As filed with the Securities and Exchange Commission on November 23, 1999
Registration No. 333-86955
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 1
To
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ANNTAYLOR STORES CORPORATION DELAWARE 13-3499319
ANNTAYLOR, INC. DELAWARE 51-0297083
(Exact name of registrant as (State or other (I.R.S. employer
specified in its charter) jurisdiction of identification no.)
incorporation or
organization)
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142 WEST 57TH STREET, NEW YORK, NEW YORK 10019,
(212) 541-3300, FAX: (212) 541-3379
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
JOCELYN BARANDIARAN, ESQ.
ANNTAYLOR STORES CORPORATION
142 WEST 57TH STREET, NEW YORK, NEW YORK 10019,
(212) 541-3300, FAX: (212) 541-3379
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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COPIES TO:
VINCENT J. PISANO, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE, NEW YORK, NY 10022, (212) 735-3000, FAX: (212) 735-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed Maximum
Maximum Aggregate Amount of
Title of Shares Amount to Be Offering Price Offering Registration
to Be Registered Registered per Share Price(1) Fee
- ------------------------------------------------------------------------------
Convertible
Subordinated
Debentures due
2019 $199,072,000(1) $556.97(2)(3) $110,876,945(2)(3) $30,824
Common Stock of
AnnTaylor Stores
Corporation,
$.0068 par value 2,404,391(4) -- -- --(5)
Guarantee(6) -- -- -- --
- ------------------------------------------------------------------------------
Total
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(1) Represents the aggregate principal amount at maturity of the
debentures that were originally issued by the Registrant on June 18,
1999.
(2) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
(3) Exclusive of accrued interest and distributions, if any.
(4) Represents the number of shares of common stock that are currently
issuable upon conversion of the debentures. The number of shares of
common stock that may be issued upon conversion of the debentures in
the future is indeterminate, and the registrant is also registering this
indeterminate amount pursuant to Rule 416 of the Securities Act.
(5) No separate consideration will be received for common stock issuable
upon conversion of the debentures and, therefore, no registration fee
is required pursuant to Rule 457(i).
(6) Includes the obligations of AnnTaylor, Inc. under the Subsidiary
Guarantee. No separate consideration will be received for the
Subsidiary Guarantee.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED NOVEMBER 23, 1999
PROSPECTUS
ANNTAYLOR STORES CORPORATION
$199,072,000 PRINCIPAL AMOUNT AT MATURITY
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2019
GUARANTEED ON A SUBORDINATED BASIS BY ANNTAYLOR, INC.
2,404,391 SHARES OF ANNTAYLOR STORES CORPORATION COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES
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Our common stock currently trades on the New York Stock Exchange.
Last reported sale price on November 22, 1999: $40.00 per share. Trading
Symbol: ANN
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THE OFFERING
Under this prospectus, the selling securityholders named in this
prospectus or in prospectus supplements may offer and sell the debentures
or the shares of our common stock into which the debentures may be
converted. The debentures were initially issued at a price of $552.56 per
$1,000 principal amount at maturity. Interest of 0.55% per year on the
principal amount at maturity is payable semiannually beginning December 18,
1999. The debentures mature June 18, 2019. Each $1,000 principal amount
debenture is initially convertible into 12.078 shares of our common stock.
We may redeem our debentures on or after June 18, 2004 at the redemption
prices listed in this prospectus. Holders of the debentures also have an
option to require us to purchase the debentures for cash or shares of our
common stock, at our election, on specified purchase dates or upon a change
of control of AnnTaylor Stores Corporation. The debentures are general
unsecured obligations and are subordinated in right of repayment to all of
our existing and future senior debt.
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INVESTING IN OUR CONVERTIBLE SUBORDINATED DEBENTURES OR OUR COMMON
STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER THE "RISK
FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November , 1999
------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THE SELLING SECURITYHOLDERS MAY NOT SELL THEIR SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY...........................................................3
ANNTAYLOR STORES.............................................................3
THE OFFERING.................................................................7
RISK FACTORS.................................................................9
RATIO OF EARNINGS TO FIXED CHARGES..........................................12
USE OF PROCEEDS.............................................................12
DIVIDEND POLICY.............................................................12
DESCRIPTION OF DEBENTURES...................................................13
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.............................31
SELLING SECURITYHOLDERS.....................................................33
PLAN OF DISTRIBUTION........................................................36
LEGAL MATTERS...............................................................39
EXPERTS.....................................................................39
STATEMENT REGARDING FORWARD LOOKING DISCLOSURES.............................39
WHERE YOU CAN FIND MORE INFORMATION.........................................39
PROSPECTUS SUMMARY
The following summary contains basic information about us contained
elsewhere in this prospectus. This summary may not contain all the
information you should consider before buying securities in this offering.
You should read the entire prospectus carefully. Unless the context
otherwise requires, the terms "we," "our," "us" and "the company" refer to
AnnTaylor Stores Corporation, a Delaware corporation. The term "Ann Taylor"
as used in this prospectus refers to AnnTaylor, Inc., a Delaware
corporation.
ANNTAYLOR STORES CORPORATION
GENERAL
We, through our wholly owned subsidiary AnnTaylor, Inc., are a
leading national specialty retailer of better quality women's apparel,
shoes and accessories sold primarily under the Ann Taylor brand name. We
believe that "Ann Taylor" is a highly recognized brand that defines a
distinct fashion point of view. Ann Taylor merchandise represents classic
styles, updated to reflect current fashion trends. Ann Taylor stores offer
a full range of career and casual separates, weekend wear, dresses, tops,
accessories and shoes, coordinated as part of a total wardrobing strategy.
This total wardrobing strategy is reinforced by an emphasis on customer
service. Ann Taylor sales associates are trained to assist customers in
merchandise selection and wardrobe coordination. This helps our customers
achieve the "Ann Taylor look" while reflecting the customers' personal
styles.
As of October 30, 1999, we operated 402 stores in 42 states, the
District of Columbia and Puerto Rico, under the names Ann Taylor, Ann
Taylor Loft and Ann Taylor Factory Store. The 318 stores operated under the
Ann Taylor name represent our core merchandise line. We believe that the
customer base for Ann Taylor stores consists primarily of relatively
affluent, fashion-conscious women from the ages of 25 to 55. We also
believe that the majority of our customers are working women with limited
time to shop, who are attracted to Ann Taylor by our focused merchandising
and total wardrobing strategies. Ann Taylor also offers them personalized
customer service, efficient store layouts and continual flow of new
merchandise.
We operated 73 Ann Taylor Loft stores as of October 30, 1999. Ann
Taylor Loft is a separate moderate-price store for women who appreciate the
Ann Taylor style but who have a more relaxed lifestyle. Merchandise is
designed uniquely for these stores and is sold under the Ann Taylor Loft
label. The first 30 Ann Taylor Loft stores were located in factory outlet
centers, including some former Ann Taylor Factory Stores that were
converted to Loft stores in 1996. In 1998, we opened the first 16 Ann
Taylor Loft stores outside the factory outlet center environment. These
stores were located primarily in regional malls and strip shopping centers
focused on the moderate-price consumer. Management believes that Ann Taylor
Loft represents a significant opportunity to extend the Ann Taylor brand to
the moderate-price women's apparel market.
RECENT RESULTS AND OTHER DEVELOPMENTS
On November 16, 1999, we announced that we earned net income for the
third fiscal quarter ended October 30, 1999 of $21,448,000, or $0.65 per
share on a diluted basis (on an average of 34.1 million shares
outstanding), compared to net income of $14,074,000, or $0.50 per share on
a diluted basis (on an average of 31.0 million shares outstanding), for the
third fiscal quarter of 1998. Our net sales for the third quarter of 1999
totaled $272,289,000, compared to net sales of $227,535,000 for the third
quarter of 1998, an increase of 19.7%, and our comparable store sales for
the third quarter of 1999 increased 8.1% compared to the third quarter of
1998.
During the third quarter of fiscal 1999, we opened 6 new Ann Taylor
stores and 11 new Ann Taylor Loft stores and completed the expansion of 5
Ann Taylor stores, bringing the total number of our stores to 402.
Merchandise inventories were $165,334,000 at October 30, 1999,
compared to $148,526,000 at October 31, 1998. Total store square footage
increased to 2,255,000 square feet at October 30, 1999, from 2,002,000
square feet at October 31, 1998. On a per square foot basis, merchandise
inventories at the end of the third quarter of 1999 were unchanged compared
to the prior year. This comparison excludes inventories attributable to our
sourcing division, which principally constitute merchandise in transit from
the manufacturers to our distribution center.
During the third quarter of fiscal 1999, we repurchased a total of
700,000 shares of our Common Stock for an aggregate purchase price of $26.8
million, under the $40 million securities repurchase program announced by
the Company in September 1999.
The following tables set forth our unaudited consolidated operating
results for the fiscal quarters ended October 30, 1999 and October 31,
1998, and our consolidated balance sheet as of October 30, 1999:
STATEMENT OF OPERATIONS
QUARTERS ENDED
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OCT. 30, OCT. 31,
1999 1998
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(unaudited)
(in thousands except
per share amounts)
Net sales........................................ $ 272,289 $ 227,535
Cost of sales.................................... 122,414 103,117
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Gross profit..................................... 149,875 124,418
Selling, general and administrative expenses..... 108,122 91,571
Amortization of goodwill......................... 2,760 2,760
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Operating income................................. 38,993 30,087
Interest expense................................. 866 4,718
Other expense, net............................... 541 73
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Income before income taxes....................... 37,586 25,296
Income tax provision............................. 16,138 11,222
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Net income.................................... $ 21,448 $ 14,074
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Basic earnings per share...................... $ 0.68 $ 0.55
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Weighted average shares outstanding.............. 31,408 25,671
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Diluted earnings per share.................... $ 0.65 $ 0.50
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Weighting average shares outstanding,
assuming dilution............................. 34,082 31,034
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Number of stores open at beginning of period..... 387 342
Number of stores opened during period............ 17 17
Number of stores expanded during period*......... 5 3
Number of stores closed during period............ 2 --
Number of stores open at end of period........... 402 359
Total store square footage at end of period...... 2,255,000 2,002,000
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* Expanded stores are excluded from comparable store sales for the first
year following expansion.
BALANCE SHEET
OCTOBER 30, 1999
(unaudited)
(in thousands)
ASSETS
Current assets
Cash and cash equivalents...................... $ 50,467
Accounts receivable, net....................... 77,244
Merchandise inventories........................ 165,334
Prepaid expenses and other current assets...... 21,873
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Total current assets..................... 314,918
Property and equipment, net.......................... 171,440
Goodwill, net........................................ 311,419
Deferred financing costs, net........................ 5,661
Other assets......................................... 3,568
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Total assets............................. $ 807,006
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................... $ 57,872
Accrued expenses............................... 59,398
Current portion of long-term debt.............. 1,282
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Total current liabilities................ 118,552
Long-term debt....................................... 114,072
Other liabilities.................................... 13,341
Commitments and contingencies
Stockholders' equity
Common stock, $.0068 par value; 120,000,000
shares authorized; 31,554,120 shares
issued...................................... 214
Additional paid-in capital..................... 469,276
Retained earnings.............................. 121,813
Deferred compensation on restricted stock...... (3,057)
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588,246
Less treasury stock, 715,948 shares,
at cost..................................... (27,205)
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Total stockholders' equity............... 561,041
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Total liabilities and stockholders'
equity................................ $ 807,006
===============
THE OFFERING
Amount offered.......... $199,072,000 aggregate principal amount at maturity
Original issue price.... $552.56 per $1,000 principal amount at maturity
Maturity date........... June 18, 2019
Cash interest........... 0.55% per year on the principal amount at
maturity, payable semiannually
Yield to maturity of
debentures.............. 3.75% per year
Subsidiary Guarantee.... Ann Taylor, our wholly owned operating subsidiary,
fully and unconditionally guarantees the
debentures offered in this prospectus. This
subsidiary guarantee is subordinated in right of
payment to the prior payment in full of all of
the existing and future guarantor senior
indebtedness of Ann Taylor. The debentures and
the subsidiary guarantee are also effectively
subordinated to all existing and future
liabilities of our subsidiaries other than Ann
Taylor.
Conversion rights....... Each debenture holder may convert each $1,000
principal amount at maturity of their debenture
into 12.078 shares of our common stock at any
time prior to maturity. The conversion rate may
be adjusted in designated circumstances but will
not be adjusted for original issue discount.
Upon conversion, you will not receive any cash
payment representing accrued original issue
discount or accrued unpaid stated interest.
Instead, the accrued original issue discount and
accrued unpaid stated interest will be deemed
paid by the shares of common stock received by
you on conversion.
Subordination........... The debentures are subordinated in right of
payment to the prior payment in full of all of
our existing and future senior indebtedness and
are effectively subordinated to all existing and
future liabilities of our subsidiaries other
than Ann Taylor. Ann Taylor's obligations under
the subsidiary guarantee are subordinated in
right of payment to all of Ann Taylor's existing
and future senior indebtedness. The indenture
does not limit our ability or Ann Taylor's
ability to incur senior or other debt.
Original issue discount. We initially sold each debenture at an original
issue discount for United States federal income
tax purposes. This original issue discount
amount equals the excess of the stated principal
amount (redemption price) at maturity of the
debenture, $1,000, over the issue price of
$552.56. You must include accrued original issue
discount in your gross income for United States
federal income tax purposes prior to conversion,
redemption, sale or maturity of the debentures.
This will be true even if the debentures are
ultimately not converted, redeemed, sold or paid
at maturity.
Optional redemption..... On and after June 18, 2004, we can redeem the
debentures for cash at any time at our option at
the redemption prices listed in this prospectus,
plus cash interest to the redemption date.
Purchase at the option of
the holder.............. Each debenture holder has the option to require us
to purchase the debentures held by them for a
purchase price of $635.42 on June 18, 2004, for
$735.19 on June 18, 2009 and for $855.33 on June
18, 2014. We may choose to pay this purchase
price in cash, shares of our common stock or any
combination of cash and stock.
If a change of control of AnnTaylor Stores
Corporation occurs prior to June 18, 2004, then
each debenture holder will have an option to
require us to repurchase the debentures held by
them for an amount equal to the issue price plus
accrued original issue discount and cash
interest accrued to the date of purchase.
Optional conversion to
semiannual coupon debenture
upon tax event.......... On the occurrence of specified tax events, we have
the option to convert the debentures from
debentures that accrue original issue discount
and pay stated interest semiannually in cash at
a rate of 0.55% per year, to debentures that
cease to accrue original issue discount, and pay
stated interest semiannually in cash at a rate
of 3.50% per year. This interest would accrue at
3.50% per year on a restated principal amount of
the debentures equal to the issue price plus
original issue discount accrued through the date
of the conversion.
Use of proceeds......... We will not receive any of the proceeds from the
sale of the debentures or common stock offered
under this prospectus.
Trading................. The debentures issued in the initial private
placement are eligible for trading in the Portal
Market. However, debentures sold using this
prospectus will no longer be eligible for
trading in the Portal Market. Our common stock
is traded on the New York Stock Exchange under
the symbol "ANN".
RISK FACTORS
An investment in our debentures or our common stock involves a high
degree of risk. You should carefully consider the following risk factors
and other information in this prospectus before investing in our debentures
or our common stock. The trading price of our debentures and our common
stock could decline due to any of these risks, and you may lose all or part
of your investment.
RISKS RELATED TO THE DEBENTURES
WE MAY NOT BE ABLE TO PAY OFF THE DEBENTURES ON THE PURCHASE DATES OR UPON A
CHANGE OF CONTROL OF ANNTAYLOR STORES CORPORATION
On each purchase date of June 18, 2004, June 18, 2009 and June 18,
2014, each debenture holder will generally have an option to require us to
purchase their debentures. Also, if a change of control of AnnTaylor Stores
Corporation occurs, each debenture holder will generally have an option for
us to repurchase their debentures. We may not have sufficient cash to pay
the debentures, or restrictions in other agreements may not allow us to
make these repurchases. In either case, we may have to issue shares of our
common stock instead.
