AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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<TABLE>
<S> <C> <C>
ANNTAYLOR STORES CORPORATION DELAWARE 13-3499319
ANNTAYLOR FINANCE TRUST DELAWARE 13-7089625
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
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142 WEST 57TH STREET, NEW YORK, NEW YORK 10019, (212) 541-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOCELYN F.L. BARANDIARAN, ESQ.
ANNTAYLOR STORES CORPORATION
142 WEST 57TH STREET, NEW YORK, NEW YORK 10019, (212) 541-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
VINCENT J. PISANO, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE, NEW YORK, NEW YORK 10022, (212) 735-3000
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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, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, please 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
[CAPTION]
<TABLE>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Convertible Trust Originated
Preferred SecuritiesSM of
AnnTaylor Finance
Trust............................ 2,012,500 $58.625(1)(2) $117,982,813(1)(2) $40,684
Convertible Subordinated
Debentures of AnnTaylor Stores
Corporation...................... (3) -- -- --
Common Stock of AnnTaylor Stores
Corporation...................... 5,121,812(4) -- -- --
Guarantee(5)...................... -- -- -- --
Total.......................... 2,012,500 100% $117,982,813 $40,684
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act.
(2) Exclusive of accrued interest and distributions, if any.
(3) $100,625,000 in aggregate principal amount of 8 1/2% Convertible
Subordinated Debentures (the "Convertible Debentures") of AnnTaylor Stores
Corporation (the "Company") were issued and sold to AnnTaylor Finance Trust
("Ann Taylor Finance" or the "Trust") in connection with the issuance by the
Trust of 2,012,500 of its 8 1/2% Convertible Trust Originated Preferred
SecuritiesSM (the "Convertible TOPrSSM" or "Preferred Securities"). The
Convertible Debentures may be distributed, under certain circumstances, to
the holders of Preferred Securities for no additional consideration.
(4) Such shares of Company Common Stock are issuable upon conversion of the
Preferred Securities registered hereunder. This Registration Statement also
covers such shares as may be issuable pursuant to anti-dilution adjustments.
(5) Includes the rights of holders of the Preferred Securities under the
Guarantee and certain back-up undertakings as described in the Registration
Statement. No separate consideration will be received for the Guarantee and
the back-up undertakings.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 21, 1996
PROSPECTUS
2,012,500 PREFERRED SECURITIES
ANNTAYLOR FINANCE TRUST
8 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIESSM (CONVERTIBLE TOPRSSM)
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
[AnnTaylor LOGO]
-------------------
This Prospectus relates to the 8 1/2% Convertible Trust Originated Preferred
SecuritiesSM (the "Convertible TOPrSSM" or "Preferred Securities"), which
represent preferred undivided beneficial ownership interests in the assets of
AnnTaylor Finance Trust, a statutory business trust formed under the laws of the
State of Delaware ("AnnTaylor Finance" or the "Trust"), and the shares of common
stock, par value $.0068 per share (the "Company Common Stock"), of AnnTaylor
Stores Corporation, a Delaware corporation (the "Company"), issuable upon
conversion of the Preferred Securities. The Preferred Securities were issued and
sold (the "Original Offering") on April 25, 1996 and May 17, 1996 (together, the
"Original Offering Date") to the Initial Purchasers (as defined herein) and were
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), in the United States to persons reasonably believed by the
Initial Purchasers to be qualified institutional buyers as defined in Rule 144A
under the Securities Act, to certain qualified institutional buyers acting on
behalf of institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. The Company owns all the common securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust Securities")
representing undivided beneficial interests in the assets of the Trust. The
Trust exists for the sole purpose of issuing the Trust Securities and investing
the proceeds thereof to purchase an equivalent amount of 8 1/2% Convertible
Subordinated Debentures Due 2016 (the "Convertible Debentures") of the Company.
Upon an event of default under the Declaration (as defined herein), the holders
of the Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation or otherwise.
The Preferred Securities and the Company Common Stock issuable upon
conversion of the Preferred Securities (collectively the "Offered Securities")
may be offered and sold from time to time by the holders named herein or by
their transferees, pledgees, donees or their successors (collectively, the
"Selling Holders") pursuant to this Prospectus. The Offered Securities may be
sold by the Selling Holders from time to time directly to purchasers or through
agents, underwriters or dealers. See "Selling Holders" and "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Offered Securities and the applicable agent's
commission, dealer's purchase price or underwriter's discount, if any, will be
set forth in an accompanying supplement to this Prospectus (the "Prospectus
Supplement"). The Selling Holders will receive all of the net proceeds from the
sale of the Offered Securities and will pay all underwriting discounts, selling
commissions and transfer taxes, if any, applicable to any such sale. The Company
is responsible for payment of all other expenses incident to the registration of
the Offered Securities. The Selling Holders and any broker-dealers, agents or
underwriters that participate in the distribution of the Offered Securities may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution" for a description
of indemnification arrangements.
(continued on following page)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE
"RISK FACTORS" BEGINNING ON PAGE 6.
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Application will be made to list the Offered Securities on the New York Stock
Exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
(continued from front cover)
Each Preferred Security is convertible at the option of the holder thereof
into shares of Company Common Stock at a conversion rate of 2.545 shares of
Company Common Stock for each Preferred Security (equivalent to $19.65 per share
of Company Common Stock), subject to adjustment in certain circumstances. The
Company Common Stock is quoted on the New York Stock Exchange ("NYSE") under the
symbol "ANN". On June 20, 1996, the last reported sale price of the Company
Common Stock on the NYSE Composite Tape was $20 3/4.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 8 1/2% of the liquidation amount of $50 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on each January 15, April 15, July 15 and October 15,
commencing July 15, 1996. See "Description of the Preferred
Securities--Distributions". The payment of distributions out of moneys held by
the Trust and payments on liquidation of the Trust or the redemption of
Preferred Securities, as described below, are guaranteed by the Company (the
"Guarantee") to the extent the Trust has funds available therefor as described
under "Description of the Guarantee". The Guarantee, when taken together with
the Company's obligations under the Indenture (as defined herein) pursuant to
which the Convertible Debentures are issued and its obligations under the
Declaration (as defined herein), including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provide a full and unconditional guarantee of amounts due on
the Preferred Securities. The Company's obligations under the Guarantee rank (i)
subordinate and junior to all other liabilities of the Company except any
liabilities that may be pari passu by their terms, (ii) pari passu with the most
senior preferred stock issued from time to time by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock or any preferred securities of any affiliate of
the Company and (iii) senior to the Company Common Stock. See "Description of
the Guarantee". The obligations of the Company under the Convertible Debentures
are subordinate and junior in right of payment to Senior Indebtedness (as
defined herein) of the Company. The Company's operations are conducted through
its wholly owned subsidiary, AnnTaylor, Inc. ("Ann Taylor"). At May 4, 1996,
indebtedness of Ann Taylor, including trade payables of $40.2 million,
aggregated approximately $218.6 million, which indebtedness is effectively
senior to the Convertible Debentures.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities correspond to the interest rate and interest
payment dates and other payment dates for the Convertible Debentures, which are
the sole assets of the Trust. If the Company fails to make principal or interest
payments on the Convertible Debentures, the Trust will not have sufficient funds
to make distributions on the Preferred Securities, in which event the Guarantee
will not apply to such distributions until the Trust has sufficient funds
available therefor.
The Company has the right to defer payments of interest on the Convertible
Debentures at any time for up to 20 consecutive quarters (each, an "Extension
Period"), but not beyond the maturity of the Convertible Debentures. If interest
payments are so deferred, distributions on the Preferred Securities also will be
deferred. During any Extension Period, distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at a rate of 8
1/2% per annum compounded quarterly. During any Extension Period, holders of
Preferred Securities will be required to include such deferred interest in their
gross income for United States Federal income tax purposes in advance of receipt
of the cash distributions with respect to such deferred interest payments.
Moreover, if a holder of Preferred Securities converts its Preferred Securities
into Company Common Stock during any Extension Period, the holder will not
receive any cash related to the deferred distributions. There could be multiple
Extension Periods of varying lengths throughout the term of Convertible
Debentures (but distributions would continue to accumulate quarterly and accrue
interest until the end of any such Extension Period). See "Risk Factors--Option
to Extend Interest Payment Period; Tax Consequences", "Description of the
Preferred Securities--Distributions" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period".
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after April 15, 1999 at the redemption prices set
forth herein. The Convertible Debentures may also be redeemed at any time upon
the occurrence of a Tax Event (as defined herein). If the Company redeems
Convertible Debentures, the Trust must redeem Trust Securities on a pro rata
basis having an aggregate liquidation amount equal to the aggregate principal
amount of the Convertible Debentures so redeemed at a redemption price
corresponding to the redemption price of the Convertible Debentures plus accrued
and unpaid distributions thereon (the "Redemption Price") to the date fixed for
redemption. See "Description of the Preferred Securities--Redemption". The
Preferred Securities will be redeemed upon maturity of the
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Convertible Debentures. In addition, the Trust will be dissolved upon the
occurrence of a Tax Event arising from a change in law or a change in legal
interpretation regarding tax matters, unless the Convertible Debentures are
redeemed in the limited circumstances described herein. The Trust will also be
dissolved upon the occurrence of an Investment Company Event (as defined
herein). Upon dissolution of the Trust, the Convertible Debentures will be
distributed to the holders of the Trust Securities, on a pro rata basis, in lieu
of any cash distribution. If the Convertible Debentures are distributed to the
holders of the Preferred Securities, the Company will use its best efforts to
cause the Convertible Debentures to be listed on the NYSE or other national
securities exchange or similar organization as the Preferred Securities are then
listed or quoted. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Convertible Debentures".
In the event of the liquidation, winding up or termination of the Trust, the
holders of the Preferred Securities will be entitled to receive for each
Preferred Security a liquidation amount of $50 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment,
unless, in connection with such dissolution in the event of a Tax Event or an
Investment Company Event, Convertible Debentures are distributed to the holders
of the Preferred Securities. See "Description of the Preferred Securities--
Liquidation Distribution Upon Dissolution".
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Exchange Act, and in accordance therewith files periodic reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661. The Commission also maintains a Web site at http://www.sec.gov.
that contains reports, proxy statements and other information. Copies of all or
part of such materials may also be obtained at prescribed rates from the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Such materials can also be
inspected at the offices of the New York Stock Exchange, at 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) on Form S-3 under the Securities
Act with respect to the securities offered by this Prospectus (the "Registration
Statement"). This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered by
this Prospectus, reference is made to the Registration Statement, including the
exhibits thereto, and the financial statements and notes thereto filed or
incorporated by reference as a part thereof, which are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete, and, in each such instance, are
qualified in all respects by reference to the applicable documents filed with
the Commission. The Registration Statement and the exhibits thereto filed by the
Company with the Commission may be inspected and copied at the locations
described above.
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of Preferred Securities because (i) all of the voting securities of the
Trust will be owned, directly or indirectly, by the Company, a reporting company
under the Exchange Act, (ii) the Trust has no independent operations and exists
for the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in the
Convertible Debentures issued by the Company and (iii) the obligations of the
Trust under the Trust Securities are fully and unconditionally guaranteed by the
Company to the extent that the Trust has funds available to meet such
obligations. See "Description of the Convertible Debentures" and "Description of
the Guarantee".
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (Commission File No. 1-10738) are incorporated herein by
reference:
(a) Annual Report on Form 10-K for the year ended February 3, 1996;
(b) Proxy Statement relating to the 1996 Annual Meeting of Stockholders;
(c) Quarterly Report on Form 10-Q for the quarter ended May 4, 1996;
(d) Current Reports on Form 8-K, dated April 8, 1996, May 2, 1996, June 10,
1996 and June 21, 1996; and
(e) The description of the Company Common Stock, contained in the Company's
registration statement on Form 8-A, which became effective May 16, 1991.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the filing of a post-effective amendment that indicates the termination of this
offering shall be deemed to be incorporated in this Prospectus by reference and
to be a part hereof from the date of filing of such documents.
Any statements contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this offering to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge to each person to whom this
Prospectus has been delivered, a copy of any or all of the documents referred to
above that have been or may be incorporated by reference herein other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference therein). Requests for such copies should be directed to AnnTaylor
Stores Corporation, 142 West 57th Street, New York, New York 10019, Attention:
Jocelyn F.L. Barandiaran, Corporate Secretary. Telephone requests may be
directed to the Corporate Secretary at (212) 541-3300.
5
<PAGE>
RISK FACTORS
Prospective purchasers of the Offered Securities should consider carefully
the information set forth or incorporated by reference in this Prospectus and,
in particular, should evaluate the following risks in connection with an
investment in the Preferred Securities being offered hereby.
COMPETITION AND OTHER BUSINESS FACTORS
The women's retail apparel industry is highly competitive. Ann Taylor
competes primarily with better department stores, specialty retailers and
boutiques engaged in the retail sale of better quality women's apparel, many of
which are larger and have greater resources than the Company. Sales and earnings
of the Company depend to a significant extent upon its ability to respond to
changes in fashion trends. As with other retail businesses, the Company's
operations may be adversely affected by a number of factors beyond its control,
including economic downturns, cyclical variations in the retail market for
better quality women's apparel and rapid changes in fashion preferences. The
Company believes that the decrease in its comparable store sales in Fiscal 1995
is attributable to the poor consumer response to Ann Taylor's merchandise
offerings, as well as weakness in demand for women's apparel generally. There
can be no assurance that a prolonged economic downturn and weakness in demand
for women's apparel would not have a material adverse impact on the Company and
Ann Taylor.
CAT/CYGNE DESIGNS
In Fiscal 1995, the Company purchased approximately 16% of its merchandise
directly from Cygne Designs, Inc. ("Cygne") and an additional 38% of its
merchandise through CAT U.S., Inc. and C.A.T. (Far East) Limited (together,
"CAT"), the Company's direct sourcing joint venture which is 40% owned by the
Company and 60% owned by Cygne. In November 1995, Cygne disclosed that it was in
violation of certain terms of the bank credit agreement that provides Cygne's
principal source of working capital financing and that, as a result of such
violation, the lender under that credit facility has the right to cancel the
facility and to demand immediate repayment of the amounts outstanding
thereunder. Cygne also disclosed that a separate trade credit facility had been
suspended as a result of Cygne's failure to make payments thereunder when due.
Cygne has stated that, if it is unable to restore its suspended trade credit
facility, maintain its present financing and credit facilities or otherwise
obtain necessary working capital, it could experience a liquidity shortfall that
would adversely affect its ability to finance its operations. On May 21, 1996,
Cygne announced that it had obtained from the bank that provides its bank credit
facility a permanent waiver of all defaults under its credit agreement, and
received a commitment letter from the bank to provide Cygne a new credit
facility to replace such credit facility.
CAT obtains its principal working capital financing pursuant to a $40
million loan facility provided by the same bank that provides Cygne with its
principal working capital facility. Although CAT currently is in compliance with
the terms of its credit agreement, the agreement contains a cross-default
provision relating to defaults under other indebtedness of CAT or Cygne,
pursuant to which a default by Cygne under its credit facility gives CAT's
lender the right to cancel CAT's $40 million credit facility and to demand
immediate repayment of the amounts outstanding under that facility. If CAT's
lenders were to take such action or if they failed to renew such facility, CAT
would require alternate financing in order to meet such obligations and to
continue to operate its business as presently conducted. Although the Company
believes such alternate financing would be available for CAT, if it were not,
the interruption or cessation of business by CAT could have a material adverse
effect on the Company. CAT's loan facility expires upon consummation of the
CAT/Cygne Transaction described below. CAT has obtained a commitment letter
from its bank to replace its existing credit facility upon consummation of the
CAT/Cygne transaction.
The Company has entered into a purchase agreement, dated as of June 7, 1996,
to acquire Cygne's interest in CAT and certain of the assets (the "Assets") of
the Ann Taylor Woven Division of Cygne that are used in sourcing merchandise for
Ann Taylor (collectively, the "CAT/Cygne Transaction"). The
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<PAGE>
Company believes that the CAT/Cygne Transaction will mitigate the supply
interruption risks arising from the financial difficulties experienced by Cygne.
Upon consummation of the CAT/Cygne Transaction, CAT will become an indirect
wholly owned subsidiary of the Company. In addition to continuing its own
sourcing activities on behalf of the Company, CAT will own the Assets of the
Division and will perform all sourcing functions for Ann Taylor currently
performed by Cygne. The CAT/Cygne Transaction is subject to various
conditions. Accordingly, there can be no assurance that the CAT/Cygne
Transaction will be consummated or, if consummated, that it will be consummated
promptly enough to prevent sourcing disruptions.
In the event that Cygne's operations were interrupted or discontinued, the
Company could experience temporary inventory shortfalls, disruptions or delays
with respect to any unfilled purchase orders then outstanding with Cygne.
Although the Company believes that adequate alternate sources would be available
that could replace Cygne as a merchandise resource, there can be no assurance
that such alternate sources will be available at the time of any such
interruption.
The Company from time to time has made advances to Cygne in order to assist
it in carrying fabric purchases made by Cygne in anticipation of the issuance by
the Company of merchandise purchase orders. Advances from the Company to Cygne
outstanding at May 4, 1996 totaled approximately $8 million. As a consequence of
Cygne's financial difficulties, it is possible that Cygne could default on such
Company advances. In the event of such a default by Cygne, the Company believes
that it would have a right of set-off to the extent of accounts payable by the
Company to Cygne for merchandise purchased from Cygne. However, no assurances
can be given that a court would uphold such right of set-off. At May 4, 1996,
accounts payable to Cygne totaled approximately $9.6 million. If the CAT/Cygne
Transaction is consummated, the amount of the purchase price to be paid by the
Company in cash will be reduced by the amount of such outstanding fabric
advances.
Ann Taylor has outstanding a $4 million standby letter of credit to support
CAT's obligations to its principal lender. The lender has the right under
certain circumstances to draw on such letter of credit to cover unpaid principal
and interest owed by CAT. The commitment letter obtained by CAT to replace CAT's
credit facility requires that such standby letter of credit be increased to $8
million to support this new facility.
The Company's agreement with Cygne relating to the parties' ownership of CAT
provides that either Cygne or Ann Taylor may offer to purchase the other party's
interest in CAT. The party that receives the offer then has the option to either
accept the offer and sell its interest in CAT on the terms offered, or purchase
the offering party's interest in CAT on the terms offered. There can be no
assurance that, if the Company were to offer to purchase Cygne's interest in CAT
under this provision, Cygne would not elect instead to purchase the Company's
interest, or that if Cygne were to offer to purchase the Company's interest in
CAT, such offer would reflect the value of such interest, or that the Company
would have the financial ability to purchase Cygne's interest in CAT at the
offered price. If Cygne were to purchase the Company's interest in CAT, there
can be no assurance that the Company would be able to continue to do business
with CAT on terms having the same economic effect as its current arrangement or
be able to replace CAT as a merchandise sourcing agent on similar terms.
INTEGRATION OF CAT AND THE CYGNE SOURCING BUSINESS
The direct sourcing business differs from the Company's traditional retail
business and requires certain skills that traditionally have not been required
of Ann Taylor personnel. The Company may face challenges in assimilating CAT's
and the Division's sourcing functions and their employees into the Ann
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Taylor organization and will require management to focus a portion of its time
on overseeing the integration process. Accordingly, there can be no assurance
that the Company will be able to successfully integrate CAT's and the Division's
sourcing operations with its existing operations or realize certain of the
benefits expected to be obtained from the CAT/Cygne Transaction.
INDEBTEDNESS AND ABILITY TO SERVICE INDEBTEDNESS
After giving effect to the Original Offering and the application of the net
proceeds thereof to reduce outstanding indebtedness of Ann Taylor, as of May 4,
1996, the long-term consolidated indebtedness of the Company and Ann Taylor,
including the current portion of long-term debt, would have been approximately
$165.7 million, or approximately 30% of its total capitalization. After further
giving effect to the CAT/Cygne Transaction, including additional borrowings that
are expected to be made in connection therewith, as of May 4, 1996, the
long-term consolidated indebtedness of the Company and Ann Taylor, including the
current portion of long-term debt, would have been approximately $183.6 million
or approximately 30% of its total capitalization. This high degree of leverage
could have important consequences to the holders of the Offered Securities,
including the following: (i) the ability of Ann Taylor to obtain additional
financing for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired in the future; (ii) a substantial portion of
Ann Taylor's cash flow from operations will be required for the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to Ann Taylor for its operations and for the payment of dividends to the Company
to be used to make payments on the Convertible Debentures; (iii) the Company may
be substantially more leveraged than certain of its competitors, which may place
the Company at a competitive disadvantage; and (iv) the Company's substantial
degree of leverage may hinder its ability to adjust rapidly to changing market
conditions and could make it more vulnerable in the event of a downturn in
general economic conditions or its business. In addition, substantially all of
Ann Taylor's borrowings other than the 8 3/4% Notes (as defined herein) are and
will continue to be at variable rates of interest, which exposes Ann Taylor to
the risk of increased interest rates. See "Financing Arrangements".
Unless otherwise extended or refinanced, Ann Taylor will be required in 1998
to repay in full its obligations under the Amended and Restated Credit
Agreement, dated as of September 29, 1995 (the "Bank Credit Agreement"), between
Ann Taylor and the Lenders named therein, which currently provides for a $24.5
million Term Loan (the "Term Loan") and a $122 million Revolving Credit Facility
(the "Revolving Credit Facility"). After giving effect to the Original Offering
and the application of the estimated net proceeds thereof to reduce outstanding
indebtedness of Ann Taylor, as of May 4, 1996, Ann Taylor's outstanding
indebtedness under the Term Loan would have been $24.5 million and there would
have been no outstanding indebtedness under Ann Taylor's Revolving Credit
Facility. After further giving effect to additional borrowings that are expected
to be made upon consummation of the CAT/Cygne Transaction, as of May 4, 1996,
Ann Taylor's outstanding indebtedness under the Term Loan would have been $24.5
million and Ann Taylor's outstanding indebtedness under the Revolving Credit
Facility would have been $11.3 million. Ann Taylor is also required, commencing
in Fiscal 1996, to reduce outstanding borrowings under the Revolving Credit
Facility to $50 million or less for a 30-day period each fiscal year. Amounts
under Ann Taylor's Receivables Facility (the "Receivables Facility"), under
which $36 million was outstanding at May 4, 1996, become due in January 1997.
Although there can be no assurance, the Company expects to negotiate an
extension of the maturity of the Receivables Facility during 1996.
Ann Taylor's ability to make scheduled principal payments, or to refinance
its obligations, with respect to its indebtedness, and to pay interest thereon,
will depend on its financial and operating performance, which, in turn, is
subject to prevailing economic conditions and to certain financial, business and
other factors beyond its control. If Ann Taylor's cash flow and capital
resources are insufficient to fund its debt service obligations, Ann Taylor may
be forced to reduce or delay planned capital expenditures, sell assets, seek
additional funds from an equity offering of the Company or
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<PAGE>
refinance or restructure its debt. There can be no assurance that Ann Taylor's
cash flow and capital resources will be sufficient for payment of its
indebtedness in the future. If Ann Taylor is not able to satisfy its debt
service obligations, it could default on its indebtedness, including the Bank
Credit Agreement, the Receivables Facility and the 8 3/4% Notes (as defined
herein), which would entitle the holders of such indebtedness to accelerate the
maturity thereof, thereby permitting acceleration of debt under other
instruments that may contain cross-acceleration or cross-default provisions. See
"Financing Arrangements".
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
Ann Taylor's ability to pay dividends, as well as repay debt, make
acquisitions, create liens, make capital expenditures and make certain
investments, is restricted by the provisions of the Bank Credit Agreement (and
with respect to certain of the restrictions, the Indenture (the "Note
Indenture") relating to its 8 3/4% Subordinated Notes due 2000 (the "8 3/4%
Notes")) and the Receivables Facility, and is dependent on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
There can be no assurance that financial results that comply with the
restrictive covenants and financial tests in the Bank Credit Agreement and the
Receivables Facility will be achieved, and Ann Taylor's inability to satisfy
these covenants, if not waived by its lenders, could result in a default under
one or more of such financing arrangements. In the event of such a default, the
lenders could elect to declare all amounts borrowed, together with accrued and
unpaid interest, due and payable. In addition, a failure to comply with the
obligations contained in the Bank Credit Agreement, the Receivables Facility or
the Note Indenture could result in an event of default under the Bank Credit
Agreement, the Receivables Facility or the Note Indenture, respectively, which
could permit acceleration of debt under other instruments that may contain
cross-acceleration or cross-default provisions. See "Financing Arrangements".
If Ann Taylor were unable to pay such amounts, the lenders could proceed against
any collateral securing obligations due to them. If such indebtedness were to be
accelerated, there can be no assurance that the assets of Ann Taylor would be
sufficient to repay in full such indebtedness and other indebtedness of Ann
Taylor or to pay dividends to the Company to pay principal and interest on the
Convertible Debentures in order for the Trust to meet its obligations under the
Preferred Securities. Although the payment of dividends and distributions is
currently prohibited by the Bank Credit Agreement, the Company has entered into
an amendment with the lenders under the Bank Credit Agreement in order to pay
the regularly scheduled distributions relating to the Preferred Securities so
long as there is no event of default under the Bank Credit Agreement. The
Receivables Facility has restrictions on the payment of dividends and
distributions that mirror the Bank Credit Agreement, as amended from time to
time. Therefore, the amendment to the dividend covenant under the Bank Credit
Agreement to permit regularly scheduled dividends on the Preferred Securities
has the effect of amending the corresponding covenant in the Receivables
Facility in a similar fashion. The Note Indenture will continue to contain
certain restrictions on the payment of dividends by Ann Taylor. See "Financing
Arrangements".
During Fiscal 1995, Ann Taylor was not in compliance with certain of the
financial covenants contained in its then-existing bank credit agreement and
receivables facility on two occasions, which noncompliance was cured by a waiver
under or an amendment to those facilities. Ann Taylor is currently in compliance
with all of the financial covenants contained in the Bank Credit Agreement and
the Receivables Facility. Although based upon its current projections, the
Company believes that it will be able to remain in compliance with all of the
financial covenants in the Bank Credit Agreement and the Receivables Facility,
no assurance can be given that the Company's financial results will provide such
compliance.
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RANKING OF OBLIGATIONS UNDER GUARANTEE AND CONVERTIBLE DEBENTURES
The Company's obligations under the Guarantee rank (i) subordinate and
junior to all other liabilities of the Company except any liabilities that may
be pari passu expressly by their terms, (ii) pari passu with the most senior
preferred stock issued from time to time by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the Company and
(iii) senior to the Company Common Stock. The obligations of the Company under
the Convertible Debentures are subordinate and junior in right of payment to
Senior Indebtedness of the Company. No payment of principal of (including
redemption payments, if any), premium, if any, or interest on, the Convertible
Debentures may be made if (i) any Senior Indebtedness of the Company is not paid
when due and any applicable grace period with respect to such default has ended
and such default has not been cured or waived, ceased to exist or (ii) the
maturity of any Senior Indebtedness of the Company has been accelerated because
of a default. At May 4, 1996, Senior Indebtedness of the Company consisted
solely of the Company's guarantee of $186.5 million of indebtedness of Ann
Taylor. In addition, because the Company's operations are conducted through Ann
Taylor, and Ann Taylor has not guaranteed the payment of principal of and
interest on the Convertible Debentures, all liabilities of Ann Taylor, including
trade payables, are effectively senior to the Convertible Debentures and the
Guarantee. As of May 4, 1996, Ann Taylor had approximately $218.6 million
principal amount of indebtedness outstanding, including trade payables of $40.2
million. There are no terms of the Preferred Securities, the Convertible
Debentures or the Guarantee that limit the Company's or AnnTaylor's ability to
incur additional indebtedness or liabilities, including indebtedness or
liabilities that would rank senior or effectively senior to the Convertible
Debentures and the Guarantee. See "Description of the Guarantee--Status of the
Guarantee; Subordination" and "Description of the Convertible
Debentures--Subordination".
HOLDING COMPANY STRUCTURE AND SUBORDINATION
The ability of the Trust to pay amounts due on the Preferred Securities is
wholly dependent upon the Company's making payments on the Convertible
Debentures. Since the Company is a holding company whose operations are
conducted through Ann Taylor and its subsidiaries, the ability of the Company to
pay interest and principal on the Convertible Debentures, and therefore for the
Trust to make distributions and other payments on the Preferred Securities, will
be dependent on Ann Taylor's ability to pay dividends to the Company in
sufficient amounts. Because Ann Taylor does not guarantee the payment of
principal of and interest on the Convertible Debentures, claims of holders of
the Preferred Securities effectively are subordinate to the claims of creditors
of Ann Taylor, including trade creditors. See "--Ranking of Obligations Under
Guarantee and Convertible Debentures".
CONTROL OF THE COMPANY
As of April 15, 1996, the ML Entities owned approximately 26.7% of the
outstanding Company Common Stock. Consequently, the ML Entities, which have two
designees on the Company's Board of Directors, are in a position to influence
the management and affairs of the Company. Upon conversion of the Convertible
Debentures, the ML Entities would own approximately 21.8% of the outstanding
Company Common Stock.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer interest payments
from time to time on the Convertible Debentures for successive periods not
exceeding 20 consecutive quarterly interest periods during which no interest
shall be due and payable, provided, that no such Extension Period may extend
beyond the maturity date of the Convertible Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period,
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<PAGE>
subject to the requirements described herein. As a consequence of such
extension, quarterly distributions on the Preferred Securities would be deferred
(although such distributions would continue to accrue with interest thereon
compounded quarterly) by the Trust during any such Extension Period. In the
event that the Company exercises this right, then, during such period the
Company (i) shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock except for dividends or distributions in
shares of its capital stock of the same class on which such dividend or
distribution is being paid and conversions or exchanges of common stock of one
class into common stock of another class and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purpose of an
employee incentive plan or benefit plan of the Company or any of its
subsidiaries, (ii) shall not make any payment of interest, principal of or
premium, if any, on, or repay, repurchase or redeem any debt securities issued
by the Company that rank pari passu with or junior to the Convertible Debentures
(except by conversion into or exchange for shares of its capital stock), and
(iii) shall not make any guarantee payments with respect to the foregoing. Prior
to the termination of any such Extension Period, the Company may further extend
the Extension Period; provided, that such Extension Period, together with all
previous and further extensions thereof, may not exceed 20 consecutive quarters
and that such Extension Period may not extend beyond the maturity date of the
Convertible Debentures. Consequently, there could be multiple Extension Periods
of varying lengths throughout the term of the Convertible Debentures. See
"Description of the Preferred Securities--Distributions" and "Description of the
Convertible Debentures--Option to Extend Interest Payment Period".
Should the Company exercise its right to defer payments of interest on the
Convertible Debentures, each holder of Preferred Securities will continue to
accrue income (as original issue discount ("OID")) in respect of the deferred
interest allocable to its Preferred Securities for United States Federal income
tax purposes, which will be allocated but not distributed to holders of record
of Preferred Securities. As a result, each such holder of Preferred Securities
will recognize income for United States Federal income tax purposes in advance
of the receipt of cash and will not receive the cash from the Trust related to
such income if such holder disposes of its Preferred Securities prior to the
record date for the date on which distributions of such amounts are made.
Moreover, if a holder of Preferred Securities converts its Preferred Securities
into Company Common Stock during any Extension Period, the holder will not
receive any cash related to the deferred distributions. The Company has no
current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Convertible Debentures. However,
should the Company determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be affected. A holder that
disposes of or converts its Preferred Securities during any Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Preferred Securities. In addition, as a result of the
existence of the Company's right to defer interest payments, the market price of
the Preferred Securities (which represent an undivided beneficial interest in
the Convertible Debentures) may be more volatile than other similar securities
where the issuer does not have such rights to defer interest payments. See
"United States Federal Income Taxation--Potential Extension of Interest Payment
Period and Original Issue Discount".
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would treat as equity for United States
Federal income tax purposes instruments with a maximum term of more than 20
years that are not shown as indebtedness on the consolidated balance sheet of
the issuer. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that certain
legislative proposals initiated by the Clinton administration, including the
Proposed Legislation, that may be adopted by either of the tax-writing
committees of Congress, would
11
<PAGE>
have an effective date that is no earlier than the date of "appropriate
Congressional action". Based on the Joint Statement, it is expected that if the
Proposed Legislation were enacted, such legislation would not apply to the
Convertible Debentures since they were issued prior to the date of any
"appropriate Congressional action". Furthermore, even if the Proposed
Legislation were enacted in its current form with effective date provisions
making it applicable to the Convertible Debentures, it would not cause the
Convertible Debentures to be treated as equity for United States Federal income
tax purposes since the maximum term of the Convertible Debentures will not
exceed 20 years. There can be no assurances, however, that any proposed
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Debentures, such
legislation could result in the distribution of the Convertible Debentures to
holders of the Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities--Special Event Redemption or Distribution".
RIGHTS UNDER THE GUARANTEE
The Guarantee Trustee holds the Guarantee for the benefit of the holders of
the Preferred Securities. The Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
that are required to be paid on the Preferred Securities, to the extent the
Trust has funds available therefor, (ii) the Redemption Price, with respect to
the Preferred Securities called for redemption by the Trust, to the extent the
Trust has funds available therefor and (iii) upon a voluntary or involuntary
dissolution, winding up or termination of the Trust (other than in connection
with a distribution of the Convertible Debentures to holders of Preferred
Securities or a redemption of all of the Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of payment to the extent
the Trust has funds available therefor and (b) the amount of assets of the Trust
remaining available for distribution to holders of the Preferred Securities upon
the liquidation of the Trust. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of Preferred Securities may directly
institute a legal proceeding directly against the Company to enforce the
obligations of the Guarantor under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee, or any other person
or entity. If the Company were to default on its obligation to pay amounts
payable on the Convertible Debentures, the Trust would lack available funds for
the payment of distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and in such event holders of the Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, a holder of the Preferred Securities would be required to rely on the
enforcement (1) by the Property Trustee of its rights, as registered holder of
the Convertible Debentures, against the Company pursuant to the terms of the
Convertible Debentures or (2) by such holder of Preferred Securities of its
right against the Company to enforce payments on the Convertible Debentures. See
"Description of the Guarantee" and "Description of the Convertible Debentures".
The Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the sole holder of the
Convertible Debentures against the Company. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of
12
<PAGE>
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it under the Indenture as a holder of the
Convertible Debentures. If the Property Trustee fails to enforce its rights
under the Convertible Debentures, any holder of Preferred Securities may
directly institute a legal proceeding against the Company to enforce the
Property Trustee's rights under the Convertible Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event or an Investment Company Act Event (each
as defined herein, and each, a "Special Event"), the Trust will be dissolved,
except in the limited circumstance described below, with the result that the
Convertible Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In certain
circumstances, the Company shall have the right to redeem the Convertible
Debentures, in whole (but not in part), in lieu of a distribution of the
Convertible Debentures by the Trust, in which event the Trust will redeem the
Trust Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution".
Under current United States Federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. Upon the occurrence of a Special
Event, however, a dissolution of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "United
States Federal Income Taxation--Receipt of Convertible Debentures or Cash Upon
Liquidation of the Trust".
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Convertible Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities. Because holders of
Preferred Securities may receive Convertible Debentures upon the occurrence of a
Special Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Convertible Debentures and should
carefully review all the information regarding the Convertible Debentures
contained herein. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Convertible
Debentures--General".
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of the Issuer Trustees. See "Description of Preferred
Securities--Voting Rights".
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<PAGE>
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid distributions. In addition, as a result of the
Company's right to defer interest payments, the market price of the Preferred
Securities (which represent an undivided interest in the Convertible Debentures)
may be more volatile than other similar securities where the issuer does not
have such right to defer interest payments. A holder who disposes of or converts
its Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the
Convertible Debentures through the date of disposition or conversion in income
as ordinary income (i.e., original issue discount), and to add such amount to
its adjusted tax basis in its pro rata share of the underlying Convertible
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of original issue
discount, all accrued but unpaid interest), a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes. See
"United States Federal Income Taxation".
14
<PAGE>
THE COMPANY
The Company, through its wholly owned subsidiary Ann Taylor, is a leading
national specialty retailer of better quality women's apparel, shoes and
accessories sold primarily under the Ann Taylor brand name. Ann Taylor
merchandise represents classic styles, updated to reflect current fashion
trends. The Company's 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, helping them
achieve the "Ann Taylor look" while reflecting the customers' personal styles.
The Company believes that "Ann Taylor" is a highly recognized national brand
that defines a distinct fashion point of view. As a result of strong consumer
acceptance of this niche positioning, the Company's sales per square foot
productivity and operating profit margins have historically been among the
highest in the specialty apparel retailing industry. The Company has adopted a
growth strategy of capitalizing on this brand recognition by introducing product
extensions within its stores and entering new channels of distribution, as well
as continuing its retail store expansion program.
The Company is a holding company that was incorporated under the laws of the
State of Delaware in 1988 under the name AnnTaylor Holdings, Inc. The Company
changed its name to AnnTaylor Stores Corporation in April 1991. The Company was
formed at the direction of Merrill Lynch Capital Partners, Inc. ("ML Capital
Partners"), a wholly owned subsidiary of Merrill Lynch & Co., Inc. ("ML&Co."),
for the purpose of acquiring Ann Taylor in a leveraged buyout transaction (the
"Acquisition") in 1989. As of April 15, 1996, certain limited partnerships
controlled directly or indirectly by ML Capital Partners, together with certain
other affiliates of ML&Co. (collectively, the "ML Entities"), owned 6,155,118
shares, or approximately 26.7%, of the outstanding Company Common Stock. The ML
Entities have two designees on the Company's Board of Directors and, therefore,
are in a position to influence management of the Company.
The principal executive offices of the Company are located at 142 West 57th
Street, New York, New York 10019, and the telephone number is (212) 541-3000.
Unless the context indicates otherwise, all references herein to the Company
include the Company and its wholly owned subsidiary Ann Taylor.
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<PAGE>
ANNTAYLOR FINANCE TRUST
AnnTaylor Finance is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust (the "Declaration") executed by AnnTaylor
Stores Corporation, as sponsor of the Trust, and the trustees of the Trust (the
"Issuer Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware. The Company owns Common Securities
in an aggregate liquidation amount equal to 3% of the total capital of the
Trust. The Common Securities rank pari passu, and payments are made thereon pro
rata, with the Preferred Securities, except that, upon the occurrence and during
the continuance of an event of default under the Declaration, the rights of the
holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The assets of the Trust
consist principally of the Convertible Debentures. The Trust exists for the
exclusive purpose of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Convertible Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees will initially be
five. Three of the Issuer Trustees (the "Regular Trustees") will be individuals
who are employees or officers of or who are affiliated with the Company. The
fourth trustee will be a financial institution that is unaffiliated with the
Company (the "Property Trustee"). The fifth trustee will be an entity that
maintains its principal place of business in the State of Delaware (the
"Delaware Trustee"). Initially, The Bank of New York, a New York banking
corporation, will act as Property Trustee and its affiliate, The Bank of New
York (Delaware), a Delaware banking corporation, will act as Delaware Trustee
until, in each case, removed or replaced by the holder of the Common Securities.
The Bank of New York will also act as indenture trustee under the Guarantee (the
"Guarantee Trustee") and under the Indenture (the "Indenture Trustee").
Initially, J. Patrick Spainhour, the President and Chief Operating Officer, Paul
E. Francis, the Executive Vice President--Finance and Administration and Chief
Financial Officer and Walter J. Parks, the Senior Vice President--Finance of the
Company will act as Regular Trustees. See "Description of the Guarantee" and
"Description of the Preferred Securities".
The Property Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and the Property Trustee has the
power to exercise all rights, powers and privileges under the Indenture as the
holder of the Convertible Debentures. In addition, the Property Trustee
maintains exclusive control of a segregated non-interest-bearing bank account
(the "Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, has the
right to appoint, remove or replace any of the Issuer Trustees and to increase
or decrease the number of trustees, provided that the number of trustees shall
be at least two. The Company will pay all fees and expenses related to the Trust
and the offering of the Preferred Securities. See "Description of the
Convertible Debentures".
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration and the Delaware Business Trust Act, as amended (the "Trust Act").
See "Description of the Preferred Securities". The Declaration, the Indenture
and the Guarantee also incorporate by reference the terms of the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Declaration, the
Indenture and the Guarantee will be qualified under the Trust Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company. See "The
Company".
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<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as
"Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of
AnnTaylor Finance Trust Holding Solely Convertible Debentures".
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither the Company nor the Trust will receive any proceeds
from the sale of the Offered Securities.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five fiscal years in the period
ended February 3, 1996, and for each of the first fiscal quarters ended May 4,
1996 and April 29, 1995.
<TABLE>
<CAPTION>
FISCAL QUARTER
FISCAL YEAR ENDED ENDED
------------------------------------------------------ ------------------
FEB. 3, JAN. 28, JAN. 29, JAN. 30, FEB. 1, MAY 4, APR. 29,
1996 1995 1994 1993 1992 1996 1995
------- -------- -------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges............................. 1.08x 3.35x 2.16x 1.58x 1.21x 1.42x 1.85x
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and extraordinary loss and fixed charges.
Fixed charges include interest on indebtedness, distributions on the Preferred
Securities and the portion of operating lease rental expense representative of
the interest factor.
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DESCRIPTION OF THE PREFERRED SECURITIES
The following summary of certain material terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration. The Preferred
Securities were issued pursuant to the terms of the Declaration. The Declaration
incorporates by reference terms of the Trust Indenture Act. The Declaration will
be qualified under the Trust Indenture Act. The Bank of New York, as Property
Trustee, acts as indenture trustee for the Declaration for purposes of
compliance with the Trust Indenture Act. Capitalized terms not otherwise defined
herein have the meanings assigned to them in the Declaration.
GENERAL
The Preferred Securities were issued in fully registered form without
interest coupons.
The Declaration authorized the Regular Trustees to issue the Trust
Securities on behalf of the Trust. The Preferred Securities represent undivided
beneficial ownership interests in the assets of the Trust and entitle the
holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Declaration.
All of the Common Securities are owned by the Company. The Common Securities
rank pari passu, and payments are made thereon on a pro rata basis, with the
Preferred Securities, except that upon the occurrence of a Declaration Event of
Default, the rights of the holders of the Common Securities to receive payment
of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of Preferred
Securities. See "--Subordination of Common Securities". Title to the Convertible
Debentures is held by the Property Trustee for the benefit of the holders of the
Trust Securities. The Declaration does not permit the issuance by the Trust of
any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. The payment of distributions out of money held by the
Trust, and payments upon redemption of the Preferred Securities or liquidation
of the Trust, are guaranteed by the Company to the extent described under
"Description of the Guarantee". The Guarantee is held by The Bank of New York,
the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of distributions when the Trust
does not have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of Preferred Securities is to (i) vote to direct
the Property Trustee to enforce the Property Trustee's rights under the
Convertible Debentures or (ii) if the failure of the Trust to pay distributions
is attributable to the failure of the Company to pay interest or principal on
the Convertible Debentures, to institute a proceeding directly against the
Company for enforcement of payment to such holder of the principal of or
interest on the Convertible Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Convertible Debentures. See
"--Voting Rights".
DISTRIBUTIONS
Distributions on Preferred Securities are fixed at a rate per annum of 8
1/2% of the stated liquidation amount of $50 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
a rate per annum of 8 1/2% thereof compounded quarterly. The term "distribution"
as used herein includes any such interest (including any Additional Interest and
Liquidation Damages, each as defined herein) payable unless otherwise stated.
The amount of distributions payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the date of initial issuance and will be payable quarterly in arrears on
each January 15, April 15, July 15 and October 15, commencing July 15, 1996,
when, as and if available for payment, by the Property Trustee, except as
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otherwise described below. The Company has the right under the Indenture to
defer interest payments from time to time on the Convertible Debentures for
successive periods not exceeding 20 consecutive quarterly interest periods
during which no interest shall be due and payable, provided, that no such
Extension Period may extend beyond the maturity date of the Convertible
Debentures. As a consequence of such extension, quarterly distributions on the
Preferred Securities would be deferred (though such distributions would continue
to accrue with interest since interest would continue to accrue on the
Convertible Debentures) during any such extended interest payment period. In the
event that the Company exercises this right, then, during such period the
Company (i) shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock except for dividends or distributions in
shares of its capital stock of the same class on which such dividend or
distribution is being paid and conversions or exchanges of common stock of one
class into common stock of another class and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purpose of an
employee incentive plan or benefit of the Company or any of its subsidiaries,
(ii) shall not make any payment of interest, principal of or premium, if any,
on, or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior to the Convertible Debentures (except by
conversion into or exchange for shares of its capital stock), and (iii) shall
not make any guarantee payments with respect to the foregoing. Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period; provided, that such Extension Period, together with all
previous and further extensions thereof, may not exceed 20 consecutive quarters
and that such Extension Period may not extend beyond the maturity date of the
Convertible Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may select a new Extension Period,
subject to the above requirements. Consequently, there could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures. See "Description of the Convertible Debentures--Interest" and
"Description of the Convertible Debentures--Option to Extend Interest Payment
Period". If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid to the holders of record of Preferred Securities
as they appear on the books and records of the Trust on the record date next
following the termination of such deferral period.
Distributions on the Preferred Securities will be made to the extent that
the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Preferred Securities will be limited to payments received by the Trust
from the Company for the Convertible Debentures. See "Description of the
Convertible Debentures". The payment of distributions out of funds held by the
Trust, is guaranteed by the Company, as set forth under "Description of the
Guarantee".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be fifteen days prior to the relevant payment dates.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below. In the event that any date
on which distributions are payable on the Preferred Securities is not a Business
Day, payment of the distribution payable on such date will be made on the next
succeeding day which is a Business Day (without any distribution or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. A "Business Day" shall mean any day other than a day on which
banking institutions in The City of New York or in Wilmington, Delaware are
authorized or required by law to close.
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CONVERSION RIGHTS
General. Preferred Securities are convertible at any time prior to the
Business Day immediately preceding the date of repayment of such Preferred
Securities, whether at maturity or upon redemption (either at the option of the
Company or pursuant to a Tax Event), at the option of the holder thereof and in
the manner described below, into shares of Company Common Stock at an initial
conversion rate of 2.545 shares of Company Common Stock for each Preferred
Security (equivalent to a conversion price of $19.65 per share of Company Common
Stock), subject to adjustment as described under "--Conversion Price
Adjustments" below. The Trust covenants in the Declaration not to convert
Convertible Debentures held by it except pursuant to a notice of conversion
delivered to the Property Trustee, as conversion agent (the "Conversion Agent"),
by a holder of Preferred Securities. A holder of a Preferred Security wishing to
exercise its conversion right shall deliver an irrevocable conversion notice,
together, if the Preferred Security is a Certificated Security (as defined
herein), with such Certificated Security, to the Conversion Agent which shall,
on behalf of such holder, exchange such Preferred Security for a portion of the
Convertible Debentures and immediately convert such Convertible Debentures into
Company Common Stock. Holders may obtain copies of the required form of the
conversion notice from the Conversion Agent. Procedures for converting
book-entry Preferred Securities into shares of Company Common Stock differ, as
described under "--Book-Entry Only Issuance--The Depository Trust Company".
Holders of Preferred Securities at the close of business on a distribution
record date will be entitled to receive the distribution payable on such
Preferred Securities on the corresponding distribution payment date
notwithstanding the conversion of such Preferred Securities following such
distribution record date but prior to such distribution payment date. Except as
provided in the immediately preceding sentence, neither the Trust nor the
Company will make, or be required to make, any payment, allowance or adjustment
for accumulated and unpaid distributions, whether or not in arrears, on
converted Preferred Securities. The Company will make no payment or allowance
for distributions on the shares of Company Common Stock issued upon such
conversion, except to the extent that such shares of Company Common Stock are
held of record on the record date for any such distributions. Each conversion
will be deemed to have been effected immediately prior to the close of business
on the day on which the related conversion notice was received by the Conversion
Agent.
No fractional shares of Company Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the last reported sale price of Company Common Stock on
the date such Preferred Securities are surrendered for conversion.
Conversion Price Adjustments--General. The conversion price is subject to
adjustment in certain events, including (a) the issuance of shares of Company
Common Stock as a dividend or a distribution with respect to Company Common
Stock, (b) subdivisions, combinations and reclassification of Company Common
Stock, (c) the issuance to all holders of Company Common Stock of rights or
warrants entitling them (for a period not exceeding 45 days) to subscribe for
shares of Company Common Stock at less than the then Current Market Price (as
defined below) of the Company Common Stock, (d) the distribution to holders of
Company Common Stock of evidences of indebtedness of the Company, 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 Company Common Stock paid exclusively in cash, excluding cash
dividends if the annualized per share amount thereof does not exceed 15% of the
current market price of Company Common Stock as of the trading day immediately
preceding the date of declaration of such dividend, and (f) payment to holders
of Company Common Stock in respect of a tender or exchange offer (other than an
odd-lot offer) by the Company for Company Common Stock at a price in excess of
110% of the then Current Market Price of Company Common Stock as of the trading
day next succeeding the last date tenders or exchanges may be made pursuant to
such tender or exchange offer. "Current Market Price" means the average of the
daily
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<PAGE>
closing prices for the five consecutive trading days selected by the Company
commencing not more than 20 trading days before, and ending not later than, the
earlier of the day in question or, if applicable, the day before the "ex" date
with respect to the issuance or distribution in question.
The Company from time to time may reduce the conversion price of the
Convertible Debentures (and thus the conversion price of the Preferred
Securities) by any amount selected by the Company for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Company's Board
of Directors deems advisable to avoid or diminish any income tax to holders of
Company Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes. See "United States Federal Income Taxation--Adjustment of Conversion
Price".
No adjustment of the conversion price will be made upon the issuance of any
shares of Company Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of Company
Common Stock under any such plan. No adjustment in the conversion price will be
required unless such adjustment would require a change of at least one percent
(1%) in the price then in effect; provided, however, that any adjustment that
would not be required to be made shall be carried forward and taken into account
in any subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holder of the Preferred
Securities.
Conversion Price Adjustments--Merger, Consolidation or Sale of Assets of the
Company. In the event that the Company shall be a party to any transaction
(including, without limitation, and with certain exceptions, (a)
recapitalization or reclassification of the Company Common Stock, (b)
consolidation of the Company with, or merger of the Company into, any other
Person, or any merger of another Person into the Company, (c) any sale, transfer
or lease of all or substantially all of the assets of the Company or (d) any
compulsory share exchange) pursuant to which the Company Common Stock is
converted into the right to receive other securities, cash or other property
(each of the foregoing being referred to as a "Transaction"), then the holders
of Preferred Securities then outstanding shall have the right to convert the
Preferred Securities into the kind and amount of securities, cash or other
property receivable upon the consummation of such Transaction by a holder of the
number of shares of Company Common Stock issuable upon conversion of such
Preferred Securities immediately prior to such Transaction.
In the case of a Transaction, each Preferred Security would become
convertible into the securities, cash or property receivable by a holder of the
number of shares of the Company Common Stock into which such Preferred Security
was convertible immediately prior to such Transaction. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the Preferred Securities in the future. For example, if the
Company were acquired in a cash merger, each Preferred Security would become
convertible solely into cash and would no longer be convertible into securities
whose value would vary depending on the future prospects of the Company and
other factors.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends to holders of Preferred Securities or to the holders of Company
Common Stock. See "United States Federal Income Taxation".
REDEMPTION
The Convertible Debentures will mature on April 15, 2016, and may be
redeemed, in whole or in part, at any time after April 15, 1999 or at any time
in certain circumstances upon the occurrence of a
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Tax Event. Upon the repayment of the Convertible Debentures, whether at maturity
or upon redemption (either at the option of the Company or pursuant to a Tax
Event), the proceeds from such repayment shall simultaneously be applied to
redeem Trust Securities having an aggregate liquidation amount equal to the
Convertible Debentures so repaid or redeemed at the applicable Redemption Price,
together with accrued and unpaid distributions through the date of redemption;
provided, that holders of the Trust Securities shall be given not less than 30
nor more than 60 days' notice of such redemption. See "--Special Event
Redemption or Distribution", "--Redemption Procedures", "Description of the
Convertible Debentures--General" and "Description of the Convertible
Debentures--Optional Redemption".
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event shall occur and
be continuing, the Trust shall, unless the Convertible Debentures are redeemed
in the limited circumstances described below, be dissolved with the result that,
after satisfaction of creditors, if any, of the Trust, Convertible Debentures
with an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, and
having the same record date for payment as the Preferred Securities and the
Common Securities outstanding at such time would be distributed on a pro rata
basis to the holders of the Preferred Securities and the Common Securities in
liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Preferred Securities will
not recognize any income, gain or loss for United States Federal income tax
purposes as a result of such dissolution and distribution of Convertible
Debentures; and, provided, further, that if at the time there is available to
the Trust the opportunity to eliminate, within such 90-day period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure which in the sole
judgment of the Company has or will cause no adverse effect on the Trust, the
Company or the holders of the Trust Securities and will involve no material
cost, the Trust will pursue such measure in lieu of dissolution. Furthermore, if
in the case of the occurrence of a Tax Event, (i) the Regular Trustees have
received an opinion (a "Redemption Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the Company would be
precluded from deducting the interest on the Convertible Debentures for United
States Federal income tax purposes even if the Convertible Debentures were
distributed to the holders of Preferred Securities and Common Securities in
liquidation of such holders' interests in the Trust as described above or (ii)
the Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered to the Trust, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Convertible Debentures, in whole (but not in part) for cash within 90 days
following the occurrence of such Tax Event, and promptly following such
redemption, the Preferred Securities and Common Securities will be redeemed by
the Trust at the Redemption Price; provided, however, that if at the time there
is available to the Company or the Trust the opportunity to eliminate, within
such 90-day period, the Tax Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar reasonable
measure which in the sole judgment of the Company has or will cause no adverse
effect on the Trust, the Company or the holders of the Trust Securities and will
involve no material cost, the Company or the Trust will pursue such measure in
lieu of redemption.
Because the Company is a holding company whose operations are conducted
through Ann Taylor, the ability of the Company to redeem the Convertible
Debentures, and, therefore for the Trust to redeem the Preferred Securities,
will be dependent on Ann Taylor's ability to pay dividends to the
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Company in sufficient amounts. Ann Taylor's Bank Credit Agreement, the Note
Indenture and the Receivables Facility impose certain restrictions on the
ability of Ann Taylor to dividend funds to the Company, including a prohibition
against making a dividend to the Company in order to redeem the Convertible
Debentures. Therefore, any redemption of the Convertible Debentures, and,
therefore, the Preferred Securities, will require a waiver or amendment to the
Bank Credit Agreement prior to such redemption. See "Risk Factors--Indebtedness
and Ability to Service Indebtedness", "Risk Factors-- Restrictive Convenants and
Asset Encumbrances", "Risk Factors--Ranking of Obligations Under Guarantee and
Convertible Debentures" and "Financing Arrangements".
"Tax Event" means that the Regular Trustees shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement that provides
for a position with respect to such laws or regulations that differs from the
theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after April 18, 1996 (collectively, a "Change in Tax Law"), there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days of
the date thereof, subject to United States Federal income tax with respect to
income accrued or received on the Convertible Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Trust on the Convertible Debentures is not, or
within 90 days of the date thereof will not be, deductible by the Company for
United States Federal income tax purposes. Notwithstanding anything in the
previous sentence to the contrary, a Tax Event shall not include any Change in
Tax Law that requires the Company for United States Federal income tax purposes
to defer taking a deduction for any original issue discount that accrues with
respect to the Convertible Debentures until the interest payment related to such
OID is paid by the Company in money; provided, that such Change in Tax Law does
not create more than an insubstantial risk that the Company will be prevented
from taking a deduction for OID accruing with respect to the Convertible
Debentures at a date that is no later than the date the interest payment related
to such OID is actually paid by the Company in money.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date hereof.
On the date fixed for any distribution of Convertible Debentures, upon
dissolution of the Trust, (i) the Preferred Securities and the Common Securities
will no longer be deemed to be outstanding and (ii) certificates representing
Trust Securities will be deemed to represent beneficial interests in the
Convertible Debentures having an aggregate principal amount equal to the stated
liquidation amount of, and bearing accrued and unpaid interest equal to accrued
and unpaid distributions on, such Trust Securities until such certificates are
presented to the Company or its agent for transfer or reissuance.
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<PAGE>
There can be no assurance as to the market price for the Convertible
Debentures that may be distributed in exchange for Trust Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Convertible Debentures that the investor may subsequently receive on dissolution
and liquidation of the Trust may trade at a discount to the price of the Trust
Securities exchanged. If the Convertible Debentures are distributed to the
holders of the Preferred Securities, the Company will use its best efforts to
cause the Convertible Debentures to be listed on the NYSE or on any such other
national securities exchange or similar organization as the Preferred Securities
are then listed or quoted.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, register the transfer of or exchange any Preferred Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Preferred Securities and ending at the close of business on the
earliest date in which the relevant notice of redemption is deemed to have been
given to all holders of Preferred Securities to be so redeemed and (ii) register
the transfer of or exchange any Preferred Securities so selected for redemption,
in whole or in part, except for the unredeemed portion of any Preferred
Securities being redeemed in part.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), and if the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Convertible Debentures, then, by 12:00 noon, New York time, on
the redemption date, the Trust will irrevocably deposit with DTC funds
sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
such amount in respect of Preferred Securities represented by the Global
Certificates (as defined herein) and will irrevocably deposit with the paying
agent for the Preferred Securities funds sufficient to pay such amount in
respect of any Certificated Securities and will give such paying agent
irrevocable instructions and authority to pay such amount to the holders of
Certificated Securities upon surrender of their certificates. If notice of
redemption shall have been given and funds are deposited as required, then upon
the date of such deposit, all rights of holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the amount payable
on such date will be made on the next succeeding day which is a Business Day
(without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities is improperly withheld or
refused and not paid either by the Trust or by the Company pursuant to the
Guarantee described under "Description of the Guarantee", distributions on such
Preferred Securities will continue to accrue at the then applicable rate, from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the amount payable upon redemption (other than for calculating any
premium).
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata.
