Employment Agreement - AnnTaylor Stores Corp. and Katherine Lawther Krill


                             EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (the "Agreement"),  effective as of May 3, 2001
(the  "Effective  Date"),  between  ANNTAYLOR  STORES  CORPORATION,  a Delaware
corporation (the "Company"), and Katherine Lawther Krill (the "Executive").

      WHEREAS,  the Company  desires to provide for the continued  service
and  employment of the Executive  with the Company and the Executive  wishes to
continue  to perform  services  for the  Company,  all in  accordance  with the
terms and conditions provided herein;

       NOW, THEREFORE,  in consideration of the premises and the respective
covenants and agreements of the parties herein  contained,  and intending to be
legally bound hereby, the parties hereto agree as follows:

     1.  Employment.  The  Company  hereby  agrees to  continue  to  
         ----------
employ  the Executive, and the Executive hereby agrees to continue to serve the
Company, on the terms and conditions set forth herein.

     2. Term.  The term of employment of the Executive by the Company  
        ----
hereunder (the "Term") will  commence as of the  Effective  Date and will end on
the third anniversary of the Effective  Date;  provided,  however,  that 
commencing on the third  anniversary of the Effective Date, and each such 
anniversary  thereafter, the term of the Executive's  employment shall  
automatically be extended for one (1) additional year,  unless,  no later than 
90 days prior to such  anniversary, either  party  shall  have  given  notice to
the other  that it does not wish to extend  the  Term of this  Agreement  (such 
notice,  a  "Non-Renewal  Notice").  Notwithstanding expiration of the Term or 
other provisions that survive by their intent, the provisions of Sections 4, 7 
and 8 hereof shall continue in effect.

     3. Position and Duties. The Executive shall serve as President - Ann
        -------------------
Taylor Loft and shall have such responsibilities,  duties and and authority
consistent with such position as may from time to time be determined by the
Board of Directors of the Company (the "Board"). The Executive shall report
directly to the Chairman  and Chief  Executive  Officer  (the  "CEO").  The
Executive shall devote substantially all of her working time and efforts to
the business and affairs of the Company.

     4. Indemnification. To the fullest extent permitted by law and the
        ---------------
Company's   certificate  of  incorporation  and  by-laws,   the  Company  shall
indemnify  the  Executive  for  all  amounts  (including,  without  limitation,
judgments,  fines, awards,  settlement  payments,  losses,  damages,  costs and
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expenses  (including  reasonable  attorneys'  fees)  incurred  or  paid  by the
Executive in  connection  with any action,  proceeding,  suit or  investigation
arising out of or  relating to the  performance  by the  Executive  of services
for,  or acting as a  fiduciary  of any  employee  benefit  plans,  programs or
arrangements  of the  Company or as a  director,  officer or  employee  of, the
Company or any subsidiary thereof.


        5.    Compensation and Related Matters.
              --------------------------------

          (a)   Annual Compensation.

                (i) Base Salary. Commencing on the Effective Date and continuing
                    -----------
          during the period of the Executive's employment hereunder, the Company
          shall pay to the  Executive  an annual  base salary at a rate not less
          than $450,000, such salary to be paid in conformity with the Company's
          policies  relating to salaried  employees.  This salary may be (but is
          not  required to be)  increased  from time to time,  subject to and in
          accordance with the annual executive  performance review procedures of
          the Company.


               (ii)  Annual  Bonus.   Commencing  on  the  Effective   Date  and
                     ------------- 
          continuing during the period of Executive's employment hereunder,  the
   
          Executive  shall be eligible to  participate  in the Company's  annual
  
          bonus plan as in effect  from time to time,  and shall be  entitled to
          receive  such amounts (a "Bonus") as may be  authorized,  declared and
          paid by the Company  pursuant  to the terms of such plan.  The Company
          currently  maintains a Management  Performance  Compensation Plan (the
          "Performance  Plan")  pursuant  to  which  it pays  performance  bonus
          compensation to certain of its executives and employees.  It is agreed
          that the Executive shall participate in the Performance Plan effective
          as of the Effective Date. This Executive's  Performance Percentage (as
          that term is defined in the Performance  Plan) shall be established at
          60% per annum during the Term. Executive shall also participate in the
          Long Term Cash Incentive Compensation Plan currently maintained by the
          Company, and her Target Award (as defined in such plan) shall be 40%.

