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\n– ——————————————————————————<\/p>\n<\/c><\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n
EXHIBIT 3.01(a)<\/p>\n
ANNTAYLOR FUNDING, INC.
\n RECEIVABLES REPORT AS OF 12\/24\/93
\n FOR Dec-93<\/p>\n
Portfolio Information<\/p>\n
I. Outstanding Principal $
\n ——–<\/p>\n
II. Beginning Receivables Balance $
\n ——–<\/p>\n
III. New Receivables to add $
\n ——–<\/p>\n
IV. Collections to deduct $
\n ——–<\/p>\n
V. Defaulted Receivables to deduct $
\n ——–<\/p>\n
VI. +\/-Other Adjustments $
\n ——–<\/p>\n
VII. Delinquent Receivables to deduct $
\n ——–<\/p>\n
VIII. Other Ineligible Receivables to deduct $
\n ——–
\n (Not including Defaulted Receivables)<\/p>\n
IX. Aging Schedule<\/p>\n
Current Age 1 Age 2 Age 3 Age 4 Age 5 Age 6 Age 7+<\/p>\n
Calculations Reflecting Current Activity<\/p>\n
X. Eligible Receivables balance $
\n ——–
\n (II)+(III)-(IV)-(V)+(VI)-(VII)-(VIII)<\/p>\n
XI. Loss Reserve (11% of X) $
\n ——–
\n Borrowing Base (X)-(XI)<\/p>\n
XII. Excess Collateral (Borrowing Base-I) $
\n ——–<\/p>\n
Compliance<\/p>\n
XIII. Delinquency Ratio
\n One-Month Calculation (less than 11.5%)
\n ——–
\n 3-Month rolling Average (less than 11%)
\n ——–
\n [Unreadable Line]<\/p>\n
XIV. Gross Default-to-Liquidation Ratio
\n One-Month Calculation $
\n ——–
\n 3-Month rolling Average (less than 1.95%) $
\n ——–
\n Net Default-to-Liquidation Ratio
\n One-Month Calculation
\n ——–
\n 3-Month rolling Average (less than 1.325%)
\n ——–<\/p>\n
XV. Dilution Ratio
\n One-Month Calculation $
\n ——–
\n 3-Month rolling Average (less than 15.0%) $
\n ——–
\n [Unreadable Line]<\/p>\n
XVI. Payment Rate (not less than 27%)
\n ——–<\/p>\n
XVII. Net Yield (not less than 0%)
\n ——–
\n [Unreadable Line]<\/p>\n
XVIII. Spread Account Balance $
\n ——–<\/p>\n
The undersigned hereby represents and warrants that the foregoing
\nis a true and accurate accounting with respect to outstandings as
\nof in accordance with the Receivables Purchase Agreement
\ndated as of and that all representations and warranties are
\nrestated and reaffirmed.<\/p>\n
ANNTAYLOR FUNDING, INC.
\nSigned By:
\nTitle:<\/p>\n
EXHIBIT 3.05<\/p>\n
SPREAD ACCOUNT AGREEMENT
\n ————————<\/p>\n
THIS SPREAD ACCOUNT AGREEMENT, dated as of January 27, 1994
\n(as it may be amended, supplemented or otherwise modified from
\ntime to time, this “Agreement”) is among ANNTAYLOR FUNDING, INC.,
\n ———
\na Delaware corporation (the “Company”), CLIPPER RECEIVABLES
\n ——-
\nCORPORATION, a Delaware corporation (the “Lender”), STATE STREET
\n ——
\nBOSTON CAPITAL CORPORATION, as administrator for the Lender (the
\n“Administrator”) and PNC BANK, NATIONAL ASSOCIATION, a national
\n ————-
\nbanking association (“PNC Bank” or the “Bank”).
\n ——– —-<\/p>\n
BACKGROUND<\/p>\n
1. The Company, AnnTaylor, Inc., as Servicer, the Lender,
\nthe Administrator and PNC Bank, as Relationship Bank, have
\nentered into a Receivables Financing Agreement, dated as of
\nJanuary 27, 1994 (as it may be amended, modified or supplemented
\nfrom time to time, the “Financing Agreement”), pursuant to which
\n ——————-
\nthe Lender has agreed to make certain loans to the Company on the
\nterms and conditions set forth in the Financing Agreement, which
\nloans shall be secured by certain assets of the Company.<\/p>\n
2. In connection with the transactions contemplated by the
\nFinancing Agreement, the Company has agreed to establish a
\nsegregated account at the Bank, which account, together with the
\ninvestments therein and earnings thereon, has been pledged to the
\nLender, to secure the Company’s obligations pursuant to the
\nFinancing Agreement and the other transaction documents related
\nthereto.<\/p>\n
3. The parties hereto hereby desire to set forth their
\nunderstanding with respect to such Account and the investment
\ntherein as set forth herein.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and other
\ngood and valuable consideration, the receipt and sufficiency of
\nwhich are hereby acknowledged, the parties hereto hereby agree as
\nfollows:<\/p>\n
SECTION 1. Definitions. Capitalized terms used in this
\n ———–
\nAgreement and not otherwise defined herein shall have the
\nmeanings assigned thereto in Appendix A to the Financing
\nAgreement.<\/p>\n
SECTION 2. Establishment of Account. The Company and the
\n ————————
\nBank hereby establish at the Bank account number 1001144887,<\/p>\n
titled in the name of “AnnTaylor Funding, Inc. and Clipper
\nReceivables Corporation as Secured Party UA 1\/27\/94” (the “Spread
\n ——
\nAccount”). Pursuant to the Financing Agreement and hereto, the
\n– ——-
\nCompany has, and hereby does, transfer exclusive dominion and
\ncontrol over the Spread Account to the Administrator (for the
\nbenefit of the Lender). The Bank shall be entitled to rely on,
\nand to assume, the authority of any purported employee of the
\nAdministrator and is hereby authorized to act on any notice
\npurportedly executed on behalf of the Administrator with respect
\nto the Spread Account.<\/p>\n
SECTION 3. Deposits in, and Withdrawals from, the Spread
\n ———————————————
\nAccount; Communications. (a) On the closing date for the initial
\n– ———————–
\nLoan pursuant to the Financing Agreement, the Company shall make
\nan initial deposit into the Spread Account in the amount of
\n$200,000. Thereafter, certain funds may be deposited from time
\nto time into the Spread Account pursuant to Section 3.01 of the
\nFinancing Agreement. Amounts may only be withdrawn from the
\nSpread Account by the Administrator pursuant to Article III of
\nthe Financing Agreement including, without limitation, Section
\n ——-
\n3.05(d).
\n– ——-<\/p>\n
(b) The Bank hereby covenants and agrees that it shall send
\nall communications with respect to the Spread Account, including,
\nwithout limitation, all account statements and confirmations to
\neach of the Company, the Lender and the Administrator.<\/p>\n
SECTION 4. Permitted Investments. So long as the Bank does
\n ———————
\nnot receive written notice that an Event of Default shall have
\noccurred and be continuing, the funds in the Spread Account shall
\nbe invested and reinvested by the Bank pursuant to written
\ninstructions executed by a Responsible Officer of the Company in
\none or more Eligible Investments (as defined below). Subject to
\nthe restrictions on the maturity of investments set forth in
\nSection 5, the Company may authorize the Bank to make specific
\n– ———
\nEligible Investments set forth in its notice, to make Eligible
\nInvestments from time to time consistent with general
\ninstructions set forth therein or to make specific Eligible
\nInvestments pursuant to instructions received in writing from a
\nResponsible Officer of the Company, in each case in such amounts
\nas the Company shall specify. The Company agrees to report as
\nincome for financial reporting and tax purposes (to the extent
\nreportable) all investment earnings on amounts in the Spread
\nAccount. In the event that the Company shall fail to give
\ninvestment directions to the Bank by 10:00 a.m., Pittsburgh time,
\non any Business Day on which there may be uninvested cash, the
\nBank shall invest such funds in Eligible Investments described in
\nclause (v) of the definition thereof. The Bank shall invest
\n– ———-
\ninterest and reinvest proceeds of investments in the Spread
\nAccount, together with all other funds on deposit in the Spread
\nAccount, in Eligible Investments pursuant to the terms hereof.<\/p>\n
-2-<\/p>\n
If the Bank has received written notice that an Event of Default
\nhas occurred and is continuing, the Bank shall invest the funds
\nin the Spread Account as directed by the Administrator. All
\ninvestments made by the Bank shall mature no later than the
\nmaturity date therefore permitted by Section 5.
\n ———<\/p>\n
SECTION 5. Maturity of Investments. No investment of any
\n ———————–
\namount held in the Spread Account shall mature later than the
\nBusiness Day immediately preceding the Settlement Date which is
\nscheduled to occur immediately following the date of investment
\n(or, with respect to mutual fund investments or other investments
\nredeemable (without penalty) shall be redeemable no later than
\nsuch date). All income or other gain from the investment of
\nmonies deposited in the Spread Account shall be deposited by the
\nBank in such account immediately upon receipt and shall be
\ninvested pursuant to Section 4. Any net loss (determined on a
\n ———
\nmonth-by-month basis) resulting from such investment of amounts
\nin the Spread Account shall be charged to the Company, which,
\nwithin five Business Days of notice thereof by the Bank, shall
\nreimburse such account for such loss.<\/p>\n
SECTION 6. Eligible Investments. The term “Eligible
\n ——————– ——–
\nInvestments” shall mean any one or more of the following
\n– ———–
\nobligations or securities:<\/p>\n
(i) direct non-callable obligations of, and non-
\n callable obligations fully guaranteed by, the United States
\n of America, or any agency or instrumentality of the United
\n States of America the obligations of which are backed by the
\n full faith and credit of the United States of America;<\/p>\n
(ii) demand and time deposits in, certificates of
\n deposit of, and bankers’ acceptances issued by, the Bank or
\n any depository institution or trust company incorporated
\n under the laws of the United States of America or any state
\n thereof, having a combined capital and surplus of at least
\n $500,000,000, and subject to supervision and examination by
\n federal and\/or state banking authorities, so long as at the
\n time of such investment or contractual commitment providing
\n for such investment the commercial paper or other short-term
\n debt obligations of such depository institution or trust
\n company (or, in the case of a depository institution that is
\n the principal subsidiary of a holding company, the
\n commercial paper or other short-term debt obligations of
\n such holding company) have the highest short-term credit
\n rating available from Moody’s Investors Service, Inc. and
\n not less than A-1 from Standard & Poor’s Ratings Group;<\/p>\n
(iii) repurchase obligations with respect to and
\n collateralized by (A) any security described in clause (i)
\n ———-
\n above or (B) any other security issued or guaranteed by an<\/p>\n
-3-<\/p>\n
agency or instrumentality of the United States of America,
\n in each case entered into with a depository institution or
\n trust company (acting as principal) of the type described in
\n clause (ii) above, provided that the Bank has taken delivery
\n ———– ——–
\n of such security;<\/p>\n
(iv) commercial paper (including both non-interest-
\n bearing discount obligations and interest-bearing
\n obligations) payable on demand or on a specified date not
\n more than one year after the date of issuance thereof having
\n the highest short-term credit rating from Moody’s Investors
\n Service, Inc. and not less than A-1 from Standard & Poor’s
\n Ratings Group at the time of such investment; and<\/p>\n
(v) shares in the Treasury Trust Fund, so long as such
\n fund is rated AA by Standard & Poor’s Ratings Group and
\n invests solely in short term securities of the United States
\n government and\/or securities described in clause (iii)
\n ————
\n above, or in a mutual fund investing solely in short term
\n securities of the United States government and\/or securities
\n described in clause (iii) above where the mutual fund
\n ————
\n custodian has taken delivery of the collateralizing
\n securities, provided that (i) such fund shall have the
\n ——– —-
\n highest short-term credit rating available from Moody’s
\n Investors Service, Inc. and not less than A-1 from Standard
\n & Poor’s Ratings Group and (ii) such shares shall be freely
\n transferable by the holder on a daily basis.<\/p>\n
SECTION 7. Designee Under the Uniform Commercial Code. The
\n ——————————————
\nparties hereto hereby acknowledge that the Company has granted,
\nand hereby does grant, a security interest in the Spread Account,
\nand all funds, certificates, securities, other instruments,
\ngeneral intangibles and other items, properties and assets
\ncredited thereto or on deposit therein and all investments
\nthereof, all claims thereunder and all interest, dividends,
\nmonies, instruments, securities and other property from time to
\ntime received, receivable or otherwise distributable in respect
\nof or in exchange for any of the foregoing, together with all
\nproceeds thereof (collectively, the “Spread Account Property”),
\n ———————–
\nto the Lender and that the Bank shall maintain the Spread Account
\nProperty (and shall designate the Spread Account on its records
\nas being held) for the benefit of, and subject to the interest
\nof, the Lender. The Bank shall hold the Spread Account Property
\nas the agent, designee and financial intermediary for the Lender
\npursuant to Section 8-313, or as bailee for the account of the
\nLender under Section 9-305, of the Uniform Commercial Code as in
\neffect in any applicable jurisdiction (the “UCC”).
\n —<\/p>\n
SECTION 8. Duties of the Bank. The Bank’s duties and
\n ——————
\nresponsibilities shall be limited to those expressly set forth in
\nthis Agreement, and the Bank shall not be subject to nor<\/p>\n
-4-<\/p>\n
obligated to recognize, monitor or enforce the terms of any other
\nagreement between, or direction or instruction of, any or all of
\nthe parties hereto. The Bank shall not in any way be held liable
\nby reason of any insufficiency in the Spread Account resulting
\nfrom losses on investments made strictly in accordance with the
\nprovisions of this Agreement. The Bank shall not be personally
\nliable for any act taken or omitted hereunder or taken or omitted
\nby the Bank in good faith and without gross negligence. The Bank
\nshall be fully protected in relying upon any written notice,
\ndemand, certificate or document which the Bank in good faith
\nbelieves to be genuine. The Bank shall not be responsible for
\nthe sufficiency or accuracy of the form, execution, validity or
\ngenuineness of documents or securities now or hereafter deposited
\nhereunder, or of any endorsements thereon, or any lack of
\nendorsement thereon, or any description therein, nor shall the
\nBank be responsible or liable in any respect on account of the
\nidentity, authority or rights of the persons executing or
\ndelivering or purporting to execute or deliver any such document,
\nsecurity or endorsement. The Bank may consult with counsel and
\nshall be fully protected in respect of any action taken or
\nsuffered or omitted to be taken by the Bank hereunder in good
\nfaith and without gross negligence and in accordance with the
\nopinion of such counsel.<\/p>\n
SECTION 9. Indemnity. The Company hereby agrees to
\n ———
\nindemnify the Bank for, and defend the Bank and hold it harmless
\nagainst, any loss, liability or expense incurred that arises out
\nof or in connection with the performance of its duties hereunder,
\nincluding, without limitation, the costs and expenses of
\ndefending itself against or investigating any claim or liability,
\nexcept to the extent that a court of competent jurisdiction shall
\nhave determined that such loss, liability or expense resulted
\nsolely from the gross negligence or willful misconduct of the
\nBank. The Bank shall notify the Company promptly of any claim
\nfor which it may seek indemnity hereunder and, upon any such
\nnotification, the provisions of Section 13.01(d) of the Financing
\nAgreement with respect to the Bank as an indemnified party, shall
\napply mutatis mutandis, as if such provision were set forth
\n ——- ——–
\nherein.<\/p>\n
SECTION 10. Resignation. The Bank shall have the right to
\n ———–
\nresign at any time by giving written notice of such resignation
\nto the Company and the Administrator. Within 30 days after
\nreceiving such notice, the Company agrees to appoint a successor
\nbank that shall be acceptable to the Administrator (which
\nacceptance shall not be unreasonably withheld). Upon the
\nappointment of such a successor, the Bank shall distribute the
\nproperty then held hereunder, less any fees, costs and expenses
\ndue to the Bank hereunder, if any, to such successor. If a
\nsuccessor bank has not been appointed, and has not accepted such
\nappointment by the end of such 30-day period, the Bank may apply<\/p>\n
-5-<\/p>\n
to the court of competent jurisdiction for the appointment of a
\nsuccessor bank, and the costs, expenses and reasonable attorney’s
\nfees incurred in connection with such a proceeding shall be paid
\nby the Company.<\/p>\n
SECTION 11. Termination. This Agreement shall terminate on
\n ———–
\nthe Final Payout Date, at which time the property then held
\nhereunder shall be distributed to the Administrator unless the
\nAdministrator has given the Bank written notice that all
\nliabilities of the Company pursuant to the Financing Agreement
\nand the Transaction Documents have been paid in full, in which
\nevent, all funds hereunder shall be distributed to the Company.<\/p>\n
SECTION 12. Miscellaneous. This Agreement shall be
\n ————-
\ngoverned by, and construed in accordance with, the laws of the
\nState of New York. This Agreement may not be amended, waived or
\nmodified without the written consent of the parties hereto. All
\nnotices and other communications provided for herein shall,
\nunless otherwise stated herein, be in writing and shall be
\npersonally delivered, sent by express mail or courier or by
\ncertified mail, postage prepaid, or by facsimile, to the intended
\nparty at the address or facsimile number of such party set forth
\nunder its name on the signature pages hereof or such other
\naddress or facsimile number as shall be designated by such party
\nin written notice to the other parties hereto. All such notices
\nand communications shall be effective (a) if personally delivered
\nor sent by express mail or courier or if sent by certified mail,
\nwhen received and (b) if transmitted by facsimile, when sent,
\nreceipt confirmed by telephone or electronic means. This
\nAgreement shall be binding upon and shall inure to the benefit of
\nthe parties hereto and their respective successors and assigns,
\nprovided, however, that the Company shall not assign its rights
\n– ——– ——-
\nand obligations hereunder without the prior written consent of
\nthe Bank and the Administrator. This Agreement may be executed
\nin any number of counterparts, and by the different parties on
\ndifferent counterparts, each of which when so executed shall be
\ndeemed to be an original and all of which when taken together
\nshall constitute one and the same agreement.<\/p>\n
-6-<\/p>\n
IN WITNESS WHEREOF, the parties have caused this Agreement
\nto be executed by their respective officers thereunto duly
\nauthorized as of the date first above written.<\/p>\n
ANNTAYLOR FUNDING, INC.<\/p>\n
By:_________________________________
\n Name Printed:_______________________
\n Title:______________________________<\/p>\n
414 Chapel Street
\n New Haven, CT 06511
\n Telephone: (203) 865-0811
\n Facsimile: (203) 865-2756<\/p>\n
PNC BANK, NATIONAL ASSOCIATION<\/p>\n
By:_________________________________
\n Name Printed:_______________________
\n Title:______________________________<\/p>\n
Fifth Avenue and Wood Street
\n Pittsburgh, PA 15265
\n Telephone: (412) __________________
\n Facsimile: (412) 762-4167<\/p>\n
STATE STREET BOSTON CAPITAL CORPORATION<\/p>\n
By:_________________________________
\n Name Printed:_______________________
\n Title:______________________________<\/p>\n
225 Franklin Street
\n Boston, MA 02110
\n Telephone: (617) __________________
\n Facsimile: (617) 350-4020<\/p>\n
CLIPPER RECEIVABLES CORPORATION<\/p>\n
By:_________________________________
\n Name Printed:_______________________
\n Title:______________________________<\/p>\n
P.O. Box 4024
\n Boston, MA 02101
\n Telephone: (617) __________________
\n Facsimile: (617) 951-7050<\/p>\n
EXHIBIT 5.01(g)<\/p>\n
414 Chapel St.
\nNew Haven, Connecticut<\/p>\n
ANNTAYLOR FUNDING, INC.
\n 414 Chapel St.
\n New Haven, CT 06511<\/p>\n
ANNTAYLOR<\/p>\n
January 25, 1994<\/p>\n
AmSouth Bank, N.A.
\n1900 Fifth Avenue North
\nBirmingham, Alabama 35203<\/p>\n
Ladies and Gentlemen:<\/p>\n
Reference is made to our lock-box account no. 55976026,
\ntogether with the post office box related thereto, maintained
\nwith you (the “Account”). Pursuant to a Receivables Financing
\n ——-
\nAgreement dated as of January 27, 1994 among us, as borrower,
\nAnnTaylor, Inc., as Servicer, Clipper Receivables Corporation, as
\nlender (the “Lender”), State Street Boston Capital Corporation,
\n ——
\nas administrator for the Lender (the “Administrator”), and PNC
\n ————-
\nBank, National Association, as Relationship Bank, we have pledged
\nand granted a security interest to the Lender in the accounts,
\nchattel paper, instruments or general intangibles (collectively,
\n“Receivables”) with respect to which payments are or may
\n ———–
\nhereafter be made to the Account. Your execution of this letter
\nagreement is a condition precedent to our continued maintenance
\nof the Account with you.<\/p>\n
We hereby transfer exclusive ownership and control of the
\n ———
\nAccount to the Administrator, subject only to the condition
\nsubsequent that the Administrator shall have given you notice of
\nits election to assume such ownership and control, which notice
\nmay be in the form attached hereto as Annex A or in any other
\n ——-
\nform that gives you reasonable notice of such election.<\/p>\n
We hereby irrevocably instruct you, at all times from and
\nafter the date of your receipt of notice from the Administrator as
\ndescribed above, to make all payments to be made by you out of or
\nin connection with the Account directly to the Administrator, at
\nits address set forth below its signature hereto or as the
\nAdministrator otherwise notifies you, for the account of the
\nLender, or otherwise in accordance with the instructions of the
\nAdministrator.<\/p>\n
We also hereby notify you that, at all times from and after
\nthe date of your receipt of notice from the Administrator as
\ndescribed above, the Administrator shall be irrevocably entitled
\nto exercise in our place and stead any and all rights in respect
\nof or in connection with the Account, including, without
\nlimitation, (a) the right to specify when payments are to be made
\nout of or in connection with the Account and (b) the right to
\nrequire preparation of duplicate monthly bank statements on the
\nAccount for the Administrator’s audit purposes and mailing of
\nsuch statements directly to an address specified by the
\nAdministrator (provided that you will continue to send copies of
\nmonthly bank statements to us).<\/p>\n
Notice from the Administrator may be personally served or
\nsent by fascimile or U.S. mail, certified return receipt
\nrequested or by express mail or courier, to the address,
\nfacsimile number set forth under your signature to this letter
\nagreement (or to such other address or facsimile number as to
\nwhich you shall notify the Administrator in writing). If notice
\nis given by facsimile, it will be deemed to have been received
\nwhen the notice is sent and the receipt is confirmed by telephone
\nor other electronic means. All other notices will be deemed to
\nhave been received when actually received or, in the case of
\npersonal delivery, delivered.<\/p>\n
By executing this letter agreement, you acknowledge the
\nexistence of the Administrator’s right to ownership and control
\nof the Account and its ownership of and security interest in the
\namounts from time to time on deposit therein and agree that from
\nthe date hereof the Account shall be maintained by you for the
\nbenefit of, and amounts from time to time therein held by you as
\nagent for, the Administrator on the terms provided herein. The
\nAccount is to be entitled “AnnTaylor Funding, Inc. and State Street
\nBoston Capital Corporation, as Administrator for Clipper Receivables
\nCorporation as Secured Party”. Except as otherwise provided in
\nthis letter agreement, payments to the Account are to be
\nprocessed in accordance with the standard procedures currently in
\neffect. All service charges and fees with respect to the Account
\nshall continue to be payable by us as under the arrangements
\ncurrently in effect.<\/p>\n
By executing this letter agreement, you irrevocably waive
\nand agree not to assert, claim or endeavor to exercise,
\nirrevocably bar and estop yourself from asserting, claiming or
\nexercising, and acknowledge that you have not heretofore received
\na notice, writ, order or any form of legal process from any other
\nparty asserting, claiming or exercising any right of set-off,
\nbanker’s lien or other purported form of claim with respect to
\nthe Account or any funds from time to time therein. Except for
\nyour right to payment of your service charges and fees and to
\nmake deduction for returned items and overdrafts, you shall have
\nno rights in the Account or funds therein. To the extent you may
\never have such rights, you hereby expressly subordinate all such
\nrights to all rights of the Administrator.<\/p>\n
You may terminate this letter agreement by cancelling the
\nAccount maintained with you, which cancellation and termination
\nshall become effective only upon sixty days’ prior written notice
\nthereof from you to us and the Administrator. Incoming mail
\naddressed to the Account received after such cancellation shall
\nbe forwarded in accordance with the Administrator’s instructions;
\nprovided that if no instructions are received from the
\nAdministrator by the seventh day prior to the effective date of
\nsuch cancellation or termination, such mail shall be forwarded in
\naccordance with our instructions. This letter agreement may also
\nbe terminated upon written notice to you by the Administrator
\nstating that the Receivables Financing Agreement pursuant to
\nwhich this letter agreement was obtained is no longer in effect.
\nExcept as otherwise provided in this paragraph, this letter
\nagreement may not be terminated or amended without the prior
\nwritten consent of the Administrator and us.<\/p>\n
Please acknowledge your agreement to the terms set forth in
\nthis letter agreement by signing the two copies of this letter
\nagreement enclosed herewith in the space provided below, sending
\none such signed copy to the Administrator at its address provided
\nabove and returning the other signed copy to us.<\/p>\n
Very truly yours,<\/p>\n
ANNTAYLOR FUNDING, INC.
\n By: Bert A. Tieben
\n Title: Vice President<\/p>\n
Accepted and confirmed as of
\nthe date first written above:<\/p>\n
CLIPPER RECEIVABLES CORPORATION, as Lender<\/p>\n
By:
\n ——————————<\/p>\n
Title:
\n —————————<\/p>\n
ANNTAYLOR, INC.<\/p>\n
By: Bert A. Tieben
\n ——————————-<\/p>\n
Title: Senior Vice President
\n —————————-<\/p>\n
Accepted and confirmed as of
\nthe date first written above:<\/p>\n
CLIPPER RECEIVABLES CORPORATION, as Lender<\/p>\n
By: Nancy D. Smith
\n ——————————-<\/p>\n
Title: President
\n —————————-<\/p>\n
ANNTAYLOR, INC.<\/p>\n
By:
\n ——————————-<\/p>\n
Title:
\n —————————-<\/p>\n
STATE STREET BOSTON CAPITAL CORPORATION, as Administrator<\/p>\n
By:
\n ——————————–<\/p>\n
Title:
\n —————————–<\/p>\n
Address for notice:<\/p>\n
225 Franklin Street
\nBoston, Massachusetts 02110
\nAttention: Clipper Funds
\nFacsimile No.: (617) 350-4020<\/p>\n
Acknowledged and agreed to as of
\nthe date first written above:<\/p>\n
AMSOUTH BANK N.A.<\/p>\n
By:
\n ——————————<\/p>\n
Title:
\n —————————<\/p>\n
Address for notice:<\/p>\n
1900 – 5th Avenue North
\nBirmingham, Alabama 35203
\nAttention:
\n —————
\nFacsimile No.:
\n ———–<\/p>\n
STATE STREET BOSTON CAPITAL CORPORATION, as Administrator<\/p>\n
By:
\n ——————————–<\/p>\n
Title: Managing Director
\n —————————–<\/p>\n
Address for notice:<\/p>\n
225 Franklin Street
\nBoston, Massachusetts 02110
\nAttention: Clipper Funds
\nFacsimile No.: (617) 350-4020<\/p>\n
Acknowledged and agreed to as of
\nthe date first written above:<\/p>\n
AMSOUTH BANK N.A.<\/p>\n
By:
\n ——————————<\/p>\n
Title: Vice President
\n —————————<\/p>\n
Address for notice:<\/p>\n
1900 – 5th Avenue North
\nBirmingham, Alabama 35203
\nAttention: Robert De Haven
\n ———————–
\nFacsimile No.: (205) 583-4436
\n ——————-<\/p>\n
ANNEX A to
\n Lock-Box Agreement<\/p>\n
[Letterhead of State Street Boston Capital Corporation]<\/p>\n
AmSouth Bank, N.A.
\n1900 – 5th Avenue North
\nBirmingham, Alabama 35203<\/p>\n
Re: AnnTaylor Funding, Inc.\/Lock-Box Account No. 55976026<\/p>\n
Ladies and Gentlemen:<\/p>\n
Reference is made to the letter agreement, dated January 27,
\n1994 (as heretofore amended, the “Letter Agreement”) among
\n —————-
\nAnnTaylor Funding, Inc., AnnTaylor, Inc., Clipper Receivables
\nCorporation (the “Lender”), the undersigned, as Administrator for
\n ——
\nthe Lender, and you concerning the above described lock-box
\naccount (the “Account”). We hereby give you notice of our
\n ——-
\nassumption of ownership and control of the Account as provided in
\nthe Letter Agreement.<\/p>\n
We hereby instruct you to make all payments to be made by
\nyou out of or in connection with the Account [directly to the
\nundersigned, at [our address set forth above], for the account of
\nthe Lender (account no. )].
\n ———-<\/p>\n
[other instructions]<\/p>\n
Very truly yours,<\/p>\n
STATE STREET BOSTON CAPITAL
\n CORPORATION, as Administrator<\/p>\n
By:
\n ————————-
\n Name:
\n ———————–
\n Title:
\n ———————-<\/p>\n
EXHIBIT 5.01(h)(i)<\/p>\n
January 27, 1994<\/p>\n
The Persons Listed on
\nSchedule I Hereto<\/p>\n
Re: Receivables Facility of
\n AnnTaylor, Inc. and
\n AnnTaylor Funding, Inc.
\n ———————–<\/p>\n
Ladies and Gentlemen:<\/p>\n
We have acted as special counsel to AnnTaylor
\nFunding, Inc., a Delaware corporation (the “Company”),
\nand AnnTaylor, Inc., a Delaware corporation (“AnnTaylor”,
\nand together with the Company, the “Credit Parties”) in
\nconnection with the preparation, execution and delivery
\nof (i) the Purchase and Sale Agreement dated as of
\nJanuary 27, 1994 (the “Purchase Agreement”) between the
\nCompany, as purchaser and AnnTaylor, as seller, (ii) the
\nReceivables Financing Agreement, dated as of January 27,
\n1994 (the “Receivables Financing Agreement”), among the
\nCompany, Clipper Receivables Corporation (the “Lender”),
\nAnnTaylor, as Servicer, State Street Boston Capital
\nCorporation (the “Administrator”), and PNC Bank, National
\nAssociation (the “Relationship Bank”), and (iii) certain
\nother agreements, instruments and documents related to
\nthe Purchase Agreement and the Receivables Financing
\nAgreement. This opinion is being delivered pursuant to
\nSection 4.1(h) of the Purchase Agreement and Section
\n5.01(h)(i) of the Receivables Financing Agreement. Capi-
\ntalized terms used herein and not otherwise defined
\nherein shall have the same meanings herein as set forth
\nin Appendix A to the Receivables Financing Agreement.<\/p>\n
In our examination we have assumed the genuine-
\nness of all signatures including endorsements, the legal
\ncapacity of natural persons, the authenticity of all
\ndocuments submitted to us as originals, the conformity to
\noriginal documents of all documents submitted to us as
\nfacsimile, certified or photostatic copies, and the au-
\nthenticity of the originals of such copies. As to any
\nfacts material to this opinion which we did not indepen-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 2<\/p>\n
dently establish or verify, we have relied upon state-
\nments and representations of the Credit Parties and their
\nrespective officers and other representatives and of
\npublic officials, including the facts set forth in the
\nCompany’s Certificate and AnnTaylor’s Certificate, each
\nas described below.<\/p>\n
In rendering opinions set forth herein, we have
\nexamined and relied on originals or copies of the follow-
\ning:
\n (a) the Receivables Financing Agreement;<\/p>\n
(b) the Purchase Agreement;<\/p>\n
(c) the Spread Account Agreement;<\/p>\n
(d) the Note;<\/p>\n
(e) the Company Note (as defined in the
\nPurchase Agreement);<\/p>\n
(f) the Fee Letter;<\/p>\n
(g) the certificate of the Company exe-
\ncuted by an officer of the Company dated the date hereof,
\na copy of which is attached as Exhibit A hereto (the
\n“Company’s Certificate”);<\/p>\n
(h) the certificate of AnnTaylor executed
\nby an officer of AnnTaylor, dated the date hereof, a copy
\nof which is attached as Exhibit B hereto (“AnnTaylor’s
\nCertificate”);<\/p>\n
(i) the Certificate of Incorporation and
\nBy-laws of each of the Credit Parties;<\/p>\n
(j) certain resolutions of the Board of
\nDirectors of the Company adopted by unanimous written
\nconsent on January 24, 1994;<\/p>\n
(k) certain resolutions of the Board of
\nDirectors of AnnTaylor adopted on January 19, 1994;<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 3<\/p>\n
(l) signed, unfiled copies of financing
\nstatements under the Uniform Commercial Code as in effect
\nin the State of New York, naming (i) AnnTaylor as the
\ndebtor, the Company as secured party and the Lender as
\nthe assignee and (ii) the Company as debtor and the
\nLender as the secured party, which we understand and have
\nassumed in each case will be filed within ten days of the
\nassignment of Pool Receivables from AnnTaylor to the
\nCompany and the transfer of the security interest therein
\nfrom the Company to the Lender in the offices of the
\nSecretary of State of the State of New York and the City
\nRegister of New York County, New York (the “Filing Offic-
\nes”) (such financing statements, the “Financing State-
\nments”);<\/p>\n
(m) search reports provided by Lexis
\nDocument Services, (i) dated January 25, 1994 and cover-
\ning the period through December 17, 1993 listing financ-
\ning statements that name AnnTaylor as debtor and that are
\nfiled in the Secretary of State of the State of New York
\nand (ii) dated January 24, 1994, and covering the period
\nthrough December 17, 1993, listing financing statements
\nthat name the Company as debtor and that are filed in the
\nSecretary of State of the State of New York, together
\nwith copies of such financing statements, a summary of
\nwhich search reports are attached as Exhibit C hereto
\n(the “Search Reports”);<\/p>\n
(n) a certificate from the Secretary of
\nState of the State of Delaware as to the good standing of
\nthe Company in such jurisdiction; and<\/p>\n
(o) such other documents as we have
\ndeemed necessary or appropriate as a basis for the opin-
\nions set forth below.<\/p>\n
Unless otherwise indicated, references in this
\nopinion to the “New York UCC” shall mean the Uniform Com-
\nmercial Code as in effect on the date hereof in the State
\nof New York. The documents listed in paragraphs (a)
\nthrough (f) above shall hereinafter be referred to col-
\nlectively as the “Documents.”<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 4<\/p>\n
Members of our firm are admitted to the bar of
\nthe State of New York. We express no opinion as to the
\nlaws of any jurisdiction other than (i) the laws of the
\nState of New York, (ii) the General Corporation Law of
\nthe State of Delaware (the “DGCL”), and (iii) the federal
\nlaws of the United States of America to the extent spe-
\ncifically referred to herein.<\/p>\n
The opinions set forth below are subject to the
\nfollowing qualifications:<\/p>\n
(i) enforcement of each of the
\n Documents and of any interests created thereby may
\n be limited by applicable bankruptcy, insolvency,
\n reorganization, moratorium or other similar laws
\n affecting creditors’ rights generally and by general
\n principles of equity (regardless of whether enforce-
\n ment is sought in equity or at law);<\/p>\n
(ii) certain of the remedial provi-
\n sions with respect to the security including waivers
\n with respect to the exercise of remedies against the
\n collateral contained in each of the Documents may be
\n unenforceable in whole or in part, but the inclusion
\n of such provisions does not affect the validity of
\n the Documents, each taken as a whole, and, subject
\n to the other qualifications and exceptions contained
\n in this opinion, each of the Documents, each taken
\n as a whole, together with applicable law, contains
\n adequate provisions for the practical realization of
\n the benefits of the security created thereby;<\/p>\n
(iii) we express no opinion as to
\n any provision with respect to governing law to the
\n extent that it purports to affect the choice of law
\n governing perfection and the effect of perfection
\n and non-perfection of the security interests.<\/p>\n
(iv) enforcement of the Documents
\n may be subject to the terms of instruments, leases,
\n contracts or other agreements between the Credit
\n Parties and the other parties to such agreements,<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 5<\/p>\n
the rights of such other parties and any claims or
\n defenses of such other parties against the Credit
\n Parties arising under or outside such instruments,
\n leases or contracts or other agreements; and<\/p>\n
(v) we express no opinion as to the
\n enforceability of any rights to contribution or
\n indemnification provided for in the Documents which
\n are violative of the public policy underlying any
\n law, rule or regulation (including any federal or
\n state securities law, rule or regulation).<\/p>\n
We have assumed for the purpose of the opinions
\nset forth herein that the assignment from AnnTaylor to
\nthe Company pursuant to the Purchase Agreement consti-
\ntutes the sale of (and not a lien upon) the assets pur-
\nported to be conveyed thereby. We call to your attention
\nthat we have delivered an opinion to you on even date
\nherewith with respect to the characterization of such
\nassignment in the event that AnnTaylor were to become a
\ndebtor under the United States Bankruptcy Code, 11 U.S.C.
