Exhibit 10.5
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January
29, 2002, between ANNTAYLOR STORES CORPORATION, a Delaware
corporation (the "Company"), and J. XXXXXXX XXXXXXXXX (the
"Executive").
WHEREAS, the Company desires to provide for the continued
services and employment of the Executive with the Company and the
Executive wishes to provide such services and to continue his
employment with the Company, all in accordance with the terms and
conditions provided herein.
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 employ the
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Executive, and the Executive hereby agrees to be employed by and
to serve the Company, effective as of January 29, 2002 (the
"Effective Date"), on the terms and conditions set forth herein.
2. TERM. The term of this Agreement shall commence on the
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Effective Date hereof and terminate on May 31, 2005, unless
further extended or sooner terminated as provided in this
Agreement. Commencing on June 1, 2005, and on each anniversary of
such date thereafter (each date, an "Anniversary Date"), the term
of the Executive's employment shall automatically be extended for
one additional year, unless not later than six months prior to
such Anniversary Date either party shall have given notice (a
"Nonrenewal Notice") to the other party 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 Paragraphs 3(b), 9 and 10 hereof shall
continue in effect.
3. NATURE OF PERFORMANCE.
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(a) POSITION AND DUTIES. The Executive shall serve as Chairman
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of the Board and Chief Executive Officer of the Company and shall
have such responsibilities, duties and authority consistent with
such positions as may from time to time be determined by the
Board of Directors of the Company (the "Board"). The Executive
shall report directly to the Board. The Executive shall devote
substantially all of his working time 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
prior approval of the Board (which approval shall not be
unreasonably withheld), serving on the board of directors of any
other corporation.
(b) INDEMNIFICATION. To the fullest extent permitted by law and
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the Company's certificate of incorporation and bylaws, the
Company shall indemnify the Executive for all amounts (including,
without limitation, judgments, fines, 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. Following the
Term, the Company shall continue to indemnify the Executive with
respect to such services performed during the Term, to the same
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extent as the Company indemnifies its officers, directors,
employees and fiduciaries, as applicable. Executive shall be
provided director and officer liability insurance coverage by the
Company on the same terms and conditions as that being provided
to any other director and officer of the Company from time to
time during the Term hereof.
4. PLACE OF PERFORMANCE. In connection with the Executive's
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employment by the Company, the Executive shall be based at the
principal executive offices of the Company in the City of New
York or at such other principal executive office in the New York
City Metropolitan Area as the Company may hereafter maintain,
except for required travel on the Company's business. The Company
is aware that Executive maintains his principal residence and his
family resides in Columbus, Mississippi. The Company has been
advised by Executive that he intends to continue to maintain such
residence which will require Executive to commute at Executive's
sole cost and expense between the Company's headquarters and his
residence in Mississippi on a regular basis to which the Company
has no objection.
5. COMPENSATION AND RELATED MATTERS.
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(a) ANNUAL COMPENSATION.
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(i) BASE SALARY. During the period of the Executive's employment
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hereunder, the Company shall pay to the Executive an annual base
salary at a rate not less than $850,000, 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 so increased, shall not thereafter be decreased during
the Term of this Agreement. Compensation of the Executive by
salary payments shall not be deemed exclusive and shall not
prevent the Executive from participating in any other
compensation or benefit plan of the Company. The salary payments
(including any increased salary payments) hereunder shall not in
any way limit or reduce any other obligation of the Company
hereunder, and no other compensation, benefit or payment
hereunder shall in any way limit or reduce the obligation of the
Company to pay the Executive's salary hereunder.
(ii) ANNUAL BONUS. During the period of Executive's employment
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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; provided that, notwithstanding any contrary
provisions of such bonus plan, unless the Executive's employment
is terminated by the Company for Cause (as defined in Paragraph
6(c) hereof) or by the Executive other than for Good Reason, as
defined in Paragraph 6(d)(1) hereof), the Executive shall be
entitled to receive any Bonus paid with respect to any bonus
period completed on or prior to the Date of Termination or, in
the case a Nonrenewal Notice is given by the Company, through the
scheduled expiration date of the Term (even if the Executive
terminates his employment prior to such scheduled expiration date
for Good Reason under Paragraph 6(d)(1)(v) hereof). The Company
currently maintains a Management Performance Compensation Plan
(the "Performance Plan") pursuant to which it pays performance
bonus compensation to certain of its executives and employees. It
is agreed that Executive shall participate in the Performance
Plan. Executive's Performance Percentage (as that term is defined
in the Performance Plan) shall be established at 80% per annum
during the Term. Executive shall also participate in the Long
Term Cash Incentive Compensation Plan currently maintained by the
Company and his Target Award (as defined in such plan) shall be
50%.
