, Abigail P. Johnson and other members of the Johnson family,
through their ownership of voting stock of FMR Corp., may be deemed, under
the Investment Company Act of 1940, to form a controlling group with respect
to FMR Corp. The address for each of FMR Corp., Edward C. Johnson 3d and
Abigail P. Johnson is 82 Devonshire Street, Boston, MA 02109.
(FOOTNOTES CONTINUED ON NEXT PAGE)
8
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(b) Pursuant to a Schedule 13G dated January 17, 2001, and filed with the
Commission by Mellon Financial Corporation, The Boston Company, Inc., and
The Boston Company Asset Management, LLC (collectively "Mellon"), Mellon is
deemed to beneficially own 2,742,338 shares, and to have sole voting power
with respect to 2,345,138 shares, shared voting power with respect to
109,900 shares, sole dispositive power with respect to 2,729,438 shares, and
shared dispositive power with respect to 1,200 shares; of the shares
reported above for Mellon, The Boston Company, Inc. is deemed to
beneficially own 2,030,820 shares, to have sole voting power with respect to
1,648,800 shares, shared voting power with respect to 109,900 shares, sole
dispositive power with respect to 2,030,800 shares, and shared dispositive
power with respect to no shares; and, of the shares reported above for
Mellon and The Boston Company, Inc., The Boston Company Asset Management,
LLC, is deemed to beneficially own 1,708,500 shares, to have sole voting
power with respect to 1,326,500 shares, shared voting power with respect to
109,900 shares, sole dispositive power with respect to 1,708,500 shares and
shared dispositive power with respect to no shares. The address for Mellon
is One Mellon Center, Pittsburgh, Pennsylvania 15258.
(c) Pursuant to a Schedule 13G dated February 16, 2001 and filed with the
Commission by Citigroup Inc. ("Citigroup"), Citigroup beneficially owned
1,808,512 shares, had shared voting and shared dispositive power with
respect to all such shares, and sole voting and sole dispositive power with
respect to no shares. The address for Citigroup is 399 Park Avenue, New York
10043.
(d) Pursuant to a Schedule 13G dated December 31, 1999 and filed with the
Commission by American Express Company and American Express Financial
Corporation (together, "Amex"), as of December 31, 1999, Amex is deemed to
beneficially own 1,787,899 shares, but American Express Company disclaims
beneficial ownership of these shares. Amex had shared voting power with
respect to 23,162 shares, and shared dispositive power with respect to
1,787,899 shares, and sole voting and dispositive power with respect to no
shares. The address for American Express Company is American Express Tower,
200 Vesey Street, New York NY 10285; the address for American Express
Financial Corporation is IDS Tower 10, Minneapolis, Minnesota 55440.
(e) Pursuant to a Schedule 13G dated January 12, 2001 and filed with the
Commission by Lord, Abbett & Co. ("Lord Abbett"), Lord Abbett beneficially
owned 1,549,707 shares, and had sole voting and sole dispositive power with
respect to all such shares, and shared voting and shared dispositive power
with respect to no shares. The address for Lord Abbett is 90 Hudson Street,
Jersey City, NJ 07302.
(f) Pursuant to a Schedule 13G dated February 15, 2001 and filed with the
Commission by Perkins, Wolf, McDonnell & Company ("Perkins Wolf"), Perkins
Wolf beneficially owned 1,475,675 shares, and had sole voting and
dispositive power with respect to 11,900 shares, and shared voting and
dispositive power with respect to 1,463,775 shares. The address for Perkins
Wolf is 53 W. Jackson Boulevard, Chicago, Illinois 60604.
(g) The shares listed include shares subject to options exercisable within 60
days of March 28, 2001 as follows: Mr. Armstrong, 4,000 shares; Mr. Burke,
4,000 shares; Mr. Cantrell, 11,500 shares; Mr. Grayson, 13,500 shares; Mr.
Hovsepian, 13,500 shares; Ms. Lazarus, 13,500 shares; Ms. Merriman, 13,500
shares; Mr. Spainhour, 190,000 shares; Ms. DeRosa, 118,500 shares; Mr.
Erdos, 17,000 shares; Ms. Barandiaran, 16,435 shares; and Mr. Smith, 7,998
shares. The shares listed also include restricted shares which have not yet
vested and which are subject to forfeiture, as follows: Mr. Spainhour 25,000
shares; Mr. Erdos 31,667 shares; and Mr. Smith 7,000 shares.
(h) 10,000 of these shares are held by Par 4 Holdings, LLC, a limited liability
company of which Mr. Spainhour and his spouse are the sole members.
(i) Ms. DeRosa resigned from her positions as a director and officer of the
Company, Ann Taylor and their subsidiaries effective January 15, 2001.
(j) Includes 1,000 shares owned by Jeffrey S. Armstrong and 1,000 shares owned
by Andrew B. Armstrong, Mr. Armstrong's sons, and 1,000 shares held by Mr.
Armstrong's spouse as custodian for another of their children. Mr. Armstrong
disclaims beneficial ownership of these shares.
(k) 600 of these shares are held in a pension fund of which Ms. Lazarus' spouse
is the sole beneficiary. Ms. Lazarus has no voting or investment power with
respect to these shares.
(l) The shares listed include 426,264 shares subject to options exercisable
within 60 days of March 28, 2001, and 63,667 restricted shares that have not
yet vested and are subject to forfeiture.
9
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (as amended) (the
"Exchange Act"), requires the Company's directors and certain officers, and
holders of more than 10% of the Company's Common Stock, to file with the
Securities and Exchange Commission and the New York Stock Exchange reports of
their ownership and changes in their ownership of Common Stock. Copies of
Section 16(a) reports are required to be furnished to the Company. Based solely
on a review of the copies of such statements furnished to the Company, or
written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that during fiscal year 2000,
all transactions were reported on a timely basis, except that Mr. Spainhour's
Form 5 filing was made on April 17, 2000.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company as of March 28, 2001:
NAME POSITION AND OFFICES
- ---- --------------------
J. Patrick Spainhour ........ Chairman, Chief Executive Officer and Director of
the Company and Ann Taylor
Barry Erdos ................. Senior Executive Vice President and Chief
Operating Officer 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 .............. Senior Vice President--Chief Financial Officer,
Treasurer and Assistant Secretary of the Company
and Ann Taylor
Sallie A. DeMarsilis ........ Vice President and Controller of the Company and
Ann Taylor
Information regarding Mr. Spainhour is set forth above under "Nominees for
Class I Directors".
