Exhibit 10.17

ANNTAYLOR

PERSONAL AND CONFIDENTIAL

BY HAND
and
BY REGISTERED MAIL
RETURN RECEIPT REQUESTED

March 9, 2004

Mr. Barry Erdos
48 East 13th Street
New York, NY 10003

Dear Barry:

Reference is made to the employment agreement between you and AnnTaylor Stores
Corporation (the “Company”) dated March 7, 2001, as amended by Amendment #1
thereto dated June 1, 2001 and by Amendment #2 thereto dated November 25, 2001
(as so amended, the “Employment Agreement”).

In connection with your separation from the Company this letter (the “Separation
Agreement”) will confirm the agreement between you and the Company regarding
your separation of employment:

1. You hereby resign, effective as of February 27, 2004, from your positions as
an officer and director of the Company, AnnTaylor, Inc., and all other direct
and indirect subsidiaries of the Company. Your date of separation from
employment with the Company and its subsidiaries will be March 29, 2004 (the
“Separation Date”).

2. With the exception of sections 4, 7, and 8 of the Employment Agreement which
shall continue in full force and effect (other than as provided in paragraph
3(k) below), the Employment Agreement is hereby terminated and, except as set
forth below, no benefits shall be paid thereunder.

3. Subject to this Separation Agreement becoming effective and in consideration
of you executing the release attached hereto as Appendix A (the “Release”)
within twenty-one days immediately following the date hereof (the “Initial
Release”) and again within twenty-one days of the Separation Date (the “Final
Release”), and in consideration of the representations and agreements set forth
therein, the Company agrees to pay to you severance compensation as follows:

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 2

  (a) Accrued Obligations (as defined in the Employment Agreement) as of the
Separation Date, payable as soon as practicable after the Separation Date.

  (b) Continued payment of your base salary (as in effect as of the Separation
Date) from the Separation Date until March 29, 2005, payable in accordance with
the Company’s normal payroll practices.

  (c) Cash compensation equal to your Bonus (as defined in the Employment
Agreement) for fiscal year 2004, if any, pursuant to the Company’s Management
Performance Compensation Plan, such Bonus to be based upon the Company’s actual
performance for fiscal year 2004 and prorated to reflect the number of full or
partial pay periods in fiscal year 2004 for which you were employed by the
Company through and including the Separation Date, payable on the date on which
payments for such year are made to active employees under the plan.

  (d) Continuation of your medical and life insurance coverage as in effect
immediately prior to the Separation Date until March 29, 2005; provided,
however, medical benefits pursuant to this subsection shall be terminated as of
the date comparable medical benefits are made available to you during such
period and life insurance coverage provided pursuant to this subsection shall be
reduced pro rata to the extent of the dollar value of life insurance coverage
received by or made available to you during such period. You must immediately
report the receipt of any such benefits or coverage to the Company.

  (e) Cash compensation in an amount equal to the incentive compensation payment
you would have received, if any, under the Company’s Long Term Cash Incentive
Compensation Plan for the 2001-2003 and 2002-2004 Performance Cycles (to the
extent any such payments are due under such plan) pro-rated to reflect the
number of full or partial months in such performance cycle for which you were
employed by the Company through and including the Separation Date, payable on
the date on which payments for such performance cycle are made to active
employees under the plan.

  (f) Cash compensation in an amount equal to your actual earned bonus for
fiscal year 2003 pursuant to the Company’s Management Performance Compensation
Plan, payable on the later of (i) the date on which payments for such year are
made to active employees under the plan, and (ii) as soon as practicable after
the seventh day following your execution of the Final Release (such seventh day,
the “Final Release Effective Date”).

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 3

  (g) As of the Final Release Effective Date the stock options listed on
Appendix B attached hereto, granted to you by the Company (collectively, the
“Options”), shall remain outstanding until March 29, 2007, and shall continue to
be eligible for vesting and exercise in accordance with the terms of the
applicable stock option plan and the applicable option agreements as if you had
continued to be employed by the Company until such date. Any Options remaining
unvested or unexercised at the close of business on March 29, 2007 shall be
cancelled at such time. Notwithstanding the foregoing, no Option shall remain
exercisable beyond the expiration of its original ten year term.

  (h) As of the Final Release Effective Date, the restricted stock awards listed
on Appendix C-1 and C-2 attached hereto, granted to you by the Company
(collectively, the “Restricted Stock Awards”) shall (i) as set forth on Appendix
C-1 with respect to such Restricted Stock Award, vest on the Final Release
Effective Date, and (ii) as set forth on Appendix C-2 with respect to such
Restricted Stock Awards, continue to be eligible for vesting in accordance with
the terms of the applicable restricted stock plan and the applicable restricted
stock agreements as if you had continued to be employed by the Company until
March 29, 2007.

  (i) All payments made under paragraph 3 of this Separation Agreement shall be
made subject to any applicable tax withholding.