\nSec. 101 et. seq. (the “Bankruptcy Code”).<\/p>\n
Based upon the foregoing and subject to the
\nlimitations, qualifications, exceptions and assumptions
\nset forth herein, we are of the opinion that:<\/p>\n
1. The Company has been incorporated and is
\nvalidly existing and is in good standing under the laws
\nof the State of Delaware.<\/p>\n
2. Each of the Credit Parties has the corpo-
\nrate power and corporate authority to execute, deliver
\nand perform all of its obligations under each of the
\nDocuments to which it is a party. The execution and
\ndelivery by each of the Credit Parties of each of the
\nDocuments to which it is a party and the consummation of
\nthe transactions contemplated thereby have been duly
\nauthorized by all requisite corporate action on the part
\nof each such Credit Party. Each of the Documents has
\nbeen duly executed and delivered by each Credit Party
\nwhich is a party thereto.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 6<\/p>\n
3. Each of the Documents constitutes the
\nvalid and binding obligation of each Credit Party that is
\na party thereto enforceable against such Credit Party in
\naccordance with its terms.<\/p>\n
4. The execution and delivery by each of the
\nCredit Parties of each of the Documents to which it is a
\nparty and the performance by each such Credit Party of
\nits obligations under each such Document, each in accor-
\ndance with its terms, do not (i) conflict with the Cer-
\ntificate of Incorporation or By-laws of such Credit
\nParty, (ii) constitute a violation of or a default under
\nany Applicable Contract (as hereinafter defined) or (iii)
\ncause the creation of any security interest or lien
\n(other than the liens granted under, created by or per-
\nmitted by the Documents) upon any of the property of such
\nCredit Party pursuant to any Applicable Contracts. We do
\nnot express any opinion, however, as to whether the
\nexecution, delivery or performance by any Credit Party of
\nany Document to which it is a party will constitute a
\nviolation of or a default under any covenant, restriction
\nor provision with respect to financial ratios or tests or
\nany aspect of the financial condition or results of
\noperations of such Credit Party or the effect of any such
\nviolation or default on the opinions expressed herein.
\nFor purposes of this paragraph 4, “Applicable Contracts”
\nmeans those agreements or instruments set forth on Sched-
\nule I to the Company’s Certificate with respect to the
\nCompany and on Schedule I to AnnTaylor’s Certificate with
\nrespect to AnnTaylor and which have been identified to us
\nas all the agreements and instruments (other than the
\nDocuments) which are material to the business or finan-
\ncial condition of the Company and AnnTaylor respectively.<\/p>\n
5. Neither the execution, delivery or perfor-
\nmance by any Credit Party of any of the Documents to
\nwhich it is a party nor the compliance by such Credit
\nParty with the terms and provisions thereof will contra-
\nvene any provision of any Applicable Law (as hereinafter
\ndefined). For purposes of this paragraph 5 and para-
\ngraph 6, “Applicable Laws” means the DGCL and those laws,
\nrules and regulations of the State of New York and of the<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 7<\/p>\n
United States of America (including, without limitation,
\nRegulations G, U and X of the Federal Reserve Board)
\nwhich, in our experience, are normally applicable to
\ntransactions of the type contemplated by the Documents
\nand are not the subject of a specific opinion herein
\nreferring expressly to a particular law or laws.<\/p>\n
6. No Governmental Approval (as hereinafter
\ndefined) which has not been obtained or taken and is not
\nin full force and effect is required to authorize or is
\nrequired in connection with the execution, delivery or
\nperformance of any of the Documents by any Credit Party
\nexcept the filing of the Financing Statements in the
\nFiling Offices, the filing of financing statements in the
\nState of Connecticut and the filing of partial releases
\n(UCC-3 statements) with respect to security interests of
\nthe Bank of America National Trust and Savings Associa-
\ntion, as agent (the “Bank of America Release State-
\nments”). For the purposes of this paragraph 6, the term
\n“Governmental Approval” means any consent, approval,
\nlicense, authorization or validation of, or filing,
\nrecording or registration with, any Governmental Authori-
\nty pursuant to Applicable Laws, and for the purposes of
\nthis paragraph 6 and paragraph 7, the term “Governmental
\nAuthority” means any federal, New York or, to the extent
\nrelating to the DGCL, Delaware executive, legislative,
\njudicial, administrative or regulatory body.<\/p>\n
7. Neither the execution, delivery or perfor-
\nmance by any Credit Party of its obligations under the
\nDocuments to which it is a party nor compliance by such
\nCredit Party with the terms thereof will contravene any
\nApplicable Order (as hereinafter defined) against such
\nCredit Party. For purposes of this paragraph 7, the term
\n“Applicable Orders” means those orders or decrees of
\nGovernmental Authorities identified on Schedule II to the
\nCompany’s Certificate with respect to the Company and on
\nSchedule II to AnnTaylor’s Certificate with respect to
\nAnnTaylor.<\/p>\n
8. The provisions of the Purchase Agreement
\nare effective to create, in favor of the Company, a valid<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 8<\/p>\n
security interest (as such term is defined in Section 1-
\n201 of the New York UCC) in that portion of the Pool
\nReceivables of AnnTaylor constituting accounts (as such
\nterm is defined in Section 9-106 of the New York UCC)
\n(the “Accounts Property”), and the proceeds thereof. We
\ncall to your attention that the term security interest as
\ndefined in Section 1-201 of the New York UCC includes the
\nsale of accounts. We express no opinion with respect to
\nthe nature or extent of the obligations being secured by
\nthe security interest granted to the Company.<\/p>\n
9. While there is no case law precisely on
\npoint and the issue is not free from doubt, based upon
\nour review of relevant case law authority in New York,
\nincluding Stathos v. Murphy, 26 App. Div. 2d 500, 276
\n —————–
\nN.Y. Supp. 2d 727, aff’d 19 N.Y.2d 883, 281 N.Y. Supp. 2d
\n81 (1967), and the principles set forth in Restatement of
\n ————–
\nContracts 2d (1981), the provisions of the Purchase
\n– ————
\nAgreement are effective to create, in favor of the Compa-
\nny, a valid interest under the common law of the State of
\nNew York in that portion (if any) of the Pool Receivables
\nof AnnTaylor constituting general intangibles (as such
\nterm is defined in Section 9-106 of the New York UCC)
\n(the “General Intangibles Property,” and together with
\nthe Accounts Property, the “Receivables Property”) that
\nis enforceable against subsequent creditors of or pur-
\nchasers from AnnTaylor. We note, however, that unless
\nthe Obligor in respect of a Pool Receivable has received
\nnotice of such sale, bona fide payments made by such
\nObligor to AnnTaylor or to a subsequent assignee of such
\nPool Receivable as to which the Obligor has received
\nnotice of such assignment will discharge such Obligor’s
\nobligations to the extent of such payment, and such
\npayment will be recoverable only from AnnTaylor or such
\nassignee.<\/p>\n
The opinions expressed in paragraphs 8 and 9
\nare subject to the following qualifications:<\/p>\n
(a) we have assumed that the Receivables
\nProperty exists and that AnnTaylor has sufficient rights
\nin the Receivables Property for the interest of the<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 9<\/p>\n
Company to attach, and we express no opinion as to the
\nnature or extent of any of AnnTaylor’s rights in or title
\nto any Receivables Property;<\/p>\n
(b) we call to your attention that Sec-
\ntion 552 of the Bankruptcy Code limits the extent to
\nwhich property acquired by a debtor after the commence-
\nment of a case under the Bankruptcy Code may be subject
\nto a security interest arising from a security agreement
\nentered into by such debtor before the commencement of
\nsuch case;<\/p>\n
(c) we call to your attention that the
\nsecurity interest of the Company in proceeds of the
\nAccounts Property is limited to the extent set forth in
\nSection 9-306 of the New York UCC and to property of a
\ntype subject to the New York UCC;<\/p>\n
(d) we have assumed that there are no
\nagreements between AnnTaylor and any account debtor
\nprohibiting, restricting or conditioning the assignment
\nof any portion of the Receivables Property;<\/p>\n
(e) we call to your attention that the
\ninterest of the Company in the Receivables Property may
\nbe subject to the rights of account debtors, claims and
\ndefenses of account debtors and the terms of agreements
\nwith account debtors;<\/p>\n
(f) we express no opinion regarding the
\ninterest of the Company in any of the Receivables Proper-
\nty consisting of claims against any government or gov-
\nernmental agency (including, without limitation, the
\nUnited States of America or any state thereof or any
\nagency or department of the United States of America or
\nany state thereof); and<\/p>\n
(g) in the case of any account or general
\nintangible which is itself secured by other property, we
\nexpress no opinion with respect to the rights of the
\nCompany in and to such underlying property.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 10<\/p>\n
10. The provisions of the Receivables Financ-
\ning Agreement are effective to create, in favor of the
\nLender, as security for the obligations of the Company
\ndescribed in Section 9.01 thereof, a valid security
\ninterest in that portion of the Pool Receivables consti-
\ntuting accounts or general intangibles (as each such term
\nis defined in Section 9-106 of the New York UCC) (the
\n“Receivables Collateral”), and the proceeds thereof.<\/p>\n
The opinions expressed in paragraph 10 are sub-
\nject to the qualifications to opinion paragraphs 8 and 9
\nset forth above and to the following qualifications:<\/p>\n
(a) we have assumed that the Receivables
\nCollateral exists and the Company has sufficient rights
\nin the Receivables Collateral for the security interest
\nof the Lender to attach, and, except to the extent set
\nforth in opinion paragraphs 8 and 9 above, we express no
\nopinion as to the nature or extent of the Company’s
\nrights in or title to any Receivables Collateral;<\/p>\n
(b) we call to your attention that Sec-
\ntion 552 of the Bankruptcy Code limits the extent to
\nwhich property acquired by a debtor after the commence-
\nment of a case under the Bankruptcy Code may be subject
\nto a security interest arising from a security agreement
\nentered into by such debtor before the commencement of
\nsuch case;<\/p>\n
(c) we call to your attention that the
\nsecurity interest of the Lender in proceeds is limited to
\nthe extent set forth in Section 9-306 of the New York UCC
\nand to property of a type subject to the New York UCC;<\/p>\n
(d) we call to your attention that the
\nsecurity interest of the Lender may be subject to the
\nrights of account debtors, claims and defenses of account
\ndebtors and the terms of agreements with account debtors;<\/p>\n
(e) we express no opinion regarding the
\nsecurity interest of the Lender in any of the Receivables
\nCollateral consisting of claims against any government or<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 11<\/p>\n
governmental agency (including, without limitation, the
\nUnited States of America or any state thereof or any
\nagency or department of the United States of America or
\nany state thereof); and<\/p>\n
(f) in the case of any account or general
\nintangible which is itself secured by other property, we
\nexpress no opinion with respect to the rights of the
\nLender in and to such underlying property.<\/p>\n
11. The Financing Statements are in appropri-
\nate form for filing in each of the Filing Offices under
\nthe New York UCC.<\/p>\n
12. The security interest in favor of the
\nCompany in the Accounts Property described in the Financ-
\ning Statements naming AnnTaylor as debtor (the “Article 9
\nFiling Property”) will be perfected upon the filing of
\nsuch Financing Statements in the respective Filing Offic-
\nes, and no other security interest of any other transfer-
\nee of AnnTaylor is equal or prior to the security inter-
\nest of the Company in such Article 9 Filing Property.<\/p>\n
13. If the chief executive office of the
\nCompany is located in the State of New York for the
\npurposes of the New York UCC, the security interest in
\nfavor of the Lender in the Receivables Collateral de-
\nscribed in the Financing Statements naming the Company as
\ndebtor (the “Article 9 Filing Collateral”) will be per-
\nfected upon the filing of such Financing Statements in
\nthe respective Filing Offices, and no other security
\ninterest of any other transferee from the Company is
\nequal or prior to the security interest of the Lender in
\nsuch Article 9 Filing Collateral.<\/p>\n
The opinions expressed in paragraphs 11, 12 and
\n13 are subject to the qualifications to opinion para-
\ngraphs 8, 9 and 10 set forth above and to the following
\nqualifications:<\/p>\n
(a) we have assumed based upon AnnTaylor’s
\nCertificate that, for the purposes of the New York UCC,<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 12<\/p>\n
the chief executive office of AnnTaylor as of the date of
\nfiling of the Financing Statements is located in New York
\nCounty in the State of New York;<\/p>\n
(b) we have assumed based upon the Company’s
\nCertificate that, for the purposes of the New York UCC,
\nthe chief executive office of the Company as of the date
\nof filing of the Financing Statements is located either
\nin New York County in the State of New York or in the
\nState of Connecticut, and we express no opinion with
\nrespect to the perfection or priority of the security
\ninterest of the Lender in the Receivables Collateral to
\nthe extent that the chief executive office of the Company
\nis located in the State of Connecticut;<\/p>\n
(c) we call to your attention that the perfec-
\ntion and the effect of perfection and nonperfection of
\nthe security interest of the Company in the Article 9
\nFiling Property and the security interest of the Lender
\nin the Article 9 Filing Collateral may be governed by
\nlaws other than those of the New York UCC to the extent
\nthat the chief executive office of either AnnTaylor or
\nthe Company respectively is or becomes located in a
\njurisdiction other than New York;<\/p>\n
(d) we call to your attention that (i) the
\nperfection of the security interest of the Company as to
\nthe Article 9 Filing Property and the Lender as to the
\nArticle 9 Filing Collateral will be terminated as to any
\nsuch property acquired by AnnTaylor or the Company re-
\nspectively more than four months after AnnTaylor or the
\nCompany respectively changes its name, identity, or
\ncorporate structure so as to make the applicable Financ-
\ning Statements seriously misleading unless new appropri-
\nate financing statements indicating the new name, identi-
\nty or corporate structure of AnnTaylor or the Company, as
\nthe case may be, are properly filed before the expiration
\nof such four months, and (ii) the New York UCC requires
\nthe filing of continuation statements within the period
\nof six months prior to the expiration of five years from
\nthe date of the filing of the original Financing State-
\nments or the filing of any continuation statements in<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 13<\/p>\n
order to maintain the effectiveness of the original
\nFinancing Statements;<\/p>\n
(e) we express no opinion with respect to any
\nof the Accounts Property consisting of accounts or gener-
\nal intangibles arising from or relating to the sale of
\nfarm products by a farmer, consumer goods in the hands of
\nAnnTaylor, crops growing or to be gown, timber to be cut
\nor minerals or the like (including oil and gas) or ac-
\ncounts subject to subsection 5 of Section 9-103 of the
\nNew York UCC;<\/p>\n
(f) we express no opinion with respect to any
\nof the Receivables Collateral consisting of accounts or
\ngeneral intangibles arising from or relating to the sale
\nof farm products by a farmer, consumer goods in the hands
\nof the Company, crops growing or to be grown, timber to
\nbe cut or minerals or the like (including oil and gas) or
\naccounts subject to subsection 5 of Section 9-103 of the
\nNew York UCC;<\/p>\n
(g) we express no opinion as to the priority
\nof the security interest of the Company in the Article 9
\nFiling Property or the Lender in the Article 9 Filing
\nCollateral against: (i) any liens, claims or other
\ninterests that arise by operation of law and do not
\nrequire any filing or possession in order to take priori-
\nty over security interests perfected through the filing
\nof a financing statement; (ii) any lien, claim or encum-
\nbrance in favor of the United States of America or any
\nstate, or any agency or instrumentality of any of them or
\nany other governmental entity (including, without limita-
\ntion, federal tax liens, liens arising under the Employee
\nRetirement Income Security Act of 1974, as amended, or
\nclaims given priority pursuant to 31 U.S.C. Sec. 3713);
\n(iii) a lien creditor who attached or levied prior to the
\nperfection of the security interest of the Company or the
\nLender, as the case may be; (iv) a lien creditor with
\nrespect to future advances to the extent set forth in
\nSection 9-301(4) of the New York UCC; (v) another secured
\ncreditor with respect to any future advances to the
\nextent set forth in Section 9-312(7) of the New York UCC;<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 14<\/p>\n
(vi) a security interest perfected under the laws of
\nanother jurisdiction to the extent that either AnnTaylor
\nor the Company had its chief executive office in such
\njurisdiction within four months prior to the date of the
\nperfection of the security interest of the Company or the
\nLender, as the case may be; (vii) a security interest
\nperfected without filing any financing statement pursuant
\nto Section 9-302(1) of the New York UCC; (viii) a secu-
\nrity interest perfected by filing a financing statement
\nnaming AnnTaylor or the Company as debtor using a trade
\nname, fictitious name or previous name; (ix) the holder
\nof a perfected “purchase money security interest” as such
\nterm is defined in Section 9-107 of the New York UCC;
\n(x) another secured party with a perfected security
\ninterest in other property of AnnTaylor or the Company to
\nthe extent the Pool Receivables are proceeds of such
\nother creditor’s collateral; (xi) any person who has en-
\ntered into a subordination or intercreditor agreement
\nwith the Company with respect to the Accounts Property or
\nwith the Lender with respect to the Receivables Collat-
\neral; (xii) any claim for wages, salary or other compen-
\nsation; (xiii) a purchaser of accounts purchased as part
\nof the sale of the business out of which they arose;
\n(xiv) an assignment of accounts for purposes of collec-
\ntion only or a transfer of a single account; (xv) any
\nclaim arising out of tort or any surety who is subrogated
\nto the rights of AnnTaylor or the Company, as the case
\nmay be; or (xvi) the security interest of a creditor who
\nfiled a financing statement based on a prior or incorrect
\nlocation of the chief executive office of AnnTaylor or
\nthe Company to the extent such other financing statement
\nwould be effective under Section 9-401(2) or (3) of the
\nNew York UCC;<\/p>\n
(h) we have assumed that (i) all financing
\nstatements presented for filing prior to the effective
\ndate of the applicable search report in which each of
\nAnnTaylor and the Company is named as debtor have been
\nproperly filed, indexed and recorded with the Secretary
\nof State of the State of New York and are identified in
\nthe appropriate Search Report and (ii) no financing
\nstatements naming AnnTaylor or the Company as debtor were<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 15<\/p>\n
filed with Secretary of State of the State of New York
\nbetween the effective date of the Search Reports and the
\ndate of the filing of the applicable Financing Statements
\nin such Filing Office; and we call to your attention that
\nwe did not review any search report with respect to any
\nfinancing statements naming AnnTaylor or the Company as
\ndebtor filed with the City Register of New York County,
\nNew York; and<\/p>\n
(i) we have assumed that the Bank of America
\nRelease Statements will be filed on or prior to the date
\nof the filing of the Financing Statements.<\/p>\n
14. No registration of AnnTaylor or the Compa-
\nny under the Investment Company Act of 1940, as amended,
\nis required in connection with the initial assignment
\nunder the Purchase Agreement or the initial borrowing
\nunder the Receivables Financing Agreement, respectively.<\/p>\n
In rendering the foregoing opinions, we have
\nassumed, with your consent, that:<\/p>\n
(a) AnnTaylor has been incorporated in
\n the State of Delaware and is validly existing and in
\n good standing under the laws of all jurisdictions in
\n which it owns or leases property of a nature, or
\n transacts business of a type, that would make such
\n qualification necessary;<\/p>\n
(b) the execution, delivery and perfor-
\n mance of each Credit Party’s obligations under the
\n Documents to which it is a party does not and will
\n not conflict with, contravene, violate or constitute
\n a default under (i) any lease, indenture, instrument
\n or other agreement to which such Credit Party or its
\n property is subject (other than the Applicable
\n Contracts, as to which we make no such assumption),
\n (ii) any rule, law or regulation to which such
\n Credit Party is subject (other than Applicable Laws,
\n as to which we make no such assumption), or (iii)
\n any judicial or administrative order or decree of<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 16<\/p>\n
any governmental authority (other than Applicable
\n Orders, as to which we make no such assumption); and<\/p>\n
(c) no authorization, consent or
\n other approval of, notice to or filing with any
\n court, governmental authority or regulatory body
\n (other than Governmental Approvals, as to which we
\n make no such assumption) is required to authorize or
\n is required in connection with the execution, deliv-
\n ery or performance by any Credit Party of any Docu-
\n ment to which it is a party or the transactions
\n contemplated thereby.<\/p>\n
Our opinions are also subject to the following
\nassumptions and qualifications:<\/p>\n
(a) we have assumed each of the Documents
\n constitutes the legal, valid and binding obligation
\n of each party to such Document (other than the
\n Credit Parties) enforceable against such party in
\n accordance with its terms; and<\/p>\n
(b) we express no opinion as to the
\n effect on the opinions expressed herein of (i) the
\n compliance or noncompliance of the Administrator,
\n the Relationship Bank, the Collateral Agent, the
\n Credit Bank, the Liquidity Bank, the Lock-Box Bank,
\n the Lender or any other party (other than the Credit
\n Parties) to the Documents with any state, federal or
\n other laws or regulations applicable to them or (ii)
\n the legal or regulatory status or the nature of the
\n business of any such Person.<\/p>\n
This opinion is being furnished only to you and
\nis solely for your benefit and is not to be used, quoted,
\nrelied upon or otherwise referred to by any other Person
\nor for any other purpose without our prior written con-
\nsent.<\/p>\n
Very truly yours,<\/p>\n
SCHEDULE I<\/p>\n
Clipper Receivables Corporation
\n P.O. Box 4024
\n Boston, Massachusetts 02201<\/p>\n
State Street Boston Capital Corporation
\n 225 Franklin Street
\n Boston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\n Fifth Avenue and Wood Street
\n Pittsburgh, Pennsylvania 15265<\/p>\n
Standard & Poor’s Ratings Group
\n 25 Broadway
\n New York, New York 10004<\/p>\n
Moody’s Investors Service, Inc.
\n 99 Church Street
\n New York, New York 10007<\/p>\n
Exhibit A to Opinion of
\n Special Counsel to AnnTaylor Funding, Inc.
\n ——————————————<\/p>\n
Officer’s Certificate
\n ———————<\/p>\n
I, Jocelyn F.L. Barandiaran, am Corporate
\nSecretary of AnnTaylor Funding, Inc., a Delaware corpora-
\ntion (“Funding”). I understand that pursuant to Section
\n5.01(h)(i) of that certain Receivables Financing Agree-
\nment, dated as of January 27, 1994 (the “Receivables Fi-
\nnancing Agreement”), among Funding, AnnTaylor, Inc.
\n(“AnnTaylor”) as servicer, Clipper Receivables Corpora-
\ntion, State Street Boston Capital Corporation and PNC
\nBank, National Association, Skadden, Arps, Slate, Meagher
\n& Flom is rendering an opinion (the “Opinion”). Defined
\nterms used herein but not otherwise defined shall have
\nthe meaning set forth in Appendix A to the Receivables
\nFinancing Agreement. I further understand that Skadden,
\nArps, Slate, Meagher & Flom is relying on this certifi-
\ncate and the statements made herein in rendering the
\nOpinion.<\/p>\n
With regard to the foregoing, on behalf of
\nFunding, I certify that:<\/p>\n
1. The chief executive office of Funding is
\nlocated at either 142 West 57th Street, New York, New
\nYork 10019 or 414 Chapel Street, New Haven, Connecticut
\n06511.<\/p>\n
2. Set forth on Schedule I hereto are all of
\nthe agreements and instruments (other than the Transac-
\ntion Documents) to which Funding is a party which are
\nmaterial to the business or financial condition of Fund-
\ning.<\/p>\n
3. Set forth on Schedule II hereto are all of
\nthe orders, judgments and decrees of any governmental
\nauthority which are material to the business or property
\nof Funding.<\/p>\n
4. Funding holds no stock in any company.<\/p>\n
5. Funding is engaged in the business set
\nforth in the Transaction Documents. The value of all<\/p>\n
securities owned by Funding does not exceed 10% of the
\nvalue of Funding’s total assets.<\/p>\n
6. Funding does not directly or indirectly
\nown or operate facilities used for the generation, trans-
\nmission or distribution of electric energy for sale or
\nfacilities used for the distribution at retail of natural
\nor manufactured gas for heat, light or power and Funding
\ndoes not own any interest in any company which owns or
\noperates such facilities.<\/p>\n
7. Neither Funding nor any of its subsidiaries
\nis a person providing railroad transportation for compen-
\nsation (a “rail carrier”) or a person controlled by or
\naffiliated with a rail carrier or a person providing
\nsleeping car transportation for compensation (a “sleeping
\ncar carrier”) or a corporation organzied to provide
\ntransportation by rail carrier or sleeping car carrier.<\/p>\n
IN WITNESS WHEREOF, I have executed this cer-
\ntificate this day of January 1994.
\n —-<\/p>\n
By:
\n ————————————–
\n Name: Jocelyn F.L. Barandiaran
\n Title: Corporate Secretary<\/p>\n
2<\/p>\n
Schedule I<\/p>\n
Applicable Contracts
\n ——————–<\/p>\n
None<\/p>\n
3<\/p>\n
Schedule II<\/p>\n
Applicable Orders
\n —————–<\/p>\n
None<\/p>\n
4<\/p>\n
Exhibit B to Opinion of
\n Special Counsel to AnnTaylor, Inc.
\n ———————————-<\/p>\n
Officer’s Certificate
\n ———————<\/p>\n
I, Jocelyn F.L. Barandiaran, am Vice President,
\nGeneral Counsel and Corporate Secretary of AnnTaylor,
\nInc., a Delaware corporation (“AnnTaylor”). I understand
\nthat pursuant to (i) Section 5.01(h)(i) of that certain
\nReceivables Financing Agreement, dated as of January 27,
\n1994 (the “Receivables Financing Agreement”), among
\nAnnTaylor Funding, Inc. (“Funding”), AnnTaylor, as ser-
\nvicer, Clipper Receivables Corporation, State Street
\nBoston Capital Corporation and PNC Bank, National Associ-
\nation and (ii) Section 4.1(h) of that certain Purchase
\nand Sale Agreement, dated as of January 27, 1994 between
\nFunding and AnnTaylor, Skadden, Arps, Slate, Meagher & Flom is rendering an opinion (the “Opinion”). Defined
\nterms used herein but not otherwise defined shall have
\nthe meaning set forth in Appendix A to the Receivables
\nFinancing Agreement. I further understand that Skadden,
\nArps, Slate, Meagher & Flom is relying on this certifi-
\ncate and the statements made herein in rendering the
\nOpinion.<\/p>\n
With regard to the foregoing, on behalf of
\nAnnTaylor, I certify that:<\/p>\n
1. The chief executive office of AnnTaylor is
\nlocated at 142 West 57th Street, New York, New York
\n10019.<\/p>\n
2. Set forth on Schedule I hereto are all of
\nthe agreements and instruments (other than the Transac-
\ntion Documents) to which AnnTaylor is a party which are
\nmaterial to the business or financial condition of
\nAnnTaylor.<\/p>\n
3. Set forth on Schedule II hereto are all of
\nthe orders, judgments and decrees of any governmental
\nauthority which are material to the business or property
\nof AnnTaylor.<\/p>\n
4. AnnTaylor holds no stock in any company
\nother than the stock represented by the certificates set<\/p>\n
forth on Schedule III hereto; none of such stock is trad-
\ned on a national securities exchange.<\/p>\n
5. AnnTaylor is primarily engaged in the
\nbusiness described in Schedule IV. The value of all
\nsecurities owned by AnnTaylor (excluding those referred
\nto in paragraph 4 above) does not exceed 10% of the value
\nof AnnTaylor’s total assets.<\/p>\n
6. AnnTaylor does not directly or indirectly
\nown or operate facilities used for the generation, trans-
\nmission or distribution of electric energy for sale or
\nfacilities used for the distribution at retail of natural
\nor manufactured gas for heat, light or power and
\nAnnTaylor does not own any interest in any company which
\nowns or operates such facilities.<\/p>\n
7. Neither AnnTaylor nor any of its subsid-
\niaries is a person providing railroad transportation for
\ncompensation (a “rail carrier”) or a person controlled by
\nor affiliated with a rail carrier or a person providing
\nsleeping car transportation for compensation (a “sleeping
\ncar carrier”) or a corporation organzied to provide
\ntransportation by rail carrier or sleeping car carrier.<\/p>\n
2<\/p>\n
IN WITNESS WHEREOF, I have executed this cer-
\ntificate this day of January 1994.
\n —-<\/p>\n
By:
\n ————————————–
\n Name: Jocelyn F.L. Barandiaran
\n Title: Vice President, General Counsel
\n and Corporate Secretary<\/p>\n
3<\/p>\n
Schedule I<\/p>\n
Applicable Contracts
\n ——————–<\/p>\n
1. Indenture, dated as of July 15, 1989, between AnnTaylor
\n and United States Trust Company of New York, as Trustee,
\n together with the Certificate of Satisfaction and Dis-
\n charge in favor of AnnTaylor as of July 29, 1993 by such
\n Trustee.<\/p>\n
2. Indenture, dated as of July 15, 1989, between AnnTaylor
\n and State Street Bank and Trust Company of Connecticut,
\n as successor trustee to The Connecticut Bank and Trust
\n Company, National Association, as Trustee, together with
\n the Certificate of Satisfaction and Discharge in favor of
\n AnnTaylor as of July 29, 1993 by such Trustee.<\/p>\n
3. Credit Agreement, dated as of June 28, 1993, among
\n AnnTaylor, Bank of America, Bank of Montreal and the
\n other financial institutions party thereto, as amended by
\n Amendment No. 1 to Credit Agreement dated as August 10,
\n 1993, Amendment No. 2 to Credit Agreement dated as Sep-
\n tember 30, 1993, Amendment No. 3 to Credit Agreement
\n dated as December 23, 1993, and Amendment No. 4 and
\n Consent to Credit Agreement dated as January 24, 1994.<\/p>\n
4. Security and Pledge Agreement, dated as of June 28, 1993,
\n made by AnnTaylor in favor of Bank of America, as Agent,
\n as modified by Amendment No. 4 and Consent to Credit
\n Agreement dated as January 24, 1994.<\/p>\n
5. Trademark Assignment, dated as of June 28, 1993, made by
\n AnnTaylor with Bank of America, as Agent.<\/p>\n
6. Tax Sharing Agreement, dated as of July 12, 1989, between
\n the Company and AnnTaylor Stores Corporation (“ATSC”).<\/p>\n
7. Agreement, dated as of July 13, 1993, among Cygne De-
\n signs, Inc., Cygne Design F.E. Limited, CAT US Inc.,
\n C.A.T. (Far East) Limited and AnnTaylor.<\/p>\n
8. Stock Purchase Agreement, dated as of July 13, 1993,
\n between Cleveland Investment Limited and AnnTaylor.<\/p>\n
9. Agreement, dated as of June 14, 1989, and the Trademark
\n License Agreement, effective as of January 1, 1990, among
\n Allied Stores Corporation, AnnTaylor and ATSC.<\/p>\n
4<\/p>\n
10. Indenture, dated as of June 15, 1993, between AnnTaylor
\n and Fleet Bank, N.A., as Trustee.<\/p>\n
11. Employment Agreement, effective as of February 3, 1992,
\n between AnnTaylor, AnnTaylor Stores Corporation and Sally
\n Frame Kasaks.<\/p>\n
12. Lease, dated as of March 17, 1989, between Carven Associ-
\n ates and AnnTaylor concerning the West 57th Street head-
\n quarters, as amended by the First Amendment thereto dated
\n as of November 14, 1990, the Second Amendment thereto
\n dated as of February 28, 1993, the Third Amendment there-
\n to dated as of June 24, 1993, and the letter agreement
\n dated as of October 1, 1993.<\/p>\n
13. Lease, dated December 1, 1985, between Hamilton Realty
\n Co. and AnnTaylor (as successor in interest to ASC Stores
\n III, Inc.) concerning the New Haven distribution center,
\n as amended by the letter agreement dated March 22, 1993,
\n and the letter agreement dated July 26, 1993.<\/p>\n
14. Lease, dated June 12, 1986, between SMR 85-1 Limited
\n Partnership and AnnTaylor (as successor in interest to
\n ASC Stores III, Inc.) concerning the New Haven offices,
\n as amended by the Amendment to Lease dated December 7,
\n 1987 and the Second Amendment to Lease dated December 10,
\n 1992.<\/p>\n
5<\/p>\n
Schedule II<\/p>\n
Applicable Orders
\n —————–<\/p>\n
None<\/p>\n
6<\/p>\n
Schedule III<\/p>\n
Stock Certificates
\n ——————<\/p>\n
Company Certificate Nos. No. of Shares
\n– ——- —————- ————-<\/p>\n
AnnTaylor Travel, Inc.1 1 1<\/p>\n
CAT U.S. Inc.1 1 and 11 4,000<\/p>\n
C.A.T. (Far East) Limited1 5 and 8 60,000<\/p>\n
AnnTaylor Funding, Inc.1 1 100<\/p>\n
– ——————–
\n1 Pledged to Bank of America pursuant to the Security
\n and Pledge Agreement, dated as of June 28, 1993.<\/p>\n
7<\/p>\n
Schedule IV<\/p>\n
Description of Business
\n ———————–<\/p>\n
AnnTaylor is primarily engaged in the business of the
\nretail sale of women’s apparel, shoes and accessories.<\/p>\n
8<\/p>\n
EXHIBIT 5.01(h)(ii)<\/p>\n
January 27, 1994<\/p>\n
The Persons Listed
\n on Schedule I Hereto<\/p>\n
Dear Sirs and Madams:<\/p>\n
I am Vice President, General Counsel and Corpo-
\nrate Secretary of AnnTaylor, Inc., a Delaware corporation
\n(“AnnTaylor”). I am delivering this opinion in connec-
\ntion with the preparation, execution and delivery of
\n(i) the Purchase and Sale Agreement dated as of
\nJanuary 27, 1994 (the “Purchase Agreement”) between
\nAnnTaylor Funding, Inc., a Delaware corporation (the
\n“Company”), as purchaser and AnnTaylor, as seller,
\n(ii) the Receivables Financing Agreement, dated as of
\nJanuary 27, 1994 (the “Receivables Financing Agreement”),
\namong the Company, Clipper Receivables Corporation (the
\n“Lender”), AnnTaylor, as Servicer, State Street Boston
\nCapital Corporation (the “Administrator”), and PNC Bank,
\nNational Association (the “Relationship Bank”), and
\n(iii) certain other agreements, instruments and documents
\nrelated to the Purchase Agreement and the Receivables Fi-
\nnancing Agreement. This opinion is being delivered
\npursuant to Section 4.1(h) of the Purchase Agreement and
\nSection 5.01(h)(i) of the Receivables Financing Agree-
\nment. Capitalized terms used herein and not otherwise
\ndefined herein shall have the same meanings herein as set
\nforth in Appendix A to the Receivables Financing Agree-
\nment.<\/p>\n
In this connection, I have examined and am
\nfamiliar with originals or copies, certified or otherwise
\nidentified to my satisfaction, of (i) the Receivables
\nFinancing Agreement; (ii) the Purchase Agreement;
\n(iii) the Certificate of Incorporation and Bylaws of
\nAnnTaylor, as presently in effect; and (iv) resolutions
\nof the Board of Directors of AnnTaylor relating to the
\nReceivables Financing Agreement and the Purchase Agree-
\nment. I have also examined and am familiar with origi-
\nnals or copies, certified or otherwise identified to my<\/p>\n
January 27, 1994
\nPage 2<\/p>\n
satisfaction, of such records of AnnTaylor and such
\nagreements, certificates of public officials, certifi-
\ncates of officers or representatives of AnnTaylor and
\nothers, and such other documents, certificates and corpo-
\nrate or other records as I have deemed necessary or
\nappropriate as a basis for the opinions set forth below.<\/p>\n
In my examination, I have assumed the genuiness
\nof all signatures, the legal capacity of all natural
\npersons, the authenticity of all documents submitted to
\nme as originals, the conformity to original documents of
\nall documents submitted to me as certified or photostatic
\ncopies and the authenticity of the originals of such
\ncopies. As to any facts material to this opinion which I
\ndid not independently establish or verify, I have relied
\nupon certificates, statements and representations of
\nofficers and other representatives of AnnTaylor and
\nothers.<\/p>\n
I am admitted to the Bar of the State of New
\nYork and express no opinion as to the laws of any juris-
\ndiction except the General Corporation Law of the State
\nof Delaware and the laws of the United States of America
\nto the extent specifically referred to herein.<\/p>\n
Based upon and subject to the limitations,
\nqualifications, exceptions and assumptions set forth
\nherein, I am of the opinion that:<\/p>\n
(i) AnnTaylor is a corporation duly incor-
\n porated, validly existing and in good standing under
\n the laws of the State of Delaware.<\/p>\n
(ii) AnnTaylor is duly qualified to transact
\n business as a foreign corporation and is in good
\n standing in each other jurisdiction in which it owns
\n or leases property of a nature, or transacts busi-
\n ness of a type, that would make such qualification
\n necessary, except to the extent that the failure to
\n so qualify or be in good standing would not have a
\n material adverse effect on AnnTaylor.<\/p>\n
January 27, 1994
\nPage 3<\/p>\n
This opinion is being furnished by me as Vice
\nPresident, General Counsel and Corporate Secretary of
\nAnnTaylor to you solely for your benefit, and is not to
\nbe used or relied upon by any other person without my
\nexpress prior written consent.<\/p>\n
Very truly yours,<\/p>\n
SCHEDULE I<\/p>\n
Clipper Receivables Corporation
\nP.O. Box 4024
\nBoston, Massachusetts 02101<\/p>\n
State Street Boston Capital Corporation
\n225 Franklin Street
\nBoston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\nFifth Avenue and Wood Street
\nPittsburgh, Pennsylvania 15265<\/p>\n
Moody’s Investors Service
\n99 Church Street
\nNew York, New York 10007<\/p>\n
Standard & Poors Corporation
\n26 Broadway, 15th Floor
\nNew York, New York 10004<\/p>\n
EXHIBIT 5.01(h)(iii)<\/p>\n
January 27, 1994<\/p>\n
The Persons Listed on
\nSchedule I Hereto<\/p>\n
Re: Purchase Agreement between AnnTaylor, Inc.
