==============================================================================
As filed with the Securities and Exchange Commission on July 17, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Abercrombie & Fitch Co.
(Exact name of Registrant as specified in its charter)
Delaware 5651 31-1469076
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
Four Limited Parkway
Reynoldsburg, Ohio 43068
(614) 577-6500
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Samuel P. Fried
Three Limited Parkway
Columbus, Ohio 43230
(614) 479-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Jeffrey Small Jean E. Hanson
Davis Polk & Wardwell Fried, Frank, Harris, Shriver & Jacobson
450 Lexington Avenue One New York Plaza
New York, New York 10017 New York, New York 10004
(212) 450-4000 (212) 859-8000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and the list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==============================================================================
Title of Each Class of Proposed Maximum Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------
Class A Common Stock, par value
$0.01 per share $125,000,000 (2) $43,104
==============================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) The amount of Class A Common Stock registered also includes any shares
of Class A Common Stock initially offered or sold outside the United
States and Canada that are thereafter sold or resold in the United
States. Offers and sales of Class A Common Stock outside the United
States and Canada are not covered by this Registration Statement.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
==============================================================================
SUBJECT TO COMPLETION, DATED JULY 17, 1996
Shares
Abercrombie & Fitch
Class A Common Stock
(par value $0.01 per share)
Of the shares of Class A Common Stock offered by
Abercrombie & Fitch Co., shares are being offered hereby in the
United States by the U.S. Underwriters and shares are being offered
in a concurrent international offering outside the United States by the
International Underwriters. The initial public offering price and the
aggregate underwriting discount per share will be identical for both
Offerings. See "Underwriting".
The Company is currently wholly owned by The Limited, Inc. and,
upon completion of the Offerings, The Limited, Inc. will beneficially own 100%
of the Company's outstanding Class B Common Stock, which will represent
approximately % of the economic interest (or rights of holders of common
equity to participate in distributions in respect of the common equity) in the
Company ( % if the Underwriters' over-allotment options are exercised in
full). See "Risk Factors -- Control by The Limited".
Holders of Class A Common Stock generally have identical rights
to holders of Class B Common Stock, except that holders of Class A Common
Stock are entitled to one vote per share while holders of Class B Common Stock
are entitled to three votes per share on all matters submitted to a vote of
shareholders. Holders of Class A Common Stock are generally entitled to vote
with the holders of Class B Common Stock as one class on all matters as to
which the Class B Common Stock is entitled to vote. Following the Offerings,
the shares of Class B Common Stock held by The Limited, Inc. will represent
approximately % of the combined voting power of all classes of voting stock
( % if the Underwriters' over-allotment options are exercised in full) and
will be able, among other things, to elect all of the Company's directors, to
approve or disapprove amendments to the Company's Certificate of Incorporation
and Bylaws, acquisitions and dispositions of assets, mergers and other control
decisions and to control the Company's dividend policy and access to capital.
Each share of Class B Common Stock is convertible into one share of Class A
Common Stock at the option of The Limited, Inc. See "Relationship with The
Limited" and "Description of Capital Stock".
Prior to the Offerings, there has been no public market for the
Class A Common Stock. It is currently estimated that the initial public
offering price per share will be between $ and $ . For
factors to be considered in determining the initial public offering price, see
"Underwriting".
SEE "RISK FACTORS" ON PAGE 10 OF THIS PROSPECTUS FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK,
INCLUDING CERTAIN DEEMED CONSENTS OF INVESTORS TO PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION (A COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART) THAT MAY LIMIT
THE FIDUCIARY DUTIES AND, AS A RESULT, THE LIABILITY OF DIRECTORS AND OFFICERS
OF THE COMPANY TO SHAREHOLDERS. AMONG OTHER THINGS, AN INVESTOR IN CLASS A
COMMON STOCK IS DEEMED TO HAVE CONSENTED TO PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION WHICH PERMIT THE OFFICERS AND DIRECTORS OF THE
COMPANY, THE LIMITED, INC. AND CERTAIN SUBSIDIARIES OF THE LIMITED, INC. TO
ALLOCATE CORPORATE OPPORTUNITIES TO THE COMPANY, THE LIMITED, INC. OR SUCH
SUBSIDIARIES AS SUCH OFFICERS OR DIRECTORS DEEM APPROPRIATE.
Application will be made for approval of the listing of the
Class A Common Stock on the New York Stock Exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Initial Public Underwriting Proceeds to
Offering Price Discount(1) Company(2)
-------------- ------------ -----------
Per Share........... $ $ $
Total(3)............ $ $ $
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting estimated expenses of $ payable by the
Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares of Class A Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. If such options are exercised in
full, the total initial public offering price, underwriting discount
and proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting".
The shares offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York, on or about , 1996, against payment therefor in
immediately available funds.
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Montgomery Securities
J.P. Morgan & Co.
---------------
The date of this Prospectus is , 1996.
[PICTURES]
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE CLASS A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Prospectus. As used herein, unless the context otherwise requires, the
"Company" or "Abercrombie & Fitch" means Abercrombie & Fitch Co. and its
subsidiaries (which, prior to the formation of the Company on June 26, 1996,
are referred to herein as the "Abercrombie & Fitch Business"), and "The
Limited" means The Limited, Inc. and its subsidiaries (other than the
Company). Unless indicated otherwise, the information contained in this
Prospectus assumes that the Underwriters do not exercise their over-allotment
options. Except as otherwise specified, references herein to years are to the
Company's fiscal year, which ends on the Saturday closest to January 31 in the
following calendar year. For example, "1995" refers to the fiscal year ended
February 3, 1996. All fiscal years for which financial information is included
in this Prospectus had 52 weeks, except 1995 which had 53 weeks. All
references to "dollars" or "$" are to U.S. dollars. Unless otherwise defined
herein, capitalized terms used in this summary have the meanings ascribed to
them elsewhere in this Prospectus. Prospective investors should carefully
consider the information set forth under the heading "Risk Factors".
The Company
Abercrombie & Fitch is a rapidly growing specialty retailer of
high-quality, casual apparel for men and women approximately 15 to 50 years
of age. The Company's net sales have increased from $85.3 million in 1992 to
$235.7 million in 1995, representing a compound annual growth rate of 40.3%.
During this time, operating income has improved from an operating loss of
$10.2 million in 1992 to operating income of $23.8 million in 1995, while the
number of Abercrombie & Fitch stores in operation more than doubled,
increasing from 40 at the end of 1992 to 100 at the end of 1995. The Company
plans to continue this new store expansion program by opening 30 new stores in
1996 and by increasing the number of stores in operation by approximately 20%
annually for the next several years thereafter.
The Abercrombie & Fitch brand was established in 1892 and
became well known as a supplier of rugged, high-quality outdoor gear. Famous
for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the
expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch
goods were renowned for their durability and dependability--and Abercrombie &
Fitch placed a premium on complete customer satisfaction with each item sold.
In 1992, a new management team began repositioning Abercrombie & Fitch as a
more fashion-oriented casual apparel business directed at men and women with a
youthful lifestyle. In reestablishing the Abercrombie & Fitch brand, the
Company combined its historical image for quality with a new emphasis on
casual American style and youthfulness. The Company believes that this
strategic decision has contributed to the strong growth and improved
profitability it has experienced since 1992.
Business Strengths
The Company believes that certain business strengths have
contributed to its success in the past and will enable it to continue growing
profitably.
Established and Differentiated Lifestyle Brand. Abercrombie & Fitch has
created a focused and differentiated brand image based on quality,
youthfulness and classic American style. This image is consistently
communicated through all aspects of the Company's business, including
merchandise assortments, in-store marketing and print advertising. The
Company believes that the strength of the Abercrombie & Fitch brand
provides opportunities for increased penetration of current merchandise
categories and entry into new product categories.
Broad and Growing Appeal. The Company's merchandise assortment appeals
to a broad range of customers with varying ages and income levels. The
Company believes that both men and women interested in casual, classic
American fashion are attracted to the Abercrombie & Fitch lifestyle image.
The Company also believes that the brand's broad appeal has been augmented
by, and should continue to benefit from, the current trend in fashion
toward casual apparel.
Proven Management Team. Since the current management team assumed
responsibility in 1992, the Company has increased the level of brand
awareness and consistently reported improved financial results. In
addition, the Company's senior management has significant experience, with
an aggregate of over one hundred years in the retail business. The Company
believes that management's substantial experience and demonstrated track
record of highly profitable growth strongly positions the Company for the
future.
Consistent Store Level Execution. Abercrombie & Fitch believes that a
major element of its success is the consistent store level execution of its
brand strategy. Store presentation is tightly controlled by the Company and
is based on a detailed and comprehensive store plan regarding visual
merchandising, marketing and fixtures to ensure that all stores provide a
consistent portrayal of the brand. Store associates are trained as "brand
representatives" who convey and reinforce the brand image through their
attitude and enthusiasm.
Quality. Since its founding over 100 years ago, Abercrombie & Fitch has
maintained a strong reputation for quality. This reputation has been
enhanced in recent years as management has made quality a defining element
of the brand. The Company sources high quality natural fabrics from around
the world and uses distinctive trim details and specialized washes to
achieve a unique style and comfort in its products. As part of this focus
on quality, the Company establishes on-going relationships with key
factories to ensure reliability and consistency in production.
Internal Design and Merchandising Capabilities. The cornerstone of the
Company's business is its ability to design products which embody the
Abercrombie & Fitch image. Abercrombie & Fitch develops substantially all
of its merchandise line through its own design group, which allows it to
develop exclusive merchandise and offer a consistent assortment within a
season and from year to year. In addition, because the Company's
merchandise is sold exclusively in its own stores, Abercrombie & Fitch is
able to control the presentation and pricing of its merchandise, provide a
higher level of customer service and closely monitor retail sell-through,
which provides competitive advantages over other brand manufacturers that
market their goods through department stores.
Relationship with The Limited. Unlike most high growth, specialty
apparel retailers, Abercrombie & Fitch directly benefits from the resources
and expertise of a major retailer such as The Limited. Abercrombie & Fitch
has been able to concentrate the efforts of its management team and
associates on strengthening its brand image by taking advantage of The
Limited's capabilities in the areas of real estate negotiation and
acquisition, central distribution, sourcing, store design and construction
and general corporate services. The Company will continue to receive such
services after the Offerings pursuant to agreements to be entered into with
The Limited. See "Relationship with The Limited".
Growth Strategy
The Company has implemented a growth strategy designed to
permit Abercrombie & Fitch to capitalize on its business strengths. The
Company plans to continue its store expansion program by opening 30 new stores
in 1996 and increasing the number of stores in operation by approximately 20%
annually for the next several years thereafter. While substantially all
stores to be opened in 1996 will be in regional shopping malls, the Company
believes that selected street locations in university and high-traffic urban
settings also provide attractive expansion opportunities. In addition,
Abercrombie & Fitch believes that there are opportunities to expand its
customer base and enhance the productivity of its stores through further
penetration of existing merchandise categories and the introduction of new
classifications and categories. Products which are being introduced or
expanded in 1996 include men's and women's underwear and outerwear,
fragrances, sunglasses and decorative home accessories. The Company believes
that its internal design capability will enable it to continue to develop new
merchandise which reflects the Abercrombie & Fitch lifestyle. See
"Business--Growth Strategy".
The Company currently is wholly owned by The Limited. The
Company was incorporated in Delaware on June 26, 1996 as a holding company for
the Abercrombie & Fitch Business. The Company's principal offices are located
at Four Limited Parkway, Reynoldsburg, Ohio 43068. The Company's telephone
number is (614) 577-6500.
The Offerings(1)
Class A Common Stock Offered by the Company(2):
United States Offering........................... shares
International Offering........................... ------------- shares
Total.......................................... shares
Common Stock Outstanding After the Offerings(3):
Class A Common Stock............................. shares
Class B Common Stock............................. ------------- shares
Total.......................................... shares
Proposed New York Stock Exchange Symbol for Class
A Common Stock...................................
Use of Proceeds................................... All of the net proceeds
will be used to repay
borrowings of certain
of the Company's
subsidiaries under a
credit agreement
entered into with
certain lenders and
Chase Manhattan Bank,
as agent (the "Credit
Agreement"), which
borrowings were used to
fund a dividend to The
Limited and repay
certain obligations
owed to The Limited.
Voting Rights; Conversion......................... The holders of Class A
Common Stock, par value
$.01 per share (the
"Class A Common
Stock"), generally have
rights, including as to
dividends, identical to
those of holders of
Class B Common Stock,
par value $.01 per
share (the "Class B
Common Stock"), except
that holders of Class A
Common Stock are
entitled to one vote
per share and holders
of Class B Common Stock
are entitled to three
votes per share.
Holders of the Class A
Common Stock and Class
B Common Stock
generally vote together
as a single class,
except as otherwise
required by Delaware
law. See "Description
of Capital Stock --
Common Stock -- Voting
Rights". Under certain
circumstances, Class B
Common Stock converts
to Class A Common
Stock. See
"Relationship with The
Limited".
- -------------
(1) Does not include up to shares of Class A Common Stock that are
subject to the over-allotment options granted to the Underwriters by the
Company. See "Underwriting".
(2) Includes up to shares of Class A Common Stock reserved for purchase by
associates and directors of Abercrombie & Fitch and certain other
businesses operated by The Limited at the initial public offering price
set forth on the cover page of this Prospectus. The offerings of Class
A Common Stock by the U.S. Underwriters and the International
Underwriters are referred to herein as the "Offerings".
(3) Does not include an aggregate of shares of Class A Common Stock
reserved for issuance in respect of associate and director stock
options granted effective upon consummation of the Offerings with an
exercise price equal to the initial public offering price set forth on
the cover page of this Prospectus. See "Executive Compensation".
Dividends
The Board of Directors of the Company currently intends to
retain future earnings for the development of its business and does not
anticipate paying regular quarterly dividends on the Class A Common Stock
or the Class B Common Stock (collectively, the "Common Stock") for the
foreseeable future. Under Delaware law, the declaration of dividends is
within the discretion of the Company's Board of Directors and future
dividends, if any, will depend upon various factors, including the
Company's net income, current and anticipated cash needs and any other
factors deemed relevant by the Board of Directors. By virtue of its Common
Stock ownership, The Limited will have the ability to change the size and
composition of the Company's Board of Directors and thereby control the
payment of dividends by the Company. Pursuant to restrictions contained in
the Credit Agreement, so long as the Credit Agreement is outstanding, the
Company is prohibited from paying any dividends on its capital stock,
including the Class A Common Stock. See "Description of Certain
Indebtedness -- Credit Agreement".
Relationship with The Limited
On June 26, 1996, The Limited announced that its board of
directors had authorized the filing of a registration statement relating to an
initial public offering of common stock of a subsidiary comprised of its
Abercrombie & Fitch business. The Offerings are part of a reconfiguration
plan initiated by The Limited in 1995 in order to permit the public offering
of shares of common stock in Intimate Brands, Inc., a company consisting of
its Victoria's Secret Stores, Victoria's Secret Catalogue, Bath & Body Works,
Cacique, Penhaligon's and Gryphon businesses ("Intimate Brands"), and other
possible sales of interests in its businesses. The Limited authorized such
transactions so as to effect changes that are intended to encourage
entrepreneurial spirit, yield better performance, develop new growth
opportunities for all the businesses operated by The Limited and, at the same
time, indirectly to create new career opportunities for all of The Limited's
associates. The reconfiguration was also intended to enable certain of The
Limited's businesses to operate more independently while allowing The Limited
to focus on inventing new retail brand concepts.
The Company is currently wholly owned by The Limited. Upon
consummation of the Offerings, The Limited will own 100% of the Class B Common
Stock, which will represent approximately % of the combined voting power
of all classes of voting stock ( % if the Underwriters' over-allotment
options are exercised in full) and thus will continue to have the ability to
direct the election of all of the directors of the Company and otherwise
exercise a controlling influence over the business and affairs of the Company.
The Limited is principally engaged in the purchase, distribution and sale of
women's apparel and had 1995 net sales (including Intimate Brands and the
Abercrombie & Fitch Business) of approximately $7.9 billion. The Limited
operates, among other things, Intimate Brands, and the Express, The Limited
Stores, Lerner New York, Lane Bryant and Henri Bendel women's apparel
businesses and the Structure, The Limited Too and Galyan's retail stores.
The Limited has advised the Company that its current intent is
to continue to hold all of the Class B Common Stock beneficially owned by The
Limited. However, The Limited has no agreement with the Company not to sell
or distribute such shares and, other than pursuant to the Underwriting
Agreement described below, there can be no assurance concerning the period of
time during which The Limited will maintain its beneficial ownership of Common
Stock. The Company has agreed to use its best efforts to effect the
registration under the applicable federal and state securities laws of any of
the Class B Common Stock held by The Limited. Beneficial ownership of at
least 80% of the total voting power and value of the outstanding Common Stock
is required in order for The Limited to continue to include the Company in its
consolidated group for federal income tax purposes and ownership of at least
80% of the total voting power and 80% of each class of nonvoting capital stock
is required in order for The Limited to be able to effect a Tax-Free Spin-Off
(as hereinafter defined) of the Company. In the event The Limited decreases
its ownership below 80%, all borrowings under the Credit Agreement must be
repaid. See "Description of Certain Indebtedness -- Credit Agreement". Also,
the Company and The Limited will agree with the Underwriters not to sell or
otherwise dispose of, directly or indirectly, any shares of Common Stock (or
any security convertible into or exchangeable or exercisable for Common Stock)
for a period of 180 days after the date of this Prospectus without the prior
written consent of the Representatives of the Underwriters, subject to certain
exceptions. See "Underwriting". The Company does not intend to issue
additional shares of Class B Common Stock except in a manner which would
permit The Limited to maintain its proportional beneficial interest in the
value and voting power of the Company upon the issuance of additional shares
of Class A Common Stock. See "Relationship with The Limited -- Corporate
Agreement". The Limited has no current plans with respect to a Tax-Free
Spin-Off of Abercrombie & Fitch.
Each share of Class B Common Stock is convertible while held by
The Limited or any of its subsidiaries at such holder's option into one share
of Class A Common Stock. Any shares of Class B Common Stock transferred to a
person other than The Limited or any of its subsidiaries shall automatically
convert to shares of Class A Common Stock upon such disposition, except for a
disposition effected in connection with a transfer of Class B Common Stock to
shareholders of The Limited as a dividend intended to be on a tax-free basis
(a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986, as amended
(the "Code").
In the event of a Tax-Free Spin-Off, shares of Class B Common
Stock shall automatically convert into shares of Class A Common Stock on the
fifth anniversary of the Tax-Free Spin-Off, unless prior to such Tax-Free
Spin-Off The Limited delivers to the Company an opinion of counsel (which
counsel shall be reasonably satisfactory to the Company) to the effect that
such conversion would preclude The Limited from obtaining a favorable ruling
from the Internal Revenue Service that the distribution would be a Tax-Free
Spin-Off under the Code. If such an opinion is received, approval of such
conversion shall be submitted to a vote of the holders of Abercrombie &
Fitch's Common Stock as soon as practicable after the fifth anniversary of the
Tax-Free Spin-Off, unless The Limited delivers to the Company an opinion of
The Limited's counsel (which counsel shall be reasonably satisfactory to the
Company) prior to such anniversary that such vote would adversely affect the
status of the Tax-Free Spin-Off. Approval of such conversion will require the
affirmative vote of the holders of a majority of the shares of both the
Abercrombie & Fitch's Class A Common Stock and Class B Common Stock present and
voting, voting together as a single class, with each share entitled to one
vote for such purpose. No assurance can be given that such conversion would
be consummated. The Limited will convert its Class B Common Stock to Class A
Common Stock immediately prior to a Tax-Free Spin-Off if, after such
conversion, it would have beneficial ownership of at least 80% of the voting
power of the outstanding Common Stock. All shares of Class B Common Stock
shall automatically convert into Class A Common Stock if a Tax-Free Spin-Off
has not occurred and the number of outstanding shares of Class B Common Stock
falls below 60% of the aggregate number of outstanding shares of Common Stock.
This will prevent The Limited from decreasing its economic interest in the
Company to less than 60% while still retaining control of approximately %
of Abercrombie & Fitch's voting power. All conversions will be effected on a
share-for-share basis. For a description of other provisions governing the
conversion of Class B Common Stock, see "Description of Capital Stock --
Common Stock -- Conversion".
The requirement that The Limited retain beneficial ownership of
at least 80% of the voting power of the outstanding Common Stock after any
conversion prior to a Tax-Free Spin-Off is intended to ensure that the tax
treatment of the Tax-Free Spin-Off is preserved. Similarly, the requirement to
submit such conversion to a vote of the holders of Common Stock is intended to
preserve such tax treatment should the Internal Revenue Service challenge such
automatic conversion as violating the 80% vote requirement. Automatic
conversion of the Class B Common Stock into Class A Common Stock if a Tax-Free
Spin-Off has not occurred and The Limited decreases its economic interest in
the Company to less than 60% is intended to ensure that The Limited retains
voting control by virtue of its ownership of Class B Common Stock only if it
has a sizable economic interest in the Company. For so long as The Limited
maintains beneficial ownership of a majority of the number of outstanding
shares of Common Stock, the Company may not act in a way which may reasonably
be anticipated to result in a contravention by The Limited of (i) The
Limited's certificate of incorporation or bylaws; (ii) any credit agreement
binding upon The Limited; or (iii) any judgment, order or decree of any
governmental body having jurisdiction over The Limited.
Under agreements to be entered into between the Company and The
Limited upon consummation of the Offerings, The Limited will continue to
provide certain services to the Company and The Limited will make available
certain associate benefit plans to the Company's associates. In addition, the
Company and an affiliate of The Limited have entered into a sublease agreement
and, upon consummation of the Offerings, the Company and The Limited intend to
enter into a number of other intercompany agreements, including corporate and
tax-sharing agreements. With respect to matters covered by the services
agreement, the relationship between The Limited and Abercrombie & Fitch is
intended to continue in a manner generally consistent with past practices.
See "Relationship with The Limited". Although the Company will own all the
trademarks and service marks used in its business, for so long as the Company
remains a subsidiary of The Limited, The Limited will be entitled to use the
Company's trademarks and service marks at no cost to The Limited in The
Limited's annual report to shareholders and publicity material and for other
similar purposes.
Abercrombie & Fitch and certain of its subsidiaries are
currently subject to intercompany obligations to The Limited in an aggregate
principal amount of $53.1 million. Such indebtedness will remain outstanding
after consummation of the Offerings, of which $50 million is evidenced by a
note (the "Mirror Note") that represents Abercrombie & Fitch's share of
certain long-term debt of The Limited and $3.1 million is evidenced by a
note (the "Working Capital Note") payable to The Limited on January 31,
1997. The long-term Mirror Note bears interest at the rate of 7.80% per
annum and matures on May 15, 2002, paralleling the terms of the
corresponding debt of The Limited. The Working Capital Note bears interest
at a rate of 6.75% per annum. See "Capitalization" and "Description of
Certain Indebtedness -- Intercompany Debt".
SUMMARY FINANCIAL AND OPERATING DATA
Set forth below is summary historical financial and operating
data for the periods indicated for the Abercrombie & Fitch Business. This
information should be read in conjunction with the Abercrombie & Fitch
Business' historical and pro forma consolidated financial statements and notes
thereto included elsewhere in this Prospectus, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information set forth herein. The information for fiscal years 1991
and 1992 is derived from the Abercrombie & Fitch Business' unaudited
consolidated financial statements. The selected financial data as of and for
the quarters ended April 29, 1995 and May 4, 1996 are derived from the
unaudited consolidated financial statements also appearing herein, which, in
the opinion of management, reflect all adjustments (which are of a recurring
nature) necessary to present fairly the financial position and results of
operations and cash flows for the interim periods. Results for the period
ended May 4, 1996 are not necessarily indicative of the results of operations
to be expected for the full fiscal year.
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
------------------------------------------------------------------ ----------------------
February 1, January 30, January 29, January 28, February 3, April 29, May 4,
1992 1993 1994 1995 1996(1) 1995 1996
----------- ----------- ----------- ----------- ----------- --------- ---------
(in thousands, except per share, per square foot and number of stores data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................ $ 62,583 $ 85,301 $110,952 $165,463 $235,659 $ 33,377 $ 51,020
Gross income(2).................. 9,665 13,413 30,562 56,820 79,794 8,428 14,894
General, administrative and
store operating expenses(3)..... 21,268 23,603 30,240 43,069 55,996 10,297 15,293
Operating income (loss)(4)....... (11,603) (10,190) (4,064) 13,751 23,798 (1,869) (399)
Net income (loss)................ (7,003) (6,090) (2,464) 8,251 14,298 (1,169) (199)
Pro forma net income (loss)(5)... 9,909 (3,333) (2,463)
Pro forma weighted average
number of shares(6)............
Pro forma net income (loss)
per share(5)(6).................
Balance Sheet Data:
Inventories...................... $ 11,932 $ 15,075 $ 10,052 $ 16,551 $ 30,388 $ 20,923 $ 33,042
Total assets..................... 47,967 61,626 48,882 58,018 87,693 63,663 89,717
Pro forma long-term debt (7)..... 50,000
Pro forma shareholders'
equity (deficit)(8)............. (16,820)
Other Data:
Total net sales growth........... -- 36.3% 30.1% 49.1% 42.4% 42.6% 52.9%
Gross income percentage(9)....... 15.4% 15.7% 27.5% 34.3% 33.9% 25.3% 29.2%
Operating income (loss)
percentage(9)................... (18.5%) (11.9%) (3.7%) 8.3% 10.1% (5.6%) (0.8%)
Number of stores at period end... 36 40 49 67 100 72 102
Total selling square feet........ 287 332 405 541 792 580 804
Sales per selling square foot(10) $ 261 $ 276 $ 301 $ 350 $ 354 $ 60 $ 64
</TABLE>
- ------------
(1) Represents the 53-week fiscal year ended February 3, 1996.
(2) Gross income equals net sales less cost of goods sold, occupancy and
buying costs.
(3) General, administrative and store operating expenses include charges and
allocations made by The Limited to the Abercrombie & Fitch Business.
(4) Reflects a $4.4 million nonrecurring charge in 1993. See Note 3 to the
Consolidated Financial Statements.
(5) Gives pro forma effect to the interest expense, net of tax benefit, on the
$3.1 million Working Capital Note and the long-term Mirror Note in the
amount of $50 million. Also includes the pro forma effect of interest
expense and certain fees, net of tax benefit on borrowings under the
Credit Agreement for the quarters ended April 29, 1995 and May 4, 1996
and the year ended February 3, 1996. See "Pro Forma Consolidated
Financial Statements".
(6) Pro forma net income (loss) per share is based on pro forma net income
(loss) and the weighted average number of shares of Class A and Class B
Common Stock expected to be outstanding after the Offerings. Pro forma
net income (loss) per share is not necessarily indicative of what
actual net income (loss) per share would have been if the Offerings
occurred on the basis assumed.
(7) Represents the long-term Mirror Note.
(8) Gives pro forma effect to approximately $82 million in obligations owed to
The Limited, a $27 million dividend to The Limited and the issuance and
sale of Class A Common Stock in the Offerings and the application of
the net proceeds therefrom to repay approximately $115 million of
borrowings under the Credit Agreement. See "Pro Forma Consolidated
Financial Statements".
(9) Calculated as a percentage of net sales.
(10) Sales per selling square foot is the result of dividing net sales for the
period by average selling square feet, which represents the average of
selling square feet at the beginning and end of each fiscal period.
These amounts are not adjusted to reflect the seasonal nature of the
Company's sales or the impact of opening stores in different periods
during the year. Sales per selling square foot for interim periods
are not representative of results to be expected for a full fiscal
year.
A listing of key business statistics follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
------------------------------------------------------------------ ----------------------
February 1, January 30, January 29, January 28, February 3, April 29, May 4,
1992 1993 1994 1995 1996(1) 1995 1996
----------- ----------- ----------- ----------- ----------- --------- ---------
(in thousands, except per share, per square foot and number of stores data)
<S> <C> <C> <C> <C> <C> <C> <C>
Number of stores opened during
the period........................ 10 4 9 20 33 5 2
Number of stores closed during
the period........................ 1 -- -- 2 -- -- --
Number of stores at period end..... 36 40 49 67 100 72 102
Total selling square feet (000's).. 287 332 405 541 792 580 804
Sales per selling square foot(1)... $261 $276 $301 $350 $354 $60 $64
Comparable store sales
growth(2)......................... 10% 8% 6% 15% 5% 7% 17%
</TABLE>
- ----------------
(1) See footnote 10 above.
(2) Abercrombie & Fitch includes a store in its comparable store sales
calculation at the beginning of the 53rd week of the store's operation.
Stores that are expanded or downsized more than 20% in square feet are
treated as new stores for purposes of this calculation only.
RISK FACTORS
Prior to making an investment decision, prospective investors
should carefully consider the following specific investment considerations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" for a description of other factors affecting the
business of the Company.
Consent to Limitations of Liability
The Company's Certificate of Incorporation includes provisions
relating to potential conflicts of interest that may arise between the Company
and The Limited and its subsidiaries. See "Description of Capital Stock".
The following provisions were adopted in light of the fact that
the Company and The Limited and its subsidiaries are engaged in retail
businesses and intend to enter into contracts and other arrangements after the
Offerings. To date, the Company and The Limited have not adopted any formal
procedures designed to resolve potential conflicts of interest between the two
companies. The Company intends to develop procedures to address such
conflicts. The precise nature of any conflict resolution procedures will be
determined in light of, among other things, the nature of the conflict being
addressed. Any person purchasing or acquiring an interest in shares of
capital stock of the Company, including the Underwriters, will be deemed to
have consented to such provisions relating to conflicts of interest and
corporate opportunities, and such consent may restrict such person's ability
to challenge transactions carried out in compliance with such provisions. In
addition, the Company intends to disclose the existence of such provisions in
its Annual Reports on Form 10-K as well as in certain other filings with the
Securities and Exchange Commission (the "Commission"). The certificate of
incorporation of The Limited does not include comparable provisions relating
to conflicts of interest or corporate opportunities.
The enforceability of the provisions discussed below under
Delaware corporate law has not been established and, due to the absence of
relevant judicial authority, counsel to the Company is not able to deliver an
opinion as to the enforceability of such provisions. Whether or not such
provisions are held to be enforceable, the Company believes its directors will
be able to fulfill their fiduciary duties to its shareholders. In addition, it
is the opinion of the Commission that any indemnification of directors,
officers or controlling persons of the Company for liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act") is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Transactions with Interested Parties
The Company's Certificate of Incorporation provides that no
contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) between the Company and The Limited or
any subsidiary of The Limited (other than the Company) or between the Company
and any entity in which a director of the Company has a financial interest (a
"Related Entity") or between the Company and any director or officer of the
Company, The Limited, any subsidiary of The Limited or any Related Entity
shall be void or voidable solely for the reason that The Limited or such
subsidiary, a Related Entity or any one or more of the officers or directors
of the Company, The Limited or such subsidiary or any Related Entity are
parties thereto, or solely because any such directors or officers are present
at, participate in or vote (which vote shall be counted) with respect to the
authorization of the contract, agreement, arrangement or transaction (or any
amendment, modification or termination thereof). Further, the Company's
Certificate of Incorporation provides that The Limited, its subsidiaries and
any Related Entity shall not be liable to the Company or its shareholders for
breach of any fiduciary duty or duty of loyalty or failure to act in (or not
opposed to) the best interests of the Company or the derivation of any
improper personal benefit by reason of the fact that The Limited, such
subsidiary or such Related Entity in good faith takes any action or exercises
any rights or gives or withholds any consent in connection with any agreement
or contract between The Limited, such subsidiary or such Related Entity and the
Company. No vote cast or other action taken by any person who is an officer,
director or other representative of The Limited, such subsidiary or such
Related Entity, which vote is cast or action is taken by such person in his
capacity as a director of the Company, shall constitute an action of or the
exercise of a right by or a consent of The Limited, such subsidiary or such
Related Entity for the purpose of any such agreement or contract.
Allocations of Corporate Opportunities
The Company's Certificate of Incorporation provides that in the
event a director, officer or associate of the Company who is also a director,
officer or associate of The Limited or its subsidiaries acquires knowledge of a
transaction or other matter that may constitute a corporate opportunity of
either or both the Company and The Limited or its subsidiaries, such corporate
opportunity may be allocated either to the Company or The Limited or its
subsidiaries as such director, officer or associate deems appropriate under
the circumstances.
Actions under Intercompany Agreements
The Company's Certificate of Incorporation limits the liability
of officers and directors of The Limited and its subsidiaries for breaches of
fiduciary duty for actions taken or omitted under certain intercompany
agreements.
Limitations on Fiduciary Duties
The Company's Certificate of Incorporation generally eliminates
the liability of directors and officers of the Company with respect to certain
matters involving The Limited and its subsidiaries, including matters that may
constitute corporate opportunities of The Limited, its subsidiaries or the
Company. These provisions of the Company's Certificate of Incorporation
eliminate certain rights that might have been available to shareholders under
Delaware law had such provisions not been included in the Certificate of
Incorporation, although the enforceability of such provisions has not been
established.
Limitation on Personal Monetary Liability, Including Gross
Negligence
Under the Company's Certificate of Incorporation, the
directors' personal monetary liability for breach of their fiduciary duty of
care, including actions involving gross negligence, will also be eliminated to
the fullest extent permitted under Delaware law.
Control by The Limited
The Limited is currently the only shareholder of the Company.
Upon completion of the Offerings, The Limited will own 100% of the
outstanding Class B Common Stock of the Company (which Class B Common Stock is
entitled to three votes per share on any matter submitted to a vote of the
Company's shareholders). The Class B Common Stock will represent approximately
% of the combined voting power of all classes of voting stock ( % if
the Underwriters' over-allotment options are exercised in full) and thus will
be able to direct the election of all of the members of the Company's Board of
Directors and exercise a controlling influence over the business and affairs
of the Company, including any determinations with respect to mergers or other
business combinations involving the Company, the acquisition or disposition of
assets by the Company, the incurrence of indebtedness by the Company, the
issuance of any additional Common Stock or other equity securities and the
payment of dividends with respect to the Common Stock. Similarly, The Limited
will have the power to determine matters submitted to a vote of the Company's
shareholders without the consent of the Company's other shareholders, will
have the power to prevent a change of control of the Company and could take
other actions that might be favorable to The Limited. The grant pursuant to
associate benefit plans of Common Stock to, or the acquisition of Common Stock
upon the exercise of stock options held by, associates of the Company would
reduce the percentage ownership and voting interest in the Company of the
public shareholders of the Company.
The Limited has advised the Company that its current intent is
to continue to hold all of the Class B Common Stock beneficially owned by it.
However, The Limited has no agreement with the Company not to sell or
distribute such shares, and, except for restrictions in the Underwriting
Agreement set forth below, there can be no assurance concerning the period of
time during which The Limited will maintain its beneficial ownership of Common
Stock. Pursuant to the Underwriting Agreement, The Limited will agree,
subject to certain exceptions, not to sell or otherwise dispose of, directly
or indirectly, any shares of Common Stock (or any security convertible into or
exchangeable or exercisable for Common Stock) owned by it for a period of 180
days after the date of this Prospectus without the prior written consent of
the Representatives of the Underwriters. The Company has agreed, at the
request of The Limited, to use its best efforts to effect the registration
under applicable federal and state securities laws of any of the Class B
Common Stock held by The Limited. Beneficial ownership of at least 80% of the
total voting power and value of the outstanding Common Stock is required in
order for The Limited to continue to include the Company in its consolidated
group for federal income tax purposes, and ownership of at least 80% of the
total voting power and 80% of each class of nonvoting capital stock is
required in order for The Limited to be able to effect a Tax-Free Spin-Off of
the Company. In the event The Limited decreases its ownership below 80%, all
borrowings under the Credit Agreement must be repaid. See "Description of
Certain Indebtedness -- Credit Agreement". Because The Limited may seek to
maintain its beneficial ownership percentage of the Company for tax planning
purposes or otherwise and may not desire to acquire additional shares of
Common Stock in connection with a future issuance of shares by the Company,
the Company may be constrained in its ability to raise equity capital in the
future or to issue Common Stock in connection with acquisitions.
For so long as The Limited maintains beneficial ownership of a
majority of the number of outstanding shares of Common Stock, the Company may
not act in a way which may reasonably be anticipated to result in a
contravention by The Limited of: (i) The Limited's certificate of
incorporation or bylaws; (ii) any credit agreement binding upon The Limited;
or (iii) any judgment, order or decree of any governmental body having
jurisdiction over The Limited.
Each member of a consolidated group for federal income tax
purposes is jointly and severally liable for the federal income tax liability
of each other member of the consolidated group. For benefit plan purposes, the
Company will be part of The Limited's controlled group, which includes The
Limited and its other subsidiaries. Under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and federal income tax law, each
member of the controlled group is jointly and severally liable for funding and
termination liabilities of tax qualified defined benefit retirement plans as
well as certain plan taxes. Accordingly, during the period in which the
Company is included in The Limited's consolidated or controlled group, the
Company could be liable under such provisions in the event any such liability
or tax is incurred, and not discharged, by any other member of The Limited's
consolidated or controlled group.
The Company's Board of Directors currently consists of three
members, two of whom serve concurrently as members of the Board of Directors
of The Limited and Intimate Brands. Mr. Leslie H. Wexner, Chairman, President
and Chief Executive Officer of The Limited, will also serve as Chairman of the
Board of the Company, and Kenneth B. Gilman, Vice Chairman of The Limited,
will also serve as Vice Chairman of the Board of the Company. In light of its
ownership of the Company's Class B Common Stock, The Limited will have the
ability to change the size and composition of the Company's Board of Directors
and committees of the Board of Directors. See "Relationship with The Limited
- -- Corporate Agreement".
Potential Conflicts of Interest
Various conflicts of interest between the Company and The
Limited could arise following completion of the Offerings.
Control of Certain Real Estate Matters
Pursuant to the terms of the services agreement to be entered
into between the Company and The Limited and consistent with past practices,
The Limited will be granted the exclusive right to negotiate all store leases
on behalf of Abercrombie & Fitch. While Abercrombie & Fitch will use The
Limited's real estate division to select store sites and negotiate leases,
Abercrombie & Fitch has the final authority to choose to accept or not to
accept a store site or lease negotiated by The Limited. Similarly, The
Limited will be entitled to allocate store space among Abercrombie & Fitch and
other retail businesses operated by The Limited. Although Abercrombie &
Fitch's management believes that this arrangement provides it with significant
advantages, it may result in conflicts of interest between the Company and The
Limited. See "Relationship with The Limited -- Services Agreement" and
"Business -- Central Real Estate Management".
Cross-Directorships and Stock Ownership
Leslie H. Wexner, Chairman of the Board, and Kenneth B. Gilman,
Vice Chairman of the Board, as well as Michael S. Jeffries, President and
Chief Executive Officer of Abercrombie & Fitch, hold shares of common stock
and options to acquire common stock of The Limited. Such shares and options
are material to the net worth of Mr. Wexner, Mr. Gilman and Mr. Jeffries. See
"Executive Compensation". Cross-directorships and ownership interests of
directors or officers of the Company in common stock of The Limited could
create or appear to create potential conflicts of interest when directors and
officers are faced with decisions that could have different implications for
the Company and The Limited. Nevertheless, the Company believes that such
directors would be able to fulfill their fiduciary duties to its shareholders.
See "Description of Capital Stock -- Certain Certificate of Incorporation and
Bylaw Provisions". The certificate of incorporation of The Limited does not
include provisions addressing these potential conflicts.
Control of Certain Personnel Matters
In an effort to promote the career development of senior
associates of The Limited's various businesses and to address its own
personnel requirements, The Limited may reassign associates from positions at
one of its businesses to positions in another business operated by The
Limited. Such assignments and reassignments are within the discretion of The
Limited and are made with a view towards optimizing the allocation of
personnel among the different businesses of The Limited. Although this
arrangement may create occasional difficulties for Abercrombie & Fitch,
Abercrombie & Fitch's management believes that providing senior managers with
opportunities for advancement at other businesses of The Limited is an
important advantage in recruiting associates. In addition, Abercrombie &
Fitch believes it has benefitted from this arrangement, as experienced
managers from other businesses operated by The Limited have been assigned to
Abercrombie & Fitch. Although The Limited has no present intention to
relocate any senior Abercrombie & Fitch merchandising personnel or other
senior executive officers from Abercrombie & Fitch to other businesses
controlled by The Limited, there can be no assurance as to future assignments
of senior associates of The Limited's other businesses to Abercrombie & Fitch
or from Abercrombie & Fitch to other businesses controlled by The Limited.
Control of Tax Matters
By virtue of its controlling beneficial ownership and the terms
of the tax-sharing agreement to be entered into between the Company and The
Limited, The Limited will effectively control all of the Company's tax
decisions. Under the tax-sharing agreement, The Limited will have sole
authority to respond to and conduct all tax proceedings (including tax audits)
relating to Abercrombie & Fitch, to file all returns on behalf of the Company
and to determine the amount of Abercrombie & Fitch's liability to (or
entitlement to payment from) The Limited under the tax-sharing agreement. See
"Relationship with The Limited--Tax-Sharing Agreement". This arrangement may
result in conflicts of interest between the Company and The Limited. For
example, under the tax-sharing agreement, The Limited may choose to contest,
compromise or settle any adjustment or deficiency proposed by the relevant
taxing authority in a manner that may be beneficial to The Limited and
detrimental to the Company. In connection therewith, however, The Limited is
obligated under the tax-sharing agreement to act in good faith with regard to
all members included in the applicable returns.
Competition with The Limited
The Limited is one of the largest specialty retailers in the
United States. The Limited is not restricted in any manner from competing with
Abercrombie & Fitch and currently markets merchandise similar to that sold by
the Company through certain of its other subsidiaries. There can be no
assurance that The Limited will not expand, through development of new lines
of products or businesses, acquisition or otherwise, its operations that
compete with Abercrombie & Fitch.
Intercompany Agreements Not Subject to Arm's-Length Negotiation
The Limited (or one or more of its subsidiaries) and the
Company have entered and intend to enter into certain intercompany agreements,
including agreements pursuant to which The Limited (or one or more of its
subsidiaries) will provide various services to Abercrombie & Fitch, and a
tax-sharing agreement, that are material to the conduct of the Company's
business. With respect to matters covered by the services agreement, the
relationship between The Limited and Abercrombie & Fitch is intended to
continue in a manner generally consistent with past practices. See
"Relationship with The Limited" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Financial Condition --
Liquidity and Capital Resources". Because Abercrombie & Fitch is a
wholly-owned subsidiary of The Limited, none of these agreements will result
from arm's-length negotiations and, therefore, the prices charged to the
Company for services provided thereunder may be higher or lower than prices
that may be charged by third parties.
Immediate and Substantial Dilution and Negative Pro Forma Net Tangible Book
Value
Purchasers of Class A Common Stock in the Offerings will
experience an immediate dilution of $ per share in the net tangible book
value of their Class A Common Stock from the estimated initial public offering
price of $ per share. Prior to completion of the Offerings, the
Company's pro forma net tangible book value per share of Common Stock will be
$ , whereas upon completion of the Offerings, it will be $ . This
will result in an increase in net tangible book value of $ per share of
Class B Common Stock that will be received by The Limited attributable to the
Offerings. Due to the negative pro forma net tangible book value of the
Company prior to the completion of the Offerings, purchasers of Class A Common
Stock in the Offerings will have paid 100% of the Company's total capital
after the Offerings while receiving only % of the economic interests
therein.
Seasonality
The Company experiences seasonal fluctuations in its net sales
and net income, with a disproportional amount of the Company's net sales and a
majority of its net income typically realized during the fourth quarter. Net
sales and net income are generally weakest during the first quarter. The
Company's quarterly results of operations may also fluctuate significantly as
a result of a variety of other factors, including the timing of new store
openings and the net sales contributed by new stores, merchandise mix and the
timing and level of markdowns. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality and Quarterly
Fluctuations".
Future Growth
Abercrombie & Fitch has grown rapidly over the past several
years. The Company's future growth prospects are dependent upon a number of
factors, including, among other things, the availability of suitable store
locations, the ability to develop new merchandise and the ability to hire and
train qualified associates. There is no assurance that the Company will be
able to continue to grow profitably. In 1995, the Company spent $22.3 million
for new stores and remodeling and expanding existing stores and anticipates
spending between $19 and $23 million in 1996 and 1997 for such capital
expenditures. The Company expects that substantially all future capital
expenditures will be funded by net cash provided by operating activities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business".
Dependence on Key Personnel
The Company believes that it has benefitted substantially from
the leadership of Leslie H. Wexner, Chairman, President and Chief Executive
Officer of The Limited and Chairman of the Board of the Company and Michael S.
Jeffries, President and Chief Executive Officer of Abercrombie & Fitch. The
loss of any of the services of these individuals could have a material adverse
effect on the Company's business and prospects. In addition, Mr. Wexner's
service as Chairman, President and Chief Executive Officer of The Limited and
Chairman of the Board of the Company may create or appear to create potential
conflicts of interest. See "-- Potential Conflicts of Interest".
Factors Affecting Abercrombie & Fitch's Business; Foreign Sourcing
Abercrombie & Fitch's business is sensitive to changes in
consumer spending patterns, consumer preferences and overall economic
conditions. In addition, Abercrombie & Fitch competes with a broad range of
other retailers, some of whom have greater financial resources than the
Company. In 1995, approximately 56% of the Company's merchandise was sourced
from independent foreign factories located primarily in the Far East. The
Company has no long-term merchandise supply contracts and many of its imports
are subject to existing or potential duties, tariffs or quotas that may limit
the quantity of certain types of goods which may be imported into the United
States from countries in that region. The Company competes with other
companies for production facilities and import quota capacity. The Company's
business is also subject to a variety of other risks generally associated with
doing business abroad, such as political instability (including issues
concerning the future of Hong Kong following the transfer of Hong Kong to The
People's Republic of China on July 1, 1997), currency and exchange risks and
local political issues. The Company's future performance will be subject to
such factors, which are beyond its control, and there can be no assurance that
such factors would not have a material adverse effect on the Company's results
of operations. See "Business -- Sourcing" and "-- Competition".
No Prior Market; Possible Volatility of Stock Price
Prior to the Offerings, there has been no public market for the
Class A Common Stock of the Company. There can be no assurance that the
initial public offering price will correspond to the price at which the Class
A Common Stock will trade in the public market subsequent to the Offerings or
that an active public market for the Class A Common Stock will develop and
continue after the Offerings. For a discussion of the factors to be
considered in determining the initial public offering price, see
"Underwriting".
Possible Future Sales of Common Stock by The Limited
Subject to applicable federal securities laws and the
restrictions set forth below in the Underwriting Agreement, The Limited may
sell any and all of the shares of Common Stock beneficially owned by it or
distribute any or all of the shares of Common Stock to its shareholders. The
Company has agreed to use its best efforts to effect the registration under
applicable federal and state securities laws of any of the Class B Common
Stock held by The Limited. See "Relationship with the Limited--Corporate
Agreement". Pursuant to the Underwriting Agreement, The Limited will agree,
subject to certain exceptions, not to sell or otherwise dispose of, directly
or indirectly, any shares of Common Stock (or any security convertible into or
exchangeable or exercisable for Common Stock) for a period of 180 days after
the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters. Sales or distributions by The Limited of
substantial amounts of Common Stock in the public market or to its
shareholders could adversely affect prevailing market prices for the Class A
Common Stock. See "Relationship with The Limited" and "Shares Eligible for
Future Sale".
Anti-Takeover Provisions
The Company's Certificate of Incorporation and Bylaws contain a
number of provisions that could impede a merger, consolidation, takeover or
other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control
of the Company. Those provisions include (i) a requirement that a vote of the
holders of at least 75% of the outstanding Common Stock is required to effect
a merger or consolidation with any person or entity owning 5% or more of the
Common Stock of the Company (an "Interested Person"), a sale of all or
substantially all of the assets of the Company to an Interested Person and
certain other control transactions; (ii) a classified board; and (iii) a
requirement that certain provisions of the Company's Certificate of
Incorporation and Bylaws may be amended, and directors may be removed, only
with the approval of the holders of at least 75% of the outstanding Common
Stock. The Limited, as owner of approximately % of the combined voting
power of all classes of voting stock, could sell or otherwise dispose of a
substantial portion of its holdings and still be able to block any merger,
consolidation, takeover or other business combination with any Interested
Person and certain other material transactions and matters. In addition, the
Company is subject to the provisions of Section 203 of the Delaware General
Corporation Law. See "Description of Capital Stock -- Certain Certificate of
Incorporation and Bylaw Provisions" and "-- The Delaware General Corporation
Law".
USE OF PROCEEDS
The estimated proceeds to the Company from the Offerings, after
the deduction of the underwriting expenses, will be $ million ($
million if the Underwriters' over-allotment options are exercised in full),
which proceeds are expected to be used to repay borrowings by subsidiaries of
the Company under the Credit Agreement previously entered into with certain
lenders and Chase Manhattan Bank, as agent. The current weighted average
effective interest rate applicable to borrowings under the Credit Agreement is
approximately 5.98% per annum. Pursuant to the Credit Agreement, which has a
scheduled final maturity of June 30, 2001, borrowings thereunder must be
repaid in an amount equal to the Excess Cash Flow (as defined therein) of the
Company, which amount will include the net proceeds of the Offerings.
Borrowings under the Credit Agreement were used to fund a dividend to The
Limited and repay certain obligations owed to The Limited.
DIVIDENDS
The Board of Directors of the Company currently intends to
retain future earnings for the development of its business and does not
anticipate paying regular quarterly dividends on the Common Stock for the
foreseeable future. Under Delaware law, the declaration of dividends is within
the discretion of the Company's Board of Directors and future dividends, if
any, will depend upon various factors, including the Company's net income,
current and anticipated cash needs and any other factors deemed relevant by
the Board of Directors. By virtue of its stock ownership, The Limited will
have the ability to change the size and composition of the Company's Board of
Directors and thereby control the payment of dividends by the Company.
Pursuant to restrictions contained in the Credit Agreement, so long as the
Credit Agreement is outstanding, the Company is prohibited from paying any
dividends on its capital stock, including the Class A Common Stock. See
"Description of Certain Indebtedness -- Credit Agreement".
DILUTION
The negative pro forma net tangible book value of the Common
Stock at , 1996 would have been $ or $ per share, based
upon shares of Class B Common Stock outstanding. Assuming the
Offerings were consummated on , 1996, after giving effect to the
issuance of shares of Class A Common Stock in the Offerings (at an
assumed initial public offering price of $ per share and after deducting
anticipated offering expenses and the underwriting discount and commissions),
the pro forma net tangible book value at , 1996 would have been $
, or $ per share. This represents an immediate increase in net
tangible book value of $ per share of Class B Common Stock to The Limited
and an immediate dilution of net tangible book value of $ per share of
Common Stock to new investors purchasing Class A Common Stock in the
Offerings. Pro forma net tangible book value per share is determined by
subtracting total liabilities from tangible assets and dividing the remainder
by the number of shares of Common Stock outstanding. The following table
illustrates this per share dilution:
Assumed initial public offering price per share.............. $
Pro forma net tangible book value per share of Common Stock
before the Offerings........................................$
Increase per share attributable to new investors(1).......... ________
Pro forma net tangible book value per share of Common
Stock after the Offerings................................... ________
Dilution per share to Class A Common Stock investors(2)...... $
- -------------------
(1) After deducting the underwriting discount and commissions and estimated
expenses of the Offerings.
(2) Dilution is determined by subtracting net tangible book value per share
after giving effect to the Offerings from the initial public offering price
paid by a new investor for a share of Class A Common Stock.
The following table summarizes, on a pro forma basis at
, 1996, the differences between the number of shares held by, the voting
rights of, the total investment in the Company of and the average cost per
share paid by The Limited and the investors purchasing shares of Class A
Common Stock in the Offerings:
<TABLE>
<CAPTION>
Shares Held Total Investment
------------------------ -----------------------------
Percentage of Percentage of Percentage of Average Cost
Number the Company Voting Rights Amount Investment Per Share
------- -------------- ------------- ------ ------------- ------------
(dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
The Limited $
New Investors
------- -------------- ------------- ------ ------------- ------------
Total 100% 100%
======= ============== ============= ====== ============= ============
</TABLE>
The foregoing tables assume no exercise of the Underwriters'
over-allotment options or any outstanding stock options. See "Executive
Compensation" for information regarding stock options.
CAPITALIZATION
The following table sets forth the historical and pro forma
(before the Offerings) capitalization of the Company as of May 4, 1996 based
on the estimated effects of the following transactions and events: (i)
transfer of certain preexisting obligations of Abercrombie & Fitch's operating
subsidiary to Abercrombie & Fitch's trademark subsidiary in the amount of $32
million (the "Trademark Obligations") by such trademark subsidiary to The
Limited and a resulting dividend to The Limited in a corresponding amount;
(ii) distribution of the long-term Mirror Note in the amount of $50 million by
Abercrombie & Fitch's operating subsidiary to The Limited and a resulting
dividend to the Limited in a corresponding amount; (iii) borrowing by two of
Abercrombie & Fitch's subsidiaries of $150 million under the Credit Agreement
and the application of such funds to repay $91 million of long-term debt owed
to The Limited, to pay a $27 million dividend to The Limited and to repay in
full the Trademark Obligations; and (iv) conversion of the remaining $3.1
million of long-term intercompany debt into the Working Capital Note. The
following table further sets forth the pro forma (after the Offerings)
capitalization of the Company as of May 4, 1996 based on (a) the
reclassification of 1,000 shares of Common Stock, par value $.10 per share,
of the Company held by The Limited into shares of Class B Common Stock;
and (b) the issuance and sale of shares of Class A Common Stock in the
Offerings and the application of the net proceeds therefrom to repay
approximately $115 million of borrowings under the Credit Agreement. The
data should be read in conjunction with the historical Consolidated
Financial Statements and notes thereto and the Pro Forma Consolidated
Financial Statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
May 4, 1996
-----------------------------------------------------
Pro forma Pro forma
before after
Historical(1) Offerings Offerings
--------------- ----------------- -----------------
(dollars in thousands)
<S> <C> <C> <C>
Short-term borrowings:
Credit Agreement(2)...................................... - $150,000 $ 35,000
- 3,074(4) 3,074(4)
--------------- ----------------- -----------------
Working Capital Note.....................................
Total short-term borrowings............................. - 153,074 38,074
Long-term Mirror Note..................................... - 50,000(5) 50,000(5)
$ 94,074 - -
--------------- ----------------- -----------------
Long-term intercompany debt(3)............................
94,074 203,074 88,074
--------------- ----------------- -----------------
Total debt..............................................
Shareholders' equity (deficit)(6):
Preferred stock, shares authorized, no shares
issued and outstanding..................................
Common stock, par value $.10 per share, 1,000 shares
authorized, 1,000 shares issued and outstanding..........
Class A Common Stock, par value $.01 per share,
shares authorized, shares issued and outstanding...
Class B Common Stock, par value $.01 per share,
shares authorized, shares issued and outstanding..
Paid-in capital........................................... 1
(22,821) (131,821) (16,820)
--------------- ----------------- -----------------
Retained earnings (deficit)...............................
Total shareholders' equity (deficit).................... (22,821) (131,820) (16,820)
--------------- ----------------- -----------------
Total capitalization.................................... $71,253 $71,254 $71,254
=============== ================= =================
</TABLE>
- --------------
(1) Represents amounts derived from the historical Consolidated Financial
Statements of the Abercrombie & Fitch Business included elsewhere in this
Prospectus.
(2) On July 2, 1996, two of Abercrombie & Fitch's subsidiaries entered into
the Credit Agreement and then on July 15, 1996 the stock of such entities
was contributed to Abercrombie & Fitch Co. See "Description of Certain
Indebtedness -- Credit Agreement".
(3) Represents long-term intercompany debt owed to The Limited.
(4) Represents the Working Capital Note, which bears interest at 6.75% per
annum and matures on January 31, 1997.
(5) Represents the long-term Mirror Note, which is Abercrombie & Fitch's share
of certain long-term debt of The Limited. See "Description of Certain
Indebtedness -- Intercompany Debt".
(6) Does not include an aggregate of shares of Class A Common Stock
reserved for issuance in respect of associate and director stock options
granted effective upon consummation of the Offerings with an exercise price
equal to the initial public offering price set forth on the cover page of
this Prospectus.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Consolidated Financial
Statements of Abercrombie & Fitch include the historical Consolidated
Financial Statements of the Abercrombie & Fitch Business (as defined in
Note 1 of the Notes to the Consolidated Financial Statements of the
Abercrombie & Fitch Business included elsewhere in this Prospectus) and
give effect to the transactions and events described in the Notes to Pro
Forma Consolidated Financial Statements as if the transactions and events
referred to therein were initiated at the beginning of the relevant fiscal
year in the case of the unaudited Pro Forma Consolidated Statements of
Operations for fiscal year 1995 and the first quarters of 1995 and 1996 and
as of May 4, 1996 in the case of the unaudited Pro Forma Consolidated
Balance Sheet.
The unaudited Pro Forma Consolidated Financial Statements give
effect to the following transactions and events: (i) transfer of the
preexisting Trademark Obligations in the amount of $32 million by Abercrombie
& Fitch's trademark subsidiary to The Limited and a resulting dividend to The
Limited in a corresponding amount; (ii) distribution of the long-term Mirror
Note in the amount of $50 million by Abercrombie & Fitch's operating
subsidiary to The Limited and a resulting dividend to The Limited in a
corresponding amount; (iii) $150 million of borrowings under the Credit
Agreement which were used to repay $91 million of long-term debt owed to The
Limited, to pay a $27 million dividend to The Limited and repay in full the
Trademark Obligations; (iv) conversion of the remaining $3.1 million of
long-term intercompany debt into the Working Capital Note; and (v) the sale and
issuance of million shares of Class A Common Stock in the Offerings
and the application of the $115 million net proceeds therefrom to repay
borrowings under the Credit Agreement.
Management believes the assumptions used provide a reasonable
basis on which to present the unaudited Pro Forma Consolidated Financial
Statements. The unaudited Pro Forma Consolidated Financial Statements should
be read in conjunction with the historical Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE COMPANY'S
RESULTS OF OPERATIONS OR THE COMPANY'S FINANCIAL POSITION HAD THE TRANSACTIONS
AND EVENTS DESCRIBED ABOVE BEEN CONSUMMATED ON THE DATES ASSUMED AND DO NOT
PROJECT THE COMPANY'S RESULTS OF OPERATIONS OR THE COMPANY'S FINANCIAL POSITION
FOR ANY FUTURE DATE OR PERIOD.
ABERCROMBIE & FITCH
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
At May 4, 1996
-----------------------------------------------------------------------------------------------
Abercrombie Pro forma Pro forma
& Fitch Abercrombie & before Adjustments after
Business(1) Fitch Co. Adjustments Offerings (8) Offerings
------------- --------------- ----------- ----------- ------------ ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.......................... $823 $1 (2) $150,000 (3) $824 $115,000 $824
(150,000) (6) (115,000)
Accounts receivable........... 3,231 3,231 3,231
Inventories................... 33,042 33,042 33,042
Store supplies................ 3,753 3,753 3,753
Deferred income taxes......... 1,208 1,208 1,208
Other......................... 261 261 261
----------- --------------- ----------- ----------
Total current assets.......... 42,318 1 42,319 42,319
Property and equipment, net.... 45,765 45,765 45,765
Deferred income taxes.......... 1,624 1,624 1,624
10 10 10
----------- --------------- ----------- ----------
Other assets...................
$89,717 $1 $89,718 $89,718
=========== =============== =========== ==========
Total assets...................
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Accounts payable.............. $4,044 $4,044 $4,044
Accrued expenses.............. 13,593 13,593 13,593
Credit agreement.............. 150,000 (3) 150,000 (115,000) 35,000
Trademark obligations......... 32,000 (4) -- --
(32,000) (6)
Working capital note.......... 3,074 (7) 3,074 3,074
Income taxes payable.......... 200 200 200
----------- --------------- ----------- ----------
Total current liabilities... 17,837 170,911 55,911
Long-term intercompany debt.... 94,074 (91,000) (6) -- --
(3,074) (7)
Long-term mirror note.......... 50,000 (5) 50,000 50,000
Other long-term liabilities.... 627 627 627
Shareholders' equity (deficit). (22,821) $1 (27,000) (6) (131,820) 115,000 (16,820)
(82,000) (4)(5)
----------- --------------- ----------- ----------
Total liabilities and
shareholders' equity
(deficit)...................... $89,717 $1 $89,718 $89,718
=========== =============== =========== ==========
</TABLE>
The accompanying notes are an integral part of the unaudited Pro
Forma Consolidated Financial Statements.
ABERCROMBIE & FITCH
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Year Ended February 3, 1996
------------------------------------------------------------
Historical Adjustments Pro forma
---------------- ------------- -----------
(in thousands, except per share amount)
<S> <C> <C> <C>
Net sales................................................ $235,659 $235,659
Cost of goods sold, occupancy and buying costs........... 155,865 155,865
---------------- ------------- -----------
Gross income............................................. 79,794 79,794
General, administrative and store operating expenses..... 55,996 55,996
---------------- ------------- -----------
Operating income......................................... 23,798 23,798
Interest expense......................................... -- $7,389 (1) 7,389
---------------- ------------- -----------
Income before income taxes............................... 23,798 (7,389) 16,409
Provision for income taxes............................... 9,500 (3,000) (2) 6,500
---------------- ------------- -----------
Net income............................................... $14,298 $(4,389) $9,909
================ ============= ===========
Pro forma net income per share........................... $===========
</TABLE>
The accompanying notes are an integral part of the unaudited Pro
Forma Consolidated Financial Statements.
ABERCROMBIE & FITCH
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter Ended May 4, 1996
-------------------------------------------------------------
Historical Adjustments Pro forma
-------------- ------------- ------------
<S> <C> <C> <C>
(in thousands, except per share amount)
Net sales................................................ $51,020 $51,020
36,126 36,126
-------------- ------------
Cost of goods sold, occupancy and buying costs...........
Gross income............................................. 14,894 14,894
General, administrative and store operating expenses..... 15,293 15,293
-------------- ------------
Operating loss........................................... (399) (399)
Interest expense......................................... -- $3,664(1) 3,664
-------------- ------------- ------------
Loss before income taxes................................. (399) (3,664) (4,063)
Benefit from income taxes................................ (200) (1,400)(2) (1,600)
-------------- ------------- ------------
$(199) $(2,264) $(2,463)
Net loss................................................. ============== ============= ============
Pro forma net loss per share............................. $
============
</TABLE>
The accompanying notes are an integral part of the unaudited Pro Forma
Consolidated Financial Statements.
ABERCROMBIE & FITCH
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter Ended April 29, 1995
--------------------------------------------------------------
Historical Adjustments Pro forma
--------------- --------------- -------------
(in thousands, except per share amount)
<S> <C> <C> <C>
Net sales................................................ $33,377 $33,377
Cost of goods sold, occupancy and buying costs........... 24,949 24,949
--------------- -------------
Gross income............................................. 8,428 8,428
General, administrative and store operating expenses..... 10,297 10,297
--------------- -------------
Operating loss........................................... (1,869) (1,869)
Interest expense......................................... -- $3,664(1) 3,664
--------------- --------------- -------------
Loss before income taxes................................. (1,869) (3,664) (5,533)
Benefit from income taxes................................ (700) (1,500)(2) (2,200)
--------------- --------------- -------------
Net loss................................................. $(1,169) $(2,164) $(3,333)
=============== =============== =============
Pro forma net loss per share............................. $
=============
</TABLE>
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The following pro forma adjustments are based on available
information and certain estimates and assumptions. Therefore, it is likely
that the actual adjustments will differ from the pro forma adjustments. The
Company believes that such assumptions provide a reasonable basis for
presenting all of the significant effects of the following transactions and
events and that the pro forma adjustments give appropriate effect to those
assumptions and are properly applied in the unaudited pro forma consolidated
financial statements.
2. Adjustments to Pro Forma Consolidated Balance Sheet
(1) Represents amounts derived from the historical Consolidated
Financial Statements of the Abercrombie & Fitch Business included elsewhere in
this Prospectus.
(2) Represents the initial capitalization of Abercrombie &
Fitch Co.
(3) Proceeds from borrowing under the Credit Agreement.
(4) Transfer of the Trademark Obligations to The Limited in the
amount of $32 million.
(5) Distribution to The Limited of the $50 million long-term
Mirror Note.
(6) To reflect the payment of the $32 million Trademark
Obligations, payment of $91 million of long-term intercompany debt owed to The
Limited and a $27 million dividend to The Limited.
(7) The conversion of $3.1 million of long-term intercompany
debt into the Working Capital Note.
(8) The issuance and sale of shares of Class A Common
Stock in the Offerings and the application of the $115 million net proceeds
therefrom to repay borrowings under the Credit Agreement.
3. Adjustments to Pro Forma Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended Quarter Ended
------------------------------------------ ---------------
February 3, 1996 April 29, 1995 May 4, 1996
---------------- -------------- ---------------
<S> <C> <C> <C>
(1) Reflects interest expense as follows:
$150 million Credit Agreement
due June 30, 2001 (a)....................... $3,068 $2,337 $2,337
$3.1 million Working Capital Note
due January 31, 1997 (b).................... 121 52 52
$50 million Mirror Note
due May 15, 2002 (c)........................ 3,900 975 975
300 300 300
---------------- -------------- ---------------
Financing fees...............................
$7,389 $3,664 $3,664
================ ============== ===============
</TABLE>
(footnotes on following page)
- -------------------
(a) Represents interest calculated at an effective rate of 6.25% on
$150 million principal outstanding for thirteen weeks for the
period indicated, provided, that the period ended February 3, 1996
includes additional interest at an effective rate of 6.25% on $35
million for a period of four months.
(b) Interest is calculated at an effective interest rate of 6.75% for
a period of seven months in the fiscal year ended February 3, 1996
and three months in the quarters ended April 29, 1995 and May 4,
1996.
(c) Interest is calculated based upon 7.80% for the period indicated.
(2) Estimated income tax effects of the pro forma adjustments at the effective
annual rate.
No adjustment has been made for additional costs of Abercrombie
& Fitch operating as a public company as management believes that the
incremental costs will not be significant. In addition, no adjustments have
been made for changes in costs from the service and lease agreements described
herein between Abercrombie & Fitch and The Limited since management believes
the aggregate net changes in costs will not be material.
SELECTED FINANCIAL DATA
Set forth below is the selected historical financial and
operating data for the periods indicated. This information should be read in
conjunction with the Abercrombie & Fitch Business' historical and pro forma
consolidated financial statements and notes thereto included elsewhere in this
Prospectus, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial information set forth herein.
The information for fiscal years 1991 and 1992 is derived from the Abercrombie
& Fitch Business' unaudited consolidated financial statements. The selected
financial data as of and for the quarters ended April 29, 1995 and May 4, 1996
are derived from the unaudited consolidated financial statements also
appearing herein, which, in the opinion of management, reflect all adjustments
(which are of a recurring nature) necessary to present fairly the financial
position and results of operations and cash flows for the interim periods.
Results for the period ended May 4, 1996 are not necessarily indicative of the
results of operations to be expected for the full fiscal year.
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
--------------------------------------------------------------------- --------------------
February 1, January 30, January 29, January 28, February 3, April 29, May 4,
1992 1993 1994 1995 1996(1) 1995 1996
------------ ----------- ------------ ----------- ----------- --------- ---------
(in thousands, except per share, per square foot and number of stores data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales...................... $62,583 $85,301 $110,952 $165,463 $235,659 $33,377 $51,020
Gross income(2)................ 9,665 13,413 30,562 56,820 79,794 8,428 14,894
General, administrative and
store operating expenses(3)... 21,268 23,603 30,240 43,069 55,996 10,297 15,293
Operating income (loss)(4)..... (11,603) (10,190) (4,064) 13,751 23,798 (1,869) (399)
Net income (loss).............. (7,003) (6,090) (2,464) 8,251 14,298 (1,169) (199)
Pro forma net income (loss)(5). 9,909 (3,333 (2,463)
Pro forma weighted average
number of shares(6)...........
Pro forma net income (loss) per
share(5)(6)...................
Balance Sheet Data:
Inventories.................... $11,932 $15,075 $10,052 $16,551 $30,388 $20,923 $33,042
Total assets................... 47,967 61,626 48,882 58,018 87,693 63,663 89,717
Pro forma long-term debt(7).... 50,000
Pro forma shareholders' equity
(deficit)(8).................. (16,820)
Other Data:
Total net sales growth......... -- 36.3% 30.1% 49.1% 42.4% 42.6% 52.9%
Gross income percentage(9)..... 15.4% 15.7% 27.5% 34.3% 33.9% 25.3% 29.2%
Operating income (loss)
percentage(9)................. (18.5%) (11.9%) (3.7%) 8.3% 10.1% (5.6%) (0.8%)
Number of stores at period end. 36 40 49 67 100 72 102
Total selling square feet...... 287 332 405 541 792 580 804
Sales per selling square foot(10) $261 $276 $301 $350 $354 $60 $64
Comparable store sales growth(11) 10% 8% 6% 15% 5% 7% 17%
</TABLE>
- --------------
(1) Represents the 53-week fiscal year ended February 3, 1996.
(2) Gross income equals net sales less cost of goods sold, occupancy and
buying costs.
(3) General, administrative and store operating expenses include charges and
allocations made by The Limited to the Abercrombie & Fitch Business.
(4) Reflects a $4.4 million nonrecurring charge in 1993. See Note 3 to the
Consolidated Financial Statements.
(5) Gives pro forma effect to the interest expense, net of tax benefit, on the
$3.1 million Working Capital Note and the long-term Mirror Note in the
amount of $50 million. Also includes the pro forma effect of interest
expense and certain fees, net of tax benefit on borrowings under the Credit
Agreement for the quarters ended April 29, 1995 and May 4, 1996 and the
year ended February 3, 1996. See "Pro Forma Consolidated Financial
Statements".
(6) Pro forma net income (loss) per share is based on pro forma net income
(loss) and the weighted average number of shares of Class A and Class B
Common Stock expected to be outstanding after the Offerings. Pro forma net
income (loss) per share is not necessarily indicative of what actual net
income (loss) per share would have been if the Offerings occurred on the
basis assumed.
(7) Represents the long-term Mirror Note.
(8) Gives pro forma effect to approximately $82 million in obligations owed to
The Limited, a $27 million dividend to The Limited and the issuance and
sale of Class A Common Stock in the Offerings and the application of the
net proceeds therefrom to repay approximately $115 million of borrowings
under the Credit Agreement. See "Pro Forma Consolidated Financial
Statements".
(9) Calculated as a percentage of net sales.
(10) Sales per selling square foot is the result of dividing net sales for
the period by average selling square feet, which represents the average of
selling square feet at the beginning and end of each fiscal period. These
amounts are not adjusted to reflect the seasonal nature of the Company's
sales or the impact of opening stores in different periods during the year.
Sales per selling square foot for interim periods are not representative
of results to be expected for a full fiscal year.
(11) Abercrombie & Fitch includes a store in its comparable store sales
calculation at the beginning of the 53rd week of the store's operation.
Stores that are expanded more than 20% in square feet are treated as new
stores for purposes of this calculation only.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of Abercrombie & Fitch's
financial condition and results of operations should be read in conjunction
with the Consolidated Financial Statements and the Pro Forma Consolidated
Financial Statements included elsewhere in this Prospectus. For the purposes
of the Management's Discussion and Analysis, unless the context otherwise
requires, the "Company" or "Abercrombie & Fitch" refers to the Abercrombie &
Fitch Business as defined in Note 1 of the Notes to the Consolidated Financial
Statements.
General
Since the current management team assumed responsibility for
Abercrombie & Fitch in 1992, the Company has consistently improved its
financial performance. In the period from 1993 to 1995, the Company increased
net sales from $111.0 million to $235.7 million and grew operating income from
$(4.1) million to $23.8 million. The strong growth during this period
resulted from expansion of the number of stores in operation and increased
comparable store sales as the Company improved its merchandise assortment and
strengthened its brand awareness. From 1993 to 1995, the Company improved
sales per selling square foot from $301 to $354. The Company has also
improved operating income as as a percent of sales from (3.7%) in 1993 to
10.1% in 1995 by increasing sales volume and gross income at a faster rate
than general, administrative and store operating expenses. The momentum
evidenced by the Company's financial performance from 1993 to 1995 continued
into 1996 as net sales, driven by 17% comparable store sales growth, increased
to $51.0 million in the first quarter of 1996 from $33.4 million in the first
quarter of 1995.
The following table sets forth, for the periods indicated, the
percentage relationship to net sales of certain items in the Company's
consolidated statements of operations for the fiscal periods shown below:
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
------------------------------------------------- -------------------------
January 29, January 28, February 3, April 29, May 4,
1994 1995 1996 1995 1996
------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, occupancy and buying 72.5 65.7 66.1 74.7 70.8
------------- ------------- ------------- ------------ ------------
costs.....................................
Gross income.............................. 27.5 34.3 33.9 25.3 29.2
General, administrative and store
operating expenses....................... 27.3 26.0 23.8 30.9 30.0
4.0 -- -- -- --
------------- ------------- ------------- ------------ ------------
Special and nonrecurring items............
Operating income (loss)................... (3.7) 8.3 10.1 (5.6) (0.8)
Provision for (benefit from) income taxes. (1.4) 3.3 4.0 (2.1) (0.4)
------------- ------------- ------------- ------------ ------------
Net income (loss)......................... (2.2)% 5.0% 6.1% (3.5)% (0.4)%
============= ============= ============= ============ ============
</TABLE>
Financial Summary
The following table sets forth certain summarized financial
data for the fiscal periods shown:
<TABLE>
<CAPTION>
Fiscal Year Ended % Change Quarter Ended
---------------------------------------- -------------- ------------------
January 29, January 28, February 3, 1993- 1994- April 29, May 4,
1994 1995 1996 1994 1995 1995 1996 % Change
----------- ------------ ----------- ------- ------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ($ in millions)...... $111.0 $165.5 $235.7 49% 42% $33.4 $51.0 53%
Increase in comparable store
sales......................... 6% 15% 5% 7% 17%
Sales increase attributable to
new and remodeled stores...... 24% 34% 37% 36% 36%
Sales per selling square foot.. $301 $350 $354 16% 1% $60 $64 7%
Sales per average store
(thousands)................... $2,493 $2,853 $2,823 14% (1%) $480 $505 5%
Average store size at period
end (selling square feet)..... 8,265 8,075 7,920 (2%) (2%) 8,056 7,882 (2%)
Selling square feet at period
end (thousands)............... 405 541 792 34% 46% 580 804 39%
Number of stores:
beginning of period..... 40 49 67 67 100
opened.................. 9 20 33 5 2
closed.................. -- (2) -- -- --
----------- ------------ ----------- ---------- -------
end of period........... 49 67 100 72 102
=========== ============ =========== ========== =======
</TABLE>
Net Sales
For the first quarter of 1996, net sales increased to $51.0
million from $33.4 million, an increase of $17.6 million, or 53%. The
increase was due to a comparable store sales increase of 17%, combined with the
addition of 30 new stores as compared to the year-earlier period. Total
selling square footage increased by 224,000 square feet, or 39%. Comparable
store sales increases were strong in both the men's and women's businesses,
with women's knits and men's pants and outerwear among the best performing
categories. Net sales per selling square foot for the total Company increased
7%.
For the 53-week fiscal year 1995, net sales were $235.7
million, an increase of 42% from $165.5 million in 1994. Sales growth came
primarily from the addition of 33 new stores, with comparable store sales
increasing 5%. Management believes that comparable store sales were
negatively affected by overall softness in the retail industry. The
fifty-third week accounted for 1.7% of the total sales increase. During 1995,
the Company allocated more selling square footage per store to women's
apparel, resulting in a significant increase in total sales of the women's
business. Significant growth was achieved in women's shirts, knits and shorts.
The total volume of the men's business increased, but to a lesser extent than
the women's business due to this reallocation. A very strong increase in
men's outerwear was partially offset by a continuing deemphasis of dress
shirts and ties as the Company previously decided such merchandise was not
consistent with the Company's focus on casual apparel. Net sales per selling
square foot for the total Company increased 1%.
In 1994, net sales increased to $165.5 million from $111.0
million, an increase of $54.5 million, or 49%. Comparable store sales
increased 15%, and there was a net increase in number of stores of 18. Square
footage increased by 136,000 selling square feet, or 34%. Sales in the
women's business more than doubled from the prior year due to a broader
merchandise assortment, particularly in women's sweaters, shorts and shirts.
The men's business achieved sales increases as a result of strong growth in
men's outerwear, knits, shorts and accessories. The increases were partially
offset by the Company's decision to deemphasize dress shirts and ties. Net
sales per selling square foot for the total Company increased 16%.
In 1993, net sales increased to $111.0 million from $85.3
million in 1992, an increase of $25.7 million, or 30%. Comparable store sales
increased 6%. Nine new stores were opened during the year, increasing the
number of stores to 49. The men's business increased primarily due to strong
increases in sport shirts, knits and outerwear. The women's business achieved
a very strong performance in women's knits, jeans and shirts, which was
somewhat offset by decreases in skirts, jackets and shorts. Net sales per
selling square foot for the total Company increased 9%.
Gross Income
In the first quarter of 1996, gross income, expressed as a
percentage of net sales, was 29.2%, which represented a 3.9% increase from the
25.3% level in the same period in 1995. The increase was attributable to
improved merchandise margins (representing gross income before the deduction
of buying and occupancy costs) and decreased buying and occupancy costs as a
percentage of net sales. Merchandise margins improved 2.4% through increased
sell-through of full-priced merchandise. Buying and occupancy costs declined
as a percentage of net sales due to favorable expense leveraging associated
with increased comparable store sales.
In 1995, gross income, expressed as a percentage of net sales,
was 33.9%, which represented a 0.4% decrease from the 34.3% level in 1994.
The decrease was primarily attributable to an increase in buying and occupancy
cost of 1.3% which represented asset writeoffs associated with the renovation
and relocation of two stores. Merchandise margins were up slightly for the
period.
In 1994, gross income, expressed as a percentage of net sales,
was 34.3%, which represented a 6.8% increase from the 27.5% level in 1993.
Merchandise margins improved 4.2% from the previous year due to higher initial
markups (IMU) and fewer markdowns. Buying and occupancy costs as a percentage
of net sales declined 2.3% as a result of strong comparable store net sales
growth and a 16% increase in net sales per selling square foot.
In 1993, gross income, expressed as a percentage of net sales,
was 27.5%, which represented an 11.8% increase from the level in 1992.
Merchandise margins improved 10.4% as the Company incurred fewer markdowns and
significantly increased IMU.
General, Administrative and Store Operating Expenses
General, administrative and store operating expenses, expressed
as a percentage of net sales, were 30.0% in the first quarter of 1996 and
30.9% in the comparable period in 1995. The decline is attributable to the
strong comparable store sales growth, together with improved management of
store payrolls.
General, administrative and store operating expenses, expressed
as a percentage of net sales, were 23.8%, 26.0% and 27.3% for 1995, 1994 and
1993, respectively. The improvement during the three-year period resulted
from management's continued emphasis on expense control and the favorable
leveraging of store and home office expenses over higher sales volume.
Additionally, improvements have been made to increase the distribution center
productivity and as a result, the cost of operating the distribution center
has declined, as a percentage of net sales, each year.
Special and Nonrecurring Items
As described in Note 3 to the Consolidated Financial Statements
appearing elsewhere herein, in 1993 the Company participated in The
Limited's plan which provided for the closure, downsizing and remodeling of
under-performing stores of the Company. In developing the plan, specific
stores were identified based upon a number of criteria, including the
quality and location of the real estate, historical financial results,
other business factors and management's assessment of future potential. A
total of seven under-performing stores were identified for this plan. The
Company continuously evaluates its stores against these criteria, and
charges for stores that meet the criteria for downsizing or closing are
taken in the appropriate period. There are no stores currently operated by
the Company that have been identified for downsizing or closure based upon
the program's criteria. The provision for store closure, downsizing and
remodeling aggregated approximately $4.4 million and includes the net book
value of abandoned fixed assets and lease termination payments. There was
no material cash outflow as a result of the charge. The Company completed
the program on October 28, 1995.
Operating Income
The improvement in operating income, as a percentage of net
sales, for the quarter ended May 4, 1996 to (0.8%) compared to (5.6%) in the
same period last year is a result of both higher gross income and reduced
general, administrative and store operating expenses as a percentage of net
sales.
Operating income, as a percentage of net sales, was 10.1%, 8.3%
and (3.7%) for 1995, 1994 and 1993, respectively. Operating income improved
from a loss in 1993 as higher merchandise margins were coupled with lower
general, administrative and store operating expenses as a percentage of net
sales. Sales volume and gross income have increased at a faster rate than
general, administrative and store operating expenses as the Company continues
to emphasize cost controls.
Foreign Sourcing and International Expansion
The Company sources a substantial amount of its merchandise from
independent foreign factories located primarily in the Far East. The
Company's business is subject to a variety of risks generally associated
with doing business abroad, such as political instability, currency and
exchange risks and local political issues. The Company has no long-term
merchandise supply contracts and many of its imports are subject to
existing or potential duties, tariffs or quotas that may limit the quantity
of certain types of goods which may be imported into the United States from
countries in that region. The Company's future performance will be subject
to such factors, which are beyond its control, and there can be no
assurance that such factors would not have a material adverse effect on the
Company's results of operations.
Seasonality and Quarterly Fluctuations
As illustrated in the table below, the Company's business is
highly seasonal, with significantly higher sales, gross income and net income
realized during the fourth quarter, which includes the Christmas selling
season. See "Risk Factors--Seasonality".
(dollars in thousands)
1994 Quarter First Second Third Fourth
- -------------------- ------------ ----------- ------------ ------------
Net sales........... $ 23,399 $ 29,045 $ 38,584 $ 74,435
% of full year..... 14.1% 17.6% 23.3% 45.0%
Gross income........ $ 5,643 $ 8,285 $ 11,815 $ 31,077
% of full year..... 9.9% 14.6% 20.8% 54.7%
Net income (loss)... $ (1,225) $ (530) $ 466 $ 9,540
% of full year..... (14.8%) (6.4%) 5.6% 115.6%
(dollars in thousands)
1995 Quarter First Second Third Fourth
- -------------------- ------------ ----------- ------------ ------------
Net sales........... $ 33,377 $ 38,668 $ 57,222 $ 106,392
% of full year..... 14.2% 16.4% 24.3% 45.1%
Gross income........ $ 8,428 $ 12,023 $ 19,503 $ 39,840
% of full year..... 10.6% 15.1% 24.4% 49.9%
Net income (loss)... $ (1,169) $ 250 $ 2,583 $ 12,634
% of full year..... (8.2%) 1.7% 18.1% 88.4%
Financial Condition
The Company's consolidated balance sheet at May 4, 1996
provides continuing evidence of financial strength and flexibility. A more
detailed discussion of liquidity, capital resources and capital requirements
follows:
Liquidity and Capital Resources
Net cash used for operating activities totaled $(6.8) million
in the first quarter of 1996 and $(9.3) million in the comparable period in
1995. This is the result of a reduction in the first quarter's net loss and
the fact that net cash used for inventories declined $1.7 million due to the
timing of Spring merchandise deliveries in 1996 versus 1995.
Net cash provided by operating activities totaled $12.7
million, $20.2 million and $20.6 million for 1995, 1994 and 1993,
respectively.
Net income increased consistently over the period while
inventory levels also increased. Inventories increased 84% to $30.4 million
in 1995 and 65% to $16.6 million in 1994, supporting the sales growth in those
periods. Due to the Company's timing of payments, accounts payables increased
only slightly over each of the three fiscal years, despite the increase in
inventory. In addition, as more fully described in Note 3 to the Consolidated
Financial Statements appearing elsewhere herein, the Company recorded a $4.4
million charge in 1993 related to special and nonrecurring items.
Investing activities include capital expenditures, primarily
for new, relocated and expanded stores.
Financing activities were primarily due to intercompany
transactions as discussed in Note 8 to the Consolidated Financial Statements
appearing elsewhere herein.
Abercrombie & Fitch's operations are seasonal in nature and are
comprised of two principal selling seasons: Spring (the first and second
quarters) and Fall (the third and fourth quarters), with the fourth quarter,
including the holiday season, accounting for approximately 45% of net sales in
each of the last two years. Accordingly, cash requirements are highest in the
third quarter as the Company's inventory builds in anticipation of the holiday
selling season.