BARRY ERDOS, AGE 56. Mr. Erdos has been Senior Executive Vice President and
Chief Operating Officer of the Company and Ann Taylor since March 2001. He was
Executive Vice President--Chief Financial Officer and Treasurer of the Company
and Ann Taylor from March 1999 to March 2001. Prior to that, he was chief
operating officer of J. Crew Group, Inc., a mail order and store retailer of
apparel, shoes and accessories, from February 1998 to January 1999. From 1987 to
January 1998, he held various positions with The Limited Inc., a specialty
retailer of apparel and other products, including, from 1997 to 1998, executive
vice president and chief financial officer for the Limited Express division, and
from 1995 to 1997, as executive vice president and chief financial officer for
the Lane Bryant division.
JOCELYN F.L. BARANDIARAN, AGE 40. 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 39. Mr. Smith has been Senior Vice President--Chief
Financial Officer and Treasurer of the Company and Ann Taylor since March 2001.
Prior to that, he was Vice President--Controller and Assistant Treasurer of the
Company from March 1997 to March 2001, and was Vice President--Controller and
Assistant Treasurer of Ann Taylor from February 1995 to March 2001. He has also
held the position of Assistant Secretary of both the Company and Ann Taylor
since June 1998.
SALLIE A. DEMARSILIS, AGE 36. Ms. DeMarsilis has been Vice President and
Controller of the Company and Ann Taylor since March 2001. Prior to that, she
was Senior Director and Assistant Controller of the Company and Ann Taylor from
May 2000 to March 2001, and was Assistant Controller
10
of the Company and Ann Taylor from November 1994 to March 2001. She has also
held the position of Assistant Treasurer of Ann Taylor since February 1995.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation practices are designed to attract, retain and
motivate highly talented, results-oriented executives of experience and ability,
and to provide these executives with appropriate incentives to achieve the
Company's financial and strategic objectives. The Company's compensation
programs are designed to "pay for performance", utilizing a combination of
annual base salary, a cash incentive compensation program that rewards
executives for achievement of short term objectives, and long term incentive
programs, including a long-term cash incentive compensation plan and a stock
option plan, that reward executives based on long term corporate performance.
The Compensation Committee reviews the Company's compensation practices and
programs annually, in consultation with a nationally recognized compensation
consultant, in order to ensure that the Company's compensation programs are
achieving their desired effects and to obtain information regarding industry
compensation practices and developments, generally, and comparative data
necessary to evaluate executive compensation.
An executive's annual base salary generally is intended to be positioned
within a range comparable to the competitive median salary, but the executive's
targeted total compensation, including long term incentives, is intended to be
positioned above median, up to approximately the 75th percentile of competitive
practice, provided that performance objectives are achieved. In determining an
individual executive's compensation, consideration is given to, among other
things, the executive's experience and anticipated contribution to the Company,
as well as to compensation paid to like executives at other companies. No
specific weight is given to any of these considerations. The other companies
used in evaluating the competitive position of the Company's compensation
programs, as well as for evaluating the compensation of individual executives,
consist of companies in the apparel and retail industries, including companies
among the Dow Jones Retail, Apparel Index, to the extent information is
available.
ANNUAL CASH COMPENSATION
As noted above, an executive's base salary typically is set at an amount
that is approximately at the median range of compensation for equivalent
positions. Thus, base compensation alone is less than the executive's targeted
total compensation level. In order to attain the targeted compensation level,
the executive is dependent, in part, upon earning the variable,
performance-based incentive component that is provided for under the Company's
Management Performance Compensation Plan (the "Annual Performance Plan"). 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 strategic objectives.
Under the Annual Performance Plan, each year the Compensation Committee
establishes an annual threshold net income target that must be achieved before
incentive compensation may be paid to any participant under the plan for the
year. For each participant, there may also be established personalized
divisional, work unit and/or individual performance objectives. As a result, the
individual's incentive compensation relates not only to the achievement of the
Company's profit objective, but also reflects the individual participant's role
in the Company, their scope of influence on corporate or divisional results, and
their personal job performance. An incentive compensation matrix is also
established for each incentive period that provides for increased payments under
the plan, for exceeding plan targets.
If the performance targets established under the Annual Performance Plan
are achieved, incentive compensation is paid such that, when added to the
executive's base compensation, the executive achieves his
11
or her targeted cash compensation level. If the performance targets are
exceeded, the executive's contribution to this performance is reflected by a
greater incentive compensation payment under the plan. Similarly, failure to
reach the stated performance objectives results in the executive's performance
compensation, and thus total cash compensation, being less than the targeted
level.
LONG TERM COMPENSATION
The other principal components of executive compensation are the Company's
long term incentive programs, which are intended to focus executives' efforts on
the Company's long term financial performance and on enhancing the market value
of the Company's Common Stock. These objectives are achieved through a Long Term
Cash Incentive Compensation Plan (the "Long Term Cash Plan") that, as described
below, provides for cash rewards for achievement of long term earnings targets,
and through the Company's stock option plan, that gives executives a financial
interest as beneficial owners of Company Common Stock.
Under the Long Term Cash Plan, each year the Committee designates a
consecutive three-year period as a "performance cycle", and establishes a
three-year cumulative earnings per share target that must be achieved by the end
of the three-year cycle, in order for incentive compensation to be paid under
the plan at the end of the cycle. The Committee believes that there should be a
direct correlation between achievement of these cumulative earnings per share
targets and an increase in long term stockholder value. The Committee designated
as participants under the Long Term Cash Plan for the current cycle the Ann
Taylor officers who are Senior Vice Presidents or above, comprising the Ann
Taylor Executive Committee. These executives are expected to have the greatest
effect on the Company's long-term profitability and to enable the Company to
meet and exceed its multi-year goals.
The first three-year performance cycle that was established under the Long
Term Cash Plan was the period from fiscal 1998 through 2000. The 1999-2001
period, the 2000-2002 period, and the 2001-2003 period also have been designated
as performance cycles under this plan. These cycles are running concurrently,
and are in varying stages of completion.
The Company also makes periodic grants of stock options, approximately
annually. The exercise price for 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. As a
result, the options do not have any value to the executive unless the market
price of the Common Stock rises. The Company believes that stock options further
align executives' interests with those of stockholders and focuses management on
building long term stockholder value.
The Company may also make grants of shares of restricted stock when deemed
necessary in order to attract or retain executives. Restricted stock awards are
intended as special recognition for executives who make a superior contribution
to achievement of the Company's goals, or in acknowledgment of the executive's
potential for advancement beyond their current position.
ANALYSIS OF 2000 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews the compensation arrangements for the
Company's Chairman and Chief Executive Officer annually, typically in the first
quarter of the fiscal year.
