Exhibit 10
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 1, 2005
(the "Effective Date"), between ANNTAYLOR STORES CORPORATION, a Delaware
corporation (the "Company"), and Katherine Lawther Krill (the "Executive").
WHEREAS, the Executive has been employed in the position of President
of the Company pursuant to an Employment Agreement dated January 29, 2004 (the
"Prior Agreement");
WHEREAS, the Executive has been promoted to the position of Chief
Executive Officer of the Company, effective as of the Effective Date, and the
parties wish to set forth the terms and conditions of Executive's continued
employment with the Company;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to be employed by and continue
to serve the Company, effective as of the Effective Date, on the terms and
conditions set forth herein.
2. Term. The term of this Agreement shall commence as of the Effective
Date and will end on October 1, 2008; provided, however, that commencing
on October 1, 2008, and each such anniversary thereafter, the term of the
Executive's employment shall automatically be extended for one additional
year, unless, no later than the April 1 immediately preceding such
anniversary, either party shall have given notice (a "Non-Renewal Notice")
to the other that it does not wish to extend this Agreement. References
hereinafter to the "Term" of this Agreement shall refer to both the
initial term and any extended term of the Agreement hereunder.
Notwithstanding expiration of the Term or other provisions that survive by
their intent, the provisions of Sections 4, 7 and 8 hereof shall continue
in effect.
3. Position and Duties. The Executive shall serve as Chief Executive
Officer of the Company ("CEO"), and shall have such responsibilities,
duties and authority consistent with such position as may from time to
time be determined by the Board of Directors of the Company (the "Board").
The Executive shall devote substantially all of her working time and
efforts to the business and affairs of the Company; provided that, this
Agreement shall not be interpreted to prohibit the Executive from making
passive investments, engaging in charitable activities or, subject to the
prior approval of the Board, serving on the board of directors of other
corporations. The Executive shall report directly to the Board and, for as
long as the Executive is employed by the Company as the CEO, the Company
shall nominate the Executive for re-election as a member of the Board. At
the time of her termination of employment with the Company, the Executive
shall resign from the Board if requested to do so by the Company.
4. Indemnification. To the fullest extent permitted by law and the
Company's certificate of incorporation and by-laws, the Company shall
indemnify the Executive for all amounts (including, without limitation,
judgments, fines, awards, settlement payments, losses, damages, costs and
expenses, including reasonable attorneys' fees) incurred or paid by the
Executive in connection with any action, proceeding, suit or investigation
arising out of or relating to the performance by the Executive of services
for, or acting as a fiduciary of any employee benefit plans, programs or
arrangements of the Company or as a director, officer or employee of, the
Company or any subsidiary thereof. The Executive shall be covered by the
Company's D&O insurance policy in accordance with its terms, as in effect
from time to time. Following the Term, the Company shall continue to
indemnify the Executive with respect to such services performed during the
Term, to the same extent as the Company indemnifies its officers,
directors, employees and fiduciaries, as applicable.
5. Compensation and Related Matters.
(a) Annual Compensation.
(i) Base Salary. During the period of the Executive's
employment hereunder, the Company shall pay to the
Executive an annual base salary at a rate not less
than $1,000,000 (effective as of the Effective Date),
such salary to be paid in conformity with the
Company's policies relating to salaried employees.
This salary may be (but is not required to be)
increased from time to time, subject to and in
accordance with the annual executive performance
review procedures of the Company and, if increased,
shall not thereafter be decreased.
(ii) Annual Bonus. During the period of the Executive's
employment hereunder, the Executive shall be eligible
to participate in the Company's annual bonus plan as
in effect from time to time, and shall be entitled to
receive such amounts (a "Bonus") as may be authorized,
declared and paid by the Company pursuant to the terms
of such plan. The Company currently maintains a
Management Performance Compensation Plan (the
"Performance Plan") providing performance bonus
compensation pursuant to which the Executive has been
participating. It is agreed that the Executive shall
participate in the Performance Plan. Commencing with
the Company's 2006 fiscal year, the Executive's
Performance Percentage (as that term is defined in the
Performance Plan) shall be established at 100% per
annum. The business criterion to be used in
determining the relevant Performance Goal (as that
term is defined in the Performance Plan) shall be
determined by the Compensation Committee of the Board
(the "Compensation Committee") and approved by the
Board. The Executive shall also participate in the
Long Term Cash Incentive Compensation Plan and the
2004 Long Term Cash Incentive Plan and any successor
plan (together, the "Long-Term Plans"). Commencing
with any awards granted under the Long-Term Plans on
or after the Effective Date, her Target Award (as
defined in the Long-Term Plans) shall be 50%. Any
awards granted under the Performance Plan and the
Long-Term Plans prior to the Effective Date shall be
subject to the terms and conditions under which the
awards were granted.
