<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- ---------------
Commission file number 1-12107
-------
ABERCROMBIE & FITCH CO.
--------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 31-1469076
- --------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
Four Limited Parkway East, Reynoldsburg, OH 43068
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 577-6500
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class A Common Stock Outstanding at December 2, 1996
- --------------------------------- -------------------------------------
$.01 Par Value 8,050,000 Shares
Class B Common Stock Outstanding at December 2, 1996
- --------------------------------- -------------------------------------
$.01 Par Value 43,000,000 Shares
</TABLE>
<PAGE>
ABERCROMBIE & FITCH CO.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and Thirty-nine Weeks Ended
November 2, 1996 and October 28, 1995............... 3
Consolidated Balance Sheets
November 2, 1996 and February 3, 1996............... 4
Consolidated Statements of Cash Flows
Thirty-nine Weeks Ended
November 2, 1996 and October 28, 1995............... 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.... 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................... 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ABERCROMBIE & FITCH CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------- ------------------------
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES $87,688 $57,222 $196,139 $129,267
Cost of Goods Sold, Occupancy
and Buying Costs 56,731 37,719 132,236 89,313
----------- ----------- ---------- -----------
GROSS INCOME 30,957 19,503 63,903 39,954
General, Administrative and
Store Operating Expenses 21,732 15,220 53,252 37,190
----------- ----------- ---------- -----------
OPERATING INCOME 9,225 4,283 10,651 2,764
Interest Expense 2,643 - 3,794 -
----------- ----------- ---------- -----------
INCOME BEFORE INCOME TAXES 6,582 4,283 6,857 2,764
Provision for Income Taxes 2,600 1,700 2,700 1,100
----------- ----------- ---------- -----------
NET INCOME $ 3,982 $ 2,583 $ 4,157 $ 1,664
=========== =========== ========== ===========
NET INCOME PER SHARE $.09 $.06 $.09 $.04
=========== =========== ========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 45,945 43,000 43,982 43,000
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ABERCROMBIE & FITCH CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
November 2, February 3,
1996 1996
----------- -----------
<S> <C> <C>
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 1,816 $ 874
Accounts Receivable 3,109 3,617
Inventories 51,339 30,388
Store Supplies 4,243 3,529
Other 961 448
----------- -----------
TOTAL CURRENT ASSETS 61,468 38,856
PROPERTY AND EQUIPMENT, NET 51,256 47,203
DEFERRED INCOME TAXES 1,218 1,624
OTHER ASSETS 6 10
----------- -----------
TOTAL ASSETS $ 113,948 $ 87,693
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 9,357 $ 4,359
Accrued Expenses 21,198 14,500
Intercompany Debt - 86,045
Credit Agreement 29,733 -
Working Capital Note 8,616 -
Income Taxes 1,485 4,892
----------- -----------
TOTAL CURRENT LIABILITIES 70,389 109,796
INTERCOMPANY PAYABLE 1,601 -
LONG-TERM MIRROR NOTE 50,000 -
OTHER LONG-TERM LIABILITIES 855 519
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock 511 -
Paid-in Capital 118,362 305
Retained Earnings (Deficit) (127,770) (22,927)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (8,897) (22,622)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 113,948 $ 87,693
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ABERCROMBIE & FITCH CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
------------------------
November 2, October 28,
1996 1995
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,157 $ 1,664
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 8,423 6,706
Changes in Assets and Liabilities:
Inventories (20,951) (30,102)
Accounts Payable and Accrued Expenses 11,696 5,676
Income Taxes (3,001) (3,600)
Other Assets and Liabilities 56 (121)
---------- ---------
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES 380 (19,777)
---------- ---------
CASH USED FOR INVESTING ACTIVITIES
Capital Expenditures (12,910) (11,657)
---------- ---------
FINANCING ACTIVITIES:
Increase in Intercompany Payable 15,172 31,566
Repayment of Intercompany Debt (91,000) -
Repayment of Trademark Obligation (32,000) -
Dividend Paid to Parent (27,000) -
Proceeds from Borrowings Under Credit Agreement 150,000 -
Repayment of Borrowings Under Credit Agreement (120,267) -
Net Proceeds from Sale of Stock 118,567 -
Other Changes in Shareholders' Equity - 150
---------- ---------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 13,472 31,716
---------- ---------
NET INCREASE IN CASH 942 282
Cash, Beginning of Year 874 592
---------- ---------
CASH, END OF PERIOD $ 1,816 $ 874
========== =========
</TABLE>
In the thirty-nine weeks ended November 2, 1996, non-cash financing activities
included the distribution of a note representing preexisting obligations of
Abercrombie & Fitch's operating subsidiary in respect of certain trademarks in
the amount of $32 million by Abercrombie & Fitch's trademark subsidiary to The
Limited Inc., distribution of the $50 million long-term mirror note and the
conversion of $8.6 million of intercompany debt into the working capital note.
