**3. Improper Terminations for Cause.**     For the avoidance of doubt, an improper termination of the Executive by the Company for Causepursuant to Section 6 of the Employment Agreement shall be treated as a termination of theExecutive by the Company without Cause. The last paragraph of Section 6(a) shall be deleted.**4. Separation from Service.**     For purposes of the cash severance benefit payable pursuant to Section 6(b) of the EmploymentAgreement upon a Termination of the Executive’s employment by the Company without Cause or by theExecutive for Good Reason, payment of such benefit shall, subject to Section 29(c) of theEmployment Agreement (as amended by this Amendment), commence in the month in which the Executivehas a “separation from service” within the meaning of Section 409A (including §1.409A-1(h)), andshall continue for the full period specified in Section 6(b)(ii) of the Employment Agreement.**5. Good Reason Definition.**     In order for the Executive to terminate her employment for Good Reason, she must comply withthe following procedural requirements: (i) the termination for Good Reason must occur within alimited period of time not to exceed two years following the initial existence of the eventsclaimed to constitute Good Reason, (ii) the Executive must provide written notice to the Companywithin ninety (90) days after the initial existence of the events claimed to constitute Good Reasonand (iii) the Company must be provided with a period of thirty (30) days after the Company’sreceipt of such written notice to remedy the events claimed to constitute Good Reason without beingrequired to pay the benefits pursuant to Section 6(b) of the Employment Agreement.**6. Severance Benefits Offsets.**     In the event the Company adopts a change in control severance plan, the Employment Agreemententitles the Executive to participate in such plan and receive the greater of the cash severancebenefits provided under the Employment Agreement or any such change in control severance plan (withthe cash severance benefits otherwise payable subject to offset to avoid a duplication of benefits(*i.e.*, cash severance benefits are payable under either the Employment Agreement or change incontrol severance plan, but not both)). If the Executive becomes entitled to cash severancebenefits under any such change in control severance plan because the cash severance benefitsthereunder in the circumstances are greater than under the Employment Agreement, then, to theextent of the amount of the cash severance benefits that would otherwise be payable under theEmployment Agreement in the circumstances, the severance benefits payable under any such change incontrol severance plan shall be paid at the same time and in the same form as provided underSection 6(b) of the Employment Agreement as amended by this Amendment. Any cash severance benefitspayable in the circumstances under any such change in control severance plan having a value inexcess of the cash severance benefits that would otherwise be payable under the EmploymentAgreement shall be paid in the time and form specified in any such change in control severanceplan. Notwithstanding the preceding two sentences, if the Executive becomes entitled to cashseverance benefits under any such change in control severance plan, the full amount of the cashseverance benefits shall be paid in the time and form specified in any such change in controlseverance plan if the Executive has a
 

 
“separation from service” (within the meaning of Section 409A, including §1.409A-1(h)) within twoyears following a “change in the ownership,” a “change in the effective control” or a “change inthe ownership of a substantial portion of the assets” of the Company (within the meaning of Section409A) and a different time and form of payment for the cash severance benefits payable under theEmployment Agreement is permitted by §1.409A-3(c).**7. Section 280G Gross-Up Payment Reduction and Payment Timing.**     In the event a reduction in the amount of Company Payments pursuant to Section 10(b)(ii) ofthe Employment Agreement is triggered in connection with a change of ownership or effectivecontrol, the Executive shall not be permitted to give written notice or otherwise direct the orderin which Company Payments are reduced. In all cases, Company Payments will be reduced in the orderspecified in Section 10(b)(ii) of the Employment Agreement. For purposes of determining whether aGross-Up Payment is required under Section 10(b) of the Employment Agreement and, if so, the amountof any such Gross-Up Payment, the Executive shall be deemed to pay U.S. federal income taxes andstate and local income taxes at the Executive’s actual applicable tax rates for the calendar yearin which the Company Payments are to be made, and any reduction in U.S. federal income taxes whichcould be obtained from deduction of such state and local income taxes shall similarly be calculatedusing the Executive’s actual applicable tax rates for the calendar year in which the CompanyPayments are to be made. Any Gross-Up Payment becoming payable pursuant to Section 10(b) of theEmployment Agreement shall be made by the end of the Executive’s taxable year next following theExecutive’s taxable year in which the Executive remits the related taxes.**8. Six-Month Delay for Specified Employees.**     Section 29(c) of the Employment Agreement (the Six Month Delay for “Specified Employees”Section) is replaced it its entirety by the following language from this Amendment.Notwithstanding any provision to the contrary in the Employment Agreement, if the Executive is a“specified employee” (within the meaning of Section 409A) at the time of the Executive’s“separation from service” (within the meaning of Section 409A, including §1.409A-1(h)) and anyamount that would be paid to the Executive under the Employment Agreement or otherwise during thesix-month period following the Executive’s separation from service constitutes a deferral ofcompensation (within the meaning of Section 409A) that is required to be delayed in order to complywith Section 409A, such amount shall not be paid to the Executive until the earlier of (i) sixmonths after the date of the Executive’s separation from service, and (ii) the date of theExecutive’s death (the “**Delay Period**”). Upon the expiration of the Delay Period, all payments andbenefits delayed pursuant to the preceding sentence (whether they would have otherwise been payablein a single lump sum or in installments in the absence of such delay) shall be paid or reimbursedto the Executive in a lump sum within thirty (30) days following the expiration of the DelayPeriod, and any remaining payments and benefits due under the Employment Agreement or otherwiseshall be paid or provided in accordance with the normal payment dates specified for such paymentsand benefits. For purposes of this section, each separate installment of any continued Base Salaryseverance payments the Executive may become entitled to pursuant to Section 6(b) of the EmploymentAgreement is intended to constitute a separate payment for purposes of Section 409A, including§1.409A-2(b)(2).
 

