Exhibit 10.4
ANNTAYLOR STORES
CORPORATION
SPECIAL SEVERANCE PLAN, AS AMENDED
AnnTaylor Stores Corporation, a
Delaware corporation (the “Company”), hereby adopts the
AnnTaylor Stores Corporation Special Severance Plan (the
“Plan”) for the benefit of certain employees of the
Company and its subsidiaries, on the terms and conditions
hereinafter stated.
The Plan, as set forth herein, is
intended to help retain qualified employees, maintain a stable work
environment and provide economic security to certain employees of
the Company in the event of a Qualifying Termination (as defined
herein). The Plan, as a “severance pay arrangement”
within the meaning of Section 3(2)(B)(i) of ERISA, is intended to
be excepted from the definitions of “employee pension benefit
plan” and “pension plan” set forth under
Section 3(2) of ERISA, and is intended to meet the descriptive
requirements of a plan constituting a “severance pay
plan” within the meaning of regulations published by the
Secretary of Labor at Title 29, Code of Federal Regulations, ss.
2510.3-2(b).
SECTION 1. DEFINITIONS. As
hereinafter used:
1.1 “Affiliate” shall
mean any corporation, directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control
with the Company.
1.2 “Annual
Compensation” shall mean (i) the Severed
Employee’s current rate of base salary (determined
immediately prior to the Qualifying Termination and without regard
to any decrease in such salary constituting Good Reason), plus
(ii) the average of the Severed Employee’s annual
bonuses earned in respect of the three full fiscal years (or the
number of full years worked with the Company, if fewer than three)
immediately preceding the year in which the Change in Control
occurs or, if higher, in which the Qualifying Termination
occurs.
1.3 “Board” shall mean
the Board of Directors of the Company.
1.4 “Cause” shall mean,
with respect to a termination of the Employee’s employment
with the Company, (i) the willful and continued failure by the
Employee to substantially perform the Employee’s duties with
the Company (other than by reason of physical or mental incapacity)
or (ii) the conviction of the Employee for the commission of a
felony involving moral turpitude.
1.5 “Change in Control”
shall be deemed to have occurred if:
(I) any “person”, as
such term is used in Sections 13(d) and 14(d) of the Exchange Act,
other than (A) the Company, (B) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or (C) any corporation owned, directly or indirectly,
by the stockholders of the Company (in substantially the
same proportion as their ownership of shares),
(a “Person”) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company’s
then outstanding voting securities;
(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 the Company to effect a transaction described in clause (I),
(III) or (IV) of this Section 1.5) whose election by the
Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority
thereof;
(III) there is consummated a merger
or consolidation of the Company with any other entity, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or parent
entity) 50% or more of the combined voting power of the voting
securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the beneficial owner (as defined in clause
(I) above), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of
the Company’s then outstanding securities; or
(IV) the stockholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets (or any transaction
having a similar effect).
1.6 “Code” shall mean
the Internal Revenue Code of 1986, as it may be amended from time
to time.
1.7 “Committee” shall
mean the Compensation Committee of the Board.
1.8 “Company” shall mean
AnnTaylor Stores Corporation, a Delaware corporation, or any
successor thereto.
1.9 “Disability” shall
mean a physical or mental condition causing the Employee to be
unable to substantially perform his or her duties with the Company,
including, without limitation, such condition entitling him or her
to benefits under any sick pay or disability income policy or
program of the Company.
1.10 “Effective Date”
shall mean January 1, 2000.
1.11 “Employee” shall
mean any employee of the Company or any direct or indirect
subsidiary of the Company who is a Level I, Level II, Level III or
Level IV Employee.
1.12 “ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as it may be
amended from time to time.
1.13 “Exchange Act”
shall mean the Securities Exchange Act of 1934, as
amended.
1.14 “Good Reason” shall
mean any of the following acts or omissions that take place on or
after the occurrence of a Change in Control: (i) the material
diminution in the Employee’s duties or authority; (ii) a
change of the Employee’s place of employment by more than
fifty (50) miles; or (iii) a reduction in the
Employee’s salary or bonus opportunity; provided, however,
that clause (i) above shall only be applicable to an Employee
who is as a Level I or Level II Employee.
1.15 “Level I Employee”
shall mean an Employee who has the title of (i) President of
the AnnTaylor Stores, LOFT or AnnTaylor Factory divisions of the
Company, or (ii) Executive Vice President of the Company or
any direct or indirect subsidiary of the Company.
