Exhibit 10.1

 

As amended through August 18, 2005

 

ANNTAYLOR STORES CORPORATION

DEFERRED COMPENSATION PLAN

PLAN DOCUMENT

 

1. Purpose: The purpose of this AnnTaylor Stores Corporation Deferred
Compensation Plan (the “Plan”) is to enable select employees of AnnTaylor Stores
Corporation (“Ann Taylor”) and its subsidiaries (collectively, the “Company”) to
defer compensation in accordance with the terms and conditions set forth herein.

 

2. Administration

 

  a. The Plan shall be administered by the Board of Directors of AnnTaylor
Stores Corporation (the “Board”), by a committee thereof, or by a committee of
three or more persons appointed by the Board (the Board serving in such
function, or such committee, or their respective delegate, hereinafter referred
to as the “Committee”).

 

  b. The Committee shall have full power and authority to administer the Plan
and otherwise to perform the duties and responsibilities specified hereunder.
All determinations by the Committee shall be binding and conclusive on all
parties. Without limiting the foregoing, the Committee shall have the following
specific powers and duties:

 

  (i) to interpret the provisions of the Plan and make any and all
determinations arising thereunder;

 

  (ii) to maintain such records as it shall deem necessary or appropriate for
the proper administration of the Plan;

 

  (iii) to establish such rules and procedures not inconsistent with the terms
of the Plan as it shall deem necessary or appropriate to effectuate the purpose
of the Plan.

 

3. Plan Year: The 1995 Plan Year shall commence on the effective date of the
Plan and end on December 31, 1995. Beginning on January 1, 1996, the Plan Year
shall be the calendar year.

 

4.

Eligible Employees: Eligibility to make deferrals under the Plan for any Plan
Year shall be limited to those employees of the Company who, as of the day prior
to the start of such Plan Year, hold the title of vice president or above (the
“Participants”), provided that certain employees hired during a Plan Year may be

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eligible to participate during such Plan Year at the discretion of the
Committee. Employees who hold the title of vice president or above as of the
effective date of the Plan shall be eligible to participate in the 1995 Plan
Year.

 

5. Deferral of Compensation

 

  a. Subject to such restrictions and limitations as the Committee may impose,
each Participant may elect, in writing on a form or forms prescribed by the
Committee and at the time prescribed below, to have the Company defer payment
(expressed in whole percentages) of (1) up to 25% of the Participant’s
Compensation (as defined herein) with respect to a Plan Year, or (2) up to 100%
of the Participant’s Incentive Compensation (as defined herein) with respect to
a Plan Year. For purposes hereof, (i) the term “Compensation” with respect to a
Plan Year shall mean the total salary and Incentive Compensation (as defined
herein) earned by the Participant for services rendered in respect of such Plan
Year (without regard to his or her deferral election hereunder), and (ii) the
term “Incentive Compensation” with respect to a Plan Year shall mean all
incentive compensation (attributable to “incentive compensation periods” which
begin during the Plan Year) earned by the Participant for services rendered in
respect of such Plan Year (without regard to his or her deferral election
hereunder). For this purpose, Performance Compensation paid or earned under the
AnnTaylor Stores Corporation Management Performance Compensation Plan shall be
considered Incentive Compensation. Deferrals of salary shall be effected through
payroll deductions. For purposes of the 1995 Plan Year, (1) a Participant’s
salary to be included as Compensation shall be limited to salary earned during
pay periods which commence after the effective date of the Plan and (2)
Incentive Compensation shall be limited to the incentive compensation
attributable to the “incentive compensation period” commencing in August 1995
shall be included as Incentive Compensation hereunder.

 

  b. Any election made pursuant to subparagraph (a) above to defer Compensation
or Incentive Compensation shall be submitted to the Committee at such time prior
to the beginning of the Plan Year with respect to which such Compensation will
be earned as the Committee shall determine, and such election shall become
irrevocable as of the commencement of such Plan Year, provided that, in the
first Plan Year in which a Participant becomes eligible to participate in the
Plan, such election may be made within 30 days after the date the Participant
becomes eligible to participate in the Plan. For the 1995 Plan Year, any
election pursuant to subparagraph (a) above shall be submitted to the Committee
prior to the effective date of the Plan.

 

6. Deferred Compensation Account: The Company shall establish a memorandum
account (“Deferred Compensation Account”) for each Participant in the Plan. A
Participant’s Deferred Compensation Account shall be (i) credited

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with all amounts deferred by the Participant under the Plan as of the date such
amounts would otherwise have been paid to such Participant, and (ii) charged
with any distributions made with respect to the Participant pursuant to
Paragraph 7. A Participant’s Deferred Compensation Account will be credited
quarterly on the last day of each calendar quarter with any amount representing
interest at an annual rate equal to the one-year Treasury constant maturity rate
determined as of the first day of each Plan Year, plus two percentage points.

