SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Filed by a Party other than the Registrant [ ]
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[ ] 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 sec. 240.14a-12
ANNTAYLOR STORES CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
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(ANNTAYLOR LOGO)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2002
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AnnTaylor
Stores Corporation (the "Company") will be held at 9:00 a.m. on Thursday, May 2,
2002, at The Peninsula Hotel, 700 Fifth Avenue, New York, New York 10019, for
the following purposes:
1. To elect three Class II Directors of the Company, each to serve for a
term of three years;
2. To approve the proposed amendment to the Company's Associate Discount
Stock Purchase Plan to increase the total number of shares of common
stock of the Company available under this plan by an additional 400,000
shares;
3. To re-approve the material terms of the performance goals in the
Company's Management Performance Compensation Plan approved by the
Company's stockholders in 1992, 1994 and 1997;
4. To ratify the appointment by the Company of Deloitte & Touche LLP as
the Company's independent auditors for fiscal year 2002; and
5. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Only stockholders of record at the close of business on Monday, March 18,
2002 are entitled to notice of and to vote at the Annual Meeting and at any and
all adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ Barbara K. Eisenberg
Barbara K. Eisenberg
Secretary
New York, New York
April 4, 2002
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. VOTING BY PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING AND
VOTING IN PERSON IF YOU SO DESIRE.
[ANNTAYLOR LOGO]
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2002
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 (the
"Board") for use at the Annual Meeting of Stockholders of the Company, to be
held at 9:00 a.m. on Thursday, May 2, 2002, at The Peninsula Hotel, 700 Fifth
Avenue, New York, New York, 10019 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 the: (1) election of three Class II
Directors, each to serve for a term of three years; (2) proposed amendment to
the Company's Associate Discount Stock Purchase Plan to increase the number of
shares of common stock of the Company available under such plan by an additional
400,000 shares; (3) re-approval of the material terms of the performance goals
in the Company's Management Performance Compensation Plan; and (4) ratification
of the appointment of the Company's independent auditors for fiscal year 2002.
The mailing of this Proxy Statement and the accompanying form of proxy to
the stockholders of the Company is expected to commence on or about April 4,
2002.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.0068 per
share (the "Common Stock"), at the close of business on March 18, 2002 (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 29,500,580 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 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 II 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. With respect to Proposals
2, 3, and 4, the affirmative vote of the holders of a majority of the shares of
the Company's Common Stock represented in person or by proxy and entitled to
vote at the Annual Meeting is required for approval.
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 Proposals 2, 3, and 4,
as the case may be.
Shares of Common Stock that are represented by properly executed proxies
and received in time for voting at the Annual Meeting (and 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 for the election of the Board of Directors' nominees for Class
II Directors and in favor of Proposals 2, 3, and 4.
No business other than as set forth in the accompanying Notice of Annual
Meeting of Stockholders 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. Stockholders who execute the enclosed proxy may still attend
the Annual Meeting and vote in person.
Any proxy may be revoked at any time before it is exercised by providing
written notice of revocation to the Secretary of the Company, 1372 Broadway,
12th Floor, New York, New York 10018, by executing a proxy bearing a later date,
or by voting in person at the Annual Meeting. Attendance at the Annual Meeting
will not, however, in and of itself constitute a revocation of a proxy or an
earlier vote.
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 Company has retained Morrow & Co.,
Inc. ("Morrow"), a professional soliciting organization, to assist in soliciting
proxies from brokerage firms, custodians, and other fiduciaries. The Company
expects the fees for Morrow to be approximately $7,500 plus expenses. The cost
of this solicitation will be borne by the Company.
The principal executive offices of the Company are located at 142 West 57th
Street, New York, New York 10019.
PROPOSAL 1
ELECTION OF CLASS II DIRECTORS
The Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III, each 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 II Directors are to be elected to serve
three-year terms ending at the Annual Meeting of Stockholders to be held in
2005, or until their respective successors are elected and qualified. The Board
of Directors has nominated for re-election James J. Burke, Jr., Barry Erdos and
Ronald W. Hovsepian as Class II 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 FOR CLASS II DIRECTORS.
Set forth below is a brief biography of each nominee for election as a
Class II Director and of all other members of the Board of Directors who will
continue in office.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
TERM EXPIRING 2005
JAMES J. BURKE, JR., AGE 50. Mr. Burke has been a Director of the Company
since 1989 and a Director of the Company's wholly-owned operating subsidiary,
AnnTaylor, Inc. ("Ann Taylor") from 1989 to 2001. He has been a partner and
director of Stonington Partners, Inc. ("Stonington Partners"), a private
investment firm, since 1993. Mr. Burke also served as a consultant to Merrill
Lynch Capital Partners, Inc., a private investment firm associated with Merrill
Lynch & Co., Inc., from 1994 through 2000. Mr. Burke was formerly a director of
Pathmark Stores, Inc., and its parent, SMG Holdings Corporation, which was
re-organized under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Code") in 2000 and was also formerly Chairman
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of Eerie World Entertainment, L.L.C., a restaurant company which was reorganized
under Chapter 11 of the Bankruptcy Code in 2001. Mr. Burke is also a director of
Education Management Corp., as well as several privately held companies.
BARRY ERDOS, AGE 57. Mr. Erdos has been a Director of the Company and Ann
Taylor since November 2001. He has been Senior Executive Vice President and
Chief Operating Officer of the Company and Ann Taylor since 2001. He was
Executive Vice President--Chief Financial Officer and Treasurer of the Company
and Ann Taylor from 1999 to 2001. Prior to joining the Company, he was Chief
Operating Officer of J. Crew Group, Inc., a specialty retailer of apparel, shoes
and accessories, from 1998 to 1999. From 1987 to 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.
RONALD W. HOVSEPIAN, AGE 41. Mr. Hovsepian has been a Director of the
Company since 1998 and a Director of Ann Taylor from 1998 to 2001. He is an
executive officer and Managing Director of Internet Capital Group ("ICG"), a
vehicle for participating in the value potential of business-to-business
e-commerce. He was Vice President of business development at International
Business Machines Corporation ("IBM") from 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 58. Mr. Armstrong has been a Director of the
Company since 1989 and a Director of Ann Taylor from 1989 to 2001. He has been a
Managing Director of Arena Capital Partners, LLC, a private investment firm,
since 1998. Mr. Armstrong was a partner and Director of Stonington Partners from
1993 to 1997. From 1994 to 2000, Mr. Armstrong also served as a consultant to
Merrill Lynch Capital Partners, Inc.
WESLEY E. CANTRELL, AGE 67. Mr. Cantrell has been a Director of the
Company since 1998 and a Director of Ann Taylor from 1998 to 2001. He was Chief
Executive Officer of Lanier WorldWide, Inc. ("Lanier"), a supplier of automated
office imaging equipment and systems, from 1987 to 2001, and Chairman of the
Board of Directors of Lanier from 1999 to 2001. He is also a director of
Environmental Design International, Ltd., a private company, and 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 60. Ms. Merriman has been a Director of the Company
since 1993 and a Director of Ann Taylor from 1993 to 2001. She has been the
principal in Hanne Merriman Associates, retail business consultants, since 1992.
Ms. Merriman is also a director of USAirways Group, Inc., The Rouse Company,
State Farm Mutual Automobile Insurance Company, Ameren Corp., T. Rowe Price
Mutual Funds and Finlay Enterprises, Inc. She is a member of the National
Women's Forum.
INCUMBENT CLASS I DIRECTORS
TERM EXPIRING 2004
ROBERT C. GRAYSON, AGE 57. Mr. Grayson has been a Director of the Company
since 1992 and a Director of Ann Taylor from 1992 to 2001. He has been President
of Robert C. Grayson & Associates, Inc., a retail marketing consulting firm,
since 1992. He has also served as Chairman of Berglass-Grayson, a management
consulting firm, since 1995. Mr. Grayson is also a director of Kenneth Cole
Productions, Inc. and Frisby Technologies Inc.
ROCHELLE B. LAZARUS, AGE 54. Ms. Lazarus has been a Director of the
Company since 1992 and a Director of Ann Taylor from 1992 to 2001. She has been
Chief Executive Officer of Ogilvy & Mather Worldwide, an advertising agency,
since 1996, and also Chairman of Ogilvy & Mather Worldwide since 1997. She is
also a Director of General Electric Company and TIAA-CREF.
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J. PATRICK SPAINHOUR, AGE 52. Mr. Spainhour has been Chairman, Chief
Executive Officer and a Director of the Company and Ann Taylor since 1996.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Company's Board of Directors held six meetings in fiscal year 2001.
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 67% 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 five meetings in fiscal year 2001. The members of the Audit Committee are
Messrs. Armstrong (Chairman), Burke, 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 three meetings in fiscal year 2001. The
members of the Compensation Committee are Messrs. Armstrong, Cantrell, 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 Board 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. See "Stockholder Proposals for the 2003 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 year 2001. The members of the
Governance Committee are Messrs. Burke, Cantrell, Grayson and Ms. Merriman
(Chairperson).
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. 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 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 awarded
immediately after the Annual Meeting of Stockholders. 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 non-employee Directors in fiscal year 2001 were
made under the AnnTaylor Stores Corporation 1992 Stock Option and Restricted
Stock and Unit Award Plan (as restated and amended, the "1992 Plan"). These
stock options have an exercise price equal to the Fair Market Value (as defined
under the 1992 Plan) of a share of Common Stock on the date of grant, have a
term of ten years and become exercisable and vest on the first anniversary of
the date of grant. The stock options of a Director who later ceases to be a
Director, to the extent exercisable at the time of termination, shall remain
exercisable for one year following such termination for any reason other than
removal for cause, but in no event later than the ten year term of the stock
options.
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PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
ASSOCIATE DISCOUNT STOCK PURCHASE PLAN
PLAN OVERVIEW
In 1999, the Company adopted the Associate Discount Stock Purchase Plan
(the "ADSPP") to provide employees of the Company and participating subsidiaries
with an opportunity to purchase shares of Common Stock of the Company through
payroll deductions. The ADSPP is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
PROPOSED AMENDMENT TO THE ADSPP
As of March 1, 2002, there were 43,784 shares of Common Stock available for
issuance under the ADSPP. The Board believes that this number will not be
sufficient to meet the Company's anticipated needs. Therefore, with the intent
to provide the Company with a sufficient number of shares for the ADSPP, the
Board adopted an amendment to the ADSPP, subject to stockholder approval, to
increase the number of shares of Common Stock available for issuance under the
ADSPP by an additional 400,000 shares. The Company believes that its ability to
provide its employees with an opportunity to purchase stock through the ADSPP
has been and continues to be an important factor in recruiting, retaining and
motivating employees, all of which are essential to the Company's long-term
growth and success.
In 1999, the stockholders of the Company authorized the issuance of 250,000
shares of Common Stock under the ADSPP. If this proposal is approved by the
stockholders of the Company, the maximum aggregate number of shares of Common
Stock that could be issued under the ADSPP will be increased by 400,000 shares.
The Committee may make certain adjustments, as it deems appropriate, to the
number, kind and purchase price of the shares available for purchase under the
ADSPP (and in the maximum number of shares subject to any option under the
ADSPP) in the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of the Company.
DESCRIPTION OF THE ADSPP
The following description of the ADSPP is not intended to be complete and
is qualified in its entirety by the specific language of the ADSPP, a copy of
which is attached as Exhibit A to this Proxy Statement. Defined terms that are
otherwise not defined herein shall have the meanings set forth in the ADSPP.
ELIGIBILITY
All employees of the Company and of any Subsidiary that the Board
designates as a participating Subsidiary under the ADSPP (other than "seasonal"
employees and employees who are citizens of a foreign country the laws of which
prohibit the granting of options to its citizens), are eligible to participate
in the ADSPP as of the first enrollment date following their employment.
