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RECEIVABLES FINANCING AGREEMENT
Dated as of January 27, 1994
Among
ANNTAYLOR FUNDING, INC.
as the Company
--------------
ANNTAYLOR, INC.
as Servicer
-----------
and
CLIPPER RECEIVABLES CORPORATION
as Lender
---------
and
STATE STREET BOSTON CAPITAL CORPORATION
as Administrator
----------------
and
PNC BANK, NATIONAL ASSOCIATION
as Relationship Bank
--------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
<PAGE>
|| TABLE OF CONTENTS
ARTICLE I
LOANS
SECTION 1.01. Commitments to Lend; Limits on
Lender's Obligations . . . . . . . . . . . . . 2
SECTION 1.02. Loan Procedures . . . . . . . . . . . . . . . 2
SECTION 1.03. Borrowing Base . . . . . . . . . . . . . . . . 2
SECTION 1.04. Note . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.05. Principal . . . . . . . . . . . . . . . . . . 3
ARTICLE II
INTEREST
SECTION 2.01. Interest . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Payment Dates . . . . . . . . . . . . . . . . 4
SECTION 2.03. Funding with Commercial Paper . . . . . . . . 4
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures . . . . . . . . . . . . 5
SECTION 3.02. Deemed Collections; Reduction of
Outstanding Principal, Etc . . . . . . . . . . 8
SECTION 3.03. Payments and Computations, Etc. . . . . . . . 10
SECTION 3.04. Treatment of Collections and Deemed Collections
11
SECTION 3.05. Spread Account; Customer Letter of Credit . . 11
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.02. Yield Protection . . . . . . . . . . . . . . . 13
SECTION 4.03. Funding Losses . . . . . . . . . . . . . . . . 15
ARTICLE V
CONDITIONS OF LOANS
SECTION 5.01. Conditions Precedent to Initial Loan . . . . . 15
SECTION 5.02. Conditions Precedent to All Loans . . . . . . 17
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . . 18
SECTION 6.02. Representations and Warranties of AnnTaylor . 23
i
<PAGE>
ARTICLE VII
GENERAL COVENANTS OF THE COMPANY AND ANNTAYLOR
SECTION 7.01. Affirmative Covenants . . . . . . . . . . . . 26
SECTION 7.02 Separate Corporate Existence . . . . . . . . . 28
SECTION 7.03. Reporting Requirements . . . . . . . . . . . . 30
SECTION 7.04. Negative Covenants of the Company . . . . . . 32
SECTION 7.05 Negative Covenants of AnnTaylor . . . . . . . 34
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer . . . . . . . . . . . 35
SECTION 8.02. Duties of Servicer . . . . . . . . . . . . . . 36
SECTION 8.03. Rights of the Administrator . . . . . . . . . 37
SECTION 8.04. Responsibilities of the Company . . . . . . . 39
SECTION 8.05. Further Action Evidencing Security Interest . 39
SECTION 8.06. Application of Collections . . . . . . . . . . 40
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest . . . . . . . . . . 40
SECTION 9.02. Remedies . . . . . . . . . . . . . . . . . . . 40
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.01. Events of Default . . . . . . . . . . . . . . 41
SECTION 10.02. Remedies . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI
THE ADMINISTRATOR; RELATIONSHIP BANK
SECTION 11.01. Authorization and Action . . . . . . . . . . . 43
SECTION 11.02. Administrator's and Relationship Bank's
Reliance, Etc . . . . . . . . . . . . . . . . 44
SECTION 11.03. State Street Capital and PNC Bank and Affiliates
44
ARTICLE XII
ASSIGNMENT OF LENDER'S INTEREST
SECTION 12.01. Restrictions on Assignments . . . . . . . . . 45
SECTION 12.02. Rights of Assignee . . . . . . . . . . . . . . 46
SECTION 12.03. Evidence of Assignment . . . . . . . . . . . . 46
SECTION 12.04. Rights of the Banks and Collateral Agent . . . 46
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities . . . . . . . . . . . . . . . . . 46
ii
<PAGE>
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc . . . . . . . . . . . . . . . 50
SECTION 14.02. Notices, Etc. . . . . . . . . . . . . . . . . 50
SECTION 14.03. No Waiver; Remedies . . . . . . . . . . . . . 51
SECTION 14.04. Binding Effect; Survival . . . . . . . . . . . 51
SECTION 14.05. Costs, Expenses and Taxes . . . . . . . . . . 52
SECTION 14.06. No Proceedings . . . . . . . . . . . . . . . . 52
SECTION 14.07. Confidentiality of the Company Information . . 53
SECTION 14.08. Confidentiality of Program Information . . . . 55
SECTION 14.09. Captions and Cross References . . . . . . . . 57
SECTION 14.10. Governing Law . . . . . . . . . . . . . . . . 57
SECTION 14.11. Waiver Of Jury Trial . . . . . . . . . . . . . 57
SECTION 14.12. Consent To Jurisdiction; Waiver Of Immunities 57
SECTION 14.13. Execution in Counterparts . . . . . . . . . . 58
SECTION 14.14. No Recourse Against Other Parties . . . . . . 58
iii
<PAGE>
APPENDICES
APPENDIX A Definitions
SCHEDULES
SCHEDULE 6.01(n) List of Offices of the Company where
Records Are Kept
SCHEDULE 6.01(o) List of Lock-Box Banks
SCHEDULE 6.01(p)-1 Forms of Contracts
SCHEDULE 6.01(p)-2 Description of Credit and Collection Policy
SCHEDULE 6.02(k) List of Offices of the Servicer where
Records Are Kept
SCHEDULE 6.02(l) List of Bank Accounts
SCHEDULE 6.01(r) Trade Names
SCHEDULE 7.03(c) Method of Aging
EXHIBITS
EXHIBIT 1.02(a) Form of Borrowing Notice
EXHIBIT 1.04 Form of Note
EXHIBIT 3.01(a) Form of Information Package
EXHIBIT 3.05 Form of Spread Account Agreement
EXHIBIT 5.01(g) Form of Lock-Box Agreement
EXHIBIT 5.01(h)-(i) Form of Opinion of Skadden, Arps, Slate,
Meagher & Flom - Enforceability
EXHIBIT 5.01(h)-(ii) Form of Opinion of General Counsel for the
Company
EXHIBIT 5.01(h)-(iii) Form of Opinion of Skadden, Arps, Slate,
Meagher & Flom - True Sale
EXHIBIT 5.01(h)-(iv) Form of Opinion of Skadden, Arps, Slate,
Meagher & Flom - Substantive Consolidation
EXHIBIT 5.01(h)-(v) Form of Opinion of Connecticut Counsel
||
iv
<PAGE>
RECEIVABLES FINANCING AGREEMENT
THIS IS A RECEIVABLES FINANCING AGREEMENT, dated as of
January 27, 1994, among ANNTAYLOR FUNDING, INC., a Delaware
corporation (the "Company"), ANNTAYLOR, INC., a Delaware
-------
corporation ("AnnTaylor"), as initial servicer, CLIPPER
---------
RECEIVABLES CORPORATION, a Delaware corporation ("Lender"), STATE
------
STREET BOSTON CAPITAL CORPORATION, a Massachusetts corporation
("State Street Capital"), as administrator for Lender under the
--------------------
Program Administration Agreement (in such capacity, the
"Administrator") and PNC BANK, NATIONAL ASSOCIATION, a national
-------------
banking association, as a referral agent for Lender under the
Relationship Bank Agreement (in such capacity, together with any
successors thereto in such capacity, the "Relationship Bank" and
-----------------
in its individual capacity, "PNC Bank"). Unless otherwise
--------
indicated, capitalized terms used in this Agreement are defined
in Appendix A.
----------
Background
----------
1. The Company is a limited purpose subsidiary of
AnnTaylor formed for the purpose of purchasing Receivables
generated by AnnTaylor in the ordinary course of its business.
2. The Company has, and expects to have, Pool Receivables
which the Company intends to finance pursuant to this Agreement.
The Company has requested Lender, and Lender has agreed, subject
to the terms and conditions contained in this Agreement, to make
loans to the Company from time to time during the term of this
Agreement, which loans will be secured by the Receivables Pool.
3. AnnTaylor has been requested by the Company, Lender and
the Administrator to act, and has agreed to act, as initial
Servicer.
4. State Street Capital has been requested, and is
willing, to act as the Administrator.
5. PNC Bank has been requested, and is willing, to act as
the Relationship Bank.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as
follows:
<PAGE>
ARTICLE I
LOANS
SECTION 1.01. Commitments to Lend; Limits on Lender's
---------------------------------------
Obligations. Upon the terms and subject to the conditions of
- -----------
this Agreement, from time to time prior to the Termination Date,
the Company may request that Lender make loans to the Company
(each being a "Loan") and Lender shall make such Loans; provided
---- --------
that no Loan shall be made by Lender if, after giving effect
thereto, the then Outstanding Principal would exceed either (a)
$40,000,000 (the "Lending Limit"), or (b) the Borrowing Base then
-------------
in effect; and provided further that each Loan made pursuant to
----------------
this Section 1.01 shall have an original principal amount of at
------------
least $5,000,000 and shall be in integral multiples of
$1,000,000, unless the Outstanding Principal is $20,000,000 or
more, in which case, each Loan shall have an original principal
amount of at least $100,000 and shall be in integral multiples of
$100,000.
SECTION 1.02. Loan Procedures.
---------------
(a) Notice of Loan. Each Loan to the Company by Lender
--------------
shall be made on notice from the Company to the Administrator
substantially in the form of Exhibit 1.02(a) (each, a "Borrowing
--------------- ---------
Notice") received by the Administrator not later than noon (New
- ------
York City time) on the Business Day next preceding the date of
such proposed Loan (or, in the case of the initial Loan, not
later than 9:00 a.m. (New York City time) on the date of such
initial Loan). Each such notice of a proposed Loan shall specify
the desired amount and date of such Loan, which date shall be a
Settlement Date.
(b) Funding of Loan. On the date of each Loan, Lender
---------------
shall, upon satisfaction of the applicable conditions set forth
in Article V, make available to the Administrator at the
---------
Administrator's Office the principal amount of its Loan in same
day funds, and after receipt by the Administrator of such funds,
the Administrator will disburse such funds to an account of the
Company designated in writing by the Company in the applicable
Borrowing Notice.
SECTION 1.03. Borrowing Base.
--------------
(a) Computation of Borrowing Base. On any date, the
-----------------------------
"Borrowing Base" means an amount equal to
--------------
NPB - LR
where:
2
<PAGE>
LR = the Loss Reserve on such date; and
NPB = the Net Pool Balance on such date.