THE DEBENTURES ARE SUBORDINATED TO OUR SENIOR DEBT OBLIGATIONS
The debentures are unsecured and subordinated in right of payment to
all of our existing and future senior debt obligations. Likewise, Ann
Taylor's subsidiary guarantee is unsecured and subordinated in right of
payment to all of its existing and future guarantor senior debt
obligations. Therefore, if either we or Ann Taylor go bankrupt, liquidate
our assets, reorganize or enter into other specified transactions, our and
Ann Taylor's assets will be available to pay the obligations with respect
to the debentures only after we and Ann Taylor have paid all of our senior
debt obligations in full, and there may not be sufficient assets remaining
to pay amounts due on any or all of the debentures then outstanding. The
debentures and the subsidiary guarantee also are effectively subordinated
in right of payment to all of the liabilities, including trade payables, of
our subsidiaries other than Ann Taylor. The indenture governing the
debentures does not prohibit or limit our ability or the ability of Ann
Taylor or our other subsidiaries to incur senior debt obligations, other
debt obligations and other liabilities. If we take any of these actions,
this could harm our ability to pay off the debentures.
A TRADING MARKET FOR THE DEBENTURES MAY NOT DEVELOP
Although the initial purchasers of the debentures have advised us
that they intend to make a market in the debentures, they are not obligated
to do so and may discontinue market making at any time without notice.
Their market-making activity will be subject to the limitations imposed by
the securities laws. We cannot guarantee that the market for the debentures
will be maintained. Also, we do not intend to apply for listing of the
debentures on any securities exchange. The trading price of the debentures
will likely decline if there ceases to be an active trading market for
them.
SUBSIDIARY GUARANTEE MAY BE UNENFORCEABLE DUE TO FRAUDULENT CONVEYANCE
STATUTES
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, Ann Taylor's subsidiary guarantee could be
voided, or claims in respect of the subsidiary guarantee could be
subordinated to all other debts of Ann Taylor if a court found that:
Ann Taylor, at the time it incurred the debt evidenced by the subsidiary
guarantee, received less than reasonably equivalent value or fair
consideration for the guarantee, and was any of the following:
o insolvent or rendered insolvent by reason of the guarantee,
o engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, or
o intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature.
In addition, any payment by Ann Taylor pursuant to the subsidiary guarantee
could be required to be returned to Ann Taylor, or to a fund for the
benefit of the creditors of Ann Taylor.
The measures of insolvency for purposes of these fraudulent transfer
laws will vary depending upon the law applied in any proceeding to
determine whether a fraudulent transfer has occurred. Generally, however,
Ann Taylor would be considered insolvent if:
o the sum of its debts, including contingent liabilities, was
greater than the fair salable value of all of its assets;
o the present fair salable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating
history and other factors, we believe that Ann Taylor, after giving effect
to the subsidiary guarantee, will not be insolvent. Furthermore, we believe
that Ann Taylor will not have unreasonably small capital for the business
in which it is engaged and will not have incurred debts beyond its ability
to pay at maturity. However, we cannot assure you as to what standard a
court would apply in making such determinations or that a court would agree
with our conclusions in this regard.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE ARE SIGNIFICANTLY SMALLER THAN MANY OF OUR NATIONAL COMPETITORS, WE
MAY LACK THE FINANCIAL RESOURCES NEEDED TO MAINTAIN OR INCREASE OUR MARKET
SHARE
The women's retail apparel industry is highly competitive. Our stores
compete with departments in national and local department stores, and with
other specialty store chains and independent retail stores carrying similar
lines of merchandise. We believe that our focused merchandise selection,
exclusive fashions, personalized service and convenience distinguish us
from other apparel retailers. Nevertheless, many of our competitors are
considerably larger and have substantially greater financial, marketing and
other resources than we have. Consequently, we may not be able to compete
successfully with them in the future. In addition, we have only limited
experience in the moderate-price category in which Ann Taylor Loft
competes. Many of our competitors have greater experience in managing a
moderate-price women's apparel business and may have greater brand
recognition among this customer segment than we have.
THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO PREDICT FASHION TRENDS
ACCURATELY
Our sales and earnings depend to a significant extent upon our
ability to predict or respond to changes in fashion trends and consumer
preferences. We have experienced seasons in which there was unsatisfactory
customer acceptance of our merchandise. As a result, we had lower than
planned sales, greater than planned markdowns and lower gross margins
earned on goods sold. Our operations may be adversely affected in the
future by a failure to predict and respond to changes in fashion
preferences.
DUE TO AN OUTSTANDING CREDIT FACILITY, ANN TAYLOR COULD POTENTIALLY
BE UNABLE TO HONOR ITS FINANCIAL OBLIGATIONS OWING TO US
Since we are a holding company whose operations are conducted through
Ann Taylor and its subsidiaries, our ability to pay interest and principal
on the debentures will be dependent on Ann Taylor's ability to pay
dividends or make other payments or distributions to us in sufficient
amounts. Ann Taylor's ability to, among other things, pay dividends to us,
repay debt, including intercompany debt owing to us, make acquisitions,
transfer assets, create liens, make capital expenditures, incur
indebtedness and make investments, is restricted by the provisions of Ann
Taylor's credit facility dated as of June 30, 1998. For example, if Ann
Taylor fails to achieve financial results that comply with the restrictive
covenants and financial tests in the credit facility, it could be in
default under the credit facility. In the event of a default, the lenders
could elect to declare all amounts borrowed, together with accrued and
unpaid interest, due and payable. If Ann Taylor is unable to pay, the
lenders could proceed against any collateral securing obligations due to
them. If this indebtedness is accelerated, there can be no assurance that
Ann Taylor's assets would be sufficient to repay in full that indebtedness.
OUR BUSINESS COULD SUFFER AS A RESULT OF PROBLEMS ASSOCIATED WITH THE "YEAR
2000 ISSUE"
The risks posed by the Year 2000 issue could adversely affect our
business in a number of significant ways. If our internal and network
information systems do not correctly recognize and process date information
beyond the year 1999, we may not be able to conduct operations at the same
level of efficiency. Although we believe our Year 2000 compliance efforts
with respect to our systems will be successful, any failure or delay in
achieving Year 2000 compliance could result in costs that differ materially
from our present cost estimates. We are developing a contingency plan to
permit our primary operations to continue if our modifications and
conversions of our systems are not successfully completed on a timely
basis. Our cost estimates for Year 2000 compliance do not take into account
any expenditures arising out of a response to any contingencies that may
materialize.
Our cost estimates also do not include costs that may be incurred as
a result of a third parties' failure to become Year 2000 compliant on a
timely basis.
We have been communicating with our business partners, including key
manufacturers, vendors, banks and other third parties with whom we do
business, to obtain information regarding their state of readiness with
respect to the Year 2000 issue. We have determined that the following
events could have a material adverse effect on our business and results of
operations:
o failure of third parties to remediate Year 2000 issues
affecting their respective businesses on a timely basis; or
o failure of third parties to implement contingency plans
sufficient to permit uninterrupted continuation of their
businesses in the event of a failure of their systems or those
of their key suppliers.
We may not be able to compensate adequately for business interruptions
caused by these third parties. Potential risks include suspension or
significant curtailment of service or significant delays by banks,
utilities or common carriers, or at U.S. ports of entry.
Our business could also be materially adversely affected by the
failure of governmental agencies to address Year 2000 issues affecting our
operations. For example, a significant amount of our merchandise is
manufactured outside the United States. We are dependent upon the issuance
by foreign governmental agencies of export visas for, and upon the U.S.
Customs Service to process and permit entry into the United States of, this
merchandise. If failures in government systems result in the suspension or
delay of these agencies' services, we could experience significant
interruption or delays in inventory flow.
OUR DEPENDENCE ON THE SUPPLY OF MERCHANDISE FROM OTHER COUNTRIES EXPOSES US TO
A SIGNIFICANT RISK OF DISRUPTION TO OUR OPERATIONS
Our merchandise is manufactured in over 20 countries. During fiscal
year 1998, approximately 35% of our merchandise was manufactured in China
and approximately 10% of our merchandise was manufactured in Hong Kong. Any
event causing a sudden disruption of manufacturing or imports from China or
Hong Kong, including the imposition of additional import restrictions,
could have a material adverse effect on our operations. In addition, we
cannot predict whether any of the foreign countries in which our products
are currently manufactured or any of the countries in which our products
may be manufactured in the future will be subject to future or increased
import restrictions by the U.S. government, including the likelihood, type
or effect of any trade restriction. Trade restrictions, including increased
tariffs or quotas, against apparel, footwear or other items sold by us
could affect the importation of such merchandise generally and, in that
event, could increase the cost or reduce the supply of merchandise
available to us and adversely affect our business, financial condition,
results of operations and liquidity. Our merchandise flow may also be
adversely affected by financial or political instability in any of the
countries in which our goods are manufactured, if it affects the production
or export of merchandise from those countries. Substantially all of our
foreign purchases are negotiated and paid for in U.S. dollars, and
merchandise flow may also be adversely affected by significant fluctuation
in the value of the U.S. dollar against foreign currencies or restrictions
on the transfer of funds.
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
PERIOD
FROM FISCAL FISCAL FISCAL FISCAL FISCAL
JANUARY 31, YEAR YEAR YEAR YEAR YEAR
1999 TO ENDED ENDED ENDED ENDED ENDED
OCTOBER 30, JANUARY 30, JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1999 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of
earnings to
fixed
charges..... 4.7 2.8 1.7 1.5 1.1 3.4
</TABLE>
The ratios of earnings to fixed charges have been computed by
dividing our earnings from continuing operations and our consolidated
subsidiaries before income taxes, extraordinary loss and fixed charges, by
the fixed charges. For purposes of these ratios, fixed charges consist of
interest expense and the portion of rent expense representative of
interest.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the
sale of the debentures pursuant to this prospectus. We will not receive any
of the proceeds from their sale of the debentures.
DIVIDEND POLICY
We have never paid dividends on our common stock and do not intend to
pay dividends in the foreseeable future. As a holding company, our ability
to pay dividends is dependent upon the receipt of dividends or other
payments from Ann Taylor. The payment of dividends by Ann Taylor to us is
subject to restrictions under Ann Taylor's credit facility. Our payment of
cash dividends on the common stock is also subject to restrictions
contained in our guarantee of Ann Taylor's obligations under the credit
facility. Any determination to pay cash dividends in the future will be at
the discretion of our board of directors and will be dependent upon our
results of operations, financial condition, contractual restrictions and
other factors deemed relevant at that time by our board of directors.
DESCRIPTION OF DEBENTURES
The debentures were issued under an indenture dated June 18, 1999,
between us and Ann Taylor and The Bank of New York, as trustee. This
section is only a summary of the provisions of the debentures and the
indenture and the related registration rights agreement and is not
complete. You should refer to these documents for more detailed
information. Wherever we refer to particular provisions or defined terms of
the indenture, we also incorporate these provisions or defined terms into
this prospectus by reference. Unless the context suggests otherwise,
references in this "Description of Debentures" to "we", "us" or "our" refer
to AnnTaylor Stores Corporation and not to its subsidiaries and all
references to the "Subsidiary Guarantor" refer to AnnTaylor, Inc. and not
to its subsidiaries.
GENERAL
The debentures are unsecured obligations, i.e., they are not backed
by a specific pledge of collateral. They are also subordinated obligations
limited to $199,072,000 aggregate principal amount at maturity and will
mature on June 18, 2019. The principal amount at maturity of each debenture
is $1,000 and will be payable by us at the office of the paying agent, or
an office or agency maintained by us for such purpose in the Borough of
Manhattan, City of New York. The paying agent will initially be the
trustee.
The debentures were initially offered at a substantial discount from
their principal amount at maturity. See "United States Federal Income Tax
Considerations -- Cash Interest and Original Issue Discount." The excess of
the stated principal amount at maturity of each debenture over its issue
price, is the original issue discount. The original issue discount began
accruing from the date the debentures were issued. The calculation of the
accrual of the original issue discount in the period during which a
debenture remains outstanding will be on a semiannual bond equivalent basis
using a 360-day year composed of twelve 30-day months.
The debentures will bear interest at the rate of 0.55% per year on
the principal amount due at maturity. Once the debentures are paid in full
or funds are made available for payment in full of the debentures in
accordance with the indenture, interest shall cease to accrue. Interest
accrues from the issue date, or from the most recent date to which interest
has been paid or provided for. Cash interest will be payable at maturity or
earlier purchase, redemption or conversion. Cash interest will also be
payable semiannually on June 18 and December 18 of each year, commencing on
December 18, 1999. Cash interest shall be paid to holders of record at the
close of business on June 3 or December 3, whether or not a business day,
immediately preceding each interest payment date. Each payment of cash
interest on the debentures will include interest accrued through the day
before the applicable interest payment date or the date of maturity,
earlier purchase, redemption or conversion, as the case may be. Any payment
of principal and cash interest required to be made on any day that is not a
business day will be made on the next succeeding business day. In the event
of the maturity, conversion, or redemption of a debenture, original issue
discount and cash interest will cease to accrue on the debenture, under the
terms and subject to the conditions of the indenture. Likewise, this
accrual will cease if the holder of a debenture requires us to purchase it
pursuant to the terms of the indenture.
We may not reissue a debenture that has: (a) matured; (b) been
converted; (c) been purchased by us at the option of a holder; (d) been
redeemed; or (e) been otherwise cancelled, except for purposes of
registration of a transfer, exchange or replacement.
Debentures may be presented for conversion at the office of the
conversion agent and for exchange or registration of transfer at the office
of the registrar. The agent for these purposes shall initially be the
trustee.
FORM, DENOMINATION AND REGISTRATION
Global Debenture; Book-Entry Form
The debentures were issued in registered book-entry form, without
coupons, in denominations of $1,000 principal amount at maturity and
integral multiples of $1,000. There is no service charge for any
registration of transfer or exchange of debentures, but we may require a
holder of debentures to pay for any tax, assessment or other governmental
charge payable in connection with the transfer.
The debentures that are sold under this prospectus will be
represented by one or more global debentures without coupons. The global
debentures will be deposited with a custodian for, and registered in the
name of, a nominee of DTC in New York, New York.
Purchasers of debentures under this prospectus may hold their
interests in a global debenture directly through DTC if they are
participants in DTC. Purchasers who are not DTC participants may own
interests in global debentures only through DTC participants or specified
parties that clear through or maintain a custodial relationship with a DTC
participant. So long as DTC, or its nominee, is the registered owner or
holder of a global debenture, DTC or the nominee will be considered the
sole owner or holder of the debentures represented by the global debenture.
DTC or its participants will be responsible for recording beneficial
ownership interests in global debentures.
DTC has advised that it will only take actions on the debentures that
you would be permitted to take, including presentation of the debentures
for exchange, to the extent that you direct it to do so, and then only with
regards to your ownership interests.
Transfers between participants in DTC will be made according to DTC
rules and will be settled in same- day funds. The ability of a person
holding a beneficial interest in a global debenture to transfer or pledge
its interest to persons or entities who are not DTC participants may be
restricted in states that require persons to take physical delivery of
securities in definitive form, since debentures will only be delivered in
certificated form in the limited circumstances described below.
A beneficial interest in global debentures may only be exchanged for
certificated debentures in the limited circumstances described in the
indenture.
Payments on global debentures will be made to DTC or its nominee.
Neither we, the trustee nor any paying agent will have any responsibility
or liability for payments made to beneficial ownership interests in the
global debentures or for maintaining, supervising or reviewing any records
relating to these beneficial ownership interests. We expect DTC to credit
participants' accounts on the payment date with payments in amounts
proportional to their beneficial interests in the global debenture, unless
it has reason to believe that it will not receive payment. Also, we expect
that any payment by a DTC participant to a non-participant who holds
beneficial interests in a global debenture through that participant will be
governed by standing instructions and customary practices. However, the
participants will be responsible for these payments.