 

7. Payment of Deferred Compensation

 

  a. Except as otherwise provided in subparagraphs (b), (c) or (d) below, the
amount then credited to a Participant’s Deferred Compensation Account shall be
paid to him or her by the Company, in a single lump sum cash payment (less any
mandatory withholding as provided in Paragraph 12 hereof), as soon as
practicable following January 1 of the calendar year following the Participant’s
termination of employment with the Company. The foregoing notwithstanding, any
Participant who is considered a “specified employee” under section 409A of The
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (“Section 409A”), as of the date the Participant’s employment is
terminated, will not be entitled to any such distribution until at least six
months after the termination of employment.

 

  b. In the event of the Participant’s termination of employment by reason of
death or Disability (as defined herein), the Company shall pay to such
Participant (or to such Participant’s Beneficiary, as defined in Paragraph 8
hereof), in a single lump sum cash payment, the amount then credited to such
Participant’s Deferred Compensation Account (less any mandatory withholding as
provided in Paragraph 12 hereof) as soon as practicable following the date of
termination of employment due to the Participant’s death or Disability. For
purposes hereof, a “Disability” shall exist if the Participant (i) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than 3 months under the Company’s long-term
disability plan.

 

  c. In the event that a Participant incurs a severe financial hardship
occasioned by accident, illness or similar extraordinary and unforeseeable
emergency beyond the control of the Participant, the Committee, in its sole
discretion and upon written application of such Participant, may authorize
immediate payment of all or a portion of the amount then credited to such
Participant’s Deferred Compensation Account (less any

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mandatory withholding as provided in Paragraph 12 hereof) (a “Hardship
Withdrawal”); provided that such payment shall in no event exceed the amount
necessary to alleviate such financial hardship. The circumstances that will give
rise to the approval of a Hardship Withdrawal will depend upon the facts of each
case, but, in any case, payment under this subparagraph (c) may not be made to
the extent that such hardship is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of the Participant’s
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship, or (iii) by cessation of deferrals under the Plan.

 

  d. In the event of a Change in Control (as defined in subparagraph (e)
hereof), the Company shall pay each Participant the amount then credited to such
Participant’s Deferred Compensation Account in a single lump sum cash payment
(less any mandatory withholding as provided in Paragraph 12 hereof) as soon as
practicable thereafter, provided that amounts deferred after December 31, 2004,
including amounts relating to Incentive Compensation with respect to the 2004
Plan Year which were paid in 2005, will not be distributed pursuant to this
Section 7(d) unless the event also qualifies as a change in control pursuant to
the definition in Section 409A. For purposes of clarification, unless a Change
in Control is deemed to have occurred in accordance with Section 409A and
subparagraph (e) hereof, all amounts credited to such Participant’s Deferred
Compensation Account shall be distributed in accordance with subparagraphs (a)
through (c) hereof.

 

  e. A “Change in Control” shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been satisfied:

 

  (i) any “person”, as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than (1)
the Company, (2) Merrill Lynch & Co. or any affiliate thereof, which for
purposes of this Agreement shall include First Capital Partners Inc. and its
affiliates (collectively “ML”), (3) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or (4) any corporation
owned, directly or indirectly, by the stockholders of Ann Taylor in
substantially the same proportion as their ownership of shares of common stock
of Ann Taylor (a “Person”), is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Ann
Taylor representing 30% or more of the combined voting power of Ann Taylor’s
then outstanding voting securities (not including the securities beneficially
owned by such Person securities acquired directly from ML representing in excess
of 15% of the combined voting power of Ann Taylor’s then outstanding voting
securities but including any such securities acquired directly from ML
representing up to 15% of such combined voting power);

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  (ii) during any period of not more than two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with Ann Taylor to effect a transaction described in clause (i), (iii), or (iv)
of this Paragraph 7(e)) whose election by the Board or nomination for election
by Ann Taylor’s stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;

 

  (iii) the stockholders of Ann Taylor approve a merger or consolidation of Ann
Taylor with any other corporation, other than (1) a merger or consolidation
which would result in the voting securities of Ann Taylor outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving or
parent entity) 50% or more of the combined voting power of the voting securities
of Ann Taylor or such surviving or parent entity outstanding immediately after
such merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of Ann Taylor (or similar transaction) in which no
Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Ann Taylor representing
30% or more of the combined voting power of Ann Taylor’s then outstanding
securities (not including the securities beneficially owned by such Person
securities acquired directly from ML representing in excess of 15% of the
combined voting power of Ann Taylor’s then outstanding voting securities but
including any such securities acquired directly from ML representing up to 15%
of such combined voting power); or

 

  (iv) the stockholders of Ann Taylor approve a plan of complete liquidation of
Ann Taylor or an agreement for the sale or disposition by Ann Taylor of all or
substantially all of Ann Taylor’s assets (or any transaction having a similar
effect).