(b) Frequency of Computation. The Borrowing Base shall be
------------------------
computed and reported, as provided in Section 3.01, as of (i) the
------------
date of the initial Loan and (ii) the Cut-Off Date for each
Settlement Period. In addition, if the Administrator or the
Relationship Bank reasonably believes that there shall exist any
event or occurrence that has a reasonable possibility of causing
a Material Adverse Effect, the Administrator or the Relationship
Bank may require the Servicer to provide a computation of
Collections received by the Company or the Servicer since the
last Cut-Off Date, the then aggregate Unpaid Balance of all Pool
Receivables and such other information comprising a part of the
Information Package that can be updated from the last Cut-Off
Date for purposes of computing the Borrowing Base as of any other
date, and the Servicer agrees to do so within 5 Business Days of
its receipt of the Administrator's or the Relationship Bank's
request.
SECTION 1.04. Note. The Loans shall be evidenced by a
----
promissory note (as from time to time supplemented, extended,
amended, modified or replaced from time to time, the "Note"),
----
substantially in the form set forth in Exhibit 1.04, with
------------
appropriate insertions, dated the date hereof, payable to the
order of Lender in the maximum principal amount of $40,000,000
(or, if less, in the aggregate unpaid principal amount of all of
the Loans) on the Termination Date. The Administrator shall
record in its records, or at its option on the schedule attached
to the Note, the date and amount of each Loan made hereunder,
each repayment thereof and the other information provided for
thereon. The aggregate unpaid principal amount so recorded shall
be rebuttable presumptive evidence of the principal amount owing
and unpaid on the Note. The failure so to record any such
information or the error in so recording any such information
shall not, however, limit or otherwise affect the actual
obligations of the Company hereunder or under the Note to repay
the principal amount of all Loans, together with all interest
accruing thereon.
SECTION 1.05. Principal. The Company shall repay the
---------
principal of the Loans (i) on each Settlement Date in an amount
equal to the excess, if any, of the Outstanding Principal over
the Borrowing Base then in effect and (ii) in full on the
Termination Date. Outstanding Principal shall not be considered
reduced by any allocation, setting aside or distribution of any
portion of Collections unless such Collections shall have been
actually delivered to the Administrator pursuant hereto (or
deemed delivered pursuant to Section 3.03(a)(i)). Outstanding
Principal shall not be considered reduced by any distribution of
3
<PAGE>
any portion of Collections if at any time such distribution is
rescinded or must otherwise be returned for any reason.
ARTICLE II
INTEREST
SECTION 2.01. Interest. The Company hereby promises to pay
--------
interest for each Interest Period on the unpaid principal amount
of each Loan (or the applicable portion thereof) for the period
commencing on the date of such Loan until such Loan is paid in
full, as follows:
(a) at all times while the making or maintenance
of such Loan (or the applicable portion thereof) by
Lender is funded by the issuance of Commercial Paper
Notes, the CP Rate for such Interest Period;
(b) at all times while the making or maintenance
of such Loan (or the applicable portion thereof) by
Lender is funded by a Liquidity Loan, the Bank Rate
applicable to such Interest Period; and
(c) at all times while the making or maintenance
of such Loan (or the applicable portion thereof) by
Lender is funded by a Credit Draw, a rate per annum
equal for each date during the Interest Period to the
Alternate Base Rate in effect on such day plus 1% per
annum;
provided, however, that on any day when an Event of Default shall
- -------- -------
have occurred and be continuing, the Loans shall accrue interest
at a rate per annum equal to the higher of (i) the Alternate Base
Rate plus 2% per annum and (ii) the rate otherwise applicable to
such Loan during such Interest Period plus 2% per annum. The
interest rate on any Loan bearing interest at the Alternate Base
Rate shall change simultaneously with each change in the
Alternate Base Rate.
SECTION 2.02. Payment Dates. Interest accrued on each Loan
-------------
shall be payable, without duplication; (a) on the Termination
Date; (b) on the date of any payment or repayment, in whole or in
part, of any principal outstanding of such Loan and (c) on each
Settlement Date. Interest accrued on Loans after the date such
Loan is due and payable (whether on the Termination Date, upon
acceleration or otherwise), together with interest on any and all
other amounts remaining unpaid, shall be payable upon demand. No
provision of this Agreement shall require the payment or permit
the collection of interest in excess of the maximum permitted by
applicable law. Interest for any Loan shall not be considered
4
<PAGE>
paid by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.
SECTION 2.03. Funding with Commercial Paper and Liquidity
-------------------------------------------
Loans. The Lender will fund the Loans with Commercial Paper
- -----
Notes unless the Lender is unable to issue such Commercial Paper
Notes to fund the Loans. If the Lender is unable to issue
Commercial Paper Notes to fund the Loans (by virtue of
prohibitions or restrictions on such issuance in the Liquidity
Agreement or the Program Administration Agreement or otherwise),
the Lender will fund the Loans with Liquidity Loans to the extent
permitted pursuant to the Liquidity Agreement. In the event that
the Lender has funded any Loan with a Liquidity Loan, as soon as
practicable, on a Settlement Date, the Lender will replace such
Liquidity Loan funding with Commercial Paper Notes.
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures.
---------------------
The parties hereto will take the following actions with
respect to each Settlement Period:
(a) Information Package. On or before the fifth day
-------------------
of the calendar month immediately following the calendar
month in which the Cut-Off Date for such Settlement Period
occurs, or, if such day is not a Business Day, the next
succeeding Business Day (each, a "Reporting Date"), Servicer
--------------
shall deliver to the Relationship Bank and the Administrator
a report, substantially in the form of Exhibit 3.01 (each,
------------
an "Information Package").
-------------------
(b) Collections. Servicer shall set aside for the
-----------
sole benefit of Lender, the Administrator and the
Relationship Bank all Collections received to the extent
necessary to pay the Estimated Amount as it accrues (whether
or not then due) that will be payable during such Settlement
Period or on the next occurring Settlement Date; provided
--------
that, unless the Administrator or the Relationship Bank
shall request it to do so in writing after the occurrence
and during the continuance of an Event of Default, Servicer
shall not be required to hold such Collections in a separate
deposit account containing only such Collections. So long
as no Event of Default has occurred and is continuing,
Collections received during a Settlement Period in excess of
the amount to be set aside with respect to the Estimated
Amount for such Settlement Period shall be used by the
Company to pay the purchase price for Receivables generated
by AnnTaylor, as seller, pursuant to the Purchase Agreement;
5
<PAGE>
if any Collections remain after such payment, they shall be
retained by the Company for use in its sole discretion
(subject to the terms of this Agreement). If an Event of
Default has occurred and is continuing, all Collections
shall be held by Servicer pursuant to the first sentence of
this paragraph (b). On each Settlement Date, Servicer shall
-------------
remit to the Administrator an amount equal to the lesser of
(1) the amount of Collections received during the Settlement
Period related to such Settlement Date and (2) the sum of
(i) the amount of interest on the Loans accrued during the
most recently ended Interest Period (plus any interest
previously accrued and remaining unpaid), plus (ii) the
----
amount of principal then due and owing with respect to the
Loans (plus any principal previously due and remaining
unpaid), plus (iii) all fees and other amounts accrued and
----
payable by the Company under this Agreement. To the extent
that the amount described in the foregoing clause (1) is
----------
less than the amount described in the foregoing clause (2),
----------
the Administrator shall first, withdraw the amount of any
-----
such deficiency from the Spread Account and second, draw the
------
amount of any remaining deficiency from the Customer Letter
of Credit. All Collections received during the applicable
Settlement Period that exceed the amount described in the
foregoing clause (2) shall be (A) deposited by the Servicer
----------
to the Spread Account and/or (B) paid by the Servicer to the
issuer of the Customer Letter of Credit, in each case, to
the extent necessary to bring the sum of the funds in the
Spread Account plus the stated amount of the Customer Letter
of Credit up to the Enhancement Limit; unless an Event of
Default has occurred and is continuing, all remaining
Collections shall be available to the Company pursuant to
the second sentence of this paragraph (b).
-------------
(c) Order of Application of Collections Prior to
--------------------------------------------
Termination Date. Upon receipt by the Administrator of
----------------
amounts on any Settlement Date pursuant to the foregoing
paragraph (b) prior to the occurrence of the Termination
-------------
Date, the Administrator shall apply such amounts to the
items specified in the subclauses below, in the order of
priority of such subclauses:
(i) to accrued and unpaid Servicer's Fee;
(ii) to interest accrued during the most recently
ended Interest Period in respect of any outstanding
Liquidity Loans, plus any such interest previously due
and remaining unpaid;
(iii) to interest accrued during the most
recently ended Interest Period in respect of Commercial
6
<PAGE>
Paper Notes issued to fund the Loans, plus any such
interest previously due and remaining unpaid;
(iv) to the Program Fee accrued during the most
recently ended Interest Period, plus any portion of the
Program Fee previously due and remaining unpaid;
(v) to the extent of any principal due on the
Loans, to the outstanding principal (A) first, of the
-----
Liquidity Loans until reduced to zero, (B) second, of
------
the Commercial Paper Notes issued to fund the Loans
until reduced to zero and (C) third, to the outstanding
-----
principal of any Credit Draws made to fund the Loans;
(vi) to interest accrued during the most recently
ended Interest Period in respect of Credit Draws made
to fund the Loans, plus any such interest previously
due and remaining unpaid;
(vii) to accrued and unpaid amounts owed to the
Administrator hereunder;
(viii) to other accrued and unpaid amounts owing
to Lender hereunder;
(ix) on a pro rata basis, to accrued and unpaid
--- ----
amounts owing to the Relationship Bank or any other
Affected Party hereunder; and
(x) any remaining amounts to the Spread Account,
up to the Enhancement Limit or to the issuer of the
Customer Letter of Credit, up to the amount necessary
to restore the stated amount thereof to the Enhancement
Limit, as applicable.
(d) Order of Application of Collections After
-----------------------------------------
Termination Date. Upon receipt by the Administrator of
----------------
amounts on any Settlement Date pursuant to the foregoing
paragraph (b) on or after the occurrence of the Termination
-------------
Date, the Administrator shall apply such items to the item
specified in the subclauses below, in the order of priority
of such subclauses:
(i) to accrued and unpaid Servicer's Fee;
(ii) to interest accrued during the most recently
ended Interest Period in respect of any outstanding
Liquidity Loans, plus any such interest previously due
and remaining unpaid;
7
<PAGE>
(iii) to interest accrued during the most
recently ended Interest Period in respect of Commercial
Paper Notes issued to fund the Loans, plus any such
interest previously due and remaining unpaid;
(iv) to the Program Fee accrued during the most
recently ended Interest Period, plus any such Program
Fee previously due and remaining unpaid;
(v) to the outstanding principal of any Liquidity
Loans until reduced to zero;
(vi) to the outstanding principal of the
Commercial Paper Notes issued to fund the Loans until
reduced to zero;
(vii) to interest accrued during the most
recently ended Interest Period in respect to Credit
Draws made to fund the Loans, plus any such interest
previously due and remaining unpaid;
(viii) to the outstanding principal of any Credit
Draws made to fund the Loans until reduced to zero;
(ix) to accrued and unpaid amounts owed to the
Administrator hereunder;
(x) to other accrued and unpaid amounts owing to
Lender hereunder;
(xi) on a pro rata basis, to accrued and unpaid
--- ----
amounts owing to the Relationship Bank or any other
Affected Party hereunder; and
(xii) any remaining amounts to the Company.