SUBSIDIARY GUARANTEE
Payment of the principal, premium, if any, interest and all other
amounts owed in respect of the debentures are guaranteed on an unsecured
subordinated basis by Ann Taylor, the subsidiary guarantor. The guarantee
of the subsidiary guarantor is, to the extent set forth in the indenture,
subordinated to the guarantor senior indebtedness of the subsidiary
guarantor on the same basis that the debentures are subordinated to our
senior indebtedness. The obligations of the subsidiary guarantor under its
guarantee are limited so as not to constitute a fraudulent conveyance under
applicable Federal or state laws. See "Risk Factors--Subsidiary guarantee
may be unenforceable due to fraudulent conveyance statutes."
SUBORDINATION OF DEBENTURES
Indebtedness evidenced by the debentures is subordinated in right of
payment, as set forth in the indenture, to the prior payment in full of all
our existing and future senior indebtedness. The payment of senior
indebtedness may be in cash or other payment satisfactory to holders of
senior indebtedness. The term "senior indebtedness" shall mean in respect
of AnnTaylor Stores Corporation the following:
(1) the principal, premium, if any, interest and all other amounts
owed in respect of (A) indebtedness of AnnTaylor Stores Corporation
for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by AnnTaylor
Stores Corporation;
(2) all capital lease obligations of AnnTaylor Stores Corporation;
(3) all obligations of AnnTaylor Stores Corporation issued or assumed
as the deferred purchase price of property, all conditional sale
obligations of AnnTaylor Stores Corporation and all obligations of
AnnTaylor Stores Corporation under any title retention agreement,
excluding trade accounts payable arising in the ordinary course of
business;
(4) all obligations of AnnTaylor Stores Corporation for the
reimbursement of any letter of credit, banker's acceptance, security
purchase facility or similar credit transaction;
(5) all obligations of the type referred to in clauses (1) through
(4) above of other persons for the payment of which AnnTaylor Stores
Corporation is responsible or liable as obligor, guarantor or
otherwise, including without limitation the guarantee by us of Ann
Taylor's obligations under the credit facility; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of other persons secured by any lien on any of our property
or assets, whether or not such obligation is assumed by us, except
for:
(a) any indebtedness that is by its terms subordinated to or on
an equal basis with the debentures; and
(b) any indebtedness between or among us or our affiliates.
This exception includes all other debt securities and guarantees in respect
of those debt securities issued to any trust, or trustee of the trust,
partnership or other entity affiliated with us that is, directly or
indirectly, a financing vehicle of AnnTaylor Stores Corporation in
connection with the issuance by the financing entity of preferred
securities or other securities that rank on an equal basis with, or junior
to, the debentures.
The senior indebtedness shall continue to be senior indebtedness and
entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of the senior
indebtedness. The holders of the debentures shall be entitled to receive
payment or distribution with respect to any debentures only after the
payment obligations on the senior indebtedness have been satisfied.
By reason of the subordination, no payment may be made on the
debentures if any debentures are declared due and payable prior to their
stated maturity because of the occurrence of an event of default until the
earlier of:
(a) 120 days after the date of the acceleration, or
(b) the payment in full of all senior indebtedness, but only if
the payment is then otherwise permitted under the terms of the indenture.
In the event of dissolution, insolvency, bankruptcy or other similar
proceedings, upon any distribution of our assets, the holders of the
debentures are required to pay over their share of the distribution to the
trustee in bankruptcy, receiver or other person distributing our assets for
application to the payment of all senior indebtedness remaining unpaid, to
the extent necessary to pay all holders of senior indebtedness in full in
cash or other payment satisfactory to the holders of senior indebtedness.
Our unsecured creditors who are not holders of debentures or holders
of senior indebtedness may recover less, ratably, than holders of our
senior indebtedness and may recover more, ratably, than the holders of
debentures. The holders of the debentures shall be entitled to receive
payment or distribution with respect to any debentures only after the
payment obligations on the senior indebtedness have been satisfied.
In addition, no payment of the principal amount at maturity, or, if
the debentures have been converted to semiannual coupon debentures
following a tax event, the "restated principal amount", and no payment of
issue price, accrued original issue discount, redemption price or change in
control purchase price or cash interest with respect to any debentures may
be made by us, nor may we pay cash with respect to the put price of any
debenture, other than for fractional shares, or acquire any debentures for
cash or property except as set forth in the indenture if:
(1) any payment default on any senior indebtedness has occurred and
is continuing beyond any applicable grace period; or
(2) any default, other than a payment default, with respect to senior
indebtedness occurs and is continuing that permits the acceleration of the
maturity of the senior indebtedness and the default is either the subject
of judicial proceedings or we receive a written notice of the default.
Notwithstanding the foregoing, payments with respect to the
debentures may resume and we may acquire debentures for cash when:
(a) the default with respect to the senior indebtedness is cured
or waived or ceases to exist, or
(b) in the case of a default described in (2) above, 179 or
more days pass after notice of the default is received by us, provided that
the terms of the indenture otherwise permit the payment or acquisition of
the debentures at that time.
If we receive a senior indebtedness default notice, then a
similar notice received within nine months thereafter relating to the same
default on the same issue of senior indebtedness shall not be effective to
prevent the payment or acquisition of the debentures as provided above.
The debentures and the subsidiary guarantee are also effectively
subordinated to all existing and future liabilities of our subsidiaries
other than Ann Taylor, the subsidiary guarantor. Any right that we have to
receive assets of any of our subsidiaries upon their liquidation or
reorganization, and the consequent right of the holders of the debentures
to participate in those assets, will be subject to the claims of that
subsidiary's creditors, including trade creditors. To the extent that we
are recognized as a creditor of one of our subsidiaries, our claims would
still subordinate to any security interests in the assets of that
subsidiary and any indebtedness of that subsidiary senior to that held by
us.
The subsidiary guarantee is an unsecured subordinated obligation of
the subsidiary guarantor, ranking equally with all other existing and
future subordinated indebtedness of the subsidiary guarantor. The
indebtedness evidenced by the subsidiary guarantee is subordinated on
substantially the same basis to Ann Taylor's guarantor senior indebtedness
as the debentures are subordinated to our senior indebtedness. The term
"guarantor senior indebtedness" shall mean in respect of the subsidiary
guarantor:
(1) the principal, premium, if any, interest and all other amounts
owed in respect of (A) indebtedness of Ann Taylor for money borrowed,
including without limitation the credit facility; and (B) indebtedness
evidenced by securities, debentures, bonds or other similar instruments
issued by Ann Taylor;
(2) all capital lease obligations of Ann Taylor;
(3) all obligations of Ann Taylor issued or assumed as the deferred
purchase price of property, all conditional sale obligations of Ann Taylor
and all obligations of Ann Taylor under any title retention agreement, but
excluding trade accounts payable arising in the ordinary course of
business;
(4) all obligations of Ann Taylor for the reimbursement of any letter
of credit, banker's acceptance, security purchase facility or similar
credit transaction;
(5) all obligations of the type referred to in clauses (1) through
(4) above of other persons for the payment of which Ann Taylor is
responsible or liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of other persons secured by any lien on any property or asset of
Ann Taylor, whether or not the obligation is assumed by Ann Taylor, except
for any indebtedness that is by its terms subordinated to or on an equal
basis with the subsidiary guarantee.
Guarantor senior indebtedness shall continue to be guarantor senior
indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of the
guarantor senior indebtedness.
There are no restrictions in the indenture on the creation of
additional senior indebtedness, guarantor senior indebtedness or any other
indebtedness.
CONVERSION RIGHTS
A holder of a debenture may convert the debenture into shares of
common stock at any time before the close of business on June 18, 2019. If
a debenture is called for redemption, the holder may convert it at any time
before the close of business on the redemption date. A holder of a
debenture may deliver a purchase notice or a change in control purchase
notice exercising its option to require us to purchase its debenture. After
that time, a debenture may be converted only if the purchase notice or the
change in control purchase notice is withdrawn by a written notice of
withdrawal delivered by the holder to the paying agent prior to the close
of business on the purchase date or the change in control purchase date, as
the case may be, in accordance with the terms of the indenture.
The initial conversion rate for the debentures is 12.078 shares of
common stock per $1,000 principal amount at maturity, subject to adjustment
upon the occurrence of the events described below. A holder otherwise
entitled to a fractional share of common stock will receive cash in an
amount equal to the market value of that fractional share based on the
closing sale price on the trading day immediately preceding the conversion
date. A holder may convert a portion of its debentures so long as that
portion is $1,000 principal amount at maturity or an integral multiple
thereof.
To convert a debenture, a holder must (1) complete and manually sign
the conversion notice on the back of the debenture or complete and manually
sign a facsimile thereof and deliver the notice to the conversion agent,
which shall initially be the trustee, at the office maintained by the
conversion agent for this purpose, (2) surrender the debenture to the
conversion agent, (3) if required, furnish appropriate endorsements and
transfer documents, and (4) if required, pay all transfer or similar taxes.
Pursuant to the indenture, the date on which all of the foregoing
requirements have been satisfied is the conversion date.
Upon conversion of a debenture, a holder will not receive any cash
payment representing accrued original issue discount or, except as provided
below, accrued cash interest. Our delivery to the holder of the fixed
number of shares of common stock into which the debenture is convertible
together with the cash payment, if any, in lieu of any fractional shares
will satisfy our obligation to pay the principal amount at maturity of the
debenture. The delivery of the common stock into which the debenture is
convertible will also satisfy our obligation to pay the accrued original
issue discount and accrued cash interest attributable to the period from
the issue date to the conversion date. Thus, the accrued original issue
discount and accrued cash interest will be deemed to be paid in full rather
than cancelled, extinguished or forfeited. Notwithstanding the foregoing,
accrued but unpaid cash interest will be payable upon any conversion of
debentures at the option of the holder made concurrently with or after
acceleration of the debentures following an event of default described
under "-- Events of Default; Notice and Waiver".
Debentures surrendered for conversion during the period from the
close of business on any regular record date next preceding any interest
payment date to the opening of business of the interest payment date must
be accompanied by payment of an amount equal to the interest thereon that
the registered holder is to receive. This foregoing payment requirement
does not apply to debentures that are redeemed during that same period.
Except where debentures surrendered for conversion must be accompanied by
payment as described above, no interest on converted debentures will be
payable by us on any interest payment date subsequent to the date of
conversion. The conversion rate will not be adjusted at any time during the
term of the debentures for accrued original issue discount or accrued cash
interest. A certificate for the number of full shares of common stock into
which any debenture is converted and cash in lieu of any fractional shares
will be delivered as soon as practicable, but in any event no later than
the seventh business day following the conversion date. For a summary of
the U.S. federal income tax treatment of a holder receiving common stock
upon conversion, see "United States Federal Income Tax Considerations
- --Disposition or Conversion of Debentures."
In the event we exercise our option to have interest in lieu of
original issue discount accrue on a debenture following a tax event, the
holder will be entitled on conversion to receive the same number of shares
of common stock that the holder would have received if we had not exercised
such option. See "Description of Debentures - We may convert the debentures
to semiannual coupon debentures upon specified tax events."
The conversion rate is subject to adjustment in specified events,
including:
(a) the issuance of shares of common stock as a dividend or a
distribution with respect to common stock,
(b) subdivisions, combinations and reclassification of common
stock,
(c) the issuance to all holders of common stock of rights or
warrants entitling them for a period not exceeding 45 days, to subscribe
for shares of common stock at less than the then market price of the common
stock,
(d) the distribution to holders of common stock of evidences
of our indebtedness, securities or capital stock, cash or assets, including
securities, but excluding those rights, warrants, dividends and
distributions referred to above and dividends and distributions paid
exclusively in cash,
(e) the payment of dividends and other distributions on
common stock paid exclusively in cash, excluding cash dividends if the
annualized per share amount of the dividend does not exceed 15% of the
current market price of common stock as of the trading day immediately
preceding the date of declaration of the dividend, and
(f) payment to holders of common stock in respect of a tender
or exchange offer other than an odd-lot offer by us for common stock at a
price in excess of 110% of the then market price of common stock as of the
trading day next succeeding the last date tenders or exchanges may be made
pursuant to a tender or exchange offer.
However, no adjustment need be made if holders may participate in
the transactions otherwise giving rise to an adjustment on a basis and with
notice that our board of directors determines to be fair and appropriate,
or otherwise.
Rather than being entitled to an adjustment in the conversion rate,
the holder of a debenture upon its conversion will be entitled to receive,
in addition to the shares of common stock into which such debenture is
convertible, the kind and amounts of assets, debt securities or rights,
options or warrants comprising the distribution that the holder would have
received if that holder had converted the debenture immediately prior to
the record date for determining the shareholders entitled to receive the
distribution in the following circumstances:
o in cases where the fair market value of the portion of assets,
debt securities or rights, warrants or options to purchase our
securities applicable to one share of common stock distributed
to stockholders exceeds the average sale price per share of
common stock by less than $1.00; or
o in cases where the average sale price exceeds the fair market
value of the portion of assets, debt securities or rights,
warrants or options so distributed by less than $1.00.
The indenture permits us to increase the conversion rate from time
to time.
In the event that we shall be a party to any transaction pursuant to
which the common stock is converted into the right to receive other
securities, cash or other property, then the holders of debentures then
outstanding shall have the right to convert the debentures into the kind
and amount of securities, cash or other property receivable upon the
consummation of the transaction by a holder of the number of shares of
common stock issuable upon conversion of the debentures immediately prior
to that transaction. The transactions referred to in this paragraph,
include, without limitation,
(a) a recapitalization or reclassification of our common stock,
(b) a consolidation with, or merger into, any other person,
or any merger of another person into our company,
(c) any sale, transfer or lease of all or substantially all of
our assets, or
(d) any compulsory share exchange.
The foregoing change could substantially lessen or eliminate the
value of the conversion privilege associated with the debentures in the
future. For example, if we were acquired in a cash merger, each debenture
would become convertible solely into cash and would no longer be
convertible into securities whose value would vary depending on our future
prospects and other factors.
In the event of a taxable distribution to holders of common stock
which results in an adjustment of the conversion rate, or in which holders
otherwise participate, or in the event the conversion rate is increased at
our discretion, the holders of the debentures may, in designated
circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend. Moreover, in other circumstances,
the absence of this kind of adjustment to the conversion rate may result in
a taxable dividend to holders of common stock. See "United States Federal
Income Tax Considerations -- Adjustment of Conversion Price."
WE MAY REDEEM THE DEBENTURES ON OR AFTER JUNE 18, 2004
No sinking fund is provided for the debentures. Prior to June 18,
2004, the debentures will not be redeemable at our option. On and after
that date, we may redeem the debentures for cash as a whole at any time, or
from time to time in part, upon not less than 30 days' nor more than 60
days' notice of redemption given by mail to holders of debentures, unless a
shorter notice period shall be satisfactory to the trustee. This redemption
shall be at the redemption prices set forth below plus accrued cash
interest to the redemption date. Any redemption must be in integral
multiples of $1,000 principal amount at maturity.
The table below shows the amount of original issue discount accrued
for each annual period until maturity and the redemption prices of a
debenture per $1,000 principal amount at maturity on June 18, 2004, at each
June 18 thereafter prior to maturity, and at maturity on June 18, 2019,
which prices reflect the accrued original issue discount calculated to each
designated date. The redemption price of a debenture redeemed between these
dates would include an additional amount reflecting the additional original
issue discount accrued since the next preceding date in the table to the
redemption date.
