ESCROW AGREEMENT
ESCROW AGREEMENT dated as of September 20, 1996 by and among CYGNE DESIGNS,
INC., a Delaware corporation ("CDI"), and Cygne Group (F.E.) Limited, a Hong
Kong corporation ("CGFE" and, together with CDI, the "Company"), THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED, a foreign banking corporation acting
through its New York Branch (the "Bank"), and MARINE MIDLAND BANK, a banking
corporation and trust company organized and existing under the laws of the State
of New York, as the escrow agent hereunder (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Bank are parties to an Amended and Restated
Credit Agreement dated as of September 20, 1996 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by issuing letters
of credit and making loans) to be made by the Bank to the Company in an
aggregate face or principal amount not exceeding $17,500,000;
WHEREAS, the Credit Agreement provides for the Company (i) to grant a first
priority perfected pledge and security interest to the Bank under the Security
Agreement (as defined in the Credit Agreement) with respect to all of the
validly issued, fully paid and nonassessable shares of common stock of AnnTaylor
stores Corporation ("ATSC"), par value $0.0068 per share (the "ATSC Shares"),
received by the company in connection with the Stock and Asset Purchase
Agreement (as defined in the Credit Agreement), (ii) to effect the sale,
assignment and transfer from time to time of the ATSC Shares through an escrow
account maintained with the Escrow Agent in accordance with the terms and
conditions thereof and (iii) to cause the Escrow Agent to remit all proceeds
relating to each such sale, assignment and transfer of ATSC Shares (the
"Proceeds") directly to the Collateral Account (as defined in the Credit
Agreement); and
WHEREAS, the Company and the Bank desire to appoint Marine Midland Bank as
the Escrow Agent, and Marine Midland Bank is willing to act as the Escrow Agent
hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as defined therein.
Section 2. Establishment of Escrow Account. The ATSC Shares delivered by
the Bank shall be accepted by the Escrow Agent and placed into an account with
the Escrow
-2-
Agent in the name of the Bank (the "Escrow Account") to be held and administered
in accordance with the terms and conditions hereof.
Section 3. Establishment of Brokerage Account. The ATSC Shares shall be
sold, assigned and transferred pursuant to instructions delivered by the Bank to
the Escrow Agent from time to time in accordance with the terms and conditions
hereof through an account in the name of the Escrow Agent (the "Brokerage
Account") at a Specified Broker (as defined below). The instructions delivered
by the Bank to the Escrow Agent shall be based upon instructions provided to the
Bank by the Company, which instructions shall specify the number of shares to be
sold, the Specified Broker through which the shares are to be sold and any
pricing limitations. The Escrow Agent shall deliver a certificate or
certificates representing the appropriate number of ATSC Shares to be sold,
assigned and transferred to the Specified Broker set forth in the sale
instructions of the Company provided to the Bank, against payment on the
settlement date of each respective sale, assignment and transfer. For purposes
hereof, "Specified Broker" shall mean Bear, Xxxxxxx & Co, Inc., Xxxxxxxxx Lufkin
& Xxxxxxxx Securities Corporation, X.X. Xxxxxx & Co. and Xxxxxx Brothers Inc.
Section 4. Notice of Pledge and Assignment. The Company and the Bank hereby
notify the Escrow Agent that (i) the Company has pledged and granted to the Bank
under the Security Agreement a first priority perfected pledge and security
interest in all of the ATSC Shares owned by the Company and the proceeds thereof
and (ii) the Company has assigned to the Bank the Registration Rights (as
defined in the Assignment dated as of September 20, 1996 made by the Company in
favor of the Bank) of the Company relating to the ATSC Shares as provided in the
Stockholders Agreement. The Escrow Agent hereby acknowledges such pledge and
security interest and such assignment, and shall, at the request of the Bank,
deliver to the Bank the certificate or certificates evidencing the number of
ATSC Shares than remaining in the Escrow Account.