(e) Non-Distribution of Servicer's Fee. If the
----------------------------------
Administrator consents (which consent may be revoked at any
time during the continuance of an Event of Default), the
amount in respect of Servicer's Fee may be retained by
Servicer, in which case no distribution shall be made in
respect of the Servicer's Fee pursuant to clause (c) or (d)
---------- ---
above, as the case may be.
(f) Delayed Payment. If on any day described in this
---------------
Section 3.01, a payment is not paid because the sum of (i)
------------
Collections during the relevant Settlement Period, (ii) the
amounts in the Spread Account and (iii) the amounts
available to be drawn on the Customer Letter of Credit were
less than the aggregate amounts payable, the next available
Collections shall be applied to such payment.
8
<PAGE>
SECTION 3.02. Deemed Collections; Reduction of Outstanding
--------------------------------------------
Principal, Etc.
- --------------
(a) Deemed Collections. If on any day
------------------
(i) the Unpaid Balance of any Pool Receivable is
(A) reduced as a result of any defective,
rejected or returned merchandise or services, any cash
discount, or any adjustment by the Company or any
Affiliate of the Company,
(B) reduced or cancelled as a result of a setoff
in respect of any claim by the Obligor thereof against
the Company or any Affiliate of the Company (whether
such claim arises out of the same or a related or an
unrelated transaction), or
(C) reduced on account of the obligation of the
Company to pay to the related Obligor any rebate or
refund, or
(D) less than the amount included in calculating
the Net Pool Balance for purposes of any Information
Package, or
(ii) any of the representations or warranties of the
Company set forth in Section 6.01(l), (p) or (v) were not
--------------- --- ---
true when made with respect to any Pool Receivable, or any
of the representations or warranties of the Company set
forth in Section 6.01(l) or (v) are no longer true with
--------------- ---
respect to any Pool Receivable, or
(iii) without duplication, the Company receives a
Deemed Collection (as defined in the Purchase Agreement),
then, on such day, the Company shall be deemed to have received a
Collection of such Pool Receivable
(I) in the case of clause (i) above, in the
----------
amount of such reduction or cancellation or the
difference between the actual Unpaid Balance and the
amount included in calculating such Net Pool Balance,
as applicable;
(II) in the case of clause (ii) above, in the
-----------
amount of the Unpaid Balance of such Pool Receivable;
and
(III) in the case of clause (iii) above, in the
------------
amount so received as a Deemed Collection.
9
<PAGE>
If the Company has paid in full the Unpaid Balance of a
Receivable, such Receivable, and any Related Security therefor,
shall be released from the security interest therein created by
this Agreement, without any further act, and such Receivable
shall no longer be a Pool Receivable.
(b) The Company's Optional Prepayment. The Company may at
---------------------------------
any time elect to prepay the Loans in whole or in part, by giving
the Administrator at least 3 Business Days' prior written notice
of such prepayment (including the amount of such proposed
reduction and the proposed date on which such prepayment will be
made),
provided that,
- --------
(A) the amount of any such prepayment shall be
not less than $100,000 and shall be an integral
multiple of $100,000, and the Outstanding Principal
after giving effect to such reduction shall be not less
than $20,000,000 (unless the Outstanding Principal
shall thereby be reduced to zero), and
(B) any prepayment shall be accompanied by the
interest accrued on the amount being prepaid, plus any
Liquidation Fee, plus, if the Termination Date shall
have occurred and the Outstanding Principal shall
thereby be reduced to zero, all other amounts then due
to the Lender, the Administrator or the Relationship
Bank.
SECTION 3.03. Payments and Computations, Etc.
------------------------------
(a) Payments. All amounts to be paid, remitted or
--------
deposited by the Company or Servicer to the Administrator or any
other Person hereunder (other than amounts payable under
Section 4.02) shall be paid or deposited in accordance with the
- ------------
terms hereof no later than 11:30 a.m. (New York time) on the day
when due in lawful money of the United States of America in same
day funds (i) in the case of amounts to be paid, remitted or
deposited in respect of accrued and unpaid interest on the Loans
or in reduction of Outstanding Principal, to the Collateral Agent
(which payment shall be deemed to be a payment actually delivered
to the Administrator for the purposes hereof) at The First
National Bank of Chicago, ABA# 071000013, Clearing Account 4811-
5377, for further credit to Account 21-201949-3 (ii) in the case
of all fees, expenses and other amounts (other than amounts
payable under Section 4.02), to the Administrator at State Street
------------
Bank & Trust Co., ABA# 011000028, Account 13585872, Attention:
Jeff Noordhoek, ext. 4-4940, Route Code 5, Function 5, and (iii)
in all other cases to the address of the Person entitled to such
payment or deposit as such Person shall specify.
10
<PAGE>
(b) Late Payments. Without duplication, the Company shall,
-------------
to the extent permitted by law, pay to Lender interest on all
amounts not paid or deposited when due hereunder and the Servicer
shall, to the extent permitted by law, pay to Lender interest on
all amounts not remitted when due hereunder because of any
failure of the Servicer to comply with its obligations as
Servicer hereunder, in each case at 2% per annum above the
--- -----
Alternate Base Rate, payable on demand, provided, however, that
-------- -------
such interest rate shall not at any time exceed the maximum rate
permitted by applicable law.
(c) Method of Computation. All computations of interest,
---------------------
Liquidation Fee, any fees payable under Sections 4.01(b) and any
----------------
other fees payable by the Company to Lender, the Administrator or
the Relationship Bank in connection with Loans hereunder shall be
made on the basis of a year of 360 days (other than interest
calculated by reference to the Alternate Base Rate, in which case
such calculation shall be made on the basis of a year of 365 or
366 days, as applicable) for the actual number of days (including
the first day but excluding the last day) elapsed.
SECTION 3.04. Treatment of Collections and Deemed
-----------------------------------
Collections. The Company shall forthwith deliver to Servicer all
- -----------
Collections deemed received by the Company pursuant to Section
-------
3.02(a), and Servicer shall hold or distribute such Collections
- -------
pursuant to the terms hereof to the same extent as if such
Collections had actually been received on the date of such
delivery to Servicer. During the continuance of an Event of
Default, if requested by the Administrator or the Relationship
Bank, Servicer shall cause such deemed Collections to be paid on
the second Business Day after they arise to the Lock-Box Bank or,
if Collections are being paid to the Collateral Agent pursuant to
Section 8.03(c), to the Collateral Agent. So long as the Company
- ---------------
shall hold any Collections or deemed Collections required to be
paid to Servicer, the Administrator or Collateral Agent, it shall
hold such Collections for the sole benefit of the Lender, the
Administrator and the Relationship Bank and shall clearly mark
its records to reflect such benefit (subject to the Company's
right to use certain Collections to pay the purchase price due
under the Purchase Agreement as set forth in Section 3.01(b));
---------------
provided that unless the Administrator or the Relationship Bank
- --------
shall request it to do so in writing after the occurrence and
during the continuance of an Event of Default, the Company shall
not be required to hold such Collections in a separate deposit
account containing only such Collections.
SECTION 3.05. Spread Account; Customer Letter of Credit.
-----------------------------------------
(a) Unless the Company has delivered a Customer Letter of Credit
pursuant to Section 3.05(e), the Company, for the benefit of
---------------
Lender, shall establish and maintain or cause to be established
and maintained in the name of the Company, on behalf of Lender,
11
<PAGE>
with the Relationship Bank, a segregated account (the "Spread
------
Account"), bearing a designation clearly indicating that the
- -------
funds deposited therein are held for the benefit of Lender. The
Spread Account, all funds deposited therein from time to time,
all investments of such funds and all proceeds of any of the
foregoing shall be subject to a pledge and security interest in
favor of the Administrator for the benefit of Lender pursuant to
an agreement substantially in the form attached hereto as Exhibit
-------
3.05 (such agreement, as amended, supplemented or otherwise
- ----
modified from time to time, being the "Spread Account
--------------
Agreement").
- ---------
(b) Except as expressly provided in this Agreement,
Servicer agrees that it shall have no right of setoff or banker's
lien against, and no right to otherwise deduct from, any funds
held in the Spread Account for any amount owed to it by the
Administrator, the Relationship Bank or Lender.
(c) Funds on deposit in the Spread Account shall be
invested at the direction of Servicer in accordance with the
Spread Account Agreement; provided, however, investments of funds
-------- -------
representing Collections collected during any Settlement Period
shall be invested in investments that will mature so that such
funds will be available for transfer on the applicable Settlement
Date with respect to such Settlement Period. All interest and
other investment earnings (net of losses and investment expenses)
on funds on deposit in the Spread Account shall be added to the
balance in the Spread Account and applied in accordance with this
Agreement.
(d) On or prior to the date of the initial Loan hereunder,
the Company will deposit $200,000 in the Spread Account. If on
any Settlement Date, no Event of Default has occurred and is
continuing and the amount of funds in Spread Account, after
giving effect to all withdrawals therefrom on such date, exceeds
1.5% of the Lending Limit (the "Enhancement Limit"), the amount
-----------------
of such excess shall be released to the Company.
(e) The Company may, at its option, in lieu of establishing
and maintaining the Spread Account, deliver to the Administrator,
for the benefit of Lender, and maintain in force until the Final
Payout Date, one or more irrevocable letters of credit
(collectively, with any substitutions therefor and replacements
thereof, the "Customer Letter of Credit"), with a stated amount
-------------------------
equal to the Enhancement Limit, from a bank or other financial
institution whose short term unsecured debt obligations are rated
at least A-1 by Standard and Poor's Corporation and P-1 by
Moody's Investors Service, Inc., and who is otherwise acceptable
to the Administrator (whose acceptance shall not be unreasonably
withheld), and in a form reasonably acceptable to the
Administrator, together with an opinion of counsel for such
12
<PAGE>
Customer Letter of Credit issuer acceptable in form and substance
to the Administrator; provided that a copy of such Customer
--------
Letter of Credit shall have been provided to Standard & Poor's
Corporation and Moody's Investors Service, Inc. and they shall
have either confirmed (orally or in writing) the rating of the
Commercial Paper Notes or waived (orally or in writing) such
requirement of confirmation.