         (b) Stock  Option.  As of the Effective  Date,  the Executive has
             --------------
          been granted a ten-year  non-qualified option to acquire 30,000 shares
          of common stock of the Company  ("Shares")  pursuant to the  Company's
          Amended and Restated 1992 Stock Option and Restricted  Stock Plan (the
          "1992  Plan").  The option  price per Share shall be equal to the Fair
          Market  Value  (as  defined  in the  1992  Plan)  of a Share as of the
          Effective  Date. The option shall become  exercisable  with respect to
          one-fourth  of the  Shares  subject  thereto on each of the first four
          anniversaries of the Effective Date,  provided  Executive has remained
          continuously employed by the Company until the applicable date (except
          as  provided  in  Section   6(e)(vi)   hereof).   The  option  granted
===============================================================================

          hereunder shall contain such other terms and conditions as are set 
          forth in the Company's standard stock option agreements applicable to
          such option, including, but not limited to, accelerated exercisability
          upon the occurrence of a Change in Control, which shall  have the same
          meaning as the term "Acceleration  Event," as defined in the 1992 Plan
          (a "Change in Control").

              (c) Restricted  Stock.  As of the Effective  Date,  Executive has
                  -----------------
          been granted 20,000  restricted  shares of common stock of the Company
          (the "Restricted Shares") pursuant to the 1992 Plan. One-fourth of the
          Restricted  Shares shall vest on, and be  delivered  to the  Executive
          promptly  following,  each  of the  first  four  anniversaries  of the
          Effective  Date,  provided the  Executive  has  remained  continuously
                            --------
          employed by the Company until the applicable  date (except as provided
          in  Section  6(e)(v)  hereof).   Notwithstanding  the  foregoing,  any
          outstanding Restricted Shares shall become fully vested on a Change in
          Control.

               (d)  Other  Benefits.   Commencing  on  the  Effective  Date  and
                    ---------------
          continuing during the period of Executive's employment hereunder,  the
          Executive  shall be  entitled  to  participate  in all other  employee
          benefit plans,  programs and  arrangements  of the Company,  as now or
          hereinafter in effect, which are applicable to the Company's employees
          generally or to its executive officers, as the case may be, subject to
          and on a basis  consistent  with the  terms,  conditions  and  overall
          administration of such plans,  programs and  arrangements.  During the
          period of Executive's  employment  hereunder,  the Executive  shall be
          entitled  to  participate  in  and  receive  any  fringe  benefits  or
          perquisites  which may become  available  to the  Company's  executive
          employees.


               (e) Vacations and Other Leaves.  The Executive  shall be entitled
                   ---------------------------
          to four (4) weeks  vacation per year and to paid holidays and personal
          leave days determined in accordance with applicable  Company plans and
          policies.

               (f)  Expenses.  During the period of the  Executive's  employment
                    ---------
          hereunder,   the  Executive   shall  be  entitled  to  receive  prompt
          reimbursement  for all reasonable and customary  expenses  incurred by
          the Executive in performing services hereunder, including all expenses
          of travel and  accommodations  while away from home on  business or at
          the request of and in the service of the Company;  provided that, such
                                                             -------- ----
          expenses  are  incurred  and  accounted  for in  accordance  with  the
          policies and procedures established by the Company.

               6. Termination.  (a) The Executive's  employment hereunder may be
                  -----------
terminated without breach of this Agreement only under the following 
circumstances:

                    (i)  Death.  The  Executive's   employment  hereunder  shall
                         ------
               terminate  upon  her  death.
================================================================================