OFFERING PERIODS
There are two six-month Offering Periods under the ADSPP each year,
commencing each February 1 and August 1. The first Offering Period commenced on
August 1, 1999, and under the ADSPP, the last Offering Period will commence
February 1, 2009. Participants in the ADSPP may elect to make contributions of
up to a maximum of 15% of their compensation. As soon as practicable following
the end of each Offering Period, the Company applies the funds then in each
Participant's Account to the purchase of shares of Common Stock. The price paid
for each share purchased is intended to be 85% of the lower of the closing price
for the Common Stock on the New York Stock Exchange on the Trading Day
immediately preceding (i) the first day of the Offering Period for which the
purchase is made and (ii) the last day of the Offering Period for which the
purchase is made. There is no limit on the number of shares that may be
purchased under
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the ADSPP; however, no Participant's right to acquire shares may accrue at a
rate exceeding $25,000 of Fair Market Value of Common Stock (determined as of
the first business day in an Offering Period) in any calendar year, nor may a
Participant acquire shares under the ADSPP if, after such purchase, such
Participant would own shares, or options to purchase shares, representing 5% or
more of the total combined voting power or value of all classes of stock of the
Company or any of its Subsidiaries.
ADSPP ADMINISTRATION
A Committee appointed by the Board administers the ADSPP. The Committee has
the authority to delegate any or all of its authority under the ADSPP to Company
management. The Board of Directors may amend or terminate the ADSPP at any time.
The Board may also provide for an adjustment in the purchase price and the
number and kind of securities available under the ADSPP in the event of
reorganization, recapitalization, stock split or other similar events.
Amendments that would increase the number of shares of Common Stock reserved for
purchase, materially increase benefits to Participants, or materially modify the
requirements for participation under the ADSPP, also require stockholder
approval. Shares available under the ADSPP may be either outstanding treasury
shares held by the Company or newly issued shares.
FEDERAL INCOME TAX CONSEQUENCE
The following is a brief summary of certain of the U.S. federal income tax
consequences of certain transactions under the ADSPP, based on federal income
tax laws currently in effect. This summary is not intended to provide, or to
supplement, tax advice to eligible employees.
TAX CONSEQUENCES ASSOCIATED WITH PAYROLL DEDUCTIONS
The compensation paid to a Participant from whom payroll deductions are
taken for purposes of purchasing Common Stock under the ADSPP is taxable to the
Participant as ordinary income in the year paid and deductible in such year by
the Company.
TAX CONSEQUENCES TO PARTICIPANTS WITH RESPECT TO THE PURCHASE AND DISPOSITION
OF SHARES
In general, Participants who are citizens of the United States will not
have taxable income or loss under the ADSPP until they sell or otherwise dispose
of shares acquired under the ADSPP (or die while holding such shares in their
accounts). If the shares are held, as of the date of sale or disposition, for
longer than both (i) two years after the beginning of the enrollment period for
which they were purchased, and (ii) one year following purchase, the sale is
considered a "qualifying disposition". For qualifying dispositions, the
Participant will be treated as having taxable ordinary income equal to the
lesser of (i) the excess of the fair market value of the shares at the time of
disposition over the amount paid for the shares under the Plan or (ii) 15% of
the fair market value of the shares on the first day of the enrollment period.
Any amount realized in excess of such ordinary income will be taxed as long-term
capital gain. If the shares are sold at less than the purchase price, the
Participant will have a capital loss equal to the difference between the sale
price and the purchase price.
If a disposition does not meet the foregoing criteria, it is a
disqualifying disposition, and the Participant will have taxable ordinary income
equal to the excess of the fair market value of the shares on the purchase date
over the purchase price. In addition, the Participant will have taxable capital
gain (or loss) equal to the difference between the sale price and the purchase
price plus the amount of ordinary income recognized.
TAX CONSEQUENCES TO THE COMPANY WITH RESPECT TO THE PURCHASE AND DISPOSITION OF
SHARES
The Company is not entitled to any federal tax deduction when shares of
Common Stock are purchased pursuant to the ADSPP. The Company will be entitled
to a deduction only if the Participant makes a disqualifying disposition of
shares purchased under the ADSPP. In such case, the Company can generally deduct
as compensation expense an amount equal to the amount of ordinary income taxable
to the Participant
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as a result of the disqualifying disposition. The Company is not entitled to an
income tax deduction with respect to qualifying dispositions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ADOPTION OF
THE AMENDMENT TO THE COMPANY'S ASSOCIATE DISCOUNT STOCK PURCHASE PLAN.
PROPOSAL 3
RE-APPROVAL OF MATERIAL TERMS OF
PERFORMANCE GOALS
IN THE
COMPANY'S MANAGEMENT PERFORMANCE COMPENSATION PLAN
The Company has maintained the AnnTaylor Stores Corporation Management
Performance Compensation Plan since 1992. In 1994, the Board of Directors
adopted, and stockholders approved, an amendment and restatement of that plan in
order to comply with the provisions of Section 162(m) of the Code. In 1997, the
Board of Directors adopted, and stockholders approved, a further amendment and
restatement of that plan in order to, among other things, (i) increase the
amount of the maximum individual award payable in any Performance Period and
(ii) expand the types of corporate business criteria that the Compensation
Committee may consider in establishing each Performance Period's performance
goals and in 1998, that plan was further amended in connection with Section
162(m) of the Code (the "Performance Compensation Plan").
Section 162(m) of the Code limits the deductibility of certain compensation
in excess of $1.0 million per year paid by a publicly traded corporation to the
following individuals who are employed as of the end of the corporation's tax
year: the chief executive officer and the four other executive officers named in
the summary compensation table of the corporation's proxy statement ("Covered
Employees"). Compensation that qualifies as "performance-based" compensation is,
however, exempt from the $1.0 million deductibility limitation. In order for
compensation granted pursuant to the Performance Compensation Plan to qualify
for this exemption, among other things, the material terms under which the
compensation is to be paid must be disclosed to and approved by stockholders in
a separate vote prior to payment, and the compensation must be paid solely on
account of the attainment of preestablished, objective performance goals.
Accordingly, the Performance Compensation Plan was submitted to stockholders for
approval and was approved at the 1997 annual meeting of stockholders. Treasury
regulations require that when the compensation committee has authority to change
the targets under a performance goal after stockholder approval of the goal,
material terms of the performance goal must be disclosed to and re-approved by
stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which stockholders previously approved the
performance goal. Because stockholders previously approved the performance goals
in 1997, for compensation payable under the Performance Compensation Plan to
continue to qualify as "performance-based" compensation, the Performance
Compensation Plan is being submitted to stockholders for re-approval at the
Annual Meeting of Stockholders in 2002. The Company has not made any changes to
the Performance Compensation Plan since it was approved by the stockholders in
1997.
DESCRIPTION OF THE PERFORMANCE COMPENSATION PLAN
The following description of the Performance Compensation Plan is not
intended to be complete and is qualified in its entirety by the specific
language of the Performance Compensation Plan, a copy of which is attached as
Exhibit B to this Proxy Statement. Defined terms that are otherwise not defined
herein shall have the meanings set forth in the Performance Compensation Plan.
OVERVIEW
The Performance Compensation Plan is intended, as part of the Company's
over-all compensation strategy, to attract and retain in the employ of the
Company and its subsidiaries highly motivated, results-oriented officers and key
employees of experience and ability, by basing such persons' compensation, in
part,
7
on their contributions to the growth and profitability of the Company, thereby
giving them incentive to remain with the Company and its subsidiaries and to
continue to make contributions to the Company in the future.
PERFORMANCE COMPENSATION PLAN ADMINISTRATION
The Performance Compensation Plan is administered by the Compensation
Committee of the Board of Directors. The Compensation Committee consists of two
or more persons, at least two of whom are "outside directors" within the meaning
of Section 162(m) of the Code. Under the Performance Compensation Plan, the term
"Section 162(m) Officer" means an Executive Officer whose applicable employee
remuneration (as defined in Section 162(m) of the Code), for the year in which
the Award would be payable and including amounts that may be earned under this
Plan, is expected to exceed the limitation set forth in Section 162(m) of the
Code for deductibility. The Performance Compensation Plan provides that the
Compensation Committee may delegate to one or more officers its authority with
respect to participants who are not 162(m) Officers. The Performance
Compensation Plan provides that a performance period may consist of a six-month
season or such longer period of up to twelve months as may from time to time be
selected by the Committee (a "Performance Period").
ELIGIBILITY
Salaried associates in the employ of the Company or any of its subsidiaries
(including officers and Directors, but excluding persons who are Directors only)
are eligible to become participants and receive performance compensation under
the Performance Compensation Plan. In selecting from among all eligible
associates those who will become participants in any Performance Period and in
determining their potential performance compensation for such period, the
Compensation Committee considers the position and responsibilities of the
eligible associates, the value of their services to the Company and such other
factors as the Compensation Committee deems relevant.
PERFORMANCE COMPENSATION
Prior to the beginning of each Performance Period (or within such other
period as may be permitted by Section 162(m) of the Code), the Compensation
Committee assigns to each participant an individual performance ratio (a
"Performance Percentage") for such period and establishes a matrix assigning a
performance ratio (a "Performance Ratio") to various levels of performance that
might be achieved for such period. The Performance Percentage is a factor that
ranges from one percent to one hundred percent. The Performance Ratio is a
factor that causes the amount of performance compensation to increase based on
specified increases in level of performance, pursuant to a preestablished
schedule. A participant's performance compensation for the Performance Period
will be equal to the product of (i) the participant's annual base salary for the
fiscal year of which such Performance Period is a part, multiplied by (ii) the
Performance Percentage assigned to such participant for such Performance Period,
multiplied by (iii) the Performance Ratio achieved for such Performance Period.
The Performance Compensation Plan provides that the Compensation Committee may,
but need not, use this formula.
PERFORMANCE GOALS ESTABLISHED BY COMPENSATION COMMITTEE
The Performance Compensation Plan provides that the Compensation Committee
is to establish performance goals expressed in terms of the achievement of any
of one or more of the following business criteria: revenue; net or gross sales;
comparable store sales; gross margin; operating profit; earnings before all or
any of interest, taxes, depreciation and/or amortization; cash flow; working
capital; return on equity, assets, capital or investment; market share; sales
(net or gross) measured by store, product line, territory, operating or business
unit, customers, or other category; earnings or book value per share; earnings
from continuing operations; net worth; turnover in inventory; levels of expense,
cost or liability by store, product line, territory, operating or business unit
or other delineation; appreciation in the price of the Company's Common Stock;
total stockholder return (stock price appreciation plus dividends); and
implementation of critical projects or processes. Where applicable, the
performance goals may be expressed in terms of attaining a specified level of
the selected criterion or the attainment of a percentage increase or decrease in
the selected criterion, or may
8
be applied to the performance of the Company relative to a market index, a group
of other companies or a combination thereof, all as determined by the
Compensation Committee. Such performance goals may relate to the performance of
a store, business unit, product line, division, territory, the Company or an
individual or any combination thereof. With respect to participants who are not
Section 162(m) Officers, performance goals may also include such objective or
subjective individual performance criteria as the Compensation Committee may,
from time to time, establish. Performance goals may include a threshold level of
performance below which no award payment will be made and levels of performance
at which specified percentages of the target award will be paid, and may also
include a maximum level of performance above which no additional award will be
paid. Each of the foregoing performance goals will be determined in accordance
with generally accepted accounting principles and will be subject to
certification by the Compensation Committee. The performance goals established
by the Compensation Committee may be different with respect to different
Performance Periods and different goals may be applicable to different
Participants. The Compensation Committee is authorized to make equitable
adjustments to the performance goals in recognition of unusual or nonrecurring
events affecting the Company or its financial statements, in response to changes
in applicable laws or regulations, or to account for items of gain, loss or
expense determined to be extraordinary or unusual in nature or infrequent in
occurrence or related to the disposition of a segment of a business or related
to a change in accounting principles.