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
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SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Trust Securities; provided, however, that, if on any distribution
date or redemption date a Declaration Event of Default shall have occurred and
be continuing, no payment of any distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities shall be made
unless payment in full in cash of all accumulated and unpaid distributions on
all outstanding Preferred Securities for all distribution periods terminating on
or prior thereto, or in the case of payment of the amount payable upon
redemption of the Preferred Securities, the full amount of such amount in
respect of all outstanding Preferred Securities shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied to
the payment in full in cash of all distributions on, or the amount payable upon
redemption of, Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Preferred Securities and not the holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Preferred Securities have been
distributed on a pro rata basis to the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on April 15,
2021, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or the equivalent
with respect to the Company, the filing of a certificate of cancellation with
respect to the Trust after having obtained the consent of at least a majority in
liquidation amount of the Trust Securities, voting together as a single class,
to file such certificate of cancellation, or the revocation of the charter of
the Company and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) upon the distribution of all of the Convertible
Debentures upon the occurrence of a Special Event, (v) upon the entry of a
decree of a judicial dissolution of the Company or the Trust, or (vi) upon the
redemption of all the Trust Securities.
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MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other entity, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; provided, that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Preferred Securities
other securities having substantially the same terms as the Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Securities rank with respect to distributions, assets and payments, (ii) the
Company expressly acknowledges a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Convertible
Debentures, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose substantially identical to that of the Trust, (vii) the Company
guarantees the obligations of such successor entity under the Successor
Securities to the same extent as provided by the Guarantee, (viii) prior to such
merger, consolidation, amalgamation or replacement, the Company has received an
opinion of a nationally recognized independent counsel to the Trust reasonably
acceptable to the Property Trustee experienced in such matters to the effect
that: (A) such merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the holders' interest in the new
entity), (B) following such merger, consolidation, amalgamation or replacement,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (C) following such merger,
consolidation, amalgamation or replacement, the Trust (or such successor trust)
will be treated as a grantor trust for United States Federal income tax
purposes. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in liquidation amount of the Common Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or the successor entity to be classified as other than a grantor
trust for United States Federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf of
the holders of the Preferred Securities and only the holders of the Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration and, therefore, the Indenture.
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If the Property Trustee fails to enforce its rights under the Convertible
Debentures after a holder of Preferred Securities has made a written request,
such holder of record of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Convertible Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, the redemption date), then a
holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder directly of the principal of or interest
on the Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Convertible Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Debentures
to be immediately due and payable. The Company and the Trust are each required
to file annually with the Property Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantee--Amendments and Assignment", and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as holder of the Convertible Debentures,
to (i) exercise the remedies available to it under the Indenture as a holder of
the Convertible Debentures, (ii) waive any past Indenture Event of Default that
is waiveable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Debentures shall be due
and payable or (iv) consent to any amendment, modification, or termination of
the Indenture or the Convertible Debentures where such consent shall be
required; provided, however, that where a consent or action under the Indenture
would require the consent or act of the holders of more than a majority of the
aggregate principal amount of Convertible Debentures affected thereby, only the
holders of the percentage of the aggregate stated liquidation amount of the
Preferred Securities which is at least equal to the percentage required under
the Indenture may direct the Property Trustee to give such consent or take such
action. If the Property Trustee fails to enforce its rights under the
Convertible Debentures after a holder of record of Preferred Securities has made
a written request, such holder of record of Preferred Securities may directly
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Convertible Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures
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having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Debentures. Such notice shall
state that such Indenture Event of Default also constitutes a Declaration Event
of Default. The Property Trustee shall be under no obligation to take any of the
actions described in clause (i), (ii) or (iii) above unless the Property Trustee
has obtained an opinion of independent tax counsel to the effect that as a
result of such action, the Trust will not fail to be classified as a grantor
trust for United States Federal income tax purposes and each holder will be
treated as owning an undivided beneficial interest in the Convertible
Debentures.
In the event the consent of the Property Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of the holders of more than a majority of the aggregate principal amount
of the Convertible Debentures, the Property Trustee may only give such consent
at the direction of the holders of at least the same proportion in aggregate
stated liquidation amount of the Securities. The Property Trustee shall not take
any such action in accordance with the directions of the holders of the Trust
Securities unless the Property Trustee has obtained an opinion of tax counsel to
the effect that for the purposes of United States Federal income tax the Trust
will not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Convertible Debentures in
accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the Preferred Securities have no rights to appoint or remove the
Regular Trustees, who may be appointed, removed or replaced solely by the
Company as the holder of all of the Common Securities.
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MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Property Trustee and the Delaware
Trustee), provided, that if any proposed amendment provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise or (ii) the dissolution,
winding-up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
provided, that if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of a majority in liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States Federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Trust entered
into a registration rights agreement with the Initial Purchasers (the
"Registration Rights Agreement") pursuant to which the Company and the Trust
would, at the Company's expense, for the benefit of the holders of the Preferred
Securities, the Guarantee, the Convertible Debentures and the shares of Company
Common Stock issuable upon conversion of the Convertible Debentures (together,
the "Registrable Securities"), (i) file with the Securities and Exchange
Commission (the "SEC" or the "Commission") within 60 days after the date of
issuance of the Registrable Securities (June 24, 1996), a registration statement
(the "Shelf Registration Statement") covering resales of the Registrable
Securities, (ii) use their best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act within 180 days
after the date of the issuance of the Registrable Securities (October 22, 1996)
and (iii) use their best efforts to keep effective the Shelf Registration
Statement until three years after the date it is declared effective or such
earlier date as all Registrable Securities shall have been disposed of or on
which all Registrable Securities held by persons that are not affiliates of the
Company or the Trust may be resold without registration pursuant to Rule 144(k)
under the Securities Act (the "Effectiveness Period"). The Company would provide
to each holder of Registrable Securities copies of the prospectus which is a
part of the Shelf Registration Statement, notify each holder when the Shelf
Registration Statement had become effective and take certain other actions as
are required to permit unrestricted resales of the Registrable Securities. A
holder of Registrable Securities that sells such Registrable Securities pursuant
to the Shelf Registration Statement would be required to be named as a selling
security holder in the related Prospectus and to deliver a Prospectus to
purchasers, would be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and would be bound by the
provisions of the Registration Rights Agreement, including certain
indemnification obligations.
If (i) on or prior to 60 days following the date of original issuance of the
Registrable Securities (June 24, 1996), a Shelf Registration Statement had not
been filed with the Commission, or (ii) on or prior to the 180th day following
the issuance of the Registrable Securities (October 22, 1996), such Shelf
Registration Statement had not been declared effective (each, a "Registration
Default"),
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additional interest ("Liquidated Damages") would accrue on the Convertible
Debentures and, accordingly, additional distributions would accrue on the
Preferred Securities, in each case from and including the day following such
Registration Default. Liquidated Damages would be paid quarterly in arrears,
with the first quarterly payment due on the first interest or distribution
payment date, as applicable, following the date on which such Liquidated Damages
begin to accrue, and would accrue at a rate per annum equal to an additional
one-quarter of one percent (0.25%) of the principal amount or liquidation
amount, as applicable, to and including the 90th day following such Registration
Default and one-half of one percent (0.50%) thereof from and after the 91st day
following such Registration Default. In the event that the Shelf Registration
Statement ceases to be effective during the Effectiveness Period for more than
30 consecutive days or any 90 days, whether or not consecutive, during any
12-month period, then the interest rate borne by the Convertible Debentures and
the distribution rate borne by the Preferred Securities would each increase by
an additional one-half of one percent (0.50%) per annum from such 31st or 91st
day, as applicable, until such time as the Shelf Registration Statement again
becomes effective. This Prospectus is a part of the Shelf Registration Statement
filed in accordance with the foregoing requirements.
The Company and the Trust have agreed in the Registration Rights Agreement
to use their best efforts to cause the Preferred Securities and the Company
Common Stock issuable upon conversion of the Convertible Debentures to be listed
on the NYSE upon effectiveness of the Shelf Registration Statement.
The summary herein of certain provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement, a copy of which is filed as
an exhibit to this Registration Statement.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interest in the global certificate or certificates issued in connection with
sales of Preferred Securities made pursuant to this Prospectus. Except as
described in the next paragraph, the Preferred Securities were issued only as
fully registered securities registered in the name of Cede & Co. (as nominee for
DTC). One or more fully registered global Preferred Security certificates (the
"Global Certificates") will be issued, representing, in the aggregate, Preferred
Securities sold pursuant to this Prospectus, and will be deposited with DTC. In
the event of a transfer of securities that were issued in fully registered,
certificated form, the holder of such certificates will be required to exchange
them for interests in the Global Certificates representing the number of
Preferred Securities being transferred.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
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Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of Preferred
Securities ("Beneficial Owner") is in turn to be recorded on the Participants'
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Preferred Securities are credited, which may or may not be the
Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Securities represented thereby for all
purposes under the Declaration and the Preferred Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Preferred Securities, DTC will exchange the Global
Certificates for Certificated Securities, which it will distribute to its
Participants and which will be legended as set forth under the heading "Notices
to Investors".
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Preferred Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Preferred Securities are
being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Participants to whose accounts the Preferred Securities
are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distributions on the Preferred Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust
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or the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the Trust, disbursement of such payments to Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company, the Issuer
nor the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving notice to the Trust.
Under such circumstances, in the event that a successor securities depository is
not obtained, Preferred Security certificates are required to be printed and
delivered. Additionally, the Trust (with the consent of the Company) may decide
to discontinue use of the system of book-entry transfers through DTC (or a
successor depository). In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, the Company
will appoint a paying agent with respect to the Preferred Securities.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a Global Certificate.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of Certificated
Securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The Paying
Agent shall initially be The Bank of New York. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Issuer
Trustees. In the event that The Bank of New York shall no longer be the Paying
Agent, the Trustee shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company).
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
The Property Trustee will act as Registrar, Transfer Agent, Paying Agent and
Conversion Agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries maintain deposit accounts and
conduct other banking transactions with the Property Trustee in the ordinary
course of their businesses. The Property Trustee, prior to the occurrence of a
default with respect to the Trust Securities, undertakes to perform only such
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duties as are specifically set forth in the Declaration and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising their
voting rights, direct the Property Trustee to take any action following a
Declaration Event of Default.
GOVERNING LAW
The Declaration and the Preferred Securities is governed by, and will be
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States Federal income tax
purposes so that the Debentures will be treated as indebtedness of the Company
for United States Federal income tax purposes. In this connection, the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust or the Declaration that the Regular Trustees
determine in their discretion to be necessary or desirable for such purposes as
long as such action does not adversely affect the interests of the holders of
the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
was executed and delivered by the Company for the benefit of the holders from
time to time of Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee. The Guarantee incorporates by
reference the terms of the Trust Indenture Act. The Guarantee will be qualified
under the Trust Indenture Act. The Bank of New York, as the Guarantee Trustee,
holds the Guarantee for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company
irrevocably and unconditionally agrees to pay in full to the holders of the
Preferred Securities (except to the extent paid by such Trust), as and when due,
regardless of any defense, right of set off or counterclaim which the Trust may
have or assert, the following payments (the "Guarantee Payments"), without
duplication: (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities to the extent the Trust has funds available
therefor, (ii) the Redemption Price, with respect to any Preferred Securities
called for redemption by the Trust, to the extent the Trust has funds available
therefor and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Convertible Debentures to the holders of Preferred Securities or the redemption
of all the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Preferred
Securities to the date of payment to the extent the Trust has funds available
therefor and (b) the amount of assets of the Trust remaining available for
distribution to holders of Preferred Securities upon the liquidation of the
Trust. The holders of a majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. Any holder of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the obligations of the Guarantor under
the Guarantee without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity. If the Company were to
default on its obligation to pay amounts payable on the Convertible Debentures,
the Trust would lack available funds for the payment of distributions or amounts
payable on redemption of the Preferred Securities or otherwise, and in such
event holders of the Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, a holder of the Preferred
Securities would be required to rely on the enforcement (1) by the Property
Trustee of its rights, as registered holder of the Convertible Debentures,
against the Company pursuant to the terms of the Convertible Debentures or (2)
by such holder of Preferred Securities of its right against the Company to
enforce payments on Convertible Debentures. See "Description of the Convertible
Debentures". The Declaration provides that each holder of Preferred Securities,
by acceptance thereof, agrees to the provisions of the Guarantee, including the
subordination provisions thereof, and the Indenture.
The Guarantee is a guarantee on a subordinated basis with respect to the
Preferred Securities from the time of issuance of such Preferred Securities but
does not apply to any payment of distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of the Trust, except to
the extent the Trust shall have funds available therefor. If the Company does
not make interest payments on the Convertible Debentures, the Trust will not pay
distributions on the Preferred Securities and will not have funds available
therefor. See "Description of the Convertible Debentures". The Guarantee, when
taken together with the Company's obligations under the Convertible Debentures,
and the Indenture thereto and the Declaration, including its obligations to pay
costs, expenses, debts and liabilities of the Trust (other than with respect to
the Trust Securities) provides a full and
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unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities issued by the Trust.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon the occurrence and during the continuation of a Declaration Event of
Default, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that, so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the interest
payment period and such extension shall be continuing, (ii) the Company shall be
in default with respect to its payment or other obligations under the Guarantee
or (iii) there shall have occurred and be continuing any event that, with the
giving of notice or the lapse of time or both, would constitute an Indenture
Event of Default, then the Company (a) shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock, except for
dividends or distributions in shares of its capital stock of the same class on
which such dividend or distribution is being paid and conversions or exchanges
of common stock of one class into common stock of another class and except for a
redemption, purchase or other acquisition of shares of its capital stock made
for the purpose of an employee incentive plan or benefit plan of the Company or
any of its subsidiaries, (b) shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior to the Convertible Debentures
(except by conversion into or exchange for shares of its capital stock), and (c)
shall not make any guarantee payments with respect to the foregoing.
As part of the Guarantee, the Company has agreed that it will honor all
obligations described therein relating to the conversion of the Preferred
Securities into Company Common Stock as described in "Description of the
Preferred Securities--Conversion Rights".
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of all the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities will be as set forth under "Description of the
Preferred Securities--Voting Rights". All guarantees and agreements contained in
the Guarantee bind the successors, assigns, receivers, trustees and
representatives of the Company and inure to the benefit of the holders of the
Preferred Securities then outstanding. Except in connection with any permitted
merger or consolidation of the Company with or into another entity or any
permitted sale, transfer or lease of the Company's assets to another entity as
described below under "Description of the Convertible Debentures--Restrictions",
the Company may not assign its rights or delegate its obligations under the
Guarantee without the prior approval of the holders of at least a majority of
the aggregate stated liquidation amount of the Preferred Securities then
outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Preferred Securities upon
(i) full payment of the Redemption Price of all Preferred Securities, (ii) upon
distribution of the Convertible Debentures held by the Trust to the holders of
the Preferred Securities, (iii) upon liquidation of the Trust or (iv) upon the
distribution of Company Common Stock to such holder in respect of the conversion
of such holder's Preferred Securities into Company Common Stock and will
terminate completely upon full payment of
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the amounts payable in accordance with the Declaration of the Trust. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Preferred Securities must restore payment of
any sum paid under such Preferred Securities or such Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred stock issued from time to time by the Company and
with any guarantee now or hereafter entered into by the Company in respect of
any preferred or preference stock or preferred securities of any affiliate of
the Company and (iii) senior to the Company Common Stock. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection (that
is, the guaranteed party may directly institute a legal proceeding against the
Company to enforce its rights under a Guarantee without instituting a legal
proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent man would exercise in the conduct
of his own affairs. Subject to such provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
GOVERNING LAW
The Guarantee is governed by, and will be construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust invested the proceeds from the issuance and sale
of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Indenture Trustee"), a copy of which has been filed as an exhibit
to the Registration Statement. Certain capitalized terms used herein are defined
in the Indenture. The Indenture will be qualified under the Trust Indenture Act.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Convertible Debentures may be distributed to
the holders of the Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution".
If the Convertible Debentures are distributed to the holders of Preferred
Securities, the Company will use its best efforts to have the Convertible
Debentures listed on the NYSE or on such other national securities exchange or
similar organization on which the Preferred Securities are then listed or
quoted.
GENERAL
The Convertible Debentures were issued as unsecured debt under the
Indenture. The Convertible Debentures will be limited in aggregate principal
amount of $103,737,200, such amount being the sum of the aggregate stated
liquidation amount of the Preferred Securities and the Common Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will become due and
payable, together with any accrued and unpaid interest thereon, including
Compounded Interest (as defined herein) and Additional Interest, if any, on
April 15, 2016.
The Convertible Debentures, if distributed to holders of Preferred
Securities in liquidation of such holder's interest in the Trust, will initially
be issued in the same form as the Preferred Securities that such Convertible
Debentures replace. Any Global Certificate will be replaced with one or more
Global Securities (as defined under "--Book-Entry and Settlement"). Under
certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security. In the event that
Convertible Debentures are issued in certificated form, such Convertible
Debentures will be in denominations of $50 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Convertible Debentures issued as a Global Security will be made
to DTC, a successor depositary or, in the event that no depositary is used, to a
Paying Agent for the Convertible Debentures. In the event Convertible Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Debentures will be registrable and Convertible
Debentures will be exchangeable for Convertible Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee in The City of New York; provided, that unless the
Convertible Debentures are held by the Trust or any successor permissible under
"Description of the Preferred Securities--Merger, Consolidation or Amalgamation
of the Trust", payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto.
There are no covenants or provisions in the Indenture that afford holders of
Convertible Debentures protection in the event of a highly leveraged transaction
or other similar transaction involving the Company that may adversely affect
such holders.
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INTEREST
Each Convertible Debenture bears interest at the rate of 8 1/2% per annum
from the original date of issuance, payable quarterly in arrears on January 15,
April 15, July 15 and October 15 (each, an "Interest Payment Date"), commencing
July 15, 1996, to the person in whose name such Convertible Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. If any Convertible
Debentures are held in certificated form, the record date for each Interest
Payment Date shall be 15 days prior to such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed. In the event
that any date on which interest is payable on the Convertible Debentures is not
a Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right at any time during the term of the Convertible
Debentures to defer interest payments from time to time by extending the
interest payment period for successive periods not exceeding 20 consecutive
quarters for each such period; provided, no Extension Period may extend beyond
the maturity date of the Convertible Debentures. At the end of each Extension
Period, the Company shall pay all interest then accrued and unpaid (including
Additional Interest and Liquidated Damages) together with interest thereon
compounded quarterly at the rate specified for the Convertible Debentures to the
extent permitted by applicable law ("Compounded Interest"); provided, that
during any Extension Period, the Company (i) shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock, except for
dividends or distributions in shares of its capital stock of the same class on
which such dividend or distribution is being paid and conversions or exchanges
of common stock of one class into common stock of another class and except for a
redemption, purchase or other acquisition of shares of its capital stock made
for the purpose of an employee incentive plan or benefit plan of the Company or
any of its subsidiaries, (ii) shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem, any debt securities
issued by the Company that rank pari passu with or junior to the Convertible
Debentures (except by conversion into or exchange for shares of its capital
stock) and (iii) shall not make any guarantee payments with respect to the
foregoing. Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided, that such Extension Period
together with all previous and further extensions thereof may not exceed 20
consecutive quarters and may not extend beyond the maturity of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period, subject to
the above requirements. No interest during an Extension Period, except at the
end thereof, shall be due and payable. The Company has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Convertible Debentures. If the Property Trustee shall be
the sole holder of the Convertible Debentures, the Company shall give the
Regular Trustees and the Property Trustee notice of its selection of such
Extension Period at least one Business Day prior to the earlier of (i) the date
the distributions on the Preferred Securities are payable or (ii) the date the
Trust is required to give notice to the NYSE (or any applicable self-regulatory
organization) or to holders of the Preferred Securities of the record date or
the date such distribution is payable, but in any event not less than ten
Business Days prior to such record date. The Company shall cause the Trust to
give notice of the Company's selection of such Extension Period to the holders
of the Preferred Securities. If the Property Trustee shall not be
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the sole holder of the Convertible Debentures, the Company shall give the
holders of the Convertible Debentures notice of its selection of such Extension
Period at least ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date the Company is required to give notice to the NYSE
(or any applicable self-regulatory organization) or to holders of the
Convertible Debentures on the record or payment date of such related interest
payment, but in any event not less than two Business Days prior to such record
date.
ADDITIONAL INTEREST
If the Trust would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case, the
Company will pay as additional interest ("Additional Interest") such amounts as
shall be required so that the net amounts received and retained by the Trust
after paying any such taxes, duties, assessments or governmental charges will be
not less than the amounts the Trust would have received had no such taxes,
duties, assessments or governmental charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Company Common Stock at the
option of the holders of the Convertible Debentures at any time prior to the
Business Day immediately preceding the date of repayment of such Convertible
Debentures, whether at maturity or upon redemption (either at the option of the
Company or pursuant to a Tax Event), at the initial conversion price set forth
on the cover page of this Prospectus subject to the conversion price adjustments
described under "Description of the Preferred Securities--Conversion Rights".
The Trust has covenanted not to convert Convertible Debentures held by it except
pursuant to a notice of conversion delivered to the Conversion Agent by a holder
of Preferred Securities. Upon surrender of a Preferred Security to the
Conversion Agent for conversion, the Trust will distribute $50 principal amount
of the Convertible Debentures to the Conversion Agent on behalf of the holder of
the Preferred Securities so converted, whereupon the Conversion Agent will
convert such Convertible Debentures to Company Common Stock on behalf of such
holder. The Company's delivery to the holders of the Convertible Debentures
(through the Conversion Agent) of the fixed number of shares of Company Common
Stock into which the Convertible Debentures are convertible (together with the
cash payment, if any, in lieu of fractional shares) will be deemed to satisfy
the Company's obligation to pay the principal amount of the Convertible
Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid or
duly provided for; provided, however, that if any Convertible Debenture is
converted after a record date for payment of interest, the interest payable on
the related interest payment date with respect to such Convertible Debenture
shall be paid to the Trust (which will distribute such interest to the
converting holder) or other holder of Convertible Debentures, as the case may
be, despite such conversion.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Convertible Debentures, in
whole or in part, at any time or from time to time after April 15, 1999 upon not
less than 30 nor more than 60 days' notice, at a redemption price equal to
105.95% of the principal amount of the Convertible Debentures to be redeemed
plus any accrued and unpaid interest, including Additional Interest, Compounded
Interest and Liquidation Damages, if any, to the redemption date if redeemed on
or before April 15, 2000, and
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at the following optional redemption prices (expressed as a percentage of the
principal amount of Convertible Debentures), if redeemed during the 12-month
period beginning April 15:
OPTIONAL
REDEMPTION
YEAR PRICE
---- ----------
2000................................ 105.10%
2001................................ 104.25
2002................................ 103.40
2003................................ 102.55
2004................................ 101.70
2005................................ 100.85
2006 and thereafter................. 100.00
plus, in each case, accrued and unpaid interest, including Additional Interest,
Compounded Interest and Liquidation Damages, if any, to the redemption date.
If a partial redemption of the Preferred Securities resulting from a partial
redemption of the Convertible Debentures would result in the delisting of the
Preferred Securities, the Company may only redeem Convertible Debentures in
whole.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed the Proposed Legislation that, among
other things, would treat as equity for United States Federal income tax
purposes instruments with a maximum term of more than 20 years that are not
shown as indebtedness on the consolidated balance sheet of the issuer. On March
29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways
and Means Committee Chairman Bill Archer issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action". Based on
the Joint Statement, it is expected that if the Proposed Legislation were
enacted, such legislation would not apply to the Convertible Debentures since
they were issued prior to the date of any "appropriate Congressional action".
Furthermore, even if the Proposed Legislation were enacted in its current form
with effective date provisions making it applicable to the Convertible
Debentures, it would not cause the Convertible Debentures to be treated as
equity for United States Federal income tax purposes since the maximum term of
the Convertible Debentures will not exceed 20 years. There can be no assurances,
however, that any proposed legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Convertible Debentures. If
legislation is enacted that adversely affects the tax treatment of the
Convertible Debentures, such legislation could result in the distribution of the
Convertible Debentures to holders of the Preferred Securities or, in certain
limited circumstances, the redemption of such securities by the Company and the
distribution of the resulting cash in redemption of the Preferred Securities.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution".
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Convertible Debentures may be made if (i)
any Senior Indebtedness of the Company is not paid when due and any applicable
grace period with respect to such default has ended and such default has not
been cured or waived, or ceased to exist or (ii) the maturity of any Senior
Indebtedness of the Company has been accelerated
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because of a default. At May 4, 1996, Senior Indebtedness of the Company
consisted of the Company's guarantee of $186.5 million of indebtedness of Ann
Taylor. Upon any distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
principal of, and premium, if any, and interest due or to become due on, all
Senior Indebtedness of the Company must be paid in full before the holders of
the Convertible Debentures are entitled to receive or retain any payment. Upon
satisfaction of all claims related to all Senior Indebtedness of the Company
then outstanding, the rights of the holders of the Preferred Securities will be
subrogated to the rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions applicable to Senior Indebtedness until all
amounts owing on the Convertible Debentures are paid in full.
The term "Senior Indebtedness" shall mean in respect of the Company: (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Debentures and (2) any indebtedness between or among such obligor or
its affiliates, including all other debt securities and guarantees in respect of
those debt securities issued to any other trust, or trustee of such trust,
partnership or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in
connection with the issuance by such Financing Entity of preferred securities or
other securities that rank pari passu with, or junior to, the Preferred
Securities. Such 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 such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. The Company's operations are conducted
through its wholly owned subsidiary, Ann Taylor. At May 4, 1996, indebtedness of
Ann Taylor, including trade payables of $40.2 million, aggregated approximately
$218.6 million, which indebtedness is effectively senior to the Convertible
Debentures.
CERTAIN COVENANTS
In the Indenture, the Company has covenanted that, so long as any
Convertible Debentures are outstanding, if (i) there shall have occurred and be
continuing any event that with the giving of notice or the lapse of time or
both, would constitute an Indenture Event of Default, (ii) the Company shall be
in default with respect to its payment of any obligations under the Guarantee,
or (iii) the Company has exercised its option to defer interest payments on the
Convertible Debentures by extending the interest payment period and such period,
or any extension thereof, shall be continuing, then the Company (a) shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock, except for dividends or distributions in shares of its capital
stock of the same class on which such dividend or distribution is being paid and
conversions or exchanges of common stock of one class into common stock of
another class and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purposes of an employee incentive plan
or benefit plan of the Company or any of its subsidiaries, (b)
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shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company that rank
pari passu with or junior to the Convertible Debentures (except by conversion
into or exchange for shares of its capital stock), and (c) shall not make any
guarantee payments with respect to the foregoing.
The Company has agreed (i) to directly or indirectly maintain 100% ownership
of the Common Securities of the Trust; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of such Common Securities and (ii) to use its reasonable efforts to
cause the Trust (x) to remain a statutory business trust, except in connection
with the distribution of Convertible Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its assets substantially
as an entirety unless (a) if the Company is not the survivor, the successor is a
corporation organized in the United States and expressly assumes the due and
punctual payment of the principal of (and premium, if any) and interest on all
Convertible Debentures issued thereunder and the performance of every other
covenant of the Indenture on the part of the Company and (b) immediately
thereafter no event of default under the Indenture and no event which, after
notice or lapse of time, or both, would become an event of default under the
Indenture, shall have happened and be continuing. Upon any such consolidation,
merger, conveyance or transfer, the successor corporation shall succeed to and
be substituted for the Company under the Indenture and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
the Indenture and the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of the Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Convertible Debentures will
be issued in the same form as the Preferred Securities which such Convertible
Debentures replace. Any Global Certificate will be replaced by one or more
global certificates (each a "Global Security") registered in the name of the
depositary or its nominee. Except under the limited circumstances described
below, the Convertible Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Convertible Debentures
in definitive form. The Global Securities described above may not be transferred
except by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders thereof for
any purpose under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of DTC or if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
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THE DEPOSITARY
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in the Trust and a Global Security is
issued, DTC will act as securities depositary for the Convertible Debentures
represented by such Global Security. For a description of DTC and the specific
terms of the depositary arrangements, see "Description of the Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company". As of the
date of this Prospectus, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Convertible Preferred Securities apply in all material
respects to any debt obligations represented by one or more Global Securities
held by DTC. The Company may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is unable or unwilling
to continue as a depositary for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Convertible Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act of 1934, as amended (the
"Exchange Act"), at which time the Depositary is required to be so registered to
act as such depositary and no successor depositary shall have been appointed,
(iii) the Company, in its sole discretion, determines that such Global Security
shall be so exchangeable or (iv) there shall have occurred an Event of Default
with respect to such Convertible Debentures. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Convertible Debentures registered in such names as the Depositary shall direct.
It is expected that such instructions will be based upon directions received by
the Depositary from its Participants with respect to ownership of beneficial
interests in such Global Security.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Convertible Debentures: (i) failure for 30 days to pay
interest on the Convertible Debentures, including any Additional Interest,
Compounded Interest and Liquidated Damages in respect thereof, when due provided
that a valid extension of an interest payment period will not constitute a
default in the payment of interest (including any Additional Interest,
Compounded Interest or Liquidated Damages) for this purpose; or (ii) failure to
pay principal of or premium, if any, on the Convertible Debentures when due
whether at maturity, upon redemption, by declaration or otherwise; or (iii)
failure by the Company to deliver shares of Company Common Stock upon an
election by a holder of Preferred Securities to convert such Preferred
Securities; or (iv) failure to observe or perform any other covenant contained
in the Indenture for 90 days after notice to the Company by the Trustee or by
the holders of not less than 25% in aggregate outstanding principal amount of
the Convertible Debentures; (v) the dissolution, winding up or termination of
the Trust, except in connection with the distribution of Convertible Debentures
to the holders of Preferred Securities in liquidation of the Trust upon the
redemption of all outstanding Preferred Securities and in connection with
certain mergers, consolidations or amalgamations permitted by the Declaration;
or (vi) certain events in bankruptcy, insolvency or reorganization of the
Company.
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The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Event of Default; provided, however, that,
after such acceleration, but before a judgment or decree based on acceleration,
the holders of a majority in aggregate principal amount of outstanding
Convertible Debentures may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal, have been cured or waived as provided in the Indenture. For
information as to waiver of defaults, see "--Modifications and Amendments of the
Indenture".
Notwithstanding the foregoing, if an Indenture Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise payable, the Company acknowledges that, in
such event, a holder of Preferred Securities may institute a Direct Action for
payment on or after the respective due date specified in the Convertible
Debentures. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such holder
of Convertible Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of or interest
on the Convertible Debentures held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
The Holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past defaults except (a) a default in payment
of the principal of (or premium, if any) or interest, if any, on any Convertible
Debentures and (b) a default in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the holder
of each Convertible Debenture; provided, however, that if the Convertible
Debentures are held by the Trust or a trustee of such Trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to such
waiver or modification to such waiver; provided, further, that if the consent of
the holder of each outstanding Convertible Debenture is required, such waiver
shall not be effective until each holder of the Trust Securities shall have
consented to such waiver.
A default under any other indebtedness of the Company or the Trust would not
constitute an Event of Default under the Convertible Debentures.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of
Convertible Debentures, unless such holders shall have offered to the Indenture
Trustee reasonable indemnity. Subject to such provisions for the indemnification
of the Indenture Trustee, the holders of a majority in aggregate principal
amount of the Convertible Debentures then outstanding will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee, or exercising any trust or power conferred
on the Indenture Trustee with respect to such series.
No holder of any Convertible Debenture will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to the Indenture Trustee written
notice of a continuing Event of Default, (ii) if the Trust is not the sole
holder of Convertible Debentures, the holders of at least 25% in aggregate
principal amount of the Convertible Debentures then outstanding shall also have
made written request, (iii) such holder has
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offered reasonable indemnity to the Indenture Trustee to institute such
proceeding as Indenture Trustee, (iv) the Indenture Trustee shall have failed to
institute such proceeding within 60 days of such notice, and (v) the Indenture
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Convertible Debentures a direction
inconsistent with such request. However, such limitations do not apply to a suit
instituted by a holder of a Convertible Debenture for enforcement of payment of
the principal of or interest on such Convertible Debenture on or after the
respective due dates expressed in such Convertible Debenture.
The Company is required to file annually with the Indenture Trustee and the
Property Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to modify
the Indenture or the rights of the holders of Convertible Debentures; provided,
however, that no such modification may, without the consent of the holder of
each outstanding Convertible Debenture affected thereby, (i) extend the stated
maturity of the Convertible Debentures or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, or adversely affect the right
to convert Convertible Debentures or the subordination provisions of the
Indenture, or (ii) reduce the percentage in aggregate principal amount of
outstanding Convertible Debentures, the holders of which are required to consent
to any such supplemental indenture.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, comply with the Trust Indenture Act and for certain other
customary purposes.
GOVERNING LAW
The Indenture and the Convertible Debentures is governed by, and will be
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent man would exercise in the conduct
of his own affairs. Subject to such provision, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Convertible Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Indenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Indenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
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EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures is equal to the sum of
the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures match the distribution rate and distribution and other payment dates
for the Preferred Securities; (iii) pursuant to the Indenture, the Company shall
pay all, and the Trust shall not be obligated to pay, directly or indirectly,
costs, expenses, debt and obligations of the Trust other than with respect to
the Trust Securities; and (iv) the Declaration provides that the Issuer Trustees
will not cause or permit the Trust to, among other things, engage in any
activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee". If the Company does not make interest payments
on the Convertible Debentures purchased by the Trust, it is expected that the
Trust will not have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of its issuance but does not apply to any
payment of distributions unless and until the Trust has sufficient funds for the
payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provides a full and unconditional guarantee of amounts on the
Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities-- Book-Entry
Only Issuance--The Depository Trust Company" and "Description of the Preferred
Securities--Voting Rights", may direct the Property Trustee to enforce its
rights under the Convertible Debentures. If the Property Trustee fails to
enforce its rights under the Convertible Debentures, any holder of Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the Property Trustee's rights under the Convertible Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the respective
due date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Preferred Securities. If
the Company fails to make payments under the
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Guarantee, the Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Guarantee, any holder
of Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee,
or any other person or entity.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Company Common Stock, par value $.0068 per share, and 2,000,000 shares of
preferred stock, par value $.01 per share. Ann Taylor's authorized capital stock
consists of 1,000 shares of common stock, par value $1.00 per share, of which
one share is issued and outstanding and is owned by the Company.
COMMON STOCK
Holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders generally, including the election
of directors. Subject to the rights of holders of preferred stock, the holders
of Company Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of the Company, holders of Company Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to the rights of
holders of preferred stock, including any liquidation amount payable with
respect to any outstanding preferred stock. The holders of Company Common Stock
have no preemptive or conversion rights and are not subject to further calls or
assessments by the Company.
PREFERRED STOCK
The Company's Certificate of Incorporation, as amended, authorizes the Board
of Directors (without stockholder approval) to, among other things, issue shares
of preferred stock from time to time in one or more series, each series to have
such powers, designations, preferences and rights, and qualifications,
limitations or restrictions thereof, as may be determined by the Board of
Directors. The Company currently has no shares of preferred stock outstanding.
CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAWS PROVISIONS
Pursuant to the Certificate of Incorporation, the Board of Directors of the
Company is divided into three classes serving staggered three-year terms.
Directors can be removed from office only for cause and only by the affirmative
vote of the holders of a majority of the then-outstanding shares of capital
stock entitled to vote generally in an election of directors. Vacancies on the
Board of Directors may be filled only by the remaining directors and not by the
stockholders.
The Certificate of Incorporation also provides that any action required or
permitted to be taken by the stockholders of the Company may be effected only at
an annual or special meeting of stockholders, and prohibits stockholder action
by written consent in lieu of a meeting. The Company's By-laws provide that
special meetings of stockholders may be called only by the chairman, the
president or the secretary of the Company and must be called by any such officer
at the request in writing of the Board of Directors. Stockholders are not
permitted to call a special meeting or to require that the Board of Directors
call a special meeting of stockholders.
The By-laws establish an advance notice procedure for the nomination, other
than by or at the direction of the Board of Directors, of candidates for
election as directors as well as for other stockholder proposals to be
considered at annual meetings of stockholders. In general, notice of intent to
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nominate a director or raise business at such meetings must be received by the
Company not less than 60 nor more than 90 days prior to the anniversary of the
previous year's annual meeting, and must contain certain specified information
concerning the person to be nominated or the matters to be brought before the
meeting and information concerning the stockholder submitting the proposal.
LIMITATIONS ON DIRECTORS' LIABILITY
The Company's Certificate of Incorporation provides that no director of the
Company shall be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions will be to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of fiduciary
duty as a director (including breaches resulting from grossly negligent
behavior), except in the situations described above. These provisions will not
limit the liability of directors under federal securities laws.
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FINANCING ARRANGEMENTS
BANK CREDIT AGREEMENT
The Bank Credit Agreement currently provides for a $24.5 million Term Loan
and a $122 million Revolving Credit Facility.
The principal amount of the Term Loan is payable on September 29, 1998. At
May 4, 1996, the Company had $24.5 million outstanding under the Term Loan. The
Term Loan bears interest at a rate equal to, at the Company's option, Bank of
America National Trust and Saving Association's (i) Base Rate plus 2.50%, or
(ii) Eurodollar Rate plus 3.50%.
The Revolving Credit Facility currently provides for borrowings by Ann
Taylor in a principal amount of up to $122 million at any one time, including
letters of credit. Subject to the terms of the Revolving Credit Facility, Ann
Taylor may, from time to time, borrow, repay and reborrow under such facility.
The entire unpaid balance may be prepaid at any time without penalty, and is
payable in full on July 29, 1998. Amounts borrowed under the Revolving Credit
Facility are not subject to scheduled repayment prior to such date; however, Ann
Taylor is required to reduce the outstanding payment balance of the Revolving
Credit Facility to $50 million or less for a 30-day period in Fiscal 1996 and
each fiscal year thereafter. Prior to the third quarter of Fiscal 1996, loans
under the Revolving Credit Facility bear interest at a rate equal to, at the
Company's option, Bank of America's (i) Base Rate plus .75%, or (ii) Eurodollar
Rate plus 1.75%. Beginning in the third quarter of Fiscal 1996, loans under the
Revolving Credit Facility will bear interest at a rate to be determined by
reference to the ratio of funded debt to EBITDA. At May 4, 1996, Ann Taylor had
borrowings of $19.4 million under the Revolving Credit Facility, including $8.4
million in letters of credit.
The Bank Credit Agreement contains mandatory prepayment and commitment
reduction provisions in the event that Ann Taylor or any of its restricted
subsidiaries consummates (i) a financing transaction secured by a mortgage on
the distribution center located in Louisville, Kentucky, which is owned by a
wholly owned subsidiary of Ann Taylor (the "Distribution Center Financing") or
(ii) one or more financing transactions (including sale and leaseback
transactions) secured by equipment or store furniture or fixtures. These
provisions generally require that an amount equal to 50% of the greater of (a)
the net cash proceeds of such transaction and (b) the principal amount of
indebtedness incurred in such transaction be applied to prepay loans and to
reduce the commitment under the Bank Credit Agreement. The Distribution Center
Financing was consummated in November 1995, and the original commitments under
the Revolving Credit Facility and the Term Loan have been reduced by $3 million
($125 million to $122 million) and $500,000 ($25 million to $24.5 million),
respectively.
The Bank Credit Agreement contains financial covenants, including a minimum
net worth test, a minimum fixed charge test and a debt to capitalization ratio
test. The Bank Credit Agreement contains certain other restrictive covenants
that impose limitations (subject to certain exceptions) on Ann Taylor and the
Company with respect to, among other things, (i) creating or incurring liens,
(ii) selling or disposing of property or assets, (iii) making or owning
investments, (iv) incurring guarantees or other contingent obligations, (v)
declaring or paying dividends or making distributions on account of, or
acquiring, common stock or preferred stock of Ann Taylor or the Company, (vi)
making any change in the nature of Ann Taylor's business, (vii) engaging in
certain transactions with affiliates, (viii) as to Ann Taylor only,
consolidating, merging, dissolving or liquidating, or selling all or
substantially all of Ann Taylor's assets, (ix) redeeming or purchasing, or
paying or repaying principal of or interest on the 8 3/4% Notes, (x) modifying
certain material agreements, and (xi) making capital expenditures in excess of
the thresholds set forth in the Bank Credit Agreement. The Bank Credit Agreement
also restricts the ability of Ann Taylor and the Company to incur additional
indebtedness, subject to certain exceptions. In order to issue the Convertible
Debentures and the Guarantee, and to make distributions on the Preferred
Securities (so long as there is no event of default under the Bank Credit
Agreement), the Company and Ann Taylor obtained an amendment to certain of these
covenants. Such amendment
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contains a restrictive covenant prohibiting the amendment or other modification
of the terms of the Preferred Securities, if such amendment or modification
would, as determined by the lenders, be adverse to their interests, without the
consent of the lenders under the Bank Credit Agreement.
The obligations of Ann Taylor under the Bank Credit Agreement are secured by
a lien on substantially all of its tangible and intangible property (other than
its receivables and inventory), including trademarks and service marks (but
excluding leasehold interests), pursuant to various security agreements. In
addition, the Company has guaranteed Ann Taylor's payment obligations under the
Bank Credit Agreement and has pledged all of Ann Taylor's common stock to secure
its guaranty.
RECEIVABLES FACILITY
All of Ann Taylor's receivables ("Receivables") are sold to its wholly owned
subsidiary, Ann Taylor Funding, Inc. ("Funding") pursuant to a Purchase and Sale
Agreement, dated as of January 27, 1994, and as amended as of October 31, 1995.
Funding and Ann Taylor are parties to an Amended and Restated Receivables
Financing Agreement, dated as of October 31, 1995, with Market Street Capital
Corp., as lender ("Market Street"), and PNC, National Association ("PNC"), as
administrator, pursuant to which the Receivables are pledged to Market Street to
serve as collateral for up to $40 million of indebtedness.
Loans under the Receivables Facility bear interest at different rates
depending on whether such loans are funded by the issuance by Market Street of
short-term promissory notes ("Commercial Paper Notes"). If the loans are funded
by Commercial Paper Notes, the interest rate is determined based on the discount
rate or rates at which such Commercial Paper Notes are sold and the commissions
and charges charged with respect to such Commercial Paper Notes. If the loans
are not funded by Commercial Paper Notes, the interest rate is equal to (i)
PNC's reserve adjusted Eurodollar Rate, plus 1.25% per annum, or, in certain
circumstances, (ii) the higher of (a) PNC's prime rate plus .25% or (b) PNC's
federal fund rate, plus 1.25% per annum. These loans presently are not funded by
Commercial Paper Notes. Interest is due and payable monthly.
The Receivables Facility contains financial covenants applicable to Ann
Taylor similar to those contained in the Bank Credit Agreement, and contains
restrictions on the payment of dividends and distributions that mirror the Bank
Credit Agreement, as amended from time to time. See "--Bank Credit Agreement".
8 3/4% NOTES
The 8 3/4% Notes mature on June 15, 2000, are limited to $110,000,000
aggregate principal amount and are unsecured and subordinated obligations of Ann
Taylor. At February 3, 1996, $100,000,000 aggregate principal amount of 8 3/4%
Notes was outstanding. Each 8 3/4% Note bears interest at the rate of 8 3/4% per
annum, payable semi-annually on June 15 and December 15 of each year. There is
no sinking fund for the 8 3/4% Notes.
The Note Indenture contains, among other things, certain covenants,
including limitations on indebtedness, limitations on restricted payments such
as dividends on Ann Taylor's capital stock, limitations on other subordinated
indebtedness and restrictions on transactions with affiliates and the use of
proceeds from asset sales. Under the Note Indenture, Ann Taylor may not make a
Restricted Payment unless (i) no event of default has occurred and is
continuing; (ii) the aggregate of all Restricted Payments made after June 21,
1993 shall not exceed the sum of (a) 50% of Consolidated Adjusted Net Income (as
defined in the Note Indenture) of Ann Taylor since May 1, 1993 plus (b) the
aggregate net proceeds received by Ann Taylor from (x) the issue or sale of
capital stock or (y) any equity contribution by the Company plus (c) the
aggregate net proceeds received by Ann Taylor from debt securities exchanged for
capital stock plus (d) the aggregate amount received in repayment of any
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loan or advance plus (e) $10,000,000; and (iii) the Company could incur $1.00 of
additional Indebtedness (as defined in the Note Indenture) under the Note
Indenture. At May 4, 1996, on a pro forma basis after giving effect to the
Original Offering, approximately $163 million was available for Restricted
Payments under the Note Indenture.
The 8 3/4% Notes may not be redeemed by Ann Taylor prior to June 15, 1998,
except in the event of a Change in Control Trigger Event (as defined in the Note
Indenture). On or after July 15, 1998, the 8 3/4% Notes will be subject to
redemption at the option of Ann Taylor, in whole or in part. Under the terms of
the Note Indenture, upon the happening of a Change in Control Trigger Event, and
the satisfaction of certain conditions relating to Ann Taylor's indebtedness
that is senior to the 8 3/4% Notes, each holder of 8 3/4% Notes may require Ann
Taylor to repurchase such holder's 8 3/4% Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
purchase.
The Bank Credit Agreement prohibits Ann Taylor from making an optional
redemption of the 8 3/4% Notes, without the consent of the lenders thereunder.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership, disposition and conversion
of Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets. This summary addresses the United
States Federal income tax considerations to holders of Preferred Securities who
are citizens or residents of the United States, corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof or therein, or estates or trusts the income of
which is subject to United States Federal income taxation regardless of its
source or other holders who are otherwise subject to United States federal
income taxation on a net income basis with respect to Preferred Securities
("U.S. Holders") and does not address the tax consequences to holders of
Preferred Securities who are not U.S. Holders. This summary does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as other than a capital asset. This summary also does not
address the tax consequences to persons that have a functional currency other
than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Preferred Securities. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws of
any state or local government or of any foreign government that may be
applicable to the Preferred Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
The Company has taken the position that the Convertible Debentures will be
classified for United States Federal income tax purposes as indebtedness of the
Company under current law, and, by acceptance of a Preferred Security, each
holder covenants to treat the Convertible Debentures as indebtedness and the
Preferred Securities as evidence of an indirect beneficial ownership interest in
the Convertible Debentures. No assurance can be given, however, that such
position of the Company will not be challenged by the Internal Revenue Service
or, if challenged, that such a challenge will not be successful. The remainder
of this discussion assumes that the Convertible Debentures will be classified as
indebtedness of the Company for United States Federal income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Skadden, Arps,
Slate, Meagher & Flom, special counsel to the Company and the Trust, rendered
its opinion generally to the effect that, under then current law and assuming
full compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United Stated Federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States Federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Convertible Debentures, and each holder will be required to
include in its gross income any original issue discount accrued with respect to
its allocable share of those Convertible Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest payments on the Convertible
Debentures will be treated as "original issue discount". Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis
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before the receipt of cash attributable to the interest, regardless of their
method of tax accounting. Generally, all of a holder's taxable interest income
with respect to the Convertible Debentures will be accounted for as OID. Actual
payments and distributions of stated interest will not, however, be separately
reported as taxable income. The amount of OID that accrues in any quarter will
approximately equal the amount of the interest that accrues on the Convertible
Debentures in that quarter at the stated interest rate. In the event that the
interest payment period is extended, holders will continue to accrue OID
approximately equal to the amount of the interest payment due at the end of the
extended interest payment period on an economic accrual basis over the length of
the extended interest payment period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
To the extent a holder acquires its Preferred Securities at a price that is
greater or less than the adjusted issue price of such holder's proportionate
share of the Convertible Debentures (which generally should approximate the face
amount plus accrued but unpaid interest on the Convertible Debentures), the
holder may be deemed to have acquired its undivided interest in the Convertible
Debentures with acquisition premium or market discount. A holder who purchases
Preferred Securities at a premium will be permitted to reduce the amount of OID
required to be included in income to reflect the acquisition premium. A holder
who purchases Preferred Securities at a market discount will include the amount
of such discount in income in accordance with the market discount rules
described below.
A holder that acquires its undivided beneficial interest in the Convertible
Debentures at a market discount generally will be required to recognize ordinary
income to the extent of accrued market discount on the Convertible Debentures
upon their retirement or, to the extent of any gain, upon the disposition of the
Preferred Securities. Such market discount will accrue ratably or, at the
election of the holder, under a constant yield method over the remaining term of
the Convertible Debentures. A holder will also be required to defer the
deduction of a portion of the interest paid or accrued on indebtedness incurred
to purchase or carry Preferred Securities that represent an undivided interest
in Convertible Debentures acquired with market discount. In lieu of the
foregoing, a holder may elect to include market discount in income currently as
it accrues on all market discount instruments acquired by such holder in the
taxable year of the election or thereafter, in which case the interest deferral
rule will not apply.
A holder may elect, in lieu of applying the market discount or premium rules
described above, to account for all income under the Convertible Debentures as
if it were OID. A holder that makes this election and that is considered to have
acquired its undivided beneficial interest in the Convertible Debentures with
market discount will be considered to have made the election described in the
immediately preceding paragraph.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution", Convertible
Debentures may be distributed to holders in exchange for the Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution to holders, for United States Federal income tax purposes, would be
treated as a nontaxable event to each holder, and each holder would receive an
aggregate tax basis in the Convertible Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Convertible Debentures so received in liquidation of the Trust would include
the period during which the Preferred Securities were held by such holder. If,
however, the related Special Event is a Tax Event which results in the Trust
being treated as an association taxable as a corporation,
53
<PAGE>
the distribution would likely constitute a taxable event to holders of the
Preferred Securities, in which event the Company would generally be required to
redeem the Convertible Debentures and distribute the resulting cash in
liquidation of the Trust.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Convertible Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Preferred Securities. Under current law, such a redemption would, for United
States Federal income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder would recognize gain or loss as if
it sold such redeemed Preferred Securities for cash. See "--Sales of Preferred
Securities".
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. A
holder's adjusted tax basis in the Preferred Securities generally will be its
initial purchase price increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred Securities to the date of disposition. Subject to the market
discount rules described above, such gain or loss will be a capital gain or loss
and will be a long-term capital gain or loss if the Preferred Securities have
been held for more than one year at the time of sale.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. A holder who disposes of or converts his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Convertible Debentures
through the date of disposition or conversion in income as ordinary income, and
to add such amount to his adjusted tax basis in his pro rata share of the
underlying Convertible Debentures deemed disposed of or converted. To the extent
the selling price is less than the holder's adjusted tax basis (which basis will
include, in the form of OID, all accrued but unpaid interest), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income tax
purposes.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed the Proposed Legislation that, among
other things, would treat as equity for United States Federal income tax
purposes instruments with a maximum term of more than 20 years that are not
shown as indebtedness on the consolidated balance sheet of the issuer. On March
29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways
and Means Committee Chairman Bill Archer issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action". Based
on the Joint Statement, it is expected that if the Proposed Legislation were
enacted, such legislation would not apply to the Convertible Debentures since
they were issued prior to the date of any "appropriate Congressional action".
Furthermore, even if the Proposed Legislation were enacted in its current form
with effective date provisions making it applicable to the Convertible
Debentures, it would not cause the Convertible Debentures to be treated as
equity for the United States Federal income tax purposes since the maximum term
of the Convertible Debentures will not exceed 20 years. There can be no
assurances, however, that any proposed legislation enacted after the date hereof
will not otherwise adversely affect the tax treatment of the Convertible
Debentures. If legislation is enacted that adversely affects the tax treatment
of the Convertible Debentures, such legislation could result in the distribution
of the
54
<PAGE>
Convertible Debentures to holders of the Preferred Securities or, in certain
limited circumstances, the redemption of such securities by the Company and the
distribution of the resulting cash in redemption of the Preferred Securities.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution."
CONVERSION OF PREFERRED SECURITIES INTO COMMON STOCK
A holder will not recognize gain or loss upon the conversion, through the
Conversion Agent, of Preferred Securities for a proportionate share of the
Convertible Debentures held by the Trust.
A holder will not recognize income, gain or loss upon the conversion,
through the Conversion Agent, of Convertible Debentures into Company Common
Stock. A holder will, however, recognize gain upon the receipt of cash in lieu
of a fractional share of Company Common Stock equal to the amount of cash
received less the holder's tax basis in such fractional share. A holder's tax
basis in the Company Common Stock received upon exchange and conversion should
generally be equal to the holder's tax basis in the Preferred Securities
delivered to the Conversion Agent for exchange less the basis allocated to any
fractional share for which cash is received and a holder's holding period in the
Company Common Stock received upon exchange and conversion should generally
begin on the date the holder acquired the Preferred Securities delivered to the
Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible Debentures
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Company Common Stock into or for which the
Convertible Debentures are convertible or exchangeable) of the holders of the
Preferred Securities in the assets or earnings and profits of the Company were
increased, and (ii) the adjustment was not made pursuant to a bona fide,
reasonable antidilution formula. An adjustment in the conversion ratio would not
be considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Company Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, income on the Preferred Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States Federal income tax, provided the
required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
55
<PAGE>
SELLING HOLDERS
The Preferred Securities were originally issued by the Trust and sold by
Merrill Lynch, Pierce, Fenner & Smith, Incorporated, CS First Boston, Donaldson,
Lufkin & Jenrette Securities Corporation and Robertson, Stephens & Company LLC
(the "Initial Purchasers"), in a transaction exempt from the registration
requirements of the Securities Act, to persons reasonably believed by such
Initial Purchasers to be "qualified institutional buyers" (as defined in Rule
144A under the Securities Act), to certain qualified institutional buyers acting
on behalf of institutional "accredited investors" (as defined in Rule 501(a)
(1), (2), (3) or (7) under the Securities Act), or outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. The Selling Holders may from time to time offer and sell
pursuant to this Prospectus any or all of the Preferred Securities, any
Convertible Debentures and Company Common Stock issued upon conversion of the
Preferred Securities. The term Selling Holder includes the record holders listed
below and the beneficial owners of the Preferred Securities and their
transferees, pledgees, donees or other successors.
The following table sets forth information with respect to the record
holders of the Preferred Securities as of June 13, 1996.
NUMBER OF
PREFERRED
SELLING HOLDER SECURITIES
----------------------------------------------------------- -----------
1. CEDE & CO. ................................................ 1,786,500
2. FRANK RUSSEL TRUST COMPANY................................. 80,000
3. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED......... 53,000
4. PONDWAVE & CO. ............................................ 41,000
5. OCH-ZIFF CAPITAL MANAGEMENT LP............................. 30,000
6. INCE AND COMPANY........................................... 17,000
7. BOST & CO. ................................................ 5,000
-----------
Total...................................................... 2,012,500
-----------
-----------
As of June 13, 1996, Merrill Lynch, Pierce, Fenner & Smith ("Merrill Lynch")
held of record 53,000 or approximately 2.63% of the outstanding Preferred
Securities. Merrill Lynch disclaims beneficial ownership of these Preferred
Securities. Merrill Lynch is affiliated with the ML Entities, which, as of April
15, 1996, beneficially owned 6,155,118 shares of Company Common Stock or
approximately 26.7% of the outstanding Company Common Stock. The ML Entities
have two designees on the Company's Board of Directors and, therefore, are in a
position to influence the management and affairs of the Company.
None of the other Selling Holders has, or within the past three years has
had, any position, office or other material relationship with the Trust or the
Company or any of their predecessors or affiliates. Because the Selling Holders
may, pursuant to this Prospectus, offer all or some portion of the Preferred
Securities, the Convertible Debentures or the Company Common Stock issuable upon
conversion of the Preferred Securities, no estimate can be given as to the
amount of the Preferred Securities, the Convertible Debentures or the Company
Common Stock issuable upon conversion of the Preferred Securities that will be
held by the Selling Holders upon termination of any such sales. In addition, the
Selling Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Preferred Securities since the date on
which they provided the information regarding their Preferred Securities, in
transactions exempt from the registration requirements of the Securities Act.
56
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the Offered
Securities is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Offered Securities being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and severally,
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
57
<PAGE>
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code ("Plans"), may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
The Company and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to certain Plans. The
acquisition and ownership of Preferred Securities by a Plan (or by an individual
retirement arrangement or other plan described in Section 4975(e)(1) of the
Code) with respect to which the Company or any of its affiliates is considered a
party in interest or a disqualified person, may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Preferred Securities are acquired pursuant to and in accordance with an
applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable prohibited transaction exemption. Any other
Plans or other entities whose assets include Plan assets subject to ERISA or
Section 4975 of the Code proposing to acquire Preferred Securities should
consult with their own counsel.
LEGAL MATTERS
Certain legal matters with respect to the Preferred Securities, the
Convertible Debentures, the Guarantee and the Company Common Stock issuable upon
conversion will be passed upon for the Company and the Trust by Jocelyn F.L.
Barandiaran, Esquire, Vice President, General Counsel and Corporate Secretary of
the Company, and by Skadden, Arps, Slate, Meagher & Flom. Ms. Barandiaran
beneficially owns 2,000 shares of Company Common Stock and has been granted
options to purchase an additional 52,500 shares of Company Common Stock.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus of AnnTaylor Stores Corporation as of February 3, 1996 and January
28, 1995 and for each of the fiscal years in the three year period ended
February 3, 1996, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated by reference herein,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The combined financial statements of the AnnTaylor Woven Division of Cygne
Designs, Inc., CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary as of
February 3, 1996 and January 28, 1995 and for each of the years then ended, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon, incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
58
<PAGE>
- --------------------------------------- --------------------------------------
NO DEALER, SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN 2,012,500 PREFERRED
CONNECTION WITH THE OFFERING MADE BY SECURITIES
THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING ANNTAYLOR
BEEN AUTHORIZED BY ANNTAYLOR FINANCE FINANCE TRUST
TRUST, ANNTAYLOR STORES CORPORATION
OR ANY OF THEIR AGENTS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY,
ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN 8 1/2% CONVERTIBLE TRUST
THE FACTS SET FORTH IN THIS ORIGINATED PREFERRED
PROSPECTUS OR IN THE AFFAIRS OF SECURITIESSM ("CONVERTIBLE TOPRSSM")
ANNTAYLOR FINANCE TRUST OR ANNTAYLOR GUARANTEED TO THE EXTENT
STORES CORPORATION SINCE THE SET FORTH HEREIN BY, AND
DATE HEREOF. CONVERTIBLE INTO
COMMON STOCK OF,
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information............. 4
Incorporation of Certain Documents
by Reference.................... 5 [AnnTaylor LOGO]
Risk Factors...................... 6
The Company....................... 15
AnnTaylor Finance Trust........... 16
Accounting Treatment.............. 17
Use of Proceeds................... 17
Ratio of Earnings to Fixed
Charges......................... 17
Description of the Preferred
Securities........................ 18
Description of the Guarantee...... 34
Description of the Convertible
Debentures........................ 37
Effect of Obligations Under the
Convertible Debentures and the
Guarantee....................... 46 ----------------------------
Description of Capital Stock...... 47 PROSPECTUS
Financing Arrangements............ 49 ----------------------------
United States Federal Income
Taxation.......................... 52
Selling Holders................... 56
Plan of Distribution.............. 57
ERISA Considerations.............. 58
Legal Matters..................... 58
Experts........................... 58
- --------------------------------------- --------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses (other than the SEC filing fee) are estimated.