Section 5. Sale of ATSC Shares; Proceeds. The Company hereby requests the
Bank to instruct the Escrow Agent to sell, assign and transfer the ATSC Shares,
and remit the Proceeds, in accordance with the provisions set forth below:
(a) The Company shall deliver notice to the Escrow Agent and the Bank
that the shelf registration filed by ATSC with the Securities Exchange
Commission with respect to the ATSC Shares shall have been declared
effective, which notice shall include the effective date of such
registration (the "Effective Date");
(b) On the day the Company delivers the notice of the Effective Date,
and in the case of clause (z) of this Section 5(b), at such other times as
it deems appropriate (but in no case more than once a week), and on each
day every two (2) weeks thereafter during the term of this Agreement, the
Company shall deliver to the Bank a report, certified by the chief
financial officer of the Company (the "Obligations Report"), setting forth
(i) the obligations of the Company under the Credit Agreement, either then
outstanding or to become due and payable within the immediately succeeding
two (2) week period, and (ii) the number of ATSC Shares, if any, to be
sold, assigned and transferred hereunder to
ESCROW AGREEMENT
3
permit the Company (x) to pay to the Bank, and to provide to the Bank
collateral security therefor, the face or principal amount of such
obligations, including any interest thereon, described in clause (i) above,
(y) to comply with the mandatory prepayment obligations of the Company
under the Credit Agreement (together with the amount described in clause
(x) above, the "Required Collateral Balance"), and (z) to increase the
balance in the Collateral Account (the "Cash Collateral Balance");
(c) After the receipt by the Bank of the notice of the Effective Date,
and upon receipt of each Obligations Report, the Bank shall instruct the
Escrow Agent, in accordance with Section 3 hereof, (i) to deliver to the
Specified Broker such certificate or certificates evidencing the number of
ATSC Shares equal to or greater than, after disposition and net of related
costs, (A) the difference between the Required Collateral Balance and the
Cash Collateral Balance pursuant to Sections 5(b)(x) and (y) above, and (B)
the amount of the increase, if any, in the Cash Collateral Balance pursuant
to Section 5(b)(z) above, but in no event shall the number of shares or
clauses (A) and (B) be in excess of two percent (2%) of the then
outstanding shares of common stock of ATSC with respect to any two (2) week
period, and (ii) to instruct the Specified Broker to execute through the
Brokerage Account from time to time the sale, assignment and transfer of
such ATSC Shares at the best market price then available;
(d) Upon receipt thereof from the Specified Broker, the Escrow Agent
shall remit all Proceeds directly to the Collateral Account; and
(e) If the Company shall fail in any event to notify the Escrow Agent
in a timely fashion with respect to any notice required hereunder, the Bank
shall effect such notice.
Section 6. Instructions as to Certain Conditions. With respect to each
sale, assignment and transfer of ATSC Shares hereunder, the Escrow Agent is
hereby instructed to instruct the Specified Broker, that (i) no sale, assignment
and transfer of ATSC Shares may knowingly be made to any person who beneficially
owns in excess of five percent (5%) of the then outstanding shares of common
stock of ATSC and (ii) no sale, assignment and transfer of more than two percent
(2%) of the then outstanding shares of common stock of ATSC may knowingly be
made to a single purchaser (or group of related purchasers).
Section 7. Termination of Escrow Agreement. Upon the receipt of written
notice from the Bank that the obligations of the Company to the Bank under the
Credit Agreement and the Notes have been paid in full, the Commitments have
expired or been terminated, and the Letters of Credit and the Standby Letters of
Credit have expired or been terminated, (i) the Escrow Agent shall deliver to
the Bank the certificate or certificates evidencing the number of ATSC Shares
then remaining in the Escrow Account, and (ii) the Escrow Account shall be
deemed dissolved and this Escrow Agreement terminated.
Section 8. Commercially Reasonable Manner. The Company acknowledges that
the sale, assignment and transfer of ATSC Shares hereunder may or may not be
made at the
ESCROW AGREEMENT
4
highest possible price available during the term of this Agreement, but agrees
that any such transaction and the actions of the parties hereunder shall be
deemed to have been made in a commercially reasonable manner.
Section 9. Escrow Agent. The Company agrees to pay the Escrow Agent the
compensation, pursuant to separate letter agreement between them, promptly upon
request therefor, and to reimburse the Escrow Agent for all reasonable expenses
or disbursements incurred by the Escrow Agent in the performance of its duties
hereunder, including reasonable fees, expenses and disbursements of counsel to
the Escrow Agent. The Escrow Agent shall have a lien upon the Escrow Account for
its costs, expenses and fees which may arise hereunder and may retain that
portion of the Escrow Account equal to such unpaid amounts, until all such
costs, expenses and fees have been paid.
Ssection 10. Rights, Duties and Immunities of Escrow Agent. Acceptance by
the Escrow Agent of its duties under this Escrow Agreement is subject to the
following terms and conditions, which all parties hereto hereby agree shall
govern and control the rights, duties and immunities of the Escrow Agent.
(a) The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions hereof and the Escrow Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set out herein. This Escrow Agreement shall not be deemed to
create a fiduciary relationship between the parties hereto under state or
federal law.