In determining Mr. Spainhour's total compensation for fiscal 2000, the
Committee considered the terms of his employment agreement, his length of
service with the Company as Chairman and Chief Executive Officer, the Company's
financial performance during the preceding year, future objectives and
challenges for the Company, and Mr. Spainhour's individual performance and
contributions to the Company. The Committee also considered competitive data
regarding salaries and incentives awarded to other chief executives in the
Company's industry and at Company competitors, among other things. In making its
compensation decisions with respect to Mr. Spainhour, the Committee exercised
its discretion and judgment based on the above factors, and no specific formula
was applied to determine the weight of each factor.
12
The Committee believes that Mr. Spainhour has provided important leadership
in the development of the Company's five-year strategic plan, and recognizes
that the execution and the success of the plan can only be measured over time,
as the plan's initiatives are implemented. The Committee also believes that Mr.
Spainhour provides important leadership in enhancing the Company's corporate
culture, and in supporting a corporate environment that values talent and
innovation.
Further, the Committee believes that a significant portion of the target
compensation for the Chief Executive Officer should be represented by incentive,
performance-based compensation--payable only if the Company achieves its
financial objectives. As a result, a significant portion of Mr. Spainhour's
annual compensation is performance-based, and a significant portion of the
restricted shares and stock options awarded to him during fiscal 2000 (in
connection with the renewal of his employment contract) were performance-based,
vesting only if the Company achieves specified financial targets.
In fiscal 2000, the Company did not meet the target range established by
the Committee under the Annual Performance Plan for 2000. Consequently, Mr.
Spainhour did not receive any compensation under the Company's Annual
Performance Plan for fiscal 2000. The Company did, however, achieve the high end
of the target range established by the Committee for the 1998-2000 Performance
Cycle under the Long Term Cash Plan, resulting in a bonus payment to Mr.
Spainhour of $850,000 for such cycle. Consistent with the Company's compensation
philosophy, incentive compensation represented 50% of Mr. Spainhour's cash
compensation for fiscal 2000, although his annual compensation was lower than it
otherwise would have been had the Annual Performance Plan target been achieved.
In accordance with the terms of the Company's employment agreement with Mr.
Spainhour (described below under "Executive Compensation--Employment and Change
in Control Agreements"), Mr. Spainhour's base compensation for fiscal 2000 was
$850,000. In addition to his base salary, the Committee assigned to Mr.
Spainhour a performance percentage of 80% under the Annual Performance Plan for
fiscal 2000 and a performance percentage of 50% under the Long Term Cash Plan
for the 2000-2002 Performance Cycle.
Additionally, as required by his contract, Mr. Spainhour was awarded a
total of 75,000 restricted shares under the Company's Stock Option Plan and
certain options, as more fully discussed below.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
In 1998, the Company's stockholders adopted the Long Term Cash Plan; in
1997, the stockholders approved the amended Annual Performance Plan, which was
originally adopted in 1992. These plans include provisions that allow the
Company to comply with Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Section 162(m) generally disallows a deduction to publicly
traded companies to the extent of excess compensation over $1 million paid to
the named executive officers. As a result of adopting the Long Term Cash Plan
and the amended Annual Performance Plan, qualifying performance-based
compensation will not be subject to the deduction limit if certain requirements
are met, and the Company will be able to take a tax deduction for
performance-based compensation in excess of $1 million per taxable year paid to
each of the named executives listed in Table I.
However, if compliance with Section 162(m) regulations conflicts with the
Company's compensation philosophy or with what is believed to be the best
interests of the Company and its stockholders, the Company may conclude that
paying non-deductible compensation is more consistent with the compensation
philosophy and in the Company's and the stockholders' best interests.
Robert C. Grayson (CHAIRMAN)
Gerald S. Armstrong
Wesley E. Cantrell
Rochelle B. Lazarus
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
As of the Record Date, there were no Compensation Committee interlocks.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the annual and
long-term compensation awarded or paid for each of the last three fiscal years
to the Chief Executive Officer and the four other most highly compensated
executive officers of the Company, as of February 3, 2001 (collectively, the
"named executives"). Ms. DeRosa resigned her position effective January 15,
2001.
TABLE I
SUMMARY OF EXECUTIVE OFFICER COMPENSATION
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- ------------------------------
OTHER RESTRICTED SECURITIES LTIP ALL OTHER
FISCAL ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($)(a) COMPENSATION($) AWARDS($) OPTIONS(#) ($)(b) ($)(c)
- --------------------------- ---- --------- ------------ -------------- --------- ---------- ------- ------------
J. Patrick Spainhour ....... 2000 $850,000 -- -- $1,000,000(d) 100,000 $850,000 $2,550
Chairman and Chief 1999 808,333 $1,332,800 -- 829,688(e) 400,000 -- 2,556
Executive Officer 1998 725,000 942,500 -- -- 20,000 -- 2,400
Patricia DeRosa (f) ........ 2000 737,500 -- -- 843,750(g) 140,000 600,000(h) --
Former President and 1999 662,500 793,800 -- -- 35,000 -- --
Chief Operating Officer 1998 600,000 660,000 -- -- 10,000 -- --
Barry Erdos (i) ............ 2000 445,833 -- -- -- 18,000 180,000 3,113
Senior Executive Vice 1999 360,820 369,500 -- 842,500(j) 25,000 -- --
President and Chief 1998 -- -- -- -- -- -- --
Operating Officer
Jocelyn F.L. Barandiaran ... 2000 255,833 -- -- -- 15,000 103,200 --
Senior Vice President-- 1999 243,000 116,678 -- -- 15,000 -- --
General Counsel and 1998 233,004 121,450 -- -- 4,200 -- --
Secretary
James M. Smith ............. 2000 175,833 -- -- 71,813(k) 5,000 -- 2,581
Senior Vice President-- 1999 153,433 62,740 -- -- 3,000 -- 2,412
Chief Financial Officer, 1998 145,600 65,520 -- -- 2,000 -- 2,184
Treasurer and
Assistant Secretary
- -----------
(a) Bonus awards were earned pursuant to the Company's Management Performance
Compensation Plan.
(b) The amounts shown in this column represent payments for the 1998-2000 cycle
under the Company's Long Term Cash Plan.
(c) Represents contributions made by the Company on behalf of the named
executives to its 401(k) Savings Plan.
(d) Represents the market value, on the date of grant, of 50,000
performance-vesting restricted shares of Common Stock granted to Mr.
Spainhour on March 8, 2000. The value of these shares as of February 3,
2001, was $1,349,500. Mr. Spainhour's right to 25,000 of these shares lapsed
on March 8, 2001, and these shares were canceled, as the performance target
for fiscal 2000 was not achieved. Mr. Spainhour's right to the remaining
(FOOTNOTES CONTINUED ON NEXT PAGE)
14
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
25,000 shares vests on March 8, 2002, contingent on the Company achieving
the performance target established by the Board of Directors for fiscal year
2001. Mr. Spainhour owns a total of 25,000 restricted shares. In accordance
with the terms of the Company's Stock Option Plan, all of such restricted
shares will vest upon the occurrence of an "Acceleration Event" (as defined
in the Stock Option Plan). Mr. Spainhour would be entitled to receive
dividends on these restricted shares if any dividends were paid by the
Company on its Common Stock.