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(b) STOCK OPTIONS.
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(1) The Executive will be granted a time-vested Non-Qualified
Stock Option to acquire one hundred fifty thousand (150,000)
shares of the Company's Common Stock (the "Option Shares")
under the Company's 2002 Stock Option and Restricted Stock
and Unit Award Plan (the "Option Plan") with an exercise
price equal to the fair market value (as defined under the
Option Plan) of the Common Stock on the Effective Date. The
option shall vest and become exercisable with respect to
one-third of the Option Shares on each of the first three
anniversaries of the Effective Date, provided Executive has
remained continuously employed by the Company until the
applicable date (except as provided in Paragraph 7(d)(5)
hereof). The Executive shall be eligible to receive
additional options under the Option Plan or other and
additional option plans as may be adopted by the Company
during the term hereof, taking into account, among other
things, Executive's performance and position with the
Company.
(2) The Executive will be granted a performance vested
Non-Qualified Stock Option to acquire one hundred fifty
thousand (150,000) shares of the Company's Common Stock
("Performance Option Shares") under the Option Plan with an
exercise price equal to the fair market value (as defined
under the Option Plan) of the Company's Common Stock on the
Effective Date. Such option shall vest and become
exercisable, provided Executive has remained continuously
employed by the Company until the applicable date (except as
provided in Paragraph 6(d)(5) hereof), as follows:
(i) options to purchase 50,000 Performance Option
Shares shall vest and become exercisable as
of March 15, 2003, if the Company shall have
achieved earnings per share for fiscal year
2002 of at least the target earnings per
share set forth in Exhibit A attached hereto;
(ii) options to purchase 50,000 Performance Option
Shares shall vest and become exercisable as
of March 15, 2004, if the Company shall have
achieved earnings per share for fiscal year
2003 of at least the target earnings per
share set forth in Exhibit A attached hereto;
and
(iii)options to purchase 50,000 Performance Option
Shares shall vest and become exercisable as
of March 15, 2005, if the Company shall have
achieved earnings per share for fiscal year
2004 of at least the target earnings per
share set forth in Exhibit A attached hereto;
(3) In addition,
A. if the Company's earnings per share for fiscal
year 2002 greater than the target earnings per
share set forth in Exhibit A attached hereto for
such fiscal year, then in addition to the
50,000 options to purchase Performance Option
Shares that vest and become exercisable as of
March 15, 2003, a portion of the options to
purchase Performance Option Shares eligible
to vest on March 15, 2004 shall vest and
become exercisable as of March 15, 2003
calculated as follows: 50,000 multiplied by
the "Increase Percentage" (as defined
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herein); As used herein, the term "Increase
Percentage" means the difference between the
actual earnings per share for a fiscal year
and the target earnings per share set forth
in Exhibit A attached hereto for such fiscal
year divided by the target earnings per share
for such fiscal year set forth in Exhibit A
attached hereto.
B. if the Company's earnings per share for fiscal year
2003 are greater than the target earnings per
share for such fiscal year set forth in Exhibit
A attached hereto, then in addition to the
50,000 options to purchase Performance Option
Shares that vest and become exercisable as of
March 15, 2004, a portion of the options to
purchase Performance Option Shares eligible
to vest on March 15, 2005 shall vest and
become exercisable as of March 15, 2004
calculated as follows: 50,000 multiplied by
the Increase Percentage.
C. if the Company's earnings per share for fiscal
years 2002, 2003 and/or 2004 are less than 100%
but at least 90% of the target earnings per share
for such fiscal year set forth in Exhibit A
attached hereto, then the number of the
options to purchase Performance Option Shares
that vest and become exercisable for any such
fiscal year shall be calculated as follows:
50,000 multiplied by the "Decrease
Percentage" (as defined herein). As used
herein, the term "Decrease Percentage" means
the quotient obtained by dividing the actual
earnings per share for a fiscal year by the
target earnings per share set forth in
Exhibit A for such fiscal year;
D. if the Company shall not have achieved the target
earnings per share set forth in Exhibit A attached
hereto for fiscal years 2002, 2003 and/or
2004, but the Company shall have achieved
cumulative earnings per share aggregating at
least the aggregate target earnings per share
for fiscal years 2002 through 2004 set forth
in Exhibit A attached hereto, then any
options to purchase Performance Option Shares
that did not vest and become exercisable,
pursuant to subparagraphs (b)(2)(i) through
(iii) and (b)(3)A through C above, shall vest
and become exercisable as of March 15, 2005;
and
E. any Performance Option Shares that shall not have
vested and become exercisable, pursuant to
subparagraphs (b)(2)(i) through (iii) and (b)(3)A
through D above, as of March 15, 2005, shall lapse
and such portion of the option shall be canceled
immediately upon determination thereof.