For any Performance Period, the Board may establish a ceiling on the
aggregate amount that may be paid out in performance compensation for such
Performance Period. In the event that such a limit is established for any
Performance Period, the performance compensation otherwise payable to all
participants for such Performance Period will be reduced pro rata. In addition,
the Performance Compensation Plan provides that no participant who is a Section
162(m) Officer of the Company at the beginning of the Performance Period may
receive an amount of performance compensation, with respect to a Performance
Period, in excess of $1,500,000 per twelve-month Performance Period, to be
reduced proportionately for Performance Periods of shorter duration.
PAYMENT
Performance compensation will be paid by the Company or the subsidiary
employing the participant promptly following the end of the Performance Period
to which it relates and the availability of the Company's final consolidated
financial results for such Performance Period. With respect to Section 162(m)
Officers, no payment may be made until the applicable performance results have
been certified by the Compensation Committee. A participant will not be entitled
to receive payment of performance compensation unless such participant is still
in the employ of the Company or one of its subsidiaries at the time the
performance compensation is actually paid.
The Board at any time and from time to time may modify, amend, suspend or
terminate the Performance Compensation Plan without notice; provided that no
amendment that requires stockholder approval in order for the Performance
Compensation Plan to continue to comply with Section 162(m) of the Code will be
effective unless approved by the requisite vote of the stockholders of the
Company. Inasmuch as benefits under the Performance Compensation Plan will be
determined by the Compensation Committee and performance goal criteria may vary
from year to year and from participant to participant, benefits to be paid under
the Performance Compensation Plan are not determinable. No awards were paid to
Covered Employees in respect of fiscal years 2001 and 2000. Awards to named
executive officers in respect of fiscal year 1999 are included in the Table
entitled "Summary of Executive Officer Compensation."
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
9
PROPOSAL 4
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 year 2002. Deloitte has
served as the independent auditors of the Company since 1989.
Audit Fees--During fiscal year 2001, Deloitte billed the Company $356,500
for professional services rendered for the audit of the Company's consolidated
financial statements for fiscal year 2001 and for the review during fiscal year
2001 of the financial statements included in the Company's Quarterly Reports on
Form 10-Q.
Financial Information Systems Design and Implementation Fees--During fiscal
year 2001, 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 year 2001, Deloitte billed the Company
$478,055 for all other professional services.
The Audit Committee has considered the non-audit services rendered by
Deloitte for the Company and concluded, based upon information furnished by
Deloitte, that providing such services are compatible with maintaining
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 appointment of the Company's independent auditors. If
stockholders do not approve ratification of the appointment of such auditors,
the Board of Directors will reconsider the appointment.
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 appropriate questions.
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 2002.
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
provided to stockholders; and communicating regularly with management and the
Company's independent auditors regarding such matters. In carrying out its
oversight responsibilities, the Audit Committee does not provide 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 Audit Committee 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.
10
STRUCTURE AND MEMBERSHIP
The Audit Committee is governed by a Charter which specifies that the Audit
Committee shall consist of at least three members of the Board of Directors, one
of whom shall chair the Audit Committee, and it shall meet at least four times
annually. The Charter requires that each member of the Audit Committee be
independent of the Company and its management. The Audit 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 defined in Section 303.01 of the New York Stock Exchange Listed
Company Manual. No member of the Audit Committee is an officer of the Company or
employed or affiliated with Deloitte, nor has any member of the Audit 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
Audit Committee has accounting or related financial management experience.
AUDIT COMMITTEE ACTIVITIES
In discharging its oversight responsibilities for fiscal year 2001, the
Audit Committee: (1) reviewed and discussed the audited financial statements
with management and the Company's independent auditors; (2) discussed with the
Company's independent auditors the matters 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 Standard No. 1, and discussed with the independent
auditors any relationships that may affect the auditor's objectivity and
independence. The Audit Committee also reviewed with Deloitte and management
significant developments in accounting rules and the application and disclosure
of critical accounting policies applied by the Company.
The Audit Committee has received written disclosure from Deloitte that it
is independent, as required by the Independence Standards Board's Standard No.
1. Deloitte 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 its independence. Deloitte also has confirmed 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 Audit 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 2, 2002 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
11
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 2, 2002, with the cumulative total return on the
Standard & Poor's 500 Stock Index and the Dow Jones U.S. Retailers, Apparel
Index for the same period. In accordance with the rules of the Commission, the
returns are indexed to a value of $100 at February 1, 1997 and assume that all
dividends were reinvested.
COMPARISON OF 5 YEAR TOTAL RETURN*
AMONG ANNTAYLOR STORES CORPORATION, THE S&P 500 INDEX
AND THE DOW JONES US RETAILERS APPAREL INDEX
[GRAPH]
<Table>
<Caption>
ANNTAYLOR STORES DOW JONES US RETAILERS,
CORPORATION S & P 500 APPAREL
---------------- --------- -----------------------
2/1/97 100.00 100.00 100.00
1/31/98 67.75 126.91 158.83
1/30/99 224.64 168.14 267.60
1/29/00 128.99 185.54 241.20
2/3/01 156.46 183.87 281.37
2/2/02 219.71 156.46 231.36
</Table>
* $100 invested on 2/1/97 in stock or on 1/31/97 in index (including
reinvestment of dividends).
12
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
The following Table sets forth certain information as of March 5, 2002
concerning the beneficial ownership of the Company's Common Stock by (i) each
stockholder who is known by the Company to own beneficially in excess of 5% of
the outstanding Common Stock, (ii) each Director, (iii) the named executive
officers listed in the Table entitled "Summary of Executive Officer
Compensation," and (iv) all Directors and executive officers as a group. Except
as otherwise indicated, each stockholder listed below has sole voting and
investment power with respect to shares beneficially owned by such person. The
Commission has defined the term "beneficial ownership" to include any person who
has or shares voting power or investment power with respect to any security or
who has the right to acquire beneficial ownership of any security within 60
days.
<Table>
<Caption>
NO. OF
SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT
- ------------------------ ------------ -------
Wellington Management Company, LLP(a)....................... 2,691,225 8.9%
FMR Corp. and affiliates(b)................................. 2,664,355 8.8%
TCW Group Inc.(c)........................................... 1,772,750 5.8%
J. Patrick Spainhour(d)(e).................................. 632,878 2.1%
Barry Erdos(d).............................................. 104,848 *
Katherine Lawther Krill(d).................................. 72,728 *
Kim Roy(d).................................................. 33,000 *
James M. Smith(d)........................................... 24,198 *
Gerald S. Armstrong(d)(f)................................... 16,964 *
James J. Burke, Jr.(d)...................................... 58,920 *
Wesley E. Cantrell(d)....................................... 13,500 *
Robert C. Grayson(d)........................................ 40,500 *
Ronald W. Hovsepian(d)...................................... 15,500 *
Rochelle B. Lazarus(d)...................................... 15,500 *
Hanne M. Merriman(d)........................................ 15,700 *
All executive officers and Directors as a group (14
persons)(d)(e)(f)......................................... 1,053,853 3.5%
</Table>
- ---------------
* Less than 1%
(a) In an amended Schedule 13G filed with the Commission on February 12, 2002 by
Wellington Management Company, LLP ("Wellington"), Wellington reported
beneficial ownership of 2,691,225 shares. Wellington, in its capacity as
investment advisor, has shared voting power with respect to 1,873,425 shares
and shared dispositive power with respect to 2,691,225 shares. Wellington's
address is 75 State Street, Boston, MA 02109.
(b) In an amended Schedule 13G filed with the Commission on February 13, 2002,
FMR Corp., Edward C. Johnson 3d ("ECJ") and Abigail P. Johnson
(collectively, the "FMR Group") reported beneficial ownership of 2,664,355
shares. Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. and an investment adviser, is the beneficial owner
of 2,460,055 shares as a result of acting as investment adviser to various
investment companies. ECJ, FMR Corp., through its control of Fidelity, and
the Fidelity funds (the "Fidelity Funds"), each has sole power to dispose of
the 2,460,055 shares owned by the Fidelity Funds. The Board of Trustees of
the Fidelity Funds has the sole power to vote or direct the voting of the
shares owned directly by such entity. Fidelity Management Trust Company
("FMTC"), a wholly-owned subsidiary of FMR Corp., is the beneficial owner of
48,800 shares as a result of serving as investment manager of certain
institutional account(s). ECJ and FMR Corp., through its control of FMTC,
each has sole voting and dispositive power over all 48,800 shares owned by
institutional account(s). Fidelity International Limited is the beneficial
owner of 155,500 shares and has sole voting and dispositive power with
respect to all of those shares. The address for each of FMR Corp., ECJ and
Abigail P. Johnson is 82 Devonshire Street, Boston, MA 02109.
(c) In a Schedule 13G, dated and filed with the Commission on February 13, 2002,
The TCW Group, Inc., on behalf of itself and its direct and indirect
subsidiaries reported beneficial ownership of 1,772,750 shares. They have
shared voting and dispositive power with respect to all 1,772,750 shares.
Their address is 865 South Figueroa Street, Los Angeles, CA 90017.
(footnotes continued on next page)
13
(footnotes continued from previous page)
(d) The shares listed include shares subject to stock options that are or will
become exercisable within 60 days of March 5, 2002 as follows: Mr.
Armstrong, 6,000 shares; Mr. Burke, 6,000 shares; Mr. Cantrell, 13,500
shares; Mr. Grayson, 15,500 shares; Mr. Hovsepian, 15,500 shares; Ms.
Lazarus, 15,500 shares; and Ms. Merriman, 15,500 shares; Mr. Spainhour,
457,500 shares; Mr. Erdos, 46,500 shares; Ms. Krill, 47,873 shares; and Mr.
Smith, 11,998 shares. The shares listed also include restricted shares which
have not yet vested and which are subject to forfeiture, as follows: Mr.
Spainhour, 125,000 shares; Mr. Erdos, 37,667 shares; Ms. Krill, 24,668
shares; Ms. Roy, 33,000 shares and Mr. Smith, 12,000 shares.
(e) 12,000 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.
(f) Includes an aggregate of 3,000 shares owned by Mr. Armstrong's three sons,
each of whom owns 1,000 shares. Mr. Armstrong disclaims beneficial
ownership of such shares.
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
Commission and the New York Stock Exchange reports of their ownership and
changes in their ownership of Common Stock. Based solely on a review of copies
of Section 16(a) reports furnished to the Company, or written representations
from certain reporting persons that such persons have not engaged in any
transactions in the Company's equity securities during fiscal year 2001, the
Company believes that during fiscal year 2001, all transactions were reported on
a timely basis except that Ms. Lazarus, a Director, was late in filing two
reports involving a total of two transactions.
EXECUTIVE OFFICERS
The following Table sets forth certain information regarding the executive
officers of the Company:
<Table>
<Caption>
NAME POSITION AND OFFICES
- ---- --------------------
J. Patrick Spainhour......................... Chairman, Chief Executive Officer and a
Director
Barry Erdos.................................. Senior Executive Vice President, Chief
Operating Officer and a Director
Katherine Lawther Krill...................... President, AnnTaylor Loft
Kim Roy...................................... President, AnnTaylor Stores
Barbara K. Eisenberg......................... Senior Vice President, General Counsel and
Secretary
James M. Smith............................... Senior Vice President, Chief Financial
Officer and Treasurer
Sallie A. DeMarsilis......................... Vice President and Controller
</Table>
Information regarding Messrs. Spainhour and Erdos is set forth above under
"Incumbent Class I Directors" and "Nominees for Election as Class II Directors,"
respectively.