                    (ii)  Cause.  The  Company  may  terminate  the  Executive's
                          ------
               employment hereunder for "Cause". For purposes of this Agreement,
               the  Company  shall have  "Cause" to  terminate  the  Executive's
               employment hereunder upon the (1) the Executive's  conviction for
               the commission of an act or acts  constituting a felony under the
               laws of the United States or any state thereof, (2) action by the
               Executive  toward  the  Company  involving  dishonesty,  (3)  the
               Executive's  refusal  to abide by or  follow  reasonable  written
               directions  of the Board or the CEO,  which does not cease within
               ten (10) business days after such written  notice  regarding such
               refusal has been give to the  Executive by the  Company,  (4) the
               Executive's  gross  nonfeasance  which does not cease  within ten
               (10) business days after notice  regarding such  nonfeasance  has
               been give to the  Executive  by the Company or (5) failure of the
               Executive to comply with the provisions of Section 7 or 8 of this
               Agreement,  or other willful  conduct by the  Executive  which is
               intended to have and does have a material  adverse  impact on the
               Company.

                    (iii)  Disability.  If,  as  a  result  of  the  Executive's
                           -----------
               incapacity due to physical or mental illness, the Executive shall
               have been absent from her duties  hereunder on a full-time  basis
               for the entire period of six (6) consecutive  months,  and within
               thirty (30) days after written Notice of Termination  (as defined
               in Section  6(b) below) is given (which may occur before or after
               the end of such six (6) month  period) shall not have returned to
               the performance of her duties hereunder on a full-time basis, the
               Executive's    employment    hereunder    shall   terminate   for
               "Disability".


                    (iv)  Termination  by  the  Executive.   The  Executive  may
                          -------------------------------
               terminate  her  employment   hereunder  for  "Good  Reason".  For
               purposes  of this  Agreement,  the  Executive  shall  have  "Good
               Reason" to terminate her employment  hereunder (1) upon a failure
               by the  Company to comply  with any  material  provision  of this
               Agreement  which has not been cured within ten (10) business days
               after  notice  of  such  noncompliance  has  been  given  by  the
               Executive  to  the  Company,  (2)  upon  action  by  the  Company
               resulting in a diminution of the  Executive's  title or authority
               or (3) upon the Company's relocation of the Executive's principal
               place of  employment  outside  of the New York City  metropolitan
               area, or (4) one year after a Change in Control.

               (b) Notice of  Termination.  Any  termination of the  Executive's
                   -----------------------
          employment by the Company or by the Executive  (other than termination
          under Section  6(a)(i) hereof) shall be communicated by written Notice
          of Termination to the other party hereto in accordance with Section 10
          hereof.  For  purposes of this  Agreement,  a "Notice of  Termination"

================================================================================
shall mean a notice which shall indicate the specific  termination  provision in
this Agreement relied upon and shall set forth in reasonable detail the fact and
circumstances  claimed to  provide a basis for  termination  of the  Executive's
employment under the provision so indicated.

               (c)   Date  of  Termination.  "Date  of  Termination"  shall  
                      ---------------------
mean (i) if the Executive's  employment is terminated by her death,  the date of
her  death,  (ii) in the  event  that the Term  shall  expire  as a result  of a
Non-Renewal  Notice  provided by the Company to the  Executive,  the date of the
expiration of the Term and (iii) in each other case,  the date  specified in the
Notice of  Termination;  provided  that,  if within  thirty  (30) days after any
                         --------  ----
Notice of  Termination  is given the party  receiving such Notice of Termination
notifies the other party that a dispute exists  concerning the termination,  the
Date  of  Termination  shall  be the  date  on  which  the  dispute  is  finally
determined,  either by mutual  written  agreement of the parties or by a binding
and final arbitration award.


               (d)   Termination Upon Death;  Disability;  for Cause;  Voluntary
                     -----------------------------------------------------------
Termination  other  than for  Good  Reason.  If the  Executive's  employment  is
------------------------------------------
terminated  by reason of  Executive's  death or  Disability,  by the Company for
Cause or  voluntarily by the Executive  other than for Good Reason,  the Company
shall, as soon as practicable  after the Date of Termination,  pay the Executive
all unpaid amounts, if any, to which the Executive is entitled as of the Date of
Termination  under  Section  5(a)  hereof  and  shall pay to the  Executive,  in
accordance  with the terms of the applicable  plan or program,  all other unpaid
amounts to which  Executive is then entitled under any  compensation  or benefit
plan or program of the Company (collectively,  "Accrued Obligations"); upon such
payment,  the Company shall have no further  obligations to the Executive  under
this Agreement.


