Subsidiary Guaranty and Collateral Agreement - AnnTaylor Distribution Services Inc. and Bank of America NT&SA


               SUBSIDIARY GUARANTY AND COLLATERAL AGREEMENT

          
          SUBSIDIARY GUARANTY AND COLLATERAL AGREEMENT (as such
agreement may be amended, supplemented or otherwise modified from
time to time, this "Agreement"), dated as of June 30, 1998, is
                    ---------
made by each of the signatories hereto (together with any other
entity that may become a party hereto as provided herein, the
"Grantors"), in favor of BANK OF AMERICA NATIONAL TRUST AND
 --------
SAVINGS ASSOCIATION, with an office at 1455 Market Street, San
Francisco, California 94103, in its capacity as administrative
agent under the Credit Agreement (as defined below) (the
"Administrative Agent").
 --------------------

                        R E C I T A L S:
          ANNTAYLOR, INC., (the "Borrower"), certain financial
                                 --------
institutions currently and in the future to be parties to the
Credit Agreement (such financial institutions being collectively
referred to as the "Lenders"), the Administrative Agent,
                    -------
BancAmerica Robertson Stephens, as Arranger (in such capacity,
the "Arranger"), Citicorp USA, First Union Capital Markets, in
     --------
their respective capacities as Syndication Agents (in such
capacities, the "Syndication Agents"), and Bank of America
                 ------------------
National Trust and Savings Association, Citibank, N.A. and First
Union National Bank in their respective capacities as Issuing
Banks (in such capacities, the "Issuing Banks"), have entered
                                -------------
into a Credit Agreement dated as of June 30, 1998, (as such
agreement may be amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), which provides for the
                   ----------------
Lenders to make Loans and the Issuing Banks to issue Letters of
Credit.  Pursuant to the Credit Agreement, the Grantors are
required to execute and deliver this Agreement.

          NOW, THEREFORE, in consideration of the above premises
and in order to induce the Lenders to make Loans and each Issuing
Bank to issue Letters of Credit under the Credit Agreement, each
Grantor hereby agrees with the Administrative Agent for its
benefit, and for the benefit of the Lenders, the Issuing Banks,
the Arranger, the Syndication Agents and the Administrative
Agent, by acceptance hereof, hereby agrees as follows:

          Section 1.  Defined Terms and Other Definitional
                      ------------------------------------
Provisions.
----------
          
          (a)  Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.

          (b)  The following terms shall have the following
meanings:

          "Accounts":  all accounts receivable and other rights
           --------
     to payment arising out of the sale or lease of goods and
     services, whether or not earned by performance, and all
     Credit Card Accounts, including, without limitation, all
     "accounts" as such term is defined in the Uniform Commercial
     Code in the State of New York in effect on the date hereof
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                          -2-
     (the "UCC") (in each instance, however, and wherever
           ---
     arising, collectively, "Accounts").
                             --------

          "Bankruptcy Code":  as defined in Section 2(d)(iv).
           ---------------                  ----------------
          
          "Chattel Paper, Instruments, Investment Property and
           ---------------------------------------------------
     Documents":  All chattel paper, all instruments, all
     ---------
     investment property and all documents (including, without
     limitation, (a) the shares of stock described in Annex I-A
                                                      ---------
     hereto (the "Pledged Shares") and all dividends, instruments
                  --------------
     and other property from time to time distributed in respect
     thereof or in exchange therefor, and (b) the notes and debt
     instruments described in Annex I-B hereto (the "Pledged
                              ---------              -------
     Debt") and all payments thereunder and instruments and other
     ----
     property from time to time delivered in respect thereof or
     in exchange therefor), and all bills of lading, warehouse
     receipts and other documents of title and documents,
     including, without limitation, all "chattel paper",
     "instruments", "investment property" and documents", as such
     terms are defined in the UCC, in each instance whether now
     owned or hereafter acquired by any Grantor, other than any
     promissory note with an original principal amount of less
     than $1,000,000 owing to any Grantor from a senior executive
     or key employee of such Grantor (an "Excluded Note")
                                          -------------
     (collectively, "Chattel Paper, Instruments, Investment
                     --------------------------------------
     Property and Documents")
     ----------------------

          "Collateral":  as defined in Section 3.
           ----------                  ---------
          
          "Equipment":  All machinery and equipment, all
           ---------
     manufacturing, distribution, selling, data processing and
     office equipment, all furniture, furnishings, appliances,
     tools, tooling, molds, dies, vehicles, vessels, aircraft and
     all other goods of every type and description, in each
     instance whether now owned or hereafter acquired by any
     Grantor and wherever located, including all "equipment", as
     such term is defined in the UCC; provided that equipment
     shall not include "fixtures" as defined in Section 9-313 of
     the UCC (collectively, "Equipment").
                             ---------

          "General Intangibles":  All rights, interests, choses
           -------------------
     in action, causes of action, claims and all other intangible
     property of any Grantor of every kind and nature, in each
     instance whether now owned or hereafter acquired by any
     Grantor, including, without limitation, all corporate and
     other business records; all loans, royalties, and other
     obligations receivable; all inventions, designs, patents,
     patent applications, service marks, trade names and
     trademarks (including any applications for the foregoing and
     whether or not registered) and the goodwill of any Grantor's
     business connected with and symbolized by such trademarks,
     trade secrets, computer programs, software, printouts and
     other computer materials, goodwill, registrations, U.S.
     registered copyrights, licenses relating to trademarks and
     U.S. registered copyrights, franchises, customer lists,
     credit files, correspondence and advertising materials; all
     customer and supplier contracts, firm sale orders, rights
     under license and franchise agreements, and other contracts
     and contract rights; all interests in partnerships, joint
     ventures and other entities; all tax refunds and tax refund
     claims; all right, title and interest under leases,
     subleases, licenses and concessions and other agreements
     relating to real or personal property; all payments due or
     made to any Grantor in connection with any requisition,
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                            -3-
     confiscation, condemnation, seizure or forfeiture of any
     property by any person or governmental authority; all
     deposit accounts (general or special) with any bank or other
     financial institution; all credits with and other claims
     against carriers and shippers; all rights to
     indemnification; all reversionary interests in pension and
     profit sharing plans and reversionary, beneficial and
     residual interest in trusts; all proceeds of insurance of
     which any Grantor is a beneficiary; and all letters of
     credit, guaranties, liens, security interests and other
     security held by or granted to any Grantor; and all other
     intangible property, whether or not similar to the
     foregoing, including, without limitation, all "general
     intangibles", as such term is defined in the UCC (in each
     instance, however, and wherever arising, collectively,
     "General Intangibles"); provided, that the foregoing
      -------------------    --------
     limitation shall not affect, limit, restrict or impair the
     grant by such Grantor of a security interest pursuant to
     this Agreement in any receivable or any money or other
     amounts due or to become due under any such contract,
     agreement, instrument or indenture.

          "Guaranteed Obligations":  as defined in Section 2(a).
           ----------------------                  ------------
          
          "Inventory":  all inventory, finished goods, raw
           ----------
     materials, work in process and other goods, including,
     without limitation, all "inventory" as such term is defined
     in the UCC (in each instance, however, and wherever arising,
     collectively, "Inventory").
                    ---------

          "Other Property":  All property or interests in
           --------------
     property now owned or hereafter acquired by any Grantor
     which now may be owned or hereafter may come into the
     possession, custody or control of the Administrative Agent,
     any of the Lenders, any Issuing Bank or any agent or
     Affiliate of any of them in any way or for any purpose
     (whether for safekeeping, deposit, custody, pledge,
     transmission, collection or otherwise); and all rights and
     interests of any Grantor, now existing or hereafter arising
     and however and wherever arising, in respect of any and all
     (i) notes, drafts, letters of credit, bank accounts, stocks,
     bonds, and debt and equity securities, whether or not
     certificated, and warrants, options, puts and calls and
     other rights to acquire or otherwise relating to the same;
     (ii) money; (iii) proceeds of loans; and (iv) insurance
     proceeds and books and records relating to any of the
     property covered by this Agreement (collectively, "Other
                                                        -----
     Property").
     --------

          "Personal Property Collateral":  as defined in Section
           ----------------------------                  -------
     4(d)(iv).
     --------

          "Pledged Collateral":  as defined in Section 5(a)(i).
           ------------------                  ---------------
          
          "Securities Act":  as defined in Section 6(c)(i).
           --------------                  ---------------
          
          "Subordinated Debt":  as defined in Section 2(c)(iv).
           -----------------                  ----------------
          
          (c)  The words "hereof," "herein", "hereto" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule
references are to this Agreement unless otherwise specified.