(f) The Company may satisfy its obligations pursuant to
this Section 3.05 by providing both a Spread Account and a
------------
Customer Letter of Credit, provided that the sum of the amount of
--------
funds from time to time in the Spread Account plus the stated
amount from time to time of the Customer Letter of Credit is at
least equal to the Enhancement Limit.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees.
----
(a) Arrangement Fee. AnnTaylor shall pay to the
---------------
Administrator, for the account of Lender and the Relationship
Bank, an arrangement fee ("Arrangement Fee") payable on such
---------------
dates and in such amounts as are set forth in the letter dated
December 7, 1993 from the Relationship Bank to AnnTaylor.
(b) Other Fees. The Company shall pay to the Administrator
----------
for the account of the Lender certain other fees payable in such
amounts and on such dates as are set forth in the fee letter,
dated as of the date hereof (as amended or supplemented from time
to time, the "Fee Letter") among the Company, AnnTaylor, the
----------
Relationship Bank and the Administrator.
SECTION 4.02. Yield Protection.
----------------
(a) If (i) Regulation D or (ii) any Regulatory Change
occurring after the date hereof
(A) shall subject an Affected Party to any tax, duty
or other charge with respect to any Loan owned by, owed to
or funded by it, or any obligations or right to make Loans
or to provide funding therefor, or shall change the basis of
taxation of payments to the Affected Party of any part of
the Loans owned by, owed to or funded in whole or in part by
it or any other amounts due under this Agreement in respect
of the Loans (or any portion thereof) owned by or funded by
it or its obligations or rights, if any, to make Loans or to
provide funding therefor (except for changes in the rate of
any tax which is a franchise tax or a tax on the net income
13
<PAGE>
of such Affected Party imposed by the United States of
America, by any jurisdiction in which such Affected Party's
principal executive office is located and, if such Affected
Party's principal executive office is not in the United
States of America, by any jurisdiction where such Affected
Party's principal office in the United States is located);
or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed
by the Federal Reserve Board, but excluding any reserve
included in the determination of the interest rate
applicable to the Loans), special deposit or similar
requirement against assets of any Affected Party, deposits
or obligations with or for the account of any Affected Party
or with or for the account of any affiliate (or entity
deemed by the Federal Reserve Board to be an affiliate) of
any Affected Party, or credit extended by any Affected
Party; or
(C) shall change the amount of capital maintained or
required or requested or directed to be maintained by any
Affected Party in respect of the transactions contemplated
hereby; or
(D) shall impose any other condition affecting any
Loan owned by, owed to or funded in whole or in part by any
Affected Party, or its obligations or rights, if any, to
make Loans or to provide funding therefor;
and the result of any of the foregoing is or would be
(x) to increase the cost to (I) an Affected Party
funding or making or maintaining any Loans (or any portion
thereof), any purchases, reinvestments, or loans or other
extensions of credit under the Liquidity Agreement, or any
Credit Draw, or any commitment of such Affected Party with
respect to any of the foregoing, or (II) the Administrator
for continuing its or the Company's relationship with
Lender,
(y) to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, or
under the Liquidity Agreement or the Credit Agreement with
respect thereto, or
(z) in the sole determination of such Affected Party,
to reduce the rate of return on the capital of an Affected
Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which
such Affected Party could otherwise have achieved,
14
<PAGE>
then within thirty days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth
the basis of such demand), the Company shall pay directly to such
Affected Party such additional amount or amounts as will
compensate such Affected Party for such additional or increased
cost or such reduction.
(b) Each Affected Party will promptly notify the Company
and the Administrator of any event of which it has knowledge
which will entitle such Affected Party to compensation pursuant
to this Section 4.02; provided, however, no failure to give or
------------ -------- -------
delay in giving such notification shall adversely affect the
rights of any Affected Party to such compensation except that no
Affected Party shall be entitled to compensation under this
Section 4.02 with respect to any increased costs or reduced
- ------------
return incurred more than 90 days prior to the date on which a
responsible officer of such Affected Party had actual knowledge
and notified the Company of the event giving rise to such
increased cost or reduced return.
(c) In determining any amount provided for or referred to
in this Section 4.02, an Affected Party may use any reasonable
------------
averaging and attribution methods that it reasonably shall deem
applicable; provided that such Affected Party shall not be
--------
arbitrary with respect to requesting similar compensation with
respect to similar transactions to the extent it is entitled to
do so pursuant to the applicable agreements. Any Affected Party
when making a claim under this Section 4.02 shall submit to the
------------
Company a statement as to such increased cost or reduced return
(including calculation thereof in reasonable detail), which
statement shall, in the absence of demonstrable error, be
conclusive and binding upon the Company.
(d) Any Affected Party which is a participant shall only be
entitled to amounts under this Section 4.02 to the extent that
------------
such amounts, together with all amounts due to the Person selling
such participation under this Section 4.02, do not exceed the
------------
amounts that would have been due to such Person under this
Section 4.02 if the participation had not been entered into or
- ------------
sold.
SECTION 4.03. Funding Losses. In the event that any
--------------
Liquidity Bank shall incur any loss or expense (including any
loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such
Liquidity Bank to make any Liquidity Loan or maintain any
Liquidity Loan, but not including loss of anticipated profit) as
a result of any Loan not being made in accordance with a request
therefore under Section 1.02 (other than by reason of the failure
------------
of Lender to fund such Loan pursuant to its commitment), then,
upon written notice from the Administrator to the Company and
15
<PAGE>
Servicer, but without duplication of any Liquidation Fee paid by
the Company, the Company shall pay to Servicer, and Servicer
shall remit such amount paid by the Company to the Administrator
for the account of such Liquidity Bank, the amount of such loss
or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding upon the Company and
Servicer.
ARTICLE V
CONDITIONS OF LOANS
SECTION 5.01. Conditions Precedent to Initial Loan. The
------------------------------------
initial Loan hereunder is subject to the condition precedent that
the Administrator shall have received, on or before the date of
such Loan, the following, each (unless otherwise indicated) dated
such date and in form and substance satisfactory to the
Administrator:
(a) A copy of the resolutions of the Board of
Directors of each of the Company and AnnTaylor approving
this Agreement and the other Transaction Documents to which
it is a party to be delivered by it hereunder and the
transactions contemplated hereby, certified by its Secretary
or Assistant Secretary;
(b) Good standing certificates for the Company issued
by the Secretaries of State of Delaware and Connecticut;
good standing certificates for AnnTaylor issued by the
Secretaries of State of New York and Delaware.
(c) A certificate of the Secretary or Assistant
Secretary of each of the Company and AnnTaylor certifying
the names and true signatures of the officers authorized on
its behalf to sign this Agreement and the other Transaction
Documents to be delivered by it hereunder (on which
certificate the Administrator and Lender may conclusively
rely until such time as the Administrator shall receive from
the Company or AnnTaylor, as the case may be, a revised
certificate meeting the requirements of this subsection
----------
(c));
---
(d) The Certificate of Incorporation of each of the
Company and AnnTaylor, duly certified by the Secretary of
State of Delaware, as of a recent date acceptable to
Administrator, together with a copy of the by-laws of each
of the Company and AnnTaylor, duly certified by the
Secretary or an Assistant Secretary of the Company or
AnnTaylor, as the case may be;
16
<PAGE>
(e) Copies of proper financing statements (Form UCC-
1), filed or delivered to the Lender or the Administrator
for filing on or prior to the date of the initial Loan,
naming (i) AnnTaylor as the debtor and seller of
Receivables, the Company as the secured party and purchaser
and Lender as the assignee and (ii) the Company as the
debtor and Lender as the secured party;
(f) A search report provided in writing to the
Administrator by LEXIS Document Service, listing all
effective financing statements that name the Company or
AnnTaylor as debtor and that are filed in the jurisdictions
in which filings were made pursuant to subsection (e) above
--------------
and in such other jurisdictions that Administrator shall
reasonably request, together with copies of such financing
statements (none of which shall cover the Receivables Pool
or any interests therein);
(g) Duly executed copies of Lock-Box Agreements with
each of the Lock-Box Banks;
(h) Opinions of (i) Skadden, Arps, Slate, Meagher &
Flom, special counsel to the Company, in substantially the
form of Exhibits 5.01(h)-(i), 5.01(h)-(iii) and 5.01(h)-
-------------------- ------------- --------
(iv), (ii) Jocelyn F.L. Barandiaran, Esq., general counsel
----
for the Company, in substantially the form of Exhibit
-------
5.01(h)-(ii) and (iii) Tyler, Cooper & Alcorn, special
------------
Connecticut counsel to the Company, in substantially the
form of Exhibit 5.01(h)-(v);
-------------------
(i) Such powers of attorney as the Administrator shall
reasonably request to enable the Administrator to collect
all amounts due under any and all Pool Receivables;
(j) A pro forma Information Package, prepared in
--- -----
respect of the proposed initial Loan, assuming a Cut-Off
Date of December 24, 1993;
(k) A report in form and substance satisfactory to the
Administrator from the Relationship Bank as to a pre-closing
due diligence audit of the Company by the Relationship Bank;
(l) The Liquidity Agreement, duly executed by Lender,
the Liquidity Agent and each Liquidity Bank;
(m) Written approval by the Credit Bank of this
Agreement and the transactions contemplated hereby;
(n) Letters from the rating agencies then rating the
Commercial Paper Notes, confirming in effect that the
existing ratings of the Commercial Paper Notes will remain
17
<PAGE>
in effect after giving effect to the transactions
contemplated hereby;
(o) The Purchase Agreement, duly executed by the
Company and AnnTaylor;
(p) The Note, duly executed by the Company;
(q) The Fee Letter, duly executed by the Company and
AnnTaylor;
(r) A copy of all documents required to be delivered
under the Purchase Agreement;
(s) The written consent of the required banks pursuant
to the AnnTaylor Credit Agreement to the transactions
contemplated by the Transaction Documents; and
(t) Partial releases (UCC-3 statements) executed by
Bank of America National Trust and Savings Association, as
Agent, releasing all of its interest in the Receivables
Pool.
SECTION 5.02. Conditions Precedent to All Loans. Each Loan
---------------------------------
(including the initial Loan) shall be subject to the further
conditions precedent that on the date of such Loan the following
statements shall be true (and the Company by accepting the amount
of such Loan shall be deemed to have certified that):
(a) the representations and warranties contained in
Section 6.01 are correct on and as of such day as though
------------
made on and as of such day and shall be deemed to have been
made on such day,
(b) no event has occurred and is continuing, or would
result from such Loan, that constitutes an Event of Default
or Unmatured Event of Default,
(c) after giving effect to each proposed Loan, the
Outstanding Principal will not exceed the Lending Limit or
the Borrowing Base, and
(d) the Termination Date shall not have occurred.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the
-------------------------------------
Company. The Company represents and warrants as follows:
- -------
18
<PAGE>
(a) Organization and Good Standing. It has been duly
------------------------------
organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its
business as such properties are presently owned and such
business is presently conducted, and had at all relevant
times, and now has, all necessary power, authority, and
legal right to acquire and own the Pool Receivables.