Historically, the Company has participated in The Limited's
centralized cash management system whereby cash received from operations is
transferred to The Limited's centralized cash accounts and cash disbursements
are funded from the centralized cash accounts on a daily basis. See
"Relationship with The Limited". The receipt and disbursement of cash is
tracked in an intercompany cash management account. Accordingly, cash
requirements for operating purposes during the year and for capital
expenditures were met from this source. The Company will continue to utilize
the centralized cash management system after the consummation of the
Offerings. At July 11, 1996, after the initial capitalization of Abercrombie
& Fitch, the intercompany cash management account became an interest earning
asset or interest bearing liability of the Company, depending on the level of
cash receipts and disbursements. Interest on this intercompany cash
management account is calculated based on the Federal Reserve AA composite
30-day rate. After the consummation of the Offerings and use of the net
proceeds therefrom as described elsewhere herein, the Company's capitalization
on a pro forma basis will include the long-term Mirror Note in the amount of
$50 million, the $3.1 million Working Capital Note and $(16.8) million of
shareholders' equity (deficit). Management believes cash flow from operations
will be sufficient to service debt, finance capital expenditures and meet
working capital needs. Management believes that initially, due to seasonal
working capital needs, the Company will be in a liability and interest paying
status with respect to the intercompany cash management account, but that by
the end of 1996 it will be in an asset and interest earning position.
Management believes the availability of funds from The Limited and credit risk
of The Limited do not pose significant risks to the Company.
Capital Expenditures
Capital expenditures, primarily for new and remodeled stores,
amounted to $1.3 million in the first quarter of 1996 and $2.8 million in the
comparable period in 1995. Capital expenditures amounted to $24.5 million,
$12.6 million and $4.7 million for 1995, 1994 and 1993, respectively, of which
$22.3 million, $11.6 million and $4.5 million, respectively, was for new
stores and remodeling and expanding existing stores.
The Company has announced its intention to open approximately
30 new stores and to remodel one store in 1996, which would add approximately
250,000 square feet of selling space and represent a 32% increase over
year-end 1995. The Company anticipates spending $21 to $25 million for
capital expenditures in 1996, of which $19 to $23 million will be for new
stores, the relocation and expansion of existing stores and related
improvements. The Company anticipates spending $20 to $24 million in 1997 for
capital expenditures, of which $19 to $23 million will be for new stores, the
relocation and expansion of existing stores and related improvements. The
Company expects that substantially all future capital expenditures will be
funded by net cash provided by operating activities.
Impact of Inflation
The Company's results of operations and financial condition are
presented based upon historical cost. While it is difficult to accurately
measure the impact of inflation due to the imprecise nature of the estimates
required, the Company believes that the effects of inflation, if any, on its
results of operations and financial condition have been minor.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
The Company cautions that any forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995)
contained in this Prospectus or made by management of the Company involve risks
and uncertainties, and are subject to change based on various important
factors. The following factors, among others, in some cases have affected and
in the future could affect the Company's financial performance and actual
results and could cause actual results for 1996 and beyond to differ
materially from those expressed or implied in any such forward-looking
statements: changes in consumer spending patterns, consumer preferences and
overall economic conditions, the impact of competition and pricing, changes in
weather patterns, political stability, currency and exchange risks and changes
in existing or potential duties, tariffs or quotas, availability of suitable
store locations at appropriate terms, ability to develop new merchandise and
ability to hire and train associates.
BUSINESS
Abercrombie & Fitch is a rapidly growing specialty retailer of
high-quality, casual apparel for men and women approximately 15 to 50 years
of age. The Company's net sales have increased from $85.3 million in 1992 to
$235.7 million in 1995, representing a compound annual growth rate of 40.3%.
During this time, operating income has improved from an operating loss of
$10.2 million in 1992 to operating income of $23.8 million in 1995, while the
number of Abercrombie & Fitch stores in operation more than doubled,
increasing from 40 at the end of 1992 to 100 at the end of 1995. The Company
plans to continue this new store expansion program by opening 30 new stores in
1996 and by increasing the number of stores in operation by approximately 20%
annually for the next several years thereafter.
The Abercrombie & Fitch brand was established in 1892 and
became well known as a supplier of rugged, high-quality outdoor gear. Famous
for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the
expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch
goods were renowned for their durability and dependability--and Abercrombie &
Fitch placed a premium on complete customer satisfaction with each item sold.
In 1992, a new management team began repositioning Abercrombie & Fitch as a
more fashion-oriented casual apparel business directed at men and women with a
youthful lifestyle. In reestablishing the Abercrombie & Fitch brand, the
Company combined its historical image for quality with a new emphasis on casual
American style and youthfulness. The Company believes that this strategic
decision has contributed to the strong growth and improved profitability it
has experienced since 1992.
Industry sources estimate that the men's and women's apparel
market generated approximately $127 billion in retail purchases in 1995.
These sources estimate that men's and women's apparel total sales volume grew
at a compound annual rate of approximately 3.9% between 1992 and 1995.
Abercrombie & Fitch's compound annual growth of 40.3% during this period has
outpaced that of the industry. The Company believes that the size of
Abercrombie & Fitch's market, coupled with its business strengths and growth
strategies, should provide significant opportunities for growth and increased
market share in the future.
Business Strengths
The Company believes that certain business strengths have
contributed to its success in the past and will enable it to continue growing
profitably.
Established and Differentiated Lifestyle Brand. Abercrombie & Fitch has
created a focused and differentiated brand image based on quality,
youthfulness and classic American style. This image is consistently
communicated through all aspects of the Company's business, including
merchandise assortments, in-store marketing and print advertising. The
Company believes that the strength of the Abercrombie & Fitch brand
provides opportunities for increased penetration of current merchandise
categories and entry into new product categories.
Broad and Growing Appeal. The Company's merchandise assortment appeals
to a broad range of customers with varying ages and income levels. The
Company believes that both men and women interested in casual, classic
American fashion are attracted to the Abercrombie & Fitch lifestyle image.
The Company also believes that the brand's broad appeal has been augmented
by, and should continue to benefit from, the current trend in fashion
toward casual apparel.
Proven Management Team. Since the current management team assumed
responsibility in 1992, the Company has increased the level of brand
awareness and consistently reported improved financial results. In
addition, the Company's senior management has significant experience, with
an aggregate of over one hundred years in the retail business. The Company
believes that management's substantial experience and demonstrated track
record of highly profitable growth strongly positions the Company for the
future.
Consistent Store Level Execution. Abercrombie & Fitch believes that a
major element of its success is the consistent store level execution of its
brand strategy. Store presentation is tightly controlled by the Company and
is based on a detailed and comprehensive store plan regarding visual
merchandising, marketing and fixtures to assure that all stores provide a
consistent portrayal of the brand. Store associates are trained as "brand
representatives" who convey and reinforce the brand image through their
attitude and enthusiasm.
Quality. Since its founding over 100 years ago, Abercrombie & Fitch has
maintained a strong reputation for quality. This reputation has been
enhanced in recent years as management has made quality a defining element
of the brand. The Company sources high quality natural fabrics from around
the world and uses distinctive trim details and specialized washes to
achieve a unique style and comfort in its products. As part of this focus
on quality, the Company establishes on-going relationships with key
factories to ensure reliability and consistency of production.
Internal Design and Merchandising Capabilities. The cornerstone of the
Company's business is its ability to design products which embody the
Abercrombie & Fitch image. Abercrombie & Fitch develops substantially all
of its merchandise line through its own design group, which allows it to
develop exclusive merchandise and offer a consistent assortment within a
season and from year to year. In addition, because the Company's
merchandise is sold exclusively in its own stores, Abercrombie & Fitch is
able to control the presentation and pricing of its merchandise, provide a
higher level of customer service and closely monitor retail sell-through,
which provides competitive advantages over other brand manufacturers that
market their goods through department stores.
Relationship with The Limited. Unlike most high growth, specialty
apparel retailers, Abercrombie & Fitch directly benefits from the resources
and expertise of a major retailer such as The Limited. Abercrombie & Fitch
has been able to concentrate the efforts of its management team and
associates on strengthening its brand image by taking advantage of The
Limited's capabilities in the areas of real estate negotiation and
acquisition, central distribution, sourcing, store design and construction
and general corporate services. The Company will continue to receive such
services after the Offerings pursuant to agreements to be entered into with
The Limited. See "Relationship with The Limited".
Growth Strategy
The Company has implemented a growth strategy designed to
permit Abercrombie & Fitch to capitalize on its business strengths. The
principal elements of the Company's growth strategy are summarized below:
New Store Growth. Beginning in 1993, the Company began its store
expansion program, opening 9, 20 and 33 stores in 1993, 1994 and 1995,
respectively. The Company plans to continue this store expansion program
by opening 30 new stores in 1996 and increasing the number of stores in
operation by approximately 20% annually for the next several years
thereafter. While substantially all stores to be opened in 1996 will be
in regional shopping malls, the Company believes that selected street
locations in university and high-traffic urban settings also provide
attractive expansion opportunities. Given the strength of the Abercrombie
& Fitch brand and its customer demographics, management believes that, in
the current format, there will be approximately 250 to 350 additional mall
and street location sites available for new stores.
Further Penetration of Existing Merchandise Categories. Management
believes that Abercrombie & Fitch's ability to design and market new
merchandise quickly and effectively has been a key element of its
success. In recent years the Company has significantly broadened its
assortment in existing categories in order to increase volume and
productivity. Since 1993 the number of items offered in the Company's
assortment has increased approximately 75% In 1996, the Company is
continuing to expand key categories. For example, the number of items
in the Fall 1996 men's outerwear line is approximately double the prior
year's highly successful offering, and the women's outerwear assortment
has also been expanded significantly. In addition, the Company recently
introduced a new line of men's underwear and loungewear, with a women's
underwear/ sleepwear line planned for the 1996 holiday season. As a
result of the Company broadening its product mix, it has been able to
flow fresh merchandise to the stores on a more frequent basis. The
Company has also begun to offer a targeted assortment in its stores in
the sunbelt in order to better respond to differences in climate.
Introduction of New Merchandise Categories. The Company believes it can
successfully extend the Abercrombie & Fitch brand into new merchandise
categories and further increase sales productivity and growth. For the
holiday season in 1996, Abercrombie & Fitch will introduce a new line of
personal care products, including fragrances and soaps, as well as a
limited number of decorative home accessories. In addition, the Company
will offer its own uniquely designed line of sunglasses. The Company
believes that its internal design capability will continue to develop new
merchandise categories to capitalize on the Abercrombie & Fitch brand.
Abercrombie & Fitch Stores
Store Environment
Abercrombie & Fitch stores and point-of-sale marketing are
designed to convey the principal elements and personality of the
brand--quality, casual American fashion, and a youthful lifestyle. The store
design, furniture, fixtures and music are all carefully planned and
coordinated to create a shopping experience that is consistent with the
Abercrombie & Fitch lifestyle. The Company's in-store photographs are also
principal components in creating and enhancing the casual, energized
environment of the stores. These photographs, which are enlarged and
displayed prominently throughout the stores, contain distinctive black and
white images of men and women engaged in activities identified with an active,
fun lifestyle. The Company believes that its customers experience the
Abercrombie & Fitch stores as entertaining destinations, in which they feel
welcomed and comfortable.
The Company's sales associates, or brand representatives, are a
central element in creating the entertaining, yet comfortable, atmosphere of
the stores. In addition to providing a high level of customer service, the
brand representatives reflect the casual, energetic attitude of the
Abercrombie & Fitch brand and culture. In conjunction with other components
of the store environment, the Company believes its brand representatives
significantly contribute to a store atmosphere that is consistent with a
gathering among friends.
Abercrombie & Fitch maintains a uniform appearance throughout
its store base, in terms of merchandise display and location on the selling
floor. Store managers receive detailed store plans that dictate fixture and
merchandise placement to ensure uniform execution of the merchandising
strategy at the store level. Standardization of store design and merchandise
presentation also creates cost savings in store furnishings, maximizes usage
and productivity of selling space and allows Abercrombie & Fitch to
efficiently open new stores. The Company has developed a new, more
sophisticated store prototype that seeks to further stress the casual,
youthful nature of the Abercrombie & Fitch brand. This is accomplished in
part through the use of lighter colors throughout the store and wood floors.
The Company plans to introduce this prototype in new stores and remodel
selected existing stores beginning in Fall 1996.
Store Expansion Program
Abercrombie & Fitch stores are located principally in regional
shopping malls. At July 6, 1996, Abercrombie & Fitch operated 105 stores
nationwide, averaging 7,840 selling square feet. See "-- Properties" for a
listing of store locations by state. The table below highlights the store
expansion strategy pursued by Abercrombie & Fitch:
<TABLE>
<CAPTION>
Average Store
Selling Space
Stores Open Stores Stores Stores Open Total Selling at end of
Fiscal at beginning of Opened during Closed during at end of Space Fiscal Year
Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year (000's sq. ft.) (sq. ft.)
------ --------------- ------------- ------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1991 27 10 1 36 287 7,972
1992 36 4 - 40 332 8,300
1993 40 9 - 49 405 8,265
1994 49 20 2 67 541 8,075
1995 67 33 - 100 792 7,920
</TABLE>
Abercrombie & Fitch plans to open 30 stores in 1996 (of which
five have been opened to date) and increase the number of stores in operation
by approximately 20% annually for the next several years thereafter. The
Company has identified the stores remaining to be opened in 1996, and expects
them all to be in operation before the holiday season. While substantially
all stores to be opened in 1996 will be in regional shopping malls, the
Company believes that selected street locations in university and high-traffic
urban settings also provide attractive expansion opportunities. In
evaluating real estate locations the Company considers a variety of criteria.
Regional malls are measured based on strength of anchor stores, the fashion
and quality mix of other specialty tenants and population and income
characteristics of the surrounding area. Non-mall locations are assessed in
terms of strength of other nearby specialty stores, and whether the shopping
area attracts a customer mix consistent with the lifestyle characteristics
targeted by the brand.
A key element of Abercrombie & Fitch's new store strategy is to
open new stores with trained managers in place. The Company targets that all
managers of new stores have prior experience in other Abercrombie & Fitch
stores in either the manager or assistant manager position.
New Store Economics
The Company's stores that were open during all of 1995 averaged
$2.9 million in net sales and produced net sales per selling square foot of
approximately $365. The average cost for leasehold improvements, furniture and
fixtures for these stores was approximately $858,000 per store, after giving
effect to landlord allowances. Inventory purchases for such stores averaged
$302,000 per store. These stores generated an average after-tax return on
investment (after-tax four wall contribution divided by capital investment and
average inventory) of approximately 39% in 1995, or 65% on a pre-tax basis.
The Company estimates that the average cost for leasehold
improvements, furniture and fixtures for stores to be opened in 1996 will be
approximately $660,000 per store, after giving effect to landlord allowances.
Average pre-opening costs per store, which will be expensed as incurred, are
expected to be less than $25,000. In addition, inventory purchases are
expected to average approximately $300,000 per store.
Abercrombie & Fitch's stores have typically exceeded
management's store operating profitability and return on asset targets during
the first year of operation.
Merchandising
Product Mix
The Company designs and sells all of its merchandise under its
proprietary Abercrombie & Fitch brand. The merchandise assortment covers a
broad range of classifications in men's and women's casual apparel. In
addition, the Company offers a broad range of accessories that includes belts,
socks, caps, boxers, underwear and personal care products. Although the
Company currently markets dress shirts and ties, it has deemphasized these
categories as the Company decided such merchandise was not consistent with the
Company's focus on casual apparel.
The following table sets forth the Company's merchandise mix by
major category as a percentage of net sales for the years 1993-1995.
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Men's............... 76.0% 67.6% 60.2%
Women's............. 24.0 32.4 39.8
Total Company........ 100.0% 100.0% 100.0%
</TABLE>
Over the past several years, the Company has increased the
square footage and the size of the merchandise offering devoted to women's
sportswear, which has resulted in an increase in the women's business as a
percentage of total net sales.
Abercrombie & Fitch believes that there are major
opportunities to increase volume through both increased penetration of the
existing classifications and adding new merchandise classifications.
Management believes that Abercrombie & Fitch's ability to design and market
new merchandise quickly and effectively has been a key element of its
success. In recent years the Company has significantly broadened its
assortment in existing categories in order to increase volume and
productivity. Since 1993 the number of items offered in the Company's
assortment has increased approximately 75%. In 1996, the Company is
continuing to expand key categories. For example, the number of items in
the Fall 1996 men's outerwear line is approximately double the prior year's
highly successful offering, and the women's outerwear assortment has also
been expanded significantly. In addition, the Company recently introduced
a new line of men's underwear and loungewear, with a women's underwear/
sleepwear line planned for the 1996 holiday season. As a result of the
Company broadening its product mix, it has been able to flow fresh
merchandise to the stores on a more frequent basis. The Company has also
begun to offer a targeted assortment in its stores in the sunbelt in order
to better respond to differences in climate.
The Company believes it can extend the Abercrombie & Fitch
brand into new merchandise categories and further increase sales
productivity and growth. For the holiday season in 1996, Abercrombie &
Fitch will introduce a new line of personal care products, including
fragrances and soaps, as well as a limited number of decorative home
accessories. In addition, the Company will offer its own uniquely designed
line of sunglasses. The Company believes that its internal design
capability will continue to develop new merchandise categories to reflect
the Abercrombie & Fitch image.
The Company's point-of-sale information system allows
management to track the performance of merchandise items on a stock-keeping
unit, or SKU, basis. Reorder "triggers" are used to replenish inventory of
strong selling items. In addition, performance by store at a SKU level is
tracked to allow inventory to be replenished based on differences in selling
trends by store.
Product Design
The cornerstone of the Company's business is its ability to
design products which embody the Abercrombie & Fitch image of a casual,
youthful lifestyle. Since the new management team joined the Company in 1992,
a major strategy has been to build an internal design group. From the end of
1992, the design group has grown from a staff of three to more than 30. The
men's and women's businesses each maintain separate design and merchant
groups. The product development process begins with senior management in the
merchandising and design areas, who develop seasonal merchandise themes and
concepts. These concepts are used to create line lists of items that are then
developed by the designers. Designs cover not only fabric content,
specifications and colors, but also labels, hangtags, and other descriptive
marketing. In developing concepts and designs, the Company's executives
identify trends through domestic and foreign travel, retail shopping, and
awareness of activities favored by the young, active segment of the
population.
Product Quality
Throughout its over 100 year history, quality has been a major
element of the Abercrombie & Fitch brand. The Company strives to offer
distinct, high quality merchandise in order to enhance customer satisfaction
and increase brand loyalty. The Company emphasizes natural fibers and uses a
number of different washes to achieve the desired comfort and hand-feel in its
products. The Company's designers also place significant importance on
developing distinctive trim details. Many of the products have unique
buttons, pocket detailing, labels, graphic designs and hangtags. As part of
this focus on quality, the Company establishes on-going relationships with key
factories to ensure reliability and consistency of production. All factories
used for the Company's production are approved for quality and dependability
by senior management before orders are placed.
Marketing and Promotion
The Company's marketing and promotional strategies are
consistent with its established and differentiated lifestyle brand. The
significant brand equity in the Abercrombie & Fitch name enables the Company
to maintain a non-promotional price strategy in most of its merchandise
classifications throughout the year. The Company conducts two major
season-end promotional events each year. These events are intended to clear
seasonal goods in advance of introducing new full-priced assortments and
returning the stores to their generally non-promotional status. The Company's
pricing strategy is designed to deliver the quality consistent with designer
brands at price points below those typically associated with such designers.
The Company focuses its advertising efforts on in-store
displays and print media. In-store advertising includes a series of
distinctive black and white photographs that are enlarged and prominently
displayed throughout the stores. These photographs portray men and women
engaged in activities identified with an active and spirited lifestyle and
connote the timeless quality associated with the Abercrombie & Fitch brand.
Print media advertising is focused on selected national publications and, as
with the in-store photographs, communicates and reinforces the Abercrombie &
Fitch brand image.
The Company has a proprietary credit card available to its
customers, representing in 1995 approximately 6% of net sales.
Associates
Customer service is a defining feature of the Abercrombie &
Fitch corporate culture. The Company believes that knowledgeable and
enthusiastic sales associates have a direct impact on a customer's perception
of the brand. Accordingly, Abercrombie & Fitch focuses significant resources
on the selection and training of sales associates. Abercrombie & Fitch
stresses the role of these sales associates as "brand representatives" and
they are expected to reflect the lifestyle image of the brand. Brand
representatives are required to be familiar with the full range of Abercrombie
& Fitch merchandise and to have the ability to assist customers with
merchandise selection. The Company minimizes brand representatives' time
spent on administrative functions by centrally determining merchandise display
and replenishment, markdowns and labor scheduling. By emphasizing
friendliness, product knowledge and personal attention, management believes
that Abercrombie & Fitch has established a reputation for excellent customer
service.
The typical management of an Abercrombie & Fitch store consists
of one store manager and three to five assistant managers. The Company
compensates its district and store managers with a base salary plus a
performance bonus based primarily on store sales. The Company's store,
district and regional managers spend a majority of their work week on
Abercrombie & Fitch selling floors, providing leadership through coaching the
staff and assisting customers.
At July 6, 1996, the Company had approximately 3,800
associates, of whom approximately 300 were full-time salaried associates and
approximately 400 were full-time hourly associates. A significant number of
associates are hired on a seasonal basis to meet demand during holiday
gift-buying seasons. The balance were part-time hourly associates. None of
the Company's associates is represented by a labor union. The Company
believes that its relationship with its associates is good.
Sourcing
Abercrombie & Fitch utilizes a variety of sourcing
arrangements. Mast Industries, Inc. ("Mast"), a wholly owned subsidiary
of The Limited, supplied approximately 28% of the apparel purchased by the
Company in 1995. The Company believes all transactions entered into with
Mast are on an arm's-length basis, and Abercrombie & Fitch is not obligated
to source product through Mast.
In 1995, approximately 56% of the Company's merchandise was
sourced from independent foreign factories located primarily in the Far East.
The Company has no long-term merchandise supply contracts and many of its
imports are subject to existing or potential duties, tariffs or quotas that
may limit the quantity of certain types of goods which may be imported into
the United States from countries in those regions. The Company competes with
other companies for production facilities and import quota capacity. In
addition, although the General Agreement on Tariffs and Trade ("GATT") adopted
on December 8, 1994 requires the elimination of duties, tariffs and quotas on
apparel and textile products by January 1, 2005, the GATT treaty is not
expected to have any meaningful effect on the import of merchandise used in
Abercrombie & Fitch's business for several years. Abercrombie & Fitch
attempts to monitor manufacturing to ensure that no one company or country is
responsible for a disproportionate amount of the Company's merchandise. The
Company typically transacts business on an order-by-order basis and does not
maintain any long-term or exclusive commitments or arrangements to purchase
from any vendor. The Company believes that it has good relationships with its
vendors and that, as the number of its stores increases, there will be
adequate sources to produce a sufficient supply of quality goods in a timely
manner and on satisfactory economic terms. See "Risk Factors -- Factors
Affecting Abercrombie & Fitch's Business; Foreign Sourcing".
Central Store Planning
The Company's store design and construction operations
are handled centrally by the store planning division of The Limited ("Limited
Store Planning"). Limited Store Planning is organized into teams comprised of
designers, construction managers, architects, purchasing agents and financial
personnel who are responsible for all phases of store design and construction.
Teams are assigned to work with the senior management of a specific retail
business (including Abercrombie & Fitch) to develop and implement store
designs that are consistent with and promote the image of a given retail
business. Abercrombie & Fitch and The Limited intend to enter into an
agreement pursuant to which The Limited would continue to provide such
services to Abercrombie & Fitch on a basis consistent with past practices.
The Limited will charge Abercrombie & Fitch for such services on a basis
consistent with amounts charged by The Limited from time to time to its other
businesses for comparable services. See "Relationship with The Limited --
Services Agreement".
Central Real Estate Management
The Company's real estate operations, including all aspects
of lease negotiations, are handled centrally by the real estate division of
The Limited. Abercrombie & Fitch and The Limited intend to enter into an
agreement pursuant to which The Limited would continue to provide such
services to Abercrombie & Fitch on a basis consistent with past practices.
The Limited will charge Abercrombie & Fitch for such services on a basis
consistent with amounts charged by The Limited from time to time to its
other businesses for comparable services. See "Relationship With The
Limited -- Services Agreement".
Potential new stores, locations, expansions and relocations are
identified by Abercrombie & Fitch and by The Limited's real estate division.
In choosing new sites for retail stores, The Limited's real estate division
provides financial details regarding the proposed lease arrangement to
Abercrombie & Fitch, which then evaluates the net required investment and
potential rates of return relative to the Company's established hurdle rates
before the store is approved for construction. The actual construction of the
store is managed by Limited Store Planning. Although the real estate division
retains control over the allocation of space within a given mall among the
various retail businesses of The Limited, including Abercrombie & Fitch, each
individual business is entitled to reject any transaction negotiated by the
real estate division of The Limited. See "Risk Factors -- Potential Conflicts
of Interest". Real estate decisions are based on a number of factors,
including consistency with a given business image, sales and profit potential,
the overall economic condition and demographic characteristics of the market,
the identity of the other tenants in close proximity and the availability of
acceptable lease terms.
Although Abercrombie & Fitch's arrangement with The Limited may
raise the potential for conflicts of interest, Abercrombie & Fitch's
management believes the arrangement provides it with a significant competitive
strength. Given The Limited's substantial size, Abercrombie & Fitch's
management believes that The Limited is able to obtain lease terms and store
sites on Abercrombie & Fitch's behalf that are more favorable than those that
Abercrombie & Fitch could obtain on its own. Substantially all leases entered
into by Abercrombie & Fitch are guaranteed by The Limited. Abercrombie &
Fitch's management believes that its size and financial strength should allow
it to enter into leases on attractive terms without guarantees from The
Limited, and it is the intent of both The Limited and Abercrombie & Fitch that
future Abercrombie & Fitch leases will not be guaranteed by The Limited.
Merchandise Distribution
The Company's distribution operations are managed in a
distribution center owned by The Limited and subleased to Abercrombie & Fitch.
See "Relationship with The Limited -- Sublease Agreement". The distribution
center is located in Reynoldsburg, Ohio. Once received at the distribution
center, merchandise is inspected, packed for delivery to the stores and
forwarded to a central shipping facility operated by Limited Distribution
Services ("LDS"), a subsidiary of The Limited, which also provides certain
engineering services to the distribution center.
LDS also maintains a worldwide logistics network of agents and
space availability arrangements to support the in-bound movement of
merchandise into the distribution center. The out-bound shipping system
consists of common carrier line haul routes connecting the distribution
complex to a network of delivery agents. This system allows each store
operated by the Company to receive several deliveries each week and daily
during the peak holiday shopping season, which the Company believes is more
frequent than the Company's smaller competitors. LDS does not own or operate
trucks or trucking facilities. Abercrombie & Fitch and The Limited intend to
enter into an agreement pursuant to which LDS would continue to provide such
services to Abercrombie & Fitch on a basis consistent with past practices.
The Limited will charge Abercrombie & Fitch for such services on a basis
consistent with amounts charged by The Limited from time to time to its other
businesses for comparable services. See "Relationship with The Limited --
Services Agreement".
Management Information Systems
The Company's management information systems and
electronic data processing systems consist of a full range of retail,
financial, and merchandising systems, including credit, inventory distribution
and control, sales reporting, accounts payable, merchandise reporting and
distribution. Abercrombie & Fitch has an information system that is uniquely
structured to the needs of its particular business. Certain of the equipment
used in the management information systems is owned by The Limited.
Abercrombie & Fitch and The Limited intend to enter into an agreement pursuant
to which Abercrombie & Fitch would continue to use such equipment on a basis
consistent with past practices. The Limited will charge Abercrombie & Fitch
for such use on a basis consistent with amounts charged by The Limited from
time to time to its other businesses for comparable services. See
"Relationship with The Limited -- Services Agreement".
Sales are updated daily in the merchandise reporting systems
by polling sales information from each store's point-of-sale ("POS")
terminals. The Company's POS system consists of registers providing price
look-up, scanning of bar-coded tickets and credit authorization. Through
automated nightly two-way electronic communication with each store, sales
information, payroll hours and store initiated transfers are uploaded to
the host system, and price changes are downloaded through the POS devices.
The nightly communication with the stores also enables the Company to
receive store transfer and physical inventory details and send electronic
mail. The Company evaluates information obtained through daily reporting
to implement merchandising decisions regarding markdowns and allocation of
merchandise.
Trademarks and Servicemarks
A subsidiary of the Company is the owner in the United
States of the trademark Abercrombie & Fitch (the "Name Mark"). The Name
Mark of the Company is registered in the United States Patent and Trademark
Office. The term of this registration is ten years, and it is renewable
for additional ten-year periods indefinitely, so long as the mark is still
in use at the time of renewal. The Company's rights in its Name Mark are a
significant part of the Company's business. The Company, therefore,
intends to maintain its Name Mark and its registration. The Company is not
aware of any claims of infringement or other challenges to the Company's
right to register or use its Name Mark in the United States.
Another subsidiary is also the owner in the United States of
trademarks and service marks used to identify its merchandise and services,
other than its Name Mark (the "Merchandise Marks"). Many of the Merchandise
Marks of the Company are registered in the United States Patent and Trademark
Office. The Merchandise Marks are important to the Company, and, therefore,
the Company intends to, directly or indirectly, maintain these marks and their
registrations. However, the Company may choose not to renew a registration of
one or more of its Merchandise Marks if it determines that the mark is no
longer important to its business. The Company does not believe any material
claims of infringement or other challenges to the Company's right to register
or use its Merchandise Marks in the United States in a manner consistent with
its current practices are pending.
The Company also conducts business in foreign countries
principally as a result of the fact that a substantial portion of its
merchandise is manufactured outside the United States. The Company believes
its subsidiaries own registrations of its Name Mark and Merchandise Marks in
numerous foreign countries to the degree necessary to protect such marks,
although there may be restrictions on the use of certain of Abercrombie &
Fitch's marks in a limited number of foreign jurisdictions.
The Company has not licensed any of its trademarks or service
marks to any other entity, although, for so long as the Company remains a
subsidiary of The Limited, The Limited will be entitled to use the Company's
trademarks and service marks at no cost to The Limited in The Limited's annual
report to shareholders and publicity materials and for other similar purposes.
Competition
All aspects of the Company's businesses are highly
competitive. The Company competes primarily with department stores, mass
merchandisers and other specialty retailers, including The Limited. See
"Risk Factors--Potential Conflicts of Interest--Competition with The
Limited". The Company believes that the principal bases upon which it
competes are quality, fashion, service, selection and price.
The Company believes that it has significant competitive
advantages because of high consumer recognition and acceptance of its brand
name and its strong presence in the major shopping malls in the United States,
its relationship with The Limited and the experience of its management team.
Certain of the Company's competitors in selected product lines are larger and
have greater financial, marketing and other resources than the Company,
however, and there can be no assurance that the Company will be able to
compete successfully with them in the future.
Properties
The main offices of Abercrombie & Fitch are located in
Reynoldsburg, Ohio. These headquarters are owned by The Limited and subleased
to Abercrombie & Fitch. Abercrombie & Fitch also has a distribution center
located in Reynoldsburg, Ohio which is owned by The Limited and subleased to
Abercrombie & Fitch. Abercrombie & Fitch believes that its facilities are
well maintained, in good operating condition and adequate for its current
needs. See "Relationship with The Limited -- Sublease Agreement".
As of July 6, 1996, Abercrombie & Fitch operated 105 stores,
which are located primarily in shopping malls throughout the United States.
Of these stores, 102 were leased directly from third parties (principally
shopping mall developers) and three were leased from retail stores operated by
other businesses of The Limited. See "Relationship with The Limited -- Shared
Facilities Agreement". The Company believes that, as approximately 95% of its
stores are located in shopping malls, there are growth opportunities for
expansion to free-standing locations.
Leases with third parties are typically between 10 and 15 years
in duration. In most cases, the business unit pays an annual base rent plus a
contingent rent based on the store's annual sales in excess of a specified
threshold. Leases with other businesses of The Limited are on terms that
represent the proportionate share of the base rent payable in accordance with
the underlying lease plus the portion of any contingent rent payable in
accordance with the underlying lease attributable to the performance of
Abercrombie & Fitch. Many of the leases entered into by Abercrombie & Fitch
are guaranteed by The Limited. Abercrombie & Fitch management believes that
its size and financial strength should allow it to enter into leases on
attractive terms without guarantees from The Limited, and it is the intent of
both The Limited and Abercrombie & Fitch that future Abercrombie & Fitch
leases will not be guaranteed by The Limited.
The map and store list below set forth the number of stores by
state operated by Abercrombie & Fitch in the United States and the cities in
which Abercrombie & Fitch stores are located as of July 6, 1996:
[Image material is contained here consisting of a map
of the continental United States. States in which stores are
located are shaded and cities in which stores are
located are indicated by a dot.]
<TABLE>
<S> <C> <C> <C> <C>
Arizona - 1 Georgia - 5 Massachusetts - 5 Nebraska - 1 Oklahoma - 2
Scottsdale Atlanta (4) Boston (4) Omaha Oklahoma City
Savannah Holyoke Tulsa
California - 7 New Hampshire - 1
Los Angeles (2) Illinois - 6 Maryland - 3 Salem Oregon - 1
Sacramento Chicago (6) Baltimore(2) Portland
San Diego Towson New Jersey - 4
San Francisco (2) Indiana - 3 Cherry Hill Pennsylvania - 5
San Mateo Evansville Michigan - 4 Edison Langhorne
Indianapolis (2) Ann Arbor Freehold Philadelphia (2)
Colorado - 4 Detroit (2) Short Hills Pittsburgh (2)
Boulder Kansas - 2 Grand Rapids
Denver (3) Kansas City (2) Nevada - 1 Tennessee - 2
Minnesota - 2 Las Vegas Knoxville
Connecticut - 3 Kentucky - 2 Minneapolis-St. Paul (2) Nashville
Hartford Lexington New York - 10
Milford Louisville Missouri - 3 Albany (2) Texas - 10
Stamford Kansas City Buffalo Austin (2)
Louisiana - 1 St. Louis (2) Manhasset Dallas (3)
District of Columbia - 1 New Orleans New York City (2) Fort Worth
North Carolina - 3 Rochester (2) Houston (3)
Florida - 3 Greensboro Staten Island San Antonio
Orlando Raleigh White Plains
Tampa Winston-Salem Virginia - 4
W. Palm Beach Ohio - 4 Arlington
Cincinnati Fairfax
Cleveland Tysons Corner
Columbus Virginia Beach
Dayton
Washington - 2
Seattle (2)
</TABLE>
Litigation
The Company is a defendant in lawsuits arising in the ordinary
course of business. Although the amount of any liability that could arise
with respect to any such lawsuit cannot be accurately predicted, in the
opinion of management, the resolution of these matters is not expected to have
a material adverse effect on the financial position or results of operations
of the Company.
RELATIONSHIP WITH THE LIMITED
Upon completion of the Offerings, The Limited will own 100% of
the outstanding Class B Common Stock of Abercrombie & Fitch which will
represent approximately % of the combined voting power of all of the
outstanding Common Stock (or approximately % if the Underwriters'
over-allotment options are exercised in full). For so long as The Limited
continues to own shares of Common Stock representing more than 50% of the
combined voting power of the Common Stock of Abercrombie & Fitch, The Limited
will be able, among other things, to determine any corporate action requiring
approval of holders of Common Stock representing a majority of the combined
voting power of the Common Stock, including the election of the entire Board
of Directors of Abercrombie & Fitch, without the consent of the other
shareholders of Abercrombie & Fitch. Similarly, for so long as The Limited
continues to own shares of Common Stock representing more than 75% of the
combined voting power of the Common Stock of Abercrombie & Fitch, The Limited
will be able, among other things, to determine any corporate action requiring
approval of holders of Common Stock representing 75% of the combined voting
power of the Common Stock, including certain amendments to Abercrombie &
Fitch's Certificate of Incorporation and Bylaws and approval of certain
mergers and other control transactions, without the consent of the other
shareholders of Abercrombie & Fitch. Furthermore, for so long as The Limited
holds 25% of the combined voting power of the Common Stock of Abercrombie &
Fitch it will be able to block any corporate action requiring the approval of
holders of Common Stock representing more than 75% of the combined voting
power of the Common Stock. See "Description of Capital Stock". In addition,
through its control of the Board of Directors and beneficial ownership of
Common Stock, The Limited will be able to control certain decisions, including
decisions with respect to Abercrombie & Fitch's dividend policy, Abercrombie &
Fitch's access to capital (including borrowing from third-party lenders and
the issuance of additional equity securities), mergers or other business
combinations involving Abercrombie & Fitch, the acquisition or disposition of
assets by Abercrombie & Fitch and any change in control of Abercrombie &
Fitch. The Limited has advised Abercrombie & Fitch that its current intent is
to continue to hold all of the Class B Common Stock beneficially owned by it.
However, The Limited has no agreement with Abercrombie & Fitch not to sell or
distribute such shares, and, other than pursuant to the Underwriting Agreement,
in which The Limited will agree not to sell or otherwise dispose of any shares
of Common Stock (or any security convertible into or exchangeable or
exercisable for Common Stock) owned by it for a period of 180 days following
the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters, subject to certain exceptions, there can
be no assurance concerning the period of time during which The Limited will
maintain its beneficial ownership of Common Stock. Beneficial ownership of at
least 80% of the total voting power and value of the outstanding Common Stock
is required in order for The Limited to continue to include Abercrombie &
Fitch in its consolidated group for federal income tax purposes and ownership
of at least 80% of the total voting power and 80% of each class of nonvoting
capital stock is required in order for The Limited to be able to effect a
Tax-Free Spin-Off of Abercrombie & Fitch. In the event The Limited's
ownership decreases below 80%, all borrowings under the Credit Agreement must
be repaid. See "Description of Certain Indebtedness--Credit Agreement".
Abercrombie & Fitch's relationship with The Limited will also
be governed by agreements to be entered into in connection with the Offerings,
including a services agreement, a corporate agreement, a shared facilities
agreement and a tax-sharing agreement, the material terms of which are
described below. It is anticipated that such agreements will be entered into
concurrently with the consummation of the Offerings. With respect to matters
covered by the services agreement, the relationship between The Limited and
Abercrombie & Fitch is intended to continue in a manner generally consistent
with past practices. Because Abercrombie & Fitch is a wholly owned subsidiary
of The Limited, none of these arrangements will result from arm's-length
negotiations and, therefore, the prices charged to the Company for services
provided thereunder may be higher or lower than prices that may be charged by
third parties.
The descriptions set forth below are intended to be summaries
and, while material terms of the agreements are set forth herein, the
descriptions are qualified in their entirety by reference to the forms of the
relevant agreement filed with the Registration Statement of which this
Prospectus forms a part. Abercrombie & Fitch's Certificate of Incorporation
also contains provisions relating to the allocation of business opportunities
that may be suitable for either of The Limited or Abercrombie & Fitch and to
the approval of transactions between Abercrombie & Fitch and The Limited.
For additional information concerning the above-mentioned
provisions of Abercrombie & Fitch's Certificate of Incorporation and
circumstances under which the Class A Common Stock and Class B Common Stock
may be converted, see "Description of Capital Stock". For a description of
certain intercompany debt, see "Description of Certain
Indebtedness--Intercompany Debt".
Services Agreement
The Company and The Limited intend to enter into an
intercompany services and operating agreement (the "Services Agreement") with
respect to services to be provided by The Limited (or subsidiaries of The
Limited) to the Company. The Services Agreement will provide that such
services will be provided in exchange for fees which (based on current costs
for such services) management believes would not exceed fees that would be
paid if such services were provided by an independent third party and which
are consistent in all material respects with the allocation of the costs of
such services set forth in the historical financial statements of Abercrombie
& Fitch. See the Consolidated Financial Statements included elsewhere herein.
Management's estimate of the net charge for services that would have been
payable by the Company in 1995 if the Services Agreement had been in effect
during that period is approximately $4.0 million, which is approximately the
amount included in the 1995 Consolidated Financial Statements. Such fees will
be paid monthly in arrears. The Company may request an expansion or
termination of services, in which case the parties will discuss, without
obligation, the provision or termination of such services and an appropriate
change or reduction in charges for such services, provided, however, that
Abercrombie & Fitch may not terminate a service if the termination of such
service would adversely affect the cost to The Limited of providing such
service to other businesses operated by The Limited. Services will be
provided to Abercrombie & Fitch based on several billing methodologies.
Pursuant to one of such billing methodologies, specified services will be
provided to Abercrombie & Fitch at costs comparable to those charged to other
businesses operated by The Limited from time to time, and Abercrombie & Fitch
is obligated to purchase those services at the specified costs. In the event
The Limited proposes changes in billing methodology which would result in a
significant increase (being the greater of a 10% increase in costs or $1
million) in costs for the affected services, the Company may terminate such
services.
The purpose of the Services Agreement is to ensure that The
Limited continues to provide to Abercrombie & Fitch the range of services that
The Limited provided to the Company prior to the Offerings. With respect to
matters covered by the Services Agreement, the relationship between The
Limited and Abercrombie & Fitch is intended to continue in a manner generally
consistent with current practices. The services initially to be provided by
The Limited to the Company include, among other things, certain accounting,
aircraft, associate benefit plan administration, audit, cash management,
corporate development, corporate secretary, governmental affairs, human
resources and compensation, investor and public relations, legal, risk
management, tax and treasury services. Pursuant to the Services Agreement,
The Limited will also continue to perform the store design/planning, real
estate and import and shipping services provided to Abercrombie & Fitch prior
to the Offerings. See "Business--Central Store Planning", "--Central Real
Estate Management" and "--Merchandise Distribution".
In addition to the identified services, The Limited intends to
agree to continue coverage of the Company under The Limited's umbrella
liability, property, casualty and fiduciary insurance policies. The Company
intends to agree to reimburse The Limited for the portion of The Limited's
premium cost with respect to such insurance that is attributable to coverage
of the Company. Either The Limited or the Company may terminate such coverage
under The Limited's policies at any time upon prior written notice during the
90 days prior to the anniversary date of the policy; provided that termination
of coverage by Abercrombie & Fitch may only be for nonpayment and only if a
replacement policy, acceptable to The Limited, is entered into by Abercrombie
& Fitch.
Also, in addition to the identified services, The Limited
intends to agree to allow eligible associates of the Company to participate in
The Limited's associate benefit plans. In addition to a monthly services fee,
under the Services Agreement, the Company intends to agree to reimburse The
Limited for The Limited's costs (including any contributions and premium costs
and including certain third-party expenses and allocations of certain personnel
expenses of The Limited), generally in accordance with past practice, relating
to participation by the Company's associates in any of The Limited's benefit
plans.
The Services Agreement will have an initial term of five years
and will be renewed automatically thereafter for successive one-year terms
unless either Abercrombie & Fitch or The Limited elects not to renew the
Services Agreement. After the initial five-year term, the Services Agreement
may be terminated at any time by either party upon six months' written notice.
The Services Agreement will also provide that the Agreement will be subject to
early termination by either Abercrombie & Fitch or The Limited upon six
months' written notice if The Limited ceases to own shares of Common Stock
representing more than 50% of the combined voting power of the Common Stock of
Abercrombie & Fitch, whether as a result of a Tax-Free Spin-Off or otherwise.
Pursuant to the Services Agreement, each party will agree to
indemnify the other, except in certain limited circumstances, against
liabilities that the other may incur that are caused by or arise in connection
with such party's failure to fulfill its material obligations under the
Services Agreement.
Sublease Agreement
Abercrombie & Fitch has entered into a sublease agreement
with an affiliate of The Limited (the "Sublease Agreement") pursuant to which
such affiliate subleases to Abercrombie & Fitch the distribution center and
headquarters office space currently used by Abercrombie & Fitch. The Sublease
Agreement provides that the lessee will lease space at an average annual
rental rate equal to $11.00 per square foot in the case of office space and
$2.85 per square foot in the case of the distribution center, subject to
adjustment based on the Consumer Price Index every third year. Abercrombie &
Fitch's management believes that these rental rates are commensurate with
market rates, although the Company did not seek bids from third parties. The
net charge paid by the Company in 1995 under the Sublease Agreement was
approximately $1.8 million, which is the amount included in the 1995
Consolidated Financial Statements.
The Sublease Agreement will have an initial term of fifteen
years and will be renewed automatically thereafter for eight successive
five-year terms unless either the lessor or the lessee (or sublessor or
sublessee) elects not to renew the Sublease Agreement upon at least one year's
notice.
Shared Facilities Agreement
At July 6, 1996, three of the Company's stores were
located in space leased by other businesses controlled by The Limited. The
Company and the relevant businesses operated by The Limited intend to enter
into shared facilities agreements (collectively, the "Shared Facilities
Agreement") pursuant to which the Company will sublease such facilities from
the relevant subsidiary of The Limited. Under the Shared Facilities
Agreement, the Company will be responsible for its pro rata share (based on
square feet occupied) of all costs and expenses (principally fixed rent) under
the relevant lease plus the portion of any performance based rent attributable
to the Company. This method of allocating such costs and expenses is
consistent in all material respects with the allocation of such costs and
expenses set forth in the historical financial statements of Abercrombie &
Fitch. See the Consolidated Financial Statements included elsewhere herein.
Management's estimate of the store lease and other occupancy costs charge that
would have been payable by the Company in 1995 if the Shared Facilities
Agreement had been in effect during that period is approximately $1.4 million.
Tax-Sharing Agreement
Abercrombie & Fitch is, and after the Offerings will
continue to be, included in The Limited's federal consolidated income tax
group and Abercrombie & Fitch's tax liability will be included in the
consolidated federal income tax liability of The Limited and its subsidiaries.
In certain circumstances, certain Abercrombie & Fitch subsidiaries may be
included with certain subsidiaries of The Limited in combined, consolidated or
unitary income tax groups for state and local tax purposes. Abercrombie &
Fitch and The Limited intend to enter into a tax-sharing agreement (the
"Tax-Sharing Agreement"). Pursuant to the Tax-Sharing Agreement, Abercrombie
& Fitch and The Limited will make payments between them such that, with
respect to any period, the amount of taxes to be paid by Abercrombie & Fitch,
subject to certain adjustments, will be determined as though Abercrombie &
Fitch were to file separate federal, state and local income tax returns
(including, except as provided below, any amounts determined to be due as a
result of a redetermination of the tax liability of The Limited arising from
an audit or otherwise) as the common parent of an affiliated group of
corporations filing combined, consolidated or unitary (as applicable) federal,
state and local returns rather than a consolidated subsidiary of The Limited
with respect to federal, state and local income taxes. Abercrombie & Fitch
will be reimbursed, however, for tax attributes that it generates, such as net
operating losses, if and when they are used on a consolidated basis.
In determining the amount of tax-sharing payments under the
Tax-Sharing Agreement, The Limited will prepare for Abercrombie & Fitch pro
forma returns with respect to federal and applicable state and local income
taxes that reflect the same positions and elections used by The Limited in
preparing the returns for The Limited's consolidated group and other
applicable groups. The Limited will continue to have all the rights of a
parent of a consolidated group (and similar rights provided for by applicable
state and local law with respect to a parent of a combined, consolidated or
unitary group), will be the sole and exclusive agent for Abercrombie & Fitch
in any and all matters relating to the income, franchise and similar tax
liabilities of Abercrombie & Fitch, will have sole and exclusive
responsibility for the preparation and filing of consolidated federal and
consolidated or combined state income tax returns (or amended returns), and
will have the power, in its sole discretion, to contest or compromise any
asserted tax adjustment or deficiency and to file, litigate or compromise any
claim for refund on behalf of Abercrombie & Fitch. In addition, The Limited
has agreed to undertake to provide the aforementioned services with respect to
Abercrombie & Fitch's separate state and local returns and Abercrombie &
Fitch's foreign returns. Under the Tax-Sharing Agreement, Abercrombie & Fitch
will pay The Limited a fee intended to reimburse The Limited for all direct
and indirect costs and expenses incurred with respect to Abercrombie & Fitch's
share of the overall costs and expenses incurred by The Limited with respect
to tax related services.
In general, the Company will be included in The Limited's
consolidated group for federal income tax purposes for so long as The Limited
beneficially owns at least 80% of the total voting power and value of the
outstanding Common Stock. Each member of a consolidated group is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax-Sharing Agreement
allocates tax liabilities between Abercrombie & Fitch and The Limited, during
the period in which the Company is included in The Limited's consolidated
group, the Company could be liable in the event that any federal tax liability
is incurred, but not discharged, by any other member of The Limited's
consolidated group. See "Risk Factors -- Control by The Limited".
Corporate Agreement
The Company and The Limited intend to enter into a
corporate agreement (the "Corporate Agreement") under which the Company will
grant to The Limited a continuing option, transferable to any of its
subsidiaries, to purchase, under certain circumstances, additional shares of
Class B Common Stock or shares of nonvoting capital stock of the Company (the
"Stock Option"). The Stock Option may be exercised by The Limited
simultaneously with the issuance of any equity security of the Company (other
than in the Offerings or upon the exercise of the Underwriters' over-allotment
options), with respect to Class B Common Stock, only to the extent necessary
to maintain its then-existing percentage of the total voting power and value
of the Company and, with respect to shares of nonvoting capital stock, to the
extent necessary to own 80% of each outstanding class of such stock. The
purchase price of the shares of Class B Common Stock purchased upon any
exercise of the Stock Option, subject to certain exceptions, will be based on
the market price at which such stock may be purchased by third parties. The
Stock Option expires in the event that The Limited reduces its beneficial
ownership of Common Stock in the Company to Common Stock representing less
than 60% of the number of outstanding shares of Common Stock. The Company
does not intend to issue additional shares of Class B Common Stock except
pursuant to the exercise of the Stock Option.
The Corporate Agreement will further provide that, upon the
request of The Limited, the Company will use its best efforts to effect the
registration under the applicable federal and state securities laws of any of
the shares of Class B Common Stock and nonvoting capital stock (and any other
securities issued in respect of or in exchange for either) held by The Limited
for sale in accordance with The Limited's intended method of disposition
thereof, and will take such other actions necessary to permit the sale thereof
in other jurisdictions, subject to certain limitations specified in the
Corporate Agreement. The Limited will also have the right, which it may
exercise at any time and from time to time, to include the shares of Class B
Common Stock and nonvoting capital stock (and any other securities issued in
respect of or in exchange for either) held by it in certain other
registrations of common equity securities of the Company initiated by the
Company on its own behalf or on behalf of its other shareholders. The Company
will agree to pay all out-of-pocket costs and expenses in connection with each
such registration that The Limited requests or in which The Limited
participates. Subject to certain limitations specified in the Corporate
Agreement, such registration rights will be assignable by The Limited and its
assigns. The Corporate Agreement will contain indemnification and
contribution provisions: (i) by The Limited and its permitted assigns for the
benefit of the Company and related persons; and (ii) by the Company for the
benefit of The Limited and the other persons entitled to effect registrations
of Common Stock (and other securities) pursuant to its terms and related
persons.
For so long as The Limited maintains beneficial ownership of a
majority of the number of outstanding shares of Common Stock, the Company may
not take any action or enter into any commitment or agreement which may
reasonably be anticipated to result, with or without notice and with or
without lapse of time, or otherwise, in a contravention (or an event of
default) by The Limited of: (i) any provision of applicable law or regulation,
including but not limited to provisions pertaining to the Code or ERISA; (ii)
any provision of The Limited's certificate of incorporation or bylaws; (iii)
any credit agreement or other material instrument binding upon The Limited; or
(iv) any judgment, order or decree of any governmental body, agency or court
having jurisdiction over The Limited or any of its respective assets. Except
for those provisions relating to corporate opportunities and limitations on
liabilities, the requirements for approval of certain business combinations
and other control transactions, as well as the capital structure of the two
companies, the Certificates of Incorporation and Bylaws of The Limited and
Abercrombie & Fitch are substantially similar. See "Description of Capital
Stock -- Certain Certificate of Incorporation and Bylaw Provisions". The
Limited's certificate of incorporation and bylaws are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
MANAGEMENT
The following table sets forth certain information concerning
the executive officers of the Company, each of whom assumed their position
with the Company on July 15, 1996:
<TABLE>
<CAPTION>
Name Age Position
---- --- ----------
<S> <C> <C>
Leslie H. Wexner...................... 58 Chairman of the Board
Kenneth B. Gilman..................... 50 Vice Chairman of the Board
Michael S. Jeffries................... 51 President and Chief Executive Officer
Michele S. Donnan-Martin.............. 32 Vice President - General Merchandising Manager -Women's
Seth R. Johnson....................... 42 Vice President - Chief Financial Officer
</TABLE>
Mr. Wexner has been President and Chief Executive Officer of The Limited
since he founded The Limited in 1963 and Chairman of the Board for more than
five years. Mr. Wexner has also been the Chairman of the Board and Chief
Executive Officer of Intimate Brands since 1995. Mr. Wexner is also a
director of Hollinger International, Inc. and Hollinger International
Publishing, Inc.
Mr. Gilman has been Vice Chairman and Chief Financial Officer of The
Limited since June 1993. For more than five years prior thereto, Mr. Gilman
was executive Vice President and Chief Financial Officer of The Limited. Mr.
Gilman has also been the Vice Chairman of the Board of Intimate Brands since
1995.
Mr. Jeffries has been President and Chief Executive Officer of Abercrombie
& Fitch since February 1992. For one and one-half years prior thereto, Mr.
Jeffries held the position of Executive Vice President - Merchandising for
Paul Harris Stores, Inc. For five years prior thereto, Mr. Jeffries held the
position of President and Chief Executive Officer of Alcott & Andrews.
Ms. Donnan-Martin has been Vice President - General Merchandising Manager -
Women's at Abercrombie & Fitch since February 1996. For three and one-half
years prior thereto, Ms. Donnan-Martin held the position of Vice President
Women's Merchandising at Abercrombie & Fitch. Prior to joining Abercrombie &
Fitch in June 1992, she held the position of Divisional Merchandise Manager
for J. Crew Group, Inc. for two years.
Mr. Johnson has been Vice President - Chief Financial Officer of
Abercrombie & Fitch since June 1992. Prior to 1992, Mr. Johnson held the
position of Director, Financial Analysis from 1989 to 1992 for The Limited.
The Board of Directors of Abercrombie & Fitch currently
consists of Messrs. Wexner, Gilman and Jeffries. In addition, The Limited
intends to cause the appointment as directors of Abercrombie & Fitch of four
additional directors (the "Independent Directors") not associated with the
Company, one of whom will not be associated with The Limited or any of its
affiliates.
In light of its voting power in the Company, The Limited has
the ability to change the size and composition of the Board of Directors.
Members of the Board of Directors are divided into three
classes and serve staggered three-year terms. Of the current members of the
Board of Directors, the term of Mr. Jeffries expires at the next annual
meeting of shareholders (expected to occur in the second quarter of 1997), the
term of Mr. Gilman expires at the annual meeting of shareholders to be held in
1998 and the term of Mr. Wexner expires at the annual meeting of shareholders
to be held in 1999.
The Board of Directors will have an audit committee, consisting
entirely of Indpendent Directors, which will review the results and scope of
the audit and other services provided by Abercrombie & Fitch's independent
auditors.
Compensation of Directors
Directors who are not associates of the Company receive an
annual retainer of $10,000 (increased by $1,500 for each committee chair held)
plus a fee of $800 for each Board of Directors' meeting attended ($400 for a
telephonic meeting) and, as committee members, receive $600 per committee
meeting attended ($200 for each telephonic meeting). Each action in writing
taken by the Board of Directors or any committee entitles each outside member
to be paid $200. In addition, pursuant to the Abercrombie & Fitch 1996 Stock
Plan for Non-Associate Directors (the "1996 Non-Associate Director Stock
Plan") described below, each non-associate director will receive annual grants
of options to acquire 2,000 shares of Class A Common Stock at an exercise
price equal to the fair market value of the underlying shares on the date of
grant. The annual retainer will be paid 50% in cash and 50% in Class A Common
Stock pursuant to the 1996 Non-Associate Director Stock Plan described below.
Associates and officers of the Company who are directors receive no additional
compensation for services rendered as directors.
EXECUTIVE COMPENSATION
Summary
The information set forth below describes the components of
the total compensation paid by The Limited during its last completed fiscal
year (the last three completed fiscal years in the cases of Messrs. Wexner
and Gilman) to Mr. Wexner, who is the Chairman of the Board of Abercrombie
& Fitch, and Messrs. Gilman, Jeffries and Johnson and Ms. Donnan-Martin
(the "named executive officers"). Prior to the named individuals becoming
executive officers of Abercrombie & Fitch on July 15, 1996, such executive
officers were associates of The Limited. Messrs. Wexner and Gilman will
continue their employment with The Limited following the Offerings. It is
expected that Messrs. Wexner and Gilman will receive no cash compensation
from Abercrombie & Fitch, although they will be eligible for participation
in the Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan
(the "Stock Plan") discussed below. The annual base salary and annual
bonus opportunity for Messrs. Wexner and Gilman in respect of their
service with The Limited and its affiliates will continue to be determined
by The Limited's compensation committee and will be paid by The Limited.
The compensation set forth below was paid by The Limited to such
individuals in respect of their employment with The Limited.
The principal components of each such named executive officer's
cash compensation from The Limited have been the annual base salary and bonus
as set forth in the Summary Compensation Table. The bonus amounts represent
amounts that the compensation committee of the Board of Directors of The
Limited approved for each named individual based on the performance of The
Limited and Abercrombie & Fitch during 1995. The long-term compensation shown
in the Summary Compensation Table was provided under The Limited's 1993 Stock
Option and Performance Incentive Plan, which provides for various types of
awards such as options to acquire common stock of The Limited and restricted
common stock of The Limited. Messrs. Jeffries and Johnson and Ms.
Donnan-Martin will continue to be eligible to participate in such plan
following the Offerings. It is intended that substantially all the
compensation to be paid to Messrs. Jeffries and Johnson and Ms. Donnan-Martin
after the Offerings will be paid by the Company, not The Limited.
Immediately following the Offerings, the annual base salaries
and annual bonus opportunities of Messrs. Jeffries and Johnson and Ms.
Donnan-Martin will be at the levels as was determined by the compensation
committee of The Limited. Subsequently, the annual base salary and the annual
bonus opportunity of Messrs. Jeffries and Johnson and Ms. Donnan-Martin will
be determined by the compensation committee of the Company (the "Compensation
Committee"). It is anticipated that the base salary paid by the Company to
Messrs. Jeffries and Johnson and Ms. Donnan-Martin, and to all other executive
officers compensated by the Company rather than The Limited, will initially be
generally comparable to present levels of base salary received from The
Limited, subject to such adjustments as may be determined in the normal course
of business. In addition, in connection with the Offerings it is anticipated
that the Company will adopt three compensation plans. Pursuant to the 1996
Non-Associate Director Stock Plan, described more fully below, the Company
will grant on the effective date of the Offerings and on the first business
day of each fiscal year of the Company options to purchase 2,000 shares of
Class A Common Stock to each non-associate director of the Company. Pursuant
to the Abercrombie & Fitch Incentive Compensation Plan (the "Incentive Plan"),
described more fully below, eligible associates of the Company will be
eligible to receive cash bonuses based on attainment by the Company of certain
performance goals.
All of the named executive officers will be eligible to
participate in the Stock Plan and the Incentive Plan, pursuant to which it is
anticipated that incentive compensation awards will be granted after the
Offerings. Effective upon the consummation of the Offerings, it is expected
that the Compensation Committee will grant certain executive officers options
to purchase an aggregate of shares of the Company's Class A Common
Stock under the Stock Plan. The exercise price of these options will be equal
to the initial public offering price set forth on the cover page of this
Prospectus. These options are composed of three approximately equal tranches.
Each tranche will vest generally in four equal annual installments commencing
on the first, second and third anniversaries of the grant date, respectively,
subject to continued employment with the Company. In addition, it is
anticipated that the Compensation Committee will grant, and in consideration
for the cancellation of certain previously granted options to purchase shares
of The Limited's common stock will offer to grant, to certain executive
officers and to non-executive officer associates options to purchase an
aggregate of up to shares of the Company's Class A Common Stock
under the Stock Plan with an exercise price equal to the initial public
offering price set forth on the cover page of this Prospectus. These options
would vest in annual increments of 25% commencing on various dates beginning
January 1, 1997, subject to continued employment with the Company. See "--
Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan".
In addition, subject to the cancellation of the grants of
restricted shares of The Limited's common stock made on
to certain executive officers and associates, it is expected that such
executive officers and associates will be granted, effective upon the
consummation of the Offerings, an aggregate of
restricted shares of the Company's Class A Common Stock under the Stock
Plan, which shares will vest on , subject to
continued employment with the Company. See Note 3 to the Summary Compensation
Table below and "-- Abercrombie & Fitch 1996 Stock Option and Performance
Incentive Plan".
The following table presents certain specific information
regarding the compensation paid by The Limited for the periods indicated to
Mr. Wexner, the Chairman of the Board of Abercrombie & Fitch, and to Messrs.
Gilman, Jeffries and Johnson and Ms. Donnan-Martin who have become executive
officers of Abercrombie & Fitch.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------- ------------------------------
Securities All Other
Name & Restricted Stock Underlying Compensation($)
Principal Position Year(1) Salary($) Bonus($)(2) Award(s)($)(3) Options(#) (4)
------------------ ---- ------ ----- ---------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner(5).......... 1995 $1,150,000 $768,315 -- 100,000 $148,436
Chairman of the Board 1994 1,150,000 832,370 556,562 50,000 149,066
1993 1,150,000 660,100 2,150,000 0 147,636
Kenneth B. Gilman(5)......... 1995 941,935 449,620 -- 25,000 190,772
Vice Chairman of the 1994 896,144 473,760 278,281 25,000 185,736
Board
1993 796,154 390,320 1,075,000 -- 157,926
Michael S. Jeffries.......... 1995 491,700 426,300 159,393 12,000 51,695
President and Chief
Executive Officer
Michele S. Donnan-Martin..... 1995 217,510 107,184 26,566 5,000 17,850
Vice President- General
Merchandising Manager-Women's
Seth R. Johnson.............. 1995 198,340 97,440 26,566 5,000 22,013
Vice President - Chief
Financial Officer
</TABLE>
- ----------------
(1) Under rules promulgated by the Commission, since the Company was not a
reporting company during the three immediately preceding fiscal years, only
the information with respect to the most recent completed fiscal year is
noted in the Summary Compensation Table except for such information that
was previously required to be filed with the Commission.
(2) Represents, for each fiscal year, the aggregate of the performance-based
cash incentive compensation paid for the Spring and Fall selling seasons
occurring in that fiscal year.
(3) On February 1, 1996, 9,516, 1,586, 1,586, restricted common stock
performance awards of The Limited were made to executive officers Jeffries,
Donnan-Martin and Johnson, respectively. The per share value of the common
stock of The Limited on such date was $16.75. These awards vest 10% on
February 1, 1996, an additional 20% on February 1, 1997, an additional 30%
on February 1, 1998, and the remaining 40% on February 1, 1999, in each
case subject to the holder's continued employment with The Limited.
As of February 2, 1996, the aggregate restricted stock holdings in The
Limited stock and the market value of such holdings for each of the named
executive officers were: Mr. Wexner, 132,500 shares, $2,219,375; Mr. Gilman
66,250 shares; $1,109,688; Mr. Jeffries, 61,516 shares, $1,030,393; Ms.
Donnan-Martin, 3,586 shares, $60,066; Mr. Johnson, 3,586 shares, $60,066
(based on the $16.75 fair market value of The Limited's common stock on
such date).
(4) Represents, for each named executive officer, the amount of employer
matching and supplemental contributions allocated to his/her account under
certain qualified and non-qualified defined contribution plans maintained by
The Limited during the calendar year in which the 1995 fiscal year
commenced. It is anticipated that after the Offerings the named executive
officers will continue to participate in such plans.
(5) Messrs. Wexner and Gilman are also employed by The Limited and received no
direct cash compensation from the Company. The annual base salary and
annual bonus opportunity for Messrs. Wexner and Gilman in respect of their
service with The Limited and its affiliates was determined by The Limited's
Compensation Committee and was paid by The Limited.
The following table sets forth certain information regarding
options to acquire common stock of The Limited granted to the named executive
officers during the 1995 fiscal year of The Limited.
Option Grants in Fiscal Year 1995
Individual Grants
<TABLE>
<CAPTION> Potential Realizable Value at Assumed
Securities % of Annual Rates of Stock Price
Underlying Total Options Appreciation
Options Granted to Exercise for Option Term(3)
Granted Employees In Price Expiration ---------------------------------------
Name (#)(1) Fiscal Year(2) ($/sh) Date 5.0%($) 10.0%($)
---- ---------- -------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner.... 100,000 4.69% $17.50 3/1/05 $1,100,565 $2,789,049
Kenneth B. Gilman... 5,714 0.27% 17.50 2/22/05 62,886 159,366
19,286 0.90% 17.50 3/1/05 212,255 537,896
Michael S. Jeffries. 5,800 0.27% 17.50 2/27/05 63,945 161,385
6,200 0.29% 17.50 3/1/05 68,355 172,515
Michele S. Donnan-
Martin.............. 4,282 0.20% 17.50 2/27/05 47,209 119,147
718 0.03% 17.50 3/1/05 7,916 19,978
Seth R. Johnson..... 4,742 0.22% 17.50 2/27/05 52,281 131,946
258 0.01% 17.50 3/1/05 2,844 7,179
</TABLE>
- --------------------
(1) All options granted relate to shares of common stock of The Limited.
(2) All options listed were granted to the named executive officers pursuant
to The Limited's 1993 Stock Option and Performance Incentive Plan. All
such options become exercisable in four equal annual portions commencing on
the first anniversary of the grant date. The table above indicates that
each named executive officer, other than Mr. Wexner, received two such
stock option grants during 1995. One grant represents options intended to
qualify as "incentive stock options" within the meaning of Section 422 of
the Code and the other represents non-qualifying stock options. All such
stock option grants were made on the same day, February 28, 1995.
(3) The assumed rates of growth are prescribed by the Commission for
illustrative purposes only and are not intended to predict or forecast
future stock prices.The following table provides information relating to
the number and value of shares of common stock of The Limited subject to
options held by the named executive officers as of February 2, 1996.
<TABLE> Aggregated Option Exercises in 1995 Fiscal Year
<CAPTION> and Fiscal Year-end Option Values
Value of Unexercised,
Number of Securities Underlying In-the-Money
Unexercised Options at FY-End (#) Options Held at FY-End ($)(1)
Shares --------------------------------- -----------------------------
Acquired On Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
----- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner.... -- -- 12,500 137,500 -- --
Kenneth B. Gilman... -- -- 200,000 68,750 $376,562 --
Michael S. Jeffries. -- -- 27,750 33,250 -- --
Michele S. Donnan-
Martin.............. -- -- 10,500 12,500 -- --
Seth R. Johnson..... -- -- 20,750 14,250 29,250 --
</TABLE>
- ---------------
(1) Calculated on the basis of the number of shares of common stock of The
Limited subject to each such option multiplied by the excess of the $16.75
fair market value of a share of The Limited's common stock at fiscal
year-end over the per share exercise price of such option.
Long-Term Incentive Plans -- Awards in Fiscal Year 1995
No awards were granted in respect of the 1995 fiscal year to
the named executive officers other than the restricted stock performance
awards granted in The Limited, Inc. stock on February 1, 1996 to corporate
officers Jeffries, Donnan-Martin and Johnson, as disclosed in the Summary
Compensation Table.
Abercrombie & Fitch Incentive Compensation Plan
It is anticipated that, prior to the consummation of the
Offerings, the Company's Board of Directors will adopt, and The Limited, as
the Company's sole shareholder, will approve, effective on the consummation
of the Offerings, the Incentive Plan. The Incentive Plan is intended to
satisfy the applicable provisions of Section 162(m) of the Code. Under the
Incentive Plan, approximately 30 key executives of the Company, other than
Messrs. Wexner and Gilman, with significant operating and financial
responsibility are eligible to earn seasonal cash incentive compensation
payments that are paid twice each year.
Prior to the beginning of each spring and fall selling season,
operating income and/or gross margin and/or sales objectives may be
established by the Compensation Committee of the Company. Any objectives set
would expect a stretch performance level, and be based on an analysis of
historical performance and growth expectations for the business, financial
results of other comparable businesses, and progress towards achieving the
long-range strategic plan for the business. These objectives and
determination of results are based entirely on financial measures, and
discretion may not be used to modify award results.
Annual incentive compensation targets established for eligible
executives will range from 10% to 110% of base salary. Targeted incentive
compensation would equal a percentage of an eligible executive's total
compensation as established by the pay guidelines. Executives earn their
target incentive compensation if the business achieves the established
operating income and/or gross margin and/or sales objectives. The target
incentive compensation percentage for each executive is based on the level and
functional responsibility of his or her position and competitive practices, in
that order of priority. For the named executive officers, annual incentive
compensation targets can range from 40% to 110% of base salary. The amount of
incentive compensation paid to executives can range from zero to double their
targets, based upon the extent to which operating income and/or gross margin
and/or sales objectives are achieved. The minimum level at which an executive
would earn any incentive payment, and the level at which an executive would
earn the maximum incentive payment of double the target, are established by
the Compensation Committee of the Company prior to the commencement of each
bonus period, and actual payouts are based on a straight-line interpolation
based on these minimum and maximum levels and the target operating income
objectives.
The maximum dollar amount to be paid for any year under the
Incentive Plan to each participant may not exceed $2 million.
Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan
It is anticipated that, prior to the consummation of the
Offerings, the Company's Board of Directors will adopt, and The Limited, as
the Company's sole shareholder, will approve, effective on the consummation
of the Offerings, the Stock Plan.
Purpose of Plan
The purpose of the Stock Plan is to attract and retain the best
available executive and key management associates for the Company and its
subsidiaries and to encourage the highest level of performance by such
associates, thereby enhancing the value of the Company for the benefit of its
shareholders. The Stock Plan is also intended to motivate executive and key
management associates to contribute to the Company's future growth and
profitability and to reward their performance in a manner that provides them
with a means to increase their holdings of the Class A Common Stock of the
Company and aligns their interests with the interests of the shareholders of
the Company.
Administration of the Stock Plan
The Stock Plan will be administered by a committee of two or
more members of the Company's Board of Directors (the "Plan Committee"). The
Plan Committee will be composed of directors who qualify as "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and as "outside directors" within the
meaning of Section 162(m) of the Code. The Plan Committee has the power in
its discretion to grant awards under the Stock Plan, to determine the terms
thereof, to interpret the provisions of the Stock Plan and to take such action
as it deems necessary or advisable for the administration of the Stock Plan.
Number of Authorized Shares
The Stock Plan provides for awards with respect to a maximum of
1,500,000 shares of Class A Common Stock to associates of the Company and its
subsidiaries and to associates of The Limited and its subsidiaries during the
term of the Stock Plan. Corresponding tax offset payments also may be awarded
at the discretion of the Plan Committee. The number and class of shares
available under the Stock Plan and/or subject to outstanding awards may be
adjusted by the Plan Committee to prevent dilution or enlargement of rights in
the event of various changes in the capitalization of the Company.
Eligibility and Participation
Eligibility to participate in the Stock Plan is limited to the
named executive officers and full-time executive and key management
associates of the Company and its subsidiaries and to associates of The
Limited and its subsidiaries who are selected by the Plan Committee.
Currently, approximately 500 associates of the Company and its subsidiaries
are within the classes eligible to participate in the Stock Plan. The Company
anticipates that approximately 10% of those eligible associates will
participate in the Stock Plan. Participation in the Stock Plan is at the
discretion of the Plan Committee and shall be based upon the associate's
present and potential contributions to the success of the Company and its
subsidiaries and such other factors as the Plan Committee deems relevant. No
associate may be granted in any calendar year awards covering more than
400,000 shares of Class A Common Stock.
Type of Awards Under the Stock Plan
The Stock Plan provides that the Plan Committee may grant
awards to eligible associates in any of the following forms, subject to such
terms, conditions and provisions as the Plan Committee may determine to be
necessary or desirable: (i) incentive stock options; (ii) nonstatutory stock
options; (iii) stock appreciation rights; (iv) restricted shares; (v)
performance shares; (vi) performance units; (vii) shares of unrestricted Class
A Common Stock; and (viii) tax offset payments.
Term of Stock Plan
Unless earlier terminated by the Company's Board of Directors,
the Stock Plan will terminate on the tenth anniversary of the earlier of the
adoption of the Stock Plan by the Company's Board of Directors or the date of
the consummation of the Offerings.
Amendment and Termination
The Company's Board of Directors may suspend, amend, modify or
terminate the Stock Plan.
Abercrombie & Fitch 1996 Stock Plan for Non-Associate Directors
It is anticipated that, prior to the consummation of the
Offerings, the Company's Board of Directors will adopt and The Limited, as
the Company's sole shareholder will approve, effective on the consummation
of the Offerings, the 1996 Non-Associate Director Stock Plan. The
following is a summary of the material terms of the 1996 Non-Associate
Director Stock Plan, a copy of which is filed as an exhibit to the
registration statement of which this Prospectus is a part. The following
summary does not purport to be complete and is qualified in its entirety by
the terms of the 1996 Non-Associate Director Stock Plan.
Purpose of Plan
The purpose of the 1996 Non-Associate Director Stock Plan is to
promote the interests of the Company and its shareholders by increasing the
proprietary interest of non-associate directors in the growth and performance
of the Company.
Eligibility
The 1996 Non-Associate Director Stock Plan provides for awards
of nonqualified options to directors of the Company who are not associates of
the Company or its affiliates ("Eligible Directors").
Types of Awards
Pursuant to the 1996 Non-Associate Director Stock Plan, on the
effective date of the Offerings each Eligible Director will be granted an
option to purchase 2,000 shares of Class A Common Stock at the price at which
such shares are offered to the public. Subsequently, on the first business
day of each fiscal year of the Company, commencing following the Offerings,
each Eligible Director will be granted an option to purchase 2,000 shares of
Class A Common Stock as of the first business day of such fiscal year at a per
share exercise price equal to the fair market value of a share of Class A
Common Stock on such date. Each option will: (i) vest in annual 25%
increments commencing on the first anniversary of the grant date; and (ii)
expire on the earlier of the tenth anniversary of the date of grant and one
year from the date on which an optionee ceases to be an Eligible Director.
The exercise price per share of Class A Common Stock shall be 100% of the fair
market value per share on the date the option is granted. The exercise price
of options must be satisfied in cash.
In addition, the 1996 Non-Associate Director Stock Plan
provides that each Eligible Director will receive 50% of such Eligible
Director's annual retainer in unrestricted shares of Class A Common Stock,
valued as of the last business day of each fiscal quarter commencing
hereafter.
Number of Authorized Shares
The maximum number of shares of Class A Common Stock in respect
of which options may be granted and shares awarded in lieu of 50% of the
annual retainer under the 1996 Non-Associate Director Stock Plan is 100,000.
Shares of Class A Common Stock subject to options that are forfeited,
terminated or canceled will again be available for awards. The shares of
Class A Common Stock to be delivered under the 1996 Non-Associate Director
Stock Plan will be made available from the authorized but unissued shares of
Class A Common Stock or from treasury shares. The number and class of shares
available under the 1996 Non-Associate Director Stock Plan and/or subject to
outstanding options may be adjusted by the Board of Directors to prevent
dilution or enlargement of rights in the event of various changes in the
capitalization of the Company.
Administration
The 1996 Non-Associate Director Stock Plan will be administered
by the Board of Directors. Subject to the provisions of the 1996
Non-Associate Director Stock Plan, the Board shall be authorized to interpret
the 1996 Non-Associate Director Stock Plan, to establish, amend, and rescind
any rules and regulations relating to it and to make all other determinations
necessary or advisable for its administration; provided, however, that the
Board shall have no discretion with respect to the selection of directors to
receive options, the number of shares of Class A Common Stock subject to any
such options, the purchase price thereunder or the timing or term of grants of
options. The determinations of the Board in the administration of the 1996
Non-Associate Director Stock Plan, as described herein, shall be final and
conclusive. The Secretary of the Company shall be authorized to implement the
1996 Non-Associate Director Stock Plan in accordance with its terms and to
take such actions of a ministerial nature as shall be necessary to effectuate
the intent and purposes thereof. The validity, construction and effect of the
1996 Non-Associate Director Stock Plan and any rules and regulations relating
to it shall be determined in accordance with the laws of the State of Delaware.
Transferability
The options granted under the 1996 Non-Associate Director Stock
Plan may not be assigned or transferred, except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order.
Shares issued under the 1996 Non-Associate Director Stock Plan
in respect of 50% of the annual retainer may be assigned or transferred.
Term of Plan
No option may be granted under the 1996 Non-Associate Director
Stock Plan after the tenth annual meeting of the Company's shareholders
following the consummation of the Offerings.
Amendments
The 1996 Non-Associate Director Stock Plan may be amended by
the Company's Board of Directors, as it shall deem advisable or to conform to
any change in any law or regulation applicable thereto; provided, that the
Company's Board of Directors may not, except in the limited circumstances
described above, without the authorization and approval of shareholders: (i)
increase the number of shares of Class A Common Stock which may be purchased
pursuant to options, either individually or in the aggregate; (ii) change the
requirement that option grants be priced at fair market value; (iii) modify in
any respect the class of individuals who constitute Eligible Directors; or
(iv) materially increase benefits thereunder. The provisions governing
eligibility, the grant, terms and conditions of the options and the award of
shares of Class A Common Stock in respect of the annual retainer and, for
purposes of the 1996 Non-Associate Director Stock Plan, the amount of the
annual retainer, may not be amended more often than once every six months,
other than to comport with changes in the Code, ERISA or the rules under
either such statute.
Awards under the Plan
The following table sets forth amounts to be paid to the
Non-Associate Director group in 1996 under the 1996 Non-Associate Director
Stock Plan.
1996 Non-Associate Director Stock Plan Benefits Table
<TABLE>
<CAPTION>
Name and Position Dollar Value($) Number of Units
----------------- --------------- ---------------
<S> <C> <C>
Non-Associate Director Group (assuming four non-associate directors) $20,000(1) 8,000(2)
</TABLE>
- --------------------
(1) Consists of restricted shares of the Company's Class A Common Stock to be
issued in respect of 50% of each such director's annual retainer, valued as
of the date such retainer is paid.
(2) Consists of options to purchase shares of the Company's Class A Common
Stock at an exercise price equal to the fair market value on the date of
grant. Each such option will vest in 25% increments commencing on the
first anniversary of the date of grant.
PRINCIPAL SHAREHOLDER
All of the shares of Class B Common Stock outstanding prior
to the completion of the Offerings are beneficially owned by The Limited.
Upon consummation of the Offerings, The Limited will beneficially own 100%
of the Class B Common Stock and, accordingly, will own Common Stock
representing approximately % of the economic interest in the Company ( % if
the Underwriters' over-allotment options are exercised in full) and
representing approximately % of the combined voting power of the Company's
outstanding Common Stock (or % if the Underwriters' over-allotment options
are exercised in full). As of March 18, 1996 Leslie H. Wexner, Chairman
of the Company and Chairman of the Board, Chief Executive Officer and
President of The Limited, beneficially owned approximately 25.2 % of the
outstanding common stock of The Limited. The address of The Limited is
Three Limited Parkway, Columbus, Ohio 43230.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have
shares of Class A Common Stock issued and outstanding ( if the
Underwriters' over-allotment options are exercised in full) and shares of
Class B Common Stock issued and outstanding. All of the shares of Class A
Common Stock to be sold in the Offerings will be freely transferable and
tradeable without restrictions under the Securities Act, except for any
shares purchased by an "affiliate" of the Company (as that term is defined
in Rule 144 adopted under the Securities Act ("Rule 144")), which will be
subject to the resale limitations of Rule 144. All of the outstanding
shares of Class B Common Stock are owned by The Limited and have not been
registered under the Securities Act and may not be sold in the absence of
an effective registration statement under the Securities Act other than in
accordance with Rule 144 or another exemption from registration. The
Limited has certain rights to require the Company to effect registration of
shares of Class B Common Stock owned by The Limited, which rights may be
assigned. See "Relationship with The Limited -- Corporate Agreement".
In general, under Rule 144 as currently in effect, a person
(including an affiliate) who beneficially owns shares that are "restricted
securities" as to which at least two years have elapsed since the later of the
date of acquisition of such securities from the issuer or from an affiliate of
the issuer, and any affiliate who owns shares that are not "restricted
securities", is entitled to sell within any three-month period, a number of
shares that does not exceed (together with the sales by other persons required
to be aggregated) the greater of one percent of the total number of
outstanding shares of the class of stock being sold or the average weekly
reported trading volume of the class of stock being sold during the four
calendar weeks preceding the filing of the required notice of such sale. A
person (or persons whose shares are aggregated) who is not deemed an
"affiliate" of the Company and who has beneficially owned restricted
securities as to which at least three years have elapsed since the later of
the date of the acquisition of such securities from the issuer or from an
affiliate of the issuer is entitled to sell such shares without regard to the
volume limitations described above. As defined in Rule 144, an "affiliate" of
an issuer is a person that directly or indirectly through the use of one or
more intermediaries controls, is controlled by, or is under common control
with, such issuer. The Commission has proposed reducing the periods of
beneficial ownership of "restricted securities" required by Rule 144. Under
the proposal, persons who have beneficially owned restricted securities for at
least one year, instead of two years as currently required, would be able to
resell such securities by complying with the volume limitations described
above. In the case of a person who is not deemed to be an affiliate of the
Company during the preceding three months, the proposal would permit sales
without regard to the limitations described above as long as at least two
years have elapsed since the later of the date of the acquisition of such
securities from the issuer or from an affiliate of the issuer, instead of
three years as currently required. There can be no assurance that the
proposed revisions to Rule 144 will be adopted by the Commission.
Rule 144A under the Securities Act ("Rule 144A") provides a
non-exclusive safe harbor exemption from the registration requirements of the
Securities Act for specified resales of restricted securities to certain
institutional investors. In general, Rule 144A allows unregistered resales of
restricted securities to a "qualified institutional buyer", which generally
includes an entity, acting for its own account or for the account of other
qualified institutional buyers, that in the aggregate owns or invests at least
$100 million in securities of unaffiliated issuers. Rule 144A does not extend
an exemption to the offer or sale of securities that, when issued, were of the
same class as securities listed on a national securities exchange or quoted on
an automated quotation system.
Prior to the Offerings, there has been no market for the Class
A Common Stock. No predictions can be made of the effect, if any, that market
sales of currently outstanding shares of Class B Common Stock or the
availability of such shares for sale will have on the market price of Class A
Common Stock prevailing from time to time. Nevertheless, sales of substantial
amounts of Class B Common Stock in the public market, or the perception that
such sales could occur, could adversely affect prevailing market prices for
Class A Common Stock. Although The Limited in the future may effect or direct
sales or other dispositions of Common Stock that would reduce its beneficial
ownership interest in the Company, The Limited has advised the Company that
its current intention is to continue to hold all of the Class B Common Stock
beneficially owned by it immediately after the completion of the Offerings.
However, The Limited has no agreement with the Company not to sell or
distribute such shares and, other than pursuant to the Underwriting Agreement
described below, there can be no assurance concerning the period of time
during which The Limited will maintain its beneficial ownership of Common
Stock. Beneficial ownership of at least 80% of the total voting power and
value of the outstanding Common Stock is required in order for The Limited to
continue to include the Company in its consolidated group for federal tax
purposes and ownership of at least 80% of the total voting power and 80% of
each class of nonvoting capital stock is required in order for The Limited to
be able to effect a Tax-Free Spin-Off of the Company. The Limited has
indicated to the Company that any decision by The Limited to reduce such
beneficial ownership interest would be made in the future on the basis of all
of the circumstances existing at such time, including the effect of any such
reduction on The Limited (including any benefit to The Limited from the
removal from The Limited's consolidated balance sheet of the Company's
indebtedness (and assets) in the event The Limited's interest in the Common
Stock is reduced below 50%), the needs of The Limited, the performance of The
Limited, stock market conditions and other factors. In connection with the
Offerings, subject to certain exceptions, the Company and The Limited will
agree with the Underwriters not to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any security convertible into or
exchangeable or exercisable for Common Stock) for a period of 180 days after
the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company will consist of
(a) shares of Common Stock, par value $0.01 per share, of which: (i)
shares will be designated as Class A Common Stock; and (ii) shares will be
designated as Class B Common Stock; and (b) shares of Preferred Stock, of
which no shares are outstanding as of the date hereof. Of the shares of
Common Stock designated as Class A Common Stock, shares are being offered
hereby and shares are reserved for issuance upon conversion of Class B
Common Stock into Class A Common Stock. Of the shares of Common Stock
designated as Class B Common Stock, shares will be outstanding and held by
The Limited upon consummation of the Offerings. Each of the Class A Common
Stock and Class B Common Stock constitutes a series of Common Stock under
the General Corporation Law of the State of Delaware (the "DGCL"). A
description of the material terms and provisions of the Company's
Certificate of Incorporation affecting the relative rights of the Class A
Common Stock, the Class B Common Stock and the Preferred Stock is set forth
below. The description is intended as a summary and is qualified in its
entirety by reference to the form of the Company's Certificate of
Incorporation filed with the Registration Statement of which this
Prospectus forms a part. Common Stock Voting RightsThe holders of Class A
Common Stock and Class B Common Stock generally have identical rights
except that holders of Class A Common Stock are entitled to one vote per
share while holders of Class B Common Stock are entitled to three votes per
share on all matters to be voted on by shareholders. Holders of shares of
Class A Common Stock and Class B Common Stock are not entitled to cumulate
their votes in the election of directors. Generally all matters to be
voted on by shareholders must be approved by a majority of the votes
entitled to be cast by all shares of Class A Common Stock and Class B
Common Stock present in person or represented by proxy, voting together as
a single class, subject to any voting rights granted to holders of any
Preferred Stock. However, the Company's Certificate of Incorporation
includes, among other things: (i) a requirement that a vote of at least
75% of the outstanding Common Stock is required to effect a merger or
consolidation with an Interested Person (as defined therein), a sale of all
or substantially all of the assets of the Company to an Interested Person
and certain other control transactions; and (ii) a provision specifying
that certain provisions of the Company's Certificate of Incorporation and
Bylaws may be amended, and directors may be removed, only with the approval
of 75% of the outstanding Common Stock.