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ABERCROMBIE & FITCH CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. (the "Company") was incorporated on June 26, 1996,
and on July 15, 1996 acquired the stock of Abercrombie & Fitch Holdings,
the parent company of the Abercrombie & Fitch Business, and A&F Trademark,
Inc., in exchange for 43 million shares of Class B common stock issued to
The Limited, Inc. ("The Limited"). The Company is a specialty retailer of
high quality, casual apparel for men and women with an active, youthful
lifestyle. The business was established in 1892 and subsequently acquired
by The Limited in 1988.
An initial public offering of 8.05 million shares of the Company's Class A
common stock, including the sale of 1.05 million shares pursuant to the
exercise by the underwriters of their options to purchase additional shares
(the "Offering"), was consummated on October 1, 1996. As a result of the
Offering, approximately 84.2% of the outstanding common stock of the
Company is owned by The Limited.
Holders of Class A common stock generally have rights identical 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. Under certain circumstances, each share of Class B common
stock is convertible into one share of Class A common stock, while held by
The Limited.
The net proceeds received by the Company from the Offering, approximating
$118.6 million, and cash from operations were used to partially repay the
borrowings under the $150 million credit agreement.
The accompanying consolidated financial statements include the historical
financial statements of, and transactions applicable to Abercrombie & Fitch
Co. and its subsidiaries and reflect the assets, liabilities, results of
operations and cash flows on a historical cost basis. The Company is a
direct subsidiary of The Limited. The common stock issued to The Limited
(43 million Class B shares) in connection with the incorporation of the
Company has been reflected as outstanding for all periods presented.
6
<PAGE>
The consolidated financial statements as of and for the periods ended
November 2, 1996 and October 28, 1995 are unaudited and are presented
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, these consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto contained in the Company's Prospectus dated September 25, 1996. In
the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (which are of a 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.
The consolidated financial statements as of November 2, 1996 and for the
thirteen and thirty-nine week periods ended November 2, 1996 and October
28, 1995 included herein have been reviewed by the independent public
accounting firm of Coopers & Lybrand L.L.P. and the report of such firm
follows the notes to consolidated financial statements.
1. ADOPTION OF ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." The Company will make the
required disclosures in its 1996 Annual Report.
3. INVENTORIES
The fiscal year of the Company and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and Fall
(the third and fourth quarters). Valuation of finished goods inventories
is based principally upon the lower of average cost or market determined on
a first-in, first-out basis utilizing the retail method. Inventory
valuation at the end of the first and third quarters reflects adjustments
for inventory markdowns and shrinkage estimates for the total selling
season.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
November 2, February 3,
1996 1996
------------ -----------
<S> <C> <C>
Property and equipment, at cost $ 93,294 $ 80,867
Accumulated depreciation and
amortization (42,038) (33,664)
----------- -----------
Property and equipment, net $ 51,256 $ 47,203
=========== ===========
</TABLE>
7
<PAGE>
5. INCOME TAXES
The Company is included in The Limited's consolidated federal income tax
group for income tax purposes and is responsible for its proportionate
share of income taxes calculated upon its federal taxable income at a
current estimate of the Company's annual effective tax rate.
6. FINANCING ARRANGEMENTS
Short-term borrowings consist of the following at November 2, 1996
(thousands):
<TABLE>
<S> <C>
Credit Agreement $29,733
Working Capital Note 8,616
---------
$38,349
=========
</TABLE>
The credit agreement represents the remaining balance on $150 million
originally borrowed on July 2, 1996 under a bank credit agreement. The
LIBOR-related interest rate at November 2, 1996 was 5.92%. 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
earnings before income taxes, depreciation and amortization. The amounts
borrowed are repayable in nine consecutive semi-annual installments,
commencing on June 30, 1997. In addition, any outstanding borrowings must
be paid in full in the event that The Limited ceases to own directly at
least 80% of the outstanding stock of the Company. It is anticipated that
the remaining balance will be paid by cash provided from operations within
one year, and, accordingly, is classified as short-term borrowings. The
working capital note, which represents an obligation payable to The Limited
matures on January 31, 1997 and bears interest at an annual rate of 6.75%.
The long-term mirror note of $50 million represents a note distributed by
the Company's operating subsidiary to The Limited on July 2, 1996. The
7.8% interest rate and May 15, 2002 maturity of the mirror note parallels
that of the corresponding debt of The Limited.
Interest paid during the thirty-nine weeks ended November 2, 1996,
including interest on the intercompany cash management account (see Note
7), approximated $2.5 million.
8
<PAGE>
7. INTERCOMPANY RELATIONSHIP WITH PARENT
The Limited provides various services to the Company including, but not
limited to, store design and construction supervision, real estate
management, travel and flight support and merchandise sourcing. To the
extent expenditures are specifically identifiable they are charged to the
Company. All other related support expenses are charged to the Company and
other divisions of The Limited pro rata based upon various allocation
methods.