KATHERINE LAWTHER KRILL, AGE 47. Ms. Krill has been President of the
AnnTaylor Loft since 2001. Prior thereto, she was Executive Vice President,
Merchandise and Design of the AnnTaylor Loft from 1998 to 2001, and was Senior
Vice President, General Merchandise Manager of AnnTaylor Loft from 1996 to 1998.
KIM ROY, AGE 43. Ms. Roy joined the Company in 2001 as President,
AnnTaylor Stores. For more than five years prior thereto, Ms. Roy held a variety
of positions at Liz Claiborne Inc. (apparel company), most recently as Group
President, responsible for all LizBrand, Special Markets and Accessories
businesses.
BARBARA K. EISENBERG, AGE 56. Ms. Eisenberg joined the Company in 2001 as
Senior Vice President, General Counsel and Secretary. Prior thereto, Ms.
Eisenberg was Senior Vice President, General Counsel and
14
Corporate Secretary of J. Crew Group, Inc. from 1999 to 2001 and was Vice
President, General Counsel and Corporate Secretary from 1998 until then. Prior
thereto, she was Vice President, Associate General Counsel and Corporate
Secretary of Burlington Industries, Inc. (textile manufacturer) for more than
five years.
JAMES M. SMITH, AGE 40. Mr. Smith has been Senior Vice President--Chief
Financial Officer and Treasurer of the Company and Ann Taylor since 2001. Prior
thereto, he was Vice President--Controller and Assistant Treasurer of the
Company and Ann Taylor from 1997 to 2001.
SALLIE A. DEMARSILIS, AGE 37. Ms. DeMarsilis has been Vice President and
Controller of the Company and Ann Taylor since 2001. Prior thereto, she was
Senior Director and Assistant Controller of the Company and Ann Taylor from 2000
to 2001, and Assistant Controller of the Company and Ann Taylor from 1994 to
2000.
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 stock
option plans, that reward executives based on long term corporate performance.
The Compensation Committee generally reviews the Company's compensation
practices and programs, 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 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 Performance
Compensation 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 Performance Compensation Plan, each year the Compensation
Committee establishes an annual threshold net income target that must be
achieved before incentive compensation may be paid to a participant under the
plan for the year. For each participant, there may also be established
personalized,
15
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, his/her scope of influence on corporate or divisional results
and 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 Performance Compensation
Plan are achieved, incentive compensation is paid such that, when added to the
executive's base compensation, the executive achieves his 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. No payment was
made under Performance Compensation Plan in 2001 because the Company did not
meet the target range established under that plan for fiscal year 2000, and no
payment will be made as well under the Performance Compensation Plan in 2002
with respect to fiscal year 2001 performance.
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 plans, that gives executives a financial
interest as beneficial owners of Common Stock.
Under the Long Term Cash Plan, each year the Compensation 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 Compensation 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 Compensation 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 Company achieved the high end of the target cumulative earnings per
share levels established under the Long Term Cash Plan for the three-year
performance cycle of fiscal 1998 through 2000, and payments thereunder were made
in fiscal 2001. No payment was made with respect to the 1999-2001 performance
cycle because the Company did not achieve the cumulative earnings per share
targets for that cycle. Subsequent three-year performance cycles designated
under the Long Term Cash Plan are the 2000-2002 period, 2001-2003 period and
2002-2004 period. These cycles are running concurrently and are in varying
stages of completion, although it is anticipated that the cumulative earnings
per share levels established for the 2000-2002 and 2001-2003 cycles will not be
achieved.
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.
16
The Compensation Committee reviewed various long-term compensation
alternatives to use as incentives for senior executives and other key managers
of the Company. The Committee recognized that general merit increases would not
be made in 2002, that no payments had been made in fiscal year 2001 under the
Performance Compensation Plan and that it was unlikely that compensation would
be earned under certain of the performance cycles designated under the Long Term
Cash Plan. In addition, the 1992 Plan would expire at the end of fiscal year
2001. After reviewing various alternatives, the Company adopted the 2002 Stock
Option and Restricted Stock and Unit Award Plan ("2002 Plan") to use as a
meaningful incentive and retention tool that would more closely align senior
executives' and other key managers' interests with the interests of the
shareholders. Awards of stock options, and to a lesser extent restricted stock,
were made to executives under that plan and the grants to the named executive
officers are included in the Summary of Executive Officer Compensation and Stock
Options Granted in Fiscal Year 2001 Tables.
ANALYSIS OF 2001 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 year 2001, the
Compensation 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 Compensation Committee also considered
competitive data regarding salaries and incentives awarded to other chief
executives in the Company's industry and at the Company's competitors, among
other things. In making its compensation decisions with respect to Mr.
Spainhour, the Compensation Committee exercised its discretion and judgment
based on the above factors, and no specific formula was applied to determine the
weight of each factor.
The Compensation Committee believes that Mr. Spainhour has provided
important leadership in the development of the Company's strategic vision and
recognizes that the execution and the success of that vision can only be
measured over time, as initiatives are implemented. The Compensation 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 Compensation Committee believes that a significant portion of
the target compensation for the Chief Executive Officer should be represented by
incentive, performance-based compensation that is payable only if the Company
achieves its financial objectives. As a result, a significant portion of Mr.
Spainhour's annual cash compensation and long-term compensation is
performance-based.
The Company did not meet the target range established by the Compensation
Committee under the Performance Compensation Plan for 2001, nor the cumulative
earnings per share levels established under the Long Term Cash Plan for the
three-year performance cycle of fiscal 1999-2001. Consequently, Mr. Spainhour
did not receive any compensation in 2001 under the Company's Performance
Compensation Plan or for the 1999-2001 cycle under the Long Term Cash Plan. As
described in the Committee Report included in the proxy statement for the 2001
Annual Meeting of Stockholders, Mr. Spainhour received a payment in fiscal 2001
with respect to the 1998-2000 performance cycle. Neither Mr. Spainhour's base
salary of $850,000 nor his performance percentage of 80% under the Performance
Compensation Plan and 50% under the Long Term Cash Plan were increased in fiscal
2001.
Mr. Spainhour's employment agreement would have expired on May 31, 2002.
The Compensation Committee entered into a new employment agreement with Mr.
Spainhour, effective as of January 29, 2002, at the same base salary and
performance percentages under the Performance Compensation Plan and Long Term
Cash Plan (described under "Executive Compensation--Employment and Change in
Control Agreements").
As provided in his employment agreement, the Company awarded Mr. Spainhour
a total of 300,000 stock options and 100,000 shares of restricted stock under
the 1992 Plan and 2002 Plan. In accordance with the
17
Company's compensation philosophy, 50% of each of such stock option and
restricted stock awards are performance-based and only vest if the Company
achieves designated earnings per share levels. (See Note (d) to the Summary of
Executive Officer Compensation Table and Note (c) to the Stock Options Granted
in Fiscal Year 2001 Table for additional information).
COMPLIANCE WITH SECTION 162(M) OF THE CODE
In 1998, the Company's stockholders adopted the Long Term Cash Plan; in
1997, the stockholders approved the Performance Compensation Plan, which was
originally adopted in 1992 and subsequently amended and restated in 1994, and is
being submitted to stockholders for re-approval at the 2002 Annual Meeting.
These plans include provisions that allow the Company to comply with Section
162(m) of the Code. Section 162(m) generally disallows a deduction to publicly
traded companies to the extent of excess compensation over $1.0 million paid to
the named executive officers. As a result of adopting the Long Term Cash Plan
and the Performance Compensation 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 $1.0 million per taxable year paid to each of the
named executive officers.
However, if compliance with Section 162(m) regulations conflicts with the
Company's compensation philosophy or with what is believed to be the best
interests of the Company and its stockholders, the Company may conclude that
paying non-deductible compensation is more consistent with the compensation
philosophy and in the Company's and the stockholders' best interests.
Robert C. Grayson (Chairman)
Gerald S. Armstrong
Wesley E. Cantrell
Rochelle B. Lazarus
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
As of the Record Date, there were no Compensation Committee interlocks.
18
EXECUTIVE COMPENSATION
The following Table sets forth compensation information for the Company's
Chief Executive Officer and the four next most highly compensated executive
officers for 2001, 2000 and 1999 fiscal years.
SUMMARY OF EXECUTIVE OFFICER COMPENSATION
<Table>
<Caption>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ------------------------ --------
OTHER RESTRICTED SECURITIES LTIP
FISCAL ANNUAL STOCK UNDERLYING PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) COMPENSATION($) AWARDS($) OPTIONS(#) ($)(B)
- --------------------------- ------ --------- ----------- ---------------- ---------- ---------- --------
J. Patrick Spainhour...... 2001 $850,000 -- -- $3,795,000(d) 300,000 --
Chairman and Chief 2000 850,000 -- -- 1,000,000(e) 100,000 $850,000
Executive Officer 1999 808,333 $1,332,800 -- 829,688(f) 400,000 --
Barry Erdos............... 2001 517,644 -- -- 855,200(g) 110,000 --
Senior Executive Vice 2000 445,833 -- -- -- 18,000 180,000
President and Chief 1999 360,820 369,500 -- 842,500(h) 25,000 --
Operating Officer
Katherine L. Krill(i)..... 2001 425,651 -- -- 710,850(j) 75,000 --
President, AnnTaylor 2000 347,500 -- -- -- 12,000 210,000
Loft 1999 333,333 147,735 -- -- 7,500 --
Kim Roy(k)................ 2001 472,917 250,000 150,000(l) 1,021,350(m) 85,000 --
President, AnnTaylor 2000 -- -- -- -- -- --
Stores 1999 -- -- -- -- -- --
James M. Smith............ 2001 220,587 -- 80,945(n) 290,150(o) 31,000 --
Senior Vice President-- 2000 175,833 -- -- 71,813(p) 5,000 --
Chief Financial Officer 1999 153,433 62,740 -- -- 3,000 --
and Treasurer
<Caption>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(C)
- --------------------------- ------------
J. Patrick Spainhour...... $2,550
Chairman and Chief 2,550
Executive Officer 2,556
Barry Erdos............... 2,644
Senior Executive Vice 3,113
President and Chief --
Operating Officer
Katherine L. Krill(i)..... 2,675
President, AnnTaylor 2,611
Loft 2,371
Kim Roy(k)................ --
President, AnnTaylor --
Stores --
James M. Smith............ 2,606
Senior Vice President-- 2,581
Chief Financial Officer 2,412
and Treasurer
</Table>
- ---------------
(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 and 50,000 time-vesting restricted shares of Common
Stock granted to Mr. Spainhour on January 29, 2002. The value of these
shares as of February 2, 2002, was $3,790,000. One-third of the
performance-vesting restricted shares vest on March 15th in each of 2003,
2004 and 2005 if the Company achieves certain earnings goals and provided
Mr. Spainhour has remained continuously employed by the Company until the
applicable date. One-third of the time-vesting restricted shares become
exercisable on each of the first three anniversaries of the grant date,
provided that Mr. Spainhour has remained continuously employed by the
Company until the applicable date. However, in accordance with the terms of
the Company's 1992 Plan and 2002 Plan, all of such restricted shares will
vest upon the occurrence of any "Acceleration Event." 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 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 2,
2002, was $1,895,000. Mr. Spainhour's right to 25,000 of these shares
lapsed on March 8, 2001 and his right to the remaining 25,000 shares lapsed
on March 8, 2002, and these shares were canceled, as the performance
targets for fiscal years 2000 and 2001, respectively, were not achieved.
(f) 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 2, 2002, was $947,500. 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.