(1) (2) (3)
DEBENTURE ACCRUED ORIGINAL REDEMPTION
REDEMPTION DATE ISSUE PRICE ISSUE DISCOUNT PRICE (1)+(2)
- --------------- ----------- -------------- -------------
June 18, 2000................ $552.56 $15.37 N/A
June 18, 2001................ 552.56 31.31 N/A
June 18, 2002................ 552.56 47.86 N/A
June 18, 2003................ 552.56 65.03 N/A
June 18, 2004................ 552.56 82.86 $ 635.42
June 18, 2005................ 552.56 101.36 653.92
June 18, 2006................ 552.56 120.56 673.12
June 18, 2007................ 552.56 140.49 693.05
June 18, 2008................ 552.56 161.17 713.73
June 18, 2009................ 552.56 182.63 735.19
June 18, 2010................ 552.56 204.91 757.47
June 18, 2011................ 552.56 228.03 780.59
June 18, 2012................ 552.56 252.02 804.59
June 18, 2013................ 552.56 276.93 829.49
June 18, 2014................ 552.56 302.77 855.33
June 18, 2015................ 552.56 329.60 882.16
June 18, 2016................ 552.56 357.44 910.00
June 18, 2017................ 552.56 386.33 938.89
June 18, 2018................ 552.56 416.32 968.88
At Stated Maturity........... 552.56 447.44 1,000.00
If converted to semiannual coupon debentures following the
occurrence of a tax event, the debentures will be redeemable at the
restated principal amount plus accrued and unpaid interest from the date of
the conversion to the redemption date. In no event may the debentures be
redeemed prior to June 18, 2004. See "Description of Debentures - We may
convert the debentures to semiannual coupon debentures upon specified tax
events."
If fewer than all of the debentures are to be redeemed, the trustee
shall select the debentures to be redeemed in principal amounts at maturity
of $1,000 or integral multiples thereof by lot, pro rata or by another
method the trustee considers fair and appropriate. If a portion of a
holder's debentures is selected for partial redemption and that holder
converts a portion of those debentures prior to redemption, the converted
portion shall be deemed, solely for purposes of determining the aggregate
principal amount at maturity of debentures to be redeemed by us, to be of
the portion selected for redemption.
YOU MAY REQUIRE US TO REPURCHASE THE DEBENTURES AS OF A SPECIFIED PURCHASE
DATE
On June 18, 2004, June 18, 2009 and June 18, 2014, we will become
obligated to purchase, at the option of the holder, at the put prices set
forth below plus accrued cash interest to the purchase date, any
outstanding debenture for which a written purchase notice has been
delivered by the holder. The purchase notice shall be delivered to the
paying agent or an office or agency maintained by us for this purpose in
the Borough of Manhattan, The City of New York, at any time from the
opening of business on the date that is 20 business days preceding the
purchase date until the close of business on the purchase date. If the
purchase notice is withdrawn prior to the purchase date, our obligation to
pay shall cease. Our obligation to pay is further subject to the additional
conditions set forth in part in the following paragraphs.
The table below shows the put prices of a debenture as of the
specified purchase dates (equal to the issue price plus accrued original
issue discount to the respective purchase date):
PURCHASE DATE PUT PRICE
June 18, 2004 $635.42
June 18, 2009 $735.19
June 18, 2014 $855.33
If prior to the purchase date the debentures have been converted to
semiannual coupon debentures following the occurrence of a tax event, the
put price will be equal to the restated principal amount plus accrued and
unpaid cash interest from the date of the conversion to, but excluding, the
purchase date. See "Description of Debentures We may convert the debentures
to semiannual coupon debentures upon specified tax events."
We, at our option, may elect to pay the put price in cash or common
stock, or any combination thereof. For a summary of the U.S. federal income
tax treatment of this type of transaction, see "United States Federal
Income Tax Considerations -- Disposition or Conversion of Debentures."
We will give notice not less than 20 business days prior to each
purchase date to all holders at their addresses shown in the register of
the registrar and to beneficial owners as required by applicable law
stating, among other things,
(a) whether the Company will pay the put price of the debentures in
cash or common stock, or any combination thereof, and
(b) the procedures that holders must follow to require us to
purchase debentures from the holders.
The purchase notice given by any holder requiring us to purchase
debentures shall state:
(1) the certificate numbers of the debentures to be delivered by the
holder for purchase by us;
(2) the portion of the principal amount at maturity of debentures to
be purchased, which portion must be $1,000 or an integral multiple thereof;
(3) that the debentures are to be purchased by us pursuant to the
applicable provisions of the debentures; and
(4) if we elect, pursuant to our notice, to pay a specified
percentage of the put price in shares of common stock but the specified
percentage is ultimately to be paid in cash because any of the conditions
to payment of the specified percentage of the put price in shares of common
stock contained in the indenture is not satisfied prior to the close of
business on the purchase date, as described below, that the holder elects:
(a) to withdraw the purchase notice as to some or all of the
debentures to which it relates stating the principal amount at maturity and
certificate numbers of the debentures as to which the withdrawal shall
relate; or
(b) to receive cash in respect of the put price of all
debentures subject to the purchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in clause (4) above in the purchase notice, the holder
will be deemed to have elected to receive cash for the specified percentage
of the put price that was to have been payable in shares of common stock.
See "United States Federal Income Tax Considerations -- Disposition or
Conversion of Debentures."
Any purchase notice may be withdrawn by the holder by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the purchase date. The notice of withdrawal shall state the
principal amount at maturity and the certificate numbers of the debentures
as to which the withdrawal notice relates and the principal amount at
maturity, if any, which remains subject to the purchase notice.
If we elect to pay the put price, in whole or in part, in shares of
common stock, the number of shares to be delivered in respect of the
specified percentage of the put price to be paid in common stock will be
equal to the dollar amount of the specified percentage of the put price
divided by the market price of a share of common stock. However, no
fractional shares of common stock will be delivered upon any purchase by us
of debentures in payment, in whole or in part, of the put price. Instead,
we will pay cash based on the market price for all fractional shares of
common stock. Each holder whose debentures are purchased at the option of
that holder as of the purchase date will receive the same percentage of
cash or common stock in payment of the put price for those debentures,
except as described above with regard to the payment of cash in lieu of
fractional shares of common stock. See "United States Federal Income Tax
Considerations -- Disposition or Conversion of Debentures."
The "market price" means the average of the sale prices of the
common stock for the five trading day period ending on the third trading
day prior to the applicable purchase date, or other date in question, for
purposes of adjusting the conversion rate. The market price will be
appropriately adjusted to take into account the actual occurrence, during
the seven trading days preceding the purchase date, or other date in
question, for purposes of adjusting the conversion rate, of events that
would result in an adjustment of the conversion rate with respect to the
common stock.
The "sale price" on any trading day means, (a) the closing per share
sale price for the common stock or, (b) if no closing sale price is
reported, the average of the bid and ask prices or, (c) if more than one in
either case, the average of the average bid and average ask prices as
reported in the composite transactions for the principal United States
securities exchange on which the common stock is traded or, (d) if the
common stock is not listed on a United States national or regional
securities exchange, the average of the closing and average prices as
reported by the National Association of Securities Dealers Automated
Quotation System.
A "trading day" means each day on which the securities exchange or
quotation system which is used to determine the sale price is open for
trading or quotation. We may pay the put price, in whole or in part, in
common stock only if the information necessary to calculate the market
price is reported in The Wall Street Journal or another daily newspaper of
national circulation.
Because the market price of the common stock is determined prior to
the purchase date, holders of debentures bear the market risk with respect
to the value of the common stock to be received from the date such market
price is determined to the purchase date.
Upon determination of the actual number of shares of common stock
issuable in accordance with the foregoing provisions, we will publish such
determination in The Wall Street Journal or another daily newspaper of
national circulation.
Our right to purchase debentures, in whole or in part, with shares
of common stock is subject to our satisfying various conditions, including
the registration of the common stock under the Securities Act and the
Exchange Act, unless there exists an applicable exemption to registration
thereunder. If those conditions are not satisfied prior to the close of
business on the purchase date, we will pay the put price of the debentures
in cash. We will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable and
will file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by us to purchase debentures at the option of the
holders of those debentures on a purchase date. We may not change the form
of consideration or components or percentages of components thereof to be
paid once we have given our notice to holders of debentures except as
described in the second sentence of this paragraph.
Payment of the put price for a debenture for which a purchase notice
has been delivered and not withdrawn is conditioned upon delivery of that
debenture together with necessary endorsements to the paying agent or an
office or agency maintained by us for that purpose in the Borough of
Manhattan, The City of New York, at any time, whether prior to, on or after
the purchase date, after delivery of the purchase notice. Payment of the
put price for the debenture will be made promptly following the later of
the business day following the purchase date and the time of delivery of
the debenture. If the paying agent holds, in accordance with the terms of
the indenture, money or securities sufficient to pay the put price of the
debenture on the business day following the purchase date, then,
immediately after the purchase date, that debenture will cease to be
outstanding. Also, cash interest and original issue discount on the
debenture will cease to accrue and will be deemed paid, whether or not the
debenture is delivered to the paying agent. All other rights of the holder
shall terminate as well, other than the right to receive the put price upon
delivery of the debenture.
No debentures may be purchased pursuant to the provisions described
above if there has occurred and is continuing an event of default described
under "Events of Default; Notice and Waiver" other than a default in the
payment of the put price with respect to the debentures. If we become
obligated to purchase any outstanding debenture on a purchase date, there
can be no assurance that the company would have sufficient funds to pay the
put price on that purchase date for all the debentures tendered by the
holders thereof. Any future credit agreements or other agreements relating
to other indebtedness, including senior indebtedness, to which we become a
party may provide that the maturing of any obligation to purchase the
debentures would constitute an event of default thereunder and may restrict
or prohibit the repurchase of the debentures. In the event a purchase date
occurs at a time when we are prohibited from repurchasing the debentures,
we could seek the consent of our then existing lenders to repurchase the
debentures or could attempt to refinance the borrowings that contain
prohibitions. If we do not obtain consent or repay these borrowings, we
would remain prohibited from repurchasing the debentures. Our failure to
repurchase debentures required to be repurchased under the terms of the
indenture would constitute an event or default under the indenture and
would likely constitute a default under the terms of any of our other
indebtedness outstanding at the time, including senior indebtedness. In
these circumstances, the subordination provisions in the indenture would
likely prohibit or restrict payments to the holders of debentures.
YOU MAY REQUIRE US TO REPURCHASE THE DEBENTURES UPON A CHANGE OF CONTROL OF
OUR COMPANY
If any change in control of our business occurs on or prior to June
18, 2004, each holder of debentures will have the right, at the holder's
option, subject to the terms and conditions of the indenture, to require us
to purchase all or any part of the holder's debentures. The principal
amount at maturity of debentures to be purchased must be $1,000 or an
integral multiple of that amount. The change in control purchase date shall
be 30 business days after the occurrence of the change in control. The cash
price shall be equal to the issue price plus accrued original issue
discount and accrued cash interest to the change in control purchase date.
If prior to a change in control purchase date the debentures have been
converted to semiannual coupon debentures following the occurrence of a tax
event, we will be required to purchase the debentures at a cash price equal
to the restated principal amount plus accrued and unpaid interest from the
date of the conversion to, but excluding, the change in control purchase
date. Holders will not have any right to require us to purchase debentures
in the event of any change in control of our business occurring after June
18, 2004.
Within 15 business days after the change in control, we will mail to
the trustee and to each holder and to beneficial owners as required by
applicable law a notice regarding the change in control, which notice shall
state, among other things:
o the date of the change in control and, briefly, the events
causing the change in control,
o the date by which the change in control purchase notice must be
given,
o the change in control purchase date,
o the change in control purchase price,
o the name and address of the paying agent and the conversion
agent,
o the conversion rate and any adjustments thereto,
o that debentures with respect to which a change in control purchase
notice has been given may be converted into common stock at any
time prior to the close of business on the change of control
purchase date only if the change in control purchase notice has
been withdrawn by the holder in accordance with the terms of
the indenture,
o that debentures must be surrendered to the paying agent to
collect payment,
o that the change in control purchase price for any debenture as to
which a purchase notice has been given and not withdrawn will
be paid promptly following the later of the change in control
purchase date and the time of surrender of the debenture to the
paying agent,
o the procedures that holders must follow to exercise their rights
vis-a-vis a change in control of the company and a brief
description of those rights,
o briefly, the conversion rights of holders of debentures, and
o the procedures for withdrawing a change in control purchase
notice.
We will cause a copy of the notice to be published in The Wall
Street Journal or another daily newspaper of national circulation.
To exercise the purchase right, the holder must deliver written
notice of the exercise of the right to the paying agent or an office or
agency maintained by us for that purpose in the Borough of Manhattan, The
City of New York, prior to the close of business on the change in control
purchase date. The change in control purchase notice shall state:
o the certificate numbers of the debentures to be delivered by the
holder for purchase by us,
o the portion of the principal amount at maturity of debentures to
be purchased, which portion must
be $1,000 or an integral multiple thereof, and
o that the debentures are to be purchased by us pursuant to the
applicable provisions of the debentures.
Any change in control purchase notice may be withdrawn by the holder
by a written notice of withdrawal delivered to the paying agent prior to
the close of business on the change in control purchase date. The notice of
withdrawal shall state the principal amount at maturity and the certificate
numbers of the debentures as to which the withdrawal notice relates and the
principal amount at maturity, if any, which remains subject to a change in
control purchase notice.
Payment of the change in control purchase price for a debenture for
which a change in control purchase notice has been delivered and not
withdrawn is conditioned upon delivery of the debenture together with
necessary endorsements to the paying agent or an office or agency
maintained by us for that purpose in the Borough of Manhattan, The City of
New York, at any time after the delivery of the change in control purchase
notice. The debenture may be delivered prior to, on or after the change in
control purchase date. Payment of the change in control purchase price for
a debenture will be made promptly following the later of the business day
following the change in control purchase date and the time of delivery of
the debenture. If the paying agent holds, in accordance with the terms of
the indenture, money sufficient to pay the change in control purchase price
of the debenture on the business day following the change in control
purchase date, then, immediately after the change in control purchase date,
the debenture will cease to be outstanding. In addition, cash interest and
original issue discount on the debenture will cease to accrue and will be
deemed paid, whether or not the debenture is delivered to the paying agent.
All other rights of the holder will terminate, as well other than the right
to receive the change in control purchase price upon delivery of the
debenture.
Under the indenture, a "change in control" of our business is deemed
to have occurred at such time as:
o any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act), other than us, any of
our subsidiaries, or any employee benefit plan of either us or
any of our subsidiaries, files a Schedule 13D or 14D-1 under
the Exchange Act or any successor schedule, form or report,
disclosing that the person has become the beneficial owner of
50% or more of the total voting power in the aggregate of all
classes of capital stock of our business then outstanding
normally entitled to vote in elections of directors, with
exceptions, or
o there shall be consummated any consolidation or merger of our
business pursuant to which the common stock would be converted
into cash, securities or ther property, in each case, other
than a consolidation or merger in which the holders of common
stock immediately prior to the consolidation or merger have,
directly or indirectly, at least a majority of the total voting
power in the aggregate of all classes of capital stock of the
continuing or surviving corporation normally entitled to vote
in elections of directors immediately after the consolidation
or merger, or
o the occurrence of any transaction or event in connection with
which all or substantially all common stock shall be exchanged
for, converted into, acquired for or constitute solely the
right to receive consideration, whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise,
all or substantially all of which consists of common stock
which is (or, upon consummation of or immediately following
such transaction or event, will be) listed on a United States
national securities exchange or approved for quotation on the
Nasdaq National Market or any similar United States system of
automated dissemination of quotations of securities prices.
The indenture does not permit the board of directors to waive our
obligation to purchase debentures at the option of a holder in the event of
a change in control of our business.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by us to purchase debentures at the
option of the holders thereof upon a change in control. The change in
control purchase feature of the debentures may in certain circumstances
make more difficult or discourage a takeover of our business and, thus, the
removal of incumbent management. The change in control purchase feature,
however, is not the result of management's knowledge of any specific effort
to accumulate shares of common stock or to obtain control of our business
by means of a merger, tender offer, solicitation or otherwise, or part of a
plan by management to adopt a series of anti-takeover provisions. Instead,
the change in control purchase feature is a standard term contained in
other offerings of securities comparable to the debentures that have been
marketed by the initial purchasers, and the terms of this feature result
from negotiations between us and the initial purchasers.
If a change in control were to occur, there can be no assurance that
we would have funds sufficient to pay the change in control purchase price
for all of the debentures that might be delivered by holders seeking to
exercise the purchase right.