(b) Due Qualification. It is duly qualified to do
-----------------
business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or
the conduct of its business requires such qualification,
licenses or approvals except where the failure to be in good
standing or to so qualify has not had and will not have a
Material Adverse Effect.
(c) Power and Authority; Due Authorization. It (i)
--------------------------------------
has all necessary power, authority and legal right to (A)
execute and deliver this Agreement, the Note and the other
Transaction Documents to which it is a party, (B) carry out
the terms of the Transaction Documents, and (C) borrow the
Loans and grant the security interest in the Receivables
Pool on the terms and conditions herein provided and (ii)
has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement, the
Note and the other Transaction Documents to which it is a
party and the borrowing of the Loans and the granting of the
security interest in the Receivables Pool on the terms and
conditions herein provided.
(d) Valid Security Interest; Binding Obligations.
--------------------------------------------
This Agreement creates a valid first priority security
interest in the Receivables Pool in favor of the Lender,
enforceable against creditors of, and purchasers from, the
Company; and this Agreement constitutes, and the Note and
each other Transaction Document to be signed by it when duly
executed and delivered will constitute, its legal, valid and
binding obligation enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting
the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at
law.
(e) No Violation. The consummation of the
------------
transactions contemplated by this Agreement, the Note and
the other Transaction Documents and the fulfillment of the
terms hereof will not (i) conflict with, result in any
19
<PAGE>
breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default
under, the certificate of incorporation or by-laws of the
Company or any indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other
agreement or instrument to which the Company is a party or
by which it or any of its properties is bound, except where
such conflict, breach or default has not had and will not
have a Material Adverse Effect, (ii) result in the creation
or imposition of any Lien upon any of the Company's
properties pursuant to the terms of any such indenture, loan
agreement, receivables purchase agreement, mortgage, deed of
trust, or other agreement or instrument, other than this
Agreement, or (iii) violate any law or any order, rule, or
regulation applicable to the Company of any court or of any
federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over
the Company or any of its properties except where such
violation has not had and will not have a Material Adverse
Effect.
(f) No Proceedings. There are no proceedings or
--------------
investigations pending, or to the Company's knowledge
threatened, before any court, regulatory body,
administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this
Agreement or any other Transaction Document, (ii) seeking to
prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction
Document, or (iii) seeking any determination or ruling that
could reasonably be expected to have a Material Adverse
Effect.
(g) Bulk Sales Act. No transaction contemplated
--------------
hereby requires compliance with any bulk sales act or
similar law.
(h) Government Approvals. No authorization or
--------------------
approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by
the Company of this Agreement or any other Transaction
Document, except for the filing of the UCC financing
------
statements referred to in Article V, all of which, at the
---------
time required in Article V, shall have been duly made and
---------
shall be in full force and effect (or, in the case of the
initial Loan, shall have been duly delivered to the
Administrator).
(i) Financial Condition. (x) The balance sheet of
-------------------
the Company as of the date hereof certified by a Responsible
20
<PAGE>
Officer, copies of which have been furnished to the
Administrator, fairly presents the Company's assets and
liabilities as of such date (after giving effect to the
transactions contemplated by the Transaction Documents); and
(y) since the date of the Company's incorporation, there has
been no material adverse change in any of the Company's
financial condition, business, or operations.
(j) Litigation. No injunction, decree or other
----------
decision has been issued or made by any court, governmental
agency or instrumentality thereof that could reasonably be
expected to have a Material Adverse Effect, and no written
threat by any person has been made to attempt to obtain any
such decision.
(k) Margin Regulations. The use of all funds obtained
------------------
by the Company under this Agreement will not conflict with
or contravene any of Regulations G, T, U and X promulgated
by the Board of Governors of the Federal Reserve System from
time to time.
(l) Quality of Title. The Receivables Pool is owned
----------------
by the Company free and clear of any Lien (other than any
Lien arising hereunder solely as the result of any action
taken by Lender (or any assignee thereof) or by the
Administrator); upon the filing of UCC-1 financing
statements with the Secretary of State of Connecticut and
the execution of the Spread Account Agreement, Lender shall
have acquired and shall at all times thereafter continuously
maintain a valid and perfected first priority security
interest in the Receivables Pool (other than with respect to
the Spread Account, in which case such security interest
shall be in respect of the Eligible Investments (as defined
in the Spread Account Agreement) credited thereto), free and
clear of any Lien (other than any Lien arising hereunder
solely as the result of any action taken by Lender (or any
assignee thereof) or by the Administrator); and no financing
statement or other instrument similar in effect covering the
Receivables Pool or any portion thereof is on file in any
recording office except such as may be filed (i) in favor of
AnnTaylor in accordance with the Contracts, (ii) in favor of
Lender or the Administrator in accordance with this
Agreement or in connection with any Lien arising hereunder
solely as the result of any action taken by Lender (or any
assignee thereof) or by the Administrator, (iii) in favor of
the Company pursuant to the Purchase Agreement, (iv) in
favor of the Collateral Agent or (v) in favor of Bank of
America National Trust and Savings Association, as Agent,
for which partial releases have been delivered pursuant to
Section 5.01(t).
---------------
21
<PAGE>
(m) Accurate Reports. No Information Package (if
----------------
prepared by the Company or to the extent information therein
was supplied by the Company) or other information, exhibit,
financial statement, document, book, record or report
furnished or to be furnished in writing by or on behalf of
the Company to the Administrator, Lender or the Relationship
Bank in connection with this Agreement was or will be
inaccurate in any material respect (in light of the
circumstances under which such information was furnished and
taken as a whole together with all other information
previously furnished or then being furnished) as of the date
it was or will be dated or (except as otherwise disclosed to
the Administrator, Lender and the Relationship Bank at or
prior to such time) as of the date so furnished, or
contained or will contain any material misstatement of fact
or omitted or will omit to state a material fact or any fact
necessary to make the statements contained therein not
materially misleading on the date as of which such
information is dated or certified.
(n) Offices. The chief place of business and chief
-------
executive office of the Company is located at its address
specified in Schedule 6.01(n), and the offices where the
----------------
Company keeps all its books, records and documents
evidencing Pool Receivables, the related Contracts and all
agreements related to such Pool Receivables are located at
the addresses specified in Schedule 6.01(n) (or at such
----------------
other locations, notified to the Administrator in accordance
with Section 7.01(f), in jurisdictions where all action
---------------
required by Section 8.05 has been taken and completed).
------------
(o) Lock-Box Accounts. The names and addresses of all
-----------------
the Lock-Box Banks, together with the account numbers of the
lock-box accounts of the Company at such Lock-Box Banks, are
specified in Schedule 6.01(o) (or have been notified to the
----------------
Administrator and the Relationship Bank in accordance with
Section 7.04(d)).
---------------
(p) Eligible Receivables. Each Receivable included in
--------------------
the Net Pool Balance as an Eligible Receivable on the date
of any calculation of the Borrowing Base shall be an
Eligible Receivable on such date.
(q) Capitalization. The authorized capital stock of
--------------
the Company consists of one hundred (100) shares of common
stock, $1.00 par value, of which all are currently issued
and outstanding. All of such outstanding shares are validly
issued, fully paid and nonassessable and are owned
(beneficially and of record) by AnnTaylor.
22
<PAGE>
(r) Trade Names. Except as disclosed on Schedule
----------- --------
6.01(r), the Company does not use any trade name other than
-------
its actual corporate name. From and after the date that
fell five (5) years before the date hereof, the Company has
not been known by any legal name other than its corporate
name as of the date hereof, nor has it been the subject of
any merger or other corporate reorganization except as
disclosed on Schedule 6.01(r).
----------------
(s) Taxes. The Company has filed all tax returns and
-----
reports required by law to have been filed by it and has
paid all taxes and governmental charges thereby shown to be
owing, except any taxes not yet delinquent and any such
taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside
on its respective books.
(t) Compliance with Applicable Laws. The Company is
-------------------------------
in compliance in all material respects with the requirements
of all applicable laws, rules, regulations, and orders of
all governmental authorities (including, without limitation,
Regulation Z, laws, rules and regulations relating to usury,
truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy and all other consumer laws, rules and
regulations applicable to the Receivables and related
Contracts), a breach of any of which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
(u) Receivable Evidenced By Instruments. None of the
-----------------------------------
Receivables is evidenced by an instrument (other than
instruments received in connection with collection efforts,
all of which shall be delivered, duly endorsed, to the
Administrator if requested by the Administrator or the
Relationship Bank during the continuance of an Event of
Default).
SECTION 6.02. Representations and Warranties of AnnTaylor.
-------------------------------------------
AnnTaylor, as Servicer, represents and warrants as follows:
(a) Organization and Good Standing. It has been duly
------------------------------
organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its
business as such properties are presently owned and such
business is presently conducted.
(b) Due Qualification. It is duly qualified to do
-----------------
business as a foreign corporation in good standing, and has
23
<PAGE>
obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or
the conduct of its business requires such qualification,
licenses or approvals except where the failure to be in good
standing or to so qualify has not had and will not have a
Servicer Material Adverse Effect.
(c) Power and Authority; Due Authorization. It (i)
--------------------------------------
has all necessary power, authority and legal right to (A)
execute and deliver this Agreement and the other Transaction
Documents to which it is a party, and (B) carry out the
terms of the Transaction Documents, in its capacity as
Servicer, and (ii) has duly authorized by all necessary
corporate action the execution, delivery and performance of
this Agreement and the other Transaction Documents to which
it is a party in its capacity as Servicer.
(d) Binding Obligations. This Agreement constitutes,
-------------------
and each other Transaction Document to be signed by it in
its capacity as Servicer when duly executed and delivered
will constitute, its legal, valid and binding obligation
enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at
law.
(e) No Violation. The consummation of the
------------
transactions contemplated by this Agreement and the other
Transaction Documents to which AnnTaylor is a party in its
capacity as Servicer, and the fulfillment of the terms
hereof will not (i) conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under,
the certificate of incorporation or by-laws of AnnTaylor or
any indenture, loan agreement, receivables purchase
agreement, mortgage, deed of trust, or other agreement or
instrument to which AnnTaylor is a party or by which it or
any of its properties is bound, except where such conflict,
breach or default has not had and will not have a Servicer
Material Adverse Effect, (ii) result in the creation or
imposition of any Lien upon any of AnnTaylor's properties
pursuant to the terms of any such indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or
other agreement or instrument, other than this Agreement, or
(iii) violate any law or any order, rule, or regulation
applicable to AnnTaylor of any court or of any federal or
state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over
24
<PAGE>
AnnTaylor or any of its properties except where such
violation has not had and will not have a Servicer Material
Adverse Effect.