The Company participates 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. After the initial
capitalization of the Company, the intercompany cash management account
became an interest earning asset or interest bearing liability of the
Company depending upon the level of cash receipts and disbursements.
Interest on the intercompany cash management account is calculated based on
the commercial paper rates for "AA" rated companies as reported in the
Federal Reserve's H.15 statistical release. The amount of the intercompany
payable under these arrangements to The Limited at November 2, 1996 is
approximately $1.6 million.
9
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND]
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors of
Abercrombie & Fitch Co.
We have reviewed the condensed consolidated balance sheet of Abercrombie & Fitch
Co. at November 2, 1996, and the related condensed consolidated statements of
income and cash flows for the thirteen-week and thirty-nine-week periods ended
November 2, 1996 and October 28, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of February 3, 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated July 11,
1996, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of February 3, 1996, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 11, 1996
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
During the third quarter of 1996, net sales increased 53% to $87.7 million from
$57.2 million a year ago. Third quarter operating income of $9.2 million more
than doubled last year's $4.3 million.
Earnings per share were $.09 in the third quarter of 1996 compared to $.06 in
1995. Year-to-date earnings per share were $.09 in 1996 compared to $.04 in
1995. On an adjusted basis, third quarter earnings per share were $.09 in 1996
compared to $.03 in 1995 and year-to-date earnings per share were $.08 in 1996
compared to a $(.02) loss in 1995. The adjusted results for the current and
prior year periods presented reflect: 1) 51.05 million shares outstanding; 2)
interest expense on the Company's ongoing capital structure, which excludes
interest expense on the Company's $150 million credit agreement that the Company
anticipates will be repaid in the fourth quarter of 1996; and 3) interest
expense on the Company's seasonal borrowings. Seasonal borrowings are provided
through The Limited's centralized cash management system and are reflected in
the Company's intercompany balances with The Limited.
Financial Summary
- -----------------
The following summarized statement of income data compares the adjusted thirteen
and thirty-nine week periods ended November 2, 1996 to the adjusted information
for the comparable 1995 periods (in thousands except per share data):
<TABLE>
<CAPTION>
Third Quarter
------------------------------------------------------------------------------------------------
As Reported Adjusted As Reported Adjusted
November 2, November 2, October 28, October 28,
1996 Adjustments 1996 1995 Adjustments 1995
------------ ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Operating income $ 9,225 - $ 9,225 $ 4,283 - $ 4,283
Interest expense (2,643) $1,300 (1,343) - $(1,556) (1,556)
------- ------ ------- ------- ------- -------
Income before income taxes 6,582 1,300 7,882 4,283 (1,556) 2,727
Provision for income taxes 2,600 550 3,150 1,700 (610) 1,090
------- ------ ------- ------- ------- -------
Net income $ 3,982 $ 750 $ 4,732 $ 2,583 $ (946) $ 1,637
======= ====== ======= ======= ======= =======
Net income per share $.09 $.09 $ .06 $.03
======= ======= ======= =======
Weighted average shares
outstanding 45,945 51,050 43,000 51,050
======= ======= ======= =======
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Year-to-Date
------------------------------------------------------------------------------------------------
As Reported Adjusted As Reported Adjusted
November 2, November 2, October 28, October 28,
1996 Adjustments 1996 1995 Adjustments 1995
------------ ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Operating income $10,651 - $10,651 $ 2,764 - $ 2,764
Interest expense (3,794) $(97) (3,891) - $(4,241) (4,241)
------- ------ ------- ------- ------- -------
Income before income taxes 6,857 (97) 6,760 2,764 (4,241) 1,477
Provision for income taxes 2,700 - 2,700 1,100 (1,690) (590)
------- ------ ------- ------- ------- -------
Net income (loss) $ 4,157 $(97) $ 4,060 $ 1,664 $(2,551) $ (887)
======= ====== ======= ======= ======= =======
Net income (loss) per share $.09 $.08 $ .04 ($.02)
======= ======= ======= =======
Weighted average shares
outstanding 43,982 51,050 43,000 51,050
======= ======= ======= =======
</TABLE>
The following summarized financial and statistical data compares the thirteen
and thirty-nine week periods ended November 2, 1996 to the comparable 1995
periods:
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
------------------------------ -----------------------------
1996 1995 % Change 1996 1995 % Change
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Increase in comparable store sales 19% 9% 17% 6%
Sales increase attributable to
new and remodeled stores 35% 40% 35% 37%
Sales per average selling square foot $99 $88 13% $227 $210 8%
Sales per average store (thousands) $779 $702 11% $1,791 $1,690 6%
Average store size at end of
quarter (selling square feet) 7,849 8,012 (2%)
Selling square feet at end of quarter
(thousands) 934 689 36%
Number of stores:
Beginning of period 106 77 100 67
Opened 13 9 19 19
Closed - - - -
----- ----- ----- -----
End of period 119 86 119 86
===== ===== ===== =====
</TABLE>
12
<PAGE>
Net Sales
- ---------
Net sales for the third quarter of 1996 increased 53% to $87.7 million from
$57.2 million, an increase of $30.5 million. The increase was due to a
comparable store sales increase of 19%, combined with the addition of 33 new
stores as compared to the third quarter of 1995. Total selling square footage
increased by 245,000 square feet or 36%. Comparable store sales increases were
strong in both the men's and women's categories with women's sweaters and pants
and men's sweaters, pants and jeans among the best performing departments. Net
sales per selling square foot for the Company increased 13%.