(b) Stock Option. In connection with her promotion to CEO and the
execution of this Agreement, the Executive has been granted a
ten-year time-vested non-qualified stock option (the
"Option"), to acquire 200,000 shares of the Company's common
stock ("Shares") under the Company's 2003 Equity Incentive
Plan, as amended (the "2003 Plan"). The exercise price per
Share shall be equal to the Fair Market Value (as defined in
the 2003 Plan) of a Share on the date of Board approval of
this Agreement, which shall be the date of grant of the
Option. The Option shall become vested and exercisable with
respect to an aggregate of 66,666 Shares on the first
anniversary of the Effective Date and with respect to an
additional 66,667 Shares on each of the second and third
anniversaries of the Effective Date, provided the Executive
has remained continuously employed by the Company until the
applicable date (except as provided in this Agreement).
Subject to the provisions herein, the Option shall contain
such other terms and conditions as are set forth in the
Company's standard form of stock option agreements, which
shall include, but not be limited to, accelerated
exercisability upon the occurrence of a "change in control",
which term shall have the same meaning as the term
"Acceleration Event," as defined in the 2003 Plan (hereinafter
referred to as a "Change in Control").
(c) Time-Vested Restricted Stock. In connection with her promotion
to CEO and the execution of this Agreement, the Executive has
been granted an aggregate of 200,000 time-vested restricted
Shares (the "Time-Vested Restricted Shares") under the 2003
Plan, subject to approval by the Company's shareholders at the
Company's 2006 annual meeting of an amendment to the 2003 Plan
increasing the number of shares available for issuance under
the 2003 Plan (the "Amendment"), which Amendment the Board has
approved concurrently with its approval of this Agreement. An
aggregate of 66,666 Time-Vested Restricted Shares shall vest
on, and be delivered to the Executive promptly following, the
first anniversary of the Effective Date, and an aggregate of
66,667 Time-Vested Restricted Shares shall vest on, and be
delivered to the Executive promptly following, each of the
second and third anniversaries of the Effective Date, in each
case, provided the Executive has remained continuously
employed by the Company until the applicable anniversary date
(except as provided in this Agreement). The Company shall
enter into a restricted stock award agreement with the
Executive for the above grant of Time-Vested Restricted
Shares, incorporating the vesting terms in this Agreement and
otherwise on the terms and conditions set forth in the
Company's standard form of restricted stock award agreement,
which shall include, but not be limited to, accelerated
vesting upon the occurrence of a Change in Control.
(d) Performance-Based Restricted Stock Grant. In connection with
her promotion to CEO and the execution of this Agreement, the
Executive has been granted an aggregate of 200,000
performance-based restricted Shares (the "Performance-Based
Restricted Shares") under the 2003 Plan, subject to
shareholder approval of the Amendment. An aggregate of 66,666
Performance-Based Restricted Shares shall be eligible to vest
and be delivered to the Executive on the March 15 following
the end of the Company's 2006 fiscal year, and an aggregate of
66,667 Performance-Based Restricted Shares shall be eligible
to vest and be delivered to the Executive on the March 15
following the end of the Company's 2007 and 2008 fiscal years,
in each case subject to the attainment by the Company of
specified corporate performance goals with respect to the
applicable fiscal year, as determined by the Compensation
Committee and approved by the Board. A portion of the
Performance-Based Restricted Shares scheduled to vest on the
March 15 following the end of a particular fiscal year may
vest and be delivered to Executive upon partial achievement of
performance goals for such fiscal year, as determined by the
Compensation Committee. Any portion of the Performance-Based
Restricted Shares scheduled to vest on the March 15 following
the end of a particular fiscal year which do not so vest shall
be immediately forfeited. The Company shall enter into a
restricted stock award agreement with the Executive for the
above grant of Performance-Based Restricted Shares,
incorporating the vesting terms in this Agreement and
otherwise on the terms and conditions set forth in the
Company's standard form of restricted stock award agreement,
which shall include, but not be limited to, accelerated
vesting upon the occurrence of a Change in Control.
