ANNTAYLOR
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD MAY 18, 1999
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___________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AnnTaylor
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Stores Corporation, a Delaware corporation (the "Company"), will be held at
9:00 a.m. on Tuesday, May 18, 1999, at The Rihga Royal Hotel, 151 West 54th
Street, 54th floor, New York, New York, for the following purposes:
1. To elect three Class II Directors of the Company, each to serve for a
term of three years;
2. To amend the Company's Amended and Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock of
the Company from 40 million shares to 120 million shares;
3. To approve the Company's Associate Discount Stock Purchase Plan;
4. To ratify the appointment by the Company of Deloitte & Touche llp as the
Company's independent auditors for fiscal 1999; and
5. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
Only stockholders of record at the close of business on March 22, 1999 are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments or postponements thereof. A list of stockholders entitled to
vote at the meeting will be available for inspection at the office of the
Secretary of the Company, 142 West 57th Street, New York, New York, for at
least ten days prior to the meeting, and will also be available for
inspection at the meeting.
By Order of the Board of Directors,
Jocelyn F.L. Barandiaran
Secretary
New York, New York
April 2, 1999
YOUR VOTE IS IMPORTANT
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WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
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COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD, AND MAIL IT TO THE COMPANY
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IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. RETURNING A
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SIGNED PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN
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PERSON, IF YOU SO DESIRE.
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ANNTAYLOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
PROXY STATEMENT
__________________________
This Proxy Statement is being furnished to the stockholders of AnnTaylor
Stores Corporation, a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Stockholders of the Company, to be held at 9:00
a.m. on Tuesday, May 18, 1999, at The Rihga Royal Hotel, 151 West 54th
Street, 54th floor, New York, New York, and at any and all adjournments or
postponements thereof. At the Annual Meeting, the stockholders of the Company
are being asked to consider and vote upon (1) the election of three Class II
Directors, each to serve for a term of three years; (2) a proposal to amend
the Company's Amended and Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 40 million shares to 120
million shares, (3) the approval of the Company's Associate Discount Stock
Purchase Plan, and (4) a proposal to ratify the appointment of the Company's
independent auditors for fiscal year 1999.
This Proxy Statement and the enclosed form of proxy are first being
mailed to stockholders of the Company on or about April 2, 1999.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.0068
per share ("Common Stock"), at the close of business on March 22, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
At the close of business on the Record Date, there were __________ shares of
Common Stock outstanding. The presence, either in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on the Record
Date is necessary to constitute a quorum at the Annual Meeting. All
abstentions and broker non-votes will be included as shares that are present
and entitled to vote for purposes of determining the presence of a quorum at
the meeting. Each stockholder will be entitled to one vote per share, in
person or by proxy, for each share of Common Stock held in such stockholder's
name as of the Record Date on any matter submitted to a vote of stockholders
at the Annual Meeting.
The Class II Directors will be elected by the affirmative vote of
holders of a plurality of the shares of Common Stock represented and voting
in person or by proxy and entitled to vote at the Annual Meeting.
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Approval of the amendment to the Compan's Amended and Restated
Certificate of Incorporation ("Certificate of Incorporation") to increase the
number of authorized shares from 40 million shares to 120 million shares
requires the affirmative vote of holders of a majority of the Company's
outstanding Common Stock entitled to vote at the Annual Meeting.
Approval of the Associate Discount Stock Purchase Plan and ratification
of the appointment of the Company's independent auditors for the Company's
1999 fiscal year require the affirmative vote of holders of a majority of the
shares of Common Stock represented in person or by proxy and entitled to vote
at the Annual Meeting.
In determining whether each of the proposals submitted to a vote of the
stockholders has received the requisite number of affirmative votes, (i)
abstentions will not be counted as votes cast in connection with determining
the plurality required to elect a director and will have no effect on the
outcome of that vote, and (ii) abstentions will be counted and will have the
same effect as a vote against the amendment of the Certificate of
Incorporation, adoption of the Associate Discount Stock Purchase Plan, and
ratification of the appointment of the Company's independent auditors.
If a broker indicates on a proxy that it does not have discretionary
authority and has not received voting instructions from the beneficial owners
as to certain shares to vote on a particular proposal ("broker non-votes"),
those shares will not be considered as present or voted with respect to that
matter and will have no effect on the outcome of the vote on any proposal,
except that broker non-votes will be counted and will have the same effect as
a vote against the amendment to the Certificate of Incorporation.
Shares of Common Stock that are represented by properly executed proxies
(that have not been revoked) and received in time for voting at the Annual
Meeting will be voted in accordance with the instructions indicated on the
proxy. In the absence of specific instructions to the contrary, the persons
named in the accompanying form of proxy intend to vote all properly executed
proxies received by them:
(1) FOR the election of the Board of Directors' nominees as Class II
Directors,
(2) FOR the amendment to the Certificate of Incorporation to increase the
number of authorized shares from 40 million shares to 120 million
shares,
(3) FOR the approval of the Associate Discount Stock Purchase Plan, and
(4) FOR the ratification of Deloitte & Touche llp as the Company's
independent auditors for the Company's 1999 fiscal year.
No business other than as set forth in the accompanying Notice of Annual
Meeting is expected to come before the Annual Meeting, but should any other
matter requiring a vote of stockholders be properly brought before the Annual
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Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote such proxy in accordance with their best judgement on such
matters.
For information with respect to advance notice requirements applicable
to stockholders who wish to propose any matter for consideration or nominate
any person for election as a director at an annual meeting, see "Stockholder
Proposals for 2000 Annual Meeting".
Under applicable Delaware law, none of the holders of Common Stock is
entitled to appraisal rights in connection with any proposal to be acted on
at the Annual Meeting.
Stockholders who execute the enclosed proxy may still attend the Annual
Meeting and vote in person. Any proxy may be revoked at any time prior to
the exercise thereof by delivering in a timely manner a written revocation or
a new proxy bearing a later date to the Secretary of the Company, 142 West
57th Street, New York, New York 10019, or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not, however, in and
of itself constitute a revocation of a proxy.
This solicitation is being made by the Company. The cost of this
solicitation will be borne by the Company. Solicitation will be made by
mail, and may be made personally or by telephone by officers and other
employees of the Company who will not receive additional compensation for
solicitation.
The principal executive offices of the Company are located at 142 West
57th Street, New York, New York 10019.
PROPOSAL 1
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ELECTION OF CLASS II DIRECTORS
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The Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III, serving staggered three-year
terms. The Company's Certificate of Incorporation requires that such classes
be as nearly equal in number of directors as possible.
The terms of the Company's three current Class II Directors, James J.
Burke, Jr., Patricia DeRosa and Ronald W. Hovsepian, expire at the Annual
Meeting. At the Annual Meeting, three Class II Directors are to be elected
to serve three-year terms ending in the year 2002 or until their respective
successors are elected and qualified, or their earlier death, resignation or
removal. The Board of Directors has nominated Mr. Burke, Ms. DeRosa and Mr.
Hovsepian for re-election as Class II Directors. Each of the three nominees
has consented to serve as a Director if elected at the Annual Meeting and, to
the best knowledge of the Board of Directors, each of such nominees is and
will be able to serve if so elected. In the event that any of these nominees
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should be unavailable to stand for election before the Annual Meeting, the
persons named in the accompanying proxy intend to vote for such other person,
if any, as may be designated by the Board of Directors, in the place of a
nominee unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE COMPANY'S NOMINEES AS CLASS II DIRECTORS.
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Set forth below is a brief biography of each nominee for election as a
Class II Director and of all other members of the Board of Directors who will
continue in office.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
TERM EXPIRING 2002
JAMES J. BURKE, JR., AGE 47. Mr. Burke has been a Director of the
Company and its wholly owned operating subsidiary, AnnTaylor, Inc. ("Ann
Taylor"), since February 1989. He has been a partner of Stonington Partners,
Inc. ("Stonington Partners"), a private investment firm, since November 1993,
and a director of Stonington Partners since August 1993. He was a partner of
Merrill Lynch Capital Partners, Inc. ("ML Capital Partners"), a private
investment firm associated with Merrill Lynch & Co., Inc. ("ML&Co."), from
May 1993 through June 1994, and was president and chief executive officer of
ML Capital Partners from January 1987 through April 1993. Mr. Burke was a
first vice president of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") from July 1988 through June 1994 and was a managing
director of the Investment Banking Division of ML&Co. from April 1985 through
June 1994. Since June 1994, Mr. Burke has served as a consultant to ML
Capital Partners. Mr. Burke is also a director of Borg-Warner Security
Corporation, Education Management Corp., Pathmark Stores, Inc., Supermarkets
General Holdings Corporation and United Artists Theatre Circuit, Inc., and
several privately held companies.
PATRICIA DEROSA, AGE 46. Ms. DeRosa has been President, Chief Operating
Officer and a Director of the Company and Ann Taylor since December 1996.
From August 1995 to November 1996, she was executive vice president, business
development of Charming Shoppes, Inc., a women's specialty apparel retailer.
From 1975 to 1981 and from 1983 to August 1995, she served in various
capacities at The Gap, Inc., a specialty apparel retailer, including from
1993 to 1995 as president of the GapKids division.
RONALD W. HOVSEPIAN, AGE 37. Mr. Hovsepian has been a Director of the
Company and Ann Taylor since June 1998. He has been vice president of
business development of International Business Machines Corporation (IBM), a
supplier of advanced information processing products and services, since
January 1999. He was general manager of IBM's global retail and distribution
industry solutions organization in 1998; from 1996 to 1997 he was vice
president, supply chain solutions, and from 1994 to 1995 he was director,
consumer driven solutions, at IBM Corp.
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INCUMBENT CLASS III DIRECTORS
TERM EXPIRING 2000
GERALD S. ARMSTRONG, AGE 55. Mr. Armstrong has been a Director of the
Company and Ann Taylor since February 1989. He has been the managing partner
of Arena Capital Partners, LLC ("Arena"), a private investment firm, since
January 1998. Mr. Armstrong was a partner of Stonington Partners from
November 1993 to December 1997, and a director of Stonington Partners from
August 1993 to December 1997. He was a partner of ML Capital Partners from
May 1993 through June 1994, and was an executive vice president of ML Capital
Partners from November 1988 through April 1993. Mr. Armstrong was also a
managing director of the Investment Banking Division of ML&Co. from November
1988 through June 1994. Since June 1994, Mr. Armstrong has served as a
consultant to ML Capital Partners. Mr. Armstrong is also a director of Blue
Bird Corporation and World Color Press, Inc.
WESLEY E. CANTRELL, AGE 64. Mr. Cantrell has been a Director of the
Company and Ann Taylor since November 1998. He has been president and chief
executive officer of Lanier WorldWide, Inc. since March 1987. Lanier
WorldWide is engaged in the office systems and equipment business, and is an
operating unit of Harris Corporation, a company engaged in the
communications, semiconductors, office systems and equipment, and advanced
electronic systems industries.
HANNE M. MERRIMAN, AGE 57. Ms. Merriman has been a Director of the
Company and Ann Taylor since December 1993. She has been the Principal in
Hanne Merriman Associates, retail business consultants, since January 1992.