<TABLE>
<S> <C>
SEC registration fee........................................... $[ ]
Printing and engraving expenses................................ [ ]
Legal fees and expenses........................................ [ ]
Blue Sky fees and expenses (including legal fees and
expenses)...................................................... [ ]
Accounting fees and expenses................................... [ ]
Transfer agent and trustee fees................................ [ ]
Miscellaneous.................................................. [ ]
----------
Total.................................................. $[ ]
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
As authorized by Section 145 of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"), each director and officer of the
Company may be indemnified by the Company against expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he is involved by reason of the fact
that he is or was a director or officer of the Company if he acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
Company, the director or officer may not be indemnified in respect of any claim,
issue or matter as to which he shall have been adjudged to be liable for
negligence or misconduct in the performance of this duty to the Company unless a
court determines otherwise. The designees of the ML Entities who serve on the
Company's board of directors also have certain rights to indemnification by ML &
Co. and the ML Entities for liabilities incurred in connection with actions
taken by them in their capacity as directors of the Company.
Article Seven of the Certificate of Incorporation of the Company provides
that, to the fullest extent permitted by law, directors of the Company will not
be liable for monetary damages to the Company or its stockholders for breaches
of their fiduciary duties.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS
The Exhibits listed in the following Exhibit Index are filed as part of the
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
4.1 Certificate of Trust of AnnTaylor Finance Trust.
4.2 Amended and Restated Declaration of Trust of AnnTaylor Finance Trust, dated
as of April 25, 1996, among AnnTaylor Stores Corporation, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee and J. Patrick Spainhour, Paul E. Francis and Walter J.
Parks, as Trustees.
4.3 Indenture for the 8 1/2% Convertible Subordinated Debentures, dated as of
April 15, 1996, among AnnTaylor Stores Corporation and The Bank of New
York, as Indenture Trustee.
4.4 Form of 8 1/2% Preferred Securities (included in Exhibit A-1 to Exhibit 4.2
above).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
4.5 Form of 8 1/2% Convertible Subordinated Debentures (included in Exhibit A
to Exhibit 4.3 above).
4.6 AnnTaylor Stores Corporation Preferred Securities Guarantee Agreement,
dated as of April 25, 1996, between AnnTaylor Stores Corporation, as
Guarantor, and The Bank of New York, as Guarantee Trustee.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom as to the legality of the
Preferred Securities, Convertible Subordinated Debentures and Guarantee
being registered hereby.*
5.2 Opinion of Jocelyn F.L. Barandiaran, General Counsel of AnnTaylor Stores
Corporation, as to the legality of the Common Stock of AnnTaylor Stores
Corporation being registered hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom as to certain tax matters.*
10.1 Registration Rights Agreement, dated April 25, 1996, between AnnTaylor
Finance Trust and Merrill Lynch & Co., as Representative of the Initial
Purchasers.
12.1 Ratio of Earnings to Fixed Charges of AnnTaylor Stores Corporation.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibits 5.1
and 8.1).*
23.2 Consent of Jocelyn F.L. Barandiaran, General Counsel of AnnTaylor Stores
Corporation (included in Exhibit 5.2).*
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Ernst & Young LLP.
24 Power of Attorney (set forth on signature page of the Registration
Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Indenture Trustee under the 8 1/2%
Convertible Subordinated Debenture Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Property Trustee under the Amended and
Restated Declaration of Trust.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Guarantee Trustee under the Guarantee.
</TABLE>
- ------------
* To be filed by amendment.
B. FINANCIAL STATEMENTS AND SCHEDULES
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements of the Company.
ITEM 17. UNDERTAKINGS.
(a) 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;
II-2
<PAGE>
(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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the
offering.
(b) 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, 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
Securities Act of 1933 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 of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act.
(e) The Company 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 Registrants pursuant to Rule 424(b) (1) or
(4) 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; and
(2) For purposes 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all 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 City of New York, State of New York, on June 21, 1996.
ANNTAYLOR STORES CORPORATION
By /s/ SALLY FRAME KASAKS
...................................
Chairman of the Board, Chief
Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul E. Francis, Walter J. Parks and Jocelyn F.L.
Barandiaran, and each of them acting singly, such person's true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them acting singly, full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully and to all intents and purposes as such person might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them may lawfully do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- --------------
<S> <C> <C>
/s/ SALLY FRAME KASAKS Chairman of the Board, Chief June 21, 1996
........................................ Executive Officer and Director
Sally Frame Kasaks
/s/ J. PATRICK SPAINHOUR President, Chief Operating June 21, 1996
........................................ Officer and Director
J. Patrick Spainhour
/s/ PAUL E. FRANCIS Executive Vice President--Finance June 21, 1996
........................................ and Administration, Chief
Paul E. Francis Financial Officer and Director
/s/ WALTER J. PARKS Senior Vice President--Finance June 21, 1996
........................................ and Principal Accounting
Walter J. Parks Officer
/s/ GERALD S. ARMSTRONG Director June 21, 1996
........................................
Gerald S. Armstrong
/s/ JAMES J. BURKE, JR. Director June 21, 1996
........................................
James J. Burke, Jr.
/s/ ROBERT C. GRAYSON Director June 21, 1996
........................................
Robert C. Grayson
/s/ ROCHELLE B. LAZARUS Director June 21, 1996
........................................
Rochelle B. Lazarus
/s/ HANNE M. MERRIMAN Director June 21, 1996
........................................
Hanne M. Merriman
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AnnTaylor
Finance Trust certifies that it has reasonable grounds to believe that it meets
all 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 City of New York, State of New York, on June 21, 1996.
ANNTAYLOR FINANCE TRUST
By /s/ J. PATRICK SPAINHOUR
...................................
J. Patrick Spainhour
Trustee
By /s/ PAUL E. FRANCIS
...................................
Paul E. Francis
Trustee
By /s/ WALTER J. PARKS
...................................
Walter J. Parks
Trustee
II-5
<PAGE>
<TABLE><CAPTION>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- ---------------------------------------------------------------------------
<C> <S>
4.1 Certificate of Trust of AnnTaylor Finance Trust.
4.2 Amended and Restated Declaration of Trust of AnnTaylor Finance Trust, dated
as of April 25, 1996, among AnnTaylor Stores Corporation, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee and J. Patrick Spainhour, Paul E. Francis and Walter J.
Parks, as Trustees.
4.3 Indenture for the 8 1/2% Convertible Subordinated Debentures, dated as of
April 15, 1996, among AnnTaylor Stores Corporation and The Bank of New
York, as Indenture Trustee.
4.4 Form of 8 1/2% Preferred Securities (included in Exhibit A-1 to Exhibit 4.2
above).
4.5 Form of 8 1/2% Convertible Subordinated Debentures (included in Exhibit A
to Exhibit 4.3 above).
4.6 AnnTaylor Stores Corporation Preferred Securities Guarantee Agreement,
dated as of April 25, 1996, between AnnTaylor Stores Corporation, as
Guarantor, and The Bank of New York, as Guarantee Trustee.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom as to the legality of the
Preferred Securities, Convertible Subordinated Debentures and Guarantee
being registered hereby.*
5.2 Opinion of Jocelyn F.L. Barandiaran, General Counsel of AnnTaylor Stores
Corporation, as to the legality of the Common Stock of AnnTaylor Stores
Corporation being registered hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom as to certain tax matters.*
10.1 Registration Rights Agreement, dated April 25, 1996, between AnnTaylor
Finance Trust and Merrill Lynch & Co., as Representative of the Initial
Purchasers.
12.1 Ratio of Earnings to Fixed Charges of AnnTaylor Stores Corporation.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibits 5.1
and 8.1).*
23.2 Consent of Jocelyn F.L. Barandiaran, General Counsel of AnnTaylor Stores
Corporation (included in Exhibit 5.2).*
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Ernst & Young LLP.
24 Power of Attorney (set forth on signature page of the Registration
Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Indenture Trustee under the 8 1/2%
Convertible Subordinated Debenture Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Property Trustee under the Amended and
Restated Declaration of Trust.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Guarantee Trustee under the Guarantee.
</TABLE>
-------------
* To be filed by amendment
EXHIBIT 4.1
CERTIFICATE OF TRUST
The undersigned, the trustees of AnnTaylor Finance Trust, desiring to
form a business trust pursuant to Delaware Business Trust Act, 12 Del. C.
--- --
Sec. 3810, hereby certify as follows:
1. The name of the business trust being formed hereby (the "Trust")
is "AnnTaylor Finance Trust".
2. The name and business address of the trustee of the Trust which
has its principal place of business in the State of Delaware is
as follows:
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of the date of
filing.
Dated: April 18, 1996
/s/ J. Patrick Spainhour
---------------------------
Name: J. Patrick Spainhour
Title: Regular Trustee
/s/ Paul E. Francis
----------------------------------
Name: Paul E. Francis
Title: Regular Trustee
/s/ Walter J. Parks
----------------------------------
Name: Walter J. Parks
Title: Regular Trustee
THE BANK OF NEW YORK (DELAWARE), as
Delaware Trustee
By:/s/ Donald J. Wrobel
--------------------------------
Name: Donald J. Wrobel
Title: Executive Vice President,
Retail Credit Card Division
EXHIBIT 4.2
====================================
AMENDED AND RESTATED DECLARATION
OF TRUST
ANNTAYLOR FINANCE TRUST
Dated as of April 25, 1996
====================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . 10
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . 11
SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . 11
SECTION 2.4 Periodic Reports to Property Trustee . . . . . . . . . 12
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . 12
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . 12
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.5 Title to Property of the Trust . . . . . . . . . . . . 17
SECTION 3.6 Powers and Duties of the Regular Trustees . . . . . . . 17
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. . 21
SECTION 3.8 Powers and Duties of the Property Trustee . . . . . . . 22
SECTION 3.9 Certain Duties and Responsibilities of the Property
Trustee . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.10 Certain Rights of Property Trustee . . . . . . . . . . 27
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . . . . . . . 30
SECTION 3.12 Not Responsible for Recitals or Issuance of Securities 30
SECTION 3.13 Duration of Trust . . . . . . . . . . . . . . . . . . . 30
SECTION 3.14 Mergers . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities . . . . . . . . 33
SECTION 4.2 Responsibilities of the Sponsor . . . . . . . . . . . . 33
<PAGE>
Page
----
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees . . . . . . . . . . . . . . . . . . 34
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . 34
SECTION 5.3 Property Trustee; Eligibility . . . . . . . . . . . . . 35
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.5 Initial Trustees . . . . . . . . . . . . . . . . . . . 36
SECTION 5.6 Appointment, Removal and Resignation of Trustees . . . 37
SECTION 5.7 Vacancies among Trustees . . . . . . . . . . . . . . . 39
SECTION 5.8 Effect of Vacancies . . . . . . . . . . . . . . . . . . 39
SECTION 5.9 Meetings . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.10 Delegation of Power . . . . . . . . . . . . . . . . . . 40
SECTION 5.11 Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities . . . . . . . . 41
SECTION 7.2 Execution and Authentication . . . . . . . . . . . . . 42
SECTION 7.3 Form and Dating . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.4 Registrar, Paying Agent and Conversion Agent . . . . . 45
SECTION 7.5 Paying Agent to Hold Money in Trust . . . . . . . . . . 46
SECTION 7.6 Replacement Securities . . . . . . . . . . . . . . . . 47
SECTION 7.7 Outstanding Preferred Securities . . . . . . . . . . . 47
SECTION 7.8 Preferred Securities in Treasury . . . . . . . . . . . 48
SECTION 7.9 Temporary Securities . . . . . . . . . . . . . . . . . 48
SECTION 7.10 Cancellation . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust . . . . . . . . . . . . . . . . . . 50
ii
<PAGE>
Page
----
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.2 Transfer Procedures and Restrictions . . . . . . . . . 52
SECTION 9.3 Deemed Security Holders . . . . . . . . . . . . . . . . 63
SECTION 9.4 Book Entry Interests . . . . . . . . . . . . . . . . . 63
SECTION 9.5 Notices to Clearing Agency . . . . . . . . . . . . . . 64
SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . 64
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.4 Indemnification . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.5 Outside Businesses . . . . . . . . . . . . . . . . . . 71
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.2 Certain Accounting Matters . . . . . . . . . . . . . . 72
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.4 Withholding . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.2 Meetings of the Holders of Securities; Action by
Written Consent . . . . . . . . . . . . . . . . . . 76
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee . . 78
SECTION 13.2 Representations and Warranties of Delaware Trustee . . 79
iii
<PAGE>
Page
----
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights . . . . . . . . . . . . . . . . . . 80
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 15.2 Governing Law . . . . . . . . . . . . . . . . . . . . . 83
SECTION 15.3 Intention of the Parties . . . . . . . . . . . . . . . 83
SECTION 15.4 Headings . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 15.5 Successors and Assigns . . . . . . . . . . . . . . . . 83
SECTION 15.6 Partial Enforceability . . . . . . . . . . . . . . . . 84
SECTION 15.7 Counterparts . . . . . . . . . . . . . . . . . . . . . 84
iv
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- -------------------
310(a) . . . . . . . . . . . . . . . . . 5.3(a)
310(c) . . . . . . . . . . . . . . . . . Inapplicable
311(c) . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . Inapplicable
314(f) . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . 3.9(b)
315(c) . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . 3.9(a)
316(a) . . . . . . . . . . . . . . . . . Annex I
316(c) . . . . . . . . . . . . . . . . . 3.6(e)
_______________
* This Cross-Reference Table does not constitute part of the Declaration and
shall not affect the interpretation of any of its terms or provisions.
v
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
ANNTAYLOR FINANCE TRUST
April 25, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of April 25, 1996, by the undersigned trustees (together with all
other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), AnnTaylor
Stores Corporation, a Delaware corporation, as trust sponsor (the "Sponsor"),
and by the holders, from time to time, of undivided beneficial interests in the
Trust issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established AnnTaylor Finance
Trust (the "Trust"), a trust under the Business Trust Act (as defined herein)
pursuant to a Declaration of Trust dated as of April 18, 1996, (the "Original
Declaration") and a Certificate of Trust filed with the Secretary of State of
the State of Delaware on April 18, 1996, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain Debentures (as
defined herein) of the Debenture Issuer (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration;
and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
-----------
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Additional Interest" means if the Trust is required to pay any taxes,
-------------------
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other taxing authority,
such amounts as shall be required so that the net amounts received and retained
by the Trust after paying such taxes, duties, assessments and governmental
charges will not be less than the amounts the Trust would have received had no
such taxes, duties, assessments or governmental charges been imposed.
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act or any successor rule thereunder.
2
<PAGE>
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
-----
registrar.
"Authorized Officer" of a Person means any Person that is authorized
------------------
to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global Cer-
-------------------
tificate, ownership and transfers of which shall be maintained and made through
book entries by a Depositary as described in Section 9.4.
"Business Day" means any day other than a day on which banking
------------
institutions in the City of New York or in Wilmington, Delaware are authorized
or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
------------------
Code, 12 Del. Code Sec.3801 et seq., as it may be amended from time to time, or
------------ -- ---
any successor legislation.
"Certificate" means a certificate in global or definitive form
-----------
representing a Common Security or a Preferred Security.
"Clearing Agency" means an organization registered as a "Clearing
---------------
Agency" pursuant to Section 17A of the Exchange Act.
"Closing Date" means April 25, 1996.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
----------
"Common Securities" has the meaning specified in Section 7.1(a).
-----------------
"Common Securities Guarantee" means the guarantee agreement dated as
---------------------------
of April 25, 1996, of the Sponsor in respect of the Common Securities.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
--------------------------
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
3
<PAGE>
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Compounded Interest" means interest compounded quarterly at the rate
-------------------
specified for the Debentures to the extent permitted by applicable law upon
interest accrued and unpaid (including Additional Interest and Liquidated
Damages) at the end of each Extension Period.
"Covered Person" means (a) any officer, director, shareholder,
--------------
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means the Sponsor in its capacity as issuer of the
----------------
Debentures.
"Debenture Trustee" means The Bank of New York, a New York banking
-----------------
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by the
----------
Debenture Issuer under the Indenture to be held by the Property Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"Definitive Preferred Securities" means the Regulation S Definitive
-------------------------------
Preferred Security, the Restricted Definitive Preferred Security and any other
Preferred Securities in definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in Section 5.2.
----------------
"Depositary" means The Depository Trust Company, the initial Clearing
----------
Agency.
"Distribution" means a distribution payable to Holders of Securities
------------
in accordance with Section 6.1.
"Effectiveness Period" has the meaning specified in Section 14.1.
--------------------
"Event of Default" in respect of the Securities means an Event of
----------------
Default (as defined in the Indenture) has occurred and is continuing in respect
of the Debentures.
4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor legislation.
"Exchanged Preferred Securities" means any Preferred Security issued
------------------------------
in connection with a sale pursuant to an effective Shelf Registration Statement
and not bearing any Restricted Securities Legend.
"Fiduciary Indemnified Person" has the meaning set forth in Section
----------------------------
10.4(b).
"Holder" means a Person in whose name a Certificate representing a
------
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
------------------
Indemnified Person.
"Indenture" means the Indenture dated as of April 15, 1996, between
---------
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.
"Initial Purchasers" has the meaning set forth in the Purchase
------------------
Agreement.
"Investment Company" means an investment company as defined in the
------------------
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in the terms of
------------------------
the Securities as set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
------------
"Liquidated Damages" means the additional interest which shall accrue
------------------
on the Debentures and, accordingly on the Preferred Securities, if, (i) on or
prior to 60 days following the date of original issuance of the Preferred
Securities, a Shelf Registration Statement has not been
5
<PAGE>
filed with the Commission, or (ii) on or prior to the 180th day following the
issuance of Registrable Securities (as defined in Section 14.1 herein), such
Registration Statement is not declared effective.
"Majority in liquidation amount of the Securities" means, except as
------------------------------------------------
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of more than 50% of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms of the
------------------
Securities as set forth in Annex I hereto.
"Offering Memorandum" means the confidential offering memorandum,
-------------------
dated as of April 18, 1996, relating to the issuance by the Trust of Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a cer-
---------------------
tificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to
6
<PAGE>
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Participants" has the meaning set forth in Section 7.3(b).
------------
"Paying Agent" has the meaning specified in Section 3.8(h).
------------
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" has the meaning specified in Section 7.1(a).
--------------------
"Preferred Securities Guarantee" means the guarantee agreement dated
------------------------------
as of April 25, 1996, of the Sponsor in respect of the Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to a Book
-----------------------------------
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
"Property Trustee" means the Trustee meeting the eligibility re-
----------------
quirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in Section
------------------------
3.8(c).
"Purchase Agreement" shall have the meaning set forth in Section
------------------
7.3(a).
"Quorum" means a majority of the Regular Trustees or, if there are
------
only two Regular Trustees, both of them.
7
<PAGE>
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated April 25, 1996, among the Sponsor, the Trust, and the Initial
Purchasers named in the Purchase Agreement.
"Regular Trustee" means any Trustee other than the Property Trustee
---------------
and the Delaware Trustee.
"Regulation S Definitive Preferred Security" has the meaning set forth
------------------------------------------
in Section 7.3(c).
"Related Party" means, with respect to the Sponsor, any direct or
-------------
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property Trustee, any
-------------------
vice-president, any assistant vice-president, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer or any other officer in
the Corporate Trust Department of the Property Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Restricted Definitive Preferred Security" has the meaning set forth
----------------------------------------
in Section 7.3(c).
"Restricted Period" means the one-year period following the last issue
-----------------
date for the Preferred Securities (including Preferred Securities issued to
cover overallotments and Common Securities issued in connection with related
capital contributions). The Sponsor shall inform the Trustee as to the
termination of the restricted period and the Trustee may rely conclusively
thereon.
"Restricted Preferred Securities" shall include the Regulation S
-------------------------------
Definitive Preferred Securities, the Restricted Definitive Preferred Securities
and the Rule 144A Global Preferred Securities (as defined in Article IX herein).
8
<PAGE>
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
---------
"Securities" means the Common Securities and the Preferred Securities.
----------
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time or any successor legislation.
"Securities Custodian" means the custodian with respect to the Rule
--------------------
144A Global Preferred Security and any other Preferred Security in global form.
"Shelf Registration Statement" has the meaning specified in Section
----------------------------
14.1.
"66-2/3% in liquidation amount of the Securities" means, except as
-----------------------------------------------
provided in the terms of the Preferred Securities and by the Trust Indenture
Act, Holders of outstanding Securities voting together as a single class or, as
the context may require, Holders of Preferred Securities or Holder(s) of
outstanding Common Securities voting separately as a class, representing at
least 66 2/3% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions, to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Special Event" has the meaning set forth in Annex I hereto.
-------------
"Sponsor" means AnnTaylor Stores Corporation, a Delaware corporation,
-------
or any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
--------------
"Tax Event" has the meaning set forth in Annex I hereto.
---------
"10% in liquidation amount of the Securities" means, except as pro-
-------------------------------------------
vided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holders of outstanding Securities voting together as a single class or,
9
<PAGE>
as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities, voting separately as a class, who are
the record owners of 10% or more of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting per-
centages are determined) of all outstanding Securities of the relevant class.
"Treasury Regulations" means the income tax regulations, including
--------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
------- --------
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended from time to time, or any successor legislation.
"Unrestricted Definitive Preferred Security" has the meaning set forth
------------------------------------------
in Section 9.2(c).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
--------------------------------
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
10
<PAGE>
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Secs. 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
------------------------------
(a) Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide the Property Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Holders of the
Securities ("List of Holders") as of such record date, provided that neither the
--------
Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Property Trustee by the
Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity) provided that the Property Trustee may destroy any List of
--------
Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under Sec.
Sec. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
-------------------------------
Within 60 days after May 15 of each year, the Property Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Sec. 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Sec. 313 of the Trust Indenture Act. The
11
<PAGE>
Property Trustee shall also comply with the requirements of Sec. 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
------------------------------------
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Sec. 314 of the Trust Indenture Act (if any) and the compliance cer-
tificate required by Sec. 314 of the Trust Indenture Act in the form, in the
manner and at the times required by Sec. 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions
--------------------------------------
Precedent.
---------
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Sec. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to
Sec. 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
-------------------------
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, provided that, if the underlying Event of
--------
Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "Super Majority") to
be waived under the Indenture, the Event of Default under the Declaration
may only be waived by the vote of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.
12
<PAGE>
The foregoing provisions of this Section 2.6(a) shall be in lieu of
Sec. 316(a)(1)(B) of the Trust Indenture Act and such Sec. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
--------
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below in this Section 2.6(b), the
Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Declaration as provided below
in this Section 2.6(b), the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion in liqui-
dation amount of the Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
- -------- -------
waived any such Event of Default and all
13
<PAGE>
Events of Default with respect to the Common Securities and its consequences
until all Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated, and until such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee will be
deemed to be acting solely on behalf of the Holders of the Preferred Securities
and only the Holders of the Preferred Securities will have the right to direct
the Property Trustee in accordance with the terms of the Securities. The
foregoing provisions of this Section 2.6(b) shall be in lieu of Sec.Sec.
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sec.Sec.
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon
such waiver, any such default shall cease to exist and any Event of Default with
respect to the Common Securities arising therefrom shall be deemed to have been
cured for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
Sec. 316(a)(1)(B) of the Trust Indenture Act and such Sec. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
------------------------
(a) The Property Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities actually known to a Responsible Officer of the Property Trustee,
unless such defaults have been cured before the giving of such notice (the term
"defaults" for the purposes of this Section 2.7(a) being hereby defined to be an
Event of Default as defined in the Indenture, not including any periods of grace
provided for therein and irrespective of the giving of any notice provided
therein); provided that, except for a default in the payment of prin-
--------
14
<PAGE>
cipal of (or premium, if any) or interest on any of the Debentures or in the
payment of any sinking fund installment established for the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the Property Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 501(1) and 501(2) of the Indenture;
or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer of the Property
Trustee charged with the administration of the Declaration shall have
actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
----
The Trust is named "AnnTaylor Finance Trust," as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
------
The address of the principal office of the Trust is c/o AnnTaylor
Stores Corporation, 142 West 57th Street, New York, New York 10019, Attention:
Walter J. Parks. On 10 Business Days written notice to the Holders of
Securities, the Regular Trustees may designate another principal office.
SECTION 3.3 Purpose.
-------
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities and use the proceeds
15
<PAGE>
from such sale to acquire the Debentures, and (b) except as otherwise limited
herein, to engage in only those other activities necessary or incidental there-
to. The Trust shall not borrow money, issue debt or reinvest proceeds derived
from investments, pledge any of its assets, or otherwise undertake (or permit to
be undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
---------
(a) Subject to the limitations provided in this Declaration and to
the specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
(b) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.
(c) Unless otherwise determined by the Regular Trustees, and except
as otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.6, provided, that the registration statement referred to
--------
in Section 3.6, including any amendments thereto, shall be signed by a majority
of the Regular Trustees; and
(d) a Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Regular Trustees
16
<PAGE>
have power and authority to cause the Trust to execute pursuant to Section 3.6.
SECTION 3.5 Title to Property of the Trust.
------------------------------
Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
-----------------------------------------
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
-------- -------
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided, further, that there shall be no
-------- -------
interests in the Trust other than the Securities, and the issuance of Securities
shall be limited to simultaneous issuance of both Preferred Securities and Com-
mon Securities on the Closing Date and any other date Preferred Securities and
Common Securities are sold pursuant to the over-allotment option granted in the
Purchase Agreement;
(b) in connection with the issue and sale of the Preferred
Securities, at the direction of the Sponsor, to:
(i) prepare and execute, if necessary, an offering memorandum
(the "Offering Memorandum") in preliminary and final form prepared by the
Sponsor, in relation to the offering and sale of Preferred Securities to
qualified institutional buyers in reliance on Rule 144A under the
Securities Act, to institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and outside the United
States to non-U.S. persons in offshore transactions in reliance on Regula-
tion S under the Securities Act and to execute and file with the
Commission, at such time as determined by the Sponsor,
17
<PAGE>
a registration statement filed on Form S-3 prepared by the Sponsor, in-
cluding any amendments thereto in relation to the Preferred Securities;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Preferred Securities in any State or
foreign jurisdiction in which the Sponsor has determined to qualify or reg-
ister such Preferred Securities for sale;
(iii) execute and file an application, prepared by the Sponsor,
to the Private Offerings, Resale and Trading through Automated Linkages
("PORTAL") Market and, at such time as determined by the Sponsor, to the
New York Stock Exchange or any other national stock exchange or the Nasdaq
Stock Market's National Market for listing or quotation of the Preferred
Securities;
(iv) to execute and deliver letters, documents, or instruments
with The Depository Trust Company relating to the Preferred Securities;
(v) execute and file with the Commission, at such time as
determined by the Sponsor, a registration statement on Form 8-A, including
any amendments thereto, prepared by the Sponsor relating to the registra-
tion of the Preferred Securities under Section 12(b) of the Exchange Act;
and
(vi) execute and enter into the Purchase Agreement, Registration
Rights Agreement and other related agreements providing for the sale of the
Preferred Securities;
(c) to acquire the Debentures with the proceeds of the sale of the
Preferred Securities and the Common Securities; provided, however, that the
-------- -------
Regular Trustees shall cause legal title to the Debentures to be held of record
in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
18
<PAGE>
provided that the Regular Trustees shall consult with the Sponsor and the
- --------
Property Trustee before taking or refraining from taking any Ministerial Action
in relation to a Special Event;
(e) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of Sec.316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by Sec. 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of its election to defer payments
of interest on the
19
<PAGE>
Debentures by extending the interest payment period under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration or
with applicable law, that the Regular Trustees determine in their discretion to
be necessary or desirable in carrying out the activities of the Trust as set out
in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes;
provided that such action does not adversely affect the interests of Holders;
- --------
and
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust.
20
<PAGE>
The Regular Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of
the powers or the authority of the Property Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this Section
3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
----------------------------------------------------
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity other than as required or authorized
by this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Securities
pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
21
<PAGE>
(vii) other than as provided in this Declaration or Annex I
hereto, (A) direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under the Indenture, (C)
exercise any right to rescind or annul any declaration that the principal
of all the Debentures shall be due and payable, or (D) consent to any
amendment, modification or termination of the Indenture or the Debentures
where such consent shall be required unless the Trust shall have received
an opinion of counsel to the effect that such modification will not cause
more than an insubstantial risk that (x) the Trust will be deemed an
Investment Company required to be registered under the Investment Company
Act, or (y) for United States federal income tax purposes the Trust will
not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
-----------------------------------------
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of
the Debentures held by the Property Trustee, deposit such funds into the
Property Trustee Account and make payments to the
22
<PAGE>
Holders of the Preferred Securities and Holders of the Common Securities
from the Property Trustee Account in accordance with Section 6.1. Funds in
the Property Trustee Account shall be held uninvested until disbursed in
accordance with this Declaration. The Property Trustee Account shall be an
account that is maintained with a banking institution the rating on whose
long-term unsecured indebtedness is at least equal to the rating assigned
to the Preferred Securities by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule 436(g)(2) under
the Securities Act;
(ii) engage in such ministerial activities as so directed and as
shall be necessary or appropriate to effect the redemption of the Preferred
Securities and the Common Securities to the extent the Debentures are re-
deemed or mature; and
(iii) upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Securities, engage in such
ministerial activities as so directed as shall be necessary or appropriate
to effect the distribution of the Debentures to Holders of Securities upon
the occurrence of certain special events (as may be defined in the terms of
the Securities) arising from a change in law or a change in legal
interpretation or other specified circumstances pursuant to the terms of
the Securities.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Securities.
(e) The Property Trustee shall take any Legal Action which arises out
of or in connection with an Event of Default of which a Responsible Officer of
the Property Trustee has actual knowledge or the Property Trustee's duties and
obligations under this Declaration or the Trust Indenture Act.
(f) The Property Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the
23
<PAGE>
Holders of Securities pursuant to the terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer of
the Property Trustee occurs and is continuing, the Property Trustee shall, for
the benefit of Holders of the Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of such
Securities.
(h) The Property Trustee will act as Paying Agent and Registrar in
both London and New York (each, a "Paying Agent") to pay Distributions,
redemption payments or liquidation payments on behalf of the Trust with respect
to all securities and any such Paying Agent shall comply with Sec. 317(b) of the
Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at
any time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Property Trustee.
(i) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.
The Property Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set out
in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
-----------------------------------------------------------
(a) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into
24
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this Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Property Trustee has actual knowledge, the Property
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) No provision of this Declaration shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
Declaration and the Property Trustee shall not be liable except
for the performance of such duties and obligations as are
specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this
Declaration; but in the case of any such certificates or opinions
that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a
25
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Responsible Officer of the Property Trustee, unless it shall be proved that
the Property Trustee was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in liqui-
dation amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Declaration;
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or indemnity
reasonably satisfactory to the Property Trustee against such risk or
liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Property Trustee Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded
to the Property Trustee under this Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;
(vii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in writing
with the Sponsor. Money held by the Property Trustee need not be
segregated from other funds held by it except in
26
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relation to the Property Trustee Account maintained by the Property Trustee
pursuant to Section 3.8(c)(i) and except to the extent otherwise required
by law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Property Trustee be
liable for any default or misconduct of the Regular Trustees or the
Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
----------------------------------
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, con-
sent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities
laws) or any rerecording, refiling or registration thereof;
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(v) the Property Trustee may consult with counsel of its choice
or other experts and the advice or opinion of such counsel and experts with
respect to legal matters or advice within the scope of such experts' area
of expertise shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion, such counsel may be
counsel to the Sponsor or any of its Affiliates, and may include any of its
employees. The Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Declaration from any
court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at
the request or direction of any Holder, unless such Holder shall have
provided to the Property Trustee adequate security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of the
Property Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Property
Trustee provided that, nothing contained in this Section 3.10(a)(vi) shall
--------
be taken to relieve the Property Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested in
it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Property Trustee shall not be
28
<PAGE>
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Property Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be
required to inquire as to the authority of the Property Trustee to so act
or as to its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the Property
Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of the Securities as
would be entitled to direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in acting in
accordance with such instructions; and
(xi) except as otherwise expressly provided by this Declaration,
the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration.
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
29
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jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
----------------
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Regular Trustees or the Property Trustee described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for
the sole and limited purpose of fulfilling the requirements of Sec. 3807 of the
Business Trust Act.
SECTION 3.12 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.13 Duration of Trust.
-----------------
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall exist until April 15, 2021.
SECTION 3.14 Mergers.
-------
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other entity or body, except
as described in Section 3.14(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority
30
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of the Regular Trustees and without the consent of the Holders of the
Securities, the Delaware Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State of the United States; provided that:
--------
(i) if the Trust is not the survivor, such successor entity (the
"Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities with respect
to Distributions, assets and payments upon liquidation,
redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the Property
Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization
on which the Preferred Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or replacement does
not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders
of the Preferred Securities (including any Successor Securities) in any
material respect;
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(vi) such Successor Entity has a purpose substantially identical
to that of the Trust;
(vii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by
the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally recognized
independent counsel to the Trust reasonably acceptable to the Property
Trustee experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement
will not adversely affect the rights, preferences and privileges of
the Holders of the Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the
Holders' interest in the new entity);
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be
required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will be treated as a
grantor trust for United States federal income tax purposes.
(c) Notwithstanding Section 3.14(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Common Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.
32
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ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
---------------------------------------
On the Closing Date and on any other date Preferred Securities and
Common Securities are sold pursuant to the over-allotment option granted in the
Purchase Agreement, the Sponsor will purchase all of the Common Securities
issued by the Trust, in an amount at least equal to 3% of the capital of the
Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
-------------------------------
In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Offering Memorandum and to prepare for filing by
the Trust with the Commission the Shelf Registration Statement, including any
amendments thereto;
(b) to determine the States and foreign jurisdictions in which to
take appropriate action to qualify or register for sale all or part of the Pre-
ferred Securities and to do any and all such acts, other than actions that must
be taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to PORTAL and
to the New York Stock Exchange or any other national stock exchange or the
Nasdaq National Market for listing or quotation of the Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
33
<PAGE>
(e) to negotiate the terms of the Purchase Agreement, Registration
Rights Agreement and other related agreements providing for the sale of the Pre-
ferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
------------------
The number of Trustees shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
provided, however, that the number of Trustees shall in no event be less than
- -------- -------
two (2); provided further that (1) one Trustee, the Delaware Trustee, in the
-------- -------
case of a natural person, shall be a person who is a resident of the State of
Delaware or that, if not a natural person, is an entity which has its principal
place of business in the State of Delaware; (2) there shall be at least one
Regular Trustee who is an employee or officer of, or is affiliated with the
Parent; and (3) one Trustee shall be the Property Trustee for so long as this
Declaration is required to qualify as an indenture under the Trust Indenture
Act, and such Trustee may also serve as Delaware Trustee if it meets the
applicable requirements.
SECTION 5.2 Delaware Trustee.
----------------
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
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<PAGE>
provided that, if the Property Trustee has its principal place of business in
- --------
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
-----------------------------
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation pub-
lishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 5.3(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published;
and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-5 and to the extent Rule 3a-5
requires a trustee having certain qualifications to hold title to the
"eligible assets" of the trust, the Property Trustee shall possess those
qualifications.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Sec. 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder
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<PAGE>
of the Common Securities (as if it were the obligor referred to in Sec. 310(b)
of the Trust Indenture Act) shall in all respects comply with the provisions of
Sec. 310(b) of the Trust Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be set forth in Section 5.5
hereof.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally.
-----------------------------------------------------------------
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 Initial Trustees.
----------------
(a) The initial Regular Trustees shall be:
J. Patrick Spainhour
c/o AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Paul E. Francis
c/o AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Walter J. Parks
c/o AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
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<PAGE>
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street, 21 West
Corporate Trust Trustee Administration
New York, New York 10286
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
-------------------------------------------------
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of any Securities.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 5.6(a) until a Successor Property Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Property Trustee and delivered to the Regular Trustees and the
Sponsor; and
(c) The Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Succes-
sor Delaware Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Delaware Trustee and delivered to
the Regular Trustees and the Sponsor.
(d) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent ac-
37
<PAGE>
counting) by an instrument in writing signed by the Trustee and delivered to the
Sponsor and the Trust, which resignation shall take effect upon such delivery or
upon such later date as is specified therein; provided, however, that:
-------- -------
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the Spon-
sor and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of
the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been ap-
pointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
(e) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.6.
(f) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery pursuant to this Section 5.6 of an instrument
of resignation or removal, the Property Trustee or Delaware Trustee resigning or
being removed, as applicable, may petition any court of competent jurisdiction
for appointment of a Successor Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
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<PAGE>
(g) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
------------------------
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution certi-
fying the existence of such vacancy by the Regular Trustees or, if there are
more than two, a majority of the Regular Trustees shall be conclusive evidence
of the existence of such vacancy. The vacancy shall be filled with a Trustee
appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
-------------------
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul the Trust. Whenever a vacancy in the number of Regular
Trustees shall occur, until such vacancy is filled by the appointment of a
Regular Trustee in accordance with Section 5.6, the Regular Trustees in office,
regardless of their number, shall have all the powers granted to the Regular
Trustees and shall discharge all the duties imposed upon the Regular Trustees by
this Declaration.
SECTION 5.9 Meetings.
--------
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing (in-
cluding by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
39
<PAGE>
in person or by telephone) of a Regular Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the unanimous
written consent of the Regular Trustees. In the event there is only one Regular
Trustee, any and all action of such Regular Trustee shall be evidenced by a
written consent of such Regular Trustee.
SECTION 5.10 Delegation of Power.
-------------------
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
SECTION 5.11 Merger, Conversion, Consolidation
---------------------------------
or Succession to Business.
-------------------------
Any corporation into which the Property Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor
40
<PAGE>
of the Property Trustee or the Delaware Trustee, as the case may be, hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
-------------
Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Preferred Securities and the Common Securities in accor-
dance with the preferences set forth in their respective terms. If and to the
extent that the Debenture Issuer makes a payment of interest (including
Compounded Interest (as defined in the Indenture), Additional Interest (as de-
fined in the Indenture) and Liquidated Damages), premium and/or principal on the
Debentures held by the Property Trustee (the amount of any such payment being a
"Payment Amount"), the Property Trustee shall and is directed, to the extent
funds are available for that purpose, to make a distribution (a "Distribution")
of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
---------------------------------------
(a) The Regular Trustees shall on behalf of the Trust issue one class
of convertible preferred securities, representing undivided beneficial interests
in the assets of the Trust (the "Preferred Securities"), having such terms (the
"Terms") as are set forth in Annex I and one class of convertible common
securities, representing undivided beneficial interests in the assets of the
Trust (the "Common Securities"), having such terms as are set forth in Annex I.
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Preferred Securities and the Common Securities. The Trust
shall issue no Securities in bearer form.
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(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
nonassessable.
(d) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
(e) The Securities shall have no preemptive rights.
SECTION 7.2 Execution and Authentication.
----------------------------
(a) The Securities shall be signed on behalf of the Trust by a
Regular Trustee. In case any Regular Trustee of the Trust who shall have signed
any of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities neverthe-
less may be delivered as though the person who signed such Securities had not
ceased to be such Regular Trustee; and any Securities may be signed on behalf of
the Trust by such persons who, at the actual date of execution of such Security,
shall be the Regular Trustees of the Trust, although at the date of the execu-
tion and delivery of the Declaration any such person was not such a Regular
Trustee.
(b) One Regular Trustee shall sign the Preferred Securities for the
Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been au-
thenticated under this Declaration.
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Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Preferred Securities for original issue
in paragraph 5 of the Securities. The aggregate number of Preferred Securities
outstanding at any time shall not exceed the number set forth in the Terms in
Annex I hereto except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as
the Property Trustee to deal with the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
---------------
The Preferred Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration. Certifi-
cates may be printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Regular Trustees, as evidenced by
their execution thereof. The Securities may have letters, numbers, notations or
other marks of identification or designation and such legends or endorsements
required by law, stock exchange rule, agreements to which the Trust is subject,
if any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Trust). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Property Trustee in
writing. Each Preferred Security shall be dated the date of its authentication.
The terms and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Property Trustee and the Sponsor,
by their execution and delivery of this Declaration, expressly agree to such
terms and provisions and to be bound thereby.
(a) Global Securities. The Preferred Securities are being offered
-----------------
and sold by the Trust pursuant to a
43
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Purchase Agreement relating to the Preferred Securities, dated April 18, 1996,
among the Trust, the Sponsor and the Initial Purchasers named therein (the
"Purchase Agreement").
Securities offered and sold to Qualified Institutional Buyers ("QIBs")
in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in
the Purchase Agreement, shall be issued in the form of one or more, permanent
global Securities in definitive, fully registered form without distribution
coupons with the appropriate global legends and Restricted Securities Legend set
forth in Exhibit A-1 hereto (each, a "Rule 144A Global Preferred Security"),
which shall be deposited on behalf of the purchasers of the Preferred Securities
represented thereby with the Property Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary of a
nominee of the Depositary, duly executed by the Trust and authenticated by the
Property Trustee as hereinafter provided. The number of Preferred Securities
represented by the Rule 144A Global Preferred Security may from time to time be
increased or decreased by adjustments made on the records of the Property
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply only to
---------------------
the Rule 144A Global Preferred Securities and such other Preferred Securities in
global form as may be authorized by the Trust to be deposited with or on behalf
of the Depositary.
The Trust shall execute and the Property Trustee shall, in accordance
with this Section 7.3, authenticate and make available for delivery initially
one or more Rule 144A Global Preferred Securities that (a) shall be registered
in the name of Cede & Co. or other nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
written instructions or held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Declaration with respect to any Rule 144A Global Pre-
ferred Security held on their behalf by the Depositary or by the Property
Trustee as the custodian of the Depositary or under such Rule 144A Global
Preferred Security, and the Depositary may be treated by the Trust, the Property
Trustee and any agent of the Trust or the Property Trustee as the absolute owner
of such
44
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Rule 144A Global Preferred Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Rule 144A Global Pre-
ferred Security.
(c) Certificated Securities. Except as provided in Section 7.9,
-----------------------
owners of beneficial interests in the Rule 144A Global Preferred Security will
not be entitled to receive physical delivery of certificated Preferred
Securities. Preferred Securities offered and sold in reliance on Regulation S
under the Securities Act ("Regulation S"), as provided in the Purchase
Agreement, shall be issued initially in the form of individual certificates in
definitive, fully registered form without distribution coupons and shall bear
the Restricted Securities Legend set forth in Exhibit A-1 hereto (the "Regula-
tion S Definitive Preferred Securities"). Purchasers of Securities who are QIBs
acting on behalf of institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and did not purchase
Preferred Securities in reliance on Regulation S under the Securities Act will
receive Preferred Securities in the form of individual certificates in defini-
tive, fully registered form without distribution coupons and with the Restricted
Securities Legend set forth in Exhibit A-1 hereto ("Restricted Definitive
Preferred Securities"); provided, however, that upon transfer of such Restricted
-------- -------
Definitive Preferred Securities to a QIB, such Restricted Definitive Preferred
Securities will, unless the Rule 144A Global Preferred Security has previously
been exchanged, be exchanged for an interest in a Rule 144A Global Security
pursuant to the provisions at Section 9.2. Restricted Definitive Preferred
Securities will bear the Restricted Securities Legend set forth on Exhibit A-1
unless removed in accordance with this Section 7.3 or Section 9.2.
SECTION 7.4 Registrar, Paying Agent and Conversion Agent.
--------------------------------------------
The Trust shall maintain in the Borough of Manhattan, City of New
York, State of New York or in the city of London, England, as the case may be,
(i) an office
45
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or agency where Preferred Securities may be presented for registration of
transfer or from exchange ("Registrar"), (ii) an office or agency where
Preferred Securities may be presented for payment ("Paying Agent") and an office
or agency where Securities may be presented for conversion ("Conversion Agent").
The Registrar shall keep a register of the Preferred Securities and of their
transfer and exchange. The Trust may appoint the Registrar, the Paying Agent
and the Conversion Agent and may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any additional
conversion agent. The Trust may change any Paying Agent, Registrar, co-
registrar or Conversion Agent without prior notice to any Holder. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Regular Trustees. The Trust shall notify the Property Trustee of the
name and address of any Agent not a party to this Declaration. If the Trust
fails to appoint or maintain another entity as Registrar, Paying Agent or
Conversion Agent, the Property Trustee shall act as such. The Trust or any of
its Affiliates may act as Paying Agent, Registrar, or Conversion Agent. The
Trust shall act as Paying Agent, Registrar, co-registrar, and Conversion Agent
for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar, Paying
Agent, and Conversion Agent for the Preferred Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
-----------------------------------
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of principal or distribution on the Securities, and will notify
the Property Trustee if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require a Paying Agent to pay
all money held by it to the Property Trustee. The Trust at any time may require
a Paying Agent to pay all money held by it to the Property Trustee and to
account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further
46
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liability for the money. If the Trust or the Sponsor or an Affiliate of the
Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 7.6 Replacement Securities.
----------------------
If the holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Preferred Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. If required by the Property Trustee
or the Trust, an indemnity bond must be sufficient in the judgment of both to
protect the Trustees, the Property Trustee, the Sponsor or any authenticating
agent from any loss which any of them may suffer if a Security is replaced. The
Company may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Sponsor pursuant to Article III hereof, the Sponsor in its discretion may,
instead of issuing a new Security, pay or purchase such Security, as the case
may be.
Every replacement Security is an additional obligation of the Trust.
SECTION 7.7 Outstanding Preferred Securities.
--------------------------------
The Preferred Securities outstanding at any time are all the Preferred
Securities authenticated by the Property Trustee except for those cancelled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.
If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a bona fide purchaser.
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If Preferred Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Preferred Securities in Treasury.
--------------------------------
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which the Property Trustee knows are so owned shall be so disregarded.
SECTION 7.9 Temporary Securities.
--------------------
(a) Until definitive Securities are ready for delivery, the Trust may
prepare and, in the case of the Preferred Securities, the Property Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Trust
considers appropriate for temporary Securities. Without unreasonable delay, the
Trust shall prepare and, in the case of the Preferred Securities, the Property
Trustee shall authenticate definitive Securities in exchange for temporary
Securities.
(b) A Global Preferred Security deposited with the Depositary or with
the Property Trustee as custodian for the Depositary pursuant to Section 7.3
shall be transferred to the beneficial owners thereof in the form of certifi-
cated Preferred Securities only if such transfer complies with Section 9.2 and
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Preferred Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Sponsor within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing.
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(c) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.9 shall be surrendered by the Depositary to the
Property Trustee located in the Borough of Manhattan, The City of New York, to
be so transferred, in whole or from time to time in part, without charge, and
the Property Trustee shall authenticate and make available for delivery, upon
such transfer of each portion of such Global Preferred Security, an equal
aggregate liquidation amount of Securities of authorized denominations in the
form of certificated Securities. Any portion of a Global Preferred Security
transferred pursuant to this Section shall be registered in such names as the
Depositary shall direct. Any Preferred Security in the form of certificated
Preferred Securities delivered in exchange for an interest in the Restricted
Global Preferred Security shall, except as otherwise provided by Sections 7.3
and 9.1 bear the Restricted Securities Legend set forth in Exhibit A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the registered
holder of a Global Preferred Security may grant proxies and otherwise authorize
any person, including Participants and persons that may hold interests through
Participants, to take any action which a holder is entitled to take under this
Declaration or the Securities.
(e) In the event of the occurrence of either of the events specified
in Section 7.9(b), the Trust will promptly make available to the Property
Trustee a reasonable supply of certificated Securities in definite, fully
registered form without interest coupons.
SECTION 7.10 Cancellation.
------------
The Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent
shall forward to the Property Trustee any Preferred Securities surrendered to
them for registration of transfer, redemption, conversion, exchange or payment.
The Property Trustee shall promptly cancel all Preferred Securities, surrendered
for registration of transfer, redemption, conversion, exchange, payment,
replacement or cancellation and shall dispose of cancelled Preferred Securities
as the Trust directs. The Trust may not issue new Preferred Securities to
replace Preferred Securities that it has paid or that have been
49
<PAGE>
delivered to the Property Trustee for cancellation or that any holder has
converted.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
--------------------
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of
at least a Majority in liquidation amount of the Securities, voting
together as a single class, to file such certificate of cancellation, or
the revocation of the charter of the Sponsor and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the
Sponsor or the Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
Additional Interest, Compounded Interest and Liquidated Damages, shall have
been paid to the Holders in accordance with the terms of the Securities;
(v) upon the occurrence and continuation of a Tax Event pursuant
to which the Trust shall have been dissolved in accordance with the terms
of the Securities and all of the Debentures endorsed thereon shall have
been distributed to the Holders of Securities in exchange for all of the
Securities;
(vi) the expiration of the term of the Trust on April 15, 2021;
or
(vii) before the issuance of any Securities, with the consent of
all the Regular Trustees and the Sponsor.
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(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), the Trustees shall file a certificate of cancel-
lation with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General.
-------
(a) Where Preferred Securities are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal number of Preferred Securities represented by different certificates, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Trust shall issue and the Property Trustee shall authenticate
Preferred Securities at the Registrar's request.
(b) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
Subject to this Article IX, the Sponsor and any Related Party may only
transfer Common Securities to the Sponsor or a Related Party of the Sponsor;
provided that, any such transfer is subject to the condition precedent that the
- --------
transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more than
an insubstantial risk that:
(i) the Trust would not be classified for United States federal
income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the transferee
would become an Investment Company.
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(c) The Regular Trustees shall provide for the registration of
Securities and of transfers of Securities, which will be effected without charge
but only upon payment (with such indemnity as the Regular Trustees may require)
in respect of any tax or other governmental charges that may be imposed in
relation to it. Upon surrender for registration of transfer of any Securities,
the Regular Trustees shall cause one or more new Securities to be issued in the
name of the designated transferee or transferees. Every Security surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Regular Trustees duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Security
surrendered for registration of transfer shall be canceled by the Regular Trust-
ees. A transferee of a Security shall be entitled to the rights and subject to
the obligations of a Holder hereunder upon the receipt by such transferee of a
Security. By acceptance of a Security, each transferee shall be deemed to have
agreed to be bound by this Declaration.
(d) The Trust shall not be required (i) to issue, register the
transfer of, or exchange, Preferred Securities during a period beginning at the
opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms and ending at the close of
business on the day of selection, or (ii) to register the transfer or exchange
of any Preferred Security so selected for redemption in whole or in part, except
the unredeemed portion of any Preferred Security being redeemed in part.
SECTION 9.2 Transfer Procedures and Restrictions.
------------------------------------
(a) General. Except in connection with a Shelf Registration
-------
Statement contemplated by and in accordance with the terms of the Registration
Rights Agreement, if Preferred Securities are issued upon the transfer, exchange
or replacement of Preferred Securities bearing the Restricted Securities Legend
set forth in Exhibit A-1 hereto, or if a request is made to remove such
Restricted Securities Legend on Preferred Securities, the Preferred Securities
so issued shall bear the Restricted Securities Legend, or the Restricted
Securities Legend shall not be removed, as the case may be, unless there is
delivered to the Trust and the Property Trustee such satisfactory evidence,
which may include an opinion of counsel licensed to practice law in the State of
New York, as may be reasonably required by the
52
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Company, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of Rule 144A, Rule 144 or Regulation S under the Securities Act or, with respect
to Restricted Securities, that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Property Trustee, at the written direction of the
Trust, shall authenticate and deliver Preferred Securities that do not bear the
legend.
(b) Transfers After Effectiveness of Shelf Registration Statement.
-------------------------------------------------------------
After the effectiveness of a Shelf Registration Statement for any Preferred
Securities, all requirements pertaining to legends on such Preferred Security
will cease to apply, and beneficial interests in a Preferred Security in global
form without legends will be available to transferees of such Preferred Securi-
ties, upon exchange of the transferring holder's Restricted Definitive Preferred
Security or directions to transfer such Holder's beneficial interest in the Rule
144A Global Preferred Security, as the case may be. No such transfer or
exchange of a Restricted Definitive Preferred Security or of an interest in the
Rule 144A Global Preferred Security shall be effective unless the transferor
delivers to the Trust a certificate in the form of Exhibit D hereto as to
compliance by such person with the provisions of the Registration Rights
Agreement applicable thereto. After the effectiveness of the Shelf Registration
Statement, the Trust shall issue and the Property Trustee, upon instruction from
the Trust, shall authenticate a Preferred Security in global form without the
Restricted Securities Legend (the "Exchanged Global Preferred Security") to
deposit with the Depositary to evidence transfers of (i) beneficial interests
from the Rule 144A Global Preferred Security, (ii) Restricted Definitive
Preferred Securities, and (iii) Unrestricted Definitive Preferred Securities.
(c) Regulation S Definitive Preferred Security to Unrestricted
----------------------------------------------------------
Definitive Preferred Security; Termination of Restricted Period. Following the
- ---------------------------------------------------------------
termination of the "restricted period" with respect to the issuance of the Pre-
ferred Securities, Regulation S Definitive Preferred Securities may be exchanged
for an interest in a Preferred Security in definitive, fully registered form
without distribution coupons, but without the Restricted Securities Legend (an
"Unrestricted Definitive Preferred Security"),
53
<PAGE>
that is free from any restriction on transfer (other than such as are solely
attributable to any holder's status). Unrestricted Definitive Preferred
Securities will bear a CUSIP number different from that of the Exchanged Global
Preferred Securities and transfers or exchanges from an Unrestricted Definitive
Preferred Security or Regulation S Definitive Preferred Security to an Exchanged
Preferred Security must be effected pursuant to Section 9.2 (b).
(d) Transfer and Exchange of Definitive Preferred Securities. When
--------------------------------------------------------
Definitive Preferred Securities are presented to the Registrar or co-Registrar
(x) to register the transfer of such Definitive Preferred Securities;
or
(y) to exchange such Definitive Preferred Securities for an equal
number of Definitive Preferred Securities of another number,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Preferred Securities surrendered for
- -------- -------
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Trust and the
Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Definitive Preferred Securities that are
Restricted Definitive Preferred Securities, are being transferred or
exchanged pursuant to an effective registration statement under the
Securities Act or, prior to the time of the effectiveness of such
registration statement, pursuant to clause (A) or (B) below, and are accom-
panied by the following additional information and documents, as appli-
cable:
(A) if such Restricted Preferred Securities are being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from such
Holder to that effect
54
<PAGE>
(in the form set forth on the reverse of the Preferred Security);
or
(B) if such Restricted Preferred Securities are being
transferred pursuant to an exemption from registration in accor-
dance with Rule 144 or Regulation S under the Securities Act:
(i) a certification to that effect (in the form set forth on the
reverse of the Preferred Security) and (ii) if the Trust or
Registrar so requests, evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth in the
Restricted Securities Legend.
Definitive Preferred Securities that are transferred to QIBs in
accordance with Rule 144A under the Securities Act must take delivery of their
interests as the Preferred Securities in the form of a beneficial interest in
the Rule 144A Global Preferred Security in accordance with Section 9.2(e).
(e) Restrictions on Transfer of a Definitive Preferred Security for a
-----------------------------------------------------------------
Beneficial Interest in a Global Preferred Security. A Definitive Preferred
- --------------------------------------------------
Security may not be exchanged for a beneficial interest in a Global Preferred
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Preferred Security, duly en-
dorsed or accompanied by appropriate instruments of transfer, in form satisfac-
tory to the Property Trustee, together with:
(i) if such Definitive Preferred Security is a Restricted
Preferred Security, certification, in the form set forth on the reverse of
the Preferred Security, that such Definitive Preferred Security is being
transferred to a QIB in accordance with Rule 144A under the Securities Act;
and
(ii) whether or not such Definitive Preferred Security is a
Restricted Preferred Security, written instructions directing the Property
Trustee to make, or to direct the Depositary to make, an adjustment on its
books and records with respect to such Global Preferred Security to reflect
an increase in the number of the Preferred Securities represented by the
Global Preferred Security,
55
<PAGE>
then the Property Trustee shall cancel such Definitive Preferred Security and
cause, or direct the Depositary to cause, the aggregate number of Preferred
Securities represented by the Global Preferred Security to be increased ac-
cordingly. If no Global Preferred Securities are then outstanding, the Trust
shall issue and the Property Trustee shall authenticate, upon written order of
any Regular Trustee, an appropriate number of Preferred Securities in global
form.
(f) Transfer and Exchange of Global Preferred Securities. The
----------------------------------------------------
transfer and exchange of Global Preferred Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Declaration (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor.
(g) Transfer of a Beneficial Interest in a Global Preferred Security
----------------------------------------------------------------
for a Definitive Preferred Security.
- -----------------------------------
(i) Any person having a beneficial interest in a Global
Preferred Security that is being transferred or exchanged pursuant to
clause (A) or (B) below, and not pursuant to an effective registration
statement, may upon request, and if accompanied by the information
specified below, exchange such beneficial interest for a Definitive
Preferred Security representing the same number of Preferred Securities.
Upon receipt by the Property Trustee from the Depositary or its nominee on
behalf of any Person having a beneficial interest in a Global Preferred
Security of written instructions or such other form of instructions as is
customary for the Depositary or the person designated by the Depositary as
having such a beneficial interest in a Restricted Preferred Security and
the following additional information and documents (all of which may sub-
mitted by facsimile):
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the owner of a bene-
ficial interest in a Global Preferred Security, a certification
from such Person to that effect (in the form set forth on the
reverse of the Preferred Security); or
56
<PAGE>
(B) if such beneficial interest is being transferred pur-
suant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act: (i) a
certification to that effect from the transferee or transferor
(in the form set forth on the reverse of the Preferred Security)
and (ii) if the Property Trustee or Registrar so requests,
evidence reasonably satisfactory to them as to the compliance
with the restrictions set forth in the legend set forth in
Section 9.2(j),
then the Property Trustee or the Securities Custodian, at the direction of
the Property Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of the Global Pre-
ferred Security to be reduced on its books and records and, following such
reduction, the Trust will execute and the Property Trustee will authen-
ticate and deliver to the transferee a Definitive Preferred Security.