(b) The Escrow Agent shall not be responsible in any manner for the
validity or sufficiency of any property delivered hereunder, or for the
value or collectability of any note, check or other instrument so
delivered, or for any representations made or obligations assumed by any
party other than the Escrow Agent. Nothing herein contained shall be deemed
to obligate the Escrow Agent to deliver any cash, instruments, documents or
any other property referred to herein, unless the same shall have first
been received by the Escrow Agent pursuant to this Escrow Agreement.
(c) The Company shall reimburse and indemnify the Escrow Agent for,
and hold it harmless against, any loss, liability or expense, including but
not limited to counsel fees, incurred without bad faith or willful
misconduct on the part of the Escrow Agent arising out of or in conjunction
with its acceptance, or the performance, of its duties and obligations
hereunder as well as the costs and expenses of defending against any claim
or liability arising out of or relating to this Escrow Agreement.
(d) The Escrow Agent shall be fully protected in acting on and relying
upon any written notice, direction, request, waiver, consent, receipt or
other paper or document which the Escrow Agent in good faith believes to
have been signed and presented by the proper party or parties.
ESCROW AGREEMENT
5
(e) The Escrow Agent shall not be liable for any (i) error of
judgment, (ii) act done or step taken or omitted by it in good faith, (iii)
mistake in act or law, or (iv) action taken or refrained from in connection
herewith, except its own willful misconduct.
(f) The Escrow Agent may seek the advice of legal counsel in the event
of any dispute or question as to the construction of any provision hereof
or its duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in good
faith in accordance with the opinion of such counsel.
(g) The agreements set forth in this Section 10 shall survive the
termination hereof and the payment of all amounts hereunder.
Section 11. Resignation of Escrow Agent. The Escrow Agent shall have the
right to resign upon thirty (30) days written notice to the Company and the
Bank. In the event of such resignation, the Bank shall appoint a successor
escrow agent hereunder by delivering to the Escrow Agent a written notice of
such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to
the designated successor escrow agent all money and other property held
hereunder and shall thereupon be released and discharged from any and all
further responsibilities whatsoever hereunder; provided, however, that the
Escrow Agent shall not be deprived of its compensation earned prior to such
time. If no successor Escrow Agent shall have been designated by the date
specified in the notice of the Escrow Agent, all obligations of the Escrow Agent
hereunder shall nevertheless cease and terminate. Its sole responsibility
thereafter shall be to keep safely all property then held by it and to deliver
the same to the Bank.
Section 12. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing and
telecopied, telegraphed, cabled, mailed or delivered, addressed to the parties
at the addresses set forth herein or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, 5
Business Days after the date deposited in the mails, postage prepaid, in each
case given or addressed as aforesaid.
Section 13. Successors and Assigns; Assignment. This Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 14. Amendments, Etc. Any provision hereof may be amended or
modified only by an instrument in writing signed by each of the parties hereto.
Section 15. Governing Law; Submission to Jurisdiction. This Escrow
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts to be performed
entirely within the State of New York, without reference to or application of
rules or principles of conflicts of law. Each of the parties hereto
ESCROW AGREEMENT
6
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State Court
sitting in New York City for the purposes of all legal proceedings arising out
of or relating to this agreement or the transactions contemplated hereby. Each
of the parties hereto irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 16. Captions. The captions and section headings contained in this
Escrow Agreement are included solely for convenience or reference and shall not
affect the meaning or interpretation of any provision hereof.
Section 17. Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Escrow
Agreement.
Section 18. Counterparts. This Escrow Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Escrow Agreement
by signing any such counterpart.
Section 19. Severability. If any provision hereof is invalid and
unenforceable in any applicable jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Bank in order to carry out the intentions of the parties hereto as nearly as may
be possible and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
-------------------------------------
ESCROW AGREEMENT
7
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be duly executed as of the day and year first above written.
CYGNE DESIGNS, INC.
By /s/ XXX X. XXXXX
------------------------------
Name: Xxx X. Xxxxx
Title: Vice President--Finance
Address for Notices:
0000 Xxxxxxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000
CYGNE GROUP (F.E.) LIMITED
By /s/ XXX X. XXXXX
------------------------------
Name: Xxx X. Xxxxx
Title: Director
Address for Notices:
0000 Xxxxxxxx - 0xx Xxxxx
Xxx Xxxx, XX 00000
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, NEW YORK BRANCH
By /s/ XXX XXXXXX
------------------------------
Name: Xxx Xxxxxx
Title: Vice President
Address for Notices:
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: NYK CBU TRS
MARINE MIDLAND BANK, as Escrow Agent
By /s/ XXXXX XXXXXXX
------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
Address for Notices:
Corporate Trust Services
000 Xxxxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
ESCROW AGREEMENT