(g) Represents the market value, on the date of grant, of 25,000 and 6,000
time-vesting restricted shares of Common Stock granted to Mr. Erdos on
March 7, 2001 and January 29, 2002, respectively. The value of these shares
as of February 2, 2002 was $1,174,900. Mr. Erdos' right to these shares
vests 25% per year on each of the first four anniversaries of the
respective date of the grant. However, in accordance with the terms of the
Company's 1992 Plan and 2002 Plan, all of such restricted shares will vest
upon the occurrence of an "Acceleration Event." Mr. Erdos would be entitled
to receive dividends on these restricted shares if any dividends were paid
by the Company on its Common Stock.
(h) 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 2, 2002, was $758,000. 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 his right to the remaining 6,667
shares lapsed
(footnotes continued on next page)
19
(footnotes continued from previous page)
on March 29, 2002. These shares were canceled, as the performance targets
for fiscal years 2000 and 2001, respectively, were not achieved.
(i) Ms. Krill was promoted to President, AnnTaylor Loft effective May 3, 2001.
(j) Represents the market value, on the date of grant, of 20,000 and 3,000
time-vesting restricted shares of Common Stock granted to Ms. Krill on May
3, 2001 (in connection with her promotion) and January 29, 2002,
respectively. The value of these shares as of February 2, 2002 was
$871,700. Ms. Krill's right to these shares vests 25% per year on each of
the first four anniversaries of the respective dates of the grants.
However, in accordance with the terms of the Company's 1992 Plan and 2002
Plan, all of such restricted shares will vest upon the occurrence of an
"Acceleration Event." Ms. Krill would be entitled to receive dividends on
these restricted shares if any dividends were paid by the Company on its
Common Stock.
(k) Ms. Roy joined the Company as President, AnnTaylor Stores effective May 9,
2001.
(l) Represents amounts which were payable as a sign-on bonus in connection with
Ms. Roy's commencement of employment.
(m) Represents the market value, on the date of grant, of 30,000 and 3,000
time-vesting restricted shares of Common Stock granted to Ms. Roy on May 9,
2001 and January 29, 2002, respectively. The value of these shares as of
February 2, 2002 was $1,250,700. Ms. Roy's right to these shares vests 25%
per year on each of the first four anniversaries of the respective dates of
the grants. However, in accordance with the terms of the Company's 1992 Plan
and 2002 Plan, all of such restricted shares will vest upon the occurrence
of an "Acceleration Event." Ms. Roy would be entitled to receive dividends
on these restricted shares if any dividends were paid by the Company on its
Common Stock.
(n) Represents amounts attributable to reimbursement of moving expenses and the
tax consequences of such reimbursement.
(o) Represents the market value, on the date of grant, of 4,000 and 5,000
time-vesting restricted shares of Common Stock granted to Mr. Smith on
March 7, 2001 and January 29, 2002, respectively. The value of these 9,000
shares as of February 2, 2002 was $341,100. Mr. Smith's right to these
shares vests 25% per year on each of the first four anniversaries of the
respective dates of the grants. However, in accordance with the terms of
the Company's 1992 Plan and 2002 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.
(p) 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 2, 2002 was $113,700. Mr. Smith's
right to 1,500 of these shares vests on March 10, 2003 and his right to the
remaining 1,500 of the shares vests on March 10, 2004. However, in
accordance with the terms of the Company's 1992 Plan, all of such
restricted shares will vest upon the occurrence of an "Acceleration Event."
Mr. Smith would be entitled to receive dividends on these restricted shares
if any dividends were paid by the Company on its Common Stock.
The following Table sets forth certain information with respect to stock
options awarded during fiscal year 2001 to the named executive officers listed
in the Table entitled "Summary of Executive Officer Compensation" and these
option grants are also reflected in such Table. In accordance with Commission
rules, the hypothetical realizable values for each option grant are shown based
on compound annual rates of stock price appreciation of 5% and 10% from the
grant date to the expiration date. The assumed rates of appreciation are
prescribed by the Commission and are for illustrative purposes only; they are
not intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects.
20
STOCK OPTIONS GRANTED IN FISCAL YEAR 2001
<Table>
<Caption>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
# OF SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(B)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(A) FISCAL 2001 ($/SHARE) DATE 5%($) 10%($)
- ---- --------------- ------------ --------- ---------- ----------- ------------
J. Patrick Spainhour... 300,000(c) 16.1% 37.95 01/29/12 7,159,965 18,144,758
Barry Erdos............ 75,000 4.0% 25.10 03/07/11 1,183,894 3,000,220
35,000 1.9% 37.95 01/29/12 835,329 2,116,888
Katherine L. Krill..... 20,000 1.1% 27.02 03/14/11 339,855 861,258
30,000 1.6% 29.85 05/03/11 563,175 1,427,196
25,000 1.3% 37.95 01/29/12 596,664 1,512,063
Kim Roy................ 60,000 3.2% 30.25 05/09/11 1,141,444 2,892,643
25,000 1.3% 37.95 01/29/12 596,664 1,512,063
James M. Smith......... 6,000 0.3% 25.10 03/07/11 94,712 240,018
25,000 1.3% 37.95 01/29/12 596,664 1,512,063
</Table>
- ---------------
(a) Except as provided in footnote (c) below, 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 1992 Plan and 2002 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) This number consists of 150,000 time-vesting options and 150,000
performance-vesting options. One-third of the time-vesting options become
exercisable on each of the first three anniversaries of the grant date,
provided that Mr. Spainhour has remained continuously employed by the
Company until the applicable date. One-third of the performance-vesting
options become exercisable on March 15th in each of 2003, 2004 and 2005 if
the Company achieves certain earnings goals and Mr. Spainhour has remained
continuously employed by the Company until the applicable date.
The following Table shows the (i) number of shares of Common Stock acquired
by each named executive officer upon the exercise of Company stock options
during fiscal year 2001, (ii) the aggregate dollar value realized by each named
executive officer upon such exercise, based upon the fair market value of the
Common Stock on the date of exercise, (iii) number of all vested (exercisable)
and unvested (not yet exercisable) stock options held by each named executive
officer at the end of fiscal year 2001, and (iv) 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 2001.
AGGREGATE OPTION EXERCISES IN FISCAL 2001
AND FISCAL YEAR END OPTION VALUES
<Table>
<Caption>
NO. OF SHARES $ VALUE NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON REALIZED UPON UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
EXERCISE OF EXERCISE OF END OF FISCAL 2001 END OF FISCAL 2001($)
NAME STOCK OPTIONS OPTIONS EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(A)
- ---- ------------- ------------- --------------------------- ----------------------------
J. Patrick
Spainhour.......... -- -- 190,000/780,000 $3,536,625/$1,677,000
Barry Erdos.......... -- -- 17,000/136,000 62,831/1,148,494
Katherine L. Krill... -- -- 26,748/104,835 354,662/745,354
Kim Roy.............. -- -- 0/85,000 0/459,000
James M. Smith....... -- -- 7,998/43,419 97,642/198,459
</Table>
- ---------------
(a) Calculated based on the closing market price of the Common Stock of $37.90
on February 1, 2002, the last trading day in fiscal year 2001, less the
amount required to be paid upon exercise of the option.
21
As described in the Compensation Committee Report above, under the
Company's Long Term Cash Plan, each year the Compensation 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
such 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 2001 to 2003, indicated below (see Note (c) to Table
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 Long Term Cash 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.
LONG TERM CASH INCENTIVE COMPENSATION PLAN
AWARDS IN FISCAL YEAR 2001(A)
<Table>
<Caption>
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% 01/31/2004 $413,712 $459,680 $919,360
Barry Erdos....................... 40% 01/31/2004 204,422 227,136 454,272
Katherine L. Krill................ 40% 01/31/2004 175,219 194,688 389,376
Kim Roy........................... 40% 01/31/2004 253,094 281,216 562,432
James M. Smith.................... 25% 01/31/2004 43,805 48,672 97,344
</Table>
- ---------------
(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. The performance target for the 2001 Long Term Cash Incentive
Compensation Plan awards will not be met, and therefore it is anticipated
that no payment will be made at the end of this three-year performance cycle
ending January 31, 2004.
(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.
PENSION PLAN. Ann Taylor has 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 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 and annual earnings are used to determine
his or her annual pension accrual. If a participant has ten or fewer years with
Ann Taylor, his or her pension will accrue, for each year of participation in
the Pension Plan, at a rate of 1.25% of his or her current year's base
compensation up to the Social Security Wage Base ("Wage Base") plus 1.6% of any
base compensation 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
22
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 $200,000 (indexed for inflation). For
fiscal year 2001, all named executive officers have annual compensation which
exceeds this amount and the calculation of benefits for those executives is
based on the lower plan limitation amount.
As of December 31, 2001, the estimated monthly retirement benefit, payable
as a single life annuity, that would be payable to each named executive officer
who were participants in the Pension Plan during fiscal year 2001, assuming (i)
no increases in income and (ii) retirement and the commencement of benefit
payments at age 65, is as follows: Mr. Spainhour, $4,733.75; Mr. Erdos,
$2,099.92; Ms. Krill, $6,622.91, and Mr. Smith, $8,713.50. These benefits would
not be subject to any reduction for social security or other offset amounts. Ms.
Roy was not eligible to participate in the Pension Plan during fiscal year 2001.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS. Spainhour Employment
Agreement. Effective January 29, 2002, the Company entered into a new
employment agreement with Mr. Spainhour (the "Spainhour Agreement") to replace
the employment agreement that was to expire on May 31, 2002. The Spainhour
Agreement expires on May 31, 2005, 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. He 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.
Pursuant to the Spainhour Agreement, on January 29, 2002, the Company
granted Mr. Spainhour 50,000 time-vesting restricted shares of Company Common
Stock and time-vesting options to purchase 150,000 shares of Company Common
Stock at an exercise price of $37.95. One-third of those restricted shares vest
and one-third of those options become exercisable on each of the first three
anniversaries of the grant date, provided that Mr. Spainhour has remained
continuously employed by the Company until the applicable date.
Pursuant to the Spainhour Agreement, on January 29, 2002, the Company also
granted Mr. Spainhour 50,000 performance-vesting restricted shares of Company
Common Stock and performance-vesting options to purchase 150,000 shares of
Company Common Stock at an exercise price of $37.95. One-third of those
restricted shares vest and one-third of those options become exercisable on
March 15th in each of 2003, 2004 and 2005 if the Company achieves certain
earnings goals and Mr. Spainhour has remained continuously employed by the
Company until the applicable date. These performance vesting restricted shares
and stock options also provide for the acceleration of the vesting in 2004 and
2005 if the Company achieves specified earnings goals. Any performance vesting
restricted shares and performance vesting stock options that have not vested by
March 15, 2005 shall be canceled on that date.
All outstanding unvested restricted shares and stock options will vest and
become fully exercisable upon the occurrence of an "Acceleration Event" as
defined in the 1992 Plan and the 2002 Plan.
If Mr. Spainhour's employment is terminated 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 as a result of a
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 or for three years following a Change in Control. If any
payments or benefits received by
23
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.
Erdos Employment Agreement. The Company has an employment agreement with
Mr. Erdos (the "Erdos Agreement"), which 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 that Mr. Erdos is entitled to an annual base
salary of not less than $525,000. Mr. Erdos 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.
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.
Krill Employment Agreement. The Company has an employment agreement with
Ms. Krill (the "Krill Agreement"), which expires on May 3, 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 Krill Agreement provides that Ms. Krill is entitled to an annual base
salary of not less than $450,000. Ms. Krill 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.