(e) Represents the market value, on the date of the grant, of 25,000 restricted
shares of Common Stock granted to Mr. Spainhour on August 12, 1999, in
connection with the amendment of his employment contract. The value of these
shares as of February 3, 2001, was $674,750. Mr. Spainhour's right to these
shares vested, and all restrictions lapsed, on March 8, 2000. Mr. Spainhour
would be entitled to receive dividends on these restricted shares if any
dividends were paid by the Company on its Common Stock.
(f) Ms. DeRosa resigned her position effective January 15, 2001.
(g) Represents the market value, on the date of grant, of 50,000
performance-vesting restricted shares of Common Stock granted to Ms. DeRosa
on February 16, 2000. The value of these shares as of February 3, 2001,
would have been $1,349,500. Ms. DeRosa's right to these shares lapsed and
the shares were canceled upon Ms. DeRosa's resignation. Ms. DeRosa owns no
restricted shares.
(h) Represents amounts attributable to the 1998-2000 cycle under the Company's
Long Term Cash Plan which were payable pursuant to Ms. DeRosa's separation
agreement (described below under "Executive Compensation--Employment and
Change in Control Agreements").
(i) Mr. Erdos joined the Company as Executive Vice President--Chief Financial
Officer and Treasurer effective March 29, 1999.
(j) Represents the market value, on the date of the grant, of 20,000
performance-vesting restricted shares of Common Stock granted to Mr. Erdos
on March 29, 1999 in connection with his commencement of employment. The
value of these shares as of February 3, 2001, was $539,800. Mr. Erdos' right
to 6,666 of these shares vested on March 29, 2000, the one-year anniversary
of the date of his employment. Mr. Erdos' right to 6,667 of these shares
lapsed on March 29, 2001, and these shares were canceled, as the performance
target for fiscal 2000 was not achieved. Mr. Erdos' right to the remaining
6,667 shares vests on March 29, 2002, contingent on the Company achieving
the performance target established by the Board of Directors for fiscal year
2001, and subject to Mr. Erdos' continued employment by the Company. Mr.
Erdos owns a total of 6,667 restricted shares. In accordance with the terms
of the Company's Stock Option Plan, all of such restricted shares will vest
upon the occurrence of an "Acceleration Event". Mr. Erdos would be entitled
to receive dividends on outstanding restricted shares if any dividends were
paid by the Company on its Common Stock.
(k) Represents the market value, on the date of grant, of 3,000 time-vesting
restricted shares of Common Stock granted to Mr. Smith on March 10, 2000.
The value of these shares as of February 3, 2001 was $80,970. Mr. Smith's
right to 1,500 of these shares vests on March 10, 2003 and his right to the
remaining 1,500 of the shares vests on March 10, 2004. However, in
accordance with the terms of the Company's Stock Option Plan, all of such
restricted shares will vest upon the occurrence of an "Acceleration Event".
Mr. Smith would be entitled to receive dividends on these restricted shares
if any dividends were paid by the Company on its Common Stock. Mr. Smith has
no other restricted shares.
The following table sets forth certain information with respect to stock
options awarded during fiscal year 2000 to the named executives listed in Table
I above. These option grants are also reflected in Table I. In accordance with
Commission rules, the hypothetical realizable values for each option grant are
shown based on compound annual rates of stock price appreciation of 5% and 10%
from the grant date to the expiration date. The assumed rates of appreciation
are prescribed by the Commission and are for illustrative purposes only; they
are not intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects.
15
TABLE II
STOCK OPTIONS GRANTED IN FISCAL YEAR 2000
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
% OF TOTAL # APPRECIATION
# OF SECURITIES OF OPTIONS FOR OPTION TERM (b)
UNDERLYING GRANTED TO EXERCISE ----------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (a) FISCAL 2000 ($/SHARE) DATE 5%($) 10%($)
- ---- ----------- ----------- --------- ----- ----------- -----------
J. Patrick Spainhour ..... 100,000(c) 11.7% 22.2500 01/31/10 3,624,300 5,771,100
Patricia DeRosa .......... 100,000(d) 11.7% 16.8750 02/16/10 2,748,800 4,376,900
40,000(e) 4.7% 23.9375 04/15/03 1,559,680 2,483,520
Barry Erdos .............. 18,000 2.1% 23.9375 03/10/10 701,856 1,117,584
Jocelyn F.L. Barandiaran . 15,000 1.8% 23.9375 03/10/10 584,880 931,320
James M. Smith ........... 5,000 0.6% 23.9375 03/10/10 194,960 310,440
- ----------
(a) Except as provided below in footnotes (c) and (d), options vest 25% per year
on each of the first through fourth anniversaries of the date of grant,
subject to earlier vesting upon the occurrence of an "Acceleration Event"
(as described in the Stock Option Plan).
(b) 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.
(c) These options will become exercisable on March 8, 2002, provided the Company
shall have achieved certain earnings goals and Mr. Spainhour remains
continuously employed by the Company through that date.
(d) These options would have become exercisable over a three year period ending
on February 28, 2003, had the Company achieved certain net earning goals and
had Ms. DeRosa remained continuously employed by the Company through that
date. They were cancelled upon Ms. DeRosa's resignation.
(e) Thirty thousand of these options expire on April 15, 2003, in accordance
with Ms. DeRosa's separation agreement. The remaining 10,000 were canceled
upon her resignation.
The following table shows the number of shares of Common Stock acquired by
each named executive officer upon the exercise of Company stock options during
fiscal year 2000, and the aggregate dollar value realized by such executives
upon such exercise, based upon the fair market value of the Common Stock on the
date of exercise, as well as the number of all vested (exercisable) and unvested
(not yet exercisable) stock options held by each named executive officer at the
end of fiscal year 2000, 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 2000.