(e) Ongoing Annual Equity Grants. The Executive shall be eligible
to receive, in the discretion of the Compensation Committee,
additional annual equity grants during the Term, which grants,
if made, shall be in amounts consistent with the Executive's
position as CEO and appropriate with respect to the annual
grants made to other senior executives of the Company.
(f) Other Benefits. During the Executive's employment hereunder,
the Executive shall continue to be entitled to participate in
all other employee benefit plans, programs and arrangements of
the Company, as now or hereinafter in effect, which are
applicable to the Company's employees generally or to its
executive officers, as the case may be, subject to and on a
basis consistent with the terms, conditions and overall
administration of such plans, programs and arrangements;
provided, however, that the Executive hereby acknowledges and
agrees that she will not participate in the Company's Special
Severance Plan. During the period of the Executive's
employment hereunder, the Executive shall be entitled to
participate in and receive any fringe benefits or perquisites
which may become available to the Company's executive
employees. Without limiting the generality of the foregoing,
the Company shall provide the Executive with reimbursement of
expenses incurred by the Executive for financial, tax and real
estate planning services in an amount not to exceed $25,000
per year.
(g) Vacations and Other Leaves. The Executive shall be eligible
for a paid time off bank of 25 days per year and paid holidays
and sick days, all as determined in accordance with applicable
Company plans and policies.
(h) Expenses. During the Executive's employment hereunder, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable and customary expenses incurred by the
Executive in performing services hereunder, including all
expenses of travel and accommodations while away from home on
business or at the request of and in the service of the
Company; provided that, such expenses are incurred and
accounted for in accordance with the policies and procedures
established by the Company.
(i) Life Insurance. During the Term of this Agreement and
throughout the Severance Period (as defined in Section
6A(d)(3)), the Company shall maintain a supplemental life
insurance policy on behalf of the Executive which provides for
a death benefit equal to no less than seven million dollars
($7,000,000), the proceeds of which shall be paid upon the
death of the Executive to the beneficiary designated by the
Executive.
(j) Transportation. During the Executive's employment hereunder,
for security purposes the Company shall require that the
Executive be transported by a car and driver as provided by
the Company with the full cost of such transportation
grossed-up for taxes to be paid by the Company.
6. Termination. (a) The Executive's employment hereunder may be
terminated without breach of this Agreement only under the following
circumstances:
(i) Death. The Executive's employment hereunder shall
terminate upon her death.
(ii) Cause. The Company may terminate the Executive's
employment hereunder for "Cause." For purposes of this
Agreement, the Company shall have "Cause" to terminate
the Executive's employment hereunder upon (1) the
Executive's conviction for the commission of any act
or acts constituting a felony under the laws of the
United States or any state thereof, (2) action by the
Executive toward the Company involving dishonesty, (3)
the Executive's refusal to abide by or follow
reasonable written directions of the Board, which does
not cease within ten business days after such written
notice regarding such refusal has been given to the
Executive by the Board, (4) the Executive's gross
nonfeasance which does not cease within ten business
days after written notice regarding such nonfeasance
has been given to the Executive by the Board, or (5)
failure of the Executive to comply with the provisions
of Section 7 (prior to cessation of employment
following a Change of Control of the Company) or 8 of
this Agreement, or other willful conduct by the
Executive which is intended to have and does have a
material adverse impact on the Company.
(iii) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the
Executive shall have been absent from her duties
hereunder on a full-time basis for the entire period
of six (6) consecutive months, and within thirty (30)
days after written Notice of Termination (as defined
in Section 6(b) below) is given (which may occur
before or after the end of such six (6) month period)
shall not have returned to the performance of her
duties hereunder on a full-time basis, the Executive's
employment hereunder shall terminate for "Disability".
(iv) Termination by the Executive for Good Reason. The
Executive may terminate her employment hereunder for
"Good Reason." For purposes of this Agreement, the
Executive shall have "Good Reason" to terminate her
employment hereunder (1) upon a failure by the Company
to comply with any material provision of this
Agreement which has not been cured within ten business
days after notice of such noncompliance has been given
by the Executive to the Company, (2) upon action by
the Company resulting in a diminution of the
Executive's title or authority, (3) upon the Company's
relocation of the Executive's principal place of
employment outside of the New York City metropolitan
area, or (4) one year after a Change in Control.