1.16 “Level II Employee”
shall mean an Employee who has the title of Senior Vice President
of the Company or any direct or indirect subsidiary of the
Company.
1.17 “Level III
Employee” shall mean an Employee who has the title of Vice
President of the Company or any direct or indirect subsidiary of
the Company.
1.18 “Level IV Employee”
shall mean an Employee who is a Director-level employee of the
Company or any direct or indirect subsidiary of the Company
(including District Managers and Merchandising
Managers).
1.19 “Person” shall mean
any individual, entity or group, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act.
1.20 “Plan
Administrator” shall mean the person or persons designated by
the Committee or by the Board to administer the Plan.
1.21 “Potential Change in
Control” shall be deemed to occur in the event that, after
the Effective Date, the Company enters into an agreement, the
consummation of which would result in a Change in Control or the
Company, or any Person publicly announces an intention to take or
to consider taking action which, if consummated, would constitute a
Change in Control.
1.22 “Qualifying
Termination” shall mean a termination of an Employee’s
employment following a Change in Control and on or before such
Employee’s Qualifying Termination Date, either (i) by
the Company without Cause or (ii) by the Employee for Good
Reason. Severance Benefits will not be paid in the event of
termination of an
Employee’s employment by reason of
retirement or death, by the Company for Cause or Disability or by
the Employee without Good Reason. A termination of employment will
not be deemed to have occurred upon (1) the transfer of the
Employee to employment with an Affiliate of the Company if the
Affiliate assumes the Company’s responsibilities under the
Plan with respect to the Employee or (2) the divestiture of a
business with which the Employee is primarily associated if the
Employee is offered comparable employment by the successor company
and such successor company assumes the Company’s
responsibilities under the Plan with respect to such
Employee.
1.23 “Qualifying Termination
Date” shall mean the date occurring twenty-four
(24) months following a Change in Control.
1.24 “Severance
Benefits” shall mean the payments and benefits provided to
Severed Employees pursuant to Section 2.1 and 2.2
hereof.
1.25 “Severance Date”
shall mean the date on which an Employee incurs a Qualifying
Termination.
1.26 “Severance
Multiple” shall mean:
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(a)
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with respect to
Level I Employees, two and one-half;
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(b)
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with respect to
Level II employees, two;
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(c)
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with respect to
Level III Employees, one and one-half; and
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(d)
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with respect to
Level IV Employees, one.
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1.27 “Severed Employee”
shall mean an Employee who has incurred a Qualifying
Termination.
Additional definitions are set forth
within the Plan and shall have the meanings ascribed to them in the
Plan.
SECTION 2. BENEFITS.
2.1 (a) Subject
to Section 2.4 hereof and to subsections (b) and
(c) of this Section 2.1, each Severed Employee shall be
entitled to receive from the Company an amount equal to the product
of (i) the Severed Employee’s Annual Compensation and
(ii) the Severed Employee’s Severance Multiple (the
“Severance Amount”). The Severance Amount shall be paid
to such Severed Employee in a lump sum as soon as practicable
following the first date on which the Release referred to in
Section 2.4 hereof is no longer revocable, but in no event
later than the last day of the “applicable 2
1 / 2 month period”, as such
term in defined in Treasury Regulation §
1.409A-1(b)(4)(i)(A).
(b) Notwithstanding the foregoing,
if a Change in Control under the Plan does not constitute a
“change in the ownership or effective control of the
corporation or in the
ownership of a substantial portion of the assets
of the corporation” (within the meaning of Section 409A
of the Code and applicable guidance issued thereunder), then in the
case of a Severed Employee who is either (i) a participant in
the AnnTaylor Stores Corporation Severance Plan or (ii) party
to an individual agreement with the Company providing for
non-Change in Control-related severance payments which are payable
other than in a lump sum, the Severance Amount under this Plan
shall be paid to the Severed Employee in substantially equal
monthly installments over a number of years corresponding to the
Severed Employee’s Severance Multiple.
(c) Notwithstanding the foregoing,
to the extent required by Section 409A of the Code and
applicable guidance issued thereunder, the payment of amounts under
this Section 2.1 to a Severed Employee who is a
“specified employee” (within the meaning of said
Section 409A) shall not be made until the expiration of six
(6) months following the Severed Employee’s Severance
Date.
(d) The Severance Amount that a
Severed Employee receives under this Plan shall