Dividends
The Board of Directors of the Company currently intends to
retain future earnings for the development of its business and does not
anticipate paying regular quarterly dividends on the Class A Common Stock or
Class B Common Stock for the foreseeable future. Under Delaware law, the
declaration of dividends is within the discretion of the Board of Directors
and future dividends, if any, will depend upon various factors, including the
Company's net income, current and anticipated cash needs and any other factors
deemed relevant by the Board of Directors. By virtue of its stock ownership,
The Limited will have the ability to change the size and composition of the
Company's Board of Directors and thereby control the payments of dividends by
the Company. Pursuant to restrictions contained in the Credit Agreement, so
long as the Credit Agreement is outstanding, the Company is prohibited from
paying any dividends on its capital stock, including the Class A Common Stock.
See "Description of Certain Indebtedness--Credit Agreement".
Conversion
Prior to the earliest to occur of the date on which shares of
Class B Common Stock are issued to shareholders of The Limited or its
successor in a Tax-Free Spin-Off and the date on which the number of shares of
Class B Common Stock outstanding is less than a majority of the aggregate
number of shares of Common Stock outstanding and a Tax-Free Spin-Off has not
occurred, each share of Class B Common Stock is convertible while held by The
Limited or any of its subsidiaries at such holder's option into one share of
Class A Common Stock. Any shares of Class B Common Stock transferred to a
person other than The Limited or any of its subsidiaries shall automatically
convert to shares of Class A Common Stock upon such disposition, except for a
disposition effected in connection with a transfer of Class B Common Stock to
shareholders of The Limited as a dividend intended to be a Tax-Free Spin-Off.
In the event of a Tax-Free Spin-Off, shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock on the fifth
anniversary of the Tax-Free Spin-Off unless prior to such Tax-Free Spin-Off,
The Limited delivers to the Company an opinion of counsel (which counsel shall
be reasonably satisfactory to the Company) to the effect that such conversion
would preclude The Limited from obtaining a favorable ruling from the Internal
Revenue Service that the distribution would be a Tax-Free Spin-Off under the
Code. If such an opinion is received, approval of such conversion shall be
submitted to a vote of the holders of the Abercrombie & Fitch Common Stock as
soon as practicable after the fifth anniversary of the Tax-Free Spin-Off
unless The Limited delivers to the Company an opinion of The Limited's counsel
(which counsel shall be reasonably satisfactory to the Company) prior to such
anniversary that such vote would adversely affect the status of the Tax-Free
Spin-Off. Approval of such conversion will require the affirmative vote of
the holders of a majority of the shares of both Abercrombie & Fitch's Class A
Common Stock and Class B Common Stock present and voting, voting together as a
single class, with each share entitled to one vote for such purpose. No
assurance can be given that such conversion would be consummated. The Limited
has no current plans with respect to a Tax-Free Spin-Off of Abercrombie &
Fitch.
The Limited will convert its Class B Common Stock to Class A
Common Stock immediately prior to a Tax-Free Spin-Off if, after such
conversion, it would have beneficial ownership of at least 80% of the value as
well as the voting power of the outstanding Common Stock. All shares of Class
B Common Stock shall automatically convert into Class A Common Stock if a
Tax-Free Spin-Off has not occurred and the number of outstanding shares of
Class B Common Stock falls below 60% of the aggregate number of outstanding
shares of Common Stock. This will prevent The Limited from decreasing its
economic interest in the Company to less than 60% while still retaining
control of approximately % of Abercrombie & Fitch's voting power. All
conversions will be effected on a share-for-share basis.
The requirement that The Limited retain beneficial ownership of
at least 80% of the voting power of the outstanding Common Stock after any
conversion prior to a Tax-Free Spin-Off is intended to ensure that the tax
treatment of the Tax-Free Spin-Off is preserved. Similarly, the requirement
to submit such conversion to a vote of the holders of Common Stock is intended
to preserve such tax treatment should the Internal Revenue Service challenge
such automatic conversion as violating the 80% vote requirement. Automatic
conversion of the Class B Common Stock into Class A Common Stock if a Tax-Free
Spin-Off has not occurred and The Limited decreases its economic interest in
the Company to less than 60% is intended to ensure that The Limited retains
voting control by virtue of its ownership of Class B Common Stock only if it
has a sizable economic interest in the Company.
In addition, in order to give any holder of the Class A Common
Stock or Class B Common Stock the right to participate in any offer for a
significant amount of the shares of the other class that is not similarly
offered for the shares of such holder's class, following a Tax-Free Spin-Off
shares of Common Stock of each class will be convertible, at the option of the
registered holder thereof, on a share-for-share basis, into shares of the
other class if any person (other than The Limited or any of its consolidated
subsidiaries), or any group of persons (other than The Limited or any one or
more of its subsidiaries), agreeing to act together for the purpose of
acquiring, holding, voting or disposing of shares of Common Stock, makes an
offer which the Company's Board of Directors deems to be a bona fide offer, to
purchase 5% or more of the other class of Common Stock for cash and/or other
securities or property without making a similar offer for the shares of such
class. The shares of Common Stock of a class may only be so converted during
the period in which such bona fide offer is in effect. Any share of Common
Stock so converted and not acquired by the offeror prior to the termination,
recission or completion of the offer will automatically reconvert to a share
of the class from which it was converted upon such termination, rescission or
completion.
Other Rights
On liquidation, dissolution or winding up of the Company after
payment in full of the amounts required to be paid to holders of Preferred
Stock, all holders of Common Stock, regardless of class, are entitled to share
ratably in any assets available for distribution to holders of shares of
Common Stock.
No shares of either class of Common Stock are subject to
redemption or have preemptive rights to purchase additional shares of Common
Stock. However, see "Relationship with The Limited -- Corporate Agreement".
Upon consummation of the Offerings, all the outstanding shares
of Class A Common Stock and Class B Common Stock will be legally issued, fully
paid and nonassessable.
Preferred Stock
The Preferred Stock is issuable from time to time in one or
more series and with such designations and preferences for each series as
shall be stated in the resolutions providing for the designation and issue of
each such series adopted by the Board of Directors of Abercrombie & Fitch.
The Board of Directors is authorized by Abercrombie & Fitch's Certificate of
Incorporation to determine the voting, dividend, redemption and liquidation
preferences and limitations pertaining to such series. The Board of
Directors, without shareholder approval, may issue Preferred Stock with voting
and other rights that could adversely affect the voting power of the holders
of the Common Stock and could have certain antitakeover effects. Abercrombie
& Fitch has no present plans to issue any shares of Preferred Stock. The
ability of the Board of Directors to issue Preferred Stock without shareholder
approval could have the effect of delaying, deferring or preventing a change
in control of Abercrombie & Fitch or the removal of existing management.
Certain Certificate of Incorporation and Bylaw Provisions
Transactions with Interested Parties
The Company's Certificate of Incorporation includes certain
provisions addressing potential conflicts of interest between the Company and
The Limited and its subsidiaries and regulating and defining the conduct of
certain affairs of the Company as they may involve the Company, The Limited
and their subsidiaries, directors and officers. The Company's Certificate of
Incorporation provides that no contract, agreement, arrangement or transaction
(or any amendment, modification or termination thereof) between the Company
and The Limited or any subsidiary of The Limited (other than the Company) or
between the Company and any entity in which a director of the Company has a
financial interest (a "Related Entity") or between the Company and any
director or officer of the Company, The Limited, any subsidiary of The Limited
or any Related Entity shall be void or voidable solely for the reason that The
Limited or such subsidiary, a Related Entity or any one or more of the
officers or directors of the Company, The Limited or such subsidiary or any
Related Entity are parties thereto, or solely because any such directors or
officers are present at, participate in or vote (which vote shall be counted)
with respect to the authorization of the contract, agreement, arrangement or
transaction (or any amendment, modification or termination thereof). Further,
the Company's Certificate of Incorporation provides that The Limited, its
subsidiaries and any Related Entity shall not be liable to the Company or its
shareholders for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of the Company or the derivation
of any improper personal benefit by reason of the fact that The Limited, such
subsidiary or such Related Entity in good faith takes any action or exercises
any rights or gives or withholds any consent in connection with any agreement
or contract between The Limited, such subsidiary or such Related Entity and
the Company. No vote cast or other action taken by any person who is an
officer, director or other representative of The Limited, such subsidiary or
such Related Entity, which vote is cast or action is taken by such person in
his capacity as a director of the Company, shall constitute an action of or
the exercise of a right by or a consent of The Limited, such subsidiary or
such Related Entity for the purpose of any such agreement or contract. See
"Risk Factors".
Corporate Opportunities
The Company's Certificate of Incorporation provides that except
as The Limited may otherwise agree in writing:
(i) neither The Limited nor any subsidiary of The Limited (other than
the Company) shall have a duty to refrain from engaging directly or
indirectly in the same or similar business activities or lines of business
as the Company; and
(ii) neither The Limited nor any subsidiary (other than the Company),
officer or director of The Limited (except as provided below) will be
liable to the Company or to its shareholders for breach of any fiduciary
duty by reason of any such activities or of such person's participation
therein.
The Company's Certificate of Incorporation also provides that
if The Limited or any subsidiary of The Limited (other than the Company)
acquires knowledge of a potential transaction or matter which may be a
corporate opportunity both for The Limited or such subsidiary and for the
Company, neither The Limited nor such subsidiary shall have a duty to
communicate or offer such corporate opportunity to the Company and shall
not be liable to the Company or its shareholders for breach of fiduciary
duty as a shareholder of the Company or controlling person of a shareholder
by reason of the fact that The Limited or such subsidiary pursues or
acquires such opportunity for itself, directs such corporate opportunity to
another person, or does not communicate information regarding such
corporate opportunity to the Company.
Further, the Company's Certificate of Incorporation provides
that in the event that a director, officer or associate of the Company who is
also a director, officer or associate of The Limited or its subsidiaries
acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for the Company, The Limited or its subsidiaries
(whether such potential transaction or matter is proposed by a third party or
is conceived of by such director, officer or associate of the Company), such
director, officer or associate shall be entitled to offer such corporate
opportunity to the Company, The Limited or such subsidiary as such director,
officer or associate deems appropriate under the circumstances in his or her
sole discretion, and no such director, officer or associate shall be liable to
the Company or its shareholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interests of the
Company or the derivation of any improper personal benefit by reason of the
fact that (i) such director, officer or associate offered such corporate
opportunity to The Limited or such subsidiary (rather than the Company) or did
not communicate information regarding such corporate opportunity to the
Company or (ii) The Limited or such subsidiary pursues or acquires such
corporate opportunity for itself or directs such corporate opportunity to
another person or does not communicate information regarding such corporate
opportunity to the Company. The enforceability of the provisions discussed
above under Delaware corporate law has not been established and, due to the
absence of relevant judicial authority, counsel to the Company is not able to
deliver an opinion as to the enforceability of such provisions. These
provisions of the Company's Certificate of Incorporation eliminate certain
rights that might have been available to shareholders under Delaware law had
such provisions not been included in the Certificate of Incorporation,
although the enforceability of such provisions has not been established.
The Company's Board of Directors currently consists of three
members, two of whom serve concurrently as members of the Board of Directors
of The Limited and Intimate Brands. In addition, a significant number of
associates and officers of the Company will also be associates or officers of
The Limited or its subsidiaries.
The foregoing provisions of the Company's Certificate of
Incorporation shall expire on the date that The Limited ceases to own
beneficially Common Stock representing at least 20% of the number of
outstanding shares of Common Stock and no person who is a director or officer
of the Company is also a director or officer of The Limited or its
subsidiaries.
The affirmative vote of the holders of more than 75% of the
aggregate voting power of the Common Stock is required to alter, amend or
repeal in a manner adverse to the interests of The Limited, or adopt any
provision adverse to the interests of The Limited including provisions with
respect to the interested party and corporate opportunity provisions described
above. Accordingly, so long as The Limited beneficially owns Common Stock
representing at least 25% of the number of outstanding shares of Common Stock,
it can prevent any such alteration, amendment, repeal or adoption. See "Risk
Factors--Control by The Limited".
Actions Under Intercompany Agreements
The Company's Certificate of Incorporation also limits the
liability of The Limited and its subsidiaries for certain breaches of their
fiduciary duties in connection with action that may be taken or not taken in
good faith under the intercompany agreements. See "Relationship with The
Limited".
Any person purchasing or acquiring an interest in shares of
capital stock of the Company is deemed to have consented to the foregoing
provisions relating to intercompany agreements and the provisions set forth
above relating to transactions with interested parties and corporate
opportunities. The Certificate of Incorporation of The Limited does not
include comparable provisions relating to intercompany agreements,
transactions with interested parties or corporate opportunities.
Advance Notice Provision
Abercrombie & Fitch's Bylaws provide for an advance notice
procedure for the nomination, other than by or at the direction of the Board
of Directors, of candidates for election as directors as well as for other
shareholder proposals to be considered at annual meetings of shareholders. In
general, notice of intent to nominate a director or raise matters at such
meetings will have to be received by Abercrombie & Fitch not less than 120 or
more than 150 days prior to the first anniversary of Abercrombie & Fitch's
proxy statement in connection with the previous year's annual meeting, and
must contain certain information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the shareholder
submitting the proposal.
The Delaware General Corporation Law
The Company is a Delaware corporation subject to Section 203
of the DGCL. Section 203 provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business
combination with any "interested shareholder" for a three-year period
following the date that such shareholder becomes an interested shareholder
unless: (i) prior to such date, the Board of Directors of the corporation
approved either the business combination or the transaction which resulted
in the shareholder becoming an interested shareholder; (ii) upon
consummation of the transaction which resulted in the shareholder becoming
an interested shareholder, the interested shareholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares); or (iii) on or subsequent to such
date, the business combination is approved by the Board of Directors of the
corporation and by the affirmative vote of at least 66% of the outstanding
voting stock which is not owned by the interested shareholder. Except as
specified in Section 203 of the DGCL, an interested shareholder is defined
to include (x) any person that is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation, at any time within three years
immediately prior to the relevant date and (y) the affiliates and
associates of any such person. Under certain circumstances, Section 203 of
the DGCL makes it more difficult for an "interested shareholder" to effect
various business combinations with the Company for a three-year period,
although the shareholders of the Company may elect to exclude the Company
from the restrictions imposed thereunder. By virtue of its beneficial
ownership of Class B Common Stock, The Limited is in a position to elect to
exclude the Company from the restrictions under Section 203 and currently
has no intention to do so.
Transfer Agent
The Company's transfer agent and registrar for its Common
Stock is .
DESCRIPTION OF CERTAIN INDEBTEDNESS
Following is a discussion of the material terms of certain
indebtedness of the Company.
Intercompany Debt
Abercrombie & Fitch's subsidiaries have intercompany
obligations to The Limited in an aggregate amount of approximately $53.1
million. The long-term Mirror Note in the amount of $50 million bears
interest at the rate of 7.80% per annum and matures on May 15, 2002. The
interest rate and maturity of the long-term Mirror Note parallel those of
the corresponding debt of The Limited. The Working Capital Note,
representing indebtedness of $3.1 million, matures on January 31, 1997 and
bears interest at a rate of 6.75% per annum.
Credit Agreement
Two subsidiaries of the Company, Abercrombie & Fitch Stores,
Inc. and A & F Trademark, Inc. (each a "Borrower" and together, the
"Borrowers"), are parties to the Credit Agreement with the banks listed
therein and Chase Manhattan Bank, as agent, pursuant to which such
subsidiaries entered into a five-year term loan facility. Under the Credit
Agreement, such subsidiaries borrowed an aggregate amount of $150 million. The
amounts borrowed are repayable in nine consecutive semi-annual installments,
commencing on June 30, 1997 and ending on June 30, 2001, provided, that
borrowings must be repaid in an amount equal to the Excess Cash Flow (as
defined therein) of the Company, which amount will include the net proceeds of
the Offerings. The aggregate amount payable on each June 30 and December 31
is $10 million and $25 million, respectively. Interest on borrowings under
the Credit Agreement accrues, at each of the Borrowers' option, at either a
base rate or a rate based on the London Interbank Offered Rate ("LIBOR").
Base rate borrowings accrue interest at the higher of the prime rate
(announced by Chase Manhattan Bank in New York), or the Federal Funds Rate
plus .5%. LIBOR borrowings accrue interest at the rate of interest published
by the Telerate Service (or if such rate is not available, then the rate of
interest at which dollar deposits of $5 million are available to the Agent in
the London interbank market) plus a certain margin. Optional prepayments of
the borrowings shall be applied to the repayment installments pro rata and may
not be reborrowed.
Borrowings under the Credit Agreement are guaranteed by the
Company and by Abercrombie & Fitch Holding Corporation ("Holdings"), a
wholly-owned subsidiary of the Company and the holding company parent of
Abercrombie & Fitch Stores, Inc. In addition, each of the Borrowers have
guaranteed all obligations of the other Borrower. In the event that (a) A & F
Trademark, Inc. or Holdings is neither a direct, wholly-owned subsidiary of
the Company, (b) Abercrombie & Fitch Stores, Inc. ceases to be a direct,
wholly-owned subsidiary of Holdings nor a direct wholly-owned subsidiary of
the Company or (c) The Limited ceases to own directly at least 80% of the
outstanding capital stock of the Company or the Company and its consolidated
subsidiaries cease to be consolidated subsidiaries of The Limited, all
borrowings will be subject to mandatory prepayment.
The Credit Agreement contains financial covenants including an
interest and rental expense coverage ratio and a maximum ratio of debt to
EBITDA (as defined therein). The Credit Agreement also provides for
limitations on mergers, consolidations, acquisitions, sale of assets,
transactions with affiliates, sale and lease-back transactions, liens, capital
expenditures, debt and investments. The Credit Agreement also prohibits the
payment by the Company of dividends on its capital stock, including the Class
A Common Stock.
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States
federal income and estate tax consequences of the ownership and disposition of
the Common Stock applicable to Non-United States Holders of such Common Stock.
For the purpose of this discussion, a "Non-United States Holder" is any holder
that is, as to the United States, a foreign corporation, a non-resident alien
individual, a foreign partnership or a non-resident fiduciary of a foreign
estate or trust as such terms are defined in the Code. This discussion does
not deal with all aspects of United States federal income and estate taxation
and does not deal with foreign, state and local tax consequences that may be
relevant to Non-United States Holders in light of their personal
circumstances. Furthermore, the following discussion is based on current
provisions of the Code and administrative and judicial interpretations as of
the date hereof, all of which are subject to change. Prospective foreign
investors are urged to consult their tax advisors regarding the United States
federal, state, local and non-United States income and other tax consequences
of owning and disposing of Common Stock.
Proposed United States Treasury Regulations were issued on
April 15, 1996 (the "Proposed Regulations") which, if adopted, would affect
the United States taxation of dividends paid to a Non-United States Holder on
Common Stock. The Proposed Regulations are generally proposed to be effective
with respect to dividends paid after December 31, 1997, subject to certain
transition rules. The discussion below is not intended to be a complete
discussion of the provisions of the Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the effect
the Proposed Regulations would have if adopted.
Dividends
Generally, any dividend paid to a Non-United States Holder of
Common Stock will be subject to United States withholding tax either at a rate
of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. Under current United States Treasury
regulations, dividends paid to an address outside the United States are
presumed to be paid to a resident of such country (absent knowledge that such
presumption is not warranted) for purposes of the withholding discussed above
and, under the current interpretation of United States Treasury regulations,
for purposes of determining applicability of a tax treaty rate.
Under the Proposed Regulations, to obtain a reduced rate of
withholding under a treaty, a Non-United States Holder would generally be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-United States Holder's entitlement to benefits under a treaty. The
Proposed Regulations would also provide special rules to determine whether,
for purposes of determining the applicability of a tax treaty, dividends paid
to a Non-United States Holder that is an entity should be treated as paid to
the entity or those holding an interest in that entity.
Dividends received by a Non-United States Holder that are
effectively connected with a United States trade or business conducted by such
Non-United States Holder are exempt from such withholding tax. However, such
effectively connected dividends, net of certain deductions and credits, are
taxed at the same graduated rates applicable to United States persons. A
Non-United States Holder may claim exemption from withholding under the
effectively connected income exception by filing Form 4224 (Statement Claiming
Exemption from Withholding of Tax on Income Effectively Connected With the
Conduct of Business in the United States) each year with the Company or its
paying agent prior to the payment of the dividends for such year. In addition
to the graduated tax described above, dividends received by a corporate
Non-United States Holder that are effectively connected with a United States
trade or business of the corporate Non-United States Holder may also be
subject to a branch profits tax at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty.
A Non-United States Holder of Common Stock eligible for a
reduced rate of United States withholding tax pursuant to a tax treaty may
obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the U.S. Internal Revenue Service.
Gain on Disposition of Common Stock
A Non-United States Holder generally will not be subject to
United States federal income tax on any gain realized upon the sale or
other disposition of his Common Stock unless: (i) such gain is effectively
connected with a United States trade or business of the Non-United States
Holder; (ii) the Non-United States Holder is an individual who holds such
Common Stock as a capital asset and who is present in the United States for
a period or periods aggregating 183 days or more during the calendar year
in which such sale or disposition occurs and certain other conditions are
met; or (iii) the Company is or has been a "United States real property
holding corporation" for federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or such holder's
holding period. The Company has determined that it is not and does not
believe that it will become a "United States real property holding
corporation" for federal income tax purposes.
Backup Withholding and Information Reporting
Generally, the Company must report to the U.S. Internal
Revenue Service the amount of dividends paid, the name and address of the
recipient, and the amount, if any, of tax withheld. A similar report is
sent to the holder. Pursuant to tax treaties or other agreements, the U.S.
Internal Revenue Service may make its reports available to tax authorities
in the recipient's country of residence.
Dividends paid to a Non-United States Holder at an address
within the United States may be subject to backup withholding at a rate of 31%
if the Non-United States Holder fails to establish that it is entitled to an
exemption or to provide a correct taxpayer identification number and other
information to the payor. Backup withholding will generally not apply to
dividends paid to Non-United States Holders at an address outside the United
States (unless the payor has knowledge that the payee is a U.S. person).
The payment of the proceeds of the disposition of Common Stock
to or through the United States office of a broker is subject to information
reporting and backup withholding at a rate of 31% unless the holder certifies
its non-United States status under penalties of perjury or otherwise
establishes an exemption. Generally, the payment of the proceeds of the
disposition by a Non-United States Holder of Common Stock outside the United
States to or through a foreign office of a broker will not be subject to
backup withholding. However, information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds outside
the United States through an office outside the United States of a broker that
is (a) a United States person, (b) a United States "controlled foreign
corporation" for U.S. tax purposes or (c) a foreign person 50% or more of
whose gross income for certain periods is from the conduct of a United States
trade or business unless such broker has documentary evidence in its files of
the owner's foreign status and has no actual knowledge to the contrary or the
holder otherwise establishes an exemption.
The Proposed Regulations would, if adopted, alter the foregoing
rules in certain respects. Among other things, the Proposed Regulations would
provide certain presumptions under which a Non-United States Holder would be
subject to backup withholding and information reporting unless the Company
receives certification from the holder of non-U.S. status.
Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the U.S. Internal Revenue Service.
Estate Tax
An individual Non-United States Holder who owns Common Stock at
the time of his death or has made certain lifetime transfers of an interest in
Common Stock will be required to include the value of such stock in his gross
estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
LEGAL MATTERS
The validity of the Class A Common Stock offered hereby will
be passed upon by Davis Polk & Wardwell, New York, New York. Certain
legal matters in connection with the Class A Common Stock offered hereby
will be passed upon for the Underwriters by Fried, Frank, Harris, Shriver
& Jacobson (a partnership including professional corporations), New York,
New York.
EXPERTS
The balance sheet of Abercrombie & Fitch Co. as of July 11,
1996 and the consolidated balance sheet of the Abercrombie & Fitch Business as
of January 28, 1995 and February 3, 1996, and the related consolidated
statements of operations and cash flows for each of the three fiscal years in
the period ended February 3, 1996 included in this Prospectus have been
audited by Coopers & Lybrand L.L.P., independent auditors, as stated in their
reports appearing herein, and have been included in reliance upon such reports
given upon the authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
Abercrombie & Fitch has filed with the Commission a
registration statement on Form S-1 (the "Registration Statement") under
the Securities Act with respect to the Class A Common Stock offered
hereby. For the purposes hereof, the term "Registration Statement" means
the original Registration Statement and any and all amendments thereto.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
with respect to the Company and such Class A Common Stock, reference is
hereby made to such Registration Statement, including the exhibits and
schedules thereto, which can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission at Seven World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 at prescribed rates.
Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
Upon completion of the Offerings, the Company will be subject
to the informational requirements of the Exchange Act, and, in accordance
therewith, will file reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information
statements and other information can be inspected and copied at the addresses,
and may be accessed electronically at the URL, set forth above.
The Company intends to furnish to its shareholders annual
reports containing audited consolidated financial statements and an opinion
thereon expressed by the Company's independent auditors as well as quarterly
reports for the first three fiscal quarters of each fiscal year containing
unaudited consolidated condensed financial statements.
Statements contained in this Prospectus as to the contents of
any agreement, contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such agreement, contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any shares of Common Stock in any jurisdiction
in which such offer or solicitation is unlawful. See "Underwriting".
In this Prospectus, references to "Dollars" and to "$" are to
United States dollars.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Abercrombie & Fitch Co. Financial Statements:
Report of Independent Accountants...................................... F-2
Balance Sheet.......................................................... F-3
Notes to Balance Sheet................................................. F-4
Abercrombie & Fitch Business Financial Statements:
Report of Independent Accountants...................................... F-5
Consolidated Statements of Operations.................................. F-6
Consolidated Balance Sheets............................................ F-7
Consolidated Statements of Cash Flows.................................. F-8
Notes to Consolidated Financial Statements............................. F-9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of Abercrombie & Fitch Co.
We have audited the accompanying balance sheet of Abercrombie & Fitch Co.
as of July 11, 1996. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Abercrombie & Fitch Co. as of
July 11, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
July 11, 1996
ABERCROMBIE & FITCH CO.
BALANCE SHEET
July 11, 1996
ASSETS
Current assets:
Cash......................................................... $1,000
======
SHAREHOLDER'S EQUITY
Common Stock, $.10 par value; 1,000 shares
authorized; 1,000 shares issued and outstanding............... $100
Paid in capital............................................... 900
Retained earnings............................................. -
------
Total shareholder's equity................................... $1,000
======
The accompanying notes are an integral part of the balance sheet.
ABERCROMBIE & FITCH CO.
NOTES TO BALANCE SHEET
1. Organization
Abercrombie & Fitch Co. was incorporated on June 26, 1996, and, except for
organizational matters and activities undertaken in connection with the
proposed initial public offering of its common shares, has been inactive since
that date. As a result, the Company has not had any income or expenses. On
July 11, 1996 the Company issued 1,000 common shares to its sole shareholder,
The Limited, Inc. ("The Limited") for cash.
2. Planned Transactions
As a result of a Board Resolution by the directors of The Limited, Inc.,
The Limited will contribute the stock of Abercrombie & Fitch Holdings, the
parent company of the Abercrombie & Fitch Business, and A&F Trademark, Inc. to
Abercrombie & Fitch Co. Prior to the public offering of its shares, the
Company's certificate of incorporation will be amended to authorize
shares of preferred stock and shares of Class A common stock and
shares of Class B common stock, each with a par value of $.01 per
share. Holders of Class A common stock generally will have identical rights
to holders of Class B common stock except that holders of Class A common stock
will be entitled to one vote per share while holders of Class B common stock
will be entitled to three votes per share on all matters submitted to a vote
of shareholders. Each share of Class B common stock will be convertible while
held by The Limited or any of its subsidiaries into one share of Class A common
stock.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of The Abercrombie & Fitch Business
We have audited the accompanying consolidated balance sheet of the
Abercrombie & Fitch Business as of January 28, 1995 and February 3, 1996, and
the related consolidated statements of operations and cash flows for each of
the three fiscal years in the period ended February 3, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The
Abercrombie & Fitch Business of January 28, 1995 and February 3, 1996 and the
consolidated results of its operations and its cash flows for each of the
three fiscal years in the period ended February 3, 1996 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
July 11, 1996
THE ABERCROMBIE & FITCH BUSINESS
CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
(Unaudited)
---------------------------------------------- ------------------------
January 29, January 28, February 3, April 29, May 4,
1994 1995 1996 1995 1996
----------- ----------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
Net sales............................. $110,952 $165,463 $235,659 $33,377 $51,020
Cost of goods sold, occupancy and
buying costs................... 80,390 108,643 155,865 24,949 36,126
-------- -------- -------- ------- -------
Gross income.......................... 30,562 56,820 79,794 8,428 14,894
General, administrative and store
operating expenses............. 30,240 43,069 55,996 10,297 15,293
Special and nonrecurring items........ 4,386 -- -- -- --
-------- -------- -------- ------- -------
OOperating income (loss) before
income taxes.................... (4,064) 13,751 23,798 (1,869) (399)
Provision for (benefit from) income
taxes................................. (1,600) 5,500 9,500 (700) (200)
-------- -------- -------- ------- -------
Net income (loss)..................... $(2,464) $8,251 $14,298 $(1,169) $(199)
======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
THE ABERCROMBIE & FITCH BUSINESS
CONSOLIDATED BALANCE SHEETS
(thousands)
<TABLE>
<CAPTION>
January 28, February 3, May 4,
1995 1996 1996 Pro Forma May 4, 1996
(Unaudited)
(Unaudited) (Note 14)
----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash.................................................. $592 $874 $823 $824
Accounts receivable................................... 3,632 3,617 3,231 3,231
Inventories........................................... 16,551 30,388 33,042 33,042
Store supplies........................................ 1,974 3,529 3,753 3,753
Deferred income taxes................................. -- -- 1,208 1,208
Other................................................. 357 448 261 261
------- ------- ------- -------
Total current assets................................ 23,106 38,856 42,318 42,319
Property and equipment, net............................ 34,904 47,203 45,765 45,765
Deferred income taxes.................................. -- 1,624 1,624 1,624
Other assets........................................... 8 10 10 10
------- ------- ------- -------
Total assets........................................ $58,018 $87,693 $89,717 $89,718
======= ======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities
Accounts payable...................................... $4,379 $4,359 $4,044 $4,044
Accrued expenses...................................... 10,411 14,500 13,593 13,593
Credit agreement...................................... -- -- -- 150,000
Working capital note.................................. -- -- -- 3,074
Income taxes payable.................................. 3,434 4,892 200 200
------- ------- ------- -------
Total current liabilities........................... 18,224 23,751 17,837 170,911
------- ------- ------- -------
Long-term intercompany debt............................ 74,101 86,045 94,074 --
Long-term mirror note.................................. -- -- -- 50,000
Deferred income taxes.................................. 2,359 -- -- --
Other long-term liabilities............................ 404 519 627 627
Shareholder's equity (deficit)......................... (37,070) (22,622) (22,821) (131,820)
------- ------- ------- -------
Total liabilities and shareholder's equity (deficit) $58,018 $87,693 $89,717 $89,718
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
THE ABERCROMBIE & FITCH BUSINESS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
--------------------------------------------- -----------------------
January 29, January 28, February 3, April 29, May 4,
1994 1995 1996 1995 1996
----------- ----------- ----------- ---------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)....................... $(2,464) $8,251 $14,298 $(1,169) $(199)
Impact of other operating activities on cash
flows
Depreciation and amortization........... 7,054 7,799 9,104 2,132 2,483
Special and nonrecurring items.......... 4,386 -- -- -- --
Change in assets and liabilities
Accounts receivable..................... (171) (2,058) 15 1,356 386
Inventories............................. 5,023 (6,499) (13,837) (4,372) (2,654)
Accounts payable and accrued expenses... 4,809 4,117 4,069 (1,865) (1,222)
Income taxes............................ 2,770 5,914 1,458 (5,300) (5,900)
Other assets and liabilities............ (768) 2,631 (2,393) (55) 313
------- ------ ------- ------- -------
Net cash provided by (used for)
operating activities....................... 20,639 20,155 12,714 (9,273) (6,793)
------- ------ ------- ------- -------
Investing activities
Capital expenditures.................... (4,694) (12,603) (24,526) (2,826) (1,287)
------- ------ ------- ------- -------
Cash used for investing activities......... (4,694) (12,603) (24,526) (2,826) (1,287)
------- ------ ------- ------- -------
Financing activities
Change in long-term intercompany debt... (15,796) (7,387) 11,944 12,022 8,029
Other changes in shareholder's equity
(deficit)............................... -- 20 150 -- --
------- ------ ------- ------- -------
Net cash provided by (used for)
financing activities.......................... (15,796) (7,367) 12,094 12,022 8,029
------- ------ ------- ------- -------
Net increase (decrease ) in cash.............. 149 185 282 (77) (51)
Cash, beginning of period..................... 258 407 592 592 874
------- ------ ------- ------- -------
Cash, end of period........................... $407 $592 $874 $515 $823
======= ====== ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
THE ABERCROMBIE & FITCH BUSINESS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statement Presentation
The accompanying financial statements include the accounts of
the Abercrombie & Fitch Business and its subsidiaries. The Abercrombie &
Fitch Business is a direct subsidiary of The Limited, Inc. ("The Limited").
The Abercrombie & Fitch Business is a specialty retailer of
high-quality, casual American apparel for men and women with an active,
youthful lifestyle. The business was established in 1892 and was subsequently
acquired by The Limited in 1988.
The accompanying consolidated financial statements include the
historical financial statements of and transactions applicable to the
Abercrombie & Fitch Business and reflect the assets, liabilities, results of
operations and cash flows on a historical cost basis. Certain investment
assets unrelated to the Company have been excluded from the historical
financial statements and will not be retained by the Abercrombie & Fitch
Business.
The consolidated financial statements are prepared for
inclusion in a registration statement relating to the public offering of Class
A common shares of Abercrombie & Fitch Co., a wholly-owned subsidiary of The
Limited. Prior to the aforementioned public offering, The Limited will
contribute the stock of Abercrombie & Fitch Holdings, the parent company of
the Abercrombie & Fitch Business, and A&F Trademark, Inc. to Abercrombie &
Fitch.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
the Abercrombie and Fitch Business and all significant subsidiaries which are
more than 50% owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation.
Fiscal year
The Company's fiscal year ends on the Saturday closest to
January 31. Fiscal years are designated in the financial statements and notes
by the calendar year in which the fiscal year commences. The results for
fiscal year 1995 represent the 53-week period ended February 3, 1996 and the
results for fiscal years 1993 and 1994 represents the 52-week periods ended
January 29, 1994 and January 28, 1995.
Interim financial statements
The consolidated financial statements as of and for the periods
ended April 29, 1995 and May 4, 1996 are unaudited and are presented pursuant
to the rules and regulations of the Securities and Exchange Commission. In
the opinion of management, the accompanying consolidated financial statements
reflect all adjustments (which are of normal recurring nature) necessary to
present fairly the financial position and results of operations and cash flows
for the interim periods, but are not necessarily indicative of the results of
operations for a full fiscal year.
Store Supplies
The initial inventory of supplies for new stores including,
but not limited to, hangers, signage, sensormatic tags and point-of-sale
supplies are capitalized at the store opening date. Subsequent shipments are
expensed except for new merchandise presentation programs which are
capitalized.
Inventory
Inventories are principally valued at the lower of average cost
or market, on a first-in first-out basis, utilizing the retail method.
Property and equipment
Depreciation and amortization of property and equipment are
computed for financial reporting purposes on a straight-line basis, using
service lives ranging principally from 10-15 years for building improvements
and 3-10 years for other property and equipment. Beneficial leaseholds
represent the present value of the excess of fair market rent over contractual
rent of existing stores at the 1988 purchase of the Company by The Limited and
are being amortized over the lives of the related leases. The cost of assets
sold or retired and the related accumulated depreciation or amortization are
removed from the accounts with any resulting gain or loss included in net
income. Maintenance and repairs are charged to expense as incurred. Major
renewals and betterments that extend service lives are capitalized.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that full recoverability is questionable. Factors used
in the valuation include, but are not limited to, management's plans for
future operations, recent operating results and projected cash flows.
Revenue recognition
Sales are recorded upon purchase by customers.
Provision for income taxes
Income taxes are calculated using the liability method.
Deferred tax assets and liabilities are recognized based on the difference
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect in the years in
which those temporary differences are expected to reverse.
The Company is included in The Limited's consolidated federal
and certain state income tax groups for income tax reporting purposes and is
responsible for its proportionate share of income taxes calculated upon its
federal taxable income at a current estimate of the annual effective tax rate.
Advertising
Advertising costs consist of in-store photographs and
advertising in selected national publications and are expensed when the
photographs or publications first appear. Advertising costs amounted to $519
thousand in 1993, $1.215 million in 1994, $3.121 million in 1995 and $575
thousand and $447 thousand for the quarters ended April 29, 1995 and May 4,
1996.
Store pre-opening expenses
Pre-opening expenses related to new store openings are charged
to operations as incurred.
Store closing costs
When a store is relocated or closed, estimated unrecoverable
costs are charged to operations.
Fair value of financial instruments
The recorded values of financial instruments, including cash,
accounts receivable and accounts payable, approximate fair value due to the
short maturity and because the average interest rate approximates current
market origination rates.
Earnings per share
Historical earnings per share data is omitted from the
consolidated statements of operations as it is not meaningful.
Adoption of New Accounting Standards
The Company will make the new disclosures for SFAS No. 123,
"Accounting for Stock-Based Compensation" beginning with fiscal year-end 1996.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Since actual results may differ from
those estimates, the Company revises its estimates and assumptions as new
information becomes available.
3. Special and nonrecurring items
During 1993, the Abercrombie & Fitch Business participated in a
plan of The Limited which provided for the closure, downsizing and remodeling
of seven under-performing stores of the Abercrombie & Fitch Business. In
developing this program, specific stores were identified based upon historical
operating results of such stores and assessment of the quality of real estate.
The provision for store closure, downsizing and remodeling aggregated
approximately $4.4 million and included the net book value of abandoned fixed
assets and lease termination payments. As of October 28, 1995, the
Abercrombie & Fitch Business had completed the program.
4. Property and equipment
Property and equipment, at cost, consisted of (thousands):
January 28, February 3, May 4,
1995 1996 1996
---------- ----------- -------
(Unaudited)
Furniture, fixtures and equipment.... $50,871 $71,590 $72,803
Beneficial leaseholds................ 9,387 7,925 7,925
Building improvements and leaseholds. 2,565 1,267 1,213
Construction in progress............. 212 85 213
------- ------- -------
63,035 80,867 82,154
Less - accumulated depreciation and
amortization......................... 28,131 33,664 36,389
------- ------- -------
Property and equipment, net.......... $34,904 $47,203 $45,765
======= ======= =======
5. Leased facilities and commitments
Annual store rent is comprised of a fixed minimum amount, plus
contingent rent based upon percentage of sales exceeding a stipulated amount.
Store lease terms generally require additional payments covering taxes, common
area costs and certain other expenses.
A summary of rent expense for fiscal year 1993, 1994 and 1995
and the quarters ended April 29, 1995 and May 4, 1996 follows (thousands):
<TABLE>
<CAPTION>
January 29, January 28, February 3, April 29, May 4,
1994 1995 1996 1995 1996
---------- ----------- ----------- --------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Store rent
Fixed minimum..................... $8,112 $11,308 $17,465 $3,667 $5,430
Contingent........................ 1,010 1,475 1,322 199 388
------ ------- ------- ------ ------
Total store rent........................ 9,122 12,783 18,787 3,866 5,818
Buildings, equipment and other.......... 643 613 1,058 197 304
------ ------- ------- ------ ------
Total rent expense................ $9,765 $13,396 $19,845 $4,063 $6,122
====== ======= ======= ====== ======
</TABLE>
Rent expense includes charges from The Limited and other
divisions of The Limited for space used. The Abercrombie & Fitch Business
intends to execute formal agreements for use of such space (see Note 8). The
Abercrombie & Fitch Business was committed to noncancelable leases with
remaining terms of one to twenty years. These commitments include store
leases with initial terms ranging from ten to fifteen years and offices and a
distribution center leased from an affiliate of The Limited with an initial
term of 15 years. Substantially all of the Abercrombie & Fitch Business store
leases are guaranteed by The Limited. A summary of minimum rent commitments
under noncancelable leases follows (thousands):
1996................................... $ 22,064
1997................................... 21,982
1998................................... 22,010
1999................................... 22,323
2000................................... 22,354
Thereafter............................. 133,335
6. Accrued expenses
Accrued expenses consisted of the following (thousands):
<TABLE>
January 28, February 3, May 4,
1995 1996 1996
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
Accrued taxes, other than income. $1,252 $1,882 $1,787
Accrued compensation............. 2,185 3,025 2,378
Accrued rent..................... 2,071 2,872 2,991
Other............................ 4,903 6,721 6,437
------- ------- -------
Total............................ $10,411 $14,500 $13,593
======= ======= =======
</TABLE>
7. Income Taxes
The Abercrombie & Fitch Business consolidated financial
statements reflect a charge for federal and state income taxes as if the
Abercrombie & Fitch Business had been subject to tax on a separate company
basis during the periods presented. The charge is based on the then current
tax rates.
This provision for (benefit from) income taxes consisted of
(thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
---------------------------------------------- ------------------------
January 29, January 28, February 3, April 29, May 4,
1994 1995 1996 1995 1996
----------- ----------- ----------- --------- _________
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $(1,400) $4,300 $6,900 $(700) $(200)
State...................... (400) 1,100 1,700 (100) --
------- ------ ------ ------ -------
(1,800) 5,400 8,600 (800) (200)
------- ------ ------ ------ -------
Deferred:
Federal.................... 200 100 700 100 --
State...................... -- -- 200 -- --
------- ------ ------ ------ -------
200 100 900 100 --
------- ------ ------ ------ -------
Total provision (benefit) $(1,600) $5,500 $9,500 $(700) $(200)
======= ====== ====== ====== =======
</TABLE>
For the quarters ended April 29, 1995 and May 4, 1996, the
statements of operations reflect a provision for federal and state income
taxes based on the Company's expected annual tax rates.
A reconciliation between the statutory federal income tax rate
and the effective income tax rate follows:
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------
1993 1994 1995 April 29, 1995 May 4, 1996
----- ----- ----- -------------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal income tax rate........ 35.0% 35.0% 35.0% 35.0% 35.0%
State income tax, net of
federal income tax effect 5.2% 5.2% 5.2% 5.2% 5.2%
Other items, net............... (1.1%) (0.2%) (0.3%) (2.7%) (1.6%)
----- ----- ----- ----- -----
39.1% 40.0% 39.9% 37.5% 38.6%
===== ===== ===== ===== =====
</TABLE>
Income taxes payable included current deferred tax assets of
$1.566 million and $1.208 million, at January 28, 1995 and February 3, 1996.
Current income tax obligations are treated as having been
settled through the intercompany accounts as if the Company were filing its
income tax returns on a separate company basis. Such amounts were $.8 million
and $7.5 million in fiscal years 1994 and 1995 and were $4.6 million and $5.7
million for the quarters ended April 29, 1995 and May 4, 1996.
The effect of temporary differences which give rise to deferred
income tax balances was as follows (thousands):
<TABLE>
<CAPTION>
1994 1995
---------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets Liabilities Total Assets Liabilities Total
------------- ----------- --------- -------- ------------- -------
Fixed assets.................. $ - $(2,765) $(2,765) $1,159 $ - $1,159
Accrued expenses.............. 1,469 - 1,469 1,504 - 1,504
Other, net.................... 503 - 503 169 - 169
------------- ---------- ------- ------ ------------- ------
Total deferred income taxes... $1,972 $ (2,765) $(793) $2,832 $ - $2,832
============= ========== ======= ====== ============= ======
</TABLE>
No valuation allowance has been provided for deferred tax
assets because management believes that it is more likely than not that the
full amount of the net deferred tax assets will be realized in the future.
The Internal Revenue Service has assessed The Limited for
additional taxes and interest for the years 1989-1992. The portion of the
assessment relating to the Company was based on treatment of construction
allowances. Although The Limited made a deposit to mitigate further interest
being assessed, the Company strongly disagrees with the assessment and is
vigorously contesting the matter. Management believes resolution of this
matter will not have a material adverse effect on the Company's results of
operations or financial condition. The Limited has allocated a portion of the
deposit to the Company which is included in deferred tax assets.
8. Related party transactions
Transactions between the Abercrombie & Fitch Business, The
Limited, and its subsidiaries and affiliates, commonly occur in the normal
course of business and principally consist of the following:
Merchandise purchases
Real estate management and leasing
Capital expenditures
Inbound and outbound shipping
Corporate services
Information with regard to these transactions is as follows:
Significant purchases are made from Mast, a wholly owned
subsidiary of The Limited. Purchases are also made from Gryphon, an indirect
subsidiary of The Limited. Mast is a contract manufacturer and apparel
importer while Gryphon is a developer of fragrance and personal care products
and also a contract manufacturer. Prices are negotiated on a competitive
basis by merchants of the Abercrombie & Fitch Business with Mast, Gryphon and
the manufacturers.
The Abercrombie & Fitch Business' real estate operations,
including all aspects of lease negotiations and ongoing dealings with
landlords and developers, are handled centrally by the real estate division of
The Limited ("Real Estate Division"). Real Estate Division expenses are
allocated to the Abercrombie & Fitch Business based on a combination of new
and remodeled store construction projects and open selling square feet.
The Abercrombie & Fitch Business' store design and construction
operations are coordinated centrally by the store planning division of The
Limited ("Store Planning Division"). The Store Planning Division facilitates
the design and construction of the stores and upon completion transfers the
stores to the Abercrombie & Fitch Business at actual cost. Store Planning
Division expenses are charged to the Abercrombie & Fitch Business based on a
combination of new and remodeled store construction projects and open selling
square feet.
The Abercrombie & Fitch Business' inbound and outbound freight
is managed centrally by Limited Distribution Services ("LDS"), a wholly owned
subsidiary of The Limited. Inbound freight is charged to the Abercrombie &
Fitch Business based on actual receipts, which is in turn charged back to
Abercrombie & Fitch's FOB Columbus suppliers. Outbound freight is charged on
percentage of cartons shipped.
The Limited provides certain services to the Abercrombie &
Fitch Business including, among other things, certain tax, treasury, legal,
corporate secretary, accounting, auditing, corporate development, risk
management, associate benefit plan administration, human resource and
compensation, government affairs and public relation services. Identifiable
costs are charged directly to the Abercrombie & Fitch Business. Aircraft
costs are charged based on usage and, effective January 29, 1995, include
minimum usage charges. All other services-related costs not specifically
attributable to an operating business have been allocated to the Abercrombie &
Fitch Business based upon a percentage of sales.
The Abercrombie & Fitch Business participates in The Limited's
centralized cash management system. Under this system, cash received from
The Abercrombie & Fitch Business' operations is transferred to The Limited's
centralized cash accounts and cash disbursements are funded from the
centralized cash accounts on a daily basis. For all periods presented
intercompany transactions have been reported as financing activities in the
accompanying consolidated statements of cash flows. Effective July 11, 1996,
the intercompany accounts became an interest earning current asset (interest
bearing current liability).
The Abercrombie & Fitch Business is charged rent expense,
common area maintenance charges and utilities for stores shared with other
consolidated subsidiaries of The Limited. The charges are based on square
footage and represent the proportionate share of the underlying leases with
third parties.
The Abercrombie & Fitch Business is also charged rent expense
and utilities for the distribution and home office space occupied (which
approximates fair market value).
The Abercrombie & Fitch Business and The Limited plan to enter
into intercompany agreements in connection with the Offerings pursuant to
which The Limited will continue to provide the services on similar terms as
those described above. Management believes the charges and allocations
described above are fair and reasonable.
The following table summarizes the related party transactions
between the Abercrombie & Fitch Business and The Limited and its other wholly
owned subsidiaries, for the periods indicated (thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
---------------------------------------------- -------------
January 29, January 28, February 3, May 4,
1994 1995 1996 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
(Unaudited)
Mast and Gryphon purchases.................. $11,019 $25,325 $35,167 $7,746
Capital expenditures........................ 4,910 12,819 22,274 939
Inbound and outbound freight................ 632 2,153 2,869 657
Corporate charges........................... 2,086 2,865 4,019 1,010
Store leases and other occupancy............ 289 380 1,397 373
Distribution center, MIS and home office
expense..................................... 1,566 1,676 2,564 679
Centrally managed benefits.................. 1,239 1,289 2,417 1,067
------- ------- ------- -------
$21,741 $46,507 $70,707 $12,471
======= ======= ======= =======
</TABLE>
The following is a summary of the activity in the long-term
intercompany debt account (thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
--------------------------------------------------------- -------------
January 29, May 4,
1994 January 28, 1995 February 3, 1996 1996
----------- ---------------- ---------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Beginning balance........................... $97,284 $80,084 $73,211 $86,045
Transactions with related parties........... 21,741 46,507 70,707 12,471
Centralized cash management................. (37,541) (54,180) (65,373) (10,142)
Settlement of current period income taxes... (1,400) 800 7,500 5,700
------- ------- ------- -------
Ending balance.............................. $80,084 $73,211 $86,045 $94,074
======= ======= ======= =======
</TABLE>
9. Shareholder's equity (deficit)
A reconciliation of shareholder's equity (deficit) follows
(thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Quarter Ended
--------------------------------------------------------- -------------
January 29, May 4,
1994 January 28, 1995 February 3, 1996 1996
------------ ---------------- ---------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Beginning balance........................ $(42,877) $(45,341) $(37,070) $(22,622)
Net income (loss)........................ (2,464) 8,251 14,298 (199)
Other changes in shareholder's equity.... -- 20 150 --
--------- -------- -------- --------
Ending balance........................... $(45,341) $(37,070) $(22,622) $(22,821)
========= ======== ======== ========
</TABLE>
10. Retirement benefits (thousands)
The Abercrombie & Fitch Business participated in a defined
contribution retirement plan sponsored by The Limited. Participation in this
plan is available to all associates who have completed 1,000 or more hours of
service with the Abercrombie & Fitch Business during certain 12 month periods
and attained the age of 21. The Abercrombie & Fitch Business' contributions to
this plan are based on a percentage of the associates' annual compensation.
The cost of this plan was $257 in 1993, $343 in 1994 and $549 in 1995.
11. Employee benefits (thousands)
Officers and key employees were granted options to participate
in The Limited's stock option and restricted stock plans. Compensation
expense related to these awards has been reflected in the financial statements
and amounted to $26 in 1993, $224 in 1994 and $437 in 1995.
12. Legal matters
There are various claims, lawsuits and pending actions against
the Abercrombie & Fitch Business incident to the operations of its business.
It is the opinion of management that the ultimate resolution of these matters
will not have a material effect on the Abercrombie & Fitch Business' results
of operations or financial position.
13. Quarterly financial data (unaudited) (thousands)
<TABLE>
<CAPTION>
First Second Third Fourth
------ ------ -------- -------
<S> <C> <C> <C> <C>
1994 Quarter
Net sales........... $23,399 $29,045 $38,584 $74,435
Gross income........ 5,643 8,285 11,815 31,077
Net income (loss)... (1,225) (530) 466 9,540
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
------ ------ -------- -------
<S> <C> <C> <C> <C>
1995 Quarter
Net sales........... $33,377 $38,668 $57,222 $106,392
Gross income........ 8,428 12,023 19,503 39,840
Net income (loss)... (1,169) 250 2,583 12,634
</TABLE>
14. Subsequent events and pro forma financial data (unaudited)
Subsequent to the date of the financial statements, Abercrombie
& Fitch Co. was incorporated and The Limited will contribute the stock of
Abercrombie & Fitch Holdings, the parent company of the Abercrombie & Fitch
Business, and A&F Trademark, Inc. to Abercrombie & Fitch Co. effective July
15, 1996.
The Abercrombie & Fitch Business is party to a bank credit
agreement pursuant to which it borrowed $150 million on July 2, 1996. The
agreement has interest rates which are based on either the lender's "Base
Rate," as defined, or a LIBOR-related rate. The agreement places restrictions
on mergers, consolidations, acquisitions, sales of assets, transactions with
affiliates, sale and leaseback transactions, liens, restricted payments, debt
and investments. It also contains an interest and rental expense coverage
ratio and a maximum ratio of debt to EBITDA. The scheduled final maturity of
the borrowings under the credit agreement is June 30, 2001 although such
amounts must be repaid by the excess cash flow of the Abercrombie & Fitch
Business, which includes the net proceeds of any public offering. It is
anticipated that a substantial portion of the borrowings under the credit
agreement will be repaid in connection with the proposed public offering and,
if needed, by cash flow from operations generated in the fourth quarter of the
1996 fiscal year. Therefore all such amounts are considered as short-term
borrowings.
Long-term intercompany debt consists of an unsecured note in
the amount of $50 million that matures May 15, 2002, and bears interest at
7.80% per annum. The note represents the Abercrombie & Fitch Business' share
of certain long-term debt of The Limited, of which interest rate and maturity
of the note parallels that of corresponding debt of The Limited. The note is
to be automatically prepaid concurrently with any prepayment of the
corresponding debt of The Limited. The note is not subject to early
redemption by The Limited.
The pro forma balance sheet as of May 4, 1996 reflects the
following transactions:
(1) Represents amounts derived from the historical consolidated
financial statements of the Abercrombie & Fitch Business.
(2) The initial capitalization of Abercrombie & Fitch Co.
($.10 par value, 1,000 shares authorized, 1,000 shares issued and
outstanding).
(3) Borrowings by the Abercrombie & Fitch Business of $150
million under the credit agreement on July 2, 1996;
(4) Transfer of the Trademark Obligations to The Limited in the
amount of $32 million.
(5) Distribution to The Limited of the $50 million long-term
Mirror Note.
(6) Payment of the $32 million Trademark Obligations, payment
of $91 million of long-term intercompany debt owed to The Limited and a
$27 million dividend to The Limited.
(7) Conversion of $3.1 million of long-term intercompany debt
into the Working Capital Note.
The following transactions are not reflected in the pro forma
balance sheet:
(1) The issuance and sale of shares in the
anticipated public offerings and the application of the $115 million net
proceeds therefrom to repay borrowings under the bank credit agreement.
UNDERWRITING
Subject to the terms and conditions of the Underwriting
Agreement, the Company has agreed to sell to each of the U.S. Underwriters
named below, and each of such U.S. Underwriters, for whom Goldman, Sachs &
Co., Lazard Freres & Co. LLC, Montgomery Securities and J.P. Morgan
Securities Inc. are acting as representatives (the "Representatives of the
Underwriters"), has severally agreed to purchase from the Company, the
respective number of shares of Class A Common Stock set forth opposite its
name below:
<TABLE>
<S> <C>
Number of Shares of
U.S. Underwriter Class A Common Stock
---------------- --------------------
Goldman, Sachs & Co.......................
Lazard Freres & Co. LLC...................
Montgomery Securities.....................
J.P. Morgan Securities Inc................
---------------------
Total.....................................
</TABLE> =====================
Under the terms and conditions of the Underwriting Agreement,
the U.S. Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The Underwriters propose to offer the shares of Class A Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and in part to certain securities
dealers at such price less a concession of $ per share. The U.S.
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares
of Class A Common Stock are released for sale to the public, the offering
price and the other selling terms may from time to time be varied by the
Representatives of the Underwriters.
The Company has entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
International Offering (the "International Underwriters") providing for the
concurrent offer and sale of shares of Class A Common Stock in an
International Offering outside the United States. The initial public offering
price and aggregate underwriting discounts and commissions per share for the
Offerings are identical. The closing of the offering made hereby is a
condition to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Lazard Capital Markets, Montgomery Securities and J.P. Morgan
Securities Limited.
Pursuant to the agreement between the U.S. and International
Underwriting Syndicates (the "Agreement Between") relating to the Offerings,
each of the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered as a part of the U.S. Offering and subject
to certain exceptions, it will offer, sell or deliver the shares of Class A
Common Stock, directly or indirectly, only in the United States (including the
States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction (the "United States") and to U.S.
persons, which term shall mean, for purposes of this paragraph: (i) any
individual who is a resident of the United States or (ii) any corporation,
partnership or other entity organized in or under the laws of the United
States or any political subdivision thereof and whose office most directly
involved with the purchase is located in the United States. Each of the
International Underwriters has agreed or will agree pursuant to the Agreement
Between that, as a part of the distribution of the shares offered as a part of
the International Offering, and subject to certain exceptions, it will (i)
not, directly or indirectly, offer, sell or deliver shares of Class A Common
Stock (a) in the United States or to any U.S. persons or (b) to any person who
it believes intends to reoffer, resell or deliver the shares in the United
States or to any U.S. persons, and (ii) cause any dealer to whom it may sell
such shares at any concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between
the U.S. Underwriters and the International Underwriters of such number of
shares of Class A Common Stock as may be mutually agreed. The price of any
shares so sold shall be the initial public offering price, less an amount not
greater than the selling concession.
The Company has granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their
over-allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the shares of Class A Common Stock offered
hereby. The Company has granted the International Underwriters a similar
option exercisable for up to an aggregate of additional
shares of Class A Common Stock.
The Company and The Limited have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 days after the date of this Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of, except as provided in the U.S.
Underwriting Agreement and the International Underwriting Agreement, any
securities of the Company that are substantially similar to the shares of
Class A Common Stock, or which are convertible into or exchangeable for, or
that represent the right to receive, shares of Class A Common Stock or any
such substantially similar securities (other than any issuances or sales of
any of the foregoing securities (i) in connection with the acquisition of or
merger with any other corporation or other entity or the acquisition of any
assets or properties thereof provided that, prior to the issuance of such
securities, the Company shall obtain and deliver to the Underwriters executed
copies of an agreement from any such corporation or entity substantially to
the effect set forth in the Underwriting Agreement in form satisfactory to the
Representatives, (ii) pursuant to employee stock option, or other employee
benefit plans existing on the date of the Underwriting Agreement or (iii) to
The Limited or its subsidiaries in accordance with the terms of the Corporate
Agreement between the Company and The Limited or its subsidiaries) without the
prior written consent of the Representatives.
The Representatives of the Underwriters have informed the
Company that they do not expect sales to accounts over which they exercise
discretionary authority to exceed five percent of the total number of shares
of Class A Common Stock offered by them.
The Underwriters have reserved for sale, at the initial public
offering price, shares of Class A Common Stock for associates and
directors of the Company and certain other businesses operated by The Limited
who have expressed an interest in purchasing such shares of Class A Common
Stock in the Offerings. It is expected that such associates will purchase, in
the aggregate, less than 5% of the Class A Common Stock offered in the
Offerings. The number of shares available for sale to the general public in
the Offerings will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares
offered hereby.
Prior to the Offerings, there has been no public market for the
shares of Class A Common Stock. The initial public offering price will be
negotiated between the Company and the representatives of the U.S.
Underwriters and the International Underwriters. Among the factors to be
considered in determining the initial public offering price of the Class A
Common Stock in addition to prevailing market conditions, are the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of
companies in related businesses.
This Prospectus may be used by underwriters and dealers in
connection with offers and sales of Class A Common Stock, including shares
initially sold in the International Offering, to persons located in the United
States.
Application will be made to list the Class A Common Stock on
the New York Stock Exchange.
The Company has agreed to indemnify the several U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act.
Certain of the Underwriters have provided from time to time,
and expect to provide in the future, investment banking services to The
Limited, the Company and their subsidiaries, for which such Underwriters have
received and will receive customary fees and commissions. In addition, from
time to time, in the ordinary course of their respective businesses, J.P.
Morgan Securities Inc. and certain of its affiliates engage and may in the
future engage in investment banking and commercial banking transactions with
The Limited and certain of its affiliates. Morgan Guaranty Trust Company of
New York ("MGT"), an affiliate of J.P. Morgan Securities Inc., is the agent
bank on The Limited's $1 billion Revolving Credit Facility maturing December
14, 2000. MGT is also a lender under the Credit Agreement and, as lender,
will receive in excess of 10% of the net proceeds of the Offerings.
Accordingly, this offering will be conducted in accordance with Rule
2710(c)(8) of the National Association of Securities Dealers, Inc. ("NASD")
which requires that the public offering price of an equity security be no
higher than the price recommended by a "qualified independent underwriter"
meeting the requirements of NASD Rule 2720(b)(15) which has participated in
the preparation of the registration statement and performed its usual standard
of due diligence with respect thereto. Goldman, Sachs & Co. has agreed to act
as "qualified independent underwriter" for the Offerings, and the public
offering price of the Class A Common Stock will be no higher than the price
recommended by Goldman, Sachs & Co.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or sale is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof or that the information
contained herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
----
Prospectus Summary......... 3
Risk Factors............... 10
Use of Proceeds............ 16
Dividends.................. 16
Dilution................... 17
Capitalization............. 18
Pro Forma Consolidated
Financial Statements..... 20
Selected Financial Data.... 27
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations............... 29
Business................... 35
Relationship with
The Limited.............. 47
Management................. 52
Executive Compensation..... 53
Principal Shareholder...... 61
Shares Eligible for Future
Sale..................... 61
Description of Capital Stock 63
Description of Certain
Indebtedness .............. 68
Certain United States Tax
Consequences to Non-United
States Holders........... 69
Legal Matters.............. 71
Experts.................... 71
Additional Information..... 71
Index to Consolidated
Financial Statements..... F-1
Underwriting............... U-1
Through and including , 1996 (the 25th day after the date of this
Prospectus), all dealers effecting transactions in the Class A Common Stock,
whether or not participating in this distribution, may be required to deliver
a Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
Shares
Abercrombie & Fitch
Class A Common Stock
(par value $.01 per share)
PROSPECTUS
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Montgomery Securities
J.P. Morgan & Co.
Representatives of the Underwriters
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.The following table sets
forth the expenses in connection with the issuance and distribution of the
Class A Common Stock being registered, other than the underwriting discount.
All of the amounts shown are estimates, except the SEC and NASD registration
fees.
SEC Registration Fee.......................................... $ 43,104
National Association of Securities Dealers, Inc.
Registration Fee............................................ 13,000
New York Stock Exchange Listing Fee...........................
Blue Sky fees and expenses....................................
Printing and engraving expenses...............................
Legal fees and expenses.......................................
Accounting fees and expenses..................................
Transfer Agent and Registrar expenses.........................
Miscellaneous.................................................
----------
Total.................................................. $
==========
Item 14. Indemnification of Directors and Officers.Section 145 of the General
Corporation Law of the State of Delaware (the "Delaware Law") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person was an officer or director of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided that such officer or director acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests, and, for criminal proceedings, had no
reasonable cause to believe his conduct was illegal. A Delaware corporation
may indemnify officers and directors against expenses (including attorneys'
fees) in connection with the defense or settlement of an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Certificate of
Incorporation of the Company contains a provision to limit the personal
liability of the directors of the Company for violations of their fiduciary
duty. This provision eliminates each director's liability to the Company or
its shareholders for monetary damages except (i) for any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware Law
providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions, or (iv) for any transaction from which
a director derived an improper personal benefit. The effect of this provision
is to eliminate the personal liability of directors for monetary damages for
actions involving a breach of their fiduciary duty of care, including any such
actions involving gross negligence.
Article V of the Bylaws of the Company provides for
indemnification of the officers and directors of the Company to the full
extent permitted by applicable law.
Item 15. Recent Sales of Unregistered SecuritiesExcept for the issuance of
common stock to The Limited, the Company has not issued any securities in
unregistered transactions. The issuance of such securities is exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<S> <C>
Exhibit No.
1.1 Form of Underwriting Agreement (U.S. Version).*
3.1 Form of Amended and Restated Certificate of Incorporation of
Abercrombie & Fitch Co.
3.2 Form of Bylaws of Abercrombie & Fitch Co.
4.1 Specimen Certificate of Class A Common Stock of Abercrombie & Fitch Co.*
4.2 Certificate of Incorporation of The Limited, Inc.
4.3 Bylaws of The Limited, Inc.
5.1 Opinion of Davis Polk & Wardwell regarding the legality of the securities being
registered.*
10.1 Credit Agreement, dated as of June 28, 1996, among Abercrombie & Fitch Stores, Inc.,
Abercrombie & Fitch Trademark, Inc., the banks listed therein and Chase Manhattan
Bank, N.A., as Agent.
10.2 Form of Services Agreement between Abercrombie & Fitch Co. and The Limited, Inc.
10.3 Sublease Agreement, dated June 1, 1995, between Abercrombie & Fitch Stores, Inc. and
Victoria's Secret Stores, Inc.
10.4 Form of Shared Facilities Agreement between Abercrombie & Fitch Co. and The
Limited, Inc.
10.5 Form of Tax-Sharing Agreement between Abercrombie & Fitch Co. and The Limited,
Inc.
10.6 Form of Corporate Agreement between Abercrombie & Fitch Co. and The Limited, Inc.
10.7 Form of Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan.*
10.8 Form of Abercrombie & Fitch Co. Incentive Compensation Plan.*
10.9 Form of Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors.*
21.1 Subsidiaries of Abercrombie & Fitch Co.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature pages of this Registration Statement)
27.1 Financial Data Schedule
</TABLE>
*To be filed by amendment
Item 17. Undertakings. The undersigned Registrant hereby undertakes:
(a) To provide to the underwriters at the closing specified in
the underwriting agreements, certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(b) (1) That, for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or(4) under the Securities Act of 1933 shall be deemed to be
part of this Registration Statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referred to
in Item 15 of this Registration Statement, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Reynoldsburg, State of Ohio, on July 16, 1996.
ABERCROMBIE & FITCH CO.
/s/ Seth R. Johnson
By:____________________________
Name: Seth R. Johnson
Title: Vice President - Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Samuel Fried and William K. Gerber his or
her true and lawful attorneys-in-fact and agents, each acting alone, with
full powers of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement, including post-effective
amendments, as well as any related registration statement (or amendment
thereto) filed pursuant to Rule 462 promulgated under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in
person, and hereby ratifies and confirms all his or her said attorneys-in-
fact and agents or any of them or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue thereof.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Leslie H. Wexner
_________________________ Chairman of the Board of Directors July 16, 1996
Leslie H. Wexner
/s/ Kenneth B. Gilman
_________________________ Vice Chairman of the Board of Directors July 16, 1996
Kenneth B. Gilman
/s/ Michael S. Jeffries
_________________________ Chief Executive Officer, President and Director July 16, 1996
Michael S. Jeffries (principal executive officer)
/s/ Seth R. Johnson
_________________________ Vice President and Chief Financial Officer
Seth R. Johnson (principal financial and accounting officer) July 16, 1996
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT INDEX
Exhibit No. Page No.
1.1 Form of Underwriting Agreement (U.S. Version).*
3.1 Form of Amended and Restated Certificate of Incorporation of
Abercrombie & Fitch Co.
3.2 Form of Bylaws of Abercrombie & Fitch Co.
4.1 Specimen Certificate of Class A Common Stock of Abercrombie & Fitch Co.*
4.2 Certificate of Incorporation of The Limited, Inc.
4.3 Bylaws of The Limited, Inc.
5.1 Opinion of Davis Polk & Wardwell regarding the legality of the securities being
registered.*
10.1 Credit Agreement, dated as of June 28, 1996, among Abercrombie & Fitch Stores,
Inc., Abercrombie & Fitch Trademark, Inc., the banks listed therein and Chase
Manhattan Bank, N.A., as Agent.
10.2 Form of Services Agreement between Abercrombie & Fitch Co. and The Limited,
Inc.
10.3 Sublease Agreement, dated June 1, 1995, between Abercrombie & Fitch Stores,
Inc. and Victoria's Secret Stores, Inc.
10.4 Form of Shared Facilities Agreement between Abercrombie & Fitch Co. and The
Limited, Inc.
10.5 Form of Tax-Sharing Agreement between Abercrombie & Fitch Co. and The
Limited, Inc.
10.6 Form of Corporate Agreement between Abercrombie & Fitch Co. and The
Limited, Inc.
10.7 Form of Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive
Plan.*
10.8 Form of Abercrombie & Fitch Co. Incentive Compensation Plan.*
10.9 Form of Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors.*
21.1 Subsidiaries of Abercrombie & Fitch Co.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature pages of this Registration Statement)
27.1 Financial Data Schedule
</TABLE>
*To be filed by amendment.
Exhibit 3.1
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
ABERCROMBIE & FITCH CO.
* * * * *
Abercrombie & Fitch Co. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware does hereby amend the Certificate of Incorporation of
the Corporation, which was originally filed on June 26, 1996, under the name
Abercrombie & Fitch, Inc.
FIRST. The name of the Corporation is:
ABERCROMBIE & FITCH CO.
SECOND. The address of the registered office of the
Corporation in the State of Delaware is Corporation Service Company, 1013
Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The
name of its registered agent at such address is Corporation Service Company.
THIRD. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended ("Delaware Law").
FOURTH.
Section 1. Capital Stock. (a) The total number of shares
of stock which the Corporation shall have authority to issue is _______,
consisting of _______ shares of Common Stock, par value $.01 per share (the
"Common Stock"), and _______ shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock"). The Common Stock of the Corporation shall be
all of one class, and shall be divided into two classes, consisting of Class A
Common Stock and Class B Common Stock. The Preferred Stock may be issued in
one or more series having such designations as may be fixed by the Board of
Directors.
(b) The Board of Directors is expressly authorized to
provide for the issue of all or any shares of the Common Stock and the
Preferred Stock, to determine the number of shares of each class and to fix
for each class of Common Stock and for any series of Preferred Stock such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions adopted by the Board of
Directors or a duly authorized committee thereof providing for the issue of
such series and as may be permitted by Delaware Law.
(c) The number of authorized shares of any class or classes
of stock may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of a majority of the Common
Stock of the Corporation irrespective of the provisions of Section 242(b)(2)
of Delaware Law.
Section 2. Common Stock. (a) Issuance and Consideration.
Any unissued or treasury shares of the Common Stock may be issued for such
consideration as may be fixed in accordance with applicable law from time to
time by the Board of Directors.
(b) Dividends. Subject to the rights of holders of the
Preferred Stock, the holders of the Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of the assets of the
Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of stock and the holders of the Preferred Stock
shall not be entitled to participate in any such dividends (unless otherwise
provided by the Board of Directors in any resolution providing for the issue of
a series of Preferred Stock).
(c) Number of Shares. Of the ______ shares of Common Stock
of the Corporation, ______ shares are initially designated as shares of Class
A Common Stock and ______ shares are initially designated as shares of Class B
Common Stock. The number of shares designated as Class A Common Stock or
Class B Common Stock may be increased or decreased from time to time by a
resolution or resolutions adopted by the Board of Directors or any duly
authorized committee thereof and in accordance with paragraph (d)(5)(E) below
without the consent of the holders of any outstanding shares of Common Stock
or Preferred Stock.
(d) Powers, Preferences, Etc. The following is a statement
of the powers, preferences, and relative participating, optional or other
special rights and qualifications, limitations and restrictions of the Class A
Common Stock and Class B Common Stock of the Corporation:
(1) Except as otherwise set forth below in this ARTICLE
FOURTH, the powers, preferences and relative participating,
optional or other special rights and qualifications, limitations or
restrictions of the Class A Common Stock and Class B Common Stock
shall be identical in all respects.
(2) Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Amended and
Restated Certificate of Incorporation, holders of Class A Common
Stock and Class B Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock of any corporation
(other than Common Stock of the Corporation) or property of the
Corporation as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation
legally available therefor and shall share equally on a per share
basis in all such dividends and other distributions. In the case
of dividends or other distributions payable in Common Stock,
including distributions pursuant to stock splits or divisions of
Common Stock of the Corporation, only shares of Class A Common
Stock shall be paid or distributed with respect to Class A Common
Stock and only shares of Class B Common Stock shall be paid or
distributed with respect to Class B Common Stock. The number of
shares of Class A Common Stock and Class B Common Stock so
distributed shall be equal in number on a per share basis.
Neither the shares of Class A Common Stock nor the shares of Class
B Common Stock may be reclassified, subdivided or combined unless
such reclassification, subdivision or combination occurs
simultaneously and in the same proportion for each class.
(3)(A) At every meeting of the stockholders of the
Corporation every holder of Class A Common Stock shall be entitled
to one vote in person or by proxy for each share of Class A Common
Stock standing in his or her name on the transfer books of the
Corporation, and every holder of Class B Common Stock shall be
entitled to three votes in person or by proxy for each share of
Class B Common Stock standing in his or her name on the transfer
books of the Corporation in connection with the election of
directors and all other matters submitted to a vote of
stockholders; provided, however, that with respect to any proposed
conversion of the shares of Class B Common Stock into shares of
Class A Common Stock pursuant to paragraph (d)(5)(B), every holder
of a share of Common Stock, irrespective of class, shall have one
vote in person or by proxy for each share of Common Stock standing
in his or her name on the transfer books of the Corporation.
Except as may be otherwise required by law or by this ARTICLE
FOURTH, the holders of Class A Common Stock and Class B Common
Stock shall vote together as a single class, subject to any voting
rights which may be granted to holders of Preferred Stock, on all
matters submitted to a vote of the holders of Common Stock.
(B) Every reference in this Amended and Restated
Certificate of Incorporation to a majority or other proportion of
shares of Common Stock, Class A Common Stock or Class B Common
Stock, shall refer to such majority or other proportion of the
votes to which such shares of Common Stock, Class A Common Stock
or Class B Common Stock are entitled.
(4) In the event of any dissolution, liquidation or winding
up of the affairs of the Corporation, whether voluntary or
involuntary, after payment in full of the amounts required to be
paid to the holders of Preferred Stock, the remaining assets and
funds of the Corporation shall be distributed pro rata to the
holders of Class A Common Stock and Class B Common Stock. For the
purposes of this paragraph (d)(4), the voluntary sale, conveyance,
lease, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the assets
of the Corporation or a consolidation or merger of the Corporation
with one or more other corporations (whether or not the
Corporation is the corporation surviving such consolidation or
merger) shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary.
(5)(A) Prior to the earliest to occur of the date on which
shares of Class B Common Stock are issued to stockholders of The
Limited, Inc. or its successors ("The Limited") in a Tax-Free
Spin-Off (as defined in paragraph (d)(5)(B)) and the date on which
the number of shares of Class B Common Stock outstanding is less
than 60% of the aggregate number of shares of Common Stock
outstanding and a Tax-Free Spin-Off has not occurred, each share
of Class B Common Stock is convertible at the option of the holder
thereof into one share of Class A Common Stock. At the time of a
voluntary conversion, the holder of shares of Class B Common Stock
shall deliver to the office of the Corporation or any transfer
agent for the Class B Common Stock (i) the certificate or
certificates representing the shares of Class B Common Stock to be
converted, duly endorsed in blank or accompanied by proper
instruments of transfer, and (ii) written notice to the
Corporation stating that such holder elects to convert such share
or shares and stating the name and address in which each
certificate for shares of Class A Common Stock issued upon such
conversion is to be issued. To the extent permitted by law and
subject to the taking of any necessary action or making any filing
contemplated by paragraph (d)(5)(E), such voluntary conversion
shall be deemed to have been effected at the close of business on
the date when such delivery is made to the Corporation or such
transfer agent of the shares to be converted, and the person
exercising such voluntary conversion shall be deemed to be the
holder of record of the number of shares of Class A Common Stock
issuable upon such conversion at such time. The Corporation shall
promptly deliver certificates evidencing the appropriate number of
shares of Class A Common Stock to such person.
(B) Each share of Class B Common Stock shall automatically
convert into one share of Class A Common Stock upon the transfer
of such share if, after such transfer, such share is not
beneficially owned by The Limited, unless such transfer is
effected in connection with a transfer of Class B Common Stock to
stockholders of The Limited as a dividend intended to be on a
tax-free basis under the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), (a "Tax-Free Spin-Off"). For
purposes of this paragraph (d)(5), the term "beneficially
owned" with respect to shares of Class B Common Stock means
ownership by a person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise
controls the voting power (which includes the power to vote or
to direct the voting of) of such Class B Common Stock. In the
event of a Tax-Free Spin-Off, shares of Class B Common Stock
shall automatically convert into shares of Class A Common Stock
on the fifth anniversary of the date on which shares of Class B
Common Stock are first transferred to stockholders of The
Limited in a Tax-Free Spin-Off unless, prior to such Tax-Free
Spin-Off, The Limited delivers to the Corporation an opinion of
The Limited's counsel (which counsel shall be reasonably
satisfactory to the Corporation) to the effect that such
conversion would preclude The Limited from obtaining a
favorable ruling from the Internal Revenue Service that the
distribution would be a Tax-Free Spin-Off under the Code. If
such an opinion is received, approval of such conversion shall
be submitted to a vote of the holders of the Common Stock as
soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off unless The Limited delivers to the Corporation an
opinion of The Limited's counsel (which counsel shall be
reasonably satisfactory to the Corporation) prior to such
anniversary to the effect that such vote would adversely affect
the status of the Tax-Free Spin-Off. At the meeting of
stockholders called for such purpose, every holder of Common
Stock shall be entitled to one vote in person or by proxy for
each share of Common Stock standing in his or her name on the
transfer books of the Corporation. Approval of such conversion
shall require the approval of a majority of the votes entitled
to be cast by the holders of the Class A Common Stock and Class
B Common Stock present and voting, voting together as a single
class, and the holders of the Class B Common Stock shall not be
entitled to a separate class vote. Such conversion shall be
effective on the date on which such approval is given at a
meeting of stockholders called for such purpose.
Each share of Class B Common Stock shall automatically
convert into one share of Class A Common Stock on the date on
which the number of shares of Class B Common Stock outstanding is
less than 60% of the aggregate number of shares of Common Stock
outstanding and a Tax-Free Spin-Off has not occurred.
The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock and its issued Common
Stock held in its treasury for the purpose of effecting any
conversion of the Class B Common Stock pursuant to this paragraph
(d)(5)(B), the full number of shares of Class A Common Stock then
deliverable upon any such conversion of all outstanding shares of
Class B Common Stock.
The Corporation will provide notice of any automatic
conversion of shares of Class B Common Stock to holders of record
of the Common Stock not less than 30 nor more than 60 days prior
to the date fixed for such conversion; provided, however, that if
the timing or nature of the effectiveness of an automatic
conversion makes it impracticable to provide at least 30 days'
notice, the Corporation shall provide such notice as soon as
practicable. Such notice shall be provided by mailing notice of
such conversion first class postage prepaid, to each holder of
record of the Common Stock, at such holder's address as it appears
on the transfer books of the Corporation; provided, however, that
no failure to give such notice nor any defect therein shall affect
the validity of the automatic conversion of any shares of Class B
Common Stock. Each such notice shall state, as appropriate, the
following:
(i) the automatic conversion date;
(ii) the number of outstanding shares of Class B Common
Stock that are to be converted automatically;
(iii) the place or places where certificates for such shares
are to be surrendered for conversion; and
(iv) that no dividends will be declared on the shares of
Class B Common Stock converted after such conversion date.
Immediately upon such conversion, the rights of the holders
of shares of Class B Common Stock as such shall cease and such
holders shall be treated for all purposes as having become the
record owners of the shares of Class A Common Stock issuable upon
such conversion; provided, however, that such persons shall be
entitled to receive when paid any dividends declared on the Class
B Common Stock as of a record date preceding the time of such
conversion and unpaid as of the time of such conversion.
As promptly as practicable after the time of conversion,
upon the delivery to the Corporation of certificates formerly
representing shares of Class B Common Stock, the Corporation shall
deliver or cause to be delivered, to or upon the written order of
the record holder of the surrendered certificates formerly
representing shares of Class B Common Stock, a certificate or
certificates representing the number of fully paid and
nonassessable shares of Class A Common Stock into which the shares
of Class B Common Stock formerly represented by such certificates
have been converted in accordance with the provisions of this
paragraph (d)(5)(B).
(C) Subject to the provisions of this paragraph (d)(5)(C),
from and after the date on which shares of Class B Common Stock are
transferred to the stockholders of The Limited in a Tax-Free
Spin-Off, (i) each share of Class A Common Stock shall be
convertible at the option of the holder thereof into one share of
Class B Common Stock on the date on which any person (other than
The Limited or any of its consolidated subsidiaries) or any group
of persons (other than a group composed of The Limited and/or one
or more of its consolidated subsidiaries) agreeing to act together
for the purpose of acquiring, holding, voting or disposing of
shares of Class B Common Stock, shall make an offer, which the
Board of Directors determines in its sole discretion to be "bona
fide", to holders of Class B Common Stock to purchase 5% or more
of the issued and outstanding shares of such Class B Common Stock
for cash or a combination of cash and other securities or property
and (ii) each share of Class B Common Stock shall be convertible
at the option of the holder thereof into one share of Class A
Common Stock on the date on which any person (other than The
Limited or any of its consolidated subsidiaries) or any group of
persons (other than a group composed of The Limited and/or one or
more of its consolidated subsidiaries) agreeing to act together
for the purpose of acquiring, holding, voting or disposing of
shares of Class A Common Stock, shall make an offer, which the
Board of Directors determines in its sole discretion to be "bona
fide", to holders of Class A Common Stock to purchase 5% or more
of the issued and outstanding shares of Class A Common Stock for
cash or a combination of cash and other securities or property.
The Corporation will provide notice in writing to all holders of
Common Stock of any offer referred to in the foregoing clauses (i)
and (ii). Such notice shall be provided by mailing notice of such
offer, first class postage prepaid, to each holder of the class of
Common Stock then entitled to be converted, at such holder's
address as it appears on the transfer books of the Corporation.
The Common Stock shall be convertible under this paragraph
(d)(5)(C) as long as such offer shall remain in effect and shall
not be terminated, rescinded or completed, as determined by the
Board of Directors in its sole discretion. Notwithstanding the
foregoing, each share of Common Stock converted into a share of
the other class of Common Stock pursuant to this paragraph
(d)(5)(C) and not purchased pursuant to such offer prior to the
termination, rescission or completion thereof, as determined by
the Board of Directors in its sole discretion, shall automatically
be reconverted into a share of Common Stock of the class from
which it was converted pursuant to this paragraph (d)(5)(C) upon
the earliest to occur of the termination, rescission or completion
of such offer, as so determined by the Board of Directors.
Any conversion pursuant to this paragraph (d)(5)(C) may be
effected at the office of the Corporation or any transfer agent
for the Common Stock and at such other place or places, if any,
as the Board of Directors may designate. Upon conversion pursuant
to this paragraph (d)(5)(C), the Corporation shall make no payment
or adjustment on account of dividends accrued or in arrears on
Common Stock surrendered for conversion or on account of any
dividends on Common Stock issuable on such conversion. Before any
holder of Common Stock shall be entitled to convert the same into
any other class of stock pursuant to this paragraph (d)(5)(C),
such holder shall surrender the certificate or certificates for
such Common Stock at the office of said transfer agent (or other
place as provided above). Such certificate(s), if the Corporation
shall so request, shall be duly endorsed to the Corporation or in
blank or accompanied by proper instruments of transfer to the
Corporation or in blank (such endorsements or instruments of
transfer to be in form satisfactory to the Corporation). Such
certificate(s) shall be accompanied by a written notice to the
Corporation at said office stating that such holder elects to
convert all or a specified number of Common Stock represented by
such certificate(s) in accordance with this paragraph (d)(5)(C)
and stating the name(s) in which such holder desires the
certificate(s) representing the stock to be issued. Such written
notice shall also state the name(s) of the person(s) making the
offer entitling such holder to convert such Common Stock. The
Corporation will, as soon as practicable after deposit of the
certificate(s) for the class of Common Stock to be converted,
accompanied by the written notice and the statements prescribed
above, issue and deliver at the office of said transfer agent (or
other place as provided above) to the person for whose account
such Common Stock was so surrendered, or to such person's nominee
or nominees, a certificate or certificates for the number of
shares of such other class of Common Stock to which such holder
shall be entitled as aforesaid.