  (j) Notwithstanding anything in this Separation Agreement to the contrary, in
the event that you take any action in contravention of the non-solicitation or
confidentiality provisions contained in sections 7 and 8 of the Employment
Agreement, or in material violation of the terms of this Separation Agreement,
you will immediately forfeit your right to any payments to or benefits under
paragraph 3 of this Separation Agreement, all Restricted Stock Awards shall no
longer vest and shall be immediately cancelled, and all Options shall no longer
be exercisable and shall be immediately cancelled.

  (k) Notwithstanding anything in this Separation Agreement to the contrary, the
Company shall waive your obligations under the non-compete provision in section
7 of the Employment Agreement. The non-solicitation provision in section 7 of
the Employment Agreement will remain in full force and effect until March 29,
2005.

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 4

4. You represent that you have returned all property of the Company and its
affiliates in your possession, including, but not limited to, credit cards,
security key cards, telephone cards, cell phones, car service cards, computers,
computer software or hardware, identification cards, records and copies of
records, correspondence and copies of correspondence and other books or manuals
issued by the Company or its affiliates.

5. You agree not to take any action or to make any statement, written or oral,
that disparages the business or management of the Company or any Related Persons
(as defined in the Release). You further agree not to take any action that is
intended to damage (or would reasonably be perceived as likely to cause damage
to) the business or reputation of the Company or any Related Persons, or that
interferes with, impairs or disrupts the normal operations of the Company or any
Related Persons.

6. If you do not execute the Initial Release within twenty-one days immediately
following the date hereof and the Final Release within twenty-one days
immediately following the Separation Date, or if you revoke either release prior
to the Final Release Effective Date, this Separation Agreement will be null and
void and no benefits will be paid or available to you hereunder.

7. The terms in this Separation Agreement, the Initial Release, the Final
Release, and sections 4, 7 and 8 of the Employment Agreement constitute the
entire agreement between you and the Company and may not be altered or modified
other than in a writing signed by you and the Company. You represent that in
executing this Separation Agreement you do not rely and have not relied upon any
representation or statement not set forth herein made by the Company or any of
its agents, representatives, attorneys or any Related Persons with respect to
the subject matter, basis or effect of this Separation Agreement, or otherwise.

8. This agreement will be governed by the laws of the State of New York, without
reference to its choice of law rules.

9. You acknowledge that this Separation Agreement constitutes an adequate Notice
of Termination (as defined in the Employment Agreement) for all purposes under
the Employment Agreement and that your employment shall be terminated as of the
Separation Date (the Date of Termination, as defined in the Employment
Agreement) by the Company without Cause (as defined in section 6(e) of the
Employment Agreement).

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 5

If this letter correctly sets forth our understanding, please so signify by
signing and dating the enclosed copy of this letter and returning it to me.

Very truly yours,

AnnTaylor Stores Corporation

By:   /s/J. Patrick Spainhour                                  
      Chairman and Chief Executive Officer

AGREED TO AND ACCEPTED:

/s/Barry Erdos              
BARRY ERDOS
Dated: March 9, 2004

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 6

Appendix A

GENERAL RELEASE

        WHEREAS, this GENERAL RELEASE (“RELEASE”) is made by and between Barry
Erdos (“Executive”), and ANN TAYLOR STORES CORPORATION (“ANN TAYLOR” or the
“Company”);

        WHEREAS, Executive’s employment with ANN TAYLOR will come to an end
effective March 29, 2004 (the “Separation Date”);

        WHEREAS, ANN TAYLOR denies any liability, wrongdoing, wrongful act,
discriminatory treatment, breach of contract, denial of benefits or any improper
act or motive of any kind, and denies liability for any claimed damages of any
kind, whatsoever;

        WHEREAS, Executive and ANN TAYLOR were parties to an employment
agreement dated March 7, 2001, and amended by Amendment #1 thereto dated June 1,
2001 and further amended by Amendment #2 thereto dated November 25, 2001 (the
“Employment Agreement”) which was terminated as to all but sections 4, 7, and 8
of such agreement on February 19, 2004;

        WHEREAS, Executive and ANN TAYLOR are parties to a letter agreement
dated March 9, 2004 (the “Separation Agreement”);

        WHEREAS, pursuant to the Separation Agreement, ANN TAYLOR desires
Executive to execute the Release within twenty-one days following the date on
which the Separation Agreement is executed and again within twenty-one days
following the Separation Date;

        WHEREAS, it being the desire of the parties, for good and valuable
consideration outlined in the Separation Agreement, to resolve all areas of
actual and potential claims and disputes, known or unknown, arising out of
Executive’s employment and separation from employment with ANN TAYLOR, and to
settle any obligations of ANN TAYLOR to the Executive under the Employment
Agreement, all in accordance with the terms outlined in the Separation
Agreement;

        NOW, THEREFORE, in consideration of the mutual promises and obligations
recited in the Separation Agreement:

  1. Executive, his heirs, successors, and assigns, hereby knowingly and
voluntarily remise, release and forever discharge the Company, its subsidiaries
and affiliates, its and their respective officers, directors, partners,
shareholders, employees, successors and assigns (collectively, the “Related

