-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GFezvjYjELL/YmzVTS8wak6EI0lxfa4C6JMo7nxX2wJCdLZoRWmBGmkh1LVTnBsR EXPyUe0hZLjrPLAGF106eg== 0000950103-96-001004.txt : 19960718 0000950103-96-001004.hdr.sgml : 19960718 ACCESSION NUMBER: 0000950103-96-001004 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19960717 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABERCROMBIE & FITCH CO /DE/ CENTRAL INDEX KEY: 0001018840 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-08231 FILM NUMBER: 96595661 BUSINESS ADDRESS: STREET 1: THREE LIMITED PARKWAY CITY: COLUMBUS STATE: OH ZIP: 43230 BUSINESS PHONE: 6144797101 MAIL ADDRESS: STREET 1: THREE LIMITED PARKWAY CITY: COLUMBUS STATE: OH ZIP: 43230 S-1 1 ============================================================================== As filed with the Securities and Exchange Commission on July 17, 1996 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Abercrombie & Fitch Co. (Exact name of Registrant as specified in its charter) Delaware 5651 31-1469076 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) No.) Four Limited Parkway Reynoldsburg, Ohio 43068 (614) 577-6500 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Samuel P. Fried Three Limited Parkway Columbus, Ohio 43230 (614) 479-7000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Jeffrey Small Jean E. Hanson Davis Polk & Wardwell Fried, Frank, Harris, Shriver & Jacobson 450 Lexington Avenue One New York Plaza New York, New York 10017 New York, New York 10004 (212) 450-4000 (212) 859-8000 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and the list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE ============================================================================== Title of Each Class of Proposed Maximum Aggregate Amount of Securities to be Registered Offering Price(1) Registration Fee - ------------------------------------------------------------------------------ Class A Common Stock, par value $0.01 per share $125,000,000 (2) $43,104 ============================================================================== (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). (2) The amount of Class A Common Stock registered also includes any shares of Class A Common Stock initially offered or sold outside the United States and Canada that are thereafter sold or resold in the United States. Offers and sales of Class A Common Stock outside the United States and Canada are not covered by this Registration Statement. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ============================================================================== SUBJECT TO COMPLETION, DATED JULY 17, 1996 Shares Abercrombie & Fitch Class A Common Stock (par value $0.01 per share) Of the shares of Class A Common Stock offered by Abercrombie & Fitch Co., shares are being offered hereby in the United States by the U.S. Underwriters and shares are being offered in a concurrent international offering outside the United States by the International Underwriters. The initial public offering price and the aggregate underwriting discount per share will be identical for both Offerings. See "Underwriting". The Company is currently wholly owned by The Limited, Inc. and, upon completion of the Offerings, The Limited, Inc. will beneficially own 100% of the Company's outstanding Class B Common Stock, which will represent approximately % of the economic interest (or rights of holders of common equity to participate in distributions in respect of the common equity) in the Company ( % if the Underwriters' over-allotment options are exercised in full). See "Risk Factors -- Control by The Limited". Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock, except that holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per share on all matters submitted to a vote of shareholders. Holders of Class A Common Stock are generally entitled to vote with the holders of Class B Common Stock as one class on all matters as to which the Class B Common Stock is entitled to vote. Following the Offerings, the shares of Class B Common Stock held by The Limited, Inc. will represent approximately % of the combined voting power of all classes of voting stock ( % if the Underwriters' over-allotment options are exercised in full) and will be able, among other things, to elect all of the Company's directors, to approve or disapprove amendments to the Company's Certificate of Incorporation and Bylaws, acquisitions and dispositions of assets, mergers and other control decisions and to control the Company's dividend policy and access to capital. Each share of Class B Common Stock is convertible into one share of Class A Common Stock at the option of The Limited, Inc. See "Relationship with The Limited" and "Description of Capital Stock". Prior to the Offerings, there has been no public market for the Class A Common Stock. It is currently estimated that the initial public offering price per share will be between $ and $ . For factors to be considered in determining the initial public offering price, see "Underwriting". SEE "RISK FACTORS" ON PAGE 10 OF THIS PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK, INCLUDING CERTAIN DEEMED CONSENTS OF INVESTORS TO PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION (A COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART) THAT MAY LIMIT THE FIDUCIARY DUTIES AND, AS A RESULT, THE LIABILITY OF DIRECTORS AND OFFICERS OF THE COMPANY TO SHAREHOLDERS. AMONG OTHER THINGS, AN INVESTOR IN CLASS A COMMON STOCK IS DEEMED TO HAVE CONSENTED TO PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION WHICH PERMIT THE OFFICERS AND DIRECTORS OF THE COMPANY, THE LIMITED, INC. AND CERTAIN SUBSIDIARIES OF THE LIMITED, INC. TO ALLOCATE CORPORATE OPPORTUNITIES TO THE COMPANY, THE LIMITED, INC. OR SUCH SUBSIDIARIES AS SUCH OFFICERS OR DIRECTORS DEEM APPROPRIATE. Application will be made for approval of the listing of the Class A Common Stock on the New York Stock Exchange. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Initial Public Underwriting Proceeds to Offering Price Discount(1) Company(2) -------------- ------------ ----------- Per Share........... $ $ $ Total(3)............ $ $ $ - --------------- (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting". (2) Before deducting estimated expenses of $ payable by the Company. (3) The Company has granted the Underwriters an option for 30 days to purchase up to an additional shares of Class A Common Stock at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such options are exercised in full, the total initial public offering price, underwriting discount and proceeds to the Company will be $ , $ and $ , respectively. See "Underwriting". The shares offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York, on or about , 1996, against payment therefor in immediately available funds. Goldman, Sachs & Co. Lazard Freres & Co. LLC Montgomery Securities J.P. Morgan & Co. --------------- The date of this Prospectus is , 1996. [PICTURES] IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained in this Prospectus. As used herein, unless the context otherwise requires, the "Company" or "Abercrombie & Fitch" means Abercrombie & Fitch Co. and its subsidiaries (which, prior to the formation of the Company on June 26, 1996, are referred to herein as the "Abercrombie & Fitch Business"), and "The Limited" means The Limited, Inc. and its subsidiaries (other than the Company). Unless indicated otherwise, the information contained in this Prospectus assumes that the Underwriters do not exercise their over-allotment options. Except as otherwise specified, references herein to years are to the Company's fiscal year, which ends on the Saturday closest to January 31 in the following calendar year. For example, "1995" refers to the fiscal year ended February 3, 1996. All fiscal years for which financial information is included in this Prospectus had 52 weeks, except 1995 which had 53 weeks. All references to "dollars" or "$" are to U.S. dollars. Unless otherwise defined herein, capitalized terms used in this summary have the meanings ascribed to them elsewhere in this Prospectus. Prospective investors should carefully consider the information set forth under the heading "Risk Factors". The Company Abercrombie & Fitch is a rapidly growing specialty retailer of high-quality, casual apparel for men and women approximately 15 to 50 years of age. The Company's net sales have increased from $85.3 million in 1992 to $235.7 million in 1995, representing a compound annual growth rate of 40.3%. During this time, operating income has improved from an operating loss of $10.2 million in 1992 to operating income of $23.8 million in 1995, while the number of Abercrombie & Fitch stores in operation more than doubled, increasing from 40 at the end of 1992 to 100 at the end of 1995. The Company plans to continue this new store expansion program by opening 30 new stores in 1996 and by increasing the number of stores in operation by approximately 20% annually for the next several years thereafter. The Abercrombie & Fitch brand was established in 1892 and became well known as a supplier of rugged, high-quality outdoor gear. Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch goods were renowned for their durability and dependability--and Abercrombie & Fitch placed a premium on complete customer satisfaction with each item sold. In 1992, a new management team began repositioning Abercrombie & Fitch as a more fashion-oriented casual apparel business directed at men and women with a youthful lifestyle. In reestablishing the Abercrombie & Fitch brand, the Company combined its historical image for quality with a new emphasis on casual American style and youthfulness. The Company believes that this strategic decision has contributed to the strong growth and improved profitability it has experienced since 1992. Business Strengths The Company believes that certain business strengths have contributed to its success in the past and will enable it to continue growing profitably. Established and Differentiated Lifestyle Brand. Abercrombie & Fitch has created a focused and differentiated brand image based on quality, youthfulness and classic American style. This image is consistently communicated through all aspects of the Company's business, including merchandise assortments, in-store marketing and print advertising. The Company believes that the strength of the Abercrombie & Fitch brand provides opportunities for increased penetration of current merchandise categories and entry into new product categories. Broad and Growing Appeal. The Company's merchandise assortment appeals to a broad range of customers with varying ages and income levels. The Company believes that both men and women interested in casual, classic American fashion are attracted to the Abercrombie & Fitch lifestyle image. The Company also believes that the brand's broad appeal has been augmented by, and should continue to benefit from, the current trend in fashion toward casual apparel. Proven Management Team. Since the current management team assumed responsibility in 1992, the Company has increased the level of brand awareness and consistently reported improved financial results. In addition, the Company's senior management has significant experience, with an aggregate of over one hundred years in the retail business. The Company believes that management's substantial experience and demonstrated track record of highly profitable growth strongly positions the Company for the future. Consistent Store Level Execution. Abercrombie & Fitch believes that a major element of its success is the consistent store level execution of its brand strategy. Store presentation is tightly controlled by the Company and is based on a detailed and comprehensive store plan regarding visual merchandising, marketing and fixtures to ensure that all stores provide a consistent portrayal of the brand. Store associates are trained as "brand representatives" who convey and reinforce the brand image through their attitude and enthusiasm. Quality. Since its founding over 100 years ago, Abercrombie & Fitch has maintained a strong reputation for quality. This reputation has been enhanced in recent years as management has made quality a defining element of the brand. The Company sources high quality natural fabrics from around the world and uses distinctive trim details and specialized washes to achieve a unique style and comfort in its products. As part of this focus on quality, the Company establishes on-going relationships with key factories to ensure reliability and consistency in production. Internal Design and Merchandising Capabilities. The cornerstone of the Company's business is its ability to design products which embody the Abercrombie & Fitch image. Abercrombie & Fitch develops substantially all of its merchandise line through its own design group, which allows it to develop exclusive merchandise and offer a consistent assortment within a season and from year to year. In addition, because the Company's merchandise is sold exclusively in its own stores, Abercrombie & Fitch is able to control the presentation and pricing of its merchandise, provide a higher level of customer service and closely monitor retail sell-through, which provides competitive advantages over other brand manufacturers that market their goods through department stores. Relationship with The Limited. Unlike most high growth, specialty apparel retailers, Abercrombie & Fitch directly benefits from the resources and expertise of a major retailer such as The Limited. Abercrombie & Fitch has been able to concentrate the efforts of its management team and associates on strengthening its brand image by taking advantage of The Limited's capabilities in the areas of real estate negotiation and acquisition, central distribution, sourcing, store design and construction and general corporate services. The Company will continue to receive such services after the Offerings pursuant to agreements to be entered into with The Limited. See "Relationship with The Limited". Growth Strategy The Company has implemented a growth strategy designed to permit Abercrombie & Fitch to capitalize on its business strengths. The Company plans to continue its store expansion program by opening 30 new stores in 1996 and increasing the number of stores in operation by approximately 20% annually for the next several years thereafter. While substantially all stores to be opened in 1996 will be in regional shopping malls, the Company believes that selected street locations in university and high-traffic urban settings also provide attractive expansion opportunities. In addition, Abercrombie & Fitch believes that there are opportunities to expand its customer base and enhance the productivity of its stores through further penetration of existing merchandise categories and the introduction of new classifications and categories. Products which are being introduced or expanded in 1996 include men's and women's underwear and outerwear, fragrances, sunglasses and decorative home accessories. The Company believes that its internal design capability will enable it to continue to develop new merchandise which reflects the Abercrombie & Fitch lifestyle. See "Business--Growth Strategy". The Company currently is wholly owned by The Limited. The Company was incorporated in Delaware on June 26, 1996 as a holding company for the Abercrombie & Fitch Business. The Company's principal offices are located at Four Limited Parkway, Reynoldsburg, Ohio 43068. The Company's telephone number is (614) 577-6500. The Offerings(1) Class A Common Stock Offered by the Company(2): United States Offering........................... shares International Offering........................... ------------- shares Total.......................................... shares Common Stock Outstanding After the Offerings(3): Class A Common Stock............................. shares Class B Common Stock............................. ------------- shares Total.......................................... shares Proposed New York Stock Exchange Symbol for Class A Common Stock................................... Use of Proceeds................................... All of the net proceeds will be used to repay borrowings of certain of the Company's subsidiaries under a credit agreement entered into with certain lenders and Chase Manhattan Bank, as agent (the "Credit Agreement"), which borrowings were used to fund a dividend to The Limited and repay certain obligations owed to The Limited. Voting Rights; Conversion......................... The holders of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), generally have rights, including as to dividends, identical to those of holders of Class B Common Stock, par value $.01 per share (the "Class B Common Stock"), except that holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to three votes per share. Holders of the Class A Common Stock and Class B Common Stock generally vote together as a single class, except as otherwise required by Delaware law. See "Description of Capital Stock -- Common Stock -- Voting Rights". Under certain circumstances, Class B Common Stock converts to Class A Common Stock. See "Relationship with The Limited". - ------------- (1) Does not include up to shares of Class A Common Stock that are subject to the over-allotment options granted to the Underwriters by the Company. See "Underwriting". (2) Includes up to shares of Class A Common Stock reserved for purchase by associates and directors of Abercrombie & Fitch and certain other businesses operated by The Limited at the initial public offering price set forth on the cover page of this Prospectus. The offerings of Class A Common Stock by the U.S. Underwriters and the International Underwriters are referred to herein as the "Offerings". (3) Does not include an aggregate of shares of Class A Common Stock reserved for issuance in respect of associate and director stock options granted effective upon consummation of the Offerings with an exercise price equal to the initial public offering price set forth on the cover page of this Prospectus. See "Executive Compensation". Dividends The Board of Directors of the Company currently intends to retain future earnings for the development of its business and does not anticipate paying regular quarterly dividends on the Class A Common Stock or the Class B Common Stock (collectively, the "Common Stock") for the foreseeable future. Under Delaware law, the declaration of dividends is within the discretion of the Company's Board of Directors and future dividends, if any, will depend upon various factors, including the Company's net income, current and anticipated cash needs and any other factors deemed relevant by the Board of Directors. By virtue of its Common Stock ownership, The Limited will have the ability to change the size and composition of the Company's Board of Directors and thereby control the payment of dividends by the Company. Pursuant to restrictions contained in the Credit Agreement, so long as the Credit Agreement is outstanding, the Company is prohibited from paying any dividends on its capital stock, including the Class A Common Stock. See "Description of Certain Indebtedness -- Credit Agreement". Relationship with The Limited On June 26, 1996, The Limited announced that its board of directors had authorized the filing of a registration statement relating to an initial public offering of common stock of a subsidiary comprised of its Abercrombie & Fitch business. The Offerings are part of a reconfiguration plan initiated by The Limited in 1995 in order to permit the public offering of shares of common stock in Intimate Brands, Inc., a company consisting of its Victoria's Secret Stores, Victoria's Secret Catalogue, Bath & Body Works, Cacique, Penhaligon's and Gryphon businesses ("Intimate Brands"), and other possible sales of interests in its businesses. The Limited authorized such transactions so as to effect changes that are intended to encourage entrepreneurial spirit, yield better performance, develop new growth opportunities for all the businesses operated by The Limited and, at the same time, indirectly to create new career opportunities for all of The Limited's associates. The reconfiguration was also intended to enable certain of The Limited's businesses to operate more independently while allowing The Limited to focus on inventing new retail brand concepts. The Company is currently wholly owned by The Limited. Upon consummation of the Offerings, The Limited will own 100% of the Class B Common Stock, which will represent approximately % of the combined voting power of all classes of voting stock ( % if the Underwriters' over-allotment options are exercised in full) and thus will continue to have the ability to direct the election of all of the directors of the Company and otherwise exercise a controlling influence over the business and affairs of the Company. The Limited is principally engaged in the purchase, distribution and sale of women's apparel and had 1995 net sales (including Intimate Brands and the Abercrombie & Fitch Business) of approximately $7.9 billion. The Limited operates, among other things, Intimate Brands, and the Express, The Limited Stores, Lerner New York, Lane Bryant and Henri Bendel women's apparel businesses and the Structure, The Limited Too and Galyan's retail stores. The Limited has advised the Company that its current intent is to continue to hold all of the Class B Common Stock beneficially owned by The Limited. However, The Limited has no agreement with the Company not to sell or distribute such shares and, other than pursuant to the Underwriting Agreement described below, there can be no assurance concerning the period of time during which The Limited will maintain its beneficial ownership of Common Stock. The Company has agreed to use its best efforts to effect the registration under the applicable federal and state securities laws of any of the Class B Common Stock held by The Limited. Beneficial ownership of at least 80% of the total voting power and value of the outstanding Common Stock is required in order for The Limited to continue to include the Company in its consolidated group for federal income tax purposes and ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock is required in order for The Limited to be able to effect a Tax-Free Spin-Off (as hereinafter defined) of the Company. In the event The Limited decreases its ownership below 80%, all borrowings under the Credit Agreement must be repaid. See "Description of Certain Indebtedness -- Credit Agreement". Also, the Company and The Limited will agree with the Underwriters not to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any security convertible into or exchangeable or exercisable for Common Stock) for a period of 180 days after the date of this Prospectus without the prior written consent of the Representatives of the Underwriters, subject to certain exceptions. See "Underwriting". The Company does not intend to issue additional shares of Class B Common Stock except in a manner which would permit The Limited to maintain its proportional beneficial interest in the value and voting power of the Company upon the issuance of additional shares of Class A Common Stock. See "Relationship with The Limited -- Corporate Agreement". The Limited has no current plans with respect to a Tax-Free Spin-Off of Abercrombie & Fitch. Each share of Class B Common Stock is convertible while held by The Limited or any of its subsidiaries at such holder's option into one share of Class A Common Stock. Any shares of Class B Common Stock transferred to a person other than The Limited or any of its subsidiaries shall automatically convert to shares of Class A Common Stock upon such disposition, except for a disposition effected in connection with a transfer of Class B Common Stock to shareholders of The Limited as a dividend intended to be on a tax-free basis (a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986, as amended (the "Code"). In the event of a Tax-Free Spin-Off, shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock on the fifth anniversary of the Tax-Free Spin-Off, unless prior to such Tax-Free Spin-Off The Limited delivers to the Company an opinion of counsel (which counsel shall be reasonably satisfactory to the Company) to the effect that such conversion would preclude The Limited from obtaining a favorable ruling from the Internal Revenue Service that the distribution would be a Tax-Free Spin-Off under the Code. If such an opinion is received, approval of such conversion shall be submitted to a vote of the holders of Abercrombie & Fitch's Common Stock as soon as practicable after the fifth anniversary of the Tax-Free Spin-Off, unless The Limited delivers to the Company an opinion of The Limited's counsel (which counsel shall be reasonably satisfactory to the Company) prior to such anniversary that such vote would adversely affect the status of the Tax-Free Spin-Off. Approval of such conversion will require the affirmative vote of the holders of a majority of the shares of both the Abercrombie & Fitch's Class A Common Stock and Class B Common Stock present and voting, voting together as a single class, with each share entitled to one vote for such purpose. No assurance can be given that such conversion would be consummated. The Limited will convert its Class B Common Stock to Class A Common Stock immediately prior to a Tax-Free Spin-Off if, after such conversion, it would have beneficial ownership of at least 80% of the voting power of the outstanding Common Stock. All shares of Class B Common Stock shall automatically convert into Class A Common Stock if a Tax-Free Spin-Off has not occurred and the number of outstanding shares of Class B Common Stock falls below 60% of the aggregate number of outstanding shares of Common Stock. This will prevent The Limited from decreasing its economic interest in the Company to less than 60% while still retaining control of approximately % of Abercrombie & Fitch's voting power. All conversions will be effected on a share-for-share basis. For a description of other provisions governing the conversion of Class B Common Stock, see "Description of Capital Stock -- Common Stock -- Conversion". The requirement that The Limited retain beneficial ownership of at least 80% of the voting power of the outstanding Common Stock after any conversion prior to a Tax-Free Spin-Off is intended to ensure that the tax treatment of the Tax-Free Spin-Off is preserved. Similarly, the requirement to submit such conversion to a vote of the holders of Common Stock is intended to preserve such tax treatment should the Internal Revenue Service challenge such automatic conversion as violating the 80% vote requirement. Automatic conversion of the Class B Common Stock into Class A Common Stock if a Tax-Free Spin-Off has not occurred and The Limited decreases its economic interest in the Company to less than 60% is intended to ensure that The Limited retains voting control by virtue of its ownership of Class B Common Stock only if it has a sizable economic interest in the Company. For so long as The Limited maintains beneficial ownership of a majority of the number of outstanding shares of Common Stock, the Company may not act in a way which may reasonably be anticipated to result in a contravention by The Limited of (i) The Limited's certificate of incorporation or bylaws; (ii) any credit agreement binding upon The Limited; or (iii) any judgment, order or decree of any governmental body having jurisdiction over The Limited. Under agreements to be entered into between the Company and The Limited upon consummation of the Offerings, The Limited will continue to provide certain services to the Company and The Limited will make available certain associate benefit plans to the Company's associates. In addition, the Company and an affiliate of The Limited have entered into a sublease agreement and, upon consummation of the Offerings, the Company and The Limited intend to enter into a number of other intercompany agreements, including corporate and tax-sharing agreements. With respect to matters covered by the services agreement, the relationship between The Limited and Abercrombie & Fitch is intended to continue in a manner generally consistent with past practices. See "Relationship with The Limited". Although the Company will own all the trademarks and service marks used in its business, for so long as the Company remains a subsidiary of The Limited, The Limited will be entitled to use the Company's trademarks and service marks at no cost to The Limited in The Limited's annual report to shareholders and publicity material and for other similar purposes. Abercrombie & Fitch and certain of its subsidiaries are currently subject to intercompany obligations to The Limited in an aggregate principal amount of $53.1 million. Such indebtedness will remain outstanding after consummation of the Offerings, of which $50 million is evidenced by a note (the "Mirror Note") that represents Abercrombie & Fitch's share of certain long-term debt of The Limited and $3.1 million is evidenced by a note (the "Working Capital Note") payable to The Limited on January 31, 1997. The long-term Mirror Note bears interest at the rate of 7.80% per annum and matures on May 15, 2002, paralleling the terms of the corresponding debt of The Limited. The Working Capital Note bears interest at a rate of 6.75% per annum. See "Capitalization" and "Description of Certain Indebtedness -- Intercompany Debt". SUMMARY FINANCIAL AND OPERATING DATA Set forth below is summary historical financial and operating data for the periods indicated for the Abercrombie & Fitch Business. This information should be read in conjunction with the Abercrombie & Fitch Business' historical and pro forma consolidated financial statements and notes thereto included elsewhere in this Prospectus, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other financial information set forth herein. The information for fiscal years 1991 and 1992 is derived from the Abercrombie & Fitch Business' unaudited consolidated financial statements. The selected financial data as of and for the quarters ended April 29, 1995 and May 4, 1996 are derived from the unaudited consolidated financial statements also appearing herein, which, in the opinion of management, reflect all adjustments (which are of a recurring nature) necessary to present fairly the financial position and results of operations and cash flows for the interim periods. Results for the period ended May 4, 1996 are not necessarily indicative of the results of operations to be expected for the full fiscal year.