Any certificate of Common Stock issued in connection with a
conversion pursuant to this paragraph (d)(5)(C) shall bear a legend
substantially to the effect of the last sentence of the first
subparagraph of this paragraph (d)(5)(C) until such certificate
shall be transferred to the person(s) making the offer entitling a
holder of Common Stock to convert such Common Stock pursuant to
this paragraph (d)(5)(C), or the nominee or nominees of such
person(s).
Any conversion pursuant to this paragraph (d)(5)(C) shall be
deemed to have been made as of the date of surrender of the Common
Stock to be converted; and the person or persons entitled to
receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common
Stock on such date.
(D) The Corporation will pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of one class of Common Stock on the
conversion of shares of the other class of Common Stock pursuant
to this paragraph (d)(5); provided, however, that the Corporation
shall not be required to pay any tax which may be payable in
respect of any registration of transfer involved in the issue or
delivery of shares of one class of Common Stock in a name other
than that of the registered holder of the other class of Common
Stock converted, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(E) Concurrently with any conversion of one class of Common
Stock into the other class of Common Stock effected pursuant to
paragraphs (d)(5)(A) and (B) above and, in the case of a
conversion pursuant to paragraph (d)(5)(C) above, concurrently
with the purchase of shares so converted, each share of a class of
Common Stock that is converted (i) shall be retired and canceled
and shall not be reissued and (ii) shall proportionally decrease
the number of shares of Common Stock of such class designated
hereby. The Secretary of the Corporation shall be, and hereby is,
authorized and directed to file with the Secretary of State of the
State of Delaware one or more Certificates of Decrease of
Designated Shares to record any such decrease in designated shares
of Common Stock. No undesignated shares of Common Stock shall be
designated shares of Class B Common Stock following an automatic
conversion of shares of Class B Common Stock pursuant to paragraph
(d)(5)(B) above.
(F) Immediately upon the effectiveness of this Amended and
Restated Certificate of Incorporation each share of common stock
of the Corporation, par value $1.00 per share, that is issued and
outstanding immediately prior to such effectiveness, shall be
changed into and reclassified as _____ shares of Class B Common
Stock.
Section 3. Preferred Stock.
(a) Series and Limits of Variations between Series. Any
unissued or treasury shares of the Preferred Stock may be issued from time to
time in one or more series for such consideration as may be fixed from time to
time by the Board of Directors and each share of a series shall be identical
in all respects with the other shares of such series, except that, if the
dividends thereon are cumulative, the date from which they shall be cumulative
may differ. Before any shares of Preferred Stock of any particular series
shall be issued, a certificate shall be filed with the Secretary of State of
Delaware setting forth the designation, rights, privileges, restrictions, and
conditions to be attached to the Preferred Stock of such series and such other
matters as may be required, and the Board of Directors shall fix and
determine, and is hereby expressly empowered to fix and determine, in the
manner provided by law, the particulars of the shares of such series (so far
as not inconsistent with the provisions of this ARTICLE FOURTH applicable to
all series of Preferred Stock), including, but not limited to, the following:
(1) the distinctive designation of such series and the
number of shares which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below the
number of shares thereof then outstanding) from time to time by
like action of the Board of Directors;
(2) the annual rate of dividends payable on shares of such
series, the conditions upon which such dividends shall be payable
and the date from which dividends shall be cumulative in the event
the Board of Directors determines that dividends shall be
cumulative;
(3) whether such series shall have voting rights, in
addition to the voting rights provided by law and, if so, the
terms of such voting rights;
(4) whether such series shall have conversion privileges
and, if so, the terms and conditions of such conversion,
including, but not limited to, provision for adjustment of the
conversion rate upon such events and in such manner as the Board
of Directors shall determine;
(5) whether or not the shares of such series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(6) whether such series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the
terms and amount of such sinking fund;
(7) the rights of the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, and the relative rights of priority, if any,
of payment of shares of that series; and
(8) any other relative rights, preferences and limitations
of such series.
Section 4. No Preemptive Rights. Except as otherwise set
forth above in this ARTICLE FOURTH, no holder of shares of this Corporation of
any class shall be entitled, as such, as a matter of right, to subscribe for
or purchase shares of any class now or hereafter authorized, or to purchase or
subscribe for securities convertible into or exchangeable for shares of the
Corporation or to which there shall be attached or appertain any warrants or
rights entitling the holders thereof to purchase or subscribe for shares.
FIFTH.
Section 1. Amendment of Bylaws by Directors. In
furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the Corporation.
Section 2. Amendment of Bylaws by the Stockholders. The
bylaws shall not be made, repealed, altered, amended or rescinded by the
stockholders of the Corporation except by the vote of not less than 75 percent
of the outstanding shares of the Corporation entitled to vote thereon. Any
amendment to the Certificate of Incorporation which shall contravene any bylaw
in existence on the record date of the stockholders meeting at which such
amendment is to be voted upon by the stockholders shall require the vote of
not less than 75 percent of the outstanding shares entitled to vote thereon.
SIXTH.
Section 1. Classified Board. Effective immediately upon
the issuance of more than 1,000 shares of Common Stock of the Corporation, the
Board of Directors (exclusive of directors to be elected by the holders of any
one or more series of Preferred Stock voting separately as a class or classes)
shall be divided into three classes, Class A, Class B, and Class C. The
number of directors in each class shall be the whole number contained in the
quotient arrived at by dividing the authorized number of directors by three,
and if a fraction is also contained in such quotient, then if such fraction is
one-third, the extra director shall be a member of Class A and if the fraction
is two-thirds, one of the extra directors shall be a member of Class A and the
other shall be a member of Class B. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected; provided, however, that the directors first
elected to Class A shall serve for a term ending on the date of the annual
meeting next following the end of the calendar year 1996, the directors first
elected to Class B shall serve for a term ending on the date of the second
annual meeting next following the end of the calendar year 1996, and the
directors first elected to Class C shall serve for a term ending on the date of
the third annual meeting next following the end of the calendar year 1996.
Notwithstanding the foregoing formula provisions, in the event that, as a
result of any change in the authorized number of directors, the number of
directors in any class would differ from the number allocated to that class
under the formula provided in this ARTICLE SIXTH immediately prior to such
change, the following rules shall govern:
(a) each director then serving as such shall nevertheless
continue as a director of the class of which such director is a member until
the expiration of his current term, or his prior death, resignation or removal;
(b) at each subsequent election of directors, even if the
number of directors in the class whose term of office then expires is less
than the number then allocated to that class under said formula, the number of
directors then elected for membership in that class shall not be greater than
the number of directors in that class whose term of office then expires,
unless and to the extent that the aggregate number of directors then elected
plus the number of directors in all classes then duly continuing in office
does not exceed the then authorized number of directors of the Corporation;
(c) at each subsequent election of directors, if the
number of directors in the class whose term of office then expires exceeds the
number then allocated to that class under said formula, the Board of Directors
shall designate one or more of the directorships then being elected as
directors of another class or classes in which the number of directors then
serving is less than the number then allocated to such other class or classes
under said formula;
(d) in the event of the death, resignation or removal of
any director who is a member of a class in which the number of directors
serving immediately preceding the creation of such vacancy exceeded the number
then allocated to that class under said formula, the Board of Directors shall
designate the vacancy thus created as a vacancy in another class in which the
number of directors then serving is less than the number then allocated to
such other class under said formula;
(e) In the event of any increase in the authorized number
of directors, the newly created directorships resulting from such increase
shall be apportioned by the Board of Directors to such class or classes as
shall, so far as possible, bring the composition of each of the classes into
conformity with the formula in this ARTICLE SIXTH, as it applies to the number
of directors authorized immediately following such increase; and
(f) designation of directorships or vacancies into other
classes and apportionments of newly created directorships to classes by the
Board of Directors under the foregoing items (c), (d) and (e) shall, so far as
possible, be effected so that the class whose term of office is due to expire
next following such designation or apportionment shall contain the full number
of directors then allocated to said class under said formula.
Notwithstanding any of the foregoing provisions of this ARTICLE SIXTH, each
director shall serve until his successor is elected and qualified or until his
death, resignation or removal.
Section 2. Election by Holders of Preferred Stock. During
any period when the holders of any Preferred Stock or any one or more series
thereof, voting as a class, shall be entitled to elect a specified number of
directors, by reason of dividend arrearages or other provisions giving them
the right to do so, then and during such time as such right continues (i) the
then otherwise authorized number of directors shall be increased by such
specified number of directors, and the holders of such Preferred Stock or such
series thereof, voting as a class, shall be entitled to elect the additional
directors so provided for, pursuant to the provisions of such Preferred Stock
or series; (ii) each such additional director shall serve for such term, and
have such voting powers, as shall be stated in the provisions pertaining to
such Preferred Stock or series; and (iii) whenever the holders of any such
Preferred Stock or series thereof are divested of such rights to elect a
specified number of directors, voting as a class, pursuant to the provisions
of such Preferred Stock or series, the terms of office of all directors
elected by the holders of such Preferred Stock or series, voting as a class
pursuant to such provisions or elected to fill any vacancies resulting from
the death, resignation or removal of directors so elected by the holders of
such Preferred Stock or series, shall forthwith terminate and the authorized
number of directors shall be reduced accordingly.
Section 3. Ballots. Elections of directors at an annual or
special meeting of stockholders need not be by written ballot unless the
bylaws of the Corporation shall provide otherwise.
Section 4. Elimination of Certain Personal Liability of
Directors. A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of any
fiduciary duty as a director to the fullest extent permitted by Delaware Law.
SEVENTH. After the issuance of more than 1,000 shares of
Common Stock of the Corporation, no action shall be taken by the stockholders
except at an annual or special meeting of stockholders.
EIGHTH. The Board of Directors of the Corporation, when
evaluating any offer of another party to (1) make a tender or exchange offer
for any equity security of the Corporation, (2) merge or consolidate the
Corporation with another corporation, or (3) purchase or otherwise acquire all
or substantially all of the properties and assets of the Corporation, shall
in connection with the exercise of its judgment in determining what is in the
best interests of the Corporation and its stockholders, give due consideration
to all relevant factors, including without limitation the social and economic
effects on the employees, customers, suppliers and other constituents of the
Corporation and its subsidiaries and on the communities in which the
Corporation and its subsidiaries operate or are located.
NINTH. Any director may be removed at any annual or special
stockholders' meeting upon the affirmative vote of not less than 75 percent of
the outstanding shares of voting stock of the Corporation at that time
entitled to vote thereon; provided, however, that such director may be removed
only for cause and shall receive a copy of the charges against him, delivered
to him personally or by mail at his last known address at least 10 days prior
to the date of the stockholders' meeting; provided further, that directors who
shall have been elected by the holders of a series or class of Preferred
Stock, voting separately as a class, shall be removed only pursuant to the
provisions establishing the rights of such series or class to elect such
directors.
TENTH.
Section 1. Amendment of Certain Articles. The provisions
set forth in this ARTICLE TENTH and in ARTICLES FIFTH, SIXTH, Section 1,
SEVENTH, EIGHTH, NINTH, ELEVENTH, TWELFTH and THIRTEENTH may not be amended,
altered, changed, or repealed in any respect unless such amendment,
alteration, change or repealing is approved by the affirmative vote of not
less than 75 percent of the outstanding shares of the Corporation entitled to
vote thereon; provided that with respect to any proposed amendment, alteration
or change to this Amended and Restated Certificate of Incorporation, or
repealing of any provision of this Amended and Restated Certificate of
Incorporation, which would amend, alter or change the powers, preferences or
special rights of the shares of Class A Common Stock or Class B Common Stock
so as to affect them adversely, the affirmative vote of not less than 75
percent of the outstanding shares affected by the proposed amendment, voting
as a separate class, shall be required in addition to the vote otherwise
required pursuant to this ARTICLE TENTH; and provided, further, that with
respect to any amendment, alteration or change to, or repealing of, any
provision of ARTICLE ELEVENTH, the affirmative vote of not less than 75
percent of the outstanding shares of the Corporation entitled to vote thereon,
other than shares held by the Interested Person (if any) seeking or proposing
to effect any transaction involving the Corporation or any subsidiary of the
Corporation, shall be required in addition to the vote otherwise required
pursuant to this ARTICLE TENTH.
Section 2. Amendments Generally. Subject to the provisions
of Section 1 of this ARTICLE TENTH, the Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred on stockholders herein are
granted subject to this reservation.
ELEVENTH.
Section 1. Vote Required for Certain Business Combinations.
The affirmative vote of not less than 75 percent of the outstanding shares of
"Voting Stock" (as hereinafter defined) held by stockholders other than the
"Interested Person" (as hereinafter defined) seeking to effect a "Business
Combination" (as hereinafter defined) shall be required for the approval or
authorization of any Business Combination with any Interested Person.
Section 2. Definitions. Certain words and terms as used in
this ARTICLE ELEVENTH shall have the meanings given to them by the definitions
and descriptions in this Section.
(a) Business Combination. The term "Business Combination"
shall mean (a) any merger or consolidation of the Corporation or a subsidiary
of the Corporation with or into an Interested Person, (b) any sale, lease,
exchange, transfer or other disposition, including without limitation, a
mortgage or any other security device, of all or any "Substantial Part" (as
hereinafter defined) of the assets either of the Corporation (including
without limitation, any voting securities of a subsidiary) or of a subsidiary
of the Corporation to an Interested Person, (c) any merger or consolidation of
an Interested Person with or into the Corporation or a subsidiary of the
Corporation, (d) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or other security device, of all or
any Substantial Part of the assets of an Interested Person to the Corporation
or a subsidiary of the Corporation, (e) the issuance or transfer by the
Corporation or any subsidiary of the Corporation of any securities of the
Corporation or a subsidiary of the Corporation to an Interested Person, (f)
any reclassification of securities, recapitalization or other comparable
transaction involving the Corporation that would have the effect of increasing
the voting power of any Interested Person with respect to Voting Stock of the
Corporation, and (g) any agreement, contract or other arrangement providing
for any of the transactions described in this definition of Business
Combination.
(b) Interested Person. The term "Interested Person" shall
mean and include any individual, corporation, partnership or other person or
entity which, together with its "Affiliates" and "Associates" (as defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect at the date of the adoption of this ARTICLE ELEVENTH
by the stockholders of the Corporation), "Beneficially Owns" (as defined in
Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect at the date of the adoption of this ARTICLE ELEVENTH
by the stockholders of the Corporation) in the aggregate five percent or more
of the outstanding Voting Stock of the Corporation, and any Affiliate or
Associate of any such individual, corporation, partnership or other person or
entity. Without limitation, any share of Voting Stock of the Corporation that
any Interested Person has the right to acquire at any time (notwithstanding
that Rule 13d-3 deems such shares to be beneficially owned only if such right
may be exercised within 60 days) pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise, shall be deemed to be
Beneficially Owned by the Interested Person and to be outstanding for purposes
of this definition. An Interested Person shall be deemed to have acquired a
share of the Voting Stock of the Corporation at the time when such Interested
Person became the Beneficial Owner thereof.
(c) Voting Stock. The term "Voting Stock" shall mean all
of the outstanding shares of Common Stock of the Corporation and any
outstanding shares of Preferred Stock entitled to vote on each matter on which
the holders of record of Common Stock shall be entitled to vote, and each
reference to a proportion of shares of Voting Stock shall refer to such
proportion of the votes entitled to be cast by such shares.
(d) Substantial Part. The term "Substantial Part" shall
mean more than 20 percent of the fair market value as determined by two-thirds
of the Continuing Directors of the total consolidated assets of the
Corporation and its subsidiaries taken as a whole as of the end of its most
recent fiscal year ended prior to the time the determination is being made.
(e) Continuing Director. The term "Continuing Director"
shall mean a Director who was a member of the Board of Directors of the
Corporation immediately prior to the time that the Interested Person involved
in a Business Combination became an Interested Person, or a Director who was
elected or appointed to fill a vacancy after the date the Interested Person
became an Interested Person by a majority of the then-current Continuing
Directors; provided, that with respect to The Limited, the term "Continuing
Director" shall mean a Director who was a member of the Board of Directors of
the Corporation immediately following the consummation of the initial public
offering of the Corporation's Class A Common Stock in a transaction registered
under the Securities Act of 1933, as amended (the "IPO"), or a Director who
was elected or appointed to fill a vacancy after the IPO by a majority of the
then-current Continuing Directors.
TWELFTH.
Section 1. In anticipation that the Corporation will cease
to be a wholly owned subsidiary of The Limited, but that The Limited will
remain a stockholder of the Corporation, and in anticipation that the
Corporation and The Limited may engage in the same or similar activities or
lines of business and have an interest in the same areas of corporate
opportunities, and in recognition of (i) the benefits to be derived by the
Corporation through its continued contractual, corporate and business
relations with The Limited (including service of officers and directors of The
Limited as officers and directors of the Corporation) and (ii) the
difficulties attendant to any director, who desires and endeavors fully to
satisfy such director's fiduciary duties, in determining the full scope of
such duties in any particular situation, the provisions of this ARTICLE
TWELFTH are set forth to regulate, define and guide the conduct of certain
affairs of the Corporation as they may involve The Limited and its officers
and directors, and the powers, rights, duties and liabilities of the
Corporation and its officers, directors and stockholders in connection
therewith.
Section 2. Except as The Limited may otherwise agree in
writing,
(a) The Limited shall not have a duty to refrain from
engaging directly or indirectly in the same or similar business
activities or lines of business as the Corporation, and
(b) neither The Limited nor any officer or director thereof
shall be liable to the Corporation or its stockholders for breach
of any fiduciary duty by reason of any such activities of The
Limited or of such person's participation therein.
In the event that The Limited acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both The Limited and the
Corporation, The Limited shall have no duty to communicate or offer such
corporate opportunity to the Corporation and shall not be liable to the
Corporation or its stockholders for breach of any fiduciary duty as a
stockholder of the Corporation or controlling person of a stockholder by
reason of the fact that The Limited pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person
or entity, or does not communicate information regarding, or offer, such
corporate opportunity to the Corporation.
Section 3. In the event that a director, officer or
employee of the Corporation who is also a director, officer or employee of The
Limited acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for the Corporation and The Limited (whether such
potential transaction or matter is proposed by a third-party or is conceived
of by such director, officer or employee of the Corporation), such director,
officer or employee shall be entitled to offer such corporate opportunity to
the Corporation or The Limited as such director, officer or employee deems
appropriate under the circumstances in his sole discretion, and no such
director, officer or employee shall be liable to the Corporation or its
stockholders for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of the Corporation or the
derivation of any improper personal benefit by reason of the fact that (i)
such director, officer or employee offered such corporate opportunity to The
Limited (rather than the Corporation) or did not communicate information
regarding such corporate opportunity to the Corporation or (ii) The Limited
pursues or acquires such corporate opportunity for itself or directs such
corporate opportunity to another person or does not communicate information
regarding such corporate opportunity to the Corporation.
Section 4. Any person or entity purchasing or otherwise
acquiring any interest in any shares of capital stock of the Corporation shall
be deemed to have notice of and to have consented to the provisions of this
ARTICLE TWELFTH.
Section 5. For purposes of this ARTICLE TWELFTH and ARTICLE
THIRTEENTH only, (i) the term "Corporation" shall mean the Corporation and all
corporations, partnerships, joint ventures, associations and other entities in
which the Corporation beneficially owns (directly or indirectly) fifty percent
or more of the outstanding voting stock, voting power or similar voting
interests, and (ii) the term "The Limited" shall mean The Limited and all
corporations, partnerships, joint ventures, associations and other entities
(other than the Corporation, defined in accordance with clause (i) of this
Section 5) in which The Limited beneficially owns (directly or indirectly)
fifty percent or more of the outstanding voting stock, voting power or similar
voting interests.
Section 6. Notwithstanding anything in this Certificate of
Incorporation to the contrary, the foregoing provisions of this ARTICLE
TWELFTH shall expire on the date that The Limited ceases to own beneficially
Common Stock representing at least 20% of the number of outstanding shares of
Common Stock of the Corporation and no person who is a director or officer of
the Corporation is also a director or officer of The Limited. Neither the
alteration, amendment, change or repeal of any provision of this ARTICLE
TWELFTH nor the adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with any provision of this ARTICLE
TWELFTH shall eliminate or reduce the effect of this ARTICLE TWELFTH in
respect of any matter occurring, or any cause of action, suit or claim that,
but for this ARTICLE TWELFTH, would accrue or arise, prior to such alteration,
amendment, repeal or adoption.
Section 7. The provisions of this ARTICLE TWELFTH are in
addition to the provisions of ARTICLE SIXTH, Section 5, and ARTICLE THIRTEENTH.
THIRTEENTH.
Section 1. No contract, agreement, arrangement or
transaction (or any amendment, modification or termination thereof) between the
Corporation and The Limited or any Related Entity (as defined below) or
between the Corporation and one or more of the directors or officers of the
Corporation, The Limited or any Related Entity, shall be void or voidable
solely for the reason that The Limited, any Related Entity or any one or more
of the officers or directors of the Corporation, The Limited or any Related
Entity are parties thereto, or solely because any such directors or officers
are present at or participate in the meeting of the Board of Directors or
committee thereof which authorizes the contract, agreement, arrangement,
transaction, amendment, modification or termination or solely because his or
their votes are counted for such purpose, but any such contract, agreement,
arrangement or transaction (or any amendment, modification or termination
thereof) shall be governed by the provisions of this Amended and Restated
Certificate of Incorporation, the Corporation's Bylaws, Delaware Law and other
applicable law. For purposes of this ARTICLE THIRTEENTH, (i) the term
"Related Entities" means one or more directors of this Corporation, or one or
more corporations, partnerships, associations or other organizations in which
one or more of its directors have a direct or indirect financial interest and
(ii) the terms the "Corporation" and "The Limited" have the meanings set forth
in ARTICLE TWELFTH, Section 5.
Section 2. Directors of the Corporation who are also
directors or officers of The Limited or any Related Entity may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination
thereof). Outstanding shares of Common Stock owned by The Limited and any
Related Entities may be counted in determining the presence of a quorum at a
meeting of stockholders that authorizes or approves any such contract,
agreement, arrangement or transaction (or amendment, modification or
termination thereof).
Section 3. Neither The Limited nor any officer or director
thereof or Related Entity shall be liable to the Corporation or its
stockholders for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of the Corporation or the
derivation of any improper personal benefit by reason of the fact that The
Limited or an officer of director thereof or such Related Entity in good faith
takes any action or exercises any rights or gives or withholds any consent in
connection with any agreement or contract between The Limited or such Related
Entity and the Corporation. No vote cast or other action taken by any person
who is an officer, director or other representative of The Limited or such
Related Entity, which vote is cast or action is taken by such person in his
capacity as a director of this Corporation, shall constitute an action of or
the exercise of a right by or a consent of The Limited or such Related Entity
for the purpose of any such agreement or contract.
Section 4. Any person or entity purchasing or otherwise
acquiring any interest in any shares of capital stock of the Corporation shall
be deemed to have notice of and to have consented to the provisions of this
ARTICLE THIRTEENTH.
Section 5. For purposes of this ARTICLE THIRTEENTH, any
contract, agreement, arrangement or transaction with any corporation,
partnership, joint venture, association or other entity in which the
Corporation beneficially owns (directly or indirectly) fifty percent or more
of the outstanding voting stock, voting power or similar voting interests, or
with any officer or director thereof, shall be deemed to be a contract,
agreement, arrangement or transaction with the Corporation.
Section 6. Neither the alteration, amendment, change or
repeal of any provision of this ARTICLE THIRTEENTH nor the adoption of any
provision inconsistent with any provision of this ARTICLE THIRTEENTH shall
eliminate or reduce the effect of this ARTICLE THIRTEENTH in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
ARTICLE THIRTEENTH, would accrue or arise, prior to such alteration,
amendment, change, repeal or adoption.
Section 7. The provisions of this ARTICLE THIRTEENTH are in
addition to the provisions of ARTICLE SIXTH, Section 5, and ARTICLE TWELFTH.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation, having been duly adopted by the written consent of the sole
stockholder of the Corporation in accordance with the provisions of Sections
228, 242 and 245 of the General Corporation Law of the State of Delaware, has
been executed this th day of July 1996.
ABERCROMBIE & FITCH CO.
By:____________________________________
Name:
Title:
Exhibit 3.2
FORM OF
BYLAWS OF
ABERCROMBIE & FITCH CO.
Adopted _____, 1996
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. The annual meeting of the
stockholders of this corporation, for the purpose of fixing or changing the
number of directors of the corporation, electing directors and transacting
such other business as may come before the meeting, shall be held on such
date, at such time and at such place as may be designated by the Board of
Directors.
Section 1.02. Special Meetings. Special meetings of the
stockholders may be called at any time by the chairman of the board, the vice
chairman of the board, or in case of the death, absence or disability of the
chairman of the board and the vice chairman of the board, the president, or in
case of the president's death, absence, or disability, the vice president, if
any, authorized to exercise the authority of the president, or a majority of
the Board of Directors acting with or without a meeting; provided, that if and
to the extent that any special meeting of stockholders may be called by any
other person or persons specified in any provision of the certificate of
incorporation or any amendment thereto or any certificate filed under Section
151(g) of the Delaware General Corporation Law (or its successor statute as in
effect from time to time), then such special meeting may also be called by the
person or persons, in the manner, at the times and for the purposes so
specified.
Section 1.03. Place of Meetings. Meetings of stockholders
shall be held at the principal office of the corporation in the State of Ohio,
unless the Board of Directors decides that a meeting shall be held at some
other place and causes the notice thereof to so state.
Section 1.04. Notice of Meetings. (a) Unless waived, a
written, printed, or typewritten notice of each annual or special meeting,
stating the date, hour and place and the purpose or purposes thereof shall be
served upon or mailed to each stockholder of record entitled to vote or
entitled to notice, not more than 60 days nor less than 10 days before any
such meeting. If mailed, such notice shall be directed to a stockholder at
his or her address as the same appears on the records of the corporation. If a
meeting is adjourned to another time or place and such adjournment is for 30
days or less and no new record date is fixed for the adjourned meeting, no
further notice as to such adjourned meeting need be given if the time and place
to which it is adjourned are fixed and announced at such meeting. In the
event of a transfer of shares after notice has been given and prior to the
holding of the meeting, it shall not be necessary to serve notice on the
transferee. Such notice shall specify the place where the stockholders list
will be open for examination prior to the meeting if required by Section 1.08
hereof. If the adjournment is for more than 30 days, or after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(b) A written waiver of any such notice signed by the person
entitled thereto, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 1.05. Fixing Date for Determination of Stockholders of
Record. In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any other change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. If the Board
shall not fix such a record date, (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held, and (ii) in any case
involving the determination of stockholders for any purpose other than notice
of or voting at a meeting of stockholders, the record date for determining
stockholders for such purpose shall be the close of business on the day on
which the Board of Directors shall adopt the resolution relating thereto.
Determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.06. Organization. At each meeting of the
stockholders, the chairman of the board, or in his absence, the vice chairman
of the board, or in his absence, the president, or, in his absence, any
vice-president, or, in the absence of the chairman of the board, the vice
chairman of the board, the president and a vice-president, a chairman chosen
by a majority in interest of the stockholders present in person or by proxy
and entitled to vote, shall act as chairman, and the secretary of the
corporation, or, if the secretary of the corporation not be present, the
assistant secretary, or if the secretary and the assistant secretary not be
present, any person whom the chairman of the meeting shall appoint, shall act
as secretary of the meeting.
Section 1.07. Quorum. A stockholders' meeting duly called
shall not be organized for the transaction of business unless a quorum is
present. Except as otherwise expressly provided by law, the certificate of
incorporation, these bylaws, or any certificate filed under Section 151(g) of
the Delaware General Corporation Law (or its successor statute as in effect
from time to time), (i) at any meeting called by the Board of Directors, the
presence in person or by proxy of holders of record entitling them to exercise
at least one-third of the voting power of the corporation shall constitute a
quorum for such meeting and (ii) at any meeting called other than by the Board
of Directors, the presence in person or by proxy of holders of record
entitling them to exercise at least a majority of the voting power of the
corporation shall constitute a quorum for such meeting. The stockholders
present at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum. If a meeting cannot be organized because a quorum has not
attended, a majority in voting interest of the stockholders present may
adjourn, or, in the absence of a decision by the majority, any officer
entitled to preside at such meeting may adjourn the meeting from time to time
to such time (not more than 30 days after the previously adjourned meeting)
and place as they (or he) may determine, without notice other than by
announcement at the meeting of the time and place of the adjourned meeting.
At any such adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 1.08. Order of Business and Procedure. The order of
business at all meetings of the stockholders and all matters relating to the
manner of conducting the meeting shall be determined by the chairman of the
meeting. Meetings shall be conducted in a manner designed to accomplish the
business of the meeting in a prompt and orderly fashion and to be fair and
equitable to all stockholders, but it shall not be necessary to follow any
manual of parliamentary procedure.
Section 1.09. Advance Notice of Stockholder Proposals. In
order to properly submit any business to an annual meeting of stockholders, a
stockholder must give timely notice in writing to the secretary of the
corporation. To be considered timely, a stockholder's notice must be
delivered either in person or by United States certified mail, postage
prepaid, and received at the principal executive offices of the corporation
(a) not less than 120 days nor more than 150 days before the first anniversary
date of the corporation's proxy statement in connection with the last annual
meeting of stockholders or (b) if no annual meeting was held in the previous
year or the date of the applicable annual meeting has been changed by more
than 30 days from the date contemplated at the time of the previous year's
proxy statement, not less than a reasonable time, as determined by the Board
of Directors, prior to the date of the applicable annual meeting.
Nomination of persons for election to the Board of Directors
may be made by the Board of Directors or any committee designated by the Board
of Directors or by any stockholder entitled to vote for the election of
directors at the applicable meeting of stockholders. However, nominations
other than those made by the Board of Directors or its designated committee
must comply with the procedures set forth in this Section 1.09, and no person
shall be eligible for election as a director unless nominated in accordance
with the terms of this Section 1.09.
A stockholder may nominate a person or persons for election to
the Board of Directors by giving written notice to the secretary of the
corporation in accordance with the procedures set forth above. In addition to
the timeliness requirements set forth above for notice to the corporation by a
stockholder of business to be submitted at an annual meeting of stockholders,
with respect to any special meeting of stockholders called for the election of
directors, written notice must be delivered in the manner specified above and
not later than the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders.
The secretary of the corporation shall deliver any stockholder
proposals and nominations received in a timely manner for review by the Board
of Directors or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting
of stockholders shall set forth (i) the name and address of the stockholder,
(ii) the class and number of shares of stock beneficially owned by such
stockholder, (iii) the name in which such shares are registered on the stock
transfer books of the corporation, (iv) a representation that the stockholder
intends to appear at the meeting in person or by proxy to submit the business
specified in such notice, (v) any material interest of the stockholder in the
business to be submitted and (vi) a brief description of the business desired
to be submitted to the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the stockholder
making such proposal shall promptly provide any other information reasonably
requested by the corporation.
In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if
the business to be submitted is the nomination of a person or persons for
election to the Board of Directors then such stockholder's notice must also
set forth, as to each person whom the stockholder proposes to nominate for
election as a director, (a) the name, age, business address and, if known,
residence address of such person, (b) the principal occupation or employment
of such person, (c) the class and number of shares of stock of the corporation
which are beneficially owned by such person, (d) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors or is otherwise required by the rules and
regulations of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934, as amended, (e) the written consent of such
person to be named in the proxy statement as a nominee and to serve as a
director if elected and (f) a description of all arrangements or
understandings between such stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
Any person nominated for election as director by the Board of
Directors or any committee designated by the Board of Directors shall, upon
the request of the Board of Directors or such committee, furnish to the
secretary of the corporation all such information pertaining to such person
that is required to be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 1.09,
a stockholder who seeks to have any proposal included in the corporation's
proxy statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Section 1.10. Voting. (a) Each stockholder shall, at each
meeting of the stockholders, be entitled to vote in person or by proxy each
share or fractional share of the stock of the corporation having voting rights
on the matter in question and which shall have been held by him and registered
in his name on the books of the corporation on the date fixed pursuant to
Section 1.05 of these bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such meeting.
(b) Shares of its own stock belonging to the corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be
counted for quorum purposes.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto
authorized and delivered to the secretary of the meeting in sufficient time
to permit the necessary examination and tabulation thereof before the vote is
taken; provided, however, that no proxy shall be valid after the expiration of
three years after the date of its execution, unless the stockholder executing
it shall have specified therein the length of time it is to continue in force.
At any meeting of the stockholders all matters, except as otherwise provided
in the certificate of incorporation, in these bylaws or by law, shall be
decided by the vote of a majority in voting interest of the stockholders
present in person or by proxy and voting thereon, a quorum being present. The
vote at any meeting of the stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting or required by the
certificate of incorporation. On a vote by ballot each ballot shall be signed
by the stockholder voting, or by his proxy, if there be such proxy, and it
shall state the number of shares voted.
Section 1.11. Inspectors. The Board of Directors, in advance
of any meeting of the stockholders, may appoint one or more inspectors to act
at the meeting. If inspectors are not so appointed, the person presiding at
the meeting may appoint one or more inspectors. If any person so appointed
fails to appear or act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors so appointed, if any, shall determine the number
of shares outstanding, the shares represented at the meeting, the existence of
a quorum and the authenticity, validity and effect of proxies and shall
receive votes, ballots, waivers, releases, or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots, waivers, releases, or consents, determine and
announce the results and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote as certified by them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers of Board. The powers of the
corporation shall be exercised, its business and affairs conducted, and its
property controlled by or under the direction of the Board of Directors,
except as otherwise provided by the law of Delaware or in the certificate of
incorporation.
Section 2.02. Number of Directors. The number of directors of
the corporation (exclusive of directors to be elected by the holders of any
one or more series of Preferred Stock voting separately as a class or classes)
shall not be less than four nor more than nine, the exact number of directors
to be such number as may be set from time to time within the limits set forth
above by resolution adopted by affirmative vote of a majority of the whole
Board of Directors. As used in these Bylaws, the term "whole Board" means the
total number of directors which the corporation would have if there were no
vacancies.
Section 2.03. Election of Directors. At each meeting of the
stockholders for the election of directors, the persons receiving the greatest
number of votes shall be the directors. Directors need not be stockholders.
Section 2.04. Nominations.
2.04.1. Nominations for the election of directors may be
made by the Board of Directors or by any stockholder entitled to vote for the
election of directors.
2.04.2. Such nominations, if not made by the Board of
Directors, shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the corporation
not less than 14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided, however, that if
less than 21 days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed, as prescribed, to the secretary of
the corporation not later than the close of the seventh day following the day
on which notice of the meeting was mailed to stockholders. Each such notice
shall set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee, and (iii) the number of shares of stock of
the corporation which are beneficially owned by each such nominee.
2.04.3. Notice of nominations which are proposed by the
Board of Directors shall be given on behalf of the Board by the chairman of
the meeting.
2.04.4. The chairman of the meeting may, if the facts
warrant, determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if the chairman should so
determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 2.05. Resignations. Any director of the corporation
may resign at any time by giving written notice to the chairman of the board
or the secretary of the corporation. Such resignation shall take effect at
the time specified therein, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 2.06. Vacancies. In the event that any vacancy shall
occur in the Board of Directors, whether because of death, resignation,
removal, newly created directorships resulting from any increase in the
authorized number of directors, the failure of the stockholders to elect the
whole authorized number of directors, or any other reason, such vacancy may be
filled by the vote of a majority of the directors then in office, although
less than a quorum. A director elected to fill a vacancy, other than a newly
created directorship, shall hold office for the unexpired term of his
predecessor. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
Section 2.07. Removal of Directors. Directors may be removed
only as provided in the certificate of incorporation.
Section 2.08. Place of Meeting, etc. The Board of Directors
may hold any of its meetings at the principal office of the corporation or at
such other place or places as the Board of Directors (or the chairman in the
absence of a determination by the Board of Directors) may from time to time
designate. Directors may participate in any regular or special meeting of the
Board of Directors by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board of Directors can hear each other and such participation shall constitute
presence in person at such meeting.
Section 2.09. Annual Meeting. A regular annual meeting of the
Board of Directors shall be held each year at the same place as and
immediately after the annual meeting of stockholders, or at such other place
and time as shall theretofore have been determined by the Board of Directors
and notice thereof need not be given. At its regular annual meeting the Board
of Directors shall organize itself and elect the officers of the corporation
for the ensuing year, and may transact any other business.
Section 2.10. Regular Meetings. Regular meetings of the Board
of Directors may be held at such intervals at such time as shall from time to
time be determined by the Board of Directors. After such determination and
notice thereof has been once given to each person then a member of the Board
of Directors, regular meetings may be held at such intervals and time and
place without further notice being given.
Section 2.11. Special Meetings. Special meetings of the Board
of Directors may be called at any time by the Board of Directors or by the
chairman or by a majority of directors then in office to be held on such day
and at such time as shall be specified by the person or persons calling the
meeting.
Section 2.12. Notice of Meetings. Notice of each special
meeting or, where required, each regular meeting, of the Board of Directors
shall be given to each director either by being mailed on at least the third
day prior to the date of the meeting or by being telegraphed, faxed or given
personally or by telephone on at least 24 hours notice prior to the date of
meeting. Such notice shall specify the place, date and hour of the meeting
and, if it is for a special meeting, the purpose or purposes for which the
meeting is called. At any meeting of the Board of Directors at which every
director shall be present, even though without such notice, any business may
be transacted. Any acts or proceedings taken at a meeting of the Board of
Directors not validly called or constituted may be made valid and fully
effective by ratification at a subsequent meeting which shall be legally and
validly called or constituted. Notice of any regular meeting of the Board of
Directors need not state the purpose of the meeting and, at any regular
meeting duly held, any business may be transacted. If the notice of a special
meeting shall state as a purpose of the meeting the transaction of any business
that may come before the meeting, then at the meeting any business may be
transacted, whether or not referred to in the notice thereof. A written
waiver of notice of a special or regular meeting, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein shall be deemed the equivalent of such notice, and attendance of a
director at a meeting shall constitute a waiver of notice of such meeting
except when the director attends the meeting and prior to or at the
commencement of such meeting protests the lack of proper notice.
Section 2.13. Quorum and Voting. At all meetings of the Board
of Directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the certificate of incorporation, or these bylaws, the vote
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. At all meetings of the
Board of Directors, each director shall have one vote.
Section 2.14. Committees. The Board of Directors may appoint
an executive committee and any other committee of the Board of Directors, to
consist of one or more directors of the corporation, and may delegate to any
such committee any of the authority of the Board of Directors, however
conferred, other than the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation. No committee shall
have the power or authority to declare a dividend or to authorize the issuance
of stock unless the resolution creating such committee expressly so provides.
Each such committee shall serve at the pleasure of the Board of Directors,
shall act only in the intervals between meetings of the Board of Directors and
shall be subject to the control and direction of the Board of Directors. Any
such committee may act by a majority of its members at a meeting or by a
writing or writings signed by all of its members. Any such committee shall
keep written minutes of its meetings and report the same to the Board of
Directors at the next regular meeting of the Board of Directors.
Section 2.15. Compensation. The Board of Directors may, by
resolution passed by a majority of those in office, fix the compensation of
directors for service in any capacity and may fix fees for attendance at
meetings and may authorize the corporation to pay the traveling and other
expenses of directors incident to their attendance at meetings, or may
delegate such authority to a committee of the board.
Section 2.16. Action by Consent. Any action required or
permitted to be taken at any meeting of the board or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or such
committee.
ARTICLE III
OFFICERS
Section 3.01. General Provisions. The principal officers of
the corporation shall be the chairman of the board (who shall be a director),
a vice chairman of the board (who shall be a director), a president and chief
executive officer (who shall be a director), such number of vice-presidents as
the board may from time to time determine, a secretary and a treasurer. Any
person may hold any two or more offices and perform the duties thereof, except
the offices of chairman of the board and vice chairman of the board, or the
offices of president and vice-president or the offices of president and
secretary.
Section 3.02. Election, Terms of Office, and Qualification.
The officers of the corporation named in Section 3.01 of this Article III
shall be elected by the Board of Directors for an indeterminate term and shall
hold office at the pleasure of the Board of Directors.
Section 3.03. Additional Officers, Agents, etc. In addition
to the officers mentioned in Section 3.01 of this Article III, the corporation
may have such other officers or agents as the Board of Directors may deem
necessary and may appoint, each of whom shall hold office for such period,
have such authority and perform such duties as the Board of Directors may from
time to time determine. The Board of Directors may delegate to any officer
the power to appoint any subordinate officers or agents. In the absence of
any officer of the corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate, for the time being,
the powers and duties, or any of them, of such officer to any other officer,
or to any director.
Section 3.04. Removal. Except as set forth below, any officer
of the corporation may be removed, either with or without cause, at any time,
by resolution adopted by the Board of Directors at any meeting, the notice (or
waivers of notice) of which shall have specified that such removal action was
to be considered. Any officer appointed not by the Board of Directors but by
an officer or committee to which the Board of Directors shall have delegated
the power of appointment may be removed, with or without cause, by the
committee or superior officer (including successors) who made the appointment,
or by any committee or officer upon whom such power of removal may be
conferred by the Board of Directors.
Section 3.05. Resignations. Any officer may resign at any
time by giving written notice to the Board of Directors, or to the chairman of
the board, the vice chairman of the board, the president, or the secretary of
the corporation. Any such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.06. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification, or otherwise, shall be filled
in the manner prescribed in these bylaws for regular appointments or elections
to such office.
ARTICLE IV
DUTIES OF THE OFFICERS
Section 4.01. The Chairman of the Board. The chairman of the
board shall have general supervision over the property, business and affairs
of the corporation and over its several officers, subject, however, to the
control of the Board of Directors. The chairman shall, if present, preside at
all meetings of the stockholders and of the Board of Directors. The chairman
may sign, with the secretary, treasurer or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares in the corporation.
Section 4.02. Vice Chairman of the Board. The vice chairman
of the board shall perform such duties as are conferred upon him by these
bylaws or as may from time to time be assigned to him by the chairman of the
board or the Board of Directors. The authority of the vice chairman of the
board to sign in the name of the corporation all certificates for shares and
deeds, mortgages, leases, bonds, contracts, notes and other instruments, shall
be coordinate with like authority of the chairman of the board. In the
absence or disability of the chairman of the board, the vice chairman of the
board shall perform all the duties of the chairman of the board, and when so
acting, shall have all the powers of the chairman of the board.
Section 4.03. The President. The president shall be chief
executive officer of the corporation and shall perform such duties as are
conferred upon him by these bylaws or as may from time to time be assigned to
him by the chairman of the board or the vice chairman of the board or the
Board of Directors. The president may sign, execute and deliver in the name
of the corporation all deeds, mortgages, bonds, leases, contracts, or other
instruments either when specially authorized by the Board of Directors or when
required or deemed necessary or advisable by him in the ordinary conduct of
the corporation's normal business, except in cases where the signing and
execution thereof shall be expressly delegated by these bylaws to some other
officer or agent of the corporation or shall be required by law or otherwise
to be signed or executed by some other officer or agent, and the president may
cause the seal of the corporation, if any, to be affixed to any instrument
requiring the same.
Section 4.04. Vice-Presidents. The vice-presidents shall
perform such duties as are conferred upon them by these bylaws or as may
from time to time be assigned to them by the Board of Directors, the
chairman of the board, the vice chairman of the board or the president. At
the request of the chairman of the board, in the absence or disability of
the president, the vice-president designated by the chairman of the board
shall perform all the duties of the president, and when so acting, shall
have all of the powers of the president.
Section 4.05. The Treasurer. The treasurer shall be the
custodian of all funds and securities of the corporation. Whenever so
directed by the Board of Directors, the treasurer shall render a statement of
the cash and other accounts of the corporation, and the treasurer shall cause
to be entered regularly in the books and records of the corporation to be kept
for such purpose full and accurate accounts of the corporation's receipts and
disbursements. The treasurer shall have such other powers and shall perform
such other duties as may from time to time be assigned to him by the Board of
Directors, the chairman of the board or the vice chairman of the board.
Section 4.06. The Secretary. The secretary shall record and
keep the minutes of all meetings of the stockholders and the Board of
Directors in a book to be kept for that purpose. The secretary shall be the
custodian of, and shall make or cause to be made the proper entries in, the
minute book of the corporation and such other books and records as the Board
of Directors may direct. The secretary shall be the custodian of the seal of
the corporation, if any, and shall affix such seal to such contracts,
instruments and other documents as the Board of Directors or any committee
thereof may direct. The secretary shall have such other powers and shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors, the chairman of the board or the vice chairman of the
board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01. Indemnification. (a) The corporation shall
indemnify and hold harmless any person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be
made a party to, or is involved in, any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he, his testator, or intestate is or
was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
as a member of any committee or similar body, to the fullest extent permitted
by the laws of Delaware as they may exist from time to time. The right to
indemnification conferred in this Article V shall also include the right to be
paid by the corporation the expenses incurred in connection with any such
proceeding in advance of its final disposition to the fullest extent permitted
by the laws of Delaware as they may exist from time to time.
(b) The corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents of the corporation
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorized by the laws of Delaware as they may exist from
time to time.
Section 5.02. Insurance. The proper officers of the
corporation, without further authorization by the Board of Directors, may in
their discretion purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent for another corporation, partnership, joint venture, trust or other
enterprise, against any liability.
Section 5.03. ERISA. To assure indemnification under this
Article of all such persons who are or were "fiduciaries" of an employee
benefit plan governed by the Act of Congress entitled "Employee Retirement
Income Security Act of 1974", as amended from time to time, the provisions of
this Article V shall, for the purposes hereof, be interpreted as follows: an
"other enterprise" shall be deemed to include an employee benefit plan; the
corporation shall be deemed to have requested a person to serve as an employee
of an employee benefit plan where the performance by such person of his duties
to the corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant
to said Act of Congress shall be deemed "fines"; and action taken or omitted
by a person with respect to an employee benefit plan in the performance of
such person's duties for a purpose reasonably believed by such person to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the
corporation.
Section 5.04. Contractual Nature. The foregoing provisions of
this Article V shall be deemed to be a contract between the corporation and
each director and officer who serves in such capacity at any time while this
Article is in effect. Neither any repeal or modification of this Article or,
to the fullest extent permitted by the laws of Delaware, any repeal or
modification of laws, shall affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
Section 5.05. Construction. For the purposes of this Article
V, references to "the corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was
a director or officer of such constituent corporation or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body shall stand in the
same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
ARTICLE VI
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
Section 6.01. Depositories. The chairman of the board, the
vice chairman of the board, the president, the treasurer, and any
vice-president of the corporation whom the Board of Directors authorizes to
designated depositories for the funds of the corporation are each authorized to
designate depositories for the funds of the corporation deposited in its name
and the signatories and conditions with respect thereto in each case, and from
time to time, to change such depositories, signatories and conditions, with
the same force and effect as if each such depository, the signatories and
conditions with respect thereto and changes therein had been specifically
designated or authorized by the Board of Directors; and each depository
designated by the Board of Directors or by the chairman of the board, the vice
chairman of the board, the president, the treasurer, or any such
vice-president of the corporation, shall be entitled to rely upon the
certificate of the secretary or any assistant secretary of the corporation
setting forth the fact of such designation and of the appointment of the
officers of the corporation or of other persons who are to be signatories with
respect to the withdrawal of funds deposited with such depository, or from
time to time the fact of any change in any depository or in the signatories
with respect thereto.
Section 6.02. Execution of Instruments Generally. In addition
to the powers conferred upon the chairman of the board in Section 4.01 and the
vice chairman of the board in Section 4.02 and except as otherwise provided in
Section 6.01 of this Article VI, all contracts and other instruments entered
into in the ordinary course of business requiring execution by the corporation
may be executed and delivered by the president, the treasurer, or any vice
president and authority to sign any such contracts or instruments, which may
be general or confined to specific instances, may be conferred by the Board of
Directors upon any other person or persons. Any person having authority to
sign on behalf of the corporation may delegate, from time to time, by
instrument in writing, all or any part of such authority to any person or
persons if authorized so to do by the Board of Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 7.01. Certificate for Shares. Every owner of one or
more shares in the corporation shall be entitled to a certificate, which shall
be in such form as the Board of Directors shall prescribe, certifying the
number and class of shares in the corporation owned by him. When such
certificate is counter-signed by an incorporated transfer agent or registrar,
the signature of any of said officers may be facsimile, engraved, stamped or
printed. The certificates for the respective classes of such shares shall be
numbered in the order in which they shall be issued and shall be signed in the
name of the corporation by the chairman of the board or the vice chairman of
the board, or the president or a vice president, and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer. A record
shall be kept of the name of the person, firm, or corporation owning the
shares represented by each such certificate and the number of shares
represented thereby, the date thereof, and in case of cancellation, the date
of cancellation. Every certificate surrendered to the corporation for
exchange or transfer shall be cancelled and no new certificate or certificates
shall be issued in exchange for any existing certificates until such existing
certificates shall have been so cancelled.
Section 7.02. Lost, Destroyed and Mutilated Certificates. If
any certificates for shares in the corporation become worn, defaced, or
mutilated but are still substantially intact and recognizable, the directors or
authorized officers, upon production and surrender thereof, shall order the
same cancelled and shall issue a new certificate in lieu of same. The holder
of any shares in the corporation shall immediately notify the corporation if
a certificate therefor shall be lost, destroyed, or mutilated beyond
recognition, and the corporation may issue a new certificate in the place of
any certificate theretofore issued by it which is alleged to have been lost
or destroyed or mutilated beyond recognition, and the Board of Directors may,
in its discretion, require the owner of the certificate which has been lost,
destroyed, or mutilated beyond recognition, or his legal representative, to
give the corporation a bond in such sum and with such surety or sureties as it
may direct, not exceeding double the value of the stock, to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, destruction, or mutilation of any such certificate. The Board
of Directors may, however, in its discretion, refuse to issue any such new
certificate except pursuant to legal proceedings, under the laws of the State
of Delaware in such case made and provided.
Section 7.03. Transfers of Shares. Transfers of shares in the
corporation shall be made only on the books of the corporation by the
registered holder thereof, his legal guardian, executor, or administrator, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation or with a transfer agent appointed
by the Board of Directors, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by properly executed stock
powers and evidence of the payment of all taxes imposed upon such transfer.
The person in whose name shares stand on the books of the corporation shall,
to the full extent permitted by law, be deemed the owner thereof for all
purposes as regards the corporation.
Section 7.04. Regulations. The Board of Directors may make
such rules and regulations as it may deem expedient, not inconsistent with
these bylaws concerning the issue, transfer, and registration of certificates
for shares in the corporation. It may appoint one or more transfer agents or
one or more registrars, or both, and may require all certificates for shares
to bear the signature of either or both.
ARTICLE VIII
SEAL
The Board of Directors may provide a corporate seal, which
shall be circular and contain the name of the corporation engraved around the
margin and the words "corporate seal", the year of its organization, and the
word "Delaware".
Exhibit 4.2
State of Delaware
[Image material is contained here consisting
of the seal of the State of Delaware]
Office of Secretary of State
____________________
I, MICHAEL HARKINS, SECRETARY OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF THE LIMITED, INC. FILED IN THIS OFFICE ON THE FIRST DAY OF JUNE,
A.D. 1987, AT 10 O'CLOCK A.M.
--------------------
[SEAL OF DELAWARE
DEPARTMENT OF STATE] /s/ Michael Harkins
727152027 -----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 1257804
DATE: 06/02/1987
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
The Limited, Inc., a corporation organized and existing under and by
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of said
corporation, resolutions were duly adopted setting forth proposed amendments
to the Certificate of Incorporation of said corporation, declaring said
amendments to be advisable and calling a meeting of stockholders for
consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that a new Section 5 be added to Article Sixth of the
Certificate of Incorporation and approved to read in its entirety as
follows:
Section 5. Elimination of Certain Personal Liability of
Directors. A director of this Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages
for breach of any fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which
the director derives an improper personal benefit. If the General
Corporation Law of the State of Delaware is amended after approval by
the stockholders of this Section to authorize corporate action
further eliminating or limiting the personal liability of directors,
then the lability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended. The
foregoing limitation on liability shall not apply to acts or
omissions occurring prior to the effective date of this Section.
RESOLVED, that Article Thirteenth of the Certificate of
Incorporation be added and approved to read in its entirety as
follows:
THIRTEENTH.
Section 1. Vote Required for Certain Business Combinations.
The affirmative vote of the holders of not less than 75 percent of
the outstanding shares of "Voting Stock" (as hereinafter defined)
held by stockholders other than an "Interested Person" (as
hereinafter defined) shall be required for the approval or
authorization of any "Business Combination" (as hereinafter defined)
of the Corporation with any Interested Person; provided, however,
that the 75 percent voting requirement shall not be applicable if:
(a) the "Continuing Directors" (as hereinafter defined) of the
Corporation by at least a two-thirds vote (i) have expressly approved
in advance the acquisition of the outstanding shares of Voting Stock
that caused such Interested Person to become an Interested Person, or
(ii) have expressly approved such Business Combination either in
advance of or subsequent to such Interested Person's having become an
Interested Person; or
(b) the cash or fair market value (as determined by at least
two-thirds of the Continuing Directors) of the property, securities
or "Other Consideration to be Received" (as hereinafter defined) per
share by holders of Voting Stock of the Corporation in the Business
Combination is not less than the "Fair Price" (as hereinafter
defined) paid by the Interested Person in acquiring any of its
holdings of the Corporation's Voting Stock.
Section 2. Definitions. Certain words and terms as used in
this Article THIRTEENTH shall have the meanings given to them by the
definitions and descriptions in this Section.
2.1. Business Combination. The term "Business Combination"
shall mean (a) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into an Interested Person, (b)
any sale, lease, exchange, transfer or other disposition, including
without limitation, a mortgage or any other security device, of all
or any "Substantial Part" (as hereinafter defined) of the assets
either of the Corporation (including without limitation, any voting
securities of a subsidiary) or of a subsidiary of the Corporation to
an Interested Person, (c) any merger or consolidation of an
Interested Person with or into the Corporation or a subsidiary of the
Corporation, (d) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage or other
security device, of all or any Substantial Part of the assets of an
Interested Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance or transfer by the Corporation or any
subsidiary of any securities of the Corporation or a subsidiary of the
Corporation to an Interested Person, (f) any reclassification of
securities, recapitalization or other comparable transaction
involving the Corporation that would have the effect of increasing
the voting power of any Interested Person with respect to Voting
Stock of the Corporation, and (g) any agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business Combination.
2.2. Interested Person. The term "Interested Person" shall
mean and include any individual, corporation, partnership or other
person or entity which, together with its "Affiliates" and
"Associates" (as defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934 as in effect at
the date of the adoption of this Article THIRTEENTH by the
stockholders of the Corporation), "Beneficially Owns" (as defined in
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect at the date of the adoption of this
Article THIRTEENTH by the stockholders of the Corporation) in the
aggregate 20 percent or more of the outstanding Voting Stock of the
Corporation, and any Affiliate or Associate of any such individual,
corporation, partnership or other person or entity. Without
limitation, any share of Voting Stock of the Corporation that any
Interested Person has the right to acquire at any time
(notwithstanding that Rule 13d-3 deems such shares to be beneficially
owned only if such right may be exercised within 60 days) pursuant
to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, shall be deemed to be Beneficially Owned by
the Interested Person and to be outstanding for purposes of this
definition. An Interested Person shall be deemed to have acquired a
share of the Voting Stock of the Corporation at the time when such
Interested Person became the Beneficial Owner thereof. With respect
to the shares owned by Affiliates, Associates or other persons whose
ownership is attributed to an Interested Person under the foregoing
definition of Interested Person, if the price paid by such Interested
Person for such shares is not determinable by two-thirds of the
Continuing Directors, the price so paid shall be deemed to be the
higher of (a) the price paid upon the acquisition thereof by the
Affiliate, Associate or other person or (b) the market price of the
shares in question at the time when the Interested Person became the
Beneficial Owner thereof.
2.3. Voting Stock. The term "Voting Stock" shall mean all of
the outstanding shares of Common Stock of the Corporation and any
outstanding shares of Preferred Stock entitled to vote on each matter
on which the holders of record of Common Stock shall be entitled to
vote, and each reference to a proportion of shares of Voting Stock
shall refer to such proportion of the votes entitled to be cast by
such shares.
2.4. Continuing Director. The term "Continuing Director"
shall mean a Director who was a member of the Board of Directors of
the Corporation immediately prior to the time that the Interested
Person involved in a Business Combination became an Interested
Person, or a Director who was elected or appointed to fill a vacancy
after the date the Interested Person became an Interested Person by a
majority of the then-current Continuing Directors.
2.5. Fair Price. The term "Fair Price" shall mean the
following: If there is only one class of capital stock of the
Corporation issued and outstanding, the Fair Price shall mean the
highest price that can be determined by a majority of the Continuing
Directors to have been paid at any time by the Interested Person for
any share or shares of that class of capital stock. If there is more
than one class of capital stock of the Corporation issued and
outstanding, the Fair Price shall mean with respect to each class and
series of capital stock of the Corporation, the amount determined by
a majority of the Continuing Directors to be the highest per share
price equivalent of the highest price that can be determined to have
been paid at any time by the Interested Person for any share or
shares of any class or series of capital stock of the Corporation.
In determining the Fair Price, all purchases by the Interested Person
shall be taken into account regardless of whether the shares were
purchased before or after the Interested Person became an Interested
Person. Also, the Fair Price shall include any brokerage
commissions, transfer taxes and soliciting dealers' fees paid by the
Interested Person with respect to the shares of capital stock of the
Corporation acquired by the Interested Person. In the case of any
Business Combination with an Interested Person, a majority of the
Continuing Directors shall determine the Fair Price for each class
and series of the capital stock of the Corporation. The Fair Price
shall also include interest compounded annually from the date an
Interested Person became an Interested Person through the date the
Business Combination is consummated at the publicly announced base
rate of interest of Morgan Guaranty Trust Company of New York less
the aggregate amount of any cash dividends paid, and the fair market
value of any dividends paid in other than cash, on each share of
capital stock in the same time period, in an amount up to but not
exceeding the amount of interest so payable per share of capital
stock.
2.6. Substantial Part. The term "Substantial Part" shall mean
more than 20 percent of the fair market value as determined by
two-thirds of the Continuing Directors of the total consolidated
assets of the Corporation and its subsidiaries taken as a whole as of
the end of its most recent fiscal year ended prior to the time the
determination is being made.
2.7. Other Consideration to be Received. The term "Other
Consideration to be Received" shall include, without limitation,
Common Stock or other capital stock of the Corporation retained by its
existing stockholders other than Interested Persons or other parties
to such Business Combination in the event of a Business Combination
in which the Corporation is the surviving corporation.
Section 3. Determinations by the Continuing Directors. In
making any determinations, the Continuing Directors may engage such
persons, including investment banking firms and the independent
accountants who have reported on the most recent financial statements
of the Corporation, and utilize employees and agents of the
Corporation, who will, in the judgment of the Continuing Directors,
be of assistance to the Continuing Directors. Any determinations
made by the Continuing Directors, acting in good faith on the basis
of such information and assistance as was then reasonably available
for such purposes, shall be conclusive and binding upon the
Corporation and its stockholders, including any Interested Person.
RESOLVED, that Article Fourteenth of the Certificate of
Incorporation be added and approved to read in its entirety as
follows:
FOURTEENTH. The provisions set forth in Article THIRTEENTH and
in this Article FOURTEENTH may not be amended, altered, changed or
repealed in any respect unless such action is approved by the
affirmative vote of the holders of not less than 75 percent of the
outstanding shares of Voting Stock (as defined in Article THIRTEENTH)
of the Corporation at a meeting of the stockholders duly called for
the consideration of such amendment, alteration, change or repeal;
provided, however, that if there is an Interested Person (as defined
in Article THIRTEENTH), such action must also be approved by the
affirmative vote of the holders of not less than 75 percent of the
outstanding shares of Voting Stock held by the stockholders other
than the Interested Person.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an annual meeting of the stockholders of said corporation was duly
called and held, upon notice and in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the amendments.
THIRD: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, The Limited, Inc. has caused this certificate to
be signed by Leslie H. Wexner, its Chairman of the Board, and attested by
Robert H. Morosky, its Assistant Secretary, this 19th day of May, 1987.
THE LIMITED, INC.
By /s/ Leslie Wexner______________
Leslie H. Wexner, Chairman of
the Board
ATTEST:
/s/ Robert H. Morosky
Robert H. Morosky
Assistant Secretary
State of Delaware
[Image material is contained here consisting
of the seal of the state of Delaware]
Office of Secretary of State
____________________
I, MICHAEL HARKINS, SECRETARY OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF THE LIMITED, INC. FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY
OF MAY, A.D. 1986, AT 10 O'CLOCK A.M.
| | | | | | | | | | |
[SEAL OF THE DELAWARE
DEPARTMENT OF STATE] /s/ Michael Harkins________________
726147058 Michael Harkins, Secretary of State
AUTHENTICATION: 10832776
DATE: 05/28/1986
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
The Limited, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "GCL"), DOES HEREBY
CERTIFY that the following amendment to Section 1 of Article FOURTH of its
certificate of incorporation has been duly adopted in accordance with the
provisions of Section 242 of the GCL and amends such Section 1 in its entirety
to read as follows:
"Section 1. Capital Stock. The Corporation shall be
authorized to issue two classes of stock to be designated,
respectively, "Preferred Stock" and "Common Stock"; the total number
of shares which the Corporation shall have authority to issue is Five
Hundred Ten Million (510,000,000); the total number of shares of
Preferred Stock shall be Ten Million (10,000,000) and each such share
shall have a par value of One Dollar ($1.00); and the total number of
shares of Common Stock shall be Five Hundred Million (500,000,000)
and each such share shall have a par value of Fifty Cents ($.50)."
IN WITNESS WHEREOF, The Limited, Inc. has caused this certificate to
be signed by Leslie H. Wexner, its Chairman of the Board, and attested by
Robert H. Morosky, its Assistant Secretary, this 19th day of May, 1986.
THE LIMITED, INC.
By /s/ Leslie H. Wexner____________
Leslie H. Wexner, Chairman of the
Board
ATTEST:
/s/ Robert H. Morosky
Robert H. Morosky
Assistant Secretary
[Image material is contained here consisting
of the seal of the State of Delaware]
State
of
Delaware
Office of SECRETARY OF STATE
____________________
I, Glenn C. Kenton, Secretary of State of the State of Delaware, do hereby
certify that THE LIMITED, INC. is duly incorporated under the laws of the
State of Delaware and is in good standing and has a legal corporate existence
so far as the records of this office show, as of the date below shown.
[SEAL OF THE DELAWARE
DEPARTMENT OF STATE] /s/ Glenn C. Kenton________________
Glenn C. Kenton, Secretary of State
BY: /s/ M. Toon____________________
DATE: March 16, 1982_______________
CERTIFICATE OF INCORPORATION
THE LIMITED, INC.
FIRST. The name of the corporation is:
THE LIMITED, INC.
SECOND. The address of the registered office of the Corporation in
the State of Delaware is 100 West Tenth Street in the City of Wilmington,
County of New Castle, and the name of its registered agent at that address is
The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH.
Section 1. Capital Stock. The Corporation shall be authorized to
issue two classes of stock to be designated, respectively, "Preferred Stock"
and "Common Stock"; the total number of shares which the Corporation shall have
authority to issue is Fifty-five Million (55,000,000); the total number of
shares of Preferred Stock shall be Five Million (5,000,000) and each such
share shall have a par value of One Dollar ($1.00); and the total number of
shares of Common Stock shall be Fifty Million (50,000,000) and each such share
shall have a par value of Fifty Cents ($.50).
Section 2. Preferred Stock.
2.1. Series and Limits of Variations between Series. Any unissued
or treasury shares of the Preferred Stock may be issued from time to time in
one or more series for such consideration as may be fixed from time to time by
the Board of Directors and each share of a series shall be identical in all
respects with the other shares of such series, except that, if the dividends
thereon are cumulative, the date from which they shall be cumulative may
differ. Before any shares of Preferred Stock of any particular series shall be
issued, a certificate shall be filed with the Secretary of State of Delaware
setting forth the designation, rights, privileges, restrictions, and
conditions to be attached to the Preferred Stock of such series and such other
matters as may be required, and the Board of Directors shall fix and
determine, and is hereby expressly empowered to fix and determine, in the
manner provided by law, the particulars of the shares of such series (so far
as not inconsistent with the provisions of this Article applicable to all
series of Preferred Stock), including, but not limited to, the following:
2.1.1 the distinctive designation of such series and the
number of shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of Directors;
2.1.2 the annual rate of dividends payable on shares of such
series, the conditions upon which such dividends shall be payable and the date
from which dividends shall be cumulative in the event the Board of Directors
determines that dividends shall be cumulative;
2.1.3 whether such series shall have voting rights, in
addition to the voting rights provided by law and, if so, the terms of such
voting rights;
2.1.4 whether such series shall have conversion privileges
and, if so, the terms and conditions of such conversion, including, but not
limited to, provision for adjustment of the conversion rate upon such events
and in such manner as the Board of Directors shall determine;
2.1.5 whether or not the shares of such series shall be
redeemable and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
2.1.6 whether such series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund;
2.1.7 the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
2.1.8 any other relative rights, preferences and limitations
of such series.
Section 3. Common Stock.
3.1. Issuance and Consideration. Any unissued or treasury shares of
the Common Stock may be issued for such consideration as may be fixed in
accordance with applicable law from time to time by the Board of Directors.
3.2. Voting Rights. At every meeting of the stockholders every
holder of Common Stock shall be entitled to one vote, in person or by proxy,
for each share of Common Stock standing in the name of such stockholder on the
books of the Corporation, on each matter on which the Common Stock is entitled
to vote.
3.3. Dividends. Subject to the rights of holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property, or in shares of stock and the holders of the Preferred Stock shall
not be entitled to participate in any such dividends (unless otherwise
provided by the Board of Directors in any resolution providing for the issue
of a series of Preferred Stock).
3.4. Rights in Event of Dissolution. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
either voluntarily or involuntarily, the holders of the Common Stock shall be
entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation and the amounts to which the holders of the
Preferred Stock shall be entitled, to share ratably in the remaining a~sets of
the Corporation to the exclusion of the Preferred Stock (unless otherwise
provided by the Board of Directors in any resolution providing for the issue
of a series of Preferred Stock). Neither the merger or consolidation of the
Corporation, nor the sale, lease or conveyance of all or part of its assets,
shall be deemed to be a liquidation, dissolution or winding up of the affairs
of the Corporation within the meaning of this Section 3.4.
Section 4. No Preemptive Rights. No holder of shares of this
Corporation of any class shall be entitled, as such, as a matter of right, to
subscribe for or purchase shares of any class now or hereafter authorized, or
to purchase or subscribe for securities convertible into or exchangeable for
shares of the Corporation or to which there shall be attached or appertain any
warrants or rights entitling the holders thereof to purchase or subscribe for
shares.
FIFTH.
Section 1. Amendment of Bylaws by Directors. In furtherance and not
in limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, repeal, alter, amend and rescind the bylaws of
the Corporation.
Section 2. Amendment of Bylaws by the Stockholders. The bylaws
shall not be made, repealed, altered, amended or rescinded by the stockholders
of the Corporation except by the vote of the holders of not less than 75
percent of the outstanding shares of the Corporation entitled to vote thereon.
Any amendment to the Certificate of Incorporation which shall contravene any
bylaw in existence on the record date of the stockholders meeting at which
such amendment is to be voted upon by the stockholders shall require the vote
of the holders of not less than 75 percent of the outstanding shares entitled
to vote thereon.
SIXTH.
Section 1. Classified Board. Effective immediately upon the
issuance of more than 1,000 shares of Common Stock of the Corporation, the
Board of Directors (exclusive of directors to be elected by the holders of any
one or more series of Preferred stock voting separately as a class or classes)
shall be divided into three classes, Class A, Class B, and Class C. The
number of directors in each class shall be the whole number contained in the
quotient arrived at by dividing the authorized number of directors by three,
and if a fraction is also contained in such quotient, then if such fraction is
one-third, the extra director shall be a member of Class A and if the fraction
is two-thirds, one of the extra directors shall be a member of Class A and the
other shall be a member of Class B. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected; provided, however, that the directors first
elected to Class A shall serve for a term ending on the date of the annual
meeting next following the end of the calendar year 1982, the directors first
elected to Class B shall serve for a term ending on the date of the second
annual meeting next following the end of the calendar year 1982, and the
directors first elected to Class C shall serve for a term ending on the date
of the third annual meeting next following the end of the calendar year 1982.
Notwithstanding the foregoing formula provisions, in the event that, as a
result of any change in the authorized number of directors, the number of
directors in any class would differ from the number allocated to that class
under the formula provided in this Article immediately prior to such change,
the following rules shall govern:
(a) each director then serving as such shall nevertheless continue
as a director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal;
(b) at each subsequent election of directors, even if the number of
directors in the class whose term of office then expires is less than the
number then allocated to that class under said formula, the number of
directors then elected for membership in that class shall not be greater than
the number of directors in that class whose term of office then expires,
unless and to the extent that the aggregate number of directors then elected
plus the number of directors in all classes.then duly continuing in office
does not exceed the then authorized number of directors of the Corporation;
(c) at each subsequent election of directors, if the number of
directors in the class whose term of office then expires exceeds the number
then allocated to that class under said formula, the Board of Directors shall
designate one or more of the directorships then being elected as directors of
another class or classes in which the number of directors then serving is less
than the number then allocated to such other class or classes under said
formula;
(d) in the event of the death, resignation or removal of any
director who is a member of a class in which the number of directors serving
immediately preceding the creation of such vacancy exceeded the number then
allocated to that class under said formula, the Board of Directors shall
designate the vacancy thus created as a vacancy in another class in which the
number of directors then serving is less than the number then allocated to
such other class under said formula;
(e) in the event of any increase in the authorized number of
directors, the newly created directorships resulting from such increase shall
be apportioned by the Board of Directors to such class or classes as shall, so
far as possible, bring the composition of each of the classes into conformity
with the formula in this Article, as it applies to the number of directors
authorized immediately following such increase; and
(f) designation of directorships or vacancies into other classes and
apportionments of newly created directorships to classes by the Board of
Directors under the foregoing items (c), (d) and (e) shall, so far as possible,
be effected so that the class whose term of office is due to expire next
following such designation or apportionment shall contain the full number of
directors then allocated to said class under said formula.
Notwithstanding any of the foregoing provisions of this Article, each director
shall serve until his successor is elected and qualified or until his death,
resignation or removal.
Section 2. Election by Holders of Preferred Stock. During any
period when the holders of any Preferred Stock or any one or more series
thereof, voting as a class, shall be entitled to elect a specified number of
directors, by reason of dividend arrearages or other provisions giving them the
right to do so, then and during such time as such right continues (i) the then
otherwise authorized number of directors shall be increased by such specified
number of directors, and the holders of such Preferred Stock or such series
thereof, voting as a class, shall be entitled to elect the additional
directors so provided for, pursuant to the provisions of such Preferred Stock
or series; (ii) each such additional director shall serve for such term, and
have such voting powers, as shall be stated in the provisions pertaining to
such Preferred Stock or series; and (iii) whenever the holders of any such
Preferred Stock or series thereof are divested of such rights to elect a
specified number of directors, voting as a class, pursuant to the provisions
of such Preferred Stock or series, the terms of office of all directors
elected by the holders of such Preferred Stock or series, voting as a class
pursuant to such provisions or elected to fill any vacancies resulting from
the death, resignation or removal of directors so elected by the holders of
such Preferred Stock or series, shall forthwith terminate and the authorized
number of directors shall be reduced accordingly.
Section 3. Ballots. Elections of directors at an annual or special
meeting of stockholders need not be by written ballot unless the bylaws of the
Corporation shall provide otherwise.
Section 4. Initial Directors. The directors of the Corporation
shall initially be Leslie H. Wexner, One Limited Parkway, P.O. Box 16528,
Columbus, Ohio 43216, who shall initially be a Class A director and Robert H.
Morosky, One Limited Parkway, P.O. Box 16528, Columbus, Ohio 43216, who shall
initially be a Class B director.
SEVENTH. After the issuance of more than 1,000 shares of Common
Stock of the Corporation, no action shall be taken by the stockholders except
at an annual or special meeting of stockholders.
EIGHTH. The affirmative vote of the holders of not less than 75
percent of the outstanding shares of the Corporation entitled to vote thereon
shall be required for the approval of any proposal that (1) the Corporation
merge or consolidate with any other corporation or any affiliate of such other
corporation if such other corporation and its affiliates singly or in the
aggregate are directly or indirectly the beneficial owners of more than five
percent of the outstanding shares of any class of stock of the Corporation
entitled to vote in the election of directors (such other corporation and any
affiliate thereof being herein referred to as a "Related Corporation"), or (2)
the Corporation sell, lease or exchange all or substantially all of its assets
or business to or with such Related Corporation, or (3) the Corporation issue
or deliver any stock or other securities of its issue in exchange or payment
for any properties or assets of any such Related Corporation or securities
issued by any such Related Corporation or in a merger of any affiliate of the
Corporation with or into any such Related Corporation, or (4) the Corporation
dissolve, and to effect such transaction the approval of stockholders of the
Corporation is required by law or by any agreement between the Corporation and
any national securities exchange; provided, however, that the foregoing
clauses (1), (2), (3) and (4) shall not apply (i) to any such merger,
consolidation, sale, lease, or exchange, or issuance or delivery of assets or
other securities which was approved by resolution of the Board of Directors of
the Corporation prior to the acquisition of the beneficial ownership of more
than five percent of the outstanding Common Stock by the Related Corporation,
(ii) to any such transaction solely between the Corporation and another
corporation 50 percent or more of the voting power of which is owned by the
Corporation provided that the Certificate of Incorporation of the surviving
corporation contains provisions substantially similar to those provided in
Articles FIFTH, SIXTH, Section 1, SEVENTH, EIGHTH, NINTH, TENTH, and ELEVENTH,
(iii) to any transaction between this Corporation and either (a) any
stockholder who owned in excess of 10 percent of the Common Stock of the
Corporation immediately after the merger of Limited Interim Ohio, Inc., an
Ohio corporation, into The Limited Stores, Inc. an Ohio corporation or (b) any
affiliate from time to time organized, established, or incorporated of a
stockholder referred to in (iii) (a) above. For the purposes hereof, an
"affiliate" is any person (including a corporation, partnership, association,
trust, business entity, estate or individual) who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified; "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise; and in computing the percentage of
outstanding Common Stock beneficially owned by any person, the shares
outstanding and the shares owned shall be determined as of the record date
fixed to determine the stockholders entitled to vote or express consent with
respect to such proposal. The stockholder vote, if any, required for mergers,
consolidations, sales, leases, or exchanges of assets or issuances of stock or
other securities not expressly provided for in this Article, shall be such as
may be required by applicable law.
NINTH. The Board of Directors of the Corporation, when evaluating
any offer of another party to (1) make a tender or exchange offer for any
equity security of the Corporation, (2) merge or consolidate the Corporation
with another corporation, or (3) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, shall in
connection with the exercise of its judgment in determining what is in the
best interests of the Corporation and its stockholders, give due consideration
to all relevant factors, including without limitation the social and economic
effects on the employees, customers, suppliers and other constituents of the
Corporation and its subsidiaries and on the communities in which the
Corporation and its subsidiaries operate or are located.
TENTH. Any director may be removed at any annual or special
stockholders' meeting upon the affirmative vote of the holders of not less
than 75 percent of the outstanding shares of voting stock of the Corporation
at that time entitled to vote thereon; provided, however, that such director
may be removed only for cause and shall receive a copy of the charges against
him, delivered to him personally or by mail at his last known address at least
10 days prior to the date of the stockholders' meeting; provided further, that
directors who shall have been elected by the holders of a series or class of
Preferred Stock, voting separately as a class, shall be removed only pursuant
to the provisions establishing the rights of such series or class to elect
such directors.
ELEVENTH.
Section 1. Amendment of Certain Articles. The provisions set forth
in this Article ELEVENTH and in Article FIFTH (dealing with the amendment of
bylaws), SIXTH, Section 1 (dealing with the classified Board), SEVENTH
(dealing with the prohibition against stockholder action without meetings),
EIGHTH (dealing with the 75 percent vote of stockholders required for certain
reorganizations), NINTH (dealing with certain matters to be considered by the
Board in evaluating certain offers), and TENTH (dealing with the removal of
any director) may not be amended, altered, changed, or repealed in any respect
unless such repeal or amendment is approved by the affirmative vote of the
holders of not less than 75 percent of the outstanding shares of the
Corporation entitled to vote thereon.
Section 2. Amendments Generally. Subject to the provisions of
Section 1 of this Article ELEVENTH, the corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this
reservation.
TWELFTH. The name and mailing address of the incorporator of the
Corporation are:
Name Address
Robert H. Morosky One Limited Parkway
P. O. Box 16528
Columbus, Ohio 43216
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate hereby declaring and certifying that the
facts herein,stated are true, and accordingly has hereunto set his hand this
8th day of March, 1982.
/s/ Robert H. Morosky
Robert H. Morosky
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
Be it remembered that on this 8th day of March, 1982, personally came
before me, the subscriber, a Notary Public for the State and County aforesaid,
Robert H. Morosky, known to me personally to be such person, and acknowledged
the said Certificate of Incorporation to be his act and deed and that the
facts therein stated are truly set forth.
Given under my hand and seal of office the day and year aforesaid.
/s/ James S. Graham
Notary Public
[Image material is contained here consisting
of the seal of the State of Delaware]
State
of
Delaware
Office of SECRETARY OF STATE
I, Michael Harkins, Secretary of State of the State of Delaware, do
hereby certify that above and foregoing is a true and correct copy of
Certificate of Change of Location of Registered Office of the companies
represented by "The Corporation Trust Company", as it applies to "THE LIMITED,
INC." as received and filed in this office the twenty-seventh day of July,
A.D. 1984, at 4:30 o'clock P.M.
In Testimony Whereof, I have hereunto set my hand and
official seal at Dover this twenty-ninth day of May in
the year of our Lord one thousand nine hundred and
eighty-five.
/s/ Michael Harkins________________
Michael Harkins, Secretary of State
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the Delaware
Code, the undersigned Agent for service of process, in order to change the
address of the registered office of the corporations for which it is
registered agent, hereby certifies that:
1. The name of the agent is: The Corporation
Trust Company
2. The address of the old registered office was:
100 West Tenth Street
Wilmington, Delaware 19801
3. The address to which the registered office is to be changed is:
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The new address will be effective on July 30, 1984.
4. The names of the corporations represented by said agent are set
forth on the list annexed to this certificate and made a part
hereof by reference.
IN WITNESS WHEREOF, said agent has caused this
certificate to be signed on its behalf by its Vice-President
and Assistant Secretary this 25th day of July, 1984.
THE CORPORATION TRUST COMPANY
(Name of Registered Agent)
By /s/ Virginia Colwell______
(Vice-President)
ATTEST:
/s/ Mary G. Murray________
(Assistant Secretary)
PAGE 918
STATE OF DELAWARE - DIVISION OF CORPORATIONS
CHANGE OF ADDRESS FILING FOR
CORPORATION TRUST AS OF JULY 27, 1984
DOMESTIC
0933796 THE LIMITED, INC. 03/16/1982 D DE
Exhibit 4.3
RESTATED BYLAWS
OF
THE LIMITED, INC.
Adopted April 2, 1984
and as Amended
September 17, 1987
and
February 23, 1990
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. The annual meeting of the stockholders of
this corporation, for the purpose of fixing or changing the number of
directors of the corporation, electing directors and transacting such other
business as may come before the meeting, shall be held on such date, at such
time and at such place as may be designated by the Board of Directors.
Section 1.02. Special Meetings. Special meetings of the stockholders may
be called at any time by the chairman of the board, the vice chairman of the
board, or in case of the death, absence or disability of the chairman of the
board and the vice chairman of the board, the president, or in case of the
president's death, absence, or disability, the vice president, if any,
authorized to exercise the authority of the president, or a majority of the
Board of Directors acting with or without a meeting; provided, that if and to
the extent that any special meeting of stockholders may be called by any other
person or persons specified in any provision of the certificate of
incorporation or any amendment thereto or any certificate filed under Section
151(g) of the Delaware General Corporation Law (or its successor statute as in
effect from time to time), then such special meeting may also be called by the
person or persons, in the manner, at the times and for the purposes so
specified.
Section 1.03. Place of Meetings. Meetings of stockholders shall be held
at the principal office of the corporation in the State of Ohio, unless the
Board of Directors decides that a meeting shall be held at some other place
and causes the notice thereof to so state.
Section 1.04. Notices of Meetings. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting, stating the date, hour
and place and the purpose or purposes thereof shall be served upon or mailed
to each stockholder of record entitled to vote or entitled to notice, not more
than 60 days nor less than 10 days before any such meeting. If mailed, such
notice shall be directed to a stockholder at his or her address as the same
appears on the records of the corporation. If a meeting is adjourned to
another time or place and such adjournment is for 30 days or less and no new
record date is fixed for the adjourned meeting, no further notice as to such
adjourned meeting need be given if the time and place to which it is adjourned
are fixed and announced at such meeting. In the event of a transfer of shares
after notice has been given and prior to the holding of the meeting, it shall
not be necessary to serve notice on the transferee. Such notice shall specify
the place where the stockholders list will be open for examination prior to
the meeting if required by Section 1.08 hereof.
Section 1.05. Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any other change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. If the Board
shall not fix such a record date, (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held, and (ii) in any case
involving the determination of stockholders for any purpose other than notice
of or voting at a meeting of stockholders, the record date for determining
stockholders for such purpose shall be the close of business on the day on
which the Board of Directors shall adopt the resolution relating thereto.
Determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.06. Organization. At each meeting of the stockholders, the
chairman of the board, or in his absence, the vice chairman of the board, or
in his absence, the president, or, in his absence, any vice-president, or, in
the absence of the chairman of the board, the vice chairman of the board, the
president and a vice-president, a chairman chosen by a majority in interest of
the stockholders present in person or by proxy and entitled to vote, shall act
as chairman, and the secretary of the corporation, or, if the secretary of the
corporation not be present, the assistant secretary, or if the secretary and
the assistant secretary not be present, any person whom the chairman of the
meeting shall appoint, shall act as secretary of the meeting.
Section 1.07. Quorum. A stockholders' meeting duly called shall not be
organized for the transaction of business unless a quorum is present. Except
as otherwise expressly provided by law, the certificate of incorporation,
these bylaws, or any certificate filed under Section 151 (g) of the Delaware
General Corporation Law (or its successor statute as in effect from time to
time), (i) at any meeting called by the Board of Directors, the presence in
person or by proxy of holders of record entitling them to exercise at least
one-third of the voting power of the corporation shall constitute a quorum for
such meeting and (ii) at any meeting called other than by the Board of
Directors, the presence in person or by proxy of holders of record entitling
them to exercise at least a majority of the voting power of the corporation
shall constitute a quorum for such meeting. The stockholders present at a duly
organized meeting can continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. If meeting cannot be organized because a quorum has not attended, a
majority in voting interest of the stockholders present may adjourn, or, in
the absence of a decision by the majority, any officer entitled to preside at
such meeting may adjourn the meeting from time to time to such time (not more
than 30 days after the previously adjourned meeting) and place as they (or he)
may determine, without notice other than by announcement at the meeting of the
time and place of the adjourned meeting. At any such adjourned meeting at
which a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 1.08. List of Stockholders. The secretary of the corporation
shall prepare and make a complete list of the stockholders of record as of the
applicable record date entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 1.09. Order of Business and Procedure. The order of business at
all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be determined by the chairman of the meeting,
whose decisions may be overruled only by majority vote of the stockholders
present and entitled to vote at the meeting in person or by proxy. Meetings
shall be conducted in a manner designed to accomplish the business of the
meeting in a prompt and orderly fashion and to be fair and equitable to all
stockholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
Section 1.10. Voting. (a) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or
fractional share of the stock of the corporation having voting rights on the
matter in question and which shall have been held by him and registered in his
name on the books of the corporation on the date fixed pursuant to Section
1.05 of these bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting.