Year-to-date net sales were $196.1 million, an increase of 52%, from $129.3
million for the same period in 1995. Sales growth came primarily from a
comparable store sales increase of 17% and the addition of new stores. Net
sales per selling square foot for the Company increased 8%.
Gross Income
- ------------
For the third quarter, gross income, expressed as a percentage of net sales, was
35.3%, which represented a 1.2% increase from the 34.1% level in the third
quarter of 1995. The increase was attributable to a decrease in buying and
occupancy costs, as a percentage of net sales, due to favorable expense
leveraging associated with increased comparable store sales. This more than
offset a decline in merchandise margins (representing gross income before the
deduction of buying and occupancy costs). The decline in merchandise margins
reflects higher markdowns in the third quarter of 1996 versus 1995, consistent
with the Company's strategy to introduce fresh merchandise for the holiday
selling period.
The 1996 year-to-date gross income, expressed as a percentage of net sales, was
32.6%, which represented a 1.7% increase from the 30.9% level in the comparable
period in 1995. Buying and occupancy costs declined as a percentage of net
sales, due to favorable expense leveraging associated with increased comparable
store sales. Merchandise margins were down slightly for the period due to
higher markdowns.
General, Administrative and Store Operating Expenses
- ----------------------------------------------------
General, administrative and store operating expenses, expressed as a percentage
of net sales, were 24.8% in the third quarter of 1996 and 26.6% for the same
period in 1995. The decline is attributable to expense leverage associated with
the strong comparable store sales growth and continued improvement in the
management of store payroll.
General, administrative and store operating expenses, expressed as a percentage
of net sales, were 27.2% and 28.8% for the year-to-date periods in 1996 and
1995, respectively. The improvement resulted from management's continued
emphasis on expense control and the favorable leveraging of store and home
office expenses over higher sales volume.
Operating Income
- ----------------
Third quarter and year-to-date operating income, expressed as a percentage of
net sales, were 10.5% and 5.4%, respectively in 1996, up from 7.5% and 2.1% for
the comparable periods in 1995. The improvement in operating income in these
periods is a result of both higher gross income and lower general,
administrative and store operating expenses, expressed as a percentage of net
sales.
13
<PAGE>
Interest Expense
- ----------------
Third quarter adjusted interest expense of $1.3 million was down $.2 million
from adjusted interest expense for 1995. Year-to-date 1996, the Company's
adjusted interest expense was $3.9 million, down from $4.2 million in 1995.
Adjusted interest expense was lower in 1996 principally due to higher cash flows
generated from operations during 1996. Historical interest expense of $2.6
million for the third quarter and $3.8 million for the year-to-date period in
1996 reflects interest on the $150 million credit agreement from June 30, 1996
through the end of September and interest on the remaining balance of $29.7
million for October, interest on the $50 million mirror notes and $300,000 in
financing fees relating to the credit agreement.
FINANCIAL CONDITION
Liquidity and Capital Resources
- -------------------------------
Cash provided from operating activities and cash funding from The Limited's
centralized cash management system provide the resources to support operations,
including seasonal requirements and capital expenditures. A summary of the
Company's working capital position and long-term ongoing capitalization follows
(thousands):
<TABLE>
<CAPTION>
November 2, 1996 February 3, 1996
---------------- ----------------
<S> <C> <C>
Working capital $(8,921) (1) $(70,940) (2)
Intercompany payable $ 1,601 -
Capitalization:
Long-term debt $50,000 -
Deferred income tax asset (1,218) $ (1,624)
Shareholders' equity (deficit) (8,897) (22,622)
------- --------
Total capitalization $39,885 $(24,246)
======= ========
</TABLE>
(1) Includes the $8.6 million working capital note due The Limited.
(2) Includes $86.0 million of intercompany debt due The Limited.
Net cash provided from operating activities totaled $.4 million for the thirty-
nine weeks ended November 2, 1996 versus net cash used for operating activities
of $(19.8) million in the comparable period in 1995. Inventories increased 10%
to $51.3 million in 1996 compared to the same period in 1995 causing a use of
cash to support current year sales growth. Commensurate with the growth in sales
and inventories, accounts payable and accrued expenses also increased.
Investing activities were all for capital expenditures, which are primarily for
new stores.
14
<PAGE>
The $150 million credit agreement, of which $29.7 million was outstanding at
November 2, 1996, is classified as a short-term obligation. It is currently
anticipated that all of the borrowings under the credit agreement will be
repaid by cash provided by operations in the fourth quarter of the 1996 fiscal
year.