(f) No Proceedings. There are no proceedings or
--------------
investigations pending, or to AnnTaylor's knowledge
threatened, before any court, regulatory body,
administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this
Agreement or any other Transaction Document to which
AnnTaylor is a party as Servicer, (ii) seeking to prevent
the consummation of any of the transactions contemplated by
this Agreement or any other Transaction Document to which
AnnTaylor is a party as Servicer, or (iii) seeking any
determination or ruling that could reasonably be expected to
have a Servicer Material Adverse Effect.
(g) Government Approvals. No authorization or
--------------------
approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by
AnnTaylor of this Agreement or any other Transaction
Document to which it is a party in its capacity as Servicer.
(h) Financial Condition. (x) The consolidated
-------------------
balance sheets of ATSC and its consolidated Subsidiaries as
at January 30, 1993, and the related statements of income
and shareholders' equity of ATSC and its consolidated
Subsidiaries for the fiscal year then ended, certified by
Deloitte & Touche, independent certified public accountants,
copies of which have been furnished to the Administrator,
fairly present the consolidated financial condition,
business, business prospects and operations of ATSC and its
consolidated Subsidiaries as at such date and the
consolidated results of the operations of ATSC and its
consolidated Subsidiaries for the period ended on such date,
all in accordance with GAAP consistently applied; and (y)
since January 30, 1993 there has been no material adverse
change in any such condition, business, or operations.
(i) Litigation. No injunction, decree or other
----------
decision has been issued or made by any court, governmental
agency or instrumentality thereof that could reasonably be
expected to have a Servicer Material Adverse Effect, and no
written threat by any person has been made to attempt to
obtain any such decision.
(j) Accurate Reports. No Information Package (if
----------------
prepared by AnnTaylor or any of its Affiliates, (other than
the Company), as Servicer, or to the extent information
therein was supplied by AnnTaylor or any of its Affiliates
25
<PAGE>
(other than the Company), as Servicer, or other information,
exhibit, financial statement, document, book, record or
report furnished or to be furnished in writing by or on
behalf of AnnTaylor or any of its Affiliates (other than the
Company), as Servicer to the Administrator, Lender or the
Relationship Bank in connection with this Agreement was or
will be inaccurate in any material respect (in light of the
circumstances under which such information was furnished and
taken as a whole together with all other information
previously furnished or then being furnished) as of the date
it was or will be dated or (except as otherwise disclosed to
the Administrator, Lender and the Relationship Bank at or
prior to such time) as of the date so furnished, or
contained or will contain any material misstatement of fact
or omitted or will omit to state a material fact or any fact
necessary to make the statements contained therein not
materially misleading.
(k) Offices. The chief place of business and chief
-------
executive office of AnnTaylor is located at its address
specified in Schedule 6.02(k), and the offices where
----------------
AnnTaylor keeps all its books, records and documents
evidencing Pool Receivables, the related Contracts and all
agreements related to such Pool Receivables are located at
the addresses specified in Schedule 6.02(k) (or at such
----------------
other locations, notified to the Administrator in accordance
with Section 7.01(f)).
---------------
(l) Bank Accounts. The names and addresses of all
-------------
banks with accounts in which Collections received at
AnnTaylor's stores or its headquarters are deposited,
together with the account numbers of such accounts are
specified in Schedule 6.02(l) (or have been notified to the
----------------
Administrator and the Relationship Bank in accordance with
Section 7.03(d)).
---------------
(m) Servicing Programs. No further license or
------------------
approval is required for the Administrator's use of any
program used by Servicer in the servicing of the Pool
Receivables, other than those which have been obtained and
are in full force and effect.
(n) Taxes. AnnTaylor has filed all tax returns and
-----
reports required by law to have been filed by it and has
paid all taxes and governmental charges thereby shown to be
owing, except any taxes not yet delinquent and any such
taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside
on its respective books.
26
<PAGE>
(o) Compliance with Applicable Laws. AnnTaylor, as
-------------------------------
Servicer, is in compliance in all material respects with the
requirements of all applicable laws, rules, regulations, and
orders of all governmental authorities (including, without
limitation, Regulation Z, laws, rules and regulations
relating to usury, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy and all other consumer
laws, rules and regulations applicable to the Receivables
and related Contracts), a breach of any of which,
individually or in the aggregate, could reasonably be
expected to have a Servicer Material Adverse Effect.
ARTICLE VII
GENERAL COVENANTS OF THE COMPANY AND ANNTAYLOR
SECTION 7.01. Affirmative Covenants. From the date hereof
---------------------
until the Final Payout Date, the Company and AnnTaylor each
covenants, as to itself, that it will unless, in each case, the
Administrator shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
-------------------------
respects with all applicable laws, rules, regulations and
orders with respect to the Pool Receivables and related
Contracts except where such noncompliance has not had and
will not have a Material Adverse Effect, in the case of this
covenant by the Company, or Servicer Material Adverse
Effect, in the case of this covenant by AnnTaylor.
(b) Preservation of Corporate Existence. Preserve and
-----------------------------------
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises,
privileges and qualification would have a Material Adverse
Effect, in the case of this covenant by the Company, or
Servicer Material Adverse Effect, in the case of this
covenant by AnnTaylor.
(c) Audits. (i) At any time and from time to time
------
during regular business hours, upon reasonable notice and in
a manner designed not to unreasonably disrupt the normal
business operations of AnnTaylor or the Company, permit the
Administrator, the Relationship Bank or any of their agents
or representatives, (A) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in its
possession or under its control relating to the Receivables
27
<PAGE>
Pool, including, without limitation, the related Contracts
and other agreements, and (B) to visit its offices and
properties for the purpose of examining such materials
described in clause (i)(A) next above, and to discuss
-------------
matters relating to the Receivables Pool or its performance
hereunder with any of its officers or employees having
knowledge of such matters; and (ii) without limiting the
provisions of clause (i) next above, from time to time on
----------
request of Administrator or the Relationship Bank, permit
certified public accountants or other auditors acceptable to
the Administrator to conduct, at AnnTaylor's or the
Company's expense, as the case may be, a review of its books
and records; provided, however, that, unless an Event of
-------- -------
Default has occurred and is continuing, AnnTaylor and the
Company shall only be obligated to pay for (i) the out-of-
pocket expenses of the internal auditors of the
Administrator or the Relationship Bank incurred with respect
to such reviews done not more frequently than three times
per year (and such expenses shall be subject to Section
-------
14.05(a)) and (ii) in addition to the amounts set forth in
--------
clause (i), the allocated cost of the internal auditors of
----------
the Administrator or the Relationship Bank with respect to
such reviews done not more frequently than once a year.
(d) Keeping of Records and Books of Account. Maintain
---------------------------------------
and implement administrative and operating procedures
(including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and main-
tain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all
Pool Receivables (including, without limitation, records
adequate to permit the daily identification of each new Pool
Receivable and all Collections of and adjustments to each
existing Pool Receivable).
(e) Performance and Compliance with Receivables and
-----------------------------------------------
Contracts. At its expense timely and fully perform and
---------
comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts
related to the Pool Receivables and all other agreements
related to such Pool Receivables.
(f) Location of Records. Keep its chief place of
-------------------
business and chief executive office, and the offices where
it keeps its records concerning the Pool Receivables, all
related Contracts and all other agreements related to such
Pool Receivables (and all original documents relating
thereto), at its address(es) referred to in Section 6.01(n)
---------------
or 6.02(k), as the case may be, or, upon 30 days' prior
-------
written notice to the Administrator, at such other locations
28
<PAGE>
in jurisdictions where all action required by Section 8.05
------------
shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all
------------------------------
material respects with the Credit and Collection Policy in
regard to each Pool Receivable and the related Contract.
(h) Collections. Instruct all Obligors to cause all
-----------
Collections of Pool Receivables to be deposited directly
with a Lock-Box Bank.
(i) Funding Account. Use its best efforts to deliver
---------------
to the Administrator within 30 days of the initial Loan
hereunder an agreement executed by it and the bank where the
Funding Account (as defined in the Purchase Agreement) is
located substantially in the form of a Lock-Box Agreement or
in such other form as is reasonably acceptable to the
parties hereto.
SECTION 7.02 Separate Corporate Existence. The Company
----------------------------
hereby acknowledges that Lender, the Liquidity Banks and the
Administrator, are entering into the transactions contemplated by
this Agreement and the other Transaction Documents in reliance
upon the Company's identity as a legal entity separate from
AnnTaylor. Therefore, from and after the date hereof, the
Company shall take all steps specifically required by this
Agreement or by the Lender or Administrator to continue the
Company's identity as a separate legal entity and to make it
apparent to third Persons that the Company is an entity with
assets and liabilities distinct from those of Servicer, AnnTaylor
and any other Person, and is not a division of Servicer,
AnnTaylor or any other Person. Without limiting the generality
of the foregoing and in addition to and consistent with the other
covenants set forth herein, the Company shall take such actions
as shall be required in order that:
(a) The Company will be a limited purpose corporation
whose primary activities are restricted in its certificate
of incorporation to purchasing or otherwise acquiring from
AnnTaylor, owning, holding, granting security interests, or
selling interests, in Receivables, Contracts, Related
Security and Collections from AnnTaylor, entering into
agreements for the servicing and financing of the
Receivables Pool, entering into interest rate agreements,
spread account agreements and similar documents and
conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) Not less than one member of the Company's Board of
Directors (the "Independent Director") shall be an
--------------------
individual who is not a direct, indirect or beneficial
29
<PAGE>
stockholder, officer, director, employee, affiliate,
associate, or supplier of the Company or any of its
Affiliates. The certificate of incorporation of the Company
shall provide that (i) the Company's Board of Directors
shall not approve, or take any other action to cause the
filing of, a voluntary bankruptcy petition with respect to
the Company unless the Independent Director shall approve
the taking of such action in writing prior to the taking of
such action and (ii) such provision cannot be amended
without the prior written consent of the Independent
Director;
(c) The Independent Director shall not at any time
serve as a trustee in bankruptcy for the Company, AnnTaylor
or any Affiliate thereof;
(d) Any employee, consultant or agent of the Company
will be compensated from the Company's funds for services
provided to the Company. The Company will engage no agents
other than its attorneys, auditors and other professionals,
and a servicer for the Receivables Pool, which servicer will
be fully compensated for its services to the Company by
payment of the Servicer's Fee;
(e) The Company will contract with Servicer to perform
for the Company all operations required on a daily basis to
service the Receivables Pool. The Company will pay Servicer
the Servicer's Fee pursuant hereto. The Company will not
incur any material indirect or overhead expenses for items
shared between the Company and AnnTaylor (or any other
Affiliate thereof) which are not reflected in the Servicer's
Fee. To the extent, if any, that the Company and AnnTaylor
(or any other Affiliate thereof) share items of expenses not
reflected in the Servicer's Fee, such as legal, auditing and
other professional services, such expenses will be allocated
to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of
services rendered, it being understood that AnnTaylor shall
pay all expenses relating to the preparation, negotiation,
execution and delivery of the Transaction Documents,
including, without limitation, legal, agency and other fees;
(f) The Company's operating expenses will not be paid
by AnnTaylor or any other Affiliate thereof;
(g) The Company will have its own separate post office
box and stationery;
30
<PAGE>
(h) The Company's books and records will be maintained
separately from those of AnnTaylor and any other Affiliate
thereof;
(i) All financial statements of AnnTaylor or any
Affiliate thereof that are consolidated to include the
Company will contain detailed notes clearly stating that (A)
all of the Company's assets are owned by the Company, and
(B) the Company is a separate corporate entity with
creditors who have received security interests in the
Company's assets;
(j) The Company's assets will be maintained in a
manner that facilitates their identification and segregation
from those of AnnTaylor or any Affiliate thereof;
(k) The Company will strictly observe corporate
formalities in its dealings with AnnTaylor or any Affiliate
thereof, and funds or other assets of the Company will not
be commingled with those of AnnTaylor or any Affiliate
thereof. The Company shall not maintain joint bank accounts
or other depository accounts to which AnnTaylor or any
Affiliate thereof (other than AnnTaylor in its capacity as
Servicer) has independent access; and
(l) The Company will maintain arm's-length
relationships with AnnTaylor (and any Affiliate thereof).