(ii) Definitive Preferred Securities issued in exchange for a
beneficial interest in a Global Preferred Security pursuant to this Section
9.2(g) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its
Participants or indirect participants or otherwise, shall instruct the
Property Trustee. The Property Trustee shall deliver such Preferred
Securities to the persons in whose names such Preferred Securities are so
registered in accordance with the instructions of the Depositary.
Beneficial interests in the Rule 144A Global Security may not
be exchanged for a Definitive Preferred Security except a Regulation S
Definitive Preferred Security and except as provided in Section 9.2(i).
(h) Restrictions on Transfer and Exchange of Global Preferred
---------------------------------------------------------
Securities. Notwithstanding any other provisions of this Declaration (other
- ----------
than the provisions set forth in subsection (i) of this Section 9.2), a Global
Preferred Security may not be transferred as a whole except
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by the Depositary to a nominee of the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Definitive Preferred Securities that are transferred to QIBs in
accordance with Rule 144A under the Securities Act prior to the effectiveness of
a registration statement under the Securities Act must take delivery of their
interests as the Preferred Securities in the form of a beneficial interest in
the Rule 144A Global Preferred Security in accordance with Section 9.2(e).
(i) Authentication of Definitive Preferred Securities. If at any
-------------------------------------------------
time:
(i) the Depositary notifies the Trust that the Depositary is
unwilling or unable to continue as Depositary for the Global Preferred
Securities and a successor Depositary for the Global Preferred Securities
is not appointed by the Trust at the direction of the Sponsor within 90
days after delivery of such notice; or
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the issuance of Definitive
Preferred Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Regular Trustee requesting the authentication
and delivery of Definitive Preferred Securities to the Persons designated by the
Trust, will authenticate and deliver Definitive Preferred Securities, in an
aggregate principal amount equal to the principal amount of Global Preferred
Securities, in exchange for such Global Preferred Securities.
(j) Legend.
------
(i) Except as permitted by the following paragraph (ii), each
Preferred Security certificate evidencing the Global Preferred Securities
and the Definitive Preferred Securities (and all Preferred Securities is-
sued in exchange therefor or substitution thereof) shall bear a legend (the
"Restricted
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Securities Legend") in substantially the following form:
THIS SECURITY, ANY CONVERTIBLE DEBENTURE ISSUED IN EXCHANGE
FOR THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH ANN TAYLOR STORES CORPORATION
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE
RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT ITS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
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SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT, THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Restricted Preferred Security
(including any Restricted Preferred Security represented by a Global
Preferred Security) pursuant to an effective registration statement under
the Securities Act or pursuant to Rule 144 under the Securities Act after
such registration statement ceases to be effective:
(A) in the case of any Restricted Preferred Security that
is a Definitive Preferred Security, the Registrar shall permit the
Holder thereof to exchange such Restricted Preferred Security for a
Definitive Preferred Security that does not bear the Restricted
Securities Legend and rescind any restriction on the transfer of such
Restricted Preferred Security; and
(B) in the case of any Restricted Preferred Security that
is represented by a Global Preferred Security, the Registrar shall
permit the Holder thereof to exchange such Restricted Preferred Secu-
rity (in connection with the sale of a Preferred Security pursuant to
the Registration Rights Agreement) for another Global Preferred Secu-
rity that does not bear the Restricted Securities Legend.
(k) Cancellation or Adjustment of Global Preferred Security. At such
-------------------------------------------------------
time as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the extent permitted by the
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Preferred Security shall be returned to the
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Depositary for cancellation or retained and canceled by the Property Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Preferred Security is exchanged for Definitive Preferred Securities, Preferred
Securities represented by such Global Preferred Security shall be reduced and an
adjustment shall be made on the books and records of the Property Trustee (if it
is then the Securities Custodian for such Global Preferred Security) with
respect to such Global Preferred Security, by the Property Trustee or the Secu-
rities Custodian, to reflect such reduction.
(l) Obligations with Respect to Transfers and Exchanges of Preferred
----------------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate Definitive
Preferred Securities and Global Preferred Securities at the Registrar's or
co-Registrar's request.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust or
the Sponsor may require) in respect of any tax or other governmental charge
that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Preferred
Security selected for redemption in whole or in part pursuant to Article
III, except the unredeemed portion of any Definitive Preferred Security
being redeemed in part, or (b) any Preferred Security for a period
beginning 15 Business Days before the mailing of a notice of an offer to
repurchase or redeem Preferred Securities or 15 Business Days before a
quarterly distribution date.
(iv) Prior to the due presentation for registrations of transfer
of any Preferred Security, the Trust, the Property Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person in
whose name a Preferred Security is registered as the absolute owner of such
Preferred Security for the purpose of receiving Distributions on such
Preferred Security and for all other purposes whatsoever, and none of the
Trust, the Property Trustee, the Paying
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Agent, the Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Preferred Securities issued upon any transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration
as the Preferred Securities surrendered upon such transfer or exchange.
(m) No Obligation of the Property Trustee.
-------------------------------------
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security, a
Participant in the Depositary or other Person with respect to the accuracy
of the records of the Depositary or its nominee or of any Participant
thereof, with respect to any ownership interest in the Preferred Securities
or with respect to the delivery to any Participant, beneficial owner or
other Person (other than the Depositary) of any notice (including any
notice of redemption) or the payment of any amount, under or with respect
to such Preferred Securities. All notices and communications to be given
to the Holders and all payments to be made to Holders under the Preferred
Securities shall be given or made only to or upon the order of the
registered Holders (which shall be the Depositary or its nominee in the
case of a Global Preferred Security). The rights of beneficial owners in
any Global Preferred Security shall be exercised only through the Depos-
itary subject to the applicable rules and procedures of the Depositary.
The Property Trustee may conclusively rely and shall be fully protected in
relying upon information furnished by the Depositary or any agent thereof
with respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no obligation
or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Declaration or under applicable
law with respect to any transfer of any interest in any Preferred Security
(including any transfers between or among Depositary Participants or
beneficial owners in any Global Preferred Security) other than to require
delivery of such certificates and other docu-
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mentation or evidence as are expressly required by, and to do so if and
when expressly required by, the terms of this Declaration, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.
SECTION 9.3 Deemed Security Holders.
-----------------------
The Trustees may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
--------------------
Global Preferred Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the
Depositary, and no Preferred Security Beneficial Owner will receive a definitive
Preferred Security Certificate representing such Preferred Security Beneficial
Owner's interests in such Global Preferred Securities, except as provided in
Section 9.2. Unless and until definitive, fully registered Preferred Securities
Certificates have been issued to the Preferred Security Beneficial Owners pursu-
ant to Section 9.2:
(a) the provisions of this Section 9.4 shall be in full force and ef-
fect;
(b) the Trust and the Trustees shall be entitled to deal with the
Depositary for all purposes of this Declaration (including the payment of Dis-
tributions on the relevant Global Preferred Securities and receiving approvals,
votes or consents hereunder) as the Holder of the Preferred Securities and the
sole holder of the Global Preferred Securities and shall have no obligation to
the Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this
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Declaration, the provisions of this Section 9.4 shall control; and
(d) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Depositary and shall be limited to those established
by law and agreements between such Preferred Security Beneficial Owners and the
Depositary and/or the Participants and receive and transmit payments of Distri-
butions on the Global Certificates to such Participants. The Depositary will
make book entry transfers among the Participants.
SECTION 9.5 Notices to Clearing Agency.
--------------------------
Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, the Regular Trustees shall, in the
case of any Global Preferred Security, give all such notices and communications
specified herein to be given to the Preferred Security Holders to the
Depositary, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
----------------------------------------
If the Depository elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
such Preferred Securities.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
---------
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the Securi-
ties which shall be made solely from assets of the Trust; and
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(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the Securi-
ties) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Sec. 3803(a) of the Business Trust Act, the Holders
of the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
-----------
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim in-
curred by reason of such Indemnified Person's gross negligence (or, in the case
of the Property Trustee, negligence) or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
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SECTION 10.3 Fiduciary Duty.
--------------
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions
of this Declaration, to the extent that they restrict the duties and liabilities
of an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement contem-
plated herein or therein provides that an Indemnified Person shall act in a
manner that is, or provides terms that are, fair and reasonable to the
Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be
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entitled to consider such interests and factors as it desires, including
its own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Trust or any
other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 10.4 Indemnification.
---------------
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Company Indemnified Person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent per-
mitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in its
favor by reason of the fact
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that he is or was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or
such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full extent
permitted by law, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the circum-
stances because he has met the applicable standard of conduct set forth in
paragraphs (i) and (ii). Such determination shall be made (1) by the
Regular Trustees by a majority vote of a quorum consisting of such Regular
Trustees who were not parties to such action, suit or proceeding, (2) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal counsel in
a written opinion, or (3) by the Common Security Holder of the Trust.
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(v) Expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in ad-
vance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified
Person to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Debenture Issuer as authorized in
this Section 10.4(a). Notwithstanding the foregoing, no advance shall be
made by the Debenture Issuer if a determination is reasonably and promptly
made (i) by the Regular Trustees by a majority vote of a quorum of disin-
terested Regular Trustees, (ii) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested Regular Trustees so di-
rects, by independent legal counsel in a written opinion or (iii) the
Common Security Holder of the Trust, that, based upon the facts known to
the Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Company Indemnified Person acted in bad
faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect to any crimi-
nal proceeding, that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall
any advance be made in instances where the Regular Trustees, independent
legal counsel or Common Security Holder reasonably determine that such
person deliberately breached his duty to the Trust or its Common or Pre-
ferred Security Holders.
(vi) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Debenture
Issuer or Preferred Security Holders of the Trust or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. All rights to indemnification under this Section
10.4(a) shall be deemed to be provided by a contract between the Debenture
Issuer and each Company
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Indemnified Person who serves in such capacity at any time while this
Section 10.4(a) is in effect. Any repeal or modification of this Section
10.4(a) shall not affect any rights or obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him against such liabil-
ity under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was serv-
ing at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to such con-
stituent entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members, part-
ners, employees, representatives, custodians, nominees or agents of the Property
Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being
referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary
Indemnified Person harmless against, any and all loss, liability or expense
including taxes (other than taxes
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based on the income of such Fiduciary Indemnified Person) incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration or the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 10.4(b) shall survive the
satisfaction and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
------------------
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Property Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any Affili-
ate of the Sponsor, or may act as depositary for, trustee or agent for, or act
on any committee or body of holders of, securities or other obligations of the
Sponsor or its Affiliates.
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ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
-----------
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles, con-
sistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year by a firm of independent certified public accountants selected by the
Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related statements
of income or loss;
(c) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States federal
income tax information statement, required by the Code, containing such informa-
tion with regard to the Securities held by each Holder as is required by the
Code and the Treasury Regulations. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Regular Trustees shall endeavor
to deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States federal income
tax return, on a Form 1041 or such other form required by United States federal
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income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
-------
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
-------- -------
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such accounts shall
be designated by the Regular Trustees; provided, however, that the Property
-------- -------
Trustee shall designate the signatories for the Property Trustee Account.
SECTION 11.4 Withholding.
-----------
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Regular Trustee shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Trust is required to
withhold and pay over any amounts to any authority with respect to distributions
or allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. In the event of
any claimed overwithholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not withheld
from actual Distributions made, the Trust may reduce subsequent Distributions by
the amount of such withholding.
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ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
----------
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two Regular
Trustees a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property Trustee;
and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such purported amendment
shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which affects
the rights, powers, duties, obligations or immunities of the Property
Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the
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terms of this Declaration (including the terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified
for purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment
Company that is required to be registered under the Investment Company
Act;
(c) at such time after the Trust has issued any Securities that
remain outstanding, any amendment that would adversely affect the rights, privi-
leges or preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the
Holders of a majority in liquidation amount of the Common Securities;
(f) the rights of the holders of the Common Securities under Article
V to increase or decrease the number of, and appoint and remove Trustees shall
not be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
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<PAGE>
(ii) correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this Declara-
tion;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the rights, preferences or privileges of the
Holders.
SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent.
----------------------------------------------------------------
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Regular Trustees (or as provided in the terms of the Secu-
rities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Preferred Securi-
ties are listed or admitted for trading. The Regular Trustees shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Regular Trustees one or more calls in a
writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing
the Certificates held by the Holders of Securities exercising the right to call
a meeting and only those Securities represented by the Certificates so specified
shall be counted for purposes of determining whether the required percentage set
forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Secu-
rities, the following provisions shall apply to meetings of Holders of Securi-
ties:
(i) notice of any such meeting shall be given to all the Holders
of Securities having a right to vote thereat at least 7 days and not more
than 60
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days before the date of such meeting. Whenever a vote, consent or approval
of the Holders of Securities is permitted or required under this Declara-
tion or the rules of any stock exchange or over the counter market on which
the Preferred Securities are listed or admitted for trading, such vote,
consent or approval may be given at a meeting of the Holders of Securities.
Any action that may be taken at a meeting of the Holders of Securities may
be taken without a meeting if a consent in writing setting forth the action
so taken is signed by the Holders of Securities owning not less than the
minimum amount of Securities in liquidation amount that would be necessary
to authorize or take such action at a meeting at which all Holders of Secu-
rities having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot submitted to the
Security Holders for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified by the Regular
Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is entitled
to participate, including waiving notice of any meeting, or voting or par-
ticipating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and
the Holders of the Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
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(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Preferred Securities are then listed or trading
provide otherwise, the Regular Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders of Securi-
ties, including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Holders of Securities, waiver of
any such notice, action by consent without a meeting, the establishment of
a record date, quorum requirements, voting in person or by proxy or any
other matter with respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
--------------------------------------------------
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a banking corporation with trust powers,
duly organized, validly existing and in good standing under the laws of New
York, with trust power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration.
(b) The execution, delivery and performance by the Property Trustee
of the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium, insol-
vency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement
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of such remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee will be the record
holder of the Debentures and the Property Trustee has not knowingly created any
liens or encumbrances on such Debentures.
(e) No consent, approval or authorization of, or registration with or
notice to, any New York State or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
--------------------------------------------------
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration and at
the time of Closing, and each Successor Delaware Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Delaware Trustee's
acceptance of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is a duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power and au-
thority to execute and deliver, and to carry out and perform its obligations
under the terms of, the Declaration.
(b) The execution, delivery and performance by the Delaware Trustee
of the Declaration has been duly authorized by all necessary corporate action on
the part of the Delaware Trustee. The Declaration has been duly executed and
delivered by the Delaware Trustee, and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium, insol-
vency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement
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<PAGE>
of such remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration with or
notice to, any Delaware State or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of this Declaration.
(e) The Delaware Trustee is an entity which has its principal place
of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights.
-------------------
The Holders of the Preferred Securities, the Debentures and the
Preferred Securities Guarantee and the shares of Common Stock of the Debenture
Issuer issuable upon conversion of the Debentures (collectively, the
"Registrable Securities") are entitled to the benefits of a Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Sponsor has
agreed for the benefit of the Holders of Registrable Securities that (i) it
will, at its cost, within 60 days after the date of issuance of the Registrable
Securities, file a shelf registration statement (the "Shelf Registration State-
ment") with the Commission with respect to resales of the Registrable
Securities, (ii) it will use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission within 180 days after the
date of issuance of the Registrable Securities and (iii) the Sponsor will use
its best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act until the third anniversary of the
effectiveness of the Shelf Registration Statement or such earlier date as is
provided
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in the Registration Rights Agreement (the "Effectiveness Period").
If (i) on or prior to 60 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the issuing
of the Registrable Securities, such Shelf Registration Statement is not declared
effective (each, a "Registration Default"), Liquidated Damages will accrue on
the Debentures and, accordingly, additional distributions will accrue on the
Preferred Securities, in each case from and including the day following such
Registration Default. Liquidated Damages will be paid quarterly in arrears,
with the first quarterly payment due on the first interest or distribution
payment date, as applicable, following the date on which such Liquidated Damages
begin to accrue, and will accrue at a rate per annum equal to an additional one-
quarter of one percent (0.25%) of the principal amount or liquidation amount, as
applicable, to and including the 90th day following such Registration Default
and one-half of one percent (0.50%) thereof from and after the 91st day
following such Registration Default. In the event that the Shelf Registration
Statement ceases to be effective during the Effectiveness Period for more than
30 consecutive days or any 90 days, whether or not consecutive, during any 12-
month period, then the interest rate borne by the Debentures and the
distribution rate borne by the Preferred Securities will each increase by an
additional one-half of one percent (0.50%) per annum from such 31st or 91st day,
as applicable, until such time as the Shelf Registration Statement again becomes
effective.
During the Effectiveness Period, the Trust and the Sponsor shall
notify DTC and the Paying Agent(s) with respect to the Securities then
outstanding within three business days after each Registration Default and each
lapse in effectiveness of a Shelf Registration Statement. Any Liquidated
Damages due and payable hereunder shall be paid in the same manner as payments
of interest on the Securities. Any Liquidated Damages due and payable hereunder
shall be payable on each payment date to the record Holder of Securities
entitled to receive the payment to be paid on such date, such date to be
deferred until the end of any interest payment deferral period permitted under
the terms of the Securities.
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ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.
-------
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, sent by
facsimile or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):
c/o AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: Walter J. Parks
(b) if given to the Property Trustee, at the mailing address set
forth below (or such other address as the Property Trustee may give notice of to
the Holders of the Securities):
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
(c) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as the Delaware Trustee may give notice of to
the Holders of the Securities):
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Trustee Administration
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
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AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention:
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 15.2 Governing Law.
-------------
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 15.3 Intention of the Parties.
------------------------
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The provi-
sions of this Declaration shall be interpreted to further this intention of the
parties.
SECTION 15.4 Headings.
--------
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 15.5 Successors and Assigns
----------------------
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
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<PAGE>
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 15.6 Partial Enforceability.
----------------------
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or cir-
cumstances other than those to which it is held invalid, shall not be affected
thereby.
SECTION 15.7 Counterparts.
------------
This Declaration may contain more than one counterpart of the sig-
nature page and this Declaration may be executed by the affixing of the signa-
ture of each of the Trustees to one of such counterpart signature pages. All of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
J. Patrick Spainhour,
as Trustee
/s/ J. Patrick Spainhour
----------------------------------------------------
Paul E. Francis,
as Trustee
/s/ Paul E. Francis
----------------------------------------------------
Walter J. Parks,
as Trustee
/s/ Walter J. Parks
----------------------------------------------------
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:/s/ Walter Douglas
-------------------------------------------------
Name: Walter Douglas
Title: Senior Vice President
THE BANK OF NEW YORK,
as Property Trustee
By:/s/ Byron Merino
-------------------------------------------------
Name: Byron Merino
Title: Assistant Treasurer
ANNTAYLOR STORES CORPORATION,
as Sponsor
By:/s/ Paul E. Francis
-------------------------------------------------
Name: Paul E. Francis
Title: Executive Vice
President - Finance
and Administration
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ANNEX I
TERMS OF
8 1/2% CONVERTIBLE PREFERRED SECURITIES
8 1/2% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of April 25, 1996 (as amended from time to time, the "Dec-
laration"), the designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Preferred Securities and the Common Securities
are set out below (each capitalized term used but not defined herein has the
meaning set forth in the Declaration or, if not defined in such Declaration, as
defined in the Offering Memorandum referred to below):
1. Designation and Number.
----------------------
(a) "Preferred Securities." 1,750,000 Preferred Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the
Trust of Eighty-Seven Million Five Hundred Thousand Dollars
($87,500,000), plus up to an additional 262,500 Preferred Securities
of the Trust with an aggregate liquidation amount with respect to the
assets of the Trust of Thirteen Million One Hundred Twenty-Five Thou-
sand Dollars ($13,125,000) solely to cover over-allotments, as
provided for in the Purchase Agreement (the "Additional Preferred
Securities"), and a liquidation amount with respect to the assets of
the Trust of $50 per preferred security, are hereby designated for the
purposes of identification only as "8 1/2% Convertible Preferred
Securities (liquidation amount $50 per Convertible Preferred
Security)" (the "Preferred Securities"). The Preferred Security
Certificates evidencing the Preferred Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to conform to the
rules of any stock exchange or other organization on which the
Preferred Securities are listed.
(b) "Common Securities." 54,124 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust
of Two Million Seven Hundred Six Thousand and Two Hundred Dollars
($2,706,200) plus up to an additional 8,120 Common Securities of the
Trust with an aggregate liquidation amount with respect
<PAGE>
to the assets of the Trust of Four Hundred Six Thousand Dollars
($406,000) to meet the capital requirements of the Trust in the event
of an issuance of Additional Preferred Securities, and a liquidation
amount with respect to the assets of the Trust of $50 per Common Secu-
rity, are hereby designated for the purposes of identification only as
"8 1/2% Convertible Common Securities (liquidation amount $50 per Con-
vertible Common Security)" (the "Common Securities"). The Common
Security Certificates evidencing the Common Securities shall be sub-
stantially in the form of Exhibit A-2 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be re-
quired by ordinary usage, custom or practice.
2. Distributions.
-------------
(a) Distributions payable on each Security will be fixed at a rate per
annum of 8 1/2% (the "Coupon Rate") of the stated liquidation amount
of $50 per Security, such rate being the rate of interest payable on
the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by
applicable law). The term "Distributions" as used herein includes any
such interest including any Additional Interest, Compounded Interest
and Liquidated Damages payable unless otherwise stated. A Distribu-
tion is payable only to the extent that payments are made in respect
of the Debentures held by the Property Trustee and to the extent the
Property Trustee has funds available therefor. The amount of Distri-
butions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a full quarterly Distribution
period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed.
(b) Distributions on the Securities will be cumulative, will accrue from
the date of initial issuance and will be payable quarterly in arrears,
on the following dates, which dates correspond to the interest payment
dates on the Debentures: January 15, April 15, July 15, and October
15 of each year, commencing on July 15, 1996, when, as and if avail-
able for payment by the Property Trustee, except as otherwise de-
scribed below. The Debenture Issuer has the right under the Indenture
to defer payments of interest by extending the interest payment period
from time to time on the Debentures for successive periods not exceed-
ing 20 consecutive quar-
I-2
<PAGE>
ters (each an "Extension Period"), during which Extension Period no
interest shall be due and payable on the Debentures; provided, that no
--------
Extension Period shall last beyond the date of maturity of the Deben-
tures. As a consequence of such extension, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will contin-
ue to accrue with interest thereon (to the extent permitted by appli-
cable law) at the Coupon Rate compounded quarterly during any such
Extension Period. Prior to the termination of any such Extension Peri-
od, the Debenture Issuer may further extend such Extension Period;
provided, that such Extension Period together with all such previous
--------
and further extensions thereof may not exceed 20 consecutive quarters
and that such Extension Period may not extend beyond the maturity date
of the Debentures. Payments of accrued Distributions will be payable
to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period. Upon the
termination of any Extension Period and the payment of all amounts
then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be 15 days prior to the
relevant payment dates, except as otherwise described in this Annex I
to the Declaration. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment in respect of
the Preferred Securities being held in book-entry form through The
Depository Trust Company (the "Depositary") will be made as described
under the heading "Description of the Preferred Securities -- Book-
Entry Only Issuance -- The Depository Trust Company" in the Offering
Memorandum. The relevant record dates for the Common Securities shall
be the same record dates as for the Preferred Securities. Distribu-
tions payable on any Securities that are not punctually paid on any
Distribution payment date, as a result of the Debenture Issuer having
failed to make a payment under the Debentures, will cease to be
payable to the Person in whose name such Securities are registered on
the relevant record date, and such defaulted Distribution will instead
be payable to the Person in whose name such Securities are registered
on the special record date or other specified date determined in
accordance with the Indenture. If any date on which Distributions are
payable on the Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the
I-3
<PAGE>
next succeeding day that is a Business Day (and without any
distribution or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date.
(d) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Common Stock of the Debenture Issuer
pursuant to the terms of the Securities as forth in this Annex I to
the Declaration, no payment, allowance or adjustment shall be made
with respect to accumulated and unpaid Distributions on such Securi-
ties, or be required to be made; provided that Holders of Securities
--------
at the close of business on any record date for the payment of Distri-
butions will be entitled to receive the Distributions payable on such
Securities on the corresponding payment date notwithstanding the con-
version of such Securities into Common Stock of the Debenture Issuer
following such record date.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
-----------------------------------------
In the event of any voluntary or involuntary dissolution, winding-up
or termination of the Trust (each a "Liquidation") the then Holders of the
Securities on the date of the Liquidation will be entitled to receive out of the
assets of the Trust available for distribution to Holders of Securities after
satisfaction of liabilities of creditors, distributions in an amount equal to
the aggregate of the stated liquidation amount of $50 per Security plus accrued
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"), unless, in connection with such Liquidation, Deben-
tures in an aggregate principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Coupon Rate of,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on, such Securities, shall be distributed on a Pro Rata
basis to the Holders of the Securities.
If, upon any such Liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on
I-4
<PAGE>
the Securities shall be paid on a Pro Rata basis in accordance with paragraph 10
below.
4. Redemption and Distribution.
---------------------------
(a) Upon the repayment of the Debentures in whole or in part, whether at
maturity or upon redemption (either at the option of the Debenture
Issuer or pursuant to a Tax Event), the proceeds from such repayment
or payment shall be simultaneously applied to redeem Securities having
an aggregate liquidation amount equal to the aggregate principal
amount of the Debentures so repaid or redeemed at a redemption price
equal to the redemption price of such repaid or redeemed Debentures,
together with accrued and unpaid Distributions thereon through the
date of the redemption, payable in cash (the "Redemption Price").
Holders will be given not less than 30 nor more than 60 days' notice
of such redemption. Upon the repayment of the Debentures at maturity
or upon any acceleration, earlier redemption or otherwise, the
proceeds from such repayment will be applied to redeem the Securities,
in whole, upon not less than 30 nor more than 60 days' notice.
(b) If fewer than all the outstanding Securities are to be so redeemed,
the Common Securities and the Preferred Securities will be redeemed
Pro Rata and the Preferred Securities to be redeemed will be as de-
scribed in paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
defined below and each a "Special Event") shall occur and be continu-
ing the Regular Trustees shall, unless the Debentures are redeemed in
the limited circumstances in relation to a Tax Event described in this
Section 4(c), dissolve the Trust and, after satisfaction of creditors
of the Trust, if any, cause Debentures held by the Property Trustee,
having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the Coupon
Rate of, and accrued and unpaid Distributions on, and having the same
record date for payment as the Securities, to be distributed to the
Holders of the Securities in liquidation of such Holders' interest in
the Trust on a Pro Rata basis, within 90 days following the occurrence
of such Special Event (the "90 Day Period"); provided, however, that
-------- -------
in the case of a Tax Event, such dissolution and distribution shall be
conditioned on the Regular Trustees' receipt of an opinion of a na-
tionally recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may rely on pub-
I-5
<PAGE>
lished revenue rulings of the Internal Revenue Service, to the effect
that the Holders of the Preferred Securities will not recognize any
income, gain or loss for United States federal income tax purposes as
a result of such dissolution and distribution of Debentures, and
provided, further, that if at the time there is available to the Trust
-------- -------
the opportunity to eliminate, within the 90 Day Period, the Special
Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure
which in the sole judgment of the Sponsor, has or will cause no ad-
verse effect on the Trust, the Sponsor or the Holders of the Securi-
ties and will involve no material cost ("Ministerial Action"), the
Trust will pursue such Ministerial Action in lieu of dissolution.
If in the event of a Tax Event, (i) after receipt of a Tax
Event Opinion (as defined hereinafter) by the Trust, the Regular
Trustees have received an opinion (a "Redemption Tax Opinion") of a
nationally recognized independent tax counsel experienced in such mat-
ters that, as a result of a Tax Event, there is more than an insub-
stantial risk that the Debenture Issuer would be precluded from
deducting the interest on the Debentures for United States federal
income tax purposes even if the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interest in the
Trust as described in this paragraph 4(c), or (ii) after receipt of a
Tax Event Opinion, the Regular Trustees shall have been informed by
such tax counsel that a No Recognition Opinion cannot be delivered to
the Trust, the Debenture Issuer shall have the right, upon not less
than 30 nor more than 60 days' notice, to redeem the Debentures in
whole (but not in part) for cash within 90 days following the occur-
rence of such Tax Event, and promptly following such redemption, the
Securities shall be redeemed at the Redemption Price on a Pro Rata
basis at $50 per Security plus accrued and unpaid distributions; pro-
----
vided, however, that if at the time there is available to the Deben-
----- -------
ture Issuer or the Trust the opportunity to eliminate, within such 90
Day Period, the Tax Event by taking some Ministerial Action which has
no adverse effect on the Trust, the Holders of Securities or the
Debenture Issuer, the Trust or the Debenture Issuer will pursue such
Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have re-
ceived an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the
effect that,
I-6
<PAGE>
as a result of (a) any amendment to, or change (including any an-
nounced prospective change) in, the laws (or any regulations thereun-
der) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation
or pronouncement that provides for a position with respect to such
laws or regulations that differs from the theretofore generally
accepted position or (d) any action taken by any governmental agency
or regulatory authority, which amendment or change is enacted,
promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each
case after the date of the Offering Memorandum (collectively, a
"Change in Tax Law"), there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date thereof, sub-
ject to United States federal income tax with respect to interest
accrued or received on the Debentures, (ii) the Trust is, or will be
within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges, or (iii)
interest payable by the Debenture Issuer to the Trust on the Deben-
tures is not, or within 90 days of the date thereof will not be, de-
ductible by the Debenture Issuer for United States federal income tax
purposes. Notwithstanding anything in the previous sentence to the
contrary, a Tax Event shall not include any Change in Tax Law that
requires the Debenture Issuer for United States federal income tax
purposes to defer taking a deduction for any original issue discount
("OID") that accrues with respect to the Debentures until the interest
payment related to such OID is paid by the Debenture Issuer in money;
provided, that such Change in Tax Law does not create more than an
--------
insubstantial risk that the Debenture Issuer will be prevented from
taking a deduction for OID accruing with respect to the Debentures at
a date that is no later than the date the interest payment related to
such OID is actually paid by the Debenture Issuer in money.
"Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent
counsel experienced in practice under the Investment Company Act (an
"Investment Company Event Opinion") that, as a result occurrence of a
change in law or regulation or a change
I-7
<PAGE>
in interpretation or application of law or regulation by any legis-
lative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk
that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which
Change in 1940 Act Law becomes effective on or after the date of the
Offering Memorandum.
On the date fixed for any distribution of Debentures, upon
dissolution of the Trust: (i) the Securities will no longer be deemed
to be outstanding and (ii) certificates representing Securities will
be deemed to represent beneficial interests in Debentures having an
aggregate principal amount equal to the stated liquidation amount, and
bearing accrued and unpaid interest equal to accrued and unpaid
Distributions, on such Securities until such certificates are present-
ed to the Debenture Issuer or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all
Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) If the Debentures are distributed to the Holders of the Securities,
pursuant to the terms of the Indenture, the Debenture Issuer will use
its best efforts to have the Debentures listed on the New York Stock
Exchange or on such other exchange as the Preferred Securities were
listed immediately prior to the distribution of the Debentures.
(f) "Redemption or Distribution Procedures."
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for the Securities (a "Redemp-
tion/Distribution Notice") will be given by the Trust by mail
to each Holder of Securities to be redeemed or exchanged not
fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemp-
tion, will be the date fixed for redemption of the Debentures.
For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to
this paragraph 4(f)(i), a Redemption/Distribution Notice shall
be deemed to be given on the day such notice is first mailed by
first-class mail, postage pre-
I-8
<PAGE>
paid, to Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the
address of each such Holder appearing in the books and records
of the Trust. No defect in the Redemption/Distribution Notice
or in the mailing of either thereof with respect to any Holder
shall affect the validity of the redemption or exchange pro-
ceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities are
to be redeemed, the Securities to be redeemed shall be redeemed
Pro Rata from each Holder of Preferred Securities, it being
understood that, in respect of Preferred Securities registered
in the name of and held of record by the Depositary or its
nominee (or any successor Clearing Agency or its nominee), the
distribution of the proceeds of such redemption will be made to
each Clearing Agency Participant (or Person on whose behalf
such nominee holds such securities) in accordance with the
procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued
if the Debentures are redeemed as set out in this paragraph 4
(which notice will be irrevocable), then (A) with respect to
Preferred Securities held in book-entry form, by 12:00 noon,
New York City time, on the redemption date, provided that the
Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related redemption or
maturity of the Debentures, the Trust will deposit irrevocably
with the Depositary or its nominee (or successor Clearing
Agency or its nominee) funds sufficient to pay the applicable
Redemption Price with respect to such Preferred Securities and
will give the Depositary irrevocable instructions and authority
to pay the applicable Redemption Price to the Holders of such
Preferred Securities represented by the Global Certificates,
and (B) with respect to Preferred Securities issued in certifi-
cated form and Common Securities, provided that the Debenture
Issuer has paid the Property Trustee a sufficient amount of
cash in connection with the related redemption or maturity of
the Debentures, the Trust will irrevocably deposit with the
Paying Agent funds suffi-
I-9
<PAGE>
cient to pay the amount payable on redemption to the Holders of
such Securities upon surrender of their certificates. If a Re-
demption/Distribution Notice shall have been given and funds
deposited as required, then on the date of such deposit, all
rights of Holders of such Securities so called for redemption
will cease, except the right of the Holders of such Securities
to receive the redemption price, but without interest on such
redemption price. Neither the Regular Trustees nor the Trust
shall be required to register or cause to be registered the
transfer of any Securities that have been so called for redemp-
tion. If any date fixed for redemption of Securities is not a
Business Day, then payment of the amount payable on such date
will be made on the next succeeding day that is a Business Day
(without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next cal-
endar year, such payment will be made on the immediately pre-
ceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If pay-
ment of the redemption price in respect of any Securities is
improperly withheld or refused and not paid either by the Trust
or by the Sponsor as guarantor pursuant to the relevant Securi-
ties Guarantee, Distributions on such Securities will continue
to accrue at the then applicable rate, from the original
redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for re-
demption for purposes of calculating the amount payable upon
redemption (other than for purposes of calculating any
premium).
(iv) In the event of any redemption in part, the Trust shall not be
required to (i) issue, register the transfer of or exchange of
any Preferred Security during a period beginning at the opening
of business 15 days before any selection for redemption of
Preferred Securities and ending at the close of business on the
earliest date in which the relevant notice of redemption is
deemed to have been given to all holders of Preferred
Securities to be so redeemed and (ii) register the transfer of
or exchange of any Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed
portion of any Preferred Securities being redeemed in part.
I-10
<PAGE>
(v) Redemption/Distribution Notices shall be sent by the Regular
Trustees on behalf of the Trust to (A) in the case of
Preferred Securities held in book-entry form, the Depositary
and, in the case of Securities held in certificated form, the
Holders of such certificates and (B) in respect of the Common
Securities, the Holder thereof.
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Sponsor
or any of its subsidiaries may at any time and from time to
time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
5. Conversion Rights.
-----------------
The Holders of Securities shall have the right at any time prior to the
Business Day immediately preceding the date of repayment of such
Securities, whether at maturity or upon redemption (either at the option of
the Company or pursuant to a Tax Event), at their option, to cause the Con-
version Agent to convert Securities, on behalf of the converting Holders,
into shares of Common Stock of the Debenture Issuer in the manner described
herein on and subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Common Stock of the
Debenture Issuer pursuant to the Holder's direction to the Conversion
Agent to exchange such Securities for a portion of the Debentures
theretofore held by the Trust on the basis of one Security per $50
principal amount of Debentures, and immediately convert such amount of
Debentures into fully paid and nonassessable shares of Common Stock of
the Debenture Issuer at an initial conversion rate of 2.545 shares of
Common Stock of the Debenture Issuer per $50 principal amount of
Debentures (which is equivalent to a conversion price of $19.65 per
share of Common Stock of the Debenture Issuer, subject to certain ad-
justments set forth in the terms of the Debentures (as so adjusted,
"Conversion Price")).
(b) In order to convert Securities into Common Stock of the Debenture
Issuer the Holder shall submit to the Conversion Agent at the office
referred to above an irrevocable request to convert Securities on
behalf of such Holder (the "Conversion Request"), together, if the
Securities are in certificated form, with such certificates. The
Conversion Request shall (i) set forth the
I-11
<PAGE>
number of Securities to be converted and the name or names, if other
than the Holder, in which the shares of Common Stock of the Debenture
Issuer should be issued and (ii) direct the Conversion Agent (a) to
exchange such Securities for a portion of the Debentures held by the
Trust (at the rate of exchange specified in the preceding paragraph)
and (b) to immediately convert such Debentures on behalf of such
Holder, into Common Stock of the Debenture Issuer (at the conversion
rate specified in the preceding paragraph). The Conversion Agent
shall notify the Trust of the Holder's election to exchange Securities
for a portion of the Debentures held by the Trust and the Trust shall,
upon receipt of such notice, deliver to the Conversion Agent the
appropriate principal amount of Debentures for exchange in accordance
with this Section. The Conversion Agent shall thereupon notify the
Debenture Issuer of the Holder's election to convert such Debentures
into shares of Common Stock of the Debenture Issuer. Holders of Secu-
rities at the close of business on a Distribution record date will be
entitled to receive the Distribution payable on such securities on the
corresponding Distribution payment date notwithstanding the conversion
of such Securities following such record date but prior to such
distribution payment date. Except as provided above, neither the
Trust nor the Sponsor will make, or be required to make, any payment,
allowance or adjustment upon any conversion on account of any accumu-
lated and unpaid Distributions accrued on the Securities (including
any Additional Interest, Compounded Interest and Liquidation Damages
accrued thereon) surrendered for conversion, or on account of any
accumulated and unpaid dividends on the shares of Common Stock of the
Debenture Issuer issued upon such conversion. The Debenture Issuer
shall make no payment or allowance for distributions on the shares of
Common Stock of the Debenture Issuer issued upon such conversion,
except to the extent that such shares of Common Stock of the Debenture
Issuer are held of record on the record date for any such
distributions and except as provided in Section 1309 of the Indenture.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day on which a Notice of Conversion
relating to such Securities is received the Trust in accordance with
the foregoing provision (the "Conversion Date"). The Person or
Persons entitled to receive the Common Stock of the Debenture Issuer
issuable upon conversion of the Debentures shall be treated for all
purposes as the record holder or holders of such Common Stock of the
Debenture Issuer at such time. As promptly as practicable on or after
the Conversion Date, the Debenture Issuer shall
I-12
<PAGE>
issue and deliver at the office of the Conversion Agent a certificate
or certificates for the number of full shares of Common Stock of the
Debenture Issuer issuable upon such conversion, together with the cash
payment, if any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same, unless otherwise directed by the
Holder in the notice of conversion and the Conversion Agent shall
distribute such certificate or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints The Bank
of New York "Conversion Agent" for the purpose of effecting the
conversion of Securities in accordance with this Section. In effect-
ing the conversion and transactions described in this Section, the
Conversion Agent shall be acting as agent of the Holders of Securities
directing it to effect such conversion transactions. The Conversion
Agent is hereby authorized (i) to exchange Securities from time to
time for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this Section and (ii)
to convert all or a portion of the Debentures into Common Stock of the
Debenture Issuer and thereupon to deliver such shares of Common Stock
of the Debenture Issuer in accordance with the provisions of this Sec-
tion and to deliver to the Trust a new Debenture or Debentures for any
resulting unconverted principal amount.
(d) No fractional shares of Common Stock of the Debenture Issuer will be
issued as a result of conversion, but in lieu thereof, such fractional
interest will be in cash (based on the last reported sale price of the
Common Stock of the Debenture Issuer on the date such Securities are
surrendered for conversion) by the Debenture Issuer to the Trust,
which in turn will make such payment to the Holder or Holders of
Securities so converted.
(e) The Debenture Issuer shall at all times reserve and keep available out
of its authorized and unissued Common Stock of the Debenture Issuer,
solely for issuance upon the conversion of the Debentures, free from
any preemptive or other similar rights, such number of shares of
Common Stock of the Debenture Issuer as shall from time to time be
issuable upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Debenture Issuer shall be entitled
to deliver upon conversion of Debentures, shares of Common Stock of
the Debenture Issuer reacquired and held in the treasury of the
Debenture Issuer (in lieu
I-13
<PAGE>
of the issuance of authorized and unissued shares of Common Stock of
the Debenture Issuer), so long as any such treasury shares are free
and clear of all liens, charges, security interests or encumbrances.
Any shares of Common Stock of the Debenture Issuer issued upon conver-
sion of the Debentures shall be duly authorized, validly issued and
fully paid and nonassessable. The Trust shall deliver the shares of
Common Stock of the Debenture Issuer received upon conversion of the
Debentures to the converting Holder free and clear of all liens,
charges, security interests and encumbrances, except for United States
withholding taxes. Each of the Debenture Issuer and the Trust shall
prepare and shall use its best efforts to obtain and keep in force
such governmental or regulatory permits or other authorizations as may
be required by law, and shall comply with all applicable requirements
as to registration or qualification of the Common Stock of the
Debenture Issuer (and all requirements to list the Common Stock of the
Debenture Issuer issuable upon conversion of Debentures that are at
the time applicable), in order to enable the Debenture Issuer to
lawfully issue Common Stock of the Debenture Issuer to the Trust upon
conversion of the Debentures and the Trust to lawfully deliver the
Common Stock of the Debenture Issuer to each Holder upon conversion of
the Securities.
(f) The Debenture Issuer will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock of the
Debenture Issuer on conversion of Debentures and the delivery of the
shares of Common Stock of the Debenture Issuer by the Trust upon con-
version of the Securities. The Debenture Issuer shall not, however,
be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock
of the Debenture Issuer in a name other than that in which the
Securities so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has
paid to the Trust the amount of any such tax, or has established to
the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities or
set forth in this Annex I to the Declaration or to the Declaration
itself or otherwise require the Property Trustee or the Trust to pay
any amounts on account of such withholdings.
I-14
<PAGE>
6. Voting Rights - Preferred Securities.
------------------------------------
(a) Except as provided under paragraphs 6(b) and 7, in the Business Trust
Act and as otherwise required by law and the Declaration, the Holders
of the Preferred Securities will have no voting rights.
Subject to the requirements set forth in this paragraph, the Holders
of a majority in liquidation amount of the Preferred Securities,
voting separately as a class may direct the time, method, and place of
conducting any proceeding for any remedy available to the Property
Trustee, or direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to
direct the Property Trustee, as holder of the Debentures, to (i)
exercise the remedies available to it under the Indenture as a holder
of the Debentures, (ii) waive any past default and its consequences
that is waivable under the Indenture, (iii) exercise any right to re-
scind or annul a declaration that the principal of all the Debentures
shall be due and payable, or (iv) consent to any amendment, modifi-
cation, or termination of the Indenture or the Debentures where such
consent shall be required; provided, however, that where a consent or
-------- -------
action under the Indenture would require the consent or act of the
Holders of greater than a majority of the Holders in principal amount
of Debentures affected thereby (a "Super Majority"), the Property
Trustee may only give such consent or take such action at the written
direction of the Holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures out-
standing. The Property Trustee shall be under no obligation to revoke
any action previously authorized or approved by a vote of the Holders
of the Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to the
Property Trustee or the Debenture Trustee as set forth above, the
Property Trustee shall be under no obligation to take any action in
accordance with the directions of the Holders of the Preferred Securi-
ties under this paragraph unless the Property Trustee has obtained an
opinion of independent tax counsel to the effect that for the purposes
of United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action and each
Holder will be treated as owning an undivided beneficial interest in
the Debentures. If the Property Trustee fails to enforce its rights
under the Debentures after a Holder of Preferred Securities has made a
written request, such Holder of
I-15
<PAGE>
Preferred Securities may directly institute a legal proceeding against
the Debenture Issuer to enforce the Property Trustee's rights under
the Debentures without first instituting any legal proceeding against
the Property Trustee or any other Person. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is con-
tinuing and such event is attributable to the failure of the Debenture
Issuer to pay interest or principal on the Debentures on the date such
interest or principal is otherwise payable (or in the case of
redemption on the redemption date), then a holder of Preferred Secu-
rities may directly institute a proceeding for enforcement of payment
to such holder (a "Direct Action") of the principal of or interest on
the Debenture having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Debentures. Except as
provided in the preceding sentence, the holders of Preferred
Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures. In connection with such
Direct Action, the Debenture Issuer will be subrogated to the rights
of such holder of Preferred Securities under the Declaration to the
extent of any payment made by the Debenture Issuer to such holder of
Preferred Securities in such Director Action.
Any required approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities
convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which Holders of
Preferred Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be mailed
to each Holder of record of Preferred Securities. Each such notice
will include a statement setting forth the following information (i)
the date of such meeting or the date by which such action is to be
taken, (ii) a description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for
the delivery of proxies or consents.
No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the
terms of the Securities.
I-16
<PAGE>
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of
the Preferred Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such
Preferred Securities were not outstanding.
7. Voting Rights - Common Securities.
---------------------------------
(a) Except as provided under paragraphs 7(b), (c) and 8, in the Business
Trust Act and as otherwise required by law and the Declaration, the
Holders of the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace
any Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after the Event of
Default with respect to the Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the
second to last sentence of this paragraph, the Holders of a Majority
in liquidation amount of the Common Securities, voting separately as a
class, may direct the time, method, and place of conducting any pro-
ceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee
under the Declaration, including (i) directing the time, method, place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default
and its consequences that is waivable under Section 606 of the
Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable, or
(iv) consent to any amendment, modification, or termination of the
Indenture or the Debentures where such consent shall be required; pro-
----
vided that, where a consent or action under the Indenture would
-----
require the consent or act of the Holders of greater than a majority
in principal amount of Debentures affected thereby (a "Super
Majority"), the Property Trustee may only give such consent or take
such action at the written direction of the Holders of at least the
proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount
of the
I-17
<PAGE>
Debentures outstanding. Pursuant to this paragraph 7(c), the Property
Trustee shall not revoke any action previously authorized or approved
by a vote of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting any
remedy available to the Property Trustee or the Debenture Trustee as
set forth above, the Property Trustee shall be under no obligation to
take any action in accordance with the directions of the Holders of
the Common Securities under this paragraph unless the Property Trustee
has obtained an opinion of independent tax counsel to the effect that
for the purposes of United States federal income tax the Trust will
not be classified as other than a grantor trust on account of such
action and each Holder will be treated as owning an undivided
beneficial interest in the Debentures. If the Property Trustee fails
to enforce its rights under the Debentures after a Holder of Common
Securities has made a written request, such Holder of Common
Securities may institute a legal proceeding directly against the
Debenture Issuer or any other Person to enforce the Property Trustee's
rights under the Debentures, without first instituting any legal
proceeding against the Property Trustee or any other Person.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the
Trust or pursuant to written consent. The Regular Trustees will cause
a notice of any meeting at which Holders of Common Securities are
entitled to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to each Holder of
record of Common Securities. Each such notice will include a state-
ment setting forth (i) the date of such meeting or the date by which
such action is to be taken, (ii) a description of any resolution pro-
posed for adoption at such meeting on which such Holders are entitled
to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the
terms of the Securities.
I-18
<PAGE>
8. Registration Rights.
-------------------
The Holders of the Preferred Securities, the Debentures, the Preferred
Securities Guarantee and the shares of Common Stock of the Debenture Issuer
issuable upon conversion of the Debentures (collectively, the "Registrable
Securities") are entitled to the benefits of a Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Sponsor has agreed for the
benefit of the Holders of Registrable Securities that (i) it will, at its cost,
within 60 days after the date of issuance of the Registrable Securities, file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Registrable Securities, (ii) it will
use its best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission within 180 days after the date of issuance of the
Registrable Securities and (iii) the Sponsor will use its best efforts to
maintain such Shelf Registration Statement continuously effective under the
Securities Act until the third anniversary of the effectiveness of the Shelf
Registration Statement or such earlier date as is provided in the Registration
Rights Agreement (the "Effectiveness Period").
If (i) on or prior to 60 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the issuing
of the Registrable Securities, such Shelf Registration Statement is not declared
effective (each, a "Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Debentures and, accordingly, additional
distributions will accrue on the Preferred Securities, in each case from and
including the day following such Registration Default. Liquidated Damages will
be paid quarterly in arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the principal
amount or liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of one percent (0.50%) thereof
from and after the 91st day following such Registration Default. Upon (x) the
filing of the Shelf Registration Statement after the 60-day period described in
clause (i) above or (y) the effectiveness of the Shelf Registration Statement
after the 180-day period described in clause (ii) above, the interest rate borne
by the Debentures and the distribution rate borne by the Preferred Securities
from the date of such filing or effectiveness, as the case may be, will be
reduced to the original interest rate. In the event that the Shelf Registration
Statement ceases to be effective during the Effectiveness Period for more than
30 consecutive days or any 90 days, whether or not consecutive, during any 12-
month period, then the interest rate
I-19
<PAGE>
borne by the Debentures and the distribution rate borne by the Preferred
Securities will each increase by an additional one-half of one percent (0.50%)
per annum from such 31st or 91st day, as applicable, until such time as the
Shelf Registration Statement again becomes effective.
9. Amendments to Declaration and Indenture.
---------------------------------------
(a) In addition to any requirements under Section 12.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that
would adversely affect the powers, preferences or special rights of
the Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of the
Trust, other than as described in Section 8.1 of the Declaration, then
the Holders of Securities as a class, will be entitled to vote on such
amendment or proposal (but not on any other amendment or proposal) and
such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in liquidation amount
of the Securities affected thereby, voting together as a single class;
provided, however, if any amendment or proposal referred to in clause
-------- -------
(i) above would adversely affect only the Preferred Securities or only
the Common Securities, then only the affected class will be entitled
to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a Majority in
liquidation amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the holder of the
Debentures is required under the Indenture with respect to any amend-
ment, modification or termination on the Indenture or the Debentures,
the Property Trustee shall request the written direction of the
Holders of the Securities with respect to such amendment, modification
or termination and shall vote with respect to such amendment,
modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided,
--------
however, that where a consent under the Indenture would require the
-------
consent of the holders of greater than a majority in aggregate
principal amount of the Debentures (a "Super Majority"), the Property
Trustee may only give such consent at the written direction of the
Holders of at least the same proportion in aggregate stated liquida-
tion preference of the Securities; provided, further, that the
-------- -------
Property Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this
I-20
<PAGE>
paragraph 8(b) unless the Property Trustee has obtained an opinion of
tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a
grantor trust on account of such action.
10. Pro Rata.
--------
A reference in these terms of the Securities to any payment, dis-
tribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
11. Ranking.
-------
The Preferred Securities rank pari passu and payment thereon shall be
---- -----
made Pro Rata with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Debentures held
by the Property Trustee, the rights of Holders of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights to payment of the Holders of the
Preferred Securities.
12. Acceptance of Securities Guarantee and Indenture.
------------------------------------------------
Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
13. No Preemptive Rights.
--------------------
The Holders of the Securities shall have no preemptive rights to
subscribe for any additional securities.
I-21
<PAGE>
14. Miscellaneous.
-------------
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Preferred
Securities Guarantee or the Common Securities Guarantee (as may be appropriate),
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.
I-22
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include if Preferred Security is in global form and the Depository
Trust Company is the U. S. Depositary -- UNLESS THIS CERTIFICATE IS PRESENTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPO-
RATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[Include if Preferred Security is in global form -- TRANSFERS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO
BELOW.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ANNTAYLOR STORES
CORPORATION (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE
A1-1
<PAGE>
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Certificate Number Number of Preferred Securities
[CUSIP NO. [ ]]
[ISIN NO. [ ]]
Preferred Securities
of
AnnTaylor Finance Trust
8 1/2% Convertible Preferred Securities
(liquidation amount $50 per Convertible Preferred Security)
AnnTaylor Finance Trust, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
___________________________________________
(the "Holder") is the registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust designat-
ed the 8 1/2% Convertible Preferred Securities (liquidation amount $50 per
Convertible Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges, restric-
tions, preferences and other terms and provisions of the Preferred Securities
represented hereby are issued and shall in all respects be subject to the provi-
sions of the Amended and Restated Declaration of Trust of
A1-2
<PAGE>
the Trust dated as of April 25, 1996, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the
Preferred Securities as set forth in Annex I to the Declaration. Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Preferred Securities
Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Preferred Securities Guarantee and the Indenture to a
Holder without charge upon written request to the Trust at its principal place
of business.
Reference is hereby made to select provisions of the Preferred
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Decla-
ration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.
A1-3
<PAGE>
Unless the Property Trustee's Certificate of Authentication hereon has
been properly executed, these Preferred Securities shall not be entitled to any
benefit under the Declaration or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Trust has executed this certificate this day
of , 199 .
------------ --
AnnTaylor Finance Trust
By:
--------------------------
Name:
Title:
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the within-
mentioned Declaration.
Dated: ,
--------- ----
The Bank of New York
as Property Trustee
By: _______________________
Authorized Signatory
A1-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a
rate per annum of 8 1/2% (the "Coupon Rate") of the stated liquidation amount of
$50 per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term "Distribu-
tions" as used herein includes such cash distributions and any such interest
payable unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Property Trustee
and to the extent the Property Trustee has funds available therefor. The amount
of Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the Preferred
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on January 15, April 15, July 15 and
October 15 of each year, commencing on July 15, 1996, to Holders of record
fifteen (15) days prior to such payment dates, which payment dates shall corre-
spond to the interest payment dates on the Debentures. The Debenture Issuer has
the right under the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures for successive peri-
ods not exceeding 20 consecutive quarters (each an "Extension Period") during
which Extension Period no interest shall be due and payable on the Debentures;
provided, that no Extension Period shall extend beyond the date of maturity of
- --------
the Debentures. As a consequence of such extension, Distributions will also be
deferred. Despite such extension, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Coupon Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
extend such Extension Period; provided, that such Extension Period together with
--------
all such previous and further extensions thereof may not exceed 20 consecutive
quarters. Payments of accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of any Extension Period and
the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
A1-5
<PAGE>
The Preferred Securities shall be redeemable as provided in the
Declaration.
The Preferred Securities shall be convertible into shares of Common
Stock of AnnTaylor Stores Corporation, through (i) the exchange of Preferred
Securities for a portion of the Debentures and (ii) the immediate conversion of
such Debentures into Common Stock of AnnTaylor Stores Corporation, in the manner
and according to the terms set forth in the Declaration.
A1-6
<PAGE>
CONVERSION REQUEST
To: The Bank of New York
as Property Trustee of
AnnTaylor Finance Trust
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion below
designated, into Common Stock of ANNTAYLOR STORES CORPORATION (the "Ann Taylor
Common Stock") in accordance with the terms of the Amended and Restated Decla-
ration of Trust (the "Declaration"), dated as of April 25, 1996, by J. Patrick
Spainhour, Paul E. Francis and Walter J. Parks as Regular Trustees, The Bank of
New York (Delaware), as Delaware Trustee, The Bank of New York, as Property
Trustee, AnnTaylor Stores Corporation, as Sponsor, and by the Holders, from time
to time, of individual beneficial interests in the Trust to be issued pursuant
to the Declaration. Pursuant to the aforementioned exercise of the option to
convert these Preferred Securities, the undersigned hereby directs the Conver-
sion Agent (as that term is defined in the Declaration) to (i) exchange such
Preferred Securities for a portion of the Debentures (as that term is defined in
the Declaration) held by the Trust (at the rate of exchange specified in the
terms of the Preferred Securities set forth as Annex I to the Declaration) and
(ii) immediately convert such Debentures on behalf of the undersigned, into
AnnTaylor Common Stock (at the conversion rate specified in the terms of the
Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
A1-7
<PAGE>
Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Declaration and the Preferred Securities, agrees to be
bound by the terms of the Registration Rights Agreement relating to the Ann
Taylor Common Stock issuable upon conversion of the Preferred Securities.
Date: ____________, ____
in whole __ in part __
Number of Preferred Securities to be converted:
___________________
If a name or names other than the undersigned,
please indicate in the spaces below the name or
names in which the shares of Ann Taylor Common
Stock are to be issued, along with the address or
addresses of such person or persons
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature Guarantee:*
---------------------------------
- --------------------
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A1-8
<PAGE>
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee:**
- --------------------
** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A1-9
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
[FORM OF FACE OF SECURITY]
[THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE REGISTRATION
STATEMENT.]
[OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF ANNTAYLOR STORES CORPORATION.]
Certificate Number Number of Common Securities
Common Securities
of
AnnTaylor Finance Trust
8 1/2% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
International Paper Capital Trust, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
- --------------------------------------------------------------
(the "Holder") is the registered owner of common securities of the Trust repre-
senting undivided beneficial interests in the assets of the Trust designated the
8 1/2% Convertible Common Securities (liquidation amount $50 per Convertible
Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of April 25,
1996, as the same may be amended from time to time (the "Declaration"),
including the designation of
<PAGE>
the terms of the Common Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The Holder is entitled to the benefits of the Common
Securities Guarantee to the extent provided therein. The Sponsor will provide a
copy of the Declaration, the Common Securities Guarantee and the Indenture to a
Holder without charge upon written request to the Sponsor at its principal place
of business.
Reference is hereby made to select provisions of the Common Securities
set forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal
income tax purposes the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
A2-2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this day
of , 199 .
------------ --
AnnTaylor Finance Trust
By:
-------------------------
Name:
Title:
A2-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate
per annum of 8 1/2% (the "Coupon Rate") of the stated liquidation amount of $50
per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will
be computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on January 15, April 15, July 15 and
October 15 of each year, commencing on July 15, 1996, to Holders of record
fifteen (15) days prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures. The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for
successive periods not exceeding 20 consecutive quarters (each an "Extension
Period") during which Extension Period no interest shall be due and payable on
the Debentures; provided, that no Extension Period shall last beyond the date
--------
of maturity of the Debentures. As a consequence of such extension,
Distributions will also be deferred. Despite such extension, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during
any such Extension Period. Prior to the termination of any such Extension
Period, the Debenture Issuer may further extend such Extension Period; provided,
--------
that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
A2-4
<PAGE>
The Common Securities shall be redeemable as provided in the
Declaration.