Financing activities were primarily due to intercompany transactions as
discussed in Note 7 to the quarterly financial statements. In addition,
financing activities during 1996 included proceeds of $150 million from the
credit agreement which were used to repay $91 million of intercompany debt and
$32 million of Trademark Obligations and fund a $27 million dividend to The
Limited.
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.
Capital Expenditures
--------------------
Capital expenditures, primarily for new and remodeled stores, totaled $12.9
million for the thirty-nine weeks ended November 2, 1996 compared to $11.7
million for the comparable period of 1995. The Company anticipates spending
$21 - $25 million in 1996 for capital expenditures, of which $18 - $22
million will be for new stores, the relocation and expansion of existing
stores and related improvements for the retail business.
The Company has announced its intention to add approximately 214,000 net
selling square feet in 1996, which will represent a 27% increase over year-end
1995. It is anticipated that the increase will result from the addition of 29
new stores and the remodeling of one store. The Company expects that future
capital `expenditures will be funded principally by net cash provided by
operating activities.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
---------------------------------------------------------------------------
1995
----
All forward-looking statements made by the Company involve material risks and
uncertainties and are subject to change based on various important factors
which may be beyond the Company's control. Accordingly, the Company's future
performance and financial results may differ maerially from those expressed or
implied in any such forward-looking statements. Such factors include, but are
not limited to, 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 on appropriate terms, ability to develop new
merchandise and ability to hire and train associates, and other factors that
may be described in the Company's filings with the Securities and Exchange
Commission. The Company does not undertake to publicly update or revise its
forward-looking statements even if experience or future changes make it clear
that any projected results expressed or implied therein will not be realized.
15
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
3. Articles of Incorporation and Bylaws
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
4. Instruments Defining the Rights of Security Holders
4.1 Specimen Certificate of Class A Common Stock of the Company
incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File No. 333-8231) (the
"Form S-1").
4.2 Certificate of Incorporation of The Limited incorporated by
reference to Exhibit 4.2 to the Company's Form S-1.
4.3 Bylaws of The Limited incorporated by reference to Exhibit 4.3 to
the Company's Form S-1.
4.4 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
incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1.
10. Material Contracts
10.1 Services Agreement, dated September 27, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.2 Shared Facilities Agreement, dated September 27, 1996, by and
between The Limited London-Paris-New York, Inc. and Abercrombie &
Fitch Co.
10.3 Shared Facilities Agreement, dated September 27, 1996, by and
between Express, Inc. and Abercrombie & Fitch Co.
10.4 Tax Sharing Agreement, dated September 27, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.5 Corporate Agreement, dated October 1, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.6 Abercrombie & Fitch Co. Incentive Compensation Plan.
10.7 Abercrombie & Fitch Co. 1996 Stock Option and Performance
Incentive Plan incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement of Form S-8 (File No.
333-15945).
10.8 Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate
Directors incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (File No.
333-15941).
16
<PAGE>
15. Letter re: Unaudited Interim Financial Information to Securities and
Exchange Commission re: Incorporation of Report of Independent
Accountants
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None.
17
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABERCROMBIE & FITCH CO.
(Registrant)
By /s/ Seth R. Johnson
________________________
Seth R. Johnson,
Vice President and Chief
Financial Officer*
Date: December 13, 1996
------------------------------
* Mr. Johnson is the principal financial officer and has been duly authorized
to sign on behalf of the Registrant.
18
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Document
- ----------- ----------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
10.1 Services Agreement, dated as of September 27, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.2 Shared Facilities Agreement, dated September 27, 1996, by and
between The Limited London-Paris-New York, Inc. and Abercrombie
& Fitch Co.
10.3 Shared Facilities Agreement, dated September 27, 1996, by and
between Express, Inc. and Abercrombie & Fitch Co.
10.4 Tax Sharing Agreement, dated September 27, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.5 Corporate Agreement, dated October 1, 1996, by and between
Abercrombie & Fitch Co. and The Limited.
10.6 Abercrombie & Fitch Co. Incentive Compensation Plan.
15 Letter re: Unaudited Interim Financial Information to Securities
and Exchange Commission re: Incorporation of Independent
Accountants' Report.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 3.1
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 315,000,000, consisting of
300,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 15,000,000 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.
<PAGE>
(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 300,000,000 shares of Common Stock of the
----------------
Corporation, 150,000,000 shares are initially designated as shares of Class A
Common Stock and 150,000,000 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)
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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;
7
<PAGE>
(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
8
<PAGE>
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.
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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 $.10 per share, that is issued and outstanding immediately prior to such
effectiveness, shall be changed into and reclassified as 43,000 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;
12
<PAGE>
(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
13
<PAGE>
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
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<PAGE>
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
15
<PAGE>
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
16
<PAGE>
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
17
<PAGE>
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.