Any Person that renders or otherwise furnishes services to
the Company will be compensated by the Company at market
rates for such services it renders or otherwise furnishes to
the Company. Except as contemplated in the Transaction
Documents neither the Company nor AnnTaylor will be or will
hold itself out to be responsible for the debts of the other
or the decisions or actions respecting the daily business
and affairs of the other.
SECTION 7.03. Reporting Requirements. From the date hereof
----------------------
until the Final Payout Date, the Company and AnnTaylor each
covenants as to itself that it will, unless the Administrator and
the Relationship Bank shall otherwise consent in writing, furnish
to the Administrator and the Relationship Bank the items set
forth in paragraphs (a), (b), (g), (h), (i), (j), (k) and (m) in
-------------- --- --- --- --- --- --- ---
the case of the Company and the items set forth in paragraphs
----------
(c), (d), (e), (f), (g), (h), (i), (k), (l) and (m) in the case
- --- --- --- --- --- --- --- --- --- ---
of AnnTaylor:
(a) Monthly Financial Statements - the Company. As
------------------------------------------
soon as available and in any event within 45 days after the
end of each month copies of the financial statements of the
Company prepared in conformity with GAAP (but subject to
31
<PAGE>
year end audit adjustments), duly certified by a Responsible
Officer of the Company;
(b) Annual Financial Statements - the Company. As
-----------------------------------------
soon as available and in any event within 90 days after the
end of each fiscal year of the Company, copies of the
financial statements of the Company prepared in conformity
with GAAP, including a footnote containing the aggregate
Unpaid Balance of the Pool Receivables, the Unpaid Balance
of the Delinquent Receivables and of the Defaulted
Receivables, duly certified by independent certified public
accountants of recognized standing selected by the Company;
(c) Quarterly Financial Statements - ATSC. As soon as
-------------------------------------
available and in any event within 45 days after the end of
each fiscal quarter of ATSC, copies of the financial
statements of ATSC and its Subsidiaries prepared on a
consolidated basis in conformity with GAAP, duly certified
by a Responsible Officer of ATSC, together with a
certificate from such officer containing a computation of,
and showing compliance with, the financial restrictions
contained in Sections 7.05(d) and (e);
---------------- ---
(d) Annual Financial Statements - ATSC. As soon as
----------------------------------
available and in any event within 90 days after the end of
each fiscal year of ATSC, copies of the financial statements
of ATSC and its Subsidiaries prepared on a consolidated
basis in conformity with GAAP, duly certified by independent
certified public accountants of recognized standing selected
by ATSC, together with a certificate from such accountants
containing a computation of, and showing compliance with,
the financial restrictions contained in Sections 7.05(d) and
----------------
(e);
---
(e) Financial Statements - AnnTaylor. As soon as
--------------------------------
practicable after requested by the Administrator or the
Relationship Bank, copies of the financial statements of
AnnTaylor and its Subsidiaries prepared on a consolidated
basis in conformity with GAAP, duly certified by a
Responsible Officer of AnnTaylor;
(f) Reports to Holders and Exchanges. In addition to
--------------------------------
the reports required by subsections (a), (b), (c), (d) and
--------------- --- --- ---
(e) next above, promptly upon the Administrator's or
---
Relationship Bank's request, copies of any reports which
ATSC sends to any of its securityholders, and any reports or
registration statements that ATSC files with the Securities
and Exchange Commission or any national securities exchange
other than registration statements relating to employee
benefit plans and to registrations of securities for selling
securities;
32
<PAGE>
(g) ERISA. Promptly after the filing or receiving
-----
thereof, copies of all reports and notices with respect to
any Reportable Event defined in Article IV of ERISA as to
which the 30-day notice requirement has not been waived by
the Pension Benefit Guaranty Corporation which ATSC, the
Company or AnnTaylor, as the case may be, files under ERISA
with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or
which the Company or AnnTaylor, as the case may be, receives
from the Pension Benefit Guaranty Corporation;
(h) Events of Default. As soon as possible and in any
-----------------
event within five days after a Responsible Officer of the
Company or AnnTaylor, as the case may be, has knowledge of
the occurrence of each Event of Default and each Unmatured
Event of Default, a written statement of a Responsible
Officer of the Company or AnnTaylor, as the case may be,
setting forth details of such event and the action that the
Company proposes to take with respect thereto;
(i) Litigation. As soon as possible and in any event
----------
within five Business Days of the Company's or AnnTaylor's,
as the case may be, knowledge thereof, notice of (i) any
litigation, investigation or proceeding which may exist at
any time could reasonably be expected to have a Material
Adverse Effect and (ii) any material adverse development in
previously disclosed litigation;
(j) Management Report. As soon as available, a copy
-----------------
of the annual management report of ATSC prepared in
connection with the annual audit referred to in Section
-------
7.03(d).
-------
(k) Change in Credit and Collection Policy. Prior to
--------------------------------------
its effective date, notice of any change in the Credit and
Collection Policy;
(l) Bank Accounts. On or prior to each January 27th
-------------
and, during the continuance of an Event of Default, as often
as requested by the Administrator or the Relationship Bank,
an updated and corrected Schedule 6.02(l); and
----------------
(m) Other. Promptly, from time to time, such other
-----
information, documents, records or reports respecting the
Pool Receivables or the condition or operations, financial
or otherwise, of the Company or AnnTaylor, as the case may
be, as the Administrator or the Relationship Bank may from
time to time reasonably request in order to protect the
interests of the Administrator or Lender under or as
contemplated by this Agreement.
33
<PAGE>
SECTION 7.04. Negative Covenants of the Company. From the
---------------------------------
date hereof until the Final Payout Date, the Company will not
without the prior written consent of the Administrator:
(a) Sales, Liens, Etc. Except as otherwise provided
------------------
herein or in the Purchase Agreement, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Lien upon or with respect to,
the Receivables Pool, or any interest therein, or any lock-
box account to which any Collections of any Pool Receivable
are sent, or any right to receive income or proceeds from or
in respect of any of the foregoing.
(b) Extension or Amendment of Receivables. Except in
-------------------------------------
accordance with the Credit and Collection Policy as
permitted in Section 8.02, extend, amend or otherwise modify
------------
the terms of any Pool Receivable, or amend, modify or waive
any term or condition of any Contract related thereto.
(c) Change in Business or Credit and Collection
-------------------------------------------
Policy. Make any change in the character of its business or
------
in the Credit and Collection Policy, which change would, in
either case, adversely affect the collectability of a
significant portion of the Pool Receivables or otherwise
adversely affect the first priority, perfected security
interest or remedies of Lender under this Agreement or any
other Transaction Document or, without limiting the
generality of the foregoing, change the method of
calculating aging, which method is described on Schedule
--------
7.03(c).
-------
(d) Change in Payment Instructions to Obligors. Add
------------------------------------------
or terminate any bank as a Lock-Box Bank from those listed
in Schedule 6.01(o) or make any change in its instructions
----------------
to Obligors regarding payments to be made to the Company or
Servicer or payments to be made to any Lock-Box Bank, unless
the Administrator and the Relationship Bank shall have
received notice of such addition, termination or change and
duly executed copies of Lock-Box Agreements with each new
Lock-Box Bank.
(e) Mergers, Acquisitions, Sales, etc. Be a party to
---------------------------------
any merger or consolidation, or purchase or otherwise
acquire all or substantially all of the assets or any stock
of any class of, or any partnership or joint venture
interest in, any other Person, or sell, transfer, convey or
lease all or any substantial part of its assets (other than
pursuant hereto and the Purchase Agreement), or sell or
assign with or without recourse any Receivables or any
interest therein (other than pursuant hereto or the Purchase
Agreement).
34
<PAGE>
(f) Restricted Payments. Purchase or redeem any
-------------------
shares of the capital stock of the Company, declare or pay
any dividends thereon (other than stock dividends), make any
distribution to stockholders or set aside any funds for any
such purpose, or make any payment in cash with respect to
the Company Note (as defined in the Purchase Agreement)
issued pursuant to the Purchase Agreement, unless after
giving effect thereto, the Company's Net Worth is at least
$850,000.
(g) Deposits to Special Accounts. Deposit or
----------------------------
otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds
other than Collections of Pool Receivables.
(h) Incurrence of Indebtedness. Incur or permit to
--------------------------
exist any indebtedness or liability on account of deposits
or advances or for borrowed money or for the deferred
purchase price of any property or services, except (i)
indebtedness not exceeding in the aggregate $4,995 at any
one time outstanding, (ii) the Company's obligations
hereunder or under the other Transaction Documents and (iii)
the Company's obligations under a reimbursement agreement
related to the Customer Letter of Credit, provided that such
--------
obligations are subordinate to the Company's obligations
hereunder and under the Note and the parties thereto have
agreed to non-petition language with respect to the Company
reasonably satisfactory to the Administrator.
(i) Purchase Agreement. Amend or waive any provision
------------------
of the Purchase Agreement, or terminate the Purchase
Agreement.