The Common Securities shall be convertible into shares of Common Stock
of AnnTaylor Stores Corporation, through (i) the exchange of Common Securities
for a portion of the Debentures and (ii) the immediate conversion of such Deben-
tures into Common Stock of AnnTaylor Stores Corporation, in the manner and
according to the terms set forth in the Declaration.
A2-5
<PAGE>
CONVERSION REQUEST
To: The Bank of New York
as Property Trustee of
AnnTaylor Finance Trust
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of ANNTAYLOR STORES CORPORATION (the "Ann Taylor
Common Stock") in accordance with the terms of the Amended and Restated Decla-
ration of Trust (the "Declaration"), dated as of April 25, 1996, by J. Patrick
Spainhour, Paul E. Francis and Walter J. Parks, as Regular Trustees, The Bank of
New York (Delaware), as Delaware Trustee, The Bank of New York, as Property
Trustee, AnnTaylor Stores Corporation, as Sponsor, and by the Holders, from time
to time, of individual beneficial interests in the Trust to be issued pursuant
to the Declaration. Pursuant to the aforementioned exercise of the option to
convert these Common Securities, the undersigned hereby directs the Conversion
Agent (as that term is defined in the Declaration) to (i) exchange such Common
Securities for a portion of the Debentures (as that term is defined in the
Declaration) held by the Trust (at the rate of exchange specified in the terms
of the Common Securities set forth as Annex I to the Declaration) and (ii) imme-
diately convert such Debentures on behalf of the undersigned, into AnnTaylor
Common Stock (at the conversion rate specified in the terms of the Common
Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
A2-6
<PAGE>
Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Declaration and the Common Securities, agrees to be bound
by the terms of the Registration Rights Agreement relating to the Ann Taylor
Common Stock issuable upon conversion of the Common Securities.
Date: ____________, ____
in whole __ in part __
Number of Common Securities to be converted:
_____________________
If a name or names other than the undersigned,
please indicate in the spaces below the name or
names in which the shares of Ann Taylor Common
Stock are to be issued, along with the address or
addresses of such person or persons
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature Guarantee:*
---------------------------------
- --------------------
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A2-7
<PAGE>
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
___________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________
(Insert address and zip code of assignee)
and irrevocably appoints ________________________________________
________________________________________________________________________________
_______________________________ agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee**:
--------------------------------------------------------
- --------------------
** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A2-8
<PAGE>
EXHIBIT B
FORM OF DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH ANNTAYLOR STORES CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTI-
TUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE>
ANNTAYLOR STORES CORPORATION
8 1/2% Convertible Subordinated
Security Due 2016
No._________ $___________
[CUSIP No. _________]
ANNTAYLOR STORES CORPORATION, a corporation duly organized and exist-
ing under the laws of the State of
Delaware (herein called "the Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to ____________________, or registered assigns, the
principal sum [indicated on Schedule A hereof]*** [of ______ Dollars]****
($ ) on April 15, 2016.
Interest Payment Dates: January 15, April 15, July 15 and October 15, commenc-
ing July 15, 1996
Regular Record Dates: the close of business on the 15th day immediately
preceding each Interest Payment Date, commencing June
30, 1996
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
Dated: _________, ____
ANNTAYLOR STORES CORPORATION
- --------------------
*** Applicable to Global Securities only.
**** Applicable to certificated Securities only.
B-2
<PAGE>
By:________________________
Name:
Title:
[Seal]
Attest:
_______________
B-3
<PAGE>
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: , THE BANK OF NEW YORK,
--------- ----
as Trustee
By: _______________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
ANNTAYLOR STORES CORPORATION
8 1/2% Convertible Subordinated
Debenture Due 2016*****
(i) Interest. AnnTaylor Stores Corporation, a Delaware corporation
--------
(the "Company"), is the issuer of this 8 1/2% Convertible Subordinated Debenture
Due 2016 (the "Security") limited in aggregate principal amount to $90,206,200
(or $103,737,200 if the over-allotment option is exercised), issued under the
Indenture hereinafter referred to. The Company promises to pay interest on the
Securities in cash from April 25, 1996 or from the most recent interest payment
date to which interest has been paid or duly provided for, quarterly (subject to
deferral for up to 20 consecutive quarters as described in Section 3 hereof) in
arrears on January 15, April 15, July 15 and October 15 of each year (each such
date, an "Interest Payment Date"), commencing July 15, 1996, at the rate of
8 1/2% per annum (subject to increase as provided in Section 13 hereto) plus
----
Additional Interest, Compound Interest and Liquidated Damages if any, until the
principal hereof shall have become due and payable.
- --------------------
***** All terms used in this Security which are defined in the Indenture or
in the Declaration attached as Annex A thereto shall have the meanings
assigned to them in the Indenture or the Declaration, as the case may
be.
B-4
<PAGE>
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. The amount of interest payable
for any period shorter than a full quarterly period for which interest is
computed will be computed on the basis of the actual number of days elapsed. In
the event that any date on which interest is payable on the Securities is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(ii) Additional Interest. The Company shall pay to AnnTaylor Finance
-------------------
Trust (and its permitted successors or assigns under the Declaration) (the
"Trust") such amounts as shall be required so that the net amounts received and
retained by the Trust after paying any taxes, duties, assessments or other
governmental charges of whatever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority ("Additional
Interest") will be not less than the amounts the Trust would have received had
no such taxes, duties, assessment or governmental charges been imposed.
(iii) Option to Extend Interest Payment Period. The Company shall
----------------------------------------
have the right at any time during the term of the Securities to defer interest
payments from time to time by extending the interest payment period for
successive periods not exceeding 20 consecutive quarters for each such period;
provided, no Extension Period may extend beyond the maturity date of the
- --------
Securities. At the end of each Extension Period, the Company shall pay all
interest then accrued and unpaid (including Additional Interest and Liquidated
Damages) together with interest thereon compounded quarterly at the rate
specified for the Securities to the extent permitted by applicable law
("Compounded Interest"); provided, that during any Extension Period, the Company
--------
(i) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock, except for dividends or distributions in shares of its
capital stock of the same class on which such dividend or distribution is being
paid and conversions or exchanges of common stock of one class into common stock
of another class and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan of the Company or any of its subsidiaries, (ii) shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem, any debt securities
B-5
<PAGE>
issued by the Company that rank pari passu with or junior to the Securities (ex-
cept by conversion into or exchange for shares of its capital stock) and (iii)
shall not make any guarantee payments with respect to the foregoing. Prior to
the termination of any such Extension Period, the Company may further extend
such Extension Period; provided that such Extension Period together with all
--------
previous and further extensions thereof may not exceed 20 consecutive quarters
and may not extend beyond the maturity of the Securities. Upon the termination
of any Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. No interest
during an Extension Period, except at the end thereof, shall be due and payable.
If the Property Trustee is the sole holder of the Securities at the
time the Company selects an Extension Period, the Company shall give notice to
the Regular Trustees, the Property Trustee and the Trustee of its selection of
such Extension Period at least one Business Day prior to the earlier of (i) the
date the distributions on the Preferred Securities are payable or (ii) if the
Preferred Securities are listed on the New York Stock Exchange or other stock
exchange or quotation system, the date the Trust is required to give notice to
the New York Stock Exchange or other applicable self-regulatory organization or
to holders of the Preferred Securities on the record date or the date such
distributions are payable, but in any event not less than ten Business Days
prior to such record date.
If the Property Trustee is not the sole holder of the Securities at
the time the Company selects an Extension Period, the Company shall give the
Holders of these Securities and the Trustee notice of its selection of an
Extension Period at least ten Business Days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) if the Preferred Securities are listed
on the New York Stock Exchange or other stock exchange or quotation system, the
date the Company is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Securities on
the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.
B-6
<PAGE>
The quarter in which any notice is given pursuant to the second and
third paragraphs of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under the first paragraph of
this Section 3.
(iv) Method of Payment. The interest so payable, and punctually paid
-----------------
or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the 15th day immediately preceding each Interest Payment Date (the "Regular
Record Date"), commencing June 30, 1996. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any securi-
ties exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Company maintained for that purpose in New York,
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
- -------- -------
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
(v) Paying Agent and Security Registrar. The Trustee will act as
-----------------------------------
Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such
capacity.
(vi) Indenture. The Company issued the Securities under an indenture,
---------
dated as of April 15, 1996 (the "Indenture"), between the Company and The Bank
of New York, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities
B-7
<PAGE>
thereunder of the Trustee, the Company and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S.
Code Sec.Sec. 77aaa-77bbbb) ("TIA") as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms, certain of
which are summarized hereon, and holders are referred to the Indenture and the
TIA for a statement of such terms. The Securities are unsecured general
obligations of the Company limited to $90,206,200 in aggregate principal
amount (or $103,737,200 if the over-allotment option is exercised) and
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
(vii) Optional Redemption. The Securities are redeemable, in
-------------------
whole or in part, at the Company's option at any time and from time to time
after April 15, 1999, upon not less than 30 or more than 60 days' notice, at a
redemption price equal to 105.95% of the principal amount of the Securities to
be redeemed plus any accrued and unpaid interest, including Additional Interest,
Compounded Interest and Liquidated Damages if any, to the Redemption Date, if
redeemed on or before April 15, 2000, and at the following optional redemption
prices (expressed as a percentage of the principal amount of the Securities), if
redeemed during the 12-month period beginning April 15:
Percentage of
Principal
Year Amount
---- ----------
2000 . . . . . . . . . . . . . . . . . 105.10%
2001 . . . . . . . . . . . . . . . . . 104.25%
2002 . . . . . . . . . . . . . . . . . 103.40%
2003 . . . . . . . . . . . . . . . . . 102.55%
2004 . . . . . . . . . . . . . . . . . 101.70%
2005 . . . . . . . . . . . . . . . . . 100.85%
2006 and thereafter . . . . . . . . . 100.00%
plus, in each case, accrued and unpaid interest, including Additional Interest,
Compounded Interest and Liquidated Damages if any, to the Redemption Date. On
or after the Redemption Date, interest will cease to accrue on the Securities,
or portion thereof, called for redemption.
B-8
<PAGE>
(viii) Optional Redemption Upon Tax Event. The Securities are subject
----------------------------------
to redemption in whole (but not in part), at any time within 90 days, if a Tax
Event (as defined in the Declaration) shall occur and be continuing, at a re-
demption price equal to 100% of the principal amount thereof plus accrued but
unpaid interest, including Additional Interest, if any, to the Redemption Date.
Any redemption pursuant to this Section 8 will be made upon not less than 30 nor
more than 60 days' notice.
(ix) Notice of Redemption. Notice of redemption will be mailed at least 30
--------------------
days but not more than 60 days before the Redemption Date to each Holder of the
Securities to be redeemed at his address of record. The Securities in denom-
inations larger than $50 may be redeemed in part but only in integral multiples
of $50. In the event of a redemption of less than all of the Securities, the
Securities will be chosen for redemption by the Trustee in accordance with the
Indenture. On and after the Redemption Date, interest ceases to accrue on the
Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a Regular Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid to the person in
whose name this Security is registered at the close of business on such record
date.
(x) Redemption. The Securities will mature on April 15, 2016, and
----------
may be redeemed, in whole or in part, at any time after April 15, 1999 as set
forth above or at any time in certain circumstances upon the occurrence of a Tax
Event as set forth above. Upon the repayment of the Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Securities so repaid or redeemed at the appli-
cable redemption price together with accrued and unpaid distributions through
the date of redemption; provided, that holders of the Trust Securities shall be
--------
given not less than 30 nor more than 60 days notice of such redemption. Upon
the repayment of the Securities at maturity or upon any acceleration, earlier
redemption or otherwise, the proceeds from such repayment will be applied to
redeem the Preferred Securities, in whole, upon not less than 30 nor more than
60 days' notice. There are no sinking fund payments with respect to the Securi-
ties.
(xi) Subordination. The payment of the principal of, interest on or
-------------
any other amounts due on the Securities is subor-
B-9
<PAGE>
dinated in right of payment to all existing and future Senior Indebtedness (as
defined below) of the Company, as described in the Indenture. Each holder, by
accepting a Security, agrees to such subordination and authorizes and directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate the subordination so provided and appoints the Trustee as its
attorney-in-fact for such purpose.
"Senior Indebtedness" shall mean in respect of the Company (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, deben-
tures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Securities and (2) any indebtedness between or among such obligor or its affili-
ates, including all other debt securities and guarantees in respect of those
debt securities issued to any other trust, or a trustee of such trust,
partnership, or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in connec-
tion with the issuance by such Financing Entity of preferred securities or other
securities which rank pari passu with, or junior to, the Preferred Securities.
(xii) Conversion. The Holder of any Security has the right,
----------
exercisable at any time prior to the close of business (New York time) on the
Business Day immediately preceding the date of repayment of such Security
whether at maturity or upon redemption (either at the option of the Company or
pursuant to a Tax Event), to convert the principal amount thereof (or any por-
tion thereof that is an integral multiple of $50) into shares of Common Stock at
the initial conversion price 2.545 shares of Common Stock for each Security
(equivalent to a conversion price of $19.65 per share of Common Stock of the
Company), subject to
B-10
<PAGE>
adjustment under certain circumstances, except that if a Security is called for
redemption, the conversion right will terminate at the close of business on the
Redemption Date.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of busi-
ness on the next Interest Payment Date, then, notwithstanding such conversion,
the interest payable on such Interest Payment Date will be paid to the
registered Holder of such Security on such Regular Record Date. In such event,
such Security, when surrendered for conversion, need not be accompanied by
payment of an amount equal to the interest payable on such Interest Payment Date
on the portion so converted. The number of shares issuable upon conversion of a
Security is determined by dividing the principal amount of the Security convert-
ed by the conversion price in effect on the Conversion Date. No fractional
shares will be issued upon conversion but a cash adjustment will be made for any
fractional interest. The outstanding principal amount of any Security shall be
reduced by the portion of the principal amount thereof converted into shares of
Common Stock.
(xiii) Registration Rights.
-------------------
The holders of the Preferred Securities, the Securities, the Guarantee
and the shares of common stock of the Company issuable upon conversion of the
Securities (collectively, the "Registrable Securities") are entitled to the
----------------------
benefits of a Registration Rights Agreement, dated as of April 25, 1996, among
the Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company has agreed for the
benefit of the holders of Registrable Securities that (i) it will, at its cost,
within 60 days after the date of issuance of the Preferred Securities, file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Registrable Securities, (ii) it will
use its best efforts to cause, such Shelf Registration Statement to be declared
effective by the Commission within 180 days after the date of issuance of the
Registrable Securities and (iii) the Sponsor will use its best efforts to
maintain such Shelf Registration Statement continuously effective under the
Securities Act until the third anniversary of the
B-11
<PAGE>
effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement.
If (i) on or prior to 60 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the issuing
of the Registrable Securities, such Shelf Registration Statement is not declared
effective (each, a "Registrable Default"), additional interest ("Liquidated
-------------------
Damages") will accrue on the Securities and, accordingly, additional dis-
tributions will accrue on the Preferred Securities, in each case from and
including the day following such Registration Default. Liquidated Damages will
be paid quarterly in arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the principal
amount or liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of the one percent (0.50%)
thereof from and after the 91st day following such Registration Default. In the
event that the Shelf Registration Statement ceases to be effective during the
Effectiveness Period for more than 30 consecutive days or any 90 days, whether
or not consecutive, during any 12-month period, then the interest rate borne by
the Securities and the distribution rate borne by the Preferred Securities will
each increase by an additional one-half of one percent (0.50%) per annum from
such 31st or 91st day, as applicable, until such time as the Shelf Registration
Statement again becomes effective.
(xiv) Registration, Transfer, Exchange and Denominations. As
--------------------------------------------------
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $50 and integral multiples thereof. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge
B-12
<PAGE>
payable in connection therewith. Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary. In the event of redemption or conversion of this Security in
part only, a new Security or Securities for the unredeemed or unconverted
portion hereof will be issued in the name of the Holder hereof upon the cancel-
lation hereof.
(xv) Persons Deemed Owners. Except as provided in Section 4 hereof,
---------------------
the registered Holder of a Security may be treated as its owner for all purpos-
es.
(xvi) Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders
of Securities entitled to the money must look to the Company for payment unless
an abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
(xvii) Defaults and Remedies. The Securities shall have the Events
---------------------
of Default as set forth in Section 501 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to the Company and
the Trustee may declare all the Securities to be due and payable immediately.
The holders of a majority in principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference to, and
subject in its entirety by, the more complete description thereof contained in
the Indenture.
B-13
<PAGE>
(xviii) Amendments, Supplements and Waivers. The Indenture permits,
-----------------------------------
with certain exceptions as therein provided, the amendment thereof and the modi-
fication of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate princi-
pal amount of the Securities at the time Outstanding, on behalf of the Holders
of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
(xix) Trustee Dealings with the Company. The Trustee, in its
---------------------------------
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
(xx) No Recourse Against Others. A director, officer, employee or
--------------------------
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the con-
sideration for the issue of the Securities.
(xxi) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
-------------
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
(xxii) Authentication. The Securities shall not be valid until
--------------
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
The Company will furnish to any Holder of the Securities upon written
request and without charge a copy of the Indenture. Request may be made to:
B-14
<PAGE>
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention of:
B-15
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
-------------------------------------------------------
(Sign exactly as your name appears on the other side of
this Security)
Date:
-------------------------
Signature Guarantee:*
--------------------------------------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) exchanged for the undersigned's own account without transfer; or
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
B-16
<PAGE>
(2) transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) or (4) is
-------- -------
checked, the Trustee may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act; provided, further, that after the date that
-------- -------
a Shelf Registration Statement has been filed and so long as such Shelf
Registration Statement continues to be effective, the Trustee may only permit
transfers for which box (5) has been checked.
-------------------------
Signature
Signature Guarantee:*
]
- ------------------------- -------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
B-17
<PAGE>
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
----------------- --------------------------------------------------
NOTICE: To be executed by an executive officer]
B-18
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be
$__________. The following increases or decreases in the principal amount of
this Global Security have been made:
<TABLE><CAPTION>
Amount of increase Signature
in Principal Amount Principal Amount of authorized
of this Global Amount of decrease of this Global officer of
Security including in Principal Amount Security following Trustee or
upon exercise of of this Global such decrease Securities
Date Made over-allotment option Security or increase Custodian
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
B-19
<PAGE>
ELECTION TO CONVERT
To: AnnTaylor Stores Corporation
The undersigned owner of this Security hereby irrevocably exercises
the option to convert this Security, or the portion below designated, into
Common Stock of ANNTAYLOR STORES CORPORATION in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Indenture and the Security, agrees to be bound by the
terms of the Registration Agreement relating to the Common Stock issuable upon
conversion of the Securities.
Date: ____________, ____
in whole __
Portions of Security to be
in part __ converted ($50 or integral multiples thereof):
$_________________
-------------------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature Guarantee:*
---------------------------------
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
B-20
<PAGE>
EXHIBIT C
____________________________________________________________
____________________________________________________________
ANNTAYLOR FINANCE TRUST
1,750,000
8-1/2% Convertible Trust Originated Preferred SecuritiesSM
("Convertible TOPrSSM")
guaranteed by and convertible into
shares of common stock of
ANNTAYLOR STORES CORPORATION
PURCHASE AGREEMENT
------------------
Dated: April 18, 1996
____________________________________________________________
____________________________________________________________
C-2
<PAGE>
ANNTAYLOR FINANCE TRUST
1,750,000
8-1/2% Convertible Trust Originated Preferred SecuritiesSM
("Convertible TOPrSSM")
PURCHASE AGREEMENT
------------------
April 18, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ROBERTSON, STEPHENS & COMPANY LLC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
AnnTaylor Finance Trust (the "Issuer"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 et
--
seq.), proposes to issue and sell to Merrill Lynch & Co., Merrill Lynch, Pierce,
- ---
Fenner & Smith Incorporated ("Merrill Lynch"), CS First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation and Robertson, Stephens &
Company LLC (collectively, the "Initial Purchasers," which term shall also
include any initial purchaser substituted as hereinafter provided in Section
12), an aggregate of 1,750,000 8-1/2% Convertible Trust Originated Preferred
SecuritiesSM, liquidation
- --------------------
SM "Convertible Trust Originated Preferred SecuritiesSM" and "Convertible
TOPrSSM" are service marks of Merrill Lynch & Co., Inc.
<PAGE>
C-2
amount $50 per security (the "Firm Preferred Securities"), and, at the election
of the Initial Purchasers, solely to cover overallotments, if any, in connection
with the offering of the Firm Preferred Securities, up to 262,500 additional 8-
1/2% Convertible Trust Originated Preferred SecuritiesSM (the "Additional
Preferred Securities"). The Firm Preferred Securities and any Additional
Preferred Securities that the Initial Purchasers elect to purchase are collec-
tively referred to as the "Preferred Securities". The Preferred Securities will
be convertible at the option of the holder thereof into shares of Common Stock,
par value $.0068 per share (shares of which class of stock are hereinafter
referred to as "Common Stock"), of AnnTaylor Stores Corporation (the "Company").
The Preferred Securities are more fully described in the Offering Memorandum
referred to below.
The Preferred Securities will be guaranteed by the Company, to the
extent set forth in the Offering Memorandum (as defined below), with respect to
distributions and amounts payable upon liquidation or redemption (the "Preferred
Securities Guarantee") pursuant to the Preferred Securities Guarantee Agreement
(the "Preferred Securities Guarantee Agreement") to be dated as of the Closing
Time (as defined below) executed and delivered by the Company and The Bank of
New York (the "Guarantee Trustee"), a New York banking corporation ("The Bank of
New York") not in its individual capacity but solely as trustee, for the benefit
of the holders from time to time of the Preferred Securities. The entire
proceeds from the sale of the Preferred Securities will be combined with the
entire proceeds from the sale by the Issuer to the Company of its common
securities (the "Common Securities") guaranteed by the Company, to the extent
set forth in the Offering Memorandum, with respect to distributions and amounts
payable upon liquidation or redemption (the "Common Securities Guarantee" and,
together with the Preferred Securities Guarantee, the "Guarantees") pursuant to
the Common Securities Guarantee Agreement (the "Common Securities Guarantee
Agreement" and, together with the Preferred Securities Guarantee Agreement, the
"Guarantee Agreements"), to be dated as of the Closing Time, executed and
delivered by the Company for the benefit of the holders from time to time of the
Common Securities, and will be used by the Issuer to purchase the 8-1/2%
Convertible Subordinated Debentures due 2016 (the "Convertible Debentures")
issued by the Company. The Preferred Securities and the Common Securities will
be issued pursuant to the amended and restated declaration of trust of the
Issuer, to be dated as of the Closing Time (the "Declaration"), among the
Company, as Sponsor, the trustees named therein (the "Trustees") and the holders
from time to time of undivided beneficial interests in the assets of the Issuer.
The Convertible Debentures will be issued pursuant to an Indenture, to be dated
as of the Closing Time (the "Indenture"), between the Company and The Bank of
New York, as trustee (the "Indenture Trustee"). The Preferred Securities, the
Preferred Securi-
<PAGE>
C-3
ties Guarantee, the Convertible Debentures and the Conversion Shares (as defined
below) are collectively referred to herein as the "Securities". This Agreement,
the Indenture, the Declaration, the Guarantee Agreements, the Securities and the
Registration Rights Agreement (as defined below) are referred to collectively as
the "Operative Documents". Capitalized terms used herein without definition
have the respective meanings specified in the Offering Memorandum.
The Preferred Securities will be offered and sold to the Initial
Purchasers without registration under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance upon exemptions from the registration requirements
of the 1933 Act. In connection with the sale of the Preferred Securities, the
Issuer and the Company have prepared a preliminary offering memorandum dated
April 8, 1996 (the "Preliminary Offering Memorandum") and a final offering
memorandum dated the date hereof (such final offering memorandum, in the form
first furnished to the Initial Purchasers for use in connection with the
offering and sale of the Preferred Securities, or if such form is not so used,
in the form subsequently furnished for such use, the "Offering Memorandum"),
each setting forth certain information concerning the Issuer, the Company and
the Securities. The Issuer and the Company hereby confirm that they have
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offer and resale of the Preferred Securities
by the Initial Purchasers. Unless stated to the contrary, all references herein
to the Offering Memorandum are to the Offering Memorandum at the date hereof
(the "Execution Time") and are not meant to include any amendment or supplement
thereto subsequent to the Execution Time. If the Issuer and the Company prepare
a supplement dated the date hereof to the Preliminary Offering Memorandum
containing only pricing related information, then the term "Offering Memorandum"
for purposes of this Agreement shall refer collectively to the Preliminary
Offering Memorandum and such supplement.
The Issuer and the Company understand that the Initial Purchasers
propose to make an offering of the Preferred Securities only on the terms,
subject to the conditions and in the manner set forth in the Offering Memorandum
and Section 3, as soon as the Initial Purchasers deem advisable after this
Agreement has been executed and delivered.
The Initial Purchasers and other holders of Securities (including
subsequent transferees) will be entitled to the benefits of the registration
rights agreement, to be dated as of the Closing Time (the "Registration Rights
Agreement"), among the Issuer, the Company and the Initial Purchasers, in the
form attached as Exhibit A. Pursuant to the Registration Rights Agreement, the
Issuer and the Compa-
<PAGE>
C-4
ny will agree to file with the Securities and Exchange Commission (the "Commis-
sion") under the circumstances set forth therein a shelf registration statement
pursuant to Rule 415 under the 1933 Act relating to the resale of (i) the
Preferred Securities, (ii) the Convertible Debentures and (iii) the shares of
Common Stock of the Company initially issuable upon conversion of the
Convertible Debentures (the "Conversion Shares") by holders thereof, and to use
their best efforts to cause such shelf registration statement to be declared
effective.
All references in this Agreement to financial statements and schedules
and other information that is "contained", "included" or "stated" in the
Offering Memorandum (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information that is or is deemed to be incorporated by reference in the Offering
Memorandum; and all references in this Agreement to amendments or supplements to
the Offering Memorandum shall be deemed to mean and include the filing of any
document under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
that is or is deemed to be incorporated by reference in the Offering Memorandum.
Section 1. Representations and Warranties. (a) The Issuer and the
------------------------------
Company, jointly and severally, represent and warrant to and agree with the
Initial Purchasers that:
(i) As of their respective dates, none of the Offering Memorandum or
any amendment or supplement thereto, and as of the Closing Time, the
Offering Memorandum, as amended or supplemented to such time, contained or
will contain an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with
information furnished in writing or confirmed in writing to the Company by
or on behalf of any Initial Purchaser through you expressly for use in the
Offering Memorandum.
(ii) Each of the Preferred Securities, the Preferred Securities
Guarantee and the Convertible Debentures satisfy the eligibility
requirements of Rule 144A(d)(3) under the 1933 Act.
(iii) None of the Issuer, the Company, any of their affiliates (as
such term is defined in Rule 501(b) of Regulation D under the 1933 Act
("Regulation D")), or any person acting on behalf of the foregoing (other
than the
<PAGE>
C-5
Initial Purchasers, as to which no representation or warranty is made) has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of the Securities under the 1933 Act.
(iv) None of the Issuer, the Company or any of their affiliates (as
such term is defined in Rule 501(b) of Regulation D) or any person (other
than the Initial Purchasers, as to which no representation or warranty is
made) acting on the Issuer's or the Company's behalf has engaged, in
connection with the offering of the Securities, (A) in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the 1933 Act or (B) in any directed selling efforts within the meaning of
Rule 902 under the 1933 Act in the United States in connection with the
Securities being offered and sold pursuant to Regulation S under the 1933
Act, and each of them has complied with the offering restrictions
requirement of Regulation S under the 1933 Act.
(v) Assuming the accuracy of the representations and warranties and
compliance with the agreements of the Initial Purchasers in Section 3, it
is not necessary in connection with the offer, sale and delivery of the
Preferred Securities to the Initial Purchasers, or in connection with the
initial resale of the Preferred Securities by the Initial Purchasers in
accordance with this Agreement, to register the Securities under the 1933
Act or to qualify the Indenture, the Guarantees or the Declaration under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(vi) Each of Deloitte & Touche and Ernst & Young, who are reporting
upon the financial statements and schedules included in the Offering
Memorandum, are independent public accountants as required by the 1933 Act
and the applicable rules and regulations thereunder.
(vii) This Agreement has been duly authorized, executed and deliv-
ered by each of the Company and the Issuer.
(viii) The Company has all corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Declaration, the Indenture, the Guarantee and the Registration Rights
Agreement. The Issuer has all business trust power and authority to
execute, deliver, and perform its obligations under this Agreement.
<PAGE>
C-6
(ix) As of the Closing Time, the Registration Rights Agreement will
have been duly authorized, executed and delivered by each of the Issuer and
the Company and upon such execution by each of the Issuer and the Company
(assuming the due authorization, execution and delivery thereof by the
other parties thereto) the Registration Rights Agreement will constitute
the valid and binding obligations of each of the Issuer and the Company
enforceable against each of the Issuer and the Company in accordance with
the terms thereof, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and except
as any rights to indemnity and contribution may be limited by federal and
state securities laws and public policy considerations.
(x) The consolidated financial statements included or incorporated by
reference in the Offering Memorandum present fairly the consolidated
financial position of the Company and the Subsidiary (as hereinafter
defined) as of the dates indicated and the consolidated results of
operations and the consolidated cash flows of the Company and the
Subsidiary for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. The
combined financial statements included in the Offering Memorandum present
fairly the combined financial position of CAT U.S., Inc. and C.A.T.
(Far East), Ltd. ("CAT") as of the dates indicated and the combined results
of operations and the consolidated cash flows of CAT for the periods
specified. The combined financial statements included in Annex III to the
Offering Memorandum present fairly the combined financial statements of CAT
and the Ann Taylor Woven Division of Cygne Designs, Inc. The selected
financial data included or incorporated by reference in the Offering
Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial state-
ments included or incorporated by reference in the Offering Memorandum.
(xi) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Offering
Memorandum; and the Company is duly qualified to transact business as a
foreign corporation and is
<PAGE>
C-7
in good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and the Subsidiary, considered as one enterprise. The Company
is not engaged in any business other than acting as a holding company for
the capital stock of AnnTaylor, Inc., a Delaware corporation (the
"Subsidiary").
(xii) The Company's only subsidiaries are the Subsidiary, the
Issuer, AnnTaylor Travel, Inc., a Delaware corporation and a wholly owned
subsidiary of the Subsidiary, AnnTaylor Distribution Services, Inc., a
Delaware corporation and a wholly owned subsidiary of the Subsidiary, and
AnnTaylor Funding, Inc., a Delaware corporation and a wholly owned
subsidiary of the Subsidiary; the Company also has a minority ownership
interest in each of CAT. The Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware with corporate power under such laws to own, lease and operate its
properties and conduct its business; and the Subsidiary is duly qualified
to transact business as a foreign corporation and is in good standing in
each other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good standing
would not have a material adverse effect on the Company and the Subsidiary,
considered as one enterprise. All of the outstanding shares of capital
stock of the Subsidiary have been duly authorized and validly issued and
are fully paid and nonassessable and are owned, directly or indirectly, by
the Company free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind, except as provided in or pursuant
to the Amended and Restated Bank Credit Agreement, dated as of September
29, 1995 (the "Bank Credit Agreement"), as amended, between the Subsidiary
and the lenders named therein.
(xiii) The Company had at the date indicated a duly authorized,
issued and outstanding capitalization as set forth in the Offering
Memorandum in the column entitled "Actual" under the caption
"Capitalization"; the Preferred Securities, the Common Securities, the
Conversion Shares, the Convertible Debentures, the Declaration, the
Registration Rights Agreement, the Preferred Securities Guarantee Agreement
and the Indenture conform in all material respects to the descriptions
thereof in the Offering Memorandum under the captions "Description of the
Preferred Securities", "Description of the Guarantee", "Description of the
Convertible Debentures", "Effect of Obligations
<PAGE>
C-8
Under the Convertible Debentures and the Guarantee" and "Description of
Capital Stock"; and the statements made in the Offering Memorandum under
the captions "Offering Memorandum Summary - Recent Developments - CAT/Cygne
Transaction", and "CAT/Cygne Transaction", insofar as such statements
purport to summarize certain provisions of the CAT/Cygne Transaction,
provide a fair summary of such provisions.
(xiv) The Issuer has been duly created and is validly existing in
good standing as a business trust under the Delaware Act with the power and
authority to own property and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under
this Agreement, the Preferred Securities, the Common Securities and the
Declaration; the Issuer is duly qualified to transact business as a foreign
corporation in good standing in each jurisdiction in which such
qualification is necessary, except to the extent that the failure to so
qualify would not have a material adverse effect on the Issuer; and the
Issuer is not a party to or otherwise bound by any agreement other than
those described in the Offering Memorandum.
(xv) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Issuer to the Company
against payment therefor as described in the Offering Memorandum, will be
validly issued and (subject to the terms of the Declaration) fully paid and
nonassessable undivided beneficial interests in the assets of the Issuer
and will conform in all material respects to the description thereof in the
Offering Memorandum; the issuance of the Common Securities is not subject
to preemptive or other similar rights; no holder thereof will be subject to
personal liability by reason of being such a holder; and at the Closing
Time, all of the issued and outstanding Common Securities of the Issuer
will be directly owned by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
(xvi) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable; no holder thereof is or will be subject to personal
liability by reason of being such a holder; and none of the outstanding
shares of capital stock of the Company was issued in violation of the
preemptive rights of any stockholder of the Company.
<PAGE>
C-9
(xvii) The Declaration has been duly authorized by the Company and,
at the Closing Time, will have been duly executed and delivered by the
Company and the Regular Trustees (as defined in the Declaration), and
assuming the due authorization, execution and delivery of the Declaration
by the Delaware Trustee and the Property Trustee (as defined in the
Declaration), the Declaration will, at the Closing Time, be a valid and
binding obligation of the Company and the Regular Trustees, enforceable
against the Company and the Regular Trustees in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xviii) Each of the Common Securities Guarantee Agreement and the
Preferred Securities Guarantee Agreement has been duly authorized by the
Company and, when validly executed and delivered by the Company (and
assuming due authorization, execution and delivery of the Preferred
Securities Guarantee Agreement by The Bank of New York, not in its
individual capacity but solely as trustee), will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xix) The Preferred Securities have been duly authorized by the
Declaration and, when authenticated in the manner provided for in the
Declaration and issued and delivered pursuant to this Agreement against
payment of the consideration set forth herein, will be validly issued and
(subject to the terms of the Declaration) fully paid and nonassessable
undivided beneficial interests in the assets of the Issuer; the issuance of
the Preferred Securities is not subject to preemptive or other similar
rights; and holders of Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit incorporated under the General Corporation Law of
the State of Delaware.
<PAGE>
C-10
(xx) The Indenture has been duly authorized by the Company, will be
substantially in the form heretofore delivered to you and, when validly
executed and delivered by the Company and the Indenture Trustee, will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(xxi) The Convertible Debentures have been duly authorized by the
Company. When executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided in this
Agreement, the Convertible Debentures will constitute 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 as
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xxii) Neither the Issuer nor the Company is, or after giving
effect to the consummation of the transactions contemplated herein, will
be, and neither the Company nor the Issuer is directly or indirectly
controlled by, or acting on behalf of any person which is, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(xxiii) The Conversion Shares have been duly authorized and validly
reserved for issuance upon conversion of the Convertible Debentures by all
necessary corporate action of the Company and, when duly issued by the
Company upon such conversion, will be validly issued, fully paid and nonas-
sessable; no holder thereof will be subject to personal liability for
obligations of the Company solely by reason of being such a holder; and the
issuance of the Conversion Shares will not be subject to preemptive or
similar rights.
(xxiv) Since the respective dates as of which information is given
in the Offering Memorandum, except as otherwise stated therein or
contemplated thereby, there has not been (A) any material adverse change in
the condition (financial or otherwise), earnings, business affairs or
business prospects of the
<PAGE>
C-11
Company and the Subsidiary, considered as one enterprise, whether or not
arising in the ordinary course of business, or (B) any dividend or
distribution of any kind declared, paid or made by the Company on its
capital stock.
(xxv) None of the Company, the Subsidiary or the Issuer is in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company, the Subsidiary and the Issuer considered
as one enterprise. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the Issuer, the issuance,
sale and delivery of the Preferred Securities by the Issuer, the issuance,
sale and delivery of the Convertible Debentures by the Company, the
execution, delivery and performance by the Company of this Agreement, the
Declaration, the Indenture, the Guarantee Agreements and the Registration
Rights Agreement, the consummation by the Company and the Issuer of the
transactions contemplated hereby, thereby and in the Offering Memorandum
and compliance by the Company and the Issuer with the terms of the
foregoing have been duly authorized by all necessary action on the part of
the Company and the Issuer and do not and will not result in any violation
of the charter or by-laws of the Company or the Subsidiary or violation of
the Declaration and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default under,
or give rise to any right to accelerate the maturity or require the
prepayment of any indebtedness under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company, the Subsidiary or the Issuer under (A) any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company, the Subsidiary or the Issuer is a party or
by which either of them may be bound or to which any of their properties
may be subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company, the Subsidiary or the Issuer, considered
as one enterprise) or (B) any existing applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality
or court, domestic or foreign, having jurisdiction over the Company, the
Subsidiary or the Issuer or any of their respective properties. The Issuer
is not in violation of the Declaration.
<PAGE>
C-12
(xxvi) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign is
necessary in connection with the offering, issuance or sale of the
Preferred Securities by the Issuer and the Guarantees, the Convertible
Debentures and the Conversion Shares by the Company, or is required for the
valid authorization, execution, delivery and performance by the Company and
the Issuer of the Operative Documents to which the Company and the Issuer
are party or the consummation by the Company and the Issuer of the
transactions contemplated therein, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the
offer and sale of the Preferred Securities or by the federal and state
securities laws in connection with the registration obligations under the
Registration Rights Agreement.
(xxvii) Except as disclosed in the Offering Memorandum, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against the Company or the Subsidiary
that is required to be disclosed in the Offering Memorandum or that is
reasonably expected by the Company to result in any material adverse change
in the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company, the Subsidiary or the Issuer, considered
as one enterprise, or that is reasonably expected by the Company to
materially and adversely affect the consummation of the transactions
contemplated by this Agreement. The aggregate of all pending legal or
governmental proceedings to which the Company, the Subsidiary or the Issuer
is a party that are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business of the Company, the
Subsidiary or the Issuer, as the case may be, is not reasonably expected by
the Company to have a material adverse effect on the condition (financial
or otherwise), earnings, business affairs or business prospects of the
Company, the Subsidiary and the Issuer, considered as one enterprise.
(xxviii) The Company and the Subsidiary each owns, possesses or has
obtained all material governmental licenses, permits, certificates,
consents, orders, approvals and other authorizations necessary to own or
lease, as the case may be, and to operate its properties and to carry on
its business as presently conducted, except where the failure to possess
such licenses, permits, certificates, consents, orders, approvals or other
authorizations would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and the Subsidiary,
<PAGE>
C-13
considered as one enterprise, and neither the Company nor the Subsidiary
has received any notice of proceedings relating to revocation or
modification of any such licenses, permits, certificates, consents, orders,
approvals or authorizations, which, in the reasonable judgment of the
Company, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
and the Subsidiary, considered as one enterprise.
(xxix) The Company and the Subsidiary each owns or possesses, or
can acquire on reasonable terms, adequate patents, patent licenses,
trademarks, service marks and trade names necessary to carry on its
business as presently conducted, and neither the Company nor the Subsidiary
has received any notice of infringement of or conflict with asserted rights
of others with respect to any patents, patent licenses, trademarks, service
marks or trade names that in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could materially adversely affect
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and the Subsidiary, considered as one
enterprise.
(xxx) The Company has not taken and will not take, directly or
indirectly, any action designed to, or that the Company reasonably believes
would cause or result in, stabilization or manipulation of the price of the
Preferred Securities or the Common Stock.
(xxxi) The Company has obtained the written agreement of Sally
Frame Kasaks, J. Patrick Spainhour, Paul E. Francis and the ML Entities
that, for a period of 120 days from the date hereof, such persons will not,
without the prior written consent of Merrill Lynch, which consent will not
be unreasonably withheld, directly or indirectly, sell, offer to sell,
grant any option for the sale of, or otherwise dispose of any shares of
Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock ("convertible securities"); provided, however, that during
-------- -------
such 120-day period, (i) such shares of Common Stock or convertible
securities may be transferred by will or the laws of descent and
distribution and (ii) such persons may make gifts of shares of Common Stock
or convertible securities or transfer such shares of Common Stock or
convertible securities to family trusts, so long as the donee agrees to be
bound by the foregoing restriction in the same manner as it applies to such
persons.
<PAGE>
C-14
(xxxii) Except as disclosed in the Offering Memorandum and except as
would not individually or in the aggregate have a material adverse effect
on the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and the Subsidiary, considered as one
enterprise, (A) the Company and the Subsidiary are in compliance with all
applicable Environmental Laws, (B) the Company and the Subsidiary have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (C)
there are no pending or threatened Environmental Claims against the Company
or the Subsidiary, and (D) there are no circumstances with respect to any
property or operations of the Company or the Subsidiary that the Company
reasonably believes would form the basis of an Environmental Claim against
the Company or the Subsidiary.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any United States
federal, state, local or municipal statute, law, rule, regulation,
ordinance, code, policy or rule of common law and any judicial or
administrative interpretation thereof including any judicial or
administrative order, consent decree or judgment, relating to the
environment, health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority. "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations or proceedings
relating in any way to any Environmental Law.
(xxxiii) The Preferred Securities have been designated PORTAL
eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD").
(b) Any certificate signed by any officer of the Company or the
Subsidiary or by any trustee of the Issuer and delivered to you or to counsel
for the Initial Purchasers shall be deemed a representation and warranty by the
Company and the Issuer to each Initial Purchaser as to the matters covered
thereby.
Section 2. Sale and Delivery to the Initial Purchasers; Closing. (a)
----------------------------------------------------
On the basis of the representations and warranties herein contained, and subject
to the terms and conditions herein set forth, the Issuer agrees to sell to each
Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly,
to purchase from the Issuer, at the purchase price of $50 per Firm Preferred
Security, (a) an aggregate of
<PAGE>
C-15
1,750,000 Firm Preferred Securities, and (b) in the event and to the extent that
the Initial Purchasers shall elect to purchase Additional Preferred Securities
pursuant to the paragraph immediately following, an aggregate of up to 262,500
Additional Preferred Securities.
(b) The Issuer hereby grants to the Initial Purchasers the right to
purchase at their election up to 262,500 Additional Preferred Securities, at the
purchase price per security set forth in the immediately preceding paragraph,
for the sole purpose of covering overallotments in the sale of the Firm Pre-
ferred Securities. Any such election to purchase Additional Preferred
Securities shall be exercised by written notice from the Initial Purchasers to
the Company and the Issuer, within 30 days after the date of this Agreement,
setting forth the aggregate number of Additional Preferred Securities to be
purchased and the date on which such Additional Preferred Securities are to be
delivered. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Initial Purchasers, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time. If the option is exercised as to all or any portion of the
Additional Preferred Securities, each of the Initial Purchasers, acting
severally and not jointly, will purchase that proportion of the total number of
Additional Preferred Securities then being purchased which the number of Firm
Preferred Securities set forth in Schedule A opposite the name of such Initial
Purchaser bears to the total number of Firm Preferred Securities, subject in
each case to such adjustments as Merrill Lynch in its discretion shall make to
eliminate any sales or purchases of fractional securities.
(c) As compensation to the Initial Purchasers for their commitments
hereunder and in view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Convertible Debentures, the Company
hereby agrees to pay at the Closing Time and at any Date of Delivery to the Rep-
resentatives, for the accounts of the Initial Purchasers, a commission of $1.50
per Preferred Security purchased by the Initial Purchasers.
(d) Payment of the purchase price for, and delivery of certificates
for, the Firm Preferred Securities shall be made at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, at 10:00 A.M., New
York City time, on April 25, 1996 or such later date and time not more than two
full business days thereafter as you, the Company and the Issuer shall determine
(such date and time of payment and delivery being herein called the "Closing
Time"). In addition, in the event that any or all of the Additional Preferred
Securities are purchased by the Initial Purchasers, payment of the purchase
price for, and delivery of certificates for, such Additional Preferred
Securities shall be made at the offices of
<PAGE>
C-16
Shearman & Sterling set forth above, or at such other place as the Company, the
Issuer and you shall determine, on the Date of Delivery as specified in the
notice from you to the Company and the Issuer. Payment shall be made to the
Company by wire transfer of immediately available funds to a bank account
designated by the Company against delivery to the Representatives for the
respective accounts of the Initial Purchasers of the Firm Preferred Securities
and the Additional Preferred Securities, if any, to be purchased by them.
(e) Certificates for the Firm Preferred Securities and the Additional
Preferred Securities to be purchased by the Initial Purchasers shall be in such
denominations and registered in such names as you may request in writing at
least two full business days before the Closing Time or the Date of Delivery, as
the case may be. The certificates for the Firm Preferred Securities and the
Additional Preferred Securities will be made available in New York City for
examination and packaging by you not later than 10:00 A.M. on the business day
immediately prior to the Closing Time or the Date of Delivery, as the case may
be.
(f) It is understood that each Initial Purchaser has authorized you,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Preferred Securities that it has agreed to purchase.
You may (but shall not be obligated to) make payment of the purchase price for
the Firm Preferred Securities and the Additional Preferred Securities, if any,
to be purchased by any Initial Purchaser whose funds shall not have been
received by the Closing Time or the Date of Delivery, as the case may be, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
Section 3. Resale of the Securities. Each Initial Purchaser
------------------------
severally and not jointly represents and warrants to, and agrees with, the
Issuer and the Company that:
(a) it is a Qualified Institutional Buyer and an "accredited
investor" within the meaning of Rule 501(a) under the 1933 Act;
(b) it has not offered or sold, and will not offer or sell, any Pre-
ferred Securities except (i) to persons whom it reasonably believes to be
Qualified Institutional Buyers, (ii) to a limited number of other
institutional accredited investors whom it believes to be "accredited
investors" (as defined in Rule 501(a) (1), (2), (3) or (7) of Regulation D)
that, prior to their purchase of the Preferred Securities, deliver to it a
letter substantially in the form of Exhibit A to the Offering Memorandum or
(iii) non-U.S. persons outside the
<PAGE>
C-17
United States to whom it reasonably believes offers and sales of the
Preferred Securities may be made in reliance upon Regulation S under the
1933 Act;
(c) neither it nor any of its U.S. affiliates or any person acting on
its or their behalf has made or will make offers or sales of the Preferred
Securities in the United States by means of any form of general
solicitation or general advertising (within the meaning of Regulation D) or
in any manner involving a public offering (within the meaning of Section
4(2) under the 1933 Act) in the United States;
(d) in connection with the transactions described in Section
3(b)(iii), it will sell Preferred Securities in such transactions only in
accordance with Regulation S under the 1933 Act and has not offered or
sold, and will not offer or sell, the Preferred Securities to, or for the
account or benefit of, U.S. persons (i) as part of its distribution at any
time or (ii) otherwise until one year after the Closing Time, and it will
send to each distributor, dealer or other person receiving a selling
concession, fee or remuneration to which it sells the Preferred Securities
during the restricted period a confirmation or other notice setting forth
the restrictions on offers and sales of the Preferred Securities within the
United States or to, or for the account or benefit of, U.S. persons. Terms
used in this paragraph have the meanings given to them by Regulation S
under the 1933 Act;
(e) it (i) has not offered or sold and will not offer or sell any
Preferred Securities to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which do not constitute an offer
to the public in the United Kingdom for purposes of the Public Offers of
Securities Regulations 1995, (ii) has complied and will comply with all
applicable provisions of the Financial Services Act 1986 of Great Britain
with respect to anything done by it in relation to the Preferred Securities
in, from or otherwise involving the United Kingdom, and (iii) has only
issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Preferred Securities to a
person who is of a kind described in Article 8 of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995 of
Great Britain or is a person whom the document may otherwise lawfully be
issued or passed on; and
<PAGE>
C-18
(f) it and each of its affiliates will not offer or sell any
Preferred Securities in the United States by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the 1933 Act).
Section 4. Certain Covenants of the Issuer and the Company. The
-----------------------------------------------
Issuer and the Company covenant with each Initial Purchaser as follows:
(a) The Issuer and the Company will furnish to the Initial Purchasers
and counsel for the Initial Purchasers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum and any
amendments or supplements thereto as the Initial Purchasers and their
counsel may reasonably request.
(b) The Company and the Issuer will give the Initial Purchasers
notice of their intention to prepare any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum, will furnish
the Initial Purchasers and counsel to the Initial Purchasers with copies of
any such amendment or supplement and will not distribute any such amendment
or supplement to which the Initial Purchasers or counsel for the Initial
Purchasers shall reasonably object.
(c) If at any time prior to completion of the distribution of the
Securities by the Initial Purchasers to purchasers who are not their
affiliates (as determined by you) any event shall occur or condition exist
as a result of which it is necessary, in the opinion of counsel for the
Initial Purchasers or counsel for the Company, to amend the Offering
Memorandum or amend or supplement any Offering Memorandum in order that
each Offering Memorandum, as then amended or supplemented, will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading or if, in the reasonable opinion of the Initial Purchasers or
counsel to the Initial Purchasers, such amendment or supplement is
necessary to comply with applicable law, the Issuer and the Company will,
subject to paragraph (b) of this Section 4, promptly prepare such amendment
or supplement as may be necessary to correct such untrue statement or
omission or to effect such compliance (in form and substance reasonably
agreed upon by counsel to the Initial Purchasers), so that as so amended or
supplemented, the statements in the Offering Memorandum will not include an
untrue statement of a material fact or omit to state a material
<PAGE>
C-19
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading or so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case may be, and
furnish to the Initial Purchasers such number of copies of such amendment
or supplement as the Initial Purchasers may reasonably request. The Issuer
and the Company agree to notify the Initial Purchasers in writing to
suspend use of the Offering Memorandum as promptly as practicable after the
occurrence of an event specified in this paragraph (c), and the Initial
Purchasers hereby agree upon receipt of such notice from the Issuer and the
Company to suspend use of the Offering Memorandum until the Issuer and the
Company have amended or supplemented the Offering Memorandum to correct
such misstatement or omission or to effect such compliance.
(d) Notwithstanding any provision of paragraph (b) or (c) to the
contrary, however, the Issuer's and the Company's obligations under para-
graphs (b) and (c) and the Initial Purchasers' obligations under
paragraph (c) shall terminate on the earlier to occur of (i) the effective
date of a shelf registration statement with respect to the Securities filed
pursuant to the Registration Rights Agreement and (ii) the date upon which
the Initial Purchasers and their affiliates cease to hold Securities
acquired as part of their initial distribution, but in any event not later
than nine months from the Closing Time.
(e) Neither the Company, the Issuer nor any of their respective
affiliates (as defined in Rule 501(b) under the 1933 Act), nor any person
acting on behalf of the foregoing (other than the Initial Purchasers), will
engage in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States, or engage in any directed selling efforts
(as defined in Rule 902 under the 1933 Act) with respect to the Securities
prior to the effectiveness of a registration statement with respect to the
Securities, and each of them will comply with the offering restrictions
requirement of Regulation S. Terms used in this clause (e) have the
meanings given to them by Regulation S.
(f) Neither the Company nor any of its affiliates (including the
Issuer) (as defined in Rule 501(b) under the 1933 Act) will, directly or
indirectly, make offers or sales of any security, or solicit offers to buy
any
<PAGE>
C-20
security, under circumstances that would require the registration of the
Securities under the 1933 Act.
(g) So long as any of the Securities are "restricted securities"
within the meaning of Rule 144(a)(3) under the 1933 Act, the Company will,
during any period in which it is not subject to and in compliance with,
Section 13 or 15(d) of the 1934 Act, provide to each holder of such
restricted securities and to each prospective purchaser (as designated by
such holder) of such restricted securities, upon the request of such holder
or prospective purchaser, any information required to be provided by Rule
144A(d)(4) under the 1933 Act. This covenant is intended to be for the
benefit of the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted securities.
(h) Each Preferred Security (and each Convertible Subordinated
Debenture distributed to holders of Preferred Securities pursuant to the
terms of the Declaration) will bear the following legend until such legend
shall no longer be necessary or advisable because the Preferred Securities
(or the Convertible Debentures) are no longer subject to the restrictions
on transfer described herein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH ANNTAYLOR STORES CORPORATION (THE "COMPANY") OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY
PREDECESSOR OF THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE
<PAGE>
C-21
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TER-
MINATION DATE.
(i) Each Conversion Share, if any, will bear the following legend
until such legend shall no longer be necessary or advisable because the
Conversion Shares are no longer subject to the restrictions on transfer de-
scribed herein:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE
<PAGE>
C-22
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THE CONVERTIBLE DEBENTURES
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED
AND THE LAST DATE ON WHICH ANNTAYLOR STORES CORPORATION (THE "COMPANY") OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDE-
CESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY
(A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE COMPANY COMMON STOCK IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITIES FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVES-
TOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSU-
ANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COM-
<PAGE>
C-23
PLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
(j) The Company will, or will cause the Issuer to, arrange for the
registration and qualification of the Preferred Securities for offering and
sale under the applicable securities or "blue sky" laws of such states and
other jurisdictions as the Initial Purchasers may reasonably designate in
connection with the resale of the Preferred Securities as contemplated by
this Agreement and the Offering Memorandum and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Preferred Securities; provided that in no event shall
--------
the Issuer or the Company be obligated to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would
not otherwise be required to so qualify but for this Section 4(k), (ii)
file any general consent to service of process in any jurisdiction where it
is not at the Closing Time then so subject, (iii) subject itself to
taxation in any such jurisdiction if it is not so subject or (iv) register
the Securities under the 1933 Act except in accordance with the
Registration Rights Agreement. The Company shall, or shall cause the
Issuer to, promptly advise the Initial Purchasers of the receipt by the
Company or the Issuer, as the case may be, of any notification with respect
to the suspension of the qualification or exemption from qualification of
the Preferred Securities for offering or sale in any jurisdiction or the
institution of any proceeding for such purpose.
(k) The Issuer will use the proceeds received from the sale of the
Preferred Securities and the Company will use the proceeds received from
the issue and sale of the Convertible Debentures in the manner specified in
the Offering Memorandum under the caption "Use of Proceeds".
(l) The Issuer and the Company shall not, directly or indirectly, for
a period of 120 days after the date hereof, except with the prior written
consent of Merrill Lynch, offer, sell or enter into any agreement to sell,
or otherwise dispose of (a) any trust certificates or other securities of
the Issuer (other than the Preferred Securities and the Common Securities
of the Issuer), (b) any preferred stock or any other security of the
Company that is substantially similar to the Preferred Securities, (c) any
shares of any class of common stock of the Company (other than (i) shares
of Common Stock issuable upon conversion of the Preferred Securities or
pursuant to the exercise
<PAGE>
C-24
of options and warrants outstanding as of the date hereof, (ii) the grant
of stock options or other stock-based awards (and the exercise or vesting
thereof) to directors, officers and employees of the Company or the
Subsidiary, (iii) as may be required pursuant to the Certificate of
Incorporation of the Company or (iv) any shares issued in connection with
the CAT/Cygne Transaction) or (d) any other securities which are
convertible into, or exercisable or exchangeable for, any of (a) through
(c).
Section 5. Payment of Expenses. The Company will pay all costs and
-------------------
expenses incident to the performance of their obligations under this Agreement,
including (a) the preparation and printing of the Preliminary Offering
Memorandum and the Offering Memorandum (including financial statements and
exhibits) and any amendments or supplements thereto, and the cost of furnishing
copies thereto to the Initial Purchasers, (b) the preparation, issuance,
printing and distribution of the Preferred Securities and any survey of state
securities or "blue sky" laws or legal investment memoranda ("Blue Sky Survey"),
(c) the delivery of the Preferred Securities to the Initial Purchasers,
including any stock transfer taxes payable upon the sale of the Preferred
Securities to the Initial Purchasers, (d) the fees and disbursements of the
Company's counsel and accountants, (e) the qualification of the Preferred
Securities under the applicable state securities or "blue sky" laws in
accordance with Section 4(k), including filing fees and fees and disbursements
of counsel for the Initial Purchasers in connection therewith and in connection
with the Blue Sky Survey, (f) any filing fees in connection with any filing for
review of the offering with the NASD, (g) any fees charged by rating agencies
for rating the Preferred Securities, (h) the fees and expenses of the Indenture
Trustee, the Property Trustee, the Guarantee Trustee and the Delaware Trustee
and the transfer agent and registrar for the Common Stock, including the fees
and disbursements of counsel for such trustees and the transfer agent and
registrar, (i) all expenses and listing fees in connection with the application
for designation of the Preferred Securities as PORTAL eligible securities and
(j) the cost of qualifying the Preferred Securities with The Depository Trust
Company.
If the sale of the Preferred Securities provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 6 is not satisfied or because this Agreement is terminated
pursuant to Section 11(a)(i) other than by reason of a default by the Initial
Purchasers in payment for the Preferred Securities at the Closing Time, the
Company shall reimburse the Initial Purchasers promptly upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel to the Initial Purchasers) that
<PAGE>
C-25
shall have been incurred by them in connection with the proposed purchase and
sale of the Preferred Securities.
Section 6. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of the several Initial Purchasers to purchase and pay for the
Preferred Securities that they have respectively agreed to purchase pursuant to
this Agreement are subject to the accuracy of the representations and warranties
of the Company and the Issuer contained herein or in certificates of any officer
of the Company or the Subsidiary or any trustee of the Issuer delivered pursuant
to the provisions hereof, to the performance by the Company and the Issuer of
their respective obligations hereunder, and to the following further conditions:
(a) At the Closing Time, you shall have received a signed opinion of
Skadden, Arps, Slate, Meagher & Flom, counsel for the Company and the Issuer,
dated as of the Closing Time, in form and substance satisfactory to counsel for
the Initial Purchasers, to the effect that:
(i) The Indenture has been duly authorized, executed and delivered by
the Company and, when duly authorized, executed and delivered by the
Indenture Trustee, will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and except that the waiver
of stay or extension laws contained in Section 515 of the Indenture may be
unenforceable.