Fiscal Year Ended Quarter Ended ------------------------------------------------------------------ ---------------------- February 1, January 30, January 29, January 28, February 3, April 29, May 4, 1992 1993 1994 1995 1996(1) 1995 1996 ----------- ----------- ----------- ----------- ----------- --------- --------- (in thousands, except per share, per square foot and number of stores data) Statement of Operations Data: Net sales........................ $ 62,583 $ 85,301 $110,952 $165,463 $235,659 $ 33,377 $ 51,020 Gross income(2).................. 9,665 13,413 30,562 56,820 79,794 8,428 14,894 General, administrative and store operating expenses(3)..... 21,268 23,603 30,240 43,069 55,996 10,297 15,293 Operating income (loss)(4)....... (11,603) (10,190) (4,064) 13,751 23,798 (1,869) (399) Net income (loss)................ (7,003) (6,090) (2,464) 8,251 14,298 (1,169) (199) Pro forma net income (loss)(5)... 9,909 (3,333) (2,463) Pro forma weighted average number of shares(6)............ Pro forma net income (loss) per share(5)(6)................. Balance Sheet Data: Inventories...................... $ 11,932 $ 15,075 $ 10,052 $ 16,551 $ 30,388 $ 20,923 $ 33,042 Total assets..................... 47,967 61,626 48,882 58,018 87,693 63,663 89,717 Pro forma long-term debt (7)..... 50,000 Pro forma shareholders' equity (deficit)(8)............. (16,820) Other Data: Total net sales growth........... -- 36.3% 30.1% 49.1% 42.4% 42.6% 52.9% Gross income percentage(9)....... 15.4% 15.7% 27.5% 34.3% 33.9% 25.3% 29.2% Operating income (loss) percentage(9)................... (18.5%) (11.9%) (3.7%) 8.3% 10.1% (5.6%) (0.8%) Number of stores at period end... 36 40 49 67 100 72 102 Total selling square feet........ 287 332 405 541 792 580 804 Sales per selling square foot(10) $ 261 $ 276 $ 301 $ 350 $ 354 $ 60 $ 64
- ------------ (1) Represents the 53-week fiscal year ended February 3, 1996. (2) Gross income equals net sales less cost of goods sold, occupancy and buying costs. (3) General, administrative and store operating expenses include charges and allocations made by The Limited to the Abercrombie & Fitch Business. (4) Reflects a $4.4 million nonrecurring charge in 1993. See Note 3 to the Consolidated Financial Statements. (5) Gives pro forma effect to the interest expense, net of tax benefit, on the $3.1 million Working Capital Note and the long-term Mirror Note in the amount of $50 million. Also includes the pro forma effect of interest expense and certain fees, net of tax benefit on borrowings under the Credit Agreement for the quarters ended April 29, 1995 and May 4, 1996 and the year ended February 3, 1996. See "Pro Forma Consolidated Financial Statements". (6) Pro forma net income (loss) per share is based on pro forma net income (loss) and the weighted average number of shares of Class A and Class B Common Stock expected to be outstanding after the Offerings. Pro forma net income (loss) per share is not necessarily indicative of what actual net income (loss) per share would have been if the Offerings occurred on the basis assumed. (7) Represents the long-term Mirror Note. (8) Gives pro forma effect to approximately $82 million in obligations owed to The Limited, a $27 million dividend to The Limited and the issuance and sale of Class A Common Stock in the Offerings and the application of the net proceeds therefrom to repay approximately $115 million of borrowings under the Credit Agreement. See "Pro Forma Consolidated Financial Statements". (9) Calculated as a percentage of net sales. (10) Sales per selling square foot is the result of dividing net sales for the period by average selling square feet, which represents the average of selling square feet at the beginning and end of each fiscal period. These amounts are not adjusted to reflect the seasonal nature of the Company's sales or the impact of opening stores in different periods during the year. Sales per selling square foot for interim periods are not representative of results to be expected for a full fiscal year. A listing of key business statistics follows:
Fiscal Year Ended Quarter Ended ------------------------------------------------------------------ ---------------------- February 1, January 30, January 29, January 28, February 3, April 29, May 4, 1992 1993 1994 1995 1996(1) 1995 1996 ----------- ----------- ----------- ----------- ----------- --------- --------- (in thousands, except per share, per square foot and number of stores data) Number of stores opened during the period........................ 10 4 9 20 33 5 2 Number of stores closed during the period........................ 1 -- -- 2 -- -- -- Number of stores at period end..... 36 40 49 67 100 72 102 Total selling square feet (000's).. 287 332 405 541 792 580 804 Sales per selling square foot(1)... $261 $276 $301 $350 $354 $60 $64 Comparable store sales growth(2)......................... 10% 8% 6% 15% 5% 7% 17%
- ---------------- (1) See footnote 10 above. (2) Abercrombie & Fitch includes a store in its comparable store sales calculation at the beginning of the 53rd week of the store's operation. Stores that are expanded or downsized more than 20% in square feet are treated as new stores for purposes of this calculation only. RISK FACTORS Prior to making an investment decision, prospective investors should carefully consider the following specific investment considerations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" for a description of other factors affecting the business of the Company. Consent to Limitations of Liability The Company's Certificate of Incorporation includes provisions relating to potential conflicts of interest that may arise between the Company and The Limited and its subsidiaries. See "Description of Capital Stock". The following provisions were adopted in light of the fact that the Company and The Limited and its subsidiaries are engaged in retail businesses and intend to enter into contracts and other arrangements after the Offerings. To date, the Company and The Limited have not adopted any formal procedures designed to resolve potential conflicts of interest between the two companies. The Company intends to develop procedures to address such conflicts. The precise nature of any conflict resolution procedures will be determined in light of, among other things, the nature of the conflict being addressed. Any person purchasing or acquiring an interest in shares of capital stock of the Company, including the Underwriters, will be deemed to have consented to such provisions relating to conflicts of interest and corporate opportunities, and such consent may restrict such person's ability to challenge transactions carried out in compliance with such provisions. In addition, the Company intends to disclose the existence of such provisions in its Annual Reports on Form 10-K as well as in certain other filings with the Securities and Exchange Commission (the "Commission"). The certificate of incorporation of The Limited does not include comparable provisions relating to conflicts of interest or corporate opportunities. The enforceability of the provisions discussed below under Delaware corporate law has not been established and, due to the absence of relevant judicial authority, counsel to the Company is not able to deliver an opinion as to the enforceability of such provisions. Whether or not such provisions are held to be enforceable, the Company believes its directors will be able to fulfill their fiduciary duties to its shareholders. In addition, it is the opinion of the Commission that any indemnification of directors, officers or controlling persons of the Company for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act") is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Transactions with Interested Parties The Company's Certificate of Incorporation provides that no contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) between the Company and The Limited or any subsidiary of The Limited (other than the Company) or between the Company and any entity in which a director of the Company has a financial interest (a "Related Entity") or between the Company and any director or officer of the Company, The Limited, any subsidiary of The Limited or any Related Entity shall be void or voidable solely for the reason that The Limited or such subsidiary, a Related Entity or any one or more of the officers or directors of the Company, The Limited or such subsidiary or any Related Entity are parties thereto, or solely because any such directors or officers are present at, participate in or vote (which vote shall be counted) with respect to the authorization of the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof). Further, the Company's Certificate of Incorporation provides that The Limited, its subsidiaries and any Related Entity shall not be liable to the Company or its shareholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Company or the derivation of any improper personal benefit by reason of the fact that The Limited, such subsidiary or such Related Entity in good faith takes any action or exercises any rights or gives or withholds any consent in connection with any agreement or contract between The Limited, such subsidiary or such Related Entity and the Company. No vote cast or other action taken by any person who is an officer, director or other representative of The Limited, such subsidiary or such Related Entity, which vote is cast or action is taken by such person in his capacity as a director of the Company, shall constitute an action of or the exercise of a right by or a consent of The Limited, such subsidiary or such Related Entity for the purpose of any such agreement or contract. Allocations of Corporate Opportunities The Company's Certificate of Incorporation provides that in the event a director, officer or associate of the Company who is also a director, officer or associate of The Limited or its subsidiaries acquires knowledge of a transaction or other matter that may constitute a corporate opportunity of either or both the Company and The Limited or its subsidiaries, such corporate opportunity may be allocated either to the Company or The Limited or its subsidiaries as such director, officer or associate deems appropriate under the circumstances. Actions under Intercompany Agreements The Company's Certificate of Incorporation limits the liability of officers and directors of The Limited and its subsidiaries for breaches of fiduciary duty for actions taken or omitted under certain intercompany agreements. Limitations on Fiduciary Duties The Company's Certificate of Incorporation generally eliminates the liability of directors and officers of the Company with respect to certain matters involving The Limited and its subsidiaries, including matters that may constitute corporate opportunities of The Limited, its subsidiaries or the Company. These provisions of the Company's Certificate of Incorporation eliminate certain rights that might have been available to shareholders under Delaware law had such provisions not been included in the Certificate of Incorporation, although the enforceability of such provisions has not been established. Limitation on Personal Monetary Liability, Including Gross Negligence Under the Company's Certificate of Incorporation, the directors' personal monetary liability for breach of their fiduciary duty of care, including actions involving gross negligence, will also be eliminated to the fullest extent permitted under Delaware law. Control by The Limited The Limited is currently the only shareholder of the Company. Upon completion of the Offerings, The Limited will own 100% of the outstanding Class B Common Stock of the Company (which Class B Common Stock is entitled to three votes per share on any matter submitted to a vote of the Company's shareholders). The Class B Common Stock will represent approximately % of the combined voting power of all classes of voting stock ( % if the Underwriters' over-allotment options are exercised in full) and thus will be able to direct the election of all of the members of the Company's Board of Directors and exercise a controlling influence over the business and affairs of the Company, including any determinations with respect to mergers or other business combinations involving the Company, the acquisition or disposition of assets by the Company, the incurrence of indebtedness by the Company, the issuance of any additional Common Stock or other equity securities and the payment of dividends with respect to the Common Stock. Similarly, The Limited will have the power to determine matters submitted to a vote of the Company's shareholders without the consent of the Company's other shareholders, will have the power to prevent a change of control of the Company and could take other actions that might be favorable to The Limited. The grant pursuant to associate benefit plans of Common Stock to, or the acquisition of Common Stock upon the exercise of stock options held by, associates of the Company would reduce the percentage ownership and voting interest in the Company of the public shareholders of the Company. The Limited has advised the Company that its current intent is to continue to hold all of the Class B Common Stock beneficially owned by it. However, The Limited has no agreement with the Company not to sell or distribute such shares, and, except for restrictions in the Underwriting Agreement set forth below, there can be no assurance concerning the period of time during which The Limited will maintain its beneficial ownership of Common Stock. Pursuant to the Underwriting Agreement, The Limited will agree, subject to certain exceptions, not to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any security convertible into or exchangeable or exercisable for Common Stock) owned by it for a period of 180 days after the date of this Prospectus without the prior written consent of the Representatives of the Underwriters. The Company has agreed, at the request of The Limited, to use its best efforts to effect the registration under applicable federal and state securities laws of any of the Class B Common Stock held by The Limited. Beneficial ownership of at least 80% of the total voting power and value of the outstanding Common Stock is required in order for The Limited to continue to include the Company in its consolidated group for federal income tax purposes, and ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock is required in order for The Limited to be able to effect a Tax-Free Spin-Off of the Company. In the event The Limited decreases its ownership below 80%, all borrowings under the Credit Agreement must be repaid. See "Description of Certain Indebtedness -- Credit Agreement". Because The Limited may seek to maintain its beneficial ownership percentage of the Company for tax planning purposes or otherwise and may not desire to acquire additional shares of Common Stock in connection with a future issuance of shares by the Company, the Company may be constrained in its ability to raise equity capital in the future or to issue Common Stock in connection with acquisitions. For so long as The Limited maintains beneficial ownership of a majority of the number of outstanding shares of Common Stock, the Company may not act in a way which may reasonably be anticipated to result in a contravention by The Limited of: (i) The Limited's certificate of incorporation or bylaws; (ii) any credit agreement binding upon The Limited; or (iii) any judgment, order or decree of any governmental body having jurisdiction over The Limited. Each member of a consolidated group for federal income tax purposes is jointly and severally liable for the federal income tax liability of each other member of the consolidated group. For benefit plan purposes, the Company will be part of The Limited's controlled group, which includes The Limited and its other subsidiaries. Under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and federal income tax law, each member of the controlled group is jointly and severally liable for funding and termination liabilities of tax qualified defined benefit retirement plans as well as certain plan taxes. Accordingly, during the period in which the Company is included in The Limited's consolidated or controlled group, the Company could be liable under such provisions in the event any such liability or tax is incurred, and not discharged, by any other member of The Limited's consolidated or controlled group. The Company's Board of Directors currently consists of three members, two of whom serve concurrently as members of the Board of Directors of The Limited and Intimate Brands. Mr. Leslie H. Wexner, Chairman, President and Chief Executive Officer of The Limited, will also serve as Chairman of the Board of the Company, and Kenneth B. Gilman, Vice Chairman of The Limited, will also serve as Vice Chairman of the Board of the Company. In light of its ownership of the Company's Class B Common Stock, The Limited will have the ability to change the size and composition of the Company's Board of Directors and committees of the Board of Directors. See "Relationship with The Limited - -- Corporate Agreement". Potential Conflicts of Interest Various conflicts of interest between the Company and The Limited could arise following completion of the Offerings. Control of Certain Real Estate Matters Pursuant to the terms of the services agreement to be entered into between the Company and The Limited and consistent with past practices, The Limited will be granted the exclusive right to negotiate all store leases on behalf of Abercrombie & Fitch. While Abercrombie & Fitch will use The Limited's real estate division to select store sites and negotiate leases, Abercrombie & Fitch has the final authority to choose to accept or not to accept a store site or lease negotiated by The Limited. Similarly, The Limited will be entitled to allocate store space among Abercrombie & Fitch and other retail businesses operated by The Limited. Although Abercrombie & Fitch's management believes that this arrangement provides it with significant advantages, it may result in conflicts of interest between the Company and The Limited. See "Relationship with The Limited -- Services Agreement" and "Business -- Central Real Estate Management". Cross-Directorships and Stock Ownership Leslie H. Wexner, Chairman of the Board, and Kenneth B. Gilman, Vice Chairman of the Board, as well as Michael S. Jeffries, President and Chief Executive Officer of Abercrombie & Fitch, hold shares of common stock and options to acquire common stock of The Limited. Such shares and options are material to the net worth of Mr. Wexner, Mr. Gilman and Mr. Jeffries. See "Executive Compensation". Cross-directorships and ownership interests of directors or officers of the Company in common stock of The Limited could create or appear to create potential conflicts of interest when directors and officers are faced with decisions that could have different implications for the Company and The Limited. Nevertheless, the Company believes that such directors would be able to fulfill their fiduciary duties to its shareholders. See "Description of Capital Stock -- Certain Certificate of Incorporation and Bylaw Provisions". The certificate of incorporation of The Limited does not include provisions addressing these potential conflicts. Control of Certain Personnel Matters In an effort to promote the career development of senior associates of The Limited's various businesses and to address its own personnel requirements, The Limited may reassign associates from positions at one of its businesses to positions in another business operated by The Limited. Such assignments and reassignments are within the discretion of The Limited and are made with a view towards optimizing the allocation of personnel among the different businesses of The Limited. Although this arrangement may create occasional difficulties for Abercrombie & Fitch, Abercrombie & Fitch's management believes that providing senior managers with opportunities for advancement at other businesses of The Limited is an important advantage in recruiting associates. In addition, Abercrombie & Fitch believes it has benefitted from this arrangement, as experienced managers from other businesses operated by The Limited have been assigned to Abercrombie & Fitch. Although The Limited has no present intention to relocate any senior Abercrombie & Fitch merchandising personnel or other senior executive officers from Abercrombie & Fitch to other businesses controlled by The Limited, there can be no assurance as to future assignments of senior associates of The Limited's other businesses to Abercrombie & Fitch or from Abercrombie & Fitch to other businesses controlled by The Limited. Control of Tax Matters By virtue of its controlling beneficial ownership and the terms of the tax-sharing agreement to be entered into between the Company and The Limited, The Limited will effectively control all of the Company's tax decisions. Under the tax-sharing agreement, The Limited will have sole authority to respond to and conduct all tax proceedings (including tax audits) relating to Abercrombie & Fitch, to file all returns on behalf of the Company and to determine the amount of Abercrombie & Fitch's liability to (or entitlement to payment from) The Limited under the tax-sharing agreement. See "Relationship with The Limited--Tax-Sharing Agreement". This arrangement may result in conflicts of interest between the Company and The Limited. For example, under the tax-sharing agreement, The Limited may choose to contest, compromise or settle any adjustment or deficiency proposed by the relevant taxing authority in a manner that may be beneficial to The Limited and detrimental to the Company. In connection therewith, however, The Limited is obligated under the tax-sharing agreement to act in good faith with regard to all members included in the applicable returns. Competition with The Limited The Limited is one of the largest specialty retailers in the United States. The Limited is not restricted in any manner from competing with Abercrombie & Fitch and currently markets merchandise similar to that sold by the Company through certain of its other subsidiaries. There can be no assurance that The Limited will not expand, through development of new lines of products or businesses, acquisition or otherwise, its operations that compete with Abercrombie & Fitch. Intercompany Agreements Not Subject to Arm's-Length Negotiation The Limited (or one or more of its subsidiaries) and the Company have entered and intend to enter into certain intercompany agreements, including agreements pursuant to which The Limited (or one or more of its subsidiaries) will provide various services to Abercrombie & Fitch, and a tax-sharing agreement, that are material to the conduct of the Company's business. With respect to matters covered by the services agreement, the relationship between The Limited and Abercrombie & Fitch is intended to continue in a manner generally consistent with past practices. See "Relationship with The Limited" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition -- Liquidity and Capital Resources". Because Abercrombie & Fitch is a wholly-owned subsidiary of The Limited, none of these agreements will result from arm's-length negotiations and, therefore, the prices charged to the Company for services provided thereunder may be higher or lower than prices that may be charged by third parties. Immediate and Substantial Dilution and Negative Pro Forma Net Tangible Book Value Purchasers of Class A Common Stock in the Offerings will experience an immediate dilution of $ per share in the net tangible book value of their Class A Common Stock from the estimated initial public offering price of $ per share. Prior to completion of the Offerings, the Company's pro forma net tangible book value per share of Common Stock will be $ , whereas upon completion of the Offerings, it will be $ . This will result in an increase in net tangible book value of $ per share of Class B Common Stock that will be received by The Limited attributable to the Offerings. Due to the negative pro forma net tangible book value of the Company prior to the completion of the Offerings, purchasers of Class A Common Stock in the Offerings will have paid 100% of the Company's total capital after the Offerings while receiving only % of the economic interests therein. Seasonality The Company experiences seasonal fluctuations in its net sales and net income, with a disproportional amount of the Company's net sales and a majority of its net income typically realized during the fourth quarter. Net sales and net income are generally weakest during the first quarter. The Company's quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings and the net sales contributed by new stores, merchandise mix and the timing and level of markdowns. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Seasonality and Quarterly Fluctuations". Future Growth Abercrombie & Fitch has grown rapidly over the past several years. The Company's future growth prospects are dependent upon a number of factors, including, among other things, the availability of suitable store locations, the ability to develop new merchandise and the ability to hire and train qualified associates. There is no assurance that the Company will be able to continue to grow profitably. In 1995, the Company spent $22.3 million for new stores and remodeling and expanding existing stores and anticipates spending between $19 and $23 million in 1996 and 1997 for such capital expenditures. The Company expects that substantially all future capital expenditures will be funded by net cash provided by operating activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business". Dependence on Key Personnel The Company believes that it has benefitted substantially from the leadership of Leslie H. Wexner, Chairman, President and Chief Executive Officer of The Limited and Chairman of the Board of the Company and Michael S. Jeffries, President and Chief Executive Officer of Abercrombie & Fitch. The loss of any of the services of these individuals could have a material adverse effect on the Company's business and prospects. In addition, Mr. Wexner's service as Chairman, President and Chief Executive Officer of The Limited and Chairman of the Board of the Company may create or appear to create potential conflicts of interest. See "-- Potential Conflicts of Interest". Factors Affecting Abercrombie & Fitch's Business; Foreign Sourcing Abercrombie & Fitch's business is sensitive to changes in consumer spending patterns, consumer preferences and overall economic conditions. In addition, Abercrombie & Fitch competes with a broad range of other retailers, some of whom have greater financial resources than the Company. In 1995, approximately 56% of the Company's merchandise was sourced from independent foreign factories located primarily in the Far East. The Company has no long-term merchandise supply contracts and many of its imports are subject to existing or potential duties, tariffs or quotas that may limit the quantity of certain types of goods which may be imported into the United States from countries in that region. The Company competes with other companies for production facilities and import quota capacity. The Company's business is also subject to a variety of other risks generally associated with doing business abroad, such as political instability (including issues concerning the future of Hong Kong following the transfer of Hong Kong to The People's Republic of China on July 1, 1997), currency and exchange risks and local political issues. The Company's future performance will be subject to such factors, which are beyond its control, and there can be no assurance that such factors would not have a material adverse effect on the Company's results of operations. See "Business -- Sourcing" and "-- Competition". No Prior Market; Possible Volatility of Stock Price Prior to the Offerings, there has been no public market for the Class A Common Stock of the Company. There can be no assurance that the initial public offering price will correspond to the price at which the Class A Common Stock will trade in the public market subsequent to the Offerings or that an active public market for the Class A Common Stock will develop and continue after the Offerings. For a discussion of the factors to be considered in determining the initial public offering price, see "Underwriting". Possible Future Sales of Common Stock by The Limited Subject to applicable federal securities laws and the restrictions set forth below in the Underwriting Agreement, The Limited may sell any and all of the shares of Common Stock beneficially owned by it or distribute any or all of the shares of Common Stock to its shareholders. The Company has agreed to use its best efforts to effect the registration under applicable federal and state securities laws of any of the Class B Common Stock held by The Limited. See "Relationship with the Limited--Corporate Agreement". Pursuant to the Underwriting Agreement, The Limited will agree, subject to certain exceptions, not to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any security convertible into or exchangeable or exercisable for Common Stock) for a period of 180 days after the date of this Prospectus without the prior written consent of the Representatives of the Underwriters. Sales or distributions by The Limited of substantial amounts of Common Stock in the public market or to its shareholders could adversely affect prevailing market prices for the Class A Common Stock. See "Relationship with The Limited" and "Shares Eligible for Future Sale". Anti-Takeover Provisions The Company's Certificate of Incorporation and Bylaws contain a number of provisions that could impede a merger, consolidation, takeover or other business combination involving the Company or discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company. Those provisions include (i) a requirement that a vote of the holders of at least 75% of the outstanding Common Stock is required to effect a merger or consolidation with any person or entity owning 5% or more of the Common Stock of the Company (an "Interested Person"), a sale of all or substantially all of the assets of the Company to an Interested Person and certain other control transactions; (ii) a classified board; and (iii) a requirement that certain provisions of the Company's Certificate of Incorporation and Bylaws may be amended, and directors may be removed, only with the approval of the holders of at least 75% of the outstanding Common Stock. The Limited, as owner of approximately % of the combined voting power of all classes of voting stock, could sell or otherwise dispose of a substantial portion of its holdings and still be able to block any merger, consolidation, takeover or other business combination with any Interested Person and certain other material transactions and matters. In addition, the Company is subject to the provisions of Section 203 of the Delaware General Corporation Law. See "Description of Capital Stock -- Certain Certificate of Incorporation and Bylaw Provisions" and "-- The Delaware General Corporation Law". USE OF PROCEEDS The estimated proceeds to the Company from the Offerings, after the deduction of the underwriting expenses, will be $ million ($ million if the Underwriters' over-allotment options are exercised in full), which proceeds are expected to be used to repay borrowings by subsidiaries of the Company under the Credit Agreement previously entered into with certain lenders and Chase Manhattan Bank, as agent. The current weighted average effective interest rate applicable to borrowings under the Credit Agreement is approximately 5.98% per annum. Pursuant to the Credit Agreement, which has a scheduled final maturity of June 30, 2001, borrowings thereunder must be repaid in an amount equal to the Excess Cash Flow (as defined therein) of the Company, which amount will include the net proceeds of the Offerings. Borrowings under the Credit Agreement were used to fund a dividend to The Limited and repay certain obligations owed to The Limited. DIVIDENDS The Board of Directors of the Company currently intends to retain future earnings for the development of its business and does not anticipate paying regular quarterly dividends on the Common Stock for the foreseeable future. Under Delaware law, the declaration of dividends is within the discretion of the Company's Board of Directors and future dividends, if any, will depend upon various factors, including the Company's net income, current and anticipated cash needs and any other factors deemed relevant by the Board of Directors. By virtue of its stock ownership, The Limited will have the ability to change the size and composition of the Company's Board of Directors and thereby control the payment of dividends by the Company. Pursuant to restrictions contained in the Credit Agreement, so long as the Credit Agreement is outstanding, the Company is prohibited from paying any dividends on its capital stock, including the Class A Common Stock. See "Description of Certain Indebtedness -- Credit Agreement". DILUTION The negative pro forma net tangible book value of the Common Stock at , 1996 would have been $ or $ per share, based upon shares of Class B Common Stock outstanding. Assuming the Offerings were consummated on , 1996, after giving effect to the issuance of shares of Class A Common Stock in the Offerings (at an assumed initial public offering price of $ per share and after deducting anticipated offering expenses and the underwriting discount and commissions), the pro forma net tangible book value at , 1996 would have been $ , or $ per share. This represents an immediate increase in net tangible book value of $ per share of Class B Common Stock to The Limited and an immediate dilution of net tangible book value of $ per share of Common Stock to new investors purchasing Class A Common Stock in the Offerings. Pro forma net tangible book value per share is determined by subtracting total liabilities from tangible assets and dividing the remainder by the number of shares of Common Stock outstanding. The following table illustrates this per share dilution: Assumed initial public offering price per share.............. $ Pro forma net tangible book value per share of Common Stock before the Offerings........................................$ Increase per share attributable to new investors(1).......... ________ Pro forma net tangible book value per share of Common Stock after the Offerings................................... ________ Dilution per share to Class A Common Stock investors(2)...... $ - ------------------- (1) After deducting the underwriting discount and commissions and estimated expenses of the Offerings. (2) Dilution is determined by subtracting net tangible book value per share after giving effect to the Offerings from the initial public offering price paid by a new investor for a share of Class A Common Stock. The following table summarizes, on a pro forma basis at , 1996, the differences between the number of shares held by, the voting rights of, the total investment in the Company of and the average cost per share paid by The Limited and the investors purchasing shares of Class A Common Stock in the Offerings:
Shares Held Total Investment ------------------------ ----------------------------- Percentage of Percentage of Percentage of Average Cost Number the Company Voting Rights Amount Investment Per Share ------- -------------- ------------- ------ ------------- ------------ (dollars in millions except per share amounts) The Limited $ New Investors ------- -------------- ------------- ------ ------------- ------------ Total 100% 100% ======= ============== ============= ====== ============= ============
The foregoing tables assume no exercise of the Underwriters' over-allotment options or any outstanding stock options. See "Executive Compensation" for information regarding stock options. CAPITALIZATION The following table sets forth the historical and pro forma (before the Offerings) capitalization of the Company as of May 4, 1996 based on the estimated effects of the following transactions and events: (i) transfer of certain preexisting obligations of Abercrombie & Fitch's operating subsidiary to Abercrombie & Fitch's trademark subsidiary in the amount of $32 million (the "Trademark Obligations") by such trademark subsidiary to The Limited and a resulting dividend to The Limited in a corresponding amount; (ii) distribution of the long-term Mirror Note in the amount of $50 million by Abercrombie & Fitch's operating subsidiary to The Limited and a resulting dividend to the Limited in a corresponding amount; (iii) borrowing by two of Abercrombie & Fitch's subsidiaries of $150 million under the Credit Agreement and the application of such funds to repay $91 million of long-term debt owed to The Limited, to pay a $27 million dividend to The Limited and to repay in full the Trademark Obligations; and (iv) conversion of the remaining $3.1 million of long-term intercompany debt into the Working Capital Note. The following table further sets forth the pro forma (after the Offerings) capitalization of the Company as of May 4, 1996 based on (a) the reclassification of 1,000 shares of Common Stock, par value $.10 per share, of the Company held by The Limited into shares of Class B Common Stock; and (b) the issuance and sale of shares of Class A Common Stock in the Offerings and the application of the net proceeds therefrom to repay approximately $115 million of borrowings under the Credit Agreement. The data should be read in conjunction with the historical Consolidated Financial Statements and notes thereto and the Pro Forma Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus.
May 4, 1996 ----------------------------------------------------- Pro forma Pro forma before after Historical(1) Offerings Offerings --------------- ----------------- ----------------- (dollars in thousands) Short-term borrowings: Credit Agreement(2)...................................... - $150,000 $ 35,000 - 3,074(4) 3,074(4) --------------- ----------------- ----------------- Working Capital Note..................................... Total short-term borrowings............................. - 153,074 38,074 Long-term Mirror Note..................................... - 50,000(5) 50,000(5) $ 94,074 - - --------------- ----------------- ----------------- Long-term intercompany debt(3)............................ 94,074 203,074 88,074 --------------- ----------------- ----------------- Total debt.............................................. Shareholders' equity (deficit)(6): Preferred stock, shares authorized, no shares issued and outstanding.................................. Common stock, par value $.10 per share, 1,000 shares authorized, 1,000 shares issued and outstanding.......... Class A Common Stock, par value $.01 per share, shares authorized, shares issued and outstanding... Class B Common Stock, par value $.01 per share, shares authorized, shares issued and outstanding.. Paid-in capital........................................... 1 (22,821) (131,821) (16,820) --------------- ----------------- ----------------- Retained earnings (deficit)............................... Total shareholders' equity (deficit).................... (22,821) (131,820) (16,820) --------------- ----------------- ----------------- Total capitalization.................................... $71,253 $71,254 $71,254 =============== ================= =================
- -------------- (1) Represents amounts derived from the historical Consolidated Financial Statements of the Abercrombie & Fitch Business included elsewhere in this Prospectus. (2) On July 2, 1996, two of Abercrombie & Fitch's subsidiaries entered into the Credit Agreement and then on July 15, 1996 the stock of such entities was contributed to Abercrombie & Fitch Co. See "Description of Certain Indebtedness -- Credit Agreement". (3) Represents long-term intercompany debt owed to The Limited. (4) Represents the Working Capital Note, which bears interest at 6.75% per annum and matures on January 31, 1997. (5) Represents the long-term Mirror Note, which is Abercrombie & Fitch's share of certain long-term debt of The Limited. See "Description of Certain Indebtedness -- Intercompany Debt". (6) Does not include an aggregate of shares of Class A Common Stock reserved for issuance in respect of associate and director stock options granted effective upon consummation of the Offerings with an exercise price equal to the initial public offering price set forth on the cover page of this Prospectus. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited Pro Forma Consolidated Financial Statements of Abercrombie & Fitch include the historical Consolidated Financial Statements of the Abercrombie & Fitch Business (as defined in Note 1 of the Notes to the Consolidated Financial Statements of the Abercrombie & Fitch Business included elsewhere in this Prospectus) and give effect to the transactions and events described in the Notes to Pro Forma Consolidated Financial Statements as if the transactions and events referred to therein were initiated at the beginning of the relevant fiscal year in the case of the unaudited Pro Forma Consolidated Statements of Operations for fiscal year 1995 and the first quarters of 1995 and 1996 and as of May 4, 1996 in the case of the unaudited Pro Forma Consolidated Balance Sheet. The unaudited Pro Forma Consolidated Financial Statements give effect to the following transactions and events: (i) transfer of the preexisting Trademark Obligations in the amount of $32 million by Abercrombie & Fitch's trademark subsidiary to The Limited and a resulting dividend to The Limited in a corresponding amount; (ii) distribution of the long-term Mirror Note in the amount of $50 million by Abercrombie & Fitch's operating subsidiary to The Limited and a resulting dividend to The Limited in a corresponding amount; (iii) $150 million of borrowings under the Credit Agreement which were used to repay $91 million of long-term debt owed to The Limited, to pay a $27 million dividend to The Limited and repay in full the Trademark Obligations; (iv) conversion of the remaining $3.1 million of long-term intercompany debt into the Working Capital Note; and (v) the sale and issuance of million shares of Class A Common Stock in the Offerings and the application of the $115 million net proceeds therefrom to repay borrowings under the Credit Agreement. Management believes the assumptions used provide a reasonable basis on which to present the unaudited Pro Forma Consolidated Financial Statements. The unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the historical Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations". THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE COMPANY'S RESULTS OF OPERATIONS OR THE COMPANY'S FINANCIAL POSITION HAD THE TRANSACTIONS AND EVENTS DESCRIBED ABOVE BEEN CONSUMMATED ON THE DATES ASSUMED AND DO NOT PROJECT THE COMPANY'S RESULTS OF OPERATIONS OR THE COMPANY'S FINANCIAL POSITION FOR ANY FUTURE DATE OR PERIOD. ABERCROMBIE & FITCH PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
At May 4, 1996 ----------------------------------------------------------------------------------------------- Abercrombie Pro forma Pro forma & Fitch Abercrombie & before Adjustments after Business(1) Fitch Co. Adjustments Offerings (8) Offerings ------------- --------------- ----------- ----------- ------------ ---------- (in thousands) ASSETS Current assets: Cash.......................... $823 $1 (2) $150,000 (3) $824 $115,000 $824 (150,000) (6) (115,000) Accounts receivable........... 3,231 3,231 3,231 Inventories................... 33,042 33,042 33,042 Store supplies................ 3,753 3,753 3,753 Deferred income taxes......... 1,208 1,208 1,208 Other......................... 261 261 261 ----------- --------------- ----------- ---------- Total current assets.......... 42,318 1 42,319 42,319 Property and equipment, net.... 45,765 45,765 45,765 Deferred income taxes.......... 1,624 1,624 1,624 10 10 10 ----------- --------------- ----------- ---------- Other assets................... $89,717 $1 $89,718 $89,718 =========== =============== =========== ========== Total assets................... LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities Accounts payable.............. $4,044 $4,044 $4,044 Accrued expenses.............. 13,593 13,593 13,593 Credit agreement.............. 150,000 (3) 150,000 (115,000) 35,000 Trademark obligations......... 32,000 (4) -- -- (32,000) (6) Working capital note.......... 3,074 (7) 3,074 3,074 Income taxes payable.......... 200 200 200 ----------- --------------- ----------- ---------- Total current liabilities... 17,837 170,911 55,911 Long-term intercompany debt.... 94,074 (91,000) (6) -- -- (3,074) (7) Long-term mirror note.......... 50,000 (5) 50,000 50,000 Other long-term liabilities.... 627 627 627 Shareholders' equity (deficit). (22,821) $1 (27,000) (6) (131,820) 115,000 (16,820) (82,000) (4)(5) ----------- --------------- ----------- ---------- Total liabilities and shareholders' equity (deficit)...................... $89,717 $1 $89,718 $89,718 =========== =============== =========== ==========
The accompanying notes are an integral part of the unaudited Pro Forma Consolidated Financial Statements. ABERCROMBIE & FITCH PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended February 3, 1996 ------------------------------------------------------------ Historical Adjustments Pro forma ---------------- ------------- ----------- (in thousands, except per share amount) Net sales................................................ $235,659 $235,659 Cost of goods sold, occupancy and buying costs........... 155,865 155,865 ---------------- ------------- ----------- Gross income............................................. 79,794 79,794 General, administrative and store operating expenses..... 55,996 55,996 ---------------- ------------- ----------- Operating income......................................... 23,798 23,798 Interest expense......................................... -- $7,389 (1) 7,389 ---------------- ------------- ----------- Income before income taxes............................... 23,798 (7,389) 16,409 Provision for income taxes............................... 9,500 (3,000) (2) 6,500 ---------------- ------------- ----------- Net income............................................... $14,298 $(4,389) $9,909 ================ ============= =========== Pro forma net income per share........................... $===========
The accompanying notes are an integral part of the unaudited Pro Forma Consolidated Financial Statements. ABERCROMBIE & FITCH PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Quarter Ended May 4, 1996 ------------------------------------------------------------- Historical Adjustments Pro forma -------------- ------------- ------------ (in thousands, except per share amount) Net sales................................................ $51,020 $51,020 36,126 36,126 -------------- ------------ Cost of goods sold, occupancy and buying costs........... Gross income............................................. 14,894 14,894 General, administrative and store operating expenses..... 15,293 15,293 -------------- ------------ Operating loss........................................... (399) (399) Interest expense......................................... -- $3,664(1) 3,664 -------------- ------------- ------------ Loss before income taxes................................. (399) (3,664) (4,063) Benefit from income taxes................................ (200) (1,400)(2) (1,600) -------------- ------------- ------------ $(199) $(2,264) $(2,463) Net loss................................................. ============== ============= ============ Pro forma net loss per share............................. $ ============
The accompanying notes are an integral part of the unaudited Pro Forma Consolidated Financial Statements. ABERCROMBIE & FITCH PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Quarter Ended April 29, 1995 -------------------------------------------------------------- Historical Adjustments Pro forma --------------- --------------- ------------- (in thousands, except per share amount) Net sales................................................ $33,377 $33,377 Cost of goods sold, occupancy and buying costs........... 24,949 24,949 --------------- ------------- Gross income............................................. 8,428 8,428 General, administrative and store operating expenses..... 10,297 10,297 --------------- ------------- Operating loss........................................... (1,869) (1,869) Interest expense......................................... -- $3,664(1) 3,664 --------------- --------------- ------------- Loss before income taxes................................. (1,869) (3,664) (5,533) Benefit from income taxes................................ (700) (1,500)(2) (2,200) --------------- --------------- ------------- Net loss................................................. $(1,169) $(2,164) $(3,333) =============== =============== ============= Pro forma net loss per share............................. $ =============
Notes to Pro Forma Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The following pro forma adjustments are based on available information and certain estimates and assumptions. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments. The Company believes that such assumptions provide a reasonable basis for presenting all of the significant effects of the following transactions and events and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma consolidated financial statements. 2. Adjustments to Pro Forma Consolidated Balance Sheet (1) Represents amounts derived from the historical Consolidated Financial Statements of the Abercrombie & Fitch Business included elsewhere in this Prospectus. (2) Represents the initial capitalization of Abercrombie & Fitch Co. (3) Proceeds from borrowing under the Credit Agreement. (4) Transfer of the Trademark Obligations to The Limited in the amount of $32 million. (5) Distribution to The Limited of the $50 million long-term Mirror Note. (6) To reflect the payment of the $32 million Trademark Obligations, payment of $91 million of long-term intercompany debt owed to The Limited and a $27 million dividend to The Limited. (7) The conversion of $3.1 million of long-term intercompany debt into the Working Capital Note. (8) The issuance and sale of shares of Class A Common Stock in the Offerings and the application of the $115 million net proceeds therefrom to repay borrowings under the Credit Agreement. 3. Adjustments to Pro Forma Consolidated Statements of Operations
Year Ended Quarter Ended ------------------------------------------ --------------- February 3, 1996 April 29, 1995 May 4, 1996 ---------------- -------------- --------------- (1) Reflects interest expense as follows: $150 million Credit Agreement due June 30, 2001 (a)....................... $3,068 $2,337 $2,337 $3.1 million Working Capital Note due January 31, 1997 (b).................... 121 52 52 $50 million Mirror Note due May 15, 2002 (c)........................ 3,900 975 975 300 300 300 ---------------- -------------- --------------- Financing fees............................... $7,389 $3,664 $3,664 ================ ============== ===============
(footnotes on following page) - ------------------- (a) Represents interest calculated at an effective rate of 6.25% on $150 million principal outstanding for thirteen weeks for the period indicated, provided, that the period ended February 3, 1996 includes additional interest at an effective rate of 6.25% on $35 million for a period of four months. (b) Interest is calculated at an effective interest rate of 6.75% for a period of seven months in the fiscal year ended February 3, 1996 and three months in the quarters ended April 29, 1995 and May 4, 1996. (c) Interest is calculated based upon 7.80% for the period indicated. (2) Estimated income tax effects of the pro forma adjustments at the effective annual rate. No adjustment has been made for additional costs of Abercrombie & Fitch operating as a public company as management believes that the incremental costs will not be significant. In addition, no adjustments have been made for changes in costs from the service and lease agreements described herein between Abercrombie & Fitch and The Limited since management believes the aggregate net changes in costs will not be material. SELECTED FINANCIAL DATA Set forth below is the selected historical financial and operating data for the periods indicated. This information should be read in conjunction with the Abercrombie & Fitch Business' historical and pro forma consolidated financial statements and notes thereto included elsewhere in this Prospectus, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other financial information set forth herein. The information for fiscal years 1991 and 1992 is derived from the Abercrombie & Fitch Business' unaudited consolidated financial statements. The selected financial data as of and for the quarters ended April 29, 1995 and May 4, 1996 are derived from the unaudited consolidated financial statements also appearing herein, which, in the opinion of management, reflect all adjustments (which are of a recurring nature) necessary to present fairly the financial position and results of operations and cash flows for the interim periods. Results for the period ended May 4, 1996 are not necessarily indicative of the results of operations to be expected for the full fiscal year.