18
<PAGE>
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; provided
--------
that the provisions of this ARTICLE ELEVENTH shall not apply to any Business
Combination, and such Business Combination shall require only such affirmative
vote, if any, as is required by law or otherwise, if such Business Combination
shall have been approved by a majority (whether such approval is made prior or
subsequent to the acquisition of Beneficial Ownership of the Voting Stock that
caused the Interested Person to become an Interested Person) of the Continuing
Directors (as hereinafter defined).
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
19
<PAGE>
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
20
<PAGE>
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.
21
<PAGE>
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
22
<PAGE>
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.
23
<PAGE>
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).
24
<PAGE>
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.
25
<PAGE>
Section 7. The provisions of this ARTICLE THIRTEENTH are in addition to
the provisions of ARTICLE SIXTH, Section 5, and ARTICLE TWELFTH.
26
<PAGE>
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
27th day of August 1996.
ABERCROMBIE & FITCH CO.
By: /s/ Samuel P. Fried
-----------------------
Name: Samuel P. Fried
Title: Secretary
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<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ABERCROMBIE & FITCH CO.
Adopted September 20, 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
<PAGE>
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
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(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,
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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
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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
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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,
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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)
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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
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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.
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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
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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.
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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 (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.
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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
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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.
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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
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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
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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
17
<PAGE>
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
18
<PAGE>
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".
19
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Exhibit 10.1
SERVICES AGREEMENT
------------------
This Services Agreement (this "Agreement") is entered into as of September
27, 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:
<PAGE>
ARTICLE I
DEFINITIONS
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.
"Actual-Use Billing" has the meaning ascribed thereto in Section 3.01
"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 3.06.
"Change Notice" has the meaning ascribed thereto in Section 3.08.
"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.
2
<PAGE>
"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 3.07.
"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.
3
<PAGE>
"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.
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 Corporation, an Ohio
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,
4
<PAGE>
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 actual-use billing method ("Actual-Use
Billing"), (iii) the pass-through billing method ("Pass-Through Billing"), (iv)
the percentage of Abercrombie & Fitch' net sales method ("Percent of Sales
Billing") or (v) based upon a calculation of certain costs relating to employee
benefit plans and benefit arrangements ("Benefit Billing"). The Customary
Billing, Actual-Use 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 3.07 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 3.06 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 (S)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 3.03 Actual-Use Billing. The costs of Services determined by
------------------
the Actual-Use Billing method (such Services consisting exclusively of aircraft
services) shall be based on actual flight hours obtained from flight logs
multiplied by an estimated market rate which is subject to annual adjustment.
5
<PAGE>
Section 3.04 Pass-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 3.05 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) actual expenses 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").
Section 3.06. 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
6
<PAGE>
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 3.07. 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
3.07(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
7
<PAGE>
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 3.08. 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
8
<PAGE>
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.
9
<PAGE>
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 3.07.
10
<PAGE>
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.
11
<PAGE>
(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 3.08 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.
12
<PAGE>
(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).
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
(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.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives.
ABERCROMBIE & FITCH CO.
/s/ Kenneth B. Gilman
By:_________________________________
Name: Kenneth B. Gilman
Title: Vice Chairman
THE LIMITED, INC.
/s/ Kenneth B. Gilman
By:_________________________________
Name: Kenneth B. Gilman
Title: Vice Chairman and Chief
Financial Officer
17
<PAGE>
Services Agreement - Schedule I
General Corporate Services/1/
<TABLE>
<CAPTION>
Service Billing Methodology
- ----------------------- ------------------------
<S> <C>
. Aircraft Services Actual-Use Billing
. General Real Estate Services Customary Billing
. Import and Shipping Services Customary Billing
. International Expansion Services Customary Billing
. Store Planning and Construction Customary Billing
. Accounting, Public Reporting Percent of Sales Billing
and Consolidation Services
. Internal Audit Percent of Sales Billing
. Treasury and Cash Management Percent of Sales Billing
(including loans and investments)
. Corporate Development Percent of Sales Billing
. Risk Management and Administrative Insurance Percent of Sales Billing
. Corporate Secretarial Services Percent of Sales Billing
. Marketing Data Services Percent of Sales Billing
. Executive Compensation and Customary Billing
Benefit Plan Design Services
. Governmental Affairs Percent of Sales Billing
. Human Resources and Compensation Customary Billing
. Investor and Public Relations Percent of Sales Billing
. Legal Services Percent of Sales Billing
</TABLE>
- -----------------
/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.