(ii) The Convertible Debentures have been duly authorized by the
Company and when the Convertible Debentures have been duly authenticated by
the Indenture Trustee in the manner described in its certificate delivered
to you today (which fact such counsel need not determine by an inspection
of the Convertible Debentures) and paid for by the Issuer, the Convertible
Debentures will be duly executed, issued and delivered by the Company and
constitute 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 as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors'
<PAGE>
C-26
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and except that the waiver of stay or
extension laws contained in Section 515 of the Indenture may be
unenforceable.
(iii) The execution and delivery of the Declaration have been duly
authorized by the Company, the Declaration has been duly executed and
delivered by the Company; and, assuming the due authorization, execution
and delivery of the Declaration by The Bank of New York (Delaware), The
Bank of New York and the Regular Trustees, the Declaration constitutes a
valid and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, subject to the effect upon the
Declaration of (a) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance and other similar laws
relating to or affecting the rights and remedies of creditors generally,
(b) general principles of equity and (c) the effect of applicable public
policy on the enforceability of provisions relating to indemnification or
contribution.
(iv) Each of the Guarantee Agreements has been duly authorized,
executed and delivered by the Company, and is a valid and binding agreement
of the Company.
(v) The Conversion Shares have been duly authorized by the Company,
reserved for issuance upon conversion and, if and when issued in accordance
with the Indenture at conversion prices at or in excess of the par value of
such Conversion Shares, will be validly issued, fully paid and nonas-
sessable; and no holder thereof will be subject to personal liability by
reason of being such a holder.
(vi) This Agreement has been duly authorized, executed and delivered
by each of the Company and the Issuer.
(vii) The Registration Rights Agreement has been duly authorized,
executed and delivered by each of the Company and the Issuer and
constitutes a valid and binding agreement of the Company and the Issuer,
enforceable against the Company and the Issuer in accordance with its
terms, except to the extent that enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium 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
<PAGE>
C-27
equity), and except to the extent that the right to indemnity and
contribution contained in the Registration Rights Agreement may be limited
by state or federal securities laws or the public policy underlying such
laws.
(viii) The holders of outstanding shares of capital stock of the
Company are not entitled to any preemptive rights under the Certificate of
Incorporation or By-Laws of the Company or the law of Delaware to subscribe
for the Preferred Securities, the Convertible Debentures or the Conversion
Shares.
(ix) No authorization, approval, consent or license of any New York,
Delaware or United States federal government, governmental instrumentality
or court that, in the opinion of such counsel, are normally applicable to
transactions of the type contemplated by this Agreement (other than United
States, state and foreign securities or blue sky laws and the rules and
regulations of the NASD) ("Applicable Laws"), is required for the issuance
and sale of the Preferred Securities by the Issuer to the Initial
Purchasers pursuant to this Agreement, the performance by the Issuer and
the Company of their respective obligations in this Agreement, the
Indenture, the Convertible Debentures, the Guarantees, the Declaration, the
Preferred Securities and the Registration Rights Agreement, except such as
may be required under state securities law or under federal and state
securities laws in connection with the registration obligations under the
Registration Rights Agreement.
(x) The statements made in the Offering Memorandum under the captions
"Description of the Preferred Securities", "Description of the Guarantee",
"Description of the Convertible Debentures", "Effect of Obligations Under
the Convertible Debentures and the Guarantee", and "Description of Capital
Stock", insofar as such statements purport to summarize certain provisions
of the Trust Securities, the Convertible Debentures, the Preferred
Securities Guarantee, the Indenture, the Declaration and the Certificate of
Incorporation of the Company, to the extent that they constitute matters of
law or legal conclusions, have been reviewed by such counsel and fairly
summarize the information required to be disclosed therein in all material
respects; and the statements made in the Offering Memorandum under the
captions "Offering Memorandum Summary - Recent Developments - CAT/Cygne
Transaction", and "CAT/Cygne Transaction", insofar as such statements
purport to summarize certain provisions of the CAT/Cygne Transaction,
provide a fair summary of such provisions.
<PAGE>
C-28
(xi) The execution, delivery and performance by the Company of this
Agreement, the Declaration, the Indenture, the Guarantee Agreements and the
Registration Rights Agreement, the consummation by the Company and the
Issuer of the transactions contemplated hereby and thereby and in the
Offering Memorandum, the filing of the certificate of trust with the
Secretary of State of the State of Delaware, compliance by the Company and
the Issuer with the terms of the foregoing and the application of the
proceeds from the sale of the Preferred Securities as contemplated by the
Offering Memorandum do not and will not result in any violation of the
charter or by-laws of the Company or the Subsidiary and the Declaration,
and do not and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company, the Subsidiary or the Issuer under (A) any
agreement or instrument set forth on Schedule I to such counsel's opinion,
(B) any existing Applicable Law, or (C) any judgment, order or decree under
Applicable Laws of any New York, Delaware or federal government,
governmental instrumentality or court having jurisdiction over the Company,
the Subsidiary or the Issuer or any of their respective properties of which
such counsel is aware. Such counsel need express no opinion, however, as
to whether the execution, delivery and performance by the Company of any of
the agreements identified in the preceding sentence will constitute a
violation of or a default under any covenant, restriction or provision with
respect to financial ratios or tests or any aspect of the financial
condition or results of operations of the Company, the Subsidiary or the
Issuer.
(xii) The issuance, sale and delivery by the Issuer of the
Preferred Securities and of the Common Securities, the execution and
delivery by the Issuer of this Agreement and the Registration Rights
Agreement, the purchase by the Issuer of the Convertible Debentures and the
performance by the Issuer of its obligations thereunder does not (a) result
in any violation of the Declaration or any Delaware statute, order, rule or
regulation of any Delaware court or other Delaware governmental agency or
body having jurisdiction over the Issuer or any of its properties or assets
which are normally applicable to transactions of the type contemplated by
this Agreement, (b) require the approval of any such Delaware court or
Delaware governmental agency or body pursuant to Applicable Laws, or (c) to
our knowledge, without independent investigation, conflict with or result
in breach or violation of any of the provisions of, or constitute a default
under any agreement or instrument set forth on Schedule II to such
counsel's opinion.
<PAGE>
C-29
(xiii) When the Preferred Securities, the Preferred Securities
Guarantee and the Convertible Debentures are issued and delivered pursuant
to this Agreement, such securities will not be of the same class (within
the meaning of Rule 144A under the 1933 Act) as securities of the Company
listed on a national securities exchange registered under Section 6 of the
1934 Act or quoted in a U.S. automated inter-dealer quotation system.
(xiv) Assuming (a) the accuracy of the representations and
warranties of the Issuer and the Company set forth in Section 1 of this
Agreement and of the Initial Purchasers set forth in Section 3 of this
Agreement, (b) the due performance by the Issuer and the Company of the
covenants and agreements set forth in Section 4 of this Agreement and the
due performance by the Initial Purchasers of the covenants and agreements
set forth in Section 3 of this Agreement, (c) compliance by the Initial
Purchasers with the offering and transfer procedures and restrictions
described in the Offering Memorandum and (d) the accuracy of the
representations and warranties made in accordance with the Offering
Memorandum by purchasers to whom the Initial Purchasers initially resell
Preferred Securities, the offer, sale and delivery of the Preferred
Securities to the Initial Purchasers in the manner contemplated by the
Purchase Agreement and the Offering Memorandum and the initial resale of
the Preferred Securities by the Initial Purchasers in the manner
contemplated in the Offering Memorandum and this Agreement do not require
registration under the 1933 Act, it being understood that such counsel need
express no opinion as to any subsequent resale of any Preferred Securities,
and none of the Declaration, the Indenture or the Preferred Securities
Guarantee Agreement is required to be qualified under the Trust Indenture
Act of 1939, as amended.
(xv) Neither the Company nor the Issuer is required to be registered
under the Investment Company Act of 1940, as amended.
(xvi) The Issuer has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act, 12
Del. C. Sec. 3801, et seq. (the "Delaware Act").
------
(xvii) Under the Delaware Act and the Declaration, the Issuer has
the power and authority to (a) execute and deliver, and to perform its
obligations under, this Agreement and the Registration Rights Agreement,
(b) issue and perform its obligations under the Preferred Securities and
the Common Securities and (c) purchase and hold the Convertible Debentures.
<PAGE>
C-30
(xviii) The Preferred Securities have been duly authorized by the
Declaration and when issued, delivered and paid for in accordance with this
Agreement will represent, subject to the qualifications set forth in
paragraph (xix) below, fully paid and nonassessable undivided beneficial
interests in the assets of the Issuer and will entitle the holders thereof
to the benefits of the Declaration, subject to the effect upon the
Declaration of (a) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance and other similar laws
relating to or affecting the rights and remedies of creditors generally,
(b) general principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied in a
proceeding in equity or at law), and (c) the effect to applicable public
policy on the enforceability or provisions relating to indemnification or
contribution.
(xix) The holders of the Preferred Securities will be entitled to
the same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation Law
of the State of Delaware. Such counsel may note that the holders of the
Preferred Securities may be obligated to make payments as set forth in the
Declaration and that the holders of Common Securities are liable for all of
the debts and obligations of the Issuer to the extent specified in
Section 10.1(b) of the Declaration.
(xx) Under the Delaware Act and the Declaration, the issuance of the
Preferred Securities and the Common Securities is not subject to preemptive
rights.
In addition, such opinion shall state that such counsel have
participated in the preparation of the Offering Memorandum and in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants for the Company, and with your representatives
and your counsel at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel need not pass upon or assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, on the basis of the foregoing, no facts
have come to the attention of such counsel that have caused them to believe that
the Offering Memorandum or any amendment thereto (except for the financial
statements and other financial data included therein or omitted therefrom, as to
which such counsel need express no opinion) at the time any such amended or
supplemented Offering Memorandum was issued or at the Closing Time, contained or
contains an untrue statement of a material
<PAGE>
C-31
fact or omitted or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading except that such
counsel need express no opinion or belief with respect to the financial
statements, schedules and other financial data included therein or omitted
therefrom.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the Securities as counsel for the
Initial Purchasers may reasonably request. In giving such opinion, such counsel
may state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and the Subsidiary, certificates of trustees of the Issuer and
certificates of public officials; provided that such certificates have been
--------
delivered to the Initial Purchasers.
(b) At the Closing Time, you shall have received a signed opinion of
Jocelyn F.L. Barandiaran, general counsel of the Company, dated as of the
Closing Time, together with signed or reproduced copies of such opinion for each
of the other Initial Purchasers, in form and substance satisfactory to counsel
for the Initial Purchasers, to the effect that:
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Offering
Memorandum.
(ii) The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it
owns or leases property of a nature, or transacts business of a type, that
would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the Company and the Subsidiary, considered as one
enterprise.
(iii) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with
corporate power and authority under such laws to own, lease and operate its
properties and conduct its business.
(iv) The Subsidiary is duly qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction in
which it owns or leases property of a nature, or transacts business of a
type, that would make
<PAGE>
C-32
such qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and the Subsidiary, considered as one enterprise.
(v) The Company has an authorized capitalization as set forth in the
Offering Memorandum; all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable; no holder thereof is or will be subject to personal
liability by reason of being such a holder; and none of the outstanding
shares of capital stock of the Company was issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of
law or under the charter or by-laws of the Company.
(vi) All of the outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable; all of such shares are owned by the Company, free and clear
of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind (other than pursuant to the Bank Credit Agreement);
no holder thereof is subject to personal liability by reason of being such
a holder; and none of such shares was issued in violation of the preemptive
rights of any stockholder of the Subsidiary arising by operation of law or
under the charter or by-laws of the Subsidiary.
(vii) Other than described in the Offering Memorandum, such
counsel does not know of any statutes or regulations, or any pending or
threatened legal or governmental proceedings to which the Company or the
Subsidiary is a party or to which the assets of the Company or the
Subsidiary is subject which, individually or in the aggregate, would have a
material adverse effect on the Company and the Subsidiary, considered as
one enterprise.
(viii) Except to the extent described in the Offering Memorandum,
to the knowledge of such counsel, no default exists in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the Offering
Memorandum. Such counsel need express no opinion, however, as to any
defaults relating to a violation of or a default under any covenant,
restriction or provision with respect to financial ratios or tests or any
aspect of the financial condition or results of operations of the Company
or the Subsidiary.
<PAGE>
C-33
In addition, such opinion shall state that such counsel has
participated in the preparation of the Offering Memorandum and in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants for the Company, and with your representatives
and your counsel at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel need not pass upon or assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, on the basis of the foregoing, no facts
have come to the attention of such counsel that have caused such counsel to
believe that the Offering Memorandum or any amendment thereto (except for the
financial statements and other financial data included therein or omitted
therefrom, as to which such counsel need express no opinion) at the time any
such amended or supplemented Offering Memorandum was issued or at the Closing
Time, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading except that such counsel need express no
opinion or belief with respect to the financial statements, schedules and other
financial data included therein or omitted therefrom.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the Securities as counsel for the
Initial Purchasers may reasonably request. In giving such opinion, such counsel
may state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and the Subsidiary, certificates of Trustees of the Issuer and
certificates of public officials; provided that such certificates have been
--------
delivered to the Initial Purchasers.
(c) At the Closing Time, you shall have received a signed opinion of
Richards Layton & Finger, counsel to the Delaware Trustee, dated as of the
Closing Time, together with signed or reproduced copies of such opinion for each
of the other Initial Purchasers, in form and substance satisfactory to counsel
for the Initial Purchasers, to the effect that:
(i) The Bank of New York, Delaware, a Delaware banking corporation,
has been duly incorporated and is validly existing in good standing as a
banking corporation under the laws of the State of Delaware and has the
corporate power to act as Trustee of a Delaware business trust under the
laws of the State of Delaware, 12 Dela. Sec. 3801 et seq.
---- -- ---
<PAGE>
C-34
(d) At the Closing Time, you shall have received a signed opinion of
Emmett, Marvin & Martin, LLP, counsel to The Bank of New York, dated as of the
Closing Time, together with signed or reproduced copies of such opinion for each
of the other Initial Purchasers, in form and substance satisfactory to counsel
for the Initial Purchasers, to the effect that:
(i) The Bank of New York is a banking corporation duly incorporated
and validly existing under the laws of the State of New York.
(ii) The execution, delivery and performance by The Bank of New York,
as property trustee (the "Property Trustee") of the Declaration, the
execution, delivery and performance by the Guarantee Trustee of the Guaran-
tee Agreement and the execution, delivery and performance by the Indenture
Trustee of the Indenture have been duly authorized by all necessary
corporate action on the part of the Property Trustee, the Guarantee Trustee
and the Indenture Trustee, respectively. The Declaration, the Guarantee
Agreement and the Indenture have been duly executed and delivered by the
Property Trustee, the Guarantee Trustee and the Indenture Trustee,
respectively, and constitute the legal, valid and binding obligations of
the Property Trustee, the Guarantee Trustee and the Indenture Trustee,
respectively, enforceable against the Property Trustee, the Guarantee
Trustee and the Indenture Trustee, respectively, in accordance with their
terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iii) The execution, delivery and performance of the Declaration,
the Guarantee Agreement and the Indenture by the Property Trustee, the
Guarantee Trustee and the Indenture Trustee, respectively, do not conflict
with or constitute a breach of the Organization Certificate or By-laws of
the Property Trustee, the Guarantee Trustee or the Indenture Trustee,
respectively, or the terms of any indenture or other agreement or
instrument known to such counsel and to which the Property Trustee, the
Guarantee Trustee or the Indenture Trustee, respectively, is a party or is
bound or any judgment, order or decree known to such counsel to be
applicable to the Property Trustee, the Guarantee Trustee or the Indenture
Trustee, respectively, of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Property Trustee, the Guarantee Trustee or the Indenture Trustee,
respectively.
<PAGE>
C-35
(iv) No consent, approval or authorization of, or registration with or
notice to, any federal or New York State banking authority is required for
the execution, delivery or performance by the Property Trustee, the
Guarantee Trustee or the Indenture Trustee of the Declaration, the
Guarantee Agreement or the Indenture, respectively.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the Securities as counsel for the
Initial Purchasers may reasonably request. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of Delaware and the federal law of the United States, upon the
opinions of counsel satisfactory to counsel for the Initial Purchasers. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and the Subsidiary, certificates of trustees of the Issuer and
certificates of public officials; provided that such certificates have been
--------
delivered to the Initial Purchasers.
(e) At the Closing Time, you shall have received a signed opinion of
Skadden, Arps, Slate, Meagher & Flom, special tax counsel to the Company, dated
as of the Closing Time, together with signed or reproduced copies of such
opinion for each of the other Initial Purchasers, in form and substance
satisfactory to counsel for the Initial Purchasers, to the effect that:
(i) The Issuer will be characterized as a grantor trust for U.S.
federal income tax purposes and not as an association subject to tax as a
corporation.
(ii) The statements made in the Offering Memorandum set forth under
the captions "United States Federal Income Taxation", "Risk Factors --
Option to Extend Interest Payment Period; Tax Consequences", "Risk
Factors -- Proposed Tax Legislation", and "Description of the Convertible
Debentures -- Proposed Tax Legislation" fairly present in all material
respects the principal U.S. federal income tax consequences of an
investment in the Preferred Securities.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the Securities as counsel for the
Initial Purchasers may reasonably request. In giving such opinion, such counsel
may state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and the Subsidiary,
<PAGE>
C-36
certificates of trustees of the Issuer and certificates of public officials;
provided that such certificates have been delivered to the Initial Purchasers.
- --------
(f) At the Closing Time, you shall have received the favorable
opinion of Shearman & Sterling, counsel for the Initial Purchasers, dated as of
the Closing Time, together with signed or reproduced copies of such opinion for
each of the other Initial Purchasers, to the effect that the opinions delivered
pursuant to Sections 6(a), 6(b), 6(c), 6(d) and 6(e) appear on their face to be
appropriately responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by you, and with respect to the
incorporation and legal existence of the Company, the Securities, this Agreement
and such other related matters as you may require. In giving such opinion, such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to you. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and certificates of public
officials.
(g) At the Closing Time, (i) the Offering Memorandum, as it may then
be amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) there shall not have been,
since the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company, the
Subsidiary and the Issuer, considered as one enterprise, whether or not arising
in the ordinary course of business, (iii) no action, suit or proceeding shall be
pending or, to the knowledge of the Company or the Issuer, threatened against
the Company, the Subsidiary or the Issuer other than as set forth in the
Offering Memorandum or in any supplement thereto and no proceedings shall be
pending or, to the knowledge of the Company or the Issuer, threatened against
the Company, the Subsidiary or the Issuer before or by any government,
governmental instrumentality or court, domestic or foreign, that could be
reasonably expected to result in any material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects of
the Company and the Subsidiary considered as one enterprise, other than as set
forth in the Offering Memorandum, (iv) each of the Company and the Issuer shall
have complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Time and (v) the representations and warranties of the Company and the Issuer
set forth in Section 1(a) shall be accurate as
<PAGE>
C-37
though expressly made at and as of the Closing Time. At the Closing Time, you
shall have received a certificate of the Chief Financial Officer and the
President and Chief Operating Officer of the Company, dated as of the Closing
Time, to such effect. At the Closing Time, you shall also have received a
certificate signed by a Regular Trustee, dated as of the Closing Time, to such
effect.
(h) At the time that this Agreement is executed by the Company, you
shall have received from Deloitte & Touche a letter, dated such date, in form
and substance satisfactory to you confirming that they are independent public
accountants with respect to the Company within the meaning of the 1933 Act and
the applicable published rules and regulations thereunder, and stating in effect
that:
(i) in their opinion, the audited financial statements included or
incorporated by reference in the Offering Memorandum comply as to form in
all material respects with the applicable accounting requirements of the
1933 Act and the 1934 Act and the respective published rules and
regulations thereunder;
(ii) on the basis of procedures (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
latest available unaudited interim consolidated financial statements of the
Company; a reading of the minutes of all meetings of the stockholders,
directors and executive, finance and audit committees of the Company and
the Subsidiary; and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company and the
Subsidiary as to transactions and events subsequent to the date of the most
recent audited financial statements in or incorporated in the Offering
Memorandum, and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to believe
that at a specified date not more than five business days prior to the date
of the letter, there were any increases in the long-term debt of the
Company and its subsidiaries or any decreases in stockholders' equity or
the capital stock of the Company as compared with the amounts shown on the
most recent balance sheet included in or incorporated in the Offering
Memorandum except in each case for decreases and increases that the
Offering Memorandum disclose have occurred or may occur, or for the period
from February 4, 1996 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year, in revenues,
income before income taxes (or any increase in the loss before income
taxes) or net income (or any increase in net loss), except in each case for
decreases
<PAGE>
C-38
or increases that the Offering Memorandum discloses have occurred or may
occur; and
(iii) in addition to the procedures referred to in clause (ii)
above, they have performed specified procedures, not constituting an audit,
with respect to certain amounts, percentages, numerical data and financial
information appearing in the Offering Memorandum, which have previously
been specified by you and which shall be specified in such letter, and have
compared certain of such items with, and have found such items to be in
agreement with, the accounting and financial records of the Company.
(i) At the Closing Time, you shall have received from Deloitte &
Touche a letter, in form and substance satisfactory to you and dated as of the
Closing Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to Section 6(h), except that the specified date referred to
shall be a date not more than five days prior to the Closing Time.
(j) At the Closing Time, counsel for the Initial Purchasers shall
have been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Securities as contemplated in this Agreement and in
order to evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company, the performance of any of the covenants
of the Company, or the fulfillment of any of the conditions herein contained;
and all proceedings taken by the Company and the Issuer at or prior to the
Closing Time in connection with the authorization, issuance and sale of the
Securities as contemplated in this Agreement shall be satisfactory in form and
substance to you and to counsel for the Initial Purchasers.
(k) At the Closing Time, the Issuer, the Company and the Initial
Purchasers shall have entered into the Registration Rights Agreement, and the
Registration Rights Agreement shall be in full force and effect.
(l) At the Closing Time, there shall not be any pending or threatened
legal or governmental proceedings with respect to any of the transactions
contemplated in this Agreement.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, this Agreement may be
terminated by you on notice to the Company and the Issuer at any time at or
prior to the Closing
<PAGE>
C-39
Time, and such termination shall be without liability of any party to any other
party, except as provided in Section 5 herein. Notwithstanding any such
termination, the provisions of Sections 8 and 9 shall remain in effect.
Section 7. Conditions to Purchase of Additional Preferred Securities.
---------------------------------------------------------
In the event that the Initial Purchasers exercise their option granted in
Section 2 to purchase all or any of the Additional Preferred Securities and the
Date of Delivery determined by you pursuant to Section 2 is later than the
Closing Time, the obligations of the several Initial Purchasers to purchase and
pay for the Additional Preferred Securities that they shall have respectively
agreed to purchase pursuant to this Agreement are subject to the accuracy of the
representations and warranties of the Company and the Issuer herein contained,
to the performance by the Company and the Issuer of their obligations hereunder
and to the following further conditions:
(a) At the Date of Delivery, the provisions of Sections 6(g)(i)
through 6(g)(iv) shall have been complied with at and as of the Date of Delivery
and, at the Date of Delivery, you shall have received a certificate of the
President or an Executive Vice President, and the Treasurer or Controller, of
the Company, dated as of the Date of Delivery, to such effect and a certificate
of a Regular Trustee of the issuer, dated as of the Date of Delivery, to such
effect.
(b) At the Date of Delivery, you shall have received the favorable
opinions of Skadden, Arps, Slate, Meagher & Flom, counsel for the Company and
the Issuer, together with signed or reproduced copies of such opinions for each
of the other Initial Purchasers, in each case in form and substance satisfactory
to counsel for the Initial Purchasers, dated as of the Date of Delivery,
relating to the Additional Preferred Securities and otherwise to the same effect
as the opinions required by Section 6(a).
(c) At each applicable Date of Delivery, you shall have received a
signed opinion of Jocelyn F.L. Barandiaran, general counsel for the Company,
dated as of such Date of Delivery, in form and substance satisfactory to counsel
for the Initial Purchasers, to the same effect as the opinion required by
Section 6(b).
(d) At the Date of Delivery, you shall have received the favorable
opinions of Richards Layton & Finger, counsel to the Delaware Trustee, and of
Emmett, Martin & Marvin, LLP, counsel to The Bank of New York, together with
signed or reproduced copies of such opinions for each of the other Initial
Purchasers, in each case in form and substance satisfactory to counsel for the
Initial Purchasers, dated as of the Date of Delivery, relating to the Additional
Preferred Securities and
<PAGE>
C-40
otherwise to the same effect as the opinion required by Sections 6(c) and 6(d),
respectively.
(e) At the Date of Delivery, you shall have received the favorable
opinions of Skadden, Arps, Slate, Meagher & Flom, special tax counsel to the
Company, together with signed or reproduced copies of such opinions for each of
the other Initial Purchasers, in each case in form and substance satisfactory to
counsel for the Initial Purchasers, dated as of the Date of Delivery, relating
to the Additional Preferred Securities and otherwise to the same effect as the
opinion required by Section 6(e).
(f) At the Date of Delivery, you shall have received the favorable
opinion of Shearman & Sterling, counsel for the Initial Purchasers, dated as of
the Date of Delivery, relating to the Additional Preferred Securities and
otherwise to the same effect as the opinion required by Section 6(f).
(g) At the Date of Delivery, you shall have received a letter from
Deloitte & Touche, in form and substance satisfactory to you and dated as of the
Date of Delivery, to the effect that they reaffirm the statements made in the
letter furnished pursuant to Section 6(h), except that the specified date
referred to shall be a date not more than five days prior to the Date of
Delivery.
(h) At the Date of Delivery, counsel for the Initial Purchasers shall
have been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Additional Preferred Securities as contemplated in this
Agreement in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or the Issuer, the
performance of any of the covenants of the Company, or the fulfillment of any of
the conditions herein contained; and all proceedings taken by the Company and
the Issuer at or prior to the Date of Delivery in connection with the
authorization, issuance and sale of the Additional Preferred Securities as
contemplated in this Agreement shall be satisfactory in form and substance to
you and to counsel for the Initial Purchasers.
Section 8. Indemnification. (a) The Company and the Issuer, jointly
---------------
and severally, agree to indemnify and hold harmless each Initial Purchaser and
each person, if any, who controls any Initial Purchaser within the meaning of
Section 15 of the 1933 Act to the extent and in the manner set forth in clauses
(i), (ii) and (iii) below:
<PAGE>
C-41
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact included in any preliminary offering
memorandum or the Offering Memorandum (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 8(c) hereof, the reasonable fees and
disbursements of counsel chosen by you), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through you expressly for use in the Offering Memorandum (or
any amendment or supplement thereto), or any preliminary offering memorandum;
provided further that the foregoing indemnification with respect to any
- -------- -------
preliminary offering memorandum shall not inure to the benefit of any Initial
Purchaser (or any person controlling such Initial Purchaser) from whom the
person asserting any such losses, claims, damages or liabilities purchased any
of the Preferred Securities if a copy of the Offering Memorandum (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Initial
Purchaser on the initial resale to such person, if such is required by law, at
or prior to the written confirmation of the sale of such Preferred Securities to
such
<PAGE>
C-42
person and if the Offering Memorandum (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Company, its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
and the Issuer against any and all loss, liability, claim, damage and
expense described in the indemnity agreement in Section 8(a), as incurred,
but only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Offering Memorandum (or any amendment
or supplement thereto) or any preliminary offering memorandum in reliance
upon and in conformity with written information furnished to the Company by
such Initial Purchaser through you expressly for use in the Offering
Memorandum (or any amendment or supplement thereto), or such preliminary
offering memorandum.
(c) Each indemnified party shall give prompt notice to each indem-
nifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability that it may have otherwise
than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of such action. In no event
shall the indemnifying party or parties be liable for the fees and expenses
of more than one counsel for all indemnified parties in connection with any
one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
If it so elects within a reasonable time after receipt of such notice, an
indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by
it and approved by the indemnified parties defendant in such action, unless
such indemnified parties reasonably object to such assumption on the ground
that there may be legal defenses available to them which are different from
or are in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action.
Section 9. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity provided for in
Section 8 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company, the Issuer and
the Initial Purchasers shall
<PAGE>
C-43
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company, the Issuer
and one or more of the Initial Purchasers, as incurred, in such proportions that
(a) the Initial Purchasers are responsible for that portion represented by the
percentage that the initial purchasers' discount appearing on the cover page of
the Offering Memorandum bears to the offering price appearing thereon and
(b) the Company and the Issuer are severally responsible for the balance on the
same basis as each of them would have been obligated to provide indemnification
pursuant to Section 8; provided, however, that no person guilty of fraudulent
-------- -------
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Initial Purchaser, and each
director and officer of the Company and each person, if any, who controls the
Company or the Issuer within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as the Company or the Issuer, as the case
may be. The Initial Purchasers' respective obligations to contribute pursuant
to this Section 9 are several in proportion to the number of Preferred
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
Section 10. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Issuer, the Company or its officers and of the Initial
Purchasers set forth in or made pursuant to this Agreement will remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Issuer, the Company, any Initial Purchaser or any controlling
person thereof and will survive delivery of and payment for the Securities.
Section 11. Termination of Agreement. (a) You may terminate this
------------------------
Agreement, by notice to the Company and the Issuer, at any time at or prior to
the Closing Time (i) if there has been, since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and the Subsidiary, considered as one enterprise,
whether or not arising in the ordinary course of business, (ii) if there has
occurred any material adverse change in the financial markets in the United
States or internationally or any outbreak of hostilities or escalation of
existing hostilities or other calamity or crisis the effect of which on the
financial markets of the United States or internationally is such as to make it,
in your judgment, impracticable to market the Securities, or enforce contracts
for the sale of the Securities, (iii) if trading in any securities of the
Company
<PAGE>
C-44
has been suspended by the Commission or the New York Stock Exchange, or if
trading generally on the New York Stock Exchange or in the over-the-counter
market has been suspended, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by such
exchange or by order of the Commission or any other governmental authority or
(iv) if a banking moratorium has been declared by either federal or New York
authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 5. Notwithstanding any such termination, the
provisions of Sections 8 and 9 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 6, with the effect stated in such Section.
Section 12. Default by One or More of the Initial Purchasers. If
------------------------------------------------
one or more of the Initial Purchasers shall fail at the Closing Time to purchase
the Initial Securities that it or they are obligated to purchase pursuant to
this Agreement (the "Defaulted Securities"), you shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, or any other initial purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms set forth in this Agreement; if, however, you have not
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Preferred Securities, the non-defaulting Initial Purchasers
shall be obligated to purchase the full amount thereof in the proportions that
their respective Initial Share underwriting obligation proportions bear to the
underwriting obligation proportions of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Preferred Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either you or the Company shall have the right to postpone
<PAGE>
C-45
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Offering Memorandum or in any other documents or
arrangements. As used herein, the term "Initial Purchaser" includes any person
substituted for a Initial Purchaser under this Section 12.
Section 13. Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to you or the Initial Purchasers shall be directed to you at Merrill
Lynch World Headquarters, North Tower, World Financial Center, New York,
New York 10281-1201 (telecopier no.: (212) 449-3150), attention of Mary Beth
Henson; and notices to the Company shall be directed to it at AnnTaylor Stores
Corporation, 142 West 57th Street, New York, New York 10019 (telecopier no.:
(212) 541-3299), attention of Jocelyn F.L. Barandiaran, Esq.
Section 14. Parties. This Agreement is made solely for the benefit
-------
of the several Initial Purchasers, the Company and the Issuer and, to the extent
expressed, any person who controls the Company, the Issuer or any of the Initial
Purchasers within the meaning of Section 15 of the 1933 Act, and the directors
of the Company and the Issuer, their officers, employees and trustees, and their
respective executors, administrators, successors and assigns and, subject to the
provisions of Section 12, no other person shall acquire or have any right under
or by virtue of this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from any of the several Initial
Purchasers of the Securities. All of the obligations of the Initial Purchasers
hereunder are several and not joint.
Section 15. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company or the Issuer submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Initial Purchaser or
controlling person, or by or on behalf of the Company or the Issuer, and shall
survive delivery of the Preferred Securities to the Initial Purchasers.
Section 16. Governing Law and Time. This Agreement shall be governed
----------------------
by the laws of the State of New York. Specified times of the day refer to New
York City time.
<PAGE>
C-46
Section 17. Counterparts. This Agreement may be executed in one or
------------
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
<PAGE>
C-47
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Issuer and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
ANNTAYLOR FINANCE TRUST
By: AnnTaylor Stores Corporation,
as sponsor
By:/s/ J. Patrick Spainhour
-------------------------
Name: J. Patrick Spainhour
Title: President and Chief
Operating Officer
ANNTAYLOR STORES CORPORATION
By: /s/Paul E. Francis
-------------------------------------------
Name: Paul E. Francis
Title: Executive Vice President -
Finance and Administration
<PAGE>
C-48
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ROBERTSON, STEPHENS & COMPANY LLC
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: /s/ Mary Beth Henson
--------------------------------------
Mary Beth Henson
Director
Investment Banking Group
<PAGE>
SCHEDULE A
Number of
Preferred Securities
Initial Purchaser to be Purchased
----------------- -------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . 700,000
CS First Boston Corporation . . . . . . 350,000
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . 350,000
Robertson, Stephens & Company LLC. . . . 350,000
---------
Total . . . . . . . . . . . . . . . 1,750,000
=========
<PAGE>
EXHIBIT D
FORM OF TRANSFEROR CERTIFICATE FOR TRANSFER DURING THE EFFECTIVENESS OF A SHELF
REGISTRATION STATEMENT
[Trustee]
[address]
Re: [ ]
------------------------
Reference is hereby made to the Amended and Restated Declaration of
Trust dated as of April 25, 1996, (the "Declaration") by J. Patrick Spainhour,
Paul E. Francis and Walter J. Parks, as Regular Trustees, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Property Trustee and
AnnTaylor Stores Corporation, as Sponsor. Capitalized terms used but not de-
fined herein shall have the meanings given them in the Declaration.
This letter relates to Preferred Securities which are held in
the form of [the Rule 144A Global Preferred Security with the Depositary (CUSIP
No. )][a Restricted Definitive Preferred Security (CUSIP No. )] in the
name of [name of transferor] (the "Transferor") to effect the transfer of the
Preferred Securities in exchange for an equivalent beneficial interest in the
Exchanged Global Preferred Security.
In connection with such request, and in respect of such Preferred
Securities, the Transferor does hereby certify that (i) such Preferred
Securities are being transferred in accordance with and pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
and in accordance with any applicable securities laws of any state of the United
States and (ii) the Transferor has complied with its obligations to provide
information to the Issuer, as required by the Registration Rights Agreement, and
with its obligations, if any, under the Act with regard to the delivery of a
prospectus.
[Name of Transferor]
By: ______________
Name:
Title:
________________
cc: [Issuer]
EXHIBIT 4.3
------------------------------------------------------------
ANNTAYLOR STORES CORPORATION,
As Issuer
TO
THE BANK OF NEW YORK,
As Trustee
________________
Indenture
Dated as of April 15, 1996
________________
$90,206,200
(subject to increase to up to $103,737,200 in
the event an over-allotment option is exercised)
8 1/2% Convertible Subordinated Debentures Due 2016
------------------------------------------------------------
<PAGE>
AnnTaylor Stores Corporation
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
--------------- ---------
Sec. 310(a)(1) . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . 608, 610
Sec. 311(a) . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . 613
Sec. 312(a) . . . . . . . . . . . . . . 701
702(a)
(b) . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . 702(c)
Sec. 313(a) . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . 101, 1004
(b) . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . 703(b)
Sec. 314(a) . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . 102
Sec. 315(a) . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . 514
Sec. 316(a) . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . 104(c)
Sec. 317(a)(1) . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . 1003
Sec. 318(a) . . . . . . . . . . . . . . 107
______________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
- ii -
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals of the Company . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application . . . . . . . . 2
SECTION 101. Definitions . . . . . . . . . . . . . . . 2
Act . . . . . . . . . . . . . . . . . . . 3
Additional Interest . . . . . . . . . . . 3
Additional Payments . . . . . . . . . . . 3
Affiliate . . . . . . . . . . . . . . . . 3
Agent . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . 3
Board Resolution . . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . . 3
Closing Price . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . 4
Common Securities . . . . . . . . . . . . 4
Common Securities
Guarantee . . . . . . . . . . . . . . 4
Common Stock . . . . . . . . . . . . . . . 4
Company . . . . . . . . . . . . . . . . . 4
Company Request . . . . . . . . . . . . . 4
Company Order . . . . . . . . . . . . . . 4
Compounded Interest . . . . . . . . . . . 5
Conversion Agent . . . . . . . . . . . . . 5
Conversion Date . . . . . . . . . . . . . 5
Corporate Trust Office . . . . . . . . . . 5
Declaration . . . . . . . . . . . . . . . 5
Defaulted Interest . . . . . . . . . . . . 5
Delaware Trustee . . . . . . . . . . . . . 5
Depositary . . . . . . . . . . . . . . . . 5
Direct Action . . . . . . . . . . . . . . 5
Dissolution Event . . . . . . . . . . . . 5
Dissolution Tax Opinion . . . . . . . . . 6
Effectiveness Period . . . . . . . . . . . 6
Event of Default . . . . . . . . . . . . . 6
Exchange Act . . . . . . . . . . . . . . . 6
Expiration Time . . . . . . . . . . . . . 6
Extension Period . . . . . . . . . . . . . 6
Global Security . . . . . . . . . . . . . 6
Guarantee . . . . . . . . . . . . . . . . 6
Holder . . . . . . . . . . . . . . . . . . 6
Indenture . . . . . . . . . . . . . . . . 6
Initial Purchasers . . . . . . . . . . . . 6
Interest Payment Date . . . . . . . . . . 6
- iii -
<PAGE>
Page
----
Investment Company Event . . . . . . . . . 6
Liquidated Damages . . . . . . . . . . . . 6
Maturity . . . . . . . . . . . . . . . . . 7
Ministerial Action . . . . . . . . . . . . 7
90-Day Period . . . . . . . . . . . . . . 7
No Recognition Opinion . . . . . . . . . . 7
Non Book-Entry Preferred
Securities . . . . . . . . . . . . . 7
Notice of Conversion . . . . . . . . . . . 7
Officers' Certificate . . . . . . . . . . 7
Opinion of Counsel . . . . . . . . . . . . 7
Outstanding . . . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . 8
Person . . . . . . . . . . . . . . . . . 8
Predecessor Security . . . . . . . . . . . 8
Preferred Securities . . . . . . . . . . . 8
Property Trustee . . . . . . . . . . . . . 8
Purchase Agreement . . . . . . . . . . . . 8
Purchased Shares . . . . . . . . . . . . . 9
Redemption Date . . . . . . . . . . . . . 9
Redemption Price . . . . . . . . . . . . 9
Redemption Tax Opinion . . . . . . . . . . 9
Reference Date . . . . . . . . . . . . . 9
Registration Default . . . . . . . . . . 9
Registration Rights
Agreement . . . . . . . . . . . . . . 9
Regular Record Date . . . . . . . . . . . 9
Responsible Officer . . . . . . . . . . . 9
Restricted Securities
Legend . . . . . . . . . . . . . . . 9
Securities . . . . . . . . . . . . . . . . 9
Security Register . . . . . . . . . . . . 9
Security Registrar . . . . . . . . . . . . 9
Senior Indebtedness . . . . . . . . . . . 9
Shelf Registration
Statement . . . . . . . . . . . . . . 10
Special Event . . . . . . . . . . . . . . 10
Special Record Date . . . . . . . . . . . 10
Stated Maturity . . . . . . . . . . . . . 10
Subsidiary . . . . . . . . . . . . . . . . 11
Tax Event . . . . . . . . . . . . . . . . 11
Trading Day . . . . . . . . . . . . . . . 11
Trust . . . . . . . . . . . . . . . . . . 11
Trustee . . . . . . . . . . . . . . . . . 11
Trust Indenture Act . . . . . . . . . . . 11
Trust Securities . . . . . . . . . . . . . 11
Vice President . . . . . . . . . . . . . . 11
Voting Stock . . . . . . . . . . . . . . . 11
- iv -
<PAGE>
Page
----
SECTION 102. Compliance Certificates and Opinions . . . 12
SECTION 103. Form of Documents Delivered to Trustee . . 12
SECTION 104. Acts of Holders; Record Dates . . . . . . 13
SECTION 105. Notices, Etc., to Trustee and the
Company . . . . . . . . . . . . . . . . 14
SECTION 106. Notice to Holders; Waiver . . . . . . . . 15
SECTION 107. Conflict with Trust Indenture Act . . . . 16
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . 16
SECTION 109. Successors and Assigns . . . . . . . . . . 16
SECTION 110. Separability Clause . . . . . . . . . . . 16
SECTION 111. Benefits of Indenture . . . . . . . . . . 16
SECTION 112. Governing Law . . . . . . . . . . . . . . 16
SECTION 113. Legal Holidays . . . . . . . . . . . . . . 17
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . 17
SECTION 202. Initial Issuance to Property Trustee . . . 18
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . 19
SECTION 302. Denominations . . . . . . . . . . . . . . 20
SECTION 303. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . 21
SECTION 304. Temporary Securities . . . . . . . . . . . 21
SECTION 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . 22
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . 23
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . 24
SECTION 308. Persons Deemed Owners . . . . . . . . . . 26
SECTION 309. Cancellation . . . . . . . . . . . . . . . 27
SECTION 310. Right of Set Off . . . . . . . . . . . . . 27
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . 27
SECTION 312. Option to Extend Interest Payment
Period . . . . . . . . . . . . . . . 27
SECTION 313. Paying Agent, Security Registrar and
Conversion Agent . . . . . . . . . . 29
SECTION 314. Global Security . . . . . . . . . . . . . 29
- v -
<PAGE>
Page
----
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture . 31
SECTION 402. Application of Trust Money . . . . . . . . 32
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . 32
SECTION 502. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . 36
SECTION 504. Trustee May File Proofs of Claim . . . . . 36
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities . . . . . . 37
SECTION 506. Application of Money Collected . . . . . . 37
SECTION 507. Limitation on Suits . . . . . . . . . . . 38
SECTION 508. Unconditional Right of Holders to
Receive Principal and Interest
and Convert . . . . . . . . . . . . . 38
SECTION 509. Restoration of Rights and Remedies . . . . 39
SECTION 510. Rights and Remedies Cumulative . . . . . . 39
SECTION 511. Delay or Omission Not Waiver . . . . . . . 39
SECTION 512. Control by Holders . . . . . . . . . . . . 39
SECTION 513. Waiver of Past Defaults . . . . . . . . . 40
SECTION 514. Undertaking for Costs . . . . . . . . . . 40
SECTION 515. Waiver of Stay or Extension Laws . . . . . 41
SECTION 516. Enforcement by Holders of Preferred
Securities . . . . . . . . . . . . . . . 41
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . 42
SECTION 602. Notice of Defaults . . . . . . . . . . . . 42
SECTION 603. Certain Rights of Trustee . . . . . . . . 42
SECTION 604. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . 44
SECTION 605. May Hold Securities . . . . . . . . . . . 44
SECTION 606. Money Held in Trust . . . . . . . . . . . 44
SECTION 607. Compensation and Reimbursement . . . . . . 44
SECTION 608. Disqualification; Conflicting Interests . 45
SECTION 609. Corporate Trustee Required; Eligibility . 45
- vi -
<PAGE>
Page
----
SECTION 610. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . 46
SECTION 611. Acceptance of Appointment by Successor . . 47
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . 48
SECTION 613. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 48
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . 48
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . 49
SECTION 703. Reports by Trustee . . . . . . . . . . . . 49
SECTION 704. Reports by Company . . . . . . . . . . . . 49
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . 50
SECTION 802. Successor Substituted . . . . . . . . . . 51
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . 52
SECTION 902. Supplemental Indentures with Consent of
Holders . . . . . . . . . . . . . . . 53
SECTION 903. Execution of Supplemental Indentures . . . 54
SECTION 904. Effect of Supplemental Indentures . . . . 54
SECTION 905. Conformity with Trust Indenture Act . . . 55
SECTION 906. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . 55
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest . . . . 55
SECTION 1002. Maintenance of Office or Agency . . . . . 55
SECTION 1003. Money for Security Payments to Be Held
in Trust . . . . . . . . . . . . . . 56
- vii -
<PAGE>
Page
----
SECTION 1004. Statement by Officers as to Default . . . 57
SECTION 1005. Limitation on Dividends; Transactions
with Affiliates; Covenants as to
the Trust . . . . . . . . . . . . . . 57
SECTION 1006. Payment of Expenses of the Trust . . . . . 58
SECTION 1007. Registration Rights . . . . . . . . . . . 59
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . 60
SECTION 1102. Applicability of Article . . . . . . . . . 61
SECTION 1103. Election to Redeem; Notice to Trustee . . 61
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed . . . . . . . . . . . . . . 61
SECTION 1105. Notice of Redemption . . . . . . . . . . . 62
SECTION 1106. Deposit of Redemption Price . . . . . . . 62
SECTION 1107. Securities Payable on Redemption Date . . 63
SECTION 1108. Securities Redeemed in Part . . . . . . . 63
SECTION 1109. Optional Redemption . . . . . . . . . . . 64
SECTION 1110. Tax Event Redemption . . . . . . . . . . . 64
SECTION 1111. No Sinking Fund . . . . . . . . . . . . . 65
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate . . . . . . . . . 65
SECTION 1202. Default on Senior Indebtedness . . . . . . 66
SECTION 1203. Liquidation; Dissolution; Bankruptcy . . . 66
SECTION 1204. Subrogation . . . . . . . . . . . . . . . 68
SECTION 1205. Trustee to Effectuate Subordination . . . 69
SECTION 1206. Notice by the Company . . . . . . . . . . 69
SECTION 1207. Rights of the Trustee; Holders of Senior
Indebtedness . . . . . . . . . . . . 70
SECTION 1208. Subordination May Not Be Impaired . . . . 71
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Rights . . . . . . . . . . . . 72
SECTION 1302. Conversion Procedures . . . . . . . . . . 72
SECTION 1303. Conversion Price Adjustments . . . . . . . 75
SECTION 1304. Reclassification, Consolidation,
Merger or Sale of Assets . . . . . . 80
SECTION 1305. Notice of Adjustments of
Conversion Price . . . . . . . . . . 81
- viii -
<PAGE>
Page
----
SECTION 1306. Prior Notice of Certain Events . . . . . . 81
SECTION 1307. Certain Defined Terms . . . . . . . . . . 82
SECTION 1308. Dividend or Interest Reinvestment Plans . 83
SECTION 1309. Certain Additional Rights . . . . . . . . 83
SECTION 1310. Restrictions on Common Stock Issuable
Upon Conversion. . . . . . . . . . . 84
SECTION 1311. Trustee Not Responsible for Determining
Conversion Price or Adjustments . . . 85
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. No Recourse . . . . . . . . . . . . . . 85
EXHIBIT A Form of Security
ANNEX A Form of Amended and Restated Declaration of
Trust among the Company, as Sponsor, The Bank
of New York, as Property Trustee, The Bank of
New York (Delaware), as Delaware Trustee, and
J. Patrick Spainhour, Paul E. Francis and Wal-
ter J. Parks, as trustees, dated as of April
25, 1996.
______________
Note: This table of contents shall not, for any pur-
pose, be deemed to be a part of the Indenture.
- ix -
<PAGE>
INDENTURE, dated as of April 15, 1996, between AnnTaylor Stores
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
142 West 57th Street, New York, New York 10019, and The Bank of New York, a New
York banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Ann Taylor Finance Trust, a Delaware business trust (the
"Trust"), formed under the Amended and Restated Declaration of Trust among the
Company, as Sponsor, The Bank of New York, as property trustee (the "Property
Trustee") and The Bank of New York (Delaware) (the "Delaware Trustee") and J.
Patrick Spainhour, Paul E. Francis and Walter J. Parks, as trustees, dated as of
April 25, 1996 (the "Declaration"), pursuant to the Purchase Agreement (the
"Purchase Agreement") dated April 18, 1996, among the Company, the Trust and the
Initial Purchasers named therein, will issue and sell up to 1,750,000 (or
2,012,500 if the over-allotment option is exercised) of its 8 1/2% Convertible
Preferred Securities (the "Preferred Securities") with a liquidation amount of
$50 per Preferred Security, having an aggregate liquidation amount with respect
to the assets of the Trust of $87,500,000 (or $100,625,000 if the over-allotment
option is exercised);
WHEREAS, the trustees of the Trust, on behalf of the Trust, will
execute and deliver to the Company Common Securities evidencing an ownership
interest in the Trust, registered in the name of the Company, in an aggregate
amount equal to three percent of the capitalization of the Trust, equivalent to
54,124 Common Securities (or 62,244 Common Securities if the over-allotment
option is exercised), with a liquidation amount of $50 per Common Security,
having an aggregate liquidation amount with respect to the assets of the Trust
of $2,706,200 (or $3,112,200 if the over-allotment option is exercised) (the
"Common Securities");
WHEREAS, the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase from the Company
Securities (as defined below) in an aggregate principal amount of $90,206,200
(or $103,737,200 if the over-allotment option is exercised);
WHEREAS, the Company is guaranteeing the payment of distributions on
the Preferred Securities, and payment of the Redemption Price and payments on
liquidation with respect to the Preferred Securities, to the extent provided in
the Preferred Securities Guarantee Agreement (the "Guar-
<PAGE>
antee") between the Company and The Bank of New York, as guarantee trustee, for
the benefit of the holders of the Preferred Securities from time to time;
WHEREAS, the Company has duly authorized the creation of an issue of
its 8 1/2% Convertible Subordinated Debentures Due 2016 (the "Securities"), of
substantially the tenor and amount hereinafter set forth and to provide therefor
the Company has duly authorized the execution and delivery of this Indenture;
and
WHEREAS, so long as the Trust is a Holder of Securities, and any
Preferred Securities are outstanding, the Declaration provides that the holders
of Preferred Securities may cause the Conversion Agent to (a) exchange such
Preferred Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock;
WHEREAS, all things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either direct-
- 2 -
<PAGE>
ly or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
---
in Section 104.
"Additional Interest" has the meaning specified in Section 301.
-------------------
"Additional Payments" means Compounded Interest and Additional
-------------------
Interest, if any.
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
-----
registrar.
"Board of Directors" means either the board of directors of the
------------------
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
----------------
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day on which banking institutions in The City
------------
of New York or in Wilmington, Delaware are authorized or required by law to
close.
"Closing Price" has the meaning specified in Section 1307.
-------------
- 3 -
<PAGE>
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities" has the meaning specified in the recitals to this
-----------------
Instrument.
"Common Securities Guarantee" means any guarantee that the Company may
---------------------------
enter into that operate directly or indirectly for the benefit of holders of
Common Securities of the Trust.
"Common Stock" includes any stock of any class of the Company which
------------
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company. However, subject
to the provisions of Article Thirteen, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided, that if at any
--------
time there shall be more than one such resulting class, the shares of each such
class then so issuable on conversion shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
-------
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
--------------- -------------
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
- 4 -
<PAGE>
"Compounded Interest" has the meaning specified in Section 312.
-------------------
"Conversion Agent" means the Person appointed to act on behalf of the
----------------
holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 1302
hereof.
"Conversion Date" has the meaning specified in Section 1302.
---------------
"Corporate Trust Office" means the principal office of the Trustee in
----------------------
New York, New York, at which at any particular time its corporate trust business
shall be administered and which at the date of this Indenture is 101 Barclay
Street, 21 West, New York, New York 10286.
"Declaration" has the meaning specified in the Recitals of this
-----------
instrument.
"Defaulted Interest" has the meaning specified in Section 307.
------------------
"Delaware Trustee" has the meaning given it in the Recitals of this
----------------
instrument.
"Depositary" means, with respect to any Securities issued in the form
----------
of one or more Global Security, a clearing agency registered under the Exchange
Act that is dedicated to act as Depositary for the Securities.
"Direct Action" means a proceeding directly instituted by a holder of
-------------
Preferred Securities for enforcement of payment to such holder of the principal
of or interest on the Securities having a principal amount equal to the aggre-
gate liquidation amount of the Preferred Securities of such holder on or after
the respective due date specified in the Securities, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Securities on the
date such interest or principal is otherwise payable (or in the case of redemp-
tion, on the redemption date.)
"Dissolution Event" means that, as a result of the occurrence and
-----------------
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration and the Securities held by the Property Trustee are to be
distributed to the holders of Trust Securities issued by the Trust pro rata in
--- ----
accordance with the Declaration.
- 5 -
<PAGE>
"Dissolution Tax Opinion" has the meaning specified in the
-----------------------
Declaration.
"Effectiveness Period" has the meaning specified in Section 1007.
--------------------
"Event of Default" has the meaning specified in Section 501.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor legislation.
"Expiration Time" has the meaning specified in Section 1303(e).
---------------
"Extension Period" has the meaning specified in Section 312.
----------------
"Global Security" has the meaning specified in Section 314.
---------------
"Guarantee" has the meaning specified in the Recitals to this
---------
instrument.
"Holder" means a Person in whose name a Security is registered in the
------
Security Register.
"Indenture" means this instrument as originally executed or as it may
---------
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers," with respect to the Preferred Securities, means
------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation and Robertson, Stephens &
Company L.P.
"Interest Payment Date" has the meaning specified in Section 301.
---------------------
"Investment Company Event" has the meaning specified in the
------------------------
Declaration.
"Liquidated Damages" has the meaning specified in Section 1007.
------------------
- 6 -
<PAGE>
"Maturity", when used with respect to any Security, means the date on
--------
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of acceler-
ation, call for redemption or otherwise.
"Ministerial Action" has the meaning specified in Section 1110.
------------------
"90-Day Period" has the meaning specified in Section 1110.
-------------
"No Recognition Opinion" has the meaning specified in the Declaration.
----------------------
"Non Book-Entry Preferred Securities" has the meaning specified in
-----------------------------------
Section 314.
"Notice of Conversion" means the notice to be given by a holder of
--------------------
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Securities and to convert such Securities
into Common Stock on behalf of such holder.
"Officers' Certificate" means a certificate signed by the Chairman of
---------------------
the Board, the Vice Chairman of the Board, the President or a Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
------------------
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
-----------
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except: (i) Securities theretofore cancelled by the
------
Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose
payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if such
--------
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and (iii) Securities that have been paid pursuant to Section
- 7 -
<PAGE>
306, converted into Common Stock pursuant to Section 1301, or in exchange for or
in lieu of which other Securities have been authenticated and delivered pursuant
to this Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such Securities are
valid obligations of the Company, provided, however, that in determining whether
-------- -------
the Holders of the requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the Securi-
ties or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
------------
principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, company, partnership,
------
joint venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
--------------------
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the Recitals to
--------------------
this instrument.
"Property Trustee" has the meaning specified in the Recitals of this
----------------
instrument.
"Purchase Agreement" has the meaning specified in the Recitals to this
------------------
instrument.
- 8 -
<PAGE>
"Purchased Shares" has the meaning specified in Section 1303(e).
----------------
"Redemption Date", when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
----------------
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Redemption Tax Opinion" has the meaning set forth in the Declaration.
----------------------
"Reference Date" has the meaning specified in Section 1303(c).
--------------
"Registration Default" has the meaning specified in Section 1007.
--------------------
"Registration Rights Agreement" has the meaning specified in Section
-----------------------------
1007.
"Regular Record Date" has the meaning specified in Section 301.
-------------------
"Responsible Officer", when used with respect to the Trustee, means
-------------------
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the treasurer, any assistant treasurer, any trust officer or assis-
tant trust officer, the controller or any assistant controller or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Securities Legend" has the meaning specified in Section
----------------------------
202.
"Securities" has the meaning specified in the Recitals to this
----------
instrument.
"Security Register" and "Security Registrar" have the respective
----------------- ------------------
meanings specified in Section 305.
"Senior Indebtedness" means in respect of the Company (i) the princi-
-------------------
pal, premium, if any, and interest in
- 9 -
<PAGE>
respect of (A) indebtedness of such obligor for money borrowed and
(B) indebtedness evidenced by securities, debentures, bonds or other similar
instruments issued by such obligor, (ii) all capital lease obligations of such
obligor, (iii) all obligations of such obligor issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business),
(iv) all obligations of such obligor for the reimbursement of any letter of
credit, banker's acceptance, security purchase facility or similar credit
transaction, (v) all obligations of the type referred to in clauses (i) through
(iv) above of other persons for the payment of which such obligor is responsible
or liable as obligor, guarantor or otherwise, and (vi) all obligations of the
type referred to in clauses (i) through (v) above of other persons secured by
any lien on any property or asset of such obligor (whether or not such
obligation is assumed by such obligor), except for (1) any such indebtedness
that is by its terms subordinated to or pari passu with the Securities and
(2) any indebtedness between or among such obligor or its affiliates, including
all other debt securities and guarantees in respect of those debt securities
issued to any other trust, or a trustee of such trust, partnership, or other
entity affiliated with the Company that is, directly or indirectly, a financing
vehicle of the Company (a "Financing Entity") in connection with the issuance by
such Financing Entity of preferred securities or other securities which rank
pari passu with, or junior to, the Preferred Securities. Such 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 such Senior Indebtedness.
"Shelf Registration Statement" has the meaning specified in Section
----------------------------
1007.
"Special Event" has the meaning specified in the Declaration.
-------------
"Special Record Date" for the payment of any Defaulted Interest means
-------------------
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
---------------
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal, together with any accrued and unpaid
interest (including Compounded Interest), of such Security or such installment
of interest is due and payable.
- 10 -
<PAGE>
"Subsidiary" of any Person means (i) a corporation more than 50% of
----------
the outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tax Event" has the meaning specified in the Declaration.
---------
"Trading Day" has the meaning specified in Section 1307.
-----------
"Trust" has the meaning specified in the Recitals to this instrument.
-----
"Trustee" means the Person named as the "Trustee" in the first
-------
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
-------------------
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred Securities.
----------------
"Vice President," when used with respect to the Company or the
--------------
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means capital stock of such Person which
------------
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
- 11 -
<PAGE>
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act or reasonably requested by the Trustee in connection with such
application or request. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
- 12 -
<PAGE>
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of substan-
tially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute
- 13 -
<PAGE>
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee or the Company, as the
case may be, deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Outstanding Securities entitled to give, make or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Holders. If
not set by the Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such vote, prior to
such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote, as
the case may be. With regard to any record date, only the Holders on such date
(or their duly designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any such action with regard to any particular Security may do so
with regard to all or any part of the principal amount of such Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and the Company.