The Company shall enter into Stock Option Agreements with
the Executive for the above stock option grants,
incorporating the vesting terms set forth above, and
otherwise substantially on the terms and conditions set
forth in the form of the Company's standard Stock Option
Agreement previously approved by the Compensation Committee
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of the Board of Directors, including, but not limited to,
terms providing for accelerated exercisability.
(c) RESTRICTED STOCK.
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(1) Executive will be granted fifty thousand (50,000)
time-vested restricted shares of Common Stock of the Company
(the "Time Restricted Shares") under the Option Plan on the
Effective Date. One-third of the Time Restricted Shares
shall vest on, and be delivered to the Executive promptly
following, each of the first three anniversaries of the
Effective Date, provided the Executive has remained
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continuously employed by the Company until the applicable
date.
(2) The Executive will be granted fifty thousand (50,000)
performance vested restricted shares of Common Stock of the
Company (the "Performance Restricted Shares") under the
Option Plan on the Effective Date. The Executive's rights
to the Performance Restricted Shares shall vest and the
restrictions thereon shall lapse as follows:
(i) 16,666 Performance Restricted Shares shall
vest and become exercisable as of March 15,
2003, if the Company shall have achieved
earnings per share for fiscal year 2002 of at
least the target earnings per share set forth
in Exhibit A attached hereto;
(ii) 16,667 Performance Restricted Shares shall
vest and become exercisable as of March 15,
2004, if the Company shall have achieved
earnings per share for fiscal year 2003 of at
least the target earnings per share set forth
in Exhibit A attached hereto; and
(iii)16,667 Performance Restricted Shares shall
vest and become exercisable as of March 15,
2005, if the Company shall have achieved
earnings per share for fiscal year 2004 of at
least the target earnings per share set forth
in Exhibit A attached hereto;
(3) In addition,
A. if the Company's earnings per share for
fiscal year 2002 are greater than the target
earnings per share for such fiscal year set
forth in Exhibit A attached hereto, then in
addition to the 16,666 Performance Restricted
Shares that vest as of March 15, 2003, a
portion of the Performance Restricted Shares
eligible to vest on March 15, 2004 shall vest
as of March 15, 2003 calculated as follows:
16,666 multiplied by the "Increase
Percentage";
B. if the Company's earnings per share for
fiscal year 2003 are greater than the target
earnings per share for such Fiscal Year set
forth in Exhibit A attached hereto, then in
addition to the 16,667 Performance Restricted
Shares that vest as of March 15, 2004, a
portion of the Performance Restricted Shares
eligible to vest on March 15, 2005 shall vest
as of March 15, 2004 calculated as follows:
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16,667 multiplied by the "Increase
Percentage" (as defined herein);
C. if the Company's earnings per share for
fiscal years 2002, 2003 and/or 2004 are less
than 100% but at least 90% of the target
earnings per share for such fiscal year set
forth in Exhibit A attached hereto, then the
number of Performance Restricted Shares that
vest for such fiscal year shall be calculated
as follows: 16,666 or 16,667, as the case
may be, multiplied by the "Decrease
Percentage";
D. if the Company shall not have achieved the
target earnings per share set forth in
Exhibit A attached hereto for fiscal years
2002, 2003 and/or 2004, but the Company shall
have achieved cumulative earnings per share
aggregating at least the aggregate target
earnings per share for fiscal years 2002
through 2004 set forth in Exhibit A attached
hereto, then any Performance Restricted
Shares that did not vest pursuant to
subparagraphs (c)(2)(i) through (iii) and
(c)(3)A through C above, shall vest and the
restrictions thereon shall lapse as of March
15, 2005; and
E. any Performance Restricted Shares that shall
not have vested, pursuant to subparagraphs
(c)(2)(i) through (iii) and (c)(3)A through D
above as of March 15, 2005, shall
automatically be forfeited by the Executive.