(v) Termination by the Executive without Good Reason and
Termination by the Company without Cause. The Company
may terminate the Executive's employment hereunder
without Cause and the Executive may terminate her
employment voluntarily hereunder without Good Reason.
(b) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than
termination under Section 6(a)(i) hereof) shall be communicated
by written Notice of Termination to the other party hereto in
accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision
so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
the Executive's employment is terminated by her death, the date
of her death, (ii) in the event that the Term shall expire as a
result of a Non-Renewal Notice provided by the Company to the
Executive, the date of the expiration of the then current Term,
and (iii) in each other case, the date specified in the Notice
of Termination; provided that, if within thirty days after any
Notice of Termination is given, the party receiving such Notice
of Termination notifies the other party that a dispute exists
concerning the characterization for purposes of this Agreement
of such termination and if the party disputing such matter
prevails in such dispute as evidenced by a binding and final
arbitration award, then the Date of Termination shall
retroactively be adjusted to be the date specified as such in
the award or, if no date is so specified, then as of the date
on which such award is issued.
6A. Compensation Upon Termination or During Disability.
(a) Disability. During any period that the Executive fails to
perform her duties hereunder as a result of incapacity due to
physical or mental illness, the Executive shall continue to
receive her full salary at the rate then in effect for such
period and other applicable benefits provided to active
employees until her employment is terminated pursuant to
Section 6(a)(iii) hereof. Subject to the provisions of Section
7 hereof, in the event the Executive's employment is
terminated pursuant to Section 6(a)(iii) hereof, then
(i) as soon as practicable thereafter, the Company shall
pay the Executive all unpaid amounts, if any, to which
the Executive is entitled as of the Date of
Termination under Section 5(a) hereof and shall pay or
provide to the Executive, in accordance with the terms
of the applicable plan or program, all other unpaid
amounts and benefits to which Executive is then
entitled under any compensation or benefit plan or
program of the Company (collectively, "Accrued
Obligations");
(ii) following the Date of Termination and for a period of
eighteen (18) months thereafter, the Company shall pay
the Executive monthly an amount equal to (x) the
quotient of (A) the sum of (1) the Executive's annual
base salary at the rate in effect as of the Date of
Termination and (2) the Severance Bonus (as defined in
Section 6A(d)(2)(B)(i), except that only the
Executive's annual Bonus under the Performance Plan or
any successor plan (and no bonuses under the Long-Term
Plans or any successor plan) shall be taken into
account in calculating the Severance Bonus for
purposes of this paragraph (ii)), divided by (B) the
number twelve (12) (such quotient being referred to
herein as the "Severance Payments"), minus (y) any
amounts payable to the Executive during such month as
a disability benefit under a Company paid plan;
thereafter, the Executive shall be eligible to receive
payments pursuant to the Company's applicable
short-term and long-term disability plans; provided,
however, that the Company shall provide the Executive
with a supplemental long-term disability benefit with
a total monthly benefit such that her aggregate annual
long-term disability benefit is not less than sixty
percent (60%) of the Executive's annual base salary in
effect on the Date of Termination;
(iii) as of the Date of Termination, all outstanding stock
options, restricted Shares and other equity-based
awards granted to the Executive prior to the Effective
Date (including any such awards granted at the time of
execution of the Prior Agreement) shall continue to be
governed by their respective terms (including, as
applicable, the terms set forth in the Prior
Agreement);
(iv) as of the Date of Termination, all outstanding stock
options granted to the Executive on or after the
Effective Date (including the Option granted pursuant
to Section 5(b) hereof) shall become vested and
exercisable and shall remain exercisable for the
period set forth in the relevant stock option
agreement and plan under which each was granted and
all then outstanding time-vested restricted shares
granted on or after the Effective Date (including the
Time-Vested Restricted Shares granted pursuant to
Section 5(c) hereof) shall vest and be promptly
delivered to the Executive;
(v) on the Date of Termination, a pro rata portion of all
then outstanding performance-based restricted shares
granted on or after the Effective Date (including the
Performance-Based Restricted Shares granted pursuant
to Section 5(d) hereof) which are scheduled to vest on
the March 15 following the end of the fiscal year in
which the Date of Termination occurs shall vest as of
such March 15 and shall be delivered to the Executive
as soon as practicable thereafter, such pro rata
portion to be based on actual performance for such
fiscal year and the number of days during such fiscal
year that the Executive remained employed by the
Company through the Date of Termination; and
(vi) continued medical and welfare benefits shall be
provided to the Executive and her dependents for a
period of eighteen (18) months following the Date of
Termination with the full cost to be paid by the
Company.