Fiscal Year Ended Quarter Ended --------------------------------------------------------------------- -------------------- February 1, January 30, January 29, January 28, February 3, April 29, May 4, 1992 1993 1994 1995 1996(1) 1995 1996 ------------ ----------- ------------ ----------- ----------- --------- --------- (in thousands, except per share, per square foot and number of stores data) Statement of Operations Data: Net sales...................... $62,583 $85,301 $110,952 $165,463 $235,659 $33,377 $51,020 Gross income(2)................ 9,665 13,413 30,562 56,820 79,794 8,428 14,894 General, administrative and store operating expenses(3)... 21,268 23,603 30,240 43,069 55,996 10,297 15,293 Operating income (loss)(4)..... (11,603) (10,190) (4,064) 13,751 23,798 (1,869) (399) Net income (loss).............. (7,003) (6,090) (2,464) 8,251 14,298 (1,169) (199) Pro forma net income (loss)(5). 9,909 (3,333 (2,463) Pro forma weighted average number of shares(6)........... Pro forma net income (loss) per share(5)(6)................... Balance Sheet Data: Inventories.................... $11,932 $15,075 $10,052 $16,551 $30,388 $20,923 $33,042 Total assets................... 47,967 61,626 48,882 58,018 87,693 63,663 89,717 Pro forma long-term debt(7).... 50,000 Pro forma shareholders' equity (deficit)(8).................. (16,820) Other Data: Total net sales growth......... -- 36.3% 30.1% 49.1% 42.4% 42.6% 52.9% Gross income percentage(9)..... 15.4% 15.7% 27.5% 34.3% 33.9% 25.3% 29.2% Operating income (loss) percentage(9)................. (18.5%) (11.9%) (3.7%) 8.3% 10.1% (5.6%) (0.8%) Number of stores at period end. 36 40 49 67 100 72 102 Total selling square feet...... 287 332 405 541 792 580 804 Sales per selling square foot(10) $261 $276 $301 $350 $354 $60 $64 Comparable store sales growth(11) 10% 8% 6% 15% 5% 7% 17%
- -------------- (1) Represents the 53-week fiscal year ended February 3, 1996. (2) Gross income equals net sales less cost of goods sold, occupancy and buying costs. (3) General, administrative and store operating expenses include charges and allocations made by The Limited to the Abercrombie & Fitch Business. (4) Reflects a $4.4 million nonrecurring charge in 1993. See Note 3 to the Consolidated Financial Statements. (5) Gives pro forma effect to the interest expense, net of tax benefit, on the $3.1 million Working Capital Note and the long-term Mirror Note in the amount of $50 million. Also includes the pro forma effect of interest expense and certain fees, net of tax benefit on borrowings under the Credit Agreement for the quarters ended April 29, 1995 and May 4, 1996 and the year ended February 3, 1996. See "Pro Forma Consolidated Financial Statements". (6) Pro forma net income (loss) per share is based on pro forma net income (loss) and the weighted average number of shares of Class A and Class B Common Stock expected to be outstanding after the Offerings. Pro forma net income (loss) per share is not necessarily indicative of what actual net income (loss) per share would have been if the Offerings occurred on the basis assumed. (7) Represents the long-term Mirror Note. (8) Gives pro forma effect to approximately $82 million in obligations owed to The Limited, a $27 million dividend to The Limited and the issuance and sale of Class A Common Stock in the Offerings and the application of the net proceeds therefrom to repay approximately $115 million of borrowings under the Credit Agreement. See "Pro Forma Consolidated Financial Statements". (9) Calculated as a percentage of net sales. (10) Sales per selling square foot is the result of dividing net sales for the period by average selling square feet, which represents the average of selling square feet at the beginning and end of each fiscal period. These amounts are not adjusted to reflect the seasonal nature of the Company's sales or the impact of opening stores in different periods during the year. Sales per selling square foot for interim periods are not representative of results to be expected for a full fiscal year. (11) Abercrombie & Fitch includes a store in its comparable store sales calculation at the beginning of the 53rd week of the store's operation. Stores that are expanded more than 20% in square feet are treated as new stores for purposes of this calculation only. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of Abercrombie & Fitch's financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and the Pro Forma Consolidated Financial Statements included elsewhere in this Prospectus. For the purposes of the Management's Discussion and Analysis, unless the context otherwise requires, the "Company" or "Abercrombie & Fitch" refers to the Abercrombie & Fitch Business as defined in Note 1 of the Notes to the Consolidated Financial Statements. General Since the current management team assumed responsibility for Abercrombie & Fitch in 1992, the Company has consistently improved its financial performance. In the period from 1993 to 1995, the Company increased net sales from $111.0 million to $235.7 million and grew operating income from $(4.1) million to $23.8 million. The strong growth during this period resulted from expansion of the number of stores in operation and increased comparable store sales as the Company improved its merchandise assortment and strengthened its brand awareness. From 1993 to 1995, the Company improved sales per selling square foot from $301 to $354. The Company has also improved operating income as as a percent of sales from (3.7%) in 1993 to 10.1% in 1995 by increasing sales volume and gross income at a faster rate than general, administrative and store operating expenses. The momentum evidenced by the Company's financial performance from 1993 to 1995 continued into 1996 as net sales, driven by 17% comparable store sales growth, increased to $51.0 million in the first quarter of 1996 from $33.4 million in the first quarter of 1995. The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items in the Company's consolidated statements of operations for the fiscal periods shown below:
Fiscal Year Ended Quarter Ended ------------------------------------------------- ------------------------- January 29, January 28, February 3, April 29, May 4, 1994 1995 1996 1995 1996 ------------- ------------- ------------- ------------ ------------ Net sales................................. 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold, occupancy and buying 72.5 65.7 66.1 74.7 70.8 ------------- ------------- ------------- ------------ ------------ costs..................................... Gross income.............................. 27.5 34.3 33.9 25.3 29.2 General, administrative and store operating expenses....................... 27.3 26.0 23.8 30.9 30.0 4.0 -- -- -- -- ------------- ------------- ------------- ------------ ------------ Special and nonrecurring items............ Operating income (loss)................... (3.7) 8.3 10.1 (5.6) (0.8) Provision for (benefit from) income taxes. (1.4) 3.3 4.0 (2.1) (0.4) ------------- ------------- ------------- ------------ ------------ Net income (loss)......................... (2.2)% 5.0% 6.1% (3.5)% (0.4)% ============= ============= ============= ============ ============
Financial Summary The following table sets forth certain summarized financial data for the fiscal periods shown:
Fiscal Year Ended % Change Quarter Ended ---------------------------------------- -------------- ------------------ January 29, January 28, February 3, 1993- 1994- April 29, May 4, 1994 1995 1996 1994 1995 1995 1996 % Change ----------- ------------ ----------- ------- ------ ---------- ------- -------- Net sales ($ in millions)...... $111.0 $165.5 $235.7 49% 42% $33.4 $51.0 53% Increase in comparable store sales......................... 6% 15% 5% 7% 17% Sales increase attributable to new and remodeled stores...... 24% 34% 37% 36% 36% Sales per selling square foot.. $301 $350 $354 16% 1% $60 $64 7% Sales per average store (thousands)................... $2,493 $2,853 $2,823 14% (1%) $480 $505 5% Average store size at period end (selling square feet)..... 8,265 8,075 7,920 (2%) (2%) 8,056 7,882 (2%) Selling square feet at period end (thousands)............... 405 541 792 34% 46% 580 804 39% Number of stores: beginning of period..... 40 49 67 67 100 opened.................. 9 20 33 5 2 closed.................. -- (2) -- -- -- ----------- ------------ ----------- ---------- ------- end of period........... 49 67 100 72 102 =========== ============ =========== ========== =======
Net Sales For the first quarter of 1996, net sales increased to $51.0 million from $33.4 million, an increase of $17.6 million, or 53%. The increase was due to a comparable store sales increase of 17%, combined with the addition of 30 new stores as compared to the year-earlier period. Total selling square footage increased by 224,000 square feet, or 39%. Comparable store sales increases were strong in both the men's and women's businesses, with women's knits and men's pants and outerwear among the best performing categories. Net sales per selling square foot for the total Company increased 7%. For the 53-week fiscal year 1995, net sales were $235.7 million, an increase of 42% from $165.5 million in 1994. Sales growth came primarily from the addition of 33 new stores, with comparable store sales increasing 5%. Management believes that comparable store sales were negatively affected by overall softness in the retail industry. The fifty-third week accounted for 1.7% of the total sales increase. During 1995, the Company allocated more selling square footage per store to women's apparel, resulting in a significant increase in total sales of the women's business. Significant growth was achieved in women's shirts, knits and shorts. The total volume of the men's business increased, but to a lesser extent than the women's business due to this reallocation. A very strong increase in men's outerwear was partially offset by a continuing deemphasis of dress shirts and ties as the Company previously decided such merchandise was not consistent with the Company's focus on casual apparel. Net sales per selling square foot for the total Company increased 1%. In 1994, net sales increased to $165.5 million from $111.0 million, an increase of $54.5 million, or 49%. Comparable store sales increased 15%, and there was a net increase in number of stores of 18. Square footage increased by 136,000 selling square feet, or 34%. Sales in the women's business more than doubled from the prior year due to a broader merchandise assortment, particularly in women's sweaters, shorts and shirts. The men's business achieved sales increases as a result of strong growth in men's outerwear, knits, shorts and accessories. The increases were partially offset by the Company's decision to deemphasize dress shirts and ties. Net sales per selling square foot for the total Company increased 16%. In 1993, net sales increased to $111.0 million from $85.3 million in 1992, an increase of $25.7 million, or 30%. Comparable store sales increased 6%. Nine new stores were opened during the year, increasing the number of stores to 49. The men's business increased primarily due to strong increases in sport shirts, knits and outerwear. The women's business achieved a very strong performance in women's knits, jeans and shirts, which was somewhat offset by decreases in skirts, jackets and shorts. Net sales per selling square foot for the total Company increased 9%. Gross Income In the first quarter of 1996, gross income, expressed as a percentage of net sales, was 29.2%, which represented a 3.9% increase from the 25.3% level in the same period in 1995. The increase was attributable to improved merchandise margins (representing gross income before the deduction of buying and occupancy costs) and decreased buying and occupancy costs as a percentage of net sales. Merchandise margins improved 2.4% through increased sell-through of full-priced merchandise. Buying and occupancy costs declined as a percentage of net sales due to favorable expense leveraging associated with increased comparable store sales. In 1995, gross income, expressed as a percentage of net sales, was 33.9%, which represented a 0.4% decrease from the 34.3% level in 1994. The decrease was primarily attributable to an increase in buying and occupancy cost of 1.3% which represented asset writeoffs associated with the renovation and relocation of two stores. Merchandise margins were up slightly for the period. In 1994, gross income, expressed as a percentage of net sales, was 34.3%, which represented a 6.8% increase from the 27.5% level in 1993. Merchandise margins improved 4.2% from the previous year due to higher initial markups (IMU) and fewer markdowns. Buying and occupancy costs as a percentage of net sales declined 2.3% as a result of strong comparable store net sales growth and a 16% increase in net sales per selling square foot. In 1993, gross income, expressed as a percentage of net sales, was 27.5%, which represented an 11.8% increase from the level in 1992. Merchandise margins improved 10.4% as the Company incurred fewer markdowns and significantly increased IMU. General, Administrative and Store Operating Expenses General, administrative and store operating expenses, expressed as a percentage of net sales, were 30.0% in the first quarter of 1996 and 30.9% in the comparable period in 1995. The decline is attributable to the strong comparable store sales growth, together with improved management of store payrolls. General, administrative and store operating expenses, expressed as a percentage of net sales, were 23.8%, 26.0% and 27.3% for 1995, 1994 and 1993, respectively. The improvement during the three-year period resulted from management's continued emphasis on expense control and the favorable leveraging of store and home office expenses over higher sales volume. Additionally, improvements have been made to increase the distribution center productivity and as a result, the cost of operating the distribution center has declined, as a percentage of net sales, each year. Special and Nonrecurring Items As described in Note 3 to the Consolidated Financial Statements appearing elsewhere herein, in 1993 the Company participated in The Limited's plan which provided for the closure, downsizing and remodeling of under-performing stores of the Company. In developing the plan, specific stores were identified based upon a number of criteria, including the quality and location of the real estate, historical financial results, other business factors and management's assessment of future potential. A total of seven under-performing stores were identified for this plan. The Company continuously evaluates its stores against these criteria, and charges for stores that meet the criteria for downsizing or closing are taken in the appropriate period. There are no stores currently operated by the Company that have been identified for downsizing or closure based upon the program's criteria. The provision for store closure, downsizing and remodeling aggregated approximately $4.4 million and includes the net book value of abandoned fixed assets and lease termination payments. There was no material cash outflow as a result of the charge. The Company completed the program on October 28, 1995. Operating Income The improvement in operating income, as a percentage of net sales, for the quarter ended May 4, 1996 to (0.8%) compared to (5.6%) in the same period last year is a result of both higher gross income and reduced general, administrative and store operating expenses as a percentage of net sales. Operating income, as a percentage of net sales, was 10.1%, 8.3% and (3.7%) for 1995, 1994 and 1993, respectively. Operating income improved from a loss in 1993 as higher merchandise margins were coupled with lower general, administrative and store operating expenses as a percentage of net sales. Sales volume and gross income have increased at a faster rate than general, administrative and store operating expenses as the Company continues to emphasize cost controls. Foreign Sourcing and International Expansion The Company sources a substantial amount of its merchandise from independent foreign factories located primarily in the Far East. The Company's business is subject to a variety of risks generally associated with doing business abroad, such as political instability, currency and exchange risks and local political issues. The Company has no long-term merchandise supply contracts and many of its imports are subject to existing or potential duties, tariffs or quotas that may limit the quantity of certain types of goods which may be imported into the United States from countries in that region. The Company's future performance will be subject to such factors, which are beyond its control, and there can be no assurance that such factors would not have a material adverse effect on the Company's results of operations. Seasonality and Quarterly Fluctuations As illustrated in the table below, the Company's business is highly seasonal, with significantly higher sales, gross income and net income realized during the fourth quarter, which includes the Christmas selling season. See "Risk Factors--Seasonality". (dollars in thousands) 1994 Quarter First Second Third Fourth - -------------------- ------------ ----------- ------------ ------------ Net sales........... $ 23,399 $ 29,045 $ 38,584 $ 74,435 % of full year..... 14.1% 17.6% 23.3% 45.0% Gross income........ $ 5,643 $ 8,285 $ 11,815 $ 31,077 % of full year..... 9.9% 14.6% 20.8% 54.7% Net income (loss)... $ (1,225) $ (530) $ 466 $ 9,540 % of full year..... (14.8%) (6.4%) 5.6% 115.6% (dollars in thousands) 1995 Quarter First Second Third Fourth - -------------------- ------------ ----------- ------------ ------------ Net sales........... $ 33,377 $ 38,668 $ 57,222 $ 106,392 % of full year..... 14.2% 16.4% 24.3% 45.1% Gross income........ $ 8,428 $ 12,023 $ 19,503 $ 39,840 % of full year..... 10.6% 15.1% 24.4% 49.9% Net income (loss)... $ (1,169) $ 250 $ 2,583 $ 12,634 % of full year..... (8.2%) 1.7% 18.1% 88.4% Financial Condition The Company's consolidated balance sheet at May 4, 1996 provides continuing evidence of financial strength and flexibility. A more detailed discussion of liquidity, capital resources and capital requirements follows: Liquidity and Capital Resources Net cash used for operating activities totaled $(6.8) million in the first quarter of 1996 and $(9.3) million in the comparable period in 1995. This is the result of a reduction in the first quarter's net loss and the fact that net cash used for inventories declined $1.7 million due to the timing of Spring merchandise deliveries in 1996 versus 1995. Net cash provided by operating activities totaled $12.7 million, $20.2 million and $20.6 million for 1995, 1994 and 1993, respectively. Net income increased consistently over the period while inventory levels also increased. Inventories increased 84% to $30.4 million in 1995 and 65% to $16.6 million in 1994, supporting the sales growth in those periods. Due to the Company's timing of payments, accounts payables increased only slightly over each of the three fiscal years, despite the increase in inventory. In addition, as more fully described in Note 3 to the Consolidated Financial Statements appearing elsewhere herein, the Company recorded a $4.4 million charge in 1993 related to special and nonrecurring items. Investing activities include capital expenditures, primarily for new, relocated and expanded stores. Financing activities were primarily due to intercompany transactions as discussed in Note 8 to the Consolidated Financial Statements appearing elsewhere herein. Abercrombie & Fitch's operations are seasonal in nature and are comprised of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters), with the fourth quarter, including the holiday season, accounting for approximately 45% of net sales in each of the last two years. Accordingly, cash requirements are highest in the third quarter as the Company's inventory builds in anticipation of the holiday selling season. Historically, the Company has participated in The Limited's centralized cash management system whereby cash received from operations is transferred to The Limited's centralized cash accounts and cash disbursements are funded from the centralized cash accounts on a daily basis. See "Relationship with The Limited". The receipt and disbursement of cash is tracked in an intercompany cash management account. Accordingly, cash requirements for operating purposes during the year and for capital expenditures were met from this source. The Company will continue to utilize the centralized cash management system after the consummation of the Offerings. At July 11, 1996, after the initial capitalization of Abercrombie & Fitch, the intercompany cash management account became an interest earning asset or interest bearing liability of the Company, depending on the level of cash receipts and disbursements. Interest on this intercompany cash management account is calculated based on the Federal Reserve AA composite 30-day rate. After the consummation of the Offerings and use of the net proceeds therefrom as described elsewhere herein, the Company's capitalization on a pro forma basis will include the long-term Mirror Note in the amount of $50 million, the $3.1 million Working Capital Note and $(16.8) million of shareholders' equity (deficit). Management believes cash flow from operations will be sufficient to service debt, finance capital expenditures and meet working capital needs. Management believes that initially, due to seasonal working capital needs, the Company will be in a liability and interest paying status with respect to the intercompany cash management account, but that by the end of 1996 it will be in an asset and interest earning position. Management believes the availability of funds from The Limited and credit risk of The Limited do not pose significant risks to the Company. Capital Expenditures Capital expenditures, primarily for new and remodeled stores, amounted to $1.3 million in the first quarter of 1996 and $2.8 million in the comparable period in 1995. Capital expenditures amounted to $24.5 million, $12.6 million and $4.7 million for 1995, 1994 and 1993, respectively, of which $22.3 million, $11.6 million and $4.5 million, respectively, was for new stores and remodeling and expanding existing stores. The Company has announced its intention to open approximately 30 new stores and to remodel one store in 1996, which would add approximately 250,000 square feet of selling space and represent a 32% increase over year-end 1995. The Company anticipates spending $21 to $25 million for capital expenditures in 1996, of which $19 to $23 million will be for new stores, the relocation and expansion of existing stores and related improvements. The Company anticipates spending $20 to $24 million in 1997 for capital expenditures, of which $19 to $23 million will be for new stores, the relocation and expansion of existing stores and related improvements. The Company expects that substantially all future capital expenditures will be funded by net cash provided by operating activities. Impact of Inflation The Company's results of operations and financial condition are presented based upon historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, the Company believes that the effects of inflation, if any, on its results of operations and financial condition have been minor. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Prospectus or made by management of the Company involve risks and uncertainties, and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results for 1996 and beyond to differ materially from those expressed or implied in any such forward-looking statements: changes in consumer spending patterns, consumer preferences and overall economic conditions, the impact of competition and pricing, changes in weather patterns, political stability, currency and exchange risks and changes in existing or potential duties, tariffs or quotas, availability of suitable store locations at appropriate terms, ability to develop new merchandise and ability to hire and train associates. BUSINESS Abercrombie & Fitch is a rapidly growing specialty retailer of high-quality, casual apparel for men and women approximately 15 to 50 years of age. The Company's net sales have increased from $85.3 million in 1992 to $235.7 million in 1995, representing a compound annual growth rate of 40.3%. During this time, operating income has improved from an operating loss of $10.2 million in 1992 to operating income of $23.8 million in 1995, while the number of Abercrombie & Fitch stores in operation more than doubled, increasing from 40 at the end of 1992 to 100 at the end of 1995. The Company plans to continue this new store expansion program by opening 30 new stores in 1996 and by increasing the number of stores in operation by approximately 20% annually for the next several years thereafter. The Abercrombie & Fitch brand was established in 1892 and became well known as a supplier of rugged, high-quality outdoor gear. Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch goods were renowned for their durability and dependability--and Abercrombie & Fitch placed a premium on complete customer satisfaction with each item sold. In 1992, a new management team began repositioning Abercrombie & Fitch as a more fashion-oriented casual apparel business directed at men and women with a youthful lifestyle. In reestablishing the Abercrombie & Fitch brand, the Company combined its historical image for quality with a new emphasis on casual American style and youthfulness. The Company believes that this strategic decision has contributed to the strong growth and improved profitability it has experienced since 1992. Industry sources estimate that the men's and women's apparel market generated approximately $127 billion in retail purchases in 1995. These sources estimate that men's and women's apparel total sales volume grew at a compound annual rate of approximately 3.9% between 1992 and 1995. Abercrombie & Fitch's compound annual growth of 40.3% during this period has outpaced that of the industry. The Company believes that the size of Abercrombie & Fitch's market, coupled with its business strengths and growth strategies, should provide significant opportunities for growth and increased market share in the future. Business Strengths The Company believes that certain business strengths have contributed to its success in the past and will enable it to continue growing profitably. Established and Differentiated Lifestyle Brand. Abercrombie & Fitch has created a focused and differentiated brand image based on quality, youthfulness and classic American style. This image is consistently communicated through all aspects of the Company's business, including merchandise assortments, in-store marketing and print advertising. The Company believes that the strength of the Abercrombie & Fitch brand provides opportunities for increased penetration of current merchandise categories and entry into new product categories. Broad and Growing Appeal. The Company's merchandise assortment appeals to a broad range of customers with varying ages and income levels. The Company believes that both men and women interested in casual, classic American fashion are attracted to the Abercrombie & Fitch lifestyle image. The Company also believes that the brand's broad appeal has been augmented by, and should continue to benefit from, the current trend in fashion toward casual apparel. Proven Management Team. Since the current management team assumed responsibility in 1992, the Company has increased the level of brand awareness and consistently reported improved financial results. In addition, the Company's senior management has significant experience, with an aggregate of over one hundred years in the retail business. The Company believes that management's substantial experience and demonstrated track record of highly profitable growth strongly positions the Company for the future. Consistent Store Level Execution. Abercrombie & Fitch believes that a major element of its success is the consistent store level execution of its brand strategy. Store presentation is tightly controlled by the Company and is based on a detailed and comprehensive store plan regarding visual merchandising, marketing and fixtures to assure that all stores provide a consistent portrayal of the brand. Store associates are trained as "brand representatives" who convey and reinforce the brand image through their attitude and enthusiasm. Quality. Since its founding over 100 years ago, Abercrombie & Fitch has maintained a strong reputation for quality. This reputation has been enhanced in recent years as management has made quality a defining element of the brand. The Company sources high quality natural fabrics from around the world and uses distinctive trim details and specialized washes to achieve a unique style and comfort in its products. As part of this focus on quality, the Company establishes on-going relationships with key factories to ensure reliability and consistency of production. Internal Design and Merchandising Capabilities. The cornerstone of the Company's business is its ability to design products which embody the Abercrombie & Fitch image. Abercrombie & Fitch develops substantially all of its merchandise line through its own design group, which allows it to develop exclusive merchandise and offer a consistent assortment within a season and from year to year. In addition, because the Company's merchandise is sold exclusively in its own stores, Abercrombie & Fitch is able to control the presentation and pricing of its merchandise, provide a higher level of customer service and closely monitor retail sell-through, which provides competitive advantages over other brand manufacturers that market their goods through department stores. Relationship with The Limited. Unlike most high growth, specialty apparel retailers, Abercrombie & Fitch directly benefits from the resources and expertise of a major retailer such as The Limited. Abercrombie & Fitch has been able to concentrate the efforts of its management team and associates on strengthening its brand image by taking advantage of The Limited's capabilities in the areas of real estate negotiation and acquisition, central distribution, sourcing, store design and construction and general corporate services. The Company will continue to receive such services after the Offerings pursuant to agreements to be entered into with The Limited. See "Relationship with The Limited". Growth Strategy The Company has implemented a growth strategy designed to permit Abercrombie & Fitch to capitalize on its business strengths. The principal elements of the Company's growth strategy are summarized below: New Store Growth. Beginning in 1993, the Company began its store expansion program, opening 9, 20 and 33 stores in 1993, 1994 and 1995, respectively. The Company plans to continue this store expansion program by opening 30 new stores in 1996 and increasing the number of stores in operation by approximately 20% annually for the next several years thereafter. While substantially all stores to be opened in 1996 will be in regional shopping malls, the Company believes that selected street locations in university and high-traffic urban settings also provide attractive expansion opportunities. Given the strength of the Abercrombie & Fitch brand and its customer demographics, management believes that, in the current format, there will be approximately 250 to 350 additional mall and street location sites available for new stores. Further Penetration of Existing Merchandise Categories. Management believes that Abercrombie & Fitch's ability to design and market new merchandise quickly and effectively has been a key element of its success. In recent years the Company has significantly broadened its assortment in existing categories in order to increase volume and productivity. Since 1993 the number of items offered in the Company's assortment has increased approximately 75% In 1996, the Company is continuing to expand key categories. For example, the number of items in the Fall 1996 men's outerwear line is approximately double the prior year's highly successful offering, and the women's outerwear assortment has also been expanded significantly. In addition, the Company recently introduced a new line of men's underwear and loungewear, with a women's underwear/ sleepwear line planned for the 1996 holiday season. As a result of the Company broadening its product mix, it has been able to flow fresh merchandise to the stores on a more frequent basis. The Company has also begun to offer a targeted assortment in its stores in the sunbelt in order to better respond to differences in climate. Introduction of New Merchandise Categories. The Company believes it can successfully extend the Abercrombie & Fitch brand into new merchandise categories and further increase sales productivity and growth. For the holiday season in 1996, Abercrombie & Fitch will introduce a new line of personal care products, including fragrances and soaps, as well as a limited number of decorative home accessories. In addition, the Company will offer its own uniquely designed line of sunglasses. The Company believes that its internal design capability will continue to develop new merchandise categories to capitalize on the Abercrombie & Fitch brand. Abercrombie & Fitch Stores Store Environment Abercrombie & Fitch stores and point-of-sale marketing are designed to convey the principal elements and personality of the brand--quality, casual American fashion, and a youthful lifestyle. The store design, furniture, fixtures and music are all carefully planned and coordinated to create a shopping experience that is consistent with the Abercrombie & Fitch lifestyle. The Company's in-store photographs are also principal components in creating and enhancing the casual, energized environment of the stores. These photographs, which are enlarged and displayed prominently throughout the stores, contain distinctive black and white images of men and women engaged in activities identified with an active, fun lifestyle. The Company believes that its customers experience the Abercrombie & Fitch stores as entertaining destinations, in which they feel welcomed and comfortable. The Company's sales associates, or brand representatives, are a central element in creating the entertaining, yet comfortable, atmosphere of the stores. In addition to providing a high level of customer service, the brand representatives reflect the casual, energetic attitude of the Abercrombie & Fitch brand and culture. In conjunction with other components of the store environment, the Company believes its brand representatives significantly contribute to a store atmosphere that is consistent with a gathering among friends. Abercrombie & Fitch maintains a uniform appearance throughout its store base, in terms of merchandise display and location on the selling floor. Store managers receive detailed store plans that dictate fixture and merchandise placement to ensure uniform execution of the merchandising strategy at the store level. Standardization of store design and merchandise presentation also creates cost savings in store furnishings, maximizes usage and productivity of selling space and allows Abercrombie & Fitch to efficiently open new stores. The Company has developed a new, more sophisticated store prototype that seeks to further stress the casual, youthful nature of the Abercrombie & Fitch brand. This is accomplished in part through the use of lighter colors throughout the store and wood floors. The Company plans to introduce this prototype in new stores and remodel selected existing stores beginning in Fall 1996. Store Expansion Program Abercrombie & Fitch stores are located principally in regional shopping malls. At July 6, 1996, Abercrombie & Fitch operated 105 stores nationwide, averaging 7,840 selling square feet. See "-- Properties" for a listing of store locations by state. The table below highlights the store expansion strategy pursued by Abercrombie & Fitch:
Average Store Selling Space Stores Open Stores Stores Stores Open Total Selling at end of Fiscal at beginning of Opened during Closed during at end of Space Fiscal Year Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year (000's sq. ft.) (sq. ft.) ------ --------------- ------------- ------------- ---------- --------------- ------------- 1991 27 10 1 36 287 7,972 1992 36 4 - 40 332 8,300 1993 40 9 - 49 405 8,265 1994 49 20 2 67 541 8,075 1995 67 33 - 100 792 7,920
Abercrombie & Fitch plans to open 30 stores in 1996 (of which five have been opened to date) and increase the number of stores in operation by approximately 20% annually for the next several years thereafter. The Company has identified the stores remaining to be opened in 1996, and expects them all to be in operation before the holiday season. While substantially all stores to be opened in 1996 will be in regional shopping malls, the Company believes that selected street locations in university and high-traffic urban settings also provide attractive expansion opportunities. In evaluating real estate locations the Company considers a variety of criteria. Regional malls are measured based on strength of anchor stores, the fashion and quality mix of other specialty tenants and population and income characteristics of the surrounding area. Non-mall locations are assessed in terms of strength of other nearby specialty stores, and whether the shopping area attracts a customer mix consistent with the lifestyle characteristics targeted by the brand. A key element of Abercrombie & Fitch's new store strategy is to open new stores with trained managers in place. The Company targets that all managers of new stores have prior experience in other Abercrombie & Fitch stores in either the manager or assistant manager position. New Store Economics The Company's stores that were open during all of 1995 averaged $2.9 million in net sales and produced net sales per selling square foot of approximately $365. The average cost for leasehold improvements, furniture and fixtures for these stores was approximately $858,000 per store, after giving effect to landlord allowances. Inventory purchases for such stores averaged $302,000 per store. These stores generated an average after-tax return on investment (after-tax four wall contribution divided by capital investment and average inventory) of approximately 39% in 1995, or 65% on a pre-tax basis. The Company estimates that the average cost for leasehold improvements, furniture and fixtures for stores to be opened in 1996 will be approximately $660,000 per store, after giving effect to landlord allowances. Average pre-opening costs per store, which will be expensed as incurred, are expected to be less than $25,000. In addition, inventory purchases are expected to average approximately $300,000 per store. Abercrombie & Fitch's stores have typically exceeded management's store operating profitability and return on asset targets during the first year of operation. Merchandising Product Mix The Company designs and sells all of its merchandise under its proprietary Abercrombie & Fitch brand. The merchandise assortment covers a broad range of classifications in men's and women's casual apparel. In addition, the Company offers a broad range of accessories that includes belts, socks, caps, boxers, underwear and personal care products. Although the Company currently markets dress shirts and ties, it has deemphasized these categories as the Company decided such merchandise was not consistent with the Company's focus on casual apparel. The following table sets forth the Company's merchandise mix by major category as a percentage of net sales for the years 1993-1995.