Ms. Merriman is also a director of USAirways Group, Inc., The Rouse Company,
State Farm Mutual Automobile Insurance Company, Ameren Corp., Central
Illinois Public Service Company, T. Rowe Price Mutual Funds, and Finlay
Enterprises, Inc. She also serves as a director of the Children's Hospital
Foundation (part of the Children's National Medical Center), and is a member
of the National Women's Forum.
INCUMBENT CLASS I DIRECTORS
TERM EXPIRING 2001
ROBERT C. GRAYSON, AGE 54. Mr. Grayson has been a Director of the
Company and Ann Taylor since April 1992. He has been president of Robert C.
Grayson & Associates, Inc., a retail marketing consulting firm, since
February 1992. He has also served as chairman of Berglass-Grayson, a
management consulting firm, since June 1995. He was a vice chairman of the
board of Tommy Hilfiger Corp., an apparel manufacturer and retailer, and
chairman of the board of Tommy Hilfiger Retail, a subsidiary of such company,
from June 1994 to March 1996. Mr. Grayson is also a director of Sunglass Hut
International, Inc., Kenneth Cole Productions, Inc. and Frisby Technologies
Inc.
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ROCHELLE B. LAZARUS, AGE 51. Ms. Lazarus has been a Director of the
Company and Ann Taylor since April 1992. She has been chief executive
officer of Ogilvy & Mather Worldwide, an advertising agency, since September
1996, and also chairman of Ogilvy & Mather Worldwide since March 1997. She
was president and chief operating officer of Ogilvy & Mather Worldwide from
December 1995 to September 1996, and was president of Ogilvy & Mather North
America from April 1994 to December 1995.
J. PATRICK SPAINHOUR, AGE 49. Mr. Spainhour has been Chairman and Chief
Executive Officer of the Company and Ann Taylor since August 1996 and a
Director of the Company and Ann Taylor since February 1996. From February
1996 to August 1996, he was President and Chief Operating Officer of the
Company and Ann Taylor. From August 1994 to February 1996, Mr. Spainhour was
executive vice president and chief financial officer of The Donna Karan
Company, a designer apparel company. From February 1993 to July 1994, he was
executive vice president, finance and operations of Stride Rite Corp., a
footwear company.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Company's Board of Directors held six meetings in fiscal 1998. Each
Director attended at least 75% of the total number of Board meetings and
meetings of Board committees on which such Director served. The Board of
Directors has established standing Audit, Compensation and Nominating
Committees. The membership and functions of the standing committees of the
Board of Directors are as follows:
AUDIT COMMITTEE: The principal functions of the Audit Committee include
recommending independent auditors and reviewing the terms of their
engagement; conferring with them regarding the scope and results of their
audit of the Company's financial statements, and regarding the Company's
internal accounting controls and other matters; conferring with the Company's
director of internal audit regarding planned activities of the Company's
internal audit department and reviewing the results of such audits; and
reviewing the adequacy of internal accounting controls and the results of
fiscal policies and financial management of the Company. The Audit Committee
held two meetings in fiscal 1998. The current members of the Audit Committee
are Mr. Grayson (Chairman), Ms. Lazarus and Ms. Merriman.
COMPENSATION COMMITTEE: The principal functions of the Compensation
Committee are to establish the Company's executive compensation practices;
review and approve or make recommendations regarding the compensation of the
executive officers of the Company; and to administer certain of the Company's
benefit plans, including its stock option plans and other incentive
compensation plans. The Compensation Committee held four meetings in fiscal
1998. The current members of the Compensation Committee are Ms. Lazarus
(Chairman), Mr. Armstrong, Mr. Burke and Ms. Merriman.
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NOMINATING COMMITTEE: The principal function of the Nominating
Committee is to make recommendations to the Board of Directors with respect
to qualified candidates to serve as Directors of the Company. The Committee
will consider nominees recommended by stockholders. To be considered, such
recommendations should be submitted in writing to the Secretary of the
Company and should include a description of the proposed nominee's
qualifications, other relevant biographical data, and the written consent of
the proposed nominee to serve, if elected. In addition, the Company's
By-Laws provide procedures under which stockholders may directly nominate
persons for election as directors. See "Stockholder Proposals for 2000
Annual Meeting". The Nominating Committee held two meetings in fiscal 1998.
The current members of the Nominating Committee are Ms. Merriman (Chairman),
Mr. Armstrong and Mr. Grayson.
COMPENSATION OF DIRECTORS AND RELATED MATTERS
Directors who are employees of the Company do not receive any
compensation for serving on the Board of Directors of the Company or Ann
Taylor. In addition, Mr. Armstrong and Mr. Burke, who serve on the Boards of
the Company and Ann Taylor as representatives of ML&Co. and certain of its
affiliates, have declined to receive any compensation from the Company for
Board service. All other Directors (referred to below as "non-employee
Directors") receive an annual retainer of $20,000, plus $1,000 for each
meeting of the Board or committee of the Board that they attend. Committee
chairs also receive an annual stipend of $3,000 for their service as such.
In addition, commencing with fiscal 1998, each non-employee Director also
receives an annual grant of an option to purchase 2,000 shares of Common
Stock. Any new non-employee Director joining the Board will, at the time of
election, also receive an initial grant of an option to purchase 7,500 shares
of Common Stock. On June 17, 1998, incumbent non-employee Directors were
each granted a one-time option to purchase 7,500 shares of Common Stock.
All stock option grants to Directors are made under the Company's 1992
Amended and Restated Stock Option and Restricted Stock and Unit Award Plan
(the "Stock Option Plan"), have an exercise price equal to the Fair Market
Value (as defined under the Stock Option Plan) of a share of Common Stock on
the date of grant, and have a term of ten years. Directors' rights to
exercise stock options vest on the first anniversary of the date of the
grant.
Mr. Armstrong and Mr. Burke serve on the Boards of Directors of the
Company and Ann Taylor as representatives of ML&Co. and certain of its
affiliates, pursuant to consulting agreements between them and ML&Co. Such
consulting agreements provide, among other things, for their continued
availability to serve on the Boards of Directors of the Company, Ann Taylor
and certain other companies in which ML&Co. or certain of its affiliates have
equity investments, unless requested to resign by ML&Co., and for their
compensation by ML&Co. for serving in such capacities and for other
consulting services. As indicated above, Mr. Armstrong and Mr. Burke have
declined to receive any compensation from the Company or Ann Taylor
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(including stock options) as long as they are receiving compensation from
ML&Co. for their service on the Company's Board. As of the Record Date,
ML&Co. and certain of its affiliates beneficially owned an aggregate of ____%
of the Company's Common Stock.
PROPOSAL 2
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AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE IN THE
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NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 40 MILLION SHARES TO 120
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MILLION SHARES
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At the Annual Meeting, there will be submitted to stockholders a
proposal to amend the Company's Certificate of Incorporation to increase the
total number of shares of Common Stock that the Company is authorized to
issue from 40 million shares to 120 million shares.
The Company presently is authorized to issue 40 million shares of Common
Stock having a par value of $.0068 per share. As of March 22, 1999,
approximately _____ million shares of Common Stock were issued and
approximately _____ million shares were outstanding (net of approximately
_____ treasury shares). Of the remaining authorized but unissued shares,
approximately 2.6 million shares are reserved for issuance under the
Company's stock option plans, 2,800 shares are reserved for issuance upon the
conversion of the Company's outstanding warrants, and 5.1 million shares are
reserved for issuance upon the conversion of the Company's outstanding
convertible debentures. In addition, if the Associate Discount Stock
Purchase Plan is approved by shareholders at the 1999 Annual Meeting, 250,000
shares of Common Stock will be reserved for issuance under that plan. Based
upon the foregoing, the Company has only approximately ________ shares
remaining available for other purposes.
On March 10, 1999, the Board of Directors approved the amendment to the
Certificate of Incorporation to increase the number of shares of Common Stock
authorized to be issued by the Company, from 40 million shares to 120 million
shares, subject to shareholder approval at the Annual Meeting. The pertinent
provisions of the amendment to the Certificate of Incorporation are set forth
in Exhibit A to this Proxy Statement (the "Amendment"). No change is
proposed to be made to the number of shares of preferred stock that the
Company is authorized to issue. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock is required to adopt the
proposed Amendment. If the proposal is accepted, it is anticipated that the
Amendment will be filed with the Delaware Secretary of State and become
effective immediately following the Annual Meeting.
The Board of Directors believes that it is in the Company's best
interests to increase the number of authorized shares of Common Stock, in
order that the Company may have shares available for future stock dividends
or splits, financing and acquisition transactions, employee benefit plans and
other general corporate purposes. If the amendment is approved, the Company
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will also have greater flexibility in the future to issue shares in excess of
those presently authorized, without the expense and delay of a special
shareholders' meeting.
Except in connection with the Company's existing employee benefit plans,
the proposed Associate Discount Stock Purchase Plan, and shares reserved for
issuance upon conversion of the Company's outstanding convertible debentures
and warrants, the Board of Directors has no present intention or commitment
to issue additional shares of Common Stock.
If the Board of Directors deems it to be in the best interests of the
Company and the stockholders to issue additional shares of Common Stock in
the future, additional shares of Common Stock may be issued at such times and
in such amounts and upon such terms as the Board of Directors may determine,
without further approval of the stockholders. The Board of Directors
generally would not seek further authorization by vote of the shareholders,
unless such approval is expressly required by applicable law or stock
exchange regulations.
Stockholders of the Company have no preemptive right to purchase
additional shares of Common Stock. Thus, should the Board of Directors elect
to issue additional shares of Common Stock, existing stockholders would not
have any preferential rights to purchase such shares.
The proposed Amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have an anti-takeover
effect, although this is not the intention of the proposal. For example, in
the event of a hostile attempt by a third party to take over control of the
Company, it may be possible for the Company to endeavor to impede the attempt
by issuing shares of Common Stock. The issuance of additional shares of
Common Stock would dilute the voting power of the other outstanding shares
and increase the potential cost to acquire control of the Company. The
amendment therefore may have the effect of discouraging unsolicited takeover
attempts. By potentially discouraging initiation of unsolicited takeover
attempts, the proposed amendment may limit the opportunity for the Company's
stockholders to dispose of their shares at the higher price generally
available in takeover attempts. The proposed amendment may have the effect
of permitting the Company's current management, including the current Board
of Directors, to retain its position, and place it in a better position to
resist changes that stockholders may wish to make if they are dissatisfied
with the conduct of the Company's business. However, the Board of Directors
is not aware of any attempt to take over control of the Company, and the
Board of Directors is not presenting this proposal with the intent that it be
utilized as a type of anti-takeover device.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 40 MILLION SHARES TO 120 MILLION SHARES.
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PROPOSAL 3
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APPROVAL OF THE COMPANY'S
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ASSOCIATE DISCOUNT STOCK PURCHASE PLAN
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At the Annual Meeting, there will be submitted to stockholders a proposal
to approve the adoption of the Company's Associate Discount Stock Purchase Plan
(the "Plan") for the benefit of the employees of the Company and participating
subsidiaries. The Board of Directors believes that the proposed Plan is in the
best interests of the Company and its stockholders and employees.