               (e)   Termination Without Cause; Termination for Good Reason;  
                     -------------------------------------------------------
Non-Renewal.  If the Company shall  terminate the Executive's  employment  other
-----------
than for Cause or the Executive  shall  terminate her employment for Good Reason
or the Term shall  expire as a result of a  Non-Renewal  Notice  provided by the
Company to the  Executive,  then,  subject to compliance  with the provisions of
Sections 7 and 8 hereof:


                    (i)  the  Company  shall  pay to the  Executive,  as soon as
               practicable   after  the  Date  of   Termination,   the   Accrued
               Obligations;

                    (ii) (A) unless clause (B) below applies, then following the
               Date of  Termination  and for the  longer of twelve  (12)  months
               thereafter  or the balance of the Term,  the Company shall pay to
               the Executive monthly an amount,  ("Severance Payments") equal to
               the quotient of the Executive's annual base salary at the rate in
================================================================================
               effect as of the Date of  Termination  (the "Base  Salary"),
               divided by the number  twelve (12) (minus any amounts  payable to
               the Executive during any such month as a disability benefit under
               a Company paid plan), or (B) in the event the Date of Termination
               occurs on or following a Change in Control, then, within five (5)
               days after the Date of Termination,  the Company shall pay to the
               Executive in a lump sum an amount equal to the product of (X) the
               sum of the  Executive's  Base Salary and the average of the total
               bonuses earned by the Executive, including bonuses paid under the
               Company's  Management  Performance   Compensation  Plan  and  the
               Company's  Long Term  Incentive  Cash  Compensation  Plan, in the
               three fiscal years of the Company ended  immediately prior to the
               Date of Termination (or, if higher,  in the three fiscal years of
               the  Company  ended  immediately  prior to the Change in Control)
               multiplied by (Y) two and one-half (2-1/2).  For purposes of this
               subsection  (ii): (I) if the Date of Termination  occurs prior to
               the  occurrence of a Change in Control but during the pendency of
               a Potential Change in Control (as hereinafter defined), such Date
               of  Termination  shall be deemed  to have  occurred  following  a
               Change in Control and (II) a "Potential  Change in Control" shall
               be deemed to have  occurred  if the event set forth in any one of
               the following clauses shall have occurred:


                    (1) the Company enters into an agreement,  the  consummation
               of which would result in the occurrence of a Change in Control;

                    (2) the Company or any person (as defined in Section 3(a)(9)
               of the Securities Exchange Act of 1934, as amended (the "Exchange
               Act"),  as modified and used in Sections  13(d) and 14(d) thereof
               (a  "Person"),  except  that such term shall not  include (i) the
               Company  or any of its  subsidiaries,  (ii) a  trustee  or  other
               fiduciary  holding  securities  under an employee benefit plan of
               the  Company  or any  of its  affiliates,  (iii)  an  underwriter
               temporarily  holding  securities  pursuant to an offering of such
               securities,  or (iv) a corporation owned, directly or indirectly,
               by the  stockholders  of the  Company in  substantially  the same
               proportions as their ownership of stock of the Company)  publicly
               announces  an  intention  to take or to consider  taking  actions
               which, if consummated, would constitute a Change in Control;

                    (3) any Person becomes the  beneficial  owner (as defined in
               Rule 13d-3 under the Exchange Act),  directly or  indirectly,  of
               securities of the Company  representing  15% of or more of either
               the then outstanding shares of common stock of the Company or the
               combined   voting  power  of  the  Company's   then   outstanding
               securities (not including in the securities beneficially owned by
               such Person any securities  acquired  directly from the Company);
               or
================================================================================

               (4) the Board  adopts a  resolution  to the  effect  that,  for
      purposes of this subsection  (ii), a Potential Change in Control has
      occurred.