(b) Death. If the Executive's employment is terminated by her
death, the Company shall pay to the person(s) or entity set
forth in Section 9(b) hereof the Accrued Obligations, the
proceeds of the supplemental life insurance policy as
described in Section 5(i) and all then outstanding equity
awards shall be treated as set forth in Sections
6A(a)(iii)-(v) hereof.
(c) Termination for Cause; Voluntary Termination Without Good
Reason. If the Executive's employment is terminated by the
Company for Cause or voluntarily by the Executive for other
than Good Reason (including by reason of the expiration of the
Term of this Agreement as a result of a Non-Renewal Notice
having been given by the Executive), the Company shall pay the
Accrued Obligations to the Executive at the time(s) set forth
in Section 6A(a)(i) hereof and the Company shall have no
further payment obligations to the Executive under this
Agreement. All outstanding equity awards granted on or after
the Effective Date which are not then vested or exercisable
(as the case may be) shall be immediately forfeited and shall
terminate. All outstanding equity awards granted to the
Executive prior to the Effective Date shall be treated in
accordance with the Prior Agreement or the respective plans
and award agreements under which they were granted.
(d) Termination Without Cause; Termination for Good Reason;
Non-Renewal. If (i) the Company shall terminate the
Executive's employment other than for Disability pursuant to
Section 6(a)(iii) or for Cause, (ii) the Executive shall
terminate her employment for Good Reason, or (iii) the Term of
this Agreement expires as a result of a Non-Renewal Notice
having been provided by the Company, then, subject to the
provisions of Sections 7 and 8 hereof:
(1) the Company shall pay the Accrued Obligations to the
Executive at the time(s) set forth in Section 6A(a)(i) hereof
and shall continue to provide health, medical and life
insurance benefits to the Executive with the full cost to be
paid by the Company for the greater of the term of the
Agreement or eighteen (18) months (but in no event later than
the end of the second calendar year following the calendar
year in which the Date of Termination occurs); and, if
permissible, COBRA benefits will commence after the applicable
period has expired); provided, however that the Company's
obligation to provide such continued health and medical
benefits shall be reduced to the extent that equivalent
coverages and benefits (determined on a coverage-by-coverage
and benefit-by-benefit basis) of the same type are received by
or made available by a subsequent employer to the Executive
during such time (and the Executive within a reasonable period
of time will notify the Company with respect to any such
benefits received by or made available to the Executive);
(2) (A) unless clause (B) below applies, then following the
Date of Termination and for the longer of eighteen (18) months
thereafter or the remaining Term of this Agreement, the
Company shall pay to the Executive monthly an amount equal to
the Severance Payments (as defined in Section 6A(a)(ii)
hereof) and all equity awards shall be treated as set forth in
Sections 6A(a)(iii)-(v) hereof, or
(B) in the event the Date of Termination occurs following a
Change in Control, then,
(i) within five days after the Date of Termination, the
Company shall pay to the Executive in a lump sum an amount
equal to the product of (X) three (3), multiplied by (Y) the
sum of the Executive's annual salary at the rate in effect as
of the Date of Termination plus the Severance Bonus (as
defined below). Severance Bonus shall mean: (I) if the Date of
Termination occurs on or after the end of the Company's 2006
fiscal year, the average of the total bonuses earned by the
Executive, including bonuses earned under the Performance
Plan, the Long-Term Plans and all successor plans, in the
three (or fewer) fiscal years of the Company ended immediately
prior to the Date of Termination (excluding fiscal years prior
to the Company's 2006 fiscal year); or (II) if the Date of
Termination occurs on or prior to the end of the Company's
2006 fiscal year, the greater of (i) the total bonuses earned
by the Executive for the fiscal year ended coincident with or
immediately prior to the Date of Termination, or (ii) 100% of
the target bonus for the year in which the Date of Termination
occurs;
For purposes of this subsection (2)(B): (I) if the Date of
Termination occurs prior to the occurrence of a Change in
Control but during the pendency of a Potential Change in
Control (as hereinafter defined), such Date of Termination
shall be deemed to have occurred following a Change in
Control, and (II) a "Potential Change in Control" shall be
deemed to have occurred if the event set forth in any one of
the following clauses shall have occurred:
(i) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in
Control;