-----------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
- 14 -
<PAGE>
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when
mailed to a Holder in the aforesaid manner shall be conclusively deemed to have
been received by such Holder whether or not actually received by such Holder.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
- 15 -
<PAGE>
SECTION 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Preferred
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
- 16 -
<PAGE>
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert his Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal or conversion of the Securities need not be made on such date, but may
be made on the next succeeding Business Day (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the immediately preceding
Business Day) with the same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated Maturity or on such last day for
conversion, provided, that no interest shall accrue for the period from and
--------
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication shall
be substantially in the form of Exhibit A which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). The Company
shall furnish any such legend not contained in Exhibit A to the Trustee in
writing. Each Security shall be dated the date of its authentication. The
terms and provisions of the Securities set forth in Exhibit A are part of the
terms of this Indenture and to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed, litho-
graphed or engraved or produced by any combination of these methods on steel
engraved borders or may be produced in any other manner permitted by the rules
of any securities exchange on which the Securities may be listed, all as deter-
mined by the officers executing such Securities, as evidenced by their
execution of such Securities.
- 17 -
<PAGE>
SECTION 202. Initial Issuance to Property Trustee.
------------------------------------
The Securities initially issued to the Property Trustee of the Trust
shall be in the form of one or more individual certificates in definitive, fully
registered form without distribution coupons and shall bear the following legend
(the "Restricted Securities Legend") unless the Company determines otherwise in
accordance with applicable law:
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH ANNTAYLOR STORES CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COM-
- 18 -
<PAGE>
PLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is limited to the sum of (a) $90,206,200 and
(b) such aggregate principal amount (which may not exceed $13,531,000 aggregate
principal amount) of Securities, if any, as shall be purchased by the Trust
pursuant to an over-allotment option in accordance with the terms and provisions
of the Purchase Agreement dated April 18, 1996, among the Company, the Trust re-
ferred to therein, and the Initial Purchasers except for Securities authen-
ticated and delivered upon registration of transfer of, or in exchange for, or
in lieu of, other Securities pursuant to Section 304, 305, 306, 906, 1108 or
1301.
The Securities shall be known and designated as the "8 1/2%
Convertible Subordinated Debentures Due 2016" of the Company. Their Stated
Maturity shall be April 15, 2016, and they shall bear interest at the rate of
8 1/2% per annum, from April 25, 1996 or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided for,
as the case may be, payable quarterly (subject to deferral as set forth herein),
in arrears, on January 15, April 15, July 15 and October 15 (each an "Interest
Payment Date") of each year, commencing July 15, 1996 until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Security is registered at the close of business on
the regular record date for such interest installment, which shall be the close
of business on the date which is 15 days prior to each Interest Payment Date
(the "Regular Record Date"). Interest will compound quarterly and will accrue
at the rate of 8 1/2% per annum on any interest installment in arrears for more
than one quarter or during an extension of an interest payment period as set
forth in Section 312 hereof.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest in computed, will
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<PAGE>
be computed on the basis of the actual number of days elapsed. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
If at any time while the Property Trustee is the Holder of any
Securities, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company will pay as additional interest ("Additional
Interest") on the Securities held by the Property Trustee, such amounts as shall
be required so that the net amounts received and retained by the Trust and the
Property Trustee after paying any such taxes, duties, assessments or other
governmental charges will be not less than the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at
the office or agency of the Company in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
--------
however, that at the option of the Company payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be redeemable as provided in Article Eleven
hereof.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve hereof.
The Securities shall be convertible as provided in Article Thirteen
hereof.
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $50 and integral multiples thereof.
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<PAGE>
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the authen-
tication and delivery of such Securities; and the Trustee in accordance with
such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without
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<PAGE>
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at any office or agency of the Company
designated pursuant to Section 1002, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Securities the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
(a) General.
-------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
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<PAGE>
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 or 1301 not involving any transfer.
The Company shall not be required (i) in the case of a partial
redemption of the Securities, to issue, register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before the
day of the mailing of a notice of redemption of Securities selected for
redemption under Section 1104 and ending at the close of business on the day of
such mailing, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
(b) Transfer Procedures and Restrictions.
------------------------------------
The Securities may not be transferred except in compliance with the
Restricted Securities Legend unless otherwise determined by the Company in
accordance with applicable law. Upon any distribution of the Securities to the
holders of the Preferred Securities in accordance with the Declaration, the
Company and the Trustee shall enter into a supplemental indenture pursuant to
Section 901(6) to provide for transfer procedures and restrictions with respect
to the Securities substantially similar to those contained in the Declaration to
the extent applicable in the circumstances existing at the time of such
distribution.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
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<PAGE>
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder,
- 24 -
<PAGE>
and such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix
a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to
each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange, if,
after notice given
- 25 -
<PAGE>
by the Company to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue (including in each such case Compounded Interest),
which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company shall
not make nor be required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest (including Additional Interest,
Compounded Interest and Liquidated Damages) on the Securities being converted,
which shall be deemed to be paid in full.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such Secu-
rity for the purpose of receiving payment of principal of and (subject to
Section 307) interest (including Additional Interest, Compounded Interest and
Liquidated Damages) on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
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<PAGE>
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; provided, however, that the Trustee shall not be required to destroy the
-------- -------
certificates representing such cancelled Securities.
SECTION 310. Right of Set Off.
----------------
Notwithstanding anything to the contrary in this Indenture, the
Company shall have the right to set off any payment it is otherwise required to
make hereunder to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee.
SECTION 311. CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, that any such notice may
--------
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 312. Option to Extend Interest Payment Period.
----------------------------------------
(a) The Company shall have the right at any time during the term of
the Securities to defer interest payments from time to time by extending the
interest payment period for successive periods not exceeding 20 consecutive
quarters for each such period; provided, no Extension Period may extend beyond
--------
the maturity date of the Securities. At the end of each Extension Period, the
Company shall pay all interest then accrued and unpaid (including Additional
Interest and Liquidated Damages) together with interest
- 27 -
<PAGE>
thereon compounded quarterly at the rate specified for the Securities to the
extent permitted by applicable law ("Compounded Interest"); provided, that
--------
during any Extension Period, the Company (i) shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock, except for
dividends or distributions in shares of its capital stock of the same class on
which such dividend or distribution is being paid and conversions or exchanges
of common stock of one class into common stock of another class and except for a
redemption, purchase or other acquisition of shares of its capital stock made
for the purpose of an employee incentive plan or benefit plan of the Company or
any of its subsidiaries, (ii) shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem, any debt securities
issued by the Company that rank pari passu with or junior to the Securities
(except by conversion into or exchange for shares of its capital stock) and
(iii) shall not make any guarantee payments with respect to the foregoing.
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together with
--------
all previous and further extensions thereof may not exceed 20 consecutive
quarters and may not extend beyond the maturity of the Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the above requirements.
No interest during an Extension Period, except at the end thereof, shall be due
and payable.
(b) If the Property Trustee is the sole Holder of the Securities at
the time the Company selects an Extension Period, the Company shall give written
notice to the Regular Trustees, the Property Trustee and the Trustee of its
selection of such Extension Period at least one Business Day prior to the earli-
er of (i) the date the distributions on the Preferred Securities are payable or
(ii) if the Preferred Securities are listed on the New York Stock Exchange or
other stock exchange or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or the
date such distributions are payable, but in any event not less than ten Business
Days prior to such record date.
(c) If the Property Trustee is not the sole holder of the Securities
at the time the Company selects an Extension Period, the Company shall give the
Holders of the Securities and the Trustee written notice of its selection of
such Extension Period at least ten Business Days prior to the earlier of (i) the
next succeeding Interest Payment Date
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<PAGE>
or (ii) if the Preferred Securities are listed on the New York Stock Exchange or
other stock exchange or quotation system, the date the Company is required to
give notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Securities on the record or payment date of
such related interest payment, but in any event not less than two Business Days
prior to such record date.
(d) The quarter in which any notice is given pursuant to paragraphs
(b) and (c) hereof shall be counted as one of the 20 quarters permitted in the
maximum Extension Period permitted under paragraph (a) hereof.
SECTION 313. Paying Agent, Security Registrar and Conversion Agent.
-----------------------------------------------------
The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of
its Affiliates may act in any such capacity.
SECTION 314. Global Security.
---------------
(a) In connection with a Dissolution Event,
(i) the Securities in certificated form may be presented to the
Trustee by the Property Trustee in exchange for a global Security in an
aggregate principal amount equal to the aggregate principal amount of all out-
standing Securities (a "Global Security"), to be registered in the name of the
Depositary, or its nominee, and delivered by the Trustee to the Depositary for
crediting to the accounts of its participants pursuant to the instructions of
the Regular Trustees. The Company upon any such presentation shall execute a
Global Security in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with this Indenture.
Payments on the Securities issued as a Global Security will be made to the
Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Securities in certificated form may be presented to the
Trustee by the Property Trustee and any Preferred Security Certificate which
represents Preferred Securities other than Preferred Securities held by the
Depositary or its nominee ("Non Book-Entry
- 29 -
<PAGE>
Preferred Securities") will be deemed to represent beneficial interests in
Securities presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the Non Book-Entry
Preferred Securities until such Preferred Security Certificates are presented to
the Security Registrar for transfer or reissuance at which time such Preferred
Security Certificates will be cancelled and a Security, registered in the name
of the holder of the Preferred Security Certificate or the transferee of the
holder of such Preferred Security Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Security Certificate cancelled, will be executed by the Company and
delivered to the Trustee for authentication and delivery in accordance with this
Indenture. On issue of such Securities, Securities with an equivalent aggregate
principal amount that were presented by the Property Trustee to the Trustee will
be deemed to have been cancelled.
(b) A Global Security may be transferred, in whole but not in part,
only to another nominee of the Depositary, or to a nominee of such successor
Depositary.
(c) If (i) the Depositary notifies the Company that it is unwilling
or unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Event of Default with respect to such
Securities, as the case may be, the Company will execute, and, subject to
Article Three of this Indenture, the Trustee, upon written notice from the
Company and receipt of a Company Order, will authenticate and deliver the
Securities in definitive registered form without coupons, in authorized denomi-
nations, and in an aggregate principal amount equal to the principal amount of
the Global Security in exchange for such Global Security. In addition, upon an
Event of Default or if the Company may at any time determine that the Securities
shall no longer be represented by a Global Security, in such event the Company
will execute, and subject to Section 305 of this Indenture, the Trustee, upon
receipt of an Officers' Certificate evidencing such determination by the
Company, will authenticate and make available for delivery the Securities in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. Upon the exchange of the Global
Security for such Securities in definitive registered form without coupons, in
authorized denominations, the Global Security shall be cancelled by the Trustee.
Such Securities in
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<PAGE>
definitive registered form issued in exchange for the Global Security shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been de-
stroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation have become due and payable,
and the Company has deposited or caused to be deposited with
the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal and interest
(including Compounded Interest and Liquidated Damages) to
the
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<PAGE>
date of such deposit (in the case of Securities which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee. All moneys
deposited with the Trustee pursuant to Section 401 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall be returned to
the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article Twelve or be voluntary or involuntary or be effected
- 32 -
<PAGE>
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure for 30 days to pay interest on the
Securities, including any Additional Interest, Compounded
Interest and Liquidated Damages in respect thereof, when
due; provided that a valid extension of an interest payment
--------
period will not constitute a default in the payment of
interest (including any Additional Interest, Compounded
Interest or Liquidated Damages) for this purpose;
(2) failure to pay principal of or premium, if any, on
the Securities when due whether at maturity, upon redemp-
tion, by declaration or otherwise;
(3) failure by the Company to deliver shares of its
Common Stock upon an election by a holder of Preferred
Securities to convert such Preferred Securities;
(4) failure to observe or perform any other covenant
contained in the Indenture for 90 days after notice to the
Company by the Trustee or by the holders of not less than
25% in aggregate outstanding principal amount of the
Securities;
(5) entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of
the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the
Company or of substantially all of the property of the
Company, or or-
- 33 -
<PAGE>
dering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days;
(6) the commencement by the Company of a voluntary
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by the Company or to
the entry of a decree or order for relief in respect of
itself in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against
the Company, or the filing by the Company of a petition or
answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by the
Company to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of substantially all of the
property of the Company, or the making by the Company of an
assignment for the benefit of creditors, or the admission by
the Company in writing of its inability to pay its debts
generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(7) the voluntary or involuntary dissolution, winding
up or termination of the Trust, except in connection with
(i) the distribution of Securities to holders of Preferred
Securities in liquidation of the Trust upon the redemption
of all of the outstanding Preferred Securities of the Trust
or (ii) certain mergers, consolidations or amalgamations,
each as permitted by the Declaration.
- 34 -
<PAGE>
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal of all the Securities and
any other amounts payable hereunder to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal and all accrued interest shall become
immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as provided in this Article hereinafter, the Holders of a majority
in aggregate principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest (including any Additional
Interest, Compounded Interest and Liquidated Damages) on all
Securities,
(B) the principal of any Securities which have become
due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if:
(1) default is made in the payment of any interest (including
any Additional Interest or Compounded Interest) on any Security when
such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest (including any Additional Payments) and,
to the extent that payment thereof shall be legally enforceable, interest on any
overdue principal and on any overdue interest (including any Additional Interest
and Compounded Interest), at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to
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<PAGE>
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses, disburse-
ments and advances of the Trustee, its agents and counsel, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal or interest (including any Additional Payments), upon presentation
of the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including any Additional Payments) on the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
principal and interest (including any Compounded Interest),
respectively.
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<PAGE>
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest
----------------------------------------------------------------
and Convert.
-----------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest
(including any Additional Payments) on such Security on the respective Stated
Maturities expressed in such Security (or, in
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<PAGE>
the case of redemption, on the Redemption Date) and to convert such Security in
accordance with Article Thirteen and to institute suit for the enforcement of
any such payment and right to convert, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding
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<PAGE>
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided, that
--------
(1) such direction shall not be in conflict with any rule of law
or with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
-----------------------
Subject to Section 902 hereof, the Holders of not less than a majority
in principal amount of the Outstanding Securities may on behalf of the Holders
of all the Securities waive any past default hereunder and its consequences,
except a default
(1) in the payment of the principal of, premium, if any, or
interest (including any Additional Payments and Liquidated Damages) on
any Security (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due other-
wise than by acceleration has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected; provided, however, that
-------- -------
if the Securities are held by the Trust or a trustee of the Trust,
such waiver shall not be effective until the holders of a majority in
liquidation amount of Trust Securities shall have consented to such
waiver; provided, further, that if the consent of the Holder of each
-------- -------
outstanding Security is required, such waiver shall not be effective
until each holder of the Trust Securities shall have consented to such
waiver.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as
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<PAGE>
Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; provided, that neither this Section nor the Trust Indenture Act shall be
--------
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company or the Trustee or in any suit
for the enforcement of the right to receive the principal of and interest
(including any Additional Payments) on any Security or to convert any Security
in accordance with Article Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 516. Enforcement by Holders of Preferred Securities.
----------------------------------------------
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Securities on the date such interest
or principal is otherwise payable, the Company acknowledges that, in such event,
a holder of Preferred Securities may institute a Direct Action for payment on or
after the respective due date specified in the Securities. The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of all the holders of Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Securities held by the Trust or the
Property Trustee and the Company shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the Preferred Securi-
ties to the extent of any payments made by the Company to such holder in any
Direct Action. The holders of Preferred Securities will
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<PAGE>
not be able to exercise directly any other remedy available to the holders of
the Securities.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
-------- -------
in the case of any default of the character specified in Section 501(4), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced
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<PAGE>
by a Company Request or Company Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to reasonable
examination of the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
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<PAGE>
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without
negligence or willful misconduct, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 608 and 613, may other-
wise deal with the Company with the same rights it would have if it were not
Trustee, Paying Agent, Security Registrar, or such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, fees,
disbursements and advances incurred or made by the Trustee in accor-
dance with any provision of this Indenture (including the reasonable
compensation and the ex-
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<PAGE>
penses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(6) or Section 501(7), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and has its Corporate
Trust Office in New York, New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
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<PAGE>
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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<PAGE>
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities deliv-
ered to the Company and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who has been
a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; provided, that on request of the Company or
--------
the successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments required to more fully and
certainly vest in and confirm to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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<PAGE>
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders as of a date not more than
15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more
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<PAGE>
than 15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year, commencing May 15,
1996, the Trustee shall transmit by mail to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as
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may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant to such Act; provided, that any such information,
--------
documents or reports required to be filed with the Commission pursuant to Sec-
tion 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or determi-
nable from information contained therein, including the Company's compliance
with any of its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
The Company shall also provide to the Trustee on a timely basis such
information as the Trustee requires to enable the Trustee to prepare and file
any form required to be submitted by the Company with the Internal Revenue Ser-
vice and the Holders of the Notes relating to original issue discount,
including, without limitation, Form 1099-OID or any successor form.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge with or into any other
Person or, directly or indirectly, convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis to any
Person, unless:
(1) the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer
or lease, all or substantially all of the properties and assets of the
Company on a consolidated basis shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form reasonably sat-
isfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities
and the
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performance or observance of every covenant of this Indenture on the part
of the Company to be performed or observed and shall have provided for
conversion rights in accordance with Article Thirteen;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company
or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supple-
mental indenture is required in connection with such transaction, such
supplemental indenture, comply with this Article and that all condi-
tions precedent herein provided for relating to such transaction have
been complied with.
This Section shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company on a consolidated
basis in accordance with Section 801, the successor Person formed by such con-
solidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
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ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article Thirteen; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture; provided, that such action
--------
pursuant to this clause (4) shall not adversely affect the interests
of the Holders of the Securities or, so long as any of the Preferred
Securities shall remain outstanding, the holders of the Preferred
Securities;
(5) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act; or
(6) to make provision for transfer procedures, certification, book-
entry provisions, the form of restricted securities legends, if any, to be
placed on Securities, and all other matters required pursuant to Section
305(b) or otherwise necessary, desirable or appropriate in connection with
the issuance of Securities to holders of Preferred Securities in the event
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of a distribution of Securities by the Trust if a Special Event occurs and
is continuing.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
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consent of the Holder of each Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal of, or any
installment of interest (including any Additional Payments) on, any
Security, or reduce the principal amount thereof, or reduce the rate
or extend the time for payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, any Security or
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date), or adversely affect the right to convert any Security as
provided in Article Thirteen (except as permitted by Section 901(3)),
or modify the provisions of this Indenture with respect to the subor-
dination of the Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or
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waived without the consent of the Holder of each Outstanding Security
affected thereby;
provided that if the Securities are held by the Trust or a trustee of the Trust,
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such supplemental indenture shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to such
supplemental indenture; provided, further, that if the consent of the Holder of
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each Outstanding Security is required, such supplemental indenture shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record
date, or their duly designated proxies, and only such Persons, shall be entitled
to consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided that unless such consent shall have
--------
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
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Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby. No such supplemental indenture shall directly
or indirectly modify the provisions of Article Twelve in any manner which might
terminate or impair the rights of the Senior Indebtedness pursuant to such
subordination provisions.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest.
---------------------------------
The Company will duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the United States an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
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Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
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shall in any manner relieve the Company of its obligation to maintain an office
or agency in the United States for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
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trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of any such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease.
SECTION 1004. Statement by Officers as to Default.
-----------------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. Limitation on Dividends; Transactions with Affiliates; Covenants
----------------------------------------------------------------
as to the Trust.
---------------
(a) The Company covenants that so long as the Securities are
outstanding, if (i) there shall have occurred and be continuing any event that
with the giving of notice or the lapse of time or both, would constitute an
Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Guarantee, or (iii) the Company has
exercised its option to defer interest payments on the Securities by extending
the interest payment period and such period, or any extension thereof, shall be
continuing, then the Company (a) shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any class of its preferred or common stock,
except for dividends or distributions in shares of its capital stock of the same
class on which such dividend or
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distribution is being paid and conversions or exchanges of common stock of one
class into common stock of another class and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purposes of an
employee incentive plan or benefit plan of the Company or any of its
subsidiaries, (b) shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by the
Company that rank pari passu with or junior to the Securities (except by
conversion into or exchange for shares of its capital stock), and (c) shall not
make any guarantee payments with respect to the foregoing.
(b) The Company also covenants and agrees (i) that it shall directly
or indirectly maintain 100% ownership of the Common Securities of the
Trust; provided, however, that any permitted successor of the Company hereunder
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may succeed to the Company's ownership of such Common Securities and (ii) that
it shall use its reasonable efforts, consistent with the terms and provisions of
the Declaration, to cause the Trust (x) to remain a statutory business trust,
except in connection with the distribution of the Securities to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes.
SECTION 1006. Payment of Expenses of the Trust.
--------------------------------
In connection with the offering, sale and issuance of the Securities
to the Property Trustee in connection with the sale of the Trust Securities by
the Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the offering,
sale and issuance of the Securities, including commissions to the Initial
Purchasers payable pursuant to the Purchase Agreement and compensation of the
Trustee under the Indenture in accordance with the provisions of Section 607 of
the Indenture;
(b) be responsible for and pay for all debts and obligations (other
than with respect to the Trust Securities) of the Trust, pay for all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization of the Trust, the offering, sale and issuance of
the Trust Securities (including commissions to the Initial Purchasers in
connection therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, the costs and expenses relating to the opera-
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tion of the Trust, including without limitation, costs and expenses of accoun-
tants, attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other telecommunica-
tions expenses and costs and expenses incurred in connection with the
acquisition, financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
SECTION 1007. Registration Rights.
-------------------
The holders of the Preferred Securities, the Securities, the Guarantee
and the shares of Common Stock of the Company issuable upon conversion of the
Securities (collectively, the "Registrable Securities") are entitled to the
benefits of a Registration Rights Agreement, dated as of April 25, 1996, among
the Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company has agreed for the
benefit of the holders of Registrable Securities that (i) it will, at its cost,
within 60 days after the date of issuance of the Registrable Securities, file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to the resales of the Registrable Securities, (ii) it
will use its best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission within 180 days after the date of issuance
of the Registrable Securities and (iii) the Sponsor will use its best efforts to
maintain such Shelf Registration Statement continuously effective under the
Securities Act until the third anniversary of the effectiveness of the Shelf
Registration Statement or such earlier date as is provided in the Registration
Rights Agreement (the "Effectiveness Period").
If (i) on or prior to 60 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the issuing
of the Registrable Securities, such Shelf Registration Statement is not declared
effective (each, a "Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Securities and, accordingly, additional dis-
tributions will accrue on the Preferred Securities, in each case from and
including the day following such Registration Default. Liquidated Damages will
be paid quarterly in arrears, with the first quarterly payment due on the
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first interest or distribution payment date, as applicable, following the date
on which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the principal
amount or liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of one percent (0.50%) thereof
from and after the 91st day following such Registration Default. Upon (x) the
filing of the Shelf Registration Statement after the 60-day period described in
clause (i) above or (y) the effectiveness of the Shelf Registration Statement
after the 180-day period described in clause (ii) above, the interest rate borne
by the Securities and the distribution rate borne by the Preferred Securities
from the date of such filing or effectiveness, as the case may be, will be
reduced to the original interest rate. In the event that the Shelf Registration
Statement ceases to be effective during the Effectiveness Period for more than
30 consecutive days or any 90 days, whether or not consecutive, during any 12-
month period, then the interest rate borne by the Securities and the distribu-
tion rate borne by the Preferred Securities will each increase by an additional
one-half of one percent (0.50%) per annum from such 31st or 91st day, as
applicable, until such time as the Shelf Registration Statement again becomes
effective.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
-------------------
(a) The Securities may be redeemed at the election of the Company, in
whole or in part, at any time or from time to time after April 15, 1999, at the
Redemption Prices set forth in Section 1109 below upon not less than 30 or more
than 60 days' notice.
(b) The Securities may be redeemed, in whole (but not in part), at
the election of the Company at any time within 90 days following the occurrence
of a Tax Event; provided, however, that if, at the time there is available to
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the Company or the Trust the opportunity to eliminate, within such 90-day
period, the Tax Event by taking some ministerial action, such as filing a form
or making an election, or pursuing some other similar reasonable measure, which
in the sole judgment of the Company has or will cause no adverse effect on the
Trust, the Holders of the Trust Securities or the Company or will involve no
material cost, then the Company or the Trust shall pursue such measure in lieu
of redemption.
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SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as permitted
by Section 1101, shall be made in accordance with such provision and this
Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days and no more than 90
days prior to the Redemption Date fixed by the Company, notify the Trustee in
writing of such Redemption Date and of the principal amount of Securities to be
redeemed and provide a copy of the notice of redemption given to Holders of
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $50 or
any integral multiple thereof) of the principal amount of the Securities.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
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portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if relevant, CUSIP or ISIN number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(4) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
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SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
(including Additional Payments, if any) to the Redemption Date; provided, howev-
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er, that installments of interest whose Stated Maturity is on or prior to the
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Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to the terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by the Security.
SECTION 1108. Securities Redeemed in Part.
---------------------------
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Security during
a period beginning at the opening of business 15 days before any selection for
redemption of Securities and ending at the close of business on the earliest
date in which the relevant notice of redemption is deemed to have been given to
all holders of Securities to be so redeemed and (ii) register the transfer of or
exchange any Securities so selected for redemption, in whole or in part, except
for the unredeemed portion of any Securities being redeemed in part.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such Secu-
rity without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Security so
surrendered.
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SECTION 1109. Optional Redemption.
-------------------
(a) The Company shall have the right to redeem the Securities, in
whole or in part, at any time or from time to time on or after April 15, 1999,
upon not less than 30 nor more than 60 days' notice, at a redemption price equal
to 105.95% of the principal amount of the Securities to be redeemed plus any
accrued and unpaid interest, including Additional Payments and Liquidated
Damages, if any, to the Redemption Date, if redeemed on or before April 15,
2000, and at the following optional redemption prices (expressed as a percentage
of the principal amount of Securities), if redeemed during the 12-month period
beginning April 15:
Percentage of
Principal
Year Amount
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2000 . . . . . . . . . 105.10%
2001 . . . . . . . . . 104.25%
2002 . . . . . . . . . 103.40%
2003 . . . . . . . . . 102.55%
2004 . . . . . . . . . 101.70%
2005 . . . . . . . . . 100.85%
2006 and thereafter . . 100.00%
plus, in each case, accrued and unpaid interest, including Additional Payments
and Liquidated Damages, if any, to the Redemption Date. Any redemption pursuant
to this Section 1109 shall be made pursuant to the provisions of Sections 1101
through 1108 hereof.
(b) If a partial redemption of the Securities would result in the
delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
listed, the Company shall not be permitted to effect such partial redemption and
may only redeem the Securities in whole.
SECTION 1110. Tax Event Redemption.
--------------------
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel rendering the Dissolution Tax Opinion
that a No Recognition Opinion cannot be delivered to the Trust,
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then, notwithstanding Section 1109(a) but subject to Section 1109(b), the
Company shall have the right upon not less than 30 days nor more than 60 days
notice to the Holders of the Securities to redeem the Securities in whole (but
not in part) for cash at a redemption price equal to 100% of the principal
amount of the Securities plus accrued and unpaid interest, if any, within 90
days following the occurrence of such Tax Event (the "90-Day Period"); provided,
--------
however, that if, at the time there is available to the Company or the Trust the
- -------
opportunity to eliminate within the 90-Day Period, the Tax Event by taking some
ministerial action ("Ministerial Action"), such as filing a form or making an
election, or pursuing some other similar reasonable measure which, in the sole
judgment of the Company, has or will cause no adverse effect on the Company, the
Trust or the Holders of the Trust Securities and will involve no material cost,
the Company or the Trust shall pursue such ministerial action or other measure
in lieu of redemption, and provided, further, that the Company shall have no
-------- -------
right to redeem the Securities while the Trust is pursuing any ministerial
action or other similar measure pursuant to its obligations under the Declara-
tion. The redemption payment of 100% of the principal amount of the Securities
plus accrued and unpaid interest, including Additional Payments, if any, shall
be made prior to 12:00 noon, New York time, on the date of such redemption or
such earlier time as the Company determines, provided, that the Company shall
--------
deposit with the Trustee an amount sufficient to make such redemption payment by
10:00 a.m. on the date such redemption payment is to be made.
SECTION 1111. No Sinking Fund.
---------------
The Securities are not entitled to the benefit of any sinking fund.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate.
------------------------
The Company covenants and agrees, and each Holder of Securities by
such Holder's acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article Twelve; and
each Holder of a Security, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions. The
payment by the Company of the principal of, premium, if any, and interest
(including Additional Payments) on all Securities issued hereunder
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shall, to the extent and in the manner hereinafter set forth, be subordinated
and junior in right of payment to the prior payment in full of all existing and
future Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred; provided however, that no provision of this Article Twelve
-------- -------
shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 1202. Default on Senior Indebtedness.
------------------------------
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness continuing beyond the period of grace, if any, specified in
the instrument evidencing such Senior Indebtedness, unless and until such
default shall have been cured or waived or shall have ceased to exist, and in
the event that the maturity of any Senior Indebtedness has been accelerated
because of a default, then no payment shall be made by the Company with respect
to the principal of (including redemption payments, if any), premium, if any, or
interest on the Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 1202, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
SECTION 1203. Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before any payment is made on account of the principal (and premium, if any) or
interest on the Securities; and upon any such disso-
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lution or winding up or liquidation or reorganization, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee would be entitled, except for the provisions of this Article
Twelve, shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders of the Securities or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Holders of
Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the Holders of the Securities before all Senior Indebtedness is paid
in full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article Twelve, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Twelve with
respect to the Securities to the payment of all Senior Indebtedness which may at
the time be outstanding; provided, that (i) such
--------
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Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the holders of
such Senior Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment. The consolidation of the Company with,
or the merger of the Company with or into, another Person or the liquidation or
dissolution of the Company following the conveyance, transfer or lease of all or
substantially all its properties and assets on a consolidated basis to another
Person upon the terms and conditions provided for in Article Eight hereof shall
not be deemed a dissolution, winding up, liquidation or reorganization for the
purposes of this Section 1203 if such other Person shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
stated in Article Eight hereof. Nothing in Section 1202 or in this Section 1203
shall apply to claims of, or payments to, the Trustee under or pursuant to Sec-
tion 607 hereof.
SECTION 1204. Subrogation.
-----------
Subject to the payment in full of all Senior Indebtedness, the rights
of the Holders of the Securities shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of (and premium, if any,) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Holders of the
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Securities or the Trustee would be entitled except for the provisions of this
Article Twelve, and no payment over pursuant to the provisions of this Article
Twelve, to or for the benefit of the holders of such Senior Indebtedness by
Holders of the Securities or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article
Twelve are and are intended solely for the purposes of defining the relative
rights of the Holders of the Securities, on the one hand, and the holders of
such Senior Indebtedness on the other hand.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of such Senior Indebtedness in respect
of cash, property or securities of the Company, as the case may be, received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Twelve, the Trustee, subject to the provisions of Section 603,
and the Holders of the Securities, shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.
SECTION 1205. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of Securities by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve and appoints the Trustee as such Holder's attorney-in-fact
for any and all such purposes.
SECTION 1206. Notice by the Company.
---------------------
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company which would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. Notwithstanding the
provisions of this Article Twelve or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the
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<PAGE>
provision of this Article Twelve, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
of the Trustee from the Company or a holder or holders of Senior Indebtedness or
from any trustee therefor; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 603 hereof, shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
-------- -------
the Trustee shall not have received the notice provided for in this Section 1206
at least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (and premium, if any) or interest on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which they were received, and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 603, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of such Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Twelve, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
right of such Person under this Article Twelve, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness.
-----------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Twelve in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior Indebt-
edness, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
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<PAGE>
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article Twelve, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Section 603, the Trustee shall not be liable to any
holder of such Senior Indebtedness if it shall pay over or deliver to Holders of
Securities, the Company or any other Person money or assets to which any holder
of such Senior Indebtedness shall be entitled by virtue of this Article Twelve
or otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article Twelve and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 1208. Subordination May Not Be Impaired.
---------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, such Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior
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Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Rights.
-----------------
Subject to and upon compliance with the provisions of this Article,
the Securities are convertible, at the option of the Holder, at any time on or
before the Business Day immediately preceding the date of repayment of such
Securities, whether at maturity or upon redemption (either at the option of the
Company or pursuant to a Tax Event) into fully paid and nonassessable shares of
Common Stock of the Company at an initial conversion rate of 2.545 shares of
Common Stock for each $50 in aggregate principal amount of Securities (equal to
a conversion price of $19.65 per share of Common Stock), subject to adjustment
as described in this Article Thirteen. A Holder of Securities may convert any
portion of the principal amount of the Securities into that number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) obtained by dividing the principal amount of the
Securities to be converted by such conversion price. In case a Security or
portion thereof is called for redemption, such conversion right in respect of
the Security or portion so called shall expire at the close of business on the
corresponding Redemption Date, unless the Company defaults in making the payment
due upon redemption.
SECTION 1302. Conversion Procedures.
---------------------
(a) In order to convert all or a portion of the Securities, the
Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the Holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the Declaration to
convert such Preferred Securities into Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $50 principal amount of Securities
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for each Preferred Security) and (ii) to immediately convert such Securities, on
behalf of such holder, into Common Stock of the Company pursuant to this Article
Thirteen and, if such Preferred Securities are in definitive form, surrendering
such Preferred Securities, duly endorsed or assigned to the Company or in blank.
So long as any Preferred Securities are outstanding, the Trust shall not convert
any Securities except pursuant to a Notice of Conversion delivered to the
Conversion Agent by a holder of Preferred Securities.
If a Notice of Conversion is delivered on or after the Regular Record
Date and prior to the subsequent Interest Payment Date, the Holder will be
entitled to receive the interest payable on the subsequent Interest Payment Date
on the portion of Securities to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. Except as otherwise provided in
the immediately preceding sentence, in the case of any Security which is
converted, interest whose Stated Maturity is after the date of conversion of
such Security shall not be payable, and the Company shall not make nor be
required to make any other payment, adjustment or allowance with respect to
accrued but unpaid interest on the Securities being converted, which shall be
deemed to be paid in full. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the day on which the
Notice of Conversion was received (the "Conversion Date") by the Conversion
Agent from the Holder or from a holder of the Preferred Securities effecting a
conversion thereof pursuant to its conversion rights under the Declaration, as
the case may be. The Person or Persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock as of the Conversion Date. As promptly
as practicable on or after the Conversion Date, the Company shall issue and
deliver at the office of the Conversion Agent, unless otherwise directed by the
Holder in the Notice of Conversion, a certificate or certificates for the number
of full shares of Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same. The Conversion Agent shall deliver such
certificate or certificates to such Person or Persons.
(b) The Company's delivery upon conversion of the fixed number of
shares of Common Stock into which the Securities are convertible (together with
the cash payment, if any, in lieu of fractional shares) shall be deemed to
satisfy the Company's obligation to pay the principal amount at Maturity of the
portion of Securities so converted and any unpaid interest (including Compounded
Interest and Addition-
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al Interest) accrued on such Securities at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a result
of conversion, but in lieu thereof, the Company shall pay to the Conversion
Agent a cash adjustment in an amount equal to the same fraction of the last
reported sale price of such fractional interest on the date on which the Securi-
ties or Preferred Securities, as the case may be, were duly surrendered to the
Conversion Agent for conversion, or, if such day is not a Trading Day, on the
next Trading Day, and the Conversion Agent in turn will make such payment, if
any, to the Holder of the Securities or the holder of the Preferred Securities
so converted.
(d) In the event of the conversion of any Security in part only, a
new Security or Securities for the unconverted portion thereof will be issued in
the name of the Holder thereof upon the cancellation thereof in accordance with
Section 305.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders of Preferred
Securities (in the exchange of Preferred Securities for Securities) and as agent
of the Holders of Securities (in the conversion of Securities into Common
Stock), as the case may be, directing it to effect such conversion transactions.
The Conversion Agent is hereby authorized (i) to exchange Securities held by the
Trust from time to time for Preferred Securities in connection with the
conversion of such Preferred Securities in accordance with this Article Thirteen
and (ii) to convert all or a portion of the Securities into Common Stock and
thereupon to deliver such shares of Common Stock in accordance with the
provisions of this Article Thirteen and to deliver to the Trust a new Security
or Securities for any resulting unconverted principal amount.
(f) All shares of Common Stock delivered upon any conversion of
Restricted Securities shall bear a restrictive legend substantially in the form
of the legend required to be set forth on such Securities and shall be subject
to the restrictions on transfer provided in such legend and in Section 305(b)
hereof. Neither the Trustee nor the Conversion Agent shall have any respon-
sibility for the inclusion or content of any such restrictive legend on such
Common Stock; provided, however, that the Trustee or the Conversion Agent shall
-------- -------
have provided to the Company or to the Company's transfer agent for such Common
Stock, prior to or concurrently with a request to the Company to deliver to such
Conversion Agent certificates for such Common Stock, written
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notice that the Securities delivered for conversion are Restricted Securities.
SECTION 1303. Conversion Price Adjustments.
----------------------------
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into a small-
er number of shares or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the conversion privilege and
the conversion price in effect immediately prior to such action shall be
adjusted so that the Holder of any Securities thereafter surrendered for
conversion shall be entitled to receive the number of shares of capital stock of
the Company which he would have owned immediately following such action had such
Securities been converted immediately prior thereto. An adjustment made
pursuant to this subsection (a) shall become effective immediately after the
record date in the case of a dividend or other distribution and shall become
effective immediately after the effective date in case of a subdivision,
combination or reclassification (or immediately after the record date if a
record date shall have been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of any Security
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes or series of capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
Board Resolution filed with the Trustee) shall determine the allocation of the
adjusted conversion price between or among shares of such classes or series of
capital stock.
(b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (f) below) on the record date mentioned below,
the conversion price for the Securities shall be adjusted so that the same shall
equal the price determined by multiplying the conversion price in effect immedi-
ately prior to the date of issuance of such rights or warrants by a fraction of
which the numerator shall be the number of shares of Common Stock
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outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. For the purposes of this subsection, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not issue any rights or warrants in respect of
shares of Common Stock held in the treasury of the Company. In case any rights
or warrants referred to in this subsection in respect of which an adjustment
shall have been made shall expire unexercised within 45 days after the same
shall have been distributed or issued by the Company, the conversion price shall
be readjusted at the time of such expiration to the conversion price that would
have been in effect if no adjustment had been made on account of the distribu-
tion or issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in case the
Company shall, by dividend or otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness, shares of any class or series of capital
stock, cash or assets (including securities, but excluding any rights or
warrants referred to in subparagraph (b), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in subparagraph
(a) of this Section 1303), the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (c) by a fraction of which the numerator shall
be the current market price per share (determined as provided in subparagraph
(f)) of the Common Stock on the date fixed for the payment of such distribution
(the "Reference Date") less the fair market value (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors), on the Reference Date, of the
portion of the evidences of indebtedness, shares of capital stock, cash and
assets so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date. In the event that such dividend or
distribution is not so
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paid or made, the conversion price shall again be adjusted to be the conversion
price which would then be in effect if such dividend or distribution had not
occurred. If the Board of Directors determines the fair market value of any
distribution for purposes of this subparagraph (c) by reference to the actual or
when issued trading market for any securities comprising such distribution, it
must in doing so consider the prices in such market over the same period used in
computing the current market price per share of Common Stock (determined as
provided in subparagraph (f)). For purposes of this subparagraph (c), any divi-
dend or distribution that includes shares of Common Stock or rights or warrants
to subscribe for or purchase shares of Common Stock shall be deemed instead to
be (1) a dividend or distribution of the evidences of indebtedness, shares of
capital stock, cash or assets other than such shares of Common Stock or such
rights or warrants (making any conversion price reduction required by this
subparagraph (c)) immediately followed by (2) a dividend or distribution of such
shares of Common Stock or such rights or warrants (making any further conversion
price reduction required by subparagraph (a) or (b)), except (A) the Reference
Date of such dividend or distribution as defined in this subparagraph shall be
substituted as (a) "the record date in the case of a dividend or other distribu-
tion," and (b) "the record date for the determination of stockholders entitled
to receive such rights or warrants" and (c) "the date fixed for such determina-
tion" within the meaning of subparagraphs (a) and (b) and (B) any shares of
Common Stock included in such dividend or distribution shall not be deemed
outstanding for purposes of computing any adjustment of the conversion price in
subparagraph (a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding all regular cash
dividend, if the annualized amount thereof per share of Common Stock does not
exceed 15% of the current market price per share determined as provided in
subparagraph (f) of the Common Stock on the Trading Day immediately preceding
the date of declaration of such dividend), the conversion price shall be reduced
so that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the conversion price
reduction contemplated by this subparagraph by a fraction of which the numerator
shall be the current market price per share (determined as provided in
subparagraph (f)) of the Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed and not excluded as provided
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following
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the date fixed for the payment of such distribution; provided, however, that in
-------- -------
the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the current market price per share (as
defined in subparagraph (f)) of the Common Stock on the record date mentioned
above, in lieu of the foregoing adjustment, adequate provision shall be made so
that each Holder of shares of Securities shall have the right to receive upon
conversion the amount of cash such Holder would have received had such Holder
converted each share of the Securities immediately prior to the record date for
the distribution of the cash. In the event that such dividend or distribution
is not so paid or made, the conversion price shall again be adjusted to be the
conversion price which would then be in effect if such record date had not been
fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or any portion of
the Company's Common Stock shall expire and such tender or exchange offer shall
involve the payment by the Company or such Subsidiary of consideration per share
of Common Stock having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds 110% of the current market price per
share (determined as provided in subpara-
- 78 -
<PAGE>
graph (f)) of the Common Stock on the Trading Day next succeeding the Expiration
Time, the conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect immediately prior
to the effectiveness of the conversion price reduction contemplated by this
subparagraph (e) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
at the Expiration Time multiplied by the current market price per share
(determined as provided in subparagraph (f)) of the Common Stock on the Trading
Day next succeeding the Expiration Time and the denominator shall be the sum of
(x) the fair market value (determined as aforesaid) of the aggregate consider-
ation payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the current market price
per share (determined as provided in subparagraph (f)) of the Common Stock on
the Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time.
(f) For the purpose of any computation under subparagraphs (b), (c),
(d) or (e), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
five consecutive Trading Days selected by the Company commencing not more than
20 Trading Days before, and ending not later than, the earlier of the day in
question or, if applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; provided, however, that if
-------- -------
another event occurs that would require an adjustment pursuant to subparagraph
(a) through (e), inclusive, the Board of Directors may make such adjustments to
the Closing Prices during such five Trading Day period as it deems appropriate
to effectuate the intent of the adjustments in this Section 1303, in which case
any such determination by the Board of Directors shall be set forth in a Board
Resolution and shall be conclusive. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the New York Stock
Exchange or on such successor securities exchange as the Common Stock may be
listed or in the relevant market from which the Closing Prices were obtained
without the right to receive such issuance or distribution, and (2) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such securities exchange or in such market
after the Expiration Time of such offer.
(g) The Company may make such reductions in the conversion price, in
addition to those required by subparagraphs (a) through (e), as it considers to
be advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. The Company from time to time may reduce the conversion price by
any amount for any period of time if the period is at least twenty (20) days,
the reduction is irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such reduction would be in the
best interest of the Company, which determination shall be conclusive. Whenever
the conversion price is reduced pursuant to the preceding sentence, the Company
shall mail to holders of record of the Securities a notice of the reduction at
least fifteen (15) days prior to the date the reduced conversion price takes
effect, and such
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<PAGE>
notice shall state the reduced conversion price and the period it will be in
effect.
(h) No adjustment of the conversion price shall be required upon the
issuance of any shares of Common Stock pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in shares of
Common Stock under any such plan. No adjustment in the conversion price shall
be required unless such adjustment would require an increase or decrease of at
least 1% in the conversion price; provided, however, that any adjustments which
-------- -------
by reason of this subparagraph are not required to be made shall be carried
forward and taken into account in determining whether any subsequent adjustment
shall be required.
(i) If any action would require adjustment of the conversion price
pursuant to more than one of the provisions described above, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value to the Holder of the Securities.
SECTION 1304. Reclassification, Consolidation, Merger or Sale of Assets.
---------------------------------------------------------
In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale, transfer or lease of all or substantially all of the
assets of the Company or (d) any compulsory share exchange) pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms of
such transaction whereby the Holder of each Security then outstanding shall have
the right thereafter to convert such Security only into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock of the Company
into which such Security could have been converted immediately prior to such
transaction.
The Company or the Person formed by such consolidation or resulting
from such merger or which acquired such
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<PAGE>
assets or which acquires the Company's shares, as the case may be, shall make
provision in its certificate or articles of incorporation or other constituent
document to establish such right. Such certificate or articles of incorporation
or other constituent document shall provide for adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article Thirteen.
The above provisions shall similarly apply to successive transactions of the
foregoing type.
SECTION 1305. Notice of Adjustments of Conversion Price.
-----------------------------------------
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Preferred Securities and the Securities; and
(b) a notice stating the conversion price has been adjusted and
setting forth the adjusted conversion price shall as soon as practicable be
mailed by the Company to all record holders of Preferred Securities and the
Securities at their last addresses as they appear upon the stock transfer books
of the Company and the Trust.
SECTION 1306. Prior Notice of Certain Events.
------------------------------
In case:
(i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 1303(c) or (d) or (2) authorize a
tender or exchange offer that would require an adjustment pursuant to
Section 1303(e);
(ii) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
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<PAGE>
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company shall be
required, or of the sale or transfer of all or substantially all of the
assets of the Company or of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the stock transfer books the Trust or
(b) shall cause to be mailed to all Holders at their last addresses as they
shall appear in the Security Register, at least 15 days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 1307. Certain Defined Terms.
---------------------
The following definitions shall apply to terms used in this Article
Thirteen:
(1) "Closing Price" of any common stock on any day shall mean
-------------
the last reported sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and
asked prices regular way of such common stock, in each
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<PAGE>
case on the NYSE Composite Tape or, if the common stock is not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such common stock is listed or admitted to trading, or,
if not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices as furnished by any New
York Stock Exchange member firm selected from time to time by the Board of
Directors of the Company for that purpose or, if not so available in such
manner, as otherwise determined in good faith by the Board of Directors.
(2) "Trading Day" shall mean a day on which securities are
-----------
traded on the national securities exchange or quotation system used to
determine the Closing Price.
SECTION 1308. Dividend or Interest Reinvestment Plans.
---------------------------------------
Notwithstanding the foregoing provisions, the issuance of any shares
of Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan, and
the issuance of any shares of Common Stock or options or rights to purchase such
shares pursuant to any employee benefit plan or program of the Company or
pursuant to any option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of the date the Securities were first
issued, shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the Company to which any
of the adjustment provisions described above applies. There shall also be no
adjustment of the conversion price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Company except as
specifically described in this Article Thirteen.
SECTION 1309. Certain Additional Rights.
-------------------------
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section 1303(c) or 1303(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 1303(c)), the Holder of the Securities, upon the
conversion thereof subsequent to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution and prior to
the effectiveness of the conversion price adjustment in respect of such
distribution, shall also be entitled to receive for each share of Common Stock
into which the Secu-
- 83 -
<PAGE>
rities are converted, the portion of the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock; provided, however, that, at
-------- -------
the election of the Company (whose election shall be evidenced by a resolution
of the Board of Directors) with respect to all Holders so converting, the
Company may, in lieu of distributing to such Holder any portion of such
distribution not consisting of cash or securities of the Company, pay such
Holder an amount in cash equal to the fair market value thereof (as determined
in good faith by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors). If any conversion of
Securities described in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders of Common Stock which the Holder of
Securities so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled, provided, that such due bill (i) meets any applicable requirements of
--------
the principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
SECTION 1310. Restrictions on Common Stock Issuable Upon Conversion.
-----------------------------------------------------
(a) Shares of Common Stock to be issued upon conversion of a Security
in respect of Restricted Preferred Securities (as defined in the Declaration)
shall bear such restrictive legends as the Company may provide in accordance
with applicable law.
(b) If shares of Common Stock to be issued upon conversion of a
Security in respect of Restricted Preferred Securities are to be registered in a
name other than that of the Holder of such Preferred Security, then the Person
in whose name such shares of Common Stock are to be registered must deliver to
the Conversion Agent a certificate satisfactory to the Company and signed by
such Person, as to compliance with the restrictions on transfer applicable to
such Preferred Security. Neither the Trustee nor any Conversion Agent or
Registrar shall be required to register in a name other than that of the Holder
shares of Common Stock or such
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<PAGE>
Preferred Securities issued upon conversion of any such Security in respect of
such Preferred Securities not so accompanied by a properly completed certifi-
cate.
SECTION 1311. Trustee Not Responsible for Determining Conversion Price or
-----------------------------------------------------------
Adjustments.
-----------
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Security to determine
whether any facts exist which may require any adjustment of the conversion
price, or with respect to the nature or extent of any such adjustment when made,
or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither the Trustee nor
any Conversion Agent shall be accountable with respect to the validity or value
(or the kind of account) of any shares of Common Stock or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Security; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any Security
for the purpose of conversion, or, except as expressly herein provided, to
comply with any of the covenants of the Company contained in Article Ten or this
Article Thirteen.
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. No Recourse.
-----------
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Security, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, stockholder, officer
or director, past, present or future as such, of the Company or of any prede-
cessor or successor corporation, either directly or through the Company or any
such predecessor or successor corporation, whether by virtue of any constitu-
tion, statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or
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<PAGE>
directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or implied therefrom;
and that any and all such personal liability of every name and nature, either at
common law or in equity or by constitution or statute, of, and any and all such
rights and claims against, every such incorporator, stockholder, officer or
director as such, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any of the Securities or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of such Securities.
- 86 -
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
ANNTAYLOR STORES CORPORATION
By:/s/ Paul E. Francis
----------------------------------
Name: Paul E. Francis
Title: Executive Vice President-
Finance and Administration
Attest:
/s/ Jocelyn F.L. Barandiaran
- ----------------------------
Secretary
THE BANK OF NEW YORK, as Trustee
By:/s/ Byron Merino
--------------------------------
Name: Byron Merino
Title: Assistant Treasurer
Attest:
/s/ Mary La Gumina
- ------------------
Assistant Vice President
- 87 -
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24 day of April, 1996 before me personally came Paul E.
Francis, to me known, who, being by me duly sworn, did depose and say that
he/she is the Executive Vice President - Finance and Administration of AnnTaylor
Stores Corporation, one of the corporations described in and which executed the
foregoing instrument; and that he/she signed his/her name thereto by authority
of the Board of Directors of such corporation.
/s/ Matthew G. Puletz
----------------------------------
Matthew G. Puletz
Notary Public State of New York
No. 02PU5055911
Qualified in New York County
Certificate Filed in New York County
Commission Expires
Feb. 20, 1998
- 88 -
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24 day of April, 1996 before me personally came Byron Merino,
to me known, who, being by me duly sworn, did depose and say that he/she is an
Assistant Treasurer of The Bank of New York, a corporation described in and
which executed the foregoing instrument; and that he/she signed his/her name
thereto by authority of the Board of Directors of such corporation.
/s/Timothy J. Shea
-------------------------------
Timothy J. Shea
Notary Public State of New York
No. 01SH5027547
Qualified in New York County
Certificate Filed in New York County
Commission Expires
May 6, 1996
- 89 -
<PAGE>
EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH ANNTAYLOR STORES CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE>
ANNTAYLOR STORES CORPORATION
8 1/2% Convertible Subordinated
Security Due 2016
No._________ $___________
[CUSIP No. _________]
ANNTAYLOR STORES CORPORATION, a corporation duly organized and exist-
ing under the laws of the State of Delaware (herein called "the Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ____________________, or
registered assigns, the principal sum [indicated on Schedule A hereof]*
[of ______ Dollars]** ($ ) on April 15, 2016.
Interest Payment Dates: January 15, April 15, July 15 and October 15, commenc-
ing July 15, 1996
Regular Record Dates: the close of business on the 15th day immediately
preceding each Interest Payment Date, commencing June
30, 1996
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
Dated: _________, ____
ANNTAYLOR STORES CORPORATION
--------------------
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
- 2 -
<PAGE>
By:________________________
Name:
Title:
[Seal]
Attest:
_______________
- 3 -
<PAGE>
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: , THE BANK OF NEW YORK,
--------- ----
as Trustee
By: _______________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
ANNTAYLOR STORES CORPORATION
8 1/2% Convertible Subordinated
Debenture Due 2016*
(1) Interest. AnnTaylor Stores Corporation, a Delaware corporation
--------
(the "Company"), is the issuer of this 8 1/2% Convertible Subordinated Debenture
Due 2016 (the "Security") limited in aggregate principal amount to $90,206,200
(or $103,737,200 if the over-allotment option is exercised), issued under the
Indenture hereinafter referred to. The Company promises to pay interest on the
Securities in cash from April 25, 1996 or from the most recent interest payment
date to which interest has been paid or duly provided for, quarterly (subject to
deferral for up to 20 consecutive quarters as described in Section 3 hereof) in
arrears on January 15, April 15, July 15 and October 15 of each year (each such
date, an "Interest Payment Date"), commencing July 15, 1996, at the rate of
8 1/2% per annum (subject to increase as provided in Section 13 hereto) plus
----
Additional Interest, Compound Interest and Liquidated Damages if any, until the
principal hereof shall have become due and payable.
--------------------
* All terms used in this Security which are defined in
the Indenture or in the Declaration attached as Annex A
thereto shall have the meanings assigned to them in the
Indenture or the Declaration, as the case may be.
- 4 -
<PAGE>
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. The amount of interest payable
for any period shorter than a full quarterly period for which interest is
computed will be computed on the basis of the actual number of days elapsed. In
the event that any date on which interest is payable on the Securities is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(2) Additional Interest. The Company shall pay to AnnTaylor Finance
-------------------
Trust (and its permitted successors or assigns under the Declaration) (the
"Trust") such amounts as shall be required so that the net amounts received and
retained by the Trust after paying any taxes, duties, assessments or other
governmental charges of whatever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority ("Additional
Interest") will be not less than the amounts the Trust would have received had
no such taxes, duties, assessment or governmental charges been imposed.
(3) Option to Extend Interest Payment Period. The Company shall have
----------------------------------------
the right at any time during the term of the Securities to defer interest
payments from time to time by extending the interest payment period for
successive periods not exceeding 20 consecutive quarters for each such period;
provided, no Extension Period may extend beyond the maturity date of the
- --------
Securities. At the end of each Extension Period, the Company shall pay all
interest then accrued and unpaid (including Additional Interest and Liquidated
Damages) together with interest thereon compounded quarterly at the rate
specified for the Securities to the extent permitted by applicable law
("Compounded Interest"); provided, that during any Extension Period, the Company
--------
(i) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock, except for dividends or distributions in shares of its
capital stock of the same class on which such dividend or distribution is being
paid and conversions or exchanges of common stock of one class into common stock
of another class and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan of the Company or any of its subsidiaries, (ii) shall not make
any payment of interest, principal or premium, if any, on or repay, repur-
- 5 -
<PAGE>
chase or redeem, any debt securities issued by the Company that rank pari passu
with or junior to the Securities (except by conversion into or exchange for
shares of its capital stock) and (iii) shall not make any guarantee payments
with respect to the foregoing. Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period; provided that such
--------
Extension Period together with all previous and further extensions thereof may
not exceed 20 consecutive quarters and may not extend beyond the maturity of the
Securities. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may commence a new Extension Period, subject to
the above requirements. No interest during an Extension Period, except at the
end thereof, shall be due and payable.
If the Property Trustee is the sole holder of the Securities at the
time the Company selects an Extension Period, the Company shall give notice to
the Regular Trustees, the Property Trustee and the Trustee of its selection of
such Extension Period at least one Business Day prior to the earlier of (i) the
date the distributions on the Preferred Securities are payable or (ii) if the
Preferred Securities are listed on the New York Stock Exchange or other stock
exchange or quotation system, the date the Trust is required to give notice to
the New York Stock Exchange or other applicable self-regulatory organization or
to holders of the Preferred Securities on the record date or the date such
distributions are payable, but in any event not less than ten Business Days
prior to such record date.
If the Property Trustee is not the sole holder of the Securities at
the time the Company selects an Extension Period, the Company shall give the
Holders of these Securities and the Trustee notice of its selection of an
Extension Period at least ten Business Days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) if the Preferred Securities are listed
on the New York Stock Exchange or other stock exchange or quotation system, the
date the Company is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Securities on
the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.
- 6 -
<PAGE>
The quarter in which any notice is given pursuant to the second and
third paragraphs of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under the first paragraph of
this Section 3.
(4) Method of Payment. The interest so payable, and punctually paid
-----------------
or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the 15th day immediately preceding each Interest Payment Date (the "Regular
Record Date"), commencing June 30, 1996. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any securi-
ties exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Company maintained for that purpose in New York,
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that, at the option of the Company, payment of interest may
- -------- -------
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
(5) Paying Agent and Security Registrar. The Trustee will act as
-----------------------------------
Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such
capacity.
(6) Indenture. The Company issued the Securities under an indenture,
---------
dated as of April 15, 1996 (the "Indenture"), between the Company and The Bank
of New York, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is
- 7 -
<PAGE>
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by the Trust Indenture Act
of 1939 (15 U.S. Code Sec.Sec. 77aaa-77bbbb) ("TIA") as in effect on the date of
the Indenture. The Securities are subject to, and qualified by, all such terms,
certain of which are summarized hereon, and holders are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured general obligations of the Company limited to $90,206,200 in aggregate
principal amount (or $103,737,200 if the over-allotment option is exercised) and
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the Compa-
ny, which is absolute and unconditional, to pay the principal of and interest on
this Security at the times, place and rate, and in the coin or currency, herein
prescribed or to convert this Security as provided in the Indenture.