TABLE III
AGGREGATE OPTION EXERCISES IN FISCAL 2000
AND FISCAL YEAR END OPTION VALUES
NO. OF SHARES $ VALUE NUMBER OF SHARES UNDERLYING $ VALUE OF UNEXERCISED
ACQUIRED ON REALIZED UPON UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE OF EXERCISE OF AT END OF FISCAL 2000 AT END OF FISCAL 2000
NAME STOCK OPTIONS OPTIONS EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (a)
- ----- ------------ ------- ----------------------- -----------------------------
J. Patrick Spainhour .... -- -- 172,500/497,500 $1,679,025/$588,900
Patricia DeRosa ......... -- -- 97,250/61,250 547,177/149,025
Barry Erdos ............. -- -- 6,250/36,750 --/54,945
Jocelyn F.L. Barandiaran -- -- 6,551/44,684 24,169/94,057
James M. Smith .......... -- -- 4,873/15,544 23,452/35,880
- ----------------
(a) Calculated based on the closing market price of the Common Stock of $26.99
on February 2, 2001, the last trading day in fiscal year 2000, less the
amount required to be paid upon exercise of the option.
16
As described in the Compensation Committee Report above, under the
Company's Long Term Cash Plan, each year the Committee designates a consecutive
three-year period as a "performance cycle", and establishes a three-year
cumulative earnings per share target that must be achieved by the end of the
three-year cycle, in order for incentive compensation to be paid under the plan
at the end of the cycle. The following table indicates the incentive
compensation payments that the named executives would be entitled to receive
under the Long Term Cash Plan, if the Company achieves the performance
objectives established by the Compensation Committee for the three-year
performance cycle, comprising fiscal years 2000 to 2002, indicated below. Target
awards are expressed as a percentage of the named executive officer's annual
base salary in effect at the time of payment of the award. Payments under the
plan may exceed these target amounts, up to twice the targeted amount, if the
Company exceeds the performance objectives, and may be less than the target
amounts if the Company does not achieve the performance objectives.
TABLE IV
LONG TERM CASH INCENTIVE COMPENSATION PLAN
AWARDS IN FISCAL YEAR 2000 (a)
PERFORMANCE
PERCENTAGE OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
OF ANNUAL PERIOD UNTIL NON-STOCK-PRICE-BASED PLANS (b)
SALARY MATURATION OR ---------------------------------------
NAME AWARDED PAYOUT THRESHOLD (c) TARGET MAXIMUM (d)
- ---- ------- ------------- ------------- -------- ------------
J. Patrick Spainhour ......... 50% 02/01/2003 $413,712 $459,680 $919,360
Patricia DeRosa (e) .......... 40% 02/01/2003 292,032 324,480 648,960
Barry Erdos .................. 30% 02/01/2003 131,414 146,016 292,032
Jocelyn Barandiaran .......... 20% 02/01/2003 50,230 55,811 111,621
James M. Smith ............... -- -- -- -- --
- ----------------
(a) Under the terms of the plan, in the event of a change in control of the
Company (as defined in the plan), plan participants are entitled to receive,
within 30 business days following such change in control, a cash payment in
respect of any incomplete three-year performance cycle equal to the amount
such participant would have received for such cycle, prorated through the
end of the month in which the change in control occurs, and based upon the
cumulative earnings per share of the Company ("EPS") for such performance
cycle computed as follows: (1) actual EPS for any completed year in such
performance cycle, (2) EPS derived from the Board-approved operating budget,
for the year in which the change in control occurs, and (3) projected EPS as
presented to the Compensation Committee at the time the three-year
performance cycle was established, for any years in such performance cycle
following the year in which the change in control occurs.
(b) The dollar value of the estimated payout is based on an estimated annual
salary at maturation of award.
(c) The minimum amount payable under the plan is 90% of the target award,
provided that 90% of the performance target is achieved. In the event that
90% of the performance target is not achieved, no payout is made under this
plan.
(d) The maximum amount payable under the plan is 200% of the target award,
provided that at least 125% of the performance target is achieved.
(e) Ms. DeRosa is not eligible for any future payments under this plan due to
her resignation.
PENSION PLAN. Since 1989, Ann Taylor has maintained a defined benefit
retirement plan (as amended from time to time, the "Pension Plan") for the
benefit of its employees and those of its wholly owned subsidiaries, which is
intended to qualify under Section 401(a) of the Internal Revenue Code.
Originally, the Pension Plan provided for calculation of benefits based on a
"cash balance" formula. Effective January 1, 1998, the Pension Plan provides for
calculation of benefits based on a "career average" formula instead of a cash
balance formula. Under the "career average" formula, each participant's service
17
and annual earnings are used to determine their annual pension accrual. During
each participant's first ten years with Ann Taylor, their pension will accrue,
for each year of participation in the Pension Plan, at the rate of 1.25% of
their current year's pay up to the Social Security Wage Base ("Wage Base") plus
1.6% of any pay that exceeds the Wage Base, up to the maximum amount permitted
by the Code. Upon completion of more than 10 years of service, the participant's
annual pension accrual increases to 1.6% of the current year's pay, up to the
Wage Base, plus 1.95% of any pay over the Wage Base, up to the maximum amount
permitted by the Code. Pension benefits are fully vested after five years of
service. Under the Code, the annual compensation that may be taken into account
for purposes of calculating benefits under the Pension Plan is limited to
$170,000 (indexed for inflation). For fiscal 2000, all executives named in Table
I have annual compensation which exceeds this figure and the calculation of
benefits for these executives is based on the lower plan limitation amount.
As of December 31, 2000, the estimated monthly retirement benefit, payable
as a single life annuity, that would be payable to each of the executives named
in Table I who were participants in the Pension Plan during fiscal 2000,
assuming (i) no increases in income and (ii) retirement and the commencement of
benefit payments at age 65, is as follows: Mr. Spainhour, $4,148; Mr. Erdos,
$1,821; Ms. Barandiaran, $7,660; and Mr. Smith, $7,561. These benefits would not
be subject to any reduction for social security or other offset amounts. Ms.
DeRosa is not entitled to retirement benefits under the Pension Plan because she
left the Company before her pension vested.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS. SPAINHOUR EMPLOYMENT
AGREEMENT. The Company has an employment agreement with Mr. Spainhour (as
amended, the "Spainhour Agreement"), which expires on May 31, 2002, with
automatic one-year renewal terms unless either party advises the other that it
does not wish to extend the term by delivery of a "Non-renewal Notice" to the
other party.
The Spainhour Agreement provides that Mr. Spainhour is currently entitled
to an annual base salary of $850,000. Mr. Spainhour also is entitled to
participate in the Company's annual bonus, long term incentive compensation and
stock option plans, as well as other Company benefit programs.
The Spainhour Agreement provides for the grant of an aggregate of 75,000
restricted shares of Company Common Stock under the Company's Stock Option Plan,
of which 25,000 shares were awarded in August 1999 and became vested on March 8,
2000. The remaining 50,000 restricted shares, which are performance-vesting,
were awarded in March 2000; 25,000 of such restricted shares would have vested
on March 8, 2001, but were canceled on that date because the Company failed to
achieve the net income goal for fiscal 2000 established under Mr. Spainhour's
contract. The remaining 25,000 of such shares will vest on March 8, 2002,
provided the Company achieves specified net income goals for fiscal 2001. In
accordance with the terms of the Company's Stock Option Plan, all outstanding
unvested of such restricted shares will vest upon the occurrence of an
"Acceleration Event" (as defined in the Stock Option Plan).