\n and AnnTaylor Funding, Inc.
\n ——————————————<\/p>\n
Ladies and Gentlemen:<\/p>\n
We have acted as special counsel to AnnTaylor,
\nInc., a Delaware corporation (“AnnTaylor”), and AnnTaylor
\nFunding, Inc., a Delaware corporation and wholly owned
\nsubsidiary of AnnTaylor (“Funding”), in connection with
\nthe transactions contemplated by (i) the Purchase and
\nSale Agreement, dated as of January 27, 1994 (the “Pur-
\nchase Agreement”), between AnnTaylor, as seller, and
\nFunding, as buyer, providing for the sale and contribu-
\ntion by AnnTaylor to Funding of certain credit-card
\nreceivables originated by AnnTaylor (the “Pool Receiv-
\nables”); and (ii) the Receivables Financing Agreement,
\ndated as of January 27, 1994 (the “Receivables Financing
\nAgreement”), among Funding, Clipper Receivables Corpora-
\ntion (the “Lender”), AnnTaylor, as servicer (in such
\ncapacity, the “Servicer”), State Street Boston Capital
\nCorporation (the “Administrator”) and PNC Bank, National
\nAssociation (the “Relationship Bank”). This opinion is
\nbeing delivered pursuant to Section 5.01(h)(iii) of the
\nReceivables Financing Agreement. Capitalized terms used
\nherein and not otherwise defined herein shall have the
\nsame meanings herein as set forth in Appendix A to the
\nReceivables Financing Agreement or in the Purchase Agree-
\nment.<\/p>\n
SUMMARY OF THE TRANSACTIONS<\/p>\n
The Pool Receivables consist of a portfolio of
\naccounts receivable arising under unsecured, revolving,
\nconsumer credit-card accounts established with AnnTaylor
\nfor the purchase of merchandise by the Obligors from
\nAnnTaylor. The Pool Receivables include both indebted-
\nness owing from Obligors under the credit-card accounts
\nin connection with purchases from AnnTaylor and finance-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 2<\/p>\n
charge obligations relating thereto. The Purchase Agree-
\nment and the Receivables Financing Agreement provide for
\nthe transfer of the Pool Receivables from AnnTaylor to
\nFunding, the appointment of AnnTaylor as servicer of the
\nPool Receivables and related matters (the “Transactions”)
\ndescribed below.<\/p>\n
Pursuant to the Purchase Agreement, AnnTaylor
\nwill sell to Funding all Pool Receivables which will
\nconsist of all Receivables existing on the Initial Cut-
\nOff Date or created by it from the specified Initial Cut-
\nOff Date to and including the Purchase and Sale Termina-
\ntion Date described therein and all Finance Charge Re-
\nceivables that relate to Principal Receivables created
\nprior to the Purchase and Sale Termination Date. Funding
\nwill borrow funds from the Lender pursuant to the Receiv-
\nables Financing Agreement to fund, in part, the purchase
\nof Pool Receivables, and Funding will grant to the Lender
\na security interest in the Pool Receivables to secure
\nsuch loans.<\/p>\n
Pursuant to the Purchase Agreement, as consid-
\neration for the sale of the Pool Receivables, Funding
\nwill pay to AnnTaylor a Purchase Price equal to the
\naggregate Unpaid Balance of the Pool Receivables trans-
\nferred from time to time multiplied by the “Fair Market
\nValue Discount Factor” (as described in the Purchase
\nAgreement). The Fair Market Value Discount Factor is
\ncomputed via a formula intended to discount the face
\nvalue of the Pool Receivables by a factor that takes into
\nconsideration the time value of money based upon antici-
\npated dates of collection of the Pool Receivables, the
\nrisk of nonpayment, the cost of servicing and a reason-
\nable profit. On the closing date of the Purchase Agree-
\nment, with respect to Pool Receivables that existed as of
\nthe close of business on the Initial Cut-Off Date or that
\nwere created thereafter but existed on the closing date,
\nAnnTaylor will contribute certain of such Pool Receiv-
\nables to the capital of Funding, and Funding will pay the
\nPurchase Price for the purchase of the remainder thereof
\nby (i) the payment of cash borrowed from the Lender under
\nthe Receivables Financing Agreement and (ii) the issuance
\nof a promissory note (the “Company Note”) issued by
\nFunding to AnnTaylor (which note will be subordinated to
\nthe promissory note issued by Funding on behalf of the<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 3<\/p>\n
Lender). Thereafter, Funding will pay funds to AnnTaylor
\nfrom Collections on Pool Receivables (after setting aside
\namounts needed by Funding to pay other costs and expens-
\nes) in payment or partial payment of the Purchase Price
\nof Pool Receivables that arise after the closing date.
\nTo the extent that it is determined on any monthly Set-
\ntlement Date that Funding did not have funds available
\nduring the related Settlement Period to pay the Purchase
\nPrice in cash with respect to Pool Receivables arising
\nduring such Settlement Period, either there will be an
\nincrease in the Company Note or AnnTaylor will make a
\ncapital contribution to Funding, which increase of the
\nCompany Note and capital contribution will in aggregate
\nbe in an amount equal to the difference between the Pur-
\nchase Price with respect to Pool Receivables that arose
\nduring the related Settlement Period and the funds other-
\nwise paid to AnnTaylor with respect thereto.<\/p>\n
AnnTaylor initially will be appointed as
\nServicer of the Pool Receivables pursuant to the Receiv-
\nables Financing Agreement. AnnTaylor may be removed only
\nfor cause upon specified Servicer Transfer Events, and
\nthe parties contemplate that AnnTaylor will remain the
\nServicer of the Pool Receivables.<\/p>\n
OPINION REQUESTED<\/p>\n
You have requested our opinion as to whether,
\nin the event that AnnTaylor were to become a debtor under
\nthe Bankruptcy Code, 11 U.S.C. Sec. 101 et seq. (the “Bank-
\n ——-
\nruptcy Code”), the transfer of the Pool Receivables
\npursuant to the Purchase Agreement would be held to be a
\n“sale” by AnnTaylor of the Pool Receivables transferred
\nto Funding rather than the transfer of a security inter-
\nest in connection with a borrowing made by AnnTaylor. In
\nthe event of a bankruptcy of AnnTaylor, if the transfers
\nwere held to be sales, Funding would own all of the Pool
\nReceivables transferred to it, and such Pool Receivables
\nand the Collections and other proceeds in respect of such
\nPool Receivables would not be part of AnnTaylor’s estate.<\/p>\n
Members of our Firm are admitted to the bar in
\nthe State of New York, and we do not express any opinion
\nas to the laws of any other jurisdiction other than the
\nlaws of the United States of America to the extent re-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 4<\/p>\n
ferred to specifically herein. Each of the Purchase
\nAgreement and the Receivables Financing Agreement pro-
\nvides that it shall be governed in accordance with the
\nlaws of the State of New York, which we have analyzed as
\nthe governing law for the purpose of the opinion set
\nforth herein.<\/p>\n
FACTS AND ASSUMPTIONS<\/p>\n
In connection with rendering the opinion set
\nforth below, we have examined and relied upon originals
\nor copies of (i) the Purchase Agreement, (ii) the Receiv-
\nables Financing Agreement and (iii) such other documents
\nrelating to the Transactions as we have deemed necessary
\nor advisable as a basis for such opinion.<\/p>\n
In our examination, we have assumed the legal
\ncapacity of all natural persons, the genuineness of all
\nsignatures, the authenticity of all documents submitted
\nto us as originals, the conformity to original documents
\nof all documents submitted to us as facsimile, certified
\nor photostatic copies and the authenticity of the origi-
\nnals of such latter documents. In making our examination
\nof such documents, for purposes of this opinion we have
\nassumed that all parties thereto had the power, corporate
\nor other, to enter into and perform all obligations
\nthereunder and have also assumed the due authorization by
\nall requisite action, corporate or other, the execution
\nand delivery by such parties of such documents, the
\nvalidity and binding effect thereof and that such docu-
\nments are enforceable against such parties.<\/p>\n
We have made no independent investigation of
\nthe facts referred to herein and, with respect to such
\nfacts, have relied, for the purpose of rendering this
\nopinion, exclusively on those facts provided to us by
\nAnnTaylor and Funding as confirmed in certificates pro-
\nvided to us by AnnTaylor and Funding attached hereto as
\nExhibit A certifying the facts and assumptions set forth
\nbelow and in the preceding “Summary of the Transactions,”
\nwhich we assume are true, and on those facts contained in
\nthe Purchase Agreement, the Receivables Financing Agree-
\nment and such other documents relating to the Transac-
\ntions as we deemed advisable, including the factual<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 5<\/p>\n
representations and warranties contained therein as made
\nby the respective parties thereto.<\/p>\n
It is our understanding that the relevant facts
\nregarding the Transactions are as follows:<\/p>\n
1. Purpose. Recognizing, among other fac-
\n ——-
\ntors, the tax, accounting and legal consequences of the
\nTransactions, AnnTaylor and Funding determined that, from
\na business viewpoint, the sale of the Pool Receivables by
\nAnnTaylor to Funding is in the best interests of
\nAnnTaylor and Funding. Further, this determination has
\nbeen explicitly memorialized by appropriate resolutions
\nadopted by the respective Boards of Directors of
\nAnnTaylor and Funding.<\/p>\n
2. Economics of the Transaction. As indicat-
\n —————————-
\ned in paragraph 6 below, the parties intend that the
\ntransfer of the Pool Receivables pursuant to the Purchase
\nAgreement constitutes a sale thereof. We understand that
\nthe economics of the Transactions reflect the intent of
\nAnnTaylor and Funding that the transfer of the Pool Re-
\nceivables be considered a sale of the Pool Receivables by
\nAnnTaylor to Funding rather than loans secured by the
\nPool Receivables. Specifically, the Purchase Price pay-
\nable by Funding to AnnTaylor for the Pool Receivables is
\nintended to be consistent with the terms of such a sale
\nmade at arm’s length to a third party. In addition, if
\nthe Purchase Agreement evidenced secured loans to
\nAnnTaylor, then such secured loans, rather than interests
\nin the Pool Receivables owned by Funding, would be con-
\nveyed as security by Funding to the Lender. We under-
\nstand that the terms of the Receivables Financing Agree-
\nment reflect a loan by the Lender to Funding secured by
\ninterests in Pool Receivables owned by Funding, and that
\nthe terms would not be as favorable to Funding if the
\nLender were granted a security interest in secured loans
\nmade by Funding to AnnTaylor.<\/p>\n
3. Complete, Irrevocable Transfer. Except as
\n ——————————
\ndescribed below with respect to permitted modifications
\nto a Contract or a Pool Receivable that may be agreed to
\nby AnnTaylor in its capacity as Servicer, AnnTaylor
\nrelinquishes all control and title over the Pool Receiv-
\nables upon the transfer of each Pool Receivable under the<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 6<\/p>\n
Purchase Agreement. It should be noted that the Servicer
\nis granted such rights with respect to the Pool Receiv-
\nables as are necessary to allow it to fulfill its obliga-
\ntion to Funding and the Lender to collect the payments on
\nthe Pool Receivables and to otherwise fulfill its obliga-
\ntions as Servicer.<\/p>\n
In conjunction with its normal servicing activ-
\nities, the Servicer may, in accordance with the Credit
\nand Collection Policy, extend the maturity of or defer
\ninterest payments or finance charges with respect to any
\nPool Receivable or adjust the Unpaid Balance of any Pool
\nReceivable as the Servicer may determine to be appro-
\npriate to maximize collections thereof. It is our under-
\nstanding that such an ability on the part of the Servicer
\nis consistent with the delegation to a third party for
\nconsideration of the day-to-day administration of assets
\nthat are not owned by such third party. The Servicer
\nwill be compensated for these servicing activities by
\npayment of the Servicer’s Fee which we understand repre-
\nsents a fair market value servicing fee.<\/p>\n
Except for AnnTaylor’s obligation in certain
\ncircumstances (such as returned goods or disputed charg-
\nes) and upon breaches of certain representations or war-
\nranties under the Purchase Agreement to repurchase the
\nsubject Pool Receivables, as described in paragraph 18
\nbelow, the sale of each Pool Receivable by AnnTaylor is
\nirrevocable.<\/p>\n
4. No Obligation Due from AnnTaylor to Fund-
\n —————————————–
\ning as a Result of the Transactions. Except as set forth
\n– ———————————–
\nin paragraphs 18 and 19 below, AnnTaylor is not indebted
\nto Funding at the time of or as a result of the Transac-
\ntions and AnnTaylor does not have an obligation to pay
\nany amount to Funding or, in respect of any indebtedness
\nof Funding, to any other creditor of Funding.<\/p>\n
5. No Right to Surplus. AnnTaylor does not
\n ——————-
\nhave the right to receive any proceeds allocable to any
\nPool Receivable, even if Funding should receive more than
\nthe Purchase Price payable to AnnTaylor from Collections
\nor other recoveries on the Pool Receivables.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 7<\/p>\n
6. Intent\/Nomenclature. The Purchase Agree-
\n ——————-
\nment recites that “in consideration of the Purchase
\nPrice . . . AnnTaylor agrees to sell, assign and trans-
\nfer, and does hereby sell, assign and transfer to [Fund-
\ning], and [Funding] agrees to purchase, and does hereby
\npurchase, from AnnTaylor, all of AnnTaylor’s right, title
\nand interest in and to: (a) each Receivable . . . .”
\nThe language used reflects the intention of the respec-
\ntive parties that the transfers of such Pool Receivables
\nbe sales.<\/p>\n
7. Notice to Creditors and Potential Bona
\n ————————————–
\nFide Purchasers. At the time of the closing under the
\n– —————
\nPurchase Agreement, AnnTaylor will report on its finan-
\ncial records the transfer of the Pool Receivables made by
\nit as a sale under generally accepted accounting princi-
\nples (“GAP”). Such GAP financial statements, to the
\nextent prepared on a consolidated basis for AnnTaylor and
\nits consolidated subsidiaries, will be appropriately
\nfootnoted or will otherwise disclose that the Pool Re-
\nceivables have been sold to Funding and that a security
\ninterest in such Pool Receivable has been transferred to
\nthe Lender. For purposes of GAP, the financial records
\nof Funding will report the Transactions as the purchase
\nof all Pool Receivables from AnnTaylor and the transfer
\nof a security interest therein to the Lender. The com-
\nputer records storing essential information on the Pool
\nReceivables and similar assets of AnnTaylor will be
\nappropriately coded to reflect the sale of the Pool Re-
\nceivables to Funding and the grant of a security interest
\nby Funding to the Lender. We are informed that creditors
\nof AnnTaylor and Funding rely substantially upon their
\nrespective books, records, tapes and appropriate filings
\nof financing statements in making credit decisions. We
\nare further informed that purchasers of Pool Receivables
\nand similar assets rely on information generated from the
\ncomputer records.<\/p>\n
In addition, it is our understanding that if a
\nthird party, including a potential purchaser of the Pool
\nReceivables, inquires, AnnTaylor will promptly indicate
\nthat the Pool Receivables have been sold to Funding and
\nthat a security interest therein has been transferred by
\nFunding to the Lender, and AnnTaylor will not claim any
\nownership interest in the Pool Receivables.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 8<\/p>\n
8. No Postsale Adjustment. No provision
\n ———————-
\nexists in the Purchase Agreement (except with respect to
\nPool Receivables that are subject to a reduction or can-
\ncellation of the Unpaid Balance by reason of credit
\nadjustments or other dilution and Pool Receivables with
\nrespect to which the eligibility criteria are not met or
\na representation or warranty by AnnTaylor as seller has
\nbeen violated) for any modification after the date on
\nwhich a given Pool Receivable is transferred of the
\namount of the consideration delivered to AnnTaylor by
\nFunding in exchange for such Pool Receivable, and we
\nassume that no such modifications will be made.<\/p>\n
9. Payment Risk. The amount and timing of
\n ————
\npayments made to Funding (or to the Servicer on behalf of
\nFunding and the Lender) from the Obligors on the Pool Re-
\nceivables cannot be directly controlled by AnnTaylor.
\nFunding (and the Lender as the principal creditor of
\nFunding upon maturity of its loans), and not AnnTaylor,
\nwill bear the risk of a slower or faster rate of payment
\non the Pool Receivables than anticipated at the time of
\nthe transfer of the Pool Receivables. Although slower or
\nfaster payment on the Pool Receivables may affect timing
\non the payment of the Company Note issued by Funding to
\nAnnTaylor, the Company Note will have a market interest
\nrate to compensate AnnTaylor with respect to the out-
\nstanding principal amount thereof.<\/p>\n
10. No Recourse for Defaults. AnnTaylor has
\n ————————
\nnot guaranteed to Funding (or to any assignee, including
\nthe Lender) the payment of any Pool Receivable.
\nAnnTaylor is not obligated to repurchase from Funding any
\nPool Receivable in default, unless any such default is
\nattributable to a breach of its representations and
\nwarranties with respect to such Pool Receivable under the
\nPurchase Agreement. If the losses on the Pool Receiv-
\nables exceed the risk of loss factor reflected in the
\nFair Market Value Discount Factor at the time such Pool
\nReceivables were first transferred, such losses will be
\nabsorbed by Funding (and the Lender as the principal
\ncreditor of Funding upon maturity of its loans). Al-
\nthough losses may affect the ability of Funding to pay
\nits creditors, which would include its obligations to
\nAnnTaylor under the Company Note, the initial size of the
\nCompany Note is viewed by AnnTaylor to be a reasonable<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 9<\/p>\n
amount relative to the initial capitalization of Funding,
\nand increases in the Company Note (other than capitalized
\ninterest) will not exceed the incremental dollar amount
\nof fluctuations in the aggregate balance of Pool Receiv-
\nables.<\/p>\n
11. No Call or Put Feature. Because
\n ———————-
\nAnnTaylor, whether in its capacity as Servicer or as
\nseller under the Purchase Agreement, is not entitled to
\nrepurchase the Pool Receivables transferred by it,
\nAnnTaylor cannot cause an early payment of the Pool
\nReceivables.<\/p>\n
Similarly, because Funding cannot require
\nAnnTaylor to repurchase Pool Receivables, other than in
\nconnection with credit adjustments or other dilution,
\nfailure to meet specified eligibility criteria (measured
\nat the time any such Pool Receivable was transferred) or
\nthe breach by AnnTaylor of representations and warranties
\nas described in paragraph 18 below, Funding cannot cause
\nan early payment of the Pool Receivables. When the loans
\nfrom the Lender to Funding have matured or are accelerat-
\ned, Funding will have to either refinance the Pool Re-
\nceivables or extend the time of payment to the Lender
\nwhile the Pool Receivables collect. Neither the Lender
\nnor Funding has the ability to cause AnnTaylor to repur-
\nchase the Pool Receivables at such time.<\/p>\n
12. No Intent to Evade Public Policy, etc. We
\n ————————————–
\nunderstand that AnnTaylor has a valid business reason for
\nthe sale of the Pool Receivables. We have no reason to
\nbelieve that such sale is made with any intent to hinder,
\ndelay or defraud any entity to which AnnTaylor is or will
\nbecome indebted on or after the date of transfer. We
\nhave no reason to believe that AnnTaylor is insolvent or
\nthat the sale of the Pool Receivables will render
\nAnnTaylor insolvent on the date of the transfer or as a
\nresult of the transfer; we have been informed that
\nAnnTaylor is not engaged in business or about to engage
\nin business for which the assets remaining with it after
\nthe sale of the Pool Receivables will be an unreasonably
\nsmall amount of capital; and we understand that AnnTaylor
\ndoes not intend to incur or believe that it will incur
\ndebts beyond its ability to pay as such debts mature. We
\nhave no reason to believe that the consideration received<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 10<\/p>\n
by AnnTaylor upon the sale of the Pool Receivables to
\nFunding will not constitute, in each case, reasonably
\nequivalent value and fair consideration for the property
\nsold, consistent with terms that would be arrived at on
\nan arm’s-length basis. We have no reason to believe that
\nthe sale of the Pool Receivables by AnnTaylor is done
\nwith any intent to evade any applicable laws or public
\npolicy.<\/p>\n
13. Yield Considerations. While the discount
\n ——————–
\nat which Funding purchases Pool Receivables from
\nAnnTaylor is intended, among other things, to provide a
\nyield on the purchase price paid reflective of a reason-
\nable profit and the time that will elapse until purchased
\nPool Receivables are collected, AnnTaylor does not guar-
\nantee or otherwise pay to Funding a specified yield if
\nthe collection time differs from that anticipated at the
\ntime a particular Pool Receivable is transferred. Simi-
\nlarly, AnnTaylor does not guarantee a specified yield to
\nFunding (or any assignee, including the Lender).<\/p>\n
14. Collections\/Deposits to Accounts. The
\n ——————————–
\nServicer will follow such collection procedures as it has
\ncustomarily followed with respect to receivables it
\nservices for its own account comparable to the Pool Re-
\nceivables. In accordance with the requirements of the
\nReceivables Financing Agreement and the Purchase Agree-
\nment, all Obligors will be directed to remit Collections
\nto the Lock-Box Accounts. The Lock-Box Accounts are
\nsegregated bank accounts in the name of Funding and the
\nAdministrator as secured party and are not commingled
\nwith the general funds of AnnTaylor. AnnTaylor has no
\nright to utilize monies received on Pool Receivables for
\nits own purposes until such funds have been paid to it as
\npart of the Purchase Price for Pool Receivables. If it
\nis determined on any Settlement Date that AnnTaylor has
\nreceived funds from Collections during the related Set-
\ntlement Period in excess of the Purchase Price with
\nrespect to Pool Receivables that were generated during
\nsuch Settlement Period, AnnTaylor must reduce the amount
\nof the Company Note or otherwise refund to Funding the
\nexcess amount.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 11<\/p>\n
15. Servicing.
\n ———<\/p>\n
(a) Choice of Initial Servicer. We
\n ————————–
\nunderstand that AnnTaylor originated the Pool Receivables
\nin the ordinary course of business. We understand that
\nAnnTaylor is fully familiar with servicing such Pool
\nReceivables and has the administrative and other staff
\nand agents necessary to service such Pool Receivables.
\nIn addition, we have been informed that receivables such
\nas the Pool Receivables are structured to be serviced by
\nservicers such as AnnTaylor. We further understand that
\nphysical possession of the documents associated with the
\nPool Receivables facilitates servicing of the Pool Re-
\nceivables. We have also been informed that, based on
\nthese factors, other entities could not comparably ser-
\nvice the Pool Receivables as efficiently as AnnTaylor or
\nfor a lesser cost than that to be paid to AnnTaylor as
\nthe Servicer’s Fee. We have been informed that servicing
\nthe Pool Receivables by any entity other than AnnTaylor
\ncould result in a diminution in the value of the Pool
\nReceivables, and that it is thus in Funding’s and the
\nLender’s best interest that so long as AnnTaylor is in
\ncompliance with its obligations under the Receivables
\nFinancing Agreement, AnnTaylor service the Pool Receiv-
\nables. AnnTaylor has agreed to service the Pool Receiv-
\nables as agent on behalf of Funding, the Lender and the
\nAdministrator, subject to its right to delegate certain
\nresponsibilities to subservicers. We assume that
\nAnnTaylor will discharge properly its fiduciary duty as
\nServicer with respect to servicing, administering and
\ncollecting the Pool Receivables.<\/p>\n
(b) Duties. AnnTaylor’s duties as
\n ——
\nServicer under the Receivables Financing Agreement are
\ncustomary for a servicer of credit-card receivables,
\ninterests in which are transferred as security to a
\nthird-party investor that has provided funding to the
\nbuyer for the purchase of such receivables.<\/p>\n
(c) Collection Fees and Expenses. The
\n —————————-
\nServicer will receive the Servicer’s Fee as its primary
\ncompensation for servicing, administering and collecting
\nthe Pool Receivables. The Servicer’s Fee will compensate
\nAnnTaylor for performing the functions of a servicer,
\nadministrator and collector of credit-card receivables as<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 12<\/p>\n
an agent for Funding, the Lender and the Administrator,
\nincluding billing, collecting and posting all payments,
\nresponding to inquiries of Obligors and investigating
\ndelinquencies. The Servicer’s Fee will also compensate
\nAnnTaylor for its services as the administrator of the
\nPool Receivables, including accounting for Collections
\nand the furnishing on a monthly basis of the Information
\nPackage to the Administrator and the Relationship Bank.
\nSuch fee will also reimburse AnnTaylor for certain taxes,
\naccounting fees, data-processing costs and other costs
\nassociated with administering the Pool Receivables.
\nAnnTaylor would not receive any prescribed servicer fee
\nif AnnTaylor were terminated as Servicer except with
\nrespect to amounts payable in respect of the activities
\nof AnnTaylor as Servicer prior to its termination as
\nServicer. Any successor servicer assuming AnnTaylor’s
\nobligations would be entitled to at least the same
\nservicer fees in respect of its activities as servicer.<\/p>\n
(d) Replacement of the Servicer. Upon
\n —————————
\nany Servicer Transfer Event, the Administrator or the
\nRelationship Bank may terminate AnnTaylor as Servicer.<\/p>\n
(e) Normal Servicer Arrangement. We
\n —————————
\nunderstand that the servicer arrangements set forth above
\nwere arrived at as a result of arm’s-length negotiations
\nand that they are typical of servicer arrangements made
\nfor servicing, administering and collecting assets such
\nas the Pool Receivables.<\/p>\n
(f) Reflection of Sale on Books and Re-
\n ———————————–
\ncords. We understand that AnnTaylor utilizes a computer
\n– —–
\nsystem to maintain information regarding the credit-card
\nreceivables that it owns or services, including informa-
\ntion with respect to the legal ownership of such credit-
\ncard receivables. We understand and assume that Funding
\nand others with an interest in credit-card receivables in
\nAnnTaylor’s possession place principal reliance on the
\ncomputer-based records for information respecting the
\nownership and status of the credit-card receivables.
\nAnnTaylor will maintain its computer records so that,
\nfrom and after the closing, its summary master control
\ndata processing records that refer to the Pool Receiv-
\nables will indicate clearly that such Pool Receivables
\nhave been sold to Funding and that security interests in<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 13<\/p>\n
such Pool Receivables have been subsequently transferred
\nby Funding to the Lender. If at any time AnnTaylor
\nproposes to sell, grant a security interest in or other-
\nwise transfer any interest in credit-card receivables,
\nAnnTaylor will give to such prospective purchaser, lender
\nor other transferee computer tapes, records or printouts
\nthat, if they refer to the Pool Receivables, clearly
\nreflect that the Pool Receivables have been sold and are
\nheld by Funding and that a security interest therein is
\nheld by the Lender. We assume that the creditors of
\nAnnTaylor rely substantially upon computer records and
\nappropriate searches reflecting the filings of financing
\nstatements in making credit decisions.<\/p>\n
(g) Posting of Payments. We understand
\n ——————-
\nthat the Servicer posts payments received on Pool Receiv-
\nables to the particular Obligor’s account on or about the
\ndate of receipt. Consequently, on any given day, the
\ntotal amount owed on a particular Pool Receivable may be
\ndetermined from the computer records of the Servicer or
\nits subservicers, if any.<\/p>\n
16. Additional Notice of Sale. UCC-1 financ-
\n ————————-
\ning statements satisfying the requirements of the appli-
\ncable Uniform Commercial Codes will be filed, which will
\nreflect that the Pool Receivables have been sold by
\nAnnTaylor to Funding and that Funding has transferred a
\nsecurity interest therein to the Lender.<\/p>\n
17. Accounting and Tax Treatment. Although
\n —————————-
\nAnnTaylor prepares consolidated financial statements and
\ntax returns that include Funding, the transfer from
\nAnnTaylor to Funding will be treated by AnnTaylor and
\nFunding as a sale for both tax and accounting purposes,
\nas applicable.<\/p>\n
18. Breach of Warranties. In the Purchase
\n ——————–
\nAgreement, there are specified eligibility criteria with
\nrespect to the Pool Receivables and AnnTaylor makes
\nrepresentations and warranties with respect to the Pool
\nReceivables, upon which Funding relies in purchasing the
\nPool Receivables and upon which the Lender relies in
\nloaning funds to Funding secured by the Pool Receivables.