For  purposes of this  Agreement,  the period  during or with  respect to which
Executive  is  entitled  to receive  payments  hereunder  is referred to as the
"Severance Period";

                    (iii) the Company  shall pay to the  Executive,  at the same
               time as bonuses  are paid to other  Company  executives,  a Bonus
               with  respect  to the  fiscal  year in which  occurs  the Date of
               Termination,  such Bonus to be based upon actual  performance for
               such  fiscal  year and pro rated to reflect the number of days in
               such fiscal year through and including  the Date of  Termination;
               and

                    (iv) the  Executive  shall  continue to be provided  for the
               duration of the  Severance  Period with the same medical and life
               insurance coverage as existed  immediately prior to the Notice of
               Termination;   provided,   however,   that   benefits   otherwise
                              --------    -------
               receivable  by the  Executive  pursuant to this Section  6(e)(iv)
               shall be reduced to the extent that benefits of the same type are
               received  by or  made  available  to  the  Executive  during  the
               Severance  Period  (and any  such  benefits  received  by or made
               available  to the  Executive  shall be reported to the Company by
               the  Executive).  For the purpose of medical  and life  insurance
               coverage  referred to in this  subparagraph,  the term "Severance
               Period"   shall   include  the  period   following  the  Date  of
               Termination  and for the longer of twelve (12) months  thereafter
               or the balance of the Term;


                    (v) any  outstanding  Restricted  Shares  shall become fully
               vested;

                    (vi) in the event that the Date of Termination  occurs prior
               to a Change in Control,  then each outstanding  Option shall vest
               and become  exercisable in accordance with the schedule set forth
               in  Section  5(b)  hereof  as if  no  termination  of  employment
               occurred  and such  Option  shall  terminate  90 days  after  the
               expiration of the Severance Period;

                    (vii) in the event that the Date of Termination occurs on or
               after a Change in Control,  then each  outstanding  Option  which
               became vested upon such Change in Control in accordance  with the
               terms of Sections  5(b) and (c) hereof  shall  terminate  90 days
               after the expiration of the Severance Period.

               (f)   Gross-Up  Payment. In the event that any payment or benefit
                     -----------------
received or to be  received  by the  Executive  in  connection  with a Change in

================================================================================
Control or the termination of the Executive's employment,  whether such payments
or benefits  are received  pursuant to the terms of this  Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a Change in Control or any person  affiliated with the Company or such person
(all such payments and benefits  being  hereinafter  called  "Total  Payments"),
would be subject (in whole or part), to the tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),  the
Company  shall pay to the  Executive  such  additional  amounts  (the  "Gross-Up
Payment")  as may be  necessary  to place the  Executive  in the same  after-tax
position as if no portion of the Total  Payments  had been subject to the Excise
Tax. In the event that the Excise Tax is subsequently determined to be less than
the amount  taken into  account  hereunder,  the  Executive  shall  repay to the
Company,  at the time that the amount of such reduction in Excise Tax is finally
determined,  the portion of the Gross-Up Payment  attributable to such reduction
(plus that portion of the Gross-Up  Payment  attributable  to the Excise Tax and
federal, state and local income tax imposed on the Gross-Up Payment being repaid
by the  Executive  to the extent that such  repayment  results in a reduction in
Excise Tax and/or a federal,  state or local income tax deduction) plus interest
on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code.  In the event that the Excise Tax is  determined  to exceed the amount
taken into account  hereunder  (including by reason of any payment the existence
or amount of which cannot be  determined  at the time of the Gross-Up  Payment),
the Company shall make an additional  Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such  excess)  at the  time  that  the  amount  of  such  excess  is  finally
determined.  The Executive and the Company shall each reasonably  cooperate with
the  other  in  connection  with  any  administrative  or  judicial  proceedings
concerning  the  existence or amount of liability for Excise Tax with respect to
the Total Payments.