=======================================================================
                                -4-

          
          (d)  The meanings given to the terms defined herein
shall be equally applicable to both the singular and plural forms
of the such terms.

          (e)  Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a
Grantor, shall refer to such Grantor's Collateral or the relevant
part thereof.

          Section 2.  Guaranty.
                      --------
          (a)  Guaranty.  (i)  Each Grantor hereby
               --------
unconditionally and irrevocably guarantees to the Administrative
Agent, for its benefit and the benefit of the Lenders, the
Issuing Banks, the Arranger and the Syndication Agents, the full
and prompt payment when due, whether at maturity or earlier, by
reason of acceleration, mandatory prepayment or otherwise, and in
accordance with the terms and conditions of the Credit Agreement,
of all of the Obligations, whether or not from time to time
reduced or extinguished or hereafter increased or incurred,
whether or not recovery may be or hereafter may become barred by
any statute of limitations, and whether enforceable or
unenforceable as against the Borrower, now or hereafter existing,
or due or to become due (all such indebtedness, liabilities and
obligations being hereinafter collectively referred to as the
"Guaranteed Obligations").
 ----------------------

          (b)  No Subrogation.  Notwithstanding anything to the
               --------------
contrary in this Agreement, each Grantor hereby irrevocably
waives all rights which may have arisen in connection with this
Agreement to be subrogated to any of the rights (whether
contractual, under the Bankruptcy Code, including Section 509
                                                  -----------
thereof, under common law or otherwise) of the Administrative
Agent, the Lenders, the Issuing Banks, the Arranger or the
Syndication Agents against the Borrower or against any collateral
security or guarantee or right of offset held by such Person for
the payment of the Obligations.  Each Grantor hereby further
irrevocably waives all contractual, common law, statutory or
other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Borrower or
any other Person which may have arisen in connection with this
Agreement.  So long as the Guaranteed Obligations remain
outstanding, if any amount shall be paid by or on behalf of the
Borrower to any Grantor on account of any of the rights waived in
this paragraph, such amount shall be held by such Grantor in
trust, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the
Administrative Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the Administrative Agent, if
required), to be applied against the Obligations as provided
herein.  The provisions of this paragraph shall survive the term
of this Agreement and the payment in full of the Obligations and
the termination of the commitments of the Lenders to extend
credit under the Credit Agreement.

          (c)  Waivers; Other Agreements.
               -------------------------
               
               (i)  Subject to the terms hereof and of the Credit
     Agreement, the Administrative Agent is hereby authorized,
     without notice to or demand upon any Grantor, which notice
     or demand is expressly waived hereby, and without
     discharging or otherwise affecting the obligations of any
     Grantor hereunder (which shall remain absolute and
====================================================================
                           -5-
     
     unconditional notwithstanding any such action or omission to
     act), from time to time, to:


                         (A)  supplement, renew, extend,
          accelerate or otherwise change the time for payment of,
          or other terms relating to, the Guaranteed Obligations,
          or otherwise modify, amend or change the terms of any
          promissory note or other agreement, document or
          instrument (including the Credit Agreement and the
          other Loan Documents) now or hereafter executed by the
          Borrower and delivered to the Administrative Agent,
          including, without limitation, any increase or decrease
          of the rate of interest thereon;

                         (B)  waive or otherwise consent to
          noncompliance with any provision of any instrument
          evidencing the Guaranteed Obligations, or any part
          thereof, or any other instrument or agreement in
          respect of the Guaranteed Obligations (including the
          Credit Agreement and the other Loan Documents) now or
          hereafter executed by the Borrower and delivered to the
          Administrative Agent;
                         
                         
                         (C)  accept partial payments on the
          Guaranteed Obligations;
                         
                         
                         (D)  receive, take and hold additional
          security or collateral for the payment of the
          Guaranteed Obligations, or for the payment of any other
          guaranties of the Guaranteed Obligations or other
          liabilities of the Borrower, and exchange, enforce,
          waive, substitute, liquidate, terminate, abandon, fail
          to perfect, subordinate, transfer, otherwise alter and
          release any such additional security or collateral;

                         (E)  apply any and all such security or
          collateral and direct the order or manner of sale
          thereof as the Administrative Agent may determine in
          its sole discretion;

                         (F)  settle, release, compromise,
          collect or otherwise liquidate the Guaranteed
          Obligations or accept, substitute, release, exchange or
          otherwise alter, affect or impair any security or
          collateral for the Guaranteed Obligations or any other
          guaranty therefor, in any manner;

                         (G)  add, release or substitute any one
          or more other guarantors, makers or endorsers of the
          Guaranteed Obligations and otherwise deal with the
          Borrower or any other guarantor, maker or endorser as
          the Administrative Agent may elect in its sole
          discretion;

                         (H)  apply any and all payments or
          recoveries from the Borrower, from any other guarantor,
          maker or endorser of the Guaranteed Obligations or from
          any Grantor to the Guaranteed Obligations to the
          Obligations in such order as provided in Section
                                                   -------
          2.05(b) of the Credit Agreement, whether such
          -------
          Guaranteed Obligations are secured or unsecured or
          guaranteed or not guaranteed by others;

=======================================================================
                                -6-
                         
                         (I)  apply any and all payments or
          recoveries from any Grantor or any other guarantor,
          maker or endorser of the Guaranteed Obligations or sums
          realized from security furnished by any of them upon
          any of their indebtedness or obligations to the
          Administrative Agent as the Administrative Agent in its
          sole discretion, may determine, whether or not such
          indebtedness or obligations relate to the Guaranteed
          Obligations; and

                         (J)  refund at any time, at the
          Administrative Agent's sole discretion, any payment
          received by the Administrative Agent in respect of any
          Guaranteed Obligations, and payment to the
          Administrative Agent of the amount so refunded shall be
          fully guaranteed hereby even though prior thereto this
          Agreement shall have been cancelled or surrendered (or
          any release or termination of any collateral by virtue
          thereof) by the Administrative Agent, and such prior
          cancellation or surrender shall not diminish, release,
          discharge, impair or otherwise affect the obligations
          of any Grantor hereunder in respect of the amount so
          refunded (and any collateral so released or terminated
          shall be reinstated with respect to such obligations);

     even if any right of reimbursement or subrogation or other
     right or remedy of any Grantor is extinguished, affected or
     impaired by any of the foregoing (including, without
     limitation, any election of remedies by reason of any
     judicial, non-judicial or other proceeding in respect of the
     Guaranteed Obligations which impairs any subrogation,
     reimbursement or other right of such Grantor).

               
               (ii)  Each Grantor hereby waives:
                    
                    
                    (A)  any requirements of diligence or
          promptness on the part of the Administrative Agent;

                    
                    
                    (B)  presentment, demand for payment or
          performance and protest and notice of protest with
          respect to the Guaranteed Obligations;
                    
                    
                    (C)  notices (I) of nonperformance, (II) of
          acceptance of this Agreement, (III) of default in
          respect of the Guaranteed Obligations, (IV) of the
          existence, creation or incurrence of new or additional
          indebtedness, arising either from additional loans
          extended to the Borrower or otherwise, (V) that the
          principal amount, or any portion thereof, and/or any
          interest on any instrument or document evidencing all
          or any part of the Guaranteed Obligations is due, (VI)
          of any and all proceedings to collect from the
          Borrower, any endorser or any other guarantor of all or
          any part of the Guaranteed Obligations, or from anyone
          else, and (VII) of exchange, sale, surrender or other
          handling of any security or collateral given to the
          Administrative Agent to secure payment of the
          Guaranteed Obligations or any guaranty therefor;

                    
                    
                    (D)  any right to require the Administrative
          Agent to (I) proceed first against the Borrower, or any
          other person whatsoever, (II) proceed against or
          exhaust any security given to or held by the
          Administrative Agent in connection with the Guaranteed
=====================================================================
                             -7-
          Obligations, or (III) pursue any other remedy in the
          Administrative Agent's power whatsoever;

                    
                    
                    (E)  any defense arising by reason of (I) any
          disability or other defense of the Borrower, (II) the
          cessation from any cause whatsoever of the liability of
          the Borrower, (III) any act or omission of the
          Administrative Agent or others which directly or
          indirectly, by operation of law or otherwise, results
          in or aids the discharge or release of the Borrower or
          any security given to or held by the Administrative
          Agent in connection with the Guaranteed Obligations;

                    
                    
                    (F)  any and all other suretyship defenses
          under applicable law; and

                    
                    
                    (G)  the benefit of any statute of
          limitations affecting the Guaranteed Obligations or
          such Grantor's liability hereunder or the enforcement
          hereof.
     