The Company shall enter into a Restricted Stock Award Agreement
with the Executive for each of the above grants of restricted
shares, incorporating the vesting terms set forth above with
respect to each such grant, and otherwise on the terms and
conditions set forth in the form of Restricted Stock Award
Agreement previously approved by the Compensation Committee of
the Board of Directors for restricted stock awards under the
Option Plan, including, but not limited to, terms providing for
accelerated vesting.
(d) OTHER BENEFITS. During the period of Executive's employment
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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. During
the period of 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
financial planning and tax preparation services on a tax-free
basis.
(e) VACATIONS AND OTHER LEAVES. The Executive shall be entitled
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to an aggregate paid vacation of not less than four (4) weeks for
each twelve (12) month period of the Term hereof. Payment for
any accrued and unused vacation time at the time of termination
of this Agreement shall be in accordance with the Company's
policies at the time of such termination. The Executive shall be
entitled to paid holidays and personal leave days in accordance
with the Company policy covering executive employees.
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(f) EXPENSES. During the period of the Executive's employment
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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. It is understood and agreed by Executive that such
reimbursement shall not cover expenses and costs incurred by him
in connection with his commuting from his principal residence as
described in Paragraph 4 of this Agreement.
(g) SERVICES FURNISHED. The Company shall furnish the Executive
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with office space, stenographic assistance and such other
facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties hereunder.
6. TERMINATION. The Executive's employment hereunder may be
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terminated without breach of this Agreement only under the
following circumstances:
(a) DEATH. The Executive's employment hereunder shall terminate
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upon his death.
(b) DISABILITY. If, as a result of the Executive's incapacity
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due to physical or mental illness, the Executive shall have been
absent from his 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 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 his
duties hereunder on a full-time basis, the Executive's employment
hereunder shall terminate for "Disability."
(c) CAUSE. The Company may terminate the Executive's employment
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hereunder for "Cause". For purposes of this Agreement, the
Company shall have "Cause" to terminate the Executive's
employment hereunder upon (i) 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, (ii) action by
the Executive toward the Company involving dishonesty (other than
good faith expense account disputes), (iii) the Executive's
refusal to abide by or follow written directions of the Board of
Directors, (iv) the Executive's gross nonfeasance which does not
cease within ten (10) business days after notice regarding such
nonfeasance has been given to the Executive by the Company or (v)
failure of the Executive to comply with the provisions of
Paragraph 9 (prior to a cessation of employment following a
Change in Control of the Company) or 10 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.
(d) TERMINATION BY THE EXECUTIVE.
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(1) The Executive may terminate his employment hereunder for
"Good Reason". For purposes of this Agreement, the Executive
shall have "Good Reason" to terminate his employment
hereunder (i) upon a failure by the Company to comply with
any material provision of this Agreement which has not been
cured within ten (10) business days after notice of such
noncompliance has been given by the Executive to the
Company, (ii) upon action by the Company resulting in a
diminution of the Executive's title or authority, (iii) upon
the Company's relocation of the Executive's principal place
of employment outside of the New York City Metropolitan
Area, (iv) one year after a "Change in Control of the
Company" (as defined in Paragraph (d)(2) below) or (v) at
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any time following the expiration of ninety (90) days
following the Company's issuance of a Nonrenewal Notice. The
Executive may terminate his employment voluntarily without
Good Reason upon at least six months' prior notice to the
Company.
(2) For purposes of this Agreement, a "Change in Control of the
Company" will be deemed to have occurred if:
(A) any "person", as such term is used in Paragraphs 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than (1) any person
who on the date hereof is a director or officer of the
Company, (2) any trustee or other fiduciary holding
securities under an employee benefit 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
stock of the corporation ) (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 20% or more of
the combined voting power of the Company's then
outstanding voting securities;
(B) during any period of 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 (A), (C) or (D) of this Paragraph
6(d)(2)) whose election by the Board or nomination for
election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(C) there is consummated a merger or consolidation of the
Company with any other corporation, other than (1) 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 entity) more
than 80% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation or (2) 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 (A) above),
directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power
of the Company's then outstanding securities; or
(D) 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.
(e) NOTICE OF TERMINATION. Any termination of the Executive's
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employment by the Company or by the Executive (other than
termination under Paragraph 6(a) hereof) shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Paragraph 12 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
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the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision to
indicated.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i)
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if the Executive's employment is terminated by his death, the
date of his death, (ii) if the Executive's employment is
terminated pursuant to subparagraph (b) above, the date which is
the later of thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty
(30) day period) or the end of the six (6) consecutive month
period referred to in subparagraph (b) above, and (iii) if the
Executive's employment is terminated pursuant to subparagraph (c)
or (d) above, the date specified in the Notice of Termination;
provided that, if within thirty (30) 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 termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties or by a binding and final
arbitration award.