We might also be required to prepay senior indebtedness having
financial covenants with change of control provisions in favor of the
holders of the senior indebtedness. In addition, our senior indebtedness,
including our guarantee of Ann Taylor's credit facility, may have
cross-default provisions that could be triggered by a default under the
change of control provisions, thereby possibly accelerating the maturity of
the senior indebtedness. In this case, the holders of the debentures would
be subordinated to the prior claims of the holders of the senior
indebtedness. In addition, our ability to purchase debentures with cash may
be limited by the terms of our then-existing borrowing agreements. No
debentures may be purchased pursuant to the provisions described above if
there has occurred and is continuing an event of default described under
"--Events of Default, Notice and Waiver". Debentures may be purchased,
however, if there is a default in the payment of the change in control
purchase price with respect to those debentures.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial
purchasers of the debentures. If you sell debentures or common stock issued
upon conversion of the debentures under this registration statement, you
generally will be required to be named as a selling securityholder in this
prospectus, deliver this prospectus to purchasers and be bound by
applicable provisions of the registration rights agreement, including some
indemnification provisions.
In this registration rights agreement, we agreed to file a
registration statement that includes this prospectus with the Securities
and Exchange Commission by September 16, 1999. We agreed to use all
reasonable efforts to cause this registration statement to become effective
as promptly as practicable, but before December 15, 1999. We agreed to keep
this registration statement effective until either all of the securities
registered under this under this registration agreement are sold, or the
period applicable to the debentures and underlying shares of our common
stock held by non-affiliates under Rule 144(k) under the Securities Act
expires. We may suspend the use of this prospectus under limited
circumstances, including pending corporate developments or public filings
with the Securities and Exchange Commission, for a period not to exceed 45
days in any 3-month period and 90 days in any 12-month period. We also
agreed to pay liquidated damages to holders of debentures and shares of
common stock issued upon conversion of the debentures if the registration
statement is not timely filed or made effective or if the prospectus is
unavailable for periods in excess of those permitted above. You should
refer to the indenture for a description of these liquidated damages.
WE MAY CONSOLIDATE, MERGE OR SELL OUR ASSETS WITHOUT YOUR CONSENT
We may consolidate with, merge into, transfer or lease all or
substantially all of our assets to any person or entity without the consent
of the holders of the debentures if specified conditions are satisfied,
including:
o the other person is an entity organized and existing under the
laws of a United States jurisdiction and expressly assumes our
obligations on the debentures and under the indenture; and
o immediately after this transaction, no default event, and no event
which, after notice or lapse of time or both, would become a
default event, is continuing.
WE MAY CONVERT THE DEBENTURES TO SEMIANNUAL COUPON DEBENTURES UPON SPECIFIED
TAX EVENTS
If a specified tax event occurs, we will have the option to elect to
have cash interest accrue and be payable at 3.50% per year on a restated
principal amount per debenture in lieu of future original issue discount
and the cash interest provided for under the indenture. This interest would
accrue from the date on which we exercise this option and would by payable
semiannually. Our exercise of this option could alter the timing of income
recognition by holders of the debentures with respect to these semiannual
interest payments. See "United States Federal Income Tax Considerations."
For the purposes of this option:
o the restated principal amount would equal the issue price of the
debenture plus original issue discount accrued to the later of
the date immediately prior to the tax event or the date on
which we exercise this option; and
o a tax event means that we shall have received an opinion from
independent tax counsel that, on or after June 18, 1999, as a
result of any amendment to, change in, or announced prospective
change in, the laws or regulations of the United States or any
political subdivision or taxing authority of the United States,
or any amendment to, or change in, an interpretation or
application of these laws or regulations by any legislative
body, court, governmental agency or regulatory authority, there
is more than an insubstantial risk that interest or original
issue discount payable on the debentures would not be
deductible on a current accrual basis or under any other method
for United States federal income tax purposes.
President Clinton's fiscal year 2000 budget proposes a tax law
change that would, if enacted and made applicable to the debentures,
prevent us from deducting interest, including original issue discount,
payable on the debentures on a current accrual basis for United States
federal income tax purposes. It could also cause some or all of the
interest, including original issue discount, payable on the debentures to
fail to be deductible by us under any other method for United States
federal income tax purposes. If this proposal or any similar future
proposal is enacted and made applicable to the debentures, the result would be
a tax event and the terms of the debentures would be subject to modification at
our option as described above.
EVENTS OF DEFAULT; NOTICE AND WAIVER
Default events.
The indenture defines a default event as:
o our failure to pay principal, accrued cash interest, if the
default continues for 31 days, or original issue discount or
other amounts due on the debentures, whether or not payment is
prohibited by the subordination provisions of the debenture and
the indenture,
o our failure to deliver shares of common stock when required upon
conversion of a debenture, and failure to remedy this within 10
days after the required delivery date,
o our failure to comply with any other agreement in the debentures
or the indenture, after we receive notice of default from the
trustee or holders of at least 25% of the aggregate principal
amount at maturity of the debentures then outstanding, and our
failure to cure this failure within 90 days after we receive
notice,
o default on any debt in excess of $15,000,000 which results in that
debt being accelerated, without that debt being discharged or
the acceleration being rescinded or annulled within 20 days
after we receive notice of default from the trustee or holders
of at least 25% of the aggregate principal amount at maturity
of debentures then outstanding,
o the Subsidiary Guarantee ceases to be, or shall be asserted in
writing by the subsidiary guarantor, or any person acting on
behalf of the subsidiary guarantor, not to be in full force and
effect, other than by reason of termination of the indenture or
the release of the Subsidiary Guarantee in accordance with the
indenture, or
o designated events of bankruptcy or insolvency.
Notice.
Within 90 days after a default event, the trustee will mail notice
of all defaults of which it is aware to the debenture holders, unless these
defaults have been cured or waived prior to the mailing. However, the
trustee may elect to withhold notice of a default, other than a payment
default, if the trustee determines in good faith that this is in the
interests of the debenture holders.
Remedies upon default events.
If a default event occurs and continues, the trustee or the holders
of at least 25% in principal amount at maturity of the debentures
outstanding may declare the debentures to be due and payable immediately.
If we experience bankruptcy or insolvency, the debentures automatically
become immediately due and payable. If our obligations under the debentures
have accelerated, we cannot make any payment until the earlier of our
payment in full of all outstanding senior debt or 120 days after the
acceleration, subject to limited exceptions.
Trustee.
Generally, the trustee will be under no obligation to exercise any
right or power under the indenture or otherwise incur financial liability
unless the debenture holders have offered reasonable indemnity against
loss, liability or expense that is satisfactory to the trustee. We are
required to furnish the trustee with an annual statement of our defaults
under the indenture, and we must give the trustee 5 business days notice of
any default.
Requirements to pursue remedies.
Before any debenture holder may pursue any remedy with respect to
the debentures or the indenture, the following conditions must be
satisfied:
o the debenture holder wishing to pursue a remedy must give
the trustee written notice of a continuing default event,
o the holders of at least 25% in aggregate principal amount
at maturity of the outstanding debentures must make a
written request to the trustee to pursue the remedy,
o the debenture holder(s) wishing to pursue the remedy must
have offered the trustee reasonable security or indemnity
against any loss, liability or expense satisfactory to the
trustee,
o the trustee has not instituted the proceeding requested by
the debenture holders within 60 days after it receives the
notice, and
o the holders of a majority in aggregate principal amount at
maturity of the outstanding debentures shall not have given
the trustee instructions that are different from the original
request.
However, notwithstanding these requirements, the rights of each
debenture holder to receive their principal, premium and interest on the
debentures, to convert their debentures into common stock or to bring suit
to enforce either of these rights will not be impaired without each
debenture holder's consent.
Waiver.
The holders of a majority in aggregate principal amount at maturity
of the debentures outstanding may waive past defaults and their
consequences, except for:
o payment defaults on the debentures,
o defaults on the conversion rights of the debentures, or
o defaults on designated provisions in the indenture that may
not be modified without the consent of the individual
debenture holder affected.
AMENDMENT OF THE INDENTURE OR DEBENTURES
Limited modifications, including curing ambiguities, omissions or
defects or making other changes that do not harm the debentures holders,
may be made without the consent of the debenture holders. However,
generally, neither we nor the trustee may amend the indenture or the
debentures without the consent of holders of a majority in aggregate
principal amount at maturity of the debentures. In addition, the following
amendments require the consent of each debenture holder affected by the
modification:
o reducing the principal, original issue discount or cash interest
due on the debentures, extending the stated maturity of the
debentures or changing the form of consideration in which the
debentures are payable;
o reducing the principal amount of debentures whose holders must
consent to an amendment or waiver under the indenture or
modifying the indenture or provisions relating to amendments or
waivers;
o making any change that harms the right to convert any debenture
or any option to require us to purchase a debenture;
o modifying the subordination provisions of the indenture in a
manner adverse to the debenture holders; or
o impairing the right to sue to enforce any payment on or conversion
of the debentures.
In addition, any amendment that would harm the rights of senior debt
holders requires the consent of the senior debt holders under the terms of
the relevant senior debt.
Without the consent of any holder of debentures, we, the subsidiary
guarantor and the trustee may amend the indenture to
o cure any ambiguity, defect or inconsistency, provided, however,
that such amendment does not materially adversely affect the
rights of any holder;
o provide for the assumption by a successor to us of our
obligations or the assumption by a successor to the subsidiary
guarantor of the subsidiary guarantor's obligations under the
indenture;
o provide for uncertificated debentures in addition to certificated
debentures, as long as such uncertificated debentures are in
registered form for United States federal income tax purposes;
o make any change that does not adversely affect the rights of any
holder of debentures;
o make any change to comply with any requirement of the Securities
and Exchange Commission in connection with the qualification of
the indenture under the Trust Indenture Act of 1939; or
o add to our covenants or obligations or the covenants or
obligations of the subsidiary guarantor under the indenture for
the protection of holders of the debentures or surrender any
right, power or option conferred by the indenture for us or the
subsidiary guarantor.
DISCHARGE OF THE INDENTURE
Our obligations under the indenture will be discharged if:
o all outstanding debentures are delivered to the trustee for
cancellation; or
o if we deliver to the trustee, the paying agent or the conversion
agent cash or common stock sufficient to pay off all
outstanding debentures and sums due under the indenture after
the debentures have become due and payable.
NO RECOURSE AGAINST OTHERS
The indenture provides that none of our directors, officers,
employees or stockholders, as such, shall have any liability for any of our
obligations under the debentures or the indenture or for any claim based
on, in respect of or by reason of these obligations or their creation.
DESTRUCTION, LOSS OR THEFT OF DEBENTURES
In case one of your debentures becomes mutilated, defaced,
destroyed, lost or stolen, we will execute and upon our request the trustee
will authenticate and deliver a new debenture with the same maturity and
date of issuance, an equal principal amount at maturity, registered in the
same manner and dated the date of its authentication. You must provide us
with evidence that you owned the debenture and evidence of its destruction,
loss or theft. You must also provide us and the trustee with a security or
indemnity for the substituted debenture. You may have to pay for fees and
expenses for issuing the substituted debenture.
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of our business
or the subsidiary guarantor, under Title 11 of the United States Code, the
claim of a holder of a debenture may be limited to the issue price of the
debenture plus that portion of the original issue discount, together with
any cash interest, that is deemed to have accrued from the date of issue to
the commencement of the proceeding. In addition, the debentures will be
subordinated in right of payment to senior indebtedness and guarantor
senior indebtedness and effectively subordinated to the indebtedness and
other obligations of our subsidiaries, other than the subsidiary guarantor,
and the subsidiary guarantor's subsidiaries.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of United States federal income tax
considerations relating to the purchase, ownership, disposition, and
conversion of debentures. Unless otherwise stated, this summary deals only
with debentures held as capital assets (generally, assets held for investment
under the Internal Revenue Code of 1986, as amended) by a holder who purchases
debentures upon original issuance and who is, for United States federal income
tax purposes:
o a citizen or resident of the United States;
o a corporation created or organized in or under the laws of the
United States or any of its political subdivisions;
o an estate, the net income of which is subject to United States
federal income taxation regardless of its source; or
o a trust, the administration of which is subject to the primary
supervision of a court within the United States and which has
one or more United States Persons with authority to control all
substantial decisions.
The tax treatment of a holder of debentures may vary depending on
his particular situation. This summary does not address all of the tax
consequences that may be relevant to holders who may be subject to special
tax rules such as, for example, rules relating to persons who are not
citizens or residents of the United States; banks and financial
institutions; insurance companies; broker-dealers; tax-exempt
organizations; and persons who hold debentures as part of a hedge,
conversion or constructive sale transaction, straddle or other risk
reduction transaction. In addition, this summary does not address any
aspects of state, local or foreign tax laws. Furthermore, this discussion
does not address the tax consequences applicable to holders that are
treated as partnerships or other passthrough entities for United States
federal income tax purposes. This summary is based on the United States
federal income tax law in effect as of the date hereof, which is subject to
change, possibly on a retroactive basis. An investor considering the
purchase of debentures should consult his tax advisor as to the particular
tax consequences of purchasing, owning, and disposing of debentures,
including the application and effect of United States federal, state,
local, and foreign tax laws.
CASH INTEREST AND ORIGINAL ISSUE DISCOUNT
The debentures were initially issued at a substantial discount from
their stated principal amount at maturity. For United States federal income
tax purposes, the excess of the stated principal amount at maturity of each
debenture over the issue price (the initial offering price to the initial
purchasers at which the debentures were sold) constitutes original issue
discount. In addition to stated cash interest on a debenture, which will be
taxable to a holder as ordinary interest income at the time it accrues or
is paid in accordance with the holder's method of accounting for United
States federal income tax purposes, holders of debentures will be required
to include original issue discount in income periodically over the term of
the debentures before receipt of the cash or other payment attributable to
such income. For United States federal income tax purposes, each holder of
a debenture must generally include in gross income a portion of the
original issue discount in each taxable year during which the debenture is
held in an amount equal to the original issue discount that accrues on the
debenture during such period, determined by using a constant yield to
maturity method. The original issue discount included in income for each
year will be calculated under a compounding formula that will result in the
allocation of less original issue discount to the earlier years of the term
of the debenture and more original issue discount to later years. For the
approximate cumulative total amount of the original issue discount accrued
annually, see the chart under "Description of Debentures." Any amount
included in income as original issue discount will increase a holder's tax
basis in the debenture.
DISPOSITION OR CONVERSION OF DEBENTURES
Except as described below, upon the sale or other disposition of a
debenture, a holder will recognize gain or loss equal to the difference
between the amount realized and the holder's income tax basis in the
debenture, which will generally equal the holder's cost of the debenture
increased by any accrued original issue discount includible in such
holder's gross income and reduced by any payments other than payments of
cash interest. Gain or loss upon a sale or other disposition of a debenture
will generally be capital gain or loss and will be long-term capital gain
or loss if the debenture is held for more than one year.
A holder that receives common stock in exchange for a debenture,
whether upon conversion of a debenture or, at the option of AnnTaylor
Stores Corporation, upon tender of a debenture, will generally not
recognize gain or loss (except with respect to shares, if any, received in
respect of accrued cash interest, which will be treated as a payment of
interest, and cash received in lieu of a fractional share). A holder's
income tax basis in the common stock received on conversion or tender of a
debenture will be the same as the holder's adjusted income tax basis in the
debenture at the time of conversion or tender (exclusive of any income tax
basis allocable to a fractional share), and the holding period for the
common stock received on conversion or tender will include the holding
period of the debenture converted. It is possible, however, the IRS may
argue that the holding period of the common stock allocable to accrued
original issue discount will commence on the date of the conversion or
tender. The receipt of cash in lieu of a fractional share of common stock
will generally result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the holder's
adjusted income tax basis in the fractional share.