1993 1994 1995 ---- ---- ---- Men's............... 76.0% 67.6% 60.2% Women's............. 24.0 32.4 39.8 Total Company........ 100.0% 100.0% 100.0%
Over the past several years, the Company has increased the square footage and the size of the merchandise offering devoted to women's sportswear, which has resulted in an increase in the women's business as a percentage of total net sales. Abercrombie & Fitch believes that there are major opportunities to increase volume through both increased penetration of the existing classifications and adding new merchandise classifications. Management believes that Abercrombie & Fitch's ability to design and market new merchandise quickly and effectively has been a key element of its success. In recent years the Company has significantly broadened its assortment in existing categories in order to increase volume and productivity. Since 1993 the number of items offered in the Company's assortment has increased approximately 75%. In 1996, the Company is continuing to expand key categories. For example, the number of items in the Fall 1996 men's outerwear line is approximately double the prior year's highly successful offering, and the women's outerwear assortment has also been expanded significantly. In addition, the Company recently introduced a new line of men's underwear and loungewear, with a women's underwear/ sleepwear line planned for the 1996 holiday season. As a result of the Company broadening its product mix, it has been able to flow fresh merchandise to the stores on a more frequent basis. The Company has also begun to offer a targeted assortment in its stores in the sunbelt in order to better respond to differences in climate. The Company believes it can extend the Abercrombie & Fitch brand into new merchandise categories and further increase sales productivity and growth. For the holiday season in 1996, Abercrombie & Fitch will introduce a new line of personal care products, including fragrances and soaps, as well as a limited number of decorative home accessories. In addition, the Company will offer its own uniquely designed line of sunglasses. The Company believes that its internal design capability will continue to develop new merchandise categories to reflect the Abercrombie & Fitch image. The Company's point-of-sale information system allows management to track the performance of merchandise items on a stock-keeping unit, or SKU, basis. Reorder "triggers" are used to replenish inventory of strong selling items. In addition, performance by store at a SKU level is tracked to allow inventory to be replenished based on differences in selling trends by store. Product Design The cornerstone of the Company's business is its ability to design products which embody the Abercrombie & Fitch image of a casual, youthful lifestyle. Since the new management team joined the Company in 1992, a major strategy has been to build an internal design group. From the end of 1992, the design group has grown from a staff of three to more than 30. The men's and women's businesses each maintain separate design and merchant groups. The product development process begins with senior management in the merchandising and design areas, who develop seasonal merchandise themes and concepts. These concepts are used to create line lists of items that are then developed by the designers. Designs cover not only fabric content, specifications and colors, but also labels, hangtags, and other descriptive marketing. In developing concepts and designs, the Company's executives identify trends through domestic and foreign travel, retail shopping, and awareness of activities favored by the young, active segment of the population. Product Quality Throughout its over 100 year history, quality has been a major element of the Abercrombie & Fitch brand. The Company strives to offer distinct, high quality merchandise in order to enhance customer satisfaction and increase brand loyalty. The Company emphasizes natural fibers and uses a number of different washes to achieve the desired comfort and hand-feel in its products. The Company's designers also place significant importance on developing distinctive trim details. Many of the products have unique buttons, pocket detailing, labels, graphic designs and hangtags. As part of this focus on quality, the Company establishes on-going relationships with key factories to ensure reliability and consistency of production. All factories used for the Company's production are approved for quality and dependability by senior management before orders are placed. Marketing and Promotion The Company's marketing and promotional strategies are consistent with its established and differentiated lifestyle brand. The significant brand equity in the Abercrombie & Fitch name enables the Company to maintain a non-promotional price strategy in most of its merchandise classifications throughout the year. The Company conducts two major season-end promotional events each year. These events are intended to clear seasonal goods in advance of introducing new full-priced assortments and returning the stores to their generally non-promotional status. The Company's pricing strategy is designed to deliver the quality consistent with designer brands at price points below those typically associated with such designers. The Company focuses its advertising efforts on in-store displays and print media. In-store advertising includes a series of distinctive black and white photographs that are enlarged and prominently displayed throughout the stores. These photographs portray men and women engaged in activities identified with an active and spirited lifestyle and connote the timeless quality associated with the Abercrombie & Fitch brand. Print media advertising is focused on selected national publications and, as with the in-store photographs, communicates and reinforces the Abercrombie & Fitch brand image. The Company has a proprietary credit card available to its customers, representing in 1995 approximately 6% of net sales. Associates Customer service is a defining feature of the Abercrombie & Fitch corporate culture. The Company believes that knowledgeable and enthusiastic sales associates have a direct impact on a customer's perception of the brand. Accordingly, Abercrombie & Fitch focuses significant resources on the selection and training of sales associates. Abercrombie & Fitch stresses the role of these sales associates as "brand representatives" and they are expected to reflect the lifestyle image of the brand. Brand representatives are required to be familiar with the full range of Abercrombie & Fitch merchandise and to have the ability to assist customers with merchandise selection. The Company minimizes brand representatives' time spent on administrative functions by centrally determining merchandise display and replenishment, markdowns and labor scheduling. By emphasizing friendliness, product knowledge and personal attention, management believes that Abercrombie & Fitch has established a reputation for excellent customer service. The typical management of an Abercrombie & Fitch store consists of one store manager and three to five assistant managers. The Company compensates its district and store managers with a base salary plus a performance bonus based primarily on store sales. The Company's store, district and regional managers spend a majority of their work week on Abercrombie & Fitch selling floors, providing leadership through coaching the staff and assisting customers. At July 6, 1996, the Company had approximately 3,800 associates, of whom approximately 300 were full-time salaried associates and approximately 400 were full-time hourly associates. A significant number of associates are hired on a seasonal basis to meet demand during holiday gift-buying seasons. The balance were part-time hourly associates. None of the Company's associates is represented by a labor union. The Company believes that its relationship with its associates is good. Sourcing Abercrombie & Fitch utilizes a variety of sourcing arrangements. Mast Industries, Inc. ("Mast"), a wholly owned subsidiary of The Limited, supplied approximately 28% of the apparel purchased by the Company in 1995. The Company believes all transactions entered into with Mast are on an arm's-length basis, and Abercrombie & Fitch is not obligated to source product through Mast. In 1995, approximately 56% of the Company's merchandise was sourced from independent foreign factories located primarily in the Far East. The Company has no long-term merchandise supply contracts and many of its imports are subject to existing or potential duties, tariffs or quotas that may limit the quantity of certain types of goods which may be imported into the United States from countries in those regions. The Company competes with other companies for production facilities and import quota capacity. In addition, although the General Agreement on Tariffs and Trade ("GATT") adopted on December 8, 1994 requires the elimination of duties, tariffs and quotas on apparel and textile products by January 1, 2005, the GATT treaty is not expected to have any meaningful effect on the import of merchandise used in Abercrombie & Fitch's business for several years. Abercrombie & Fitch attempts to monitor manufacturing to ensure that no one company or country is responsible for a disproportionate amount of the Company's merchandise. The Company typically transacts business on an order-by-order basis and does not maintain any long-term or exclusive commitments or arrangements to purchase from any vendor. The Company believes that it has good relationships with its vendors and that, as the number of its stores increases, there will be adequate sources to produce a sufficient supply of quality goods in a timely manner and on satisfactory economic terms. See "Risk Factors -- Factors Affecting Abercrombie & Fitch's Business; Foreign Sourcing". Central Store Planning The Company's store design and construction operations are handled centrally by the store planning division of The Limited ("Limited Store Planning"). Limited Store Planning is organized into teams comprised of designers, construction managers, architects, purchasing agents and financial personnel who are responsible for all phases of store design and construction. Teams are assigned to work with the senior management of a specific retail business (including Abercrombie & Fitch) to develop and implement store designs that are consistent with and promote the image of a given retail business. Abercrombie & Fitch and The Limited intend to enter into an agreement pursuant to which The Limited would continue to provide such services to Abercrombie & Fitch on a basis consistent with past practices. The Limited will charge Abercrombie & Fitch for such services on a basis consistent with amounts charged by The Limited from time to time to its other businesses for comparable services. See "Relationship with The Limited -- Services Agreement". Central Real Estate Management The Company's real estate operations, including all aspects of lease negotiations, are handled centrally by the real estate division of The Limited. Abercrombie & Fitch and The Limited intend to enter into an agreement pursuant to which The Limited would continue to provide such services to Abercrombie & Fitch on a basis consistent with past practices. The Limited will charge Abercrombie & Fitch for such services on a basis consistent with amounts charged by The Limited from time to time to its other businesses for comparable services. See "Relationship With The Limited -- Services Agreement". Potential new stores, locations, expansions and relocations are identified by Abercrombie & Fitch and by The Limited's real estate division. In choosing new sites for retail stores, The Limited's real estate division provides financial details regarding the proposed lease arrangement to Abercrombie & Fitch, which then evaluates the net required investment and potential rates of return relative to the Company's established hurdle rates before the store is approved for construction. The actual construction of the store is managed by Limited Store Planning. Although the real estate division retains control over the allocation of space within a given mall among the various retail businesses of The Limited, including Abercrombie & Fitch, each individual business is entitled to reject any transaction negotiated by the real estate division of The Limited. See "Risk Factors -- Potential Conflicts of Interest". Real estate decisions are based on a number of factors, including consistency with a given business image, sales and profit potential, the overall economic condition and demographic characteristics of the market, the identity of the other tenants in close proximity and the availability of acceptable lease terms. Although Abercrombie & Fitch's arrangement with The Limited may raise the potential for conflicts of interest, Abercrombie & Fitch's management believes the arrangement provides it with a significant competitive strength. Given The Limited's substantial size, Abercrombie & Fitch's management believes that The Limited is able to obtain lease terms and store sites on Abercrombie & Fitch's behalf that are more favorable than those that Abercrombie & Fitch could obtain on its own. Substantially all leases entered into by Abercrombie & Fitch are guaranteed by The Limited. Abercrombie & Fitch's management believes that its size and financial strength should allow it to enter into leases on attractive terms without guarantees from The Limited, and it is the intent of both The Limited and Abercrombie & Fitch that future Abercrombie & Fitch leases will not be guaranteed by The Limited. Merchandise Distribution The Company's distribution operations are managed in a distribution center owned by The Limited and subleased to Abercrombie & Fitch. See "Relationship with The Limited -- Sublease Agreement". The distribution center is located in Reynoldsburg, Ohio. Once received at the distribution center, merchandise is inspected, packed for delivery to the stores and forwarded to a central shipping facility operated by Limited Distribution Services ("LDS"), a subsidiary of The Limited, which also provides certain engineering services to the distribution center. LDS also maintains a worldwide logistics network of agents and space availability arrangements to support the in-bound movement of merchandise into the distribution center. The out-bound shipping system consists of common carrier line haul routes connecting the distribution complex to a network of delivery agents. This system allows each store operated by the Company to receive several deliveries each week and daily during the peak holiday shopping season, which the Company believes is more frequent than the Company's smaller competitors. LDS does not own or operate trucks or trucking facilities. Abercrombie & Fitch and The Limited intend to enter into an agreement pursuant to which LDS would continue to provide such services to Abercrombie & Fitch on a basis consistent with past practices. The Limited will charge Abercrombie & Fitch for such services on a basis consistent with amounts charged by The Limited from time to time to its other businesses for comparable services. See "Relationship with The Limited -- Services Agreement". Management Information Systems The Company's management information systems and electronic data processing systems consist of a full range of retail, financial, and merchandising systems, including credit, inventory distribution and control, sales reporting, accounts payable, merchandise reporting and distribution. Abercrombie & Fitch has an information system that is uniquely structured to the needs of its particular business. Certain of the equipment used in the management information systems is owned by The Limited. Abercrombie & Fitch and The Limited intend to enter into an agreement pursuant to which Abercrombie & Fitch would continue to use such equipment on a basis consistent with past practices. The Limited will charge Abercrombie & Fitch for such use on a basis consistent with amounts charged by The Limited from time to time to its other businesses for comparable services. See "Relationship with The Limited -- Services Agreement". Sales are updated daily in the merchandise reporting systems by polling sales information from each store's point-of-sale ("POS") terminals. The Company's POS system consists of registers providing price look-up, scanning of bar-coded tickets and credit authorization. Through automated nightly two-way electronic communication with each store, sales information, payroll hours and store initiated transfers are uploaded to the host system, and price changes are downloaded through the POS devices. The nightly communication with the stores also enables the Company to receive store transfer and physical inventory details and send electronic mail. The Company evaluates information obtained through daily reporting to implement merchandising decisions regarding markdowns and allocation of merchandise. Trademarks and Servicemarks A subsidiary of the Company is the owner in the United States of the trademark Abercrombie & Fitch (the "Name Mark"). The Name Mark of the Company is registered in the United States Patent and Trademark Office. The term of this registration is ten years, and it is renewable for additional ten-year periods indefinitely, so long as the mark is still in use at the time of renewal. The Company's rights in its Name Mark are a significant part of the Company's business. The Company, therefore, intends to maintain its Name Mark and its registration. The Company is not aware of any claims of infringement or other challenges to the Company's right to register or use its Name Mark in the United States. Another subsidiary is also the owner in the United States of trademarks and service marks used to identify its merchandise and services, other than its Name Mark (the "Merchandise Marks"). Many of the Merchandise Marks of the Company are registered in the United States Patent and Trademark Office. The Merchandise Marks are important to the Company, and, therefore, the Company intends to, directly or indirectly, maintain these marks and their registrations. However, the Company may choose not to renew a registration of one or more of its Merchandise Marks if it determines that the mark is no longer important to its business. The Company does not believe any material claims of infringement or other challenges to the Company's right to register or use its Merchandise Marks in the United States in a manner consistent with its current practices are pending. The Company also conducts business in foreign countries principally as a result of the fact that a substantial portion of its merchandise is manufactured outside the United States. The Company believes its subsidiaries own registrations of its Name Mark and Merchandise Marks in numerous foreign countries to the degree necessary to protect such marks, although there may be restrictions on the use of certain of Abercrombie & Fitch's marks in a limited number of foreign jurisdictions. The Company has not licensed any of its trademarks or service marks to any other entity, although, for so long as the Company remains a subsidiary of The Limited, The Limited will be entitled to use the Company's trademarks and service marks at no cost to The Limited in The Limited's annual report to shareholders and publicity materials and for other similar purposes. Competition All aspects of the Company's businesses are highly competitive. The Company competes primarily with department stores, mass merchandisers and other specialty retailers, including The Limited. See "Risk Factors--Potential Conflicts of Interest--Competition with The Limited". The Company believes that the principal bases upon which it competes are quality, fashion, service, selection and price. The Company believes that it has significant competitive advantages because of high consumer recognition and acceptance of its brand name and its strong presence in the major shopping malls in the United States, its relationship with The Limited and the experience of its management team. Certain of the Company's competitors in selected product lines are larger and have greater financial, marketing and other resources than the Company, however, and there can be no assurance that the Company will be able to compete successfully with them in the future. Properties The main offices of Abercrombie & Fitch are located in Reynoldsburg, Ohio. These headquarters are owned by The Limited and subleased to Abercrombie & Fitch. Abercrombie & Fitch also has a distribution center located in Reynoldsburg, Ohio which is owned by The Limited and subleased to Abercrombie & Fitch. Abercrombie & Fitch believes that its facilities are well maintained, in good operating condition and adequate for its current needs. See "Relationship with The Limited -- Sublease Agreement". As of July 6, 1996, Abercrombie & Fitch operated 105 stores, which are located primarily in shopping malls throughout the United States. Of these stores, 102 were leased directly from third parties (principally shopping mall developers) and three were leased from retail stores operated by other businesses of The Limited. See "Relationship with The Limited -- Shared Facilities Agreement". The Company believes that, as approximately 95% of its stores are located in shopping malls, there are growth opportunities for expansion to free-standing locations. Leases with third parties are typically between 10 and 15 years in duration. In most cases, the business unit pays an annual base rent plus a contingent rent based on the store's annual sales in excess of a specified threshold. Leases with other businesses of The Limited are on terms that represent the proportionate share of the base rent payable in accordance with the underlying lease plus the portion of any contingent rent payable in accordance with the underlying lease attributable to the performance of Abercrombie & Fitch. Many of the leases entered into by Abercrombie & Fitch are guaranteed by The Limited. Abercrombie & Fitch management believes that its size and financial strength should allow it to enter into leases on attractive terms without guarantees from The Limited, and it is the intent of both The Limited and Abercrombie & Fitch that future Abercrombie & Fitch leases will not be guaranteed by The Limited. The map and store list below set forth the number of stores by state operated by Abercrombie & Fitch in the United States and the cities in which Abercrombie & Fitch stores are located as of July 6, 1996: [Image material is contained here consisting of a map of the continental United States. States in which stores are located are shaded and cities in which stores are located are indicated by a dot.] Arizona - 1 Georgia - 5 Massachusetts - 5 Nebraska - 1 Oklahoma - 2 Scottsdale Atlanta (4) Boston (4) Omaha Oklahoma City Savannah Holyoke Tulsa California - 7 New Hampshire - 1 Los Angeles (2) Illinois - 6 Maryland - 3 Salem Oregon - 1 Sacramento Chicago (6) Baltimore(2) Portland San Diego Towson New Jersey - 4 San Francisco (2) Indiana - 3 Cherry Hill Pennsylvania - 5 San Mateo Evansville Michigan - 4 Edison Langhorne Indianapolis (2) Ann Arbor Freehold Philadelphia (2) Colorado - 4 Detroit (2) Short Hills Pittsburgh (2) Boulder Kansas - 2 Grand Rapids Denver (3) Kansas City (2) Nevada - 1 Tennessee - 2 Minnesota - 2 Las Vegas Knoxville Connecticut - 3 Kentucky - 2 Minneapolis-St. Paul (2) Nashville Hartford Lexington New York - 10 Milford Louisville Missouri - 3 Albany (2) Texas - 10 Stamford Kansas City Buffalo Austin (2) Louisiana - 1 St. Louis (2) Manhasset Dallas (3) District of Columbia - 1 New Orleans New York City (2) Fort Worth North Carolina - 3 Rochester (2) Houston (3) Florida - 3 Greensboro Staten Island San Antonio Orlando Raleigh White Plains Tampa Winston-Salem Virginia - 4 W. Palm Beach Ohio - 4 Arlington Cincinnati Fairfax Cleveland Tysons Corner Columbus Virginia Beach Dayton Washington - 2 Seattle (2)