     In connection with the foregoing, each Grantor covenants
     that this Agreement shall not be discharged, except by
     complete performance of the obligations contained herein.

               
               (iii)  Each Grantor hereby assumes responsibility
     for keeping itself informed of the financial condition of
     the Borrower, of any and all endorsers and/or other
     guarantors of any instrument or document evidencing all or
     any part of the Guaranteed Obligations and of all other
     circumstances bearing upon the risk of nonpayment of the
     Guaranteed Obligations or any part thereof that diligent
     inquiry would reveal and each Grantor hereby agrees that the
     Administrative Agent shall not have any duty to advise any
     Grantor of information known to the Administrative Agent
     regarding such condition or any such circumstances.

               (iv)  Each Grantor hereby agrees that any
     indebtedness of the Borrower now or hereafter owing to such
     Grantor is hereby subordinated to all of the Guaranteed
     Obligations, whether heretofore, now or hereafter created
     (the "Subordinated Debt"), and that without the prior
           -----------------
     consent of the Administrative Agent, the Subordinated Debt
     shall not be paid in whole or in part until the Guaranteed
     Obligations have been paid in full, the commitments of the
     Lenders to extend credit under the Credit Agreement have
     been terminated, no Letters of Credit are outstanding and
     the Credit Agreement has been terminated and is of no
     further force or effect, except that payments of principal
     and interest on the Subordinated Debt shall be permitted so
     long as no Potential Event of Default or Event of Default
     shall have occurred and be continuing to the extent such
     payments would not render the Borrower incapable of
     performing the Guaranteed Obligations.  No Grantor will
     accept any payment of or on account of any Subordinated Debt
     at any time in contravention of the foregoing.  At the
     request of the Administrative Agent, the Borrower shall pay
     to the Administrative Agent all or any part of the
     Subordinated Debt and any amount so paid to the
     Administrative Agent shall be applied to payment of the
     Guaranteed Obligations.  Each payment on the Subordinated
     Debt received in violation of any of the provisions hereof
     shall be deemed to have been received by the relevant
     Grantor as trustee for the Administrative Agent and shall be
     paid over to the Administrative Agent immediately on account
     of the Guaranteed Obligations, but without otherwise
====================================================================
                            -8-
     affecting in any manner such Grantor's liability under any
     of the provisions of this Agreement.  Each Grantor agrees to
     file all claims against the Borrower in any bankruptcy or
     other proceeding in which the filing of claims is required
     by law in respect of any Subordinated Debt, and the
     Administrative Agent shall be entitled to all of such
     Grantor's right thereunder.  If for any reason the relevant
     Grantor fails to file such claim at least thirty (30) days
     prior to the last date on which such claim should be filed,
     the Administrative Agent, as such Grantor's
     attorney-in-fact, is hereby authorized to do so in such
     Grantor's name or, in the Administrative Agent's discretion,
     to assign such claim to and cause proof of claim to be filed
     in the name of the Administrative Agent or its nominee.  In
     all such cases, whether in administration, bankruptcy or
     otherwise, the person or persons authorized to pay such
     claim shall pay to the Administrative Agent the full amount
     payable on the claim in the proceeding, and, to the full
     extent necessary for that purpose, each Grantor hereby
     assigns to the Administrative Agent all such Grantor's
     rights to any payments or distributions to which such
     Grantor otherwise would be entitled.  If the amount so paid
     is greater than such Grantor's liability hereunder, the
     Administrative Agent will pay the excess amount to the party
     entitled thereto.  In addition, each Grantor hereby appoints
     the Administrative Agent as its attorney-in-fact to exercise
     all of such Grantor's voting rights in connection with any
     bankruptcy proceeding or any plan for the reorganization of
     the Borrower.

               (v)  Each Grantor shall comply with all covenants
     applicable to it under the Credit Agreement and shall
     otherwise take no action which will cause an Event of
     Default or Potential Event of Default under the Credit
     Agreement.  Each Grantor shall also cause the Borrower to
     comply with all covenants applicable to the Borrower under
     the Credit Agreement.

          
          (d)  Guarantee Absolute and Unconditional.  Each
               ------------------------------------
Grantor hereby agrees that its obligations under this Agreement
are absolute and unconditional and shall not be discharged or
otherwise affected as a result of:


               (i)  the invalidity or unenforceability of any
     security for or other guaranty of the Guaranteed Obligations
     or of any promissory note or other document (including,
     without limitation, the Credit Agreement) evidencing all or
     any part of the Guaranteed Obligations, or the lack of
     perfection or continuing perfection or failure of priority
     of any security for the Guaranteed Obligations or any other
     guaranty therefor;

               
               (ii)  the absence of any attempt to collect the
     Guaranteed Obligations from the Borrower or any other
     guarantor or other action to enforce the same;

               
               (iii)  failure by the Administrative Agent to take
     any steps to perfect and maintain any security interest in,
     or to preserve any rights to, any security or collateral for
     the Guaranteed Obligations or any other guaranty therefor;

               
               (iv)  the Administrative Agent's election, in any
     proceeding instituted under Chapter 11 of Title 11 of the
                                   s
     United States Code (11 U.S.C. s 101 et seq.) (the
=====================================================================
                                   -9-
     "Bankruptcy Code"), of the application of Section 1111(b)(2)
      ---------------                          ------------------
     of the Bankruptcy Code;
               
               (v)  any borrowing or grant of a security interest
     by the Borrower, as debtor-in-possession, or extension of
     credit, under Section 364 of the Bankruptcy Code;
                   -----------
               
               (vi)  the disallowance, under Section 502 of the
                                             -----------
     Bankruptcy Code, of all or any portion of the Administrative
     Agent's claim(s) for repayment of the Guaranteed
     Obligations;

               (vii)  any use of cash collateral under Section
                                                       -------
     363 of the Bankruptcy Code;
     ---

               (viii)  any agreement or stipulation as to the
     provision of adequate protection in any bankruptcy
     proceeding;

               (ix)  the avoidance of any lien in favor of the
     Administrative Agent for any reason;

               (x)  any bankruptcy, insolvency, reorganization,
     arrangement, readjustment of debt, liquidation or
     dissolution proceeding commenced by or against the Borrower,
     any Grantor or any other guarantor, maker or endorser,
     including without limitation, any discharge of, or bar or
     stay against collecting, all or any of the Guaranteed
     Obligations (or any interest thereon) in or as a result of
     any such proceeding;

               (xi)  failure by the Administrative Agent to file
     or enforce a claim against the Borrower or its estate in any
     bankruptcy or insolvency case or proceeding;

               (xii)  any action taken by the Administrative
     Agent that is authorized by this Agreement;

               (xiii)  any election by the Administrative Agent
     under Section 9-501(4) of the Uniform Commercial Code as
           ----------------
     enacted in any relevant jurisdiction as to any security for
     the Guaranteed Obligations or any guaranty of the Guaranteed
     Obligations; or

               (xiv)  any other circumstance which might
     otherwise constitute a legal or equitable discharge or
     defense of a guarantor.

          (e)  Reinstatement.  Each Grantor further agrees that,
               -------------
if any payment made by the Borrower or any other person and
applied to the Guaranteed Obligations is at any time annulled,
set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by the
Administrative Agent, any of the Lenders, any Issuing Bank, the
Arranger or either Syndication Agent to the Borrower, its estate,
trustee, receiver or any other party, including, without
limitation, any Grantor, under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent
of such payment or repayment, each Grantor's liability hereunder
===================================================================
                             -10-

(and any lien, security interest or other collateral securing
such liability) shall be and remain in full force and effect, as
fully as if such payment had never been made, or, if prior
thereto this Agreement shall have been cancelled or surrendered
(and if any lien, security interest or other collateral securing
any Grantor's liability hereunder shall have been released or
terminated by virtue of such cancellation or surrender), this
Agreement (and such lien, security interest or other collateral)
shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of any Grantor in
respect of the amount of such payment (or any lien, security
interest or other collateral securing such obligation).

          (f) Payment. Each Grantor further agrees to pay all
              -------
costs and expenses upon demand including, without limitation, all
court costs and reasonable attorneys' fees and expenses paid or
incurred by the Administrative Agent (i) in endeavoring to
collect all or any part of the Guaranteed Obligations after the
same become due and owing from, or in prosecuting any action
against, any Grantor or any other guarantor of all or any part of
the Guaranteed Obligations or (ii) in endeavoring to realize upon
(whether by judicial, non-judicial or other proceedings) any
Collateral or any other collateral securing any Grantor's
liabilities under this Agreement.