\nSuch eligibility criteria and representations and warran-
\nties include, among other things, information relating to<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 14<\/p>\n
the characteristics of the Pool Receivables, that the
\nPool Receivables comply with law, that the Pool Receiv-
\nables are not subject to liens and other representations
\nand warranties customary for transactions of this type.<\/p>\n
If an officer of AnnTaylor obtains knowledge or
\nreceives notice from Funding or the Administrator that
\nthe eligibility criteria with respect to a Pool Receiv-
\nable has not been met or that there is a breach of any of
\nthe representation or warranty with respect to a Pool
\nReceivable, AnnTaylor is required to pay the Unpaid
\nBalance thereof to Funding and Funding will thereupon
\nreconvey such Pool Receivable to AnnTaylor. The obliga-
\ntion to make payments with respect to noncompliance of
\nthe eligibility criteria or breaches of representations
\nand warranties by AnnTaylor arises only if any such
\neligibility standard or representation or warranty was
\nuntrue at the time of transfer of the applicable Pool
\nReceivable or based upon any action or inaction by
\nAnnTaylor, and not as a result of any subsequent decline
\nin value of such Pool Receivable. Moreover, the eligi-
\nbility criteria and the representations and warranties
\ncontained in the Purchase Agreement reflect practical
\nlimitations on the ability of any prospective purchaser
\nof the Pool Receivables to review fully every Pool Re-
\nceivable prior to purchase of the Pool Receivables, and
\nAnnTaylor’s superior knowledge of, and access to, facts
\nconcerning such Pool Receivables. These eligibility
\ncriteria and representations and warranties do not confer
\nany additional rights on a purchaser or impose any added
\nburden on a seller beyond those applicable under general
\ncontract law, as well as by analogy under Section 2-608
\nof the Uniform Commercial Code, in the rescission of a
\nsale of nonconforming property.<\/p>\n
19. Dilution. As used herein, “Dilution” re-
\n ——–
\nfers to reductions in the Unpaid Balances of Pool Receiv-
\nables attributable to factors such as defective, rejected
\nor returned merchandise by Obligors, other adjustments in
\namounts owed by Obligors, exercises of setoffs by
\nObligors, allowance to Obligors of cash discounts and
\nsimilar items that result in reductions to the Unpaid
\nBalance of the Pool Receivables. AnnTaylor is respon-
\nsible to Funding for Dilution to Pool Receivables sold by
\nit to Funding. If due to Dilution AnnTaylor pays to<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 15<\/p>\n
Funding the Unpaid Balance of any Pool Receivable, Fund-
\ning will reconvey such Pool Receivable to AnnTaylor.<\/p>\n
Although AnnTaylor will be responsible for the
\npayment of Dilutions affecting Pool Receivables sold by
\nit, such obligation should not be viewed as recourse to
\nAnnTaylor and is not inconsistent with the character-
\nization of the related transfer as a sale. Risk of asset
\n“deterioration” due to Dilutions should not be viewed as
\na fundamental attribute of ownership of the Pool Receiv-
\nables, which should properly be transferred to a purport-
\ned buyer of the Pool Receivables in a true sale. This is
\nbecause Dilutions, unlike extraordinary credit losses due
\nto Obligor defaults, are essentially entirely within the
\ncontrol of the seller of the Pool Receivables. Dilutions
\narise due to the reality that although an Obligor’s
\npayment obligation may have been sold, the related seller
\nis the party that maintains an ongoing business relation-
\nship with such customer. Therefore, if the seller, as
\npart of its normal business activities with its custom-
\ners, accepts returns of merchandise, adjusts account
\nbalances, provides discounts as sales or marketing incen-
\ntives or otherwise creates Dilutions, a buyer of the
\nrelated Pool Receivables should not be required to accept
\nthe risk that its purchased assets will disappear due to
\nsuch activities by the seller. On the other hand, the
\nTransactions (as well as comparable securitized transac-
\ntions) recognize that it is necessary to allow the seller
\nof the Pool Receivables to engage in the activities that
\nmay give rise to Dilutions. Therefore, we understand
\nthat virtually all securitized sales of credit-card re-
\nceivables (as well as trade receivables and other types
\nof receivables that are subject to Dilutions) have been
\nstructured to provide, in one form or another, for a full
\ncharge-back to the seller for purchased receivables
\nbalances that disappear due to Dilutions created by the
\nseller. The existence of such provisions in the Purchase
\nAgreement should not be viewed as inconsistent with sale
\ncharacterization.<\/p>\n
20. No Other Agreements. There is not and
\n ——————-
\nwill not be any other agreement between AnnTaylor, Fund-
\ning and the Lender or any of them that supplements or
\notherwise modifies the agreements of AnnTaylor, Funding
\nand the Lender as expressed in the Purchase Agreement,<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 16<\/p>\n
the Receivables Financing Agreement and the agreements
\ndelivered on or prior to the closing date pursuant there-
\nto and specifically referred to therein.<\/p>\n
21. Terms of Documentation. To the extent
\n ———————-
\nthat the terms of the documentation take into consider-
\nation the credit of AnnTaylor, it is the intent of the
\nparties that, because the Transactions are intended to be
\na sale of the Pool Receivables and not a loan secured by
\nPool Receivables, the credit of AnnTaylor is only rele-
\nvant to the extent of its obligations as seller with
\nrespect to Dilutions and with respect to Pool Receivables
\nfor which there has been a breach of a representation or
\nwarranty and to the extent of its servicing responsibili-
\nties.
\n 22. Governing Law. Each of the Purchase
\n ————-
\nAgreement and the Receivables Financing Agreement pro-
\nvides that it is to be construed in accordance with the
\nlaws of the State of New York and that the obligations,
\nrights and remedies of the parties thereto shall be
\ndetermined in accordance with such laws.<\/p>\n
23. Notification to Obligors. The Obligors
\n ————————
\nwill not be notified of the sale of Pool Receivables by
\nAnnTaylor to Funding unless the Administrator exercises
\nits right upon an Event of Default under the Receivables
\nFinancing Agreement. We have been advised that there are
\nvalid business reasons for not notifying the Obligors of
\nthe sale of the Pool Receivables, including that such
\nnotification could confuse some Obligors and could lead
\nto defaults and to increased administrative burdens in
\nservicing the Pool Receivables.<\/p>\n
OPINION<\/p>\n
Based upon the foregoing facts and on such
\ninvestigation of the law as we have deemed pertinent, it
\nis our opinion that under present law:<\/p>\n
(i) the transfer of Pool Re-
\n ceivables under the Purchase Agreement, when
\n all relevant factors are considered as a whole,
\n constitutes the sale of the Pool Receivables
\n from AnnTaylor to Funding; and<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 17<\/p>\n
(ii) in the event that
\n AnnTaylor were to become a debtor under the
\n Bankruptcy Code, the transfer of Pool Receiv-
\n ables under the Purchase Agreement would not,
\n after full consideration of all relevant fac-
\n tors, be properly characterized as a pledge of
\n the Pool Receivables to secure a borrowing by
\n AnnTaylor from Funding, and accordingly, the
\n Pool Receivables and the proceeds thereof would
\n not be part of the estate of AnnTaylor under
\n Section 541 of the Bankruptcy Code in such
\n event, and consequently Section 362 of the
\n Bankruptcy Code would not be applicable to the
\n Pool Receivables and the proceeds thereof.<\/p>\n
In expressing the opinions expressed in para-
\ngraphs (i) and (ii) above, we wish to note that, while we
\nbelieve the opinions are supported by a sound analysis of
\nthe Transactions, there is no reported controlling judi-
\ncial precedent directly on point. We therefore examined
\ndecisions in which certain of the facts and circumstances
\nof the Transactions were present as well as cases dis-
\ncussing more generally whether the transfer of an asset
\nwas a transfer of ownership or a transfer of a limited
\ninterest for the purpose of security. Moreover, the
\nsources we have examined contain certain cases and au-
\nthorities that are arguably inconsistent with the conclu-
\nsions expressed in our opinion. These cases and authori-
\nties are, however, in our opinion distinguishable in the
\ncontext of the Transactions.<\/p>\n
While we believe that courts ultimately look to
\nthe parties’ true intention (as objectively demonstrat-
\ned), the legal structure and characteristics of the
\ntransaction and the economic substance of the transaction
\nto determine whether a transaction constitutes a sale,
\njudicial analysis has typically proceeded on a case-by-
\ncase basis. A court’s determination is usually made on
\nthe basis of an analysis of the facts and circumstances
\nof the particular case, rather than as a result of the
\napplication of consistently applied legal doctrines.
\nExisting reported decisional authority is thus not con-
\nclusive as to the relative weight to be accorded to the
\nfactors present in the Transactions and does not provide
\nconsistently applied general principles or guidelines<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 18<\/p>\n
with which to analyze all of the factors present in the
\nTransactions. There are also facts and circumstances
\npresent in the Transactions that we believe to be rele-
\nvant to our conclusion but that, because of the particu-
\nlar facts at issue in the reported cases, are not gener-
\nally discussed in the reported cases as being material
\nfactors.<\/p>\n
We also note that the holding of one recent
\ncase poses some risk that AnnTaylor would be deemed to
\nretain an interest in the Pool Receivables that would
\nconstitute property of AnnTaylor’s bankruptcy estate
\nunder Section 541 of the Bankruptcy Code in the event of
\nAnnTaylor’s bankruptcy, even though the transfer of the
\nPool Receivables to Funding has the indicia of a true
\nsale. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d
\n ———————————–
\n948 (10th Cir. 1993), cert. denied, ___ U.S. ___, 114 S.
\n ————
\nCt. 554 (1993), the United States Court of Appeals for
\nthe Tenth Circuit held that the assignment of a royalty
\ninterest in proceeds of natural gas constituted the grant
\nof a security interest in an account because under Arti-
\ncle 9 of the Uniform Commercial Code (“Article 9”) the
\ngrant of a security interest in accounts and the sale of
\naccounts are both treated as “security interests” as that
\nterm is defined in the Uniform Commercial Code. Id. at
\n —
\n955 (citing U.C.C. Sec. 9-102(1)(b), 1-201(37) and 9-
\n105(1)). Thus, based on its reading of Article 9, the
\nOctagon Gas court concluded that the debtor retained an
\n– ———–
\ninterest in an account sold by the debtor prior to bank-
\nruptcy, which interest constituted property of the
\ndebtor’s bankruptcy estate.<\/p>\n
We believe that the Octagon Gas decision is
\n ———–
\nwrong to the extent it implies that the applicability of
\nthe provisions of Article 9 should be used to determine
\nthe ownership of accounts or chattel paper. The Octagon
\n ——-
\nGas case fails to recognize that Article 9 treats the
\n– —
\nsale of accounts and chattel paper as secured transac-
\ntions solely for the purpose of applying Article 9’s
\nrules relating to attachment, perfection and priority and
\nshould not be construed as precluding true sales of
\naccounts or chattel paper. See Peter F. Coogan, et al.,
\n —
\nSecured Transactions under the Uniform Commercial Code Sec.
\n– ——————————————————
\n28.03[2], at 28-15 (Matthew Bender 1993) (stating that
\nArticle 9 is “designed to integrate [the] sale of chattel<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 19<\/p>\n
paper into the Article 9 scheme insofar as the rules
\ndealing with attachment, perfection, and priority are
\nconcerned”). Article 9 does not abolish the distinction
\nbetween sales of and liens on accounts for all purposes.
\nSee U.C.C. Sec. 9-502(2). For example, the Official Comment
\n– —
\nto U.C.C. Sec. 9-502 recognizes that there may be a true
\nsale of accounts or chattel paper even if recourse ex-
\nists. In addition, the Octagon Gas decision does not ad-
\n ———–
\ndress other provisions of Article 9, such as Section 9-
\n504(2), that clearly maintain the distinction between a
\nsecured loan and a true sale with respect to accounts and
\nchattel paper. The Octagon Gas decision also appears to
\n ———–
\nconflict with other cases, such as Major’s Furniture Mart
\n ———————-
\nv. Castle Credit Corp., 602 F.2d 538 (3d Cir. 1979), and
\n– ———————-
\nIn re Contractor’s Equipment Supply Co. v. Dewhirst, 861
\n– —————————————————
\nF.2d 241 (9th Cir. 1988).<\/p>\n
If it were asserted that the beneficial inter-
\nest in the Pool Receivables was part of AnnTaylor’s
\nestate in the event that AnnTaylor were to become a
\ndebtor under the Bankruptcy Code, we express no opinion
\nas to how long Funding would be denied possession of the
\nPool Receivables or proceeds in respect thereof in
\nAnnTaylor’s possession before such an assertion is final-
\nly decided on appeal or other review in any bankruptcy
\ncase. We also express no opinion as to whether, in the
\nevent it were asserted that the beneficial interest in
\nthe Pool Receivables and the proceeds in respect thereof
\nwere part of AnnTaylor’s estate in the event AnnTaylor
\nwere a debtor under the Bankruptcy Code, a court would
\npermit AnnTaylor to use any proceeds relating to the Pool
\nReceivables in AnnTaylor’s possession without Funding’s
\nconsent, either before deciding the issue or pending a
\nfinal decision on the merits were a prior decision to be
\nthe subject of an appeal.<\/p>\n
We also express no opinion as to the availabil-
\nity or effect of a preliminary injunction, temporary
\nrestraining order or other such temporary relief pending
\na decision on the merits, or as to the availability of
\nthe remedy of specific performance or other equitable
\nremedies to Persons seeking enforcement of their rights
\nunder the Purchase Agreement.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 20<\/p>\n
To the extent that proceeds of the Pool Receiv-
\nables are in the possession of AnnTaylor at such time as
\nAnnTaylor becomes a debtor under the Bankruptcy Code, the
\nrights of Funding to obtain such proceeds, or the prior-
\nity of a claim to such proceeds as against creditors or a
\ntrustee of AnnTaylor, are subject to Section 9-306 of the
\napplicable Uniform Commercial Code and the provisions of
\nthe Bankruptcy Code, including without limitation Section
\n362 thereof, and we express no opinion herein as to such
\nrights or priority. We note that under the terms of the
\nReceivables Financing Agreement and the Purchase Agree-
\nment, Collections on the Pool Receivables are required to
\nbe directed to a segregated lock-box account maintained
\nin the name of Funding, and that the Lender has the right
\nunder specified conditions to gain control of such lock-
\nbox account.<\/p>\n
This opinion is expressly subject to there
\nbeing no material change in the statutory or decisional
\nlaw, and there being no additional facts of which we are
\nnot aware that would materially affect the validity of
\nthe assumptions set forth herein (and we are not aware of
\nany such additional material facts).<\/p>\n
This opinion is being furnished to you solely
\nfor your benefit. This opinion is not to be used, quot-
\ned, relied upon or otherwise referred to for any other
\npurpose without our prior written permission.<\/p>\n
Very truly yours,<\/p>\n
Exhibit A
\n ———<\/p>\n
OFFICER’S CERTIFICATE
\n AnnTaylor Funding, Inc.<\/p>\n
The undersigned, Bert A. Tieben, hereby certi-
\nfies as follows:<\/p>\n
1. He is the duly elected Vice President of
\nAnnTaylor Funding, Inc. (“Funding”), and is authorized to
\nexecute and deliver this Certificate on behalf of Fund-
\ning.<\/p>\n
2. This Certificate is executed and delivered
\nknowing that it will be relied upon by Skadden, Arps,
\nSlate, Meagher & Flom (the “Law Firm”) in connection with
\na legal opinion (the “Opinion”) to be delivered on the
\ndate hereof by the Law Firm to the persons listed on
\nSchedule I to the Opinion, which Opinion addresses cer-
\ntain “true sale” issues.<\/p>\n
3. The undersigned is familiar with the
\ntransactions and other factual matters described in the
\nOpinion, and has made such investigations and inquiries,
\nincluding, without limitation, of personnel and employees
\nof Funding having familiarity with such transactions and
\nfactual matters, as may be necessary to enable the under-
\nsigned to execute and deliver this Certificate.<\/p>\n
4. The undersigned has reviewed the Opinion
\nand, with respect to the factual assumptions set forth
\nunder “Assumptions of Fact” preceding the discussion in
\nthe Opinion, hereby certifies that (i) each factual
\nstatement contained therein relating to Funding is, to
\nthe best of his knowledge after due inquiry, true and
\ncorrect and does not fail to state a material fact the
\nomission of which makes the statement as it appears
\nincomplete or misleading, (ii) with respect to factual
\nstatements contained therein which relate to parties to
\nthe transactions discussed other than Funding, while the
\nundersigned expressly disclaims any certification hereby
\nas to the truth, correctness or completeness of such
\nother statements, based on the undersigned’s participa-
\ntion in the subject transactions, the undersigned does
\nnot have actual knowledge that the statements contained
\ntherein relating to parties other than Funding are un-
\ntrue, incorrect or incomplete so as to be misleading.<\/p>\n
IN WITNESS WHEREOF, the undersigned has execut-
\ned this Certificate as of the ____ day of January 1994.<\/p>\n
AnnTaylor Funding, Inc.<\/p>\n
————————-
\n Name: Bert A. Tieben
\n Title: Vice President<\/p>\n
Exhibit B
\n ———<\/p>\n
OFFICER’S CERTIFICATE
\n AnnTaylor, Inc.<\/p>\n
The undersigned, Bert A. Tieben, hereby certi-
\nfies as follows:<\/p>\n
1. He is the duly elected Senior Vice Presi-
\ndent of AnnTaylor, Inc. (“AnnTaylor”), and is authorized
\nto execute and deliver this Certificate on behalf of
\nAnnTaylor.<\/p>\n
2. This Certificate is executed and delivered
\nknowing that it will be relied upon by Skadden, Arps,
\nSlate, Meagher & Flom (the “Law Firm”) in connection with
\na legal opinion (the “Opinion”) to be delivered on the
\ndate hereof by the Law Firm to the persons listed on
\nSchedule I to the Opinion, which Opinion addresses cer-
\ntain “true sale” issues.<\/p>\n
3. The undersigned is familiar with the
\ntransactions and other factual matters described in the
\nOpinion, and has made such investigations and inquiries,
\nincluding, without limitation, of personnel and employees
\nof AnnTaylor having familiarity with such transactions
\nand factual matters, as may be necessary to enable the
\nundersigned to execute and deliver this Certificate.<\/p>\n
4. The undersigned has reviewed the Opinion
\nand, with respect to the factual assumptions set forth
\nunder “Assumptions of Fact” preceding the discussion in
\nthe Opinion, hereby certifies that (i) each factual
\nstatement contained therein relating to AnnTaylor is, to
\nthe best of his knowledge after due inquiry, true and
\ncorrect and does not fail to state a material fact the
\nomission of which makes the statement as it appears
\nincomplete or misleading, (ii) with respect to factual
\nstatements contained therein which relate to parties to
\nthe transactions discussed other than AnnTaylor, while
\nthe undersigned expressly disclaims any certification
\nhereby as to the truth, correctness or completeness of
\nsuch other statements, based on the undersigned’s partic-
\nipation in the subject transactions, the undersigned does
\nnot have actual knowledge that the statements contained
\ntherein relating to parties other than AnnTaylor are un-
\ntrue, incorrect or incomplete so as to be misleading.<\/p>\n
IN WITNESS WHEREOF, the undersigned has execut-
\ned this Certificate as of the ____ day of January 1994.<\/p>\n
AnnTaylor, Inc.<\/p>\n
————————-
\n Name: Bert A. Tieben
\n Title: Sr. Vice President<\/p>\n
SCHEDULE I<\/p>\n
Clipper Receivables Corporation
\nP.O. Box 4024
\nBoston, Massachusetts 02101<\/p>\n
State Street Boston Capital Corporation
\n225 Franklin Street
\nBoston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\nFifth Avenue and Wood Street
\nPittsburgh, Pennsylvania 15265<\/p>\n
Moody’s Investors Service
\n99 Church Street
\nNew York, New York 10007<\/p>\n
Standard & Poors Corporation
\n26 Broadway, 15th Floor
\nNew York, New York<\/p>\n
EXHIBIT 5.01(h)(iii)<\/p>\n
January 27, 1994<\/p>\n
Persons Listed on
\nSchedule I Hereto<\/p>\n
Re: Receivables Facility of AnnTaylor, Inc. and
\n AnnTaylor Funding, Inc.
\n ——————————————-<\/p>\n
Ladies and Gentlemen:<\/p>\n
We have acted as special Connecticut counsel to AnnTaylor
\nFunding, Inc., a Delaware corporation (the “Company”), to advise
\nthe Company with respect to the perfection, in Connecticut, of the
\nsecurity interest to be granted by the Company to Clipper
\nReceivables Corporation (the “Lender”) pursuant to the Receivables
\nFinancing agreement, dated as of January 27, 1994 (the “Receivables
\nFinancing Agreement”), among the Company, Clipper Receivables
\nCorporation (the “Lender”), AnnTaylor, Inc. (“AnnTaylor”), as
\nServicer, State Street Boston Capital Corporation (the
\n“Administrator”), and PNC Bank, National Association (the
\n“Relationship Bank”), and certain other agreements, instruments and
\ndocuments related to the Purchase Agreement and the Receivables
\nFinancing Agreement. This opinion is being delivered pursuant to
\nSection 5.01(h)(iii) of the Receivables Financing Agreement.
\nCapitalized terms used herein are not otherwise defined herein
\nshall have the same meanings herein as set forth in Appendix A to
\nthe Receivable Financing Agreement.<\/p>\n
January 27, 1994
\nPage 2<\/p>\n
In our examination we have assumed the genuineness of all
\nsignatures including endorsements, the legal capacity of natural
\npersons, the authenticity of all documents submitted to us as
\noriginals, the conformity to original documents of all documents
\nsubmitted to us as certified or photostatic copies, and the
\nauthenticity of the originals of such copies. As to any facts
\nmaterial to this opinion which we did not independently establish
\nor verify, we have relied upon statements and representations of
\nthe Company and its officers and other representatives and of
\npublic officials.<\/p>\n
In rendering the opinions set forth herein, we have examined
\nand relied on originals or copies of the following:<\/p>\n
(a) the Receivables Financing Agreement;<\/p>\n
(b) signed, unfiled copies of the financing statement
\nunder the Uniform Commercial Code as in effect in the State of
\nConnecticut, naming the Company as debtor and the Lender as the
\nsecured party, which we understand and have assumed will be filed
\nwithin ten days of the grant of a security interest in the Pool
\nReceivables from the Company to the Lender, in the office of the
\nSecretary of the State of the State of Connecticut (the “Filing
\nOffice”) (such financing statement, the “Financing Statement”);<\/p>\n
(c) a search report provided by Lexis Document Services,
\ndated January 19, 1994 and covering the period through December 30,
\n1993 listing financing statements that name the Company as debtor
\nand that are filed in the Filing Office, together with copies of
\nsuch financing statements, a summary of which search report is
\nattached as Exhibit A hereto (the “Search Report”); and<\/p>\n
(d) such other documents as we have deemed necessary or
\nappropriate as a basis for the opinions set forth below.<\/p>\n
Unless otherwise indicated, references in this opinion to the
\n“Connecticut UCC” shall mean the Uniform Commercial Code as in
\neffect on the date hereof in the State of Connecticut.<\/p>\n
Members of our firm are admitted to the bar of the State of
\nConnecticut. We express no opinion as to the laws of any
\njurisdiction other than (i) the laws of the State of Connecticut,
\nand (ii) the federal laws of the United States of America to the
\nextent specifically referred to herein.<\/p>\n
Based upon the foregoing and subject to the limitations,
\nqualifications, exceptions and assumptions set forth herein, we are
\nof the opinion that:<\/p>\n
January 27, 1994
\nPage 3<\/p>\n
1. The Financing Statement is in appropriate form for filing
\nin the Filing Office under the Connecticut UCC.<\/p>\n
2. To the extent that the chief executive office of the
\nCompany is located in the State of Connecticut, the security
\ninterest in favor of the Lender in the portion of the Pool
\nReceivables that constitutes accounts or general intangibles (each
\nas defined in Article 9 of the Connecticut UCC) (the “Article 9
\nFiling Collateral”) will be perfected upon the later of
\n(i) attachment of the security interest and (ii) the filing of the
\nFinancing Statement in the Filing Office. No other security
\ninterest of any other transferee from the Company is equal or prior
\nto the security interest of the Lender in such Article 9 Filing
\nCollateral.<\/p>\n
The opinions expressed herein are subject to the following
\nqualifications, exceptions and limitations:<\/p>\n
(a) we express no opinion with respect to the validity
\nof the security interest of the Lender but have assumed for
\npurposes of the opinions set forth herein that such security
\ninterest is valid under the laws of the State of New York;<\/p>\n
(b) we have assumed that the Article 9 Filing Collateral
\nexists and the Company has sufficient rights in the Article 9
\nFiling Collateral for the security interest of the Lender to
\nattach, and we express no opinion as to the nature or extent of the
\nCompany’s rights in or title to any Article 9 Filing Collateral;<\/p>\n
(c) we call to your attention that Section 552 of the
\nUnited States Bankruptcy Code limits the extent to which property
\nacquired by the debtor after the commencement of a case under the
\nUnited States Bankruptcy Code may be subject to a security interest
\narising from a security agreement entered into by such debtor
\nbefore the commencement of such case;<\/p>\n
(d) we call to your attention that the security interest
\nof the Lender in proceeds, and the perfection of such security
\ninterest, is limited to the extent set forth in Section 9-306 of
\nthe Connecticut UCC and to property of a type subject to the
\nConnecticut UCC;<\/p>\n
(e) we call to your attention that the security interest
\nof the Lender may be subject to the rights of account debtors,
\nclaims and defenses of account debtors and the terms of agreements
\nwith account debtors;<\/p>\n
(f) we express no opinion regarding the security
\ninterest of the Lender in any of the Article 9 Filing Collateral
\nconsisting of claims against any government or governmental agency<\/p>\n
January 27, 1994
\nPage 4<\/p>\n
(including, without limitation, the United States of America or any
\nstate thereof or any agency or department of the United States of
\nAmerica or any state thereof);<\/p>\n
(g) in the case of any account or general intangible
\nwhich is itself secured by other property, we express no opinion
\nwith respect to the rights of the Lender in and to such underlying
\nproperty;<\/p>\n
(h) we have assumed that the chief executive office of
\nthe Company as of the date of filing of the Financing Statement is
\nlocated either in the State of New York or in the State of
\nConnecticut, and we express no opinion with respect to the
\nperfection or priority of the security interest of the Lender in
\nthe Article 9 Filing Collateral to the extent that the chief
\nexecutive office of the Company is located in the State of New York
\nor in any jurisdiction other than the State of Connecticut;<\/p>\n
(i) we call to your attention that the perfection of the
\nsecurity interest of the Lender in Article 9 Filing Collateral may
\nbe governed by laws other than the Connecticut UCC if the chief
\nexecutive office of the Company is or becomes located in a
\njurisdiction other than Connecticut;<\/p>\n
(j) we call to your attention that (i) the perfection of
\nthe security interest of the Lender as to the Article 9 Filing
\nCollateral will be terminated as to any such property acquired by
\nthe Company more than four months after the Company changes its
\nname, identity or corporate structure so as to make the Financing
\nStatement seriously misleading unless new appropriate financing
\nstatements indicating the new name, identity or corporate structure
\nof the Company are properly filed before the expiration of such
\nfour months, and (ii) the Connecticut UCC requires the filing of
\ncontinuation statements within the period of six months prior to
\nthe expiration of five years from the date of the filing of the
\noriginal Financing Statement or the filing of any continuation
\nstatements in order to maintain the effectiveness of the original
\nFinancing Statement;<\/p>\n
(k) we express no opinion as to the priority of the
\nsecurity interest of the Lender in the Article 9 Filing Collateral
\nagainst: (i) any liens, claims or other interests that arise by
\noperation of law and do not require any filing or possession in
\norder to take priority over security interests perfected through
\nthe filing of a financing statement; (ii) any lien, claim or
\nencumbrance in favor of the United States of America or any State,
\nor any agency or instrumentality of either of them or any other
\ngovernmental entity (including, without limitation, federal tax
\nliens, liens arising under the Employee Retirement Income Security
\nAct of 1974, as amended, or claims given priority pursuant to 31<\/p>\n
January 27, 1994
\nPage 5<\/p>\n
U.S.C. Sec. 3713); (iii) a lien creditor who attached or levied prior
\nto the perfection of the security interest of the Lender; (iv) a
\nlien creditor with respect to future advances to the extent set
\nforth in Section 9-301(4) of the Connecticut UCC; (v) another
\nsecured creditor with respect to any future advances to the extent
\nset forth in Section 9-312(7) of the Connecticut UCC; (vi) a
\nsecurity interest perfected under the laws of another jurisdiction
\nto the extent that the Company had its chief executive office in
\nsuch jurisdiction within four months prior to the date of the
\nperfection of the security interest of the Lender; (vii) a security
\ninterest perfected without filing any financing statement pursuant
\nto Section 9-302(1) of the Connecticut UCC; (viii) a security
\ninterest perfected by filing a financing statement naming the
\nCompany as debtor using a trade name, fictitious name or previous
\nname; (ix) the holder of a perfected “purchase money security
\ninterest” as such term is defined in Section 9-107 of the
\nConnecticut UCC; (x) another secured party with a perfected
\nsecurity interest in other property of the Company to the extent
\nthe Pool Receivables are proceeds of such other creditor’s
\ncollateral; (xi) any person who has entered into a subordination or
\nintercreditor agreement with the Lender; (xii) any claim for wages,
\nsalary or other compensation; (xiii) a purchaser of accounts
\npurchased as part of the sale of the business out of which they
\narose; (xiv) an assignment of accounts for purposes of collection
\nonly or a transfer of a single account; (xv) any claim arising out
\nof tort or any surety who is subrogated to the rights of the
\nCompany; or (xvi) the security interest of a creditor who filed a
\nfinancing statement based on a prior or incorrect location of the
\nchief executive office of the Company to the extent such other
\nfinancing statement would be effective under Section 9-401(2) or
\n(3) of the Connecticut UCC; (xvii) a security interest or lien
\nexisting by reason of a security interest in or lien upon such
\ncollateral or upon any goods the sale or disposition of which has
\ngiven rise to such collateral, which security interest or lien was
\ncreated by or levied against any prior owner of any interest in
\nsuch collateral or goods; and<\/p>\n
(l) we have assumed that (i) all relevant financing
\nstatements in which the Company is named as debtor have been
\nproperly filed(except for the Financing Statements), indexed and
\nrecorded in the Filing Office and are identified in the Search
\nReport and (ii) no financing statements naming the Company as
\ndebtor were filed in the filing Office between the effective date
\nof the Search Report and the date of the filing of the Financing
\nStatement in the Filing Office.<\/p>\n
January 27, 1994
\nPage 6<\/p>\n
This opinion is being furnished only to you and is solely for
\nyour benefit and is not to be used, quoted, relied upon or
\notherwise referred to by any other Person or for any other purposes
\nwithout our prior written consent.<\/p>\n
Very truly yours,<\/p>\n
TYLER, COOPER & ALCORN<\/p>\n
By _______________________
\n Joseph C. Lee,
\n A Partner<\/p>\n
January 27, 1994
\nPage 7<\/p>\n
SCHEDULE I
\n ———-<\/p>\n
Clipper Receivables Corporation
\n P.O. Box 4024
\n Boston, Massachusetts 02201<\/p>\n
State Street Boston Capital Corporation
\n 225 Franklin Street
\n Boston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\n Fifth Avenue and Wood Street
\n Pittsburgh, Pennsylvania 15265<\/p>\n
Standard & Poor’s Ratings Group
\n 25 Broadway
\n New York, New York 10004<\/p>\n
Moody’s Investors Service, Inc.
\n 99 Church Street
\n New York, New York 10007<\/p>\n
EXHIBIT 5.01(h)(iv)<\/p>\n
January 27, 1994<\/p>\n
The Persons Listed on
\nSchedule I Hereto<\/p>\n
Re: AnnTaylor, Inc.
\n AnnTaylor Funding, Inc.
\n ———————–<\/p>\n
Ladies and Gentlemen:<\/p>\n
We have acted as special counsel to AnnTaylor,
\nInc., a Delaware corporation (“AnnTaylor”) in connection
\nwith the transactions contemplated by (i) the Receivables
\nFinancing Agreement, dated as of January 27, 1994 (the
\n“Receivables Financing Agreement”) among AnnTaylor Fund-
\ning, Inc., a Delaware corporation (“Funding”), AnnTaylor,
\nas Servicer, Clipper Receivables Corporation (the “Lend-
\ner”), State Street Boston Capital Corporation (the “Ad-
\nministrator”) and PNC Bank, National Association (the
\n“Relationship Bank”) and (ii) the Purchase and Sale
\nAgreement, dated as of January 27, 1994 (the “Purchase
\nAgreement”) between AnnTaylor, as Seller and Funding.
\nCapitalized terms not otherwise defined herein have the
\nmeanings assigned to such terms in Appendix A to the
\nReceivables Financing Agreement or in the Purchase Agree-
\nment. This opinion is being furnished to you pursuant to
\nSection 5.01(h)(iv) of the Receivables Financing Agree-
\nment.<\/p>\n
Pursuant to the Purchase Agreement, AnnTaylor
\nproposes to sell to Funding, and Funding proposes to
\npurchase from AnnTaylor, Receivables and Related Rights.
\nPursuant to the Receivables Financing Agreement, Lender
\nproposes to make Loans to Funding and Funding proposes to
\nissue the Note to the Lender and grant to the Lender a
\nsecurity interest in all of its right, title and interest
\nin, among other things, the Receivables and Related
\nRights to secure, among other things, Funding’s obliga-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 2<\/p>\n
tions to repay the Loan in accordance with the Note and
\nthe Receivables Financing Agreement.<\/p>\n
The relevant transactions are more fully de-
\nscribed under Assumptions of Fact below.<\/p>\n
You have requested our opinion as to whether,
\nin an action brought under Title 11 of the United States
\nCode (the “Bankruptcy Code”) in which AnnTaylor was the
\ndebtor, a creditor or the trustee in bankruptcy of
\nAnnTaylor would have valid legal grounds to have a court
\ndisregard the corporate form so as to cause a substantive
\nconsolidation of the assets and liabilities of AnnTaylor
\nand Funding.<\/p>\n
Members of our firm are admitted to the bar in
\nthe State of New York and we express no opinion as to the
\nlaw of any jurisdiction other than the bankruptcy law of
\nthe United States.<\/p>\n
ASSUMPTIONS OF FACT
\n ——————-<\/p>\n
In rendering our opinion, we have made no inde-
\npendent investigation of the facts referred to herein and
\nhave relied for the purpose of rendering this opinion
\nexclusively on (i) those facts set forth herein which
\nhave been provided to us by AnnTaylor and Funding, as
\nconfirmed in certificates provided to us by AnnTaylor and
\nFunding attached hereto as Exhibits A and B and (ii)
\nthose facts set forth under “Summary of the Transactions”
\nand “Facts and Assumptions” in our opinion to you of even
\ndate herewith addressing certain “true sale” issues, in
\neach case which we assume have been and, except where
\nsuch “Facts and Assumptions” are limited to a particular
\npoint in time, will continue to be true. We understand
\nsuch facts to be as follows:<\/p>\n
Organization. Funding is a limited purpose
\n ————
\ncorporation duly organized and validly existing under the
\nlaws of the State of Delaware.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 3<\/p>\n
Existence. Funding maintains its corporate
\n ———
\nexistence and its good standing under the laws of the
\nState of Delaware.<\/p>\n
Ownership. All of the outstanding common stock
\n ———
\nof Funding is owned by AnnTaylor; the common stock issued
\nto AnnTaylor is the only stock of Funding.<\/p>\n
Limited Activities. The Certificate of Incor-
\n ——————
\nporation (the “Certificate of Incorporation”) of Funding
\nlimits its activities to the following: (a) to purchase
\nor otherwise acquire from AnnTaylor, own, hold, grant
\nsecurity interests in or sell interests in, or interests
\nin pools of, Receivables and Related Rights; (b) to enter
\ninto the Purchase Agreement and to incur intercompany
\nindebtedness to AnnTaylor in connection with the purchase
\nof Receivables and Related Rights; (c) to enter into the
\nReceivables Financing Agreement and transactions contem-
\nplated thereby; (d) to issue and deliver notes as contem-
\nplated by the Receivables Financing Agreement; and (e) to
\nenter into letter of credit agreements, interest rate
\nagreements, spread account agreements, lock-box agree-
\nments, subscription agreements, and similar documents or
\nto engage in other activities incidental to the forego-
\ning.<\/p>\n
Procedures Observed. Funding observes all
\n ——————-
\ncorporate procedures required by its Certificate of
\nIncorporation, its bylaws and the corporation law of the
\nState of Delaware, as well as those required under cove-
\nnants contained in the Receivables Financing Agreement.