The Plan is designed to encourage and assist a broad spectrum of
employees of the Company and participating subsidiaries to acquire an equity
interest in the Company through the purchase of Common Stock through payroll
deductions. It is believed that employee participation in the ownership of
the Company is to the mutual benefit of both the employees and the Company.
The Company also believes that the Plan will assist it in recruiting and
retaining employees, in that other companies with whom the Company competes
for employees provide greater benefits to their employees, including by
having adopted discount employee stock purchase plans.
The following description of the Associate Discount Stock Purchase Plan
is not intended to be complete and is qualified in its entirety by the
complete text of the Plan, attached to this Proxy Statement as Exhibit B.
Capitalized terms used in this summary and not defined herein, have the
meanings assigned to them in the Plan.
DESCRIPTION OF PRINCIPAL FEATURES OF THE PLAN
All employees of the Company and any Subsidiary that the Board designates
as a participating Subsidiary under the Plan (other than "seasonal" employees
and employees who are citizens of a foreign country the laws of which prohibit
the granting of options to its citizens), will be eligible to participate in the
Plan as of the first enrollment date following their employment. Subject to
stockholder approval, current employees will be eligible to participate in the
Plan effective August 1, 1999.
There will be two six-month Offering Periods under the Plan each year,
commencing each February 1 and August 1. Subject to stockholder approval, the
first Offering Period will commence August 1, 1999. The last Offering Period
will commence February 1, 2009. Participants in the Plan may elect to make
contributions of up to a maximum of 15% of their compensation. As soon as
practicable following the end of each Offering Period, the Company will apply
the funds then in each Participant's Account to the purchase of shares of Common
Stock. The price paid for each share purchased will be 85% of the lower of the
closing price for the Common Stock on the New York Stock Exchange on (i) the
first trading day of the Offering Period for which the purchase is made and (ii)
the last day of the Offering Period for which the purchase is made. There is no
limit on the number of shares that may be purchased under the Plan; however, no
Participant's right to acquire shares may accrue at a rate exceeding $25,000 of
Fair Market Value of Common Stock (determined as of the first business day
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in an Offering Period) in any calendar year, nor may a Participant acquire
shares under the Plan if, after such purchase, such Participant would own
shares, or options to purchase shares, representing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any
of its subsidiaries.
The Plan will be administered by a Committee appointed by the Board. The
Committee will have authority to delegate any or all of its authority under the
Plan to Company management. The Board of Directors may amend or terminate the
Plan at any time. The Board may also provide for an adjustment in the purchase
price and the number and kind of securities available under the Plan in the
event of reorganization, recapitalization, stock split or other similar events.
Amendments that would increase the number of shares of Common Stock reserved for
purchase, materially increase benefits to Participants, or materially modify the
requirements for participation under the Plan, also require stockholder
approval. An aggregate of 250,000 shares will be available for issuance under
the Plan (subject to equitable adjustment to reflect stock splits, stock
dividends and other capital adjustments). Shares available under the Plan may be
either outstanding treasury shares held by the Company or newly issued shares.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the U.S. federal income
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tax consequences of certain transactions under the Plan, based on federal
- -------------------------------------------------------------------------------
income tax laws currently in effect. This summary is not intended to
- -------------------------------------------------------------------------------
provide, or to supplement, tax advice to eligible employees.
- ------------------------------------------------------------
Tax consequences associated with payroll deductions. The compensation
--- ------------ ----------------------- -----------
paid to a Participant from whom payroll deductions are taken for purposes of
purchasing Common Stock under the Plan is taxable to the Participant as
ordinary income in the year paid and deductible in such year by the Company.
Tax consequences to Participants with respect to the purchase and
--- ------------ -- ------------ ---- ------- ------ -------- ---
disposition of shares. In general, Participants who are citizens of the
- ----------- -- -------
United States will not have taxable income or loss under the Plan until they
sell or otherwise dispose of shares acquired under the Plan (or die while
holding such shares in their accounts). If the shares are held, as of the
date of sale or disposition, for longer than both (i) two years after the
beginning of the enrollment period for which they were purchased, and (ii)
one year following purchase, the sale is considered a "qualifying
disposition". For qualifying dispositions, the Participant will be treated as
having taxable ordinary income equal to 15% of the fair market value of the
shares on the first day of the enrollment period (but not in excess of the
gain on the sale), and any amount realized in excess of such ordinary income
will be taxed as long-term capital gain. If the shares are sold at less than
the purchase price, the Participant will have a capital loss equal to the
difference between the sale price and the purchase price.
If a disposition does not meet the foregoing criteria, it is a
disqualifying disposition, and the Participant will have taxable ordinary
income equal to the excess of the fair market value of the shares on the
purchase date over the purchase price. In addition, the Participant will
===============================================================================
<PAGE>
have taxable capital gain (or loss) equal to the difference between the sale
price and the purchase price plus the amount of ordinary income recognized.
Tax consequences to the Company with respect to the purchase and
--- ------------ -- --- ------- ---- ------- -- --- -------- ---
disposition of shares. The Company is not entitled to any federal tax deduction
- ----------------------
when shares of Common Stock are purchased pursuant to the Plan. The Company will
be entitled to a deduction only if the Participant makes a disqualifying
disposition of shares purchased under the Plan. In such case, the Company can
generally deduct as compensation expense an amount equal to the amount of
ordinary income taxable to the Participant as a result of the disqualifying
disposition. The Company is not entitled to an income tax deduction with respect
to qualifying dispositions.
STOCKHOLDER APPROVAL
The approval of the Associate Discount Stock Purchase Plan requires the
affirmative vote of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
-----
THE ADOPTION OF THE ASSOCIATE DISCOUNT STOCK PURCHASE PLAN.
PROPOSAL 4
----------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
---------------------------------------------------
The Board of Directors has reappointed the firm of Deloitte & Touche
llp, Certified Public Accountants, as independent auditors to make an
examination of the accounts of the Company for fiscal year 1999. Deloitte &
Touche llp has served as the independent auditors of the Company since
January 1989. Although action by the stockholders is not required by law,
the Board of Directors has determined that it is desirable to request
stockholder ratification of the selection of the Company's independent
auditors. If stockholders do not approve ratification of the selection of
such auditors, the Board of Directors will reconsider the selection.
Ratification will require the affirmative vote of the holders of a majority
of the Common Stock present in person or by proxy and entitled to vote at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS FOR THE COMPANY FOR FISCAL YEAR 1999.
Representatives of Deloitte & Touche llp are expected to be present at
the Annual Meeting and will have an opportunity to make a statement if they
desire to do so and will be available to respond to questions.
===============================================================================
<PAGE>
STOCK PERFORMANCE GRAPH
-----------------------
The following graph compares the percentage changes in the Company's
cumulative total stockholder return on the Company's Common Stock for the
five-year period ended January 30, 1999, with the cumulative total return on
the Standard & Poor's 500 Stock Index ("S&P 500") and the Dow Jones Specialty
Apparel Retailers Index ("DJ Apparel") for the same period. In accordance
with the rules of the Commission, the returns are indexed to a value of $100
at January 29, 1994 and assume that all dividends were reinvested.
COMPARISON OF FIVE-YEAR ANNUAL CUMULATIVE TOTAL RETURN
ANN TAYLOR, S&P 500 INDEX, AND DJ APPAREL INDEX
CUMULATIVE TOTAL RETURN
1/29/94 1/28/95 2/3/96 2/1/97 1/31/98 1/30/99
------- ------- ------ ------ ------- -------
AnnTaylor Stores Corp. 100 155 52 79 53 177
- -------------------------------------------------------------------------------
S & P 500 100 101 139 176 224 296
- -------------------------------------------------------------------------------
Dow Jones 100 90 105 124 204 378
Retailers-Speciality-Apparel
- -------------------------------------------------------------------------------
================================================================================
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
------------------------------------
PRINCIPAL STOCKHOLDERS
As of the March 22, 1999 Record Date, the outstanding Common Stock was
held of record by ____ stockholders. The following table sets forth certain
information as of the Record Date concerning the beneficial ownership of
Common Stock by each stockholder who is known by the Company to own
beneficially in excess of 5% of the outstanding Common Stock, by each
director, by the named executives listed in Table I above, and by all
directors and executive officers as a group. Except as otherwise indicated,
all persons listed below have (i) sole voting power and investment power with
respect to their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
No. of Percent
Shares of -------
Name of Beneficial Owner Common Stock
------------------------ ------------
Morgan Stanley Dean Witter & Co. (a) .................. 4,191,741 ___%
Fleet Financial Group, Inc. (b)........................ 1,824,484 ___%
Merrill Lynch & Co., Inc. and certain affiliates (c)... 1,733,628 ___%
FMR Corp. (d).......................................... 1,649,450 ___%
AMVESCAP PLC (e)....................................... 1,325,800 ___%
Barclays Global Investors, N.A. and Barclays Global
Fund
Advisors (f)................................... 1,292,660 ___%
J. Patrick Spainhour (g)............................... 200,410 *
Patricia DeRosa (g).................................... 99,333 *
Walter J. Parks (g).................................... 625 *
Jocelyn F.L. Barandiaran (g)........................... 51,465 *
James M. Smith (g)..................................... 2,781 *
Gerald S. Armstrong (h)(i)............................. 10,964 *
James J. Burke, Jr. (h)................................ 52,920 *
Wesley C. Cantrell..................................... 0 *
Robert C. Grayson...................................... 25,000 *
Ronald Hovsepian....................................... 0 *
Rochelle B. Lazarus (j)................................ 600 *
Hanne M. Merriman...................................... 200 *
All executive officers and directors as a group (12
persons) (k)......................................... 444,298 ___%
___________
* Less than 1%
(a) Pursuant to a Schedule 13G dated February 12, 1998 and filed with the
Commission by Morgan Stanley Dean Witter & Co., Morgan Stanley Dean
Witter Advisors Inc., and Van Kampen Asset Management Inc., Morgan
Stanley Dean Witter & Co had shared voting power with respect to
3,708,741 shares, sole dispositive power with respect to no shares, and
shared dispositive power with respect to 4,191,741 shares; Morgan
Stanley Dean Witter Advisors Inc. had shared voting power with respect
to 1,891,400 shares, sole dispositive power with respect to no shares,
shared dispositive power with respect to 1,891,400 shares, and sole
dispositive power with respect to no shares; and Van Kampen Asset
Management Inc. had shared voting power with respect to 1,164,082
shares, sole dispositive power with respect to no shares, shared
dispositive power with respect to 1,294,382 shares, and sole dispositive
power with respect to no shares. The address for Morgan Stanley Dean
Witter & Co. is 1585 Broadway, New York, NY 10036; for Morgan Stanley
Dean Witter Advisors Inc. is Two World Trade Center, New York, NY 10048;
and for Van Kampen Asset Management Inc. is One Parkview Plaza, Oakbrook
Terrace, IL 60181.