Litigation The Company is a defendant in lawsuits arising in the ordinary course of business. Although the amount of any liability that could arise with respect to any such lawsuit cannot be accurately predicted, in the opinion of management, the resolution of these matters is not expected to have a material adverse effect on the financial position or results of operations of the Company. RELATIONSHIP WITH THE LIMITED Upon completion of the Offerings, The Limited will own 100% of the outstanding Class B Common Stock of Abercrombie & Fitch which will represent approximately % of the combined voting power of all of the outstanding Common Stock (or approximately % if the Underwriters' over-allotment options are exercised in full). For so long as The Limited continues to own shares of Common Stock representing more than 50% of the combined voting power of the Common Stock of Abercrombie & Fitch, The Limited will be able, among other things, to determine any corporate action requiring approval of holders of Common Stock representing a majority of the combined voting power of the Common Stock, including the election of the entire Board of Directors of Abercrombie & Fitch, without the consent of the other shareholders of Abercrombie & Fitch. Similarly, for so long as The Limited continues to own shares of Common Stock representing more than 75% of the combined voting power of the Common Stock of Abercrombie & Fitch, The Limited will be able, among other things, to determine any corporate action requiring approval of holders of Common Stock representing 75% of the combined voting power of the Common Stock, including certain amendments to Abercrombie & Fitch's Certificate of Incorporation and Bylaws and approval of certain mergers and other control transactions, without the consent of the other shareholders of Abercrombie & Fitch. Furthermore, for so long as The Limited holds 25% of the combined voting power of the Common Stock of Abercrombie & Fitch it will be able to block any corporate action requiring the approval of holders of Common Stock representing more than 75% of the combined voting power of the Common Stock. See "Description of Capital Stock". In addition, through its control of the Board of Directors and beneficial ownership of Common Stock, The Limited will be able to control certain decisions, including decisions with respect to Abercrombie & Fitch's dividend policy, Abercrombie & Fitch's access to capital (including borrowing from third-party lenders and the issuance of additional equity securities), mergers or other business combinations involving Abercrombie & Fitch, the acquisition or disposition of assets by Abercrombie & Fitch and any change in control of Abercrombie & Fitch. The Limited has advised Abercrombie & Fitch that its current intent is to continue to hold all of the Class B Common Stock beneficially owned by it. However, The Limited has no agreement with Abercrombie & Fitch not to sell or distribute such shares, and, other than pursuant to the Underwriting Agreement, in which The Limited will agree not to sell or otherwise dispose of any shares of Common Stock (or any security convertible into or exchangeable or exercisable for Common Stock) owned by it for a period of 180 days following the date of this Prospectus without the prior written consent of the Representatives of the Underwriters, subject to certain exceptions, there can be no assurance concerning the period of time during which The Limited will maintain its beneficial ownership of Common Stock. Beneficial ownership of at least 80% of the total voting power and value of the outstanding Common Stock is required in order for The Limited to continue to include Abercrombie & Fitch in its consolidated group for federal income tax purposes and ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock is required in order for The Limited to be able to effect a Tax-Free Spin-Off of Abercrombie & Fitch. In the event The Limited's ownership decreases below 80%, all borrowings under the Credit Agreement must be repaid. See "Description of Certain Indebtedness--Credit Agreement". Abercrombie & Fitch's relationship with The Limited will also be governed by agreements to be entered into in connection with the Offerings, including a services agreement, a corporate agreement, a shared facilities agreement and a tax-sharing agreement, the material terms of which are described below. It is anticipated that such agreements will be entered into concurrently with the consummation of the Offerings. With respect to matters covered by the services agreement, the relationship between The Limited and Abercrombie & Fitch is intended to continue in a manner generally consistent with past practices. Because Abercrombie & Fitch is a wholly owned subsidiary of The Limited, none of these arrangements will result from arm's-length negotiations and, therefore, the prices charged to the Company for services provided thereunder may be higher or lower than prices that may be charged by third parties. The descriptions set forth below are intended to be summaries and, while material terms of the agreements are set forth herein, the descriptions are qualified in their entirety by reference to the forms of the relevant agreement filed with the Registration Statement of which this Prospectus forms a part. Abercrombie & Fitch's Certificate of Incorporation also contains provisions relating to the allocation of business opportunities that may be suitable for either of The Limited or Abercrombie & Fitch and to the approval of transactions between Abercrombie & Fitch and The Limited. For additional information concerning the above-mentioned provisions of Abercrombie & Fitch's Certificate of Incorporation and circumstances under which the Class A Common Stock and Class B Common Stock may be converted, see "Description of Capital Stock". For a description of certain intercompany debt, see "Description of Certain Indebtedness--Intercompany Debt". Services Agreement The Company and The Limited intend to enter into an intercompany services and operating agreement (the "Services Agreement") with respect to services to be provided by The Limited (or subsidiaries of The Limited) to the Company. The Services Agreement will provide that such services will be provided in exchange for fees which (based on current costs for such services) management believes would not exceed fees that would be paid if such services were provided by an independent third party and which are consistent in all material respects with the allocation of the costs of such services set forth in the historical financial statements of Abercrombie & Fitch. See the Consolidated Financial Statements included elsewhere herein. Management's estimate of the net charge for services that would have been payable by the Company in 1995 if the Services Agreement had been in effect during that period is approximately $4.0 million, which is approximately the amount included in the 1995 Consolidated Financial Statements. Such fees will be paid monthly in arrears. The Company may request an expansion or termination of services, in which case the parties will discuss, without obligation, the provision or termination of such services and an appropriate change or reduction in charges for such services, provided, however, that Abercrombie & Fitch may not terminate a service if the termination of such service would adversely affect the cost to The Limited of providing such service to other businesses operated by The Limited. Services will be provided to Abercrombie & Fitch based on several billing methodologies. Pursuant to one of such billing methodologies, specified services will be provided to Abercrombie & Fitch at costs comparable to those charged to other businesses operated by The Limited from time to time, and Abercrombie & Fitch is obligated to purchase those services at the specified costs. In the event The Limited proposes changes in billing methodology which would result in a significant increase (being the greater of a 10% increase in costs or $1 million) in costs for the affected services, the Company may terminate such services. The purpose of the Services Agreement is to ensure that The Limited continues to provide to Abercrombie & Fitch the range of services that The Limited provided to the Company prior to the Offerings. With respect to matters covered by the Services Agreement, the relationship between The Limited and Abercrombie & Fitch is intended to continue in a manner generally consistent with current practices. The services initially to be provided by The Limited to the Company include, among other things, certain accounting, aircraft, associate benefit plan administration, audit, cash management, corporate development, corporate secretary, governmental affairs, human resources and compensation, investor and public relations, legal, risk management, tax and treasury services. Pursuant to the Services Agreement, The Limited will also continue to perform the store design/planning, real estate and import and shipping services provided to Abercrombie & Fitch prior to the Offerings. See "Business--Central Store Planning", "--Central Real Estate Management" and "--Merchandise Distribution". In addition to the identified services, The Limited intends to agree to continue coverage of the Company under The Limited's umbrella liability, property, casualty and fiduciary insurance policies. The Company intends to agree to reimburse The Limited for the portion of The Limited's premium cost with respect to such insurance that is attributable to coverage of the Company. Either The Limited or the Company may terminate such coverage under The Limited's policies at any time upon prior written notice during the 90 days prior to the anniversary date of the policy; provided that termination of coverage by Abercrombie & Fitch may only be for nonpayment and only if a replacement policy, acceptable to The Limited, is entered into by Abercrombie & Fitch. Also, in addition to the identified services, The Limited intends to agree to allow eligible associates of the Company to participate in The Limited's associate benefit plans. In addition to a monthly services fee, under the Services Agreement, the Company intends to agree to reimburse The Limited for The Limited's costs (including any contributions and premium costs and including certain third-party expenses and allocations of certain personnel expenses of The Limited), generally in accordance with past practice, relating to participation by the Company's associates in any of The Limited's benefit plans. The Services Agreement will have an initial term of five years and will be renewed automatically thereafter for successive one-year terms unless either Abercrombie & Fitch or The Limited elects not to renew the Services Agreement. After the initial five-year term, the Services Agreement may be terminated at any time by either party upon six months' written notice. The Services Agreement will also provide that the Agreement will be subject to early termination by either Abercrombie & Fitch or The Limited upon six months' written notice if The Limited ceases to own shares of Common Stock representing more than 50% of the combined voting power of the Common Stock of Abercrombie & Fitch, whether as a result of a Tax-Free Spin-Off or otherwise. Pursuant to the Services Agreement, each party will agree to indemnify the other, except in certain limited circumstances, against liabilities that the other may incur that are caused by or arise in connection with such party's failure to fulfill its material obligations under the Services Agreement. Sublease Agreement Abercrombie & Fitch has entered into a sublease agreement with an affiliate of The Limited (the "Sublease Agreement") pursuant to which such affiliate subleases to Abercrombie & Fitch the distribution center and headquarters office space currently used by Abercrombie & Fitch. The Sublease Agreement provides that the lessee will lease space at an average annual rental rate equal to $11.00 per square foot in the case of office space and $2.85 per square foot in the case of the distribution center, subject to adjustment based on the Consumer Price Index every third year. Abercrombie & Fitch's management believes that these rental rates are commensurate with market rates, although the Company did not seek bids from third parties. The net charge paid by the Company in 1995 under the Sublease Agreement was approximately $1.8 million, which is the amount included in the 1995 Consolidated Financial Statements. The Sublease Agreement will have an initial term of fifteen years and will be renewed automatically thereafter for eight successive five-year terms unless either the lessor or the lessee (or sublessor or sublessee) elects not to renew the Sublease Agreement upon at least one year's notice. Shared Facilities Agreement At July 6, 1996, three of the Company's stores were located in space leased by other businesses controlled by The Limited. The Company and the relevant businesses operated by The Limited intend to enter into shared facilities agreements (collectively, the "Shared Facilities Agreement") pursuant to which the Company will sublease such facilities from the relevant subsidiary of The Limited. Under the Shared Facilities Agreement, the Company will be responsible for its pro rata share (based on square feet occupied) of all costs and expenses (principally fixed rent) under the relevant lease plus the portion of any performance based rent attributable to the Company. This method of allocating such costs and expenses is consistent in all material respects with the allocation of such costs and expenses set forth in the historical financial statements of Abercrombie & Fitch. See the Consolidated Financial Statements included elsewhere herein. Management's estimate of the store lease and other occupancy costs charge that would have been payable by the Company in 1995 if the Shared Facilities Agreement had been in effect during that period is approximately $1.4 million. Tax-Sharing Agreement Abercrombie & Fitch is, and after the Offerings will continue to be, included in The Limited's federal consolidated income tax group and Abercrombie & Fitch's tax liability will be included in the consolidated federal income tax liability of The Limited and its subsidiaries. In certain circumstances, certain Abercrombie & Fitch subsidiaries may be included with certain subsidiaries of The Limited in combined, consolidated or unitary income tax groups for state and local tax purposes. Abercrombie & Fitch and The Limited intend to enter into a tax-sharing agreement (the "Tax-Sharing Agreement"). Pursuant to the Tax-Sharing Agreement, Abercrombie & Fitch and The Limited will make payments between them such that, with respect to any period, the amount of taxes to be paid by Abercrombie & Fitch, subject to certain adjustments, will be determined as though Abercrombie & Fitch were to file separate federal, state and local income tax returns (including, except as provided below, any amounts determined to be due as a result of a redetermination of the tax liability of The Limited arising from an audit or otherwise) as the common parent of an affiliated group of corporations filing combined, consolidated or unitary (as applicable) federal, state and local returns rather than a consolidated subsidiary of The Limited with respect to federal, state and local income taxes. Abercrombie & Fitch will be reimbursed, however, for tax attributes that it generates, such as net operating losses, if and when they are used on a consolidated basis. In determining the amount of tax-sharing payments under the Tax-Sharing Agreement, The Limited will prepare for Abercrombie & Fitch pro forma returns with respect to federal and applicable state and local income taxes that reflect the same positions and elections used by The Limited in preparing the returns for The Limited's consolidated group and other applicable groups. The Limited will continue to have all the rights of a parent of a consolidated group (and similar rights provided for by applicable state and local law with respect to a parent of a combined, consolidated or unitary group), will be the sole and exclusive agent for Abercrombie & Fitch in any and all matters relating to the income, franchise and similar tax liabilities of Abercrombie & Fitch, will have sole and exclusive responsibility for the preparation and filing of consolidated federal and consolidated or combined state income tax returns (or amended returns), and will have the power, in its sole discretion, to contest or compromise any asserted tax adjustment or deficiency and to file, litigate or compromise any claim for refund on behalf of Abercrombie & Fitch. In addition, The Limited has agreed to undertake to provide the aforementioned services with respect to Abercrombie & Fitch's separate state and local returns and Abercrombie & Fitch's foreign returns. Under the Tax-Sharing Agreement, Abercrombie & Fitch will pay The Limited a fee intended to reimburse The Limited for all direct and indirect costs and expenses incurred with respect to Abercrombie & Fitch's share of the overall costs and expenses incurred by The Limited with respect to tax related services. In general, the Company will be included in The Limited's consolidated group for federal income tax purposes for so long as The Limited beneficially owns at least 80% of the total voting power and value of the outstanding Common Stock. Each member of a consolidated group is jointly and severally liable for the federal income tax liability of each other member of the consolidated group. Accordingly, although the Tax-Sharing Agreement allocates tax liabilities between Abercrombie & Fitch and The Limited, during the period in which the Company is included in The Limited's consolidated group, the Company could be liable in the event that any federal tax liability is incurred, but not discharged, by any other member of The Limited's consolidated group. See "Risk Factors -- Control by The Limited". Corporate Agreement The Company and The Limited intend to enter into a corporate agreement (the "Corporate Agreement") under which the Company will grant to The Limited a continuing option, transferable to any of its subsidiaries, to purchase, under certain circumstances, additional shares of Class B Common Stock or shares of nonvoting capital stock of the Company (the "Stock Option"). The Stock Option may be exercised by The Limited simultaneously with the issuance of any equity security of the Company (other than in the Offerings or upon the exercise of the Underwriters' over-allotment options), with respect to Class B Common Stock, only to the extent necessary to maintain its then-existing percentage of the total voting power and value of the Company and, with respect to shares of nonvoting capital stock, to the extent necessary to own 80% of each outstanding class of such stock. The purchase price of the shares of Class B Common Stock purchased upon any exercise of the Stock Option, subject to certain exceptions, will be based on the market price at which such stock may be purchased by third parties. The Stock Option expires in the event that The Limited reduces its beneficial ownership of Common Stock in the Company to Common Stock representing less than 60% of the number of outstanding shares of Common Stock. The Company does not intend to issue additional shares of Class B Common Stock except pursuant to the exercise of the Stock Option. The Corporate Agreement will further provide that, upon the request of The Limited, the Company will use its best efforts to effect the registration under the applicable federal and state securities laws of any of the shares of Class B Common Stock and nonvoting capital stock (and any other securities issued in respect of or in exchange for either) held by The Limited for sale in accordance with The Limited's intended method of disposition thereof, and will take such other actions necessary to permit the sale thereof in other jurisdictions, subject to certain limitations specified in the Corporate Agreement. The Limited will also have the right, which it may exercise at any time and from time to time, to include the shares of Class B Common Stock and nonvoting capital stock (and any other securities issued in respect of or in exchange for either) held by it in certain other registrations of common equity securities of the Company initiated by the Company on its own behalf or on behalf of its other shareholders. The Company will agree to pay all out-of-pocket costs and expenses in connection with each such registration that The Limited requests or in which The Limited participates. Subject to certain limitations specified in the Corporate Agreement, such registration rights will be assignable by The Limited and its assigns. The Corporate Agreement will contain indemnification and contribution provisions: (i) by The Limited and its permitted assigns for the benefit of the Company and related persons; and (ii) by the Company for the benefit of The Limited and the other persons entitled to effect registrations of Common Stock (and other securities) pursuant to its terms and related persons. For so long as The Limited maintains beneficial ownership of a majority of the number of outstanding shares of Common Stock, the Company may not take any action or enter into any commitment or agreement which may reasonably be anticipated to result, with or without notice and with or without lapse of time, or otherwise, in a contravention (or an event of default) by The Limited of: (i) any provision of applicable law or regulation, including but not limited to provisions pertaining to the Code or ERISA; (ii) any provision of The Limited's certificate of incorporation or bylaws; (iii) any credit agreement or other material instrument binding upon The Limited; or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over The Limited or any of its respective assets. Except for those provisions relating to corporate opportunities and limitations on liabilities, the requirements for approval of certain business combinations and other control transactions, as well as the capital structure of the two companies, the Certificates of Incorporation and Bylaws of The Limited and Abercrombie & Fitch are substantially similar. See "Description of Capital Stock -- Certain Certificate of Incorporation and Bylaw Provisions". The Limited's certificate of incorporation and bylaws are filed as exhibits to the Registration Statement of which this Prospectus forms a part. MANAGEMENT The following table sets forth certain information concerning the executive officers of the Company, each of whom assumed their position with the Company on July 15, 1996:
Name Age Position ---- --- ---------- Leslie H. Wexner...................... 58 Chairman of the Board Kenneth B. Gilman..................... 50 Vice Chairman of the Board Michael S. Jeffries................... 51 President and Chief Executive Officer Michele S. Donnan-Martin.............. 32 Vice President - General Merchandising Manager -Women's Seth R. Johnson....................... 42 Vice President - Chief Financial Officer
Mr. Wexner has been President and Chief Executive Officer of The Limited since he founded The Limited in 1963 and Chairman of the Board for more than five years. Mr. Wexner has also been the Chairman of the Board and Chief Executive Officer of Intimate Brands since 1995. Mr. Wexner is also a director of Hollinger International, Inc. and Hollinger International Publishing, Inc. Mr. Gilman has been Vice Chairman and Chief Financial Officer of The Limited since June 1993. For more than five years prior thereto, Mr. Gilman was executive Vice President and Chief Financial Officer of The Limited. Mr. Gilman has also been the Vice Chairman of the Board of Intimate Brands since 1995. Mr. Jeffries has been President and Chief Executive Officer of Abercrombie & Fitch since February 1992. For one and one-half years prior thereto, Mr. Jeffries held the position of Executive Vice President - Merchandising for Paul Harris Stores, Inc. For five years prior thereto, Mr. Jeffries held the position of President and Chief Executive Officer of Alcott & Andrews. Ms. Donnan-Martin has been Vice President - General Merchandising Manager - Women's at Abercrombie & Fitch since February 1996. For three and one-half years prior thereto, Ms. Donnan-Martin held the position of Vice President Women's Merchandising at Abercrombie & Fitch. Prior to joining Abercrombie & Fitch in June 1992, she held the position of Divisional Merchandise Manager for J. Crew Group, Inc. for two years. Mr. Johnson has been Vice President - Chief Financial Officer of Abercrombie & Fitch since June 1992. Prior to 1992, Mr. Johnson held the position of Director, Financial Analysis from 1989 to 1992 for The Limited. The Board of Directors of Abercrombie & Fitch currently consists of Messrs. Wexner, Gilman and Jeffries. In addition, The Limited intends to cause the appointment as directors of Abercrombie & Fitch of four additional directors (the "Independent Directors") not associated with the Company, one of whom will not be associated with The Limited or any of its affiliates. In light of its voting power in the Company, The Limited has the ability to change the size and composition of the Board of Directors. Members of the Board of Directors are divided into three classes and serve staggered three-year terms. Of the current members of the Board of Directors, the term of Mr. Jeffries expires at the next annual meeting of shareholders (expected to occur in the second quarter of 1997), the term of Mr. Gilman expires at the annual meeting of shareholders to be held in 1998 and the term of Mr. Wexner expires at the annual meeting of shareholders to be held in 1999. The Board of Directors will have an audit committee, consisting entirely of Indpendent Directors, which will review the results and scope of the audit and other services provided by Abercrombie & Fitch's independent auditors. Compensation of Directors Directors who are not associates of the Company receive an annual retainer of $10,000 (increased by $1,500 for each committee chair held) plus a fee of $800 for each Board of Directors' meeting attended ($400 for a telephonic meeting) and, as committee members, receive $600 per committee meeting attended ($200 for each telephonic meeting). Each action in writing taken by the Board of Directors or any committee entitles each outside member to be paid $200. In addition, pursuant to the Abercrombie & Fitch 1996 Stock Plan for Non-Associate Directors (the "1996 Non-Associate Director Stock Plan") described below, each non-associate director will receive annual grants of options to acquire 2,000 shares of Class A Common Stock at an exercise price equal to the fair market value of the underlying shares on the date of grant. The annual retainer will be paid 50% in cash and 50% in Class A Common Stock pursuant to the 1996 Non-Associate Director Stock Plan described below. Associates and officers of the Company who are directors receive no additional compensation for services rendered as directors. EXECUTIVE COMPENSATION Summary The information set forth below describes the components of the total compensation paid by The Limited during its last completed fiscal year (the last three completed fiscal years in the cases of Messrs. Wexner and Gilman) to Mr. Wexner, who is the Chairman of the Board of Abercrombie & Fitch, and Messrs. Gilman, Jeffries and Johnson and Ms. Donnan-Martin (the "named executive officers"). Prior to the named individuals becoming executive officers of Abercrombie & Fitch on July 15, 1996, such executive officers were associates of The Limited. Messrs. Wexner and Gilman will continue their employment with The Limited following the Offerings. It is expected that Messrs. Wexner and Gilman will receive no cash compensation from Abercrombie & Fitch, although they will be eligible for participation in the Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan (the "Stock Plan") discussed below. The annual base salary and annual bonus opportunity for Messrs. Wexner and Gilman in respect of their service with The Limited and its affiliates will continue to be determined by The Limited's compensation committee and will be paid by The Limited. The compensation set forth below was paid by The Limited to such individuals in respect of their employment with The Limited. The principal components of each such named executive officer's cash compensation from The Limited have been the annual base salary and bonus as set forth in the Summary Compensation Table. The bonus amounts represent amounts that the compensation committee of the Board of Directors of The Limited approved for each named individual based on the performance of The Limited and Abercrombie & Fitch during 1995. The long-term compensation shown in the Summary Compensation Table was provided under The Limited's 1993 Stock Option and Performance Incentive Plan, which provides for various types of awards such as options to acquire common stock of The Limited and restricted common stock of The Limited. Messrs. Jeffries and Johnson and Ms. Donnan-Martin will continue to be eligible to participate in such plan following the Offerings. It is intended that substantially all the compensation to be paid to Messrs. Jeffries and Johnson and Ms. Donnan-Martin after the Offerings will be paid by the Company, not The Limited. Immediately following the Offerings, the annual base salaries and annual bonus opportunities of Messrs. Jeffries and Johnson and Ms. Donnan-Martin will be at the levels as was determined by the compensation committee of The Limited. Subsequently, the annual base salary and the annual bonus opportunity of Messrs. Jeffries and Johnson and Ms. Donnan-Martin will be determined by the compensation committee of the Company (the "Compensation Committee"). It is anticipated that the base salary paid by the Company to Messrs. Jeffries and Johnson and Ms. Donnan-Martin, and to all other executive officers compensated by the Company rather than The Limited, will initially be generally comparable to present levels of base salary received from The Limited, subject to such adjustments as may be determined in the normal course of business. In addition, in connection with the Offerings it is anticipated that the Company will adopt three compensation plans. Pursuant to the 1996 Non-Associate Director Stock Plan, described more fully below, the Company will grant on the effective date of the Offerings and on the first business day of each fiscal year of the Company options to purchase 2,000 shares of Class A Common Stock to each non-associate director of the Company. Pursuant to the Abercrombie & Fitch Incentive Compensation Plan (the "Incentive Plan"), described more fully below, eligible associates of the Company will be eligible to receive cash bonuses based on attainment by the Company of certain performance goals. All of the named executive officers will be eligible to participate in the Stock Plan and the Incentive Plan, pursuant to which it is anticipated that incentive compensation awards will be granted after the Offerings. Effective upon the consummation of the Offerings, it is expected that the Compensation Committee will grant certain executive officers options to purchase an aggregate of shares of the Company's Class A Common Stock under the Stock Plan. The exercise price of these options will be equal to the initial public offering price set forth on the cover page of this Prospectus. These options are composed of three approximately equal tranches. Each tranche will vest generally in four equal annual installments commencing on the first, second and third anniversaries of the grant date, respectively, subject to continued employment with the Company. In addition, it is anticipated that the Compensation Committee will grant, and in consideration for the cancellation of certain previously granted options to purchase shares of The Limited's common stock will offer to grant, to certain executive officers and to non-executive officer associates options to purchase an aggregate of up to shares of the Company's Class A Common Stock under the Stock Plan with an exercise price equal to the initial public offering price set forth on the cover page of this Prospectus. These options would vest in annual increments of 25% commencing on various dates beginning January 1, 1997, subject to continued employment with the Company. See "-- Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan". In addition, subject to the cancellation of the grants of restricted shares of The Limited's common stock made on to certain executive officers and associates, it is expected that such executive officers and associates will be granted, effective upon the consummation of the Offerings, an aggregate of restricted shares of the Company's Class A Common Stock under the Stock Plan, which shares will vest on , subject to continued employment with the Company. See Note 3 to the Summary Compensation Table below and "-- Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan". The following table presents certain specific information regarding the compensation paid by The Limited for the periods indicated to Mr. Wexner, the Chairman of the Board of Abercrombie & Fitch, and to Messrs. Gilman, Jeffries and Johnson and Ms. Donnan-Martin who have become executive officers of Abercrombie & Fitch. Summary Compensation Table