If a holder elects to exercise his option to cause AnnTaylor Stores
Corporation to purchase his debentures on a purchase date and AnnTaylor
Stores Corporation issues common stock in satisfaction of all of the
purchase price, such exchange will be treated the same as a conversion. If
a holder elects to exercise his option to cause AnnTaylor Stores
Corporation to purchase his debentures on a purchase date and AnnTaylor
Stores Corporation delivers a combination of cash and common stock in
satisfaction of the purchase price, gain, but not loss, realized by the
holder will generally be recognized, but only to the extent of all cash
received. The character of any gain recognized may be capital or ordinary
depending on the circumstances, including the extent to which a holder
actually or constructively has any other equity interest in AnnTaylor
Stores Corporation. The holder's gain realized will be the sum of any cash
received (other than cash attributable to accrued but unpaid stated
interest) and the fair market value of the common stock received reduced by
the holder's adjusted income tax basis in the debentures. A holder's income
tax basis in the common stock received will generally be the same as the
holder's income tax basis in the debenture, reduced by the cash received
and increased by any gain recognized (exclusive of any income tax basis
allocable to a fractional share). In the event a holder surrenders a
debenture for conversion at such a time that the debenture is required to
be accompanied by a payment in an amount equal to the interest due thereon
on the immediately next succeeding interest payment date, the holder,
particularly if an accrual method taxpayer, should consult with his tax
advisor regarding the extent to which such payment is deductible.
ADJUSTMENT OF CONVERSION PRICE
If at any time AnnTaylor Stores Corporation makes a distribution of
property to shareholders that would be taxable to such shareholders as a
dividend for United States federal income tax purposes (for example,
distributions of evidences of indebtedness or assets of AnnTaylor Stores
Corporation, but generally not stock dividends or rights to subscribe for
common stock) and, in accordance with the anti-dilution provisions of the
debentures, the conversion rate of the debentures is increased, the amount
of such increase may be deemed to be the payment of a taxable dividend to
holders of the debentures. If the conversion rate is increased at the
discretion of AnnTaylor Stores Corporation or in other circumstances as
described under the heading "Description of Debentures," such increase may
also be deemed to be the payment of a taxable dividend to holders of
debentures. Moreover, in certain other circumstances, the absence of such
an adjustment to the conversion rate may result in a taxable dividend to
holders of common stock.
TAX EVENT
The modification of the terms of the debentures by AnnTaylor Stores
Corporation upon a tax event as described in "Description of Debentures,"
could possibly alter the timing of income recognition by the holders of the
debentures with respect to the semiannual payments of interest due on the
debentures.
SELLING SECURITYHOLDERS
The following table presents information with respect to the selling
securityholders and the principal amounts of debentures and shares of our
common stock issuable upon the conversion of these debentures that they may
offer under this prospectus. The term "selling securityholders" includes
donees and pledgees selling securities received from a named selling
securityholder after the date of this prospectus. The debentures were
originally issued by us and sold by the initial purchasers, in transactions
exempt from the registration requirements of the Securities Act, to
qualified institutional buyers or to institutional "accredited investors."
To our knowledge, none of the selling securityholders has, or within the
past three years has had, any position, office or other material
relationship with us or any of our predecessors or affiliates.
The principal amounts of debentures provided in the table below is
based on information provided to us by each of the selling securityholders
as of November 22, 1999, and the percentages are based on $199,072,000
principal amount at maturity of debentures outstanding. The number of
shares of common stock that may be sold is calculated based on the current
conversion ratio of 12.078 shares of common stock per $1,000 principal
amount at maturity of a debenture. If each selling securityholder named
below converted all of its debentures, each would own less than 1% of our
outstanding common stock, based on 31,554,120 shares of common stock
outstanding as of October 30, 1999.
Since the date on which each provided this information, each selling
securityholder identified below may have sold, transferred or otherwise
disposed of all or a portion of their debentures in a transaction exempt
from the registration requirements of the Securities Act. Information
concerning the selling securityholders may change from time to time and any
changed information will be set forth in supplements to this prospectus to
the extent required. In addition, the conversion ratio, and therefore the
number of shares of our common stock issuable upon conversion of the
debentures, is subject to adjustment. Accordingly, the number of shares of
common stock issuable upon conversion of the debentures may increase or
decrease.
The selling securityholders may from time to time offer and sell any
or all of the securities under this prospectus. Because the selling
securityholders are not obligated to sell the debentures or the common
stock issuable upon the conversion of the debentures, we cannot estimate
the amount of the debentures or how many shares of our common stock that
each selling securityholder will beneficially own after this offering.
SELLING SECURITYHOLDER PRINCIPAL AMOUNT
OF DEBENTURES
(IN $)
OR COMMON STOCK
AIM BALANCED FUND............................................. $ 4,750,000
AIM VI BALANCED FUND.......................................... $ 50,000
ALEXANDRA GLOBAL INVESTMENT FUND 1 LTD........................ $ 3,000,000
ALLSTATE INSURANCE COMPANY.................................... $ 3,200,000
ARKANSAS TEACHER RETIREMENT................................... $ 4,989,000
AST AIM BALANCED PORTFOLIO.................................... $ 700,000
BANC OF AMERICA SECURITIES, LLC............................... $ 2,000,000
BANCROFT CONVERTIBLE FUND, INC................................ $ 1,190,000
BANKERS TRUST TRUSTEE FOR CHRYSLER CORP. EMP. #1 PENSION
PLAN DATED 4/1/89........................................... $ 7,079,000
BAPTIST HEALTH SOUTH FLORIDA.................................. $ 336,000
BOSTON MUSEUM OF FINE ARTS.................................... $ 259,000
CHASE MANHATTAN NA TRUSTEE FOR IBM RETIREMENT PLAN
DATED 12/18/45.............................................. $ 9,591,000
CHRYSLER CORPORATION MASTER RETIREMENT TRUST.................. $ 6,890,000
DELTA AIR LINES MASTER TRUST.................................. $ 2,790,000
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC............ $ 1,190,000
ENGINEERS JOINT PENSION FUND.................................. $ 699,000
FIDELITY FINANCIAL TRUST: FIDELITY CONVERTIBLE SECURITIES FUND $ 25,660,000
FIST: FRANKLIN CONVERTIBLE SECURITIES FUND.................... $ 6,000,000
FRANKLIN & MARSHALL COLLEGE................................... $ 540,000
HIGHBRIDGE INTERNATIONAL, LLC................................. $ 10,175,000
IBM RETIREMENT FUND........................................... $ 591,000
LLT LIMITED................................................... $ 400,000
MERRILL LYNCH, PIERCE, FENNER AND SMITH INC................... $ 9,365,000
MOTION PICTURE INDUSTRY HEALTH PLAN - ACTIVE MEMBER FUND...... $ 810,000
MOTION PICTURE INDUSTRY HEALTH PLAN - RETIREE MEMBER FUND..... $ 405,000
MUSEUM OF FINE ARTS, BOSTON................................... $ 66,000
NEW HAMPSHIRE RETIREMENT SYSTEM............................... $ 395,000
NICHOLAS-APPLEGATE CONVERTIBLE FUND........................... $ 890,000
OCM CONVERTIBLE LIMITED PARTNERSHIP........................... $ 195,000
OCM CONVERTIBLE TRUST......................................... $ 3,715,000
PARKER-HANNIFIN CORPORATION................................... $ 82,000
PARTNER REINSURANCE COMPANY LTD............................... $ 1,645,000
PENN TREATY NETWORK AMERICA INSURANCE COMPANY................. $ 553,000
PHYSICIANS LIFE............................................... $ 357,000
PILGRIM CONVERTIBLE FUND...................................... $ 5,579,000
PROMUTUAL..................................................... $ 247,000
PUTNAM CONVERTIBLE INCOME - GROWTH TRUST...................... $ 2,039,000
PUTNAM BALANCED RETIREMENT FUND............................... $ 186,000
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST............. $ 190,000
QUATTRO OFFSHORE FUND, LTD.................................... $ 850,000
RHONE - POULENC RORER PENSION PLAN............................ $ 111,000
ROBERTSON STEPHENS............................................ $ 3,000,000
SALOMON BROTHERS ASSET MANAGEMENT, INC. ...................... $ 2,287,280
SAN DIEGO CITY................................................ $ 1,190,000
SAN DIEGO CITY RETIREMENT..................................... $ 1,625,000
SAN DIEGO COUNTY CONVERTIBLE.................................. $ 5,111,000
S.G. COWEN SECURITIES......................................... $ 10,000,000
SOUTHPORT MANAGEMENT PARTNERS, L.P............................ $ 1,000,000
SOUTHPORT PARTNERS INTERNATIONAL LTD.......................... $ 2,000,000
STATE EMPLOYEES' RETIREMENT FUND OF THE STATE OF DELAWARE..... $ 3,575,000
STATE OF CONNECTICUT COMBINED INVESTMENT FUNDS................ $ 8,045,000
STATE STREET BANK CUSTODIAN FOR GE PENSION TRUST.............. $ 3,737,000
UNIVERSITY OF ROCHESTER....................................... $ 63,000
VANGUARD CONVERTIBLE SECURITIES FUND, INC..................... $ 4,830,000
WAKE FOREST UNIVERSITY........................................ $ 1,720,000
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all
securities offered and sold under this prospectus. We will not receive any
of the proceeds on these sales of these securities. In connection with the
initial offering of the debentures, we entered into a registration rights
agreement dated June 18, 1999 with the initial purchasers of the
debentures. Securities may only be offered or sold under this prospectus
pursuant to the terms of the registration rights agreement. However,
selling securityholders may resell all or a portion of the securities in
open market transactions in reliance upon Rule 144 or Rule 144A under the
Securities Act, provided they meet the criteria and conform to the
requirements of one of these rules.
Who may sell and applicable restrictions.
The securities may be sold directly by the selling securityholders
from time to time. The selling securityholders may decide not to sell any
of the securities offered under this prospectus, and selling
securityholders could transfer, devise or gift these securities by other
means.
Alternatively, the selling securityholders may from time to time
offer the securities through brokers, dealers or agents that may receive
compensation in the form of discounts, concessions or commissions from the
selling securityholders and/or the purchasers of the securities for whom
they may act as agent. In effecting sales, broker-dealers that are engaged
by the selling securityholders may arrange for other broker-dealers to
participate. The selling securityholders and any brokers, dealers or agents
who participate in the distribution of the securities may be deemed to be
underwriters and any profits on the sale of the securities by them and any
discounts, commissions or concessions received by any broker, dealer or
agent might be deemed to be underwriting discounts and commissions under
the Securities Act. To the extent the selling securityholders may be deemed
to be underwriters, the selling securityholders may be subject to statutory
liabilities, including, but not limited to, liability under Sections 11, 12
and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
Prospectus delivery.
Because selling securityholders may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act, they will be
subject to the prospectus delivery requirements of the Securities Act. At
any time a particular offer of the securities is made, a revised prospectus
or prospectus supplement, if required, will be distributed which will
disclose:
o the name of the selling securityholders and of any participating
underwriters, broker-dealers or agents;
o the aggregate amount and type of securities being offered;
o the price at which the securities were sold and other material
terms of the offering;
o any discounts, commissions, concessions or other items
constituting compensation from the selling securityholders and
any discounts, commissions or concessions allowed or reallowed
or paid to dealers; and
o that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed with
the Securities and Exchange Commission to reflect the disclosure of
additional information with respect to the distribution of the securities.
In addition, if we receive notice from a selling securityholder that a
donee or pledgee intends to sell more than 500 shares of our common stock,
a supplement to this prospectus will be filed.
Manner of sales.
The selling securityholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. Sales
may be made over the Nasdaq National Market or the over-the-counter market.
The securities may be sold at then prevailing market prices, at fixed
prices or at negotiated prices.
The securities may be sold according to one or more of the following
methods:
o a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
o purchases by a broker or dealer as principal and resale by the
broker or dealer for its account as allowed under this
prospectus;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o an exchange distribution under the rules of the exchange;
o face-to-face transactions between sellers and purchasers without
a broker-dealer; and
o by writing options.
SOME PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
INCLUDING THE ENTRY OF STABILIZING BIDS OR SYNDICATE COVERING TRANSACTIONS
OR THE IMPOSITION OF PENALTY BIDS.
The selling securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder including Regulation M. This
regulation may limit the timing of purchases and sales of any of the
securities by the selling securityholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of
securities in the market and to the activities of the selling
securityholders and their affiliates. Furthermore, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the
distribution of the securities to engage in market-making activities with
respect to the particular securities being distributed for a period of up
to five business days before the distribution. All of the foregoing may
affect the marketability of the securities and the ability of any person or
entity to engage in market-making activities with respect to the
securities.
Hedging and other transactions with broker-dealers.
In connection with distributions of the securities, the selling
securityholders may enter into hedging transactions with broker-dealers. In
connections with these transactions, broker-dealers may engage in short
sales of the registered securities in the course of hedging the positions
they assume with selling securityholders. The selling securityholders may
also sell securities short and redeliver the securities to close short
positions. The selling securityholders may also enter into options or other
transactions with broker-dealers which require the delivery to the
broker-dealer of the registered securities. The broker-dealer may then
resell or transfer these securities under this prospectus. A selling
securityholder may also loan or pledge the registered securities to a
broker-dealer and the broker-dealer may sell the securities so loaned or,
upon a default, the broker-dealer may effect sales of the pledged
securities under this prospectus.
Expenses associated with registration.
We have agreed to pay substantially all of the expenses of
registering the securities under the Securities Act and of compliance with
blue sky laws, including registration and filing fees, printing and
duplicating expenses, administrative expenses, legal and accounting fees,
fees for one legal counsel retained by the selling securityholders and fees
of the trustee under the indenture pursuant to which we originally issued
the securities. If the debentures or our underlying common stock are sold
through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts, underwriting commissions and agent
commissions.
Indemnification and contribution.
In the registration rights agreement, we and the selling
securityholders have agreed to indemnify or provide contribution to each
other and specified other persons against some liabilities in connection
with the offering of the securities, including liabilities arising under
the Securities Act. The selling securityholders may also agree to indemnify
any broker-dealer or agent that participates in transactions involving
sales of the securities against some liabilities, including liabilities
that arise under the Securities Act.
Suspension of this offering.
We may suspend the use of this prospectus if we learn of any event
that causes this prospectus to include an untrue statement of a material
fact required to be stated in the prospectus or necessary to make the
statements in the prospectus not misleading in the light of the
circumstances then existing. If this type of event occurs, a prospectus
supplement or post-effective amendment, if required, will be distributed to
each selling securityholder. Each selling securityholder has agreed not to
trade securities from the time the selling securityholder receives notice
from us of this type of event until the selling securityholder receives a
prospectus supplement or amendment. This time period will not exceed
forty-five days in any three month period or ninety days in a twelve month
period.
Termination of this offering.
Under the registration rights agreement, we are obligated to use
reasonable efforts to keep the registration statement effective until ,
2001. Therefore this offering will terminate on the earlier of: (1) the
expiration date of this effectiveness period, or (2) the date on which all
securities offered under this prospectus have been sold by the selling
securityholders.
LEGAL MATTERS
Certain legal matters with respect to the debentures and the common
stock issuable upon conversion will be passed upon for us by Jocelyn F.L.
Barandiaran, Esquire, Senior Vice President, General Counsel and Corporate
Secretary of AnnTaylor Stores Corporation and AnnTaylor, Inc., and by
Skadden, Arps, Slate, Meagher & Flom LLP. Ms. Barandiaran has been granted
options to purchase 36,235 shares of common stock of AnnTaylor Stores
Corporation.
EXPERTS
The financial statements incorporated in this prospectus by
reference from AnnTaylor Stores Corporation's and AnnTaylor Inc.'s Annual
Reports on Form 10-K for the year ended January 30, 1999 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated
in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURES
This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act relating to future events or financial results. These
forward-looking statements include statements indicating that we believe,
we expect or we anticipate that events may occur or trends may continue,
and similar statements relating to future events or financial results.