\nWithout limiting the foregoing, Funding complies with all
\nrequirements contained in the Certificate of Incorpo-
\nration relating to “Restrictions on Corporate Action” and
\n“Maintenance of Separate Business”.<\/p>\n
Management. The business and affairs of Fund-
\n ———-
\ning will be managed by or under the direction of its
\nBoard of Directors. Funding will at all times ensure
\nthat its Board of Directors duly authorizes all corporate
\nactions requiring Board authorization. When necessary,<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 4<\/p>\n
Funding obtains proper authorization from its stockholder
\nfor corporate action.<\/p>\n
Independence. The Certificate of Incorporation
\n ————
\nrequires that the Board of Directors of Funding shall
\ninclude at least one Independent Director. The Certifi-
\ncate of Incorporation defines an “Independent Director”
\nas an individual who, among other restrictions, (a) is
\nnot and has not been employed by AnnTaylor or any of its
\nsubsidiaries or affiliates as a director, officer or
\nemployee within the five years prior to such appointment,
\n(b) is not, or is not affiliated with a firm that is, a
\nsignificant advisor or consultant to AnnTaylor or any of
\nits subsidiaries or affiliates, a significant customer or
\nsupplier to AnnTaylor or any of its subsidiaries or
\naffiliates, or as to which AnnTaylor or any of its sub-
\nsidiaries or affiliates is a significant customer or
\nsupplier, in each case within the five years prior to
\nsuch appointment, (c) does not have significant personal
\nservices contract(s) with, and is not affiliated with a
\ntax-exempt entity that receives significant contributions
\nfrom, AnnTaylor or any of its subsidiaries or affiliates
\nwithin the five years prior to such appointment, (d) is
\nnot the beneficial owner of stock of AnnTaylor or any
\naffiliate of AnnTaylor, (e) is not an immediate relative
\nof any person described above, and (f) is not a major
\ncreditor of AnnTaylor or any of its subsidiaries or
\naffiliates within the five years prior to such appoint-
\nment.<\/p>\n
Records. Funding maintains separate corporate
\n ——-
\nrecords and books of account from those of AnnTaylor or
\nany other affiliate of AnnTaylor. Funding keeps correct
\nand complete books and records of account and minutes of
\nthe meetings and other proceedings of its stockholder and
\nBoard of Directors. The resolutions, agreements and
\nother instruments underlying the subject transactions
\nwill be continuously maintained as official records by
\nFunding.<\/p>\n
Offices. The Certificate of Incorporation
\n ——-
\nprovides that to the extent Funding’s office is located<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 5<\/p>\n
in the office of AnnTaylor or any affiliate of AnnTaylor,
\nFunding will pay fair market rent for any such office
\nspace and a fair share of any overhead costs.<\/p>\n
Identifiable Assets. The Certificate of Incor-
\n ——————-
\nporation and covenants in the Receivables Financing
\nAgreement require that Funding’s assets are not commin-
\ngled with those of AnnTaylor or any other entity. In
\nconformity with such requirements, Funding’s funds and
\nother assets will be identifiable and will not be commin-
\ngled with those of AnnTaylor, other than in-store collec-
\ntions on the Receivables, which will either be paid to
\nAnnTaylor as the purchase price for new Receivables, or
\nwill be deposited into a bank account of Funding within
\ntwo Business Days. Funding will maintain separate bank
\naccounts and books of account from those of AnnTaylor or
\nany other affiliate of AnnTaylor. Accordingly, the sepa-
\nrate assets and liabilities of Funding are and will
\ncontinue to be readily distinguishable from those of
\nAnnTaylor or any other affiliate of AnnTaylor.<\/p>\n
Capitalization. Prior to the Initial Closing
\n ————–
\nDate, AnnTaylor will initially capitalize Funding with
\none hundred dollars. AnnTaylor will make an additional
\ncapital contribution to Funding in connection with the
\ninitial transfer of Receivables and Related Rights under
\nthe Purchase Agreement. Pursuant to the Purchase Agree-
\nment, on the Initial Closing Date, Funding will pay
\nAnnTaylor the Purchase Price for the purchase to be made
\nin cash in the amount of the proceeds of the Loans made
\nto Funding under the Receivables Financing Agreement. On
\nthe Initial Closing Date, Funding shall issue a subordi-
\nnated promissory note (the “Company Note”) to AnnTaylor.
\nThe principal amount of the Company Note shall vary as
\nprescribed in the Purchase Agreement. At and immediately
\nafter the Initial Closing Date, each of Funding and
\nAnnTaylor will be solvent, will have adequate capital to
\ncarry on its business, and intends to and believes that
\nit will be able to pay its debts as they mature. Neither
\nFunding nor AnnTaylor intends to, or believes that it
\nwill, engage in any business for which its respective
\ncapitalization would not be adequate. None of the trans-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 6<\/p>\n
actions is being entered into with the intent to hinder,
\ndefraud or delay any of the creditors of Funding or
\nAnnTaylor.<\/p>\n
Expenses. The Certificate of Incorporation and
\n ——–
\ncovenants in the Receivables Financing Agreement require
\nFunding to pay from its own funds and assets all obliga-
\ntions and indebtedness incurred by it, other than expens-
\nes relating to the preparation, negotiation, execution
\nand delivery of the Transaction Documents as referred to
\nbelow. Each of Funding and AnnTaylor will continue to
\nprovide for its own operating expenses and liabilities
\nfrom its own funds. General overhead and administrative
\nexpenses of AnnTaylor will not be charged or otherwise
\nallocated to Funding (unless directly attributable to
\nservices provided to or for the account of Funding) and
\nsuch expenses of Funding will not be charged or otherwise
\nallocated to AnnTaylor. Certain of the organizational
\nexpenses of Funding and expenses relating to the prepara-
\ntion, negotiation, execution and delivery of the Transac-
\ntion Documents, however, have been paid by AnnTaylor.<\/p>\n
Conduct. Each of Funding and AnnTaylor con-
\n ——-
\nducts and will continue to conduct its business solely in
\nits own name so as not to mislead others as to the iden-
\ntity of Funding. Without limiting the generality of the
\nforegoing, all oral and written communications, including
\nwithout limitation letters, invoices, purchase orders,
\ncontracts, statements, and applications are made and will
\ncontinue to be made solely in the name of Funding if
\nrelated to Funding, or solely in the name of AnnTaylor if
\nrelated to AnnTaylor. AnnTaylor, as Servicer, is enti-
\ntled to deal with Obligors in its own name, but any funds
\ncollected by it from the Receivables and Related Rights
\nwill be accounted for in accordance with the Receivables
\nFinancing Agreement. Funding and AnnTaylor have and will
\ncontinue to have separate stationery and separate post
\noffice boxes.<\/p>\n
Intercompany Claims. There will be no guaran-
\n ——————-
\ntees made by AnnTaylor with respect to obligations of
\nFunding and there will be no guarantees made by Funding<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 7<\/p>\n
with respect to obligations of AnnTaylor. There will be
\nno intercompany debt between Funding and AnnTaylor other
\nthan in connection with the Company Note. With respect
\nto each of AnnTaylor and Funding, the Company Note will
\nbe (i) entered into in the ordinary course of its respec-
\ntive business; (ii) will be properly documented on its
\nbooks and records; and (iii) will pay a rate of interest
\nconsistent with that which independent entities with the
\nsame or similar bargaining leverage would pay after
\nnegotiating with each other at arm’s length. Further-
\nmore, AnnTaylor is not obligated to advance funds under
\nthe Company Note but may do so pursuant to a capital con-
\ntribution.<\/p>\n
Reliance by Others. Funding acts solely in its
\n ——————
\nname and through its duly authorized officers or agents
\nin the conduct of its businesses. Funding and AnnTaylor
\neach do not and will not: (a) hold itself out as having
\nagreed to pay or become liable for the debts of
\nAnnTaylor, in the case of Funding, or Funding, in the
\ncase of AnnTaylor; (b) fail to correct any known misrep-
\nresentation with respect to the foregoing; (c) operate or
\npurport to operate as an integrated, single economic unit
\nwith respect to each other or in their dealings with any
\nother affiliated or unaffiliated entity; (d) seek or
\nobtain credit or incur any obligation to any third party
\nbased upon the assets of each other or, with respect to
\nFunding, any other affiliated or unaffiliated entity; or
\n(e) induce any such third party to reasonably rely on the
\ncreditworthiness of each other or, with respect to Fund-
\ning, any other affiliated or unaffiliated entity. The
\nLender will have relied on the separate legal existence
\nof Funding in agreeing to make the Loans. The Lender,
\nthe Administrator and the Relationship Bank will have
\nrelied on the separate legal existence of Funding in
\nagreeing to enter into the Receivables Financing Agree-
\nment. The common stock of Funding and the Company Note
\nwill be pledged by AnnTaylor to the agent for the benefit
\nof the lenders under the AnnTaylor Credit Agreement.
\nHowever, the lenders thereunder are not necessarily
\nrelying on the assets of Funding because AnnTaylor is
\nobligated pursuant to documents relating to the AnnTaylor<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 8<\/p>\n
Credit Agreement to pledge, with certain exceptions, all
\nsecurities and instruments of debt owned by AnnTaylor,
\nwhether or not such securities and instruments are issued
\nby subsidiaries of AnnTaylor.<\/p>\n
Arm’s Length. Funding and AnnTaylor maintain
\n ————
\nand will continue to maintain an arm’s length relation-
\nship between Funding and AnnTaylor and between Funding
\nand any affiliates of AnnTaylor. The Purchase Price
\npayable by Funding to AnnTaylor under the Purchase Agree-
\nment is intended to be consistent with the terms that
\nwould be obtained in an arm’s length sale. The
\nServicer’s Fee payable by Funding to AnnTaylor under the
\nReceivables Financing Agreement is intended to be consis-
\ntent with the terms that would be obtained in an arm’s
\nlength sale.<\/p>\n
Disclosure of the Transactions. The annual
\n ——————————
\nfinancial statements of Funding and AnnTaylor will dis-
\nclose the effects of the transactions in accordance with
\ngenerally accepted accounting principles. The transfer
\nof the Receivables and Related Rights by AnnTaylor to
\nFunding pursuant to the Purchase Agreement will be treat-
\ned as a sale by AnnTaylor and a purchase by Funding under
\ngenerally accepted accounting principles. In particular,
\nthe financial statements of Funding and AnnTaylor will
\nclearly indicate their separate existence and will re-
\nflect each of their respective separate assets and lia-
\nbilities. None of such financial statements, nor any
\nconsolidated financial statements for AnnTaylor, will
\nsuggest in any way that the assets of Funding are avail-
\nable to pay the claims of creditors of AnnTaylor or any
\nother entity.<\/p>\n
Fairness of Transactions. The management of
\n ————————
\nAnnTaylor has determined that the organization of Funding
\nby AnnTaylor and the limited purposes of Funding are in
\nthe best interests of AnnTaylor.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 9<\/p>\n
DISCUSSION
\n ———-<\/p>\n
The authority of a bankruptcy court to order
\nsubstantive consolidation lies in its general equitable
\npowers under section 105(a) of the Bankruptcy Code. That
\nsection merely provides that the court may issue orders
\nnecessary to carry out the provisions of the Bankruptcy
\nCode. In re DRW Property Co. 82, 54 B.R. 489, 494
\n ————————-
\n(Bankr. N.D. Tex. 1985). There is no direct statutory
\nauthority or prescribed standards for substantive consol-
\nidation. Instead, judicially developed standards control
\nwhether substantive consolidation should be granted in
\nany given case.<\/p>\n
The fluidity and uncertainty associated with
\nsuch standards has been noted by several courts, but is
\nbest typified by the often-paraphrased comment “[t]hat as
\nto substantive consolidation, precedents are of little
\nvalue, thereby making each analysis on a case by case
\nbasis.” In re Crown Mach. & Welding, Inc., 100 B.R. 25,
\n ———————————
\n27-28 (Bankr. D. Mont. 1989). This ad hoc approach is
\n — —
\nlargely responsible for the unsettled nature of the
\nappropriate standards, relevant factors, the weight to be
\nattached to such factors and the significance of compet-
\ning considerations offered by all persons who object to
\nsubstantive consolidation. Accordingly, this analysis,
\nas well as any other analysis of whether there is a
\nsubstantial risk of substantive consolidation, is subject
\nto the general qualification that there can be no guaran-
\nty as to whether substantive consolidation will be grant-
\ned by a court exercising its discretionary equitable
\nauthority in any given instance.<\/p>\n
The nature and impact of the substantive con-
\nsolidation of affiliated corporate debtors’ estates
\nclosely resembles a corporate merger in which the rights
\nof shareholders and creditors of the merging entities are
\naffected:<\/p>\n
Substantive consolidation usually results in,
\n inter alia, pooling the assets of, and claims
\n —– —-
\n against, the two entities; satisfying liabili-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 10<\/p>\n
ties from the resulting common fund; eliminat-
\n ing inter-company claims; and combining the
\n creditors of the two companies for purposes of
\n voting on reorganization plans.<\/p>\n
In re Augie\/Restivo Baking Co., 860 F.2d 515, 518 (2d
\n– ——————————
\nCir. 1988).<\/p>\n
Certain creditors face a harsh economic result
\nassociated with an involuntary combination of their
\ndebtor’s estate with less solvent estates. For this
\nreason, the Second Circuit noted that “[t]he power to
\nconsolidate should be used sparingly,” Chemical Bank New
\n —————–
\nYork Trust Co. v. Kheel, 369 F.2d 845, 847 (2d Cir.
\n– ———————–
\n1966). Another court concluded that virtually every
\nrequest for substantive consolidation involves harm to
\ncreditors:<\/p>\n
It must be recognized and affirmatively
\n stated that substantive consolidation, in al-
\n most all instances, threatens to prejudice the
\n rights of creditors. . . . This is so because
\n separate debtors will almost always have dif-
\n ferent ratios of assets to liabilities. Thus,
\n creditors of a debtor whose asset-to-liability
\n ratio is higher than that of its affiliated
\n debtor must lose to the extent that the asset-
\n to-liability ratio of the merged estates will
\n be lower.<\/p>\n
In re Snider Bros., 18 B.R. 230, 234 (Bankr. D. Mass.
\n– ——————
\n1982) (citation omitted).<\/p>\n
It should be recognized, however, that recently
\nat least some courts have expressed a greater willingness
\nto consider the appropriateness of substantive consolida-
\ntion when faced with more complex corporate structures.
\nSee, e.g., Eastgroup Properties v. Southern Motel Assoc.,
\n– — —- ———————————————-
\nLtd., 935 F.2d 245 (11th Cir. 1991).
\n– —-<\/p>\n
Thus, courts have stated that substantive con-
\n solidation should be ‘used sparingly.’. . .<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 11<\/p>\n
There is, however, a ‘modern’ or ‘liberal’
\n trend toward allowing substantive consolida-
\n tion, which has its genesis in the increased
\n judicial recognition of the widespread use of
\n interrelated corporate structures by subsidiary
\n corporations operating under a parent entity’s
\n corporate umbrella for tax and business purpos-
\n es.<\/p>\n
935 F.2d at 248-49 (citations omitted).<\/p>\n
The reported decisions under the Bankruptcy Act
\nand cases decided shortly after the enactment of the
\nBankruptcy Code rely principally on the presence or
\nabsence of certain “elements” that are identical or
\nsimilar to factors relevant to “piercing the corporate
\nveil” theories under applicable state law. See, e.g., In
\n — —- —
\nre Vecco Constr. Indus., 4 B.R. 407 (Bankr. E.D. Va.
\n– ———————–
\n1980); In re Gulfco Inv. Corp., 593 F.2d 921 (10th Cir.
\n ———————–
\n1979); In re Food Fair, Inc., 10 B.R. 123 (Bankr.
\n ———————
\nS.D.N.Y. 1981). More recent cases take such factors into
\naccount within the context of a balancing test in which
\nthe interests of parties objecting to substantive consol-
\nidation are considered. To a certain extent, the impact
\nof consolidation on creditors appears to have been given
\na greater degree of significance than mere proof of the
\nsubstantive consolidation “elements.” See, e.g., In re
\n — —- —–
\nSnider Bros., 18 B.R. 230 (Bankr. D. Mass. 1982); In re
\n– ———— —–
\nDRW Property Co. 82, 54 B.R. 489 (Bankr. N.D. Tex. 1985);
\n– ——————-
\nIn re Steury, 94 B.R. 553 (Bankr. N.D. Ind. 1988); In re
\n– ———— —–
\nCrown Mach. & Welding, Inc., 100 B.R. 25 (Bankr. D. Mont.
\n– —————————
\n1989); but cf. In re Gainesville P-H Properties, Inc.,
\n — — ————————————–
\n106 B.R. 304 (Bankr. M.D. Fla. 1989) (relying on alter
\nego factors), aff’d sub nom. Eastgroup Properties v.
\n ————- ———————–
\nSouthern Motel Assoc., Ltd., 935 F.2d 245 (11th Cir.
\n– —————————
\n1991).<\/p>\n
The Second Circuit, in In re Augie\/Restivo
\n ——————-
\nBaking Co., Ltd., 860 F.2d 515 (2d Cir. 1988), reduced
\n– —————-
\nthe laundry list of factors pertinent to the balancing<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 12<\/p>\n
test to two “critical factors,” namely, “whether credi-
\ntors dealt with the entities as a single economic unit
\nand, did not rely on their separate identity in extending
\ncredit, . . . [or] whether the affairs of the debtors are
\nso entangled that consolidation will benefit all credi-
\ntors.” Id. at 518 (citation omitted). Recently, the
\n —
\nEleventh Circuit, in Eastgroup Properties v. Southern
\n ——————————–
\nMotel Assoc., Ltd., 935 F.2d 245 (11th Cir. 1991), viewed
\n– ——————
\nthe frequently cited list of factors as relevant to
\nmaking a prima facie case for consolidation, “as examples
\nof information that may be useful to courts charged with
\ndeciding whether there is substantial identity between
\nthe entities to be consolidated and whether consolidation
\nis necessary to avoid some harm or to realize some bene-
\nfit.” Id. at 250.
\n —<\/p>\n
Irrespective of which variant of the standard
\nfor substantive consolidation is applied, the “elements”
\nenumerated in several cases remain relevant, but not
\nnecessarily dispositive, as to whether substantive con-
\nsolidation should be granted. Two sets of substantive
\nconsolidation elements are often cited. In the cases
\nthat depend primarily on the alter ego analog to substan-
\ntive consolidation, the following factors are cited as
\nrelevant to the issue of whether substantive consolida-
\ntion is justified:<\/p>\n
(1) Parent corporation owns all or a major-
\n ity of the capital stock of the subsid-
\n iary;
\n (2) Parent and subsidiary have common offi-
\n cers and directors;
\n (3) Parent finances subsidiary;
\n (4) Parent is responsible for incorporation
\n of subsidiary;
\n (5) Subsidiary has grossly inadequate capi-
\n tal;
\n (6) Parent pays salaries, expenses or loss-
\n es of subsidiary;<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 13<\/p>\n
(7) Subsidiary has substantially no busi-
\n ness except with parent;
\n (8) Subsidiary has essentially no assets
\n except for those conveyed by parent;
\n (9) Parent refers to subsidiary as depart-
\n ment or division of parent;
\n (10) Directors or officers of subsidiary do
\n not act in interests of subsidiary, but
\n take directions from parent; and
\n (11) Formal legal requirements of the sub-
\n sidiary as a separate and independent
\n corporation are not observed.<\/p>\n
In re Tureaud, 45 B.R. 658, 662 (Bankr. N.D. Okla. 1985),
\n– ————-
\naff’d, 59 B.R. 973 (N.D. Okla. 1986) (citing Fish v.
\n– —– ——-
\nEast, 114 F.2d 177 (10th Cir. 1940) and In re Gulfco Inv.
\n– —- —————–
\nCorp., 593 F.2d 921 (10th Cir. 1979)). A second state-
\n– —–
\nment of substantive consolidation “elements,” which are
\ncited in some of the more recent cases, appears in Vecco
\n —–
\nConstr.:
\n– ——-<\/p>\n
(1) The degree of difficulty in segregating
\n and ascertaining individual assets and
\n liabilities;
\n (2) The presence or absence of consolidated
\n financial statements;
\n (3) The profitability of consolidation at a
\n single physical location;
\n (4) The commingling of assets and business
\n functions;
\n (5) The unity of interests and ownership
\n between the various corporate entities;
\n (6) The existence of parent and inter-cor-
\n porate guarantees on loans; and
\n (7) The transfer of assets without formal
\n observance of corporate formalities.<\/p>\n
Vecco Constr., 4 B.R. at 410.
\n– ————-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 14<\/p>\n
Many of the above factors are present in most
\nbankruptcy cases involving affiliated debtors. For
\nexample, stock ownership, inter-affiliate transfers,
\nincorporation caused by the parent, common directors and
\nofficers, the existence of inter-corporate claims, and
\nconsolidated financial statements or tax returns are all
\ntypical of most affiliated corporations. Accordingly,
\nsuch factors should be afforded less weight than the
\nremaining ones in a court’s determination of whether
\nsubstantive consolidation is appropriate.<\/p>\n
There is no conclusive determination to be
\nreached based on the presence or absence of some or all
\nof the “elements.” It is not, therefore, a foregone
\nconclusion that, if proponents demonstrate that all of
\nthe elements of substantive consolidation are present,
\nsubstantive consolidation should be granted. This is
\nparticularly true under the cases purporting to apply
\nsome form of balancing test (see discussion below of the
\n —
\nbalancing test adopted in In re Snider Bros.). Converse-
\n ——————
\nly, persons who object cannot rely solely upon rebutting
\na majority of the factors to successfully defeat substan-
\ntive consolidation.<\/p>\n
Poor or nonexistent recordkeeping of separate
\nassets (particularly cash and other liquid assets) and
\nliabilities and inter-affiliate transactions, whether by
\ndesign or otherwise, is one of the more common reasons
\nfor imposing substantive consolidation. When the combi-
\nnation of affiliates’ assets, liabilities and business
\naffairs are so “hopelessly entangled” such that segrega-
\ntion is either prohibitively expensive or impossible,
\ncourts exhibit little reluctance in granting substantive
\nconsolidation. However, the degree of entanglement is
\nthe central question to be examined, because the poten-
\ntially prejudicial effect of substantive consolidation
\ncannot be justified based on mere contentions of adminis-
\ntrative convenience.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 15<\/p>\n
The Second Circuit recognized the benefits to
\nbe realized by all creditors upon substantive consolida-
\n —
\ntion of estates whose financial affairs had not been
\nsegregated:<\/p>\n
[I]n the rare case such as this, where the
\n ——————
\n interrelationships of the group are hopelessly
\n obscured and the time and expense necessary
\n even to attempt to unscramble them so substan-
\n tial as to threaten the realization of any net
\n assets for all the creditors, equity is not
\n helpless to reach a rough approximation of
\n justice to some rather than deny any to all.<\/p>\n
Chemical Bank New York Trust Co. v. Kheel, 369 F.2d 845,
\n– —————————————–
\n847 (2d Cir. 1966) (emphasis added). The Second Circuit
\nappears to have established a stringent standard for the
\ndegree to which the debtors’ affairs need to be obscured
\nbefore consolidation is appropriate. In reversing the
\nlower court’s substantive consolidation order, the Second
\nCircuit held:<\/p>\n
Resort to consolidation in such circumstances
\n [involving commingling of assets and business
\n functions], however, should not be Pavlovian.
\n Rather substantive consolidation should be used
\n —————————————-
\n only after it has been determined that all
\n ——————————————
\n creditors will benefit because untangling is
\n ——————————————–
\n either impossible or so costly as to consume
\n ——————————————–
\n the assets. . . . Commingling, therefore, can
\n ———-
\n justify substantive consolidation only where
\n —-
\n “the time and expense necessary even to attempt
\n to unscramble them [is] so substantial as to
\n threaten the realization of any net assets for
\n all the creditors,” . . . or where no accurate
\n identification and allocation of assets is
\n possible. In such circumstances, all creditors
\n are better off with substantive consolidation.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 16<\/p>\n
In re Augie\/Restivo Baking Co., 860 F.2d 515, 519 (2d
\n– ——————————
\nCir. 1988) (emphasis added; citations omitted).<\/p>\n
Kheel and Augie\/Restivo indicate that substan-
\n —– ————-
\ntive consolidation should not be justified merely in
\nterms of the administrative convenience of dealing with
\naffiliated debtors on a consolidated basis, even if the
\nfinancial affairs of the debtors are not easily distin-
\nguishable. In some instances, protection of creditors
\nwhose interests would be adversely and unfairly affected
\nby consolidation predominates over financial entanglement
\nconcerns. See In re Flora Mir Candy Corp., 432 F.2d
\n — —————————
\n1060, 1063 (2d Cir. 1960) (unlikely that any showing of
\naccounting difficulties would justify consolidation when
\nclaims of debentureholders of formerly independent enti-
\nty, whose stock was subsequently transferred, would be
\nextinguished or diluted; no evidence of accounting diffi-
\nculties when financial statements for each debtor had
\nbeen prepared by accountants); but see In re I.R.C.C.,
\n — — —————
\nInc., 105 B.R. 237 (Bankr. S.D.N.Y. 1989) (evidence
\n– —-
\nconsidered by court applying Augie\/Restivo financial
\n ————-
\nentanglement standard consisted primarily of representa-
\ntions by debtor’s counsel and chapter 7 trustee of inade-
\nquate accounting practices, undocumented inter-affiliate
\nloans, commingled bank accounts, common use of assets,
\ncross-funding of expenses and consolidated tax returns).
\nOther cases involving financial entanglement as one of
\nthe factors considered also illustrate some degree of
\nvariation in the proof required to demonstrate that
\nsubstantive consolidation is warranted. Compare In re
\n ——- —–
\nVecco Constr. Indus., 4 B.R. 407, 408-09 (Bankr. E.D. Va.
\n– ——————–
\n1980) (substantive consolidation granted without opposi-
\ntion when debtors had single operating account and con-
\nsolidated financials, had made no attempt to segregate
\nreceivables, disbursements or income, had inaccurately
\nallocated affiliate expenses through inter-company ac-
\ncounts, and had filed bankruptcy schedules on consolidat-
\ned basis), In re Baker & Getty Fin. Serv., 78 B.R. 139,
\n ——————————
\n142 (Bankr. N.D. Ohio 1987) (substantive consolidation<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 17<\/p>\n
ordered when corporate funds were commingled and used for
\nprincipal’s personal purposes, inadequate records of
\ntransfers were made, and corporate entities were alter
\nego of principal who admitted having engaged in Ponzi
\nscheme to defraud investors) and In re Tureaud, 45 B.R.
\n — ————-
\n658, 661 (Bankr. N.D. Okla. 1985), aff’d, 59 B.R. 973
\n —–
\n(N.D. Okla. 1986) (alter ego finding based on majority of
\n“elements” and fraud supported substantive consolidation
\nof nondebtor entities in face of “hopeless” commingling
\nof personal and corporate assets, numerous undocumented
\ninter-corporate transfers, lack of distinction between
\ninter-company transactions despite separateness of books
\nand records, and impossibility of accurately tracing all
\ntransfers) with In re Ford, 54 B.R. 145, 147-48 n.6
\n —- ———-
\n(Bankr. W.D. MD. 1984) (evidence of commingled corporate
\nand personal funds in corporate bank account, common use
\nof funds, and common responsibility for loans insuffi-
\ncient for substantive consolidation; appropriate remedies
\nfor diversion of debtors’ funds for nondebtor uses are
\navoidance actions).<\/p>\n
Strict adherence to maintaining separate books
\nand records, avoiding commingling of assets, and other
\ncorporate policies designed to preserve the separateness
\nof corporate assets and liabilities should make it more
\ndifficult for a court to order substantive consolidation.<\/p>\n
Substantive consolidation may be ordered as a
\nresult of the debtors’ failure to comply with corporate
\nformalities in connection with interaffiliate transfers
\nand third party transactions, directors and shareholders
\nmeetings, representations made to third parties regarding
\ncorporate entities, and any other formal conduct required
\nby corporate law. The failure to observe consistently
\ncorporate formalities is typically given some evidentiary
\nweight in the cases, but usually is not dispositive
\nunless such elements, together with other evidence,
\nsupport a finding of fraudulent or inequitable conduct by
\nthe debtors or their principals. For example, in<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 18<\/p>\n
Tureaud, 45 B.R. at 661, the court found “an almost total
\n– ——-
\ndisregard of the corporate fiction; the corporations are
\na sham — functionally indistinguishable from each other
\nwith commingling of assets and business functions.” The
\ncourt also found that directors and officers of the
\nnondebtor affiliates, which were substantively consoli-
\ndated with the debtor-principal, acted in the interest of
\ntheir principal rather than independently. Some of the
\naffiliates failed to file tax returns and others were
\nsuspended for failure to make requisite corporate fil-
\nings. More significant evidence in Tureaud included the
\n ——-
\ndebtors’ principals’ fraudulent purposes for incorpora-
\ntion (“front to raise money for [principal’s personal]
\npurposes, and to hinder and delay judgment creditors”;
\nid. at 660), and “hopeless commingling” of assets and
\n– —
\nliabilities.<\/p>\n
Under the balancing analysis appearing in a
\nmajority of the more recent decisions, proponents of
\nconsolidation must not only demonstrate the existence of
\nsubstantive consolidation “elements,” including those
\npertaining to corporate formalities, but also submit
\nproof of the harm suffered as a result of the existence
\nof the “elements.” In re Snider Bros., 18 B.R. 230, 238
\n ——————
\n(Bankr. D. Mass. 1982). Although the risks of substan-
\ntive consolidation are reduced if all corporate formali-
\nties are consistently observed, such formalities appear
\nto play a secondary role under this type of analysis. In
\nIn re Donut Queen, Ltd., 41 B.R. 706, 708 (Bankr.
\n– ———————–
\nE.D.N.Y. 1984), a case in which the Snider Bros. balanc-
\n ————
\ning test is applied, the proponents offered evidence of
\nthe debtors’ failure to observe corporate formalities:<\/p>\n
The debtors failed on occasion to observe
\n the formalities of corporate separateness. For
\n example, no corporate resolutions were recorded
\n by Bapajo regarding its guarantor relationship
\n with Donut Queen and Westbury Donuts or its
\n lease arrangement with Donut Queen.<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 19<\/p>\n
Id. The court nonetheless rejected the proponent’s
\n– —
\nargument that the lack of corporate formalities was
\nsufficient basis for granting substantive consolidation:<\/p>\n
The absence of several corporate resolu-
\n tions from the Bapajo corporate records is not
\n a sufficient basis to conclude that Donut Queen
\n and Bapajo failed to observe the formalities of
\n corporate separateness. Earlier cases that
\n have determined consolidation to be warranted
\n have found a more extensive lack of corporate
\n formalities than is indicated by this evidence.
\n . . . In this case, the absence of the corpo-
\n rate resolutions might be indicative of both
\n the corporate informality inherent in the oper-
\n ating of a small corporation and the unity of
\n ownership that exists between the debtors.
\n Without further evidence, this court cannot
\n assume that the articulated failure by these
\n debtors to observe corporate formalities would
\n warrant consolidation.<\/p>\n
Id. at 710 (citations omitted).
\n– —<\/p>\n
Some courts still primarily rely on the alter
\nego or “piercing the corporate veil” doctrine derived
\nfrom state law in the substantive consolidation analysis.
\nSee In re Tureaud, 45 B.R. 658 (Bankr. N.D. Okla. 1985),
\n– — ————-
\naff’d, 59 B.R. 973 (N.D. Okla. 1986); In re 1438 Meridian
\n– —– ——————-
\nPlace, N.W., Inc., 15 B.R. 89 (Bankr. D.C. 1981); In re
\n– —————– —–
\nStop & Go of America, Inc., 49 B.R. 743 (Bankr. D. Mass.
\n– ————————–
\n1985); In re Baker & Getty Fin. Serv., 78 B.R. 139
\n ——————————
\n(Bankr. N.D. Ohio 1987); see also In re S.I. Acquisition,
\n — —- ———————–
\nInc., 58 B.R. 454, 460 n.3 (Bankr. W.D. Tex. 1986), rev’d
\n– —-
\non other grounds, 817 F.2d 1142 (5th Cir. 1987). This
\nline of cases, however, either involves an attempt to
\nconsolidate nondebtor affiliates (see Tureaud and 1438
\n — ——- —-
\nMeridian Place; see also In re DRW Property Co. 82, 54
\n– ————– — —- ————————-
\nB.R. 489 (Bankr. N.D. Tex. 1985) (substantive consolida-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 20<\/p>\n
tion of nondebtor entities denied under Snider Bros.
\n ————
\nbalancing test)) or assertions of inequitable conduct\/
\nfraud on the part of affiliated debtors or their princi-
\npals (see Baker & Getty Fin. Serv. and Stop & Go). These
\n — ———————— ———
\ncases are, therefore, factually distinguishable from
\nother substantive consolidation cases based on the recent
\ntrend in affording greater significance to inter-creditor
\nissues under the balancing test of Snider Bros., as
\n ————
\nadopted in cases such as Eastgroup Properties, or the
\n ——————–
\nnarrow approach of Augie\/Restivo. These alter ego cases
\n ————-
\nrepresent an independent means of accomplishing the
\neffect of substantive consolidation by the application of
\nrecognized remedies under nonbankruptcy law.<\/p>\n
The need to protect interests of creditors
\naffected by substantive consolidation was underscored in
\nFlora Mir Candy Corp., 432 F.2d at 1063 (consolidation
\n– ———————
\ndenied due to resulting unfair treatment of certain
\ncreditors). In recent cases, the substantive consolida-
\ntion “elements” or alter ego liability approaches have
\nbeen modified to incorporate a balancing analysis to
\naddress the potential adverse impact on creditors. The
\nbalancing test shifts the focus from the manner in which
\naffiliated debtors conducted business to the effect of
\nsubstantive consolidation on creditors. Although Snider
\n ——
\nBros. is often cited as the seminal case for requiring a
\n– —–
\nbalancing of the benefits derived from consolidation
\nagainst the harm to some creditors caused thereby, prior
\ncase law established the fundamental premise that the
\nprejudicial impact of the imposition of an equitable
\nremedy must be taken into account. Judge Friendly’s
\nconcurring opinion in Chemical Bank New York Trust Co. v.
\n ———————————–
\nKheel, 369 F.2d 845, 848-49 (2d Cir. 1966), articulated
\n– —–
\nthis fundamental premise:<\/p>\n
I cannot agree that a practice of handling
\n the business of a group of corporations so as
\n to impede or even prevent completely accurate
\n ascertainment of their respective assets and<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 21<\/p>\n
liabilities in their subsequent bankruptcy
\n justifies failure to make every reasonable
\n endeavor to reach the best possible approxima-
\n tion in order to do justice to a creditor who
\n had relied on the credit of one — especially
\n to a creditor who was ignorant of the loose
\n manner in which corporate affairs were being
\n conducted. Equality among creditors who have
\n ———————————
\n lawfully bargained for different treatment is
\n ———————————————
\n not equity, but its opposite. . . .
\n —————————-<\/p>\n
Id. (emphasis added). Other prior cases echoed the
\n– —
\nconcern for creditors prejudiced by substantive consoli-
\ndation and identified considerations that would later
\nappear in the Snider Bros. formulation of the balancing
\n ————
\ntest. See In re Richton Int’l Corp., 12 B.R. 555, 558
\n — ————————-
\n(Bankr. S.D.N.Y. 1981) (after analyzing the Vecco Constr.