==============================================================================
<PAGE>
(b) Pursuant to a Schedule 13G dated February 13, 1998 and filed with the
Commission by Fleet Financial Group, Inc. ("Fleet"), Fleet had sole
voting power with respect to 25,000 shares, shared voting power with
respect to 1,799,484 shares, sole dispositive power with respect to
25,000 shares, and shared dispositive power with respect to 1,686,400
shares. The address for Fleet Financial Group, Inc. is One Federal
Street, Boston, Massachusetts 02110.
(c) Pursuant to an amendment to a Schedule 13G dated February 16, 1999 and
filed with the Commission by ML&Co., its subsidiary Merrill Lynch Group,
Inc. ("ML Group") and certain of their affiliates (collectively, the
"Merrill Lynch Entities"), ML&Co. and ML Group are deemed to
beneficially own an aggregate of 1,733,628 shares of Common Stock.
ML&Co. and ML Group may be deemed to beneficially own these shares as a
result of their control of their wholly owned subsidiaries (i) Merrill
Lynch Capital Partners, Inc., which is the general partner of both (a)
MLCP Associates L.P. No. I, and (b) Merrill Lynch LBO Partners No. B-I,
L.P., a limited partnership that acts as general partner of Merrill
Lynch Capital Appreciation Partnership No. B-II, which, as reported in
the Schedule 13G, is the owner of record of shares representing
approximately 3.29% of the outstanding Common Stock, and ML Offshore LBO
Partners No. B-II which, as reported in the Schedule 13G, is the owner
of record of shares representing approximately 1.92% of the shares; (ii)
KECALP Inc. and Merrill Lynch MBP Inc., each of which acts as general
partners of limited partnerships that are record owners of shares (no
single limited partnership is the record holder of more than 5% of the
outstanding Common Stock); and (iii) ML IBK Positions, Inc. that, as
reported in the Schedule 13G, owns of record less than 1% of such
shares. The Merrill Lynch Entities are deemed to have shared voting and
investment power with other ML&Co. affiliates with respect to the shares
of Common Stock deemed to be beneficially owned by them. The address for
ML&Co., ML Group and ML IBK Positions, Inc. is 250 Vesey Street, World
Financial Center, North Tower, New York, New York 10281. The address for
each of the other Merrill Lynch Entities named above is 225 Liberty
Street, New York, New York 10080.
(d) Pursuant to an amendment dated January 7, 1999 to a Schedule 13G filed
with the Commission by FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson, FMR Corp. indicated that it had sole voting power with respect
to 222,000 shares and shared voting power with respect to no shares, and
each of FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson indicated
that they had sole dispositive power with respect to 1,649,450 shares.
The address for each of FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson is 82 Devonshire Street, Boston, MA 02109.
(e) Pursuant to a Schedule 13G dated February 10, 1999 and filed with the
Commission by AMVESCAP PLC on behalf of itself and its subsidiaries AVZ,
Inc., AIM Management Group Inc., AMVESCAP Group Services, Inc., INVESCO,
Inc., INVESCO North American Holdings, Inc., INVESCO Capital Management,
Inc., INVESCO Funds Group, Inc., INVESCO Management & Research, Inc.,
INVESCO Realty Advisers, Inc., and INVESCO (NY) Asset Management, Inc.
(collectively, "AMVESCAP"), AMVESCAP beneficially owns 1,325,800 shares
and has shared voting power and shared dispositive power with respect to
all such shares. The address for AMVESCAP is 11 Devonshire Square,
London EC2M 4YR England, and 1315 Peachtree Street, N.E., Atlanta,
Georgia 30309.
==============================================================================
<PAGE>
(f) Pursuant to a joint Schedule 13G dated February 12, 1999 and filed with
the Commission by Barclays Global Investors, N.A., and Barclays Global
Fund Advisors ("Barclays"), Barclays is deemed to beneficially own and
have sole dispositive power with respect to 1,292,660 shares and to have
sole voting power with respect to 1,256,380 shares, as a result of
holding such shares in trust accounts for the beneficiaries of those
accounts. The address for Barclays is 45 Fremont Street, San Francisco,
California 94105.
(g) The shares listed include shares subject to options exercisable within
60 days of March 22, 1999 as follows: Mr. Spainhour, 155,000 shares; Ms.
DeRosa, 69,333 shares; Mr. Parks, 625 shares; Ms. Barandiaran, 51,465
shares; and Mr. Smith, 2,581 shares. The shares listed also include
restricted shares which have not yet vested and which are subject to
forfeiture, as follows: Mr. Spainhour, 25,000 shares; and Ms. DeRosa,
10,000 shares.
(h) James J. Burke, Jr. and Gerald S. Armstrong serve on the Board of
Directors of the Company and Ann Taylor as designees of ML&Co. and
certain of its affiliates. Both Mr. Burke and Mr. Armstrong disclaim
beneficial ownership of the shares beneficially owned by the Merrill
Lynch Entities.
(i) 3,000 of these shares are held by Mr. Armstrong's spouse, as custodian
for their children. Mr. Armstrong disclaims beneficial ownership of
these shares.
(i) Shares are held in a pension fund of which Ms. Lazarus' spouse is the
sole beneficiary. Ms. Lazarus has no voting or investment power with
respect to these shares.
(k) The shares listed include 279,004 shares subject to options exercisable
within 60 days of March 22, 1999, and 35,000 restricted shares that have
not yet vested and are subject to forfeiture.
SECTION 16(a) BENEFICIAL
------------------------
OWNERSHIP REPORTING COMPLIANCE
------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (as amended) (the
"Exchange Act"), requires the Company's directors and certain officers, and
holders of more than 10% of the Company's Common Stock, to file with the
Securities and Exchange Commission and the New York Stock Exchange reports of
their ownership and changes in ownership of Common Stock. Copies of Section
16(a) reports are required to be furnished to the Company. Based solely on a
review of the copies of such statements furnished to the Company, or written
representations from certain reporting persons that no Forms 5 were required
for such persons, the Company believes that during fiscal year 1998, all
transactions were reported on a timely basis, except that Mr. Hovsepian's
initial statement of ownership was filed by the Compan's counsel one
business day late.
===============================================================================
<PAGE>
EXECUTIVE OFFICERS
------------------
The following table sets forth certain information regarding the
executive officers of the Company as of March 22, 1999:
NAME POSITION AND OFFICES
- ---- --------------------
J. Patrick Spainhour ......... Chairman, Chief Executive Officer and
Director of the Company and Ann Taylor
Patricia DeRosa .............. President, Chief Operating Officer and
Director of the Company and Ann Taylor
Walter J. Parks .............. Senior Vice President--Chief Financial
Officer and Treasurer of the Company and
Ann Taylor
Jocelyn F.L. Barandiaran ..... Senior Vice President--General Counsel
and Secretary of the Company and Ann Taylor
James M. Smith ............... Vice President-Controller, Assistant
Treasurer and Assistant Secretary of the
Company and Ann Taylor
Information regarding Mr. Spainhour and Ms. DeRosa is set forth above
under "Incumbent Class I Directors" and "Nominees for Election as Class II
Directors", respectively.
WALTER J. PARKS, AGE 40. Mr. Parks has been Senior Vice
President--Chief Financial Officer and Treasurer of the Company and Ann
Taylor since February 1997. He has been employed by Ann Taylor since 1988
and has held various positions, including General Accounting Manager,
Director of Financial Reporting and, from 1992 to 1995, Vice President of
Financial Reporting, and from February 1995 to February 1997, Senior Vice
President--Finance of the Company and Ann Taylor.
JOCELYN F.L. BARANDIARAN, AGE 38. Ms. Barandiaran has been Senior Vice
President--General Counsel and Secretary of the Company and Ann Taylor since
October 1996. She served as Vice President--General Counsel and Secretary of
the Company and Ann Taylor from May 1992 to September 1996.
JAMES M. SMITH, AGE 37. Mr. Smith has been Vice President--Controller
and Assistant Treasurer of the Company since March 1997, and has been Vice
President--Controller and Assistant Treasurer of Ann Taylor since February
1995. He has also held the position of Assistant Secretary of both the
Company and Ann Taylor since June 1998. From February 1993 to January 1995,
Mr. Smith was Director of Financial Reporting for Ann Taylor.
===============================================================================
<PAGE>
COMPENSATION COMMITTEE REPORT
-----------------------------
ON EXECUTIVE COMPENSATION
-------------------------
COMPENSATION PHILOSOPHY
The Company's compensation practices are designed to attract, retain and
motivate highly talented, results-oriented executives of experience and
ability, and to provide these executives with appropriate incentives to
achieve the Company's financial and strategic objectives. The Company's
compensation programs are designed to "pay for performance", utilizing a
combination of annual base salary, a cash incentive compensation program that
rewards executives for achievement of short term objectives, and long term
incentive programs, including a long-term cash incentive compensation plan
and a stock option plan, that reward executives based on long term corporate
performance.
An executive's annual base salary generally is intended to be positioned
within a range comparable to the competitive median salary, but the
executive's targeted total compensation, including long term incentives, is
intended to be positioned above median, up to approximately the 75th
percentile of competitive practice, provided that performance objectives are
achieved. In determining an individual executive's compensation,
consideration is given to, among other things, the executive's experience and
anticipated contribution to the Company, as well as to compensation paid to
like executives at other companies. No specific weight is given to any of
these considerations. The other companies used in evaluating the competitive
position of the Company's compensation programs, as well as for evaluating
the compensation of individual executives, consist of companies in the
apparel and retail industries, including companies among the Dow Jones
Specialty Apparel Retailers Index, to the extent information is available.
CASH COMPENSATION
As noted above, an executive's base salary typically is set at an amount
that is approximately at the median range of compensation for equivalent
positions. Thus, base compensation alone is less than the executive's
targeted total compensation level. In order to attain the targeted
compensation level, the executive is dependent, in part, upon earning the
variable, performance-based incentive component that is provided for under
the Company's Management Performance Compensation Plan (the "Annual
Performance Plan"). This cash compensation structure is intended to provide
executives with a balance between compensation security and appropriate
incentives to use their best efforts to cause the Company to achieve and
exceed its strategic objectives.
Under the Annual Performance Plan, each year the Compensation Committee
establishes an annual threshold corporate earnings per diluted share target
that must be achieved before incentive compensation may be paid to any
participant under the plan for the year. For each participant, there may
also be established personalized divisional, work unit and/or individual
performance objectives. As a result, the individual's incentive compensation
relates not only to the achievement of the Company's profit objective, but
also reflects the individual participant's role in the Company, their scope
of influence on corporate or divisional results, and their personal job
performance. An incentive compensation matrix is also established for each
incentive period that provides for increased payments under the plan, for
exceeding plan targets.
If the performance targets established under the Annual Performance Plan
are achieved, incentive compensation is paid such that, when added to the
executive's base compensation, the executive achieves his or her targeted
cash compensation level. If the performance targets are exceeded, the
executive's contribution to this performance is reflected by a greater
incentive compensation payment under the plan. Similarly, failure to reach
the stated performance objectives results in the executive's performance
compensation, and thus total cash compensation, being less than the targeted
level.