7.    Nonsolicitation; Noncompete.
      ----------------------------
       (a) Subject to (c) below,  during the period of  Executive's
employment, during the period she is receiving Severance Payments hereunder and,
in the  case  where  the  Executive's  employment  is  terminated  for  Cause or
executive  voluntarily  terminates  her  employment  without Good Reason,  for a
period of twelve (12) months following such termination, the Executive shall not
initiate  discussions  with any person who is then an executive  employee of the
Company  (i.e.,  director  level or  above)  with the  intent of  soliciting  or
inducing such person to leave her or her employment,  with a view toward joining
the  Executive  in the  pursuit of any  business  activity  (whether or not such
activity  involves  engaging or  participating  in a  Competitive  Business,  as
defined  below).  Notwithstanding  and other  provision of this Agreement to the
contrary,  in the event Executive  fails to comply with the preceding  sentence,
all  rights of the  Executive  and her  surviving  spouse  or other  beneficiary
hereunder   to   any   future   Severance    Payments,    Bonus   Payments   and
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continuing  life insurance and medical  coverage and all rights with respect to
restricted  stock  and  exercisability  of stock  options  shall be  forfeited;
provided  that,  the  foregoing  shall not apply if such failure of  compliance
--------  ----
commences following a Change in Control.

                    (b) Subject to (c) below, for as long as Executive  receives
Severance  Payments,  or  in  the  case  where  the  Executive's  employment  is
terminated for Cause or executive voluntarily  terminates her employment without
Good  Reason,  for a period of twelve (12) months  following  such  termination,
Executive  shall not,  without the prior written  consent of the Company  (which
consent  shall  not be  unreasonably  withheld),  engage or  participate  in any
business which is "in  competition"  (as defined below) with the business of the
Company or any of its 50% or more owned affiliates (such business being referred
to herein as a "Competitive  Business").  Notwithstanding any other provision of
this Agreement to the contrary,  in the event the Executive fails to comply with
the preceding sentence,  all rights of the Executive and her surviving spouse or
other beneficiary hereunder to any future Severance Payments, Bonus Payments and
continuing  life  insurance and medical  coverage and all rights with respect to
restricted  stock  and  exercisability  of stock  options  shall  be  forfeited;
provided  that,  the  foregoing  shall not apply if such  failure of  compliance
--------  ----
commences following a Change in Control.


               (c)   In the  event of a  violation  of  paragraphs  7(a) or 7(b)
hereof,  the remedies of the Company  shall be limited to (i) if such  violation
occurs during the period of Executive's employment hereunder, termination of the
Executive for Cause and the associated  rights of the Company  specified  herein
resulting therefrom,  (ii) regardless of when such violation occurs,  forfeiture
by the  Executive  of the  payments,  benefits  and  other  rights  set forth in
paragraphs (a) and (b) above if and to the extent  provided in such  paragraphs,
and (iii)  the right to seek  injunctive  relief in  accordance  with and to the
extent provided in Section 14 hereof.


               (d)  For purposes hereof,  a  business  will be "in  competition"
with the business of the Company or its 50% or more owned  affiliates if (i) the
Company's  business with which the other business competes  accounted for 20% or
more of the Company's  consolidated  revenues as of the end of its most recently
completed  fiscal  year  prior to the Date of  Termination,  and (ii) the entity
(including all 50% or more owned affiliates) through which the other business is
or will be operated  maintains a "women's  apparel"  business which generated at
least $50 million in revenue during the entity's most recently  completed fiscal
year ended prior to the date the  Executive  commences (or proposes to commence)
to engage or participate in the other business.  For purposes  hereof,  "women's
apparel" shall consist of dresses,  jackets, pants, skirts,  blouses,  sweaters,
T-shirts, outerwear, footwear and accessories.

