Separation Agreement - AnnTaylor Stores Corp. and Patricia DeRosa


                                   ANNTAYLOR


                            PERSONAL AND CONFIDENTIAL
                            -------------------------


Dated as of
January 15, 2001



Ms. Patricia DeRosa
11 Rockridge Avenue
Greenwich, CT  06831


Dear Patti:

Reference is made to the Employment  Agreement  between you and AnnTaylor Stores
Corporation  (the "Company") dated November 25, 1996, as amended by Amendment #1
thereto dated  February 16, 2000 (as so amended,  the  "Employment  Agreement").
Capitalized  terms not defined in this letter  agreement shall have the meanings
ascribed thereto in the Employment Agreement.

In  connection  with your  separation  from the Company,  and in addition to the
severance  compensation  to  which  you  are  entitled  under  Section  6 of the
Employment  Agreement,  this will  confirm  the  agreement  between  you and the
Company regarding your separation of employment:

1.   We agree that your date of separation  from employment with the Company and
     its subsidiaries is January 15, 2001 (the "Separation Date") and, effective
     as of the  Separation  Date,  you hereby  resign from your  positions as an
     officer and director of the Company,  AnnTaylor, Inc., and all other direct
     and indirect subsidiaries of the Company.

2.   In  consideration  of the release  set forth in  paragraph 4 of this letter
     agreement,  and  the  representations  and  agreements  set  forth  herein,
     including  those set forth in  paragraph  5 of this letter  agreement,  the
     Company  agrees  to  pay  to  you  the  additional  severance  compensation
     described in paragraph 3 below.

3.   Subject to this letter agreement  becoming effective and to your compliance
     with the terms hereof, you shall receive additional severance  compensation
     equal to:

     (a)  Cash  compensation  in an amount equal to the  incentive  compensation
          payment you would have  received  under the  Company's  Long Term Cash
          Incentive Compensation Plan for the 1998-2000 Performance Cycle if you
          had  continued  to be employed by the  Company  (minus all  applicable
          federal,  state and local withholding taxes),  payable on the later of

================================================================================
Ms. Patricia DeRosa
Dated as of January 15, 2001
Page 2


          (i) the date on which payments for such Performance  Cycle are made to
          active  employees  under  the  Plan,  and (ii)  five  days  after  the
          Effective Date (as defined in paragraph 8 below).

     (b)  The Time Vesting Stock Options  listed on Schedule A attached  hereto,
          granted to you under the  Company's  1992 Stock Option and  Restricted
          Stock and Unit Award Plan (the  "Option  Plan") and the related  stock
          option  agreements  between  you and the  Company  (collectively,  the
          "Schedule A Options"),  shall remain  outstanding  throughout  the the
          Severance Period (as defined in the Employment  Agreement) and for the
          90 days following the end of the Severance Period,  and shall continue
          to be eligible for vesting and exercise in  accordance  with the terms
          of the  Plan  and  the  applicable  option  agreement,  as if you  had
          continued  to be  employed  by the Company  during  such  period.  Any
          Schedule A Options  remaining  unvested or unexercised at the close of
          business on the  ninetieth day following the last day of the Severance
          Period shall be canceled at such time.

          The  foregoing notwithstanding,  in the event that you take any action
          in   contravention   of  the   non-solicitation   or  non-compete
          provisions  of  the  Employment   Agreement  (Section  7  of  the
          Employment  Agreement),  or in  violation  of the  terms  of this
          letter  agreement,  all  Schedule  A  Options  shall no longer be
          exercisable and shall be immediately canceled.

4.   In consideration  of the  compensation  described in paragraph 3 above, and
     subject to the provisions of paragraph 6 below, you voluntarily,  knowingly
     and willingly release and forever  discharge the Company,  its subsidiaries
     and affiliates, together with its and their respective officers, directors,
     partners,  shareholders,  employees,  successors and assigns (collectively,
     the  "Related  Persons"),  from any and all  charges,  complaints,  claims,
     promises,  agreements,  controversies,  causes of action and demands of any
     nature  whatsoever which against any of them you or your heirs,  executors,
     administrators,  successors or assigns ever had, now have or hereafter can,
     shall or may  have by  reason  of any  matter,  cause  or thing  whatsoever
     arising to the time you sign this agreement.  This release includes, but is
     not limited to, any rights or claims relating in any way to your employment
     relationship  with the  Company,  or the  cessation  thereof,  or under any
     statute,  including  claims for age  discrimination  under the  federal Age
     Discrimination  in Employment  Act, and claims under Title VII of the Civil
     Rights Act, The Americans With  Disabilities Act, the New York Human Rights
     Law, and any other federal, state or local law.