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
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(a) DISABILITY. During any period that the Executive fails to
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perform his duties hereunder as a result of incapacity due to
physical or mental illness, the Executive shall continue to
receive his full salary at the rate then in effect for such
period and other applicable benefits provided to active employees
until his employment is terminated pursuant to Paragraph 6(b)
hereof. Subject to the provisions of Paragraph 9 hereof, in the
event the Executive's employment is terminated pursuant to
Paragraph 6(b) 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 Paragraph 5(a)
hereof and shall pay to the Executive, in accordance with the
terms of the applicable plan or program, all other unpaid amounts
to which Executive is then entitled under any compensation or
benefit plan or program of the Company (collectively, "Accrued
Obligations"); and
(ii) following the Date of Termination and for a period of twelve
(12) months thereafter (the "Disability Severance Period"), 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 average of the annual bonuses earned by the Executive in
the three fiscal years of the Company ended immediately prior to
the Date of Termination, 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.
(b) DEATH. If the Executive's employment is terminated by his
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death, the Company shall pay to the person(s) or entity set forth
in Paragraph 11(b) hereof the Accrued Obligations and the
Severance Payments at the time(s) set forth in Paragraphs 7(a)(i)
and 7 (a)(ii) hereof.
(c) TERMINATION FOR CAUSE; VOLUNTARY TERMINATION WITHOUT GOOD
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REASON. If the Executive's employment is terminated by the
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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 Nonrenewal Notice having been
given by the Executive), the Company shall pay the Accrued
Obligations to the Executive at the time(s) set forth in
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Paragraph 7(a)(i) hereof and the Company shall have no further
obligations to the Executive under this Agreement.
(d) TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON;
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NONRENEWAL. If (i) the Company shall terminate the Executive's
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employment other than for Disability pursuant to Paragraph 6(b)
or for Cause, (ii) the Executive shall terminate his employment
for Good Reason, or (iii) the Term of this Agreement expires as a
result of a Nonrenewal Notice having been provided by the
Company, then, subject to the provisions of Paragraph 9 hereof:
(1) the Company shall pay the Accrued Obligations to the
Executive at the time(s) set forth in Paragraph 7(a)(i)
hereof;
(2) (A) unless clause (B) below applies, then following the Date
of Termination and for the longer of twelve 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 Paragraph 7(a)(ii)
hereof), or (B) in the event the Date of Termination occurs
following a Change in Control, then, within five (5) 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) the sum of the Executive's base salary at the rate in
effect as of the Date of Termination and the average of the
annual bonuses earned by the Executive in the three fiscal
years of the Company ended immediately prior to the Date of
Termination (or, if higher, in the three fiscal years of the
Company ended immediately prior to the Change in Control)
multiplied by (y) the number three (3). For purposes of this
subparagraph (2): (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
Paragraph 6(d)(2)(A) hereof) 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 in the securities
beneficially owned by such Person any
securities acquired directly from the
Company); or
(iv) the Board adopts a resolution to the effect
that, for purposes of this subparagraph (2),
a Potential Change in Control has occurred.
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11
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) the Executive shall continue to be provided with the same
medical and life insurance coverage as existed immediately
prior to the applicable Notice of Termination or Notice of
Nonrenewal, as the case may be, such coverage to continue
throughout the period with respect to which the Executive is
entitled to receive Severance Payments (or, if clause (B) of
Paragraph 7(d)(2) applies, for a period of three (3) years
following the Date of Termination);
(4) the Executive shall be provided with outplacement services
commensurate with his position;
(5) the Executive shall be entitled to continue to exercise all
outstanding options that were or became exercisable as of
the Date of Termination until the 90th day following
expiration of the period with respect to which the Executive
is entitled to receive Severance Payments (or, if clause (B)
of Paragraph 7(d)(2) applies, following the third
anniversary of the Date of Termination), but in no event
after expiration of the term of such options;
(6) any unvested stock options shall become fully vested and
exercisable and any unvested restricted shares shall become
fully vested ; and
(7) the Company shall pay the Executive, at the same time as
bonuses are paid to other Company executives, a Bonus with
respect to the fiscal year in which occurs the Date of
Termination, such Bonus to be based upon actual performance
for such fiscal year and pro rated to reflect the number of
days in such fiscal year through and including the Date of
Termination.