In the event of termination of Ms. Krill's employment by the Company
without Cause, or by Ms. Krill for Good Reason (as such terms are defined in the
Krill 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, Ms. Krill shall
be entitled to receive, among other things, for the longer of one year or the
remaining term of the Krill Agreement, an amount representing her salary,
subject to Ms. Krill's compliance with the non-compete and non-solicitation
provisions of the Krill 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 Krill Agreement), the Company shall
instead pay Ms. Krill a lump-sum cash payment, in an amount equal to the sum of
Ms. Krill's base salary plus the average of her last three annual bonuses,
multiplied by two and one half. Following a termination by the Company without
Cause or by Ms. Krill 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 Ms. Krill would be subject to the "golden parachute" excise
tax under the Code, the Company has agreed to pay Ms. Krill such additional
amounts as may be necessary to place her in the same after tax position as if
the payments had not been subject to such excise tax.
Roy Employment Agreement. The Company has an employment agreement with Ms.
Roy (the "Roy Agreement"), which expires on April 24, 2004, with automatic
one-year renewal terms unless either party
24
advises the other that it does not wish to extend the term by delivery of a
"Non-renewal Notice" to the other party.
The Roy Agreement provides that Ms. Roy is entitled to an annual base
salary of not less than $650,000. Ms. Roy 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.
In the event of termination of Ms. Roy's employment by the Company without
Cause, or by Ms. Roy for Good Reason (as such terms are defined in the Roy
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, Ms. Roy shall be
entitled to receive, among other things, for the longer of one year or the
remaining term of the Roy Agreement, an amount representing her salary, subject
to Ms. Roy's compliance with the non-compete and non-solicitation provisions of
the Roy 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 Roy Agreement), the Company shall instead pay Ms. Roy a
lump-sum cash payment, in an amount equal to the sum of Ms. Roy's base salary
plus the average of her last three annual bonuses, multiplied by two and one
half. Following a termination by the Company without Cause or by Ms. Roy 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 Ms.
Roy would be subject to the "golden parachute" excise tax under the Code, the
Company has agreed to pay Ms. Roy such additional amounts as may be necessary to
place her in the same after tax position as if the payments had not been subject
to such excise tax.
Change in Control Agreements. Mr. Smith as well as certain other officers
and key employees of the Company and its subsidiaries, are eligible to receive
benefits under the Company's Special 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 such severance plan).
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 lump-sum cash 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 Mr. Smith as if he had continued to be employed by the
Company.
If any payments or benefits made under the severance plan to 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 executive in the same after-tax position as if the benefits or
payments had not been subject to the excise tax.
STOCKHOLDER PROPOSALS FOR THE 2003 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 proxy
materials.
In accordance with Rule 14a-8 under the Securities Exchange Act, any
stockholder proposals intended to be presented at the 2003 Annual Meeting of
Stockholders must be received by the Company no later than December 5, 2002 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
25
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 2003 Annual Meeting of Stockholders,
notice must be received by the Company not less than sixty days nor more than
ninety days prior to May 2, 2003, which will be the anniversary date of the
prior year's meeting (or if the meeting date for the 2003 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 first to occur of 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 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 2003 Annual Meeting of Stockholders, notice must be
received by the Company not less than sixty days nor more than ninety days prior
to May 2, 2003, which will be the anniversary date of the prior year's meeting
(or if the meeting date for the 2003 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 first to occur of 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 2001 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders of the Company
with this Proxy Statement.
NEW YORK, NEW YORK
April 4, 2002
26
Exhibit A
ANNTAYLOR STORES CORPORATION
ASSOCIATE DISCOUNT STOCK PURCHASE PLAN
1. PURPOSE. AnnTaylor Stores Corporation hereby establishes the AnnTaylor
Stores Corporation Associate Discount Stock Purchase Plan, effective as of May
18, 1999. This Plan is designed to provide eligible employees of the Company and
its Designated Subsidiaries who wish to become shareholders in the Company with
a convenient method of purchasing Common Stock through payroll deductions. It is
believed that associate participation in the ownership of the Company will be to
the mutual benefit of both associates and the Company. The Plan is intended to
qualify as an employee stock purchase plan under Section 423(b) of the Code.
2. DEFINITIONS. As used in this Plan, the following capitalized terms
shall have the meanings set forth below:
(a) "Account" means the funds accumulated under the Plan with respect
to an individual Participant as a result of deductions from the
Participant's paycheck for the purpose of purchasing stock under this Plan.
The funds allocated to a Participant's Account shall remain the property of
the Participant at all times but may be commingled with the funds of other
Participants or the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Brokerage Investment Account" shall mean the Plan account at a
brokerage firm selected by the Company, that is established for each
Participant and in which all shares purchased by the Participant pursuant
to the Plan are held until withdrawn, sold or delivered pursuant to Section
7 hereof.
(d) "Business Day" means Mondays through Fridays, but excluding days
on which banking institutions in the State of New York are required by law
or regulation to be closed.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of
any further legislation or regulation amending, supplementing or
superseding such section or regulation.
(f) "Committee" means any committee appointed by the Board to
administer the Plan. The members of the Committee shall serve at the
pleasure of the Board. Any member of the Committee may resign at any time
by notice in writing mailed or delivered to the Secretary of the Company.
(g) "Common Stock" means the common stock, par value $.0068, of the
Company.
(h) "Company" means AnnTaylor Stores Corporation.
(i) "Compensation" means a Participant's salary, wages, commissions,
overtime pay, cash payments for incentive compensation and other special
cash payments, except to the extent that any such item is specifically
excluded by the Board of Directors. "Compensation" does not include sign-on
bonuses, severance payments, car allowances, relocation expenses, moving
expenses, or any other payment which could be considered as reimbursement
for expenses, or non-cash compensation.
(j) "Contribution" means amounts withheld by the Company, or a
Subsidiary of the Company, from the Compensation of a Participant through
payroll deductions under and in accordance with Section 6 of this Plan.
(k) "Custodian" means the party or parties acting as such under the
Servicing Agreement.
(l) "Eligible Employee" has the meaning given to it in Section 4 of
this Plan.
(m) "Employee" means any salaried or hourly employee (including
officers) of the Company or any of its Designated Subsidiaries, whether
such employee is so employed at the time the Plan is adopted
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or becomes so employed subsequent to the adoption of the Plan. No Board
member who is not also an employee of the Company or any of its Designated
Subsidiaries shall be eligible to become a Participant under this Plan. For
the purposes of this Plan, the employment relationship shall be treated as
continuing intact while an Employee is on any Company-approved leave of
absence.
(n) "Fair Market Value" means, as of any given date, the closing price
of the Company's Common Stock on the New York Stock Exchange on the Trading
Day immediately preceding such date. In the event that such price is not
available, then the Fair Market Value of the Common Stock will be
determined by the Committee in good faith, taking into account the most
recent trading price of the Common Stock on the New York Stock Exchange,
and such determination will be conclusive.
(o) "Offering Commencement Date" means the first day of each Offering
Period in which there will be an offering, starting with August 1, 1999,
and then each subsequent February 1 and August 1, until the Plan
terminates. A different date may be set by resolution of the Board. This is
the date on which the offering commences. On each such date, the Company
shall commence an offering by granting each Participant an option to
purchase shares on the Purchase Date. Each option so granted shall be
exercisable for the number of shares described in Section 7(a) herein, and
shall be exercisable only on the Purchase Date.
(p) "Offering Period" means the six-month period commencing with the
Offering Commencement Date, during which Participants accrue funds in their
Accounts. Each such period shall commence on August 1 or February 1 of each
year that the Plan is in effect, starting with August 1, 1999. The Board
shall have the power to change the duration and/or the required frequency
of the Offering Periods under the Plan with respect to future offerings and
shall use its best efforts to notify Employees of any change at least 15
days prior to the scheduled beginning of the first Offering Period to be
affected. In no event shall any option granted hereunder be exercisable
more than twenty-seven months after its date of grant.
(q) "Participant" means an Eligible Employee who has enrolled as a
Participant in accordance with Section 6 of this Plan and whose
participation has not terminated under Section 9 hereof.
(r) "Plan" means this AnnTaylor Stores Corporation Associate Discount
Stock Purchase Plan, as amended from time to time.
(s) "Purchase Date" means the last day of each Offering Period. On
this date, the funds in the Participant's Account shall be used to purchase
shares of Common Stock of the Company pursuant to this Plan.
(t) "Servicing Agreement" means an agreement entered into by and
between the Company and the Custodian governing certain terms and
conditions of the Plan and its operation. Such agreement may be modified
from time to time.
(u) "Subsidiary" means any corporation of which the Company now owns,
or hereafter acquires, directly or indirectly, at least a majority of the
outstanding voting capital stock. A "Designated Subsidiary" means any
Subsidiary that has been designated by the Board from time to time in its
sole discretion as eligible to participate in this Plan.
(v) "Trading Day" means any Business Day on which the New York Stock
Exchange, other national stock exchanges and the Nasdaq system are open for
trading.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
3. SHARES SUBJECT TO THE PLAN. (a) Number Available. The maximum number
of shares that will be offered under the Plan is 250,000 shares of Common Stock
(subject to adjustment pursuant to Section 3(d) hereof).
(b) Character of Shares to be Issued. Shares sold under the Plan may be
authorized and unissued shares or treasury shares.
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(c) Insufficient Number of Shares Available. If the total number of shares
for which options are to be granted on any date in accordance with this Plan
exceeds the number of shares then available under the Plan (after deduction of
all shares for which options have been exercised or are then outstanding), the
Company shall make a pro rata allocation of the shares remaining available in as
nearly a uniform manner as shall be practicable and as it shall determine to be
equitable. In such event, the payroll deductions to be made pursuant to the
authorizations therefor shall be reduced accordingly and the Company shall give
written notice of such reduction to each Participant affected thereby.
(d) Adjustments. In the event of any reorganization, recapitalization,
stock split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of the Company, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind and purchase price of the shares available
for purchase under the Plan and in the maximum number of shares subject to any
option under the Plan.
4. ELIGIBILITY. (a) Employees Eligible to Participate. Any Employee of
the Company or a Designated Subsidiary is eligible to participate in this Plan,
except (i) Employees who are classified as "seasonal employees" and (ii)
Employees who are citizens of a foreign country the laws of which prohibit the
granting of options hereunder to its citizens.
(b) Restrictions on Amount of Stock Which May be Purchased. Notwithstanding
any provision of the Plan to the contrary, no Employee shall be granted an
option under the Plan (i) if, immediately after the grant, such Employee would
own stock and/or hold outstanding options to purchase stock representing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any Subsidiary of the Company (including stock
attributed to such Employee pursuant to Section 424(d) of the Code); or (ii)
which permits such Employee's right to purchase stock under all employee stock
purchase plans (as described in section 423 of the Code) of the Company and any
Subsidiary to accrue at a rate which exceeds $25,000 of Fair Market Value of
such stock (determined at the time such option is granted) for any calendar year
in which such option would be outstanding at any time. Any amounts received from
an Employee which cannot be used to purchase stock as a result of this
limitation will be returned to the Employee as soon as practicable, without
interest.
5. OFFERINGS. (a) There will be two annual consecutive offerings under
the Plan. The first offering shall commence on August 1, 1999. Thereafter,
offerings shall commence on each subsequent February 1 and August 1, and the
final offering under this Plan shall commence on February 1, 2009 and terminate
on July 31, 2009.
(b) Participation in one offering under the Plan shall neither limit, nor
require, participation in any other offering. Unless the Participant withdraws
from the Plan, or their participation in the Plan otherwise terminates as
provided in Section 9, participation shall carry over from one Offering Period
to the next, until the end of the final offering.
6. ELECTION TO PARTICIPATE, ENROLLMENT AND PAYROLL DEDUCTIONS. (a) An
Eligible Employee may become a Participant by completing an enrollment agreement
provided by the Company and filing it with the Company at least fifteen days
prior to the Offering Commencement Date of the offering to which it relates. At
that time, the Employee shall elect to have deductions made from his or her
Compensation on each payday during the time the Employee is a Participant in an
offering, at the rate of one percent to 15 percent (in increments of 1% only) of
the Employee's Compensation, as specified by the Employee in their enrollment
agreement.