5.   You  represent  that you have 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 your employment by the Company,  or any
     other matter arising on or prior to the date hereof. You covenant and agree
     that  you  will  not  seek  recovery  against  the  Company  or  any of its
     subsidiaries,  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 4 hereof.

================================================================================
Ms. Patricia DeRosa
Dated as of January 15, 2001
Page 3



6.   The provisions of paragraph 4 above notwithstanding, nothing in this letter
     agreement  shall prevent you from  enforcing  the terms of this  agreement.
     Further, the provisions of paragraph 4 above shall not constitute a release
     or waiver of any of your rights with respect to any severance  compensation
     to which you are entitled under Section 6 of the Employment  Agreement,  or
     any  of  your  rights  to  indemnification  by  the  Company  or any of its
     subsidiaries  under,  and in accordance  with the terms of, the  respective
     Certificates  of  Incorporation   and  By-Laws  of  the  Company  and  such
     subsidiaries,  or  any  indemnification  of  you  by  the  Company  or  its
     subsidiaries  required by any applicable  law, nor do you waive or lose any
     rights  that  you have to  compensation  for  vested  accrued  unused  2001
     vacation,  or any  rights  that  you have as a former  employee  under  the
     Company's  stock  option  plan,  stock  purchase  plan,  or  retirement  or
     insurance plans, as applicable.

7.   The Company  advises you to consult with an attorney of your choosing prior
     to signing  this  agreement.  You confirm  that you have the right and have
     been given the opportunity to review this agreement and, specifically,  the
     release set forth in paragraph 4 and the representations and agreements set
     forth in paragraph 5, with an attorney of your choice.  You also understand
     and  agree  that  the  Company  is  under no  obligation  to offer  you the
     severance  compensation  set forth in paragraph 3 and that you are under no
     obligation  to  consent to the  release  set forth in  paragraph  4 and the
     representations  and agreements set forth in paragraph 5, and that you have
     entered into this agreement freely and voluntarily.

8.   You may have  twenty-one  days to  consider  the  terms of this  agreement.
     Furthermore,  once you have  signed  this  agreement,  you will have  seven
     additional days from the date you sign it to revoke your consent. To revoke
     this agreement you must clearly  communicate  your decision to do so to the
     Senior Vice  President  - Human  Resources  of the  Company  (212-541-3361)
     within the seven day period. This agreement will not become effective until
     seven days after the date you have signed it, as indicated on the last page
     hereof.  Such seventh day is considered to be the "Effective  Date" of this
     agreement.

9.   The terms in this letter constitute the entire agreement between us and may
     not be altered or  modified  other than in a writing  signed by you and the
     Company.  This letter supersedes in its entirety the letter to you from the
     Company dated January 15, 2001. You represent that in executing this letter
     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 Related  Persons with respect to the subject
     matter, basis or effect of this letter agreement, or otherwise.

================================================================================
Ms. Patricia DeRosa
Dated as of January 15, 2001
Page 4



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

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/ Patricia DeRosa
                                                   -------------------
                                                   PATRICIA  DEROSA
                                                   Dated:  February 12, 2001
================================================================================

Ms. Patricia DeRosa
Dated as of January 15, 2001
Page 5


--------------------------------------------------------------------------------

                                   SCHEDULE A

--------:------------:-------------:-----------:------------------------------
  A     :     B      :    C        :    D      :             E           
--------:------------:-------------:-----------:-------------------------------
        :            :             :  Number   :
        :            :             :  of Out-  :
        :            :             :  standing :
        :            :             :  Options  :
        :            : Number of   :     in    :
        :            : Options     :  Column C :
        :            : Remaining   :  that are :
        :            : Outstanding :  Vested   :
Grant   :   Exercise : as of       :  as of    :Summary of Vesting Terms (see
Date    :   Price    : 1/15/01     :  1/15/01  :Option Agreement for full terms)
--------:------------:-------------:-----------:--------------------------------
4/21/98 :   $15.50   :  10,000     :   5,000   : vest 25% per anniversary of
        :            :             :           : grant date
--------:------------:-------------:-----------:--------------------------------
3/8/99  :   $44.25   :  35,000     :   8,750   : vest 25% per anniversary of 
        :            :             :           : grant date
--------:------------:-------------:-----------:--------------------------------
3/10/00 :   $23.9375 :  40,000     :       0   : vest 25% per anniversary of
        :            :             :           : grant date
--------:------------:-------------:-----------:--------------------------------