(ii) the Company or any person (as defined in Section
3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as modified and used in
Sections 13(d) and 14(d) thereof (a "Person"), except
that such term shall not include (w) the Company or
any of its subsidiaries, (x) a trustee or other
fiduciary holding securities under an employee benefit
plan of the Company or any of its affiliates, (y) an
underwriter temporarily holding securities pursuant to
an offering of such securities, or (z) a corporation
owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as
their ownership of stock of the Company) publicly
announces an intention to take or to consider taking
actions which, if consummated, would constitute a
Change in Control;
(iii) any Person becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing
15% or more of either the then outstanding shares of
common stock of the Company or the combined voting
power of the Company's then outstanding securities
(not including the securities beneficially owned by
such Person or any securities acquired directly from
the Company); or
(iv) the Board of Directors adopts a resolution to the
effect that, for purposes of this subsection (2), a
Potential Change in Control has occurred. The pendency
of a Potential Change in Control shall immediately
cease upon the adoption of a resolution of the
Company's Board of Directors to that effect.
(3) For purposes of this Agreement, the period during or with
respect to which the Executive is entitled to receive payments
hereunder is referred to as the "Severance Period";
(4) all outstanding stock options granted to the Executive
(including the Option granted pursuant to Section 5(b) hereof)
and all outstanding restricted shares granted to the Executive
(including the Time-Vested Restricted Shares and the
Performance-Based Restricted Shares granted pursuant to
Sections 5(c) and 5(d), respectively) shall be governed by the
respective plans and award agreements under which each such
award was granted; and
(5) the Executive shall be provided with outplacement services
commensurate with her position.
(e) Gross-Up Payment. In the event that any payment or benefit
received or to be received by the Executive in connection with
a Change in Control or the termination of the Executive's
employment, whether such payments or benefits are received
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated
with the Company or such person (all such payments and
benefits being hereinafter called "Total Payments"), would be
subject (in whole or part), to the tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to the
Executive such additional amounts (the "Gross-Up Payment") as
may be necessary to place the Executive in the same after-tax
position as if no portion of the Total Payments had been
subject to the Excise Tax. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
(including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments.
(f) Compliance with Section 409A. Notwithstanding anything in this
Agreement to the contrary, in the event that the Executive is
deemed to be a "specified employee" within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended
("Section 409A"), no payment that is "deferred compensation"
subject to Section 409A shall be made to the Executive prior
to the date that is six (6) months after the date of
separation from service (as defined in Section 409A)(or, if
earlier, the Executive's date of death). In such event, the
payments subject to the six (6) month delay will be paid in a
lump sum on the earliest permissible payment date.
7. Nonsolicitation; Noncompete. Subject to (c) below, during the
period of the Executive's employment, during the period she is receiving
Severance Payments hereunder and, in the case where the Executive's
employment is terminated for Cause or the Executive voluntarily terminates
her employment without Good Reason, for a period of twelve months
following such termination, the Executive shall not initiate discussions
with any person who is then an executive employee of the Company (i.e.,
director level or above) with the intent of soliciting or inducing such
person to leave his or her employment with a view toward joining the
Executive in the pursuit of any business activity (whether or not such
activity involves engaging or participating in a Competitive Business, as
defined below). Notwithstanding any other provision of this Agreement to
the contrary, in the event the Executive fails to comply with the
preceding sentence, all rights of the Executive and her surviving spouse
or other beneficiary hereunder to any future Severance Payments and
continuing life insurance and medical coverage and all rights with respect
to restricted stock and exercisability of stock options shall be
forfeited; provided that, the foregoing shall not apply if such failure of
compliance commences following a Change in Control.