 

8. Designation of Beneficiary: A Participant may designate a Beneficiary or
Beneficiaries to receive any amount due him or her hereunder at his or her death
by executing a form prescribed by the Committee and delivering it to the
Committee at any time prior to his or her death. A participant may revoke or
change his or her Beneficiary designation without the Beneficiary’s consent by
executing a new form and delivering it to the Committee at any time and from

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time to time prior to his or her death. If a Participant shall have failed to
designate a Beneficiary, or if no such Beneficiary shall survive him or her,
then such amounts shall be paid to his or her spouse, if then living, or, if
not, to his or her estate.

 

9. Other Employee Benefits: Any Compensation deferred and any benefits paid
under the Plan shall not be included in creditable compensation in computing
benefits under any employee benefit plans of the Company, except to the extent
provided for thereunder.

 

10. No Right to Employment: Nothing contained herein shall be construed as
conferring upon any Participant the right to continue in the employ of the
Company.

 

11. Deferred Compensation as an Unsecured Promise: The Company shall not
segregate any funds representing the Deferred Compensation Accounts of
Participants hereunder, and nothing in the Plan shall be construed as providing
for such segregation. All payments provided for under the Plan shall be paid in
cash from general assets of the Company. Nothing the Plan, and no action taken
pursuant to its terms, shall create or be construed to create a trust or escrow
account of any kind, or a fiduciary relationship between the Committee or the
Company and any Participant, designated Beneficiary or any other person. The
Participants, their designated Beneficiaries and any other persons under the
Plan, shall rely solely on the unsecured promise of the Company to make payments
required hereunder, but shall have the right to enforce such a claim in the same
manner as any unsecured general creditor of the Company.

 

12. Withholding: The Company shall deduct and withhold from any payments made
hereunder all sums which it then may be required to deduct or withhold pursuant
to any applicable statute, law, regulation or order of any jurisdiction
whatsoever.

 

13. No Assignment: No Participant, designated Beneficiary, or any other person
entitled to any payment hereunder shall have the power to transfer, assign,
anticipate, mortgage or otherwise encumber any right to receive a payment in
advance of any such payment, and any attempted transfer, assignment,
anticipation, mortgage or encumbrance shall be void.

 

14. Obligations to the Company: If a Participant becomes entitled to a
distribution of benefits under the Plan, and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount owed
to the Company, then the Company may offset such amounts owed to it against the
amount of benefits otherwise distributable.

 

15. Amendment and Termination: The Board reserves the absolute right to amend or
terminate the Plan, in whole or in part, at any time and from time to time,
provided that no such amendment or termination shall adversely affect the right

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of any Participant or Beneficiary hereunder to receive payment of any benefits
deferred hereunder prior to the date of such amendment or termination.
Notwithstanding the foregoing or any other provision of the Plan, upon
termination of the Plan, the Committee, in its sole discretion, may accelerate
payment of all benefits deferred hereunder in such manner as it shall determine.
Notwithstanding the foregoing, in the event that the Committee determines that
accelerated payment of benefits under the Plan would be adverse to a Participant
under any applicable law, such Participant’s benefits will be paid in accordance
with Section 7.

 

16. Distribution of Plan Amendments; Acknowledgments

 

  a. The Committee shall furnish each Participant with a copy of the Plan prior
to his or her initial deferral election hereunder. In addition, the Committee
shall furnish each Participant, or in the case of a deceased Participant, his or
her Beneficiary, with a copy of any amendment of the Plan.

 

  b. Each Participant, prior to or simultaneously with his or her initial
deferral election, shall acknowledge receipt of a copy of the Plan. Such
acknowledgment shall constitute an agreement by the Participant that the
Participant, his or her Beneficiary and any representatives shall be bound by
all of the terms and conditions of the Plan.

 

17. Governing Law: Except to the extent preempted by federal law, the Plan shall
be governed by and construed in accordance with the laws of the State of
Delaware.