\n ————-
\n“elements,” court considered additional element: “sub-
\nstantive consolidation . . . will yield an equitable
\ntreatment of creditors without any undue prejudice to any
\nparticular group”); In re Food Fair, Inc., 10 B.R. 123,
\n ———————
\n127 (Bankr. S.D.N.Y. 1981) (equitable treatment without
\nundue prejudice is key factor).<\/p>\n
The court in Snider Bros. reviewed grounds for
\n ————
\nsubstantive consolidation, including the various formula-
\ntions of the “elements” test appearing in prior deci-
\nsions. The Snider Bros. court’s synthesis of the appro-
\n ————
\npriate test for substantive consolidation focused upon
\nobjecting creditors’ interests instead of “elements” that
\nare largely attributable to the debtors’ pre-petition
\nconduct:<\/p>\n
A review of the case law reveals that
\n equity has provided the remedy of consolidation
\n in those instances where it has been shown that
\n the possibility of economic prejudice which
\n would result from continued separateness out-
\n weighed the minimal prejudice that consolida-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 22<\/p>\n
tion would cause. While several courts have
\n recently attempted to delineate what might be
\n called “the elements of consolidation”, [citing
\n Vecco Constr. and Food Fair], I find that the
\n ————- ———
\n only real criterion is that which I have re-
\n ferred to, namely the economic prejudice of
\n continued debtor separateness versus the eco-
\n nomic prejudice of consolidation. There is no
\n ———–
\n one set of elements, which, if established,
\n ——————————————-
\n will mandate consolidation in every instance.
\n ———————————————-
\n Moreover, the fact that corporate formalities
\n ———————————————
\n may have been ignored, or that different debt-
\n ———————————————-
\n ors are associated in business in some way,
\n ——————————————-
\n does not by itself lead inevitably to the con-
\n ———————————————-
\n clusion that it would be equitable to merge
\n ——————————————-
\n otherwise separate estates.
\n ————————–<\/p>\n
Snider Bros., 18 B.R. at 234 (emphasis added). The court
\n– ————
\narticulated the following balancing test principles:
\n(1) the proponent must demonstrate a “necessity for
\nconsolidation, or a harm to be avoided by use of the
\nequitable remedy of consolidation”; (2) supporting evi-
\ndence must go beyond a mere showing of commingling or
\nunity of interest and must demonstrate the harm caused
\nthereby or prejudice without consolidation; (3) “ele-
\nments” are only one factor in the proof of necessity; and
\n(4) even if the proponent can demonstrate the necessity
\nfor consolidation, objecting creditors possess the de-
\nfense that the benefits of consolidation do not counter-
\nbalance the harm to the objector. Id. at 238.
\n —<\/p>\n
The balancing test formulated in Snider Bros.
\n ————
\nhas been adopted, either expressly (see In re Auto-Train
\n — —————-
\nCorp., 810 F.2d 270, 276 (D.C. Cir. 1987); In re F.A.
\n– —– ———-
\nPotts & Co., 23 B.R. 569, 572 (Bankr. E.D. Pa. 1982); In
\n– ———– —
\nre Lewellyn, 26 B.R. 246, 251 (Bankr. S.D. Iowa 1982); In
\n– ———– —
\nre Donut Queen, Ltd., 41 B.R. 706, 709 (Bankr. E.D.N.Y.
\n– ——————–
\n1984); In re DRW Property Co. 82, 54 B.R. 489, 495
\n ————————-
\n(Bankr. N.D. Tex. 1985); Holywell Corp. v. Bank of New
\n —————————–<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 23<\/p>\n
York, 59 B.R. 340, 347 (S.D. Fla. 1986), appeal dis-
\n– —- ———–
\nmissed, 838 F.2d 1547 (11th Cir.), cert. denied, 488 U.S.
\n– —— ——— ————
\n823 (1988); In re Baker & Getty Fin. Serv., Inc., 78 B.R.
\n ————————————
\n139, 143 (Bankr. N.D. Ohio 1987); In re Steury, 94 B.R.
\n ————
\n553, 554 (Bankr. N.D. Ind. 1988)) or implicitly (see In
\n — —
\nre Luth, 28 B.R. 564, 567 (Bankr. D. Idaho 1983) (citing
\n– ——-
\nSnider Bros. test as another “element”); In re Helms, 48
\n– ———— ———–
\nB.R. 714, 717 (Bankr. D. Conn. 1985) (balancing interests
\nis another important factor); In re N.S. Garrott & Sons,
\n ————————-
\n48 B.R. 13, 18 (Bankr. E.D. Ark. 1984) (adopting Snider
\n ——
\nBros. principles as important factors); In re Silver
\n– —– ————
\nFalls Petroleum Corp., 55 B.R. 495, 498 (Bankr. S.D. Ohio
\n– ———————
\n1985)) by a vast majority of courts.<\/p>\n
Recently, the Eleventh Circuit, in expressly
\nadopting the approach of Snider Bros., as thereafter
\n ————
\naccepted by the D.C. Circuit in In re Auto-train Corp.,
\n ———————-
\nformulated the standard in a slightly different manner:<\/p>\n
The D.C. Circuit has elaborated a stan-
\n dard, which we adopt today, by which to deter-
\n mine whether to grant a motion for substantive
\n consolidation. Under this standard, the propo-
\n nent of substantive consolidation must show
\n that (1) there is substantial identity between
\n the entities to be consolidated; and (2) con-
\n solidation is necessary to avoid some harm or
\n to realize some benefit. . . . When this show-
\n ing is made, a presumption arises ‘that credi-
\n tors have not relied solely on the credit of
\n one of the entities involved.’ . . . Once the
\n proponent has made this prima facie case for
\n consolidation, the burden shifts to an object-
\n ing creditor to show that (1) it has relied on
\n the separate credit of one of the entities to
\n be consolidated; and (2) it will be prejudiced
\n by substantive consolidation. . . . Finally,
\n if an objecting creditor has made this showing,
\n ‘the court may order consolidation only if it<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 24<\/p>\n
determines that the demonstrated benefits of
\n consolidation heavily outweigh the harm.’<\/p>\n
Eastgroup Properties v. Southern Motel Assoc., Ltd., 935
\n– —————————————————
\nF.2d 245, 249 (11th Cir. 1991) (citations omitted).<\/p>\n
The burden of proof is placed on the parties
\nseeking substantive consolidation, Silver Falls Petroleum
\n ———————-
\nCorp., 55 B.R. at 498, irrespective of whether substan-
\n– —–
\ntive consolidation is sought by motion or through a
\nconfirmed plan of reorganization. Id. Moreover, the
\n —
\n“burden of proof for those seeking consolidation is
\nsubstantial.” N.S. Garrott & Sons, 48 B.R. at 18. The
\n ——————-
\ncourt in Snider Bros. required a threshold showing of
\n ————
\nmore than the mere presence of substantive consolidation
\n“elements.” Snider Bros., 18 B.R. at 238; accord In re
\n ———— —— —–
\nCoventry Energy Corp., 5 Bankr. Ct. Dec. 98, 99 (Bankr.
\n– ———————
\nS.D. Ohio 1979). If successful on the issue of necessi-
\nty, the proponents must carry the burden of demonstrating
\nthat the benefits of consolidation outweigh the prejudice
\nto creditors. Id. Finally, the objecting creditors are
\n —
\ncharged with the burden of proof on defenses to consoli-
\ndation, including the issues of creditor reliance and the
\nquestion of whether the benefits of consolidation out-
\nweigh the harm. Id.
\n —<\/p>\n
Notwithstanding the widespread acceptance of
\nthe Snider Bros. balancing analysis, there remain several
\n ————
\nunsettled issues.<\/p>\n
The significance of the presence of the sub-
\nstantive consolidation “elements” is unclear. Snider
\n ——
\nBros. and those cases directly following its balancing
\n– —–
\nstandard tend to relegate proof of the substantive con-
\nsolidation “elements” to a secondary role, i.e., the
\n —-
\n“elements,” in aggregate, may be considered as a single
\nfactor in the balancing analysis. Snider Bros., 18 B.R.
\n ————
\nat 234. However, some courts take the opposite approach
\nby treating the conclusion reached under the balancing<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 25<\/p>\n
test as another, albeit important, “element” in the
\nsubstantive consolidation “elements” analysis followed by
\nVecco Constr. and many of the earlier cases. See, e.g.,
\n– ————- — —-
\nIn re Luth, 28 B.R. 564, 567 (Bankr. D. Idaho 1983)
\n– ———-
\n(citing Snider Bros. test as another “element”).
\n ————
\nAugie\/Restivo represents a third approach that results in
\n– ————-
\nthe reduction of the traditional “elements” to a single
\nsignificant factor, financial entanglement, and applica-
\ntion of the balancing test with emphasis on the reliance
\nof proponents on the consolidated credit of the debtors.
\nFinally, Eastgroup Properties views the elements as
\n ——————–
\nfactually relevant to a determination by the court as to
\nsubstantial identity between the entities and the neces-
\nsity for consolidation. Accordingly, traditional sub-
\nstantive consolidation “elements” analysis retains some
\nvitality under the more recent case law, although the
\nimportance of this analysis is unsettled.<\/p>\n
Snider Bros. compels proponents to prove the
\n ————
\nnecessity of consolidation or the substantial benefits to
\nbe derived therefrom. The determination of substantive
\nconsolidation benefits is, however, dependent on a
\ncourt’s perspective of the type of benefit that is pro-
\nmoted by consolidation. It is unclear under reported
\ndecisions whether the appropriate benefit is
\ndistributional, i.e., reallocation of certain creditors’
\n —-
\nrights to a greater number of other creditors, or a net
\ncollective benefit for all creditors, i.e., substantive
\n — —-
\nconsolidation results in an economic advantage for the
\nconsolidated estates that exceeds the extent of prejudice
\nto certain creditors’ interests. Compare In re I.R.C.C.,
\n ——- —————
\nInc., 105 B.R. 237, 242 (Bankr. S.D.N.Y. 1989) (“The
\n– —-
\ncritical issue is whether the same trustee in bankruptcy
\nof each entity may pool their assets for the benefit of
\n ———-
\nall their creditors collectively, rather than liquidating
\n– ——————————–
\neach debtor separately . . .”; “The trustee’s motion for
\nsubstantive consolidation . . . is made in furtherance of
\nhis duty to ensure the equitable treatment of all credi-
\n ———-
\ntors.”; emphasis added); In re Augie\/Restivo Baking Co.,
\n– —- ——————————-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 26<\/p>\n
Ltd., 860 F.2d 515, 518 (2d Cir. 1988) (purpose of sub-
\n– —-
\nstantive consolidation is equitable treatment of all
\n —
\ncreditors) with In re Baker & Getty Fin. Serv., Inc., 78
\n– ——— —- ————————————
\nB.R. 139, 141 (Bankr. N.D. Ohio 1987) (substantive con-
\nsolidation “to effect a more equitable distribution of
\n ————–
\nproperty among creditors”; emphasis added); Eastgroup
\n ———
\nProperties v. Southern Motel Assoc., Ltd., 935 F.2d 245,
\n– —————————————–
\n250 (11th Cir. 1991) (relevant factor supporting consoli-
\ndation is that “absent substantive consolidation, the
\nmajority of creditors will receive only a small portion
\nof their claims, while the equity interest holders may
\nreceive a substantial distribution”, referring to the
\nfindings made by the bankruptcy court; the court in
\nEastgroup Properties also appears to have viewed the fact
\n– ——————–
\nthat administrative and other priority claimants of one
\nof the estates would receive a larger portion of their
\nclaims, as opposed to pre-petition unsecured creditors of
\nthe other estate, if consolidation were approved as a
\nfactor supporting its decision); In re Luth, 28 B.R. 564,
\n ———-
\n568 (Bankr. D. Idaho 1983) (“The likelihood of creditors
\n[of one of the debtors] receiving a dividend are small or
\nnonexistent should consolidation be denied.”). If
\ndistributional benefits are properly considered under the
\nbalancing test, which seems to be inconsistent with
\nSnider Bros. and certain of its progeny, but which may be
\n– ————
\nviewed as supported by the court’s discussion in
\nEastgroup Properties, the proponent’s burden to demon-
\n– ——————–
\nstrate a substantial justification for consolidation may
\nbe more readily satisfied.<\/p>\n
Another area of uncertainty under the balancing
\ntest is the approach taken by the courts with respect to
\nasserted prejudice to an objecting creditor’s interests
\nor its reliance on the credit of separate debtors. Some
\ncourts apply an objective standard that relates to the
\ndegree of adverse economic impact that would result from
\nconsolidation. Steury, 94 B.R. at 555 (“Before embarking
\n ——
\nupon a broad discussion of the intricacies of bankruptcy
\nlaw, it is appropriate to first consider the relative<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 27<\/p>\n
rights of the debtors and their creditors under state
\nlaw. In this way we will have a standard against which
\n ————————————————-
\nany prejudice, that might befall either of them, can be
\n– ——————————————————-
\nmeasured”; emphasis added). Other courts apply a subjec-
\n– ——–
\ntive standard, which measures prejudice caused by a
\ncreditor’s subjective expectations at the time credit was
\nextended. See Snider Bros., 18 B.R. at 238 (reference to
\n — ————
\nharm to creditor who looked solely to credit of single
\ndebtor); Donut Queen, 41 B.R. at 709 (when creditors
\n ———–
\ntreat their debtor “as a distinct and separate entity,
\nconsolidation would be manifestly prejudicial”); In re
\n —–
\nHelms, 48 B.R. at 717. Some courts seem to apply subjec-
\n– —–
\ntive and objective standards:<\/p>\n
In this case there has been no proof of-
\n fered that any creditor relied on solely one or
\n the other of the entities Tyler seeks to con-
\n solidate. Further, there is no evidence that a
\n ————————————
\n consolidation would tend to improve the finan-
\n ———————————————-
\n cial position of any group of creditors as com-
\n ———————————————–
\n pared with another.
\n ——————<\/p>\n
Lewellyn, 26 B.R. at 252 (emphasis added). This lack of
\n– ——–
\nclarity on the appropriate standard to be applied to
\nobjecting creditors’ principal defense to substantive
\nconsolidation contributes to the unpredictability of
\nwhether substantive consolidation should be granted under
\ncircumstances that may substantially impair the rights of
\nobjectors who cannot demonstrate that they actually
\nrelied exclusively on their debtor’s creditworthiness
\n(e.g., creditors with affiliate guaranties, cross-de-
\n —-
\nfaults and cross-collateralization). The objecting
\ncreditor in Eastgroup Properties, for example, failed in
\n ——————–
\nits attempt to demonstrate adequate reliance on its
\ndebtor, with no suggestion as to what type of proof would
\nhave sufficed.<\/p>\n
While we acknowledge that they have shown that
\n they will be prejudiced by substantive consoli-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 28<\/p>\n
dation, we do not believe that appellants have
\n established that they relied solely on SMA’s
\n ——
\n separate credit in dealing with SMA. Appel-
\n lants point to two pieces of evidence which,
\n they contend, prove that they relied on the
\n separate credit of SMA: (1) . . . both GPH and
\n SMA held themselves out to the public and to
\n their creditors as separate corporations and
\n (2) the fact that Eastgroup pursued a court
\n fight over the identity of the tenant in the
\n lease contracts with Eastgroup . . . . That
\n GPH and SMA may have held themselves out to the
\n public and to their creditors as separate cor-
\n porations does not mean that appellants did not
\n rely on the credit of both corporations. Nor
\n does Eastgroup’s litigations over the identity
\n of its tenant satisfy its burden. That litiga-
\n tion only proves that Eastgroup’s tenant was
\n SMA; it proves nothing about whether Eastgroup
\n relied on SMA’s separate credit in deciding to
\n deal with SMA.<\/p>\n
935 F.2d at 251-52 (emphasis added).<\/p>\n
Based on the facts set forth above, and subject
\nto the discussion contained herein and the reasoned
\nanalysis of analogous case law (although there is no
\nprecedent directly on point), notwithstanding that cer-
\ntain aspects of the law in this area remain unsettled as
\ndiscussed above, in the event that AnnTaylor were to be a
\ndebtor in a case under the Bankruptcy Code, for the
\nreasons, among others, set forth below, it is our opinion
\nthat regardless of which of the approaches or standards
\ndiscussed herein the court would elect to follow, it
\nwould not be a proper exercise by the court of its equi-
\ntable discretion to disregard the separate corporate
\nexistence of Funding so as to order substantive consoli-
\ndation under the Bankruptcy Code of the assets and lia-<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 29<\/p>\n
bilities of Funding with the bankruptcy estate of
\nAnnTaylor.<\/p>\n
First, the financial and business affairs of
\nFunding will be segregated and readily distinguishable
\nfrom those of AnnTaylor. Thus, assets and liabilities of
\nFunding and of AnnTaylor will be ascertainable in bank-
\nruptcy or otherwise so as to preclude valid assertions of
\nfinancial entanglement as support for substantive consol-
\nidation under any of the standards discussed above.<\/p>\n
Second, each of Funding and AnnTaylor will
\nstrictly observe all corporate and other statutory for-
\nmalities. As a result of strict compliance with appro-
\npriate formalities and preservation of all indicia of
\nseparateness, third parties should not reasonably rely on
\nthe assets of Funding to satisfy obligations of
\nAnnTaylor. It should be difficult for any such third
\nparty to persuade a court that substantive consolidation
\nis warranted under the balancing test or substantive
\nconsolidation “elements” approach because of the lack of
\nany actual prejudice to creditors’ interests associated
\nwith the recognition of separate entities.<\/p>\n
Third, the absence of the more egregious “ele-
\nments” discussed above (other than those present in most
\ninstances involving affiliated entities as indicated in
\nthe discussion) which would support a finding that Fund-
\ning is an alter ego or instrumentality of AnnTaylor favor
\ndenial of substantive consolidation. Specifically, (1)
\nFunding will have at least one Independent Director, (2)
\nFunding should not have inadequate capital for its in-
\ntended purposes, (3) Funding will provide for its expens-
\nes on an ongoing basis, and such expenses will not be
\nroutinely paid by AnnTaylor, nor will any losses of
\nFunding be paid by AnnTaylor, (4) by virtue of the trans-
\nactions contemplated by the Receivables Financing Agree-
\nment, Funding will be engaged in meaningful business
\nactivities with third parties other than AnnTaylor, (5)<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 30<\/p>\n
Funding will not be referred to as a division or depart-
\nment of AnnTaylor, (6) the directors and officers of
\nFunding are expected to act in the interests of Funding,
\nand are not expected to act contrary to those interests
\nat the direction of AnnTaylor, (7) as indicated above,
\nall formal legal requirements relating to Funding will be
\nstrictly observed, (8) as indicated above, there should
\nbe no difficulty in segregating and ascertaining respec-
\ntive assets and liabilities, (9) while Funding would be
\nincluded in AnnTaylor’s consolidated financial state-
\nments, such statements will not reflect the assets of
\nFunding as belonging to AnnTaylor, (10) there is no bene-
\nfit to consolidation at a single physical location in the
\ncontext of this arrangement, (11) there is no commingling
\nof business functions among AnnTaylor and Funding — the
\nactivities of Funding are expected to be entirely sepa-
\nrate from whatever business activities AnnTaylor may
\notherwise be engaged in except to the extent that
\nAnnTaylor is involved in the transactions contemplated by
\nthe Receivables Financing Agreement by virtue of acting
\nas Servicer thereunder, and to the extent that such
\ncommingling arises from in-store collections, in the
\nmanner indicated above, (12) there will be no guarantees
\nmade by AnnTaylor with respect to obligations of Funding
\nand there will be no guarantees made by Funding with
\nrespect to obligations of AnnTaylor, and (13) there will
\nbe no transfers of assets, without formal observance of
\ncorporate formalities.<\/p>\n
Fourth, in the case of a court applying some
\nvariation of the balancing test, not only should credi-
\ntors of AnnTaylor be unable to demonstrate any harm to be
\nremedied by substantive consolidation with respect to
\ncreditor reliance and expectations that the assets of
\nFunding would be available to satisfy their claims or
\notherwise served as a basis for extending credit, but
\nfrom a policy perspective there would appear to be no
\nincentive to collapse Funding. Funding was neither
\nestablished for the purpose of perpetrating a fraud or<\/p>\n
The Persons listed on
\nSchedule I hereto
\nJanuary 27, 1994
\nPage 31<\/p>\n
circumventing public policy, nor would the continued
\nrecognition of Funding as an entity distinct from
\nAnnTaylor lead to such a result. Moreover, the Lender,
\nthe Administrator and the Relationship Bank will have
\nrelied on the separate legal existence of Funding, and
\nwould likely be materially harmed by a failure to respect
\nthe separate existence of Funding.<\/p>\n
The foregoing opinion is expressly subject to
\nthere being no material change in the law, and there
\nbeing no additional facts which would materially affect
\nthe validity of the assumptions and conclusions set forth
\nherein or upon which this opinion is based. However, in
\nthe course of our representation of AnnTaylor, we have
\nnot become aware of any additional facts which would
\nmaterially affect the validity of such assumptions and
\nconclusions.<\/p>\n
This opinion is being furnished to you solely
\nfor your benefit is not to be used, quoted, relied upon
\nor otherwise referred to for any other purpose without
\nour express written permission.<\/p>\n
Very truly yours,<\/p>\n
Exhibit A
\n ———<\/p>\n
OFFICER’S CERTIFICATE
\n AnnTaylor Funding, Inc.<\/p>\n
The undersigned, Bert A. Tieben, hereby certi-
\nfies as follows:<\/p>\n
1. He is the duly elected Vice President
\nof AnnTaylor Funding, Inc. (“Funding”), and is authorized
\nto execute and deliver this Certificate on behalf of
\nFunding.<\/p>\n
2. This Certificate is executed and deliv-
\nered knowing that it will be relied upon by Skadden,
\nArps, Slate, Meagher & Flom (the “Law Firm”) in connec-
\ntion with a legal opinion (the “Opinion”) to be delivered
\non the date hereof by the Law Firm to the persons listed
\non Schedule I to the Opinion, which Opinion addresses
\ncertain bankruptcy issues related to substantive consoli-
\ndation and property of the estate of AnnTaylor, Inc.<\/p>\n
3. The undersigned is familiar with the
\ntransactions and other factual matters described in the
\nOpinion, and has made such investigations and inquiries,
\nincluding, without limitation, of personnel and employees
\nof Funding having familiarity with such transactions and
\nfactual matters, as may be necessary to enable the under-
\nsigned to execute and deliver this Certificate.<\/p>\n
4. The undersigned has reviewed the Opin-
\nion and, with respect to the factual assumptions set
\nforth under “Assumptions of Fact” preceding the discus-
\nsion in the Opinion, hereby certifies that (i) each
\nfactual statement contained therein relating to Funding
\nis, to the best of his knowledge after due inquiry, true
\nand correct and does not fail to state a material fact
\nthe omission of which makes the statement as it appears
\nincomplete or misleading, (ii) with respect to factual
\nstatements contained therein which relate to parties to
\nthe transactions discussed other than Funding, while the<\/p>\n
undersigned expressly disclaims any certification hereby
\nas to the truth, correctness or completeness of such
\nother statements, based on the undersigned’s participa-
\ntion in the subject transactions, the undersigned does
\nnot have actual knowledge that the statements contained
\ntherein relating to parties other than Funding are un-
\ntrue, incorrect or incomplete so as to be misleading.<\/p>\n
5. To the best of his knowledge, there are
\nno additional facts which would materially affect the
\ntruth, correctness or completeness of the matters certi-
\nfied herein.<\/p>\n
IN WITNESS WHEREOF, the undersigned has execut-
\ned this Certificate as of the ____ day of January 1994.<\/p>\n
AnnTaylor Funding, Inc.<\/p>\n
————————-
\n Name: Bert A. Tieben
\n Title: Vice President<\/p>\n
Exhibit B
\n ———<\/p>\n
OFFICER’S CERTIFICATE
\n AnnTaylor, Inc.<\/p>\n
The undersigned, Bert A. Tieben, hereby certi-
\nfies as follows:<\/p>\n
1. He is the duly elected Senior Vice
\nPresident of AnnTaylor, Inc. (“AnnTaylor”), and is autho-
\nrized to execute and deliver this Certificate on behalf
\nof AnnTaylor.<\/p>\n
2. This Certificate is executed and deliv-
\nered knowing that it will be relied upon by Skadden,
\nArps, Slate, Meagher & Flom (the “Law Firm”) in connec-
\ntion with a legal opinion (the “Opinion”) to be delivered
\non the date hereof by the Law Firm to the persons listed
\non Schedule I to the Opinion, which Opinion addresses
\ncertain bankruptcy issues related to substantive consoli-
\ndation and property of the estate of AnnTaylor.<\/p>\n
3. The undersigned is familiar with the
\ntransactions and other factual matters described in the
\nOpinion, and has made such investigations and inquiries,
\nincluding, without limitation, of personnel and employees
\nof AnnTaylor having familiarity with such transactions
\nand factual matters, as may be necessary to enable the
\nundersigned to execute and deliver this Certificate.<\/p>\n
4. The undersigned has reviewed the Opin-
\nion and, with respect to the factual assumptions set
\nforth under “Assumptions of Fact” preceding the discus-
\nsion in the Opinion, hereby certifies that (i) each
\nfactual statement contained therein relating to AnnTaylor
\nis, to the best of his knowledge after due inquiry, true
\nand correct and does not fail to state a material fact
\nthe omission of which makes the statement as it appears
\nincomplete or misleading, (ii) with respect to factual
\nstatements contained therein which relate to parties to
\nthe transactions discussed other than AnnTaylor, while
\nthe undersigned expressly disclaims any certification<\/p>\n
hereby as to the truth, correctness or completeness of
\nsuch other statements, based on the undersigned’s partic-
\nipation in the subject transactions, the undersigned does
\nnot have actual knowledge that the statements contained
\ntherein relating to parties other than AnnTaylor are un-
\ntrue, incorrect or incomplete so as to be misleading.<\/p>\n
5. To the best of his knowledge, there are
\nno additional facts which would materially affect the
\ntruth, correctness or completeness of the matters certi-
\nfied herein.<\/p>\n
IN WITNESS WHEREOF, the undersigned has execut-
\ned this Certificate as of the ____ day of January 1994.<\/p>\n
AnnTaylor, Inc.<\/p>\n
————————-
\n Name: Bert A. Tieben
\n Title: Sr. Vice President<\/p>\n
SCHEDULE I<\/p>\n
Clipper Receivables Corporation
\nP.O. Box 4024
\nBoston, Massachusetts 02101<\/p>\n
State Street Boston Capital Corporation
\n225 Franklin Street
\nBoston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\nFifth Avenue and Wood Street
\nPittsburgh, Pennsylvania 15265<\/p>\n
Moody’s Investors Service
\n99 Church Street
\nNew York, New York 10007<\/p>\n
Standard & Poor’s Corporation
\n26 Broadway, 15th Floor
\nNew York, New York 10004<\/p>\n
EXHIBIT 5.01(h)(v)<\/p>\n
January 27, 1994<\/p>\n
Persons Listed on
\nSchedule I Hereto<\/p>\n
Re: Receivables Facility of AnnTaylor, Inc. and
\n AnnTaylor Funding, Inc.
\n ——————————————-<\/p>\n
Ladies and Gentlemen:<\/p>\n
We have acted as special Connecticut counsel to AnnTaylor
\nFunding, Inc., a Delaware corporation (the “Company”), to advise
\nthe Company with respect to the perfection, in Connecticut, of the
\nsecurity interest to be granted by the Company to Clipper
\nReceivables Corporation (the “Lender”) pursuant to the Receivables
\nFinancing agreement, dated as of January 27, 1994 (the “Receivables
\nFinancing Agreement”), among the Company, Clipper Receivables
\nCorporation (the “Lender”), AnnTaylor, Inc. (“AnnTaylor”), as
\nServicer, State Street Boston Capital Corporation (the
\n“Administrator”), and PNC Bank, National Association (the
\n“Relationship Bank”), and certain other agreements, instruments and
\ndocuments related to the Purchase Agreement and the Receivables
\nFinancing Agreement. This opinion is being delivered pursuant to
\nSection 5.01(h)(iii) of the Receivables Financing Agreement.
\nCapitalized terms used herein are not otherwise defined herein
\nshall have the same meanings herein as set forth in Appendix A to
\nthe Receivable Financing Agreement.<\/p>\n
January 27, 1994
\nPage 2<\/p>\n
In our examination we have assumed the genuineness of all
\nsignatures including endorsements, the legal capacity of natural
\npersons, the authenticity of all documents submitted to us as
\noriginals, the conformity to original documents of all documents
\nsubmitted to us as certified or photostatic copies, and the
\nauthenticity of the originals of such copies. As to any facts
\nmaterial to this opinion which we did not independently establish
\nor verify, we have relied upon statements and representations of
\nthe Company and its officers and other representatives and of
\npublic officials.<\/p>\n
In rendering the opinions set forth herein, we have examined
\nand relied on originals or copies of the following:<\/p>\n
(a) the Receivables Financing Agreement;<\/p>\n
(b) signed, unfiled copies of the financing statement
\nunder the Uniform Commercial Code as in effect in the State of
\nConnecticut, naming the Company as debtor and the Lender as the
\nsecured party, which we understand and have assumed will be filed
\nwithin ten days of the grant of a security interest in the Pool
\nReceivables from the Company to the Lender, in the office of the
\nSecretary of the State of the State of Connecticut (the “Filing
\nOffice”) (such financing statement, the “Financing Statement”);<\/p>\n
(c) a search report provided by Lexis Document Services,
\ndated January 19, 1994 and covering the period through December 30,
\n1993 listing financing statements that name the Company as debtor
\nand that are filed in the Filing Office, together with copies of
\nsuch financing statements, a summary of which search report is
\nattached as Exhibit A hereto (the “Search Report”); and<\/p>\n
(d) such other documents as we have deemed necessary or
\nappropriate as a basis for the opinions set forth below.<\/p>\n
Unless otherwise indicated, references in this opinion to the
\n“Connecticut UCC” shall mean the Uniform Commercial Code as in
\neffect on the date hereof in the State of Connecticut.<\/p>\n
Members of our firm are admitted to the bar of the State of
\nConnecticut. We express no opinion as to the laws of any
\njurisdiction other than (i) the laws of the State of Connecticut,
\nand (ii) the federal laws of the United States of America to the
\nextent specifically referred to herein.<\/p>\n
Based upon the foregoing and subject to the limitations,
\nqualifications, exceptions and assumptions set forth herein, we are
\nof the opinion that:<\/p>\n
January 27, 1994
\nPage 3<\/p>\n
1. The Financing Statement is in appropriate form for filing
\nin the Filing Office under the Connecticut UCC.<\/p>\n
2. To the extent that the chief executive office of the
\nCompany is located in the State of Connecticut, the security
\ninterest in favor of the Lender in the portion of the Pool
\nReceivables that constitutes accounts or general intangibles (each
\nas defined in Article 9 of the Connecticut UCC) (the “Article 9
\nFiling Collateral”) will be perfected upon the later of
\n(i) attachment of the security interest and (ii) the filing of the
\nFinancing Statement in the Filing Office. No other security
\ninterest of any other transferee from the Company is equal or prior
\nto the security interest of the Lender in such Article 9 Filing
\nCollateral.<\/p>\n
The opinions expressed herein are subject to the following
\nqualifications, exceptions and limitations:<\/p>\n
(a) we express no opinion with respect to the validity
\nof the security interest of the Lender but have assumed for
\npurposes of the opinions set forth herein that such security
\ninterest is valid under the laws of the State of New York;<\/p>\n
(b) we have assumed that the Article 9 Filing Collateral
\nexists and the Company has sufficient rights in the Article 9
\nFiling Collateral for the security interest of the Lender to
\nattach, and we express no opinion as to the nature or extent of the
\nCompany’s rights in or title to any Article 9 Filing Collateral;<\/p>\n
(c) we call to your attention that Section 552 of the
\nUnited States Bankruptcy Code limits the extent to which property
\nacquired by the debtor after the commencement of a case under the
\nUnited States Bankruptcy Code may be subject to a security interest
\narising from a security agreement entered into by such debtor
\nbefore the commencement of such case;<\/p>\n
(d) we call to your attention that the security interest
\nof the Lender in proceeds, and the perfection of such security
\ninterest, is limited to the extent set forth in Section 9-306 of
\nthe Connecticut UCC and to property of a type subject to the
\nConnecticut UCC;<\/p>\n
(e) we call to your attention that the security interest
\nof the Lender may be subject to the rights of account debtors,
\nclaims and defenses of account debtors and the terms of agreements
\nwith account debtors;<\/p>\n
(f) we express no opinion regarding the security
\ninterest of the Lender in any of the Article 9 Filing Collateral
\nconsisting of claims against any government or governmental agency<\/p>\n
January 27, 1994
\nPage 4<\/p>\n
(including, without limitation, the United States of America or any
\nstate thereof or any agency or department of the United States of
\nAmerica or any state thereof);<\/p>\n
(g) in the case of any account or general intangible
\nwhich is itself secured by other property, we express no opinion
\nwith respect to the rights of the Lender in and to such underlying
\nproperty;<\/p>\n
(h) we have assumed that the chief executive office of
\nthe Company as of the date of filing of the Financing Statement is
\nlocated either in the State of New York or in the State of
\nConnecticut, and we express no opinion with respect to the
\nperfection or priority of the security interest of the Lender in
\nthe Article 9 Filing Collateral to the extent that the chief
\nexecutive office of the Company is located in the State of New York
\nor in any jurisdiction other than the State of Connecticut;<\/p>\n
(i) we call to your attention that the perfection of the
\nsecurity interest of the Lender in Article 9 Filing Collateral may
\nbe governed by laws other than the Connecticut UCC if the chief
\nexecutive office of the Company is or becomes located in a
\njurisdiction other than Connecticut;<\/p>\n
(j) we call to your attention that (i) the perfection of
\nthe security interest of the Lender as to the Article 9 Filing
\nCollateral will be terminated as to any such property acquired by
\nthe Company more than four months after the Company changes its
\nname, identity or corporate structure so as to make the Financing
\nStatement seriously misleading unless new appropriate financing
\nstatements indicating the new name, identity or corporate structure
\nof the Company are properly filed before the expiration of such
\nfour months, and (ii) the Connecticut UCC requires the filing of
\ncontinuation statements within the period of six months prior to
\nthe expiration of five years from the date of the filing of the
\noriginal Financing Statement or the filing of any continuation
\nstatements in order to maintain the effectiveness of the original
\nFinancing Statement;<\/p>\n
(k) we express no opinion as to the priority of the
\nsecurity interest of the Lender in the Article 9 Filing Collateral
\nagainst: (i) any liens, claims or other interests that arise by
\noperation of law and do not require any filing or possession in
\norder to take priority over security interests perfected through
\nthe filing of a financing statement; (ii) any lien, claim or
\nencumbrance in favor of the United States of America or any State,
\nor any agency or instrumentality of either of them or any other
\ngovernmental entity (including, without limitation, federal tax
\nliens, liens arising under the Employee Retirement Income Security
\nAct of 1974, as amended, or claims given priority pursuant to 31<\/p>\n
January 27, 1994
\nPage 5<\/p>\n
U.S.C. Sec. 3713); (iii) a lien creditor who attached or levied prior
\nto the perfection of the security interest of the Lender; (iv) a
\nlien creditor with respect to future advances to the extent set
\nforth in Section 9-301(4) of the Connecticut UCC; (v) another
\nsecured creditor with respect to any future advances to the extent
\nset forth in Section 9-312(7) of the Connecticut UCC; (vi) a
\nsecurity interest perfected under the laws of another jurisdiction
\nto the extent that the Company had its chief executive office in
\nsuch jurisdiction within four months prior to the date of the
\nperfection of the security interest of the Lender; (vii) a security
\ninterest perfected without filing any financing statement pursuant
\nto Section 9-302(1) of the Connecticut UCC; (viii) a security
\ninterest perfected by filing a financing statement naming the
\nCompany as debtor using a trade name, fictitious name or previous
\nname; (ix) the holder of a perfected “purchase money security
\ninterest” as such term is defined in Section 9-107 of the
\nConnecticut UCC; (x) another secured party with a perfected
\nsecurity interest in other property of the Company to the extent
\nthe Pool Receivables are proceeds of such other creditor’s
\ncollateral; (xi) any person who has entered into a subordination or
\nintercreditor agreement with the Lender; (xii) any claim for wages,
\nsalary or other compensation; (xiii) a purchaser of accounts
\npurchased as part of the sale of the business out of which they
\narose; (xiv) an assignment of accounts for purposes of collection
\nonly or a transfer of a single account; (xv) any claim arising out
\nof tort or any surety who is subrogated to the rights of the
\nCompany; or (xvi) the security interest of a creditor who filed a
\nfinancing statement based on a prior or incorrect location of the
\nchief executive office of the Company to the extent such other
\nfinancing statement would be effective under Section 9-401(2) or
\n(3) of the Connecticut UCC; (xvii) a security interest or lien
\nexisting by reason of a security interest in or lien upon such
\ncollateral or upon any goods the sale or disposition of which has
\ngiven rise to such collateral, which security interest or lien was
\ncreated by or levied against any prior owner of any interest in
\nsuch collateral or goods; and<\/p>\n
(l) we have assumed that (i) all relevant financing
\nstatements in which the Company is named as debtor have been
\nproperly filed(except for the Financing Statements), indexed and
\nrecorded in the Filing Office and are identified in the Search
\nReport and (ii) no financing statements naming the Company as
\ndebtor were filed in the filing Office between the effective date
\nof the Search Report and the date of the filing of the Financing
\nStatement in the Filing Office.<\/p>\n
January 27, 1994
\nPage 6<\/p>\n
This opinion is being furnished only to you and is solely for
\nyour benefit and is not to be used, quoted, relied upon or
\notherwise referred to by any other Person or for any other purposes
\nwithout our prior written consent.<\/p>\n
Very truly yours,<\/p>\n
TYLER, COOPER & ALCORN<\/p>\n
By _______________________
\n Joseph C. Lee,
\n A Partner<\/p>\n
January 27, 1994
\nPage 7<\/p>\n
SCHEDULE I
\n ———-<\/p>\n
Clipper Receivables Corporation
\n P.O. Box 4024
\n Boston, Massachusetts 02201<\/p>\n
State Street Boston Capital Corporation
\n 225 Franklin Street
\n Boston, Massachusetts 02110<\/p>\n
PNC Bank, National Association
\n Fifth Avenue and Wood Street
\n Pittsburgh, Pennsylvania 15265<\/p>\n
Standard & Poor’s Ratings Group
\n 25 Broadway
\n New York, New York 10004<\/p>\n
Moody’s Investors Service, Inc.