(b) Payroll deductions for a Participant shall commence as of the Offering
Commencement Date and shall end on the last day of such Offering Period, unless
earlier terminated by the Participant as provided in Section 9.
(c) All payroll deductions made for a Participant shall be credited to the
Participant's Account under the Plan. No interest will be earned on such payroll
deductions. A Participant may not make any separate cash payment into such
Account nor may payment for shares be made other than by payroll deduction.
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(d) A Participant may discontinue participation in the Plan as provided in
Section 9, but no other change can be made during an Offering Period and,
specifically, a Participant may not alter the rate of the Participant's payroll
deductions for that Offering Period.
(e) A Participant may modify the information set forth in their enrollment
agreement (including the rate of the Participant's payroll deductions for
Contributions) at any time and from time to time by submitting a new enrollment
agreement to the Company, which will become effective with the first Offering
Commencement Date after receipt thereof by the Company or, if such new agreement
is received less than fifteen days before the Offering Commencement Date, then
effective with the next following Offering Commencement Date.
7. PURCHASE OF SHARES. (a) Number of Options. On each Offering
Commencement Date, the Company shall be deemed to have granted to each Employee
who was a Participant on such day an option to buy as many shares of Common
Stock as the Participant will be able to buy with the Contributions credited to
the Participant's Account during the Offering Period in which such Offering
Commencement Date occurs.
(b) Exercise Of Option. On the Purchase Date, each Participant shall be
deemed to have exercised the options granted by Section 7(a), and shall be
deemed to have purchased, at the option purchase price determined in accordance
with Section 7(c) hereof, such number of shares of Common Stock reserved for the
purpose of the Plan as the Contributions credited to the Participant's Account
during the Offering Period in which the Purchase Date occurs will pay for.
(c) Option Purchase Price. The option purchase price per share on any
Purchase Date shall be the lower of (i) 85% of the Fair Market Value of the
Common Stock on the Offering Commencement Date for the Offering Period in which
the Purchase Date occurs and (ii) 85% of the Fair Market Value of the Common
Stock on such Purchase Date.
(d) Evidence of Stock Ownership. Promptly following the end of each
Offering Period, the number of shares of Common Stock purchased by each
Participant on the Purchase Date shall be deposited into a Brokerage Investment
Account established in the Participant's name with the Custodian. The
Participant may, upon advance notice to the Company at the time of enrollment,
direct that the Brokerage Investment Account be established in the names of the
Participant and one other person designated by the Participant, as joint tenants
with the right of survivorship, tenants in common, or community property, to the
extent and in the manner permitted by applicable law.
(e) Risk. Participants assume all the risks associated with any decrease
in the value of their Brokerage Investment Accounts. Participants specifically
assume the risk that the balance in their Brokerage Investment Accounts may be
more or less than the amount of Common Stock that they may have purchased
pursuant to this Plan.
(f) Sale of Common Stock. A Participant shall have the right to withdraw
all or any number of shares in his or her Brokerage Investment Account and (i)
to receive certificates representing whole shares, or (ii) to direct the
Custodian to sell all or any portion of such shares and to receive the net
proceeds of such sale. Following receipt of a request to sell shares, the
Custodian shall, subject to the regulations of the Securities and Exchange
Commission and unless otherwise agreed to between the Custodian and the
Participant, make such sale for the Participant on the next Trading Day or as
soon thereafter as practicable.
8. ADMINISTRATION. (a) Commissions and Expenses. Except as set forth in
the next sentence, the Company shall be responsible for, and pay to the
Custodian, all fees, expenses and commissions relating to the establishment and
maintenance of Brokerage Investment Accounts, in accordance with the fee
schedule agreed to between the Company and the Custodian in the Service
Agreement. The foregoing notwithstanding, any fees, expenses and commissions
relating to the sale of Common Stock, the purchase of Common Stock with funds
other than payroll deductions, and the purchase and sale of anything other than
Common Stock, shall be the responsibility of, and paid for by, the Participant.
(b) Powers of the Committee. The Plan shall be administered by the
Committee. The Committee may delegate any or all of its authority hereunder to
such officer or officers of the Company as it may designate.
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The Committee shall be vested with full authority to make, administer, and
interpret such rules and regulations as it deems necessary to administer the
Plan and construe its provisions. Any determination by the Committee in carrying
out, administering or construing this Plan shall be final and binding for all
purposes and upon all interested persons and their respective heirs, successors,
and legal representatives.
(c) Employees' Rights as Shareholders. No Participant shall have any
rights as a shareholder with respect to any shares until the shares have been
purchased in accordance with Section 7 of this Plan and the stock has been
issued by the Company. The Custodian shall provide a Quarterly Statement to each
Participant showing all the transactions in the Participant's Brokerage
Investment Account, and the number of shares of Common Stock in such Brokerage
Investment Account.
(d) Voting Rights. The Custodian shall vote whole shares of Common Stock
held in a Participant's Brokerage Investment Account upon receipt of, and in
accordance with, written directions timely received from the Participant. If the
Custodian receives no such directions, the Custodian shall vote such shares in
its discretion, subject to applicable regulations.
(e) Limitations. No action of the Company or of the Board in establishing
this Plan, nor any action taken by the Company, any Designated Subsidiary, the
Board or the Committee or its delegates under this Plan, nor any provision of
this Plan, shall be construed as conferring upon any Employee any right to
continued employment for any period by the Company or any of its Subsidiaries,
or shall interfere in any way with the right of the Company or any Subsidiary to
terminate such employment.
9. TERMINATION OF PARTICIPATION. (a) Termination of Participation. A
Participant's participation in the Plan shall continue until the earliest of:
(i) such time as the Participant notifies the Company in writing that the
Participant wishes to withdraw from the Plan and such withdrawal becomes
effective, in accordance with Section 9(b) hereof; (ii) the date of the
Participant's separation of employment of the Company or any of its
Subsidiaries; and (iii) the termination of the Plan.
(b) Withdrawal by Participant. A Participant may withdraw from an
offering, in whole but not in part, at any time prior to the last Business Day
of such offering, by delivering a new enrollment agreement to the Company. A
withdrawal will be effective only if it is received by the Company as least 15
calendar days before the proposed date of withdrawal, provided that the
Committee, in its discretion, may specify (on a uniform and nondiscriminatory
basis) an earlier or later deadline for the submission of enrollment forms. When
a withdrawal becomes effective, the Participant's payroll deductions shall
cease, and all amounts then credited to the Participant's Account shall be
distributed to the Participant, without interest.
(c) Loss of Eligibility. Participation in the Plan shall be automatically
terminated upon the cessation of the Participant's status as an Eligible
Employee for any reason, including separation of employment. As soon as
practicable after such separation, the Participant's payroll deduction
Contributions shall cease and all amounts then credited to the Participant's
Account shall be distributed to the Participant, without interest.
(d) Re-entry. To re-enter the Plan as a Participant, an Eligible Employee
must complete and deliver to the Company a new enrollment agreement, in
accordance with Section 6 hereof.
(e) Rights Not Transferable. No Employee shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber either the payroll
deductions credited to such Employee's Account or any rights with regard to the
exercise of an option to purchase shares under the Plan. If any such action is
taken by the Employee, or any claim is asserted by any other person in respect
of such right and interest, whether by garnishment, levy, attachment or
otherwise, such action or claim will be treated as an election to withdraw from
the Plan.
(f) Death. In the event of the death of the Participant, the amount of
payroll deductions not theretofore invested shall be refunded to the
Participant's estate, without interest, such payment to be made as soon as
practicable.
10. AMENDMENT OR TERMINATION OF THIS PLAN. The Board at any time and from
time to time may modify, amend, suspend or terminate this Plan or any part
hereof, without notice, provided that no amendment that requires stockholder
approval in order to comply with Section 423 of the Code shall be
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effective unless the same shall be approved by the requisite vote of
stockholders of the Company. Amendments will not adversely affect stock options
that have already been granted.
11. COMPLIANCE WITH SECTION 423. This Plan is designed and intended to
comply with Section 423 of the Code, and all provisions hereof shall be
construed in a manner to so comply.
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Exhibit B
ANNTAYLOR STORES CORPORATION
MANAGEMENT PERFORMANCE COMPENSATION PLAN
1. PURPOSE. This Plan is an integral part of the Company's over-all
compensation strategy which is aimed at attracting and retaining in the employ
of the Company and its Subsidiaries highly motivated, results-oriented personnel
of experience and ability, by basing such personnel's compensation, in part, on
their contributions to the growth and profitability of the Company, thereby
giving them incentive to remain with the Company and its Subsidiaries and to
continue to make contributions to the Company in the future. Further, the
purpose of the Plan is to serve as a qualified performance-based compensation
program under Section 162(m) ("Section 162(m)") of the Internal Revenue Code of
1986, as amended (the "Code").
2. DEFINITIONS. As used in this Plan, the following capitalized terms
shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Budget" means the Company's operating budget for a Performance
Period.
(c) "Committee" means the Compensation Committee of the Board, as
appointed by the Board from time to time and consisting of not less than
two directors, at least two of whom must be "outside directors" within the
meaning of Section 162(m). All actions taken by the Committee under this
Plan with respect to Section 162(m) Officers shall be taken solely by those
members of the Committee who are "outside directors", even if less than a
majority of the Committee, and such members shall constitute a subcommittee
for purposes of Section 162(m). With respect to Eligible Associates who are
not Section 162(m) Officers, the Committee may, in its discretion, delegate
to one or more officers of the Company its duties hereunder.
(d) "Company" means AnnTaylor Stores Corporation.
(e) "Eligible Associate" has the meaning assigned thereto in Section 3
hereof.
(f) "Executive Officer" means an officer of the Company who, as of the
beginning of a Performance Period, is an "executive officer" within the
meaning of Rule 3b-7 promulgated under the Securities Exchange Act of 1934
(the "Exchange Act").
(g) "Participant" means an Eligible Associate who has been designated
as a Participant by the Committee in accordance with Section 4 of this
Plan.
(h) "Performance Compensation" means the cash amount payable to a
Participant pursuant to this Plan.
(i) "Performance Goals" has the meaning assigned thereto in Section
5(b) hereof.
(j) "Performance Percentage" and "Performance Ratio" have the meanings
assigned thereto in Section 5(a) hereof.
(k) "Performance Period" means a period designated by the Committee
during which Performance Compensation will be earned. A Performance Period
may range in length from the six-month period that coincides with the
Company's fiscal six-month Spring or Fall season to the twelve-month period
that coincides with the Company's fiscal year.
(l) "Plan" means this AnnTaylor Stores Corporation Management
Performance Compensation Plan.
(m) "Subsidiary" means any corporation of which the Company owns,
directly or indirectly, at least a majority of the outstanding voting
capital stock.
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(n) "Section 162(m) Officer" means an Executive Officer whose
applicable employee remuneration (as defined in Section 162(m) of the
Code), for the year in which the Award would be payable and including
amounts that may be earned under this Plan, is expected to exceed the
limitation set forth in Section 162(m) of the Code for deductibility.
3. ELIGIBILITY. Any salaried associate in the employ of the Company or
any of its Subsidiaries (including officers and directors, but excluding persons
who are directors only or who are members of the Committee) shall be eligible
(an "Eligible Associate") to become a Participant and receive Performance
Compensation under this Plan.
4. SELECTION OF PARTICIPANTS.
(a) As promptly as possible after the Company's Budget for a Performance
Period shall have become available, and after having received the
recommendations of the Company's Chief Executive Officer pursuant to Section
4(b) below, the Committee shall designate from among all Eligible Associates
those who shall be Participants under this Plan for such Performance Period.