(7) Optional Redemption. The Securities are redeemable, in whole or
-------------------
in part, at the Company's option at any time and from time to time after April
15, 1999, upon not less than 30 or more than 60 days' notice, at a redemption
price equal to 105.95% of the principal amount of the Securities to be redeemed
plus any accrued and unpaid interest, including Additional Interest, Compounded
Interest and Liquidated Damages if any, to the Redemption Date, if redeemed on
or before April 15, 2000, and at the following optional redemption prices
(expressed as a percentage of the principal amount of the Securities), if re-
deemed during the 12-month period beginning April 15:
Percentage of
Principal
Year Amount
---- ----------
2000 . . . . . . . . . . . . . . . . . 105.10%
2001 . . . . . . . . . . . . . . . . . 104.25%
2002 . . . . . . . . . . . . . . . . . 103.40%
2003 . . . . . . . . . . . . . . . . . 102.55%
2004 . . . . . . . . . . . . . . . . . 101.70%
2005 . . . . . . . . . . . . . . . . . 100.85%
2006 and thereafter . . . . . . . . . 100.00%
plus, in each case, accrued and unpaid interest, including Additional Interest,
Compounded Interest and Liquidated Damages if any, to the Redemption Date. On
or after the
- 8 -
<PAGE>
Redemption Date, interest will cease to accrue on the Securities, or portion
thereof, called for redemption.
(8) Optional Redemption Upon Tax Event. The Securities are subject to
----------------------------------
redemption in whole (but not in part), at any time within 90 days, if a Tax
Event (as defined in the Declaration) shall occur and be continuing, at a re-
demption price equal to 100% of the principal amount thereof plus accrued but
unpaid interest, including Additional Interest, if any, to the Redemption Date.
Any redemption pursuant to this Section 8 will be made upon not less than 30 nor
more than 60 days' notice.
(9) Notice of Redemption. Notice of redemption will be mailed at least 30
--------------------
days but not more than 60 days before the Redemption Date to each Holder of the
Securities to be redeemed at his address of record. The Securities in denom-
inations larger than $50 may be redeemed in part but only in integral multiples
of $50. In the event of a redemption of less than all of the Securities, the
Securities will be chosen for redemption by the Trustee in accordance with the
Indenture. On and after the Redemption Date, interest ceases to accrue on the
Securities or portions of them called for redemption.
If this Security is redeemed subsequent to a Regular Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid to the person in
whose name this Security is registered at the close of business on such record
date.
(10) Redemption. The Securities will mature on April 15, 2016, and
----------
may be redeemed, in whole or in part, at any time after April 15, 1999 as set
forth above or at any time in certain circumstances upon the occurrence of a Tax
Event as set forth above. Upon the repayment of the Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Securities so repaid or redeemed at the appli-
cable redemption price together with accrued and unpaid distributions through
the date of redemption; provided, that holders of the Trust Securities shall be
--------
given not less than 30 nor more than 60 days notice of such redemption. Upon
the repayment of the Securities at maturity or upon any acceleration, earlier
redemption or otherwise, the proceeds from such repayment will be applied to
redeem the Preferred Securities, in whole, upon not less than 30 nor more than
60 days' notice. There are no sinking fund payments with respect to the Securi-
ties.
- 9 -
<PAGE>
(11) Subordination. The payment of the principal of, interest on or
-------------
any other amounts due on the Securities is subordinated in right of payment to
all existing and future Senior Indebtedness (as defined below) of the Company,
as described in the Indenture. Each holder, by accepting a Security, agrees to
such subordination and authorizes and directs the Trustee on its behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and appoints the Trustee as its attorney-in-fact for such purpose.
"Senior Indebtedness" shall mean in respect of the Company (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, deben-
tures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Securities and (2) any indebtedness between or among such obligor or its
affiliates, including all other debt securities and guarantees in respect of
those debt securities issued to any other trust, or a trustee of such trust,
partnership, or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in connec-
tion with the issuance by such Financing Entity of preferred securities or other
securities which rank pari passu with, or junior to, the Preferred Securities.
(12) Conversion. The Holder of any Security has the right,
----------
exercisable at any time prior to the close of business (New York time) on the
Business Day immediately preceding the date of repayment of such Security
whether at maturity or upon redemption (either at the option of the Company or
pursuant to a Tax Event), to convert the principal amount thereof (or any por-
tion thereof that is an inte-
- 10 -
<PAGE>
gral multiple of $50) into shares of Common Stock at the initial conversion
price 2.545 shares of Common Stock for each Security (equivalent to a conversion
price of $19.65 per share of Common Stock of the Company), subject to adjustment
under certain circumstances, except that if a Security is called for redemption,
the conversion right will terminate at the close of business on the Redemption
Date.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of busi-
ness on the next Interest Payment Date, then, notwithstanding such conversion,
the interest payable on such Interest Payment Date will be paid to the
registered Holder of such Security on such Regular Record Date. In such event,
such Security, when surrendered for conversion, need not be accompanied by
payment of an amount equal to the interest payable on such Interest Payment Date
on the portion so converted. The number of shares issuable upon conversion of a
Security is determined by dividing the principal amount of the Security convert-
ed by the conversion price in effect on the Conversion Date. No fractional
shares will be issued upon conversion but a cash adjustment will be made for any
fractional interest. The outstanding principal amount of any Security shall be
reduced by the portion of the principal amount thereof converted into shares of
Common Stock.
(13) Registration Rights.
-------------------
The holders of the Preferred Securities, the Securities, the Guarantee
and the shares of common stock of the Company issuable upon conversion of the
Securities (collectively, the "Registrable Securities") are entitled to the
----------------------
benefits of a Registration Rights Agreement, dated as of April 25, 1996, among
the Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company has agreed for the
benefit of the holders of Registrable Securities that (i) it will, at its cost,
within 60 days after the date of issuance of the Preferred Securities, file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Registrable Securities, (ii) it will
use its best efforts to cause, such Shelf Registration Statement to be declared
effective by the
- 11 -
<PAGE>
Commission within 180 days after the date of issuance of the Registrable
Securities and (iii) the Sponsor will use its best efforts to maintain such
Shelf Registration Statement continuously effective under the Securities Act
until the third anniversary of the effectiveness of the Shelf Registration
Statement or such earlier date as is provided in the Registration Rights
Agreement.
If (i) on or prior to 60 days following the date of original issuance
of the Registrable Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the issuing
of the Registrable Securities, such Shelf Registration Statement is not declared
effective (each, a "Registrable Default"), additional interest ("Liquidated
-------------------
Damages") will accrue on the Securities and, accordingly, additional dis-
tributions will accrue on the Preferred Securities, in each case from and
including the day following such Registration Default. Liquidated Damages will
be paid quarterly in arrears, with the first quarterly payment due on the first
interest or distribution payment date, as applicable, following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the principal
amount or liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of the one percent (0.50%)
thereof from and after the 91st day following such Registration Default. In the
event that the Shelf Registration Statement ceases to be effective during the
Effectiveness Period for more than 30 consecutive days or any 90 days, whether
or not consecutive, during any 12-month period, then the interest rate borne by
the Securities and the distribution rate borne by the Preferred Securities will
each increase by an additional one-half of one percent (0.50%) per annum from
such 31st or 91st day, as applicable, until such time as the Shelf Registration
Statement again becomes effective.
(14) Registration, Transfer, Exchange and Denominations. As provided
--------------------------------------------------
in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
- 12 -
<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $50 and integral multiples thereof. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Prior to due presentment of this
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. In the event of redemption or conversion of
this Security in part only, a new Security or Securities for the unredeemed or
unconverted portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
(15) Persons Deemed Owners. Except as provided in Section 4 hereof,
---------------------
the registered Holder of a Security may be treated as its owner for all purpos-
es.
(16) Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders
of Securities entitled to the money must look to the Company for payment unless
an abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
(17) Defaults and Remedies. The Securities shall have the Events of
---------------------
Default as set forth in Section 501 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to the Company and
the Trustee may declare all the Securities to be due and payable immediately.
The holders of a majority in principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities issued under the
Indenture may direct
- 13 -
<PAGE>
the Trustee in its exercise of any trust or power. The Company must furnish
annually compliance certificates to the Trustee. The above description of
Events of Default and remedies is qualified by reference to, and subject in its
entirety by, the more complete description thereof contained in the Indenture.
(18) Amendments, Supplements and Waivers. The Indenture permits, with
-----------------------------------
certain exceptions as therein provided, the amendment thereof and the modi-
fication of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate princi-
pal amount of the Securities at the time Outstanding, on behalf of the Holders
of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
(19) Trustee Dealings with the Company. The Trustee, in its
---------------------------------
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
(20) No Recourse Against Others. A director, officer, employee or
--------------------------
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the con-
sideration for the issue of the Securities.
(21) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
-------------
GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW PROVI-
SIONS THEREOF.
(22) Authentication. The Securities shall not be valid until
--------------
authenticated by the manual signature of an
- 14 -
<PAGE>
authorized officer of the Trustee or an authenticating agent.
The Company will furnish to any Holder of the Securities upon written
request and without charge a copy of the Indenture. Request may be made to:
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention of:
- 15 -
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
-------------------------------------------------------
(Sign exactly as your name appears on the other side of
this Security)
Date:
-------------------------
Signature Guarantee:*
--------------------------------------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) exchanged for the undersigned's own account without transfer; or
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
- 16 -
<PAGE>
(2) transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3) or (4) is
-------- -------
checked, the Trustee may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act; provided, further, that after the date that
-------- -------
a Shelf Registration Statement has been filed and so long as such Shelf
Registration Statement continues to be effective, the Trustee may only permit
transfers for which box (5) has been checked.
-------------------------
Signature
Signature Guarantee:*
]
- ------------------------- -------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
- 17 -
<PAGE>
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
----------------- --------------------------------------------------
NOTICE: To be executed by an executive officer]
- 18 -
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be
$__________. The following increases or decreases in the principal amount of
this Global Security have been made:
Principal
Amount of increase Amount of Signature
in Principal Amount this Global of
of this Global Security authorized
Security including Amount of decrease following officer of
upon exercise of in Principal such Trustee or
over-allotment Amount of this decrease or Securities
Date Made option Global Security increase Custodian
- 19 -
<PAGE>
ELECTION TO CONVERT
To: AnnTaylor Stores Corporation
The undersigned owner of this Security hereby irrevocably exercises
the option to convert this Security, or the portion below designated, into
Common Stock of ANNTAYLOR STORES CORPORATION in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Indenture and the Security, agrees to be bound by the
terms of the Registration Agreement relating to the Common Stock issuable upon
conversion of the Securities.
Date: ____________, ____
in whole __
Portions of Security to be
in part __ converted ($50 or integral multiples thereof):
$_________________
-------------------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Signature Guarantee:*
---------------------------------
- --------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
- 20 -
EXHIBIT 4.6
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
AnnTaylor Stores Corporation
Dated as of April 25, 1996
====================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . 4
SECTION 2.2 Lists of Holders of Securities . . . . . . . 4
SECTION 2.3 Reports by the Preferred Guarantee Trustee . 4
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee 5
SECTION 2.5 Evidence of Compliance with Conditions Precedent 5
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . 5
SECTION 2.7 Event of Default; Notice . . . . . . . . . . 5
SECTION 2.8 Conflicting Interests . . . . . . . . . . . . 5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee 5
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee 7
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee 9
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility . . 9
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees . . . . . . . . . . . . 9
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . . . 10
SECTION 5.2 Subordination . . . . . . . . . . . . . . . . 10
SECTION 5.3 Waiver of Notice and Demand . . . . . . . . . 10
SECTION 5.4 Obligations Not Affected . . . . . . . . . . 10
SECTION 5.5 Rights of Holders . . . . . . . . . . . . . . 11
SECTION 5.6 Guarantee of Payment . . . . . . . . . . . . 12
SECTION 5.7 Subrogation . . . . . . . . . . . . . . . . . 12
SECTION 5.8 Independent Obligations . . . . . . . . . . . 12
SECTION 5.9 Conversion . . . . . . . . . . . . . . . . . 12
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions . . . . . . . . . 12
SECTION 6.2 Ranking . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
TERMINATION
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . 13
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation . . . . . . . . . . . . . . . . . 13
SECTION 8.2 Indemnification . . . . . . . . . . . . . . . 14
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns . . . . . . . . . . . 14
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . . 14
SECTION 9.3 Notices . . . . . . . . . . . . . . . . . . . 14
SECTION 9.4 Benefit . . . . . . . . . . . . . . . . . . . 15
SECTION 9.5 Governing Law . . . . . . . . . . . . . . . . 15
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PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of April 25, 1996, is executed and delivered by AnnTaylor
Stores Corporation, a Delaware corporation (the "Guarantor"), and The Bank of
New York as trustee (the "Preferred Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of AnnTaylor Finance Trust, a Delaware statutory business trust
(the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of April 25, 1996, among the trustees of the Trust
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof 1,750,000 preferred securities, having an aggregate
liquidation amount of $87,500,000 (plus up to an additional 262,500 preferred
securities, having an aggregate liquidation amount of $13,125,000, to cover
over-allotments), designated the 8 1/2% Trust Originated Preferred
Securities(SM) (the "Preferred Securities").
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to guarantee the obligations
of the Trust to the Holders of the Preferred Securities on the terms and
conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an event of default (as
defined in the Indenture (as defined herein)), has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments (as
defined in the Common Securities Guarantee) under the Common Securities
Guarantee shall be subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments (as defined herein) under this
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the context otherwise requires:
(a) Capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended from time to time;
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(d) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined
in this Preferred Securities Guarantee or unless the context otherwise
requires;
(f) a reference to the singular includes the plural and vice versa;
(g) a reference to any Person shall include its successors and assigns;
(h) a reference to any agreement or instrument shall mean such agreement
or instrument, as supplemented, modified, amended, or amended and
restated, and in effect from time to time; and
(i) a reference to any statute, law, rule or regulation, shall include any
amendments thereto applicable to the relevant Person, and any
successor statute, law, rule or regulation.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking institutions
in New York, New York or in Wilmington, Delaware are authorized or required by
any applicable law or executive order to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at 101 Barclay Street, 21 West,
New York, New York 10286, Attention: Corporate Trust Trustee Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the 8 1/2% Convertible Subordinated Debentures due
April 15, 2016 of the Guarantor held by the Property Trustee (as defined in the
Declaration).
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (i) any accrued and unpaid Distributions (as defined in the
Declaration) that are required to be paid on such Preferred Securities to the
extent the Trust shall have funds available therefor, (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption (the
"Redemption Price"), with respect to any Preferred Securities called for
redemption by the Trust to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with a distribution of the Debentures to
the Holders in exchange for Preferred Securities or the redemption of all of
the Preferred Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid Distributions on
the Preferred Securities to the date of payment, to the extent the Trust shall
have funds available therefor,
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and (b) the amount of assets of the Trust remaining available for distribution
to Holders upon liquidation of the Trust (in either case, the "Liquidation
Distribution").
"Holder" shall mean any holder, as registered on the books and records of
the Trust of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of April 15, 1996, among the
Guarantor (the "Convertible Debenture Issuer") and The Bank of New York, a New
York banking corporation, as trustee, pursuant to which the Debentures are to
be issued to the Property Trustee of the Trust.
"Indenture Trustee" means the Person acting as trustee under the Indenture,
initially The Bank of New York.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guarantee and thereafter
means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any
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assistant vice president, any assistant secretary, the treasurer, any
assistant treasurer or other officer of the Corporate Trust Office of the
Preferred Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and
(b) if and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within one Business Day after January 1 and June
30 of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Guarantee Trustee,
provided that the Guarantor shall not be obligated to provide such List of
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Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor or the
Preferred Securities are represented by one or more Global Securities (as
defined in the Indenture). The Preferred Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
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SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence
of compliance with any conditions precedent, if any, provided for in this
Preferred Securities Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given in the form
of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided that the Preferred Guarantee Trustee shall be protected in withholding
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such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not
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transfer this Preferred Securities Guarantee to any Person except a Holder of
Preferred Securities exercising his or her rights pursuant to Section 5.5(b) or
to a Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor Preferred
Guarantee Trustee. The right, title and interest of the Preferred Guarantee
Trustee shall automatically vest in any Successor Preferred Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee
shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the requirements of this
Preferred Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically required to be
furnished to the Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Preferred Securities
Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Preferred
Guarantee Trustee, unless it shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not
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less than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding for any
remedy available to the Preferred Guarantee Trustee, or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if the
Preferred Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to
it under the terms of this Preferred Securities Guarantee or indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against such
risk or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel of
its selection, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion.
Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to
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the Preferred Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against
the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that nothing
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contained in this Section 3.2(a)(vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any such
action. No third party shall be required to inquire as to the
authority of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively evidenced by
the Preferred Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(xi) The Preferred Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Preferred
Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
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SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee
The recitals contained in this Preferred Securities Guarantee shall be taken
as the statements of the Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness. The Preferred Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustees
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed
and has accepted such appointment by written instrument executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has
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been appointed and has accepted such appointment by instrument in writing
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of removal or resignation, the
resigning or removed Preferred Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to
the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 Subordination
If an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of Holders of Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinate to the rights of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee.
SECTION 5.3 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Preferred Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.4 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under this
Preferred Securities Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be
performed or observed by the Trust;
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(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.4 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.5 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee.
(b) Any Holder of Preferred Securities may directly institute a legal
proceeding against the Guarantor to enforce the obligations of the Guarantor
under this Preferred Securities Guarantee without first instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
Person.
(c) If an Event of Default with respect to the Debentures (an "Indenture
Event of Default"), constituting the failure to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable has
occurred and is continuing, then a Holder of Preferred Securities may directly,
at any time, institute a proceeding for enforcement of payment to such Holder of
the principal of or interest on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such Holder
on or after the respective due date specified in the Debentures. The Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures unless the Property Trustee (as
defined in the Indenture) fails to do so.
11
<PAGE>
SECTION 5.6 Guarantee of Payment
This Preferred Securities Guarantee creates a guarantee of payment and not of
collection.
SECTION 5.7 Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.8 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent of
the obligations of the Trust with respect to the Preferred Securities, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.4 hereof.
SECTION 5.9 Conversion
The Guarantor acknowledges its obligation to issue and deliver common stock of
the Guarantor upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding, if (i) the Guarantor
has exercised its option to defer interest payments on the Debentures by
extending the interest payment period and such period or extension thereof,
shall be continuing, (ii) there shall have occurred any Event of Default or
(iii) there shall have occurred and be continuing any event that, with the
giving of notice or the lapse of time or both, would constitute an event of
default under the Indenture, then the Guarantor (a) shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock, except for dividends or distributions in shares of its capital stock on
the same class on which such dividend or distribution is being paid and
conversions or exchanges of common stock of one class into common stock of
another class and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan of the Guarantor or any of its subsidiaries, (b) shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities of the Guarantor that rank pari passu with or
junior to the Debentures (except by conversion into or exchange for shares of
its capital stock) and (c) shall not make any guarantee payments with respect
to the foregoing.
12
<PAGE>
SECTION 6.2 Ranking
(a) This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor except any liabilities that
may be pari passu expressly by their terms, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Guarantor and with
any guarantee now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock or preferred securities of any Affiliate of the
Guarantor, and (iii) senior to the Guarantor's common stock.
(b) The holders of any obligations of the Guarantor that are senior in
priority to the obligations under this Preferred Securities Guarantee will be
entitled to all of the rights inuring to the holders of "Senior Indebtedness"
under Article 12 of the Indenture, and the Holders of the Preferred Securities
will be subject to all of the terms and conditions of such Article 12 with
respect to any claims or rights hereunder with the same effect as though fully
set forth herein.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Preferred Securities Guarantee shall terminate as to each Holder of
Preferred Securities upon (i) full payment of the Redemption Price of all
Preferred Securities, (ii) upon the distribution of the Debentures held by the
Trust to the Holders of all of the Preferred Securities of the Trust, (iii)
upon liquidation of the Trust, or (iv) upon the distribution of Guarantor's
common stock to such Holder in respect of the conversion of such Holder's
Preferred Securities into common stock of the Guarantor and will terminate
completely upon full payment of the amounts payable in accordance with the
Declaration of the Trust. Notwithstanding the foregoing, this Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder of Preferred Securities must restore
payment of any sums paid under the Preferred Securities or under this Preferred
Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the
13
<PAGE>
assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders of Preferred
Securities might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Preferred Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, each as permitted by the
Indenture, the Guarantor may not assign its rights or delegate its obligations
under this Preferred Securities Guarantee without the prior approval of the
Holders of at least a Majority in liquidation amount of the Preferred
Securities.
SECTION 9.2 Amendments
Except with respect to any changes that do not materially adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may be amended only with the prior approval of
the Holders of at least a Majority in liquidation amount of the Preferred
Securities. The provisions of Section 12.2 of the Declaration with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
SECTION 9.3 Notices
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
sent by facsimile or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee
Trustee's mailing address set forth below (or such other address as the
Preferred Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
14
<PAGE>
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Preferred Securities):
AnnTaylor Stores Corporation
142 West 57th Street
New York, New York 10019
Attention: Senior Vice President - Finance
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Preferred Securities Guarantee is solely for the benefit of the Holders
of the Preferred Securities and, subject to Section 3.1(a), is not separately
transferable from the Preferred Securities.
SECTION 9.5 Governing Law
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND ALL RIGHTS
AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAWS.
15
<PAGE>
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first
above written.
ANNTAYLOR STORES CORPORATION, as Guarantor
By: /s/ Paul E. Francis
------------------------------------------------
Name: Paul E. Francis
Title: Executive Vice President - Finance
and Administration
THE BANK OF NEW YORK, as Preferred Guarantee Trustee
By: /s/ Byron Merino
----------------------------------------------
Name: Byron Merino
Title: Assistant Treasurer
16
EXHIBIT 10.1
ANNTAYLOR FINANCE TRUST
8 1/2% Convertible Trust Originated Preferred Securities(SM)
("Convertible TOPrS(SM)")
guaranteed by and convertible into shares of
Common Stock of AnnTaylor Stores Corporation
REGISTRATION RIGHTS AGREEMENT
April 25, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ROBERTSON, STEPHENS & COMPANY LLC
As Representatives of the several Initial Purchasers
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
AnnTaylor Finance Trust, a statutory business trust formed under the laws
of the State of Delaware (the "Trust") by AnnTaylor Stores Corporation, a
Delaware corporation ("AnnTaylor"), proposes to issue and sell to the Initial
Purchasers named in the Purchase Agreement referred to below (the "Initial
Purchasers"), for whom
_______________
SM "Convertible Trust Originated Preferred Securities" and "Convertible
TOPrS(SM)" are service marks of Merrill Lynch & Co., Inc.
<PAGE>
2
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation and Robertson, Stephens &
Company LLC are acting as representatives (the "Representatives"), upon the
terms set forth in a purchase agreement dated April 18, 1996 (the "Purchase
Agreement"), among the Initial Purchasers, AnnTaylor and the Trust, 8 1/2%
Convertible Trust Originated Preferred Securities(SM) (liquidation amount $50
per Convertible Trust Originated Preferred Security") (the "Preferred
Securities")(the "Initial Placement"). As an inducement to the Initial
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Initial Purchasers thereunder, the Trust
and AnnTaylor agree with you, (i) for the benefit of the Initial Purchasers
and (ii) for the benefit of the holders from time to time of the Preferred
Securities, the 8 1/2% Convertible Subordinated Debentures Due 2016 (the
"Debentures") and the Common Stock, par value $0.0068 per share (the "Common
Stock"), of AnnTaylor initially issuable upon conversion of the Preferred
Securities or the Debentures (collectively, together with the Guarantee of
AnnTaylor of the Preferred Securities, the "Registrable Securities"), including
the Initial Purchasers (each of the foregoing, a "Holder" and, together, the
"Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition
shall have their respective meanings set forth in or pursuant to the Purchase
Agreement or the Offering Memorandum dated April 18, 1996, in respect of the
Preferred Securities. All references to Sections herein are to Sections of this
Agreement unless otherwise indicated. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Act" or "Securities Act" means the Securities Act of 1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such person
whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Company Offering" means the sale of Common Stock pursuant to a
registration statement filed by AnnTaylor under the Act (other than (i) a
registration statement filed on Form S-4 or any successor form or (ii) a
registration statement filed on Form S-8 or any successor form) respecting
an underwritten offering, whether primary or secondary, that is declared
effective by the Commission.
"DTC" means The Depository Trust Company.
<PAGE>
3
"Effectiveness Period" has the meaning set forth in Section 2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering, if any, as set forth in Section 6.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act),
as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Registrable Securities.
"Shelf Registration" means a registration effected pursuant to
Section 2.
"Shelf Registration Statement" means a "shelf" registration statement
of the Trust and AnnTaylor pursuant to the provisions of Section 2 filed
with the Commission which covers some or all of the Registrable Securities,
as applicable, on an appropriate form under Rule 415 under the Act, or any
similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement.
2. SHELF REGISTRATION. (a) The Trust and AnnTaylor shall, within
60 days following the date of original issuance (the "Issue Date") of the
Preferred Securities, file with the Commission a Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by the Holders from
time to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Statement and, thereafter,
shall each use their best efforts to cause such Shelf Registration Statement to
be declared effective under the Act within 180 calendar days following the Issue
Date; provided, however, that no Holder shall be entitled to have the
-------- -------
Registrable Securities held by it covered by such Shelf Registration unless such
Holder is in compliance with Section 3(m).
<PAGE>
4
(b) The Trust and AnnTaylor shall each use its best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of three
years from the date the Shelf Registration Statement is declared effective or
such shorter period that will terminate upon the earliest of the following: (A)
when all the Preferred Securities covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement, (B) when all
Debentures issued to Holders in respect of Preferred Securities that had not
been sold pursuant to the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement, (C) when all shares of Common Stock issued
upon conversion of any such Preferred Securities or any such Debentures that had
not been sold pursuant to the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement and (D) when, in the written
opinion of counsel to the Trust and AnnTaylor, all outstanding Registrable
Securities held by persons which are not affiliates of the Trust or AnnTaylor
may be resold without registration under the Act pursuant to Rule 144(k) under
the Act or any successor provision thereto (in any such case, such period being
called the "Effectiveness Period").
(c) In the event that a Shelf Registration Statement with respect to
the Registrable Securities is not (i) filed on or prior to the 60th calendar day
following the Issue Date and (ii) declared effective on or prior to the 180th
calendar day following the Issue Date (each, a "Registration Default"), the
interest rate borne by the Debentures and, accordingly, the distribution rate
borne by the Preferred Securities shall be increased by one-quarter of one
percent (0.25%) per annum, from and including the day following the Registration
Default to and including the 90th day following such Registration Default and by
one-half of one percent (0.50%) thereof from and after the 91st day following
such Registration Default. Upon (x) the filing of the Shelf Registration
Statement after the 60-day period described in clause (i) above or (y) the
effectiveness of the Shelf Registration Statement after the 180-day period
described in clause (ii) above, the interest rate borne by the Debentures and
the distribution rate borne by the Preferred Securities from the date of such
filing or effectiveness, as the case may be, will be reduced to the original
interest rate. In the event that the Shelf Registration Statement ceases to be
effective during the Effectiveness Period for more than 30 consecutive days or
any 90 days, whether or not consecutive, during any 12-month period, then the
interest rate borne by the Debentures and the distribution rate borne by the
Preferred Securities will each increase by one-half of one percent (0.50%) per
annum from such 31st or 91st day, as applicable, until such time as the Shelf
Registration Statement again becomes effective.
(d) The Trust and AnnTaylor shall be deemed not to have used their
best efforts to keep the Shelf Registration Statement effective during the
requisite period if either the Trust or AnnTaylor voluntarily takes any action
that would result in Holders of Registrable Securities covered thereby not being
able to offer and sell any such Registrable Securities during that period,
unless (i) such action is required by applicable law, (ii) upon
<PAGE>
5
the occurrence of any event contemplated by paragraph 3(c)(2)(iii) below, and
such action is taken by the Trust or AnnTaylor in good faith and for valid
business reasons or (iii) the continued effectiveness of the Shelf Registration
Statement would require AnnTaylor to disclose a material financing, acquisition
or other corporate development, and the proper officers of the Company shall
have determined in good faith that such disclosure is not in the best interests
of AnnTaylor and its stockholders, and, in the case of clause (ii) above, the
Trust and AnnTaylor thereafter promptly comply with the requirements of Section
3(i) below.
3. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement, the following provisions shall apply:
(a) The Trust and AnnTaylor shall furnish to the Initial Purchasers,
prior to the filing thereof with the Commission, a copy of any Shelf
Registration Statement, and each amendment thereof and each amendment or
supplement, if any, to the Prospectus included therein and shall each use
its best efforts to reflect in each such document, when so filed with the
Commission, such comments as the Initial Purchasers reasonably may propose.
(b) The Trust and AnnTaylor shall take such action as may be
necessary so that (i) any Shelf Registration Statement, and any amendment
thereto, and any Prospectus forming part thereof, and any amendment or
supplement thereto (and each report or other document incorporated therein
by reference in each case) complies in all material respects with the
Securities Act and the Exchange Act and the respective rules and
regulations thereunder, (ii) any Shelf Registration Statement, and any
amendment thereto, does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and (iii) any Prospectus forming part of any Shelf Registration
Statement, and any amendment or supplement to such Prospectus, does not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) AnnTaylor shall advise the Initial Purchasers and, in the
case of clause (i), the Holders and, if requested by the Initial Purchasers
or any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement, and any amendment
thereto, has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective; and
(ii) of any request by the Commission for amendments or
<PAGE>
6
supplements to the Shelf Registration Statement or the Prospectus
included therein or for additional information.
(2) AnnTaylor shall advise the Initial Purchasers and the Holders
and, if requested by the Initial Purchasers or any such Holder, confirm
such advice in writing of:
(i) the issuance by the Commission of any stop order suspending
effectiveness of the Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(ii) the receipt by the Trust or AnnTaylor of any notification
with respect to the suspension of the qualification of the securities
included therein for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and
(iii) the happening of any event that requires the making of
any changes in the Shelf Registration Statement or the Prospectus so
that, as of such date, the Shelf Registration Statement and the
Prospectus do not contain an untrue statement of a material fact and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made)
not misleading (which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been
made).
(d) AnnTaylor shall use its best efforts to prevent the issuance,
and, if issued, to obtain the withdrawal, of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible
time.
(e) The Trust and AnnTaylor shall furnish to each Holder of
Registrable Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, and, if the Holder so requests in
writing, all reports and other documents incorporated by reference in the
Shelf Registration Statement and exhibits (including those incorporated by
reference).
(f) The Trust and AnnTaylor shall, during the Effectiveness Period,
deliver to each Holder of Registrable Securities included within the
coverage of any Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and each of the Trust and
AnnTaylor consents (except upon and during the continuance of any
<PAGE>
7
event described in paragraphs 2(d) or 3(c)(2)(iii) above or Section 6(e))
to the use of the Prospectus or any amendment or supplement thereto by each
of the selling Holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto during the Shelf Registration
Period.
(g) Prior to any offering of Registrable Securities pursuant to any
Shelf Registration Statement, the Trust and AnnTaylor shall register or
qualify or cooperate with the Holders of Registrable Securities included
therein and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions in the United States as
any such Holders reasonably request in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Shelf
Registration Statement; provided, however, that in no
-------- -------
event shall the Trust or AnnTaylor be obligated to (i) qualify generally to
do business or as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for
this Section 3(g), (ii) file any general consent to service of process in
any jurisdiction where it is not as of the date hereof then so subject or
(iii) subject itself to taxation in any such jurisdiction if it is not so
subject.
(h) Unless any Registrable Securities shall be in book-entry only
form, the Trust and AnnTaylor shall cooperate with the Holders of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to any
Shelf Registration Statement free of any restrictive legends and in such
permitted denominations and registered in such names as Holders may request
in connection with the sale of Registrable Securities pursuant to such
Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Trust and AnnTaylor shall promptly prepare a post-
effective amendment to any Shelf Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except, in each case, for an untrue statement of a
material fact or omission of a material fact made in reliance on and in
conformity with written information furnished to AnnTaylor or the Trust by
or on behalf of Holders specifically for use therein). The Trust and
AnnTaylor agree to notify the Holders to suspend use of the Prospectus, and
the Holders shall suspend use of the Prospectus, and not communicate such
material non-public information to any third
<PAGE>
8
party, and not sell or purchase, or offer to sell or purchase, any
securities of the Trust or AnnTaylor, until the Trust or AnnTaylor has
amended or supplemented the Prospectus so it does not contain any such
misstatement or omission. Subject to Section 2(d), at such time as such
public disclosure is otherwise made or the Trust and AnnTaylor determine in
good faith that such disclosure is not necessary, the Trust and AnnTaylor
agree to notify the Holders of such determination and to amend or
supplement the Prospectus if necessary, so it does not contain any such
untrue statement or omission therein and to furnish the Holders such
numbers of copies of the Prospectus as so amended or supplemented as the
Holders may reasonably request.
(j) Not later than the effective date of any Shelf Registration
Statement hereunder, the Trust and AnnTaylor shall provide a CUSIP number
for the Preferred Securities registered under such Shelf Registration
Statement; in the event of and at the time of any distribution of the
Debentures to Holders, AnnTaylor shall provide a CUSIP number for the
Debentures and provide the applicable trustee with certificates for such
Registrable Securities, in a form eligible for deposit with DTC.
(k) The Trust and AnnTaylor shall use their best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to their security holders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as practicable
after the effective date of the applicable Shelf Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act.
(l) The Trust and AnnTaylor shall use their reasonable best efforts
to cause the Indenture, the Declaration and the Preferred Securities
Guarantee Agreement to be qualified under the Trust Indenture Act in a
timely manner.
(m) The Trust and AnnTaylor may require each Holder of Registrable
Securities to be sold pursuant to any Shelf Registration Statement to
furnish to the Trust and AnnTaylor such information regarding the Holder
and the distribution of such Registrable Securities as the Trust and
AnnTaylor may from time to time reasonably require for inclusion in such
Shelf Registration Statement and AnnTaylor and the Trust may exclude from
such registration the Registrable Securities of any Holder that fails to
furnish such information within a reasonable time after receiving such
request.
(n) The Trust and AnnTaylor will each use their reasonable best
efforts to cause the Preferred Securities and the Common Stock issuable
upon conversion thereof to be listed on the New York Stock Exchange on or
prior to the effective date of any Shelf Registration Statement hereunder.
<PAGE>
9
(o) The Trust and AnnTaylor shall use their reasonable best efforts
to take all other steps necessary to effect the registration, offering and
sale of the Registrable Securities covered by the Shelf Registration
Statement contemplated hereby.
4. REGISTRATION EXPENSES. Except as otherwise provided in Section
6, AnnTaylor shall bear all fees and expenses incurred in connection with the
performance of its obligations under Sections 2 and 3 and shall bear or
reimburse the Holders for the reasonable fees and disbursements of one firm of
counsel designated by AnnTaylor and reasonably acceptable to the Holders of a
majority of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefor in connection therewith.
5. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
Shelf Registration Statement, AnnTaylor and the Trust, jointly and severally,
shall indemnify and hold harmless the Initial Purchasers, each Holder, each
underwriter who participates in an offering of Registrable Securities, each
person, if any, who controls any of such parties within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each of their
respective directors, officers, employees, trustees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Shelf Registration
Statement (or any amendment thereto) covering Registrable Securities,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the cir-
cumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of AnnTaylor; and
(iii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of counsel chosen by the Holders, such
Holder or any underwriter (except to the extent otherwise expressly
provided in Section 5(c))),
<PAGE>
10
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided that this indemnity shall not apply to any loss, liability, claim,
- --------
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to the Trust or AnnTaylor by the
Initial Purchasers, such Holder or any underwriter in writing expressly for use
in the Shelf Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto) or (ii) contained in any preliminary
prospectus if the Initial Purchasers, such Holder or such underwriter failed to
send or deliver a copy of the Prospectus (or any amendment or supplement
thereto) to the Person asserting such losses, claims, damages or liabilities on
or prior to the delivery of written confirmation of any sale of securities
covered thereby to such Person in any case where such Prospectus (or any
amendment or supplement thereto) corrected such untrue statement or omission.
Any amounts advanced by AnnTaylor to an indemnified party pursuant to this
Section 5 as a result of such losses shall be returned to AnnTaylor if it shall
be finally determined by such a court in a judgment not subject to appeal or
final review that such indemnified party was not entitled to indemnification by
AnnTaylor.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Trust, AnnTaylor, the Initial Purchasers, each underwriter who
participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each officer
of AnnTaylor who signed the Shelf Registration
Statement), employees, trustees and agents and each Person, if any, who controls
the Trust, AnnTaylor, the Initial Purchasers, any underwriter or any other
selling Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all loss, liability, claim,
damage and expense whatsoever described in the indemnity contained in Section
5(a), as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to AnnTaylor by such selling Holder expressly for use in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto); provided, however, that no such Holder shall be liable for
-------- -------
any claims hereunder in excess of the amount of net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder,
<PAGE>
11
enclosing a copy of all papers served on such indemnified party, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have other than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action. If an indemnifying party so elects within a
reasonable time after receipt of such notice, such indemnifying party, jointly
with any other indemnifying party, may assume the defense of such action with
counsel chosen by it and approved by the indemnified party or parties defendant
in such action; provided that if any such indemnified party reasonably
--------
determines that there may be legal defenses available to such indemnified party
which are different from or in addition to those available to such indemnifying
party or that representation of such indemnifying party and any indemnified
party by the same counsel would present a conflict of interest, then such
indemnifying party or parties shall not be entitled to assume such defense. If
an indemnifying party is not entitled to assume the defense of such action as a
result of the proviso to the preceding sentence, counsel for such indemnifying
party shall be entitled to conduct the defense of such indemnifying party and
counsel for each indemnified party or parties shall be entitled to conduct the
defense of such indemnified party or parties. If an indemnifying party assumes
the defense of an action in accordance with and as permitted by the provisions
of this paragraph, such indemnifying party shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provision agreement provided for in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, AnnTaylor, the Initial
Purchasers and the Holders shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by AnnTaylor, the Initial Purchasers and the
Holders, as incurred; provided that no Person guilty of fraudulent
--------
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between AnnTaylor, the Initial Purchasers and
the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of AnnTaylor, on the one hand, and the Initial Purchasers and the
Holders, on the other hand, with respect to the statements or omissions which
resulted in such loss, liability, claim, damage or expense, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
fault of AnnTaylor, on the one hand, and of the Initial Purchasers and the
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a
<PAGE>
12
material fact relates to information supplied by AnnTaylor, on the one hand, or
by or on behalf of the Initial Purchasers or the Holders, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. AnnTaylor, the Initial Pur-
chasers and the Holders of the Registrable Securities agree that it would not be
just and equitable if contributions pursuant to this Section 5 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the relevant equitable considerations. For purposes of
this Section 5(d), each director, officer, employee, trustee, agent and Person,
if any, who controls an Initial Purchaser or Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Initial Purchaser or Holder, and each
director, officer, employee, trustee and agent of AnnTaylor and the Trust, and
each Person, if any, who controls AnnTaylor or the Trust within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as AnnTaylor. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its written consent.
6. UNDERWRITTEN OFFERING.
(a) The Holders of Registrable Securities covered by the Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an underwritten offering in accordance with the conditions set forth below.
In any such underwritten offering, the investment banker or bankers and manager
or managers that will administer the offering will be selected by, and the
underwriting arrangements with respect thereto will be approved by, the Holders
of a majority of the Registrable Securities to be included in such offering;
provided, however, that (i) such investment bankers and managers and
- -------- -------
underwriting arrangements must be reasonably satisfactory to AnnTaylor and the
Trust and (ii) AnnTaylor shall not be obligated to arrange for more than one
underwritten offering during the Effectiveness Period. No Holder may
participate in any underwritten offering contemplated hereby unless such Holder
(i) agrees to sell such Holder's Registrable Securities in accordance with any
approved underwriting arrangements, (ii) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements, lock-
up letters and other documents required under the terms of such approved
underwriting arrangements and (iii) at least 30% of the outstanding Registrable
Securities are included in such underwritten offering. The Holders
participating in any underwritten offering shall be responsible for any expenses
customarily borne by selling securityholders, including underwriting discounts
and commissions and fees and expenses of counsel to the selling securityholders
and shall reimburse the Trust and AnnTaylor for the fees and disbursements of
their counsel, their independent public accountants and any printing expenses
incurred in connection with such underwritten offering. Notwithstanding the
foregoing, upon receipt of a request from the Managing Underwriter or a
representative of Holders of a majority of the Registrable Securities
outstanding to prepare and file an amendment or supplement to the Shelf
Registration Statement and Prospectus in connection with an underwritten
offering,
<PAGE>
13
AnnTaylor may delay the filing of any such amendment or supplement for up to 90
days if AnnTaylor in good faith has a valid business reason for such delay.
(b) The Trust and AnnTaylor shall enter into such customary
agreements (including underwriting agreements in customary form) which are
reasonably acceptable to the Trust and the Company, and take all other
reasonably requested actions in order to expedite or facilitate the registration
or the disposition of the Registrable Securities, and in connection therewith,
if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 (or such other provisions and procedures acceptable to the
Managing Underwriters, if any) with respect to all parties to be indemnified
pursuant to Section 5.
(c) The Trust and AnnTaylor shall (i) make reasonably available for
inspection by the Holders of Registrable Securities to be registered thereunder,
any underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and any attorney, accountant or other agent retained by
such Holders or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Trust and AnnTaylor and its
subsidiaries; (ii) cause AnnTaylor's officers, directors and employees and the
Regular Trustees to make reasonably available for inspection all relevant
information reasonably requested by such Holders or any such underwriter,
attorney, accountant or agent in connection with any such Shelf Registration
Statement, in each case as is customary for similar due diligence examinations;
provided, however, that any information that is designated in writing by the
- -------- -------
Trust and AnnTaylor, in good faith, as confidential at the time of delivery of
such information shall be kept confidential by such Holders or any such
underwriter, attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party without an
accompanying obligation of confidentiality; and provided further that the
-------- -------
foregoing inspection and information gathering shall, to the greatest extent
possible, be coordinated on behalf of the Holders and the other parties entitled
thereto by one counsel designated by and on behalf of such Holders and other
parties reasonably acceptable to the Company and the Trust; (iii) make such
representations and warranties to the Holders of Registrable Securities
registered thereunder and the underwriters, if any, in form, substance and scope
as are customarily made by AnnTaylor and the Trust to underwriters in primary
underwritten offerings and covering matters including, but not limited to, those
set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the
Trust and AnnTaylor (who may be the general counsel of AnnTaylor) and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) in customary form
addressed to each selling Holder and the underwriters, if any, covering such
matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Holders
and underwriters (it being agreed that the matters to be covered by such opinion
or a written statement by such counsel delivered in connection with such
opinions
<PAGE>
14
shall include, without limitation, as of the date of the opinion and as of the
effective date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf Registration
Statement and the prospectus included therein, as then amended or supplemented,
including the documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading); (v) obtain "comfort letters" and updates thereof from the
independent public accountants of AnnTaylor (and, if necessary, any other
independent public accountants of any subsidiary of AnnTaylor or of any business
acquired by AnnTaylor for which financial statements and financial data are, or
are required to be, included in the Shelf Registration Statement), addressed to
each such Holder of Registrable Securities registered thereunder and the
underwriters, if any, in customary form and covering matters of the type
customarily covered in "comfort letters" in connection with primary underwritten
offerings; and (vi) deliver such other customary documents and certificates as
may be reasonably requested by any such Holders and the Managing Underwriters,
if any, including those to evidence compliance with Section 3(i) and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Trust and AnnTaylor. The foregoing actions set forth in
clauses (iii), (iv), (v) and (vi) of this Section 3(p) shall be performed at
each closing under any underwritten offering to the extent required thereunder.
(d) Upon the request of AnnTaylor, the Holders agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of
Registrable Securities during the 10-day period prior to the date that AnnTaylor
has notified the Holders that it intends to commence a Company Offering through
the 120-day period immediately following the closing date of such Company
Offering; provided, however, that (i) the Holders shall not be obligated to
-------- -------
comply with this Section 6(d) until the first anniversary of the date of this
Agreement and (ii) the Holders shall not be obligated to comply with this
Section 6(d) on more than one occasion in any 12-month period.
7. MISCELLANEOUS.
(a) OTHER REGISTRATION RIGHTS. AnnTaylor may grant registration
rights that would permit any Person that is a third party the right to piggyback
on any Shelf Registration Statement; provided that if the Managing Underwriter,
--------
if any, of such offering delivers an opinion to the selling Holders that the
total amount of securities which they and the holders of such piggyback rights
intend to include in any Shelf Registration Statement is so large as to
materially adversely affect the success of such offering (including the price at
which such securities can be sold), then only the amount, number or kind of
securities to be offered for the account of holders of such piggyback rights
will be reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended by the
Managing Underwriter prior to any reduction in the amount of Registrable
Securities to be included. The provisions of this Section 7(a)
<PAGE>
15
shall not affect the registration rights of the holders of common stock of
AnnTaylor acquired pursuant to the CAT/Cygne Transaction described in the
Offering Memorandum
(b) AMENDMENTS AND WAIVERS. The provision of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Trust and AnnTaylor have obtained
the written consent of the Initial Purchasers.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
1. if to a Holder, at the most current address given by such Holder
to AnnTaylor in accordance with the provisions of this Section 6(c);
2. if to the Initial Purchasers, initially at the address set forth
in the Purchase Agreement; and
3. if to the Trust or AnnTaylor, initially at its address set forth
in the Purchase Agreement.
All such notices and communications shall be deemed to have duly given when
received.
The Initial Purchasers or the Trust and AnnTaylor by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
and the Holders, including, without the need for an express assignment or any
consent by the Trust or AnnTaylor thereto, subsequent Holders of Registrable
Securities. The Trust and AnnTaylor hereby agree to extend the benefits of this
Agreement to any Holder of Registrable Securities and any such Holder may
specifically enforce the provisions of this Agreement as if an original party
hereto.
(e) COUNTERPARTS. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
16
(g) GOVERNING LAW. This agreement shall be governed by
the laws of the State of New York.
(h) SEVERABILITY. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
<PAGE>
17
Please confirm that the foregoing correctly sets forth the agreement
among AnnTaylor, the Trust and you.
Very truly yours,
ANNTAYLOR FINANCE TRUST
By:/s/ J. Patrick Spainhour
----------------------------------
Name: J. Patrick Spainhour
Title: Regular Trustee
By:/s/ Paul E. Francis
----------------------------------
Name: Paul E. Francis
Title: Regular Trustee
ANNTAYLOR STORES CORPORATION
By:/s/ Paul E. Francis
----------------------------------
Name: Paul E. Francis
Title: Executive Vice President -
Finance and Administration
<PAGE>
18
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ROBERTSON, STEPHENS & COMPANY LLC
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:/s/ Mary Beth Henson
----------------------------------------------
Name: Mary Beth Henson
Title: Director
Investment Banking Group
EXHIBIT 12.1
ANNTAYLOR STORES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE><CAPTION>
FISCAL QUARTERS
FISCAL YEARS ENDED ENDED
------------------------------------------------------ --------------------
FEB. 3, JAN. 28, JAN. 29, JAN. 30, FEB. 1, MAY 4, APRIL 29,
1996 1995 1994 1993 1992 1996 1995
------- -------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and
extraordinary loss.......... $ 4,281 $ 62,894 $ 31,519 $ 17,067 $ 8,727 $ 4,533 $ 7,569
Add total fixed charges
deducted from earnings...... 37,992 26,513 27,055 29,584 41,336 10,676 8,377
Less interest capitalized..... (1,325) (490) (490)
------- -------- -------- -------- ------- ------- ---------
Earnings available for payment
of fixed charges............. $40,948 $ 88,917 $ 58,574 $ 46,651 $50,063 $15,209 $15,456
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
Fixed charges:
Portion of minimum lease
rental deemed to be
interest................... $15,711 $ 11,794 $ 9,359 $ 8,311 $ 7,378 $ 4,555 $ 3,389
Interest expense............. 20,956 14,229 17,696 21,273 33,958 6,121 4,498
Capitalized interest......... 1,325 490 490
------- -------- -------- -------- ------- ------- ---------
Total fixed charges........ $37,992 $ 26,513 $ 27,055 $ 29,584 $41,336 $10,676 $ 8,377
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
Ratio of earnings to fixed
charges....................... 1.08 3.35 2.16 1.58 1.21 1.42 1.85
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
</TABLE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
ANNTAYLOR STORES CORPORATION:
We consent to the incorporation by reference in this Registration Statement
of AnnTaylor Stores Corporation and AnnTaylor Finance Trust on Form S-3 of our
report dated March 11, 1996 (April 8, 1996 as to Note 15), appearing in the
Annual Report on Form 10-K of AnnTaylor Stores Corporation for the fiscal year
ended February 3, 1996. We also consent 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
June 20, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of AnnTaylor Finance Trust and AnnTaylor
Stores Corporation and to the incorporation by reference therein of our report
on the combined financial statements of the AnnTaylor Woven Division of Cygne
Designs, Inc., CAT US Inc. and C.A.T. (Far East) Limited and Subsidiary included
in AnnTaylor Stores Corporation's Form 8-K filed with the Securities and
Exchange Commission on June 21, 1996.
ERNST & YOUNG LLP
New York, New York
June 21, 1996
Exhibit 25.1
===========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
ANNTAYLOR STORES CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 13-3499319
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
142 West 57th Street
New York, New York 10019
(Address of principal executive offices) (Zip code)
______________________
Convertible Subordinated Debentures
(Title of the indenture securities)
===========================================================================
<PAGE>
1. General Information. Furnish the following Information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the Obligor is an affiliate of the Trustee, describe each such
Affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7A-29 under the Trust Indenture Act of 1939 (the "Act") and Rule
24 of the Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
- 2 -
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
New York, and State of New York, on the 13th day of June, 1996.
THE BANK OF NEW YORK
By: /s/ Robert F. McIntyre
--------------------------
Name: Robert F. McIntyre
Title: Vice President
- 4 -
<PAGE>
EXHIBIT 7
- ------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December
31, 1995, published in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of the Federal Reserve
Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . $ 4,500,312
Interest-bearing balances . . . . . . . . . 643,938
Securities:
Held-to-maturity securities . . . . . . . . 806,221
Available-for-sale securities . . . . . . . 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold . . . . . . . . . . . . . . 4,166,720
Securities purchased under agreements
to resell. . . . . . . . . . . . . . . . . . 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income . . . . . . . . . . . . .27,068,535
LESS: Allowance for loan and
lease losses . . . . . . . . . . .520,024
LESS: Allocated transfer risk
reserve . . . . . . . . . . . . . . .1,000
Loans and leases, net of unearned
income and allowance, and reserve . . . . 26,547,511
Assets held in trading accounts . . . . . . . 758,462
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . 615,330
Other real estate owned . . . . . . . . . . . 63,769
Investments in unconsolidated
subsidiaries and associated
companies . . . . . . . . . . . . . . . . . 223,174
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . 900,795
Intangible assets . . . . . . . . . . . . . . 212,220
Other assets . . . . . . . . . . . . . . . . . 1,186,274
-----------
Total assets . . . . . . . . . . . . . . . . . $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . $21,248,127
Noninterest-bearing . . . . . . . .9,172,079
Interest-bearing . . . . . . . . .12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs . . . . . . 9,535,088
Noninterest-bearing . . . . . . . . . 64,417
Interest-bearing . . . . . . . . 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased . . . . . . . . . . 2,095,668
Securities sold under agreements
to repurchase . . . . . . . . . . . . . . 69,212
Demand notes issued to the U.S.
Treasury . . . . . . . . . . . . . . . . . . 107,340
Trading liabilities . . . . . . . . . . . . . 615,718
Other borrowed money:
With original maturity of one year
or less . . . . . . . . . . . . . . . . . 1,638,744
With original maturity of more than
one year . . . . . . . . . . . . . . . . . 120,863
Bank's liability on acceptances exe-
cuted and outstanding . . . . . . . . . . . 909,527
Subordinated notes and debentures . . . . . . 1,047,860
<PAGE>
Other liabilities . . . . . . . . . . . . . . 1,836,573
-----------
Total liabilities . . . . . . . . . . . . . . 39,224,720
-----------
EQUITY CAPITAL
Common stock . . . . . . . . . . . . . . . . . 942,284
Surplus . . . . . . . . . . . . . . . . . . . . 525,666
Undivided profits and capital
reserves . . . . . . . . . . . . . . . . . . 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . 29,668
Cumulative foreign currency transla-
tion adjustments . . . . . . . . . . . . . . (5,747)
-----------
Total equity capital . . . . . . . . . . . . . 3,487,187
-----------
Total liabilities and equity
capital . . . . . . . . . . . . . . . . . . . $42,711,907
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- ------------------------------------------------------------------
Exhibit 25.2
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
- -------------------------------------------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
______________________
ANNTAYLOR FINANCE TRUST
(Exact name of obligor as specified in its charter)
Delaware 13-7089625
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
142 West 57th Street
New York, New York 10019
(Address of principal executive offices) (Zip code)
Convertible Trust Originated Preferred SecuritiesSM
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to Form
T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 13th day of June, 1996.
THE BANK OF NEW YORK
By: /s/ Mary Jane Morrissey
---------------------------
Name: Mary Jane Morrissey
Title: Vice President
-4-
<PAGE>
EXHIBIT 7
- -------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................ $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................. 4,166,720
Securities purchased under agreements
to resell......................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ..........9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
<PAGE>
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this Report of
Condition has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System
and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true and correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- -----------------------------------------------------------------
<PAGE>
EXHIBIT 12
ANNTAYLOR STORES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE><CAPTION>
FISCAL QUARTERS
FISCAL YEARS ENDED ENDED
------------------------------------------------------ --------------------
FEB. 3, JAN. 28, JAN. 29, JAN. 30, FEB. 1, MAY 4, APRIL 29,
1996 1995 1994 1993 1992 1996 1995
------- -------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and
extraordinary loss.......... $ 4,281 $ 62,894 $ 31,519 $ 17,067 $ 8,727 $ 4,533 $ 7,569
Add total fixed charges
deducted from earnings...... 37,992 26,513 27,055 29,584 41,336 10,676 8,377
Less interest capitalized..... (1,325) (490) (490)
------- -------- -------- -------- ------- ------- ---------
Earnings available for payment
of fixed charges............. $40,948 $ 88,917 $ 58,574 $ 46,651 $50,063 $15,209 $15,456
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
Fixed charges:
Portion of minimum lease
rental deemed to be
interest................... $15,711 $ 11,794 $ 9,359 $ 8,311 $ 7,378 $ 4,555 $ 3,389
Interest expense............. 20,956 14,229 17,696 21,273 33,958 6,121 4,498
Capitalized interest......... 1,325 490 490
------- -------- -------- -------- ------- ------- ---------
Total fixed charges........ $37,992 $ 26,513 $ 27,055 $ 29,584 $41,336 $10,676 $ 8,377
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
Ratio of earnings to fixed
charges....................... 1.08 3.35 2.16 1.58 1.21 1.42 1.85
------- -------- -------- -------- ------- ------- ---------
------- -------- -------- -------- ------- ------- ---------
</TABLE>
Exhibit 25.3
======================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
ANNTAYLOR FINANCE TRUST
(Exact name of obligor as specified in its charter)
Delaware 13-7089625
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
142 West 57th Street
New York, New York 10019
(Address of principal executive offices) (Zip code)
______________________
Guarantee of Convertible Trust Originated Preferred SecuritiesSM
(Title of the indenture securities)
===========================================================================
<PAGE>
1. General Information. Furnish the following information as to the trustee:
(a) name and address of each examining or supervising authority to
which it is subject.
- ---------------------------------------------------------------------------
Name Address
- ---------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule
24 of the Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
New York, and State of New York, on the 13th day of June, 1996.
THE BANK OF NEW YORK
By: /S/MARY JANE MORRISSEY
---------------------------
Name: MARY JANE MORRISSEY
Title: VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
- ------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December
31, 1995, published in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of the Federal Reserve
Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . $ 4,500,312
Interest-bearing balances . . . . . . . . . 643,938
Securities:
Held-to-maturity securities . . . . . . . . 806,221
Available-for-sale securities . . . . . . . 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold . . . . . . . . . . . . . 4,166,720
Securities purchased under agreements
to resell. . . . . . . . . . . . . . . . . . 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income . . . . . . . . . . . . .27,068,535
LESS: Allowance for loan and
lease losses . . . . . . . . . . .520,024
LESS: Allocated transfer risk
reserve . . . . . . . . . . . . . . .1,000
Loans and leases, net of unearned
income and allowance, and reserve . . . . 26,547,511
Assets held in trading accounts . . . . . . . 758,462
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . 615,330
Other real estate owned . . . . . . . . . . . 63,769
Investments in unconsolidated
subsidiaries and associated
companies . . . . . . . . . . . . . . . . . 223,174
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . 900,795
Intangible assets . . . . . . . . . . . . . . 212,220
Other assets . . . . . . . . . . . . . . . . . 1,186,274
-----------
Total assets . . . . . . . . . . . . . . . . . $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . $21,248,127
Noninterest-bearing . . . . . . . .9,172,079
Interest-bearing . . . . . . . . .12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs . . . . . . 9,535,088
Noninterest-bearing . . . . . . . . . 64,417
Interest-bearing . . . . . . . . 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased . . . . . . . . . . 2,095,668
Securities sold under agreements
to repurchase . . . . . . . . . . . . . . 69,212
Demand notes issued to the U.S.
Treasury . . . . . . . . . . . . . . . . . . 107,340
Trading liabilities . . . . . . . . . . . . . 615,718
Other borrowed money:
With original maturity of one year
or less . . . . . . . . . . . . . . . . . 1,638,744
With original maturity of more than
one year . . . . . . . . . . . . . . . . . 120,863
Bank's liability on acceptances exe-
cuted and outstanding . . . . . . . . . . . 909,527
Subordinated notes and debentures . . . . . . 1,047,860
<PAGE>
Other liabilities . . . . . . . . . . . . . . 1,836,573
-----------
Total liabilities . . . . . . . . . . . . . . 39,224,720
-----------
EQUITY CAPITAL
Common stock . . . . . . . . . . . . . . . . . 942,284
Surplus . . . . . . . . . . . . . . . . . . . . 525,666
Undivided profits and capital
reserves . . . . . . . . . . . . . . . . . . 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . 29,668
Cumulative foreign currency transla-
tion adjustments . . . . . . . . . . . . . . (5,747)
-----------
Total equity capital . . . . . . . . . . . . . 3,487,187
-----------
Total liabilities and equity
capital . . . . . . . . . . . . . . . . . . . $42,711,907
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- ------------------------------------------------------------------