8. 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 of the Company 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 of the Company 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 the 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 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 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
===============================================================================
12
or additions payable by the Executive with respect of such
excess) at the time that the amount of such excess if 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.
9. NONSOLICITATION; NONCOMPETE.
----------------------------
(a) Subject to (c) below, during the period of Executive's
employment, during the period he is receiving Severance Payments
hereunder and, in the case where the Executive's employment is
terminated for Cause or Executive voluntarily terminates his
employment without Good Reason, for a period of twelve (12)
months following such termination, the Executive shall not
initiate discussions (of a non-isolated nature) 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
Executive fails to comply with the preceding sentence, all rights
of the Executive and his 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 of
the Company.
(b) Subject to (c) below, as long as Executive receives
Severance Payments, or in the case where the Executive's
employment is terminated for Cause or Executive voluntarily
terminates his employment without Good Reason, for a period of
twelve (12) months following such termination, 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 his 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 of the Company.
(c) In the event of a violation of Paragraphs 9(a) or 9(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 and benefits set
forth in paragraphs (a) and (b) above if and to the extent
provided in such paragraphs, and (iii) the right to seek
injunctive relief in accordance with and to the extent provided
in Paragraph 16 hereof; provided, such injunctive relief may only
be sought for competitive activity under Paragraph (b) above if
such activity occurs during employment or after Executive's
dismissal for Cause or Executive voluntarily terminates his
employment without Good Reason.
(d) 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
================================================================================
13
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 "woman's apparel" business which generated at least $50 million
in revenues 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, "woman's apparel" shall consist of dresses,
jackets, pants, skirts, blouses, sweaters, T-shirts, outerwear,
footwear and accessories.
(e) 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 Executive commences (or
proposes to commence) serving as a 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 woman's apparel business, which for
purposes hereof shall mean the design, manufacture and sale of
piece goods and woman's apparel to unrelated third parties,
provided that if the entity for which Executive so engages or
participates (including its affiliates) also conducts a retail
woman's apparel business, then effective upon 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 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 subparagraph (vii) above and
subparagraph (iii) above to the extent covered by subparagraph
(vii) shall not be applicable if Executive's cessation of
employment is voluntary by Executive without Good Reason and his
new engagement or participation involves "wholesale" operations
which include or also conduct retail sales of woman's apparel
other than factory outlet or discount stores to liquidate unsold
woman's apparel of such wholesale operations.
10. PROTECTION OF CONFIDENTIAL INFORMATION.
---------------------------------------
(a) Executive acknowledges that his employment by the Company
will, throughout the Term of this Agreement, involve his
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, he 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 his duties as
an executive officer of the Company), either during or after the
================================================================================
14
Term, except with the prior written consent of the Board or a
person authorized thereby; and
(ii) he will deliver promptly to the Company on termination of his
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 he obtained while
employed by, or otherwise serving or acting on behalf of, the Company and
which he may then possess or have under his control.
(b) Notwithstanding the provisions of Paragraph 16 of this Agreement,
if the Executive commits a breach of the provisions of Paragraphs 10(a)(i)
or 10(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.
11. 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 he would
be entitled to hereunder if he terminated his 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
Paragraph 11 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, distributes, devises and
legatees. If the Executive should die while any amounts would
still be payable to him hereunder if he 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 be no such
designee, to the Executive's estate.
12. 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
personally delivered to the Executive or an executive officer of
the Company, mailed by United States certified or registered
mail, return receipt requested, postage prepaid, or by overnight
courier service, to the address as follows:
If to the Company:
================================================================================
15
AnnTaylor Stores Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
If to the Executive:
J. Xxxxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
or to such other address as any 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.
13. 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. 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.
14. 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.
15. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts and by facsimile signature each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
16. 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 Paragraph 9 of the Agreement during the period of
Executive's employment or following Executive's termination of
employment for Cause or the voluntary termination of employment
by Executive without Good Reason or of Paragraph 10 of this
Agreement at any time, 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 his 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. The Company shall pay
directly or reimburse the Executive for any legal fees incurred
by Executive in connection with any arbitration related to the
last proviso of the preceding sentence and any other arbitration
in which he prevails.
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16
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 and all 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, the Employment Agreement dated as
of February 16, 1996, as amended.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
ANNTAYLOR STORES CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chairman AnnTaylor Stores Corporation
Compensation Committee
EXECUTIVE
/s/ J. Xxxxxxx Xxxxxxxxx
____________________________________
J. Xxxxxxx Xxxxxxxxx
March 5, 2002