(b) Shares of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting in sufficient time to permit the
necessary examination and tabulation thereof before the vote is taken;
provided, however, that no proxy shall be valid after the expiration of three
years after the date of its execution, unless the stockholder executing it
shall have specified therein the length of time it is to continue in force. At
any meeting of the stockholders all matters, except as otherwise provided in
the certificate of incorporation, in these bylaws or by law, shall be decided
by the vote of a majority in voting interest of the stockholders present in
person or by proxy and voting thereon, a quorum being present. The vote at any
meeting of the stockholders on any question need not be by ballot, unless so
directed by the chairman of the meeting or required by the certificate of
incorporation. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall
state the number of shares voted.
Section 1.11. Inspectors. The Board of Directors, in advance of any
meeting of the stockholders, may appoint one or more inspectors to act at the
meeting. If inspectors are not so appointed, the person presiding at the
meeting may appoint one or more inspectors. If any person so appointed fails
to appear or act, the vacancy may be filled by appointment made by the Board
of Directors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors so appointed shall determine the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies and shall receive votes,
ballots, waivers, releases, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, waivers, releases, or consents, determine and announce the
results and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the
meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote as certified by them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers of Board. The powers of the corporation
shall be exercised, its business and affairs conducted, and its property
controlled by the Board of Directors, except as otherwise provided by the law
of Delaware or in the certificate of incorporation.
Section 2.02. Number of Directors. The number of directors of the
corporation (exclusive of directors to be elected by the holders of any one or
more series of Preferred Stock voting separately as a class or classes) shall
not be less than 9 nor more than 13, the exact number of directors to be such
number as may be set from time to time within the limits set forth above by
resolution adopted by affirmative vote of a majority of the whole Board of
Directors. As used in these Bylaws, the term "whole Board" means the total
number of directors which the corporation would have if there were no
vacancies.
Section 2.03. Election of Directors. At each meeting of the stockholders
for the election of directors, the persons receiving the greatest number of
votes shall be the directors.
Section 2.04. Nominations.
2.04.1. Nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote for the election
of directors.
2.04.2. Such nominations, if not made by the Board of Directors,
shall be made by notice in writing, delivered or mailed by first class United
States mail, postage prepaid, to the secretary of the corporation not less
than 14 days nor more than 50 days prior to any meeting of the stockholders
called for the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the secretary of the
corporation not later than the close of the seventh day following the day on
which notice of the meeting was mailed to stockholders. Each such notice shall
set forth (i) the name, age, business address and, if known, residence address
of each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of stock of
the corporation which are beneficially owned by each such nominee.
2.04.3. Notice of nominations which are proposed by the Board of
Directors shall be given on behalf of the Board by the chairman of the meeting.
2.04.4. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 2.05. Resignations. Any director of the corporation may resign
at any time by giving written notice to the chairman of the board or the
secretary of the corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 2.06. Vacancies. In the event that any vacancy shall occur in
the Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the stockholders to elect the whole authorized
number of directors, or any other reason, such vacancy may be filled by the
vote of a majority of the directors then in office, although less than a
quorum. A director elected to fill a vacancy, other than a newly created
directorship, shall hold office for the unexpired term of his predecessor.
Section 2.07. Removal of Directors. Directors may be removed only as
provided in the certificate of incorporation.
Section 2.08. Place of Meeting, etc. The Board of Directors may hold any
of its meetings at the principal office of the corporation or at such other
place or places as the Board of Directors may from time to time designate.
Directors may participate in any regular or special meeting of the Board of
Directors by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board of
Directors can hear each other and such participation shall constitute presence
in person at such meeting.
Section 2.09. Annual Meeting. A regular annual meeting of the Board of
Directors shall be held each year at the same place as and immediately after
the annual meeting of stockholders, or at such other place and time as shall
theretofore have been determined by the Board of Directors and notice thereof
need not be given. At its regular annual meeting the Board of Directors shall
organize itself and elect the officers of the corporation for the ensuing
year, and may transact any other business.
Section 2.10. Regular Meetings. Regular meetings of the Board of
Directors may be held at such intervals and at such time as shall from time to
time be determined by the Board of Directors. After such determination and
notice thereof has been once given to each person then a member of the Board of
Directors, regular meetings may be held at such intervals and time and place
without further notice being given.
Section 2.11. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Board of Directors or by the chief
executive officer or by a majority of directors then in office to be held on
such day and at such time as shall be specified by the person or persons
calling the meeting.
Section 2.12. Notice of Meetings. Notice of each special meeting or,
where required, each regular meeting, of the Board of Directors shall be given
to each director either by being mailed on at least the third day prior to the
date of the meeting or by being telegraphed or given personally or by
telephone on at least 24 hours notice prior to the date of meeting. Such
notice shall specify the place, date and hour of the meeting and, if it is for
a special meeting, the purpose or purposes for which the meeting is called. At
any meeting of the Board of Directors at which every director shall be
present, even though without such notice, any business may be transacted. Any
acts or proceedings taken at a meeting of the Board of Directors not validly
called or constituted may be made valid and fully effective by ratification
at a subsequent meeting which shall be legally and validly called or
constituted. Notice of any regular meeting of the Board of Directors need not
state the purpose of the meeting and, at any regular meeting duly held, any
business may be transacted. If the notice of a special meeting shall state as
a purpose of the meeting the transaction of any business that may come before
the meeting, then at the meeting any business may be transacted, whether or
not referred to in the notice thereof. A written waiver of notice of a special
or regular meeting, signed by the person or persons entitled to such notice,
whether before or after the time stated therein shall be deemed the equivalent
of such notice, and attendance of a director at a meeting shall constitute a
waiver of notice of such meeting except when the director attends the meeting
and prior to or at the commencement of such meeting protests the lack of
proper notice.
Section 2.13. Quorum and Voting. At all meetings of the Board of
Directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the certificate of incorporation, or these bylaws, the vote
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. At all meetings of the
Board of Directors, each director shall have one vote.
Section 2.14. Committees. The Board of Directors may appoint an
executive committee and any other committee of the Board of Directors, to
consist of one or more directors of the corporation, and may delegate to any
such committee any of the authority of the Board of Directors, however
conferred, other than the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation. No
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock unless the resolution creating such committee
expressly so provides. Each such committee shall serve at the pleasure of the
Board of Directors, shall act only in the intervals between meetings of the
Board of Directors and shall be subject to the control and direction of the
Board of Directors. Any such committee may act by a majority of its members at
a meeting or by a writing or writings signed by all of its members. Any such
committee shall keep written minutes of its meetings and report the same to
the Board of Directors at the next regular meeting of the Board of Directors.
Section 2.15. Compensation. The Board of Directors may, by resolution
passed by a majority of those in office, fix the compensation of directors for
service in any capacity and may fix fees for attendance at meetings and may
authorize the corporation to pay the traveling and other expenses of directors
incident to their attendance at meetings, or may delegate such authority to a
committee of the board.
Section 2.16. Action by Consent. Any action required or permitted to be
taken at any meeting of the board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or such committee.
ARTICLE III
OFFICERS
Section 3.01. General Provisions. The officers of the corporation shall
be the chairman of the board (who shall be a director), a vice chairman of the
board (who shall be a director), a president, such number of vice-presidents
as the board may from time to time determine, a secretary and a treasurer. Any
person may hold any two or more offices and perform the duties thereof, except
the offices of chairman of the board and vice chairman of the board, or the
offices of president and vice-president.
Section 3.02. Election, Terms of Office, and Qualification. The officers
of the corporation named in Section 3.01 of this Article III shall be elected
by the Board of Directors for an indeterminate term and shall hold office
during the pleasure of the Board of Directors.
Section 3.03. Additional Officers. Agents, etc. In addition to the
officers mentioned in Section 3.01 of this Article III, the corporation may
have such other officers or agents as the Board of Directors may deem
necessary and may appoint, each of whom or each member of which shall hold
office for such period, have such authority and perform such duties as may be
provided in these bylaws as the Board of Directors may from time to time
determine. The Board of Directors may delegate to any officer the power to
appoint any subordinate officers or agents. In the absence of any officer of
the corporation, or for any other reason the Board of Directors may deem
sufficient, the Board of Directors may delegate, for the time being, the
powers and duties, or any of them, of such officer to any other officer, or
to any director.
Section 3.04. Removal. Any officer of the corporation may be removed,
either with or without cause, at any time, by resolution adopted by the Board
of Directors at any meeting, the notice (or waivers of notice) of which shall
have specified that such removal action was to be considered. Any officer
appointed not by the Board of Directors but by an officer or committee to which
the Board of Directors shall have delegated the power of appointment may be
removed, with or without cause, by the committee or superior officer
(including successors) who made the appointment, or by any committee or
officer upon whom such power of removal may be conferred by the Board of
Directors.
Section 3.05. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, or to the chairman of the board, the
vice chairman of the board, the president, or the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, shall be filled in the
manner prescribed in these bylaws for regular appointments or elections to
such office.
ARTICLE IV
DUTIES OF THE OFFICERS
Section 4.01. The Chairman of the Board. The chairman of the board shall
be chief executive officer of the corporation and shall have general
supervision over the property, business and affairs of the corporation and
over its several officers, subject, however, to the control of the Board of
Directors. He shall, if present, preside at all meetings of the stockholders
and of the Board of Directors. He may sign, with the secretary, treasurer or
any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares in the corporation. He may sign, execute
and deliver in the name of the corporation all deeds, mortgages, bonds, leases,
contracts, or other instruments either when specially authorized by the Board
of Directors or when required or deemed necessary or advisable by him in the
ordinary conduct of the corporation's normal business, except in cases where
the signing and execution thereof shall be expressly delegated by these bylaws
to some other officer or agent of the corporation or shall be required by law
or otherwise to be signed or executed by some other officer or agent, and he
may cause the seal of the corporation, if any, to be affixed to any instrument
requiring the same.
Section 4.02. Vice Chairman of the Board. The vice chairman of the board
shall perform such duties as are conferred upon him by these bylaws or as may
from time to time be assigned to him by the chairman of the board or the Board
of Directors. The authority of the vice chairman of the board to sign in the
name of the corporation all certificates for shares and deeds, mortgages,
leases, bonds, contracts, notes and other instruments, shall be coordinate
with like authority of the chairman of the board. In the absence or disability
of the chairman of the board, the vice chairman of the board shall perform all
the duties of the chairman of the board, and when so acting, shall have all the
powers of the chairman of the board.
Section 4.03. The President. The president shall perform such duties as
are conferred upon him by these bylaws or as may from time to time be assigned
to him by the chairman of the board or the vice chairman of the board or the
Board of Directors.
Section 4.04. Vice-Presidents. The vice-presidents shall perform such
duties as are conferred upon them by these bylaws or as may from time to time
be assigned to them by the Board of Directors, the chairman of the board, the
vice chairman of the board or the president. At the request of the chairman of
the board, in the absence or disability of the president, the vice-president,
designated by the chairman of the board shall perform all the duties of the
president, and when so acting, shall have all of the powers of the president.
Section 4.05. The Treasurer. The treasurer shall be the custodian of all
funds and securities of the corporation. Whenever so directed by the Board of
Directors, he shall render a statement of the cash and other accounts of the
corporation, and he shall cause to be entered regularly in the books and
records of the corporation to be kept for such purpose full and accurate
accounts of the corporation's receipts and disbursements. He shall have such
other powers and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors, the chairman of the board or the
vice chairman of the board.
Section 4.06. The Secretary. The secretary shall record and keep the
minutes of all meetings of the stockholders and the Board of Directors in a
book to be kept for that purpose. He shall be the custodian of, and shall make
or cause to be made the proper entries in, the minute book of the corporation
and such other books and records as the Board of Directors may direct. He
shall be the custodian of the seal of the corporation, if any, and shall affix
such seal to such contracts, instruments and other documents as the Board of
Directors or any committee thereof may direct. He shall have such other powers
and shall perform such other duties as may from time to time be assigned to
him by the Board of Directors, the chairman of the board or the vice chairman
of the board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01. Indemnification. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, his
testator, or intestate is or was a director or officer of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust
or other enterprise, or as a member of any committee or similar body against
all expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding (including appeals) or the
defense or settlement thereof or any claim, issue, or matter therein, to the
fullest extent permitted by the laws of Delaware as they may exist from time
to time.
Section 5.02. Insurance. The proper officers of the corporation, without
further authorization by the Board of Directors, may in their discretion
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent
for another corporation, partnership, joint venture, trust or other
enterprise, against any liability.
Section 5.03. ERISA. To assure indemnification under this Article of all
such persons who are or were "fiduciaries" of an employee benefit plan
governed by the Act of Congress entitled "Employee Retirement Income Security
Act of 1974", as amended from time to time, the provisions of this Article V
shall, for the purposes hereof, be interpreted as follows: an "other
enterprise" shall be deemed to include an employee benefit plan; the
corporation shall be deemed to have requested a person to serve as an employee
of an employee benefit plan where the performance by such person of his duties
to the corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant
to said Act of Congress shall be deemed "fines"; and action taken or omitted
by a person with respect to an employee benefit plan in the performance of
such person's duties for a purpose reasonably believed by such person to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the
corporation.
Section 5.04. Contractual Nature. The foregoing provisions of this
Article V shall be deemed to be a contract between the corporation and each
director and officer who serves in such capacity at any time while this
Section is in effect, and any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of facts.
Section 5.05. Construction. For the purposes of this Article V,
references to "the corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was
a director or officer of such constituent corporation or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body shall stand in the
same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 5.06. Non-Exclusive. The corporation may indemnify, or agree to
indemnify, any person against any liabilities and expenses and pay any
expenses, including attorneys' fees, in advance of final disposition of any
action, suit or proceeding, under any circumstances, if such indemnification
and/or payment is approved by the vote of the stockholders or of the
disinterested directors, or is, in the opinion of independent legal counsel
selected by the Board of Directors, to be made on behalf of an indemnitee who
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation.
ARTICLE VI
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
Section 6.01 Depositories. The chairman of the board, the vice chairman
of the board, the president, the treasurer, and any vice-president of the
corporation whom the Board of Directors authorizes to designate depositories
for the funds of the corporation are each authorized to designate depositories
for the funds of the corporation deposited in its name and the signatories and
conditions with respect thereto in each case, and from time to time, to change
such depositories, signatories and conditions, with the same force and effect
as if each such depository, the signatories and conditions with respect thereto
and changes therein had been specifically designated or authorized by the
Board of Directors; and each depository designated by the Board of Directors
or by the chairman of the board, the vice chairman of the board, the
president, the treasurer, or any such vice-president of the corporation, shall
be entitled to rely upon the certificate of the secretary or any assistant
secretary of the corporation setting forth the fact of such designation and of
the appointment of the officers of the corporation or of both or of other
persons who are to be signatories with respect to the withdrawal of funds
deposited with such depository, or from time to time the fact of any change
in any depository or in the signatories with respect thereto.
Section 6.02. Execution of Instruments Generally. In addition to the
powers conferred upon the chairman of the board in Section 4.01 and the vice
chairman of the board in Section 4.02 and except as otherwise provided in
Section 6.01 of this Article VI, all contracts and other instruments entered
into in the ordinary course of business requiring execution by the corporation
may be executed and delivered by the president, the treasurer, or any vice
president and authority to sign any such contracts or instruments, which may
be general or confined to specific instances, may be conferred by the Board of
Directors upon any other person or persons. Any person having authority to
sign on behalf of the corporation may delegate, from time to time, by
instrument in writing, all or any part of such authority to any person or
persons if authorized so to do by the Board of Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 7.01. Certificate for Shares. Every owner of one or more shares
in the corporation shall be entitled to a certificate, which shall be in such
form as the Board of Directors shall prescribe, certifying the number and
class of shares in the corporation owned by him. When such certificate is
counter-signed by an incorporated transfer agent or registrar, the signature
of any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in
the order in which they shall be issued and shall be signed in the name of the
corporation by the chairman of the board or the vice chairman of the board, or
the president or a vice president, and by the secretary or an assistant
secretary or the treasurer or an assistant treasurer. A record shall be kept
of the name of the person, firm, or corporation owning the shares represented
by each such certificate and the number of shares represented thereby, the
date thereof, and in case of cancellation, the date of cancellation. Every
certificate surrendered to the corporation for exchange or transfer shall be
canceled and no new certificate or certificates shall be issued in exchange
for any existing certificates until such existing certificates shall have been
so cancelled.
Section 7.02. Lost Destroyed and Mutilated Certificates. If any
certificates for shares in this corporation become worn, defaced, or mutilated
but are still substantially intact and recognizable, the directors, upon
production and surrender thereof, shall order the same cancelled and shall
issue a new certificate in lieu of same. The holder of any shares in the
corporation shall immediately notify the corporation if a certificate therefor
shall be lost, destroyed, or mutilated beyond recognition, and the corporation
may issue a new certificate in the place of any certificate theretofore issued
by it which is alleged to have been lost or destroyed or mutilated beyond
recognition, and the Board of Directors may, in its discretion, require the
owner of the certificate which has been lost, destroyed, or mutilated beyond
recognition, or his legal representative, to give the corporation a bond in
such sum and with such surety or sureties as it may direct, not exceeding
double the value of the stock, to indemnify the corporation against any claim
that may be made against it on account of the alleged loss, destruction, or
mutilation of any such certificate. The Board of Directors may, however, in
its discretion, refuse to issue any such new certificate except pursuant to
legal proceedings, under the laws of the State of Delaware in such case made
and provided.
Section 7.03. Transfers of Shares. Transfers of shares in the
corporation shall be made only on the books of the corporation by the
registered holder thereof, his legal guardian, executor, or administrator, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation or with a transfer agent appointed
by the Board of Directors, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by properly executed stock
powers and evidence of the payment of all taxes imposed upon such transfer.
The person in whose name shares stand on the books of the corporation shall,
to the full extent permitted by law, be deemed the owner thereof for all
purposes as regards the corporation.
Section 7.04. Regulations. The Board of Directors may make such rules
and regulations as it may deem expedient, not inconsistent with these bylaws
concerning the issue, transfer, and registration of certificates for shares in
the corporation. It may appoint one or more transfer agents or one or more
registrars, or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE VIII
SEAL
The Board of Directors may provide a corporate seal, which shall be
circular and contain the name of the corporation engraved around the margin
and the words "corporate seal", the year of its organization, and the word
"Delaware".
6029G
02/12/88
Exhibit 10.1
- ---------------------------------------------------------------------------
$150,000,000
CREDIT AGREEMENT
dated as of
June 28, 1996
among
Abercrombie & Fitch Stores, Inc.
A & F Trademark, Inc.
The Banks Listed Herein
The Chase Manhattan Bank, N.A.,
as Administrative Agent
and
Citibank, N.A. and Morgan Guaranty Trust Company
of New York, as Co-Agents
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
-------------
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.............................................1
Section 1.02. Accounting Terms and Determinations....................17
Section 1.03. Types of Borrowings....................................17
ARTICLE II
THE CREDITS
Section 2.01. Commitments to Lend....................................18
Section 2.02. Method of Borrowing....................................18
Section 2.03. Notes..................................................20
Section 2.04. Interest Rate Elections................................21
Section 2.05. Interest Rates.........................................23
Section 2.06. Fees...................................................26
Section 2.07. Termination of Commitments.............................26
Section 2.08. Mandatory Repayments and Prepayments...................26
Section 2.09. Optional Prepayments...................................28
Section 2.10. General Provisions as to Payments......................28
Section 2.11. Funding Losses.........................................29
Section 2.12. Computation of Interest................................30
ARTICLE III
CONDITIONS
Section 3.01. Conditions.............................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Existence and Power....................................32
Section 4.02. Corporate and Governmental Authorization; No
Contravention......................................32
Section 4.03. Binding Effect.........................................33
Section 4.04. Financial Information; Title to Properties.............33
Section 4.05. Litigation.............................................33
Section 4.06. Compliance with ERISA..................................34
Section 4.07. Taxes..................................................34
Section 4.08. Subsidiaries...........................................34
Section 4.09. Not an Investment Company..............................34
Section 4.10. Compliance with Laws...................................35
Section 4.11. Agreements.............................................35
Section 4.12. Federal Reserve Regulations............................35
Section 4.13. Disclosure.............................................35
Section 4.14. Solvency...............................................36
Section 4.15. Trademarks.............................................36
Section 4.16. Environmental Matters..................................36
ARTICLE V
COVENANTS
Section 5.01. Information............................................37
Section 5.02. Payment of Obligations.................................39
Section 5.03. Maintenance of Property and Rights; Insurance..........39
Section 5.04. Conduct of Business and Maintenance of Existence.......40
Section 5.05. Compliance with Laws...................................40
Section 5.06. Inspection of Property, Books and Records..............40
Section 5.07. Fiscal Agent...........................................41
Section 5.08. Subsidiaries; Partnerships.............................41
Section 5.09. Debt...................................................41
Section 5.10. Restricted Payments....................................42
Section 5.11. Mergers, Consolidations, Acquisitions and
Sales of Assets......................................42
Section 5.12. Transactions with Affiliates...........................43
Section 5.13. Sale and Lease-Back Transactions.......................43
Section 5.14. Investments............................................43
Section 5.15. Cash Management System.................................44
Section 5.16. Negative Pledge........................................44
Section 5.17. Use of Proceeds........................................45
Section 5.18. Grants of Negative Pledges or Dividend Restrictions....45
Section 5.19. Changes in Accounting..................................45
Section 5.20. Coverage Ratio.........................................46
Section 5.21. Leverage Ratio.........................................46
Section 5.22. Capital Expenditures...................................46
ARTICLE VI
DEFAULTS
Section 6.01. Events of Default......................................47
Section 6.02. Notice of Default......................................50
ARTICLE VII
THE AGENT
Section 7.01. Appointment and Authorization..........................50
Section 7.02. Agent and Affiliates...................................51
Section 7.03. Action by Agent........................................51
Section 7.04. Consultation with Experts..............................51
Section 7.05. Liability of Agent.....................................51
Section 7.06. Indemnification........................................52
Section 7.07. Credit Decision........................................52
Section 7.08. Successor Agent........................................52
Section 7.09. Agent's Fees...........................................53
Section 7.10. Sub-Agents.............................................53
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair.................................53
Section 8.02. Illegality.............................................53
Section 8.03. Increased Cost and Reduced Return......................54
Section 8.04. Taxes..................................................56
Section 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans.....................................58
Section 8.06. Substitution of Bank...................................59
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices................................................59
Section 9.02. No Waivers.............................................60
Section 9.03. Expenses; Documentary Taxes; Indemnification...........60
Section 9.04. Sharing of Set-offs....................................61
Section 9.05. Amendments and Waivers.................................61
Section 9.06. Successors and Assigns.................................62
Section 9.07. Collateral.............................................64
Section 9.08. Waiver of Trial by Jury................................64
Section 9.09. New York Law...........................................64
Section 9.10. Counterparts; Integration..............................65
Section 9.11. Several Obligations....................................65
Section 9.12. Interest Rate Limitation...............................65
SCHEDULES
Schedule 1 -- Commitments
Schedule 5.16 -- Existing Liens
EXHIBITS:
Exhibit A -- Form of Note
Exhibit B -- Form of Guarantee Agreement
Exhibit C -- Form of Subordination Agreement
Exhibit D -- Forms of Opinions of Counsel
CREDIT AGREEMENT
AGREEMENT dated as of June 28, 1996, among
ABERCROMBIE & FITCH STORES, INC., A & F TRADEMARK,
INC., the BANKS listed on the signature pages hereof,
THE CHASE MANHATTAN BANK, N.A., as Administrative
Agent and CITIBANK, N.A. and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Co-Agents.
Preliminary Statement
The Borrowers (such term, and all other capitalized terms in
this preliminary statement, being used as hereinafter defined) have requested
the Banks, subject to the terms and conditions of this Agreement, to extend
credit to the Borrowers, in the aggregate principal amount of up to
$150,000,000, in the form of (i) the A & F Term Loans to be made by the Banks
to A & F on the Effective Date in an aggregate principal amount not in excess
of $144,000,000, and (ii) the Trademark Co. Term Loans to be made by the Banks
to Trademark Co. on the Effective Date in an aggregate principal amount not in
excess of $6,000,000. The proceeds of the Loans shall be used (i) by A & F to
fund payments to be made by A & F in respect of inter-company indebtedness
owed to The Limited or other subsidiaries of The Limited and dividends or
other equity distributions by A & F to Holdings and (ii) by Trademark Co. to
fund dividends or other equity distributions by Trademark Co. to The Limited.
The proceeds of the dividends or other equity distributions received by
Holdings from A & F as provided in clause (i) above shall be used by Holdings
to fund dividends or other equity distributions by Holdings to The Limited.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Adjusted Debt" means, at any time, the Borrower Group's
Consolidated Debt at such time, excluding (a) any such Debt that constitutes a
Subordinated Obligation and (b) any contingent obligation of any member of the
Borrower Group as an account party or guarantor thereof in respect of trade
letters of credit incurred in the ordinary course of business.
"Administrative Questionnaire" means, with respect to each
Bank, the administrative questionnaire in the form submitted to such Bank by
the Agent and submitted to the Agent (with a copy to the Borrowers) duly
completed by such Bank.
"A & F" means Abercrombie & Fitch Stores, Inc., a Delaware
corporation, and its successors.
"A & F Parent" has the meaning set forth in the definition of
the term Reorganization.
"A & F Term Commitment" means, as to any Bank, the obligation
of such Bank to make an A & F Term Loan to A & F in an aggregate principal
amount not exceeding the amount set forth opposite such Bank's name in
Schedule 1 hereto under the caption "A & F Term Commitment".
"A & F Term Loan" means a loan made by a Bank to A & F pursuant
to Section 2.01(a).
"Affiliate" means, with respect to any member of the Borrower
Group, any Person directly or indirectly controlling, controlled by or under
common control with such member of the Borrower Group, but excluding other
members of the Borrower Group. As used in this definition, the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. For purposes of
this Agreement and the other Loan Documents, each of The Limited and its
subsidiaries (other than members of the Borrower Group) shall be deemed to be
an Affiliate of each member of the Borrower Group.
"Agent" means The Chase Manhattan Bank, N.A., in its
capacity as administrative agent for the Banks hereunder, and its
successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office and (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means at any time a loan outstanding hereunder
which bears interest at such time at a rate based on the Base Rate pursuant to
a Notice of Borrowing or Notice of Interest Rate Election or pursuant to
Article VIII.
"Borrower Group" means (i) Holdings and its subsidiaries,
including A & F, (ii) Trademark Co. and its subsidiaries and (iii) after a
Reorganization, A & F Parent and its subsidiaries.
"Borrowers" means A & F and Trademark Co.
"Borrowing" has the meaning set forth in Section 1.03.
"Calculation Period" means a period of four consecutive fiscal
quarters of the Borrower Group ending on the last day of a fiscal quarter or
fiscal year for which financial statements have been delivered to the Agent
pursuant to Section 5.01(a) or 5.01(b).
"Capital Expenditures" means, with respect to the Borrower
Group for any period, the additions to property, plant and equipment and other
capital expenditures of the Borrower Group for such period, as the same are
(or would be) set forth, in accordance with generally accepted accounting
principles, in a consolidated statement of cash flow of the Borrower Group for
such period.
"Cash Available for Principal Payments" means, for any period,
the sum (without duplication) of (a) the Borrower Group's Consolidated Net
Income for such period, (b) depreciation, amortization and other non-cash
items deducted in determining such Consolidated Net Income, (c) interest
expense deducted in determining such Consolidated Net Income, to the extent
such interest expense constitutes a Primary Subordinated Obligation and (d)
income taxes deducted in determining such Consolidated Net Income minus,
without duplication, (i) Tax Sharing Payments made during such period, (ii)
Capital Expenditures made during such period and (iii) the amount of any
noncash items included in income in determining such Consolidated Net Income.
"Cash Interest Expense" means, with respect to the Borrower
Group for any period, the consolidated interest expense of the Borrower Group
for such period excluding, to the extent otherwise included therein, (a)
amortization of financing costs paid in a previous period and (b) interest
expense that constitutes a Primary Subordinated Obligation.
"Cash Management System" means the arrangements among The
Limited and its subsidiaries for concentrating cash balances for investment
and distributing cash balances for application pursuant to open account
advances and repayment of advances between and among The Limited and such
subsidiaries in the ordinary course of business.
"Class" has the meaning set forth in Section 1.03.
"Commitment" means, with respect to each Bank, its A & F Term
Commitment or Trademark Co. Term Commitment or both, as the context may
require.
"Consolidated Debt" means, with respect to the Borrower Group
at any date, the consolidated Debt of the Borrower Group as of such date.
"Consolidated EBITDA" means, with respect to the Borrower Group
for any period, the sum (without duplication) of (a) the Borrower Group's
Consolidated Net Income for such period, excluding extraordinary or
nonrecurring gains or losses, plus (b) interest expense deducted in
determining such Consolidated Net Income, plus (c) income taxes deducted in
determining such Consolidated Net Income, plus (d) depreciation and
amortization deducted in determining such Consolidated Net Income.
"Consolidated Net Income" means, with respect to the Borrower
Group for any period, the consolidated net income (or loss) of the Borrower
Group for such period.
"Consolidated Subsidiary" means, with respect to any member of
the Borrower Group at any date, any subsidiary or other entity the accounts of
which would be consolidated with those of such member of the Borrower Group in
its consolidated financial statements if such statements were prepared as of
such date.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable arising in the
ordinary course of business, (iv) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (v) all obligations of such Person as an account party in respect
of letters of credit and bankers' acceptances, (vi) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is assumed by
such Person, and (vii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized by law
to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrowers and the Agent.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"Environmental and Safety Laws" means any and all applicable
Federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, approvals, concessions, grants,
franchises, licenses, agreements with Governmental Authorities or other
governmental restrictions or requirements binding upon a member of the
Borrower Group relating to the environment, or to employee health or safety as
it pertains to the use or handling of or exposure to noxious odors or toxic,
caustic or radioactive substances, materials or wastes (including, without
limitation, petroleum or petroleum products, polychlorinated byphenyls (PCBs),
asbestos or asbestos containing materials) or to the preservation or
reclamation of natural resources as a result of the actual or threatened
emission, discharge or release of pollutants or contaminants into the
environment including, without limitation, ambient air, surface water,
groundwater, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
such pollutants, contaminants, toxic, caustic or hazardous substances,
materials or wastes or the clean-up or other remediation thereof, including
the Hazardous Materials Transportation Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous
and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act,
as amended by the Clean Water Act of 1977, the Clean Air Act of 1970, as
amended, the Toxic Substances Control Act of 1976, the Occupational Safety and
Health Act of 1970, as amended, the Emergency Planning and Community
Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as amended,
and any similar or implementing state law, and all amendments or regulations
promulgated hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Group" means, with respect to any member of the Borrower
Group, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with such member, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrowers and the Agent.
"Euro-Dollar Loan" means at any time a loan outstanding
hereunder which bears interest at such time at a rate based on the London
Interbank Offered Rate or the NIBO Rate pursuant to a Notice of Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" means (a) 0.400% to and including the
earlier of (i) the first date after a Reorganization on which A & F Parent
ceases to be a Wholly-Owned Subsidiary of The Limited and (ii) March 31, 1997,
and (b) thereafter, (i) 0.400% during a Level I Pricing Period, (ii) 0.500%
during a Level II Pricing Period, (iii) 0.625% during a Level III Pricing
Period, and (iv) 0.750% during a Level IV Pricing Period.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(b).
"Event of Default" has the meaning set forth in Section 6.01.
"Excess Cash Flow" means, for any period, an amount equal to
the excess, if any, of (a) the sum of (i) 100% of the proceeds (net of
underwriting discounts and commissions and out-of-pocket expenses) received by
or for the account of A&F Parent during such period in respect of the issuance
by A&F Parent of any equity securities, plus (ii) 50% of Cash Available for
Principal Payments for such period, over (b) the aggregate principal amount of
Loans repaid or prepaid during such period (excluding prepayments pursuant to
Section 2.08(d)); provided that, if the period for which Excess Cash Flow is
being determined is a fiscal quarter, "Cash Available for Principal Payments"
for purposes of clause (a)(ii) above shall be an amount equal to 25% of Cash
Available for Principal Payments for the period of four consecutive fiscal
quarters ended at the end of the fiscal quarter for which such determination
is being made.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of l%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to The Chase
Manhattan Bank, N.A., on such day on such transactions as determined by the
Agent.
"Governmental Authority" means any federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantee Agreement" means the Guarantee Agreement among the
Guarantors and the Agent, substantially in the form of Exhibit B hereto, as
amended from time to time.
"Guarantors" means (i) as to the Obligations of each Borrower,
each member of the Borrower Group other than the Borrowers, (ii) as to the
Obligations of A & F, Trademark Co. and (iii) as to the Obligations of
Trademark Co., A & F.
"Holdings" means Abercrombie & Fitch Holding Corporation, a
Delaware corporation, and its successors.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter (or, if available, as determined by the
Agent after consultation with the Banks, one or two weeks thereafter), as the
applicable Borrower may elect in the applicable Notice of Borrowing or Notice
of Interest Rate Election; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) in the case of Interest Periods of one month or longer,
any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (c) below, end on
the last Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a
payment of principal of the Loans of the applicable Class is
required to be made under subsection (a) or (b) of Section 2.08
but does not end on such date, then (i) the principal amount (if
any) of each Euro-Dollar Loan required to be repaid on such date
shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall have an
Interest Period determined as set forth above; and
(2) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending on the next Quarterly Payment Date that
occurs thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b)(i) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a
payment of principal of the Loans of the applicable Class is
required to be made under subsection (a) or (b) of Section 2.08
but does not end on such date, then (i) the principal amount (if
any) of each Base Rate Loan required to be repaid on such date
shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Base Rate Loan shall have an
Interest Period determined as set forth above.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.
"Level I Pricing Period" means any period during which the
Pricing Ratio for the most recent Calculation Period is less than or equal to
1.5 to 1.0.
"Level II Pricing Period" means any period (other than a Level
I Pricing Period) during which the Pricing Ratio for the most recent
Calculation Period is less than or equal to 2.5 to 1.0.
"Level III Pricing Period" means any period (other than a Level
I Pricing Period or Level II Pricing Period) during which the Pricing Ratio
for the most recent Calculation Period is less than or equal to 3.25 to 1.0.
"Level IV Pricing Period" means any period that is not a Level
I Pricing Period, Level II Pricing Period or Level III Pricing Period.
"Leverage Ratio" means, at any time, the ratio of (a) the
Borrower Group's Adjusted Debt at such time to (b) the Borrower Group's
Consolidated EBITDA for the most recent Calculation Period.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, a member of the Borrower
Group shall be deemed to own subject to a Lien any asset which it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement relating to
such asset.
"Loan" means an A & F Term Loan or a Trademark Co. Term Loan,
whether made as a Base Rate Loan or a Euro-Dollar Loan.
"Loan Documents" means this Agreement, the Notes, the Guarantee
Agreement and the Subordination Agreement.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(b).
"Margin Stock" has the meaning given such term under Regulation
U.
"Material Adverse Effect" means, with respect to the Borrower
Group or any member thereof, (i) a materially adverse effect on the business,
assets, results of operations or financial condition of the Borrower Group,
(ii) material impairment of the ability of the Borrower Group to perform any
material Obligation under the Loan Documents, or (iii) material impairment of
the rights of or benefits available to the Banks under any Loan Document or
the Obligations.
"Material Debt" means Debt (other than a Subordinated
Obligation) of one or more members of the Borrower Group, arising in one or
more related or unrelated transactions, in an aggregate principal amount
exceeding $15,000,000.
"Maturity Date" means June 30, 2001.
"NIBO Rate" has the meaning set forth in Section 2.05(b).
"Note" means a promissory note of a Borrower payable to a Bank,
substantially in the form of Exhibit A hereto for the applicable Class,
evidencing the obligation of the applicable Borrower to repay the Loans made
by such Bank to such Borrower, and "Notes" means any of or all such promissory
notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.04.
"Obligations" means, with respect to either Borrower, (a) the
due and punctual payment by such Borrower of (i) the principal of and interest
on its Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise and (ii) all other monetary
obligations of such Borrower to the Agent and the Banks under this Agreement
and the other Loan Documents to which such Borrower is or is to be a party,
and (b) the due and punctual performance of all other obligations of such
Borrower under this Agreement and such other Loan Documents.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and (i) is maintained by a
member of the ERISA Group for employees of a member of the ERISA Group, (ii)
has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
Group for employees of any Person which was at such time a member of the ERISA
Group, or (iii) is maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes contributions
and to which a member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Pricing Period" means a Level I Pricing Period, Level II
Pricing Period, Level III Pricing Period or Level IV Pricing Period.
"Pricing Ratio" means, for any Calculation Period, the ratio of
(a) the Borrower Group's Adjusted Debt as of the last day of such Calculation
Period, to (b) the Borrower Group's Consolidated EBITDA for such Calculation
Period.
"Primary Subordinated Obligations" means, with respect to any
member of the Borrower Group, all monetary obligations and other liabilities
of such member at any time owing to any Affiliate, including, without
limitation, the principal of and interest on any Debt owing to any Affiliate;
provided that the Primary Subordinated Obligations of a member of the Borrower
Group shall not include Secondary Subordinated Obligations of such member.
"Prime Rate" means the rate of interest publicly announced by
The Chase Manhattan Bank, N.A., in New York City from time to time as its
Prime Rate.
"Quarterly Payment Date" means each day that is the last
Euro-Dollar Business Day preceding the Saturday closest to January 31, April
30, July 31 and October 31 of each year.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reorganization" means (i) the formation by The Limited of a
corporation incorporated under the laws of one of the states of the United
States of America as a direct Wholly-Owned Subsidiary of The Limited ("A & F
Parent"), (ii) the transfer by The Limited to A & F Parent of all the
outstanding shares of capital stock of Holdings, Trademark Co. and, at the
option of The Limited, the Specified Subsidiary, with the result that each of
Holdings and Trademark Co. (and, if so transferred, the Specified Subsidiary)
shall be a direct Wholly-Owned Subsidiary of A & F Parent and A & F shall be
an indirect Wholly-Owned Subsidiary of A & F Parent and (iii) the execution
and delivery by A & F Parent (and, if so transferred, the Specified
Subsidiary) of instruments pursuant to which they shall become Guarantors
pursuant to the Guarantee Agreement and shall agree to comply with the
provisions of this Agreement applicable to them, all in form and substance
satisfactory to the Agent.
"Required Banks" means at any time Banks with Loans and unused
Commitments representing at least 51% of the sum of the aggregate principal
amount of Loans outstanding and unused Commitments at such time.
"Restricted Payment" means, with respect to any member of the
Borrower Group, (a) any dividend or other distribution on any shares of such
member's capital stock (except dividends payable solely in shares of its
common stock), (b) any payment or other consideration on account of the
purchase, repurchase, redemption, retirement or acquisition of (i) any shares
of capital stock of any member of the Borrower Group or (ii) any option,
warrant or other right to acquire any shares of such capital stock, or (c) any
payment or other consideration on account of or in respect of any Subordinated
Obligation.
"Secondary Subordinated Obligations" means, with respect to any
member of the Borrower Group, the following:
(i) Tax Sharing Payments;
(ii) its monetary obligations, whether in respect of
principal, interest or otherwise, in respect of any funds advanced to it
pursuant to the Cash Management System after the Effective Date (or, in the
case of A & F Parent or any subsidiary thereof that was not a member of the
Borrower Group prior to a Reorganization, after a Reorganization);
(iii) its monetary obligations to Affiliates in respect
of accounts payable for inventory and other assets acquired from such
Affiliates in the ordinary course of business;
(iv) its monetary obligations to Affiliates in respect
of employee benefit plans maintained for its employees in the ordinary
course of business;
(v) its monetary obligations to reimburse Affiliates
for compensation paid to its employees;
(vi) its monetary obligations to reimburse Affiliates
for rents paid to third parties under leases of properties utilized by it,
to the extent reasonably allocable to it; and
(vii) its monetary obligations to reimburse Affiliates
for insurance premiums paid to independent insurance carriers (or to
Affiliates for self-insurance, in amounts not exceeding fair market
premiums), to the extent reasonably allocable to it.
"Specified Subsidiary" means High Desert Factoring, Inc., a
Nevada corporation, and its successors.
"Subordinated Obligations" means the Primary Subordinated
Obligations and the Secondary Subordinated Obligations.
"Subordination Agreement" means the Subordination Agreement
among The Limited, Holdings, the Borrowers and the Agent, substantially in the
form of Exhibit C hereto, as amended from time to time.
"subsidiary" means, with respect to any Person, any corporation
or other entity (including any partnership) of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person.
"Tax Sharing Payments" means payments made by one or more
members of the Borrower Group to Affiliates in amounts not exceeding (in the
aggregate, for all members of the Borrower Group) the United States federal,
state and local income and franchise taxes that would have been payable by the
Borrower Group for taxable periods beginning on or after February 4, 1996, if
the members of the Borrower Group were not members of consolidated, combined
or unitary group with The Limited and its other subsidiaries, taking into
consideration all post-February 3, 1996 carry-forwards, deductions and
credits that would have been available to the members of the Borrower Group
under such circumstances, and provided that such payments are not made in
advance of the times that such income and franchise taxes would have been
so payable by the members of the Borrower Group; provided that the amount
of such payments shall not be materially increased as a result of a
Reorganization.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated in the highest grade by a nationally recognized credit rating agency,
(iii) time deposits with, including certificates of deposit issued by any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000, (iv)
repurchase agreements with respect to securities described in clause (i) above
entered into with an office of a bank or trust company meeting the criteria
specified in clause (iii) above, or (v) any mutual fund managed by a reputable
investment manager that invests substantially all of its assets in Investments
of the type described in clauses (i), (ii), (iii) or (iv) above; provided in
each case that such Investment matures within one year from the date of
acquisition thereof by a member of the Borrower Group (except that an
Investment described in clause (v) above need not satisfy the foregoing
maturity requirement, but such Investment shall be subject to redemption on
demand and the Investments made by such mutual fund shall satisfy the
foregoing maturity requirement).
"The Limited" means The Limited, Inc., a Delaware corporation,
and its successors.
"Trademark Co." means A & F Trademark, Inc., a Delaware
corporation, and its successors.
"Trademark Co. Term Commitment" means, as to any Bank, the
obligation of such Bank to make a Trademark Co. Term Loan to Trademark Co. in
an aggregate principal amount not exceeding the amount set forth opposite such
Bank's name in Schedule 1 hereto under the caption "Trademark Co. Term
Commitment".
"Trademark Co. Term Loan" means a loan made by a Bank to
Trademark Co. pursuant to Section 2.01(b).
"Transactions" means the transactions contemplated by the Loan
Documents, including the borrowing of the Loans.
"Type" has the meaning set forth in Section 1.03.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefits under
such Plan exceeds (ii) the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for
such Plan, but only (a) to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA, or (b) with respect to a Plan that is a Multiemployer Plan
as described in Section 4001(a)(3) of ERISA, to the extent of the Unfunded
Liabilities of such Plan allocable to any member of the ERISA Group under
Section 4211 of ERISA.
"Wholly-Owned Subsidiary" means, with respect to any Person,
any subsidiary all of the shares of capital stock or other ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by such Person.
Section 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower Group's independent public accountants) with the most recent
audited (or, prior to the first time at which audited financial statements are
delivered, unaudited) consolidated financial statements of the Borrower Group
delivered to the Banks; provided that, if the Borrowers notify the Agent that
they wish to amend any covenant contained in Article V or the definition of
"Pricing Ratio" to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant or such definition (or
if the Agent notifies the Borrowers that the Required Banks wish to amend any
such covenant or such definition for such purpose), then compliance with such
covenant or the calculation of the Pricing Ratio, as the case may be, shall be
determined on the basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
amendment becomes effective in accordance with this Agreement.
Section 1.03. Types of Borrowings. The term "Borrowing"
refers to the portion of the aggregate principal amount of Loans of any
Class outstanding hereunder which bears interest of a specific Type and for
a specific Interest Period (subject to clauses (1)(c) and (2)(b) of the
definition of Interest Period) pursuant to a Notice of Borrowing or Notice
of Interest Rate Election. Each Bank's ratable share of each Borrowing is
referred to herein as a separate "Loan". Borrowings and Loans hereunder
are distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make such a Loan or of a Borrowing comprising such Loans)
refers to whether such Loan is an A & F Term Loan or a Trademark Co. Term
Loan, each of which constitutes a Class. The "Type" of a Loan refers to
whether such Loan is a Base Rate Loan or a Euro-Dollar Loan. Borrowings
and Loans may be identified by both Class and Type (e.g., an "A & F Euro-
Dollar Loan" is a Loan which is both an A & F Term Loan and a Euro-Dollar
Loan).
ARTICLE II
THE CREDITS
Section 2.01. Commitments to Lend. A & F Term Loans. Each
Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make a loan to A & F on the Effective Date in an aggregate
principal amount not exceeding its A & F Term Commitment.
(b) Trademark Co. Term Loans. Each Bank severally agrees,
on the terms and conditions set forth in this Agreement, to make a loan to
Trademark Co. on the Effective Date in an aggregate principal amount not
exceeding its Trademark Co. Term Commitment.
(c) Borrowings Ratable. Each Borrowing under subsection (a)
or (b) of this Section 2.01 shall be made from the Banks ratably in
proportion to their respective Commitments of the relevant Class.
Section 2.02. Method of Borrowing. (a) Each Borrower
shall give the Agent notice (a "Notice of Borrowing") not later than 10:00
A.M. (New York City time) on the Effective Date (if all Borrowings to be
made on such date are to be comprised of Base Rate Loans) or at least two
Euro-Dollar Business Days before the Effective Date (if any Borrowing to be
made on such date is to be comprised of Euro-Dollar Loans) (or such later
time as the Agent shall agree to accept such notice), specifying:
(i) the Effective Date, which shall be a Euro-Dollar
Business Day;
(ii) the aggregate amount of the Borrowing to be made by
each Borrower on the Effective Date, which shall be $5,000,000 or a larger
multiple of $1,000,000;
(iii) whether the Loans comprising such Borrowings are to
be Base Rate Loans or Euro-Dollar Loans; and
(iv) in the case of a Euro-Dollar Borrowing, the duration
of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share
of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrowers.
(c) Not later than 12:00 Noon (New York City time) on the
Effective Date, each Bank shall make available its share of the Borrowings
to be made on such date, in Federal or other funds immediately available in
New York City, to the Agent at its address specified in or pursuant to
Section 9.01. Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will make the
funds so received from the Banks available to the respective Borrowers at
the Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Bank
prior to the Effective Date that such Bank will not make available to the
Agent such Bank's share of the Borrowings to be made on such date, the
Agent may assume that such Bank has made such share available to the Agent
on such date in accordance with subsection (c) of this Section 2.02 and the
Agent may, in reliance upon such assumption, make available to the
applicable Borrower on such date a corresponding amount. If and to the
extent that such Bank shall not have so made such share available to the
Agent, such Bank and the applicable Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available
by the Agent until the date such amount is repaid to the Agent, at (i) in
the case of such Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto pursuant to
Section 2.05, and (ii) in the case of such Bank, the Federal Funds Rate.
If such Bank shall repay to the Agent such corresponding amount in respect
of a Borrowing, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.
Section 2.03. Notes. (a) Each Bank's Loans to a Borrower shall
be evidenced by a separate Note (in the form applicable to such Class)
payable to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to (i) in the case of its Note evidencing A & F
Term Loans, the aggregate principal amount of A & F Term Loans made by such
Bank (or its predecessor in interest) on the Effective Date and (ii) in the
case of its Note evidencing Trademark Co. Term Loans, the aggregate
principal amount of Trademark Co. Term Loans made by such Bank (or its
predecessor in interest) on the Effective Date.
(b) Each Bank may, by notice to the applicable Borrower and the
Agent, request that its Loans of a particular Type and Class be evidenced by a
separate Note. Each such Note shall be in substantially the form of Exhibit A
hereto applicable to the relevant Class with appropriate modifications to
reflect the fact that it evidences solely Loans of the relevant Type. Each
reference in this Agreement to the "Note" or "Notes" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the context may
require.
(c) Upon receipt of each Bank's Note or Notes pursuant to Section
3.01(b), the Agent shall forward such Note or Notes to such Bank. Each Bank
shall record the date and amount of each Loan made by it and the date and
amount of each payment of principal made by the applicable Borrower with
respect thereto, and prior to any transfer of any of its Notes shall endorse
on the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding;
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of the applicable Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by
each Borrower so to endorse its Note and to attach to and make a part of its
Note a continuation of any such schedule as and when required.
Section 2.04. Interest Rate Elections. (a) The initial Type of
Loans comprising each Borrowing, and the duration of the initial Interest
Period applicable thereto if they are initially Euro-Dollar Loans, shall be
as specified in the Notice of Borrowing. Thereafter, each Borrower may
from time to time elect to change or continue the Type of, or the duration
of the Interest Period applicable to, the Loans made to such Borrower
included in any Borrowing (excluding overdue Loans and subject in each case
to the provisions of the definition of Interest Period and Article VIII),
as follows:
(i) if such such Loans are Base Rate Loans, such
Borrower may elect to designate such Loans as Euro-Dollar Loans, may elect
to continue such Loans as Base Rate Loans for an additional Interest
Period, or may elect to designate such Loans as any combination of Base
Rate Loans and Euro-Dollar Loans; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to designate such Loans as Base Rate Loans, may elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, or may elect to
designate such Loans as any combination of Base Rate Loans and Euro-
Dollar Loans.
Notwithstanding the foregoing, a Borrower may not elect an Interest Period
for Euro-Dollar Loans unless (A) the aggregate outstanding principal amount
of such Euro-Dollar Loans to which such Interest Period will apply is at
least $5,000,000 and (B) such election will not result in the total number
of outstanding Euro-Dollar Borrowings of a Borrower exceeding five at any
time.
(b) Any election permitted by subsection (a) of this Section may
become effective on any Euro-Dollar Business Day specified by the applicable
Borrower (the "Election Date"); provided that such Borrower may not specify an
Election Date with respect to an outstanding Euro-Dollar Loan that is not the
last day of the Interest Period therefor. Each such election shall be made by
a Borrower by delivering a notice (a "Notice of Interest Rate Election") to
the Agent not later than 10:00 A.M. (New York City time) at least one Domestic
Business Day before the Election Date, if all the resulting Loans will be Base
Rate Loans, and at least three Euro-Dollar Business Days before the Election
Date, if the resulting Loans will include Euro-Dollar Loans. Each Notice of
Interest Rate Election shall specify with respect to the outstanding Loans to
which such notice applies:
(i) the Election Date;
(ii) if the Type of Loan is to be changed, the new Type of
Loan and, if such new Type is a Euro-Dollar Loan, the duration of the first
Interest Period applicable thereto;
(ii) if such Loans are Euro-Dollar Loans and the Type of
such Loans is to be continued for an additional or different Interest
Period, the duration of such additional or different Interest Period; and
(iv) if such Loans are to be designated as a combination of
Base Rate Loans and Euro-Dollar Loans, the information specified in clauses
(i) through (iii) above as to each resulting Borrowing and the aggregate
amount of each such Borrowing.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period and the last
sentence of subsection (a) of this Section.
(c) Upon receipt of a Notice of Interest Rate Election, the
Agent shall promptly notify each Bank of the contents thereof and of such
Bank's share of each Borrowing affected thereby and such notice shall not
thereafter be revocable by the Borrower.
(d) If a Borrower (i) fails to deliver a timely Notice of Interest
Rate Election to the Agent electing to continue or change the Type of, or the
duration of the Interest Period applicable to, the Loans included in any
Borrowing as provided in this Section and (ii) has not theretofore delivered a
notice of prepayment relating to such Loans, then such Borrower shall be
deemed to have given the Agent a Notice of Interest Rate Election electing to
change the Type of such Loans to (or continue the Type thereof as) Base Rate
Loans, with an Interest Period commencing on the last day of the then current
Interest Period.
Section 2.05. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day
from the date such Loan is made until it becomes due, at a rate per annum
equal to the Base Rate for such day. Such interest shall be payable for
each Interest Period on the last day thereof. Any overdue principal of
and, to the extent permitted by law, overdue interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the sum of the applicable Euro-Dollar Margin at the
time plus (i) if such Euro-Dollar Loan has an Interest Period of one or two
weeks duration, the applicable NIBO Rate, or (ii) otherwise, the applicable
London Interbank Offered Rate. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than three months, at intervals of three months after the first day thereof.
The "London Interbank Offered Rate" means, with respect to
any Euro-Dollar Borrowing for any Interest Period, the rate appearing on
Page 3750 of the Telerate Service (or on any successor or substitute page
of such Service, or any successor to or substitute for such Service,
providing rate quotations comparable to those currently provided on such
page of such Service, as determined by the Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 A.M.,
London time, two Euro-Dollar Business Days prior to the commencement of
such Interest Period, as the rate for dollar deposits with a maturity
comparable to such Interest Period. In the event that such rate is not so
available at such time for any reason, then the "London Interbank Offered
Rate" with respect to such Euro-Dollar Borrowing for such Interest Period
shall be the rate at which dollar deposits of $5,000,000 and for a maturity
comparable to such Interest Period are offered to the principal London
office of the Agent in immediately available funds in the London interbank
market at approximately 11:00 A.M., London time, two Euro-Dollar Business
Days prior to the commencement of such Interest Period.
"NIBO Rate" means, with respect to any Euro-Dollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next higher 1/16th of 1%) equal to the interest rate at
which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered in immediately available funds to the
Administrative Agent at the Eurodollar lending offices where its foreign
currency and exchange operations and Eurodollar funding operations are
customarily conducted in the international interbank market at approximately
10:00 A.M., New York City time, two Euro-Dollar Business Days prior to the
commencement of such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank
of the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents).
(c) Any overdue principal of and, to the extent permitted by law,
overdue interest on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day from and including the date payment thereof was due to
but excluding the date of actual payment, at a rate per annum equal to the sum
of 2% plus the higher of (i) the sum of the applicable Euro-Dollar Margin at
the time plus the London Interbank Offered Rate or NIBO Rate, as the case may
be, applicable to such Loan and (ii) the applicable Euro-Dollar Margin at the
time plus the rate per annum at which one-day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other
period of time not longer than three months as the Agent may select)
deposits in dollars in an amount approximately equal to such overdue
payment due to The Chase Manhattan Bank, N.A., are offered to The Chase
Manhattan Bank, N.A., in the London interbank market for the applicable
period determined as provided above (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to
the sum of 2% plus the Base Rate for such day).
(d) For so long as any Bank maintains reserves against
"Eurocurrency liabilities" (or any other category of liabilities which
includes deposits by reference to which the interest rate on Euro-Dollar Loans
is determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to United States
residents), and as a result the cost to such Bank (or its Euro-Dollar Lending
Office) of making or maintaining its Euro-Dollar Loans is increased, then such
Bank may require the applicable Borrower to pay, contemporaneously with each
payment of interest on any Euro-Dollar Loan of such Bank to such Borrower,
additional interest on such Euro-Dollar Loan for the Interest Period of such
Euro-Dollar Loan at a rate per annum up to but not exceeding the excess of
(i)(A) the applicable London Interbank Offered Rate or NIBO Rate, as the case
may be, divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii)
the rate specified in the preceding clause (i)(A). Any Bank wishing to
require payment of such additional interest pursuant to the preceding sentence
(x) shall so notify the applicable Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank to such Borrower
shall be payable to such Bank at the place indicated in such notice with
respect to each Interest Period commencing at least three Euro-Dollar Business
Days after the giving of such notice and (y) shall furnish to the applicable
Borrower at least five Euro-Dollar Business Days prior to each date on which
interest is payable on such Euro-Dollar Loans an officer's certificate setting
forth the amount to which such Bank is then entitled under this subsection (d)
(which shall be consistent with such Bank's good faith estimate of the level
at which the related reserves are maintained by it). Each such certificate
shall be accompanied by such information as the applicable Borrower may
reasonably request as to the computation set forth therein.
(e) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the applicable
Borrower and the participating Banks by telecopy, telex or cable of each rate
of interest so determined, and its determination thereof shall be conclusive
in the absence of manifest error. For purposes of determining the Euro-Dollar
Margin, Pricing Periods shall be determined based upon the Pricing Ratio for
the most recent Calculation Period. Any change in Pricing Periods shall be
effective on and as of the date of delivery to the Agent of financial
statements pursuant to Section 5.01(a) or (b) indicating a change in the
Pricing Ratio.
Section 2.06. Fees. The Borrowers jointly and severally
agree to pay to the Agent on the Effective Date the fees separately agreed
to be payable on the Effective Date, for distribution among the Banks as
separately agreed.
Section 2.07. Termination of Commitments. The Commitments
shall automatically terminate at the close of business on the Effective
Date or, if the Effective Date does not occur on or prior to July 12, 1996,
at the close of business on such date.
Section 2.08. Mandatory Repayments and Prepayments. The
Borrowers shall repay the Loans in an aggregate principal amount equal to
$10,000,000 on June 30 of each year and $25,000,000 on December 31 of each
year, commencing on and including June 30, 1997, and ending on and including
the Maturity Date.
(b) Any and all Loans outstanding on the Maturity Date shall be
due and payable on such date.
(c) In the event that either Holdings or Trademark Co. ceases to
be a direct Wholly-Owned Subsidiary of The Limited at any time prior to a
Reorganization, or a direct Wholly-Owned Subsidiary of A & F Parent at any
time after a Reorganization, the Borrowers shall prepay all Loans then
outstanding at such time. In the event that A & F is neither a direct
Wholly-Owned Subsidiary of Holdings nor a direct Wholly-Owned Subsidiary of
A&F Parent at any time, the Borrowers shall prepay all Loans then
outstanding at such time. In the event that at any time after a
Reorganization The Limited ceases to own directly at least 80% of the
outstanding capital stock of A & F Parent, or for any other reason A & F
Parent and its consolidated subsidiaries cease to be consolidated
subsidiaries of The Limited, then the Borrowers shall prepay all Loans then
outstanding at such time.
(d) In the event that at any time on or after the date of a
Reorganization A&F Parent ceases to be a direct Wholly-Owned Subsidiary of The
Limited (i) as promptly as practicable after the end of each fiscal quarter of
the Borrower Group (and in any event by the time that financial statements are
required to be delivered with respect to such fiscal quarter), commencing with
the fiscal quarter during which A&F Parent ceases to be a direct Wholly-Owned
Subsidiary of The Limited, the Borrowers shall prepay Loans in an aggregate
principal amount equal to Excess Cash Flow with respect to such fiscal
quarter, provided that the Borrowers shall not be required to make any
prepayment pursuant to this clause (i) after making the prepayment in respect
of the fiscal quarter during which the aggregate principal amount of the Loans
is reduced to less than $50,000,000, and (ii) as promptly as practicable after
the end of each successive period of four consecutive fiscal quarters
commencing at the end of the last fiscal quarter for which a prepayment was
required pursuant to clause (i) above (and in any event by the time that
financial statements are required to be delivered with respect to the last
fiscal quarter included in such period), the Borrowers shall prepay Loans in
an aggregate principal amount equal to Excess Cash Flow with respect to such
period.
(e) On the date of each repayment or prepayment of Loans pursuant
to this Section, the applicable Borrower shall pay interest accrued on the
principal amount repaid or prepaid to the day of repayment or prepayment. The
repayments and prepayments of the Loans required by the respective subsections
of this Section and the optional prepayments permitted by Section 2.09 are
separate and cumulative, so that any one such repayment or prepayment shall
reduce any other repayment or prepayment only as and to the extent specified
in subsection (g) of this Section.
(f) Prior to the date of each mandatory repayment or prepayment
pursuant to this Section, the applicable Borrower shall, by notice to the
Agent given not later than 11:00 A.M. (New York City time) on (i) the
Domestic Business Day prior to the date of repayment or prepayment of any
Base Rate Borrowing, and (ii) the third Euro-Dollar Business Day prior to
the date of repayment or prepayment of any Euro-Dollar Borrowing, select
which outstanding Borrowings of the required Class are to be repaid or
prepaid; provided that such Borrower shall not elect to prepay any Euro-
Dollar Borrowing if a Base Rate Borrowing of the required Class is
outstanding. If the applicable Borrower fails to deliver any such notice
by the time specified above, it shall be deemed to have notified the Agent
to apply such repayment or prepayment, first, to any Base Rate Borrowing of
the required Class then outstanding and, second, to Eurodollar Borrowings
of the required Class in chronological order based upon the last day of
their respective Interest Periods (allocating first to the Eurodollar
Borrowing with the least number of days in its remaining Interest Period).
Upon receipt of such notice, the Agent shall promptly notify each Bank of
the contents thereof and of such Bank's ratable share of such prepayment,
and such notice shall not thereafter be revocable by the applicable
Borrower. Each such repayment or prepayment shall be applied to repay or
prepay ratably the respective Loans included in the Borrowings so selected.
(g) Each prepayment of Loans pursuant to Section 2.09 or
subsection (d) of this Section shall be applied to reduce repayments
scheduled to be made pursuant to subsection (a) of this Section pro rata.
Section 2.09. Optional Prepayments. (a) A Borrower may,
upon at least one Domestic Business Day's notice to the Agent, in the case
of Base Rate Borrowings, or three Euro-Dollar Business Days' notice to the
Agent, in the case of Euro-Dollar Borrowings, prepay any Borrowing in whole
at any time, or from time to time in part in amounts aggregating $5,000,000
or any larger multiple of $1,000,000, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment.
Each such notice of prepayment shall specify which outstanding Borrowing is
to be prepaid in connection therewith. Each such optional prepayment shall
be applied to prepay ratably the Loans of the several Banks included in
such Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the applicable Borrower.
Section 2.10. General Provisions as to Payments. (a) Each
Borrower shall make each payment of principal of, and interest on, its
Loans and of fees payable by it hereunder, not later than 12:00 Noon (New
York City time) on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in
Section 9.01. The Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Base Rate
Loans or of fees shall be due on a day which is not a Domestic Business
Day, the date for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal of, or interest
on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from a Borrower
prior to the date on which any payment is due from such Borrower to the Banks
hereunder that such Borrower will not make such payment in full, the Agent may
assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then
due such Bank. If and to the extent that such Borrower shall not have so made
such payment, each Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent, at the Federal Funds Rate.
Section 2.11. Funding Losses. If any payment of principal
with respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or
otherwise) is made on any day other than the last day of the Interest
Period applicable thereto, or the end of an applicable period fixed
pursuant to Section 2.05(c), or if a Borrower fails to borrow, continue or
prepay any Euro-Dollar Loans after notice has been given to any Bank in
accordance with Section 2.02, 2.04 or 2.08, the applicable Borrower shall
reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure
to borrow; provided that such Bank shall have delivered to such Borrower a
certificate setting forth the amount of such loss or expense and a summary
computation thereof, which certificate shall be conclusive in the absence
of manifest error.
Section 2.12. Computation of Interest. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
ARTICLE III
CONDITIONS
Section 3.01. Conditions. This Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note or Notes, dated on or before the Effective Date complying with
the provisions of Section 2.03;
(c) receipt by the Agent of opinions of each of Samuel P. Fried,
Esq., and Davis Polk & Wardwell, in each case as counsel for the Borrowers and
their respective Affiliates that are parties to the Loan Documents,
substantially in the forms of Exhibits D-1 and D-2 hereto, respectively, and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request, and receipt by the Agent
of an opinion of Cravath, Swaine & Moore, counsel for the Agent, substantially
in the form of Exhibit D-3 hereto;
(d) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02;
(e) immediately after the Borrowings to be made on such date, no
Default shall have occurred and be continuing;
(f) the representations and warranties of each of the Borrowers
contained in this Agreement and the other Loan Documents shall be true on and
as of such date;
(g) receipt by the Agent of a certificate signed by the
President, any Vice President, the Treasurer or an attorney-in-fact of each
of the Borrowers, dated the Effective Date, to the effect set forth in
clauses (e) and (f) above;
(h) receipt by the Agent of counterparts of the Guarantee
Agreement duly executed by the parties thereto;
(i) receipt by the Agent of counterparts of the Subordination
Agreement, duly executed by the parties thereto;
(j) the Banks shall be satisfied that, after giving effect to the
advance of the Loans and application of the proceeds thereof, the Borrower
Group shall have sufficient liquidity to satisfy their current liabilities
(including interest payments in respect of the Loans) and meet their working
capital needs on an ongoing basis;
(k) the fact that (i) there shall not have occurred a material
adverse change in the business, assets, results of operations or financial
condition of the Borrower Group since February 3, 1996, and (ii) there is no
action, suit or proceeding pending or threatened against or affecting any
member of the Borrower Group or any of its Affiliates in which there is a
reasonable possibility of an adverse decision that would reasonably be
expected to materially adversely affect the ability of either Borrower to
perform any of its obligations under the Loan Documents or the rights of the
Banks thereunder or the ability of the Banks to exercise such rights;
(l) receipt by the Agent of (i) all fees and other compensation
payable to the Agent or the Banks on or prior to the Effective Date
pursuant to their agreements with the Borrowers and (ii) reimbursement of
all expenses of the Agent for which the Borrowers are liable hereunder to
the extent invoices therefor have been presented; and
(m) receipt by the Agent of all documents it may reasonably
request relating to the existence of each of the Borrowers and the
Guarantors, the corporate authority for and the validity of the Loan
Documents, and any other matters relevant hereto, all in form and substance
satisfactory to the Agent;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than July 12, 1996.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that:
Section 4.01. Existence and Power. Each member of the
Borrower Group is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and has
all powers and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted or
proposed to be conducted.
Section 4.02. Corporate and Governmental Authorizatization; No
Contravention. The execution, delivery and performance by each member of
the Borrower Group of the Loan Documents to which it is or is to be a party
and the consummation of the Transactions are within its powers, have been
duly authorized by all necessary action on the part of such member and its
stockholders, require no action by or in respect of, or filing with, any
Governmental Authority (other than such as have been duly taken or made)
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or By-
laws of such member or of any judgment, injunction, order or decree or any
material agreement or other material instrument binding upon such member or
result in the creation or imposition of any Lien on any asset of such
member, in each case both before and after giving effect to the
Transactions.
Section 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrowers and the other Loan Documents
to which any member of the Borrower Group is to be a party, when executed
and delivered in accordance with this Agreement, will constitute valid and
binding obligations of such member, in each case enforceable in accordance
with its terms, subject to the effect of applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally and equitable
principles of general applicability.
Section 4.04. Financial Information; Title to Properties.
(a) The unaudited combined balance sheet of the Borrower Group as of
February 3, 1996, and the related unaudited combined statement of income
for the fiscal year then ended, copies of which have been delivered to each
of the Banks, fairly present, in conformity with generally accepted
accounting principles (except for the absence of footnotes), the financial
position of the Borrower Group as of such date and the results of its
operations for such year.
(b) The unaudited combined balance sheet of the Borrower Group
as of May 4, 1996, and the related combined unaudited statement of income
for the 13-week period then ended fairly present, in conformity with
generally accepted accounting principles applied on a basis consistent with
the financial statements referred to in subsection (a) of this Section
(except for the absence of footnotes and otherwise as disclosed therein),
the financial position of the Borrower Group as of such date and the
results of its operations for such periods (subject to normal year-end
adjustments).
(c) Since February 3, 1996, there has been no material adverse
change in the business, results of operations or financial condition of the
Borrower Group.
(d) A & F has good and marketable title to, or valid leasehold
interests in, all its material properties and assets, except for defects in
title that do not interfere with its ability to conduct its business as
currently conducted or proposed to be conducted or to utilize such properties
and assets for their intended purposes.
Section 4.05. Litigation. There is no injunction, stay,
decree or order of any Governmental Authority or any action, suit or
proceeding pending against, or to the knowledge of either Borrower
threatened against or affecting, any member of the Borrower Group before
any court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision that would
reasonably be expected to have a Material Adverse Effect.
Section 4.06. Compliance with ERISA. Each member of the
ERISA Group (a) has fulfilled its material obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with respect to
each Plan, (b) is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code and (c) has
not incurred any material liability to the PBGC or a Plan under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA; provided that this sentence shall not apply to (i) any member of the
ERISA Group described in Section 414(m) of the Internal Revenue Code (other
than The Limited or a subsidiary thereof) or any Plan maintained by such a
member or (ii) any Plan referred to in clause (iii) of the definition of
"Plan" herein (a "Multiemployer Plan"). The Limited and its subsidiaries
have made all material payments to Multiemployer Plans which they have been
required to make under the related collective bargaining agreement or
applicable law.
Section 4.07. Taxes. All United States Federal income tax
returns and all other material tax returns which are required to be filed
by any member of the Borrower Group (or the consolidated group of which it
is a member) and all taxes shown to be due on such returns or pursuant to
any assessment received by any such member (or such consolidated group)
have been paid, except where the same may be contested in good faith by
appropriate proceedings.
Section 4.08. Subsidiaries. Holdings does not have any
subsidiaries other than A & F, which is a Wholly-Owned Subsidiary of
Holdings. Neither A & F nor Trademark Co. has any subsidiaries.
Section 4.09. Not an Investment Company. No member of the
Borrower Group is an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.10. Compliance with Laws. No member of the
Borrower Group is in violation of any law, rule or regulation, or in
default with respect to any judgment, writ, injunction or decree applicable
to it of any Governmental Authority, that (individually or in the
aggregate) would reasonably be expected to result in a Material Adverse
Effect.
Section 4.11. Agreements. (a) No member of the Borrower Group
is a party to any agreement or instrument or subject to any corporate
restriction that has resulted or would reasonably be expected to result in
a Material Adverse Effect.
(b) No member of the Borrower Group is in default in any manner
under any agreement or instrument to which it is a party or by which it or any
of its properties or assets are or may be bound, where such default would
reasonably be expected to result in a Material Adverse Effect.
Section 4.12. Federal Reserve Regulations. No member of the
Borrower Group is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
Margin Stock.
Section 4.13. Disclosure. All information (excluding
projected financial information) furnished in writing by any member of the
Borrower Group or any of its Affiliates to the Agent or any Bank for
purposes of or in connection with this Agreement or any transaction
contemplated hereby was true and accurate in all material respects or based
on reasonable estimates on the date as of which such information was stated
or certified. The Borrowers have disclosed to the Banks in writing any and
all facts (other than prevailing economic conditions affecting similarly
situated businesses generally) known to any officer of either Borrower
which materially and adversely affect or may materially and adversely
affect (to the extent either Borrower can now reasonably foresee) the
business, financial position or results of operations of the Borrower
Group. All projected financial information which has been furnished by any
member of the Borrower Group or any of its Affiliates to the Agent or any
Bank was, at the time so furnished, believed by such member to have been
prepared in a reasonable manner and based on reasonable assumptions with
respect to the business, financial position or results of operations of the
Borrower Group; provided that no representation is made by either Borrower
that the future results of the Borrower Group will equal those set forth in
such projected financial information.
Section 4.14. Solvency. As of the Effective Date, after
giving effect to the Transactions (including the application of the
proceeds of the Loans and the incurrence of all Debt to be incurred by the
respective Borrowers on the Effective Date), (a) the fair salable value of
the assets of each member of the Borrower Group will exceed the amount that
will be required to be paid on or in respect of its existing debts and
other liabilities (including contingent liabilities) as they mature; (b)
the assets of each member of the Borrower Group will not constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted; and (c) each member of the Borrower Group does
not intend to, and does not believe that it will, incur debts beyond its
ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be received by it and the amounts to be payable on
or in respect of its obligations).
Section 4.15. Trademarks. All trademarks and tradenames
material to the business of the Borrower Group (including, without
limitation, rights with respect to the name "Abercrombie & Fitch") are
owned by Trademark Co.
Section 4.16. Environmental Matters. Each member of the
Borrower Group has complied with all Environmental and Safety Laws, except
for any non-compliance that, individually or in the aggregate, could not
reasonably be anticipated to result in a Material Adverse Effect. No
member of the Borrower Group has received notice of any failure so to
comply which alone or together with any other such failure could result in
a Material Adverse Effect. In the case of A & F, its facilities do not
treat, store or dispose of any hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as those terms
are used in any Environmental and Safety Laws, in violation thereof where
such violation could result, individually or together with other
violations, in a Material Adverse Effect.
ARTICLE V
COVENANTS
Each Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Loan Document remains
unpaid:
Section 5.01. Information. The Borrowers will deliver to
each of the Banks:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower Group, combined (or, following a
Reorganization, consolidated) balance sheets of the Borrower Group as of the
end of such fiscal year and the related combined (or, following a
Reorganization, consolidated) statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Coopers & Lybrand or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower
Group, combined (or, following a Reorganization, consolidated) balance sheets
of the Borrower Group as of the end of such quarter and the related combined
(or, following a Reorganization, consolidated) statements of income and cash
flows for such quarter and for the portion of the Borrower Group's fiscal year
ended at the end of such quarter, setting forth in each case in comparative
form the figures for the corresponding quarter and the corresponding portion
of the Borrower Group's previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the chief financial officer or the
chief accounting officer of each Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of each Borrower (i)
setting forth in reasonable detail the calculations required to determine the
Pricing Ratio for the most recent Calculation Period and (with respect to
financial statements for periods that compliance is required) to establish
whether the Borrowers were in compliance with the requirements of Sections
5.20, 5.21 and 5.22 on the date of such financial statements, (ii) stating
whether any Default exists on the date of such certificate and, if any Default
then exists, setting forth the details thereof and the action which the
Borrowers are taking or propose to take with respect thereto and (iii) stating
whether, since the date of the most recent financial statements previously
delivered pursuant to this Section, there has been any material change in the
generally accepted accounting principles applied in the preparation of such
statements and, if so, describing such change;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) stating
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to sub-clause (i) of clause (c) above;
(e) promptly following the end of each period with respect to
which any prepayment is required pursuant to Section 2.08(d), a certificate of
the chief financial officer or chief accounting officer of each Borrower
setting forth a reasonably detailed calculation of Excess Cash Flow for such
period;
(f) within five days after any executive or financial officer of
either Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of an executive or financial officer of such
Borrower setting forth the details thereof and the action which the Borrowers
are taking or propose to take with respect thereto;
(g) if and when any executive or financial officer of either
Borrower obtains knowledge that any member of the ERISA Group (i) has given
or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for or result in a termination of such Plan under Title
IV of ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC;
(ii) has received notice of complete or partial withdrawal liability under
Title IV of ERISA, a copy of such notice; or (iii) has received notice from
the PBGC under Title IV of ERISA of an intent to terminate or appoint a
trustee to administer any Plan, a copy of such notice;
(h) prompt notice of the occurrence of the Reorganization and of
any event that results in A & F Parent ceasing to be a Wholly-Owned Subsidiary
of The Limited; and
(i) from time to time such additional information regarding the
financial position or business of any member of the Borrower Group as the
Agent, at the request of any Bank, may reasonably request.
Section 5.02. Payment of Obligations. Each member of the
Borrower Group will pay and discharge, at or before maturity, all their
respective material obligations and liabilities, including, without
limitation, tax liabilities, except in connection with a good faith contest
with the applicable obligee, and will maintain, in accordance with
generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
Section 5.03. Maintenance of Property and Rights;
Insurance. (a) A & F will keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear
excepted.
(b) A & F will insure and keep insured, with reputable insurance
companies, so much of its properties and such of its liabilities for bodily
injury or property damage, to such extent and against such risks (including
fire), as companies engaged in similar businesses customarily insure
properties and liabilities of similar character; or, in lieu thereof, A & F
will maintain or participate in a system or systems of self-insurance which
will be in accord with the customary practices of companies engaged in similar
business in maintaining or participating in such systems.
Section 5.04. Conduct of Business and Maintenance of
Existence. Each member of the Borrower Group will continue to engage in
business of the same general type as now conducted, and will preserve,
renew and keep in full force and effect their respective existences and
their respective rights, privileges and franchises necessary or desirable
in the normal conduct of business, except any such right, privilege or
franchise the failure of which to keep in full force and effect would not
reasonably be expected to have a Material Adverse Effect.
Section 5.05. Compliance with Laws. Each member of the
Borrower Group will comply with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including,
without limitation, Environmental and Safety Laws and ERISA and the rules
and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or where
the failure to comply, either alone or combined with other failures to
comply, would not reasonably be expected to have a Material Adverse Effect.
Section 5.06. Inspection of Property, Books and Records.
Each member of the Borrower Group will keep books, records and accounts in
which transactions are recorded as necessary to (i) permit preparation of
Borrower Group's consolidated financial statements in accordance with
generally accepted accounting principles and (ii) permit their Affiliates
to comply with the requirements of Section 13(b)(2) of the Securities Act
of 1934 as in effect from time to time; and will permit representatives of
any Bank at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often
as may reasonably be desired; provided that (a) reasonable advance notice
shall be given to such member of any such visit or inspection of properties
and (b) such member shall be afforded an opportunity to participate in any
such discussions with independent public accountants. A Bank will not
publish or disclose to any third Person any information gained under any
inspection conducted pursuant to this Section 5.06 or information obtained
pursuant to Section 5.01(i) unless and until such information is or becomes
a matter of public knowledge through no fault of such Bank or is lawfully
acquired by such Bank without restrictions of confidentiality, except (i)
as such Bank deems it necessary in connection with the enforcement of its
rights arising out of any Default or as required by law or with respect to
disclosures to bank regulatory authorities or the independent auditors or
counsel or the employees, officers or directors of such Bank, (ii)
disclosures to any actual or potential participant or, with the prior
written consent of the applicable Borrower, assignee (a "Transferee") of
such Bank's rights under this Agreement who signs a confidentiality
agreement containing provisions substantially similar to those contained in
this sentence; provided that such Bank shall promptly notify the Borrowers
of the identity of such actual or potential Transferee, or (iii) as
consented to by either Borrower in writing.
Section 5.07. Fiscal Agent. Each member of the Borrower
Group will cause its fiscal year to end on the Saturday closest to January
31 in each year.
Section 5.08. Subsidiaries; Partnerships. No member of
the Borrower Group will have any subsidiaries without the prior written
consent of the Required Banks, except that a member of the Borrower Group
may have a subsidiary that is both a Wholly-Owned Subsidiary and a
Guarantor under the Guarantee Agreement. No member of the Borrower Group
will enter into any partnership or joint venture.
Section 5.09. Debt. No member of the Borrower Group will
incur or at any time be liable with respect to any Debt, except:
(a) Debt outstanding under this Agreement and the other Loan
Documents;
(b) Debt of members of the Borrower Group owing to other
members of the Borrower Group;
(c) Debt constituting Subordinated Obligations; and
(d) (i) contingent obligations as an account party in respect of
trade letters of credit incurred in the ordinary course of its business and
(ii) reimbursement obligations in respect of any drawing under any such letter
of credit that is paid within one Domestic Business Day.
Section 5.10. Restricted Payments. No member of the
Borrower Group will declare or make or agree to make, directly or
indirectly, any Restricted Payment, except:
(a) the distribution by Trademark Co. as a dividend or other
equity distribution of its rights in respect of inter-company indebtedness
owed to Trademark Co. by A&F; provided that such inter-company indebtedness
is distributed by Trademark Co. on or promptly following the Effective Date
and is paid by A&F with the proceeds of A&F Term Loans;
(b) Restricted Payments made on, or within five Domestic Business
Days after, the Effective Date with the proceeds of the Loans;
(c) dividends or other distributions on shares of its capital
stock consisting solely of instruments evidencing Debt of such member that
constitutes a Primary Subordinated Obligation;
(d) Restricted Payments paid to another member of the Borrower
Group; and
(e) so long as no Default has occurred and is continuing or would
result from such payment, payments in respect of its Secondary Subordinated
Obligations.
Section 5.11. Mergers, Consolidations, Acquisitions and
Sales of Assets. (a) No member of the Borrower Group will merge into or
consolidate with any other Person, or permit any other Person to merge into
or consolidate with it, or purchase or otherwise acquire (in one
transaction or a series of related trans-actions) any material assets,
except that the foregoing shall not prohibit (i) the acquisition by A & F
of assets in the ordinary course of business, (ii) Investments permitted
under Section 5.14 and (iii) any merger of a member of the Borrower Group
with any other member of the Borrower Group.
(b) No member of the Borrower Group will sell, assign, transfer or
otherwise dispose of any asset, including any stock, without the prior written
consent of the Required Banks to such sale, assignment, transfer or
disposition and the terms thereof; provided, that the foregoing shall not
prohibit (i) Investments permitted under Section 5.14 or the liquidation
thereof, (ii) the sale by A & F of inventory, used or surplus equipment or
other assets in the ordinary course of business, (iii) Restricted Payments
permitted under Section 5.10, (iv) sales, assignments, transfers and other
dispositions of assets from one member of the Borrower Group to another member
of the Borrower Group and (v) sales by A&F Parent of its common stock.
Section 5.12. Transactions with Affiliates. No member of the
Borrower Group will, directly or indirectly, (a) make any Investment in an
Affiliate, (b) sell, lease or otherwise transfer any assets to or perform
services for an Affiliate, (c) purchase, lease or acquire assets or services
from an Affiliate, or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that (i) any member of the Borrower Group may enter into any such
transaction with an Affiliate that does not involve the payment of
financial or management advisory fees or similar consideration to an
Affiliate if the monetary or business consideration arising therefrom would
not be less advantageous to such member than the monetary or business
consideration which it would obtain in a comparable arm's length
transaction with a Person not an Affiliate and (ii) the foregoing shall not
prohibit (A) the Restricted Payments permitted under Section 5.10, (B)
Investments permitted under Section 5.14 and (C) the incurrence by such
member of Debt constituting Subordinated Obligations permitted under
Section 5.09.
Section 5.13. Sale and Lease-back Transactions. No member
of the Borrower Group will enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any asset,
real or personal, whether now owned or hereafter acquired, and thereafter
it or any other member of the Borrower Group shall rent or lease such asset
or other assets which it intends to use for substantially the same purpose
or purposes as the asset being sold or transferred.
Section 5.14. Investments. No member of the Borrower Group
will make or acquire any Investment in any Person other than:
(a) Temporary Cash Investments;
(b) Investments in another member of the Borrower Group;
(c) Investments constituting receivables due from Affiliates
arising pursuant to the Cash Management System in
accordance with Section 5.15; and
(d) loans to Affiliates evidenced by promissory notes of such
Affiliates payable to such member on demand; provided that such loans shall
be made only to Affiliates that are able to repay such loans on demand, as
determined by such member in good faith.
Section 5.15. Cash Management System. Transactions
pursuant to the Cash Management System by each member of the Borrower Group
will comply with the following:
(a) each transaction that involves the transfer of such member's
cash (or its equivalent) to, or collection of such member's cash (or its
equivalent) by, an Affiliate will either (i) constitute a Restricted Payment
in respect of a Secondary Subordinated Obligation permitted under Section 5.10
or (ii) constitute an Investment that is a receivable due from an Affiliate
payable to such member on demand; and
(b) each transaction that involves the transfer of cash (or its
equivalent) to or for the benefit of such member will either (i) constitute
repayment of a receivable referred to in clause (a)(ii) above, (ii) constitute
a receivable due to an Affiliate by such member that is a Subordinated
Obligation or (iii) constitute an equity contribution to such member.
Section 5.16. Negative Pledge. No member of the Borrower
Group will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens for taxes not delinquent or being contested in good
faith and by appropriate proceedings;
(b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment
insurance;
(c) mechanics', workers', materialmen's, warehousemen's,
landlords' or other like Liens arising in the ordinary course of business with
respect to obligations which are not due or which are being contested in good
faith;
(d) any Liens identified on Schedule 5.16 hereto exiting on the
Effective Date; provided that any such Lien does not attach to any asset other
than the asset or assets identified on such Schedule;
(e) Liens incurred in the ordinary course of business to secure
performance of surety and indemnity bonds, leases and other contracts (other
than to secure Debt);
(f) interests (other than Debt) of a lessor or lessee arising
under a lease;
(g) Liens arising in the ordinary course of its business which
(i) do not secure Debt or any other monetary obligation and (ii) do not in
the aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business; and
(h) Liens on assets acquired in the ordinary course of business
securing obligations as account party in respect of trade letters of credit
issued to support the purchase price of such assets.
Section 5.17. Use of Proceeds. The proceeds of the Loans
will be used only for the purposes set forth in the preliminary statement
of this Agreement. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any Margin Stock.
Section 5.18. Grants of Negative Pledges or Dividend
Restrictions. No member of the Borrower Group will agree to or become
bound by any agreement or other arrangement (other than the Loan Documents)
that would restrict or impair (i) the ability of such member to grant a
Lien on any of its properties or assets to secure the Obligations or (ii)
the ability of such member to pay dividends on its capital stock.
Section 5.19. Changes in Accounting. No member of the
Borrower Group will change its accounting policies or practices from those
utilized in the preparation of the financial statements referred to in
Section 4.04, except as permitted or required by generally accepted
accounting principles consistently applied.