          
          Section 3.  Grant of Security.  To secure the prompt
                      -----------------
and complete payment, observance and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
all the Guaranteed Obligations and all other obligations of any
Grantor, each Grantor hereby assigns and pledges to the
Administrative Agent, and hereby grants to the Administrative
Agent, for its benefit and the benefit of the Lenders, the
Issuing Banks, the Arranger and the Syndication Agents, a
security interest in, all of its right, title and interest in and
to the following, whether now owned or existing or hereafter
arising or acquired and wheresoever located (collectively, the
"Collateral"):
 ----------

          (a)  all Accounts;
          
          (b)  all Equipment;
          
          (c)  all General Intangibles;
          
          (d)  all Inventory;
          
          (e)  all Chattel Paper, Instruments, Investment
Property and Documents; and
          
          (f)  all Other Property;

together, in each instance, with all accessions and additions
thereto, substitutions therefor, and replacements, proceeds and
products thereof; provided, however, that the foregoing grant of
                  -----------------
a security interest shall not include a security interest in any
lease and any property subject to an enforceable lease which by
its terms expressly prohibits the right of the Grantor to grant a
security interest in such lease or property.  Each Grantor agrees
to use its commercially reasonable efforts to ensure that no
future lease contains any restrictions on such Grantor's right to
grant a security interest in any equipment placed on the leased
premises.
================================================================
                             -11-
          
          Section 4.  Representations and Warranties.
                      -------------------------------
          (a)  Credit Agreement.  Each Grantor hereby represents
               ----------------
and warrants to the Administrative Agent that each representation
and warranty made by Borrower in Article V of the Credit
                                 ---------
Agreement applicable to such Grantor is true and correct, which
representations and warranties (except such representations and
warranties which are expressly made as of a different date) shall
survive the execution and delivery of this Agreement, and shall,
except to the extent that the same have been modified by a
writing delivered to and accepted in writing by the
Administrative Agent, and, other than with respect to changes
permitted or contemplated by the Credit Agreement, continue to be
true and correct on the date of each Loan, and on the date of
issuance of each Letter of Credit.

          
          (b)  Perfected First Priority Liens.  This Agreement
               ------------------------------
creates a valid security interest in the Collateral (other than
the Pledged Collateral), securing the payment of the Guaranteed
Obligations, and all filings and other actions necessary or
desirable to perfect such security interest under the Uniform
Commercial Code as enacted in each relevant jurisdiction have
been duly taken or will be duly taken not later than five
Business Days after the date hereof (all such actions being the
filing of financing statements in the filing offices listed on
Annex III hereto).  The pledge and delivery of the Pledged
---------
Collateral pursuant to this Agreement and all other filings and
other actions taken by any Grantor to perfect such security
interest prior to the date hereof, create a valid and perfected
first priority security interest in the Pledged Collateral,
securing the payment of the Guaranteed Obligations except for
Pledged Collateral consisting of checks and drafts received in
the ordinary course of business with respect to which the
Administrative Agent has not at any time requested possession and
which are not a material portion of the Personal Property
Collateral, either singly or in the aggregate.

          (c) Equipment; Chief Executive Office.   As of the date
              ---------------------------------
of this Agreement, the locations listed on Annex II to this
                                           --------
Agreement constitute all locations at which its Inventory (other
than raw materials and work in process) or Equipment is located,
except for (i) Inventory or Equipment temporarily in transit from
one location listed on such Annex to another location listed on
such Annex or (ii) Inventory or Equipment in transit with common
or other carriers to a location listed on such Annex.  As of the
date of this Agreement, the chief place of business and chief
executive office of each Grantor are located at the address first
specified in the preamble hereto for such Grantor.

          
          (d)  Title; No Other Liens.  Each Grantor also
               ---------------------
represents and warrants as follows:

          (i)  Each Grantor is the legal and beneficial owner of
     the Collateral free and clear of all liens, security inter
     ests or other encumbrances, except (other than in respect of
     Pledged Collateral described in (iii) below) as expressly
     permitted by Section 8.02(b)  of the Credit Agreement.  For
                  ---------------
     the past five years, each Grantor has conducted business
     only under its own corporate name and not under any trade
     name or other name.
=================================================================
                             -12-

          (ii)  Each Grantor has exclusive possession and control
     of the Inventory (other than raw materials and work in
     process) and Equipment, except for (A) Inventory and
     Equipment in the possession and control of such Grantor's
     lessees and licensees under written lease and license
     agreements entered into in the ordinary course of business
     and consistent with past practice and (B) Inventory and
     Equipment in transit with common or other carriers.

          
          (iii)  The Pledged Shares have been duly authorized and
     validly issued and are fully paid and non-assessable.  The
     Pledged Debt of each Grantor's Subsidiaries (if any), and,
     to the best of each Grantor's knowledge, all other Pledged
     Debt, has been duly authorized, issued and delivered, and is
     the legal, valid, binding and enforceable obligation of the
     issuers thereof.

          (iv)  The Pledged Shares indicated on Annex I-A hereto
                                                ---------
     constitute all of the shares held by each Grantor of the
     respective issuers thereof and constitute 65% of all of the
     shares of stock of the respective issuers who are Foreign
     Subsidiaries.  The Pledged Shares and the Pledged Debt
     constitute all of the Pledged Collateral except for Pledged
     Collateral consisting of checks and drafts received in the
     ordinary course of business and with respect to which the
     Administrative Agent has not at any time requested
     possession and which are not a material portion of the
     Collateral under this Agreement (the "Personal Property
                                           -----------------
     Collateral"), either singly or in the aggregate.
     ----------
          
          (v)  Other than filings with the United States Patent
     and Trademark Office, filings and registrations with the
     United States Copyright Office and filings under the Uniform
     Commercial Code in effect in each relevant jurisdiction, no
     authorization, approval or other action by, and no notice to
     or filing with, any federal, state or local governmental
     authority in the United States that have not already been
     taken or made and which are in full force and effect, is
     required (A) for the pledge by each Grantor of the Pledged
     Collateral or for the grant by each Grantor of the security
     interest in the Collateral granted hereby or for the
     execution, delivery or performance of this Agreement by such
     Grantor, (B) for the exercise by the Administrative Agent of
     the voting or other rights provided in this Agreement with
     respect to the Pledged Collateral or the remedies in respect
     of the Pledged Collateral pursuant to this Agreement (except
     as may be required in connection with the disposition
     thereof by laws affecting the offering and sale of
     securities generally), or (C) for the exercise by the
     Administrative Agent of any of its other rights or remedies
     hereunder.

          (e)  Accounts.  (i)  No amount payable to any Grantor
               --------
under or in connection with any Account is evidenced by any
"instrument" or "chattel paper", as such terms are defined in the
UCC, which has not been delivered to the Administrative Agent.

          
          (ii)  The amounts represented by any Grantor to the
     Lenders from time to time as owing to such Grantor in
     respect of the Accounts will at such times be accurate.

          
          Section 5.  Covenants.  Each Grantor covenants and
                      ---------
agrees with the Administrative Agent and the Lenders that, from
and after the date of this Agreement until the Obligations shall
==================================================================
                           -13-

have been paid in full, no Letter of Credit shall be outstanding
and the Commitments shall have terminated:

          (a)  Pledged Collateral.
               ------------------
               
               (i) All certificates, notes and other instruments
     representing or evidencing the Pledged Shares or the Pledged
     Debt and all other instruments now owned or at anytime
     hereafter acquired by any Grantor other than any Excluded
     Notes (collectively, the "Pledged Collateral") shall be
                               ------------------
     delivered to and held by or on behalf of the Administrative
     Agent pursuant hereto (except as otherwise provided in the
     last sentence of Section 4(b) hereof) and shall be in
                      ------------
     suitable form for transfer by delivery, or shall be
     accompanied by duly executed instruments of transfer or
     assignments in blank, all in form and substance satisfactory
     to the Administrative Agent.  Upon the occurrence and during
     the continuance of an Event of Default, the Administrative
     Agent shall have the right, at any time in its discretion
     and without notice to any Grantor, to transfer to or to
     register in the name of the Administrative Agent or any
     nominee of the Administrative Agent any or all of the
     Pledged Collateral, subject only to the revocable rights
     specified in Section 5(c) hereof.  In addition, upon the
                  ------------
     occurrence and during the continuance of an Event of
     Default, the Administrative Agent shall have the right at
     any time to exchange certificates or instruments
     representing or evidencing Pledged Collateral for
     certificates or instruments of smaller or larger
     denominations.