(b) Prior to the beginning of a Performance Period, or by such later date
permissible under Section 162(m), and after the Company's Budget for a
Performance Period shall have become available, the Chief Executive Officer of
the Company shall submit to the Committee a list of the names, titles, salaries
and suggested Performance Percentages of those Eligible Associates whom the
Chief Executive Officer recommends that the Committee designate as Participants
under this Plan for such Performance Period.
(c) The Committee shall have the authority to designate from time to time
prior to the commencement of as well as during a Performance Period additional
Eligible Associates as Participants under this Plan for such Performance Period.
(d) In selecting from among all Eligible Associates those who shall become
Participants in any Performance Period and in determining the Performance
Percentages of such Participants for such Performance Period, the Committee
shall consider the position and responsibilities of the Eligible Associates, the
value of their services to the Company and such other factors as the Committee
deems relevant.
5. FORMULA FOR DETERMINING AMOUNT OF PERFORMANCE COMPENSATION.
(a) At the time the Committee selects Participants under this Plan for a
Performance Period, or within such other time period which may comply with
Section 162(m), the Committee shall, for each Participant:
(i) assign to such Participant their individual "Performance
Percentage" for such Performance Period; and
(ii) establish a matrix, assigning a "Performance Ratio" to various
levels of Performance Goals which might be achieved for such Performance
Period.
(b) As used in this Plan, "Performance Goals" means the specific objectives
established by the Committee for each Participant for a Performance Period. In
setting these objectives, the Committee shall consider one or more of the
following business criteria: revenue; net or gross sales; comparable store
sales; gross margin; operating profit; earnings before all or any of interest,
taxes, depreciation and/or amortization; cash flow; working capital; return on
equity, assets, capital or investment; market share; sales (net or gross)
measured by store, product line, territory, operating or business unit,
customers, or other category; earnings or book value per share; earnings from
continuing operations; net worth; turnover in inventory; levels of expense, cost
or liability by store, product line, territory, operating or business unit or
other category; appreciation in the price of shares of the Company's common
stock; total shareholder return (stock price appreciation plus dividends); and
implementation of critical projects or processes. Where applicable, the
Performance Goals may be expressed in terms of attaining a specified level of
the selected criterion or the attainment of a percentage increase or decrease in
the selected criterion, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a combination thereof,
all as determined by the Committee. Such Performance Goals may relate to the
performance of a store, business unit, product line, division, territory, the
Company or an individual or any combination thereof. With respect to
Participants
B-2
who are not Section 162(m) Officers, Performance Goals may also include such
individual objective or subjective performance criteria as the Committee may,
from time to time, establish. Performance Goals may include a threshold level of
performance below which no award payment shall be made and levels of performance
at which specified percentages of the target award shall be paid, and may also
include a maximum level of performance above which no additional award shall be
paid. Each of the foregoing Performance Goals shall be determined in accordance
with generally acceptable accounting principles and, for Section 162(m)
Officers, shall be subject to certification by the Committee. The Performance
Goals established by the Committee may be different with respect to different
Participants, different Performance Periods and/or different operations.
The Committee shall have the authority to make equitable adjustments to the
Performance Goals in recognition of unusual or nonrecurring events affecting the
Company, its financial statements or its shares, in response to changes in
applicable laws or regulations, or to account for items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent in occurrence
or related to the acquisition, disposition or discontinuance of a business or a
segment of a business, or related to a change in accounting principles, or to
reflect capital changes.
(c) Subject to adjustment pursuant to Section 5(d) below, unless otherwise
determined by the Committee, a Participant's Performance Compensation for the
Performance Period for which he or she was designated by the Committee as a
Participant pursuant to Section 4 hereof shall be equal to the product of (i)
the Participant's annual base salary for the fiscal year of which such
Performance Period is a part (prorated, as to any Participant who shall have
become an Eligible Associate and designated as a Participant after the
commencement of such fiscal year), multiplied by (ii) the Performance Percentage
assigned to such Participant for such Performance Period pursuant to Section
5(a)(i) above, multiplied by (iii) the Performance Ratio achieved by the Company
for such Performance Period.
(d) For any Performance Period, the Board may establish a ceiling on the
aggregate amount which may be paid out in Performance Compensation for such
Performance Period. In the event that such a limit is established for any
Performance Period, the Performance Compensation otherwise payable to all
Participants for such Performance Period pursuant to Section 5(c) above shall be
reduced pro rata. Notwithstanding any other provision of the Plan, no
participant who is a Section 162(m) Officer may receive Performance Compensation
for a twelve-month Performance Period in excess of $1,500,000, such amount to be
reduced proportionately for Performance Periods of shorter duration.
(e) Performance Compensation shall be paid by the Company or the Subsidiary
employing the Participant promptly following the end of the Performance Period
to which it relates. The foregoing notwithstanding, no payment of Performance
Compensation for a Performance Period may be made to a Section 162(m) Officer
until the performance results for that Performance Period are certified by the
Committee. A Participant shall not be entitled to receive payment of Performance
Compensation unless such Participant is still in the employ of (and shall not
have delivered notice of resignation to) the Company or one of its Subsidiaries
at the time the Performance Compensation is actually paid.
6. FINALITY OF DETERMINATIONS. The Committee shall administer this Plan
and construe its provisions. Any determination by the Committee in carrying out,
administering or construing this Plan shall be final and binding for all
purposes and upon all interested persons and their respective heirs, successors,
and legal representatives.
7. LIMITATIONS.
(a) No person shall at any time have any right to receive Performance
Compensation hereunder, unless such person shall have been designated as a
Participant by the Committee pursuant to Section 4 hereof and the other terms
and conditions of this Plan shall have been satisfied. No person shall have
authority to enter into any agreement for the inclusion of anyone as a
Participant or the awarding of Performance Compensation hereunder or to make any
representation or warranty with respect thereto. Designation of an Eligible
Associate as a Participant in any Performance Period shall not guarantee or
require that such Eligible Associate be designated as a Participant in any later
Performance Period.
B-3
(b) No action of the Company or the Board in establishing this Plan, nor
any action taken by the Company, the Board or the Committee under this Plan, nor
any provision of this Plan, shall be construed as conferring upon any associate
any right to continued employment for any period by the Company or any of its
Subsidiaries, or shall interfere in any way with the right of the Company or any
Subsidiary to terminate such employment.
8. AMENDMENT AND TERMINATION OF PLAN. The Board at any time and from time
to time may modify, amend, suspend or terminate this Plan, without notice,
provided that no amendment which requires stockholder approval in order to
comply with Section 162(m) of the Code shall be effective unless the same shall
be approved by the requisite vote of stockholders of the Company.
9. COMPLIANCE WITH SECTION 162(M). The Plan is designed and intended to
comply with Section 162(m), and all provisions hereof shall be construed in a
manner to so comply.
B-4
Supplement to the AnnTaylor Stores Corporation Proxy Statement, dated April 4,
2002
Exhibit B to the Proxy Statement should include the following
amendments to the Company's Management Performance Compensation Plan, adopted
March 10, 2000:
1. Section 2 of the Plan is amended by adding the following definition
as Section 2(d) and renumbering the following paragraphs of Section 2
accordingly:
"(d) A "Change in Control" shall be deemed to have occurred if:
(i) any "person", as such term is used in Section 13(d) and
14(d) of the Exchange Act, other than (1) the Company, (2) any trustee
or other fiduciary holding securities under an employee benefits plan
of the Company, or (3) any corporation owned, directly or indirectly,
by the stockholders of the Company (in substantially the same
proportion as their ownership of shares) (a "Person") is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding voting securities;
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this Section 2(d)) whose
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors at the beginning of the period
or whose election or nomination for election for election was
previously so approved, cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the beneficial owner (as
defined in clause (i) above), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of
the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect)."
2. Section 5 of the Plan is amended by adding the following as new paragraph
(f):
"(f) Notwithstanding the preceding provisions of this Section 5, in the
event of a Change in Control, a pro rata cash payment, in cancellation
of outstanding Awards in respect of the Performance Period in effect as
of the date of the Change in Control, shall be made to each Participant
within thirty (30) business days following the date of the Change in
Control. The pro rata payment to such Participant with respect to such
Performance Period shall be calculated by multiplying (X) and (Y),
where (X) equals the amount to which the Participant would have been
entitled had the Performance Period been completed, assuming for this
purpose that all Performance Goals applicable to the Participant were
achieved at a level equating to a Performance Ratio of 100% and (Y)
equals a fraction the numerator of which is the number of full and
partial months in such Performance Period that have elapsed as of the
date of the Change in Control and the denominator of which is the
number of months in the complete Performance Period."
ANNTAYLOR STORES CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2002
The undersigned hereby appoints Barbara K. Eisenberg and James M.
Smith, and each of them, proxies with full power of substitution to represent
the undersigned at the Annual Meeting of Stockholders to be held at The
Peninsula Hotel, 700 Fifth Avenue, New York, New York, 10019 on May 2, 2002 at
9:00 a.m. local time and to vote, as provided below, all the shares of Common
Stock, par value $.0068 per share, of AnnTaylor Stores Corporation (the
"Company") which the undersigned is entitled to vote, and, in their discretion,
to vote upon such other business as may properly come before the Annual Meeting
of Stockholders or any adjournment or postponement thereof, with all power which
the undersigned would possess if personally present. The undersigned hereby
revokes any proxies submitted previously with respect to such Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE
VOTED "FOR ALL NOMINEES" LISTED BELOW AND "FOR" EACH OF THE OTHER PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
---------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN (1) AND
"FOR" PROPOSALS (2), (3) AND (4).
(1) ELECTION OF THE FOLLOWING NOMINEES AS CLASS II DIRECTORS:
01 James J. Burke, Jr., 02 Barry Erdos, and 03 Ronald W. Hovsepian
[ ] FOR ALL NOMINEES
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
WITHHOLD AUTHORITY TO VOTE FOR THE FOLLOWING NOMINEE(S) ONLY: (write
the name of such nominee(s) in the space provided)
---------------------------------------------------------
(2) APPROVE THE PROPOSED AMENDMENT TO THE COMPANY'S ASSOCIATE DISCOUNT
STOCK PURCHASE PLAN
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
---------------------------------------------------------
(3) RE-APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS IN THE COMPANY'S
MANAGEMENT PERFORMANCE COMPENSATION PLAN
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
---------------------------------------------------------
(4) RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
FOR FISCAL YEAR 2002
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
---------------------------------------------------------
[ ]
By checking the box, I consent to future delivery of the Company's
annual reports, proxy statements, prospectuses and other materials and
stockholder communications electronically via the Internet (through postings at
a webpage which will be disclosed to me by the Company). I also consent to the
future delivery of any notice to the Company's stockholders required under
Delaware law electronically via the Internet (through postings at a webpage
which will be disclosed to me) in accordance with Section 232 of the Delaware
General Corporation Law.
By checking the box above, I expressly acknowledge and agree that the
Company may no longer distribute printed materials to me until such consent is
revoked. I understand that I may revoke my consent at any time by contacting the
Company's transfer agent, Mellon Investor Services LLC, P.O. Box 3316, South
Hackensack, NJ 07076-3316, and that costs normally associated with electronic
delivery, such as the cost of Internet access and usage and telephone charges as
well as any costs I may incur in printing documents, will be my responsibility.
In addition, I understand that I may need to install Adobe Acrobat Reader to
view documents in PDF format. A free copy of Adobe Acrobat Reader is currently
available at http://www.adobe.com.
Signature ___________________ Signature _____________________ Dated____________
Please mark, date, sign and return this proxy in the enclosed envelope.
Please sign as name appears hereon. When signing as agent, attorney, executor,
administrator, guardian 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.
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