LONG TERM COMPENSATION
The other principal component of executive compensation is the Company's
long term incentive programs, which are intended to focus executives' efforts
on the Company's long term financial performance and on enhancing the market
value of the Common Stock. These objectives are achieved through a Long Term
Cash Incentive Compensation Plan (the "Long Term Cash Plan") that, as
described below, provides for cash rewards for achievement of long-term
earnings targets, and through the Company's stock option plan, that gives
executives a financial interest as beneficial owners of Company Common Stock.
Under the Long Term Cash Plan, each year the Committee designates a
consecutive three-year period as a "performance cycle", and establishes a
three-year cumulative earnings per share target that must be achieved by the
end of the three-year cycle, in order for incentive compensation to be paid
under the plan at the end of the cycle. The Committee believes that there
should be a direct correlation between achievement of these cumulative
earnings per share targets and an increase in long term stockholder value.
The Committee designated the three-year period of 1998-2000 as the first
performance cycle under the Long Term Cash Plan, and established a three-year
cumulative earnings per share target for this cycle. The Committee
designated as participants under the Long Term Cash Plan for this cycle the
Ann Taylor officers who are Senior Vice Presidents or above, comprising the
Ann Taylor Executive Committee. These executives are expected to have the
greatest effect on the Company's long term profitability and to enable the
Company to meet and exceed its multi-year goals. As 1998 was the first year
of the first three-year cycle under this plan, no compensation was payable to
any executive under this plan for fiscal 1998.
The Company also makes periodic grants of stock options, approximately
annually. The exercise price for stock options is set at a price equal to or
greater than the market price of the Common Stock at the time of the grant.
As a result, the options do not have any value to the executive unless the
market price of the Common Stock rises. The Company believes that stock
options further align executives' interests with those of stockholders and
focuses management on building long term stockholder value.
===============================================================================
<PAGE>
The Company may also make grants of shares of restricted stock when
deemed necessary in order to attract or retain executives. Restricted stock
awards are intended as special recognition for executives who make a superior
contribution to achievement of the Company's goals, or in acknowledgment of
the executive's potential for advancement beyond their current position.
ANALYSIS OF 1998 COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews the compensation arrangements for the
Company's Chairman and Chief Executive Officer annually, typically in the
first quarter of the fiscal year.
In determining Mr. Spainhour's total compensation for fiscal 1998, the
Committee considered the terms of his employment agreement, his length of
service with the Company as Chairman and Chief Executive Officer, the
strategic plan developed by management under Mr. Spainhour's leadership
during the preceding year, the Company's financial performance during the
preceding year, future objectives and challenges for the Company, and Mr.
Spainhour's individual performance and contributions to the Company. The
Committee also considered competitive data regarding salaries and incentives
awarded to other chief executives in the Company's industry and at Company
competitors, among other things. In making its compensation decisions with
respect to Mr. Spainhour, the Committee exercised its discretion and judgment
based on the above factors, and no specific formula was applied to determine
the weight of each factor.
Despite the Company's disappointing financial performance in 1997, the
Committee concluded that Mr. Spainhour had provided important leadership in
the development of the Company's five-year strategic plan, and recognized
that the execution and the success of the plan can only be measured over
time, as the plan's initiatives are implemented. The Committee also believes
that Mr. Spainhour provided important leadership in enhancing the Company's
corporate culture, and in supporting a corporate environment that values
talent and innovation.
In accordance with the terms of the Company's employment agreement with
Mr. Spainhour (described below under "Executive Compensation -- Employment
Agreements"), his base compensation was increased to $725,000 effective
January 1, 1998, representing an 11.5% increase over the prior year. In
addition to this base salary, the Committee assigned to Mr. Spainhour a
performance percentage of 65% under the Annual Performance Plan for fiscal
1998, and a performance percentage of 50% under the Long Term Cash Plan for
the 1998-2000 performance cycle. The Committee also granted Mr. Spainhour
options to purchase 20,000 shares of Common Stock, vesting 25% per year on
each of the first four anniversaries of the grant date and exercisable at a
price equal to the market price of the Common Stock on the grant date.
===============================================================================
<PAGE>
The Committee believes that a significant portion of the target
compensation for the Chief Executive Officer should be represented by
incentive, performance compensation - payable only if the Company achieves
its financial objectives. In fiscal 1998, the Company achieved record
earnings of $39 million, or $1.44 per share on a diluted basis - well above
the target range established by the Committee under the Annual Performance
Plan for 1998. As a result of this strong performance, under the Annual
Performance Plan Mr. Spainhour was entitled to receive twice his performance
percentage of 65% for 1998, the maximum payable to him under that plan. As a
result, consistent with the Company's compensation philosophy, incentive
compensation represented in excess of 55% of Mr. Spainhour's cash
compensation for fiscal 1998.
In recognition of the Company's 1998 financial performance under Mr.
Spainhour's leadership, when reviewing executive compensation and making
stock option grants to executives in March 1999, the Committee awarded to Mr.
Spainhour additional options to purchase 50,000 shares of Common Stock.
These options will become vested 25% per year on each of the first four
anniversaries of the grant, and are exercisable at a price equal to the
market value of the Common Stock at the date of grant.
Rochelle B. Lazarus (Chairman)
Gerald S. Armstrong
James J. Burke, Jr.
Hanne M. Merriman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
As of the Record Date, ML&Co. and certain of its affiliates beneficially
owned an aggregate of approximately ___% of the outstanding Common Stock.
Messrs. Armstrong and Burke serve on the Boards of Directors of the Company
and Ann Taylor as representatives of ML&Co. and its affiliates. Accordingly,
ML&Co. and its affiliates are in a position to influence the management of
the Company. Messrs. Armstrong and Burke are also members of the
Compensation Committee of the Board of Directors of the Company.
===============================================================================
<PAGE>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth information regarding the annual and
long-term compensation awarded or paid for each of the last three fiscal
years to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company as of January 30, 1999
(collectively, the "named executives").
<TABLE>
<CAPTION>
TABLE I
-------
SUMMARY OF EXECUTIVE OFFICER COMPENSATION
Annual Compensation Long-Term Compensation
------------------------------------------------ ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities All Other
Name and Position Fiscal Other Annual Stock Awards Underlying Compensation
Position Year Salary($) Bonus($)(a) Compensation($) ($) Options(#) ($)(b)
- -------- ---- --------- ----------- --------------- ------------ ---------- ------------
J. Patrick Spainhour 1998 $ 725,000 $ 942,500 -- -- 20,000 $2,400
Chairman and Chief 1997 656,250 81,250 -- -- -- 3,306
Executive Officer 1996 556,074 295,000 -- $1,378,125(c) 175,000 --
Patricia 1998 600,000 660,000 -- -- 10,000
DeRosa........... 1997 600,000 150,000 367,234(d) -- -- --
President and Chief 1996 86,538 -- -- 987,500(e) 100,000 --
Operating Officer
Walter J. Parks..... 1998 245,000 137,340 -- -- -- 2,400
Senior Vice 1997 245,000 15,313 -- -- 16,000 2,438
President-Chief 1996 215,000 32,250 -- -- 7,500 2,312
Financial Officer
Jocelyn F.L. 1998 233,004 121,450 -- -- 4,200 --
Barandiaran....... 1997 225,000 14,063 -- -- 16,000 --
Senior Vice 1996 215,000 32,250 -- -- 5,000 --
President-General
Counsel and Secretary
James M. Smith ..... 1998 145,600 65,520 -- -- 2,000 2,184
Vice 1997 140,000 7,000 -- -- 7,500 2,374
President-Controller, 1996 125,000 11,250 -- -- 5,000 1,875
Assistant Treasurer
and Assistant
Secretary
<FN>
(a) Bonus awards were earned pursuant to the Company's Management Performance
Compensation Plan, except that a portion of the bonus amounts indicated for
Mr. Spainhour for 1996 and for Ms. DeRosa for 1997 were guaranteed bonuses
paid to them in accordance with the terms of their respective employment
agreements with the Company.
(b) Represents contributions made by the Company on behalf of the named
executives to its 401(k) Savings Plan.
(c) Represents the market value, on the date of the grant, of 75,000 restricted
shares of Common Stock granted to Mr. Spainhour on December 13, 1996 in
connection with his promotion to Chairman and Chief Executive Officer of
the Company. The value of these shares as of January 30, 1999 was
$2,906,250. Mr. Spainhour's rights to these shares vest with respect to
one-third of the grant per year on each of the first three anniversaries of
August 23, 1996, the effective date of his promotion, subject to his
continued employment by the Company. Mr. Spainhour would be entitled to
receive dividends on these restricted shares if any dividends are paid by
the Company on its Common Stock.
(d) Represents reimbursement of relocation expenses.
(e) Represents the market value, on the date of the grant, of 30,000 restricted
shares of Common Stock and 20,000 restricted units granted to Ms. DeRosa on
December 9, 1996 in connection with her commencement of employment,
pursuant to her employment agreement with the Company. The value of these
shares and units as of January 30, 1999, was $1,937,500. Ms. DeRosa's
rights to these shares and units vest with respect to one-third of the
grant per year on each of the first three anniversaries of December 9,
1996, the effective date of her employment agreement, subject to her
continued employment by the Company. Ms. DeRosa would be entitled to
receive dividends on the restricted shares if any dividends are paid by the
Company on its Common Stock.
</FN>
</TABLE>
================================================================================
<PAGE>
The following table sets forth certain information with respect to stock
options awarded during fiscal year 1998 to the named executives listed in
Table I above. These option grants also are reflected in Table I. In
accordance with Securities and Exchange Commission ("Commission") rules, the
hypothetical realizable values for each option grant are shown based on
compound annual rates of stock price appreciation of 5% and 10% from the
grant date to the expiration date. The assumed rates of appreciation are
prescribed by the Commission and are for illustrative purposes only; they are
not intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects.
<TABLE>
<CAPTION>
TABLE II
--------
STOCK OPTIONS GRANTED IN FISCAL YEAR 1998
Potential Realizable Value
at Assumed Annual Rates
% of Total # of Stock Price
# of Securities of Options Appreciation
Underlying Granted to Exercise for Option Term (b)
Options Employees in Price Expiration -----------------------
Name Granted(a) Fiscal 1998 ($/Share) Date 5%($) 10%($)
- ---- ---------- ------------ --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Patrick Spainhour...... 20,000 8.5% $ 15.50 4/21/08 $195,000 $494,000
Patricia DeRosa........... 10,000 4.2% 15.50 4/21/08 97,500 247,000
Walter J. Parks........... -- -- -- -- -- --
Jocelyn F.L. Barandiaran.. 4,200 1.8% 15.50 4/21/08 40,950 103,740
James M. Smith............ 2,000 0.9% 15.50 4/21/08 19,500 49,400
<FN>
(a) Options vest 25% per year on each of the first through fourth
anniversaries of the date of grant, subject to earlier vesting upon the
occurrence of one of the following "Acceleration Events": (i) any person
(excluding ML Capital Partners and its affiliates, and certain other
persons) becomes the owner of at least 20% of the outstanding Common
Stock, (ii) a majority of the Board of Directors changes, or (iii) a
merger or other specified event occurs.