               (ii)  Each Grantor agrees that it will (A) cause
     each issuer of the Pledged Shares subject to its control not
     to issue any stock or other securities in addition to or in
     substitution for the Pledged Shares issued by such issuer,
     except to such Grantor or as otherwise permitted under the
     Credit Agreement, and (B) pledge hereunder, immediately upon
     its acquisition (directly or indirectly) thereof, any and
     all additional shares of stock or other securities of each
     issuer of the Pledged Shares.  Each Grantor hereby
     authorizes the Administrative Agent to modify this Agreement
     by amending Annex I to include such additional shares or
                 -------
     other securities.

          (b)  Maintenance of Perfected Security Interest;
               ------------------------------------------
Further Assurances.
------------------
          (i)  Each Grantor agrees that from time to time, at its
     own expense, such Grantor will promptly execute and deliver
     all further instruments and documents, and take all further
     action, that may be necessary or desirable, or that the
     Administrative Agent may reasonably request, in order to
     perfect and protect any security interest granted or
     purported to be granted hereby or to enable the
     Administrative Agent to exercise and enforce its rights and
     remedies hereunder with respect to any Collateral; provided,
                                                        --------
     however, that such Grantor shall in no event be required to
     -------
     execute any leasehold mortgage with respect to any lease.
     Without limiting the generality of the foregoing, at the
     request of the Administrative Agent, each Grantor shall: (A)
     if an Event of Default shall have occurred and be
     continuing, mark conspicuously each document included in the
     Collateral at the request of the Administrative Agent made
     at any time, and whether or not an Event of Default shall
     have occurred, mark each of its records pertaining to the
     Collateral with a legend, in form and substance satisfactory
     ===============================================================
                                    -14-
     
     to the Administrative Agent, indicating that such document
     or Collateral is subject to the security interest granted
     hereby; (B) execute and file such financing or continuation
     statements, or amendments thereto, and such other
     instruments or notices, as may be necessary or desirable, or
     as the Administrative Agent may reasonably request, in order
     to perfect and preserve the security interests granted or
     purported to be granted hereby; and (C) in the case of
     investment property and any other relevant Collateral,
     taking any actions necessary to enable the Administrative
     Agent to obtain "control" (within the meaning of the
     applicable Uniform Commercial Code) with respect thereto.
     Each Grantor shall maintain the security interest created by
     this Agreement as a perfected security interest and shall
     defend such security interest against the claims and demands
     of all Persons whomsoever.

          
          (ii)  Each Grantor hereby authorizes the Administrative
     Agent to file one or more financing or continuation
     statements, and amendments thereto, relative to all or any
     part of the Collateral without the signature of the relevant
     Grantor where permitted by law.  A carbon, photographic or
     other reproduction of this Agreement or any financing
     statement covering the Collateral or any part thereof shall
     be sufficient as a financing statement where permitted by
     law.

          (iii)  Each Grantor shall furnish to the Administrative
     Agent from time to time statements and schedules further
     identifying and describing the Collateral and such other
     reports in connection with the Collateral as the
     Administrative Agent may request, all in reasonable detail.

          
          (c)  As to Inventory, Equipment and Accounts.  Each
               ---------------------------------------
Grantor shall:

          
          (i)  Keep the Inventory and Equipment (other than raw
     materials and work in process and Inventory sold in the
     ordinary course of business and Equipment sold in accordance
     with Section 8.02 of the Credit Agreement) at the places
          ------------
     specified in Section 4(c) hereof and deliver written notice
                  ------------
     to the Administrative Agent at least 30 days prior to
     establishing any other location at which it reasonably
     expects to maintain Inventory (other than raw materials and
     work in process) or Equipment in which jurisdiction all
     action required by Section 5(c) hereof shall have been taken
                        ------------
     with respect to all such Inventory or Equipment, as the case
     may be, in order to perfect the security interest granted
     therein under this Agreement.

          
          (ii)  Maintain or cause to be maintained in good
     repair, working order and condition, excepting ordinary wear
     and tear and damage due to casualty, all of the Inventory or
     Equipment, and make or cause to be made all appropriate
     repairs, renewals and replacements thereof, to the extent
     not obsolete and consistent with past practice of the each
     Grantor, as quickly as practicable after the occurrence of
     any loss or damage thereto which are necessary or desirable
     to such end.  Each Grantor shall promptly furnish to the
     Administrative Agent a statement respecting any material
     loss or damage as a result of a single occurrence to any of
     its Inventory or Equipment which has an aggregate fair
     market value exceeding $250,000.
=======================================================================
                                  -15-

          (iii)  No Grantor will, except upon 30 days' prior
     written notice to the Administrative Agent and delivery to
     the Administrative Agent of all additional executed
     financing statements and other documents reasonably
     requested by the Administrative Agent to maintain the
     validity, perfection and priority of the security interests
     provided for herein:

                    (A)  change its jurisdiction of organization
          or the location of its chief execute office or sole
          place of business from that referred to in Section 4(c)
                                                     ------------
          above.

                    
                    
                    (b)  change its name, identity or corporate
          structure to such an extent that any financing
          statement filed by the Administrative Agent in
          connection with this Agreement would become misleading.

          (d)  Additional Shares.  Each Grantor agrees that it
               -----------------
will (i) cause each issuer of the Pledged Shares subject to its
control not to issue any stock or other securities in addition to
or in substitution for the Pledged Shares issued by such issuer,
except to such Grantor or as otherwise permitted under the Credit
Agreement, and (ii) pledge, hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each issuer of
the Pledged Shares; provided that in no event shall the Grantor
be required to pledge more than 65% of the shares of any Foreign
Subsidiary.  Each Grantor hereby authorizes the Administrative
Agent to modify this Agreement by amending Annex I-A to include
such additional shares or other securities.

          
          Section 6.  Remedial Provisions.
                      -------------------
          (a)  Grantors Remain Liable.  (i)  Anything herein to
               ----------------------
the contrary notwithstanding, each Grantor shall remain liable
under the contracts and agreements included in the Collateral to
the extent set forth therein to perform its duties and
obligations thereunder to the same extent as if this Agreement
had not been executed, (ii) the exercise by the Administrative
Agent of any of its rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral (except to the extent
that such exercise prevents such Grantor from satisfying such
duties and obligations), and (iii) the Administrative Agent shall
not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this
Agreement, nor shall the Administrative Agent be obligated to
perform any of the obligations or duties of any Grantor
thereunder, to make any payment, to make any inquiry as to the
nature or sufficiency of any payment received by such Grantor or
the sufficiency of any performance by any party under any such
contract or agreement or to take any action to collect or enforce
any claim for payment assigned hereunder.

          
          (b)  As to the Pledged Collateral.
               ----------------------------
          
          (i)  So long as no Event of Default shall have occurred
     and be continuing:

                         
                         (A)  Each Grantor and not the
          Administrative Agent shall be entitled to exercise any
          and all voting and other rights of consent or approval
========================================================================
                              -16-
          pertaining to the Pledged Collateral or any part
          thereof for any purpose not inconsistent with the terms
          of this Agreement or the Credit Agreement; provided,
                                                     --------
          however, that no Grantor shall exercise or refrain from
          -------
          exercising any such right without the consent of the
          Administrative Agent if such action or inaction would
          have a material adverse effect on the value of the
          Pledged Collateral or the benefits to the
          Administrative Agent, the Lenders, the Issuing Banks,
          the Arranger and the Syndication Agents, including,
          without limitation, the validity, priority or
          perfection of the security interest granted hereby or
          the remedies of the Administrative Agent hereunder.