Section 5.20. Coverage Ratio. The ratio of (a) the sum of
(i) the Borrower Group's Consolidated EBITDA for each period of four
consecutive fiscal quarters ending on or after the Saturday closest to
October 31, 1996, plus (ii) rental and lease expense deducted in
determining such Consolidated EBITDA for such period, to (b) the sum of (i)
rental and lease expense deducted in determining such Consolidated EBITDA
for such period, plus (ii) Cash Interest Expense for such period (or
shorter period commencing at the end of the fiscal quarter ending on the
Saturday closest to July 31, 1996), shall not be less than 1.5 to 1.0;
provided that the amount of Cash Interest Expense determined pursuant to
clause (b)(ii) above shall be multiplied by (a) 4, for purposes of
determining such ratio for the period ending on the Saturday closest to
October 31, 1996, (b) 2, for purposes of determining such ratio for the
period ending on the Saturday closest to January 31, 1997, and (c) 4/3, for
purposes of determining such ratio for the period ending on the Saturday
closest to April 30, 1997.
Section 5.21. Leverage Ratio. The Leverage Ratio will not
at any time during any period set forth below, commencing on the last day
of the fiscal quarter of the Borrower Group ending on the Saturday closest
to October 31, 1996, be greater than the ratio set forth below with respect
to such period:
<TABLE>
<CAPTION>
Period
- ----------------------------------------------------------
Commencing on and
including Saturday closest Ending on and excluding
to: Saturday closest to: Ratio
- -------------------------- ----------------------- ---------
<S> <C> <C>
October 31, 1996 January 31, 1997 4.0:1.0
January 31, 1997 January 31, 1998 3.9:1.0
January 31, 1998 January 31, 1999 3.5:1.0
January 31, 1999 January 31, 2000 3.25:1.0
January 31, 2000 thereafter 3.0:1.0
</TABLE>
Section 5.22. Capital Expenditures. The members of the
Borrower Group will not make Capital Expenditures exceeding, in the
aggregate, $29,000,000 during the fiscal year of the Borrower Group ending
on the Saturday closest to January 31, 1997, $30,000,000 during the fiscal
year of the Borrower Group ending on the Saturday closest to January 31,
1998, $31,000,000 during the fiscal quarter of the Borrower Group ending on
the Saturday closest to January 31, 1999, $32,000,000 during the fiscal
year of the Borrower Group ending on the Saturday closest to January 31,
2000, or $33,000,000 during any fiscal year of the Borrower Group
thereafter.
ARTICLE VI
DEFAULTS
Section 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(a) either Borrower shall fail to pay (A) within one Domestic
Business Day of the date due, any principal of any of its Loans, or (B) within
three Domestic Business Days of the date due, any interest on any of its
Loans, any fees or any other amount payable by it hereunder or under any other
Loan Document;
(b) either Borrower shall fail to observe or perform (i) any
covenant contained in clause (a) or (b) of Section 5.01 for three Domestic
Business Days after notice thereof has been given to such Borrower by the
Agent at the request of any Bank or (ii) any covenant contained in Section
5.08, or in Sections 5.09 through 5.11, inclusive, or in Section 5.13, 5.14 or
5.21 and any such failure shall continue unremedied for five days after any
director or executive or financial officer of either Borrower obtains
knowledge of such failure, or (iii) any covenant contained in clause (f) of
Section 5.01, or in Section 5.07 or 5.12, or in Sections 5.15 through 5.19,
inclusive, and any such failure shall continue unremedied for 15 days after
any director or executive or financial officer of either Borrower obtains
knowledge of such failure, or (iv) any covenant contained in Section 5.20 or
5.22 and a period of five days shall have elapsed since any director or
executive or financial officer of either Borrower first obtained knowledge of
such failure without the Borrowers and the Required Banks having reached
agreement with respect to the terms and conditions, if any, on which the
Required Banks are willing to waive such failure (it being understood that any
such agreement or waiver shall be in the sole discretion of such Banks);
(c) any member of the Borrower Group shall fail to observe or
perform any covenant or agreement contained in any Loan Document (other than
those covered by clause (a) or (b) above) for 30 days after written notice
thereof has been given to the Borrowers by the Agent at the request of any
Bank;
(d) any representation, warranty, certification or statement made
by any member of the Borrower Group or any of its Affiliates in any Loan
Document or in any certificate, financial statement or other document
delivered pursuant to any Loan Document shall prove to have been incorrect in
any material respect when made and a period of five days shall have elapsed
since any director or executive or financial officer of either Borrower first
obtained knowledge of such incorrectness without the Borrowers and the
Required Banks having reached agreement with respect to the terms and
conditions, if any, on which the Required Banks are willing to waive such
incorrectness (it being understood that any such agreement or waiver shall be
in the sole discretion of such Banks);
(e) any member of the Borrower Group shall fail to make any
payment of principal, interest or premium in respect of any of its Material
Debt (other than the Obligations) at maturity or within any applicable grace
period;
(f) any event or condition (including, without limitation, failure
to make any payment when due) shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof or to
require the prepayment, redemption or repurchase thereof;
(g) any member of the Borrower Group (i) shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or (ii) shall
consent to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced
against it, or (iii) shall make a general assignment for the benefit of
creditors, or (iv) shall fail generally to pay its debts as they become
due, or (v) shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced
against any member of the Borrower Group seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against any member of the Borrower Group under the federal bankruptcy laws
as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans having aggregate Unfunded
Liabilities in excess of $10,000,000 (collectively, a "Material Plan")
shall be filed under Title IV of ERISA by any member of the ERISA Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan against
any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA
and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;
(j) one or more judgments or orders for the payment of money in
an aggregate amount in excess of $10,000,000 shall be rendered against any
member of the Borrower Group or any combination thereof and shall continue
unsatisfied and unstayed for a period of 10 days, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties of
any member of the Borrower Group to enforce any such judgment; or
(k) the Guarantee of any Guarantor under the Guarantee Agreement
shall cease to be, or shall be asserted by such Guarantor not to be, a valid
and binding obligation of such Guarantor;
then, and in every such event, the Agent shall (i) if requested by Banks
having more than 50% in aggregate amount of the Commitments, by notice to
the Borrowers terminate the Commitments and they shall thereupon terminate,
(ii) if requested by Banks holding Notes evidencing more than 50% in
aggregate principal amount of the Loans, by notice to the Borrowers declare
the Notes (together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable (in whole or, in the
sole discretion of the Banks, from time to time in part) without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers, (iii) exercise remedies available under the
Guarantee Agreement, as requested by the Required Banks, or (iv) any
combination of the foregoing; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above with respect to
either Borrower, without any notice to either Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the
Notes (together with accrued interest thereon) shall become immediately due
and payable (in whole) without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrowers.
Section 6.02. Notice of Default. The Agent shall give
notice to the Borrowers under clause (b)(i) or (c) of Section 6.01 promptly
upon being requested to do so by any Bank, and shall thereupon notify all
the Banks thereof.
ARTICLE VII
THE AGENT
Section 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Agent by the terms hereof or
thereof, together with all such powers as are reasonably incidental
thereto. Citibank, N.A. and Morgan Guaranty Trust Company of New York
shall not have any duties or responsibilities in their respective
capacities as Co-Agents.
Section 7.02. Agent and Affiliates. The Chase Manhattan Bank,
N.A., shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were
not the Agent, and The Chase Manhattan Bank, N.A., and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the members of the Borrower Group and their Affiliates as if it
were not the Agent.
Section 7.03. Action by Agent. The obligations of the
Agent under the Loan Documents are only those expressly set forth herein
and therein. Without limiting the generality of the foregoing, the Agent
shall not be required to take any action with respect to any Default,
except as expressly provided in Article VI.
Section 7.04. Consultation with Experts. The Agent may
consult with legal counsel (who may be counsel for a member of the Borrower
Group), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
Section 7.05. Liability of Agent. Neither the Agent nor
any of its directors, officers, agents, or employees shall be liable for
any action taken or not taken by it in connection herewith (i) with the
consent or at the request of the Required Banks or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (a) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (b) the performance or observance of any of the
covenants or agreements of either Borrower or any other member of the
Borrower Group; (c) the satisfaction of any condition specified in Article
III, except receipt of items required to be delivered to it; or (d) the
validity, effectiveness or genuineness of this Agreement, any other Loan
Document or any other instrument or writing furnished in connection
herewith. The Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other writing (which
may be a telecopy, bank wire, telex or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
Section 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Loans, indemnify the Agent (to the extent not reimbursed
by the Borrowers) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from the Agent's gross negligence or willful misconduct) that the Agent
may suffer or incur in connection with this Agreement or any other Loan
Document or any action taken or omitted by the Agent hereunder or thereunder.
Section 7.07. Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any
action under this Agreement.
Section 7.08. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Banks and the Borrowers. Upon
any such resignation, the Required Banks shall have the right to appoint a
successor Agent after consultation with the Borrowers (but the foregoing
shall not be construed to require any consent or approval by the
Borrowers). If no successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 days
after the retiring Agent gives notice of resignation, then the retiring
Agent may, on behalf of the Banks, appoint a successor Agent, which shall
be a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of its appointment
as Agent by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations.
After any retiring Agent's resignation, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was an Agent.
Section 7.09. Agent's Fees. The Borrowers shall pay to the
Agent for its own account fees in the amounts and at the times previously
agreed upon between the Borrowers and the Agent.
Section 7.10. Sub-Agents. The Agent may perform any of its
obligations and exercise any of its rights under the Loan Documents by or
through sub-agents. The provisions of this Article VII shall inure to the
benefit of any sub-agent of the Agent in the same manner and to the same
extent as they inure to the benefit of the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any Interest
Period for any Euro-Dollar Borrowing:
(a) the Agent determines that it is not possible to determine the
London Interbank Offered Rate or NIBO Rate, as applicable, for such Interest
Period, or
(b) Banks having 50% or more of the aggregate amount of the
Commitments or Loans of the relevant Class advise the Agent that the London
Interbank Offered Rate or NIBO Rate, as applicable, as determined by the
Agent, will not adequately and fairly reflect the cost to such Banks of
funding their Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to
make Euro-Dollar Loans of the Class of such Euro-Dollar Borrowing shall be
suspended.
Section 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or of any
change therein, or of any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank
or comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans
and such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrowers, whereupon until such Bank
notifies the Borrowers and the Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make
Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar
Loans to maturity and shall so specify in such notice, the applicable
Borrower shall immediately prepay in full the then outstanding principal
amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the
applicable Borrower shall borrow a Base Rate Loan in an equal principal
amount from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks),
and such Bank shall make such a Base Rate Loan.
Section 8.03. Increased Cost and Reduced Return. (a) If, on or
after the date hereof, the adoption of any applicable law, rule or regulation,
or of any change therein, or of any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve, special deposit, insurance assessment or
similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement
included in an applicable Euro-Dollar Reserve Percentage) against assets
of, deposits with or for the account of, or credit extended by, any Bank
(or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the London interbank market any other
condition affecting its Euro-Dollar Loans, its Notes or its obligation to
make Euro-Dollar Loans and the result of any of the foregoing is to
increase the cost to such Bank (or its Applicable Lending Office) of making
or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum
received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the applicable Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or of any change therein, or of any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on capital of such
Bank (or its Parent) as a consequence of such Bank's obligations hereunder to
a level below that which such Bank (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank
(with a copy to the Agent), the applicable Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank will promptly notify the Borrowers and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder (including a
statement in reasonable detail as to the method by which such amount or
amounts shall have been determined) shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
Section 8.04. Taxes. For purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect
to any payment by a Borrower pursuant to this Agreement or under
any Note, and all liabilities with respect thereto, excluding (i)
in the case of each Bank and the Agent, taxes imposed on its
income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as
the case may be), is organized or in which its principal executive
office is located or, in the case of each Bank, in which its
Applicable Lending Office is located and (ii) in the case of each
Bank, any United States withholding tax imposed on such payments
but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to
this Agreement.
"Other Taxes" means any present or future stamp or
documentary taxes and any other excise or property taxes, or
similar charges or levies, which arise from any payment made
pursuant to this Agreement or under any Notes or from the
execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b) Any and all payments by either Borrower to or for the
account of any Bank or the Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if a Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Borrower shall make such
deductions, (iii) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law and (iv) such Borrower shall furnish to the Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) Each Borrower agrees to indemnify each Bank and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section 8.04) paid by such Bank or the Agent (as the case
may be) and any liability (including penalties, interest and expense) arising
therefrom or with respect thereto. This indemnification shall be paid within
15 days after such Bank or the Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank in the
case of each other Bank, and from time to time thereafter if requested in
writing by a Borrower (but only so long as such Bank remains lawfully able
to do so), shall provide the Borrowers and the Agent with Internal Revenue
Service form 1001 or 4224, as appropriate, or any successor form prescribed
by the Internal Revenue Service, certifying that such Bank is entitled to
benefits under an income tax treaty to which the United States is a party
which exempts the Bank from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such
Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to
provide the Borrowers or the Agent with the appropriate form pursuant to
Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank shall not be entitled to indemnification
under Section 8.04(b) or (c) with respect to Taxes imposed by the United
States; provided that if a Bank, which is otherwise exempt from or subject to
a reduced rate of withholding tax, becomes subject to Taxes because of its
failure to deliver a form required hereunder, the applicable Borrower shall
take such steps as such Bank shall reasonably request to assist such Bank to
recover such Taxes.
(f) If a Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change
the jurisdiction of its Applicable Lending Office if, in the judgment of such
Bank, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank.
(g) If a Bank shall become aware that it is entitled to claim a
refund from a Governmental Authority in respect of Taxes or Other Taxes as to
which it has been indemnified by a Borrower, or with respect to which a
Borrower has paid additional amounts, pursuant to this Section 8.04, it shall
promptly notify the relevant Borrower of the availability of such refund claim
and shall, within 30 days after receipt of a request by such Borrower, make a
claim to such Governmental Authority for such refund at such Borrower's
expense. If a Bank receives a refund (including pursuant to a claim for
refund made pursuant to the preceding sentence) in respect of any Taxes or
Other Taxes as to which it has been indemnified by a Borrower or with respect
to which a Borrower has paid additional amounts pursuant to this Section 8.04,
it shall within 30 days from the date of such receipt pay over such refund to
the relevant Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 8.04 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of such Bank and without interest (other than interest
paid by the relevant Governmental Authority with respect to such refund);
provided, however, that a Borrower, upon the request of such Bank, agrees to
repay the amount paid over to such Borrower (plus penalties, interest or other
charges) to such Bank in the event such Bank is required to repay such refund
to such Governmental Authority.
Section 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar
Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03 or 8.04 and the applicable
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to
such Bank through the Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies
such Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer apply:
(a) all Loans which would otherwise be made or continued by such
Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
Section 8.06. Substitution of Bank. If (i) the obligation
of any Bank to make or maintain Euro-Dollar Loans has been suspended
pursuant to Section 8.02 or (ii) any Bank (or any Participant in its Loans)
has demanded compensation under Section 8.03 or is receiving increased
payments or indemnification payments under Section 8.04, the applicable
Borrower shall have the right to seek a bank or banks ("Substitute Banks"),
which may be one or more of the Banks or one or more other banks
satisfactory to the Agent, to purchase the Notes of such Bank (the
"Affected Bank") and, if such Borrower locates a Substitute Bank, the
Affected Bank shall, upon payment to it of the purchase price agreed
between it and the Substitute Bank (or, failing such agreement, a purchase
price in the amount of the outstanding principal amount of its Loans and
accrued interest thereon to the date of payment) plus any amount (other
than principal and interest) then due to it or accrued for its account
hereunder, assign all its rights and obligations under this Agreement and
the Notes to the Substitute Bank, and the Substitute Bank shall assume such
rights and obligations, whereupon the Substitute Bank shall be a Bank party
to this Agreement and shall have all the rights and obligations of a Bank.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, telecopy or similar writing) and shall be given to such party:
(x) in the case of the Borrowers or the Agent, at its address or telex or
telecopy number set forth on the signature pages hereof, (y) in the case of
any Bank, at its address or telex or telecopy number set forth in its
Administrative Questionnaire or (z) in the case of any party, at such other
address or telecopy or telex number as such party may hereafter specify for
the purpose by notice to the Agent and the Borrowers. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in or pursuant to this
Section and the appropriate answer back is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered at the address specified in or pursuant to this Section;
provided that notices to the Agent under Article II or Article VIII shall not
be effective until received.
Section 9.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or under
any other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses of the
Agent, including fees and disbursements of Cravath, Swaine & Moore, special
counsel for the Agent, in connection with the preparation of this Agreement
and the other Loan Documents, any waiver or consent hereunder or thereunder
or any amendment hereof or thereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable out-of-
pocket expenses incurred by the Agent and any Bank, including fees and
disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy and other enforcement proceedings resulting
therefrom.
(b) The Borrowers agree to indemnify the Agent and each Bank and
hold the Agent and each Bank harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including,
without limitation, the reasonable fees and disbursements of counsel and
settlement costs, which may be incurred by any Bank (or by the Agent) in
connection with any investigative, administrative or judicial proceeding
(whether or not the Agent or such Bank shall be designated a party thereto)
relating to or arising out of any Loan Document or any actual or proposed use
of proceeds of Loans hereunder; provided that neither the Agent nor any Bank
shall have the right to be indemnified hereunder for its own gross negligence
or willful misconduct as determined by a court of competent jurisdiction.
(c) The provisions of this Section 9.03 shall remain in effect
and survive regardless of any termination of this Agreement or the
repayment of the Obligations.
Section 9.04. Sharing of Set-offs. Each Bank agrees that
if it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount of
principal and interest due with respect to any Note held by it evidencing
Loans of a Class which is greater than the proportion received by any other
Bank in respect of the aggregate amount of principal and interest due with
respect to any Note held by such other Bank evidencing Loans of such Class,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes evidencing Loans of such Class held by the
other Banks, and such other adjustments shall be made, as may be required
so that all such payments of claims in respect of principal and interest
with respect to the Notes held by the Banks evidencing Loans of such Class
shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of a Borrower other than its
indebtedness under the Loan Documents. Each Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that any
holder of a participation in a Note evidencing its Loans of a Class,
whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a
direct creditor of such Borrower in the amount of such participation.
Section 9.05. Amendments and Waivers. Any provision of
this Agreement or any other Loan Document may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed or otherwise
approved in writing by the Borrowers and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided
that no such amendment or waiver shall (i) increase the Commitment of any
Bank or subject any Bank to any additional obligation without the consent
of such Bank, (ii) reduce the principal of or rate of interest on any Loan
or any fees hereunder without the consent of each Bank affected thereby,
(iii) postpone the date fixed for any payment of principal of any Loan
under Section 2.08(a) or (b) or for any payment of interest on any Loan or
any fees hereunder or for any reduction or termination of any Commitment
without the consent of each Bank affected thereby, (iv) permit the release
of any Guarantor from its Guarantee under the Guarantee Agreement without
the consent of each Bank, (v) postpone the date fixed for any payment of
principal of any Loan under Section 2.08(c) or (d) without the consent of
Banks with Loans and unused Commitments representing at least 70% of the
sum of the aggregate principal amount of Loans outstanding and unused
Commitments at such time, or (vi) change the percentage of the Commitments,
the percentage of the aggregate unpaid principal amount of the Notes or the
number of Banks which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement
without the consent of each Bank.
Section 9.06. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Borrowers may not assign or otherwise transfer any of their respective
rights under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all
of its Commitment or its Loans. In the event of any such grant by a Bank
of a participating interest to a Participant, whether or not upon notice to
the Borrowers and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrowers and the Agent
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver described in clause (i), (ii), (iii),
(iv) or (vi) (but, in the case of clause (vi), only to the extent such
modification, amendment or waiver would affect any requirement of approval
by all Banks of the matters referred to in such clauses (i), (ii), (iii) or
(iv)) of Section 9.05 without the consent of the Participant. The
Borrowers agree that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII and
Section 2.11 with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall
be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this sub
section (b).
(c) Any Bank may at any time assign to one or more banks or other
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement and the Notes of
either Class, and such Assignee shall assume such rights and obligations,
pursuant to an instrument executed by such Assignee and such transferor Bank,
with (and subject to) the subscribed consent of the Borrowers and of the Agent
(such consents not to be unreasonably withheld); provided that such consents
shall not be required for an assignment to an Assignee that is, before giving
effect to such assignment, a Bank or is an existing lender under any other
credit facility for The Limited or any Wholly-Owned Subsidiary thereof, or an
affiliate of any such Bank or lender; provided further, that (i) unless
otherwise agreed by the Borrowers and the Agent, each such assignment shall be
in a minimum amount of $5,000,000 or, if less, all the remaining rights and
obligations of the transferor Bank, and (ii) any such assignment of rights and
obligations in respect of any Class of Loans or Commitments shall be made
ratably with respect to all rights and obligations of the transferor Bank in
respect of both Classes. Upon execution and delivery of such an instrument,
payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, delivery
to the Agent of an executed copy of such instrument and payment to the Agent
by the Assignee of a processing fee of $2,500, then such Assignee shall be
a Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by
any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrowers shall make appropriate arrangements so that, if required, a new
Note or Notes are issued to the Assignee, at the Borrowers' expense. If
the Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall, on or prior to the date on which it
becomes a Bank party to this Agreement, deliver to the Borrowers and the
Agent certification as to exemption from deduction or withholding of any
United States federal income taxes in accordance with Section 8.04(d).
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrowers' prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
Section 9.07. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
Section 9.08. Waiver of Trial by Jury. Each of the parties
hereto irrevocably waives any and all rights to trial by jury in any legal
proceeding arising out of or relating to this Agreement or any other Loan
Document or the transactions contemplated hereby.
Section 9.09. New York Law. THIS AGREEMENT AND EACH NOTE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK.
Section 9.10. Counterparts; Integration. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement and the other Loan Documents
constitute the entire agreement and understanding among the parties hereto
and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
Section 9.11. Several Obligations. The Obligations of the
respective Borrowers hereunder and under the Notes to pay the principal of
and interest on their respective Loans are several and not joint; provided
that the foregoing shall not be construed to release or otherwise impair
either Borrower's obligations as a Guarantor under the Guarantee Agreement.
All other monetary obligations of the Borrowers hereunder and under the
Loan Documents are joint and several.
Section 9.12. Interest Rate Limitation. Notwithstanding
anything herein or in the Notes to the contrary, if at any time the
applicable interest rate, together with all fees and charges which are
treated as interest under applicable law (collectively the "Charges"), as
provided for herein or in any other Loan Document, or otherwise contracted
for, charged, received, taken or reserved by any Bank, shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by such Bank in accordance with
applicable law, the rate of interest payable under the Note or Notes held
by such Bank, together with all Charges payable to such Bank, shall be
limited to the Maximum Rate.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
ABERCROMBIE & FITCH STORES, INC.
by _________________________________
Name:
Title:
Address: 3 Limited Parkway
Columbus, OH 43230
Telecopy number: 614-479-7060
A & F TRADEMARK, INC.,
by _________________________________
Name:
Title:
Address: 3 Limited Parkway
Columbus, OH 43230
Telecopy number: 614-479-7060
THE CHASE MANHATTAN BANK, N.A.,
individually and as Administrative Agent,
by _________________________________
Name:
Title:
Address: c/o Chemical Bank
Grand Central Tower
140 East 45th Street
New York, NY 10017-3162
Telecopy number: 212-622-0002
CITIBANK, N.A.,
by _________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by _________________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Commitments
-----------
A & F Trademark Co.
Bank Term Commitment Term Commitment
- ------------------------------------ ---------------- ----------------
<S> <C> <C>
The Chase Manhattan Bank, N.A. $48,000,000 $2,000,000
Citibank, N.A. $48,000,000 $2,000,000
Morgan Guaranty Trust Company of New $48,000,000 $2,000,000
York ---------------- ---------------
$144,000,000 $6,000,000
</TABLE> ================ ===============
<PAGE>
Schedule 5.16
Existing Liens
None.
EXHIBIT A
TERM NOTE
New York, New York
[Effective Date]
For value received, [A & F TRADEMARK, INC.], a Delaware
corporation (the "Borrower"), promises to pay to the order of [THE CHASE
MANHATTAN BANK, N.A.] (the "Bank"), for the account of its Applicable Lending
Office, on the Maturity Date, the aggregate unpaid principal amount of [A & F
Trademark Co.] Term Loans of the Bank. The Borrower also promises to pay
interest on the unpaid principal amount of each such [A & F Trademark Co.]
Term Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of The Chase Manhattan Bank, N.A., New York, New York.
All [A & F Trademark Co.] Term Loans made by the Bank and all
repayments of the principal of any such [A & F Trademark Co.] Term Loans,
shall be recorded by the Bank and, prior to any transfer hereof,
appropriate notations to evidence the foregoing information with respect to
each such [A & F Trademark Co.] Term Loan then outstanding shall be
endorsed by the Bank on the schedule attached hereto, or on Pa continuation
of such schedule attached to and made a part hereof; provided that the
failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under any of the other
Loan Documents.
This note is one of the Notes referred to in the Credit
Agreement dated as of June 28, 1996, among the Borrower, [ABERCROMBIE & FITCH
STORES, INC.], the banks listed on the signature pages thereof and The Chase
Manhattan Bank, N.A., as Administrative Agent (as the same may be amended from
time to time, the "Credit Agreement"). Terms defined in the Credit Agreement
are used herein with the same meanings. Reference is made to the Credit
Agreement for provisions for the mandatory and optional prepayment hereof and
the acceleration of the maturity hereof.
[A & F TRADEMARK, INC.
by ____________________
Name:
Title:
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<S> <C> <C> <C> <C> <C>
Unpaid
Type Amount Amount of Principal Notations
Date of Loan of Loan Principal Repaid Balance Made by
- ---- ------- ------- ---------------- --------- ----------
</TABLE>
EXHIBIT B
GUARANTEE AGREEMENT dated as of [ ], 1996, among
ABERCROMBIE & FITCH HOLDING CORPORATION, a Delaware corporation
("Holdings"), ABERCROMBIE & FITCH STORES,INC., a Delaware
corporation ("A&F"), A&F TRADEMARK, INC. ("Trademark Co."
and, together with Holdings, A&F and any other entities that
became parties hereto as contemplated by Section 15 hereof,
referred to herein individually as a "Guarantor" and
collectively as the "Guarantors"), and THE CHASE MANHATTAN
BANK, N.A., as administrative agent (the "Agent") for the banks
(the"Banks") party to the Credit Agreement dated as of June 28,
1996 (as amended from time to time, the "Credit Agree
ment"), among A&F,Trademark Co., the Banks and the Agent.
The Banks have respectively agreed to make loans to A&F and
Trademark Co. The obligations of the Banks to lend under the Credit Agreement
are conditioned on, among other things, the execution and delivery by the
Guarantors of a guarantee agreement in the form hereof. The Guarantors
acknowledge that they will derive substantial benefits from the extension of
credit to A&F and Trademark Co. under the Credit Agreement. As consideration
therefor and in order to induce the Banks to make the Loans (such term and the
other capitalized terms used herein and not otherwise defined herein having
the meanings assigned to them in the Credit Agreement), the Guarantors are
willing to execute and deliver this Agreement. Accordingly, the parties
hereto agree as follows:
SECTION 1. Each of the Guarantors unconditionally guarantees,
jointly with the other Guarantors and severally,as a primary obligor and not
merely as a surety, (a) the due and punctual payment by each Borrower (other
than itself) of (i) the principal of and interest on the Loans, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and (ii) all other monetary obligations of each
Borrower (other than itself) to the Banks and the Agent under the Credit
Agreement and the other Loan Documents to which such Borrower is or is to be a
party and (b) the due and punctual performance of all other obligations of
each Borrower (other than itself) under the Credit Agreement and the other
Loan Documents (all the foregoing obligations being collectively called the
"Obligations"). Each of the Guarantors further agrees that the Obligations
may be extended or renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation.
SECTION 2. Each of the Guarantors waives presentment to,
demand of payment from and protest to the Borrowers of any of the Obligations,
and also waives notice of acceptance of its guarantee and notice of protest
for nonpayment. The obligations of each Guarantor hereunder shall not be
affected by (a) the failure of the Agent or any Bank to assert any claim or
demand or to enforce any right or remedy against either Borrower under the
provisions of any Loan Document or otherwise; (b) any rescission,
waiver,amendment or modification of, or any release from any of the terms or
provisions of, any Loan Document, any guarantee or any other agreement,
including with respect to any other Guarantor under this Agreement; (c) the
release of any security held by the Agent or any Bank for the Obligations or
any of them; or (d) the failure of the Agent or any Bank to exercise any right
or remedy against any other Guarantor or guarantor of the Obligations.
SECTION 3. Each of the Guarantors further agrees that its
guarantee hereunder constitutes a guarantee of payment when due and not of
collection, and waives any right to require that resort be had by the Agent or
any Bank to any security held for payment of the Obligations or to any balance
of any deposit account or credit on the books of the Agent or any Bank in
favor of either Borrower or any other person.
SECTION 4. The obligations of each Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or termination for any
reason, including, without limitation, any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of each
Guarantor hereunder shall not be discharged or impaired or otherwise affected
by the failure of the Agent or any Bank to assert any claim or demand or to
enforce any remedy under any Loan Document, any guarantee or any other
agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might in any manner
or to any extent vary the risk of any Guarantor or otherwise operate as a
discharge of either Borrower or any Guarantor as a matter of law or equity
(other than the indefeasible payment in full of all the Obligations).
SECTION 5. Each of the Guarantors further agrees that its
guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any Obligation is rescinded or
must otherwise be restored by the Agent or any Bank upon the bankruptcy or
reorganization of either Borrower, any other Guarantor or otherwise.
SECTION 6. In furtherance of the foregoing and not in
limitation of any other right which the Agent or any Bank has at law or in
equity against any Guarantor by virtue hereof, upon the failure of either
Borrower to pay any Obligation when and as the same shall become due, whether
at maturity, by acceleration, after notice of prepayment or otherwise, each of
the Guarantors hereby promises to and will, upon receipt of written demand by
the Agent, forthwith pay, or cause to be paid, to the Agent for distribution
to the Banks, if and as appropriate, in cash the amount of such unpaid
Obligation. Notwithstanding any payment or payments made by a Guarantor
hereunder or any setoff or application of funds of a Guarantor by the Agent or
any Bank, no Guarantor shall be entitled to be subrogated to any of the
rights of the Agent or any Bank against either Borrower or any collateral
security or guarantee or right of offset held for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from either Borrower in respect of payments
made by such Guarantor hereunder, until all amounts owing to the Agent or
any Bank by each Borrower on account of the Obligations are paid in full
and the Commitments are terminated. If any amount shall erroneously be
paid to any Guarantor on account of such subrogation, contribution,
reimbursement, indemnity and similar rights, such amount shall be held in
trust for the benefit of the Banks and shall forthwith be paid to the Agent
to be credited and applied to the payment of the Obligations. Any term or
provision of this Agreement to the contrary notwithstanding, the maximum
aggregate amount of the Obligations guaranteed hereunder by any Guarantor
shall not exceed the maximum amount that can be hereby guaranteed by that
Guarantor without rendering this Agreement, as it relates to such
Guarantor, voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer or similar laws affecting the rights of creditors
generally.
SECTION 7. Each of the Guarantors represents and warrants that
(a) it is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, (b) the execution,
delivery and performance by it of this Agreement are within its corporate
powers, have been duly authorized by all necessary corporate and (if
necessary) stockholder action, and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of its certificate of
incorporation or By-Laws or any material agreement or instrument binding upon
it, and (c) this Agreement constitutes a valid and binding agreement of such
Guarantor, enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability.
SECTION 8. The guarantees made hereunder shall survive and be
in full force and effect so long as any Obligation is outstanding and has not
been indefeasibly paid, and shall be reinstated to the extent provided in
Section 5.
SECTION 9. This Agreement and the terms, covenants and
conditions hereof shall be binding upon each Guarantor and its successors and
shall inure to the benefit of the Agent and the Banks and their respective
successors and assigns. None of the Guarantors shall be permitted to assign
or transfer any of its rights or obligations under this Agreement, except as
expressly contemplated by this Agreement.
SECTION 10. No failure on the part of the Agent to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy by the Agent or any Bank preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder and under the other Loan Documents are cumulative and are
not exclusive of any other remedies provided by law. Except as provided in
the Credit Agreement, none of the Agent or the Banks shall be deemed to have
waived any rights hereunder or under any other agreement or instrument unless
such waiver shall be in writing and signed by such parties.
SECTION 11. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. All communications and notices hereunder shall be
in writing and given as provided in Section 9.01 of the Credit Agreement;
provided that any communication or notice hereunder to any Guarantor that is
not a Borrower shall be given to it in care of A&F at the address or telecopy
or telex number specified in the Credit Agreement.
SECTION 13. In case any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable
in any respect with respect to any Guarantor, no party hereto shall be
required to comply with such provision with respect to such Guarantor for so
long as such provision is held to be invalid, illegal or unenforceable and the
validity, legality and enforceability of the remaining provisions contained
herein, and of such provision with respect to any other Guarantor, shall not
in any way be affected or impaired. The parties shall endeavor in good-faith
negotiations to replace any invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which come as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 14. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument; provided that this
Agreement shall be construed as a separate agreement with respect to each
Guarantor and may be amended, modified, supplemented, waived or released with
respect to any Guarantor without the approval of any other Guarantor and
without affecting the obligations of any other Guarantor hereunder. This
Agreement shall be effective with respect to any Guarantor when a counterpart
which bears the signature of such Guarantor shall have been delivered to the
Agent.
SECTION 15. Upon execution and delivery by the Agent and a
member of the Borrower Group of an instrument in the form of Annex 1 attached
hereto, such member of the Borrower Group shall become a Guarantor hereunder
with the same force and effect as if originally named as a Guarantor herein.
The execution and delivery of any such instrument shall not require the
consent of any Guarantor hereunder. The rights and obligations of each
Guarantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ABERCROMBIE & FITCH
HOLDING CORPORATION
by ____________________
Name:
Title:
ABERCROMBIE & FITCH STORES, INC.
by ____________________
Name:
Title:
THE CHASE MANHATTAN BANK, N.A., as
Administrative Agent
by ____________________
Name:
Title:
ANNEX 1 to the
Guarantee Agreement
SUPPLEMENT NO. dated as of , to the
GUARANTEE AGREEMENT dated as of [ ], 1996, among ABERCROMBIE
& FITCH HOLDING CORPORATION, a Delaware corporation
("Holdings"), ABERCROMBIE & FITCH STORES,INC., a Delaware
corporation ("A&F"), A&F TRADEMARK, INC. ("Trademark Co." and,
together with Holdings, A&F and any other entities that became
parties thereto as contemplated by Section 15 thereof, referred
to herein individually as a "Guarantor" and collectively as the
"Guarantors"), and THE CHASE MANHATTAN BANK, N.A., as
administrative agent (the "Agent") for the banks (the"Banks")
party to the Credit Agreement dated as of June 28, 1996 (as
amended from time to time, the "Credit Agree
ment"), among A&F, Trademark Co., the Banks and the Agent.
The Guarantors have entered into the Guarantee Agreement in
order to induce the Banks to make loans to the Borrowers (such term and other
capitalized terms used herein and not otherwise defined herein having the
meanings assigned to such terms in the Guarantee Agreement and the Credit
Agreement). Section 15 of the Guarantee Agreement provides that members of
the Borrower Group may become Guarantors under the Guarantee Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned member of the Borrower Group (the "New Guarantor") is executing
this Supplement to become a Guarantor under the Guarantee Agreement. As a
member of the Borrower Group, the New Guarantor acknowledges that it derives
substantial benefits from the extension of credit to the Borrowers under the
Credit Agreement.
Accordingly, the Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 15 of the Guarantee
Agreement, the New Guarantor by its signature below becomes a Guarantor under
the Guarantee Agreement with the same force and effect as if originally named
therein as a Guarantor and the New Guarantor hereby agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Guarantee Agreement shall
be deemed to include the New Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and equitable principles of
general applicability.
SECTION 3. This Supplement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall become
effective when the Agent shall have received a counterpart of this Supplement
that bears the signature of the New Guarantor.
SECTION 4. Except as expressly supplemented hereby, the
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such provision for
so long as such provision is held to be invalid, illegal or unenforceable and
the validity, legality and enforceability of the remaining provisions
contained herein and in the Guarantee Agreement, and of any such provision
with respect to any other Guarantor, shall not in any way be affected or
impaired. The parties shall endeavor in good faith negotiations to replace
any invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall
be in writing and given as provided in Section 12 of the Guarantee
Agreement. All communications and notices hereunder to the New Guarantor
shall be given to it at the address set forth under its signature below.
SECTION 8. The New Guarantor agrees to reimburse the Agent
for its out-of-pocket expenses in connection with this Supplement,
including the fees, disbursements and other charges of counsel for the
Agent.
IN WITNESS WHEREOF, the New Guarantor and the Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year
first above written.
[NAME OF NEW GUARANTOR],
by ____________________
Name:
Title:
[Address]
THE CHASE MANHATTAN BANK, N.A.,
as Administrative Agent
by ____________________
Name:
Title:
EXHIBIT C
SUBORDINATION AGREEMENT dated as of [ ], 1996, among THE
LIMITED, INC., a Delaware corporation ("TLI"), ABERCROMBIE &
FITCH HOLDING CORPORATION, a Delaware corporation ("Holdings"),
ABERCROMBIE & FITCH STORES, INC., a Delaware corporation ("A &
F"), A & F TRADEMARK, INC., a Delaware corporation ("Trademark
Co.") and THE CHASE MANHATTAN BANK, N.A., as Administrative
Agent (the "Agent") for the banks (the "Banks") party to the
Credit Agreement dated as of June 28, 1996 (as amended from
time to time, the "Credit Agreement"), among A & F, Trademark
Co., the Banks and the Agent.
The Banks have respectively agreed to make loans to A & F and
Trademark Co. The obligations of the Banks to lend under the Credit Agreement
are conditioned on, among other things, the execution and delivery by TLI,
Holdings, A & F, Trademark Co. and the Agent of a subordination agreement in
the form hereof. In order to induce the Banks to make Loans, each of TLI,
Holdings, A & F and Trademark Co. is willing to execute and deliver this
Agreement. Accordingly, TLI, Holdings, A & F, Trademark Co. and the Agent
hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used herein but not defined herein shall have
the meanings set forth in the Credit Agreement. In addition to the terms
defined elsewhere in this Agreement or in the Credit Agreement, as used herein
the following terms shall have the following meanings:
"Restricted Subsidiaries" means each member of the Borrower
Group and their respective successors.
"Senior Creditors" means each of the Banks, the Agent and their
respective successors and assigns.
"Senior Obligations" means all monetary obligations of each
Borrower and Guarantor under the Loan Documents, including the payment of
(i) principal of and interest (including interest accruing after the
commencement of any proceeding under any bankruptcy, insolvency,
receivership or similar law, regardless of whether a claim therefor is
allowable in such proceeding) on indebtedness under the Credit Agreement,
including any amendments, modifications, deferrals, renewals, extensions or
increases of any such indebtedness, and (ii) all fees, indemnities, expense
reimbursement obligations and other amounts payable under any Loan
Document.
ARTICLE II
SUBORDINATION
SECTION 2.1. Subordination. TLI hereby agrees on behalf of
itself and its subsidiaries that all the Subordinated Obligations of each
Restricted Subsidiary are hereby expressly subordinated, to the extent and in
the manner set forth in this Article II, to the prior payment in full in cash
of all Senior Obligations of such Restricted Subsidiary in accordance with the
terms thereof.
SECTION 2.2. Dissolution or Insolvency. Upon any distribution
of the assets of any Restricted Subsidiary or upon any dissolution, winding
up, liquidation or reorganization of any Restricted Subsidiary, whether in
bankruptcy, insolvency, reorganization, arrangement or receivership
proceedings or otherwise, or upon any assignment for the benefit of creditors
or any other marshaling of the assets and liabilities of any Restricted
Subsidiary, or otherwise:
(a) the Senior Creditors of such Restricted Subsidiary shall
first be entitled to receive payment in full in cash of the Senior Obligations
of such Restricted Subsidiary in accordance with the terms of such Senior
Obligations before TLI or any subsidiary of TLI shall be entitled to receive
any payment on account of the Subordinated Obligations of such Restricted
Subsidiary, whether as principal, interest or otherwise; and
(b) any payment by, or distribution of the assets of, such
Restricted Subsidiary of any kind or character, whether in cash, property or
securities, to which TLI or any subsidiary of TLI would be entitled except for
the provisions of this Agreement shall be paid or delivered by the person
making such payment or distribution (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly to the
Senior Creditors of such Restricted Subsidiary to the extent necessary to make
payment in full in cash of all Senior Obligations of such Restricted
Subsidiary remaining unpaid, after giving effect to any concurrent payment or
distribution to such Senior Creditors in respect of Senior Obligations of such
Restricted Subsidiary.
SECTION 2.3. Payment of Primary Subordinated Obligations
Prohibited. (a) No payment (whether directly, by exercise of any right of
set-off or otherwise) in respect of any Primary Subordinated Obligation of any
Restricted Subsidiary, whether as principal, interest or otherwise, shall be
permitted at any time until all Senior Obligations have been paid in full.
(b) No payment of any Primary Subordinated Obligation that is
prohibited by paragraph (a) above shall be received or accepted by or on
behalf of TLI or permitted by TLI to be received or accepted by or on behalf
of any of its subsidiaries.
(c) The provisions of this Section 2.3 shall not apply to the
payment of any Primary Subordinated Obligation of A & F on, or within five
Domestic Business Days after, the Effective Date with the proceeds of the A &
F Term Loans.
SECTION 2.4. Payment of Secondary Subordinated Obligations
Prohibited Upon Default. No payment (whether directly, by exercise of any
right of set-off or otherwise) in respect of the Secondary Subordinated
Obligations of any Restricted Subsidiary, whether as principal, interest or
otherwise, shall be permitted, and no such payment shall be received or
accepted by or on behalf of TLI or permitted by TLI to be received or accepted
by or on behalf of any of its subsidiaries, if prior to or after giving effect
to such payment, any Default shall have occurred and be continuing.
SECTION 2.5. Certain Payments Held in Trust. In the event
that any payment by, or distribution of the assets of, any Restricted
Subsidiary of any kind or character, whether in cash, property or securities,
and whether directly, by exercise of any right of set-off or otherwise, shall
be received by or on behalf of TLI or any subsidiary of TLI at a time when
such payment is prohibited by this Agreement, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over to, (a) the
Senior Creditors of such Restricted Subsidiary to the extent necessary to make
payment in full in cash of all Senior Obligations of such Restricted
Subsidiary remaining unpaid, after giving effect to any concurrent payment or
distribution to such Senior Creditors in respect of such Senior Obligations
or (b) in the case of any payment prohibited under Section 2.3 or 2.4
hereof, the Restricted Subsidiary from which such payment was received or,
if directed by the Senior Creditors of such Restricted Subsidiary, to such
Senior Creditors to be applied to pay any Senior Obligations then due or to
be held as collateral security therefor.
SECTION 2.6. Subrogation. Subject to the prior indefeasible
payment in full in cash of the Senior Obligations of a Restricted Subsidiary,
TLI and its subsidiaries, as applicable, shall be subrogated to the rights of
the Senior Creditors of such Restricted Subsidiary to receive payments or
distributions in cash, property or securities of such Restricted Subsidiary
applicable to such Senior Obligations until all amounts owing on the
Subordinated Obligations of such Restricted Subsidiary shall be paid in full,
and as between and among a Restricted Subsidiary, its creditors (other than
its Senior Creditors) and TLI and its subsidiaries, no such payment or
distribution made to the Senior Creditors of such Restricted Subsidiary by
virtue of this Agreement that otherwise would have been made to TLI or any
subsidiary of TLI shall be deemed to be a payment by such Restricted Subsidiary
on account of its Subordinated Obligations, it being understood that the
provisions of this Section 2.6 are intended solely for the purpose of defining
the relative rights of TLI and its subsidiaries, on the one hand, and the
Senior Creditors, on the other hand.
ARTICLE III
OTHER MATTERS REGARDING THE SUBORDINATED OBLIGATIONS
SECTION 3.1. Other Creditors. Nothing contained in this
Agreement is intended to or shall impair, as between and among the
Restricted Subsidiaries, their creditors (other than their Senior
Creditors) and TLI and its subsidiaries, the obligations of each
Restricted Subsidiary to pay to TLI and its subsidiaries the Subordinated
Obligations of such Restricted Subsidiary as and when the same shall become
due and payable in accordance with the terms thereof, or affect the
relative rights of TLI and its subsidiaries and the creditors of the
Restricted Subsidiaries (other than their Senior Creditors).
SECTION 3.2. Proofs of Claims. In the event of any
dissolution, winding up, liquidation or reorganization of any Restricted
Subsidiary, whether in bankruptcy, insolvency, reorganization, arrangement
or receivership proceedings or otherwise, or any assignment for the benefit
of creditors or any other marshaling of the assets and liabilities of any
Restricted Subsidiary, TLI agrees to file proofs of claim for the
Subordinated Obligations upon demand of the Agent, in default of which the
Agent or other authorized representative of the Senior Creditors is hereby
irrevocably authorized so to file in order to effectuate the provisions
hereof.
SECTION 3.3. No Waiver. No right of any Senior Creditor to
enforce this Agreement shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of any of the Agent, the
other Senior Creditors, or any Restricted Subsidiary, or by any noncompliance
by any Restricted Subsidiary with the terms, provisions and covenants
contained herein, and the Senior Creditors are hereby expressly authorized to
extend, renew, increase, decrease, modify or amend the terms of the Senior
Obligations or any security therefor, and to release, sell or exchange any
such security and otherwise deal freely with the Restricted Subsidiaries, all
without notice to or consent of TLI or any of its subsidiaries and without
affecting the liabilities and obligations of the parties hereto.
SECTION 3.4. Acceleration and Remedies; Bankruptcy
Filings. TLI agrees that, except for claims submitted in any proceeding
contemplated by Section 2.2 hereof, it will not, and will not permit any of
its subsidiaries to, exercise any remedies or take any action or proceeding
to enforce any Subordinated Obligation if the payment of such Subordinated
Obligation is then prohibited by Section 2.3 or 2.4, and TLI further agrees
not to join, or to permit any of its subsidiaries to join, with any other
creditors of any Restricted Subsidiary in filing any petition commencing
any bankruptcy, insolvency, reorganization, arrangement or receivership
proceeding or any assignment for the benefit of creditors against or in
respect of any Restricted Subsidiary or any other marshaling of the assets
and liabilities of any Restricted Subsidiary. TLI further agrees, to the
fullest extent permitted under applicable law, that it will not cause or
permit any Restricted Subsidiary to file any such petition, commence any
such proceeding or make any such assignment referred to above until all
Senior Obligations have been paid in full.
SECTION 3.5. Transfer of Subordinated Obligations. TLI will
not, and will not permit any of its subsidiaries to, sell, assign, transfer or
otherwise dispose of all or any part of the Subordinated Obligations, or sell,
assign, transfer or otherwise dispose of any subsidiary that has or may have
any claim constituting a Subordinated Obligation, unless the Person to whom
such sale, assignment, transfer or disposition is made (i) is TLI or a
subsidiary of TLI or (ii) shall acknowledge in writing (delivered to the
Agent) that it shall be bound by the terms of this Agreement, including the
terms of this Section 3.5, as though named herein as a successor to TLI.
SECTION 3.6. Obligations Hereunder Not Affected. (a) All
rights and interests of the Senior Creditors hereunder, and all agreements and
obligations of TLI hereunder, shall remain in full force and effect
irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement or any other Loan Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any
other amendment or waiver of or consent to departure from the Credit
Agreement or any other Loan Document (other than this Agreement);
(iii) any exchange, release or nonperfection of any security
interest in any collateral, or any release or amendment or waiver of
or consent to departure from any guarantee, in respect of all or any
of the Senior Obligations; or
(iv) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Restricted Subsidiary
in respect of its Senior Obligations or of TLI in respect of this
Agreement.
(b) This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of the Senior
Obligations or any part thereof is rescinded or must otherwise be returned by
any Senior Creditor upon the insolvency, bankruptcy or reorganization of any
Restricted Subsidiary or otherwise, all as though such payment had not been
made.
(c) TLI hereby authorizes the Senior Creditors, without notice
or demand and without affecting or impairing any of the obligations of TLI
hereunder, from time to time to (i) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise change
the terms of, the Senior Obligations or any part thereof and (ii) exercise or
refrain from exercising any rights against TLI, any subsidiary of TLI, any
Restricted Subsidiary or any other Person.
ARTICLE IV
CERTAIN AGREEMENTS OF TLI
TLI agrees, for the benefit of the Banks, that it will not
cause or permit either Borrower to fail to observe or perform any of its
covenants contained in Sections 5.09 and 5.16 of the Credit Agreement;
provided that TLI shall not be responsible for a failure to observe or perform
the covenants contained in Section 5.16 of the Credit Agreement to the extent
such failure is attributable to any of the following:
(a) mechanics', workers', materialmen's, warehousemen's, landlords'
or other like Liens that arise by operation of law;
(b) Liens obtained by judgment creditors without the consent of the
Borrowers (unless such judgment relates to Debt incurred by a Borrower in
violation of Section 5.09 of the Credit Agreement); or
(c) other Liens that arise by operation of law without the consent
of the Borrowers (unless such Liens arise as a result of a failure by TLI and
its subsidiaries to pay income or franchise taxes or to comply with ERISA).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TLI
TLI represents and warrants to the Agent, for the benefit of
the Senior Creditors, that:
(a) TLI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by TLI of this
Agreement and the consummation of the transactions contemplated hereby are
within its corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Governmental Authority (other than such as have been duly taken or made) and
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or by-laws of TLI or
any of its subsidiaries or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon TLI or any of its subsidiaries.
(c) This Agreement constitutes a valid and binding agreement
of TLI, enforceable against TLI and its subsidiaries in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and equitable principles of general
applicability.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Notices. All communications and notices
hereunder shall be in writing and shall be given as provided in Section 9.01
of the Credit Agreement; provided that any communication or notice hereunder
to TLI shall be given to it at the address or telecopy or telex number set
forth under its signature on the signature pages hereof.
SECTION 6.2. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All
representations, warranties, covenants, promises and agreements by or on
behalf of TLI that are contained in this Agreement shall bind its successors
and assigns and inure to the benefit of the Senior Creditors and the
successors and assigns of the Senior Creditors. TLI shall not assign or
delegate any of its obligations under this Agreement without the prior written
consent of the Agent, and any attempted assignment or delegation without such
consent shall be void and of no effect.
SECTION 6.3. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.4. Waivers; Amendment. No failure or delay of any
Senior Creditor in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power by any Senior Creditor preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Senior Creditors hereunder and under the other documents and instruments
creating or securing their respective Senior Obligations are cumulative and
are not exclusive of any other rights or remedies provided by law. Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by TLI,
the Restricted Subsidiaries and the Agent.
SECTION 6.5. Waiver of Jury Trial. Each party hereto
irrevocably waives any and all rights it may have to a trial by jury in any
legal proceeding arising out of or relating to this Agreement.
SECTION 6.6. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace any invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 6.7. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all
of which, when taken together, shall constitute but one instrument.
SECTION 6.8. Headings. Article and Section headings used
herein are for convenience of reference only, are not part of this Agreement
and are not to affect the construction of, or to be taken into consideration
in interpreting, this Agreement.
SECTION 6.9. Subsidiaries of TLI. References herein to
subsidiaries of TLI shall not be deemed to include any Borrower or Guarantor.
SECTION 6.10. Termination. Subject to Section 3.6(b), this
Agreement shall terminate upon payment in full of the Senior Obligations.
IN WITNESS WHEREOF, TLI, Holdings, A & F, Trademark Co. and the
Agent have caused this Agreement to be duly executed by their respective
authorized representatives as of the day and year first above written.
THE LIMITED, INC.,
by ____________________
Name:
Title:
ABERCROMBIE & FITCH
HOLDING CORPORATION
by ____________________
Name:
Title:
ABERCROMBIE & FITCH STORES, INC.
by ____________________
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.,
as Administrative Agent
by ____________________
Name:
Title:
EXHIBIT D-3
[Effective Date]
Abercrombie & Fitch Stores, Inc.
A & F Trademark, Inc.
Credit Agreement
Dear Sirs:
We have participated in the preparation of (i) the Credit
Agreement dated as of June 28, 1996 (the "Credit Agreement"), among
Abercrombie & Fitch Stores, Inc., a Delaware corporation ("A & F"), A & F
Trademark, Inc., a Delaware corporation ("Trademark Co."), the banks listed on
the signature pages thereof (the "Banks"), and The Chase Manhattan Bank, N.A.,
as Administrative Agent (the "Agent") and (ii) the Guarantee Agreement dated
as of June 28, 1996 (the "Guarantee Agreement"), among Abercrombie & Fitch
Holding Corporation, A & F, Trademark Co. (collectively, the "Guarantors") and
the Agent, and have acted as special counsel for the Agent for the purpose of
rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement.
Terms defined in the Credit Agreement and the Guarantee Agreement are used
herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Based upon the foregoing, we are of opinion that the Credit
Agreement constitutes a valid and binding agreement of each of A & F and
Trademark Co., the Guarantee Agreement constitutes a valid and binding
agreement of each Guarantor, and the Notes constitute valid and binding
obligations of A & F and Trademark Co., in each case enforceable against A &
F, Trademark Co. or the Guarantors, as the case may be, in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or
affecting creditor's rights generally from time to time in effect and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), regardless of
whether considered in a proceeding in equity or at law. With respect to the
foregoing opinion, (i) insofar as provisions contained in the Credit Agreement
provide for indemnification, the enforceability thereof may be limited by
public policy considerations, (ii) the availability of a decree for specific
performance or an injunction is subject to the discretion of the court
requested to issue any such decree or injunction and (iii) we express no
opinion as to the effect of the laws of any jurisdiction other than the State
of New York where any lender may be located or where enforcement of the Credit
Agreement may be sought that limits the rates of interest legally chargeable
or collectible.
In giving this opinion, we have assumed that (i) each of the
Borrowers and the Guarantors is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and (ii) the
execution and delivery, and the performance, by each of the Borrowers and the
Guarantors of each Loan Document to which it is a party are within its powers,
have been duly authorized by all necessary action on the part of such Borrower
or Guarantor and its respective stockholders, require no action by or in
respect of, or filing with, any Governmental Authority (other than such as
have been duly taken or made) and do not contravene, or constitute a default
under any provision of applicable law or regulation or of the certificate of
incorporation or By-Laws of such Borrower or Guarantor or of any judgment,
injunction, order or decree or any material agreement or other material
instrument binding upon such Borrower or Guarantor.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the Federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. This opinion is rendered solely to you in connection with
the above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other Person (other than an Assignee or
Participant) without our prior written consent.
Very truly yours,
To the Banks and the Agent
Referred to Herein
In care of The Chase Manhattan
Bank, N.A., as Agent
c/o Chemical Bank
Grand Central Tower
140 East 45th Street
New York, NY 10017-3162
OPINION OF [ ],
COUNSEL FOR THE BORROWERS
Effective Date
To the Banks, the Agent and the
Security Agent referred to below
c/o The Chase Manhattan Bank, N.A., as Agent
[Address]
Ladies and Gentlemen:
I am the [ ] of The Limited, Inc., a Delaware corporation ("The Limited"),
and have acted on behalf of The Limited and its subsidiaries in connection
with the Credit Agreement dated as of [ ] (the "Credit Agreement") among
Abercrombie & Fitch Stores, Inc., A&F Trademark, Inc., the banks listed on the
signature pages thereof (the "Banks") and The Chase Manhattan Bank, N.A., as
Agent (the "Agent"). Terms defined in the Credit Agreement are used herein as
therein defined.
I, or individuals under my direction, have examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and other instruments and
have conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Based upon the foregoing, and subject to the qualifications set forth below, I
am of the opinion that:
1. Each of Holdings, the Limited and the Borrowers (individually, a
"Company" and collectively, the "Companies") is a corporation duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and has all powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted or
proposed to be conducted [, except any such powers or governmental
licenses, authorizations, consents or approvals the absence of which
would not reasonably be expected to have a Material Adverse Effect].
2. The execution, delivery and performance by each of the Companies of
the Loan Documents to which it is a party [and the consummation of
the Transactions] are within its powers, have been duly authorized
by all necessary action on the part of such Company and its
stockholders, require no action by or in respect of, or filing with,
any Governmental Authority (other than such as have been duly taken
or made) and do not contravene, or constitute a default under, any
provision of applicable law or regulation of the State of Ohio or
the United States of America or of the certificate of incorporation
or By-laws of such Company or of any judgment, injunction, order or
decree or any material agreement or other material instrument
binding upon such Company or result in the creation or imposition of
any Lien on any asset of such Company, in each case both before and
after giving effect to the Transactions.
3. To the best of my knowledge, there is no injunction, stay, decree or
order of any Governmental Authority or any action, suit or
proceeding pending against, threatened against or affecting any of
the Companies before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility
of an adverse decision that would reasonably be expected to have a
Material Adverse Effect.
I am a member of the bar of the State of Ohio and the foregoing opinion is
limited to the laws of the State of Ohio, the Federal laws of the United
States of America and the General Corporation Law of the State of Delaware.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied
upon by any other person without my prior written consent.
Sincerely,
[Draft--6/26/96]
OPINION OF DAVIS POLK & WARDWELL
COUNSEL FOR THE BORROWERS
[ ], 1996
To the Banks, the Agent and the
Security Agent referred to below
c/o The Chase Manhattan Bank, N.A., as Agent
[Address]
Ladies and Gentlemen:
We have acted as special counsel for The Limited, Inc., a
Delaware corporation ("The Limited"), and its subsidiaries in connection
with the Credit Agreement dated as of May 19, 1995 (the "Credit Agreement")
among Abercrombie & Fitch Stores, Inc., A&F Trademark, Inc., the banks
listed on the signature pages thereof (the "Banks") and The Chase Manhattan
Bank, N.A., as Agent (the "Agent"). Terms defined in the Credit Agreement
are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Based upon the foregoing, and subject to the qualifications set
forth below, we are of the opinion that:
1. Each of the Loan Documents constitutes a valid and binding
agreement of each of the Borrowers that is a party thereto, in each case
enforceable in accordance with its terms, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and equitable principles of general applicability.
2. Neither Borrower is an "investment company", within the meaning
of the Investment Company Act of 1940, as amended.
The foregoing are subject to the following qualifications:
[(a) As to various provisions in the Documents that grant the
parties thereto certain rights to make determinations or take
actions in their discretion, we assume that such discretion will be
exercised in good faith and in a commercially reasonable manner.]
[(a) or (b)] We express no opinion as to the effect (if any) of
(i) any law of any jurisdiction (except the State of New York) in
which any Bank is located that may limit the rate of interest that
such Bank may charge or collect or (ii) the effect of Section 548 of
the United States Bankruptcy Code or any similar provisions of state
law.
(c) We have assumed that (i) each of the Borrowers is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization and (ii) the execution and
delivery, and the performance, by each of the Borrowers of each Loan
Document to which it is a party are within its powers, have been
duly authorized by all necessary action on the part of such Borrower
and its stockholders, require no action by or in respect of, or
filing with, any Governmental Authority (other than such as have been
duly taken or made) and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the
certificate of incorporation or By-laws of such Borrower or of any
judgment, injunction, order or decree or any material agreement or
other material instrument binding upon such Borrower.
We are members of the bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the Federal laws
of the United States of America.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
Exhibit 10.2
FORM OF
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is entered into as of
[______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation
("Abercrombie & Fitch"), and The Limited, Inc. a Delaware corporation ("The
Limited").
RECITALS
WHEREAS, Abercrombie & Fitch is issuing shares of Class A Common
Stock, $0.01 par value per share ("Class A Common Stock"), to the public in an
offering (the "Initial Public Offering") registered under the Securities Act
of 1933, as amended;
WHEREAS, The Limited beneficially owns all of the issued and
outstanding Abercrombie & Fitch Class B Common Stock, par value $0.01 per share
("Class B Common Stock");
WHEREAS, The Limited has heretofore directly or indirectly
provided certain administrative, financial, management and other services to
Abercrombie & Fitch or its Subsidiaries;
WHEREAS, on the terms and subject to the conditions set forth
herein, Abercrombie & Fitch desires to retain The Limited as an independent
contractor to provide, directly or indirectly, certain of those services to
Abercrombie & Fitch and its Subsidiaries (as defined below) after the Closing
Date (as defined below); and
WHEREAS, on the terms and subject to the conditions set forth
herein, The Limited desires to provide, directly or indirectly, such services
to Abercrombie & Fitch and its Subsidiaries.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, The Limited and Abercrombie
& Fitch, for themselves, their successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the
following terms will have the following meanings, applicable both to the
singular and the plural forms of the terms described:
"Abercrombie & Fitch" has the meaning ascribed thereto in the
preamble hereto.
"Abercrombie & Fitch Entities" means Abercrombie & Fitch and its
Subsidiaries and "Abercrombie & Fitch Entity" shall mean any of the
Abercrombie & Fitch Entities.
"Abercrombie & Fitch Indemnified Person" has the meaning ascribed
thereto in Section 4.05.
"Actions" has the meaning ascribed thereto in Section 4.04.
"Agreement" has the meaning ascribed thereto in the preamble hereto,
as such agreement may be amended and supplemented from time to time in
accordance with its terms.
"Associate Discount Program" means the program which allows the
associates of The Limited and Abercrombie & Fitch to purchase items at agreed
upon discount rates at each of the Subsidiaries of The Limited and Abercrombie
& Fitch.
"Benefit Billing" has the meaning ascribed thereto in Section 3.01.
"Benefits Services" has the meaning ascribed thereto in Section 3.05.
"Change Notice" has the meaning ascribed thereto in Section 3.07.
"Class A Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.
"Class B Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.
"Closing Date" means the date of the closing of the initial sale of
Class A Common Stock in the Initial Public Offering.
"Common Stock" means the Class B Common Stock, the Class A Common
Stock and any other class of Abercrombie & Fitch capital stock representing
the right to vote generally for the election of directors.
"Customary Billing" has the meaning ascribed thereto in Section 3.01.
"Employee Welfare Plans" has the meaning ascribed thereto in Section
4.02.
"Initial Public Offering" has the meaning ascribed thereto in the
recitals to this Agreement.
"Limited Entities" means The Limited and Subsidiaries of The Limited
and "Limited Entity" shall mean any of The Limited Entities.
"Limited Indemnified Person" has the meaning ascribed thereto in
Section 4.03.
"Pass-Through Billing" has the meaning ascribed thereto in Section
3.01.
"Payment Date" has the meaning ascribed thereto in Section 3.06.
"Percent of Sales Billing" has the meaning ascribed thereto in
Section 3.01.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government (and any department or agency thereof) or other entity.
"Prior Agreements" has the meaning ascribed thereto in the recitals
to this Agreement.
"Schedule I" means the first schedule hereto which lists the Services
(other than Services relating to employee plan and benefit matters) to be
provided by The Limited to Abercrombie & Fitch and sets forth the related
billing methodology.
"Schedule II" means the second schedule attached hereto which lists
the Services relating to employee plans and benefit arrangements to be
provided by The Limited to Abercrombie & Fitch and sets forth the related
billing methodology.
"Schedules" has the meaning ascribed thereto in Section 3.01.
"SEC" means the United States Securities and Exchange Commission.
"Service Costs" has the meaning ascribed thereto in Section 3.01.
"Services" has the meaning ascribed thereto in Section 2.01.
"Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled directly or indirectly by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof. Subsidiary, when
used with respect to The Limited or Abercrombie & Fitch, shall also include
any other entity affiliated with The Limited or Abercrombie & Fitch, as the
case may be, that The Limited and Abercrombie & Fitch may hereafter agree in
writing shall be treated as a "Subsidiary" for the purposes of this Agreement.
"The Limited" has the meaning ascribed thereto in the preamble
hereto.
Section 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to
the corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SERVICES
Section 2.01. Purchase and Sale of Services. (a) On the terms and
subject to the conditions of this Agreement and in consideration of the
Service Costs described below, The Limited agrees to provide to Abercrombie &
Fitch, or procure the provision to Abercrombie & Fitch of, and Abercrombie &
Fitch agrees to purchase from The Limited, the services described in Schedules
I and II (the "Services"). Unless otherwise specifically agreed by The
Limited and Abercrombie & Fitch, the Services to be provided or procured by
The Limited hereunder shall be substantially similar in scope, quality, and
nature to those provided to, or procured on behalf of, the Abercrombie & Fitch
Entities prior to the Closing Date.
(b) It is understood that (i) Services to be provided to
Abercrombie & Fitch under this Agreement will, at Abercrombie & Fitch'
request, be provided to Subsidiaries of Abercrombie & Fitch and (ii) The
Limited may satisfy its obligation to provide or procure Services hereunder by
causing one or more of its Subsidiaries to provide or procure such Services.
With respect to Services provided to, or procured on behalf of, any Subsidiary
of Abercrombie & Fitch, Abercrombie & Fitch agrees to pay on behalf of such
Subsidiary all amounts payable by or in respect of such Services; provided
that, without in any way limiting the obligations of Abercrombie & Fitch to
pay for such Services, Abercrombie & Fitch may allow [Abercrombie & Fitch
Service Corp.], a Delaware corporation, to make such payments on its behalf.
Section 2.02. Additional Services. In addition to the
Services to be provided or procured by The Limited pursuant to Section 2.01,
if requested by Abercrombie & Fitch, and to the extent that The Limited and
Abercrombie & Fitch may mutually agree, The Limited shall provide additional
services (including services not provided by The Limited to the Abercrombie &
Fitch Entities prior to the Closing Date) to Abercrombie & Fitch The scope of
any such services, as well as the term, costs, and other terms and conditions
applicable to such services, shall be as mutually agreed by The Limited and
Abercrombie & Fitch.
ARTICLE III
SERVICE COSTS; OTHER CHARGES
Section 3.01. Service Costs Generally. (a) Schedules I
and II hereto (collectively, the "Schedules") indicate, with respect to
each Service listed therein, whether the costs to be charged to Abercrombie
& Fitch for such Service or program are determined by (i) the customary
billing method ("Customary Billing"), (ii) the pass-through billing method
("Pass-Through Billing"), (iii) the percentage of Abercrombie & Fitch' net
sales method ("Percent of Sales Billing") or (iv) based upon a calculation
of certain costs relating to employee benefit plans and benefit
arrangements ("Benefit Billing"). The Customary Billing, Pass-Through
Billing, Percent of Sales Billing and Benefit Billing methods applicable to
Services provided to Abercrombie & Fitch are collectively referred to
herein as the "Service Costs". Abercrombie & Fitch agrees to pay to The
Limited in the manner set forth in Section 3.06 the Service Costs
applicable to each of the Services provided by The Limited.
(b) As provided herein, The Limited shall permit eligible
Abercrombie & Fitch associates to participate in certain of The Limited's
employee benefit plans. In addition to reimbursing The Limited for the
Services as set forth herein, Abercrombie & Fitch shall reimburse The Limited
for The Limited's costs (including any contributions and premium costs and
including certain third-party expenses and allocations of certain Limited
personnel expenses), generally in accordance with past practice, subject to
Section 3.05 hereof, relating to participation by Abercrombie & Fitch
associates in any of The Limited's benefit plans. It is the express intent of
the parties that Service Costs relating to the administration of Abercrombie &
Fitch employee plans and the performance of related Services will not exceed
reasonable compensation for such Services as defined in 29 CFR Section
2550.408c-2.
Section 3.02. Customary Billing. The costs of Services
determined by the Customary Billing method shall be comparable to the costs
charged from time to time to other businesses operated by The Limited for
comparable services.
Section 3.03Pass-Through Billing. The costs of Services
determined by the Pass-Through Billing method shall be equal to the
third-party costs and expenses incurred by The Limited or any of its
Subsidiaries on behalf of any Abercrombie & Fitch Entity. If The Limited
incurs costs or expenses on behalf of Abercrombie & Fitch or any of its
Subsidiaries as well as other businesses operated by The Limited, The Limited
will allocate any such costs or expenses in good faith between the various
businesses on behalf of which such costs or expenses were incurred as The
Limited shall determine in the exercise of The Limited's reasonable judgment.
The Limited shall apply usual and accepted accounting conventions in making
such allocations and The Limited or its agents shall keep and maintain such
books and records as may be reasonably necessary to make such allocations.
The Limited shall make copies of such books and records available to any
business upon request and with reasonable notice.
Section 3.04 Percent of Sales. Services for which the billing
methodology is the Percent of Sales method shall not be billed individually.
Instead, The Limited shall provide all such Services for an aggregate annual
cost equal to the amount obtained by multiplying (x) The Limited Service
Corp.'s (or any successor) projected budget for Services to be provided to all
Subsidiaries of The Limited, including Abercrombie & Fitch, for the relevant
year by (y) the projected net sales for the year of the Abercrombie & Fitch'
Subsidiaries divided by The Limited's net sales (the "Net Sales Ratio"). At
the end of the fiscal year, actual expenses versus budgeted expenses for
Services will be compared and any overage or shortfall will be allocated based
on the Net Sales Ratio. The Limited Service Corp.'s budget for Services to be
provided to Abercrombie & Fitch shall be determined on a basis consistent with
the manner in which The Limited Service Corp. determines the budgets for other
businesses operated by The Limited.
Section 3.05. Benefit Billing. (a) Prior to the Closing
Date, certain associates of Abercrombie & Fitch participated in certain
benefit plans sponsored by The Limited ("The Limited Plans"). On and after
the Closing Date, Abercrombie & Fitch associates shall continue to be eligible
to participate in The Limited Plans, subject to the terms of the governing
plan documents as interpreted by the appropriate plan fiduciaries. On and
after the Closing Date, subject to regulatory requirements and the provisions
of Section 4.01 hereof, The Limited will continue to provide Benefits Services
to and in respect of Abercrombie & Fitch associates with reference to The
Limited Plans as it administered the plans prior to the Closing Date.
(b) The costs payable by Abercrombie & Fitch for Services
relating to employee plans and benefit arrangements ("Benefits Services") may
be charged on the basis of Customary Billing, Pass-Through Billing, Percent of
Sales Billing or Benefit Billing. In addition, costs associated with certain
plans and programs identified in Schedule II will be paid principally through
employee payroll deductions for such plans and programs. Benefit Services
consists of those categories of Services which are more fully described on
Schedule II attached hereto.
(c) Each party to this Agreement may request changes in the
applicable terms of or services relating to The Limited Plans, approval of
which shall not be unreasonably withheld; provided, however, that approval of
changes in the terms of any of The Limited Plans shall be in the sole
discretion of The Limited.
(d) The Limited and Abercrombie & Fitch agree to cooperate
fully with each other in the administration and coordination of regulatory and
administrative requirements associated with The Limited Plans. Such
coordination, upon request, will include (but is not limited to) the
following: sharing payroll data for determination of highly compensated
associates, providing census information (including accrued benefits) for
purposes of running discrimination tests, providing actuarial reports for
purposes of determining the funded status of any plan, review and coordination
of insurance and other independent third party contracts, and providing for
review of all summary plan descriptions, requests for determination letters,
insurance contracts, Forms 5500, financial statement disclosures and plan
documents.
Section 3.06. Invoicing and Settlement of Costs. (a) The
Limited will invoice or notify Abercrombie & Fitch on a monthly basis (not
later than the fifth day of each month), either directly or through The
Limited's intracompany billing system, in a manner substantially consistent
with the billing practices used in connection with services provided to the
Abercrombie & Fitch Entities prior to the Closing Date (except as otherwise
agreed), of the Service Costs. In connection with the invoicing described in
this Section 3.06(a), The Limited will provide to Abercrombie & Fitch the same
billing data and level of detail as it customarily provided to the Abercrombie
& Fitch Entities prior to the Closing Date and as it customarily provides to
other businesses operated by The Limited and such other data as may be
reasonably requested by Abercrombie & Fitch.
(b) Abercrombie & Fitch agrees to pay on or before 30 days
after the date on which The Limited invoices or notifies Abercrombie & Fitch
of the Service Costs after the Closing Date (or the next Business Day, if such
day is not a Business Day) (each, a "Payment Date"), at The Limited's option
upon reasonable notice to Abercrombie & Fitch, through The Limited's
intra-company billing system, cash management systems, or, if requested by The
Limited, by wire transfer of immediately available funds payable to the order
of The Limited and without set off, all amounts invoiced by The Limited
pursuant to paragraph (a) during the preceding calendar month (or since the
Closing Date, in the case of the first Payment Date). If Abercrombie & Fitch
fails to pay any monthly payment within 90 days of the relevant Payment Date,
Abercrombie & Fitch shall be obligated to pay, in addition to the amount due
on such Payment Date, interest on such amount at the prime, or best rate
announced by Banc One Corp. plus 3% per annum compounded monthly from the
relevant Payment Date through the date of payment.
(c) Except as otherwise provided in the Schedules or agreed in
writing by the parties, Abercrombie & Fitch shall take such action as is
necessary to establish bank accounts (to be funded by Abercrombie & Fitch) or
to otherwise fund all wage and salary payments to Abercrombie & Fitch
associates and to fund all medical, retirement and other benefit claims
payable to or on behalf of Abercrombie & Fitch associates and their dependents
to the extent not covered by third party insurance. Payroll services and
benefit claims processing activities performed by The Limited or The Limited's
subcontractors shall be coordinated to facilitate payments. Following prior
written notice of not less than 15 business days, The Limited shall be
relieved of any obligation to deliver benefit and payroll services under this
Agreement to the extent that such bank accounts or other funding arrangements
are not established at the time drafts are presented for payment, or at any
time when there are insufficient funds in the relevant account or such other
arrangements fail to satisfy a properly presented claim.
Section 3.07. Amended Schedules. (a) Prior to January 31 of
each year for so long as the relevant Services continue to be provided under
this Agreement, The Limited shall prepare and deliver to Abercrombie & Fitch
updated versions of Schedules I and II (to the extent applicable), setting
forth with respect to the Services described in such schedules, any proposed
changes in billing methodology and, to the extent available, the Service Costs
estimated to be payable for such Services for the then current fiscal year.
Except as Abercrombie & Fitch and The Limited may otherwise agree, and except
as specifically described in this Agreement (including the Schedules), the
method of allocating and charging the costs reflected on Schedules I and II,
and any updated versions of such schedules, shall be consistent with The
Limited's prior practices with respect to the allocation of costs for services
to the Abercrombie & Fitch Entities immediately prior to the Closing Date;
provided that if The Limited changes the method of allocating and charging
such costs to The Limited businesses generally, such revised method shall also
be applied to Abercrombie & Fitch and Abercrombie & Fitch shall be notified in
writing not less than 60 days in advance of implementing such revised method
(a "Change Notice"). If a revised method of allocating and charging costs for
particular Services would result in a significant increase in the amount of
Service Costs that Abercrombie & Fitch would be obligated to pay under this
Agreement as compared to those that would be payable were such method not
revised, then, notwithstanding Article VI, Abercrombie & Fitch shall have the
right during the 45-day period following receipt of The Limited's Change Notice
to terminate such Services upon written notice to The Limited, and such
termination shall be effective on the implementation date of the change in
methodology. Such change in allocation method shall be deemed accepted by
Abercrombie & Fitch if no such notice of termination is received by The
Limited during such 45-day period, and thereafter any termination shall be
governed by the provisions of Article VI. For purposes of this paragraph (a),
a "significant increase" means, with respect to any amount, an aggregate
increase of more than 10% over the base amount of Service Costs applicable to
all such Services; provided such increase is at least $1,000,000.
ARTICLE IV
THE SERVICES
Section 4.01. General Standard of Service. Except as
otherwise agreed with Abercrombie & Fitch or described in this Agreement, and
provided that The Limited is not restricted by contract with third parties or
by applicable law, The Limited agrees that the nature, quality, and standard
of care applicable to the delivery of the Services hereunder will be
substantially the same as that of the Services which The Limited provides from
time to time throughout its businesses; provided that in no event shall such
standard of care be less than the standard of care that The Limited has
customarily provided to the Abercrombie & Fitch Entities with respect to the
relevant Service prior to the Closing Date. The Limited shall use its
reasonable efforts to ensure that the nature and quality of Services provided
to Abercrombie & Fitch associates either by The Limited directly or through
administrators under contract shall be undifferentiated as compared with the
same services provided to or on behalf of The Limited associates under The
Limited Plans.
Section 4.02. Delegation. Subject to Section 4.01 above,
Abercrombie & Fitch hereby delegates to The Limited final, binding, and
exclusive authority, responsibility, and discretion to interpret and construe
the provisions of employee welfare benefit plans in which Abercrombie & Fitch
has elected to participate and which are administered by The Limited under
this Agreement (collectively, "Employee Welfare Plans"). The Limited may
further delegate such authority to plan administrators to:
(i) provide administrative and other services;
(ii) reach factually supported conclusions consistent with the terms
of the Employee Welfare Plans;
(iii) make a full and fair review of each claim denial and decision
related to the provision of benefits provided or arranged for under
the Employee Welfare Plans, pursuant to the requirements of ERISA, if
within sixty days after receipt of the notice of denial, a claimant
requests in writing a review for reconsideration of such decisions.
Administrator shall notify the claimant in writing of its decision on
review. Such notice shall satisfy all ERISA requirements relating
thereto; and
(iv) notify the claimant in writing of its decision on review.
Section 4.03. Limitation of Liability. Abercrombie & Fitch
agrees that none of The Limited and its Subsidiaries and their respective
directors, officers, agents, and employees (each, a "Limited Indemnified
Person") shall have any liability, whether direct or indirect, in contract or
tort or otherwise, to Abercrombie & Fitch for or in connection with the
Services rendered or to be rendered by any Limited Indemnified Person pursuant
to this Agreement, the transactions contemplated hereby or any Limited
Indemnified Person's actions or inactions in connection with any such Services
or transactions, except for damages which have resulted from such Limited
Indemnified Person's gross negligence or willful misconduct in connection with
any such Services, actions or inactions.
Section 4.04. Indemnification of The Limited by Abercrombie &
Fitch. Abercrombie & Fitch agrees to indemnify and hold harmless each Limited
Indemnified Person from and against any damages, and to reimburse each Limited
Indemnified Person for all reasonable expenses as they are incurred in
investigating, preparing, pursuing, or defending any claim, action,
proceeding, or investigation, whether or not in connection with pending or
threatened litigation and whether or not any Limited Indemnified Person is a
party (collectively, "Actions"), arising out of or in connection with Services
rendered or to be rendered by any Limited Indemnified Person pursuant to this
Agreement, the transactions contemplated hereby or any Limited Indemnified
Person's actions or inactions in connection with any such Services or
transactions; provided that Abercrombie & Fitch will not be responsible for
any damages of any Limited Indemnified Person that have resulted from such
Limited Indemnified Person's gross negligence or willful misconduct in
connection with any of the advice, actions, inactions, or Services referred to
above.
Section 4.05. Indemnification of Abercrombie & Fitch by The
Limited. The Limited agrees to indemnify and hold harmless Abercrombie &
Fitch and its Subsidiaries and their respective directors, officers, agents,
and employees (each, a "Abercrombie & Fitch Indemnified Person") from and
against any damages, and will reimburse each Abercrombie & Fitch Indemnified
Person for all reasonable expenses as they are incurred in investigating,
preparing, or defending any Action, arising out of the gross negligence or
willful misconduct of any Limited Indemnified Person in connection with the
Services rendered or to be rendered pursuant to this Agreement.
Section 4.06. Further Indemnification. To the extent that any
other Person has agreed to indemnify any Limited Indemnified Person or to hold
a Limited Indemnified Person harmless and such Person provides services to The
Limited or any affiliate of The Limited relating directly or indirectly to any
employee plan or benefit arrangement for which Benefit Services are provided
under this Agreement, The Limited will exercise reasonable efforts (x) to make
such agreement applicable to any Abercrombie & Fitch Indemnified Person so
that each Abercrombie & Fitch Indemnified Person is held harmless or
indemnified to the same extent as any Limited Indemnified Person or (y)
otherwise make available to each Abercrombie & Fitch Indemnified Person the
benefits of such agreement.
Section 4.07. Reports. The Limited shall provide or shall
cause to be provided to Abercrombie & Fitch with data or reports requested by
Abercrombie & Fitch relating to (i) benefits paid to or on behalf of
Abercrombie & Fitch associates under The Limited Plans, including but not
limited to financial statements, claims history, and census information, and
(ii) other information relating to the Services that is required to satisfy
any reporting or disclosure requirement of ERISA or the Code. The Limited
will provide such information within a reasonable period of time after it is
requested. The costs for reports which are substantially similar to reports
prepared by The Limited or on behalf of The Limited generally for its
businesses shall be billed as part of the Benefit Costs. The cost for
additional reports shall be billed as incremental costs in accordance with
Section 3.06.
ARTICLE V
ADDITIONAL AGREEMENT
Section 5.01. Notice. Unless otherwise agreed in writing by
the parties, Abercrombie & Fitch agrees to provide The Limited with at least
two months prior written notice of any material change in the eligible
Abercrombie & Fitch associates and retirees covered by The Limited Plan, and
any change in the scope of Services to be provided by The Limited with respect
to such plans and arrangements. Notwithstanding the preceding sentence, if
Abercrombie & Fitch provides The Limited with less than two months notice of
any such change and The Limited is nonetheless able, with reasonable efforts,
to effectuate such change with such shorter notice, than The Limited shall
implement the requested change.
ARTICLE VI
TERM AND TERMINATION
Section 6.01. Term. Except as otherwise provided in this
Article VI or in Section 7.05 or as otherwise agreed in writing by the
parties, this Agreement shall have an initial term of five years from the
Closing Date, and will be renewed automatically thereafter for successive
one-year terms unless either Abercrombie & Fitch or The Limited elects not to
renew this Agreement upon not less than six-months' written notice.
Section 6.02. Termination. (a) After the initial five year
term, Abercrombie & Fitch may from time to time terminate this Agreement with
respect to one or more of the Services, in whole or in part, upon giving at
least six months prior notice to The Limited; provided that Abercrombie &
Fitch may not terminate those Services which it was not allowed to terminate
prior to the Closing Date.
(b) This Agreement will be subject to early termination by
either Abercrombie & Fitch or The Limited upon six months' written notice if
The Limited ceases to own shares of Common Stock representing more than 50% of
the combined voting power of the Common Stock of Abercrombie & Fitch.
(c) The Limited may, at its option, terminate this Agreement
as it relates to any given Service if The Limited would otherwise be required
to provide such Service with respect to any employee benefit plan or program
that is not substantially similar to a corresponding plan or program of The
Limited (as such plans and programs of The Limited exist from time to time) or
if the method of delivering such Service would no longer be substantially
similar to the manner in which such Service was delivered to the Abercrombie &
Fitch Entities, as such delivery may change from time to time.
(d) The Limited may terminate any affected Service at any time
if Abercrombie & Fitch shall have failed to perform any of its material
obligations under this Agreement relating to any such Service, The Limited has
notified Abercrombie & Fitch in writing of such failure, and such failure
shall have continued for a period of 60 days after receipt of Abercrombie &
Fitch of notice of such failure.
(e) Abercrombie & Fitch may terminate any affected Service at
any time if The Limited shall have failed to perform any of its material
obligations under this Agreement relating to any such Service, Abercrombie &
Fitch has notified The Limited in writing of such failure, and such failure
shall have continued for a period of 60 days after receipt by The Limited of
notice of such failure.
(f) Each of Abercrombie & Fitch and The Limited agrees that
prior to exercising its rights under this Section 6.02 it will consult for a
reasonable period with the other party in advance of such termination as to
its implementation.
(g) Notwithstanding this Section 6.02, either The Limited or
Abercrombie & Fitch may terminate coverage of Abercrombie & Fitch under The
Limited's umbrella liability, property, casualty or fiduciary insurance
policies (as more fully described in Schedule I) at any time upon written
notice during the 90 days prior to the anniversary date of the policy;
provided that termination of coverage by Abercrombie & Fitch may only be for
nonpayment and only if a replacement policy, acceptable to The Limited, is
entered into by Abercrombie & Fitch.
(h) Abercrombie & Fitch may terminate any affected Service
pursuant to Section 3.07 hereof.
Section 6.03. Effect of Termination. (a) Other than as
required by law, upon termination of any Service pursuant to Section 6.01 or
Section 6.02, and upon termination of this Agreement in accordance with its
terms, The Limited will have no further obligation to provide the terminated
Service (or any Service, in the case of termination of this Agreement) and
Abercrombie & Fitch will have no obligation to pay any fees relating to such
Services or make any other payments hereunder; provided that notwithstanding
such termination, (i) Abercrombie & Fitch shall remain liable to The Limited
for fees owed and payable in respect of Services provided prior to the
effective date of the termination; (ii) The Limited shall continue to charge
Abercrombie & Fitch for administrative and program costs relating to benefits
paid after but incurred prior to the termination of any Service and other
services required to be provided after the termination of such Service and
Abercrombie & Fitch shall be obligated to pay such expenses in accordance with
the terms of this Agreement; and (iii) the provisions of Articles IV, V, VI
and VII shall survive any such termination. All program and administrative
costs attributable to Abercrombie & Fitch associates for The Limited Plans
that relate to any period after the effective date of any such termination
shall be for the account of Abercrombie & Fitch.