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 7

    Persons”), from any and all debts, demands, actions, causes of actions,
accounts, covenants, contracts, agreements, claims, damages, omissions,
promises, and any and all claims and liabilities whatsoever, of every name and
nature, known or unknown, suspected or unsuspected, both in law and equity
(“Claims”), which Executive has ever had, now has, or may hereafter claim to
have against the Company or any Related Persons by reason of any matter, cause
or thing whatsoever arising from the beginning of time to the time Executive
signs this Release. This Release of Claims shall apply to any Claim of any type,
including, without limitation, any and all Claims of any type that Executive may
have arising under the common law, under Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of
1967, the Older Workers Benefit Protection Act, the Americans With Disabilities
Act of 1967, the Family and Medical Leave Act of 1993, the Employee Retirement
Income Security Act of 1974, or the New York Human Rights Law, each as amended,
and any other federal, state or local statutes, regulations, ordinances or
common law, or under any policy, agreement, contract, understanding or promise,
written or oral, formal or informal, between any of the Related Persons and
Executive, and shall further apply, without limitation, to any and all Claims in
connection with, related to or arising out of Executive’s employment, or the
termination of Executive’s employment, with the Company, and all Claims for
alleged tortious, defamatory or fraudulent conduct. Executive also hereby waives
any Claim for reinstatement, severance pay, attorney’s fees, or costs, except as
otherwise expressly set forth in the Separation Agreement. By signing this
Release, Executive agrees and represents that he will not be entitled to any
personal recovery in any action or proceeding that may be commenced on his
behalf arising out of any of the matters that are the subject of the Release,
including but not limited to claims brought by the Equal Employment Opportunity
Commission; provided, however, that nothing in this Release shall prevent
Executive from seeking to enforce his rights under the Separation Agreement.
Notwithstanding the foregoing, nothing in this Release shall affect or impair
any rights Executive may have, if any, to indemnification for attorneys’ fees,
costs and/or expenses pursuant to applicable statute, Certificates of
Incorporation and By-Laws of the Company, its affiliates or subsidiaries, nor
does Executive waive or lose any rights that Executive has as a former employee
under the Company’s qualified retirement plans.

  2. Executive represents that he has not filed against the Company or any of
the Company’s subsidiaries, affiliates or any Related Persons, any complaints,
charges or law suits arising out of his employment by the Company, or any other
matter arising on or prior to the date hereof. Executive covenants and agrees
that he will not seek recovery against the Company or any of its subsidiaries,

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 8

    affiliates or any Related Person arising out of any of the matters set forth
in this paragraph or any of the matters that are the subject of paragraph 1
hereof.

  3. The Company advises Executive to consult with an attorney of his choosing
prior to signing this Release. Executive confirms that he has the right and has
been given the opportunity to review this Release with an attorney of his
choice. Executive also understands and agrees that the Company is under no
obligation to offer Executive all of the severance compensation set forth in the
Separation Agreement and that he is under no obligation to consent to this
Release and the representations and agreements set forth herein, and that he has
entered into this Release freely and voluntarily.

  4. Executive may have twenty-one days to consider the terms of this Release.
Furthermore, once Executive has signed this agreement, Executive has seven
additional days from the date he signs it to revoke his consent. To revoke this
agreement Executive must communicate his decision to do so in writing to Barbara
Eisenberg, Company General Counsel and Secretary, (212-536-4253) within the
seven day period. This Release will not become effective until seven days after
the date Executive has signed it, as indicated on the last page hereof.

IN WITNESS WHEREOF, Executive has executed this RELEASE as his free act and deed
this               day of           , 2004

 

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    Barry Erdos

On this day of          , 2004,               personally appeared before me and
has executed this RELEASE as his free act and deed.

 

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    Notary Public     My Commission Expires

ANN TAYLOR

By:                                                   

Its:                                                 

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 9

Appendix B

Grant Date Price Current
Balance # Vested or
Vest Date # Options
Vesting

                    3/29/1999
                    1992 Plan

$28.0833
  37,500
  37,500
                      3/10/2000
                    1992 Plan $15.9583
  27,000
20,250
3/10/2004 6,750                        3/7/2001
                    1992 Plan
               Contract Date $16.7333

112,500

56,250
3/7/2004
3/7/2005  28,125  
28,125                       1/29/2002
                    2002 Plan
$25.3000

  52,500

     26,250    
1/29/2005
1/29/2006   

13,125   
13,125                        3/11/2003
                    2002 Plan

$19.0600

  35,000

   0
3/11/2004
3/11/2005
3/11/2006
3/11/2007   

8,750 
8,750 
8,750 
8,750 

                         Total

 

 264,500

  
 

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 10

                                                     Appendix C-1*

Grant Date Original
Lapse Date # Shares 3/7/2001 3/7/2005 9,375 

*   Restrictions lapse on an additional 9,375 restricted shares on 3/7/2004.

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Mr. Barry Erdos
Dated as of March 9, 2004
Page 11

                                                     Appendix C-2

Grant Date Lapse Date # Shares 1/29/2002 1/29/2005 2,250    1/29/2006 2,250 
3/11/2003* 3/11/2005 2,500    3/11/2006 2,500    3/11/2007 2,500  Total   12,000
 

*   Restrictions lapse on an additional 2,500 restricted shares on 3/11/2004.

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