(b) These columns show the hypothetical realizable value of the options at
the end of the ten-year term of the options, assuming that the market
price of the Common Stock subject to the options appreciates in value at
the annual rate indicated in the table, from the date of grant to the
end of the option term.
</FN>
</TABLE>
===============================================================================
<PAGE>
The following table shows the number of shares of Common Stock acquired
by each executive officer upon the exercise of Company stock options during
fiscal year 1998, and the aggregate dollar value realized by such executives
upon such exercise, based upon the fair market value of the Common Stock on
the date of exercise, as well as the number of all vested (exercisable) and
unvested (not yet exercisable) stock options held by each executive officer
at the end of fiscal year 1998, and the value of all such options that were
"in the money" (i.e., the market price of the Common Stock was greater than
the exercise price of the options) at the end of fiscal year 1998.
<TABLE>
<CAPTION>
TABLE III
---------
AGGREGATE OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR END OPTION VALUES
No. of Shares $ Value Number of Shares Underlying $ Value of Unexercised
Acquired on Realized Upon Unexercised Options In-the-Money Options
Exercise of Exercise of at End of Fiscal 1998 at End of Fiscal 1998
Name Stock Options Options(a) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Patrick Spainhour 25,000 $ 412,500 150,000 / 20,000 $ 3,328,125 /$465,000
Patricia DeRosa -- -- 83,000 / 27,000 1,462,875 / 532,125
Walter J. Parks 21,218 240,705 7,499 / 17,753 122,494 / 154,073
Jocelyn F.L. Barandiaran -- -- 48,040 / 24,660 851,982 / 352,794
James M. Smith 10,623 104,678 4,584 / 11,793 79,301 / 163,955
<FN>
(a) Calculated based on the closing market price of the Common Stock on the
date of exercise, less the amount required to be paid upon exercise of
the option.
(b) Calculated based on the closing market price of the Common Stock of
$38.75 on January 29, 1999, the last trading day in fiscal year 1998,
less the amount required to be paid upon exercise of the option.
</FN>
</TABLE>
===============================================================================
<PAGE>
PENSION PLAN. Since 1989, Ann Taylor has maintained a defined benefit
retirement plan for the benefit of its employees and those of its wholly
owned subsidiaries, which is intended to qualify under Section 401(a) of the
Code (as amended, the "Pension Plan"). Originally, the Pension Plan provided
for calculation of benefits based on a "cash balance" formula. Effective
January 1, 1998, the Pension Plan provides for calculation of benefits based
on a "career average" formula instead of a cash balance formula.
Under the "career average" formula, each participant's service and
annual earnings are used to determine their annual pension accrual. During
each participant's first ten years with Ann Taylor, their pension will
accrue, for each year of participation in the Pension Plan, at the rate of
1.25% of their current year's pay up to the Social Security Wage Base ("Wage
Base") plus 1.6% of any pay that exceeds the Wage Base, up to the maximum
amount permitted by the Code. Upon completion of more than 10 years of
service, the participant's annual pension accrual increases to 1.6% of the
current year's pay, up to the Wage Base, plus 1.95% of any pay over the Wage
Base, up to the maximum amount permitted by the Code.
Pension benefits are fully vested after five years of service.
Participants receive credit for service with Ann Taylor prior to July 1, 1989
for purposes of vesting, and for purposes of calculating benefits under the
Pension Plan. There is no interruption in participation for those employees
who were participants in the Pension Plan as of December 31, 1997; their cash
balance benefit was frozen as of that date. Pension benefits for such
employees who retire on or after January 1, 1998 are calculated using
whichever of the two - the amount in their cash balance account as of
December 31, 1997, or the career average formula - provides greater benefits.
Under the Code, the annual compensation that may be taken into account
for purposes of calculating benefits under the Pension Plan is limited to
$160,000 (indexed for inflation). With the exception of Mr. Smith, all
current executives named in Table I have annual compensation which exceeds
this figure, and the calculation of benefits for these executives is based on
the lower plan limitation amount.
As of December 31, 1998, the credited years of service under the Pension
Plan for Mr. Spainhour was 1.8 years; Ms. DeRosa one year; Mr. Parks 9.3
years; Ms. Barandiaran 5.7 years; and Mr. Smith 4.9 years. The estimated
monthly retirement benefit, payable as a single life annuity, that would be
payable to each of the executives named in Table I who were participants in
the Pension Plan during fiscal 1998, assuming (i) no increases in income and
(ii) retirement and the commencement of benefit payments at age 65, is as
follows: Mr. Spainhour, $3,949; Ms. DeRosa, $4,378; Mr. Parks, $7,295; Ms.
Barandiaran, $7,305; and Mr. Smith, $7,193. These benefits would not be
subject to any reduction for social security or other offset amounts.
EMPLOYMENT AGREEMENTS. Spainhour Employment Agreement. Effective as of
February 19, 1996, the Company and Mr. Spainhour entered into an employment
agreement in connection with his commencement of service as an employee of
the Company. This agreement was amended as of August 23, 1996 (as amended,
the "Spainhour Agreement"), in connection Mr. Spainhour's promotion to
Chairman and Chief Executive Officer of the Company. The Spainhour Agreement
provides for Mr. Spainhour's employment as Chairman and Chief Executive
Officer of the Company for a term of three years, which term is automatically
extended on an annual basis for one additional year unless either party
provides notice that it does not wish to extend the term (a "Nonrenewal
Notice"). Under the Spainhour Agreement, effective January 1, 1998, Mr.
Spainhour is entitled to an annual base salary of not less than $725,000.
Mr. Spainhour also is entitled to participate in the Company's annual bonus
and stock option plans, as well as other Company benefit programs.
Pursuant to the terms of the Spainhour Agreement, Mr. Spainhour was
granted, under the Stock Option Plan, an option to purchase 100,000 shares of
Common Stock at an exercise price equal to the fair market value of the
Common Stock on the date Mr. Spainhour commenced employment with the Company
(February 19, 1996). These options vested 50% on each of the first two
anniversaries of the date of grant. In addition, in connection with his
promotion to Chairman and Chief Executive Officer of the Company, Mr.
Spainhour received (i) a "performance vesting" option to purchase 75,000
shares of Common Stock under the Stock Option Plan, at an exercise price
equal to the fair market value of the Common Stock on the date of grant,
which option vests on the ninth anniversary of the date of grant, subject to
earlier vesting upon the occurrence of certain performance criteria and
subject to accelerated vesting and termination in accordance with the terms
of the Stock Option Plan; and (ii) 75,000 restricted shares of Common Stock,
one-third of which vest on each of the first three anniversaries of August
23, 1996, subject to accelerated vesting in accordance with the terms of the
Stock Option Plan, or upon the termination of Mr. Spainhour's employment
other than for Cause or by Mr. Spainhour for Good Reason (as such terms are
defined in the Spainhour Agreement).
===============================================================================
<PAGE>
In the event of termination of Mr. Spainhour's employment by the Company
without Cause, or by Mr. Spainhour for Good Reason, or in the event of the
expiration of the term of the Spainhour Agreement by reason of a Nonrenewal
Notice provided by the Company, Mr. Spainhour shall be entitled, among other
things, to receive, for the longer of one year or the remaining term of the
Spainhour Agreement, an amount representing his salary plus the average of
his last three annual bonuses, subject to Mr. Spainhour's compliance with the
noncompete and nonsolicitation provisions of the Spainhour Agreement. If any
payments or benefits received by Mr. Spainhour would be subject to the
"golden parachute" excise tax under the Code, the Company has agreed to pay
Mr. Spainhour such additional amounts as may be necessary to place him in the
same after-tax position as if the payments had not been subject to such
excise tax.
DeRosa Employment Agreement. On November 25, 1996, the Company and Ms.
Patricia DeRosa entered into an employment agreement (the "DeRosa Agreement")
providing for her employment as President and Chief Operating Officer of the
Company for a term of three years. Under the terms of the DeRosa Agreement,
Ms. DeRosa is entitled to an annual base salary of not less than $600,000 and
is entitled to participate in the Company's annual bonus and stock option
plans, as well as other Company benefit programs.
Pursuant to the terms of the DeRosa Agreement, Ms. DeRosa was granted
under the Stock Option Plan an option to acquire 100,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock
on November 25, 1996. One half of these options are "time vesting" options,
one-third of which become exercisable on each of the first three
anniversaries of December 9, 1996 (the "Effective Date"). The other half of
the options are "performance vesting" options which vest on the ninth
anniversary of Ms. DeRosa's employment, subject to earlier vesting upon the
occurrence of certain performance criteria and subject to accelerated vesting
and termination in accordance with the terms of the Stock Option Plan. In
addition, Ms. DeRosa received 30,000 restricted shares of Common Stock and
20,000 restricted units, which represent the right to receive a cash payment
based on the closing price of the Common Stock on the trading date
immediately preceding the date the restrictions lapse. One-third of each of
the restricted shares and restricted units vest on each of the first three
anniversaries of the Effective Date.
===============================================================================
<PAGE>
In the event of termination of Ms. DeRosa's employment by the Company
without Cause or by Ms. DeRosa for Good Reason, Ms. DeRosa shall be entitled,
among other things, to receive (i) for the longer of one year or the
remaining term of the DeRosa Agreement, an amount representing her base
salary and (ii) the bonus for the season in which the date of termination
occurs, pro rated to reflect the number of days in such season through the
date of termination, subject to Ms. DeRosa's compliance with the noncompete
and nonsolicitation provisions of the DeRosa Agreement. Any unvested
restricted shares and restricted units would also vest at such time. If any
payments or benefits received by Ms. DeRosa would be subject to the "golden
parachute" excise tax under the Code, the Company has agreed to pay Ms.
DeRosa such additional amounts as may be necessary to place her in the same
after-tax position as if the payments had not been subject to such excise tax.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
---------------------------------------------
In accordance with Rule 14a-8 under the Securities Exchange Act, any
stockholder proposals intended to be presented at the 2000 Annual Meeting of
Stockholders must be received by the Company no later than December 4, 1999
in order to be considered for inclusion in the Company's Proxy Statement and
form of proxy relating to that meeting.
Section 9 of Article II of the Company's By-Laws provides that, in order
for a stockholder to nominate a person for election to the Board of Directors
at an annual meeting of the Company, such stockholder must be a stockholder
of record on the date the notice described below is given and on the record
date for the annual meeting, and must have given timely prior written notice
to the Secretary of the Company. To be timely for the 2000 Annual Meeting of
Stockholders, notice must be received by the Company not less than sixty days
nor more than ninety days prior to May 18, 2000, which will be the
anniversary date of the prior year's meeting (or if the meeting date for the
2000 Annual Meeting is not within thirty days before or after the anniversary
date of the prior year's meeting, then not later than the tenth day following
the day on which the notice of the date of the meeting was mailed or public
disclosure thereof is made). Such notice must contain certain information
about the person whom the stockholder proposes to nominate and the
stockholder giving the notice, including the name, age, address, occupation,
and class and number of shares of Common Stock beneficially owned by the
proposed nominee and the name, address and class and number of shares of
Common Stock beneficially owned by such stockholder.