(b) Following termination of this Agreement with respect to
any Service, The Limited and Abercrombie & Fitch agree to cooperate in
providing for an orderly transition of such Service to Abercrombie & Fitch or
to a successor service provider. Without limiting the foregoing, The Limited
agrees to (i) provide, within 90 days of the termination, copies in a format
designated by The Limited, all records relating directly or indirectly to
benefit determinations of Abercrombie & Fitch associates, including but not
limited to compensation and service records, correspondence, plan interpretive
policies, plan procedures, administration guidelines, minutes, or any data or
records required to be maintained by law and (ii) work with Abercrombie &
Fitch in developing a transition schedule.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Prior Agreements. In the event there is any
conflict between the provisions of this Agreement, on the one hand, and
provisions of prior services agreements among The Limited or its Subsidiaries
and any of the Abercrombie & Fitch businesses (the "Prior Agreements"), on the
other hand, the provisions of this Agreement shall govern and such provisions
in the Prior Agreements are deemed to be amended so as to conform with this
Agreement.
Section 7.02. Future Litigation and Other Proceedings. In the
event that Abercrombie & Fitch (or any of its officers or directors) or The
Limited (or any of its officers or directors) at any time after the date
hereof initiates or becomes subject to any litigation or other proceedings
before any governmental authority or arbitration panel with respect to which
the parties have no prior agreements (as to indemnification or otherwise), the
party (and its officers and directors) that has not initiated and is not
subject to such litigation or other proceedings shall comply, at the other
party's expense, with any reasonable requests by the other party for
assistance in connection with such litigation or other proceedings (including
by way of provision of information and making available of employees as
witnesses). In the event that Abercrombie & Fitch (or any of its officers or
directors) and The Limited (or any of its officers or directors) at any time
after the date hereof initiate or become subject to any litigation or other
proceedings before any governmental authority or arbitration panel with
respect to which the parties have no prior agreements (as to indemnification
or otherwise), each party (and its officers and directors) shall, at their own
expense, coordinate their strategies and actions with respect to such
litigation or other proceedings to the extent such coordination would not be
detrimental to their respective interests and shall comply, at the expense of
the requesting party, with any reasonable requests of the other party for
assistance in connection therewith (including by way of provision of
information and making available of employees as witnesses).
Section 7.03. No Agency. Nothing in this Agreement shall
constitute or be deemed to constitute a partnership or joint venture between
the parties hereto or, except to the extent provided in Section 4.02,
constitute or be deemed to constitute any party the agent or employee of the
other party for any purpose whatsoever and neither party shall have authority
or power to bind the other or to contract in the name of, or create a
liability against, the other in any way or for any purpose.
Section 7.04. Subcontractors. The Limited may hire or engage
one or more subcontractors to perform all or any of its obligations under this
Agreement, provided that, subject to Section 4.03, The Limited will in all
cases remain primarily responsible for all obligations undertaken by it in
this Agreement with respect to the scope, quality and nature of the Services
provided to Abercrombie & Fitch.
Section 7.05. Force Majeure. (a) For purposes of this
Section, "force majeure" means an event beyond the control of either party,
which by its nature could not have been foreseen by such party, or, if it
could have been foreseen, was unavoidable, and includes without limitation,
acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil
unrest, interference by civil or military authorities, acts of war (declared
or undeclared) and failure of energy sources.
(b) Neither party shall be under any liability for failure to
fulfill any obligation under this Agreement, so long as and to the extent to
which the fulfillment of such obligation is prevented, frustrated, hindered,
or delayed as a consequence of circumstances of force majeure, provided always
that such party shall have exercised all due diligence to minimize to the
greatest extent possible the effect of force majeure on its obligations
hereunder.
(c) Promptly on becoming aware of force majeure causing a
delay in performance or preventing performance of any obligations imposed by
this Agreement (and termination of such delay), the party affected shall give
written notice to the other party giving details of the same, including
particulars of the actual and, if applicable, estimated continuing effects of
such force majeure on the obligations of the party whose performance is
prevented or delayed. If such notice shall have been duly given, and actual
delay resulting from such force majeure shall be deemed not to be a breach of
this Agreement, and the period for performance of the obligation to which it
relates shall be extended accordingly, provided that if force majeure results
in the performance of a party being delayed by more than 60 days, the other
party shall have the right to terminate this Agreement with respect to any
Service effected by such delay forthwith by written notice.
Section 7.06. Entire Agreement. This Agreement (including the
Schedules constituting a part of this Agreement) and any other writing signed
by the parties that specifically references this Agreement constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter
hereof. This Agreement is not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
Section 7.07.Information. Subject to applicable law and
privileges, each party hereto covenants and agrees to provide the other party
with all information regarding itself and transactions under this Agreement
that the other party reasonably believes are required to comply with all
applicable federal, state, county and local laws, ordinances, regulations and
codes, including, but not limited to, securities laws and regulations.
Section 7.08.Confidential Information. Abercrombie & Fitch and
The Limited hereby covenant and agree to hold in trust and maintain
confidential all Confidential Information relating to the other party.
"Confidential Information" shall mean all information disclosed by either
party to the other in connection with this Agreement whether orally, visually,
in writing or in any other tangible form, and includes, but is not limited to,
economic and business data, business plans, and the like, but shall not
include (i) information which becomes generally available other than by
release in violation of the provisions of this Section 7.08, (ii) information
which becomes available on a nonconfidential basis to a party from a source
other than the other party to this Agreement provided the party in question
reasonably believes that such source is not or was not bound to hold such
information confidential, (iii) information acquired or developed
independently by a party without violating this Section 7.08 or any other
confidentiality agreement with the other party and (iv) information that any
party hereto reasonably believes it is required to disclose by law, provided
that it first notifies the other party hereto of such requirement and allows
such party a reasonable opportunity to seek a protective order or other
appropriate remedy to prevent such disclosure. Without prejudice to the
rights and remedies of either party to this Agreement, a party disclosing any
Confidential Information to the other party in accordance with the provisions
of this Agreement shall be entitled to equitable relief by way of an
injunction if the other party hereto breaches or threatens to breach any
provision of this Section 7.08.
Section 7.09.Notices. Any notice, instruction, direction or
demand under the terms of this Agreement required to be in writing will be
duly given upon delivery, if delivered by hand, facsimile transmission,
intercompany mail, or mail, to the following addresses:
(a) If to Abercrombie & Fitch, to:
Abercrombie & Fitch Co.
Four Limited Parkway
Reynoldsburg, OH 43068
Attention: Samuel P. Fried
Fax: 614-479-7188
(b) If to The Limited, to:
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
Attention: Samuel P. Fried
Fax: 614-479-7188
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Jeffrey Small
Fax: 212-450-4800
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
Section 7.10.Governing Law. This Agreement shall be construed
in accordance with and governed by the substantive internal laws of the State
of Delaware.
Section 7.11.Severability. If any provision of this Agreement
shall be invalid or unenforceable, such invalidity or unenforceability shall
not render the entire Agreement invalid. Rather, the Agreement shall be
construed as if not containing the particular invalid or unenforceable
provision, and the rights and obligations of each party shall be construed and
enforced accordingly.
Section 7.12.Amendment. This Agreement may only be amended by a
written agreement executed by both parties hereto.
Section 7.13.Counterparts. This Agreement may be executed in
separate counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one agreement.
Section 7.14. Services to The Limited. (a) Abercrombie & Fitch
agrees to continue to participate in the Associate Discount Program.
(b) Abercrombie & Fitch agrees to permit The Limited and its
Subsidiaries to use the trademarks and service marks owned by Abercrombie &
Fitch or any of its Subsidiaries at no cost to The Limited or its Subsidiaries
in The Limited's annual report to shareholders and publicity materials and for
other similar purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives.
ABERCROMBIE & FITCH CO.
By: ____________________________________
Name:
Title:
THE LIMITED, INC.
By:____________________________________
Name:
Title:
Services Agreement - Schedule I
General Corporate Services(1)
<TABLE>
<CAPTION>
Service Billing Methodology
- ------------------------------------------------ --------------------------
<S> <C>
o Aircraft Services Customary Billing
o General Real Estate Services Customary Billing
o Import and Shipping Services Customary Billing
o International Expansion Services Customary Billing
o Store Planning and Construction Customary Billing
o Accounting, Public Reporting Percent of Sales Billing
and Consolidation Services
o Internal Audit Percent of Sales Billing
o Treasury and Cash Management Percent of Sales Billing
(including loans and investments)
o Corporate Development Percent of Sales Billing
o Risk Management and Administrative Percent of Sales Billing
Insurance
o Corporate Secretarial Services Percent of Sales Billing
o Marketing Data Services Percent of Sales Billing
o Executive Compensation and Customary Billing
Benefit Plan Design Services
o Governmental Affairs Percent of Sales Billing
o Human Resources and Compensation Customary Billing
o Investor and Public Relations Percent of Sales Billing
o Legal Services Percent of Sales Billing
o Tax Return Preparation and Percent of Sales Billing
Tax Planning Services
o Corporate Finance Percent of Sales Billing
o Insurance Policies Pass-Through Billing
(liability, property, casualty
and fiduciary)
o Corporate, administrative Percent of Sales Billing
and general overhead
<FN>
<F1>
(1) In each case, third-party costs incurred by The Limited on behalf of
Abercrombie & Fitch will be billed using the Pass-Through Billing methodology.
</FN>
</TABLE>
Services Agreement - Schedule II
Benefits Services
Service Billing Methodology
- ------------------------------------- -----------------------
MEDICAL/DENTAL PROGRAMS
Benefits/Claims
o Claims costs for Abercrombie & Fitch Customary Billing
Associates participating
in the following Limited Plans
and programs:
- - Medical Plan
- - Short Term Disability Plan
- - Prescription Drug Plan
- - Dental Plan
Administration
o Administration of above Abercrombie & Fitch Customary Billing
plans and programs, including:
- - maintenance of eligibility files
upon Abercrombie & Fitch' notification
of status changes
- - claim adjudication under the terms
of applicable plans
- - maintenance of toll-free telephone
lines for inquiries, etc.
- - support services (internal and
external, including COBRA)
Participant Contributions
oParticipant contributions for Participant payroll
deductions above plans or direct
bill to associates/retirees
OTHER BENEFIT PLANS
oLife Insurance Customary Billing
Life insurance for Abercrombie & Fitch
Associates (including Accidental
Death and Dismemberment)
o Savings/Retirement Plans
- - Company match/retirement contribution Customary Billing
- - Participant Contributions Payroll Deduction
o Long-Term Disability Plans
- - Employer contributions Customary Billing
- - Associate contributions Payroll deduction
Other Benefit Support Services
oAudit, Legal, Actuarial Fees and Customary Billing
related recoveries
oPayroll support of benefits Customary Billing
administration (insurance,
savings, other benefit
plans and statutory requirements)
Employee Stock Purchase Program
- -Payroll Services Customary Billing
Exhibit 10.3
Abercrombie & Fitch
SUBLEASE AGREEMENT
This Sublease Agreement (this "Sublease") is entered into and
made as of the 1st day of June, 1995, by and between Victoria's Secret Stores,
Inc., a Delaware corporation (hereinafter referred to as "Landlord") and
Abercrombie & Fitch, Inc., a Delaware corporation (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
WHEREAS, Landlord has leased from Distribution Land Corp., a
Delaware corporation ("DLC") a certain office/warehouse distribution facility
containing approximately 951,798 square feet of floor space identified on
Exhibit A attached hereto and made a part hereof by this reference (the
"Building") pursuant to the terms of that certain Building Lease Agreement
between Landlord and DLC dated as of June 1, 1995 (the "Building Lease"); and
WHEREAS, the Building is located upon an approximately 321.1
acre parcel of land located at the intersection of East Broad Street (State
Route 16) and Taylor Road, Reynoldsburg, Ohio, which land is depicted on
Exhibit A attached hereto and made a part hereof by this reference (the
"Campus"); and
WHEREAS, Landlord wishes to sublease to Tenant a portion of the
Building as more particularly described in Section 1.02 below (the "Premises")
and to grant to Tenant the right to utilize certain common areas and
facilities located within the Building and the Campus, all subject to the
terms and conditions of this Sublease and the Building Lease; and
WHEREAS, Tenant wishes to sublease, from Landlord, a portion
of the Building and to utilize those certain common areas and facilities
located within the Building and the Campus; and
WHEREAS, DLC, Landlord and others have entered into a Services
Agreement which relates, in part, to certain aspects of the management,
operation and ownership of the Building and the Campus (the "Services
Agreement").
NOW, THEREFORE, in consideration of the premises described
above and the mutual promises set forth herein, Landlord and Tenant, intending
to be legally bound, hereby agree as follows:
I -- LEASE OF PREMISES
1.01 - Lease of Premises. Landlord, in consideration of the
rents and covenants hereinafter set forth, does hereby demise, let and lease
to Tenant, and Tenant does hereby hire, take and lease from Landlord, on the
terms and conditions hereinafter set forth, the Premises, to have and to hold
the same, with all appurtenances unto Tenant for the Term hereinafter
specified. Tenant agrees to comply with all of the terms and conditions of the
Service Agreement if and to the extent that Tenant is a party thereto.
Landlord has provided to Tenant a copy of the Building Lease,
which Tenant has reviewed and fully understands. Tenant acknowledges and
agrees that all of Tenant's rights under this Sublease are derived from
Landlord's rights under the Building Lease and are subordinate and subject to
the Building Lease. Tenant agrees to adhere to and comply with all of the
terms and conditions set forth in the Building Lease. Any action or inaction
by Tenant which violates the terms and conditions of the Building Lease shall
also violate this Sublease and constitute an event of default hereunder,
entitling Landlord to pursue all remedies available to it hereunder or under
applicable law.
1.02 - Basic Sublease Provisions.
A. Building Address: 8455 East Broad Street
Reynoldsburg, Ohio 43068
B. Building Description: a two-story office/warehouse
distribution facility, containing approximately 138,534
square feet of office space, 773,640 square feet of
distribution space and 39,624 square feet of Building
Common Area (as hereinafter defined)
C. Premises Description: the floors of the building on which
the Premises are located are as follows:
(i) 1st floor
(ii) The space within the Premises is further depicted
on the floor plan attached hereto as Exhibit B and
made a part hereof by this reference, and consists
of the following approximate number of square feet:
236,073 (consisting of 34,776 square feet of office
space and 201,297 square feet of distribution space)
D. Term: Fifteen (15) years, beginning on June 1, 1995 (the
"Commencement Date") and ending on May 31, 2010 (the
"Expiration Date")
E. Annual Base Rent:
(i) Office space - $11.00 per square foot, or
$382,536.00
(ii) Distribution space - $2.85 per square foot, or
$573,696.45
(iii) Total Annual Base Rent (for distribution and office
space) of $956,232.45
(iv) The Annual Base Rent shall be subject to periodic
adjustments as provided in Section 4.02 of this
Sublease
F. Monthly Installments of Base Rent (for distribution and
office space): $79,686.04
G. Renewal Option(s): eight (8) five (5) year Renewal
Option(s) - See Section 4.05 of this Sublease for terms of
the Renewal Options
H. Addresses for Notices and Payments:
Tenant: Abercrombie & Fitch, Inc.
8455 East Broad Street
Reynoldsburg, Ohio 43068
with a copy to:
Abercrombie & Fitch, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate
Department
Landlord: Victoria's Secret Stores, Inc.
8455 East Broad Street
Reynoldsburg, Ohio 43068
with a copy to:
Victoria's Secret Stores, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate
Department
I. Use: office/warehouse distribution use related to
distribution for retail sale of men's, women's and
children's apparel, accessories, personal care items and
other products, and for all administrative activities
relating thereto
1.03 - Description of the Building, the Premises and the Common
Areas.
J. The Building. The Building is depicted on the attached
Exhibit A. The address and description of the Building are specified in Items
A and B of the Basic Sublease Provisions (which are set forth in Section 1.02
of this Sublease).
K. The Premises. The Premises consist of space which: (i) is
located on the floor or floors of the Building specified in Item C(i) of the
Basic Sublease Provisions, (ii) is located in one or more areas or parts of
each such floor, and (iii) is bound by the proposed or existing demising walls
therefor, the approximate locations of such demising walls and space being
marked in color or cross-hatched and shown on the diagram of the floor plan
for each such floor, such diagram being attached to this Sublease as Exhibit
B and made a part hereof by this reference. The approximate number of square
feet contained in the area which comprises the Premises, as determined by
Landlord for identification purposes only, is specified in Item C(ii) of the
Basic Sublease Provisions.
L. Common Areas. The Building is located within, and
constitutes a part of, the Campus. Those portions of the Campus which are
defined as "Common Areas" under the Building Lease, as the Building Lease
presently exists or as it is amended from time to time, shall be referred to
herein as the "Campus Common Areas." The Building contains certain areas or
parts which are designated for use in common by all of the tenants of the
Building and their respective employees, agents, customers, and invitees.
Such areas include entrances, exits and doors, lobbies, hallways, corridors
and stairwells, elevators, restrooms, and certain "special amenities" such as
the cafeteria, mail room and reception area, but excluding those areas and
facilities described on Exhibit C attached hereto and made a part hereof by
this reference, as said Exhibit C may be amended by Landlord from time to time
(all of which are referred to herein as the "Building Common Areas"). The
Campus Common Areas and the Building Common Areas are sometimes referred to
herein collectively as the "Common Areas".
II -- COMMON AREAS
2.01 - Use of Building Common Areas. Subject to Landlord's
right at any time to use the Building Common Areas for its own purposes,
Landlord hereby gives to Tenant and its employees, agents, customers and
invitees, the nonexclusive right to use the Building Common Areas in common
with and subject to the rights given to other tenants of the Building.
2.02 - Use of Campus Common Areas. Subject to Landlord's right
at any time to use the Campus Common Areas for its own purposes, Landlord
hereby gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Campus Common Areas to the same extent as
Landlord is permitted to use the same under the Building Lease.
2.03 - Rules and Regulations for Common Areas. The Campus
Common Areas and the Building Common Areas shall at all times be subject to
the exclusive management and control of DLC and Landlord, respectively, and
each shall have the right, from time to time, to establish, modify and enforce
reasonable rules and regulations with respect to all such Common Areas, and
the use of such Campus Common Areas and the Building Common Areas by Tenant,
its subtenants and their respective employees, agents, customers and invitees
shall be subject to such rules and regulations. Such rules and regulations
may include, but shall not be limited to, restrictions on parking, hours of
operation, access routes, hours of access to the Building and the Campus,
rules with respect to the Building and such other matters as may be deemed
appropriate by Landlord or DLC, as the case may be, from time to time.
2.04 - Changes in Common Areas. DLC and Landlord may do and
perform such acts in and to the Campus Common Areas and the Building Common
Areas, respectively, as each shall determine to be advisable. DLC and
Landlord hereby reserve the right to make reconfigurations, alterations,
additions, deletions or changes to the Campus Common Areas and Building Common
Areas, respectively, including, but not limited to, changes in the size and
configuration of said Common Areas. Landlord and DLC also reserve the right
to restrict and limit the use of the Campus Common Areas and Building Common
Areas, respectively, by Tenant, its subtenants and their respective employees,
agents, customers and invitees.
2.05 - Maintenance of Common Areas. Subject to the provisions
of Section 4.03 hereof, Landlord and DLC shall adequately maintain the Campus
Common Areas and Building Common Areas, respectively, in a good and usable
condition throughout the Term of this Sublease.
2.06 - Common Area Capital Improvements. DLC and Landlord may
make capital improvements to the Campus Common Areas and Building Common
Areas, respectively. In such case, Landlord may charge, as an Operating
Expense (as hereinafter defined), an amount equal to the annual depreciation
or amortization allowance with respect to the cost of such capital
improvement, as determined by Landlord in accordance with generally accepted
accounting principles, together with interest on such costs or the unamortized
balance thereof, at the rate as may be paid by or accrued on the books of
Landlord.
III -- TERM AND POSSESSION
3.01 - Term. The Term of this Sublease shall be for the period
of years and months specified in Item D of the Basic Sublease Provisions; and
shall begin and end on the Commencement Date and Expiration Date,
respectively, specified in Item D of the Basic Sublease Provisions, unless the
Term of this Sublease is renewed, modified or terminated as provided elsewhere
herein. If the Commencement and Expiration Dates have not been established at
the time of the execution of this Sublease, then Landlord and Tenant agree,
upon demand of the other, to execute a writing establishing the Commencement
and Expiration Dates as soon as the Commencement Date has been determined.
3.02 - Tenant's Acceptance of the Premises. Tenant hereby
accepts the Premises in an "as is" condition and acknowledges that Landlord
has made no representations or warranties with respect thereto, and that
Tenant has inspected the Premises and found it to be in satisfactory condition.
3.03 - Surrender of the Premises. Upon the expiration or
earlier termination of this Sublease, or upon the exercise by Landlord of its
right to re-enter the Premises without terminating this Sublease, Tenant shall
immediately surrender the Premises to Landlord, together with all alterations,
improvements and other property as provided elsewhere herein, in broom-clean
condition and in good order, condition and repair, except for ordinary wear
and tear and damage which Tenant is not obligated to repair, failing which
Landlord may restore the Premises to such condition at Tenant's expense. Upon
such expiration or termination, Tenant may, provided Tenant is not in default
and unless prohibited from doing so by other provisions of this Sublease, have
the right to remove its personal property and trade fixtures. Tenant shall
promptly repair any damage caused by any such removal, and shall restore the
Premises to the condition existing prior to the installation of the items so
removed, ordinary wear and tear and damage which Tenant is not obligated to
repair excepted. If Tenant fails to remove any and all such trade fixtures
from the Premises on the Expiration Date or earlier termination of this Lease,
all such trade fixtures shall become the Property of Landlord, unless Landlord
elects to require their removal, in which case Tenant shall, at its cost,
promptly remove the same and restore the Premises to its prior condition.
3.04 - Holding Over. In the event that Tenant shall not
immediately surrender the Premises on the Expiration Date of the Term hereof,
Tenant shall, by virtue of the provisions hereof, become a tenant by the month
at the monthly rent in effect during the last month of the Term of this
Sublease, which monthly tenancy shall commence with the first day next after
the Expiration Date. Tenant, as a monthly tenant, shall be subject to all of
the terms, conditions, covenants and agreements of this Sublease. Tenant shall
give to Landlord at least thirty (30) calendar days written notice of any
intention to quit the Premises, and Tenant shall be entitled to thirty (30)
calendar days written notice to quit the Premises, unless Tenant is in default
hereunder, in which event Tenant shall not be entitled to any notice to quit,
the usual thirty (30) calendar days notice to quit being hereby expressly
waived. Notwithstanding the foregoing provisions of this Section 3.04, in the
event that Tenant shall hold over after the expiration of the Term of this
Sublease, and if Landlord shall desire to regain possession of the Premises
promptly at the expiration of the Term of this Sublease, then, at any time
prior to Landlord's acceptance of rent from Tenant as a monthly tenant
hereunder, Landlord, at its option, may forthwith re-enter and take possession
of the Premises without process, or by any legal process in force.
3.05 - Renewal Options. So long as Tenant is not in default
under the terms of this Sublease, Landlord does hereby grant to Tenant the
right and option to extend and renew the fifteen (15) year Term of this
Sublease (herein called the "Initial Term") for eight (8) additional period(s)
of five (5) years each (herein the "Renewal Term(s)"), beginning on the date
immediately following the Expiration Date of the Initial Term or the preceding
Renewal Term, as appropriate, upon the same terms, conditions, covenants and
provisions as are provided in this Sublease (including the Base Rent, subject
to adjustment as provided in Section 4.02 hereof). Unless in respect of each
Renewal Term Landlord or Tenant notifies the other party, at least one (1)
year prior to the expiration of the Initial Term or Renewal Term then in
effect, of its intent not to extend and renew the Term of this Sublease, then
the Tenant shall be deemed to have exercised its Renewal Option in respect of
that Renewal Term. If the Renewal Option is exercised as provided herein,
then this Sublease shall be amended to reflect the changes which will result
from such extension of the Term of this Sublease, including the modification
to all references in the Sublease to the "Term" thereof (as defined in Section
3.01) to include the Renewal Term as well as the Initial Term.
IV -- RENT
4.01 - Base Rent.
A. Interim Rent. During the months of June and July of
1995, Tenant shall pay, on a monthly basis and in lieu of the Base Rent
described in Section 4.01 (B) below, the sum of $70,176.21. Commencing July
30, 1995, Tenant shall pay to Landlord, as Base Rent for the Premises during
the last two (2) days of the month of July, the sum of $5,141.03, which is the
Base Rent applicable to the Premises, prorated on the basis of the number of
days during July for which the Tenant is obligated to pay Base Rent as defined
in the Basic Sublease Provisions.
B. Monthly Base Rent. Commencing on August 1, 1995, Tenant
shall pay to Landlord, as Base Rent for the Premises, the annual sum specified
in Item E of the Basic Sublease Provisions, payable in equal consecutive
monthly installments as specified in Item F of the Basic Sublease Provisions,
in advance, on or before the first day of each and every calendar month during
the Term of this Sublease; provided, however, that if the Expiration Date
shall be a day other than the first day of a calendar month, the Base Rent
installment for such last fractional month shall be prorated on the basis of
the number of days during the month this Sublease was in effect in relation to
the total number of days in such month.
4.02 - Base Rent Adjustment.
A. CPI Adjustments. Commencing on the third (3rd)
anniversary of the Commencement Date and continuing on the same date every
three (3) years thereafter during the entirety of this Sublease (including any
Renewal Terms), the Base Rent due and payable to Landlord shall be adjusted
for the next succeeding three (3) year period. The adjusted Base Rent for
each year in such three (3) year period shall be equal to the Base Rent paid
during the immediately preceding twelve (12) month period (the "lease year")
increased by a percentage equal to the percentage increase in the CPI (as
hereinafter defined) computed by comparing the CPI figure for that month which
is two (2) months prior to the adjustment date (the "adjustment month") with
the CPI figure for the month occurring thirty-six (36) months prior to the
adjustment month (the "base month"). For example, in computing the percentage
increase for the lease year commencing July 1, 2000, the percentage increase
in the CPI would be determined by comparing the CPI figure for May, 2000, the
adjustment month, with the CPI figure for May, 1997, the base month, and
similar comparisons would be made using the CPI figures for adjustment months
and base months every three (3) years thereafter. For the purposes hereof,
"CPI" shall mean the Consumer Price Index, published by the Bureau of Labor
Statistics of the United States Department of Labor, in the column for "all
items" in the table titled "Consumer Price Index for all Urban Consumers:
U.S. City average, 1982-1984 = 100".
If the CPI at any time herein is no longer published or issued,
Landlord and Tenant shall agree on such other index as is then generally
recognized for determination of purchasing power in the United States.
B. Capital Improvements. If Landlord shall, at any time
after the Commencement Date, install any equipment or make any other capital
improvement to the Premises, then Landlord may add to the Base Rent (to be
paid in monthly installments), in each year during the useful life of such
equipment or other capital improvement, an amount equal to the annual
depreciation or amortization allowance with respect to the cost of such
equipment or capital improvement, as determined by Landlord in accordance with
generally accepted accounting principles, together with interest on such cost
or the unamortized balance thereof at the rate as may have to be paid by or
accrued on the books of Landlord on the unamortized balance.
4.03 - Additional Rent.
A. Definitions. For purposes of this Section 4.03, the
following definitions shall apply:
1. "Additional Rent" - shall mean the Tenant's proportionate
share of Landlord's Taxes, Insurance and Operating
Expenses.
2. "Taxes" - shall mean those amounts paid by Landlord for
real and personal property taxes relating to the Building
pursuant to the terms of the Services Agreement.
3. "Insurance" - shall mean those amounts paid by Landlord
for property, casualty, liability and any other insurance
coverages relating to the Building pursuant to the terms
of the Services Agreement.
4. "Operating Expenses" - shall mean the total dollar amount
of all costs and expenses paid or incurred by Landlord in
connection with the operation of the Building, as
determined by Landlord in conformity with its accounting
practices consistently applied, including without
limitation: water, gas, electrical, telephone and other
utility charges (other than any separately billed utility
charges paid by Tenant as provided in this Sublease);
maintenance and repair costs and expenses, including the
repair or replacement of equipment or other parts of the
Building (except those treated as capital improvements as
hereinafter described) and other charges paid or incurred
in the operation and maintenance of the elevators and the
electrical, plumbing, heating, ventilation and air
conditioning equipment and systems and other parts of the
Building; any and all rental costs incurred by Landlord
under the Building Lease in respect of the Building
Common Areas; the costs of equipping and operating
certain "special amenities" of the Building, such as the
mail room, reception area and cafeteria; cleaning and
other janitorial services; refuse collection; supplies;
landscape maintenance costs; building security services;
license and permit fees; the costs of all property
management services relating to the Building and provided
to Landlord pursuant to the Services Agreement; computer
and electronic data processing equipment and services
costs; and, in general, all other costs and expenses
which are related or incidental to, are considered by
Landlord to be necessary, appropriate or desirable for or
are treated under Landlord's accounting practices as
costs and expenses paid or incurred in connection with
the management, operation and maintenance of the
Building. In addition, Operating Expenses shall include
Landlord's proportionate share (as defined in the
Building Lease) of "Operating Expenses" under the
Building Lease.
5. Tenant's proportionate share of the foregoing shall be
determined by multiplying the total expenses incurred by
Landlord or Landlord's designee for Taxes, Insurance and
Operating Expenses by .2588, computed as a fraction, the
numerator of which shall be the number of leasable square
feet in the Premises, or 236,073 square feet, and the
denominator of which shall be the total number of
leasable square feet in the Building (excluding any
Building Common Areas), or 912,174 square feet; with the
method of measurement to be as reasonably determined by
Landlord.
B. Payment Obligation. In addition to the Base Rent
specified in this Sublease, Tenant shall, in each calendar year or partial
calendar year during the Term of this Sublease, pay to Landlord the Additional
Rent. The Additional Rent shall be paid by Tenant in monthly installments, in
such amounts as are estimated and billed by Landlord at the beginning of each
calendar year, each installment being due on the first day of each calendar
month. Within one hundred twenty (120) days (or such additional time
thereafter as is reasonable under the circumstances) after the end of each
calendar year, Landlord shall deliver to Tenant a statement of Additional Rent
for such calendar year, and the monthly installments paid or payable shall be
adjusted between Landlord and Tenant, the parties hereby agreeing that Tenant
shall pay to Landlord or Landlord shall credit Tenant's account or (if such
adjustment is at the end of the Sublease Term) pay Tenant, as the case may be,
within thirty (30) days of receipt of such statement, such amounts as may be
necessary to effect adjustment to the actual Additional Rent for such calendar
year. If the Commencement Date shall be a day other than the first day of a
calendar year, or if the Expiration Date or other date of termination of this
Sublease shall be a day other than the last day of a calendar year, then the
Additional Rent for such partial calendar year shall be prorated on the basis
of the number of days during the year this Sublease was in effect in relation
to the total number of days in such year.
C. Tenant Verification. Tenant or its accountants shall have
the right to inspect, at reasonable times and in a reasonable manner during
the forty-five (45) calendar day period following the delivery of Landlord's
statement of Additional Rent, such of Landlord's books of account and records
as pertain to and contain information concerning such costs and expenses, in
order to verify the amounts thereof. If Tenant shall dispute any item or
items included in the determination of Additional Rent for a particular
calendar year, and such dispute is not resolved by the parties hereto within
forty-five (45) calendar days after the statement for such year was delivered
to Tenant, then either party may, within thirty (30) calendar days thereafter,
request that a firm of independent certified public accountants selected by
Landlord render an opinion as to whether or not the disputed item or items may
properly be included in the determination of Additional Rent for such year;
and the opinion of such firm on the matter shall be conclusive and binding
upon the parties hereto. The fees and expenses incurred in obtaining such an
opinion shall be borne by the party adversely affected thereby; and if more
than one item is disputed and the opinion adversely affects both parties, the
fees and expenses shall be apportioned accordingly. If Tenant shall not
dispute any item or items included in the determination of Additional Rent for
a particular calendar year within forty-five (45) calendar days after the
statement for such year was delivered to it, Tenant shall be deemed to have
approved such statement.
4.04 - Late Payment Service Charge; Interest. In the event any
installment of Base Rent, or any installment of Additional Rent, or any other
amount which may become due under this Sublease is not paid when due, and such
nonpayment continues for a period of ten (10) days after Landlord gives to
Tenant written notice of such nonpayment, then, for each and every such
payment, Tenant shall immediately pay a service charge equal to five percent
(5%) of the amount not timely paid, together with interest on the amount not
timely paid at the rate of eight percent (8%) per annum, from the due date of
such payment until paid. The provisions of this Section 4.04 shall not be
construed to extend the date for payment of Base Rent or Additional Rent, or
any other amount which may become due under this Sublease, or to relieve
Tenant of its obligations to pay all such items at the time or times herein
stipulated, and neither demand for, nor collection by Landlord of, late
payment service charges and interest pursuant to this Section 4.04 shall be
construed as a cure of any default in payment by Tenant.
V -- USE OF PREMISES
5.01 - Specific Use. The Premises shall be occupied and used
exclusively for the purposes specified in Item I of the Basic Sublease
Provisions and for purposes incidental thereto, and shall not be used for any
other purposes.
5.02 - Covenants Regarding Use. In connection with its use of
the Premises, Tenant agrees to do the following:
A. Tenant shall use the Premises and conduct its business
therein in a safe, careful, reputable and lawful manner; shall keep any
garbage, trash, rubbish or other refuse in sealed containers within the
interior of the Premises until removed and placed in a dumpster or other
authorized container for the deposit of garbage and refuse, which shall be
located in an area designated by Landlord.
B. Tenant shall not commit, nor allow to be committed, in,
on or about the Premises any act of waste, including any act which might
deface, damage or destroy the Premises or any part thereof; use or permit to
be used within the Premises any hazardous substance, equipment, or other thing
which might cause injury to person or property or increase the danger of fire
or other casualty in, on or about the Premises; or permit any objectionable or
offensive noise or odors to be emitted from the Premises. Notwithstanding the
foregoing, Landlord acknowledges that Tenant will utilize certain distribution
equipment which, but for this sentence, might be deemed to violate this
provision and use of such equipment is expressly permitted.
C. Tenant shall not use the Premises, or allow the Premises
to be used, for any purpose or in any manner other than the permitted uses
which would, in Landlord's opinion, invalidate any policy of insurance now or
hereafter carried on the Premises or the Building or increase the rate of
premiums payable on any such insurance policy. Should Tenant fail to comply
with this covenant, Landlord may, at its option, require Tenant to stop
engaging in such activity or to reimburse Landlord as additional rent for any
increase in premiums charged during the Term of this Sublease on the insurance
carried by Landlord on the Premises and the Building and attributable to the
use being made of the Premises by Tenant.
5.03 - Access to and Inspection of the Premises. Landlord, its
employees and agents, shall have the right to enter any part of the Premises,
at all reasonable times after reasonable notice, for the purpose of examining
or inspecting the same, showing the same to prospective purchasers, mortgagees
or tenants, and for making such repairs, alterations or improvements to the
Premises and the Building as Landlord may deem necessary or desirable.
Landlord shall incur no liability to Tenant for such entry, except with
respect to the negligence or intentional, wrongful acts or omissions of
Landlord, its agents, employees and invitees, nor shall such entry constitute
an eviction of Tenant or a termination of this Sublease, or entitle Tenant to
any abatement of rent therefor.
5.04 - Compliance with Laws. Tenant shall comply with all
laws, statutes, ordinances, rules, regulations and orders of any federal,
state, municipal, or other government or agency thereof having jurisdiction
over and relating to the use and occupancy of the Premises, including any such
laws, statutes or regulations requiring modifications or alterations to the
Premises.
5.05 - Rules and Regulations. The Building shall at all times
be subject to the management and control of the Landlord, and Landlord shall
have the right, from time to time, to establish, modify and enforce reasonable
rules and regulations with respect to the Building, and the use of the
Building by Tenant, its subtenants and their respective employees, agents,
customers and invitees shall be subject to such rules and regulations. Such
rules and regulations may include, but shall not be limited to restrictions
upon Tenant's hours of operation, noise levels with the Building, load
placement and utility usage.
VI - UTILITIES AND OTHER SERVICES
6.01 - Electric, Gas, Water and Telephone Service. Landlord
shall contract with the appropriate public utilities companies or other
providers supplying electric, gas, water, sanitary sewer, telephone services
and all other utilities and services to the Premises or to Tenant and shall pay
directly all charges for such services from and after the Commencement Date.
Thereafter, Landlord shall reasonably allocate these utility or service
charges attributable to the Premises or to Tenant and, on a periodic basis,
provide to Tenant a written statement detailing Tenant's allocation thereof.
Tenant shall pay to Landlord, within fifteen (15) days of Tenant's receipt of
the written statement therefor, all such utility and service charges.
Provided, however, that Tenant may, if such utilities or services are
separately metered for the Premises or if Tenant, at its sole cost and
expense, undertakes to have such utilities or services separately metered for
the Premises, elect to contract directly for all such services and to pay
directly all charges therefor.
6.02 - Janitorial and Refuse Collection Service. Landlord shall
contract for janitorial and refuse collection services for the Premises and
shall pay for all charges for such services (subject to the provisions of
Section 4.03 hereof).
6.03 - Discontinuances and Interruptions of Utility Services.
Landlord shall not be liable to Tenant in damages or otherwise (i) if any
utilities shall become unavailable from any public utility company, public
authority, or any other person supplying or distributing such utility, or (ii)
for any interruption in any utility service (including, without limitation, any
heating, ventilation or air conditioning) caused by the making of any
necessary repairs or improvements or by any cause beyond Landlord's reasonable
control, and the same shall not constitute a termination of this Sublease or
an eviction of Tenant.
VII -- SIGNS
Tenant shall not inscribe, paint, affix or display any signs,
advertisements or notices on the Premises, the Building, or the Campus without
Landlord's prior written consent, which consent Landlord shall have no
obligation to give and which may be given or withheld in Landlord's sole
discretion.
VIII -- REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS AND FIXTURES
8.01 - Repair and Maintenance of Building. Landlord shall keep
and maintain the Building (including all doors, whether interior or exterior,
any plate glass in the exterior walls and doors, the roof, exterior and
interior structural walls, and the foundation) and the electrical, plumbing,
heating, ventilation and air conditioning systems serving the Building in good
order, condition and repair, and shall make all necessary repairs to the
Building and the electrical, plumbing, heating, ventilation and air
conditioning systems serving the Building, and will make all replacements from
time to time required thereto.
8.02 - Repair and Maintenance of Premises. Tenant shall
maintain the Premises in good order and in the same condition as the Premises
existed and were accepted by Tenant on the Commencement Date, except that (i)
Tenant shall not be liable to Landlord for ordinary wear and tear to the
Premises, including the carpeting, window coverings and other parts thereof or
for damage to the Premises resulting from a fire or other casualty except as
provided elsewhere herein; (ii) Tenant shall not be permitted to make any
repairs, alterations or other improvements to the Premises without Landlord's
prior written consent; and (iii) Tenant, in satisfying its obligations under
this Section 8.02, may rely upon the cleaning, janitorial, maintenance, repair
and restoration services to be furnished or performed by Landlord, provided
that Tenant gives to Landlord notice of the need for the same. If a repair is
needed to so maintain the Building, then Tenant shall give to Landlord verbal
notice, and as soon thereafter as possible confirming written notice, of such
need for repair. Within a reasonable period of time thereafter, Landlord
shall examine the item or matter described in Tenant's notice, and if Landlord
should determine that such item or matter is in need of repair, Landlord shall
make such repair. The cost of maintaining the Premises, including the
cleaning, janitorial, maintenance and repair services specified in this
Section 8.02, shall be borne and paid by Landlord as part of the Operating
Expenses of the Building; and the cost of the restoration of any damaged part
of the Premises as a result of a fire or other casualty shall be borne by and
paid by Landlord as provided in Article IX, except for the cost of the
following repairs, alterations and other improvements made to the Premises:
(i) those made pursuant to Section 8.03; and (ii) those made necessary as a
result of Tenant's failure to perform any of its obligations as specified
herein or as a result of the negligence or intentional misconduct of Tenant or
any person for whom it is legally responsible. If either of the exceptions
specified in the preceding sentence shall apply, then Landlord shall make all
such repairs, alterations or other improvements, but the cost thereof shall be
borne by Tenant, who shall be separately billed and shall reimburse Landlord
therefor.
8.03 - Alterations or Improvements. Tenant shall neither make,
nor permit to be made, any alterations or improvements to the Premises without
obtaining the prior written consent of DLC and Landlord, which consent shall
not be unreasonably withheld. If DLC and Landlord allow Tenant to make any
such alterations or improvements, Tenant shall make the same in accordance
with all applicable laws and building codes, in a good and workmanlike manner
and in quality equal to or better than the original construction of the
Building, and shall comply with such requirements as DLC and Landlord
considers necessary or desirable, including, without limitation, requirements
as to the manner in which and the times at which such work shall be done and
the contractor or subcontractors to be selected to perform such work. Tenant
shall promptly pay all costs attributable to such alterations and improvements
and shall indemnify Landlord against any mechanics' liens or other liens or
claims filed or asserted as a result thereof and against any costs or expenses
which may be incurred as a result of building code violations attributable to
such work. Tenant shall promptly repair any damage to the Premises and the
Building caused by any such alterations or improvements. Any alterations or
improvements to the Premises, except movable equipment and trade fixtures,
shall become a part of the realty and the property of Landlord, and shall not
be removed by Tenant.
8.04 - Trade Fixtures. Any trade fixtures installed in the
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, and the like, may and, at the request of Landlord, shall be removed
on the Expiration Date or earlier termination of this Sublease, provided that
Tenant is not then in default, that Tenant bears the cost of such removal, and
further that Tenant repairs, at its own expense, any and all damage to the
Premises and the Building resulting from such removal. If Tenant fails to
remove any and all such trade fixtures from the Premises on the Expiration
Date or earlier termination of this Sublease, all such trade fixtures shall
become the property of Landlord, unless Landlord elects to require their
removal, in which case Tenant shall, at its cost, promptly remove same and
restore the Premises to its prior condition.
IX -- FIRE OR OTHER CASUALTY; CASUALTY INSURANCE
9.01 - Damage or Destruction by Casualty. If the Building
should be destroyed by fire or other casualty, the result of which being that
either Landlord or DLC terminates the Building Lease, then all Base Rent and
Additional Rent due under this Sublease shall be apportioned to and shall
cease as of the date of such casualty, and Tenant shall be given a reasonable
period of time, not to exceed thirty-five (35) calendar days after receipt
from Landlord of a termination notice, in which to remove its trade fixtures
and personal property, whereupon both parties shall be released from all
further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If such damage by fire or other casualty does
not result in a termination of the Building Lease, and the Building and the
Premises are reconstructed and restored by DLC in accordance with the Building
Lease to substantially the same condition as existed prior to the casualty,
then Base Rent and Additional Rent shall be abated from the date of the
casualty until substantial completion of the reconstruction repairs; and this
Sublease shall continue in full force and effect for the balance of the Term.
Notwithstanding the foregoing, in the event the Premises are substantially
destroyed or damaged (which, as used herein, means destruction or material
damages to at least fifty percent (50%) of the Premises, as applicable), then
Tenant may, at its option and without regard to whether Landlord has a similar
option to terminate the Building Lease, terminate this Sublease by giving
written notice thereof to Landlord within thirty (30) calendar days after the
date of such casualty. In such event, all Base Rent and Additional Rent due
under this Sublease shall be apportioned to and shall cease as of the date of
such casualty, and Tenant shall be given a reasonable period of time, not to
exceed thirty-five (35) calendar days, in which to remove its trade fixtures
and personal property, whereupon both parties shall be released from all
further obligations and liabilities hereunder (except for any obligations
previously incurred hereunder).
9.02 - Casualty Insurance. Landlord shall obtain and pay for
insurance against fire and other casualty in respect of the Building in
accordance with the terms and conditions of the Services Agreement. Landlord
shall not be responsible for, and shall not be obligated to insure against,
any loss of or damage to any personal property of Tenant or which Tenant may
have in the Premises, or any trade fixtures installed by or paid for by Tenant
in the Premises, or any additional improvements which Tenant may construct in
the Premises, as provided in Section 8.03.
9.03 - Waiver of Subrogation. Landlord and Tenant each hereby
waive any and all right that they may have to recover from the other damages
for any loss occurring to them by reason of any act or omission of the other,
but only to the extent that the waiving party is actually compensated therefor
by insurance; provided that this waiver shall be effective only with respect
to loss or damage occurring during such time as the waiving party's coverage
under the appropriate policy of insurance is not adversely affected by this
waiver. If, in order to avoid such adverse effect, an endorsement must be
added to any insurance policy required hereunder, Landlord and Tenant shall
cause such endorsement immediately to be added and thereafter maintained
throughout the Term of this Sublease.
X -- GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE
10.01 - Indemnification. Tenant shall indemnify Landlord and
hold it harmless from any and all liability for any loss, damage or injury to
person or property occurring in, on or about the Campus, the Building and the
Premises, regardless of cause, except for that caused by the negligence or
intentional wrongful acts of Landlord and its employees, agents, customers and
invitees; and Tenant hereby releases Landlord from any and all liability for
the same. Landlord shall indemnify Tenant and hold it harmless from any and
all liability for any loss, damage or injury to person or property resulting
from the gross negligence or intentional wrongful acts of Landlord and its
employees, agents, customers and invitees; and Landlord hereby releases Tenant
from any and all liability for the same. The obligation to indemnify
hereunder shall include the duty to defend against any claims asserted by
reason of such loss, damage or injury and to pay any judgments, settlements,
costs, fees and expenses, including attorneys' fees, incurred in connection
therewith.
10.02 - Tenant's Insurance. Tenant, shall, at all times during
the Term of this Sublease, carry, at its own expense, policies of insurance,
with such coverages, in such amounts, and with such insurers as are reasonably
acceptable to Landlord, covering Tenant's property and fixtures located in the
Premises.
XI - EMINENT DOMAIN
Pursuant to the terms of the Building Lease, if the whole or any
part of the Building shall be taken for public or quasi-public use by a
governmental or other authority having the power of eminent domain, or shall
be conveyed to such authority in lieu of such taking, and if such taking or
conveyance shall cause the remaining part of the Building to be untenantable
and inadequate for use by Landlord for the purpose for which it was leased
under the Building Lease, then Landlord may, at its option, terminate the
Building Lease as of the date DLC is required to surrender possession of the
Building. In such event, all Base Rent and Additional Rent due under this
Sublease shall be apportioned to and shall cease as of the date DLC is
required to surrender possession of the Building, and Landlord and Tenant
shall be released from all further obligations and liability hereunder (except
for any obligations previously incurred hereunder). If a part of the Building
shall be taken or conveyed, but the remaining part is tenantable and adequate
for Landlord's use, and if the Building Lease shall be terminated as to the
part taken or conveyed as of the date DLC surrenders possession and DLC shall
make such repairs, alterations and improvements (exclusive of repairs,
alterations or improvements to tenant improvements, if any, installed by
Tenant pursuant to Section 8.03) as may be necessary to render the part not
taken or conveyed tenantable, if such taking or conveyance includes any part
of the Premises, the Base Rent and Additional Rent shall be reduced in
proportion to the part of the Premises so taken or conveyed. All compensation
awarded for such taking or conveyance shall be the property of DLC, without
any deduction therefrom for any present or future estate of Landlord or
Tenant, and Tenant hereby assigns to DLC all of its right, title and interest
in and to any such award. However, Tenant shall have the right to recover
from such authority, but not from Landlord or DLC, such compensation as may be
awarded to Tenant on account of moving and relocation expenses and
depreciation to and removal of Tenant's trade fixtures and personal property
and alterations or tenant improvements, if any, installed by Tenant pursuant
to Section 8.03.
XII - LIENS
If, because of any act or omission of Tenant or anyone claiming
by, through or under Tenant, any mechanic's lien or other lien shall be filed
against the Campus, the Building, the Premises or against other property of
Landlord or DLC (whether or not such lien is valid or enforceable as such),
Tenant shall, at its own expense, cause the same to be discharged or bonded of
record within a reasonable time, not to exceed thirty (30) calendar days after
the date Tenant becomes aware of the filing thereof, and shall also indemnify
Landlord and hold it harmless from any and all claims, losses, damages,
judgments, settlements, costs and expenses, including attorneys' fees,
resulting therefrom or by reason thereof.
XIII - ASSIGNMENT AND SUBLETTING
Tenant will not assign, transfer, mortgage, or otherwise
encumber this Sublease or sublet or rent (or permit occupancy or use of) the
Premises, or any part thereof, without obtaining the prior written consent of
DLC and Landlord, which consent neither DLC or Landlord shall have an
obligation to give and which may be given or withheld in either's sole
discretion.
XIV - TRANSFER BY LANDLORD
14.01 - Assignment of Leasehold Rights. Subject to the terms
of the Building Lease, Landlord shall have the right to assign its rights under
the Building Lease at any time during the Term of this Sublease, subject only
to the rights of Tenant hereunder; and such assignment shall operate to
release Landlord from liability hereunder for all acts or omissions occurring
after the date of such assignment.
14.02 - Subordination. Unless a mortgagee shall otherwise
elect, as provided in Section 14.03, this Sublease is and shall be subject and
subordinate to the lien of any and all mortgages (which term "mortgages" shall
include both construction and permanent financing and shall include deeds of
trust and similar security instruments) which may now or hereafter encumber or
otherwise affect the Building Lease, the Building, the Campus, or both, and to
all and any renewals, extensions, modifications, recastings or refinancings
thereof. In confirmation of such subordination, Tenant shall, at the request
of either DLC or Landlord or both, promptly execute any requisite or
appropriate certificate or other document. Tenant agrees that in the event
that any proceedings are brought for the foreclosure of any such mortgage,
Tenant shall attorn to the purchaser at such foreclosure sale, if requested to
do so by such purchaser, and to recognize such purchaser as the landlord under
this Sublease, provided that such purchaser agrees not to disturb Tenant's
possession and other rights under this Sublease so long as Tenant is not in
default hereunder, and Tenant waives the provisions of any statute or rule of
law, now or hereafter in effect, which may give or purport to give Tenant any
right to terminate or otherwise adversely affect this Sublease and the
obligations of Tenant hereunder, in the event that any such foreclosure
proceeding is prosecuted or completed.
14.03 - Mortgagee's Unilateral Subordination. If a mortgagee
shall so elect by notice to Tenant or by the recording of a unilateral
declaration of subordination, this Sublease and Tenant's rights hereunder
shall be superior and prior in right to the mortgage of which such mortgagee
has the benefit, with the same force and effect as if this Sublease had been
executed, delivered and recorded prior to the execution, delivery and
recording of such mortgage, subject, nevertheless, to such conditions as may
be set forth in any such notice of declaration which do not result in Tenant's
occupancy under this Sublease being disturbed while Tenant is not in default
hereunder.
14.04 - Subordination to Covenants, Conditions and
Restrictions. Tenant agrees that this Sublease shall be subordinate and
subject to any covenants, conditions, easements and restrictions ("CCR's")
which DLC, in its sole discretion, hereafter grants or adopts with respect to
or imposes upon the Campus, or any portion thereof, as long as such CCR's do
not substantially impair Tenant's use of the Premises for the permitted uses
hereunder. In confirmation of such subordination, Tenant shall, at DLC's
request, promptly execute any requisite or appropriate certificate or other
document.
14.05 - Exculpation. If Landlord shall fail to perform any
covenant, term or condition of this Sublease upon Landlord's part to be
performed, and if, as a consequence of such default, Tenant shall recover a
money judgment against Landlord, such judgment shall be satisfied only out of
the proceeds of sale received upon execution of such judgment and levied
thereon against the Landlord's leasehold interest in the Building and out of
rents or other income from the Building receivable by Landlord, or out of the
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's leasehold interest in the Building, subject,
nevertheless, to the rights of any mortgagee, and neither Landlord nor any of
the shareholders, directors or officers of Landlord shall be liable for any
deficiency.
XV - DEFAULTS AND REMEDIES
15.01 - Defaults by Tenant. The occurrence of any one or more
of the following events shall be a default and breach of this Sublease by
Tenant:
A. Tenant shall fail to pay any monthly installment of Base
Rent or Additional Rent within five (5) calendar days after the same shall be
due and payable, or any other sum(s) within ten (10) calendar days after the
same shall be due and payable, and such nonpayment continues for a period of
ten (10) days after Landlord gives to Tenant written notice of such nonpayment.
B. Tenant shall fail to perform or observe any term,
condition, covenant or obligation required to be performed or observed by it
under this Sublease for a period of thirty (30) calendar days or more after
notice thereof from Landlord; provided, however, that if the term, condition,
covenant or obligation to be performed by Tenant is of such nature that the
same cannot reasonably be performed within such thirty (30) day period, such
default shall be deemed to have been cured if Tenant commences such
performance within said thirty (30) day period and thereafter diligently
completes the same.
C. A trustee or receiver shall be appointed to take
possession of substantially all of Tenant's assets in or about the Premises or
of Tenant's interest in this Sublease (and Tenant does not regain possession
within sixty (60) calendar days after such appointment); Tenant makes an
assignment for the benefit of creditors; or substantially all of Tenant's
assets in or about the Premises or Tenant's interest in this Sublease are
attached or levied upon under execution (and Tenant does not discharge the
same within sixty (60) calendar days thereafter).
D. A petition in bankruptcy, insolvency, or for
reorganization or arrangement is filed by or against Tenant pursuant to any
federal or state statute (and, with respect to any such petition filed against
it, Tenant fails to secure a stay or discharge thereof within sixty (60)
calendar days after the filing of the same).
15.02 - Remedies of Landlord - Upon the occurrence of any event
of default set forth in Section 15.01, Landlord shall have the following
rights and remedies, in addition to those allowed by law, any one or more of
which may be exercised without further notice to or demand upon Tenant:
E. Landlord may re-enter the Premises and cure any default
of Tenant, in which event Tenant shall reimburse Landlord as additional rent
for any costs and expenses which Landlord may incur to cure such default; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
sustain by reason of Landlord's action, regardless of whether caused by
Landlord's negligence or otherwise.
F. Landlord may terminate this Sublease as of the date of
such default, in which event: (1) neither Tenant nor any person claiming
under or through Tenant shall thereafter be entitled to possession of the
Premises, and Tenant shall immediately thereafter surrender the Premises to
Landlord; (2) Landlord may re-enter the Premises and dispossess Tenant or any
other occupants of the Premises by force, summary proceedings, ejectment or
otherwise, and may remove their effects, without prejudice to any other remedy
which Landlord may have for possession or arrearages in rent; and (3)
notwithstanding the termination of this Sublease (a) Landlord may recover from
Tenant, as general damages, the maximum amount allowed by law, which, at a
minimum, shall be the present value of the balance of the Base Rent and
Additional Rent which would have been due and payable for the balance of the
Term of this Sublease, less the present value of the fair rental value of the
Premises for such period (with said present values being determined using an
eight percent (8%) discount rate), whereupon Tenant shall be obligated to pay
the same to Landlord, together with all costs, losses and damages which
Landlord may sustain by reason of such termination and re-entry, or (b)
Landlord may relet all or any part of the Premises for a term different from
that which would otherwise have constituted the balance of the Term of this
Sublease, and for rent and on terms and conditions different from those
contained herein, whereupon Tenant shall immediately be obligated to pay to
Landlord, as liquidated damages, the difference between the rent provided for
herein and that provided for in any lease covering a subsequent reletting of
the Premises, for the period which would otherwise have constituted the
balance of the Term of this Sublease, together with all of Landlord's costs
and expenses for preparing the Premises for reletting, including all repairs,
brokers' and attorneys' fees, and all costs, losses and damages which Landlord
may sustain by reason of such termination, re-entry and reletting, it being
expressly understood and agreed that the liabilities and remedies specified in
clauses (a) and (b) hereof shall survive the termination of this Sublease.
Notwithstanding the foregoing, Landlord shall use all reasonable efforts to
mitigate its damages.
G. Landlord may sue for injunctive relief or to recover
damages for any loss resulting from the breach.
15.03 - Non-Waiver of Defaults. The failure or delay by
Landlord or Tenant to enforce or exercise, at any time, any of the rights or
remedies or other provisions of this Sublease shall not be construed to be a
waiver thereof, nor affect the validity of any part of this Sublease or the
right of Landlord or Tenant thereafter to enforce each and every such right or
remedy or other provision. No waiver of any default and breach of the Sublease
shall be held to be a waiver of any other default and breach. The receipt by
Landlord of less than the full rent due shall not be construed to be other
than a payment on account of rent then due, nor shall any statement on
Tenant's check or any letter accompanying Tenant's check be deemed an accord
and satisfaction, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of the rent due or to pursue any other
remedies provided in this Sublease. No act or omission by Landlord or its
employees or agents during the Term of this Sublease shall be deemed an
acceptance or a surrender of the Premises, and no agreement to accept such a
surrender shall be valid unless in writing and signed by Landlord.
XVI - NOTICE AND PLACE OF PAYMENT
16.01 - Notice. Any notice or other communication required or
permitted to be given to a party under this Sublease shall be in writing,
unless otherwise specified in this Sublease, and shall be given by one of the
following methods to such party at the address set forth in Item H of the
Basic Sublease Provisions: (1) it may be sent by registered or certified United
States mail, return receipt requested and postage prepaid, or (2) it may be
sent by ordinary United States mail or delivered in person or by courier,
telecopier, telex, telegram, interconnected computers, or any other means for
transmitting a written communication. Any such notice shall be deemed to have
been given as follows: (i) when sent by registered or certified United States
mail, as of the earlier of date of delivery shown on the receipt, or as of the
second calendar day after it was mailed, and (ii) when delivered by any other
means, upon receipt. Either party may change its address for notice by giving
written notice thereof to the other party.
16.02 - Place of Payment. All rent and other payments required
to be made by Tenant to Landlord shall be delivered or mailed to Landlord at
the address specified in Item H of the Basic Sublease Provisions, or any other
address Landlord may specify from time to time by written notice given to
Tenant.
XVII - HAZARDOUS SUBSTANCES
Tenant shall not cause or permit any Hazardous Substance (as
hereinafter defined) to be used, stored, generated or disposed of on or in the
Premises or the Building by Tenant, Tenant's agents, employees, contractors,
invitees or sublessees, without first obtaining DLC and Landlord's written
consent. If Hazardous Substances are used, stored, generated or disposed of
on or in the Premises, or if the Premises or the Building becomes contaminated
in any manner for which Tenant is legally liable, Tenant shall indemnify and
hold harmless Landlord from any and all claims, damages, fines, judgments,
penalties, costs, liabilities or losses (including, without limitation, a
decrease in value of the Building, damages caused by loss or restriction of
rentable or usable space, or any damages caused by adverse impact on marketing
of the space, and any and all sums paid for settlement of claims, attorneys'
fees, consultant and expert fees) arising during or after the Term of the
Lease, and arising as a result of that contamination by Tenant. This
indemnification includes, without limitation, any and all costs incurred
because of any investigation of the site or any cleanup, removal or
restoration mandated by a federal, state or local agency or political
subdivision. Without limitation of the foregoing, if Tenant causes or permits
the presence of any Hazardous Substance on or in the Premises or the Building
and that results in contamination, Tenant shall promptly, at its sole expense,
take any and all necessary actions to return the Premises and the Building to
the condition existing prior to the presence of any such Hazardous Substance
on or in the Premises. Tenant shall first obtain Landlord's approval for any
such remedial action. As used herein, "Hazardous Substance" means any
substance that is toxic, ignitable, reactive or corrosive and that is
regulated by any local government, the State of Ohio, or the United States
Government. "Hazardous Substance" includes any and all materials or
substances that are defined as "hazardous waste", "extremely hazardous waste",
or a "hazardous substance" pursuant to state, federal or local government law.
"Hazardous Substance" includes, but is not restricted to, asbestos,
polychlorinated biphenyls, petroleum, petroleum products, and petroleum wastes.
XVIII - MISCELLANEOUS GENERAL PROVISIONS
18.01 - Relocation. Tenant acknowledges and agrees that,
pursuant to the Building Lease between DLC and Landlord, DLC has reserved the
right and option to relocate Landlord to a different building within the
Campus. Tenant agrees that this Sublease is, and Tenant's possession rights
hereunder are, subject to said relocation rights. In the event Landlord is
compelled to relocate to another building, Tenant agrees to relocate in
accordance with DLC's plan of relocation and to cooperate fully with DLC and
Landlord in completing the relocation.
18.02 - Definition of Rent. Any amounts of money to be paid
by Tenant to Landlord pursuant to the provisions of this Sublease, whether or
not such payments are denominated "Base Rent" or "Additional Rent" and whether
or not they are to be periodic or recurring, shall be deemed "Base Rent" or
"Additional Rent" for purposes of this Sublease; and any failure to pay any of
the same, as provided in Section 16.01 hereof, shall entitle Landlord to
exercise all of the rights and remedies afforded hereby or by law for the
collection and enforcement of Tenant's obligation to pay rent. Tenant's
obligation to pay any such Base Rent or Additional Rent, pursuant to the
provisions of this Sublease, shall survive the expiration or other termination
of this Sublease and the surrender of possession of the Premises after any
hold over period.
18.03 - Estoppel Certificate. Tenant agrees, at any time and
from time to time, upon not less than ten (10) calendar days prior written
notice by DLC or Landlord, to execute, acknowledge and deliver to DLC or
Landlord, as appropriate, a statement in writing (i) certifying that this
Sublease is unmodified and in full force and effect, (or, if there have been
modifications, stating such modifications); (ii) stating the dates to which the
rent and any other charges hereunder have been paid by Tenant; (iii) stating
whether or not, to the best of Tenant's knowledge, Landlord is in default in
the performance of any covenant, agreement or condition contained in this
Sublease, and, if so, specifying each such default of which Tenant may have
knowledge; and (iv) stating the address to which notices to Tenant should be
sent. Any such statement delivered pursuant hereto may be relied upon by any
owner of the Building or the Campus, any prospective purchaser of the
Building, any mortgagee or prospective mortgagee of the Building, or any
prospective assignee of any such mortgagee.
18.04 - Governing Law. This Sublease shall be construed and
enforced in accordance with the laws of the State of Ohio.
18.05 - Successors and Assigns. This Sublease and the
respective rights and obligations of the parties hereto shall inure to the
benefit of and be binding upon the successors and assigns of the parties
hereto, as well as the parties themselves; provided, however, that Landlord,
its successors and assigns, shall be obligated to perform Landlord's covenants
under this Sublease only during and in respect to their successive periods of
ownership during the Term of this Sublease.
18.06 - Severability of Invalid Provisions. If any provision of
this Sublease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
18.07 - Certain Words, Gender and Headings. As used in this
Sublease, the word "person" shall mean and include, where appropriate, an
individual, corporation, partnership or other entity; the plural shall be
substituted for the singular and the singular for the plural, where
appropriate; and words of any gender shall include any other gender. The
topical headings of the several paragraphs of this Sublease are inserted only
as a matter of convenience and reference, and do not affect, define, limit or
describe the scope or intent of this Sublease.
18.08 - Quiet Enjoyment. Subject to the terms and conditions
of the Building Lease and the performance by DLC of its obligations
thereunder, so long as Tenant pays the prescribed rent and performs or
observes all of the terms, conditions, covenants and obligations of this
Sublease required to be performed or observed by it hereunder, Tenant shall,
at all times during the Term hereof, have the peaceable and quiet enjoyment,
possession, occupancy and use of the Premises, without any interference from
Landlord or any person or persons claiming the Premises, by, through or under
Landlord.
18.09 - Complete Agreement; Amendments. This Sublease,
including all Exhibits, Riders and Addenda, constitutes the entire agreement
between the parties hereto; it supersedes all previous understandings and
agreements between the parties, if any, and no oral or implied representation
or understandings shall vary its terms; and it may not be amended, except by a
written instrument executed by both parties hereto.
18.10 - Reasonable Modifications. Tenant will consent to such
reasonable modifications of this Sublease as Landlord may hereafter find it
necessary to make in order to obtain mortgage financing, provided that such
modifications (a) do not change the rental to be paid hereunder or the length
of the Term of the Sublease; and (b) do not impose obligations upon Tenant
which are substantially or practically more burdensome to it than the
obligations contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Sublease as of the day and year first above written.
Witnesses as to Landlord: LANDLORD:
VICTORIA'S SECRET STORES, INC., a
Delaware corporation
/s/ David M. Schira By: George R. Sappenfield
Print Name: David M. Schira George R. Sappenfield,
Vice President - Real Estate
/s/ Joan C. Makley
Print Name: Joan C. Makley
ATTESTED BY:
/s/ David M. Schira /s/ C. David Zoba
Print Name: David M. Schira C. David Zoba,
Assistant Secretary
/s/ Joan C. Makley
Print Name: Joan C. Makley
Witnesses as to Tenant: TENANT:
ABERCROMBIE & FITCH, INC., a
Delaware corporation
/s/ David M. Schira By: George R. Sappenfield
Print Name: David M. Schira George R. Sappenfield,
Vice President - Real Estate
/s/ Joan C. Makley
Print Name: Joan C. Makley
ATTESTED BY:
/s/ David M. Schira /s/ C. David Zoba
Print Name: David M. Schira C. David Zoba,
Assistant Secretary
/s/ Joan C. Makley
Print Name: Joan C. Makley
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 12th day of
September, 1995, by George R. Sappenfield and C. David Zoba, Vice President -
Real Estate and Assistant Secretary, respectively, of Victoria's Secret
Stores, Inc., a Delaware corporation, on behalf of the corporation.
/s/ Joan C. Makley
Notary Public
[Notarial Seal of Joan
C. Makley is contained here]
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 12th day of
September, 1995, by George R. Sappenfield and C. David Zoba, Vice President -
Real Estate and Assistant Secretary, respectively, of Abercrombie & Fitch,
Inc., a Delaware corporation, on behalf of the corporation.
/s/ Joan C. Makley
Notary Public
[Notarial Seal of Joan
C. Makley is contained here]
This Instrument Prepared By:
Vorys, Sater, Seymour and Pease
52 East Gay Street
P.O. Box 1008
Columbus, OH 43216-1008
CONSENT TO SUBLEASE AND NONDISTURBANCE AGREEMENT
OF DISTRIBUTION LAND CORP.
This Consent to Sublease and Nondisturbance Agreement is made
as of the 1st day of June, 1995, by Distribution Land Corp., a Delaware
Corporation ("DLC"), and is executed in conjunction with that certain Sublease
Agreement, of even date herewith, and to which this instrument is attached
(the "Sublease"). Defined terms not otherwise defined herein shall have the
same meanings as given to them in the Sublease.
R E C I T A L S:
WHEREAS, DLC is the landlord under the Building Lease pursuant
to which DLC has leased to Landlord the Building; and
WHEREAS, the Building Lease is the basis for Landlord's right to
use and occupy the Building (including the Premises) and, upon the consent of
DLC, to sublease the Premises to Tenant pursuant to the terms and conditions
of the Sublease; and
WHEREAS, DLC and Tenant wish to confirm their agreements and
understandings relative to the Building Lease and the Sublease.
NOW, THEREFORE, in consideration of the covenants set forth in
the Sublease, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, DLC hereby:
1. Consents to the Sublease and the Tenant's use and
occupancy of the Premises thereunder.
2. Agrees that, notwithstanding an event of default by
Landlord under the Building Lease (and the subsequent termination of the
Building Lease as a result thereof) or the termination of the Building Lease as
a result of Tenant's failure or refusal to exercise its Renewal Options
thereunder or otherwise, and provided Tenant is not in default after the
expiration of any applicable cure period provided for in the Sublease and
Tenant attorns to DLC in a manner acceptable to DLC, then:
(a) the Sublease (and all amendments thereto) and the
rights of the Tenant thereunder, shall continue in
full force and effect and shall not be terminated,
impaired, or otherwise affected except in
accordance with the terms of the Sublease; and
(b) if Tenant desires to enter into a direct and
separate lease with DLC for the Premises, then DLC
shall cooperate in good faith and likewise agree to
enter into a direct and separate lease with Tenant
for the Premises.
IN WITNESS WHEREOF, Distribution Land Corp. has caused this
instrument to be executed by its duly authorized officer as of the date first
above written.
Witnesses: DISTRIBUTION LAND CORP.,a
Delaware corporation
/s/ Debra R. Robinett By: /s/ George R. Sappenfield
Print Name: Debra R. Robinett George R. Sappenfield,
Vice President - Real Estate
/s/ Dorothy J. Martin
Print Name: Dorothy J. Martin
ATTESTED BY:
/s/ Debra R. Robinett /s/ C. David Zoba
Print Name: Debra R. Robinett C. David Zoba,
Assistant Secretary
/s/ Dorothy J. Martin
Print Name: Dorothy J. Martin
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 21st
day of September, 1995, by George R. Sappenfield and C. David Zoba, Vice
President - Real Estate and Assistant Secretary, respectively, of Distribution
Land Corp., a Delaware corporation, on behalf of the corporation.
/s/ Debra R. Robinett
Notary Public
[Notarial Seal of Debra R.
Robinett is contained here]
EXHIBIT A
[Image material is contained here
consisting of a map of Distribution
Center No. 4 Building Area.]
EXHIBIT B
[Image material is contained here
consisting of a blueprint of Distribution
Center No. 4, first floor.]
EXHIBIT C
None
Exhibit 10.4
FORM OF
SHARED FACILITIES AGREEMENT
This SHARED FACILITIES AGREEMENT is entered into as of
[_________], 1996 (this "Agreement"), by and between [TENANT ENTITY], a
Delaware corporation ("Sublessor"), and ABERCROMBIE & FITCH CO., a Delaware
corporation (" Sublessee").
WITNESSETH:
WHEREAS, Sublessor is a tenant under each of the lease
agreements described on Schedule 1 attached hereto and made a part hereof;
WHEREAS, prior to the date hereof, Sublessee has occupied all
or a portion of the premises leased by Sublessor under such lease agreements
without a written agreement; and
WHEREAS, Sublessor and Sublessee desire to evidence their
agreement relating to such shared occupancy upon the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the covenants set forth
herein, the parties covenant and agree as follows
1. Definitions. The following are the defined terms used in this
Agreement:
"Affiliate" means a corporation, partnership or other business
entity, which, directly or indirectly, controls, is controlled by, or is
under common control with, another corporation, partnership or other
business entity. If more than 50 percent of the voting stock of a
corporation shall be owned by another corporation or by a partnership or
other business entity, the corporation whose stock is so owned shall be
deemed to be controlled by the corporation, partnership or business
entity owning such stock.
"Lease Term" means the initial term of a Prime Lease as it may be
extended by Sublessor pursuant to a renewal or extension option therein.
"Leased Premises" means the premises in which Sublessor has a
leasehold interest under a Prime Lease or all such premises
collectively, as the context may require.
"Lessor" means the landlord under a Prime Lease.
"Prime Lease" means each of the leases described on Schedule 1;
all such leases are collectively referred to as the "Prime Leases". The
parties may, after the date hereof, designate any other lease as a Prime
Lease subject to the terms of this Agreement, by replacing Schedule 1
with a new Schedule 1,which describes such other lease and which is
initialed by both parties.
"Space Size Ratios" means, in respect of any Leased Premises and
the Subleased Premises forming a part thereof, the ratio that the size
of the Subleased Premises bears to the size of the entire Leased
Premises and the ratio that the size of the Leased Premises exclusive
of the Subleased Premises bears to the size of the entire Leased
Premises, with all such sizes being as reflected on Schedule 1.
"Subleased Premises" means the portion of the Leased Premises
occupied by Sublessee as described on Schedule 1, individually or
collectively, as the context may require.
2. Sublease. Sublessor, in consideration of the covenants and
agreements to be performed by Sublessee and upon the terms and conditions
hereinafter stated, does hereby sublease, demise and let unto Sublessee, and
Sublessee does hereby sublease from Sublessor, each of the Subleased Premises
upon the terms and conditions set forth below.
3. Priority of Prime Lease. This Agreement, as it relates to the
Subleased Premises, is expressly subject and subordinate to the applicable
Prime Lease and, subject to the modifications set forth in this Agreement, all
the terms, conditions and covenants therein contained. Except to the extent
otherwise expressly set forth in this Agreement, in which event the terms of
this Agreement shall prevail, all the terms, covenants and conditions of a
Prime Lease shall be applicable to this Agreement with respect to the
corresponding Subleased Premises with the same force and effect as if
Sublessor were the landlord under the Prime Lease and Sublessee were the
tenant thereunder and the provisions of the Prime Lease are incorporated
herein by reference with the same force and effect as if they were fully set
forth herein (except to the extent that they are modified by the terms of this
Agreement), and Sublessee shall assume and fully perform and discharge, with
regard to the Subleased Premises, all the obligations of Sublessor as tenant
under the Prime Lease during the Lease Term. In the event of any breach by
Sublessee of any term, covenant or condition of this Agreement, Sublessor
shall have all the rights against Sublessee as would be available to the
Lessor against the Sublessor as tenant under the applicable Prime Lease if
such breach were by Sublessor thereunder.
4. Term. The term of the sublease granted herein shall be
coextensive, less one day, with the Lease Term of the applicable Prime Lease,
unless sooner terminated as provided herein. Sublessee acknowledges that the
Lease Term may include renewal or extension options exercisable by Sublessor
and that the exercise of any such option shall be determined by Sublessor in
its sole and absolute discretion. Sublessor will notify Sublessee in the event
Sublessor has determined not to exercise any renewal or extension option and
will offer to assign the Prime Lease, to the extent permitted under such Prime
Lease or by the Lessor, or otherwise to cooperate with Sublessee to allow
Sublessee, in its discretion, to exercise any such option with respect to the
Leased Premises, so long as Sublessor has no responsibility or liability under
the Prime Lease after expiration of the Lease Term (without consideration of
such option)
5. Utilities/Other Services. (a) Except as otherwise specified
herein, the only services, utilities or rights to which Sublessee is
entitled under this Agreement with respect to the Subleased Premises are
those to which Sublessor is entitled from the Lessor under the applicable
Prime Lease and Sublessor shall have no liability to Sublessee for the
failure to provide such services, utilities or rights unless such failure
to provide same is the result of some act or omission of Sublessor under
the Prime Lease. In addition, Sublessee shall not be entitled to utility
services greater than that which it was receiving (if Sublessee was in
possession) prior to the date hereof.
(b) If any utility services to the Leased Premises are not
separately metered as between the Subleased Premises and the remainder of
the Leased Premises, the accounts shall be in the name of Sublessor, or the
Lessor if required by the Prime Lease, and the payments to the utility
companies or the Lessor, as the case may be, shall be shared prorata by
Sublessee and Sublessor based on the Space Size Ratios, and without regard
to consumption. Sublessee shall pay its share of same to Sublessor on or
before the later of (i) five business days after Sublessee receives an invoice
(including a copy of the Lessor's invoice, if any) for same or (ii) the date
such payment is due and payable to the utility company or the Lessor, as
the case may be
6. Monetary Obligations. (a) All monetary obligations of Sublessor
under a Prime Lease, other than percentage rent, shall be shared prorata by
Sublessee and Sublessor based on the Space Size Ratios. Any percentage rent
payable under a Prime Lease shall be prorated by Sublessor and Sublessee based
solely on the sales made by each party during the period for which such
percentage rent is payable. Each party's proportionate share of percentage
rent payable under a Prime Lease shall be equal to the ratio that such party's
sales during the period for which such percentage rent is payable bears to the
aggregate of such party's sales and the other party's sales for such period.
For purposes of such proration, the percentage rent breakpoint shall not be
prorated based on the size of the Subleased Premises or by any other method.
(b) Sublessee shall pay its prorata share of such monetary
obligations to Sublessor on or before the later of (i) five business days
after Sublessee's receipt of written notice of such obligation (if the
obligation is a recurring one, only one notice that specifies the due dates
shall be required) and a copy of the Lessor's invoice, if any, or (ii) the
date Sublessor is required to pay such monetary obligations to the Lessor.
The monetary obligations referred to in this Section 6 shall include,
without limitation, base, fixed and minimum rent, percentage rent, common
area maintenance charges, enclosed mall maintenance charges, real estate
taxes and assessments, insurance charges, merchants association dues,
marketing, advertising and other promotional fund contributions and HVAC
and chilled water charges.
7. Non-Monetary Obligations. In the event any non-monetary
obligation of the tenant under a Prime Lease, other than those for which
specific provision is made in this Agreement, is not attributable to the
Subleased Premises exclusively or the remainder of the Leased Premises
exclusively (e.g., the maintenance of insurance or the repair of any HVAC unit
serving the entire Leased Premises), such obligation shall be performed by
Sublessor and the cost of performing same shall be shared prorata by Sublessee
and Sublessor based on the Space Size Ratios, unless the parties have agreed
to a different cost-sharing arrangement under a separate written agreement (e
g, the "Services Agreement" between The Limited, Inc., and Abercrombie & Fitch
Co.)
8. Tenant Inducements. The parties acknowledge that all monetary
tenant inducements arising prior to the date hereof, including, without
limitation, tenant improvement allowances and moving allowances, under a Prime
Lease have been or will be received by Sublessor for its sole and exclusive
benefit, unless the parties have made prior arrangements (through course of
conduct or written or oral agreement) to share any such monetary inducement.
All monetary inducements arising after the date hereof, including, without
limitation, tenant improvement allowances and moving allowances, under a Prime
Lease shall be shared prorata by Sublessee and Sublessor based on the Space
Size Ratios, unless otherwise agreed by the parties
9. Termination Rights. All rights of the tenant to terminate a Prime
Lease, including, without limitation, any "kickout" or "cotenancy" rights or
rights to terminate in the event of a casualty or condemnation or default of
the Lessor, shall belong exclusively to Sublessor and may be exercised by
Sublessor in its sole and absolute discretion without liability to Sublessee;
provided, however, Sublessor will notify Sublessee of its intent to terminate
a Prime Lease and will offer to assign the Prime Lease to Sublessee, to the
extent permitted under such Prime Lease or by the Lessor, so long as Sublessor
has no responsibility or liability under the Prime Lease after such
assignment. Sublessee acknowledges that in the event of any such termination,
this Agreement shall terminate with respect to such Prime Lease.
10. Access; Alterations. (a) The parties acknowledge that
certain of the Leased Premises may be configured such that Sublessor may
need access to the Subleased Premises and Sublessee may need access to the
remainder of the Leased Premises for purposes of maintaining or making
adjustments or repairs to facilities (e.g., pipes, conduits, electrical and
telecommunication wiring, etc.) serving such party's premises or for
purposes of using restroom facilities or stock or storage rooms or for such
other reasonable purposes. The parties hereby grant each other access
through their respective premises for such purposes, provided that the
party exercising such right does not unreasonably interfere with the
business of the other party.
(b) No party may make any alterations to its premises that would
adversely affect the other party's business or use or occupancy of its
premises, including any alterations that would (i) reduce the availability of
utilities, HVAC or other services to the other party's premises, (ii) impair
access to the other party's premises or (iii) cause the other party's premises
not to comply with applicable law
11. Assignment and Subletting. (a) Sublessee may not assign this
Agreement, or allow it to be assigned, in whole or in part, by operation of
law or otherwise or mortgage or pledge the same, or sublet the Subleased
Premises, or any part thereof (any of the foregoing transactions is herein
referred to as a "Transfer"), without the prior written consent of Sublessor,
which consent may be withheld by Sublessor in its sole and absolute discretion
without regard to standards of reasonableness. Notwithstanding the foregoing,
but subject to the terms of the Prime Lease, Sublessee may effect a Transfer,
without the consent of Sublessor, to an Affiliate of Sublessee or Sublessor,
provided that if at any time after such permitted Transfer the transferee is
no longer an Affiliate of either Sublessor or Sublessee, the event terminating
such affiliation shall be deemed a Transfer subject to Sublessor's consent
pursuant to the preceding sentence.
(b) In the event of any Transfer, whether or not Sublessor grants
its consent to such Transfer or has the right to withhold its consent to such
Transfer, Sublessee shall remain fully liable to perform its duties under this
Agreement following a Transfer. If Sublessee enters into a Transfer, Sublessee
shall pay Sublessor any and all consideration received by Sublessee in such
transaction (as rent or inducement for such Transfer) in excess of the total
sums that Sublessee is obligated to pay Sublessor under this Agreement, or the
prorated portion thereof if only a portion of the Subleased Premises is
Transferred, as additional rent under this Agreement without affecting or
reducing any other obligations of Sublessee hereunder. Sublessee acknowledges
that the foregoing is intended to preclude Sublessee from obtaining a profit
from a Transfer.
(c) Any proposed Transfer shall also be subject to the
restrictions and requirements set forth in the Prime Lease. Any purported
Transfer consummated in violation of the provisions of this Section 11 shall
be null and void and of no force or effect.
(d) In the event Sublessor intends to assign a Prime Lease or
further sublet the Leased Premises exclusive of the Subleased Premises to a
person or entity that is not an Affiliate of Sublessor, Sublessor shall give
Sublessee written notice of such proposed assignment or sublease at least 60
days prior to the effective date of such assignment or sublease, and Sublessee
shall have the right to terminate this Agreement with respect to such Prime
Lease by giving written notice thereof to Sublessor prior to such effective
date. Sublessee's termination notice shall specify the termination's effective
date, which shall be no later than 60 days after the effective date of the
Sublessor's assignment or sublease. If Sublessee does not elect to terminate
this Agreement with respect to such Prime Lease or such assignment or sublease
is to an Affiliate of Sublessor, the following shall be conditions precedent
to the effectiveness of such assignment or sublease: (i) in the case of an
assignment, Sublessor shall cause the assignee to assume and be bound by the
terms of this Agreement, but only to the extent such terms apply to such Prime
Lease, and, notwithstanding such assignment, Sublessor shall not be released
from and shall remain fully liable under the terms of this Agreement with
respect to such Prime Lease; and (ii) in the case of a sublease, Sublessor
shall cause the sublessee to acknowledge the rights of Sublessee under this
Agreement with respect to the Subleased Premises and the remainder of the
Leased Premises and agree that its possession is subject to such rights of
Sublessee.
12. No Default Under Prime Lease. (a) Sublessee shall do
nothing nor permit anything to be done that would cause the Prime Lease to
be terminated or forfeited because of any right of termination or
forfeiture reserved or vested in the Lessor under the Prime Lease or that
would cause Sublessor to be in default under the Prime Lease or to pay
damages or any penalty (e.g., late charges). Except as may be due to the
default by Sublessor under the Prime Lease or except as may be due to the
negligence or willful misconduct of Sublessor, Sublessee will defend,
indemnify and hold harmless Sublessor from and against all claims, damages,
losses, liabilities, obligations and costs (including, without limitation,
reasonable attorney's fees) of any kind arising from any breach or default
on the part of Sublessee by reason of which the Prime Lease may be
terminated or forfeited or Sublessor found to be in default thereunder or
the Lessor may be entitled to damages or a penalty.
(b) Sublessor shall do nothing nor permit anything to be done
that would cause the Prime Lease to be terminated or forfeited because of any
right of termination or forfeiture reserved or vested in the Lessor under the
Prime Lease or that would cause Sublessor to be in default under the Prime
Lease or to pay damages or any penalty (e.g., late charges). Except as may be
due to the default by Sublessee under this Agreement or except as may be due
to the negligence or willful misconduct of Sublessee, Sublessor will defend,
indemnify and hold harmless Sublessee from and against all claims, damages,
losses, liabilities, obligations and costs (including, without limitation,
reasonable attorney's fees) of any kind arising from any breach or default on
the part of Sublessor by reason of which the Prime Lease may be terminated or
forfeited or the Lessor may be entitled to damages or a penalty
13. Familiaritv with Prime Lease. Sublessee represents and
acknowledges that it is familiar with the terms of the Prime Leases.
14. Consent/Approvals. In the event Sublessee seeks a consent or
approval from Sublessor with respect to any matter to which such consent or
approval is required under this Agreement or the Prime Lease, then (i) the time
period, if any, in which Sublessor shall be required to respond to Sublessee
shall be extended by ten days after the expiration of any time period in which
the Lessor has to respond under the Prime Lease and (ii) the denial of such
consent or approval by the Lessor shall be conclusive and binding on
Sublessee; provided, however, that where consent or approval of the Lessor
under a Prime Lease is required, Sublessor shall use good faith efforts,
unless a different standard is specified herein with respect to a particular
matter, to obtain such consent or approval from the Lessor, except that
nothing herein shall require Sublessor to make any payment, or to amend any
terms of such Prime Lease in a way that would have an adverse effect on
Sublessor, in respect of such consent or approval.