\n 99 Church Street
\n New York, New York 10007<\/p>\n
SCHEDULE 6.01(n)
\n —————-<\/p>\n
List of Offices Where
\n Records Are Kept
\n ———————<\/p>\n
AnnTaylor Funding, Inc.
\n– ———————–<\/p>\n
Chief place of business and chief executive office:<\/p>\n
414 Chapel Street
\n New Haven, Connecticut 06511<\/p>\n
or<\/p>\n
142 West 57th Street
\n New York, New York 10019<\/p>\n
location of books and records, etc:<\/p>\n
142 West 57th Street
\n New York, New York 10019<\/p>\n
414 Chapel Street
\n New Haven, Connecticut 06511<\/p>\n
SCHEDULE 6.01(o)
\n —————-<\/p>\n
List of Lock-Box Banks
\n ———————-<\/p>\n
AmSouth (Bank) N.A.
\n1900 5th Avenue North
\nBirmingham, Alabama 35203
\nAccount Number: 55976026<\/p>\n
2<\/p>\n
SCHEDULE 6.01(p)-1<\/p>\n
ANN TAYLOR
\n Credit Card Application<\/p>\n
ANN TAYLOR CREDIT CARD APPLICATION
\n ———————–<\/p>\n
FOR STORE USE ONLY<\/p>\n
STORE EMPLOYEE NO WEEKLY SEMI-MO
\n ———- ———- —– —–
\n CHECK BOX FOR INSTANT CREDIT ACCOUNT NUMBER
\n– — —————–<\/p>\n
– —————————————————————–<\/p>\n
INSTRUCTIONS TO APPLICANT: 1. If you are applying for an
\nindividual account and relying on your own income or assets for
\nrepayment of the credit requested, do not complete the shaded
\nsection. 2. If you are applying for a joint account, complete
\nboth sections of application; if joint applicant is not a spouse,
\nboth applicants must sign the Retail Installment Credit Agreement
\nin the place provided below. 3. If you are applying for an
\nindividual account but are relying on income from alimony, child
\nsupport or separate maintenance for repayment of the credit
\nrequested, complete both sections, providing information about
\nthe person on whose alimony, support or maintenance payment you
\nare relying. 4. Alimony, child support or separate maintenance
\nneed not be revealed under “Other Income” if you do not wish to
\nhave it considered as a basis for repaying this obligation.<\/p>\n
– ——————————————————————<\/p>\n
TYPE OF CREDIT CARD ACCOUNT REQUESTED – CHECK ONE
\nINDIVIDUAL ACCOUNT in one name and based solely on your own
\ncredit worthiness. Applicant if married, may apply for an
\nIndividual Account.<\/p>\n
JOINT ACCOUNT is based on credit worthiness of both Applicant and
\nCo-applicant. Both will be mutually liable and responsible for
\npayments.<\/p>\n
COMPLETE FOR APPLICANT
\n ———————-<\/p>\n
LAST NAME FIRST, INITIAL DATE OF BIRTH
\n \/ \/
\n– —————————————————————–
\nSOCIAL SECURITY HOME TELEPHONE
\n ( )
\n– —————————————————————–
\nPRESENT ADDRESS (STREET AND NUMBER) CITY STATE ZIP<\/p>\n
– —————————————————————–
\n OWN RENT OTHER YRS MOS
\n– —- —- —- —– —–
\nPREVIOUS ADDRESS (IF PRESENT IS LESS THAN THREE YEARS)<\/p>\n
– —————————————————————–
\nCITY STATE ZIP
\n YRS MOS
\n– ——————————————– —- —-
\nAPPLICANT’S EMPLOYER<\/p>\n
– —————————————————————–
\nANNUAL SALARY UNDER $15,000 15,000 – 24,999
\n —- —-
\n 25,000 – 34,999 35,000 – 49,999
\n —- —-
\n 50,000 – 74,999 75,000 – ABOVE
\n —- —-<\/p>\n
BUSINESS ADDRESS POSITION YRS MOS<\/p>\n
– ————————— ——————— —- —-
\nBUSINESS TELEPHONE IF SELF EMPLOYED NAME OF BUSINESS
\n( )
\n– ——————– —————————————-
\nTYPE OF BUSINESS BUSINESS BANK REFERENCE<\/p>\n
– ——————————- ——————————
\nPREVIOUS EMPLOYER BUSINESS ADDRESS<\/p>\n
– ——————————- ——————————
\nPOSITION # YRS # MOS
\n ———————————– —- —-
\nIF FULL TIME COLLEGE STUDENT, LIST SCHOOL<\/p>\n
– —————————————————————–
\nSENIOR OR GRADUATE STUDENT YES NO
\n —- —-
\nSOURCE AND AMOUNT OF OTHER INCOME (SEE INSTRUCTIONS #4 ABOVE)<\/p>\n
– —————————————————————–
\nCHARGE REFERENCES: FIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nFIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nFIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nIF YOUR CREDIT REFERENCES CAN BE VERIFIED IN ANOTHER NAME, PRINT
\nTHAT NAME HERE
\n ————————————————–
\nNAME AND ADDRESS OF NEAREST RELATIVE NOT LIVING WITH YOU<\/p>\n
– —————————————————————–
\nTELEPHONE ( )
\n( )
\n– —————————-<\/p>\n
COMPLETE FOR SPOUSE OR OTHER CO-APPLICANT
\n —————————————–<\/p>\n
CO-APPLICANT NAME RELATIONSHIP TO APPLICANT<\/p>\n
– ——————————- ——————————
\nDATE OF BIRTH SOCIAL SECURITY HOME TELEPHONE
\n \/ \/ ( )
\n– —————— ———————— ——————-
\nPRESENT ADDRESS (STREET AND NUMBER) CITY STATE ZIP<\/p>\n
– —————————————————————–
\n OWN RENT OTHER YRS MOS
\n– —- —- —- —– —–
\nC0-APPLICANT’S EMPLOYER<\/p>\n
– —————————————————————–
\nANNUAL SALARY UNDER $15,000 15,000 – 24,999
\n —- —-
\n 25,000 – 34,999 35,000 – 49,999
\n —- —-
\n 50,000 – 74,999 75,000 – ABOVE
\n —- —-
\nBUSINESS ADDRESS POSITION YRS MOS<\/p>\n
– ————————— ——————— —- —-
\nBUSINESS TELEPHONE IF SELF EMPLOYED NAME OF BUSINESS
\n( )
\n– ——————– —————————————-
\nTYPE OF BUSINESS BUSINESS BANK REFERENCE<\/p>\n
– ——————————- ——————————
\nPREVIOUS EMPLOYER BUSINESS ADDRESS<\/p>\n
– ——————————- ——————————
\nPOSITION # YRS # MOS
\n ———————————– —- —-
\nIF FULL TIME STUDENT, LIST SCHOOL<\/p>\n
– —————————————————————–
\nSENIOR OR GRADUATE STUDENT YES NO
\n —- —-<\/p>\n
SOURCE AND AMOUNT OF OTHER INCOME (SEE INSTRUCTIONS #4 ABOVE)<\/p>\n
– —————————————————————–
\nCHARGE REFERENCES: FIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nFIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nFIRM NAME ACCOUNT NUMBER<\/p>\n
– —————————————– ——————–
\nIF YOUR CREDIT REFERENCES CAN BE VERIFIED IN ANOTHER NAME, PRINT
\nTHAT NAME HERE
\n ————————————————–<\/p>\n
ADDITIONAL CREDIT CARD FOR AUTHORIZED USER (OTHER THAN CO-
\nAPPLICANT)<\/p>\n
– —————————————————————–
\nLAST NAME FIRST, INITIAL<\/p>\n
– —————————————————————–
\n=================================================================<\/p>\n
TO FIND OUT ABOUT CHANGES IN THE INFORMATION IN THIS APPLICATION,
\nWRITE TO US AT P.O. BOX 1304, NEW HAVEN, CONNECTICUT 06505.<\/p>\n
CALIFORNIA RESIDENTS: After credit approval each applicant shall
\nhave the right to use this account to the extent of any credit
\nlimit set by the creditor and each applicant may be liable for
\nall amounts of credit extended under this account to any joint
\napplicant.
\nNOTICE TO OHIO RESIDENTS ONLY: THE OHIO LAWS AGAINST
\nDISCRIMINATION REQUIRE THAT ALL CREDITORS MAKE CREDIT EQUALLY
\nAVAILABLE TO ALL CREDIT WORTHY CUSTOMERS AND THAT CREDIT
\nREPORTING AGENCIES MAINTAIN SEPARATE CREDIT HISTORIES ON EACH
\nINDIVIDUAL UPON REQUEST. THE OHIO CIVIL RIGHTS COMMISSION
\nADMINISTERS COMPLIANCE WITH THIS LAW.<\/p>\n
MARRIED WISCONSIN RESIDENTS ONLY: No provision of any marital
\nproperty agreement, unilateral statement or court decree,
\napplying to marital property will adversely affect our interests
\nunless we are furnished with a copy of the agreement, statement
\nor decree or we have actual knowledge of its terms before credit
\nis granted or the account is opened. In addition, we are
\nrequired to ask you to insert the name and address of your spouse
\nhere.<\/p>\n
– ——————————————————————
\nSo that we can provide your spouse with a disclosure required
\nunder Wisconsin law.<\/p>\n
BEFORE SIGNING BELOW, I HAVE READ THE RETAIL INSTALLMENT CREDIT
\nAGREEMENT\/CREDIT SALE CONTRACT, THE TERMS OF WHICH APPEAR ON THE
\nREVERSE SIDE AND ARE INCORPORATED HEREIN BY REFERENCE. I
\nACKNOWLEDGE RECEIPT OF A COPY OF THE RETAIL INSTALLMENT CREDIT
\nAGREEMENT\/CREDIT SALE CONTRACT.<\/p>\n
– ———————– ——– ———————– —–
\nBUYER’S SIGNATURE DATE CO-BUYER’S CO-SIGNATURE DATE<\/p>\n
ANN TAYLOR RETAIL INSTALLMENT CREDIT
\nAGREEMENT CREDIT SALE CONTRACT
\n– ————————————<\/p>\n
“You” and “your” refer to each person to whom a credit card is
\nissued or who is authorized to use it, or who signs this
\nAgreement, “we”, “us” and “our” refer to Ann Taylor, 414 Chapel
\nSt. New Haven, CT 06511. You agree to pay for all purchases
\ncharged by you according to the following terms:<\/p>\n
1. COST OF CREDIT: Finance charge will be in amounts and at rates
\nnot in excess of those permitted by law and will be assessed on
\nthe outstanding balance(s) from month to month. There is never a
\nfinance charge in a monthly billing period (a) in which there is
\nno beginning balance (“Previous Balance”) or (b) during which
\n“Payments” and “Credits” equal or exceed the “Previous Balance.”
\nYou will avoid a finance charge if you pay the full amount of the
\n“New Balance” shown on your monthly billing statement within 27
\ndays after the billing date shown on that statement. If you do
\nnot, you agree to pay a finance charge, computed by applying a
\nmonthly Periodic Rate of 1.75% (ANNUAL PERCENTAGE RATE 21%) to
\nthe entire Average Daily Balance, with the following exceptions:<\/p>\n
_________________________________________________________________
\n ANNUAL
\n Residents of: Periodic Rate PERCENTAGE RATE
\n_________________________________________________________________<\/p>\n
AK 1.50% up to $1,000.00 18.00%
\n .660% over $1,000.00 8.00%
\n_________________________________________________________________<\/p>\n
AL 1.75% up to $750.00 21.00%
\n 1.50% over $750.00 18.00%
\n_________________________________________________________________<\/p>\n
AR .660% 8.00%
\n_________________________________________________________________<\/p>\n
CA, IA 1.63% 19.8%
\n_________________________________________________________________<\/p>\n
MI 1.70% 20.40%
\n_________________________________________________________________<\/p>\n
NE 1.75% up to $500.00 21.00%
\n 1.50% over $500.00 18.00%
\n_________________________________________________________________<\/p>\n
CT, DC, FL, HI, KS,
\nLA, MA, ME, MN, MO,
\nNC, MD, PA, RI, TX,
\nVA, WA, WI, WV, 1.50% 18.00%
\n_________________________________________________________________<\/p>\n
There is a minimum FINANCE CHARGE OF $.50 in any billing period
\nin which the finance charge as figured above would be less than
\n$.50, except there is no minimum FINANCE CHARGE in AR, CT, DC,
\nHI, MD, NC, ND, NE and RI.<\/p>\n
2. BALANCE METHOD FOR COMPUTING FINANCE CHARGE: We figure the
\nfinance charge on your account by applying the Periodic Rate to
\nthe “average daily balance” of your account. To get the “average
\ndaily balance” we take the beginning balance of your account each
\nday, add any new purchases (current month’s purchases are not
\nincluded for MA, ME, MN, MT, NM and RI residents) and subtract
\nany payments or credits and any returned check fee and any unpaid
\nfinance charge. This gives us the daily balance. Then, we add
\nup all the daily balances for the billing cycle and divide the
\ntotal by the number of days in the billing cycle. This gives us
\nthe “average daily balance”.<\/p>\n
3. MINIMUM PAYMENT: Each month you agree to make a minimum
\npayment of at least 1\/5 of the “New Balance” shown on your bill,
\nbut not less than $20 (or your entire “New Balance” if it is less
\nthan $20) and any past due amount. At any time you may pay more
\nthan the minimum amount due, or you may pay the full unpaid
\nbalance.<\/p>\n
4. DEFAULT: If you fail to make any payment as agreed, or if
\nyou file for bankruptcy, we have the right to demand payment of
\nthe full unpaid balance on your account, subject to any right you
\nmay have to receive notice of and to cure your default (except in
\nWI you will not be in default until you fail to make a minimum
\npayment on two occasions within a 12-month period). If your
\naccount is referred for collection to an attorney who is not our
\nsalaried employee, you agree to pay a reasonable attorney’s fee
\nof 20% of the balance owed (15% of the balance owed in MT and
\nSC), or such lesser amount that is permitted by law, and any
\ncourt costs. No attorney’s fees will be imposed in AL (when the
\nunpaid balance is under $300), IA, KS, ME, NE, OH, or WI.<\/p>\n
5. RETURNED CHECK FEE: If any check sent to us in payment on
\nyour account is returned to us unpaid by the bank, we may charge
\nyou a reasonable processing fee of $15 ($10 in AZ, AR, FL, ID,
\nIL, IA,KS, MD, MS, ND, NY, OK, WI; 5% of the check up to $15 in
\nLA; $5 in CA and VT) to cover our collection costs, or such
\nlesser amount as may be authorized by law, and you agree that we
\nmay add such fee to the balance due in your account. This fee is
\nnot imposed if you live in AK, DE, ME, MA, MO, NE, NJ, OH, OR,
\nPA, WV or WY.<\/p>\n
6. CANCELLING OR LIMITING CREDIT: We have the right to cancel
\nor limit your credit at any time. Any credit card issued under
\nthis Agreement remains our property, and you agree to return it
\nto us upon request.<\/p>\n
7. CHANGE IN THIS AGREEMENT: We have the right to change any
\nterm in this Agreement at any time by giving you notice of the<\/p>\n
intended change or as otherwise permitted by law. If you use
\nthis account after the effective date of the change, you will
\nhave agreed to the new terms, and to the extent permitted by law,
\nat our option we may apply any new terms to your entire account
\nbalance. If you do not agree to the change, you will return the
\ncredit card and pay the full unpaid balance under the original
\nAgreement.<\/p>\n
8. CREDIT INVESTIGATION: You give us permission to obtain a
\ncredit report in connection with this application or in
\nconnection with an update, renewal or extension of credit. Upon
\nyour request, you will be informed whether such a report was
\nrequested and, if it was, you will be told the name and address
\nof any consumer reporting agency that furnished such a report.
\nYou authorize us to investigate your credit standing by obtaining
\ncredit reports and by making direct inquiries of businesses where
\nyou have accounts or where you work, and also to furnish
\ninformation concerning your performance under this account to
\nconsumer reporting agencies and others who may properly receive
\nthat information.<\/p>\n
9. BILLING INQUIRIES: See the bottom of this Agreement for
\nimportant information regarding your rights to dispute billing
\nerrors.<\/p>\n
10. WHAT LAW APPLIES: This Agreement will be governed by the
\nlaws of your state of residence. Your state of residence will be
\ndetermined by the address to which we mail your monthly
\nstatement. If you move, you agree to promptly notify us in
\nwriting, and thereafter your entire account balance will be
\nsubject to the terms applicable to your new state of residence.
\nMARYLAND RESIDENTS: Seller elects to be governed by Title 12,
\nSubtitle 9 of the Maryland Commercial Law Article.
\nNOTICE TO TEXAS RESIDENTS: To contact Ann Taylor about this
\naccount call 1-800-999-4554. This contract is subject in whole
\nor in part to Texas Law which is enforced by the Consumer Credit
\nCommissioner, 2601 North Lamar Boulevard, Austin, TX 78705-4207.
\nPhone (512) 479-1285, 1-800-538-1579. Contact the commissioner
\nrelative to any inquiries or complaints.<\/p>\n
NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT
\nTO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST
\nTHE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH
\nTHE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT
\nEXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.<\/p>\n
NOTICE TO THE BUYER: 1. DO NOT SIGN THIS CREDIT AGREEMENT BEFORE
\nYOU READ IT OR IF IT CONTAINS ANY BLANK SPACE. 2. YOU ARE
\nENTITLED TO A COMPLETELY FILLED IN COPY OF THIS CREDIT AGREEMENT.
\n3. YOU MAY AT ANY TIME PAY THE TOTAL BALANCE OUTSTANDING UNDER
\nTHIS AGREEMENT. 4. KEEP THIS AGREEMENT TO PROTECT YOUR LEGAL
\nRIGHTS. HI RESIDENTS: THIS CONTRACT IS COVERED BY HAWAII’S
\nCREDIT SALE LAW, AND YOU HAVE THE RIGHTS OF A BUYER UNDER THAT
\nLAW. YOU ALSO HAVE RIGHTS UNDER OTHER STATE AND FEDERAL LAWS.<\/p>\n
ADDITIONAL NOTICE FOR MA RESIDENTS: YOU MAY CANCEL A PURCHASE
\nUNDER THIS AGREEMENT IF IT HAS BEEN SIGNED BY A PARTY THERETO AT
\nA PLACE OTHER THAN THE ADDRESS OF THE SELLER WHICH MAY BE HIS
\nMAIN OFFICE OR BRANCH THEREOF; PROVIDED, YOU NOTIFY THE SELLER IN
\nWRITING AT HIS MAIN OFFICE OR BRANCH BY ORDINARY MAIL POSTED, BY
\nTELEGRAM SENT OR BY DELIVERY, NOT LATER THAN MIDNIGHT OF THE
\nTHIRD BUSINESS DAY FOLLOWING A PURCHASE UNDER THIS AGREEMENT.<\/p>\n
YOUR BILLING RIGHTS
\n– ——————-<\/p>\n
THIS NOTICE CONTAINS IMPORTANT INFORMATION ABOUT YOUR RIGHTS AND
\nOUR RESPONSIBILITIES UNDER THE FAIR CREDIT BILLING ACT. NOTIFY
\nUS IN CASE OF ERRORS OR QUESTIONS ABOUT YOUR BILL. If you think
\nyour bill is wrong, or if you need more information about a
\ntransaction on your bill, write to us on a separate sheet at Ann
\nTaylor – Bill Adjustment Department, P.O. Box 1304, New Haven, CT
\n06505. Write to us as soon as possible. We must hear from you
\nno later than 60 days after we sent you this first bill on which
\nthe error or problem appeared. You can telephone us, but doing
\nso will not preserve your rights. IN YOUR LETTER, GIVE US THE
\nFOLLOWING INFORMATION: Your name and account number, the dollar
\namount of the suspected error; describe the error and explain,
\nif you can, why you believe there is an error. If you need more
\ninformation, describe the item you are not sure about.<\/p>\n
YOUR RIGHTS AND OUR RESPONSIBILITIES AFTER WE RECEIVE YOUR
\nWRITTEN NOTICE: We must acknowledge your letter within 30 days,
\nunless we have corrected the error by then. Within 90 days, we
\nmust either correct the error or explain why we believe the bill
\nwas correct. After we receive your letter, we cannot try to
\ncollect any amount you question, or report you as delinquent. We
\ncan continue to bill you for the amount you question, including
\nfinance charges, and we can apply any unpaid amount against your
\ncredit limit. You do not have to pay any questioned amount while
\nwe are investigating, but you are still obligated to pay the
\nparts of your bill that are not in question. If we find we made
\na mistake on your bill, you will not have to pay any finance
\ncharges related to any questioned amount. If we didn’t make a
\nmistake, you may have to pay finance charges, and you will have
\nto make up any missed payments on the questioned amount. In
\neither case, we will send you a statement of the amount you owe
\nand the date that it is due. If you fail to pay the amount we
\nthink you owe, we may report you as delinquent. However, if our
\nexplanation does not satisfy you and you write to us within ten
\ndays telling us that you still refuse to pay, we must tell anyone
\nwe report you to that you have a question about your bill. And,
\nwe must tell you the name of anyone we reported you to. We must
\ntell anyone we report you to that the matter has been settled
\nbetween us when it finally is. If we don’t follow these rules,
\nwe can’t collect the first $50 of the questioned amount, even if
\nyour bill was correct. SPECIAL RULE FOR CREDIT CARD PURCHASES.
\nIf you have a problem with the quality of property or services
\nthat you purchased with a credit card, and you have tried in good
\nfaith to correct the problem with us, you may have the right not<\/p>\n
to pay the remaining amount due on the property or services.<\/p>\n
SALLY FRAME KASAKS, CHAIRMAN AND CEO ANN TAYLOR, 414 CHAPEL
\nSTREET, NEW HAVEN, CT 06511<\/p>\n
Schedule 6.01(p)-2<\/p>\n
Credit and Collection Policy<\/p>\n
See Attached<\/p>\n
NEW ACCOUNTS<\/p>\n
DEPARTMENT<\/p>\n
NEW ACCOUNTS DEPARTMENT<\/p>\n
Charge applications are received from two primary sources:
\n* Mailed in applications from customers\/stores
\n* “Instant” credit applications received by phone from store
\npersonnel.<\/p>\n
An average of 15,000 applications are processed per month and
\nessentially all applications receive similar treatment, and
\nrequire a full application and credit report.<\/p>\n
The credit granting process is accomplished through an on-line
\napplication processing system, which utilizes a statistical
\npoint-scoring method for approving or declining accounts (see
\nattached). The point-scoring model was developed by Management
\nDecisions Systems, Inc., and was installed in May 1991. It is an
\n“empirically derived, statistically sound” system of evaluating
\nnew credit applicants as defined by Federal law, and was based on
\na statistical analysis of the payment behavior of existing Ann
\nTaylor charge customers.<\/p>\n
Minimum Standards
\n– —————–<\/p>\n
As a first step, all applications must meet basic minimum
\nrequirements:
\n– – Income – $15,000 + per year
\n ——
\n– – Length of residence (current plus previous) – at least 12
\n ——————-
\n months
\n– – Length of employment (either current or previous ) – at least
\n ——————–
\n 12 months
\n– – Residence telephone
\n ——————-
\nAll applications received through the mail are prescreened by
\ncredit clerks to determine that minimum requirements have been
\nmet; “Instant” applications are screened for minimum requirements
\nby the system.<\/p>\n
System Decision Process
\n– ———————–<\/p>\n
Applications are assigned on a random basis and are keyed into
\nthe system by an account representative utilizing a CRT. If
\nminimum standards have been met, the application information is
\nscored by the system; a credit bureau report is automatically
\nobtained, and also scored. A total score is calculated for each
\napplication, which is then directed by the system into one of the
\nfollowing categories:<\/p>\n
1. Auto-decline – If the applicant’s total number of points
\n ————
\nachieved based on the application information and credit bureau
\ndata does not meet the minimum score for approval, the
\napplication is automatically declined.<\/p>\n
A system-generated letter, listing three reasons for
\ndeclination, is sent directly to the customer, referencing the
\nareas in which the applicant lost the most points.<\/p>\n
2. Auto Approval – Applications which achieve a passing score
\n ————-
\nare automatically approved and released by the system. Depending
\non the applicant’s score and income, the system will assign a
\nlimit of $400 to $1,500.<\/p>\n
Exception Policy
\n– —————-<\/p>\n
All applications are point-scored; however, based on specific
\ncredit policy reasons, certain applications (typically 7-8% of
\ntotal applications) are designated as “judgmental”, and
\n ———-
\ndecisioned by a credit analyst.<\/p>\n
Policy reasons for judgmental classification:<\/p>\n
– – employee account
\n– – student application
\n– – reactivated purged account
\n– – duplicate account
\n– – system recommends approval, but credit report contains R9
\n rating
\n– – system recommends decline, but primary decline reason is
\n listed as “finance company inquiry”<\/p>\n
Typical approval rate for judgmental accounts: 50-55%.<\/p>\n
In addition, a certain portion of scored approvals (usually 2-3%
\nof total applications) are passed to an analyst for verification
\n ————
\nof information prior to release.
\n– ————–<\/p>\n
Policy reasons for verification requirement:<\/p>\n
– – fraud file hit
\n– – system recommends approval, but there is no credit file
\n– – system recommends approval, but bankruptcy is listed on credit
\n report
\n– – consumer statement is listed on credit report
\nTypical approval rate for verified accounts: 50-55%
\n ——<\/p>\n
Lending authority limits:
\n– ————————<\/p>\n
– – System – $400 to $1,500
\n– – Credit Analyst – $400 to $1,500
\n– – New Accounts Management Staff – up to $3,000
\n– – V.P. Credit – > $3,000<\/p>\n
All new account activity is monitored using a variety of system
\ngenerated reports, i.e.:<\/p>\n
Statistics by Solicit Code – Tracks # of applications processed
\n– ————————–
\nby store and solicit type (i.e., Instant, Mail, Employee,
\nReactivate) – calculates daily and cumulative MTD totals – report
\nis sorted 2 ways – store # order and solicit type.<\/p>\n
Employee Statistics by Solicit Code – Daily tracking of new
\n– ———————————–
\naccounts by store number and associate number.<\/p>\n
Application Statistics Report – 3 reports generated: daily, month
\n– —————————–
\nto date, and year to date – shows # of applications processed;
\napproved, declined or placed in judgmental category – sorted by
\noperator.<\/p>\n
Instant Credit Application Report – Two reports sorted by store #
\n– ———————————
\nor operator # – shows data entry information of instant credit
\napplication information.<\/p>\n
Normal Applications – shows data entry information of “mail in”
\n– ——————-
\ncredit application information – sorted by operator.<\/p>\n
New Account\/Reactivate by Risk Code – Shows daily totals of new
\n– ———————————–
\naccounts by limit assignment.<\/p>\n
Activity Summary by Credit Bureau – Reports daily and month to
\n– ———————————
\ndate credit bureau statistics by credit bureau (i.e., total #
\ninquiries, # hits, errors, etc.) – also reflects month to date
\ntotal of credit bureau system reports pulled by individual credit
\nsystem (authorization, collections, and non-financial systems).<\/p>\n
Exception Report – Daily report that details override decisions
\n– —————-
\nto new applications, limit assignment, and applications keyed and
\ndecisioned by same operator. Report is sorted by user number.<\/p>\n
Decline Letter Report – Daily report detailing all decline
\n– ———————
\nrequest letters by applicant’s name, reference #, letter type,
\ndecline reasons, and operation #.<\/p>\n
Immediate Attention Report – Tracks current status of pending
\n– ————————–
\napplications by date keyed, # days old and account #.<\/p>\n
Tracking and Monitoring Point Scoring Reports – Statistical
\n– ———————————————
\nreports include: Score Distribution; Approvals by Score;
\nDelinquency by Score; Short Term Delinquency; Approve vs.
\nDecline; and Override Report.<\/p>\n
All approved applications automatically update the A\/R master
\nfile. Our supply of blank credit cards is maintained at a vendor
\nlocation (Faraday, Inc.) where the cards are embossed and mailed
\naccording to a daily tape transmission containing new account
\nrecords. The blank cards at Faraday are safeguarded in a locked<\/p>\n
area and entrance is limited to employees working on the cards
\nonly. Any charge cards that are undeliverable are returned
\ndirectly to the credit department for investigation.<\/p>\n
POINT SCORING CHARACTERISTICS
\n —————————–<\/p>\n
Application Characteristics
\n– —————————
\n -Type of Housing
\n -Time at Current Residence
\n -Applicant’s Occupation
\n -# of Bank Card References
\n -# of Retail References<\/p>\n
Credit Bureau Characteristics
\n– —————————–
\n -Type of Credit Bureau Report
\n -Total # of Inquiries within last 6 months
\n -# Finance Inquiries in the last 2 years
\n -# Satisfactory Ratings
\n -# of 30 and\/or 60 Ratings
\n -# of 90 or more day Ratings and\/or Trade Line and\/or Public
\n Record Derogatory Items
\n -Ratio of Satisfactory Trades to the # of Trades
\n -# of Currently Past Due Balances
\n -# of New Trade Lines opened in the last 6 months
\n -# of Bank Trades
\n -# of Credit Bureau Department Store Trades
\n -# of Oil Company Trades
\n -Age of Oldest Trade on the Credit Bureau Report
\n -Ratio of Total Balances to High Credit or Limit<\/p>\n
AUTHORIZATION
\n DEPARTMENT<\/p>\n
Authorization System<\/p>\n
Approximately 140-150,000 Ann Taylor charge transactions are
\nprocessed each month; of these, about 88-90% are automatically
\napproved by CICS (Customer Information Control Systems).<\/p>\n
Of the 10-12% which are referred to Credit, approximately 82-85%
\nare approved.<\/p>\n
Transactions are referred for the following reasons, in the
\nfollowing order of priority:<\/p>\n
– – Cycle (P & L cycles always refer; the authorization system
\n prevents charge approval on a P & L account).<\/p>\n
– – Level of Issue (number of times card was replaced for
\n lost\/stolen) – verify account # on charge card – obtain positive
\n identification.<\/p>\n
– – Status Code (negative “flag”) – see Attachment A.<\/p>\n
– – Multiple account in one cardholder name – verify correct
\n account being used.<\/p>\n
– – MPI – missing payment indicator (all accounts MPI 2+ are
\n referred).<\/p>\n
Two actions can be taken:
\n (1) If the past due amount is $100 and\/or the account is 90 days or more
\n past due, sale is referred to Collection Department for
\n evaluation.<\/p>\n
– – Inactivity (account not used 24+ months).<\/p>\n
– – Overactive
\n 1. more than 10 transactions in one day
\n 2. according to ratio of “memo” payment amount to A\/R
\n balance (for fraud detection)<\/p>\n
– – Overlimit
\n If overlimit is the only negative condition, the account is
\n scored through CICS prior to referral (see Attachment B). If a
\n score of 30 is attained, the account is allowed to go overlimit
\n up to our programmed override % (currently set at 35%).<\/p>\n
Overlimit accounts which do not qualify for override are
\n referred. The account information is reviewed and evaluated:
\n amount over credit limit; payment history; account status; date
\n opened; etc. Authorizers are allowed to approve up to 20% over
\n the limit depending on the strength of the account information.