Under the Spainhour Agreement, Mr. Spainhour was also granted (i) an option
to purchase 250,000 shares of Common Stock, at an exercise price of $44.25,
which will become exercisable on March 8, 2002, provided Mr. Spainhour remains
continuously employed by the Company through that date, (ii) a "super-incentive"
performance-vesting stock option to purchase 100,000 shares of Common Stock
under the Stock Option Plan at an exercise price of $44.25, which would have
vested 50% on each of March 8, 2000 and 2001, if the Company had achieved
certain earnings goals. As such goals were not met for fiscal 1999 or 2000, none
of these options have vested. The grant also provides for alternative means of
vesting of these options if the Company meets other earnings performance goals
by March 8, 2002; and (iii) effective January 31, 2000, an additional
"super-incentive" non-qualified performance-vesting stock option to purchase
100,000 shares at an exercise price of $22.25, the fair market value of the
stock on the date of the grant. This option vests on March 8, 2002, provided
that the Company shall have achieved certain earnings goals and provided that
Mr. Spainhour remains continuously employed by the Company. Any super-incentive
options that do not vest by March 8, 2002 shall be canceled on that date. In
accordance with the terms of the Stock Option Plan, all outstanding unvested
options will vest and become fully exercisable upon occurrence of an
"Acceleration Event".
18
In the event of termination of Mr. Spainhour's employment by the Company
without Cause, or by Mr. Spainhour for Good Reason (as such terms are defined in
the Spainhour Agreement), or if such agreement expires at the end of the term
provided for as a result of Non-renewal Notice provided by the Company, Mr.
Spainhour shall be entitled to receive, among other things, 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 non-compete and non-solicitation
provisions of the Spainhour Agreement. If such termination occurs following a
Change in Control of the Company or during the pendency of a Potential Change in
Control (as such terms are defined in the Spainhour Agreement), the Company
shall instead pay Mr. Spainhour a lump-sum cash payment, in an amount equal to
the sum of Mr. Spainhour's base salary plus the average of his last three annual
bonuses, multiplied by three. Following a termination by the Company without
Cause or by Mr. Spainhour for Good Reason, all options that are exercisable as
of the date of termination remain exercisable until the 90th day following the
end of the period with respect to which severance is paid. 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.
DeROSA EMPLOYMENT AND SEPARATION AGREEMENTS. During fiscal 2000, the
Company had an employment agreement with Ms. Patricia DeRosa (the "DeRosa
Employment Agreement") which provided for her employment as President and Chief
Operating Officer of the Company until February 28, 2003.
Under the terms of the DeRosa Employment Agreement, effective April 1,
2000, Ms. DeRosa was entitled to an annual base salary of not less than $750,000
and was entitled to participate in the Company's annual bonus, long term
incentive compensation and stock option plans, as well as other Company benefit
programs.
Under the DeRosa Employment Agreement, Ms. DeRosa was granted a
"super-incentive" performance-vesting stock option to acquire 100,000 shares of
Common Stock under the Company's Stock Option Plan, at an exercise price equal
to the fair market value of the Common Stock on February 16, 2000. The options
were scheduled to vest with respect to one-third of the shares subject thereto
on each of the first, second and third anniversaries of February 28, 2000,
provided that the Company met certain earnings per share requirements for fiscal
years 2000, 2001 and 2002, respectively. The DeRosa Employment Agreement also
provided for alternative means of vesting if the Company met other performance
requirements by February 28, 2003. Any super-incentive options that did not vest
by February 28, 2003 were to be canceled on that date. In accordance with the
terms of the Company's Stock Option Plan, all options granted to Ms. DeRosa
would have vested and become fully exercisable upon occurrence of an
"Acceleration Event". These options were canceled upon Ms. DeRosa's resignation.
In addition, in February 2000, the Company further awarded Ms. DeRosa
50,000 performance-vesting restricted shares of Common Stock under the Company's
Stock Option Plan. Ms. DeRosa's right to such shares were scheduled to vest with
respect to one-third of the grant on each of the first, second and third
anniversaries of February 28, 2000, provided that the Company met certain net
income requirements for fiscal years 2000, 2001 and 2002, respectively. In
accordance with the terms of the Company's Stock Option Plan, the restricted
shares would have vested in full upon the occurrence of an "Acceleration Event".
Ms. DeRosa would be entitled to receive dividends on these restricted shares if
any dividends were paid by the Company on its Common Stock. These shares were
canceled upon Ms. DeRosa's resignation.
In connection with Ms. DeRosa's resignation from her positions, effective
January 15, 2001, the Company and Ms. DeRosa entered into a separation agreement
(the "DeRosa Separation Agreement" and, collectively with the DeRosa Employment
Agreement, the "DeRosa Agreements").
In accordance with the DeRosa Agreements, Ms. DeRosa will receive an amount
representing her base salary of $750,000, payable in monthly installments, for
two years following her resignation, and she has received $600,000 under the
Company's Long Term Cash Incentive Compensation Plan for the
19
1998-2000 Performance Cycle. Both of these payments are subject to Ms. DeRosa's
compliance with the non-compete and non-solicitation provisions of the DeRosa
Agreements.
Additionally, an aggregate of 158,500 stock options held by Ms. DeRosa at
the time of her resignation will remain outstanding until April 15, 2003 (and if
not already exercisable, will become exercisable during that period), provided
Ms. DeRosa complies with the non-compete and non-solicitation provisions of the
DeRosa Agreements.
ERDOS EMPLOYMENT AGREEMENT. Effective March 7, 2001, the Company and Mr.
Barry Erdos entered into an employment agreement in connection with his
promotion to Senior Executive Vice President and Chief Operating Officer (the
"Erdos Agreement"). The Erdos Agreement, which has a term of three years,
provides that Mr. Erdos is entitled to an annual base salary of not less than
$525,000. Mr. Erdos is also entitled to participate in the Company's annual
bonus, long term incentive compensation and stock option plans, as well as other
Company benefit programs. The Erdos Agreement expires on March 7, 2004, with
automatic one-year renewal terms unless either party advises the other that it
does not wish to extend the term by delivery of a "Non-renewal Notice" to the
other party.
The Erdos Agreement provides for the grant of 25,000 restricted shares of
Company Common Stock under the Company's Stock Option Plan. Such shares vest
twenty five percent per year on the anniversary of the date of grant. In
accordance with the terms of the Company's Stock Option Plan, all outstanding
unvested restricted shares will vest upon the occurrence of an "Acceleration
Event" (as defined in the Stock Option Plan).