               (e)   Notwithstanding the foregoing,  the Executive's engaging in
the following  activities shall not be construed as engaging or participating in
================================================================================
a Competitive  Business:  (i) investment banking; (ii) passive ownership of less
than 2% of any  class of  securities  of a public  company;  (iii)  engaging  or
participating  in  noncompetitive  businesses of an entity which also operates a
business  which is "in  competition"  with the  business  of the  Company or its
affiliates;  (iv) serving as an outside  director of an entity which  operates a
business  which is "in  competition"  with the  business  of the  Company or its
affiliates,  so long as such  business  did not  account  for 10% or more of the
consolidated  revenues  of  such  entity  as of the  end of  its  most  recently
completed  fiscal year prior to the date  Executive  commences  (or  proposes to
commence) serving as an outside director;  (v) engaging in a business  involving
licensing  arrangements so long as such business is not an in-house  arrangement
for any  entity  "in  competition"  with  the  business  of the  Company  or its
affiliates;  (vi)  affiliation  with  an  advertising  agency  and  (vii)  after
cessation of employment,  engaging or  participating  in the "wholesale" side of
the women's apparel  business,  which for purposes hereof shall mean the design,
manufacture  and sale of piece  goods and  women's  apparel to  unrelated  third
parties,  provided  that if the  entity  for which the  Executive  so engages or
participates  (including its affiliates)  also conducts a retail women's apparel
business,  then effective upon the Executive's engaging or participating in such
business,  all continuing  life insurance and medical  coverage  provided by the
Company  shall cease and all Severance  Payments  shall cease except for amounts
representing the excess (if any) of the Executive's annual base salary hereunder
(at the rate in effect as of the Date of Termination)  over the executive's base
salary  received  from such  entity  and its  affiliates,  which  amounts  shall
continue to be paid by the Company for the  remainder of the  Severance  Period.
The exceptions  contained in  subparagraph  (vii) above and  subparagraph  (iii)
above to the extent covered by subparagraph (vii) shall not be applicable if the
Executive's  cessation of employment is voluntary by the Executive  without Good
Reason and her new engagement of participation  involves "wholesale"  operations
which include or also conduct retail sales of women's apparel other than factory
outlet or discount stores to liquidate  unsold women's apparel of such wholesale
operations.

8.    Protection of Confidential Information.
      --------------------------------------
(a)   Executive   acknowledges   that  her  employment  by  the  Company  will,
throughout  the Term of this  Agreement,  involve her  obtaining  knowledge  of
confidential  information  regarding  the  business and affairs of the Company.
In recognition of the foregoing, the Executive covenants and agrees:

(i)   that,  except in compliance with legal process,  she will keep secret all
      confidential  matters  of the  Company  which  are not  otherwise  in the
      public domain and will not intentionally  disclose them to anyone outside
      of the  Company,  wherever  located  (other  than  to a  person  to  whom
      disclosure is reasonably  necessary or appropriate in connection with the
      performance  by Executive  of her duties as an  executive  officer of the
      Company),  either during or after the Term, except with the prior written
================================================================================
consent of the Board or a person authorized thereby; and

                    (ii)  that she  will  deliver  promptly  to the  Company  on
               termination of her  employment,  or at any other time the Company
               may so request, all memoranda,  notes,  records,  customer lists,
               reports and other documents (and all copies thereof)  relating to
               the business of the Company which she obtained while employed by,
               or  otherwise  serving or acting on behalf of,  the  Company  and
               which she may then possess or have under her control.


               (b)   Notwithstanding  the provisions of Section 14 of this 
Agreement,  if the  Executive  commits a breach  of the  provisions  of  Section
8(a)(i) or 8(a) (ii),  the Company  shall have the right and remedy to have such
provisions  specifically  enforced by any court having equity  jurisdiction,  it
being  acknowledged  and agreed that any such breach or  threatened  breach will
cause irreparable  injury to the Company and that money damages will not provide
an adequate remedy to the Company.


               9.    Successors; Binding Agreement.
                     -----------------------------
                    (a) Neither this Agreement nor any rights hereunder shall be
               assignable or otherwise subject to hypothecation by the Executive
               (except  by  will  or by  operation  of  the  laws  of  intestate
               succession)  or by the  Company,  except  that the  Company  will
               require any successor  (whether direct or indirect,  by purchase,
               merger,  consolidation or otherwise) to all or substantially  all
               of the business  and/or  assets of the  Company,  by agreement in
               form and substance reasonably  satisfactory to the Executive,  to
               expressly  assume and agree to perform this Agreement in the same
               manner and to the same extent that the Company  would be required
               to perform it if no such  succession had taken place.  As used in
               this Agreement, "Company" shall mean the Company as herein before
               defined  and any  successor  to its  business  and/or  assets  as
               aforesaid which executes and delivers the agreement  provided for
               in this  Section 9 or which  otherwise  becomes  bound by all the
               terms and provisions of this Agreement by operation of law.