                         
                         
                         (B)  Each Grantor and not the
          Administrative Agent shall be entitled to receive and
          retain any and all dividends and interest paid in
          respect of the Pledged Collateral; provided, however,
                                             --------  -------
          that any and all

                                   (I)  dividends and interest
               paid or payable other than in cash in respect of,
               and instruments and other property received,
               receivable or otherwise distributed in respect of,
               or in exchange for, any Pledged Collateral,

                                   (II)  dividends and other
               distributions paid or payable in cash in respect
               of any Pledged Collateral consisting of stock of
               any Subsidiary of any Grantors and dividends and
               other distributions paid or payable in cash in
               respect of any other Pledged Collateral, in each
               case, in connection with a partial or total
               liquidation or dissolution or in connection with a
               reduction of capital, capital,surplus or
               paid-in-surplus, and

                                   
                                   
                                   (III)  cash paid, payable or
               otherwise distributed in respect of principal of,
               or in redemption of, or in exchange for, any
               Pledged Collateral,


               shall forthwith be delivered to the Administrative
          Agent, in the case of (I) above, to hold as Pledged
          Collateral and shall, if received by such Grantor, be
          received in trust for the benefit of the Administrative
          Agent, the Lenders, the Issuing Banks, the Arranger and
          the Syndication Agents, be segregated from the other
          property or funds of such Grantor, and be forthwith
          delivered to the Administrative Agent, as Pledged
          Collateral in the same form as so received (with any
          necessary indorsement) and, in the case of (II) and
          (III) above, to the extent required under the terms of
          the Credit Agreement, shall forthwith be delivered to
          the Administrative Agent to be applied to the
          Guaranteed Obligations in such order as provided in
          Section 2.05(b) of the Credit Agreement.
          ---------------

                         (C)  The Administrative Agent shall
          promptly execute and deliver (or cause to be executed
          and delivered) to any Grantor all such proxies and
          other instruments as such Grantor may reasonably
          request for the purpose of enabling such Grantor to
          exercise the voting and other rights which it is
====================================================================
                                   -17-
          
          entitled to exercise pursuant to paragraph (A) above
          and to receive the dividends or interest payments which
          it is authorized to receive and retain pursuant to
          paragraph (B) above.


          (ii)  Upon the occurrence and during the continuance of
     an Event of Default and at the Administrative Agent's
     option:


                         (A)  All rights of each Grantor to
          exercise the voting and other rights of consent or
          approval which it would otherwise be entitled to
          exercise pursuant to Section 6(b)(ii)(A) hereof and to
                               -------------------
          receive the dividends and interest payments which it
          would otherwise be authorized to receive and retain
          pursuant to Section 6(b)(ii)(B) hereof shall cease, and
                      -------------------
          all such rights shall thereupon become vested in the
          Administrative Agent, who shall thereupon have the sole
          right to exercise such voting and other rights of
          consent or approval and to receive and hold as Pledged
          Collateral such dividends and interest payments.

                         
                         
                         (B)  All dividends and interest payments
          which are received by any Grantor contrary to the
          provisions of paragraph (A) of this Section 6(b)(i(B)
                                              -----------------
          hereof shall be received in trust for the benefit of
          the Administrative Agent, the Lenders, the Issuing
          Banks, the Arranger and the Syndication Agents and
          shall be segregated from other funds of such Grantor
          and shall be forthwith paid over to the Administrative
          Agent as Pledged Collateral in the same form as so
          received (with any necessary indorsement).

          
          (c)  Remedies.  If any Event of Default shall have
               --------
occurred and be continuing:

          (i)  The Administrative Agent may exercise in respect
     of the Collateral, in addition to other rights and remedies
     provided for herein or otherwise available to it, all the
     rights and remedies of a secured party upon default under
     the UCC (whether or not the UCC applies to the affected
     Collateral) and also may (A) require each Grantor to, and
     each Grantor hereby agrees that it will at its expense and
     upon request of the Administrative Agent forthwith, assemble
     all or any part of the Collateral as directed by the
     Administrative Agent and make it available to the
     Administrative Agent at a place to be designated by the
     Administrative Agent which is reasonably convenient to both
     parties and (B) without notice except as specified below,
     sell, lease, assign, grant an option or options to purchase
     or otherwise dispose of the Collateral or any part thereof
     in one or more parcels at public or private sale, at any
     exchange, broker's board or at any of the Administrative
     Agent's offices or elsewhere, for cash, on credit or for
     future delivery, and upon such other terms as may be
     commercially reasonable.  The Administrative Agent may be
     the purchaser of any or all of the Collateral so sold at any
     public sale (or, if the Collateral is of a type customarily
     sold in a recognized market or is of a type which is the
     subject of widely distributed standard price quotations, at
     any private sale) and thereafter hold the same, absolutely,
     free from any right or claim of whatsoever kind.  The
     Administrative Agent is authorized, at any such sale, if it
     deems it advisable so to do, to restrict the prospective
     bidders or purchasers of any of the Pledged Collateral to
     persons who will represent and agree that they are
     purchasing for their own account for investment, and not
     with a view to the distribution or sale of any Pledged
=====================================================================
                                  -18-
     Collateral, and to take such other actions as it may deem
     appropriate to exempt the offer and sale of the Collateral
     from any registration requirements of state or federal
     securities laws (including, if it deems it appropriate,
     actions to comply with Regulation D of the Securities and
     Exchange Commission under the Securities Act of 1933, as
     from time to time amended (the "Securities Act")).  To the
                                     --------------
     extent permitted by law, each Grantor hereby specifically
     waives all rights of redemption, stay or appraisal which it
     has or may have under any rule of law or statute now
     existing or hereafter in force.  Each Grantor agrees that,
     to the extent notice of sale shall be required by law, at
     least ten days' written notice to such Grantor of the time
     and place of any public sale or the time after which any
     private sale is to be made shall constitute reasonable
     notification.  The Administrative Agent shall not be
     obligated to make any sale of Collateral regardless of
     notice of sale having been given.  The Administrative Agent
     may adjourn any public or private sale from time to time by
     announcement at the time and place fixed therefor, and such
     sale may, without further notice, be made at the time and
     place to which it was so adjourned.  In case of any sale of
     all or any part of the Collateral on credit or for future
     delivery, the Collateral so sold may be retained by the
     Administrative Agent until the selling price is paid by the
     purchaser thereof, but the Administrative Agent shall not
     incur any liability in case of the failure of such purchaser
     to take up and pay for the Collateral so sold and, in case
     of any such failure, such Collateral may again be sold upon
     like notice.  The Administrative Agent instead of exercising
     the power of sale herein conferred upon it, may proceed by a
     suit or suits at law or in equity to foreclose the security
     interests herein granted and sell the Collateral, or any
     portion thereof, under a judgment or decree of a court or
     courts of competent jurisdiction.

          
          (ii)  Any cash held by the Administrative Agent as
     Collateral and all cash proceeds received by the
     Administrative Agent in respect of any sale of, collection
     from, or other realization upon all or any part of the
     Collateral may, in the discretion of the Administrative
     Agent, be held by the Administrative Agent as Collateral
     for, and/or then or at any time thereafter applied against
     (after payment of any amounts payable to the Administrative
     Agent pursuant to Section 8(b) hereof) in whole or in part
                       ------------
     by the Administrative Agent, for the benefit of the
     Administrative Agent, the Lenders and the Issuing Banks, all
     or any part of the Guaranteed Obligations in such order as
     is provided in Section 2.05(b) of the Credit Agreement.  Any
     surplus of such cash or cash proceeds held by the
     Administrative Agent and remaining after payment in full of
     all the Guaranteed Obligations under this Agreement, the
     expiration or termination of all outstanding Letters of
     Credit and the termination of the commitments of the Lenders
     to extend credit under the Credit Agreement shall be
     promptly paid over to the relevant Grantor or to whomsoever
     may be lawfully entitled to receive such surplus.

          (iii)  Subject to Section 7.06 of the Credit Agreement,
     the Administrative Agent shall have the right to make test
     verifications of the Accounts in any manner and through any
     medium that it reasonably considers advisable, and the
     Grantor shall furnish all such assistance and information as
     the Administrative Agent may require in connection with such
     test verifications.  Subject to Section 7.06 of the Credit
     Agreement, at any time and from time to time, upon the
     Administrative Agent's request and at the expense of the
     ==============================================================
                                  -19-
     
     Grantor, the Grantor shall cause independent public
     accountants or others satisfactory to the Administrative
     Agent to furnish to the Administrative Agent reports showing
     reconciliations, aging and test verifications of, and trial
     balances for, the Accounts.

          (iv)  At any time after the occurrence and during the
     continuance of an Event of Default, the Grantor hereby
     authorizes the Administrative Agent to collect the Grantor's
     Accounts.  If required by the Administrative Agent at any
     time after the occurrence and during the continuance of an
     Event of Default, any payments of Accounts, when collected
     by any Grantor, (A) shall be forthwith (and, in any event,
     within two Business Days) deposited by the Grantor in the
     exact form received, duly indorsed by such Grantor to the
     Administrative Agent if required, in a Collateral Account
     maintained under the sole dominion and control of the
     Administrative Agent, subject to withdrawal by the
     Administrative Agent for the account of the Lenders only as
     provided herein, and (B) until so turned over, shall be held
     by the Grantor in trust for the Administrative Agent, the
     Lenders, the Issuing Banks, the Arranger and the Syndication
     Agents, segregated from other funds of the Grantor.  Each
     such deposit of proceeds of Accounts shall be accompanied by
     a report identifying in reasonable detail the nature and
     source of the payments included in the deposit.