15. Default Notice from Lessor. In the event Sublessor receives a
notice of default from the Lessor with respect to any matter pertaining to the
Subleased Premises or any obligation of Sublessee under this Agreement,
Sublessor shall immediately notify Sublessee of same in writing, and if
Sublessee fails to promptly commence the cure of such default or fails to cure
such default as of a date that is at least 15 days prior to the expiration of
the applicable cure period under the Prime Lease, Sublessor shall have the
right, but no obligation, to immediately cure such default and Sublessee shall
reimburse Sublessor for the costs incurred in connection with curing such
default within 30 days after receipt of an invoice therefor from Sublessor.
In the event (i) Sublessor receives a notice of any
monetary default from the Lessor with respect to any matter pertaining to
the Leased Premises that does not pertain to any obligation of Sublessee
under this Agreement, (ii) Sublessor is not contesting or undertaking to
cure the alleged default and (iii) the Prime Lease permits a sublessee to
cure such a default, Sublessor shall immediately notify Sublessee of same
in writing, and Sublessee shall have the right, but no obligation, to
immediately cure such default but shall not be entitled to reimbursement
from Sublessor for the costs incurred in connection with such cure.
16. Signage. Sublessee shall have the right to maintain any existing
signage it may have in respect of any Subleased Premises. If Sublessee does
not have a storefront sign in respect of any Subleased Premises, Sublessee
shall have the right to install a sign on the storefront of such Subleased
Premises provided it conforms to the sign criteria set forth in the Prime
Lease and does not impair the rights of Sublessor to maintain signage on its
storefront. In the event any Leased Premises does not have a separate
storefront for each party, the parties shall mutually agree on the locations
of their respective signs.
17. Indemnity; Subrogation. (a) Sublessor shall defend, indemnify and
hold harmless Sublessee and its employees, officers, directors, partners and
agents against and from any and all claims, liabilities, demands, fines,
suits, actions, proceedings, orders, decrees and judgments (collectively,
"Claims") of any kind or nature by, or in favor of, anyone whomsoever, and
against and from any and all costs, damages and expenses, including attorneys'
fees, resulting from, or in connection with, loss of life, bodily or personal
injury or property damage (i) arising, directly or indirectly, out of, or from,
or on account of any accident or other occurrence in, upon or from the Leased
Premises exclusive of the Subleased Premises or (ii) occasioned in whole or in
part through the use and occupancy of the Leased Premises exclusive of the
Subleased Premises or any construction, repair, alterations or improvements
therein or appurtenances thereto, or by any act or omission of Sublessor or
any subtenant, concessionaire or licensee of Sublessor (other than Sublessee),
or its employees, agents, contractors or invitees in, upon, at or from the
Leased Premises exclusive of the Subleased Premises.
(b) Sublessee shall defend, indemnify and hold harmless Sublessor
and its employees, officers, directors, partners and agents against and from
any and all Claims in favor of, anyone whomsoever, and against and from any
and all costs, damages and expenses, including attorneys' fees, resulting
from, or in connection with, loss of life, bodily or personal injury or
property damage (i) arising, directly or indirectly, out of, or from, or on
account of any accident or other occurrence in, upon or from the Subleased
Premises or (ii) occasioned in whole or in part through the use and occupancy of
the Subleased Premises or any construction, repair, alterations or
improvements therein or appurtenances thereto, or by any act or omission of
Sublessee or any subtenant, concessionaire or licensee of Sublessee, or its
employees, agents, contractors or invitees in, upon, at or from the Subleased
Premises.
(c) Each party hereto (the "Releasing Party") hereby releases the
other (the "Released Party"), from any loss, damage, claim or liability which
the Released Party would, but for this Section 1 7(c), have had to the
Releasing Party arising out of or in connection with any damage to the
property of the Releasing Party to the extent such damage or the cause thereof
is covered by insurance maintained by the Releasing Party. Such insurance
coverage maintained shall be deemed to include any deductible or self-insured
retention in effect or permitted pursuant to this Agreement. SUCH RELEASE SHALL
EXTEND TO ANY LOSS, DAMAGE, CLAIM OR LIABILITY THAT MAY HAVE RESULTED 1N WHOLE
OR 1N PART FROM ANY ACT OR NEGLECT OF THE RELEASED PARTY, ITS OFFICERS, AGENTS
OR EMPLOYEES. Each party hereto shall immediately give to each insurance
company which has issued to it property insurance policies written notice of
the terms of such mutual releases and have such insurance policies properly
endorsed, if necessary, to prevent the invalidation of such insurance
coverages by reason of such releases and to waive the Releasing Party's
insurer's right of subrogation that would exist had the Releasing Party not
given the foregoing release.
18. Required Notice Under Prime Lease. Sublessee shall promptly
give written notice to Sublessor of (i) all claims, demands or
controversies by or with the Lessor under the Prime Lease or (ii) any
injury, death or property damage arising on or about the Subleased
Premises. Sublessor shall promptly give written notice to Sublessee of (i)
all claims, demands or controversies by or with the Lessor under the Prime
Lease or (ii) any injury, death or property damage arising on or about the
Leased Premises.
19. Accepting Subleased Premises "As Is". Sublessee
acknowledges that it is familiar with the Subleased Premises and has
operated therein prior to the date hereof. Sublessee accepts and has
accepted possession of the Subleased Premises "AS IS". Sublessee
acknowledges that, notwithstanding anything contrary in the Prime Lease,
Sublessor has made no representations or warranties with respect to the
Subleased Premises or to the condition thereof.
20. No Waiver. The failure of a party to insist in any instance upon
the strict keeping, observance or performance of any covenant, agreement,
term, provision or condition of this Agreement or to exercise any election
herein contained shall not be construed as a waiver or relinquishment for the
future of such covenant, agreement, term, provision, condition or election, but
the same shall continue and remain in full force and effect. No waiver or
modification by a party of any covenant, agreement, term, provision or
condition of this Agreement shall be deemed to have been made unless expressed
in writing and signed by such party. No surrender by Sublessee of possession
of the Subeased Premises or of any part thereof or of any remainder of the
term of this Agreement shall release Sublessee from any of its obligations
hereunder.
21. Notices. Any notice or demand which either party may or must give
to the other under this Agreement shall be given in the same manner for giving
notices under the Prime Lease, but addressed as follows:
If to Sublessor: [address of Sublessor]
with a copy to:
The Limited, Inc.
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
(Columbus, Ohio 43230 for non-U.S. mail)
Attn: Corporate Real Estate Department
If to Sublessee: Abercrombie & Fitch Co.
Four Limited Parkway East
Columbus, Ohio 43218
(Reynoldsburg, Ohio 43068 for non-U.S. mail)
Attn: Real Estate Department
with a copy to:
The Limited, Inc.
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
(Columbus, Ohio 43230 for non-U.S. mail)
Attn: Corporate Real Estate Department
Either party may, by notice in writing, direct that future
notices or demands be sent to a different address.
22. Successors. The covenants and agreements herein contained shall
bind and inure to the benefit of Sublessor and Sublessee and their respective
permitted successors and assigns.
23. Captions. The captions or headings of paragraphs in this
Agreement are inserted for convenience only, and shall not be considered in
construing the provisions hereof if any question of intent should arise.
24. Severability. If any provisions of this Agreement shall be
held to be invalid or unenforceable, the validity and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
25. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Ohio.
26. Further Assurances. Sublessor and Sublessee shall execute,
acknowledge and deliver such instruments and take such other action as may be
necessary or advisable to carry out their rights and obligations under this
Agreement, including the execution of any agreement or instrument required by
the Lessor under the Prime Lease. In addition, if Sublessee or Sublessor
desires to enter into a direct and separate lease with a Lessor for the
Subleased Premises or the remainder of the Leased Premises, respectively, the
other party shall cooperate in good faith and likewise agree to enter into a
direct and separate lease for its premises provided that such other party's
new lease is on terms at least as favorable as the terms of this Agreement, in
the case of Sublessee, or the terms of the Prime Lease, in the case of
Sublessor.
27. Amendment to Prime Lease. Sublessor may not make any amendment to
a Prime Lease that would impair or reduce the rights or increase the
obligations of Sublessee under this Agreement, without the written consent of
Sublessee. Sublessor shall furnish Sublessee with a copy of any amendment to
the Prime Lease.
28. Reasonable Efforts of Sublessor. To the extent in this Agreement
that Sublessor has conveyed to Sublessee such utilities, services and similar
entitlements as the Lessor may provide under a Prime Lease, or to which
Sublessor may be entitled under a Prime Lease, Sublessor agrees and covenants
to use its reasonable efforts to obtain delivery of same to Sublessee. With
respect to all such entitlements, as well as any covenants, warranties,
representations, obligations or other agreements of the Lessor (not otherwise
expressly limited in this Agreement), Sublessor's "reasonable efforts" shall
require the performance by Sublessor, at Sublessee's reasonable request and at
Sublessee's sole cost and expense, of one or more of the following:
(i) the execution by Sublessor and delivery to the Lessor, promptly
following receipt of Sublessee's written request therefor, of notices,
requests and other similar writings; and
(ii) the institution by Sublessor, promptly following receipt of
Sublessee's written request therefor, of arbitration (if permitted under the
Prime Lease) or legal proceedings to enforce, interpret or define the Lessor's
obligations under the Prime Lease; provided, however, that any legal
proceedings instituted by Sublessor hereunder shall be under the exclusive
control of Sublessor and shall include all reasonable preliminary and trial
proceedings in the court of original jurisdiction.
Sublessee shall defend, indemnify and hold Sublessor harmless
from and against any and all court costs, costs of filing, attorneys' fees and
awards resulting from, or incurred in connection with, legal proceedings
instituted by Sublessor pursuant to this Section 28.
29. Reasonableness and Good Faith. Whenever this Agreement grants
Sublessor or Sublessee the right to take action, exercise discretion or make
other determinations regarding the Subleased Premises, each party agrees to
act reasonably and in good faith unless a different standard is specified
herein.
30. Arbitration. Except for the non-payment of rental or other
charges due by Sublessee under this Agreement (unless Sublessee first pays
under protest as provided for below), or in the event that any action or
inaction taken by Sublessee would cause Sublessor to be in default under a
Prime Lease, all disputes and disagreements between Sublessor and Sublessee
shall be resolved pursuant to an arbitration proceeding pursuant to the
rules of the American Arbitration Association. The provisions of this
Agreement contain the sole and exclusive method, means and procedure to
resolve, as between Sublessor and Sublessee, any and all disputes or
disagreements, including whether any particular matter constitutes, or with
the passage of time would constitute, a default. As to any matter
submitted to arbitration to determine whether it would, with the passage of
time, constitute a default, such passage of time shall not commence to run
until any such affirmative determination, so long as it is simultaneously
determined that the challenge of such matter as a potential default was
made in good faith, except with respect to the payment of money. With
respect to the payment of money, such passage of time shall not commence to
run in the event that the party which is obligated to make the payment does
in fact make payment to the other party. Such payment can be accompanied
by a good-faith notice stating why the party has elected to make a payment
under protest. Such protest will be deemed waived unless the subject
matter identified in the protest is submitted to arbitration pursuant to
this Section 30.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed the day and year first written above.
SUBLESSOR:
[TENANT ENTITY],
a Delaware corporation,
ATTEST: By:____________________________________
Name:
Title:
____________,
Assistant Secretary
SUBLESSEE:
ABERCROMBIE & FITCH CO.,
a Delaware corporation,
ATTEST: By:____________________________________
Name:
Title:
___________,
Assistant Secretary
Schedule 1
(See attached)
Exhibit 10.5
FORM OF
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of
[______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation
("Abercrombie & Fitch"), and The Limited, Inc., a Delaware corporation ("The
Limited").
RECITALS
WHEREAS, The Limited is the common parent corporation of an
affiliated group of corporations within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, The Limited beneficially owns all of the issued and
outstanding Abercrombie & Fitch Class B Common Stock, par value $.01 per share
and Abercrombie & Fitch is a member of The Limited consolidated group for
federal income tax purposes;
WHEREAS, the parties are contemplating the possibility that
Abercrombie & Fitch will issue shares of Class A Common Stock, $.01 par value
per share to the public in an offering (the "Initial Public Offering")
registered under the Securities Act of 1933, as amended;
WHEREAS, The Limited Group (as defined below) has filed and
intends to file consolidated federal income tax returns as permitted by
Section 1501 of the Code and certain members of the Abercrombie & Fitch Group
(as defined below) and certain members of The Limited Sub-Group (as defined
below), have filed and intend to file returns relating to Combined State Taxes
(as defined below);
WHEREAS, Abercrombie & Fitch desires to engage The Limited to
provide certain services, and The Limited desires to provide certain services,
relating to separate state, local and foreign taxes other than Federal Taxes
and Combined State Taxes; and
WHEREAS, The Limited and Abercrombie & Fitch desire to agree
upon a method for determining the financial consequences to each party and
their subsidiaries resulting from the filing of a consolidated federal income
tax return and the filing of returns relating to Combined State Taxes.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, The Limited and Abercrombie
& Fitch, for themselves, their successors, and assigns, hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the terms set forth
below shall have the following meanings.
"Abercrombie & Fitch Combined State Tax Liability" shall mean,
with respect to any taxable year and any jurisdiction, an amount of Combined
State Taxes determined in accordance with the principles set forth in the
definition of Abercrombie & Fitch Federal Tax Liability; provided, however,
that (i) the total amount of Combined State Taxes shall also include any
actual income, franchise or similar state or local tax liability (a "State
Liability") owed in a jurisdiction (a "Combined Jurisdiction") in which a
member of the Abercrombie & Fitch Group files tax returns with a member of The
Limited Sub-Group, on a consolidated, combined or unitary basis, to the extent
such liability exceeds the liability that would have been owed had no member
of the Abercrombie & Fitch Group been included in such returns; and (ii) the
total amount of Combined State Taxes shall be reduced to the extent that, in
any Combined Jurisdiction, the State Liability of the Limited Sub-Group is
less than the liability that would have been owed had no member of the
Abercrombie & Fitch Group been included in the returns of such Combined
Jurisdiction.
"Abercrombie & Fitch Federal Tax Liability" shall mean, with
respect to any taxable year, the sum of the Abercrombie & Fitch Group's
Federal Tax liability and any interest, penalties and other additions to such
taxes for such taxable year, computed as if the Abercrombie & Fitch Group were
not and never were part of The Limited Group, but rather were a separate
affiliated group of corporations filing a consolidated federal income tax
return pursuant to Section 1501 of the Code, provided, however, that
transactions with members of The Limited Sub-Group shall be reflected
according to the provisions of the consolidated return regulations promulgated
under the Code governing intercompany transactions, and that Deconsolidation
will trigger any deferred amounts, excess loss accounts or similar items.
Such computation shall be made (A) without regard to the income, deductions
(including net operating loss and capital loss deductions) and credits in any
year of any member of The Limited Group that is not a member of the
Abercrombie & Fitch Group, (B) by taking account of any Tax Asset of the
Abercrombie & Fitch Group in accordance with Section 2.1(c)(iii) hereof, (C)
with regard to net operating loss and capital loss carryforwards and
carrybacks and minimum tax credits from earlier years of the Abercrombie &
Fitch Group, but without regard to any such carryforward from a tax period (or
portion thereof) ending on or before the date of the Initial Public Offering
and arising solely due to treating the Abercrombie & Fitch Group as if it were
never part of The Limited Group, (D) as though the highest rate of tax
specified in subsection (b) of Section 11 of the Code (or any other similar
rates applicable to specific types of income) were the only rates set forth in
that subsection, and with other similar adjustments as described in Section
1561 of the Code, and (E) reflecting the positions, elections and accounting
methods used by The Limited in preparing the consolidated federal income tax
return for The Limited Group and (F) by not permitting the Abercrombie & Fitch
Group any compensation deductions arising in respect of any exercise of
options on Limited stock by any employee of the Abercrombie & Fitch Group.
"Abercrombie & Fitch Group" shall mean, at any time,
Abercrombie & Fitch and any direct or indirect corporate subsidiaries of
Abercrombie & Fitch that would be eligible to join with Abercrombie & Fitch,
with respect to Federal Taxes, in the filing of a consolidated federal income
tax return and, with respect to Combined State Taxes, in the filing of a
consolidated, combined or unitary income or franchise tax return if Abercrombie
& Fitch were not consolidated, combined or filing on a unitary basis with any
member of The Limited Sub-Group.
"Combined State Tax" means, with respect to each state or local
taxing jurisdiction, any income, franchise or similar tax payable to such
state or local taxing jurisdiction in which a member of the Abercrombie &
Fitch Group files tax returns with a member of The Limited Sub-Group, on a
consolidated, combined or unitary basis for purposes of such income or
franchise tax.
"Deconsolidation" means any event pursuant to which Abercrombie
& Fitch ceases to be a subsidiary corporation includible in a consolidated tax
return of The Limited Group for Federal Tax purposes.
"Federal Tax" means any tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313 (a) of the Code or
execution of an Internal Revenue Service Form 870AD and, with respect to taxes
other than Federal Taxes, any final determination of liability in respect of a
tax that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise, (ii) any final disposition of a
tax issue by reason of the expiration of a statute of limitations or (iii) the
payment of tax by The Limited with respect to any item disallowed or adjusted
by any taxing authority where The Limited determines in good faith that no
action should be taken to recoup such payment.
"Post-Deconsolidation Tax Period" means (i) any tax period
beginning and ending after the date of Deconsolidation and (ii) with respect
to a tax period that begins before and ends after the date of Deconsolidation,
such portion of the tax period that commences on the day immediately after the
date of Deconsolidation.
"Pre-Deconsolidation Tax Period" means (i) any tax period
beginning and ending before or on the date of Deconsolidation and (ii) with
respect to a period that begins before and ends after the date of
Deconsolidation, such portion of the tax period ending on and including the
date of Deconsolidation.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
deduction, credit or tax attribute which could reduce taxes (including,
without limitation, deductions and credits related to alternative minimum
taxes).
"The Limited Group" shall mean, at any time, The Limited and
each direct and indirect corporate subsidiary eligible to join with The
Limited in the filing of a consolidated federal income tax return.
"The Limited Sub-Group" shall mean, at any time, The Limited
and each of its direct and indirect corporate subsidiaries other than those
subsidiaries that are members of the Abercrombie & Fitch Group.
1.2. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
TAX SHARING
2.1. Tax Sharing. (a) General. For each taxable year of The Limited
Group during which income, loss, or credit against tax of the Abercrombie &
Fitch Group are includible in the consolidated Federal Tax return of The
Limited Group, Abercrombie & Fitch shall pay to The Limited an amount equal to
the Abercrombie & Fitch Federal Tax Liability and for each taxable period
during which income, loss or credit against tax of any member of the
Abercrombie & Fitch Group are includible in a return relating to a Combined
State Tax, Abercrombie & Fitch shall pay The Limited an amount equal to the
Abercrombie & Fitch Combined State Tax Liability for such taxable period, each
as shown on the Pro Forma Returns (as defined in paragraph (c) below).
(b) Estimated Payments. The Limited shall determine the amount of
the estimated tax installment of the Abercrombie & Fitch Federal Tax Liability
(corresponding to The Limited's estimated Federal Tax installment), as
determined under the principles of Section 2.1(a) of this Agreement.
Abercrombie & Fitch shall, within 5 days of receipt of such determination (but
in no event earlier than 5 days prior to the due date of The Limited's
corresponding estimated tax payment), pay to The Limited the amount so
determined. The Limited shall determine under provisions of applicable law
the amount of the estimated tax installment of the Abercrombie & Fitch
Combined State Tax Liability (corresponding to the relevant estimated Combined
State Tax installment), as determined under the principles of Section 2.1(a)
of this Agreement. Abercrombie & Fitch shall, within 5 days of receipt of
such determination (but in no event earlier than 5 days prior to the due date
of The Limited's corresponding estimated tax payment), pay to The Limited the
amount so determined.
(c) Payment of Taxes at Year-End.
(i) On or before the due date (including all applicable and
valid extensions) for The Limited Group's consolidated Federal Tax return, The
Limited shall make available to Abercrombie & Fitch a pro forma Federal Tax
return (a "Pro Forma Federal Return") of the Abercrombie & Fitch Group
reflecting the Abercrombie & Fitch Federal Tax Liability. On or before the
due date for each Combined State Tax return, The Limited shall make available
to Abercrombie & Fitch the relevant pro forma Combined State Tax return (each
a "Pro Forma Combined State Return" and together with the Pro Forma Federal
Return, the "Pro Forma Returns") of the Abercrombie & Fitch Group reflecting
the relevant Abercrombie & Fitch Combined State Tax Liability. The Pro Forma
Returns shall be prepared in good faith in a manner generally consistent with
past practice.
(ii) On or before the date The Limited files its consolidated
Federal Tax return for any year for which payments are to be made under this
Agreement, Abercrombie & Fitch shall pay to The Limited, or The Limited shall
pay to Abercrombie & Fitch, as appropriate, an amount equal to the difference,
if any, between the Abercrombie & Fitch Federal Tax Liability reflected on the
Pro Forma Federal Return for such year and the aggregate amount of the
estimated installments of the Abercrombie & Fitch Federal Tax Liability for
such year made pursuant to Section 2.1(b). On or before the date The Limited
files a Combined State Tax return for any year for which payments are to be
made under this Agreement, Abercrombie & Fitch shall pay to The Limited, or
The Limited shall pay to Abercrombie & Fitch, as appropriate, an amount equal
to the difference, if any, between the Abercrombie & Fitch Combined State Tax
Liability reflected on the relevant Pro Forma Combined State Tax Return and
the aggregate amount of the estimated installments paid with respect to the
corresponding Abercrombie & Fitch Combined State Tax Liability pursuant to
Section 2.1(b).
(iii) If a Pro Forma Return reflects a Tax Asset that may
under applicable law be used to reduce a Federal Tax or Combined State Tax
liability of any member of The Limited Sub-Group for any taxable period, The
Limited shall pay to Abercrombie & Fitch an amount equal to the actual tax
saving (which would include refunds actually received) produced by such Tax
Asset at the time such tax saving is realized and the future Pro Forma Returns
of the Abercrombie & Fitch Group shall be adjusted to reflect such use. The
amount of any such tax saving for any taxable period shall be the amount of the
reduction in taxes payable to a taxing authority with respect to such tax
period as compared to the taxes that would have been payable to a taxing
authority with respect to such tax period in the absence of such Tax Asset.
(iv) In the event that The Limited makes a cash deposit with a
taxing authority in order to stop the running of interest or makes a payment
of tax and correspondingly takes action to recoup such payment (such as suing
for a refund), Abercrombie & Fitch shall pay to The Limited an amount equal to
Abercrombie & Fitch' share of the amount so deposited or paid (calculated in a
manner consistent with the determinations provided in this Article 2). Upon
receipt by The Limited of a refund of any amounts paid by it in respect of
which Abercrombie & Fitch shall have advanced an amount hereunder, The Limited
shall pay to Abercrombie & Fitch the amount of such refund, together with any
interest received by it on such refund. If and to the extent that any claim
for refund or contest based thereupon shall be unsuccessful, the payment by
Abercrombie & Fitch under Section 2.1(c)(iv) shall be credited toward
Abercrombie & Fitch' obligations under this Section 2(c)(iv) and any other
payment obligation of Abercrombie & Fitch under Section 2(d) below.
(d) Treatment of Adjustments. If any adjustment is made in a
Federal Tax return of The Limited Group or in a return relating to a Combined
State Tax, after the filing thereof, in which income or loss of the
Abercrombie & Fitch Group (or any member thereof) is included, then at the
time of a Final Determination of the adjustment, Abercrombie & Fitch shall pay
to The Limited or The Limited shall pay to Abercrombie & Fitch, as the case
may be, the difference between all payments actually made under Section 2.1
with respect to the taxable year or period covered by such tax return and all
payments that would have been made under Section 2.1 taking such adjustment
into account, together with any penalties actually paid and interest for each
day until the date of Final Determination calculated at the rate determined,
in the case of a payment by Abercrombie & Fitch, under Section 6621(a)(2) of
the Code and, in the case of a payment by The Limited, under Section
6621(a)(1) of the Code.
(e) Preparation of Returns and Contests. So long as (i) The
Limited Group elects to file consolidated Federal Tax returns as permitted by
Section 1501 of the Code or (ii) any Combined State Tax return is filed, The
Limited shall prepare and file such returns and any other returns, documents
or statements required to be filed with the Internal Revenue Service with
respect to the determination of the Federal Tax liability of The Limited Group
and with the appropriate taxing authorities with respect to the determination
of a Combined State Tax liability. With respect to such return preparation,
The Limited shall act in good faith with regard to all members included in an
applicable return. The Limited shall have the right with respect to any
consolidated Federal Tax returns or returns relating to a Combined State Tax
that it has filed or will file to determine in good faith (i) the manner in
which such returns, documents or statements shall be prepared and filed,
including, without limitation, the manner in which any item of income, gain,
loss, deduction or credit shall be reported, (ii) whether any extensions
should be requested, and (iii) the elections that will be made by any member
of The Limited Group. In addition, The Limited shall have the right, in good
faith, to (i) contest, compromise or settle any adjustment or deficiency
proposed, asserted or assessed as a result of any audit of any Federal Tax
return or return relating to a Combined State Tax, (ii) file, prosecute,
compromise or settle any claim for refund, and (iii) determine whether any
refunds shall be received by way of refund or credited against tax
liabilities. In addition, The Limited shall prepare and file ruling requests,
and take all other actions on behalf of any member of The Limited Group that
it deems appropriate in providing tax services to the members of The Limited
Group. The Limited shall, to the extent such information is available, advise
Abercrombie & Fitch of any significant Abercrombie & Fitch tax issue being
contested by the federal, state, local or other relevant taxing authorities,
and shall keep Abercrombie & Fitch informed with respect to any contest,
compromise or settlement thereof.
2.2 Reimbursement for Certain Services. The Limited shall provide
services in connection with this Agreement, including but not limited to, (i)
those services relating to the preparation of returns (including Pro Forma
Returns) described in paragraphs 2.1(b), 2.1(c) and 2.1(e) and (ii) services
relating to the other activities described in paragraph 2.1(e). As
compensation for these services, Abercrombie & Fitch shall pay The Limited a
fee calculated on a basis such that The Limited is reimbursed for all direct
and indirect costs and expenses incurred with respect to Abercrombie & Fitch'
share of the overall costs and expenses incurred by The Limited with respect
to tax related services. The Limited shall calculate the fee payable, invoice
Abercrombie & Fitch for the fee and Abercrombie & Fitch will pay the invoiced
amount in a manner consistent with the invoice and payment procedures provided
for in the "Intercompany Services and Operating Agreement."
2.3 Additional Services. The Limited will provide the tax services
described in this Article II with respect to all of the separate state, local
and foreign taxes of any members of the Abercrombie & Fitch Group that do not
relate to Federal Taxes or Combined State Taxes. The Limited will provide
these services in a manner consistent with the principles contained in Article
II and be compensated in the same manner as described in Section 2.2.
ARTICLE III
POST-DECONSOLIDATION
3.1. Additional Rights and Liabilities Post-Deconsolidation.
(a) Abercrombie & Fitch covenants that on or after a
Deconsolidation it will not, nor will it cause or permit any member of the
Abercrombie & Fitch Group to make or change any tax election, change any
accounting method, amend any tax return or take any tax position on any tax
return, take any other action, omit to take any action or enter into any
transaction that results in any increased tax liability or reduction of any
Tax Asset of The Limited Group or any member thereof (immediately after the
Deconsolidation) in respect of any Pre-Deconsolidation Tax Period, without
first obtaining the written consent of an authorized representative of The
Limited.
(b) In the event of a Deconsolidation, The Limited may, at its
option, elect and Abercrombie & Fitch shall join The Limited in electing (if
necessary), (i) to reattribute to itself certain Tax Assets of the Abercrombie
& Fitch Group pursuant to Treasury Regulations Section 1.1502-20(g) and, if
The Limited makes such election, Abercrombie & Fitch shall comply with the
requirements of Treasury Regulations Section 1.1502-20(g)(5)) and (ii) to
ratably allocate items (other than extraordinary items) of the Abercrombie
& Fitch Group in accordance with relevant provisions of the Treasury
Regulations Section 1.1502-76. If The Limited elects to reattribute to
itself any Tax Assets under clause (i) this Section 3.1(b), The Limited
shall pay Abercrombie & Fitch an amount equal to the actual tax saving
(which would include refunds actually received) produced by such Tax Asset
if and when such actual tax saving is realized.
(c) The Limited agrees to pay to Abercrombie & Fitch the actual
tax benefit received by The Limited Group from the use in any Pre-
Deconsolidation Tax Period of a carryback of any Tax Asset of the
Abercrombie & Fitch Group from a Post-Deconsolidation Tax Period. Such
benefit shall be considered equal to the excess of (i) the amount of
Federal Taxes or Combined State Taxes, as the case may be, that would have
been payable by The Limited Group in the absence of such carryback over
(ii) the amount of Federal Taxes or Combined State Taxes, as the case may
be, actually payable by The Limited Group. Payment of the amount of such
benefit shall be made within 90 days of the filing of the applicable tax
return for the taxable year in which the Tax Asset is utilized. If,
subsequent to the payment by The Limited to Abercrombie & Fitch of any such
amount, there shall be (A) a Final Determination which results in a
disallowance or a reduction of the Tax Asset so carried back or (B) a
reduction in the amount of the benefit realized by The Limited Group as a
result of any other Tax Asset that arises in a Post-Deconsolidation Tax
Period, Abercrombie & Fitch shall repay to The Limited, within 90 days of
such event described in (A) or (B) (an "Event" or, collectively, the
"Events") any amount which would not have been payable to Abercrombie &
Fitch pursuant to this Section 3.1(c) had the amount of the benefit been
determined in light of the Events. Abercrombie & Fitch shall hold The
Limited harmless for any penalty or interest payable by any member of The
Limited Group, as a result of any Event. Any such amount shall be paid by
Abercrombie & Fitch to The Limited within 90 days of the payment by The
Limited or any member of The Limited Group of any such interest or penalty.
Nothing in this Section 3.1(c) shall require The Limited to file a claim
for refund of Federal Taxes or Combined State Taxes which The Limited, in
its sole discretion, determines lacks substantial authority, as defined in
the Code and the regulations thereunder.
ARTICLE IV
MISCELLANEOUS
4.1. Limitation of Liability. Neither The Limited nor Abercrombie & Fitch
shall be liable to the other for any special, indirect, incidental or
consequential damages of the other arising in connection with this Agreement;
provided, however that in the event that (i) the Internal Revenue Service (or
other competent taxing authority) asserts a tax liability directly against
Abercrombie & Fitch or any member of the Abercrombie & Fitch Group, pursuant
to its authority under Treasury Regulation Section 1.1502-6 (or other relevant
statutory authority), (ii) Abercrombie & Fitch has made all payments and
performed all of its obligations otherwise required of it under this Agreement
with respect to such liability or otherwise, and (iii) The Limited was given
the opportunity to contest, settle or compromise such liability pursuant to
Section 2.1(e) of this Agreement, then The Limited shall indemnify Abercrombie
& Fitch for actual payments made after a Final Determination with respect to
such liability to the extent that such payments exceed Abercrombie & Fitch'
share of such liability (calculated in a manner that avoids double-counting
under this Agreement), such share determined in accordance with Article II of
this Agreement.
4.2. Subsidiaries. (a) Performance. The Limited agrees and acknowledges
that The Limited shall be responsible for the performance of the obligations
of each member of The Limited Sub-Group hereunder applicable to such
subsidiary. Abercrombie & Fitch agrees and acknowledges that Abercrombie &
Fitch shall be responsible for the performance by each member of the
Abercrombie & Fitch Group of the obligations hereunder applicable to such
member.
(b) Application to Present and Future Subsidiaries. This Agreement
is being entered into by The Limited and Abercrombie & Fitch on behalf of
themselves and each member of The Limited Sub-Group and Abercrombie & Fitch
Group, respectively. This Agreement shall constitute a direct obligation of
each such member and shall be deemed to have been readopted and affirmed on
behalf of any corporation which becomes a member of The Limited Sub-Group or
Abercrombie & Fitch Group in the future.
4.3. Cooperation. The Limited and Abercrombie & Fitch shall cooperate fully
in the implementation of this Agreement, including but not limited to,
providing promptly to the requesting party such assistance and documentation
as may be reasonably requested by such party in connection with any of the
activities described in Article II or Article III. In addition, The Limited
and Abercrombie & Fitch shall retain all relevant tax records for relevant
open periods in accordance with past practice.
4.4. Agent. Each member of the Abercrombie & Fitch Group hereby irrevocably
appoints The Limited as its agent and attorney-in-fact to take any action as
The Limited may deem necessary or appropriate to effect Section 2.1 including,
without limitation, those actions specified in Treasury Regulation Section
1.1502-77(a).
4.5. Amendments. This Agreement may not be amended or terminated orally, but
only by a writing duly executed by or on behalf of the parties hereto. Any
such amendment shall be validly and sufficiently authorized for purposes of
this Agreement if it is signed on behalf of The Limited and Abercrombie &
Fitch by any of their respective presidents or vice presidents.
4.6. Term. Subject to Article III, this Agreement shall expire upon the
date of Deconsolidation with respect to all Post-Deconsolidation periods;
provided, however, that all rights and obligations arising hereunder with
respect to a Pre-Deconsolidation Tax Period shall survive until they are fully
effectuated or performed and, provided, further, that notwithstanding anything
in this Agreement to the contrary, all rights and obligations arising
hereunder with respect to a Post-Deconsolidation Tax Period shall remain in
effect and its provisions shall survive for the full period of all applicable
statutes of limitation (giving effect to any extension, waiver or mitigation
thereof).
4.7. Effective Date. This Agreement shall be effective as of the date that
the Initial Public Offering is consummated ("effective date"), shall govern
all open taxable periods and shall supersede all prior agreements as to the
allocation of federal income tax liability between the parties to this
Agreement for all such open taxable years and for all subsequent taxable
years. As of the effective date, all such prior agreements are hereby
canceled with respect to members of the Abercrombie & Fitch Group.
4.8. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid, illegal or unenforceable to any
extent, the remainder of this Agreement or such provision or the application
of such provision to such party or circumstances, other than those to which it
is so determined to be invalid, illegal or unenforceable, shall remain in full
force and effect to the fullest extent permitted by law and shall not be
affected thereby, unless such a construction would be unreasonable.
4.9. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be deemed duly given upon actual receipt,
and shall be delivered (a) in person, (b) by registered or certified mail,
postage prepaid, return receipt requested, or (c) by facsimile or other
generally accepted means of electronic transmission (provided that a copy of
any notice delivered pursuant to this clause (c) shall also be sent pursuant to
clause (b), addressed as follows:
(a) If to Abercrombie & Fitch, to:
Abercrombie & Fitch Co.
Three Limited Parkway
Columbus, OH 43230
Attention: Timothy B. Lyons
Fax: 614-479-7020
(b) If to The Limited, to:
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
Attention: Timothy B. Lyons
Fax: 614-479-7020
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
4.10. Further Assurances. The Limited and Abercrombie & Fitch shall execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be necessary or advisable
to carry out their obligations under this Agreement and under any exhibit,
document or other instrument delivered pursuant hereto.
4.11. Entire Agreement. This Agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof.
4.12. Successors. This agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, to
any of the parties hereto (including but not limited to any successor of The
Limited and Abercrombie & Fitch succeeding to the tax attributes of such party
under Section 381 of the Code), to the same extent as if such successor had
been an original party hereto.
4.13. Authorization, etc. Each of the parties hereto hereby represents and
warrants that it has the power and authority to execute, deliver and perform
this Agreement, that this Agreement has been duly authorized by all necessary
corporate action on the part of such party that this Agreement constitutes a
legal, valid and binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not contravene
or conflict with any provision of law or of its charter or bylaws or any
agreement, instrument or order binding on such party.
4.14. Section Captions. Section captions used in this Agreement are for
convenience and reference only and shall not affect the construction of this
Agreement.
4.15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
LAWS AND PRINCIPLES RELATING TO CONFLICTS OF LAW.
4.16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
agreement to be executed by a duly authorized officer as of the date first
above written.
ABERCROMBIE & FITCH CO.
By:____________________________________
Name:
Title:
THE LIMITED, INC.
By:____________________________________
Name:
Title:
Exhibit 10.6
FORM OF
CORPORATE AGREEMENT
THIS CORPORATE AGREEMENT ("Agreement") is entered into as of
[______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation
("Abercrombie & Fitch"), and The Limited, Inc., a Delaware corporation ("The
Limited").
RECITALS
WHEREAS, The Limited beneficially owns all of the issued and
outstanding Abercrombie & Fitch Class B Common Stock, par value $0.01 per
share ("Class B Common Stock"), and Abercrombie & Fitch is a member of The
Limited's "affiliated group" of corporations ("Limited Group") for federal
income tax purposes;
WHEREAS, Abercrombie & Fitch issued shares of Class A Common Stock,
$0.01 par value per share ("Class A Common Stock"), to the public in an
offering (the "Initial Public Offering") registered under the Securities Act
of 1933, as amended; and
WHEREAS, the parties desire to enter into this Agreement to set forth
their agreement regarding (i) The Limited's rights to purchase additional
shares of Class B Common Stock upon any issuance of certain classes of capital
stock of Abercrombie & Fitch to any person to permit The Limited to maintain
its then current percentage ownership interest in Abercrombie & Fitch, (ii)
The Limited's rights to purchase shares of non-voting classes of capital stock
of Abercrombie & Fitch to permit The Limited to own 80 percent of each class
of such stock outstanding, (iii) certain registration rights with respect to
Class B Common Stock (and any other securities issued in respect thereof or in
exchange therefor) and (iv) certain representations, warranties, covenants and
agreements applicable to Abercrombie & Fitch so long as it is a subsidiary of
The Limited.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, The Limited and
Abercrombie & Fitch, for themselves, their successors and assigns, hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms
will have the following meanings, applicable both to the singular and the
plural forms of the terms described:
"Abercrombie & Fitch" has the meaning ascribed thereto in the
preamble hereto.
"Abercrombie & Fitch Entities" means Abercrombie & Fitch and its
Subsidiaries and "Abercrombie & Fitch Entity" shall mean any of the
Abercrombie & Fitch Entities.
"Affiliate" means, with respect to any Person, any Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to vote a
majority of the securities having voting power for the election of directors
(or other Persons acting in similar capacities) of such Person or otherwise to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning ascribed thereto in the preamble hereto,
as such agreement may be amended and supplemented from time to time in
accordance with its terms.
"Applicable Stock" means at any time the (i) shares of Class B Common
Stock owned by the Limited Entities that were owned on the date hereof, plus
(ii) shares of Class B Common Stock owned by the Limited Entities that were
purchased by the Limited Entities pursuant to Article II of this Agreement,
plus (iii) shares of Common Stock that were issued to the Limited Entities in
respect of shares described in either clause (i) or clause (ii) in any
reclassification, share combination, share subdivision, share dividend, share
exchange, merger, consolidation or similar transaction or event.
"Class A Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.
"Class B Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.
"Class B Common Stock Option" has the meaning ascribed thereto in
Section 2.1(a).
"Class B Common Stock Option Notice" has the meaning ascribed thereto
in Section 2.2.
"Common Stock" means the Class B Common Stock, the Class A Common
Stock, any other class of Abercrombie & Fitch capital stock having the right
to vote generally for the election of directors and, for so long as
Abercrombie & Fitch continues to be a subsidiary corporation includible in a
consolidated federal income tax return of the Limited Group, any other
security of Abercrombie & Fitch treated as stock for purposes of Section 1504
of the Internal Revenue Code of 1986, as amended.
"Company Securities" has the meaning ascribed thereto in Section
3.2(b).
"Disadvantageous Condition" has the meaning ascribed thereto in
Section 3.1(a).
"Holder" means The Limited and any Transferee.
"Holder Securities" has the meaning ascribed thereto in Section
3.2(b).
"Initial Public Offering" has the meaning ascribed thereto in the
recitals to this Agreement.
"Initial Public Offering Date" means the date of completion of the
initial sale of Class A Common Stock in the Initial Public Offering.
"Issuance Event" has the meaning ascribed thereto in Section 2.2.
"Issuance Event Date" has the meaning ascribed thereto in Section 2.2.
"Limited Entities" means The Limited and Subsidiaries of The Limited
and "Limited Entity" shall mean any of the Limited Entities.
"Limited Group" has the meaning ascribed thereto in the recitals to
this Agreement.
"Limited Ownership Reduction" means any decrease at any time in the
Ownership Percentage to less than 50%.
"Limited Transferee" has the meaning ascribed thereto in Section 3.9.
"Market Price" of any shares of Class A Common Stock on any date
means (i) the average of the last sale price of such shares on each of the
five trading days immediately preceding such date on the Nasdaq National
Market or, if such shares are not quoted thereon, on the principal national
securities exchange or automated interdealer quotation system on which such
shares are traded or (ii) if such sale prices are unavailable or such shares
are not so traded, the value of such shares on such date determined in
accordance with agreed-upon procedures reasonably satisfactory to Abercrombie
& Fitch and The Limited.
"Nonvoting Stock" means any class of Abercrombie & Fitch capital
stock not having the right to vote generally for the election of directors.
"Nonvoting Stock Option" has the meaning ascribed thereto in Section
2.1(b).
"Nonvoting Stock Option Notice" has the meaning ascribed thereto in
Section 2.2.
"Other Holders" has the meaning ascribed thereto in Section 3.2(c).
"Other Securities" has the meaning ascribed thereto in Section 3.2.
"Ownership Percentage" means, at any time, the fraction, expressed as
a percentage and rounded to the next highest thousandth of a percent, whose
numerator is the aggregate Value of the Applicable Stock and whose denominator
is the sum of the aggregate Value of the then outstanding shares of Common
Stock of Abercrombie & Fitch plus Repurchased Shares; provided, however, that
any shares of Common Stock issued by Abercrombie & Fitch in violation of its
obligations under Article II of this Agreement shall not be deemed outstanding
for the purpose of determining the Ownership Percentage. For purposes of this
definition and the definition of Repurchased Shares, "Value" means, with
respect to any share of stock, the value of such share determined by The
Limited under principles applicable for purposes of Section 1504 of the
Internal Revenue Code of 1986, as amended.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government (and any department or agency thereof) or other entity.
"Registrable Securities" means Class B Common Stock and any stock or
other securities into which or for which such Class B Common Stock may
hereafter be changed, converted or exchanged and any other shares or
securities issued to Holders of such Class B Common Stock (or such shares or
other securities into which or for which such shares are so changed, converted
or exchanged) upon any reclassification, share combination, share subdivision,
share dividend, share exchange, merger, consolidation or similar transaction
or event or pursuant to the Nonvoting Stock Option. As to any particular
Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public in accordance with Rule 144, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by Abercrombie & Fitch and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any state securities or blue sky law then
in effect or (iv) they shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article III, including, without limitation, (i) the fees, disbursements and
expenses of Abercrombie & Fitch's counsel and accountants and the reasonable
fees and expenses of counsel selected by the Holders in accordance with this
Agreement in connection with the registration of the securities to be disposed
of; (ii) all expenses, including filing fees, in connection with the
preparation, printing and filing of the registration statement, any
preliminary prospectus or final prospectus, any other offering document and
amendments and supplements thereto and the mailing and delivering of copies
thereof to any underwriters and dealers; (iii) the cost of printing or
producing any agreements among underwriters, underwriting agreements, and blue
sky or legal investment memoranda, any selling agreements and any other
documents in connection with the offering, sale or delivery of the securities
to be disposed of; (iv) all expenses in connection with the qualification of
the securities to be disposed of for offering and sale under state securities
laws, including the fees and disbursements of counsel for the underwriters or
the Holders of securities in connection with such qualification and in
connection with any blue sky and legal investment surveys; (v) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the securities to be
disposed of; (vi) transfer agents' and registrars' fees and expenses and the
fees and expenses of any other agent or trustee appointed in connection with
such offering; (vii) all security engraving and security printing expenses;
(viii) all fees and expenses payable in connection with the listing of the
securities on any securities exchange or automated interdealer quotation
system or the rating of such securities; (ix) any other fees and
disbursements of underwriters customarily paid by the issuers of
securities, but excluding underwriting discounts and commissions and
transfer taxes, if any; and (x) other reasonable out-of-pocket expenses of
Holders other than legal fees and expenses referred to in clause (i) and
(iv) above.
"Repurchased Shares" mean the aggregate Value of shares of
Abercrombie & Fitch's Common Stock that are, from and after the date hereof,
repurchased by Abercrombie & Fitch from its shareholders, less the aggregate
Value of shares of Common Stock (up to the aggregate Value so repurchased)
that are re-issued from and after the date hereof upon the exercise of stock
options or otherwise.
"Rule 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" means an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Selling Holder" has the meaning ascribed thereto in Section 3.5(e).
"Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled directly or indirectly by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof.
"The Limited" has the meaning ascribed thereto in the preamble hereto.
"Transferee" has the meaning ascribed thereto in Section 3.9.
1.2. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
OPTIONS
2.1. Options. (a) Abercrombie & Fitch hereby grants to The
Limited, on the terms and conditions set forth herein, a continuing right (the
"Class B Common Stock Option") to purchase from Abercrombie & Fitch, at the
times set forth herein, such number of shares of Class B Common Stock as is
necessary to allow the Limited Entities to maintain the then-current Ownership
Percentage. The Class B Common Stock Option shall be assignable, in whole or
in part and from time to time, by The Limited to any Limited Entity. The
exercise price for the shares of Class B Common Stock purchased pursuant to
the Class B Common Stock Option shall be the Market Price of the Class A Common
Stock as of the date of first delivery of notice of exercise of the Class B
Common Stock Option by The Limited (or its permitted assignee hereunder) to
Abercrombie & Fitch.
(b) Abercrombie & Fitch hereby grants to The Limited, on the terms
and conditions set forth herein, a continuing right (the "Nonvoting Stock
Option" and, together with the Class B Common Stock Option, the "Options") to
purchase from Abercrombie & Fitch, at the times set forth herein, such number
of shares of Nonvoting Stock as is necessary to allow the Limited Entities to
own 80 percent of each class of outstanding Nonvoting Stock. The Nonvoting
Stock Option shall be assignable, in whole or in part and from time to time,
by The Limited to any Limited Entity. The exercise price for the shares of
Nonvoting Stock purchased pursuant to the Nonvoting Stock Option shall be the
price at which such Nonvoting Stock is then being sold to third parties or, if
no Nonvoting Stock is being sold, the fair market value thereof as determined
in good faith by the Board of Directors of Abercrombie & Fitch.
2.2. Notice. At least 20 business days prior to the issuance of any
shares of Common Stock or the first date on which any event could occur that,
in the absence of a full or partial exercise of the Class B Common Stock
Option, would result in a reduction in the Ownership Percentage, Abercrombie &
Fitch will notify The Limited in writing (a "Class B Common Stock Option
Notice") of any plans it has to issue such shares or the date on which such
event could first occur. At least 20 business days prior to the issuance of
any shares of Nonvoting Stock or the first date on which any event could occur
that, in the absence of a full or partial exercise of the Nonvoting Stock
Option, would result in the Limited Entities owning less than 80 percent of
each class of outstanding Nonvoting Stock, Abercrombie & Fitch will notify The
Limited in writing (a "Nonvoting Stock Option Notice" and, together with a
Class B Common Stock Option, an "Option Notice") of any plans it has to issue
such shares or the date on which such event could first occur. Each Option
Notice must specify the date on which Abercrombie & Fitch intends to issue
such additional shares or on which such event could first occur (such issuance
or event being referred to herein as an "Issuance Event" and the date of such
issuance or event as an "Issuance Event Date"), the number of shares
Abercrombie & Fitch intends to issue or may issue and the other terms and
conditions of such Issuance Event.
2.3. Option Exercise and Payment. The Class B Common Stock Option
may be exercised by The Limited (or any Limited Entity to which all or any
part of the Class B Common Stock Option has been assigned) for a number of
shares equal to or less than the number of shares that are necessary for the
Limited Entities to maintain, in the aggregate, the Ownership Percentage. The
Nonvoting Stock Option may be exercised by The Limited (or any Limited Entity
to which all or any part of the Nonvoting Stock Option has been assigned) for
a number of shares equal to or less than the number of shares that are
necessary for the Limited Entities to own, in the aggregate, 80% of each class
of outstanding Nonvoting Stock. Each Option may be exercised at any time
after receipt of an applicable Option Notice and prior to the applicable
Issuance Event Date by the delivery to Abercrombie & Fitch of a written notice
to such effect specifying (i) the number of shares of Class B Common Stock or
Nonvoting Stock (as the case may be) to be purchased by The Limited, or any of
the Limited Entities, and (ii) a calculation of the exercise price for such
shares. Upon any such exercise of either Option, Abercrombie & Fitch will,
simultaneously with the issuance of Class B Common Stock, Class A Common Stock
or Nonvoting Stock in connection with an Issuance Event, deliver to The Limited
(or any Limited Entity designated by The Limited), against payment therefor,
certificates (issued in the name of The Limited or its permitted assignee
hereunder, or as directed by The Limited) representing the shares of Class B
Common Stock or Nonvoting Stock (as the case may be) being purchased upon such
exercise. Payment for such shares shall be made by wire transfer or intrabank
transfer to such account as shall be specified by Abercrombie & Fitch, for the
full purchase price for such shares.
2.4. Effect of Failure to Exercise. Any failure by The Limited to
exercise either Option, or any exercise for less than all shares purchasable
under either Option, in connection with any particular Issuance Event shall
not affect The Limited's right to exercise the relevant Option in connection
with any subsequent Issuance Event; provided, however, that, in the case of
the Class B Common Stock Option, the Ownership Percentage following such
Issuance Event in connection with which The Limited so failed to exercise such
Option in full or in part shall be recalculated as set forth in Section 1.1.
2.5. Initial Public Offering. Notwithstanding the foregoing, The
Limited shall not be entitled to exercise the Class B Common Stock Option in
connection with the Initial Public Offering of the Class A Common Stock.
2.6. Termination of Options. The Options shall terminate upon the
occurrence of the first Issuance Event that results in the Ownership
Percentage being less than 60%, other than any Issuance Event in violation of
this Agreement. Each Option, or any portion thereof assigned to any Limited
Entity other than The Limited, also shall terminate in the event that the
Person to whom such Option, or such portion thereof has been transferred,
ceases to be a Limited Entity for any reason whatsoever.
ARTICLE III
REGISTRATION RIGHTS
3.1. Demand Registration - Registrable Securities. (a) Upon
written notice provided at any time after the Initial Public Offering Date
from any Holder of Registrable Securities requesting that Abercrombie & Fitch
effect the registration under the Securities Act of any or all of the
Registrable Securities held by such Holder, which notice shall specify the
intended method or methods of disposition of such Registrable Securities,
Abercrombie & Fitch shall use its best efforts to effect the registration
under the Securities Act and applicable state securities laws of such
Registrable Securities for disposition in accordance with the intended method
or methods of disposition stated in such request (including in a Rule 415
Offering, if Abercrombie & Fitch is then eligible to register such Registrable
Securities on Form S-3 (or a successor form) for such offering); provided that:
(i) with respect to any registration statement filed, or to be
filed, pursuant to this Section 3.1, if Abercrombie & Fitch shall
furnish to the Holders of Registrable Securities that have made such
request a certified resolution of the Board of Directors of
Abercrombie & Fitch (adopted by the affirmative vote of a majority of
the directors not designated by the Limited Entities) stating that in
the Board of Directors' good faith judgment it would (because of the
existence of, or in anticipation of, any acquisition or financing
activity, or the unavailability for reasons beyond Abercrombie &
Fitch's reasonable control of any required financial statements, or
any other event or condition of similar significance to Abercrombie &
Fitch) be significantly disadvantageous (a "Disadvantageous
Condition") to Abercrombie & Fitch for such a registration statement
to be maintained effective, or to be filed and become effective, and
setting forth the general reasons for such judgment, Abercrombie &
Fitch shall be entitled to cause such registration statement to be
withdrawn and the effectiveness of such registration statement
terminated, or, in the event no registration statement has yet been
filed, shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of
which Abercrombie & Fitch shall promptly deliver to such Holders).
Upon receipt of any such notice of a Disadvantageous Condition, such
Holders shall forthwith discontinue use of the prospectus contained
in such registration statement and, if so directed by Abercrombie &
Fitch, each such Holder will deliver to Abercrombie & Fitch all
copies, other than permanent file copies then in such Holder's
possession, of the prospectus then covering such Registrable
Securities current at the time of receipt of such notice; provided,
that the filing of any such registration statement may not be delayed
for a period in excess of six months due to the occurrence of any
particular Disadvantageous Condition;
(ii) after the occurrence of the Limited Ownership Reduction, if
any, the Holders of Registrable Securities may collectively exercise
their rights under this Section 3.1 on not more than three occasions
(it being acknowledged that prior to the Limited Ownership Reduction,
if any, there shall be no limit to the number of occasions on which
such Holders (other than any of the Limited Transferees and their
Affiliates (other than the Limited Entities)) may exercise such
rights); and
(iii) the Holders of Registrable Securities shall not have the
right to exercise registration rights pursuant to this Section 3.1 in
any six-month period following the registration and sale of
Registrable Securities effected pursuant to a prior exercise of the
registration rights provided in this Section 3.1.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 3.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it
has become effective, (ii) if after it has become effective such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the
related registration statement or (iii) if the conditions to closing specified
in the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied or waived other than by reason of
some act or omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this Section 3.1
shall involve, in whole or in part, an underwritten offering, the Holders of a
majority of the Registrable Securities to be registered shall have the right
to designate an underwriter or underwriters as the lead or managing
underwriters of such underwritten offering reasonably acceptable to
Abercrombie & Fitch and, in connection with each registration pursuant to this
Section 3.1, such Holders may select one counsel to represent all such Holders.
(d) Abercrombie & Fitch shall have the right to cause the
registration of additional equity securities for sale for the account of any
Person (including, without limitation, Abercrombie & Fitch and any existing or
former directors, officers or employees of the Abercrombie & Fitch Entities)
in any registration of Registrable Securities requested by the Holders
pursuant to paragraph (a) above; provided, that if such Holders are advised in
writing (with a copy to Abercrombie & Fitch) by a nationally recognized
investment banking firm selected by such Holders reasonably acceptable to
Abercrombie & Fitch (which shall be the lead underwriter or a managing
underwriter in the case of an underwritten offering) that, in such firm's good
faith view, all or a part of such additional equity securities cannot be sold
and the inclusion of such additional equity securities in such registration
would be likely to have an adverse effect on the price, timing or distribution
of the offering and sale of the Registrable Securities then contemplated by any
Holder, the registration of such additional equity securities or part thereof
shall not be permitted. The Holders of the Registrable Securities to be
offered may require that any such additional equity securities be included in
the offering proposed by such Holders on the same conditions as the
Registrable Securities that are included therein. In the event that the
number of Registrable Securities requested to be included in a registration
statement by the Holders thereof exceeds the number which, in the good faith
view of such investment banking firm, can be sold without adversely affecting
the price, timing, distribution or sale of securities in the offering, the
number shall be allocated pro rata among the requesting Holders on the basis
of the relative number of Registrable Securities then held by each such Holder
(provided that any number in excess of a Holder's request may be reallocated
among the remaining requesting Holders in a like manner).
3.2. Piggyback Registration. In the event that Abercrombie & Fitch
at any time after the Initial Public Offering Date proposes to register any of
its Common Stock, any other of its equity securities or securities convertible
into or exchangeable for its equity securities (collectively, including Common
Stock, "Other Securities") under the Securities Act, whether or not for sale
for its own account, in a manner that would permit registration of
Registerable Securities for sale for cash to the public under the Securities
Act, it shall at each such time give prompt written notice to each Holder of
Registrable Securities of its intention to do so and of the rights of such
Holder under this Section 3.2. Subject to the terms and conditions hereof,
such notice shall offer each such Holder the opportunity to include in such
registration statement such number of Registerable Securities as such Holder
may request. Upon the written request of any such Holder made within 15 days
after the receipt of Abercrombie & Fitch's notice (which request shall specify
the number of Registrable Securities intended to be disposed of and the
intended method of disposition thereof), Abercrombie & Fitch shall use its
best efforts to effect, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which Abercrombie & Fitch has been so requested to register, to the
extent required to permit the disposition (in accordance with such intended
methods thereof) of the Registrable Securities so requested to be registered;
provided, that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration,
Abercrombie & Fitch shall determine for any reason not to register the Other
Securities, Abercrombie & Fitch may, at its election, give written notice of
such determination to such Holders and thereupon Abercrombie & Fitch shall be
relieved of its obligation to register such Registrable Securities in
connection with the registration of such Other Securities, without prejudice,
however, to the rights of the Holders of Registrable Securities immediately to
request that such registration be effected as a registration under Section 3.1
to the extent permitted thereunder;
(b) if the registration referred to in the first sentence of
this Section 3.2 is to be an underwritten registration on behalf of
Abercrombie & Fitch, and a nationally recognized investment banking firm
selected by Abercrombie & Fitch advises Abercrombie & Fitch in writing that,
in such firm's good faith view, the inclusion of all or a part of such
Registrable Securities in such registration would be likely to have an adverse
effect upon the price, timing or distribution of the offering and sale of the
Other Securities then contemplated, Abercrombie & Fitch shall include in such
registration: (i) first, all Other Securities Abercrombie & Fitch proposes to
sell for its own account ("Company Securities"), (ii) second, up to the full
number of Registrable Securities held by Holders constituting the Limited
Entities that are requested to be included in such registration (Registrable
Securities that are so held being sometimes referred to herein as "Holder
Securities") in excess of the number of Company Securities to be sold in such
offering which, in the good faith view of such investment banking firm, can be
sold without adversely affecting such offering and the sale of the Other
Securities then contemplated (and (x) if such number is less than the full
number of such Holder Securities, such number shall be allocated by The
Limited among such Limited Entities and (y) in the event that such investment
banking firm advises that less than all of such Holder Securities may be
included in such offering, such Limited Entities may withdraw their request
for registration of their Registrable Securities under this Section 3.2 and 90
days subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be
effected as a registration under Section 3.1 to the extent permitted
thereunder), (iii) third, up to the full number of Registrable Securities held
by Holders (other than the Limited Entities) of Registrable Securities that
are requested to be included in such registration in excess of the number of
Company Securities and Holder Securities to be sold in such offering which, in
the good faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and (x) if such number is less than the
full number of such Registrable Securities, such number shall be allocated pro
rata among such Holders on the basis of the number of Registrable Securities
requested to be included therein by each such Holder and (y) in the event that
such investment banking firm advises that less than all of such Registrable
Securities may be included in such offering, such Holders may withdraw their
request for registration of their Registrable Securities under this Section
3.2 and 90 days subsequent to the effective date of the registration statement
for the registration of such Other Securities request that such registration
be effected as a registration under Section 3.1 to the extent permitted
thereunder), and (iv) fourth, up to the full number of the Other Securities
(other than Company Securities), if any, in excess of the number of Company
Securities and Registrable Securities to be sold in such offering which, in
the good faith view of such investment banking firm, can be so sold without so
adversely affecting such offering (and, if such number is less than the full
number of such Other Securities, such number shall be allocated pro rata among
the holders of such Other Securities (other than Company Securities) on the
basis of the number of securities requested to be included therein by each
such holder);
(c) if the registration referred to in the first sentence of
this Section 3.2 is to be an underwritten secondary registration on behalf of
holders of Other Securities (the "Other Holders"), and the lead underwriter or
managing underwriter advises Abercrombie & Fitch in writing that in their good
faith view, all or a part of such additional securities cannot be sold and the
inclusion of such additional securities in such registration would be likely to
have an adverse effect on the price, timing or distribution of the offering
and sale of the Other Securities then contemplated, Abercrombie & Fitch shall
include in such registration the number of securities (including Registrable
Securities) that such underwriters advise can be so sold without adversely
affecting such offering, allocated pro rata among the Other Holders and the
Holders of Registrable Securities on the basis of the number of securities
(including Registrable Securities) requested to be included therein by each
Other Holder and each Holder of Registrable Securities; provided, that if such
registration statement is to be filed at any time after the Limited Ownership
Reduction, if any, and if such Other Holders have requested that such
registration statement be filed pursuant to demand registration rights granted
to them by Abercrombie & Fitch, Abercrombie & Fitch shall include in such
registration (1) first, Other Securities sought to be included therein by the
Other Holders pursuant to the exercise of such demand registration rights, (2)
second, the number of Holder Securities sought to be included in such
registration in excess of the number of Other Securities sought to be included
in such registration by the Other Holders which in the good faith view of such
investment banking firm, can be so sold without so adversely affecting such
offering (and (x) if such number is less than the full number of such Holder
Securities, such number shall be allocated by The Limited among such Limited
Entities and (y) in the event that such investment banking firm advises that
less than all of such Holder Securities may be included in such offering, such
Limited Entities may withdraw their request for registration of their
Registrable Securities under this Section 3.2 and 90 days subsequent to the
effective date of the registration statement for the registration of such
Other Securities request that such registration be effected as a registration
under Section 3.1 to the extent permitted thereunder) and (3) third, the
number of Registrable Securities sought to be included in such registration by
Holders (other than the Limited Entities) of Registrable Securities in excess
of the number of Other Securities and the number of Holder Securities sought
to be included in such registration which, in the good faith view of such
investment banking firm, can be so sold without so adversely affecting such
offering (and (x) if such number is less than the full number of such
Registrable Securities, such number shall be allocated pro rata among such
Holders on the basis of the number of Registrable Securities requested to be
included therein by each such Holder and (y) in the event that such investment
banking firm advises that less than all of such Registrable Securities may be
included in such offering, such Holders may withdraw their request for
registration of their Registrable Securities under this Section 3.2 and 90
days subsequent to the effective date of the registration statement for the
registration of such Other Securities request that such registration be
effected as a registration under Section 3.l to the extent permitted
thereunder);
(d) Abercrombie & Fitch shall not be required to effect any
registration of Registrable Securities under this Section 3.2 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, subscription offers, dividend reinvestment
plans or stock option or other executive or employee benefit or compensation
plans; and
(e) no registration of Registrable Securities effected under
this Section 3.2 shall relieve Abercrombie & Fitch of its obligation to effect
a registration of Registrable Securities pursuant to Section 3.1.
3.3. Expenses. Except as provided herein, Abercrombie & Fitch
shall pay all Registration Expenses with respect to a particular offering (or
proposed offering). Notwithstanding the foregoing, each Holder and Abercrombie
& Fitch shall be responsible for its own internal administrative and similar
costs, which shall not constitute Registration Expenses.
3.4. Registration and Qualification. If and whenever
Abercrombie & Fitch is required to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 or 3.2,
Abercrombie & Fitch shall as promptly as practicable:
(a) prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act relating to the
Registrable Securities to be offered;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities until the earlier of (A) such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition set forth in such registration
statement and (B) the expiration of six-months after such registration
statement becomes effective; provided, that such six-month period shall be
extended for such number of days that equals the number of days elapsing from
(x) the date the written notice contemplated by paragraph (f) below is given
by Abercrombie & Fitch to (y) the date on which Abercrombie & Fitch delivers
to the Holders of Registrable Securities the supplement or amendment
contemplated by paragraph (f) below;
(c) furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed copies
of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements
of the Securities Act, such documents incorporated by reference in such
registration statement or prospectus, and such other documents, as the Holders
of Registrable Securities or such underwriter may reasonably request, and a
copy of any and all transmittal letters or other correspondence to or received
from, the SEC or any other governmental agency or self-regulatory body or
other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering;
(d) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Holders of such
Registrable Securities or any underwriter to such Registrable Securities shall
request, and use its best efforts to obtain all appropriate registrations,
permits and consents in connection therewith, and do any and all other acts
and things which may be necessary or advisable to enable the Holders of
Registrable Securities or any such underwriter to consummate the disposition
in such jurisdictions of its Registrable Securities covered by such
registration statement; provided, that Abercrombie & Fitch shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any such jurisdiction wherein it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) (i) use its best efforts to furnish to each Holder of
Registrable Securities included in such registration (each, a "Selling
Holder") and to any underwriter of such Registrable Securities an opinion of
counsel for Abercrombie & Fitch addressed to each Selling Holder and dated the
date of the closing under the underwriting agreement (if any) (or if such
offering is not underwritten, dated the effective date of the registration
statement), and (ii) use its best efforts to furnish to each Selling Holder a
"cold comfort" letter addressed to each Selling Holder and signed by the
independent public accountants who have audited the financial statements of
Abercrombie & Fitch included in such registration statement, in each such case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements;
(f) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant
to Sections 3.1 or 3.2 is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) of any
request by the SEC or any other regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement
or other document relating to such offering, and in either such case, at the
request of the Selling Holders prepare and furnish to the Selling Holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading:
(g) if reasonably requested by the lead or managing
underwriters, use its best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and automated
inter-dealer quotation system on which a class of common equity securities of
Abercrombie & Fitch is then listed;
(h) to the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of Abercrombie & Fitch to attend any
"road shows" scheduled in connection with any such registration, with all
out-of-pocket costs and expense incurred by Abercrombie & Fitch or such
officers in connection with such attendance to be paid by Abercrombie & Fitch;
and
(i) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected
pursuant to Sections 3.1 or 3.2 unlegended certificates representing ownership
of the Registrable Securities being sold in such denominations as shall be
requested by the Selling Holders or the underwriters.
3.5. Conversion of Other Securities, Etc. In the event that
any Holder offers any options, rights, warrants or other securities issued by
it or any other Person that are offered with, convertible into or exercisable
or exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue
to be eligible for registration pursuant to Sections 3.1 and 3.2.
3.6. Underwriting; Due Diligence. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant
to a registration requested under this Article III, Abercrombie & Fitch shall
enter into an underwriting agreement with such underwriters for such offering,
which agreement will contain such representations and warranties by
Abercrombie & Fitch and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnification and contribution provisions
substantially to the effect and to the extent provided in Section 3.7, and
agreements as to the provision of opinions of counsel and accountants' letters
to the effect and to the extent provided in Section 3.4(e). The Selling
Holders on whose behalf the Registrable Securities are to be distributed by
such underwriters shall be parties to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of,
Abercrombie & Fitch to and for the benefit of such underwriters, shall also be
made to and for the benefit of such Selling Holders. Such underwriting
agreement shall also contain such representations and warranties by such
Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnification and contribution provisions
substantially to the effect and to the extent provided in Section 3.7.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article III, Abercrombie & Fitch shall give the Holders
of such Registrable Securities and the underwriters, if any, and their
respective counsel and accountants, such reasonable and customary access to its
books and records and such opportunities to discuss the business of
Abercrombie & Fitch with its officers and the independent public accountants
who have certified the financial statements of Abercrombie & Fitch as shall be
necessary, in the opinion of such Holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning
of the Securities Act; provided, that such Holders and the underwriters and
their respective counsel and accountants shall use their reasonable best
efforts to coordinate any such investigation of the books and records of
Abercrombie & Fitch and any such discussions with Abercrombie & Fitch's
officers and accountants so that all such investigations occur at the same
time and all such discussions occur at the same time.
3.7. Indemnification and Contribution. (a) In the case of
each offering of Registrable Securities made pursuant to this Article III,
Abercrombie & Fitch agrees to indemnify and hold harmless, to the extent
permitted by law, each Selling Holder, each underwriter of Registrable
Securities so offered and each Person, if any, who controls any of the
foregoing Persons within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, against
any and all losses, liabilities, costs (including reasonable attorney's fees
and disbursements), claims and damages, joint or several, to which they or any
of them may become subject, under the Securities Act or otherwise, including
any amount paid in settlement of any litigation commenced or threatened,
insofar as such losses, liabilities, costs, claims and damages (or actions or
proceedings in respect thereof, whether or not such indemnified Person is a
party thereto) arise out of or are based upon any untrue statement by
Abercrombie & Fitch or alleged untrue statement by Abercrombie & Fitch of a
material fact contained in the registration statement (or in any preliminary
or final prospectus included therein) or in any offering memorandum or other
offering document relating to the offering and sale of such Registrable
Securities prepared by Abercrombie & Fitch or at its direction, or any
amendment thereof or supplement thereto, or in any document incorporated by
reference therein, or any omission by Abercrombie & Fitch or alleged omission
by Abercrombie & Fitch to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
that Abercrombie & Fitch shall not be liable to any Person in any such case to
the extent that any such loss, liability, cost, claim or damage arises out of
or relates to any untrue statement or alleged untrue statement, or any
omission, if such statement or omission shall have been made in reliance upon
and in conformity with information relating to a Selling Holder or another
holder of securities included in such registration statement furnished to
Abercrombie & Fitch by or on behalf of such Selling Holder, other holder or
underwriter, as the case may be, specifically for use in the registration
statement (or in any preliminary or final prospectus included therein),
offering memorandum or other offering document, or any amendment thereof or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Selling Holder or
any other holder and shall survive the transfer of such securities. The
foregoing indemnity agreement is in addition to any liability that Abercrombie
& Fitch may otherwise have to each Selling Holder, other holder or underwriter
of the Registrable Securities or any controlling person of the foregoing and
the officers, directors, affiliates, employees and agents of each of the
foregoing; provided, further, that, in the case of an offering with respect to
which a Selling Holder has designated the lead or managing underwriters (or a
Selling Holder is offering Registrable Securities directly, without an
underwriter), this indemnity does not apply to any loss, liability, cost,
claim or damage arising out of or relating to any untrue statement or alleged
untrue statement or omission or alleged omission in any preliminary prospectus
or offering memorandum if a copy of a final prospectus or offering memorandum
was not sent or given by or on behalf of any underwriter (or such Selling
Holder or other holder, as the case may be) to such Person asserting such
loss, liability, cost, claim or damage at or prior to the written confirmation
of the sale of the Registrable Securities as required by the Securities Act
and such untrue statement or omission had been corrected in such final
prospectus or offering memorandum.
(b) In the case of each offering made pursuant to this
Agreement, each Selling Holder, by exercising its registration rights
hereunder, agrees to indemnify and hold harmless, and to cause each
underwriter of Registrable Securities included in such offering (in the same
manner and to the same extent as set forth in Section 3.7(a)) to agree to
indemnify and hold harmless, Abercrombie & Fitch, each other underwriter who
participates in such offering, each other Selling Holder or other holder with
securities included in such offering and in the case of an underwriter, such
Selling Holder or other holder, and each Person, if any, who controls any of
the foregoing within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, against
any and all losses, liabilities, costs, claims and damages to which they or
any of them may become subject, under the Securities Act or otherwise,
including any amount paid in settlement of any litigation commenced or
threatened, insofar as such losses, liabilities, costs, claims and damages (or
actions or proceedings in respect thereof, whether or not such indemnified
Person is a party thereto) arise out of or are based upon any untrue statement
or alleged untrue statement by such Selling Holder or underwriter, as the case
may be, of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or in any offering
memorandum or other offering document relating to the offering and sale of
such Registrable Securities prepared by Abercrombie & Fitch or at its
direction, or any amendment thereof or supplement thereto, or any omission by
such Selling Holder or underwriter, as the case may be, or alleged omission by
such Selling Holder or underwriter, as the case may be, of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue statement of
a material fact is contained in, or such material fact is omitted from,
information relating to such Selling Holder or underwriter, as the case may
be, furnished to Abercrombie & Fitch by or on behalf of such Selling Holder or
underwriter, as the case may be, specifically for use in such registration
statement (or in any preliminary or final prospectus included therein),
offering memorandum or other offering document. The foregoing indemnity is in
addition to any liability which such Selling Holder or underwriter, as the
case may be, may otherwise have to Abercrombie & Fitch, or controlling persons
and the officers, directors, affiliates, employees, and agents of each of the
foregoing; provided, that, in the case of an offering made pursuant to this
Agreement with respect to which Abercrombie & Fitch has designated the lead or
managing underwriters (or Abercrombie & Fitch is offering securities directly,
without an underwriter), this indemnity does not apply to any loss, liability,
cost, claim, or damage arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission in any preliminary
prospectus or offering memorandum if a copy of a final prospectus or offering
memorandum was not sent or given by or on behalf of any underwriter (or
Abercrombie & Fitch, as the case may be) to such Person asserting such loss,
liability, cost, claim or damage at or prior to the written confirmation of
the sale of the Registrable Securities as required by the Securities Act and
such untrue statement or omission had been corrected in such final prospectus
or offering memorandum.
(c) Each party indemnified under paragraph (a) or (b) above
shall, promptly after receipt of notice of a claim or action against such
indemnified part in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the claim or action; provided, that the
failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party on account of the indemnity
agreement contained in paragraph (a) or (b) above except to the extent that
the indemnifying party was actually prejudiced by such failure, and in no
event shall such failure relieve the indemnifying party from any other
liability that it may have to such indemnified party. If any such claim or
action shall be brought against an indemnified party, and it shall have
notified the indemnifying party thereof, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 3.7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. Any indemnifying party against whom indemnity may be sought
under this Section 3.7 shall not be liable to indemnify an indemnified party
if such indemnified party settles such claim or action without the consent of
the indemnifying party. The indemnifying party may not agree to any
settlement of any such claim or action, other than solely for monetary damages
for which the indemnifying party shall be responsible hereunder, the result of
which any remedy or relief shall be applied to or against the indemnified
party, without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld. In any action hereunder as to
which the indemnifying party has assumed the defense thereof with counsel
satisfactory to the indemnified party, the indemnified party shall continue to
be entitled to participate in the defense thereof, with counsel of its own
choice, but the indemnifying party shall not be obligated hereunder to
reimburse the indemnified party for the costs thereof.
(d) If the indemnification provided for in this Section 3.7
shall for any reason be unavailable (other than in accordance with its terms)
to an indemnified party in respect of any loss, liability, cost, claim or
damage referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, cost, claim or
damage (i) as between Abercrombie & Fitch and the Selling Holders on the one
hand and the underwriters on the other, in such proportion as shall be
appropriate to reflect the relative benefits received by Abercrombie & Fitch
and the Selling Holders on the one hand and the underwriters on the other hand
or, if such allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits but also the
relative fault of Abercrombie & Fitch and the Selling Holders on the one hand
and the underwriters on the other with respect to the statements or omissions
which resulted in such loss, liability, cost, claim or damage as well as any
other relevant equitable considerations and (ii) as between Abercrombie &
Fitch on the one hand and each Selling Holder on the other, in such proportion
as is appropriate to reflect the relative fault of Abercrombie & Fitch and of
each Selling Holder in connection with such statements or omissions as well as
any other relevant equitable considerations. The relative benefits received
by Abercrombie & Fitch and the Selling Holders on the one hand and the
underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by Abercrombie & Fitch and
the Selling Holders bear to the total underwriting discounts and commissions
received by the underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of Abercrombie & Fitch and
the Selling Holders on the one hand and of the underwriters on the other shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by Abercrombie & Fitch and the
Selling Holders or by the underwriters. The relative fault of Abercrombie &
Fitch on the one hand and of each Selling Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, but not by reference to any
indemnified party's stock ownership in Abercrombie & Fitch. The amount paid
or payable by an indemnified party as a result of the loss, cost, claim,
damage or liability, or action in respect thereof, referred to above in this
paragraph (d) shall be deemed to include, for purposes of this paragraph (d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Abercrombie & Fitch and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 3.7 were determined by
pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this paragraph.
Notwithstanding any other provision of this Section 3.7, no Selling Holder
shall be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities of such Selling Holder
were offered to the public exceeds the amount of any damages which such
Selling Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. Each Selling
Holder's obligations to contribute pursuant to this Section 3.7 are several in
proportion to the proceeds of the offering received by such Selling Holder
bears to the total proceeds of the offering received by all the Selling
Holders and not joint. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Indemnification and contribution similar to that
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by Abercrombie & Fitch, the Selling Holders and
underwriters with respect to any required registration or other qualification
of securities under any state law or regulation or governmental authority.
(f) The obligations of the parties under this Section 3.7
shall be in addition to any liability which any party may otherwise have to
any other party.
3.8. Rule 144 and Form S-3. Commencing 90 days after the
Initial Public Offering Date, Abercrombie & Fitch shall use its best efforts
to ensure that the conditions to the availability of Rule 144 set forth in
paragraph (c) thereof shall be satisfied. Upon the request of any Holder of
Registrable Securities, Abercrombie & Fitch will deliver to such Holder a
written statement as to whether it has complied with such requirements.
Abercrombie & Fitch further agrees to use its reasonable efforts to cause all
conditions to the availability of Form S-3 (or any successor form) under the
Securities Act of the filing of registration statements under this Agreement
to be met as soon as practicable after the Initial Public Offering Date.
Notwithstanding anything contained in this Section 3.8, Abercrombie & Fitch
may deregister under Section 12 of the Securities Exchange Act of 1934, as
amended, if it then is permitted to do so pursuant to said Act and the rules
and regulations thereunder.
3.9. Transfer of Registration Rights. Any Holder may transfer
all or any portion of its rights under Article III to any transferee of a
number of Registrable Securities owned by such Holder exceeding three percent
(3%) of the outstanding class or series of such securities at the time of
transfer (each transferee that receives such minimum number of Registrable
Securities, a "Transferee"); provided, that each Transferee of Registrable
Securities to which Registrable Securities are transferred, sold or assigned
directly by a Limited Entity (such Transferee, a "Limited Transferee"),
together with any Affiliate of such Limited Transferee (and any subsequent
direct or indirect Transferees of Registrable Securities from such Limited
Transferee and any Affiliates (other than the Limited Entities) thereof),
shall be entitled to request the registration of Registrable Securities
pursuant to Section 3.1 only once. Any transfer of registration rights
pursuant to this Section 3.9 shall be effective upon receipt by Abercrombie &
Fitch of (i) written notice from such Holder stating the name and address of
any Transferee and identifying the number of Registrable Securities with
respect to which the rights under this Agreement are being transferred and the
nature of the rights so transferred and (ii) a written agreement from such
Transferee to be bound by the terms of this Article III and Sections 5.3, 5.4,
5.9, 5.10, and 5.11 of this Agreement. The Holders may exercise their rights
hereunder in such priority as they shall agree upon among themselves.
3.10. Holdback Agreement. If any registration pursuant to
this Article III shall be in connection with an underwritten public offering
of Registrable Securities, each Selling Holder agrees not to effect any public
sale or distribution, including any sale under Rule 144, of any equity
security of Abercrombie & Fitch (otherwise than through the registered public
offering then being made), within 7 days prior to or 90 days (or such lesser
period as the lead or managing underwriters may permit) after the effective
date of the registration statement (or the commencement of the offering to the
public of such Registrable Securities in the case of Rule 415 offerings).
Abercrombie & Fitch hereby also so agrees and agrees to cause each other
holder of equity securities or securities convertible into or exchangeable or
exercisable for such securities (other than in the case of equity securities,
under dividend reinvestment plans or employee stock plans) purchased from
Abercrombie & Fitch otherwise than in a public offering to so agree.
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS
4.1. No Violations. (a) For so long as the Ownership
Percentage is equal to or greater than 50%, Abercrombie & Fitch covenants and
agrees that it will not take any action or enter into any commitment or
agreement which may reasonably be anticipated to result, with or without
notice and with or without lapse of time or otherwise, in a contravention or
event of default by any Limited Entity of (i) any provisions of applicable law
or regulation, including but not limited to provisions pertaining to the
Internal Revenue Code of 1986, as amended, or the Employee Retirement Income
Security Act of 1974, as amended, (ii) any provision of The Limited's
certificate of incorporation or bylaws, (iii) any credit agreement or other
material instrument binding upon The Limited, or (iv) any judgment, order or
decree of any governmental body, agency or court having jurisdiction over The
Limited or any of their respective assets.
(b) Abercrombie & Fitch and The Limited agree to provide to
the other any information and documentation requested by the other for the
purpose of evaluating and ensuring compliance with Section 4.1(a) hereof.
(c) Notwithstanding the foregoing Sections 4.1(a) and 4.1(b),
nothing in this Agreement is intended to limit or restrict in any way the
ability of The Limited to effect, restrict or limit any action or proposed
action of Abercrombie & Fitch, including, but not limited to, the incurrence
by Abercrombie & Fitch of indebtedness, based upon The Limited's internal
policies or other factors.
ARTICLE V
MISCELLANEOUS
5.1. Limitation of Liability. Neither The Limited nor
Abercrombie & Fitch shall be liable to the other for any special, indirect,
incidental or consequential damages of the other arising in connection with
this Agreement.
5.2. Subsidiaries. The Limited agrees and acknowledges that
The Limited shall be responsible for the performance by each Limited Entity of
the obligations hereunder applicable to such Limited Entity.
5.3. Amendments. This Agreement may not be amended or
terminated orally, but only by a writing duly executed by or on behalf of the
parties hereto. Any such amendment shall be validly and sufficiently
authorized for purposes of this Agreement if it is signed on behalf of The
Limited and Abercrombie & Fitch by any of their respective presidents or vice
presidents.
5.4. Term. This Agreement shall remain in effect until all
Registrable Securities held by Holders have been transferred by them to
Persons other than Transferees; provided, that the provisions of Section 3.7
shall survive any such expiration.
5.5. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other
than those to which it is so determined to be invalid, illegal or
unenforceable, shall remain in full force and effect to the fullest extent
permitted by law and shall not be affected thereby, unless such a construction
would be unreasonable.
5.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be deemed duly given upon
actual receipt, and shall be delivered (a) in person, (b) by registered or
certified mail, postage prepaid, return receipt requested, or (c) by facsimile
or other generally accepted means of electronic transmission (provided that a
copy of any notice delivered pursuant to this clause (c) shall also be sent
pursuant to clause (b), addressed as follows:
(a) If to Abercrombie & Fitch, to:
Abercrombie & Fitch, Inc.
Four Limited Parkway
Reynoldsburg, OH 43068
Attention: Samuel P. Fried
Fax: 614-479-7188
(b) If to The Limited, to:
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
Attention: Samuel P. Fried
Fax: 614-479-7188
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Jeffrey Small
Fax: 212-450-4800
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
5.7. Further Assurances. The Limited and Abercrombie & Fitch
shall execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such instruments and take such other action as may be necessary
or advisable to carry out their obligations under this Agreement and under any
exhibit, document or other instrument delivered pursuant hereto.
5.8. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute but one and the same agreement.
5.9. Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by,
the laws of the State of New York.
5.10. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
5.11. Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing contained in this Agreement, express or
implied, is intended to confer upon any other person or entity any benefits,
rights or remedies.
5.12. Specific Performance. The parties hereto acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that
they shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States
or any state thereof, in addition to any other remedy to which they may be
entitled at law or equity.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
ABERCROMBIE & FITCH CO.
By:__________________________
Name:
Title:
THE LIMITED, INC.
By:__________________________
Name:
Title:
Exhibit 21.1
Jurisdiction of
Subsidiary Incorporation
- ---------- ----------------
Abercrombie & Fitch Holding Corporation Delaware
Abercrombie & Fitch Stores, Inc. Delaware
A&F Trademark, Inc. Delaware
High Desert Factoring Nevada
Abercrombie & Fitch Service Corporation Ohio
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
of our reports dated July 11, 1996, on our audits of the balance sheet of
Abercrombie & Fitch Co. as of July 11, 1996 and the consolidated financial
statements of The Abercrombie & Fitch Business as of January 28, 1995 and
February 3, 1996, and for each of the three years in the period ended
February 3, 1996. We also consent to the reference to our firm under the
caption "Experts."
/s/ COOPERS & LYBRAND LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ABERCROMBIE & FITCH BUSINESSES' FEBRUARY 3, 1996 AND MAY 4, 1996 CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> FEB-03-1996 FEB-01-1997
<PERIOD-START> JAN-29-1995 FEB-04-1996
<PERIOD-END> FEB-03-1996 MAY-04-1996
<CASH> 874 823
<SECURITIES> 0 0
<RECEIVABLES> 3,617 3,231
<ALLOWANCES> 0 0
<INVENTORY> 30,388 33,042
<CURRENT-ASSETS> 38,856 42,318
<PP&E> 80,867 82,154
<DEPRECIATION> 33,664 36,389
<TOTAL-ASSETS> 87,693 89,717
<CURRENT-LIABILITIES> 23,751 17,837
<BONDS> 86,045 94,074
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 87,693 89,717
<SALES> 235,659 51,020
<TOTAL-REVENUES> 235,659 51,020
<CGS> 155,865 36,126
<TOTAL-COSTS> 155,865 36,126
<OTHER-EXPENSES> 55,996 15,293
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 23,798 (399)
<INCOME-TAX> 9,500 (200)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
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<NET-INCOME> 14,298 (199)
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