Under the Erdos Agreement, Mr. Erdos was also granted an option to purchase
75,000 shares of Common Stock, at an exercise price of $25.10, which will become
exercisable at the rate of twenty five percent per year on the anniversary of
the date of grant, provided Mr. Erdos remains continuously employed by the
Company through that date. In accordance with the terms of the Stock Option
Plan, all outstanding unvested options will vest and become fully exercisable
upon occurrence of an "Acceleration Event".
In the event of termination of Mr. Erdos' employment by the Company without
Cause, or by Mr. Erdos for Good Reason (as such terms are defined in the Erdos
Agreement), or if such agreement expires at the end of the term provided for as
a result of Non-renewal Notice provided by the Company, Mr. Erdos shall be
entitled to receive, among other things, for the longer of one year or the
remaining term of the Erdos Agreement, an amount representing his salary,
subject to Mr. Erdos' compliance with the non-compete and non-solicitation
provisions of the Erdos Agreement. If such termination occurs following a Change
in Control of the Company or during the pendency of a Potential Change in
Control (as such terms are defined in the Erdos Agreement), the Company shall
instead pay Mr. Erdos a lump-sum cash payment, in an amount equal to the sum of
Mr. Erdos' base salary plus the average of his last three annual bonuses,
multiplied by two and one half. Following a termination by the Company without
Cause or by Mr. Erdos for Good Reason, all options that are exercisable as of
the date of termination remain exercisable until the 90th day following the end
of the period with respect to which severance is paid. If any payments or
benefits received by Mr. Erdos would be subject to the "golden parachute" excise
tax under the Code, the Company has agreed to pay Mr. Erdos 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.
CHANGE IN CONTROL AGREEMENTS. Mr. Smith and Ms. Barandiaran, as well as
certain other officers and key employees of the Company and its subsidiaries,
are eligible to receive benefits under the Company's severance plan in the event
of a qualifying termination of their employment within two years following a
"change in control" of the Company (as defined in the severance plan). In
connection with the execution of his employment agreement (described above), Mr.
Erdos' participation in the severance plan ceased.
20
A qualifying termination of employment under the severance plan means (1) a
termination by the Company other than for "Cause" or (2) a termination by the
employee for "Good Reason" (as each such term is defined in the severance plan).
In the event of a qualifying termination of employment, the Company will
pay the executive a cash lump-sum payment equal to the sum of his or her base
salary in effect immediately prior to such qualifying termination, plus the
average of the annual bonuses earned in the three years immediately preceding
the year in which the change in control occurs (or, if higher, the year in which
the qualifying termination occurs), multiplied by 2. Following a qualifying
termination of employment, the Company will also provide welfare and fringe
benefits for 2 years for Ms. Barandiaran and Mr. Smith as if they had continued
to be employed by the Company.
If any payments or benefits made under the severance plan to Ms.
Barandiaran or Mr. Smith would be subject to any "golden parachute" excise tax
imposed pursuant to the Code, the Company is required to pay such additional
amounts as may be necessary to place the executives in the same after-tax
position as if the benefits or payments had not been subject to the excise tax.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
From time to time, stockholders of the Company submit proposals that they
believe should be voted on by the stockholders. The Commission has adopted
regulations that govern the inclusion of such proposals in the Company's annual
proxy materials.
In accordance with Rule 14a-8 under the Securities Exchange Act, any
stockholder proposals intended to be presented at the 2002 Annual Meeting of
Stockholders must be received by the Company no later than December 4, 2001 in
order to be considered for inclusion in the Company's Proxy Statement and form
of proxy relating to that meeting.
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 other than matters set forth in the Notice of Meeting, 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 2002 Annual Meeting of Stockholders, notice must
be received by the Company not less than sixty days nor more than ninety days
prior to May 3, 2002, which is the anniversary date of the prior year's meeting
(or if the meeting date for the 2002 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 is 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.
Stockholders may recommend, and the Company will consider, candidates for
nomination to the Board of Directors. To be considered, such recommendations
should be submitted in writing to the Secretary of the Company and should
include a description of the proposed nominee's qualifications, other relevant
biographical data, and the written consent of the proposed nominee to serve, if
elected. In addition, 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 2002 Annual Meeting
of Stockholders, notice must be received by the Company not less than sixty days
nor more than ninety days prior to May 3, 2002, which will be the anniversary
date
21
of the prior year's meeting (or if the meeting date for the 2002 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 is 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.
ADDITIONAL INFORMATION
Copies of the Company's 2000 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders of the Company
with this Proxy Statement. Additional copies of the Annual Report are available
without charge upon request. Requests should be addressed to the Secretary,
AnnTaylor Stores Corporation, 1372 Broadway, New York, New York 10018.
ANNTAYLOR STORES CORPORATION
NEW YORK, NEW YORK
April 5, 2001
22
Exhibit A
ANNTAYLOR STORES CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities with respect to the Company's audit,
accounting and financial reporting processes in order to support the integrity
of the Company's financial statements and reports and other accounting
functions.
SCOPE
The Audit Committee's responsibility is oversight and monitoring of the
Company's audit, accounting and financial reporting functions and practices, by
monitoring, on behalf of the Board, the Company's accounting and financial
reporting practices and the Company's system of internal controls; reviewing the
financial information and related disclosures that will be provided to
shareowners; and communicating regularly with management and the Company's
independent outside accountants regarding such matters. The Board of Directors
recognizes, however, that in carrying out its oversight responsibilities, the
Audit Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the work
of the independent outside accountants engaged by the Company. The Board of
Directors further recognizes that the Company's management is responsible for
preparing the Company's financial statements and that the independent outside
accountants are responsible for auditing those financial statements.
The Board of Directors is responsible for the appointment (and, when deemed
by the Board to be necessary or appropriate, removal and replacement) of the
Company's independent outside accountants. The independent accountants are
ultimately accountable to the Board of Directors and the Audit Committee.
The Committee shall also have such other responsibilities or duties as may
be assigned to it from time to time by the Board of Directors.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee shall:
o Recommend to the Board of Directors the independent outside accountants to
be engaged by the Company, approve the compensation of the independent
accountants, and review independent accountants' performance, annually.
o Oversee the independence of the Company's outside accountants by reviewing
the relationships between the outside accountants and the Company, or any
other relationships that may adversely affect the independence of the
outside accountants. In connection with this review, the Committee shall
ensure that it receives from the outside accountants, at least annually, a
written statement delineating all relationships between the accountants and
the Company; shall review with the outside accountants any disclosed
relationships or services that may affect the accountants' objectivity or
independence; and shall recommend to the Board of Directors that it take
appropriate action in response to the outside accountants' report to
satisfy itself of the outside accountants' independence.
o Review and make a recommendation to the Board of Directors regarding any
proposed dismissal or change of the Company's independent accountants.
o Review and approve any appointment, reassignment or dismissal of the
Company's director of internal audit recommended by the Company's CFO.