          (v)  At the Administrative Agent's request, the Grantor
     shall deliver to the Administrative Agent all original and
     other documents (other than register tapes) evidencing, and
     relating to, the agreements and transactions which gave rise
     to the Accounts, including, without limitation, all original
     orders, invoices and shipping receipts.

          
          (vi)  The Administrative Agent in its own name or in
     the name of others may at any time after the occurrence and
     during the continuance of an Event of Default communicate
     with obligors under the Accounts to verify with them to the
     Administrative Agent's satisfaction the existence, amount
     and terms of any Accounts.

          
          (vii)  Upon the request of the Administrative Agent at
     any time after the occurrence and during the continuance of
     an Event of Default, the Grantor shall notify obligors on
     the Accounts that the Accounts have been assigned to the
     Administrative Agent for the ratable benefit of the Lenders
     and that payments in respect thereof shall be made directly
     to the Administrative Agent.

          (d)  Registration Rights.
               -------------------
          
          (i)  If the Administrative Agent shall determine to
     exercise its right to sell all or any of the Pledged
     Collateral pursuant to Section 6(c) hereof, each Grantor
                            ------------
     agrees that, upon request of the Administrative Agent, the
     relevant Grantor will, at its own expense:

                         
                         
                         (A)  execute and deliver, and cause each
          issuer of the Pledged Collateral which is a Subsidiary
          contemplated to be sold and the directors and officers
          thereof to execute and deliver, all such instruments
          and documents, and do or cause to be done all such
=================================================================
                                  -20-
          other acts and things, as may be necessary or, in the
          opinion of the Administrative Agent, advisable to
          register such Pledged Collateral under the provisions
          of the Securities Act, and to cause the registration
          statement relating thereto to become effective and to
          remain effective for such period as prospectuses are
          required by law to be furnished, and to make all
          amendments and supplements thereto and to the related
          prospectus which, in the opinion of the Administrative
          Agent, are necessary or advisable, all in conformity
          with the requirements of the Securities Act and the
          rules and regulations of the Securities and Exchange
          Commission applicable thereto;

                         
                         
                         (B)  use its best efforts to qualify the
          Pledged Collateral under the state securities or "Blue
          Sky" laws and to obtain all necessary approvals of all
          Governmental Authorities for the sale of the Pledged
          Collateral, as requested by the Administrative Agent;

                         
                         
                         (C)  cause each such issuer to make
          available to its security holders, as soon as
          practicable, an earnings statement which will satisfy
          the provisions of Section 11(a) of the Securities Act;
                            -------------
          and

                         (D)  do or cause to be done all such
          other acts and things as may be necessary to make such
          sale of the Pledged Collateral or any part thereof
          valid and binding and in compliance with applicable
          law.

          
          (ii)  Determination by the Administrative Agent to
     exercise its right to sell any or all of the Pledged
     Collateral pursuant to Section 6(c) hereof without making a
                            ------------
     request of the relevant Grantor pursuant to Section 6(d)(i)
                                                 ---------------
     hereof shall not by the sole fact of such sale be deemed to
     be commercially unreasonable.

          
          (e)  Default, Remedies.
               -----------------
          
          (i)  The obligations of each Grantor hereunder are
     independent of and separate from the Guaranteed Obligations
     and the obligations of any other guarantor of the Guaranteed
     Obligations.  If any of the Guaranteed Obligations are not
     paid when due, or upon any Event of Default or any default
     by the Borrower as provided in any other instrument or
     document evidencing all or any part of the Guaranteed
     Obligations, the Administrative Agent may, at its sole
     election, proceed directly and at once, without notice,
     against such Grantor to collect and recover the full amount
     or any portion of the Guaranteed Obligations, without first
     proceeding against the Borrower or any other guarantor of
     the Guaranteed Obligations, or against any Collateral for
     the Guaranteed Obligations under this Agreement or otherwise
     against any Collateral under any other Collateral Documents.

          
          (ii)  At any time after maturity of the Guaranteed
     Obligations, the Administrative Agent may, without notice to
     any Grantor and regardless of the acceptance of any security
     or collateral for the payment hereof, appropriate and apply
     toward the payment of the Guaranteed Obligations (A) any
     indebtedness due or to become due from the Administrative
====================================================================
                             -21-
     Agent to such Grantor and (B) any moneys, credits or other
     property belonging to such Grantor at any time held by or
     coming into the possession of the Administrative Agent or
     any of its affiliates.

          
          (iii)  Each Grantor hereby authorizes and empowers the
     Administrative Agent, in its sole discretion, without any
     notice (except notices required by law to the extent such
     notice as a matter of law may not be waived) or demand to
     any Grantor whatsoever and without affecting the liability
     of any Grantor hereunder, to exercise any right or remedy
     which the Administrative Agent may have available to it,
     including but not limited to, foreclosure by one or more
     judicial or nonjudicial sales, and each Grantor hereby
     waives any defense to the recovery by the Administrative
     Agent against such Grantor of any deficiency after such
     action, notwithstanding any impairment or loss of any right
     of reimbursement, contribution, subrogation or other right
     or remedy against the Borrower, or any other guarantor,
     maker or endorser, or against any security for the
     Guaranteed Obligations or for any guaranty of the Guaranteed
     Obligations.  No exercise by the Administrative Agent of,
     and no omission of the Administrative Agent to exercise, any
     power or authority recognized herein and no impairment or
     suspension of any right or remedy of the Administrative
     Agent against any Grantor, any other guarantor, maker or
     endorser or any security shall in any way suspend,
     discharge, release, exonerate or otherwise affect any of
     such Grantor's obligations hereunder or give to such Grantor
     any right of recourse against the Administrative Agent, the
     Lenders or the Issuing Banks.

          
          (iv)  Each Grantor consents and agrees that the
     Administrative Agent shall not be under any obligation to
     make any demand upon or pursue or exhaust any of its rights
     or remedies against the Borrower or any guarantor or others
     with respect to the payment of the Guaranteed Obligations,
     or to pursue or exhaust any of its rights or remedies with
     respect to any security therefor, or any direct or indirect
     guaranty thereof or any security for any such guaranty, or
     to marshal any assets in favor of any Grantor or against or
     in payment of any or all of the Guaranteed Obligations or to
     resort to any security or any such guaranty in any
     particular order, and all of its rights hereunder and under
     the other Loan Documents shall be cumulative.  Each Grantor
     hereby agrees to waive, and does hereby absolutely and
     irrevocably waive and relinquish the benefit and advantage
     of, and does hereby covenant not to assert against the
     Administrative Agent any valuation, stay, appraisal,
     extension or redemption laws now existing or which may
     hereafter exist which, but for this provision, might be
     applicable to any sale made under the judgment, order or
     decree of any court, or privately under the power of sale
     conferred by this Agreement.  Without limiting the
     generality of the foregoing, each Grantor hereby agrees that
     it will not invoke or utilize any law which might cause
     delay in or impede the enforcement of the rights under this
     Agreement or any of the other Loan Documents.

          
          Section 7.  The Administrative Agent.
                      ------------------------
          (a)  The Administrative Agent Appointed
               ----------------------------------
Attorney-in-Fact.  Each Grantor hereby irrevocably appoints the
----------------
Administrative Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name
=======================================================================
                              -22-

of such Grantor or otherwise, from time to time in the
Administrative Agent's discretion, to take, upon the occurrence
and during the continuance of an Event of Default, any action and
to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of the relevant Grantor under
Section 6(b) hereof), including, without limitation:
------------
               
               (i)  to obtain and adjust insurance required to be
     paid to the Administrative Agent pursuant to Section 7.05 of
     the Credit Agreement, with the understanding that all
     insurance maintained by the Grantor with respect to the
     Collateral shall (i) provide that no cancellation, material
     reduction in amount or material change in coverage thereof
     shall be effective until at least 30 days after receipt by
     the Administrative Agent of written notice thereof, (ii)
     name the Administrative Agent as insured party or loss
     payee, (iii) if reasonably requested by the Administrative
     Agent, include a breach of warranty clause and (iv) be
     reasonably satisfactory in all other respects to the
     Administrative Agent,

               (ii)  to ask, demand, collect, sue for, recover,
     compromise, receive and give acquittance and receipts for
     moneys due and to become due under or in respect of any of
     the Collateral,

               (iii)  to receive, indorse, and collect any drafts
     or other instruments, documents and chattel paper, in
     connection with clause (i) above or (ii) above,

               
               (iv)  to sell or assign any Account upon such
     terms, for such amount and at such time or times as
     Administrative Agent deems advisable, to settle, adjust,
     compromise, extend or renew any Account or to discharge and
     release any Account,

               (v)  to file any claims or take any action or
     institute any proceedings which the Administrative Agent may
     deem necessary or desirable for the collection of any of the
     Collateral or otherwise to enforce the rights of the
     Administrative Agent with respect to any of the Collateral,
     and

               (vi)  to receive, indorse and collect all
     instruments made payable to any Grantor representing any
     dividend, interest payment or other distribution in respect
     of the Pledged Collateral or any part thereof and to give
     full discharge for the same.