In addition, Section 10 of Article II of the Company's By-Laws provides
that, in order for a stockholder to propose any matter for consideration at
an annual meeting of the Company, such stockholder must have given timely
prior written notice to the Secretary of the Company of such stockholder's
intention to bring such business before the meeting. To be timely for the
2000 Annual Meeting of Stockholders, notice must be received by the Company
not less than sixty days nor more than ninety days prior to May 18, 2000,
which is the anniversary date of the prior year's meeting (or if the meeting
date for the 2000 Annual Meeting is not within thirty days before or after
the anniversary date of the prior year's meeting, then not later than the
tenth day following the day on which the notice of the date of the meeting
was mailed or public disclosure thereof is made). Such notice must contain
certain information about such business and the stockholder who proposes to
bring the business before the meeting, including a brief description of the
business the stockholder proposes to bring before the meeting, the reasons
for conducting such business at the annual meeting, the name and address of
the stockholder, the class and number of shares of Common Stock beneficially
owned by such stockholder, and any material interest of such stockholder in
the business so proposed.
===============================================================================
<PAGE>
ADDITIONAL INFORMATION
----------------------
Copies of the Company's 1998 Annual Report to Stockholders, which
includes audited financial statements, are being mailed to stockholders of
the Company with this Proxy Statement. Additional copies of the Annual
Report are available without charge upon request. Requests should be
addressed to the Secretary, AnnTaylor Stores Corporation, 142 West 57th
Street, New York, New York 10019.
ANNTAYLOR STORES CORPORATION
NEW YORK, NEW YORK
April 2, 1999
===============================================================================
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
---------------------------------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
ANNTAYLOR STORES CORPORATION
----------------------------
The first paragraph of Article FOURTH of the Company's Amended and Restated
Certificate of Incorporation shall be amended to read as follows:
Article FOURTH. The total number of shares of stock which the
------- -------
Corporation shall have authority to issue is one hundred and twenty
million (120,000,000) shares of Common Stock, each having a par value of
sixty eight-one hundredths of one cent ($.0068), and two million
(2,000,000) shares of preferred stock, each having a par value of one
cent ($.01).
===============================================================================
<PAGE>
EXHIBIT B
ANNTAYLOR STORES CORPORATION
----------------------------
ASSOCIATE DISCOUNT STOCK PURCHASE PLAN
--------------------------------------
1. PURPOSE. AnnTaylor Stores Corporation hereby establishes the
--------
AnnTaylor Stores Corporation Associate Discount Stock Purchase Plan,
effective as of May 18, 1999. This Plan is designed to provide eligible
employees of the Company and its Designated Subsidiaries who wish to become
shareholders in the Company with a convenient method of purchasing Common
Stock through payroll deductions. It is believed that associate
participation in the ownership of the Company will be to the mutual benefit
of both associates and the Company. The Plan is intended to qualify as an
employee stock purchase plan under Section 423(b) of the Code.
2. DEFINITIONS. As used in this Plan, the following capitalized terms
-----------
shall have the meanings set forth below:
(a) "Account" means the funds accumulated under the Plan with
respect to an individual Participant as a result of deductions from the
Participant's paycheck for the purpose of purchasing stock under this Plan.
The funds allocated to a Participant's Account shall remain the property of
the Participant at all times but may be commingled with the funds of other
Participants or the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Brokerage Investment Account" shall mean the Plan account at
a brokerage firm selected by the Company, that is established for each
Participant and in which all shares purchased by the Participant pursuant to
the Plan are held until withdrawn, sold or delivered pursuant to Section 7
hereof.
(d) "Business Day" means Mondays through Fridays, but excluding
days on which banking institutions in the State of New York are required by
law or regulation to be closed.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
further legislation or regulation amending, supplementing or superseding such
section or regulation.
(f) "Committee" means any committee appointed by the Board to
administer the Plan. The members of the Committee shall serve at the
pleasure of the Board. Any member of the Committee may resign at any time by
notice in writing mailed or delivered to the Secretary of the Company.
===============================================================================
<PAGE>
(g) "Common Stock" means the common stock, par value $.0068, of
the Company.
(h) "Company" means AnnTaylor Stores Corporation.
(i) "Compensation" means a Participant's salary, wages,
commissions, overtime pay, cash payments for incentive compensation and other
special cash payments, except to the extent that any such item is
specifically excluded by the Board of Directors. "Compensation" does not
include sign-on bonuses, severance payments, car allowances, relocation
expenses, moving expenses, or any other payment which could be considered as
reimbursement for expenses, or non-cash compensation.
(j) "Contribution" means amounts withheld by the Company, or a
Subsidiary of the Company, from the Compensation of a Participant through
payroll deductions under and in accordance with Section 6 of this Plan.
(k) "Custodian" means the party or parties acting as such under
the Servicing Agreement.
(l) "Eligible Employee" has the meaning given to it in Section 4
of this Plan.
(m) "Employee" means any salaried or hourly employee (including
officers) of the Company or any of its Designated Subsidiaries, whether such
employee is so employed at the time the Plan is adopted or becomes so
employed subsequent to the adoption of the Plan. No Board member who is not
also an employee of the Company or any of its Designated Subsidiaries shall
be eligible to become a Participant under this Plan. For the purposes of
this Plan, the employment relationship shall be treated as continuing intact
while an Employee is on any Company-approved leave of absence.
(n) "Fair Market Value" means, as of any given date, the closing
price of the Company's Common Stock on the New York Stock Exchange on the day
immediately preceding such date. In the event that such price is not
available, then the Fair Market Value of the Common Stock will be determined
by the Committee in good faith, taking into account the most recent trading
price of the Common Stock on the New York Stock Exchange, and such
determination will be conclusive.
(o) "Offering Commencement Date" means the first day of each
Offering Period in which there will be an offering, starting with August 1,
1999, and then each subsequent February 1 and August 1, until the Plan
terminates, if such date is a Business Day, or the first Business Day
following such date. A different date may be set by resolution of the
Board. This is the date on which the offering commences. On each such date,
the Company shall commence an offering by granting each Participant an option
to purchase shares on the Purchase Date. Each option so granted shall be
exercisable for the number of shares described in Section 7(a) herein, and
shall be exercisable only on the Purchase Date.
===============================================================================
<PAGE>
(p) 'Offering Period" means the six-month period commencing with
the Offering Commencement Date, during which Participants accrue funds in
their Accounts. Each such period shall commence on August 1 or February 1 of
each year that the Plan is in effect, starting with August 1, 1999. The
Board shall have the power to change the duration and/or the required
frequency of the Offering Periods under the Plan with respect to future
offerings and shall use its best efforts to notify Employees of any change at
least 15 days prior to the scheduled beginning of the first Offering Period
to be affected. In no event shall any option granted hereunder be
exercisable more than twenty-seven months after its date of grant.
(q) "Participant" means an Eligible Employee who has enrolled as a
Participant in accordance with Section 6 of this Plan and whose participation
has not terminated under Section 9 hereof.
(r) "Plan" means this AnnTaylor Stores Corporation Associate
Discount Stock Purchase Plan, as amended from time to time.
(s) "Purchase Date" means the last day of each Offering Period
(or, if such day is not a Trading Day, then the immediately preceding Trading
Day), on which the funds in the Participant's Account shall be used to
purchase shares of stock of the Company pursuant to this Plan.
(t) "Servicing Agreement" means an agreement entered into by and
between the Company and the Custodian governing certain terms and conditions
of the Plan and its operations. Such agreement may be modified from time to
time.
(u) "Subsidiary" means any corporation of which the Company now
owns, or hereafter acquires, directly or indirectly, at least a majority of
the outstanding voting capital stock. A "Designated Subsidiary" means any
Subsidiary that has been designated by the Board from time to time in its
sole discretion as eligible to participate in this Plan.
(v) "Trading Day" means any Business Day on which the New York
Stock Exchange, other national stock exchanges and the Nasdaq system are open
for trading.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
3. SHARES SUBJECT TO THE PLAN. (a) Number Available. The maximum
-- ------ -------
number of shares that will be offered under the Plan is 250,000 shares of
Common Stock.
===============================================================================
<PAGE>
(b) CHARACTER OF SHARES TO BE ISSUED. Shares sold under the Plan may
be authorized and unissued shares or treasury shares.
(c) INSUFFICIENT NUMBER OF SHARES AVAILABLE. If the total number of
shares for which options are to be granted on any date in accordance with
this Plan exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available in as nearly a uniform manner as shall be practicable and
as it shall determine to be equitable. In such event, the payroll deductions
to be made pursuant to the authorizations therefor shall be reduced
accordingly and the Company shall give written notice of such reduction to
each Participant affected thereby.
(d) ADJUSTMENTS. In the event of any reorganization,
recapitalization, stock split, reverse stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or other
similar change in the capital structure of the Company, the Committee may
make such adjustment, if any, as it deems appropriate in the number, kind and
purchase price of the shares available for purchase under the Plan and in the
maximum number of shares subject to any option under the Plan.
4. ELIGIBILITY. (a) Employees Eligible to Participate. Any Employee
------------ -----------------------------------
of the Company or a Designated Subsidiary is eligible to participate in this
Plan, except (i) Employees who are classified as "seasonal employees" and
(ii) Employees who are citizens of a foreign country the laws of which prohibit
the granting of options hereunder to its citizens.
(b) RESTRICTIONS ON AMOUNT OF STOCK WHICH MAY BE PURCHASED.
Notwithstanding any provision of the Plan to the contrary, no Employee shall
be granted an option under the Plan (i) if, immediately after the grant, such
Employee would own stock and/or hold outstanding options to purchase stock
representing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or any Subsidiary of the Company
(including stock attributed to such Employee pursuant to Section 424(d) of
the Code); or (ii) which permits such Employee's right to purchase stock
under all employee stock purchase plans (as described in section 423 of the
Code) of the Company and any Subsidiary to accrue at a rate which exceeds
$25,000 of Fair Market Value of such stock (determined at the time such
option is granted) for any calendar year in which at such option would be
outstanding at any time. Any amounts received from an Employee which cannot
be used to purchase stock as a result of this limitation will be returned to
the Employee as soon as practicable, without interest.
5. OFFERINGS. (a) There will be two annual consecutive offerings under
---------
the Plan. The first offering shall commence on August 1, 1999. Thereafter,
offerings shall commence on each subsequent February 1 and August 1, and the
final offering under this Plan shall commence on February 1, 2009 and
terminate on July 31, 2009.
===============================================================================
<PAGE>
(b) Participation in one offering under the Plan shall neither limit,
nor require, participation in any other offering. Unless the Participant
withdraws from the Plan, or their participation in the Plan otherwise
terminates as provided in Section 9, participation shall carry over from one
Offering Period to the next, until the end of the final offering.
6. ELECTION TO PARTICIPATE, ENROLLMENT AND PAYROLL DEDUCTIONS. (a)
----------------------------------------------------------
An Eligible Employee may become a Participant by completing an enrollment
agreement provided by the Company and filing it with the Company at least two
weeks prior to the Offering Commencement Date of the offering to which it
relates. At that time, the Employee shall elect to have deductions made from
his or her Compensation on each payday during the time the Employee is a
Participant in an offering, at the rate of one percent to 15 percent (in
increments of 1% only) of the Employee's Compensation, as specified by the
Employee in their enrollment agreement.