A-1
o Consider, at least annually, in consultation with the independent
accountants, the director of internal audit and the CFO, the audit scope
and plan of both the independent outside accountants and the internal
auditor.
o Consider and review with the independent outside accountants, the internal
auditor and the CFO the adequacy of the Company's internal controls, and
any related significant findings and recommendations of the independent
accountants or internal auditor.
o Inquire of management, the director of internal audit, and the independent
accountants about significant risks or exposures and assess the steps
management is taking to minimize such risk to the Company.
o Understand major accounting policies applied by the Company in its
financial reporting, and review with the independent accountants and
management any significant developments in accounting rules, and any
significant proposed changes in the accounting policies applied by the
Company.
o Upon completion of the independent accountants' annual examination of the
Company's fiscal year end financial statements, review with management and
the independent accountants:
o the Company's annual financial statements, including footnotes;
o the independent accountants' audit of the financial statements and
report on the financial statements;
o any significant changes that were made to the independent accountants'
audit plan during the course of their audit, or proposed for the future;
o any difficulties or disputes with management encountered by the
independent accountants during the course of their audit; and
o any other matters required to be communicated to the Audit Committee by
the independent accountants under generally accepted auditing standards;
and, if such financial statements are found to be acceptable, to
recommend to the Board of Directors that such financial statements be
included in the Company's Annual Report on Form 10-K.
o Before their publication, review with the Company's independent accountants
and management the Company's quarterly and annual filings to be made with
the Securities and Exchange Commission, and any other published documents
containing Company financial information, and consider whether the same are
consistent with the information contained in the Company's financial
statements.
o Meet with the director of internal audit, the independent accountants, and
management in separate executive sessions on a regular basis, to discuss
any matters that the Committee believes should be discussed privately, and
to provide such parties with the opportunity to raise any matters that such
parties may believe should be discussed privately.
o Review annually of the type and format of financial information presented
to the Board by management, and propose enhancements.
o Review the Audit Committee Charter annually and propose to the Board of
Directors revisions, as necessary.
The Board of Directors acknowledges that the Audit Committee's function is
one of oversight and review. The Committee is not expected to conduct an audit
of the Company, to define the scope of the independent accountants' audit, to
control the Company's accounting practices, or to define the standards to be
used in preparation of the Company's financial statements.
AUTHORITY
The Audit Committee and each of its members is authorized by the Board of
Directors to communicate directly and/or privately with members of the Company's
management, employees, internal audit staff members and independent outside
accountants, and counsel, to the extent the Committee deems nec-
A-2
essary or appropriate to fulfill its duties. The Committee is authorized to
conduct or authorize investigations into any matters within the Committee's
scope of responsibilities. The Committee is authorized to engage, at the
Company's expense, such legal counsel, investigatory services and other expert
advice as the Committee may from time to time deem necessary or desirable in
connection with the performance of its duties.
COMPOSITION
The Board of Directors shall appoint from among its members at least three
directors who shall constitute the Audit Committee, and shall appoint one such
member of the Committee to serve as the Committee's Chair.
Each member of the Audit Committee (i) shall be a member of the Board of
Directors; (ii) shall be free of any relationship with the Company which, in the
opinion of the Board of Directors, may interfere with the exercise of their
independence from management and the Company; (iii) shall be, in the opinion of
the Board of Directors, financially literate or shall become financially
literate within a reasonable period of time after appointment to the Committee;
and (iv) shall meet the requirements of independence as set forth in Section
303.01(B)(3) of the New York Stock Exchange Listed Company Manual, as amended
from time to time. No member of the Committee shall be employed by or affiliated
with the Company's independent accountants.
COMMITTEE MEETINGS AND ACTIONS
The Audit Committee shall meet as often as it deems necessary to fulfill
its functions, but in any event not less than four times annually. Meetings
shall be scheduled at the discretion of the Chairman of the Committee. At all
meetings of the Audit Committee, a majority of the entire Committee shall
constitute a quorum for the transaction of business, and the act of a majority
of the Committee members present at any meeting at which there is a quorum shall
constitute the act of the Committee. The Committee may also take action without
a meeting, if all the members of the Committee consent to such action in
writing. The minutes of all meetings of the Committee, and any action taken by
the Committee by unanimous written consent, shall be filed with the minutes of
the proceedings of the Board of Directors.
REPORTING
The Committee shall report to the Board of Directors from time to time with
respect to its activities and its recommendations.
A-3
ANNTAYLOR STORES CORPORATION
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ANNTAYLOR STORES
CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 3, 2001.
The undersigned hereby appoints J. Patrick Spainhour, Barry Erdos and James
Smith, and any 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 Peninsula
Hotel, 700 Fifth Avenue, New York, New York, on May 3, 2001 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 other side of this card.
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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 PROPOSAL IN (B),
AND IN ACCORDANCE WITH THE JUDGMENT OF SUCH PROXIES UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN (A).
(A) ELECTION OF THE FOLLOWING NOMINEES AS CLASS I DIRECTORS:
(01) Robert C. Grayson, (02) Rochelle B. Lazarus, and
(03) J. Patrick Spainhour
(for terms to expire at the 2004 annual meeting).
[ ] FOR ALL NOMINEES
[ ] AUTHORITY WITHHELD FOR ALL NOMINEES
AUTHORITY WITHHELD FOR THE FOLLOWING NOMINEES ONLY: (write the name of such
nominees in the space provided)
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL IN (B).
(B) PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors for the Company for fiscal year 2001.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(C) IN THEIR JUDGMENT, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THIS
ANNUAL MEETING.
(Continued and to be signed on other side)
- --------------------------------------------------------------------------------
Dated --------------------------------------, 2001
- ---------------------------------------------------------------
- --------------------------------------------------------------- (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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By checking the box to the right, I consent to future access of the Company's
Annual Report, Proxy Statement, prospectuses and other communications
electronically via the Internet. I understand that the Company may no longer
distribute printed materials to me for any shareholder meeting until such
consent is revoked. I understand that I may revoke this consent at any time by
contacting the Company's Common Stock Registrar and Transfer Agent, Mellon
Investor Services LLC, Post Office Box 3316, South Hackensack, NJ 07076-3316. I
further understand that the costs normally associated with electronic access,
such as usage and telephone charges, will be my responsibility.
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