(j) Certificate of Incorporation. Amend, repeal or
----------------------------
waive Articles III, VII, X, XI, XII or XIV of its
certificate of incorporation.
SECTION 7.05 Negative Covenants of AnnTaylor. From the
-------------------------------
date hereof until the Final Payout Date, AnnTaylor will not,
without the prior written consent of the Administrator and the
Relationship Bank:
(a) Conduct of Business. Engage in any business other
-------------------
than the business engaged in by AnnTaylor on the date hereof
and any business activities substantially similar or related
thereto.
(b) Mergers, Acquisitions, etc. Be a party to any
---------------------------
merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any
class of, or any partnership or joint venture interest in,
35
<PAGE>
any other Person, other than a merger of a Subsidiary into
AnnTaylor or, except in the ordinary course of its business,
sell, transfer, convey or lease all or any substantial part
of its assets, or sell or assign with or without recourse
any Receivables or any interest therein (other than (i)
pursuant to the Purchase Agreement and (ii) to a Restricted
Subsidiary relating to factory store outlets, provided that
--------
the assets sold, transferred, conveyed or leased do not, in
the aggregate, exceed 15% of Net Worth).
(c) Restricted Payments. Violate the provisions of
-------------------
Section 8.05 of the AnnTaylor Credit Agreement as in effect
------------
from time to time or, if the AnnTaylor Credit Agreement is
terminated or cancelled or it expires, as in effect
immediately prior to such termination, cancellation or
expiration (and such provisions, and the definitions related
thereto, are herein incorporated by reference as if fully
set forth herein).
(d) Net Worth. Allow Net Worth to be less than
---------
$250,000,000.
(e) Fixed Charge Coverage Ratio. Allow the Fixed
---------------------------
Charge Coverage Ratio to be less than 1.4 to 1.
(f) Purchase Agreement. Amend or waive any provision
------------------
of the Purchase Agreement, or terminate the Purchase
Agreement.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer.
-----------------------
(a) AnnTaylor as Initial Servicer. The servicing,
-----------------------------
administering and collection of the Pool Receivables shall be
conducted by the Person designated as Servicer hereunder
("Servicer") from time to time in accordance with this Section
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8.01. Until the Administrator or the Relationship Bank gives to
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AnnTaylor a Successor Notice (as defined in Section 8.01(b)),
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AnnTaylor is hereby designated as, and hereby agrees to perform
the duties and obligations of, Servicer pursuant to the terms
hereof.
(b) Successor Notice; Servicer Transfer Events. Upon
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AnnTaylor's receipt of a notice from the Administrator or
Relationship Bank of the Administrator's or Relationship Bank's
designation of a new Servicer (a "Successor Notice"), AnnTaylor
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agrees that it will terminate its activities as Servicer
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hereunder in a manner that the Administrator believes will
facilitate the transition of the performance of such activities
to the new Servicer, and the Administrator (or its designee)
shall assume each and all of AnnTaylor's obligations to service
and administer such Receivables, on the terms and subject to the
conditions herein set forth, and AnnTaylor shall use its best
efforts to assist the Administrator (or its designee) in assuming
such obligations, including, without limitation, by allowing the
Administrator (or its designee) access to all computer software
and programs used by AnnTaylor to service the Pool Receivables.
The Administrator and Relationship Bank agree not to give
AnnTaylor a Successor Notice until after the occurrence and only
during the continuance of any Event of Default (any such Event of
Default being herein called a "Servicer Transfer Event"), in
-----------------------
which case such Successor Notice may be given at any time in the
Administrator's or the Relationship Bank's discretion. If
AnnTaylor disputes the occurrence of a Servicer Transfer Event,
AnnTaylor may take appropriate action to resolve such dispute;
provided that AnnTaylor must terminate its activities hereunder
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as Servicer and allow the newly designated Servicer to perform
such activities on the date provided by the Administrator or
Relationship Bank as described above, notwithstanding the
commencement or continuation of any proceeding to resolve the
aforementioned dispute.
(c) Subcontracts. Servicer may, with the prior consent of
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the Administrator, subcontract with any other Person for
servicing, administering or collecting the Pool Receivables,
provided that Servicer shall remain liable for the performance of
the duties and obligations of Servicer pursuant to the terms
hereof.
SECTION 8.02. Duties of Servicer.
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(a) Appointment; Duties in General. Each of the Company,
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Lender and the Administrator hereby appoints as its agent
Servicer, as from time to time designated pursuant to Section
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8.01, to enforce its rights and interests in and under the Pool
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Receivables, the Related Security and the related Contracts.
Servicer shall take or cause to be taken all such actions as may
be necessary or advisable to collect each Pool Receivable from
time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy.
(b) Allocation of Collections; Segregation. Servicer shall
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set aside for the account of the Lender the Collections of Pool
Receivables as set forth in Section 3.01, but shall not be
------------
required (unless otherwise requested by the Administrator or the
Relationship Bank after the occurrence and during the continuance
of an Event of Default) to segregate the funds constituting such
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portions of such Collections prior to the remittance thereof in
accordance with such Section. If instructed by the Administrator
or the Relationship Bank after the occurrence and during the
continuance of an Event of Default, Servicer shall segregate and
deposit with a bank designated by the Relationship Bank, with the
approval of the Administrator, the Collections of Pool
Receivables, on the second Business Day following receipt by
Servicer of such Collections in immediately available funds.
Such Collections shall be applied in accordance with Section
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3.01.
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(c) Modification of Receivables. So long as AnnTaylor is
---------------------------
the Servicer, Servicer, may, (A) in accordance with the Credit
and Collection Policy, (i) extend the maturity of, or defer
interest payments or finance charges with respect to, any Pool
Receivable as Servicer may determine to be appropriate to
maximize Collections thereof, and (ii) adjust the Unpaid Balance
of any Receivable to reflect the reductions or cancellations
described in the first sentence of Section 3.02(a) or (B) as a
---------------
result of a natural disaster, extend the maturity or defer
interest payments or finance charges with respect to any Pool
Receivable of an Obligor that is located in the area affected by
such natural disaster as Servicer may determine; provided that
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the aggregate Unpaid Balance of such extended or deferred Pool
Receivables does not exceed 3% of Outstanding Principal.
(d) Documents and Records. The Company shall deliver to
---------------------
Servicer, and Servicer shall hold for the sole benefit of the
Company and Lender in accordance with their respective interests,
all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to
Pool Receivables.
(e) Certain Duties to the Company. Servicer, if other than
-----------------------------
AnnTaylor, shall, as soon as practicable upon demand, deliver to
the Company copies of all documents, instruments and records in
its possession that evidence or relate to Pool Receivables.
(f) Termination. Servicer's authorization under this
-----------
Agreement shall terminate upon the Final Payout Date.
(g) Power of Attorney. The Company hereby grants to
-----------------
Servicer an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to take in the name of
the Company all steps which are necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other
right of any kind held or transmitted by the Company or
transmitted or received by Lender (whether or not from the
Company) in connection with any Pool Receivable.
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(h) Information. Servicer shall take such steps as shall
-----------
be necessary to enable it to provide complete and accurate
information, within five (or, if an Event of Default is
continuing, one) Business Day(s) of request, to the Administrator
and the Relationship Bank, with respect to the daily amounts and
corresponding locations of those Collections received by the
Company that have not been sent directly to the Lock-Box Banks.
SECTION 8.03. Rights of the Administrator.
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(a) Notice to Obligors. At any time after the occurrence
------------------
and during the continuance of an Event of Default the
Administrator may notify the Obligors of Pool Receivables, or any
of them, of the security interest held by Lender.
(b) Notice to Lock-Box Banks. At any time following the
------------------------
occurrence and during the continuance of a Event of Default the
Administrator is hereby authorized to give notice to the Lock-Box
Banks, as provided in the Lock-Box Agreements, of the transfer to
the Administrator of dominion and control over the lock-boxes and
related accounts to which the Obligors of Pool Receivables make
payments. The Company hereby transfers to the Administrator,
effective when the Administrator shall give notice to the Lock-
Box Banks as provided in the Lock-Box Agreements, the exclusive
dominion and control over such lock-boxes and accounts, and shall
take any further action that the Administrator may reasonably
request to effect such transfer. To the extent that the Lock-Box
Banks are transferring Collections directly to the Administrator
or pursuant to instructions from the Administrator, neither the
Company nor the Servicer shall have any obligation to pay over
such Collections pursuant to Section 3.01(b). The Administrator
---------------
hereby agrees that upon the request of the Company (i) at and
after such time that this Agreement is no longer in effect, it
will provide written notice to the Lock-Box Banks and any bank
referred to in Section 7.01(i) to such effect and (ii) unless an
---------------
Event of Default is then continuing, it will within 1 Business
Day of such request by the Company deliver instructions to any
Lock-Box Bank whose Lock-Box Agreement has been cancelled or
terminated directing that mail addressed to the lock-box account,
administered by such Lock-Box Bank be forwarded to another Lock-
Box Bank as specified in such request by the Company.
(c) Rights on Servicer Transfer Event. At any time
---------------------------------
following a Servicer Transfer Event:
(i) The Administrator may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable
under any Pool Receivable directly to the Collateral Agent.
(ii) AnnTaylor shall, at the Administrator's or
Relationship Bank's request and at AnnTaylor's expense, give
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<PAGE>
notice of the Lender's security interest to each said
Obligor and direct that payments be made directly to the
Collateral Agent.
(iii) AnnTaylor shall, at the Administrator's or
Relationship Bank's request, (A) assemble all of the
documents, instruments and other records (including, without
limitation, computer programs, tapes and disks) which
evidence the Pool Receivables, and the related Contracts and
Related Security, or which are otherwise necessary or
desirable to collect such Pool Receivables, and make the
same available to the Administrator at a place selected by
the Administrator or the Relationship Bank, and (B)
segregate all cash, checks and other instruments received by
it from time to time constituting Collections of Pool
Receivables in a manner acceptable to the Administrator and
promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments
of transfer, to the Collateral Agent.
(iv) Each of AnnTaylor, the Company and Lender hereby
authorizes the Administrator, and grants to the
Administrator an irrevocable power of attorney, to take any
and all steps in the Company's or AnnTaylor's name and on
behalf of the Company, AnnTaylor and Lender which are
necessary or desirable, in the determination of the
Administrator, to collect all amounts due under any and all
Pool Receivables, including, without limitation, endorsing
the Company's or AnnTaylor's name on checks and other
instruments representing Collections and enforcing such Pool
Receivables and the related Contracts; provided that the
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Administrator shall not exercise its rights under such power
of attorney unless a Servicer Transfer Event shall have
occurred and be continuing.
SECTION 8.04. Responsibilities of the Company. Anything
-------------------------------
herein to the contrary notwithstanding:
(a) C