\n Referral balances exceeding 20% of the limit are reviewed by a
\n supervisor.<\/p>\n
If the referral is approved, a 4-digit approval code is generated
\n by the system which is released to the store associate, and
\n documented on the sales receipt.<\/p>\n
Small credit limit increases (typically $100-$300)may be approved
\n based upon the customer’s positive account history. Increases
\n greater than $300 require that a credit report also be obtained
\n and evaluated.<\/p>\n
Credit Limit Increase Authority:
\n ——————————-
\n – Authorizer – $100-$300 (maximum limit $1,000)
\n – Lead Authorizer – up to $600 (maximum limit $1,500)
\n – Management Staff – maximum limit $3,000
\n – V.P. of Credit -> $3,000<\/p>\n
Note: An automatic limit increase program is usually run each
\n —-
\n year affecting approximately 7-10% of total file. This program
\n is based on individual account performance, and controlled by
\n system parameters. (See Attachment C.)<\/p>\n
The following functions can be performed through the
\nAuthorization System:<\/p>\n
– – alpha-look up of account #’s<\/p>\n
– – authorization of charge referrals<\/p>\n
– – entering authorization notes for display on main inquiry
\n screen<\/p>\n
– – credit bureau inquiry<\/p>\n
– – memo entries to correct voids<\/p>\n
Authorization System Reports:<\/p>\n
– – Daily Referral Detail – transaction details by account #,
\n showing operator ID, time, account status, etc.<\/p>\n
– – Hourly Transaction Summary – shows total volume of all on-
\n line transactions (including MC\/Visa and Amex) by hour<\/p>\n
– – Credit Referral Summary – shows daily and MTD referrals by
\n type<\/p>\n
– – Daily Authorization Activity – summarizes Ann Taylor, Amex,
\n and Nabanco transactions (all of those which occurred on-line;
\n any Ann Taylor off-line transactions which exceeded the floor
\n release and called in to Credit are also included — these are
\n listed as “CRT” transactions)<\/p>\n
STATUS CODES (A-M…will cause referral)<\/p>\n
Code: Definition: Action:
\n– —- ———- ——
\nAT closed\/TRW update Pull new credit report and
\n review for reopening.
\nMT hold to limit\/TRW update Keep account balance within
\n credit limit.<\/p>\n
AB closed\/TRW bankrupt alert Refer to Collections
\n Department.
\nMB hold to limit\/TRW bankrupt
\n alert Refer to Collections
\n Department.
\nA pending\/TRW update Sales
\n $400 – run report prior to
\n decisioning and refer to
\n supervisor for disposition.
\nC return mail Verify customer’s address
\n and update account
\n information.
\nCQ return mail\/telephone # Same as above, but also
\n verify telephone number.
\nD deceased Deny sale.
\nE closed by collections Refer to Collections
\n Department.
\nE1 closed\/derogatory credit info Update account with new
\n credit report- refer to
\n supervisor for review.
\nE2 closed\/customer request Verify customer into charge
\n and reopen account.
\nE3 closed\/duplicate account Verify appropriate account
\n #; deny sale and have store
\n re-ring under correct
\n account #.
\nE4 closed\/joint acct\/non- Refer to supervisor for
\n responsibility review.
\nE5 closed\/returned checks Deny sale and refer to
\n Collections Department.<\/p>\n
E7 closed\/fraud Deny sale.
\nE8 closed\/instant credit acct Deny sale.
\nE9 closed\/terminated employee New application required.
\nF1 Mr. only Request positive I.D. from
\n customer.
\nF2 Mrs. only Request positive I.D. from
\n customer.
\nF3 I.D. required\/corporate acct Request positive I.D. from
\n customer.
\nF4 Mr. or Mrs. only Request positive I.D. from
\n customer.
\nF5 new account flagged for Request positive I.D. and
\n verification verify name, address, S.S.#
\n and telephone #.
\nF6 no mail or phone orders Purchases only allowed in
\n the store; request I.D.
\nH charge-off\/P&L acct Refer to Collections
\n Department.
\nI no checks accepted Verify payment type.
\nJ card stolen\/not replaced Request I.D.
\nM hold to credit limit Review account condition;
\n customer not to exceed
\n credit limit; exceptions –
\n new credit report taken to
\n possibly increase credit
\n line.<\/p>\n
STATUS CODES (N-Z… will not cause referral)
\nS MPI reduced
\nW employee\/acct opened prior to hire date
\nY reopened collection account
\nZ reopened P&L account
\n? force account to collection
\n& adjustment pending\/suppress from auto write-off
\n# employee\/derogatory credit information
\n@ VIP account\/preferred customer
\n authorized user
\nX account was previously status A’<\/p>\n
ALPHA DATA UTILITY, INC.
\n SECTION 7 – C.I.C.S. POINT SCORE ALGORITHMS
\n ADU AUTHORIZATION POINT SCORE SYSTEM<\/p>\n
DATE OPENED POINTS
\n– ———– ——
\n12-24 Months 4
\n25-60 Months 6
\nOver 60 Months 10<\/p>\n
MPI
\n– —<\/p>\n
0 15
\n1 6
\nOver 1 0<\/p>\n
HMPI – TY
\n– ———
\n0 5
\n1 3
\nOver 1 0<\/p>\n
HIGH – BALANCE
\n– ————–
\nLess than Current – Bal. 0
\nGreater than Current – Bal. 6<\/p>\n
RISK – CODE
\n– ———–
\n0 0
\n1 2
\n2 4
\nOver 2 6<\/p>\n
HISTORY
\n– ——-
\nBoth Bal. & Paym. in M2, M3, M4 6
\nBoth Bal. & Paym. in 2 of
\nM2, M3, M4 4
\nAll others 0<\/p>\n
Over 29 points approves sale up to overlimit %.<\/p>\n
RISK CODE CHANGE PROGRAM
\n ————————<\/p>\n
Exclusions:
\n– ———-
\n– – All accounts open later than 6\/30\/92
\n– – Limits 25
\n– – Cycles 5-8; 15; 45 to 99
\n– – Current MPI > o if credit limit is 1 if credit limit is $800 or greater
\n– – Hi MPI & LY MPI > 1
\n– – Status codes A thru E; H; I; M; X; Y; Z
\n– – Payment activity in less than three billing periods within
\n the last eight months
\n– – Total payments 75% of sales<\/p>\n
All accounts not excluded by the above criteria are eligible
\n ————————————————————
\n for an increase in limit as follows:
\n ———————————–<\/p>\n
– – Calculate an average payment of the three most recent
\n —————
\n payments made, and multiply by six.
\n —
\n– – Raise risk code to the level nearest this amount; if 50% or
\n greater, advance to next level.
\n– – Minimum increase = 20% of current risk code.
\n– – Maximum increase = 40% of current risk code.<\/p>\n
COLLECTION DEPARTMENT<\/p>\n
COLLECTION POLICY<\/p>\n
Aging Criteria
\nAccount are aged for reserve purposes at billing time. To
\ncalculate an account’s age, the system determines the last month
\nin which the account was current (8 months maximum). Once this
\nstarting point has been established, we work forward to the
\ncurrent month and calculate the total payment deficiency (total
\namount due less total payments made). The system then calculates
\nthe number of payments (or age) that this deficiency represents.
\n(In order to qualify for one month’s aging, the payment
\ndeficiency must be more than one-half of the payment
\nrequirement.) Age can never exceed seven months.<\/p>\n
Charge Off Criteria
\nAutomatic – The system generates write-offs for all accounts
\ngreater than five months past due. If financial activity has
\noccurred within the current month, write-off is delayed for one
\nbilling period. Collection Manager manually writes off
\nbankruptcies and frauds.<\/p>\n
Re-aging Criteria
\nIf four consecutive payments equal to or greater than 20% of the
\nprevious balance are received on a delinquent account, the
\ndelinquency will be “cured”. Ann Taylor’s policy is to take no
\nmanual action to re-age individual accounts.<\/p>\n
Collection Policies and Procedures
\nAccounts are brought into the on-line collection system according
\nto MPI (missing payment indicator) and balance.<\/p>\n
Accounts with balance $500+:
\n– – brought into Collections at MPI 2 (30 days past due)
\n– – if date open is within the last 6 months, they are brought in
\nat MPI 1<\/p>\n
Accounts with balance $75-$499:
\n– – brought in at MPI 3 (60 days past due)
\n(if account shows 2+ missing consecutive payments, it will be
\nbrought in at MPI 2)<\/p>\n
Accounts with balance $1,000) are reviewed by management.
\n– – Daily collector productivity reports are reviewed to insure.
\n proper number of accounts worked, and proper procedures
\n followed.
\n– – Silent monitoring is also done for each collector.
\n– – Charge off review is held monthly.
\n– – Monthly write-off requires approval of V.P. of Credit.
\n– – Accounts are closed at 3 months past due.<\/p>\n
Reports:<\/p>\n
– – Potential P&L Report – listing of accounts age 4 & up
\n– – Special Aging Report – listing of delinquent accounts by
\n age, by cycle
\n– – Detail and summary of collector’s daily activity
\n– – P&L Analysis – monthly write-off analysis
\n– – MPI Movement Analysis – tracks movement between delinquency
\n levels
\n– – Collector Profile – number of accounts in collector’s que
\n– – Audit Reports such as non-financial changes<\/p>\n
CREDIT OPERATIONS\/
\n CUSTOMER SERVICE DEPARTMENT<\/p>\n
Credit Operations Department<\/p>\n
The Credit Operations Department is primarily responsible for
\nscheduling billing cycles, reconciling lock box differences and
\nunapplied media, refunding credit balances, making non-financial
\nchanges to accounts including employees, posting on-line
\nfinancial adjustments referred by Customer Service and
\nresearching returned mail.<\/p>\n
Billing Cycles
\n– ————–<\/p>\n
Customer accounts reside in one of four billing cycles. The A\/R
\nmaster file is updated and billing statements generated on the
\n3rd, 12th 18th and 24th of each month. All employees are billed
\non the 18th. The New York Data Center prints and forwards all
\nregular billing statements to our billing house for mailing. All
\n“exception” statements are forwarded to the Credit Department for
\nreview and subsequent mailing (e.g. credit balance >$300;
\nmulti-page statements; foreign address).<\/p>\n
Lockbox
\n– ——-<\/p>\n
Lockbox activity reports are sent to the Credit Department daily
\nfrom AM South Bank. Included in this package are detail
\nreports of all payments processed, any exception items (e.g. Gift
\nCertificates, live postdated checks), copies of all unapplied
\nmedia, address changes and customer correspondence.<\/p>\n
Lockbox differences are a result of bank posting errors or
\nunapplied funds. These amounts get posted to one of two control
\naccounts and are reconciled on a monthly basis by the Assistant
\nManager of Credit Operations.<\/p>\n
Payments are processed by lockbox seven days a week and are
\ntransmitted to our mainframe in New York Monday through Friday at
\n6:00 PM and are reflected on our A\/R system as of the actual date
\nprocessed.<\/p>\n
Credit Balance Refunds
\n– ———————-<\/p>\n
Credit balances are refunded upon customer request, or
\nautomatically when the credit balance has been outstanding for
\nmore than five months. All credit balances of $300 or more
\nconstitute an exception billing statement and are forwarded to
\nthe Credit Department for research. Requests for refunds are
\nprepared by Credit Operations, reviewed and approved by
\nManagement and forwarded to the Accounts Payable Department,
\nwhere the checks are issued and mailed to the customer.<\/p>\n
Non-Financial Changes
\n– ———————<\/p>\n
Address and name change request forms are forwarded to Credit
\nOperations from our store locations and are processed on line.
\nThese changes are effective immediately upon entering.<\/p>\n
On Line Financial Adjustments
\n– —————————–<\/p>\n
Financial adjustments originate mainly in the Customer Service
\nDepartment and are entered in the A\/R system by Credit
\nOperations. These adjustments consist of finance charge credits,
\n“Good Policy” adjustments, transfers between accounts due to
\naccount number error, sales audit adjustments, and employee
\ndiscount corrections.<\/p>\n
These adjustments are keyed daily and are effective on the
\ncustomer account immediately. All adjustments are captured on a
\nmainframe report and are balanced and checked for approval daily.<\/p>\n
Authority Limits
\n– —————-<\/p>\n
Financial adjustments are limited to the following authority
\nlimits:<\/p>\n
Finance Charge Write-Off<\/p>\n
.00 to 9.99 CSR Authority
\n 10.00 to 19.99 Assistant Manager
\n 20.00 to 35.00 Manager
\n 35.00 and Over Vice President of Credit<\/p>\n
Good Policy Adjustments<\/p>\n
.00 to 25.00 CSR Authority
\n 25.01 to 100.00 Assistant Manager
\n 101.00 to 250.00 Manager
\n 250.00 and Over Vice President of Credit<\/p>\n
Return Mail
\n– ———–<\/p>\n
Return mail is researched for current address and is either
\ncorrected or a status is placed on the account to obtain current
\ninformation the next time the customer is in to charge.<\/p>\n
Customer Service Department<\/p>\n
The Customer Service Department handles all customer billing
\ndisputes and inquiries received either by mail or by telephone.<\/p>\n
Billing inquiries handled by this department range from a simple
\nexplanation of a customer statement to the more involved
\nunauthorized activity dispute. Customer Service receives an
\naverage of 28,000 calls monthly and approximately 93% of these
\nare resolved at the point of call.<\/p>\n
Customer Service Representatives have the authority (see previous
\npage for limits) to remove finance charges assessed to an account
\nshould a customer have an address problem or a billing dispute.
\nGood policy adjustments are made to a customer’s account at the
\ndiscretion of the Representative and\/or Management (e.g. for
\ndiscount coupon offers, store errors, etc).<\/p>\n
Customer billing disputes that cannot be resolved at the point of
\ncall are documented and the dollar amount in question is placed
\nin “dispute”. This amount will be excluded from the account
\nbalance when calculating finance charges and minimum due. All
\ninquiries are also entered into a PC database in order to track
\ntheir type and age. The Customer Service Department follows the
\nFair Credit Billing Act and Regulation Z regarding the timely
\nresolution of billing disputes.<\/p>\n
SCHEDULE 6.01(r)
\n —————-<\/p>\n
Trade Names
\n ———–<\/p>\n
AnnTaylor Funding, Inc.
\n– ———————–<\/p>\n
[none]<\/p>\n
5<\/p>\n
SCHEDULE 6.02(k)
\n —————-<\/p>\n
List of Offices Where
\n Records Are Kept
\n ———————<\/p>\n
AnnTaylor, Inc.
\n– —————<\/p>\n
Chief place of business and chief executive office:<\/p>\n
142 West 57th Street
\n New York, New York 10019<\/p>\n
location of books and records, etc:<\/p>\n
142 West 57th Street
\n New York, New York 10019<\/p>\n
414 Chapel Street
\n New Haven, Connecticut 06511<\/p>\n
6<\/p>\n
Customer Service Monthly Totals<\/p>\n
TOTAL TOTAL STATEMENTS % REC VS.
\nMONTH INQUIRIES # OF CALLS MAILED STMT MAIL<\/p>\n
Jun-92 655 21,454 170,829 12.56%
\nJul-92 591 22,428 172,423 13.01%
\nAug-92 540 24,364 167,999 14.50%
\nSep-92 628 23,684 167,075 14.18%
\nOct-92 760 25,225 172,315 14.64%
\nNov-92 753 23,147 174,627 13.26%
\nDec-92 765 26,589 184,529 14.41%
\nJan-93 916 30,001 188,964 15.88%
\nFeb-93 838 25,464 184,996 13.76%
\nMar-93 1,013 27,123 167,072 16.23%
\nApr-93 724 26,935 185,893 14.49%
\nMay-93 779 26,094 189,965 13.74%
\nJun-93 808 29,897 192,883 15.50%
\nJul-93 722 33,630 195,569 17.20%
\nAug-93 648 33,548 194,469 17.25%
\nSept-93 718 32,737 194,560 16.83%
\nOct-93 800 33,649 193,651 17.38%
\nNov-93 710 33,231 193,249 17.20%<\/p>\n
AVERAGE 743 27,733 182,837 15.17%<\/p>\n
Schedule 6.02(1)<\/p>\n
ANN TAYLOR INC.
\n STORE BANK LIST<\/p>\n
STORE NAME BANK ACCOUNT NUMBER<\/p>\n
1 New Haven Peoples 42-7004-109
\n2 Westport Chase 907-053-2
\n3 New Canaan Shawmut 00-6561-0893
\n4 Greenwich Fleet 000-142-9965
\n5 Braintree Fleet 93576-69824
\n6 Warwick Citizen’s Bank 018-901-4
\n8 Palmer Square Chemical 0060-056363
\n9 Paramus Midland 01-009145-1
\n10 Burlington Baybank 921-258-2
\n11 Chestnut Hill Baybank 325-699-5
\n12 Cambridge Baybank 1000-355-5
\n13 Pheasant Lane First NH Bank 020163164801
\n14 80th & Madison Chase 034-1-209015
\n15 Eastchester Citibank 11788198
\n16 Holyoke Springfield 49815723
\n Institute
\n18 57th Street Chemical 026-0786945-65
\n19 South Str. Seaport Chemical 009-186115
\n20 Riverside United Jersey 111013224
\n21 George Town Riggs 01-218-077
\n22 Newbury Street Fleet 00-2661-5294
\n23 Hartford Shawmut 006552-7183
\n24 Wellesley Square Shawmut 05-0096-3922
\n25 Michigan Avenue First Nat’l 8008086
\n Bank Chicago
\n26 Old Orchard First American 12437000
\n28 Oak Street Northern Trust 431931
\n29 Manhasset Nat’l 2-009-35183-5
\n Westminster
\n30 Tyson’s Riggs 01-755-552
\n31 White Flint Citizen’s 057-4919
\n Bank
\n32 K Street Crestar 52021442
\n33 Continental Bank Continental 77-93189
\n34 Faneuil Hall Shawmut 02-0049-5677
\n35 Woodfield NBD 0000115479
\n36 Mazza First Union 2000031744689
\n40 Central Office Fleet 263624-7
\n41 Troy Michigan Nat’l 5963-11465-6
\n42 Beachwood Society 16-320-0361
\n43 Ardmore Corestates 0113-0691
\n First Penn.
\n44 King of Prussia Mellon Bank 2-540-672
\n45 Oakbrook Oakbrook 1066-86400
\n46 Oxford Center Mellon Bank 112-0741
\n47 Short Hills Summit Bank 0035630260<\/p>\n
48 North Clark Str. Midtown Bank 1029745
\n & Trust
\n49 Third Avenue E A B 106-01414-5
\n50 Willow Grove Mellon Bank 2-512-333
\n51 Ross Park Mellon Bank 156-1627
\n52 Walnut Street First Fidelity 0003308285
\n53 Shady Side Integra-First 0008448889
\n Seneca Bank
\n54 Bridgewater Summit 0000-80305
\n55 Mt. Lebanon P N C 00-0124-0786
\n56 Glen Eagle P N C 0592-454-5
\n57 Nanuet Mall Chemical 654-0640488-65
\n58 Woodbridge Center First Fidelity 8407500691
\n59 Menlo Park First Fidelity 8503500135
\n60 Ft. Lauderdale Barnett 1800122224
\n61 Bal Harbour Sun 0599-000137380
\n62 Dadeland Dadeland 10164397500
\n63 Mayfair Coconut Grove 01-220062-06
\n64 The Falls Sun 0699-001009595
\n65 Boca Town Center Barnett 1611773909
\n66 RiverChase AmSouth 32-868-049
\n67 The Gardens First Federal 2070000757
\n69 Altamonte Mall Sun 0760-760205086
\n70 Westwood B O A 1233-9-54955
\n71 Woodland Hills B O A 1140-8-00593
\n73 Beverly Hills Bank of L.A. 200051126
\n75 Del Amo B O A 0993-0-10494
\n76 Beverly Center Nat’l Bank 166-001-005308
\n California
\n77 Mission Valley B O A 08188-11287
\n78 Glendale Wells Fargo 0795-055698
\n79 Horton Plaza Wells Fargo 0780-010542
\n81 Highland Park Nation’s 109-091553-8
\n83 Houston Town First
\n & Country Interstate Bank 21-1006-4350
\n84 No. Park Comerica 7831010215
\n85 Canal Place Alerion 0019-10-537-7
\n86 San Antonio Groos 840264768
\n87 Highland Mall First State 0001083392
\n88 Rivercenter Groos 285029947
\n89 New Orleans Ctr. First Nat’l 1102-93185
\n Bank Commerce
\n90 Sutter Street B O A 02600-15257
\n91 Embarcadero Square B O A 1233-8-54960
\n92 Ghirardelli Square Wells Fargo 0043-054006
\n94 Palo Alto B O A 05203-11068
\n95 Mail Order Fleet 000-224-7852
\n96 Corte Madera B O A 09780-08430
\n98 Lakeside Mall First Nat’l 67-21-2709-2
\n Bank Jefferson
\n99 Staten Island Anchor 201001039064
\n100 Old Hyde Park Southern 0-00-100153-2
\n Exchange
\n101 Fashion Mall Safra 70-100-0684<\/p>\n
102 Boyton Beach Carney 100067500
\n103 The Avenues Barnett 2181703593
\n104 University Square Barnett 1406172621
\n105 Cherry Hill Mall Midlantic 14030-9651-2
\n106 Shreveport Premiere Bank 1101116666
\n107 Silver City Bristol
\n Galleria Savings 270-13235
\n108 Cambridgeside E. Cambridge 04-80-8001076
\n Savings
\n109 Palm Beach Mall Nation’s 3602836347
\n110 Larimer Square Colorado Nat’l 122700880646
\n111 Charlestown Mall MidAmerican 6100014352
\n Federal
\n112 Siena Square Norwest Bank 182-3473562
\n Boulder
\n114 Cherry Creek Cherry Creek 1683085
\n115 Trolley Square First Security 131-00283-43
\n116 Town Square NBD 0001709287
\n117 Lincoln Place First Inter- 43443
\n State Bank
\n118 Ocean County First Fidelity 3000512065
\n119 Las Vegas B O A 1501-9-9602
\n120 Plaza Frontenac Mark Twain 3614005591
\n121 St. Louis Center Mercantile 100128140-9
\n122 W. County Center Colonial 01-069446-01
\n123 One Pacific Place Firstier 00000827622
\n124 Country Club Country Club 078501
\n125 Galleria & Clayton Magna Bank 0537009380
\n126 Tower Place Fifth Third 714-16492
\n127 Tuscon Mall B O A 00000125709559
\n128 Freehold First Fidelity 3000398408
\n129 Rockingham Park New Dartmouth 510017916
\n Bank
\n130 Regency Square Nation’s 0205-2218
\n131 Owings Mills Bank of 3114163
\n Baltimore
\n132 Harbour Place First Union 0-14-08032
\n133 Chesterfield Peoples 4031413700
\n134 Union Station Adams Nat’l 100161201
\n Bank
\n135 Fash Ctr Pentagon Chevy Chase 107-430051-3
\n136 Reston Town Center First Union 2070478000217
\n137 Montgomery Mall Bank of 3084272
\n Baltimore
\n138 Towson Town Center Maryland 09111774
\n Nat’l
\n139 Mayfair Mall Firstar 112-047743
\n140 Woodbury Commons Chemical 141-062437865
\n141 Danbury Fair Union Trust 2-082-007
\n142 Trumbull Lafayette 51008068
\n143 West Farms Farmington 30-57-3000093
\n Bank
\n144 Buckland Hills Savings Bank 662-002-398
\n Manchester<\/p>\n
145 75th Street Marine Midland 027-71277-0
\n146 Walt Whitman Williamsburg 1366001368
\n150 Southdale First Bank – 1-367-3073-5026
\n First Southdale
\n151 Ridgedale Ameribank 1017039
\n152 Conservatory Twin City 1019000738
\n Federal
\n153 University Park First Source 119-865-4
\n154 Fairlane Town Ctr. Comerica 1011-104716
\n155 Briarwood NBD 205000023148
\n157 Century III Integra 0211938761
\n159 Springfield Mall First Union 2000072804083
\n163 Cumberland Mall Trust 9300313351
\n165 Augusta Mall First Union 208000090669
\n167 Mall of America First Bank 1-359-3010-7747
\n Bloomington
\n170 Santa Barbara B O A 04450-05554
\n171 City Corp Plaza B O A 1233-1-54959
\n172 Main Place B O A 1233-5-54957
\n173 LaJolla Wells Fargo 0734-011133
\n174 Biltmore First Inter- 964-66018
\n State Bank
\n175 Scottsdale First Inter- 509-13133
\n State Bank
\n176 Sherman Oaks B O A 03979-14183
\n177 South Lake Ave. Wells Fargo 0613-058866
\n178 Ala Moana Liberty 18-031620
\n179 Brea B O A 09522-35581
\n180 Desert Fashion Mall B O A 09506-01505
\n181 Santa Monica Place Sanwa Bank 0851-15848
\n182 Palos Verdes B O A 1233-7-54956
\n183 Media City Center Wells Fargo 0933-040495
\n184 No. County Fair Wells Fargo 0760-017830
\n185 University Town Wells Fargo 0721-113330
\n187 The Oaks B O A 10111-11247
\n191 Valley Fair B O A 05750-01049
\n192 Stonestown B O A 02529-00245
\n193 San Francisco B O A 00888-18805
\n Center
\n194 Pacific First Ctr. Seafirst 63497713
\n195 Arden Fair Wells Fargo 0347-056947
\n196 Pioneer Place US Bank Oregon 070-0008-980
\n197 Stoneridge Mall First Inter- 713-5-15701
\n State Bank
\n200 5th Avenue Chemical 134-0692452-65
\n201 Cedarhurst Nat’l West- 2-011-60823-5
\n minster
\n202 World Trade Center Chemical 024-033715
\n203 Upper West Side Chemical 067-0648979-65
\n204 Crossgate Albany Savings 280000222801
\n Bank
\n205 Walden Galleria Key 121-00-223-3
\n206 Carousel Center Key 221-02-515-6
\n207 A & S Plaza Chemical 023-0710291-65<\/p>\n
208 87th Street Citibank 33608426
\n209 Roosevelt Field Crossland
\n Mall Savings 041-770235-4
\n240 ErieView Star 570927814
\n241 Fashion Mall NBD 700002634309
\n242 Twelve Oaks Comerica 3001-00695-0
\n243 Grosse Pointe NBD 0041634-94
\n244 Kenwood Society 5000350436
\n245 Columbus City Bank One 11-8677-5
\n246 Woodland Mall Michigan Nat’l 5856-16009-7
\n247 Southern Park Dollar Savings 011-233-874
\n248 Westgate Mall Dollar Savings 2593219871
\n249 Laurel Park NBD 0010679-14
\n260 Saddlecreek Nat’l Bank 039-0500
\n Commerce
\n261 Bellevue Center First 9111646
\n Tennessee
\n262 Penn Place Charter Nat’l 101-251-7
\n263 Utica Square F & H 4000-2979-3
\n264 Hulen Mall Overton Park 58818
\n265 Green Hills Third Nat’l 176162-5
\n266 Willowbrook Mall Charter Nat’l 40044865
\n Bank
\n270 Oxmoor Center P N C 3095478350
\n271 Hanes Mall First Union 2071884185026
\n272 Southpark Mall First Union 2070490732110
\n273 Park Plaza Twin City Bank 9013-937-6
\n274 Shelter Cove Nation’s 745040798
\n275 Fayette Mall Nat’l City 70408416
\n276 North Park Mall Trustmark 100-1447374
\n277 Ashville First Citizen’s 121-26-43-130
\n278 Hamilton Place First Tennessee 000-006-213
\n279 Coolsprings Galleria First Tennessee 07-2259-6
\n280 Madison Square Mall Compass 700-5184-2
\n281 Houston Galleria Bank One 7070070037
\n282 Hillsdale Wells Fargo 0525-031290
\n283 Dallas Galleria Nation’s 059-000134-7
\n284 Perimeter Mall Trust 8801928410
\n285 Bellevue Square Seafirst 76544715
\n286 South Coast B O A 0694-2-08817
\n287 Northbrook Firstar 102652
\n288 No. Shore Mall Salem Five 897101457
\n289 Century City B O A 1233-3-54958
\n290 Prudential Fleet 9363612920
\n291 Downtown Plaza B O A 1233-2-17890
\n292 Fairfield Commons Bank One 970649680
\n293 Stamford Fleet 000-886-1005
\n294 Lenox Square Trust 8800781216
\n295 Worthington Square NBD 4000003758
\n296 The Grove Shrewsbury 011074426
\n State Bank
\n298 Winter Park Barnett 2830666787
\n299 Broadway Plaza B O A 02240-04907
\n300 River Oaks Nation’s 2663085222<\/p>\n
700 Franklin Mills Mellon Bank 8-455-628
\n701 Sawgrass Mills Barnett 3871201716
\n703 Citadel Outlet Bank of 089-002428
\n California
\n704 Gurnee Mills NBD 0006000479
\n705 Potomac Mills Riggs 01801589
\n706 Lancaster Fulton 2318770851
\n707 San Marcos State Bank 1505920
\n708 Ellenton Barnett 1959193980
\n709 Woodbury Fleet of NY 9366179640<\/p>\n
Schedule 7.03(c)<\/p>\n
January 4, 1993 Clipper Financing Facility
\n_________________________________________________________________<\/p>\n
Lending Authority Limits
\n -Student accounts – $300
\n -System – $400 to $1,500
\n -Credit Analyst – $400 to $1,500
\n -New Accounts Management Staff – up to $3,000
\n -V.P. of Credit – over $3,000<\/p>\n
COLLECTIONS
\n___________
\nCollections Billing Cycles
\n Customer accounts reside in one of four
\n billing cycles. The A\/R master file is
\n updated and billing statements generated on
\n the 3rd, 12th, 18th, and 24th of each month.
\n All employees are billed on the 18th. The
\n New York Data Center prints and forwards all
\n regular billing statements to the billing
\n house for mailing. All “exception”
\n statements are forwarded to the Credit
\n Department for review and subsequent mailing
\n (e.g., credit balances greater than $300;
\n multi-page statements; foreign address).<\/p>\n
______________
\nAging Criteria Accounts are aged for reserve purposes at the
\n time the bill is sent. The Company
\n determines age for the collection process
\n using the Missing Payment Indicator (“MPI”).
\n For reserve and charge off calculations, the
\n Company utilizes a slightly modified version
\n of MPI that it refers to as Account Aging.<\/p>\n
Flexible Accounts “MPI” Calculation<\/p>\n
The calculation of the “MPI” for flexible
\n accounts begins by going back in an account’s
\n history to the last month in which the
\n account was paid up (had a balance of less
\n than $5.00) (“starting point”), but no more
\n than eight months ago (information prior to
\n eight months is archived). Working forward
\n from this starting point, for each month the
\n system calculates the total amount of asked
\n for but not received (amount requested –
\n payments received) which is called the
\n “deficiency”. If the deficiency is negative
\n (the amount paid was more than the amount
\n requested) then the account is considered to
\n have a deficiency of 0 for that month. The
\n deficiencies for each month (from the
\n starting point to the current month) are
\n summed into the “total deficiency”.<\/p>\n
PNC Bank<\/p>\n
January 4, 1993 Clipper Financing Facility
\n_________________________________________________________________<\/p>\n
If the total deficiency is greater than
\n $4.99, the actual number of payments (the
\n “MPI”) this total deficiency represents will
\n be calculated. Starting in the current month
\n with MPI at 1 (with total deficiency greater
\n than $4.99, the account has at least one
\n missing payment), the current month’s asked
\n for payment is subtracted from the total
\n deficiency which results in the “remaining
\n deficiency”. If the remaining deficiency is
\n greater than $4.99 then the system moves back
\n to the previous month and repeats the process
\n (remaining deficiency – asked for payment =
\n new remaining deficiency) until the remaining
\n deficiency is less than $5.00. For each
\n month the remaining deficiency is greater
\n than $4.99, one is added to the MPI for that
\n account.<\/p>\n
Flexible Account Aging<\/p>\n
Flexible accounts are aged for reserve
\n purposes at billing time and, although the
\n calculation is similar to the “MPI”
\n calculation, they are completely independent
\n of each other. The starting point for
\n calculating an account’s age is the same as
\n for calculating its MPI (see above). The
\n difference between calculating an account’s
\n age and its MPI is in determining the
\n deficiency. To determine an account’s
\n deficiency under account aging the monthly
\n balance is re-calculated by rounding the
\n balance up to the next $50.00 increment and
\n the amount asked for is recalculated by
\n multiplying the new balance by 20%. For
\n example:<\/p>\n
Amount
\n ——
\n Balance Rounded X20% Asked For
\n ——- ——- —- ———
\n $649.52 $650.00 x.2 $130.00
\n $652.95 $700.00 x.2 $140.00
\n $101.21 $150.00 x.2 $30.00<\/p>\n
If the total deficiency is less than $1 or
\n less than one half of the next month’s asked
\n for payment then the account is considered
\n current. Other than the calculation of the
\n monthly deficiency number the account aging
\n follows the same methodology as MPI (see
\n above) to determine an account’s age. The
\n account aging calculation is done only to
\n determine in which age category (1-7) the
\n account will be classified. Once the
\n category is determined, the actual dollar
\n value of the receivable is included in the
\n account aging.<\/p>\n
PNC Bank<\/p>\n
January 4, 1993 Clipper Financing Facility
\n_________________________________________________________________<\/p>\n
Re-aging Criteria
\n If four consecutive payments of at least 20%
\n of the previous balance are received on a
\n delinquent account, the delinquency will be
\n “cured”. AnnTaylor’s policy is to take no
\n manual action to re-age individual accounts.<\/p>\n
Collection Policies and Procedures
\n Accounts are brought into the on-line
\n collection system according to MPI (missing
\n payment indicator) and balance due:<\/p>\n
Accounts with a balance of $500+ are brought
\n into collections at MPI 2 (30 days past due).
\n If the account was opened within the last six
\n months, the account is brought into
\n collections at MPI 1;<\/p>\n
Accounts with a balance of $75-$499 are
\n brought into collections at MPI 3 (60 days
\n past due). If the account shows 2+ missing
\n consecutive payments, it will be brought into
\n collections at MPI 2.<\/p>\n
Accounts with a balance of less than $75 are
\n brought into collections at MPI 4 (90 days
\n past due).<\/p>\n
Accounts are assigned to individual
\n collectors by age, billing cycle or balance,
\n and distributed by time zone to P.M.
\n collectors. The collectors work the accounts
\n a minimum of twice a month. Dunning notices
\n are automatically mailed each month,
\n approximately 10 days after the close of the
\n billing cycle. A series of system letters
\n are available for collectors to send.<\/p>\n
_____________
\nSystem Reports
\nAvailable Potential P & L Report – listing of accounts
\n aged 4+ “MPI”
\n Special Aging Report – listing of delinquent
\n accounts by age, by cycle
\n Detail and Summary of Collector Daily
\n Activity Report
\n P & L Analysis – monthly charge-off analysis
\n MPI Movement Analysis – tracks movement
\n between delinquency levels
\n Collector Profile – number of accounts in
\n collector’s queue
\n Audit Reports – such as non-financial changes<\/p>\n
PNC Bank<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6710,8542,8935],"corporate_contracts_industries":[9415,9494],"corporate_contracts_types":[9561,9560],"class_list":["post-41242","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-anntaylor-stores-corp","corporate_contracts_companies-pnc-financial-services-group-inc","corporate_contracts_companies-state-street-corp","corporate_contracts_industries-financial__banks","corporate_contracts_industries-retail__clothing","corporate_contracts_types-finance__credit","corporate_contracts_types-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41242"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41242"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41242"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}