(b) Payroll deductions for a Participant shall commence as of the
Offering Commencement Date and shall end on the last day of such Offering
Period, unless earlier terminated by the Participant as provided in Section 9.
(c) All payroll deductions made for a Participant shall be credited to
the Participant's Account under the Plan. No interest will be earned on such
payroll deductions. A Participant may not make any separate cash payment
into such Account nor may payment for shares be made other than by payroll
deduction.
(d) A Participant may discontinue participation in the Plan as provided
in Section 9, but no other change can be made during an Offering Period and,
specifically, a Participant may not alter the rate of the Participant's
payroll deductions for that Offering Period.
(e) A Participant may modify the information set forth in such
enrollment agreement (including the rate of the Participant's payroll
deductions for Contributions) at any time and from time to time by submitting
a new enrollment agreement to the Company, which will become effective with
the first Offering Commencement Date after receipt thereof by the Company or,
if such new agreement is received less than fifteen days before the Offering
Commencement Date, then effective with the next following Offering
Commencement Date.
7. PURCHASE OF SHARES. (a) Number of Options. On each Offering
-------------------- -------------------
Commencement Date, the Company shall be deemed to have granted to each
Employee who was a Participant on such day an option to buy as many full
shares of Common Stock as the Participant will be able to buy with the
Contributions credited to the Participant's Account during the Offering
Period in which such Offering Commencement Date occurs.
(b) EXERCISE OF OPTION. On the Purchase Date, each Participant shall
be deemed to have exercised the options granted by Section 7(a), and shall be
deemed to have purchased, at the option purchase price determined in
accordance with Section 7(c) hereof, such number of full shares of Common
Stock reserved for the purpose of the Plan as the Contributions credited to
the Participan's Account during the Offering Period in which the Purchase
Date occurs will pay for.
===============================================================================
<PAGE>
(c) OPTION PURCHASE PRICE. The option purchase price per share on any
Purchase Date shall be the lower of (i) 85% of the Fair Market Value of the
Common Stock on the Offering Commencement Date for the Offering Period in
which the Purchase Date occurs and (ii) 85% of the Fair Market Value of the
Common Stock on such Purchase Date.
(d) EVIDENCE OF STOCK OWNERSHIP. Promptly following the end of each
Offering Period, the number of shares of Common Stock purchased by each
Participant on the Purchase Date shall be deposited into a Brokerage
Investment Account established in the Participant's name with the Custodian.
The Participant may, upon advance notice to the Company at the time of
enrollment, direct that the Brokerage Investment Account be established in
the names of the Participant and one other person designated by the
Participant, as joint tenants with the right of survivorship, tenants in
common, or community property, to the extent and in the manner permitted by
applicable law.
(e) RISK. Participants assume all the risks associated with any decrease
in the value of their Brokerage Investment Accounts. Participants
specifically assume the risk that the balance in their Brokerage Investment
Accounts may be more or less than the amount of Common Stock that they may
have purchased pursuant to this Plan.
(f) SALE OF COMMON STOCK. A Participant shall have the right to
withdraw all or any number of full shares in his or her Brokerage Investment
Account and (i) to receive certificates representing such shares, or (ii) to
direct the Custodian to sell all or any portion of such shares and to receive
the net proceeds of such sale. Following receipt of a request to sell
shares, the Custodian shall, subject to the regulations of the Securities and
Exchange Commission and unless otherwise agreed to between the Custodian and
the Participant, make such sale for the Participant on the next Business Day
or as soon thereafter as practicable.
8. ADMINISTRATION. (a) Commissions and Expenses. Except as set forth
--------------
in the next sentence, the Company shall be responsible for, and pay to the
Custodian, all fees, expenses and commissions relating to the establishment
and maintenance of Brokerage Investment Accounts, in accordance with the fee
schedule agreed to between the Company and the Custodian in the Service
Agreement. The foregoing notwithstanding, any fees, expenses and commissions
relating to the sale of Common Stock, the purchase of Common Stock with funds
other than payroll deductions, and the purchase and sale of anything other
than Common Stock, shall be the responsibility of, and paid for by, the
Participant.
===============================================================================
<PAGE>
(b) POWERS OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee may delegate any or all of its authority hereunder
to such officer or officers of the Company as it may designate. The
Committee shall be vested with full authority to make, administer, and
interpret such rules and regulations as it deems necessary to administer the
Plan and construe its provisions. Any determination by the Committee in
carrying out, administering or construing this Plan shall be final and
binding for all purposes and upon all interested persons and their respective
heirs, successors, and legal representatives.
(c) EMPLOYEES' RIGHTS AS SHAREHOLDERS. No Participant shall have any
rights as a shareholder with respect to any shares until the shares have been
purchased in accordance with Section 7 of this Plan and the stock has been
issued by the Company. The Custodian shall provide a Quarterly Statement to
each Participant showing all the transactions in the Participan's Brokerage
Investment Account, and the number of shares of Common Stock in such
Brokerage Investment Account.
(d) VOTING RIGHTS. The Custodian shall vote whole shares of Common
Stock held in a Participan's Brokerage Investment Account upon receipt of,
and in accordance with, written directions timely received from the
Participant. If the Custodian receives no such directions, the Custodian
shall vote such shares in its discretion, subject to applicable regulations.
(e) LIMITATIONS. No action of the Company or of the Board in
establishing this Plan, nor any action taken by the Company, any Designated
Subsidiary, the Board or the Committee or its delegates under this Plan, nor
any provision of this Plan, shall be construed as conferring upon any
Employee any right to continued employment for any period by the Company or
any of its Subsidiaries, or shall interfere in any way with the right of the
Company or any Subsidiary to terminate such employment.
9. TERMINATION OF PARTICIPATION. (a) Termination of Participation.
-----------------------------
A Participan's Participation in the Plan shall continue until the earliest
of: (i) such time as the Participant notifies the Company in writing that the
Participant wishes to withdraw from the Plan and such withdrawal becomes
effective, in accordance with Section 9(b) hereof; (ii) the date of the
Participan's separation of employment of the Company or any of its
Subsidiaries; and (iii) the termination of the Plan.
(b) WITHDRAWAL BY PARTICIPANT. A Participant may withdraw from an
offering, in whole but not in part, at any time prior to the last Business
Day of such offering, by delivering a new enrollment agreement to the
Company. A withdrawal will be effective only if it is received by the
Company as least 15 calendar days before the proposed date of withdrawal,
provided that the Committee, in its discretion, may specify (on a uniform and
nondiscriminatory basis) an earlier or later deadline for the submission of
enrollment forms. When a withdrawal becomes effective, the Participan's
payroll deductions shall cease, and all amounts then credited to the
Participan's Account shall be distributed to the Participant without
interest.
===============================================================================
<PAGE>
(c) LOSS OF ELIGIBILITY. Participation in the Plan shall be
automatically terminated upon the cessation of the Participan's status as an
Eligible Employee for any reason, including separation of employment. As
soon as practicable after such separation, the Participan's payroll
deduction Contributions shall cease and all amounts then credited to the
Participan's Account shall be distributed to the Participant, without
interest.
(d) RE-ENTRY. To re-enter the Plan as a Participant, an Eligible
Employee must complete and deliver to the Company a new enrollment agreement,
in accordance with Section 6 hereof.
(e) RIGHTS NOT TRANSFERABLE. No Employee shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber either the
payroll deductions credited to such Employe's Account or any rights with
regard to the exercise of an option to purchase shares under the Plan. If
any such action is taken by the Employee, or any claim is asserted by any
other person in respect of such right and interest, whether by garnishment,
levy, attachment or otherwise, such action or claim will be treated as an
election to withdraw from the Plan.
(f) DEATH. In the event of the death of the Participant, the amount of
payroll deductions not theretofore invested shall be refunded to the
Participant's estate, without interest, such payment to be made as soon as
practicable.
10. AMENDMENT OR TERMINATION OF THIS PLAN. The Board at any time and
-----------------------------------------
from time to time may modify, amend, suspend or terminate this Plan or any
part hereof, without notice, provided that no amendment that requires
stockholder approval in order to comply with Section 423 of the Code shall be
effective unless the same shall be approved by the requisite vote of
stockholders of the Company. Amendments will not adversely affect stock
options that have already been granted.
11. COMPLIANCE WITH SECTION 423. This Plan is designed and intended to
-----------------------------
comply with Section 423 of the Code, and all provisions hereof shall be
construed in a manner to so comply.
===============================================================================
<PAGE>
ANNTAYLOR STORES CORPORATION
----------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ANNTAYLOR
- ------------------------------------------------------------------------
STORES CORPORATION FOR THE ANNUAL MEETING TO BE HELD ON MAY 18, 1999.
- ---------------------------------------------------------------------
The undersigned hereby appoints J. Patrick Spainhour, Patricia DeRosa and
Jocelyn F.L. Barandiaran, and any of them, proxies of the undersigned with
full power of substitution to vote all shares of Common Stock, par value
$.0068 per share, of AnnTaylor Stores Corporation (the "Company") owned or
held by the undersigned at the Annual Meeting of Stockholders of the Company
to be held at The Rihga Royal Hotel, 151 West 54th Street, 54th floor, New
York, New York, on May 18, 1999 at 9:00 a.m. local time and at any
adjournment or postponement thereof. Such proxies are directed to vote as set
forth below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN (A) AND "FOR
---------------------------------------------------------------------------
"THE PROPOSALS IN (B), (C) AND (D).
-----------------------------------
(A) ELECTION OF THE FOLLOWING NOMINEES AS CLASS II DIRECTORS: James J. Burke,
Jr., Patricia DeRosa and Ronald W. Hovsepian (for terms to expire at the
2002 annual meeting).
[ ] FOR ALL NOMINEES [ ] AUTHORITY WITHHELD FOR ALL NOMINEES
[ ] AUTHORITY WITHHELD FOR THE FOLLOWING NOMINEES ONLY: (write the name
of such nominees in the space provided)______________________________
(B) PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES FROM 40 MILLION TO 120 MILLION as described
in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(C) PROPOSAL TO ADOPT THE COMPANY'S ASSOCIATE DISCOUNT STOCK PURCHASE PLAN as
described in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(D) PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors for the Company for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(E) IN THEIR JUDGMENT, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THIS
ANNUAL MEETING. (Continued and to be signed on other side)
===============================================================================
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED "FOR ALL NOMINEES" IN (A), "FOR" THE
PROPOSALS IN (B), (C) AND (D), AND IN ACCORDANCE WITH THE JUDGMENT OF SUCH
PROXIES UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
Dated ____________________________, 1999
________________________________________
________________________________________
(Signature)
Please mark, date, sign and return this
proxy in the enclosed envelope.
Please sign as names appear at left.
When signing as agent, attorney, or
fiduciary, or for a corporation or
partnership, indicate the capacity in
which you are signing. Shares registered
in joint names should be signed by each
joint tenant or trustee.