                    (b) This Agreement and all rights of the Executive hereunder
               shall  inure  to  the  benefit  of  and  be  enforceable  by  the
               Executive's   personal  or  legal   representatives,   executors,
               administrators,  successors,  heirs,  distributees,  devisees and
               legatees.  If the  Executive  should die while any amounts  would
               still be payable to her  hereunder if she had  continued to live,
               all such amounts, unless otherwise provided herein, shall be paid
               in accordance with the terms of this Agreement to the Executive's
               devisee,  legatee,  or  other  designee  or,  if there be no such
               designee, to the Executive's estate.


               10.   Notice.  For the  purposes of this  Agreement,  notices,  
                     ------
demands and all other communications  provided for in this Agreement shall be in
================================================================================
writing and shall be deemed to have been duly given  when delivered  or (unless
otherwise  specified)  mailed by United  States  certified or  registered  mail,
return receipt requested, postage prepaid, addressed as follows:

If to the Company:
                AnnTaylor Stores Corporation
                1372 Broadway
                New York, New York  10018
                Attn:  General Counsel

If to the Executive:
                Katherine Lawther Krill
                333 Stamford Avenue
                Stamford, CT 06902

or to such  other  address  as any  party  may have  furnished  to the other in
writing  in  accordance  herewith,  except  that  notices  of change of address
shall be effective only upon receipt.

               11.   Miscellaneous.  No provisions of this Agreement may be 
                     -------------
modified, waived or discharged unless such waiver,  modification or discharge is
agreed to in writing  signed by the Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party  hereto of, or  compliance  with,  any
condition  or  provision  of this  Agreement to be performed by such other party
shall be deemed a waiver of similar or  dissimilar  provisions  or conditions at
the same or at any prior or subsequent  time. No agreements or  representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been  made by  either  party  which  are not set  forth  expressly  in this
Agreement.  The validity,  interpretation,  construction and performance of this
Agreement  shall be governed by the laws of the state of New York without regard
to its conflicts of law principles.  All payments  hereunder shall be subject to
applicable Federal, State and local tax withholding requirements.

               12.   Validity.   The  invalidity  or  unenforceability  of  any
                     --------
provision  or  provisions  of this  Agreement  shall not affect the  validity or
enforceability  of any other provision of this Agreement,  which shall remain in
full force and effect.


               13.   Counterparts.   This   Agreement   may  be   executed   in
                     ------------
one or more  counterparts,  each of which shall be deemed to be an original  but
all of which together will constitute one and the same instrument.

               14.   Arbitration.  Any dispute or  controversy  arising under or
                     -----------
in connection with this Agreement  shall be settled  exclusively by arbitration,
================================================================================
conducted  before a panel of three  arbitrators  in New York City in  accordance
with the rules of the American Arbitration  Association then in effect. Judgment
may be  entered  on the  arbitrator's  award in any court  having  jurisdiction;
provided  that,  the Company  shall be entitled to seek a  restraining  order or
--------  ----
injunction in any court of competent jurisdiction to prevent any continuation of
any  violation  of the  provisions  of Section 7 or 8 of the  Agreement  and the
Executive  hereby  consents that such  restraining  order or  injunction  may be
granted  without the  necessity of the  Company's  posting any bond.  Each party
shall bear its own costs and  expenses  (including,  without  limitation,  legal
fees) in connection with any arbitration proceeding instituted hereunder.


               15.   Entire  Agreement.  This Agreement,  together with the  
                     -----------------
compensation  and benefits plans and practices  referred to in Section 5 hereof,
sets forth the entire  agreement of the parties hereto in respect of the subject
matter contained  herein and all other prior  agreements,  promises,  covenants,
arrangements,  communications,  representations  or warranties,  whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.


           IN WITNESS  WHEREOF,  the parties have executed this Agreement as of
the Effective Date.



                          ANNTAYLOR STORES CORPORATION



                          By:  J. Patrick Spainhour
                               --------------------------------
                               J. Patrick Spainhour
                               Chairman of the Board and
                               Chief Executive Officer


                               Katherine Lawther Krill
                               --------------------------------
                               Katherine Lawther Krill