These forward-looking statements are subject to material risks and
uncertainties as indicated under the caption "Risk Factors." Actual results
could vary materially as a result of a number of factors including those
disclosed in "Risk Factors" and elsewhere in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The following documents that AnnTaylor Stores Corporation and
AnnTaylor, Inc. have previously filed with the Securities and Exchange
Commission are incorporated in this prospectus by reference and shall be
deemed a part of this prospectus:
(a) Annual Report of AnnTaylor Stores Corporation on Form 10-K for
the fiscal year ended January 30, 1999;
(b) Quarterly Report of AnnTaylor Stores Corporation on Form 10-Q
for the quarterly period ended May 1, 1999;
(c) Quarterly Report of AnnTaylor Stores Corporation on Form 10-Q for
the quarterly and six month period ended July 31, 1999
(d) The description of our common stock contained in our
Registration Statement on Form 8-A of AnnTaylor Stores Corporation filed on
April 11, 1991 under Section 12 of the Exchange Act, and any amendments
thereto;
(e) Current Report on Form 8-K of AnnTaylor Stores Corporation and
AnnTaylor, Inc. dated June 11, 1999;
(f) Current Report on Form 8-K of AnnTaylor Stores Corporation and
AnnTaylor, Inc. dated June 21, 1999;
(g) Annual Report of AnnTaylor, Inc. on Form 10-K for the fiscal
year ended January 30, 1999; and
(h) Quarterly Report of AnnTaylor, Inc. on Form 10-Q for the
quarterly period ended May 1, 1999.
(i) Quarterly Report of AnnTaylor, Inc. on Form 10-Q for the
quarterly and six month period ended July 31, 1999;
All documents filed by AnnTaylor Stores Corporation and AnnTaylor,
Inc. pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this prospectus and prior to the termination of this
offering shall be deemed to be incorporated in this prospectus by reference
and to be a part of this prospectus, from the date of filing of the
documents. Any statement incorporated in this prospectus will be deemed to
be modified or superseded for purposes of this prospectus to the extent
that a statement contained in this prospectus or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
in this prospectus modifies or supersedes the statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
We have filed with the Commission a registration statement on Form
S-3 under the Securities Act with respect to the debentures and common
stock offered under this prospectus. This prospectus does not contain all
of the information that is in the registration statement, parts of which we
have omitted, as allowed under the rules and regulations of the Commission.
You should refer to the registration statement for further information with
respect to us, our debentures and our common stock. Statements contained in
this prospectus as to the contents of any contract or other document,
including the indenture and the registration rights agreement, are not
necessarily complete and, in each instance, we refer you to the copy of
each contract or document filed as an exhibit to the registration
statement. Copies of the registration statement, including exhibits, may be
inspected without charge at the Commission's principal office in
Washington, D.C., and you may obtain copies from this office upon payment
of the fees prescribed by the Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the
information that has been incorporated by reference into this prospectus
(except exhibits, unless they are specifically incorporated by reference
into this prospectus). Requests should be directed to AnnTaylor Stores
Corporation, 142 West 57th Street, New York, NY 10019, Attention: Corporate
Secretary, telephone: (212) 541-3300.
ANNTAYLOR STORES CORPORATION
$199,072,000 PRINCIPAL AMOUNT AT MATURITY
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2019
GUARANTEED ON A SUBORDINATED BASIS BY ANNTAYLOR, INC.
AND THE 2,404,391 SHARES OF COMMON STOCK OF ANNTAYLOR STORES CORPORATION
ISSUABLE UPON CONVERSION OF THE DEBENTURES
- - - - - - - - - - - - - - -
PROSPECTUS
- - - - - - - - - - - - - - -
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS
PROSPECTUS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by
us in connection with the issuance and distribution of the securities being
registered hereunder, other than commissions.
Registration fee...................................................$ 30,824
Trustee fees and expenses.......................................... 10,000
Printing and engraving............................................. 175,000
Legal fees and expenses............................................ 225,000
Accounting fees and expenses....................................... 50,000
Rating agency fees................................................. 95,000
Miscellaneous expenses............................................. 14,176
-----------
Total........................................................$ 600,000
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Charter, By-law and Statutory Provisions
As permitted by the Delaware General Corporation Law, Article 6,
Section 4 of our Certificate of Incorporation includes a provision that
eliminates the personal liability of our directors to us or our
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
o for any breach of the director's duty of loyalty to the
corporation or its stockholders;
o for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation
of law;
o under Section 174 of the Delaware General Corporation Law; and
o for any transaction from which the director derived an improper
personal benefit.
Article 8, Sections 1 and 2 of our by-laws relating to
indemnification of directors and officers provides for indemnification in
accordance with our charter.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits
1.01 - Purchase Agreement between AnnTaylor Stores Corporation, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith and Banc America
Securities LLC dated as of June 18, 1999.*
3.01 - Restated Certificate of Incorporation of AnnTaylor Stores
Corporation. Incorporated by reference to Exhibit 4.1 to the Registration
Statement of AnnTaylor Stores Corporation on Form S-8 filed with the
Securities and Exchange Commission (the "Commission") on August 10, 1992
(Registration No. 33-50688).
3.02 - Amendment to the Restated Certificate of Incorporation of AnnTaylor
Stores Corporation. Incorporated by reference to Exhibit 3.1 to the Form
10-Q of AnnTaylor Stores Corporation for the Quarter ended May 1, 1999
filed on June 11, 1999 (Registration No. 1-11980).
3.03 - By-Laws of AnnTaylor Stores Corporation. Incorporated by reference
to Exhibit 3.2 to the Form 10-Q of AnnTaylor Stores Corporation for the
Quarter ended November 2, 1991 filed on December 17, 1991.
3.04 - Certificate of Incorporation of AnnTaylor, Inc., as amended.
Incorporated by reference to Exhibit 3.3 to the Registration Statement of
AnnTaylor Stores Corporation and AnnTaylor, Inc. Filed on May 3, 1989.
3.05 - By-laws of AnnTaylor, Inc. Incorporated by reference to Exhibit 3.4
to the Registration Statement of AnnTaylor Stores Corporation and
AnnTaylor, Inc. filed on May 3, 1989 (Registration No. 33-28522).
4.01 - Indenture between AnnTaylor Stores Corporation, AnnTaylor, Inc. and
The Bank of New York dated as of June 18, 1999.*
4.02 - Registration Rights Agreement between AnnTaylor Stores Corporation,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith and Banc America
Securities LLC dated as of June 18, 1999.*
5.01 - Opinion and consent of Jocelyn Barandiaran, General Counsel for
AnnTaylor Stores Corporation.
5.02 - Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP,
Special Counsel for AnnTaylor Stores Corporation.
8.01 - Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP,
Special Counsel for AnnTaylor Stores Corporation as to certain tax matters.
12.01 - Computation of Ratio of Earnings to Fixed Charges.
23.01 - Consent of Deloitte & Touche LLP, Independent Auditors for
AnnTaylor Stores Corporation.
23.02 - Consent of Deloitte & Touche LLP, Independent Auditors for
AnnTaylor, Inc.
24.01 - Power of Attorney of certain officers and directors of AnnTaylor
Stores Corporation.*
24.02 - Power of Attorney of certain officers and directors of AnnTaylor, Inc.*
25.01 - Form T-1: Statement of Eligibility under the Trust Indenture Act of
1939 of The Bank of New York, trustee under the indenture.*
* Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement: (i)
to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) that for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
the Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of New York, State of New York, on
the 23rd day of November, 1999.
ANNTAYLOR STORES CORPORATION
By:/s/ J. Patrick Spainhour
---------------------------------
J. Patrick Spainhour
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
By: * Chairman, Chief Executive November 23, 1999
---------------------------- Officer and Director
J. Patrick Spainhour
By: * President, Chief Operating November 23, 1999
---------------------------- Officer and Director
Patricia DeRosa
By:/s/ Barry Erdos Executive Vice President, November 23, 1999
---------------------------- Chief Financial Officer
Barry Erdos and Treasurer
By:/s/ James M. Smith Vice President-Controller, November 23, 1999
---------------------------- Assistant Treasurer and
James M. Smith Assistant Secretary
By: * Director November 23, 1999
----------------------------
Gerald S. Armstrong
By: * Director November 23, 1999
----------------------------
James J. Burke, Jr.
By: * Director November 23, 1999
----------------------------
Wesley E. Cantrell
By: * Director November 23, 1999
----------------------------
Robert C. Grayson
By: * Director November 23, 1999
----------------------------
Ronald W. Hovsepian
By: * Director November 23, 1999
----------------------------
Rochelle B. Lazarus
By: * Director November 23, 1999
----------------------------
Hanne M. Merriman
* By:/s/ Jocelyn Barandiaran
-------------------------
Jocelyn Barandiaran
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of New York, State of New York, on
the 23rd day of November, 1999.
ANNTAYLOR, INC.
By:/s/ J. Patrick Spainhour
---------------------------------
J. Patrick Spainhour
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
By: * Chairman, Chief Executive November 23, 1999
---------------------------- Officer and Director
J. Patrick Spainhour
By: * President, Chief Operating November 23, 1999
---------------------------- Officer and Director
Patricia DeRosa
By:/s/ Barry Erdos Executive Vice President, November 23, 1999
---------------------------- Chief Financial Officer
Barry Erdos and Treasurer
By:/s/ James M. Smith Vice President-Controller, November 23, 1999
---------------------------- Assistant Treasurer and
James M. Smith Assistant Secretary
By: * Director November 23, 1999
----------------------------
Gerald S. Armstrong
By: * Director November 23, 1999
----------------------------
James J. Burke, Jr.
By: * Director November 23, 1999
----------------------------
Wesley E. Cantrell
By: * Director November 23, 1999
----------------------------
Robert C. Grayson
By: * Director November 23, 1999
----------------------------
Ronald W. Hovsepian
By: * Director November 23, 1999
----------------------------
Rochelle B. Lazarus
By: * Director November 23, 1999
----------------------------
Hanne M. Merriman
* By:/s/ Jocelyn Barandiaran
------------------------
Jocelyn Barandiaran
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
NO.
1.01 Purchase Agreement between AnnTaylor Stores Corporation,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith and
Banc America Securities LLC dated as of June 18, 1999.*
3.01 Restated Certificate of Incorporation of AnnTaylor Stores
Corporation. Incorporated by reference to Exhibit 4.1 to the
Registration Statement of AnnTaylor Stores Corporation on Form
S-8 filed with the Securities and Exchange Commission (the
"Commission") on August 10, 1992 (Registration No. 33-50688).
3.02 Amendment to the Restated Certificate of Incorporation of
AnnTaylor Stores Corporation. Incorporated by reference to
Exhibit 3.1 to the Form 10-Q of AnnTaylor Stores Corporation
for the Quarter ended May 1, 1999 filed on June 11, 1999
(Registration No. 1-11980).
3.03 By-Laws of AnnTaylor Stores Corporation. Incorporated by
reference to Exhibit 3.2 to the Form 10-Q of AnnTaylor Stores
Corporation for the Quarter ended November 2, 1991 filed on
December 17, 1991.
3.04 Certificate of Incorporation of AnnTaylor, Inc., as amended.
Incorporated by reference to Exhibit 3.3 to the Registration
Statement of AnnTaylor Stores Corporation and AnnTaylor, Inc.
Filed on May 3, 1989.
3.05 By-laws of AnnTaylor, Inc. Incorporated by reference
to Exhibit 3.4 to the Registration Statement of AnnTaylor Stores
Corporation and AnnTaylor, Inc. filed on May 3, 1989 (Registration
No. 33-28522).
4.01 Indenture between AnnTaylor Stores Corporation, AnnTaylor, Inc.
and The Bank of New York dated as of June 18, 1999.*
4.02 Registration Rights Agreement between AnnTaylor Stores
Corporation, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith and Banc America Securities LLC dated as of
June 18, 1999.*
5.01 Opinion and consent of Jocelyn Barandiaran, General Counsel
for AnnTaylor Stores Corporation.
5.02 Opinion and consent of Skadden, Arps, Slate, Meagher & Flom
LLP, Special Counsel for AnnTaylor Stores Corporation.
8.01 Opinion and consent of Skadden, Arps, Slate, Meagher & Flom
LLP, Special Counsel for AnnTaylor Stores Corporation as to
certain tax matters.
12.01 Computation of Ratio of Earnings to Fixed Charges.
23.01 Consent of Deloitte & Touche LLP, Independent Auditors
for AnnTaylor Stores Corporation.
23.02 Consent of Deloitte & Touche LLP, Independent Auditors
for AnnTaylor, Inc.
24.01 Power of Attorney of certain officers and directors of
AnnTaylor Stores Corporation.*
24.02 Power of Attorney of certain officers and directors of
AnnTaylor, Inc.*
*25.01 Form T-1: Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York, trustee under the
indenture.*
* Previously filed.
EXHIBIT 5.01
ANN TAYLOR
Jocelyn F.L. Barandiaran
Senior Vice President/General
Counsel/Secretary
November 23, 1999
AnnTaylor Stores Corporation
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10019
Re: AnnTaylor Stores Corporation and AnnTaylor, Inc.
Registration Statement on Form S-3
Registration Nos. 333-86955 and 333-86955-01
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and Secretary of
AnnTaylor Stores Corporation, a Delaware corporation (the "Company"), and
AnnTaylor, Inc., a Delaware corporation (the "Subsidiary Guarantor"), and
am delivering this opinion in connection with the Registration Statement on
Form S-3 of the Company and the Subsidiary Guarantor (Registration Nos.
333-86955 and 333-86955-01) filed by the Company and the Subsidiary
Guarantor with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), on
September 13, 1999 and Amendment No. 1 thereto, filed with the Commission
on November 23, 1999 (such Registration Statement, as so amended, being
hereinafter referred to as the "Registration Statement"), relating to the
registration (i) by the Company of $199,072,000 aggregate principal amount
at maturity of its Convertible Subordinated Debentures due 2019 (the
"Debentures"), (ii) by the Subsidiary Guarantor of its guarantee (the
"Guarantee") of the Debentures on a subordinated basis, and (iii) by the
Company of the shares of common stock, par value $.0068 per share (the
"Company Common Stock"), of the Company, issuable upon conversion of the
Debentures and certain other securities described below.
The Debentures and the Guarantee were issued pursuant to an
indenture, dated as of June 18, 1999 (the "Indenture"), between the
Company, the Subsidiary Guarantor and The Bank of New York, as trustee.
This opinion is being delivered in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act. Capitalized
terms used herein but not otherwise defined herein have the meanings
ascribed to them in the Registration Statement.
In connection with this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction,
of (i) the Certificate of Incorporation and By-laws of the Company and the
Subsidiary Guarantor, as amended to date, (ii) the Registration Statement,
(iii) the applicable resolutions of the Boards of Directors of the Company
and the Subsidiary Guarantor, (iv) a specimen certificate evidencing the
Common Stock, (v) a specimen certificate evidencing the Debentures, (vi)
the Indenture filed as an exhibit to the Registration Statement and (vii)
the Purchase Agreement, dated June 18, 1999, among the Company, the
Subsidiary Guarantor and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, and Banc of America Securities LLC, as initial
purchasers. I have also examined originals or copies, certified or
otherwise identified to my satisfaction, of such records of the Company and
the Subsidiary Guarantor and such other documents, certificates and records
as I have deemed necessary or appropriate as a basis for the opinions set
forth below.
In my examination, I have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all
documents submitted to me as originals, the conformity to original
documents of all documents submitted to me as certified or photostatic
copies and the authenticity of the originals of such copies. In making my
examination of documents executed by parties other than the Company or the
Subsidiary Guarantor, I have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder
and have also assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such
documents and that such documents constitute valid and binding obligations
of such parties. As to any facts material to this opinion that I did not
independently establish or verify, I have relied upon certificates,
statements and representations of officers, trustees and other
representatives of the Company, the Subsidiary Guarantor and others.
I am admitted to the Bar in the State of New York and express no
opinion as to the laws of any other jurisdiction except the General
Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, I am of the opinion that the
shares of Company Common Stock initially issuable upon conversion of the
Debentures have been duly authorized and reserved for issuance upon
conversion and, if and when issued upon conversion of the Debentures, will
be validly issued, fully paid and nonassessable shares of Company Common
Stock.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and the reference to me under the
heading "Legal Matters" in the Registration Statement. In giving such
consent, I do not thereby admit that I am in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ JOCELYN F.L. BARANDIARAN
GERI
Exhibit 5.02
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
--
Tel: (212) 735-3000
Fax: (212) 735-2000
November 23, 1999
AnnTaylor Stores Corporation
AnnTaylor, Inc.