18
<PAGE>
<TABLE>
<CAPTION>
Service Billing Methodology
- ----------------------- ------------------------
<S> <C>
. Tax Return Preparation and Percent of Sales Billing
Tax Planning Services
. Corporate Finance Percent of Sales Billing
. Insurance Policies Pass-Through Billing
(liability, property, casualty
and fiduciary)
. Corporate, administrative Percent of Sales Billing
and general overhead
. Management Information
Systems processing Percent of Sales Billing
</TABLE>
19
<PAGE>
Services Agreement - Schedule II
Benefits Services
<TABLE>
<CAPTION>
Service Billing Methodology
- ----------------------- ------------------------
<S> <C>
MEDICAL/DENTAL PROGRAMS
Benefits/Claims
- ---------------
. 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
- --------------
. Administration of above Abercrombie & Fitch Customary Billing
plans and programs, including:
- maintenance of eligibility files
upon Abercrombie & Fitch's 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)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Service Billing Methodology
- ----------------------- ------------------------
<S> <C>
Participant Contributions
- -------------------------
. Participant contributions for
deductions above plans or direct
bill to associates/retirees Participant payroll
OTHER BENEFIT PLANS
. Life Insurance Customary Billing
--------------
Life insurance for Abercrombie & Fitch
Associates (including Accidental
Death and Dismemberment)
. Savings/Retirement Plans
- Company match/retirement contribution Customary Billing
- Participant Contributions Payroll Deduction
. Long-Term Disability Plans
--------------------------
- Employer contributions Customary Billing
- Associate contributions Payroll deduction
Other Benefit Support Services
- ------------------------------
. Audit, Legal, Actuarial Fees and Customary Billing
related recoveries
. Payroll support of benefits Customary Billing
administration (insurance,
savings, other benefit
plans and statutory requirements)
Employee Stock Purchase Program
- -------------------------------
- - Payroll Services Customary Billing
----------------
</TABLE>
21
<PAGE>
Exhibit 10.2
SHARED FACILITIES AGREEMENT
---------------------------
This SHARED FACILITIES AGREEMENT is entered into as of September 27, 1996
(this "Agreement"), by and between THE LIMITED London-Paris-New York, Inc., 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,
<PAGE>
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)
2
<PAGE>
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
3
<PAGE>
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,
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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: THE LIMITED London-Paris-New York, Inc.
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
(Columbus, Ohio 43230 for non-U.S. mail)
Attn: Corporate 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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year first written above.
SUBLESSOR:
---------
THE LIMITED London-Paris-New York, Inc.,
a Delaware corporation,
ATTEST: By: /s/ George R. Sappenfield
-------------------------------------
Name: George R. Sappenfield
Title: Vice President -- Real Estate
/s/ Samuel P. Fried
- -------------------------------
Samuel P. Fried
Assistant Secretary
SUBLESSEE:
----------
ABERCROMBIE & FITCH CO.,
a Delaware corporation,
ATTEST: By: /s/ Seth R. Johnson
-------------------------------------
Name: Seth R. Johnson
Title: Vice President--
Chief Financial Officer
/s/ Samuel P. Fried
- -------------------------------
Samuel P. Fried,
Secretary
12
<PAGE>
Schedule 1
----------
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Bill Lse No. Center Name State Store Gross Store %
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LTD 2,567 The Gardens FL ABF 589 8,755 36%
LTD 775 11,663 50%
TOO 775 3,892 16%
------
24,310
- --------------------------------------------------------------
</TABLE>
13
<PAGE>
Exhibit 10.3
SHARED FACILITIES AGREEMENT
---------------------------
This SHARED FACILITIES AGREEMENT is entered into as of September 27, 1996
(this "Agreement"), by and between EXPRESS, INC., 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
<PAGE>
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)
2
<PAGE>
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
3
<PAGE>
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,
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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: Express, Inc.
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
(Columbus, Ohio 43230 for non-U.S. mail)
Attn: Corporate 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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year first written above.
SUBLESSOR:
---------
EXPRESS, INC.,
a Delaware corporation,
ATTEST: By: /s/ George R. Sappenfield
--------------------------------------
Name: George R. Sappenfield
Title: Vice President -- Real Estate
/s/ Samuel P. Fried
- --------------------------
Samuel P. Fried
Assistant Secretary
SUBLESSEE:
----------
ABERCROMBIE & FITCH CO.,
a Delaware corporation,
ATTEST: By: /s/ Seth R. Johnson
------------------------------------------------
Name: Seth R. Johnson
Title: Vice President -- Chief Financial Officer
/s/ Samuel P. Fried
- --------------------------
Samuel P. Fried
Secretary
12
<PAGE>
Schedule 1
----------
<TABLE>
<CAPTION>
Bill Lse No. Center Name State Store Gross Store %
<S> <C> <C> <C> <C> <C> <C>
EXP 4272 Highland Park TX ABF 522 11,424 36.7%
EXP 155 8,961 28.7%
STC 155 4,045 13%
VIC 490 5,752 18.4%
VSB 490 1,022 3.3%
------
31,204
EXP 5923 San Franciso Centre CA ABF 575 8,360 45.9%
EXP 427 9,868 54.1%
------
18,228
</TABLE>
13
<PAGE>
Exhibit 10.4
TAX SHARING AGREEMENT
---------------------
THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of
September 27, 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.