(a) Subject to (c) below, as long as the Executive receives
Severance Payments, or in the case where the Executive's
employment is terminated for Cause or the Executive
voluntarily terminates her employment without Good Reason, for
a period of twelve months following such termination, the
Executive shall not, without the prior written consent of the
Company (which consent shall not be unreasonably withheld),
engage or participate in any business which is "in
competition" (as defined below) with the business of the
Company or any of its 50% or more owned affiliates (such
business being referred to herein as a "Competitive
Business"). Notwithstanding any other provision of this
Agreement to the contrary, in the event the Executive fails to
comply with the preceding sentence, all rights of the
Executive and her surviving spouse or other beneficiary
hereunder to any future Severance Payments, and continuing
life insurance and medical coverage and all rights with
respect to restricted stock and exercisability of stock
options shall be forfeited; provided that, the foregoing shall
not apply if such failure of compliance commences following a
Change in Control.
(b) In the event of a violation of Sections 7(a) or 7(b) hereof,
the remedies of the Company shall be limited to (i) if such
violation occurs during the period of Executive's employment
hereunder, termination of the Executive for Cause and the
associated rights of the Company specified herein resulting
therefrom, (ii) regardless of when such violation occurs,
forfeiture by the Executive of the payments, benefits and
other rights set forth in sections (a) and (b) above if and to
the extent provided in such sections, and (iii) the right to
seek injunctive relief in accordance with and to the extent
provided in Section 14 hereof; provided such injunctive relief
may only be sought for competitive activity under Section (b)
above if such activity occurs during employment or after
Executive's dismissal for Cause or Executive voluntarily
terminates her employment for Good Reason.
(c) For purposes hereof, a business will be "in competition" with
the business of the Company or its 50% or more owned
affiliates only if (i) the Company's business with which the
other business competes accounted for 20% or more of the
Company's consolidated revenues as of the end of its most
recently completed fiscal year prior to the Date of
Termination, and (ii) the entity (including all 50% or more
owned affiliates) through which the other business is or will
be operated maintains a "women's apparel" business which
generated at least $100 million in revenue during the entity's
most recently completed fiscal year ended prior to the date
the Executive commences (or proposes to commence) to engage or
participate in the other business. For purposes hereof,
"women's apparel" shall consist of dresses, jackets, pants,
shorts, skirts, blouses, sweaters, T-shirts, outerwear,
footwear and accessories.
(d) Notwithstanding the foregoing, the Executive's engaging in the
following activities shall not be construed as engaging or
participating in a Competitive Business: (i) investment
banking; (ii) passive ownership of less than 2% of any class
of securities of a public company; (iii) engaging or
participating in noncompetitive businesses of an entity which
also operates a business which is "in competition" with the
business of the Company or its affiliates; (iv) serving as an
outside director of an entity which operates a business which
is "in competition" with the business of the Company or its
affiliates, so long as such business did not account for 10%
or more of the consolidated revenues of such entity as of the
end of its most recently completed fiscal year prior to the
date the Executive commences (or proposes to commence) serving
as an outside director; (v) engaging in a business involving
licensing arrangements so long as such business is not an
in-house arrangement for any entity "in competition" with the
business of the Company or its affiliates; (vi) affiliation
with an advertising agency, and (vii) after cessation of
employment, engaging or participating in the "wholesale" side
of the women's apparel business, which for purposes hereof
shall mean the design, manufacture and sale of piece goods and
women's apparel to unrelated third parties, provided that if
the entity for which the Executive so engages or participates
(including its affiliates) also conducts a retail women's
apparel business, then effective upon the Executive's engaging
or participating in such business, all continuing life
insurance and medical coverage provided by the Company shall
cease and all Severance Payments shall cease except for
amounts representing the excess (if any) of the Executive's
annual base salary hereunder (at the rate in effect as of the
Date of Termination) over the Executive's base salary received
from such entity and its affiliates, which amounts shall
continue to be paid by the Company for the remainder of the
period in which the Executive is entitled to receive Severance
Payments hereunder. The exceptions contained in subsection
(vii) above and subsection (iii) above to the extent covered
by subsection (vii) shall not be applicable if the Executive's
cessation of employment is voluntary by the Executive without
Good Reason and her new engagement or participation involves
"wholesale" operations which include or also conduct retail
sales of women's apparel other than factory outlet or discount
stores to liquidate unsold women's apparel of such wholesale
operations.