142 West 57th Street
New York, New York 10019
Re: AnnTaylor Stores Corporation and AnnTaylor, Inc.
Registration Statement on Form S-3
Registration Nos. 333-86955 and 86955-01
------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to AnnTaylor Stores
Corporation, a Delaware corporation (the "Company"), and AnnTaylor, Inc., a
Delaware corporation (the "Subsidiary Guarantor"), in connection with the
preparation of a registration statement on Form S-3 (Registration Nos.
333-86955 and 86955-01) relating to the registration for resale of (a) up
to $199,072,000 aggregate principal amount at maturity of the Company's
Convertible Subordinated Debentures Due 2019 (the "Debentures") issued
under an indenture, dated as of June 18, 1999 (the "Indenture"), by and
among the Company, the Subsidiary Guarantor and The Bank of New York, as
trustee (the "Trustee"), (b) the Subsidiary Guarantor's guarantee (the
"Guarantee") of the Debentures on a subordinated basis, and (c) the shares
(the "Shares") of the Company's common stock, par value $0.0068 per share
(the "Common Stock"), issuable upon conversion of the Debentures. The
Debentures, the Guarantee and the Shares are referred to herein
collectively as the "Securities."
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act
of 1933, as amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement relating to the Securities as filed with the
Securities and Exchange Commission (the "Commission") on September 13, 1999
under the Act and Amendment No. 1 thereto as filed with the Commission on
November 23, 1999 (such Registration Statement, as so amended, being
hereinafter referred to as the "Registration Statement"); (ii) an executed
copy of the Indenture filed as an exhibit to the Registration Statement;
(iii) executed copies of the Debentures originally issued under the
Indenture; (iv) the Restated Certificate of Incorporation of the Company,
as amended to date; (v) the By-Laws of the Company, as amended to date;
(vi) the Restated Certificate of Incorporation of the Subsidiary Guarantor,
as amended to date; (vii) the By-Laws of the Subsidiary Guarantor, as
amended to date; (viii) the Form T-1 of the Trustee filed as an exhibit to
the Registration Statement; (ix) a specimen certificate evidencing the
Common Stock; (x) the Cross-Receipt, dated June 18, 1999, and the
Cross-Receipt, dated July 15, 1999, both executed by Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and the Company relating
to the original issuance of the Debentures and the receipt of payment
therefor; (xi) certain resolutions of the Board of Directors of the Company
and of the Pricing Committee established by the Board of Directors of the
Company, in each case, relating to the issuance of the Securities, the
Indenture and related matters; and (xii) certain resolutions of the Board
of Directors of the Subsidiary Guarantor, relating to the issuance of the
Guarantee and related matters. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of
the Company and the Subsidiary Guarantor and such agreements, certificates
of public officials, certificates of officers or other representatives of
the Company and others, and such other documents, certificates and records
as we have deemed necessary or appropriate as a basis for the opinions set
forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of executed documents, we have assumed
that the parties thereto, other than the Company and the Subsidiary
Guarantor, had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on
such parties. As to any facts material to the opinions expressed herein
which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives
of the Company, the Subsidiary Guarantor and others. In rendering the
opinion set forth in paragraph 3 below, we have assumed that the
certificates representing the shares of Common Stock issued upon conversion
of the Debentures will conform to the specimen certificate examined by us
and will be countersigned by a duly authorized officer of the transfer
agent for the Common Stock and duly registered by the registrar for the
Common Stock in the share record books of the Company.
Our opinions set forth herein are limited to Delaware corporate
law and the laws of the State of New York which are normally applicable to
transactions of the type contemplated by the Indenture and the Debentures
and to the extent that judicial or regulatory orders or decrees or
consents, approvals, licenses, authorizations, validations, filings,
recordings or registrations with governmental authorities are relevant, to
those required under such laws (all of the foregoing being referred to as
"Opined on Law"). We do not express any opinion with respect to the law of
any jurisdiction other than Opined on Law or as to the effect of any such
non opined on law on the opinions herein stated.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. The Debentures are valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity).
2. The Guarantee has been duly authorized, executed and
delivered by the Subsidiary Guarantor, and constitutes a valid and
binding agreement of the Subsidiary Guarantor, enforceable against
the Subsidiary Guarantor in accordance with its terms, except to the
extent that (a) enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
3. The shares of Common Stock initially issuable upon
conversion of the Debentures, if and when the Debentures are
converted into shares of Common Stock in accordance with their terms
and the terms of the Indenture, will be validly issued, fully paid
and nonassessable.
In rendering the opinions set forth above, we have assumed that
the execution and delivery by the Company of the Debentures and by the
Company and the Subsidiary Guarantor of the Indenture and the performance
by the Company and the Subsidiary Guarantor of their obligations thereunder
do not and will not violate, conflict with or constitute a default under
any agreement or instrument to which the Company, the Subsidiary Guarantor
or their properties are subject, except for those agreements and
instruments which were identified to us by the Company and the Subsidiary
Guarantor as being material to them and which are listed as exhibits to the
Company's Annual Report on Form 10-K for the year ended January 30, 1999
and to the Subsidiary Guarantor's Annual Report on Form 10-K for the year
ended January 30, 1999.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to
the reference to our firm under the caption "Legal Matters" in the
Registration Statement. In giving this consent, we do not thereby admit
that we are included in the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Commission.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Exhibit 8.01
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
November 23, 1999
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Ladies and Gentlemen:
In connection with the filing of the Registration Statement on
Form S-3 (the "Registration Statement"), you have asked us to address the
anticipated material U.S. federal income tax consequences of the purchase,
ownership and disposition of $199,072,000 aggregate principal amount at
maturity of 3 3/4% convertible subordinated Debentures due 2019 (the
"Debentures") and shares of AnnTaylor Stores Corporation common stock
issuable upon the conversion of such Debentures (the "Common Stock"). More
particularly, you have requested our opinion regarding the material U.S.
federal income tax consequences under the heading "UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS" in the Registration Statement filed on the date
hereof with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"). This opinion
is delivered in accordance with the requirements of Item 601(b)(8) of
Regulation S-K under the Securities Act.
In rendering our opinion, we have reviewed the Registration
Statement and such other materials as we have deemed necessary or
appropriate as a basis for our opinion. In addition, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations promulgated thereunder by the U.S. Department
of Treasury (the "Regulations"), pertinent judicial authorities, rulings of
the Internal Revenue Service (the "IRS"), and such other authorities as we
have considered relevant, in each case as in effect on the date hereof. It
should be noted that such Code, Regulations, judicial decisions,
administrative interpretations and other authorities are subject to change
at any time, perhaps with retroactive effect. A material change in any of
the materials or authorities upon which our opinion is based could affect
our conclusions stated herein. In addition, there can be no assurance that
the IRS will not assert contrary positions.
Based upon the foregoing, subject to the qualifications set
forth herein, it is our opinion that the following discussion fairly and
accurately describes the anticipated material U.S. federal income tax
considerations relating to the purchase, ownership, disposition and
conversion of the Debentures and Common Stock to a holder of a Debenture or
Common Stock that is, for U.S. federal income tax purposes, (1) a citizen
or resident of the United States; (2) a corporation created or organized in
or under the laws of the United States or any political subdivision
thereof; (3) an estate, the net income of which is subject to United States
federal income taxation regardless of its source; or (4) a trust, the
administration of which is subject to the primary supervision of a court
within the United States and which has one or more United States persons
with authority to control all substantial decisions.
This opinion deals only with holders of Debentures who hold the
Debentures and any Common Stock into which the Debentures are converted as
capital assets and does not address the tax consequences arising under the
laws of any foreign, state or local jurisdiction and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as rules relating to persons who are not citizens or residents
of the United States; financial institutions and banks; tax-exempt
organizations; insurance companies; broker-dealers; and persons who hold
Debentures or Common Stock as part of a hedge, conversion or constructive
sale transaction, or straddle or other risk reduction transaction.
Furthermore, this opinion does not address the tax consequences applicable
to holders that are treated as partnerships or other passthrough entities
for United States federal income tax purposes.
Cash Interest and Original Issue Discount
The Debentures were initially issued at a substantial discount
from their stated principal amount at maturity. For United States federal
income tax purposes, the excess of the stated principal amount at maturity
of each Debenture over the issue price (the initial offering price to the
initial purchasers at which the Debentures were sold) constitutes original
issue discount. In addition to stated cash interest on a Debenture, which
will be taxable to a holder as ordinary interest income at the time it
accrues or is paid in accordance with the holder's method of accounting for
United States federal income tax purposes, holders of Debentures will be
required to include original issue discount in income periodically over the
term of the Debentures before receipt of the cash or other payment
attributable to such income. For United States federal income tax purposes,
each holder of a Debenture must generally include in gross income a portion
of the original issue discount in each taxable year during which the
Debenture is held in an amount equal to the original issue discount that
accrues on the Debenture during such period, determined by using a constant
yield to maturity method. The original issue discount included in income
for each year will be calculated under a compounding formula that will
result in the allocation of less original issue discount to the earlier
years of the term of the Debenture and more original issue discount to
later years. Any amount included in income as original issue discount will
increase a holder's tax basis in the Debenture.
Disposition or Conversion of Debentures
Except as described below, upon the sale or other disposition
of a Debenture, a holder will recognize gain or loss equal to the
difference between the amount realized and the holder's income tax basis in
the Debenture, which will generally equal the holder's cost of the
Debenture increased by any accrued original issue discount includible in
such holder's gross income and reduced by any payments other than payments
of cash interest. Gain or loss upon a sale or other disposition of a
Debenture will generally be capital gain or loss and will be long-term
capital gain or loss if the Debenture is held for more than one year.
A holder that receives Common Stock in exchange for a
Debenture, whether upon conversion of a Debenture or, at the option of
AnnTaylor Stores Corporation, upon tender of a Debenture, will generally
not recognize gain or loss (except with respect to shares, if any, received
in respect of accrued cash interest, which will be treated as a payment of
interest, and cash received in lieu of a fractional share). A holder's
income tax basis in the Common Stock received on conversion or tender of a
Debenture will be the same as the holder's adjusted income tax basis in the
Debenture at the time of conversion or tender (exclusive of any income tax
basis allocable to a fractional share), and the holding period for the
Common Stock received on conversion or tender will include the holding
period of the Debenture converted. It is possible, however, the IRS may
argue that the holding period of the common stock allocable to accrued
original issue discount will commence on the date of the conversion or
tender. The receipt of cash in lieu of a fractional share of common stock
will generally result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the holder's
adjusted income tax basis in the fractional share.
If a holder elects to exercise his option to cause AnnTaylor
Stores Corporation to purchase his Debentures on a purchase date and
AnnTaylor Stores Corporation issues Common Stock in satisfaction of all of
the purchase price, such exchange will be treated the same as a conversion.
If a holder elects to exercise his option to cause AnnTaylor Stores
Corporation to purchase his Debentures on a purchase date and AnnTaylor
Stores Corporation delivers a combination of cash and Common Stock in
satisfaction of the purchase price, gain, but not loss, realized by the
holder will generally be recognized, but only to the extent of all cash
received. The character of any gain recognized may be capital or ordinary
depending on the circumstances, including the extent to which a holder
actually or constructively has any other equity interest in AnnTaylor
Stores Corporation. The holder's gain realized will be the sum of any cash
received (other than cash attributable to accrued but unpaid stated
interest) and the fair market value of the common stock received reduced by
the holder's adjusted income tax basis in the Debentures. A holder's income
tax basis in the Common Stock received will generally be the same as the
holder's income tax basis in the Debenture, reduced by the cash received
and increased by any gain recognized (exclusive of any income tax basis
allocable to a fractional share). In the event a holder surrenders a
Debenture for conversion at such a time that the Debenture is required to
be accompanied by a payment in an amount equal to the interest due thereon
on the immediately next succeeding interest payment date, the holder,
particularly if an accrual method taxpayer, should consult with his tax
advisor regarding the extent to which such payment is deductible.
Adjustment of Conversion Price
If at any time AnnTaylor Stores Corporation makes a
distribution of property to shareholders that would be taxable to such
shareholders as a dividend for United States federal income tax purposes
(for example, distributions of evidences of indebtedness or assets of
AnnTaylor Stores Corporation, but generally not stock dividends or rights
to subscribe for Common Stock) and, in accordance with the anti-dilution
provisions of the Debentures, the conversion rate of the Debentures is
increased, the amount of such increase may be deemed to be the payment of a
taxable dividend to holders of the Debentures. If the conversion rate is
increased at the discretion of AnnTaylor Stores Corporation or in other
circumstances as described under the heading "Description of Debentures,"
such increase may also be deemed to be the payment of a taxable dividend to
holders of Debentures. Moreover, in certain other circumstances, the
absence of such an adjustment to the conversion rate may result in a
taxable dividend to holders of Common Stock.
Tax Event
The modification of the terms of the Debentures by AnnTaylor
Stores Corporation upon a tax event as described in "Description of
Debentures," could possibly alter the timing of income recognition by the
holders of the Debentures with respect to the semiannual payments of
interest due on the Debentures.
This opinion is being furnished in connection with the
Registration Statement. This opinion is expressed as of the date hereof,
and we disclaim any undertaking to advise you of any subsequent changes of
the facts stated or assumed herein or any subsequent changes in applicable
law. This opinion is for your benefit and is not to be used, circulated,
quoted or otherwise referred to for any purpose, except that you may refer
to this opinion in the Registration Statement, and, in accordance with the
requirements of Item 601(b)(23) of Regulation S-K under the Securities Act,
we hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. In giving this consent, we do not admit that we
come within the category of persons whose consent is required under Section
7 of the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<TABLE>
<CAPTION>
EXHIBIT 12.01
ANNTAYLOR STORES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Years Ended Nine Months Ended
------------------------------------------------------------------- ------------------------
January 30, January 31, February 1, February 3, January 28, October 30, October 31,
1999 1998 1997 1996 1995 1999 1998
---------- ----------- ---------- --------- --------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and $72,903 $29,463 $21,642 $4,281 $62,894 $ 88,146 $51,415
extraordinary loss
Add total fixed charges 39,913 39,607 42,939 37,992 26,513 23,969 29,781
deducted from earnings
Less interest capitalized 0 0 0 (1,325) (490) 0 0
---------- ----------- ---------- --------- --------- --------- -----------
Earnings available for payment
of fixed charges $112,816 $69,070 $64,581 $40,948 $88,917 $112,115 $81,196
========== =========== ========== ========= ========= ========= ===========
Fixed charges:
Portion of minimum lease rental $21,796 $19,618 $18,523 $15,711 $11,794 $ 17,519 $16,089
deemed to be interest
Interest expense 18,117 19,989 24,416 20,956 14,229 6,450 13,692
Capitalized interest 0 0 0 1,325 490 0 0
---------- ----------- ---------- --------- --------- --------- -----------
Total fixed charges $39,913 $39,607 $42,939 $37,992 $26,513 $ 23,969 $29,781
========== =========== ========== ========= ========= ========= ===========
Ratio of earnings to fixed
charges 2.83 1.74 1.50 1.08 3.35 4.68 2.73
========== =========== ========== ========= ========= ========= ===========
</TABLE>
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-86955 of AnnTaylor Stores Corporation on
Form S-3 of our report dated March 8, 1999, appearing in the Annual Report
on Form 10-K of AnnTaylor Stores Corporation for the year ended January 30,
1999 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
New York, New York
November 19, 1999
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-86955 of AnnTaylor, Inc. on Form S-3 of our
report dated March 8, 1999, appearing in the Annual Report on Form 10-K of
AnnTaylor, Inc. for the year ended January 30, 1999 and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
Deloitte & Touche LLP
New York, New York
November 19, 1999