<PAGE>
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
2
<PAGE>
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.
3
<PAGE>
"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
4
<PAGE>
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
5
<PAGE>
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,
6
<PAGE>
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.
7
<PAGE>
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.
8
<PAGE>
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
9
<PAGE>
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)
10
<PAGE>
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
11
<PAGE>
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.
12
<PAGE>
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: /s/ Kenneth B. Gilman
_____________________________
Name: Kenneth B. Gilman
Title: Vice Chairman
THE LIMITED, INC.
By: /s/ Kenneth B. Gilman
_____________________________
Name: Kenneth B. Gilman
Title: Vice Chairman and Chief
Financial Officer
13
<PAGE>
Exhibit 10.5
CORPORATE AGREEMENT
-------------------
THIS CORPORATE AGREEMENT ("Agreement") is entered into as of October 1,
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:
<PAGE>
"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.
2
<PAGE>
"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.
3
<PAGE>
"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
4
<PAGE>
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.
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"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
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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.
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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
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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,
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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
10
<PAGE>
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
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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
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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
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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
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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
15
<PAGE>
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
16
<PAGE>
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
17
<PAGE>
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
18
<PAGE>
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
19
<PAGE>
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
--------
20
<PAGE>
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.
21
<PAGE>
(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
22
<PAGE>
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.
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.
23
<PAGE>
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.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
ABERCROMBIE & FITCH CO.
By: /s/ Kenneth B. Gilman
______________________________
Name: Kenneth B. Gilman
Title: Vice Chairman and Chief
Financial Officer
THE LIMITED, INC.
By: /s/ Kenneth B. Gilman
______________________________
Name: Kenneth B. Gilman
Title: Vice Chairman and Chief
Financial Officer
25
<PAGE>
EXHIBIT 10.6
ABERCROMBIE & FITCH CO.
Incentive Compensation Plan
The Abercrombie & Fitch Co. Incentive Compensation Plan (the "Incentive
Plan") is intended to satisfy the applicable provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Incentive Plan
shall be administered by the Compensation Committee (the "Committee") of the
Board of Directors of Abercrombie & Fitch Co. (the "Company"). The Committee
shall determine which key executives of the Company with significant operating
and financial responsibility will be eligible to earn seasonal cash incentive
compensation payments to be paid twice each year under the Incentive Plan.
Neither Leslie H. Wexner nor Kenneth B. Gilman are eligible to participate in
the Incentive Plan.
Prior to the beginning of each spring and fall selling season, the
Committee may establish operating income and/or gross margin and/or sales
objectives for the Company. These objectives must assume an increased
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 the Committee may not use any discretion to modify award
results.
Annual incentive compensation targets may be established for eligible
executives ranging from 10% to 110% of base salary, as established under the
Company's pay guidelines. Executives may 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 will be based on the level and functional
responsibility of his or her position, size of the business for which the
executive is responsible, and competitive practices, in that order of priority.
The annual incentive compensation targets for the Company's eligible executive
officers required to be named in the Company's proxy statement may range from
40% to 110% of base salary. The amount of incentive compensation paid to
participating executives may 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 or exceeded. The minimum level at which a participating executive
will earn any incentive payment, and the level at which an executive will earn
the maximum incentive payment of double the target, must be established by the
Committee prior to the commencement of each bonus period. Actual payouts must
<PAGE>
be based on a straight-line interpolation based on these minimum and maximum
levels and the target operating income and/or gross margin and/or sales
objectives.
The maximum dollar amount to be paid for any year under the Incentive Plan
to any participant may not exceed $2,000,000.
2
<PAGE>
EXHIBIT 15
----------
[LETTERHEAD OF COOPERS & LYBRAND]
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
We are aware that our report dated December 11, 1996, on our review of the
interim consolidated financial information of Abercrombie & Fitch Co. for the
thirteen-week and thirty-nine-week periods ended November 2, 1996 and included
in this Form 10-Q is incorporated by reference in the Company's registration
statements on Form S-8, Registration Nos. 333-15941, 333-15943 and 333-15945.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Financial Statements of Abercrombie & Fitch Co. and Subsidiaries for the quarter
ended November 2, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 1,816
<SECURITIES> 0
<RECEIVABLES> 3,109
<ALLOWANCES> 0
<INVENTORY> 51,339
<CURRENT-ASSETS> 61,468
<PP&E> 93,294
<DEPRECIATION> 42,038
<TOTAL-ASSETS> 113,948
<CURRENT-LIABILITIES> 70,389
<BONDS> 50,000
0
0
<COMMON> 511
<OTHER-SE> (9,408)
<TOTAL-LIABILITY-AND-EQUITY> 113,948
<SALES> 196,139
<TOTAL-REVENUES> 196,139
<CGS> 132,236
<TOTAL-COSTS> 132,236
<OTHER-EXPENSES> 53,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,794
<INCOME-PRETAX> 6,857
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 4,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,157
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