 
**9. AnnTaylor Settlement Agreement.**     Before giving effect to the Settlement Agreement, the Executive generally was to receive asupplemental retirement benefit from AnnTaylor payable each year for the remainder of theExecutive’s life (with survivor benefits for the Executive’s spouse) pursuant to the Executive’sprior employment agreement with AnnTaylor dated February 1, 1994 (the “**AnnTaylor Agreement**”).AnnTaylor has or will pay the Executive Eight Hundred and Ten Thousand Dollars ($810,000.00),subject to any applicable withholding obligations, pursuant to the Settlement Agreement (suchpayment, the “**Settlement Payment**”). For purposes of implementing Section 4(e) of the EmploymentAgreement, the Settlement Payment is in complete satisfaction of any and all supplementalretirement benefit payments that the Executive may have otherwise been entitled to (from AnnTaylor,the Company, or otherwise) through and including February 2013 (including, without limitation, anypayments that may have heretofore otherwise been due to the Executive) and is in partial settlementof the Executive’s supplemental retirement benefit payment for March 2013. The Company will make asupplemental retirement benefit payment to the Executive of $10,279.66 in March 2013, and in April2013 will commence making a monthly supplemental retirement benefit payment to the Executive of$12,476.87 (with survivor benefits for the Executive’s spouse), subject in each case to the sameterms and conditions for each such month as had the benefit been payable by AnnTaylor had theSettlement Agreement not been entered into and had the Executive not commenced employment with theCompany. Each such payment will be subject to the Company’s withholding obligations with respectthereto, offset for annual primary social security retirement benefits, and such continuing monthlypayments are subject to the lump sum payment provision of the Employment Agreement in the event ofa change in ownership or effective control of the Company (within the meaning of Section 409A).**B.** **RESTRICTED STOCK UNIT AGREEMENT****.****1. Timing of Payment of Restricted Stock Units in Connection with Certain Terminations.**     The Restricted Stock Unit Agreement provides that in the event that the Executive’s employmentis terminated by the Company without Cause (as defined in the Employment Agreement) or by theExecutive for Good Reason (as defined in the Employment Agreement), the Restricted Stock Units, tothe extent then outstanding and unvested, shall become fully vested as of the date of thetermination of the Executive’s employment. If the Executive’s termination of employment is a“separation from service” (within the meaning of Section 409A, including §1.409A-1(h)), anyRestricted Stock Units becoming vested in connection with such a termination without Cause or forGood Reason shall be paid as soon as administratively practical following the termination date (andin any event within seventy-five (75) days following the termination date); otherwise anyRestricted Stock Units becoming vested shall be paid as soon as administratively practical (and inany event within seventy-five (75) days) following the earlier of (i) the Executive’s “separationfrom service” and (ii) any other applicable payment event otherwise provided for in the RestrictedStock Unit Agreement.
 

 
**2. Timing of Payment of Restricted Stock Units in Connection with a Change in Control.**     In the event that the vesting of the Restricted Stock Units is accelerated pursuant to Section7 of the Plan, any Restricted Stocks Units becoming vested shall become payable as follows. If inconnection with the transaction a successor corporation refuses to assume the Plan and thethen-outstanding awards under the Plan (including the Restricted Stock Units) and then-outstandingawards (including Restricted Stock Units) are terminated in connection with such a transaction, theRestricted Stock Units shall terminate and become payable as soon as administratively practical(and in any event within seventy-five (75) days) following the transaction, but only if (i) thetransaction constitutes a “change in the ownership,” a “change in the effective control” or a“change in the ownership of a substantial portion of the assets” of the Company within the meaningof Section 409A, (ii) the Plan, and any other plans or awards that immediately after thetransaction are required to be aggregated with the Restricted Stock Units under Section 409A(including §1.409A-1(c)(2)), are terminated with respect to each participant within the 30 daysbefore or 12 months following the transaction and (iii) the other requirements of Section 409A(including §1.409A-3(j)(4)(ix)(B) are satisfied. Any restricted stock units that do not becomepayable in connection with such a transaction pursuant to the preceding sentence shall be paid assoon as administratively practical (and in any event within seventy-five (75) days) following theearlier of (i) the Executive’s “separation from service” and (ii) any other applicable paymentevent otherwise provided for in the Restricted Stock Unit Agreement.**3. Timing of Payment of Dividend Equivalent Rights Distributions.**     Any dividend equivalent rights distributions becoming payable pursuant to Section 5(b) of theRestricted Stock Unit Agreement shall be paid in the same calendar year as the related ordinarycash dividend is paid to holders of the Company’s Common Stock.**4. Six-Month Delay for Specified Employees.**     For the avoidance of doubt, the Restricted Stock Units shall be subject to the “six monthdelay” provisions of Section 29(c) of the Employment Agreement (as such provisions are amended bythis Amendment).
 

 
     **IN WITNESS WHEREOF**, the Company and Executive have executed this Amendment effective as ofDecember 31, 2008.      **THE COMPANY:**