          Nothing set forth in this Section 7 and no exercise by
                                    ---------
the Administrative Agent of the rights and powers granted in this
Section 7 shall limit or impair any Grantor's rights under
---------
Section 6(b) hereof.  Each Grantor hereby ratifies all that said
------------
attorneys shall lawfully do or cause to be done by virtue hereof.
All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and shall be irrevocable
until the Obligations are paid in full, no Letters of Credit are
outstanding and the commitments of the Lenders to extend credit
under the Credit Agreement are terminated.

          
          (b)  The Administrative Agent May Perform.  If any
               -------------------------------------
Grantor fails to perform any agreement contained herein, the
Administrative Agent, upon written notice to such Grantor if
practicable, may itself perform, or cause performance of, such
agreement, and the expenses of the Administrative Agent incurred
==================================================================
                            -23-

in connection therewith shall be payable by such Grantor under
Section 8(a) hereof.
------------

          (c)  The Administrative Agent's Duties.  The powers
               ---------------------------------
conferred on the Administrative Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any
duty upon any of them, in the absence of willful misconduct or
gross negligence, to exercise any such powers.  Except for the
safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral.
The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment
substantially equal to that which the Administrative Agent
accords its own property, it being understood that the
Administrative Agent shall be under no obligation to (i)
ascertain or take action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Administrative Agent has
or is deemed to have knowledge of such matters, or (ii) take any
necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral, but may do so at its
option, and all reasonable expenses incurred in connection
therewith shall be for the sole account of the relevant Grantor
and shall be added to the Guaranteed Obligations.

          Section 8.  Miscellaneous.
                      -------------
          (a)  Expenses.  Each Grantor shall upon written demand
               --------
pay to the Administrative Agent the amount of any and all
expenses, including the fees and disbursements of its counsel and
of any experts and agents, as provided in Section 12.03 of the
                                          -------------
Credit Agreement.

          (b)  Amendments, Etc.  No amendment or waiver of any
               ----------------
provision of this Agreement nor consent to any departure by any
Grantor herefrom shall in any event be effective unless the same
shall be in writing and signed by the party to be charged
therewith, and they waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given.

          (c)  Notices.  All notices and other communications
               -------
provided for hereunder shall be given in the manner set forth in
the Credit Agreement and to the address first above written or,
as to each party, at such other address as may be designated by
such party in a written notice to the other party.

          
          (d)  Continuing Security Interest; Termination.
               -----------------------------------------
          
          (i)  This Agreement shall create a continuing security
     interest in the Collateral and shall (A) remain in full
     force and effect until payment in full of the Guaranteed
     Obligations, the termination of the commitments of the
     Lenders to extend credit under the Credit Agreement, the
     expiration or termination of all Letters of Credit and the
     termination of the Credit Agreement, (B) be binding upon
     each Grantor, its successors and assigns and (C) except to
     the extent that the rights of any transferor or assignor are
     limited by Section 12.01 (concerning assignments) of the
                -------------
====================================================================
                            
                            -24-
     Credit Agreement, inure, together with the rights and
     remedies of the Administrative Agent hereunder, to the
     benefit of the Administrative Agent, the Lenders, the
     Issuing Banks, the Arranger and the Syndication Agents
     subject to the terms and conditions of the Credit Agreement.
     Without limiting the generality of the foregoing clause (C),
     any Lender may assign or otherwise transfer any interest in
     any Loan owing to such Lender to any other Person, and such
     other Person shall thereupon become vested with all the
     benefits in respect thereof granted to the Administrative
     Agent herein or otherwise, subject, however, to the
     provisions of Section 12.01 (concerning assignments) of the
                   -------------
     Credit Agreement.  Nothing set forth herein or in any other
     Loan Document is intended or shall be construed to give any
     Grantor's successors and assigns any right, remedy or claim
     under, to or in respect of this Agreement, any other Loan
     Document or any Collateral.  Each Grantor's successors and
     assigns shall include, without limitation, a receiver,
     trustee or debtor-in-possession thereof or therefor.

          (ii)  Upon the payment in full of the Guaranteed
     Obligations, the termination of the commitments of the
     Lenders to extend credit under the Credit Agreement and the
     termination of the Credit Agreement, the security interest
     granted hereby shall terminate and all rights to the
     Collateral shall revert to the relevant Grantor.  Upon any
     such termination, the Administrative Agent shall promptly
     return to the relevant Grantor, at such Grantor's expense,
     such of the Collateral held by the Administrative Agent as
     shall not have been sold or otherwise applied pursuant to
     the terms hereof.  The Administrative Agent will, at such
     Grantor's expense, execute and deliver to such Grantor such
     other documents as such Grantor shall reasonably request to
     evidence such termination.

          (iii)  Upon any release of the Administrative Agent's
     security interest in any part of the Collateral expressly
     required to be given by the Administrative Agent pursuant to
     Section 11.12(c) of the Credit Agreement, the Administrative
     ----------------
     Agent shall execute and deliver to each Grantor, at such
     Grantor's expense, all termination statements, assignments
     and other documents and instruments as may be necessary or
     desirable to release fully the security interest in such
     Collateral granted hereby; provided, however, that (i) the
                                --------  -------
     Administrative Agent shall not be required to execute any
     such documents on terms which, in the Administrative Agent's
     opinion, would expose the Administrative Agent to liability
     or create any obligation or entail any consequence other
     than the release of such security interests without recourse
     or warranty, and (ii) such release shall not in any manner
     discharge, affect or impair the Guaranteed Obligations or
     any security interests, liens or other encumbrances upon (or
     obligations of such Grantor in respect of) all interests
     retained by such Grantor, including, without limitation, the
     proceeds of any sale, all of which shall continue to
     constitute part of the Collateral.


          (e)  Additional Grantors.  Each Subsidiary of the
               -------------------
Borrower that is required to become a party to this Agreement
pursuant to Section 7.10 of the Credit Agreement shall become a
            ------------
Grantor for all purposes of this Agreement upon execution and
delivery by such Subsidiary of an Assumption Agreement in the
form of Annex IV hereto.

===============================================================
                              -25-

          (f)  Applicable Law; Severability.  This Agreement
               ----------------------------
shall be construed in all respects in accordance with, and
governed by, the laws of the State of New York.  Whenever
possible, each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.

          (g)  Consent to Jurisdiction and Service of Process;
               -----------------------------------------------
Waiver of Jury Trial.  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH PARTY HERETO ACCEPTS, FOR ITSELF IN AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED
ON THE FIRST PAGE HEREOF, SUCH SERVICE TO BECOME EFFECTIVE TEN
(10) DAYS AFTER SUCH MAILING.  EACH OF THE GRANTORS AND, BY
ACCEPTANCE HEREOF, THE ADMINISTRATIVE AGENT, THE ARRANGER, THE
SYNDICATION AGENTS AND THE LENDERS, IRREVOCABLY WAIVES (i) TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, AND (ii) ANY OBJECTION (INCLUDING WITHOUT LIMITATION,
ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
--------------------
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT IN ANY JURISDICTION SET FORTH ABOVE.  NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
          
================================================================          
                          -26-

          IN WITNESS WHEREOF, each Grantor has caused this
Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the day first above written.

                                   
                                   
                                   ANNTAYLOR DISTRIBUTION
                                        SERVICES, INC.

                                   By:/s/ Walter J. Parks
                                     _________________________
                                   Name:  Walter J. Parks
                                   Title:  Senior Vice President-
                                          Chief Financial Officer

Agreed and accepted to as of
the date first above written:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent

By: /s/ Dietmar Schiel                            
    -----------------------
Name:   Dietmar Schiel
Title:  Vice President