8. Protection of Confidential Information.
(a) The Executive acknowledges that her employment by the Company
will, throughout the Term of this Agreement, involve her
obtaining knowledge of confidential information regarding the
business and affairs of the Company. In recognition of the
foregoing, the Executive covenants and agrees that:
(i) except in compliance with legal process, she will keep
secret all confidential matters of the Company which
are not otherwise in the public domain and will not
intentionally disclose them to anyone outside of the
Company, wherever located (other than to a person to
whom disclosure is reasonably necessary or appropriate
in connection with the performance by Executive of her
duties as an executive officer of the Company), either
during or after the Term, except with the prior
written consent of the Board of Directors or a person
authorized thereby; and
(ii) she will deliver promptly to the Company on
termination of her employment or at any other time the
Company may so request, all memoranda, notes, records,
customer lists, reports and other documents (and all
copies thereof) relating to the business of the
Company which she obtained while employed by, or
otherwise serving or acting on behalf of, the Company
and which she may then possess or have under her
control.
(b) Notwithstanding the provisions of Section 14 of this
Agreement, if the Executive commits a breach of the provisions
of Section 8(a)(i) or 8(a) (ii), the Company shall have the
right and remedy to have such provisions specifically enforced
by any court having equity jurisdiction, it being acknowledged
and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages
will not provide an adequate remedy to the Company.
9. Successors; Binding Agreement.
(a) Neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the
Executive (except by will or by operation of the laws of
intestate succession) or by the Company, except that the
Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as she
would be entitled to hereunder if she terminated her
employment for Good Reason except that for purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean
the Company as herein before defined and any successor to its
business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 9 or which
otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees. If the Executive
should die while any amounts would still be payable to her
hereunder if she had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there is no such designee,
to the Executive's estate.
10. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when (i) personally
delivered to the Executive or an executive officer of the Company, (ii)
five (5) business days after being mailed by United States certified or
registered mail, return receipt requested, postage prepaid, or (iii) one
business day after being shipped by an overnight courier service, to the
address as follows:
If to the Company:
AnnTaylor Stores Corporation
7 Times Square
New York, New York 10036
Attn: General Counsel
If to the Executive:
Katherine Lawther Krill
333 Stamford Avenue
Stamford, Connecticut 06902
With a copy to:
Howard Pianko, Esq.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
or to such other address as a party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
11. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by the Executive and such officer of the
Company as may be specifically designated by the Board of Directors. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without
regard to its conflicts of law principles. All payments hereunder shall be
subject to applicable Federal, State and local tax withholding
requirements.
12. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
14. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators in New York
City in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction; provided that, the Company shall be entitled to
seek a restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of the
provisions of Section 7 or 8 of the Agreement and the Executive hereby
consents that such restraining order or injunction may be granted without
the necessity of the Company's posting any bond and further provided that,
the Executive shall be entitled to seek specific performance of her right
to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
Each party shall bear its own costs and expenses (including, without
limitation, legal fees) in connection with any arbitration proceeding
instituted hereunder; provided that the Company shall pay directly or
reimburse the Executive for any legal fees incurred by Executive in any
arbitration in which she prevails.
15. Payment of Fees. The Company shall reimburse the Executive for all
legal and consulting fees incurred in connection with the preparation and
negotiation of this Agreement in an amount not to exceed $110,000.
16. Section 409A. This Agreement is intended to comply with the
requirements of Section 409A and shall be interpreted accordingly. In the
event that any provision of this Agreement would or may cause this
Agreement to fail to comply with Section 409A, such provision may be
deemed null and void and the Company and the Executive agree to amend or
restructure this Agreement, to the extent necessary and appropriate to
avoid adverse tax consequences under Section 409A.
17. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein
and supersedes any other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party
hereto, including without limitation, and the Prior Agreement which is
replaced hereby as of the Effective Date, except that any equity awards
granted prior to the Effective Date shall continue to be governed by the
Prior Agreement and the respective plans and award agreements under which
such awards were granted.
ANNTAYLOR STORES CORPORATION
By: /s/ Ronald W. Hovsepian
--------------------------------
Name: Ronald W. Hovsepian
Title: Non-Executive Chairman
of the Board
EXECUTIVE
/s/ Katherine Lawther Krill
------------------------------
Katherine Lawther Krill