7 Times Square Tower

Your starting salary will be $900,000, to be paid semi-monthly. Please note that all payments will be subject to required withholding for federal, state and local taxes. You will earn a bonus of $1,000,000, to be paid on or about April 15, 2009. This bonus is to be repaid in full if you voluntarily leave within one year of its payment.

Fiscal Year 2008 bonus eligibility will be 70% of your base salary prorated from your date of hire. Under the 2008 Ann Taylor Incentive Plan, the bonus, is based on seasonal results and paid on a seasonal basis for associates in your position. This potential bonus will be determined by corporate (30%) and ATL (70%) operating profit targets under the Ann Taylor Incentive Plan with payout to be made at the sole discretion of the company. Your 2008 bonus is guaranteed to be paid minimally at 100% of your prorated target.

We are granting you 65,000 stock options. These options vest over a four (4) year period at 25% increments per year on each anniversary date of grant. You will receive a letter outlining the terms within 30 days from your hire date.

We are granting you 55,000 shares of Restricted Common Stock. The restrictions on these shares lapse over a four (4) year period in 25% increments.

You are eligible in the future to participate in stock options and restricted stock programs. Exact grant amounts will be determined during future grant cycles.

Fiscal Year 2008 eligibility in the restricted cash feature of the Ann Taylor Incentive Plan with a target of 85% of your base salary prorated from your date of hire. Under this feature, the bonus is based on seasonal results. This potential bonus will be determined by corporate operating profit targets under the Ann Taylor Incentive Plan. If the bonus is earned, the payout will be deferred for a 3 year period. During the 3 year period the final value of the deferral will be based on the average growth or decline of corporate net income. If you are not employed on the date of the payout at the end of the 3 year period you will forfeit the entire bonus.

Your annual Paid Time Off (PTO) entitlement is 25 days. For 2008, you are eligible for 7 days.

You will be eligible for medical, dental, vision, life and disability insurance under the Ann Taylor, Inc. Welfare Benefit Plan available on a contributory basis after 30 days of service.

You are eligible to participate in the Ann Taylor, Inc. 401K plan on the 1st of the month following 30 days of service. If you do not make an election to participate, you will automatically be enrolled in the plan 60 days from your date of hire at a deferral rate of 3%. You will be eligible to receive a match under the plan after one year of service. You have the option at any time to opt out of the plan or to change your contribution election.

You are eligible to participate in our discounted stock purchase plan available on set enrollment dates during the year

An Associate discount of 40% is available on all full-price and non full-price merchandise

Our discounted stock purchase plan is available on set enrollment dates during the year

You will be eligible to receive a free Annual Executive Health Exam

You will be eligible for Financial Planning Services from Charles Schwab which includes retirement planning and equity compensation consultation.

You will be eligible to enroll in the Ann Taylor Deferred Compensation Program in early December 2008. You can elect to defer up to 50% of your 2009 base salary and up to 100% of your 2009 ATIP bonus. In addition, you can elect to contribute up to 6% of your earnings above $230,000 which would receive a match under the plan after one year of service.

Kay Krill

President, CEO, Ann Taylor Stores Corporation

/s/    Gary Muto