Annual Compensation Long-Term Compensation ------------------------- ------------------------------ Securities All Other Name & Restricted Stock Underlying Compensation($) Principal Position Year(1) Salary($) Bonus($)(2) Award(s)($)(3) Options(#) (4) ------------------ ---- ------ ----- ---------------- ---------- ------------- Leslie H. Wexner(5).......... 1995 $1,150,000 $768,315 -- 100,000 $148,436 Chairman of the Board 1994 1,150,000 832,370 556,562 50,000 149,066 1993 1,150,000 660,100 2,150,000 0 147,636 Kenneth B. Gilman(5)......... 1995 941,935 449,620 -- 25,000 190,772 Vice Chairman of the 1994 896,144 473,760 278,281 25,000 185,736 Board 1993 796,154 390,320 1,075,000 -- 157,926 Michael S. Jeffries.......... 1995 491,700 426,300 159,393 12,000 51,695 President and Chief Executive Officer Michele S. Donnan-Martin..... 1995 217,510 107,184 26,566 5,000 17,850 Vice President- General Merchandising Manager-Women's Seth R. Johnson.............. 1995 198,340 97,440 26,566 5,000 22,013 Vice President - Chief Financial Officer
- ---------------- (1) Under rules promulgated by the Commission, since the Company was not a reporting company during the three immediately preceding fiscal years, only the information with respect to the most recent completed fiscal year is noted in the Summary Compensation Table except for such information that was previously required to be filed with the Commission. (2) Represents, for each fiscal year, the aggregate of the performance-based cash incentive compensation paid for the Spring and Fall selling seasons occurring in that fiscal year. (3) On February 1, 1996, 9,516, 1,586, 1,586, restricted common stock performance awards of The Limited were made to executive officers Jeffries, Donnan-Martin and Johnson, respectively. The per share value of the common stock of The Limited on such date was $16.75. These awards vest 10% on February 1, 1996, an additional 20% on February 1, 1997, an additional 30% on February 1, 1998, and the remaining 40% on February 1, 1999, in each case subject to the holder's continued employment with The Limited. As of February 2, 1996, the aggregate restricted stock holdings in The Limited stock and the market value of such holdings for each of the named executive officers were: Mr. Wexner, 132,500 shares, $2,219,375; Mr. Gilman 66,250 shares; $1,109,688; Mr. Jeffries, 61,516 shares, $1,030,393; Ms. Donnan-Martin, 3,586 shares, $60,066; Mr. Johnson, 3,586 shares, $60,066 (based on the $16.75 fair market value of The Limited's common stock on such date). (4) Represents, for each named executive officer, the amount of employer matching and supplemental contributions allocated to his/her account under certain qualified and non-qualified defined contribution plans maintained by The Limited during the calendar year in which the 1995 fiscal year commenced. It is anticipated that after the Offerings the named executive officers will continue to participate in such plans. (5) Messrs. Wexner and Gilman are also employed by The Limited and received no direct cash compensation from the Company. The annual base salary and annual bonus opportunity for Messrs. Wexner and Gilman in respect of their service with The Limited and its affiliates was determined by The Limited's Compensation Committee and was paid by The Limited. The following table sets forth certain information regarding options to acquire common stock of The Limited granted to the named executive officers during the 1995 fiscal year of The Limited. Option Grants in Fiscal Year 1995 Individual Grants
Potential Realizable Value at Assumed Securities % of Annual Rates of Stock Price Underlying Total Options Appreciation Options Granted to Exercise for Option Term(3) Granted Employees In Price Expiration --------------------------------------- Name (#)(1) Fiscal Year(2) ($/sh) Date 5.0%($) 10.0%($) ---- ---------- -------------- -------- ---------- ------- -------- Leslie H. Wexner.... 100,000 4.69% $17.50 3/1/05 $1,100,565 $2,789,049 Kenneth B. Gilman... 5,714 0.27% 17.50 2/22/05 62,886 159,366 19,286 0.90% 17.50 3/1/05 212,255 537,896 Michael S. Jeffries. 5,800 0.27% 17.50 2/27/05 63,945 161,385 6,200 0.29% 17.50 3/1/05 68,355 172,515 Michele S. Donnan- Martin.............. 4,282 0.20% 17.50 2/27/05 47,209 119,147 718 0.03% 17.50 3/1/05 7,916 19,978 Seth R. Johnson..... 4,742 0.22% 17.50 2/27/05 52,281 131,946 258 0.01% 17.50 3/1/05 2,844 7,179
- -------------------- (1) All options granted relate to shares of common stock of The Limited. (2) All options listed were granted to the named executive officers pursuant to The Limited's 1993 Stock Option and Performance Incentive Plan. All such options become exercisable in four equal annual portions commencing on the first anniversary of the grant date. The table above indicates that each named executive officer, other than Mr. Wexner, received two such stock option grants during 1995. One grant represents options intended to qualify as "incentive stock options" within the meaning of Section 422 of the Code and the other represents non-qualifying stock options. All such stock option grants were made on the same day, February 28, 1995. (3) The assumed rates of growth are prescribed by the Commission for illustrative purposes only and are not intended to predict or forecast future stock prices.The following table provides information relating to the number and value of shares of common stock of The Limited subject to options held by the named executive officers as of February 2, 1996. Aggregated Option Exercises in 1995 Fiscal Year
and Fiscal Year-end Option Values Value of Unexercised, Number of Securities Underlying In-the-Money Unexercised Options at FY-End (#) Options Held at FY-End ($)(1) Shares --------------------------------- ----------------------------- Acquired On Value Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable ----- ----------- ----------- ----------- ------------- ----------- ------------- Leslie H. Wexner.... -- -- 12,500 137,500 -- -- Kenneth B. Gilman... -- -- 200,000 68,750 $376,562 -- Michael S. Jeffries. -- -- 27,750 33,250 -- -- Michele S. Donnan- Martin.............. -- -- 10,500 12,500 -- -- Seth R. Johnson..... -- -- 20,750 14,250 29,250 --
- --------------- (1) Calculated on the basis of the number of shares of common stock of The Limited subject to each such option multiplied by the excess of the $16.75 fair market value of a share of The Limited's common stock at fiscal year-end over the per share exercise price of such option. Long-Term Incentive Plans -- Awards in Fiscal Year 1995 No awards were granted in respect of the 1995 fiscal year to the named executive officers other than the restricted stock performance awards granted in The Limited, Inc. stock on February 1, 1996 to corporate officers Jeffries, Donnan-Martin and Johnson, as disclosed in the Summary Compensation Table. Abercrombie & Fitch Incentive Compensation Plan It is anticipated that, prior to the consummation of the Offerings, the Company's Board of Directors will adopt, and The Limited, as the Company's sole shareholder, will approve, effective on the consummation of the Offerings, the Incentive Plan. The Incentive Plan is intended to satisfy the applicable provisions of Section 162(m) of the Code. Under the Incentive Plan, approximately 30 key executives of the Company, other than Messrs. Wexner and Gilman, with significant operating and financial responsibility are eligible to earn seasonal cash incentive compensation payments that are paid twice each year. Prior to the beginning of each spring and fall selling season, operating income and/or gross margin and/or sales objectives may be established by the Compensation Committee of the Company. Any objectives set would expect a stretch performance level, and be based on an analysis of historical performance and growth expectations for the business, financial results of other comparable businesses, and progress towards achieving the long-range strategic plan for the business. These objectives and determination of results are based entirely on financial measures, and discretion may not be used to modify award results. Annual incentive compensation targets established for eligible executives will range from 10% to 110% of base salary. Targeted incentive compensation would equal a percentage of an eligible executive's total compensation as established by the pay guidelines. Executives earn their target incentive compensation if the business achieves the established operating income and/or gross margin and/or sales objectives. The target incentive compensation percentage for each executive is based on the level and functional responsibility of his or her position and competitive practices, in that order of priority. For the named executive officers, annual incentive compensation targets can range from 40% to 110% of base salary. The amount of incentive compensation paid to executives can range from zero to double their targets, based upon the extent to which operating income and/or gross margin and/or sales objectives are achieved. The minimum level at which an executive would earn any incentive payment, and the level at which an executive would earn the maximum incentive payment of double the target, are established by the Compensation Committee of the Company prior to the commencement of each bonus period, and actual payouts are based on a straight-line interpolation based on these minimum and maximum levels and the target operating income objectives. The maximum dollar amount to be paid for any year under the Incentive Plan to each participant may not exceed $2 million. Abercrombie & Fitch 1996 Stock Option and Performance Incentive Plan It is anticipated that, prior to the consummation of the Offerings, the Company's Board of Directors will adopt, and The Limited, as the Company's sole shareholder, will approve, effective on the consummation of the Offerings, the Stock Plan. Purpose of Plan The purpose of the Stock Plan is to attract and retain the best available executive and key management associates for the Company and its subsidiaries and to encourage the highest level of performance by such associates, thereby enhancing the value of the Company for the benefit of its shareholders. The Stock Plan is also intended to motivate executive and key management associates to contribute to the Company's future growth and profitability and to reward their performance in a manner that provides them with a means to increase their holdings of the Class A Common Stock of the Company and aligns their interests with the interests of the shareholders of the Company. Administration of the Stock Plan The Stock Plan will be administered by a committee of two or more members of the Company's Board of Directors (the "Plan Committee"). The Plan Committee will be composed of directors who qualify as "non-employee directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as "outside directors" within the meaning of Section 162(m) of the Code. The Plan Committee has the power in its discretion to grant awards under the Stock Plan, to determine the terms thereof, to interpret the provisions of the Stock Plan and to take such action as it deems necessary or advisable for the administration of the Stock Plan. Number of Authorized Shares The Stock Plan provides for awards with respect to a maximum of 1,500,000 shares of Class A Common Stock to associates of the Company and its subsidiaries and to associates of The Limited and its subsidiaries during the term of the Stock Plan. Corresponding tax offset payments also may be awarded at the discretion of the Plan Committee. The number and class of shares available under the Stock Plan and/or subject to outstanding awards may be adjusted by the Plan Committee to prevent dilution or enlargement of rights in the event of various changes in the capitalization of the Company. Eligibility and Participation Eligibility to participate in the Stock Plan is limited to the named executive officers and full-time executive and key management associates of the Company and its subsidiaries and to associates of The Limited and its subsidiaries who are selected by the Plan Committee. Currently, approximately 500 associates of the Company and its subsidiaries are within the classes eligible to participate in the Stock Plan. The Company anticipates that approximately 10% of those eligible associates will participate in the Stock Plan. Participation in the Stock Plan is at the discretion of the Plan Committee and shall be based upon the associate's present and potential contributions to the success of the Company and its subsidiaries and such other factors as the Plan Committee deems relevant. No associate may be granted in any calendar year awards covering more than 400,000 shares of Class A Common Stock. Type of Awards Under the Stock Plan The Stock Plan provides that the Plan Committee may grant awards to eligible associates in any of the following forms, subject to such terms, conditions and provisions as the Plan Committee may determine to be necessary or desirable: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation rights; (iv) restricted shares; (v) performance shares; (vi) performance units; (vii) shares of unrestricted Class A Common Stock; and (viii) tax offset payments. Term of Stock Plan Unless earlier terminated by the Company's Board of Directors, the Stock Plan will terminate on the tenth anniversary of the earlier of the adoption of the Stock Plan by the Company's Board of Directors or the date of the consummation of the Offerings. Amendment and Termination The Company's Board of Directors may suspend, amend, modify or terminate the Stock Plan. Abercrombie & Fitch 1996 Stock Plan for Non-Associate Directors It is anticipated that, prior to the consummation of the Offerings, the Company's Board of Directors will adopt and The Limited, as the Company's sole shareholder will approve, effective on the consummation of the Offerings, the 1996 Non-Associate Director Stock Plan. The following is a summary of the material terms of the 1996 Non-Associate Director Stock Plan, a copy of which is filed as an exhibit to the registration statement of which this Prospectus is a part. The following summary does not purport to be complete and is qualified in its entirety by the terms of the 1996 Non-Associate Director Stock Plan. Purpose of Plan The purpose of the 1996 Non-Associate Director Stock Plan is to promote the interests of the Company and its shareholders by increasing the proprietary interest of non-associate directors in the growth and performance of the Company. Eligibility The 1996 Non-Associate Director Stock Plan provides for awards of nonqualified options to directors of the Company who are not associates of the Company or its affiliates ("Eligible Directors"). Types of Awards Pursuant to the 1996 Non-Associate Director Stock Plan, on the effective date of the Offerings each Eligible Director will be granted an option to purchase 2,000 shares of Class A Common Stock at the price at which such shares are offered to the public. Subsequently, on the first business day of each fiscal year of the Company, commencing following the Offerings, each Eligible Director will be granted an option to purchase 2,000 shares of Class A Common Stock as of the first business day of such fiscal year at a per share exercise price equal to the fair market value of a share of Class A Common Stock on such date. Each option will: (i) vest in annual 25% increments commencing on the first anniversary of the grant date; and (ii) expire on the earlier of the tenth anniversary of the date of grant and one year from the date on which an optionee ceases to be an Eligible Director. The exercise price per share of Class A Common Stock shall be 100% of the fair market value per share on the date the option is granted. The exercise price of options must be satisfied in cash. In addition, the 1996 Non-Associate Director Stock Plan provides that each Eligible Director will receive 50% of such Eligible Director's annual retainer in unrestricted shares of Class A Common Stock, valued as of the last business day of each fiscal quarter commencing hereafter. Number of Authorized Shares The maximum number of shares of Class A Common Stock in respect of which options may be granted and shares awarded in lieu of 50% of the annual retainer under the 1996 Non-Associate Director Stock Plan is 100,000. Shares of Class A Common Stock subject to options that are forfeited, terminated or canceled will again be available for awards. The shares of Class A Common Stock to be delivered under the 1996 Non-Associate Director Stock Plan will be made available from the authorized but unissued shares of Class A Common Stock or from treasury shares. The number and class of shares available under the 1996 Non-Associate Director Stock Plan and/or subject to outstanding options may be adjusted by the Board of Directors to prevent dilution or enlargement of rights in the event of various changes in the capitalization of the Company. Administration The 1996 Non-Associate Director Stock Plan will be administered by the Board of Directors. Subject to the provisions of the 1996 Non-Associate Director Stock Plan, the Board shall be authorized to interpret the 1996 Non-Associate Director Stock Plan, to establish, amend, and rescind any rules and regulations relating to it and to make all other determinations necessary or advisable for its administration; provided, however, that the Board shall have no discretion with respect to the selection of directors to receive options, the number of shares of Class A Common Stock subject to any such options, the purchase price thereunder or the timing or term of grants of options. The determinations of the Board in the administration of the 1996 Non-Associate Director Stock Plan, as described herein, shall be final and conclusive. The Secretary of the Company shall be authorized to implement the 1996 Non-Associate Director Stock Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the 1996 Non-Associate Director Stock Plan and any rules and regulations relating to it shall be determined in accordance with the laws of the State of Delaware. Transferability The options granted under the 1996 Non-Associate Director Stock Plan may not be assigned or transferred, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. Shares issued under the 1996 Non-Associate Director Stock Plan in respect of 50% of the annual retainer may be assigned or transferred. Term of Plan No option may be granted under the 1996 Non-Associate Director Stock Plan after the tenth annual meeting of the Company's shareholders following the consummation of the Offerings. Amendments The 1996 Non-Associate Director Stock Plan may be amended by the Company's Board of Directors, as it shall deem advisable or to conform to any change in any law or regulation applicable thereto; provided, that the Company's Board of Directors may not, except in the limited circumstances described above, without the authorization and approval of shareholders: (i) increase the number of shares of Class A Common Stock which may be purchased pursuant to options, either individually or in the aggregate; (ii) change the requirement that option grants be priced at fair market value; (iii) modify in any respect the class of individuals who constitute Eligible Directors; or (iv) materially increase benefits thereunder. The provisions governing eligibility, the grant, terms and conditions of the options and the award of shares of Class A Common Stock in respect of the annual retainer and, for purposes of the 1996 Non-Associate Director Stock Plan, the amount of the annual retainer, may not be amended more often than once every six months, other than to comport with changes in the Code, ERISA or the rules under either such statute. Awards under the Plan The following table sets forth amounts to be paid to the Non-Associate Director group in 1996 under the 1996 Non-Associate Director Stock Plan. 1996 Non-Associate Director Stock Plan Benefits Table
Name and Position Dollar Value($) Number of Units ----------------- --------------- --------------- Non-Associate Director Group (assuming four non-associate directors) $20,000(1) 8,000(2)
- -------------------- (1) Consists of restricted shares of the Company's Class A Common Stock to be issued in respect of 50% of each such director's annual retainer, valued as of the date such retainer is paid. (2) Consists of options to purchase shares of the Company's Class A Common Stock at an exercise price equal to the fair market value on the date of grant. Each such option will vest in 25% increments commencing on the first anniversary of the date of grant. PRINCIPAL SHAREHOLDER All of the shares of Class B Common Stock outstanding prior to the completion of the Offerings are beneficially owned by The Limited. Upon consummation of the Offerings, The Limited will beneficially own 100% of the Class B Common Stock and, accordingly, will own Common Stock representing approximately % of the economic interest in the Company ( % if the Underwriters' over-allotment options are exercised in full) and representing approximately % of the combined voting power of the Company's outstanding Common Stock (or % if the Underwriters' over-allotment options are exercised in full). As of March 18, 1996 Leslie H. Wexner, Chairman of the Company and Chairman of the Board, Chief Executive Officer and President of The Limited, beneficially owned approximately 25.2 % of the outstanding common stock of The Limited. The address of The Limited is Three Limited Parkway, Columbus, Ohio 43230. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offerings, the Company will have shares of Class A Common Stock issued and outstanding ( if the Underwriters' over-allotment options are exercised in full) and shares of Class B Common Stock issued and outstanding. All of the shares of Class A Common Stock to be sold in the Offerings will be freely transferable and tradeable without restrictions under the Securities Act, except for any shares purchased by an "affiliate" of the Company (as that term is defined in Rule 144 adopted under the Securities Act ("Rule 144")), which will be subject to the resale limitations of Rule 144. All of the outstanding shares of Class B Common Stock are owned by The Limited and have not been registered under the Securities Act and may not be sold in the absence of an effective registration statement under the Securities Act other than in accordance with Rule 144 or another exemption from registration. The Limited has certain rights to require the Company to effect registration of shares of Class B Common Stock owned by The Limited, which rights may be assigned. See "Relationship with The Limited -- Corporate Agreement". In general, under Rule 144 as currently in effect, a person (including an affiliate) who beneficially owns shares that are "restricted securities" as to which at least two years have elapsed since the later of the date of acquisition of such securities from the issuer or from an affiliate of the issuer, and any affiliate who owns shares that are not "restricted securities", is entitled to sell within any three-month period, a number of shares that does not exceed (together with the sales by other persons required to be aggregated) the greater of one percent of the total number of outstanding shares of the class of stock being sold or the average weekly reported trading volume of the class of stock being sold during the four calendar weeks preceding the filing of the required notice of such sale. A person (or persons whose shares are aggregated) who is not deemed an "affiliate" of the Company and who has beneficially owned restricted securities as to which at least three years have elapsed since the later of the date of the acquisition of such securities from the issuer or from an affiliate of the issuer is entitled to sell such shares without regard to the volume limitations described above. As defined in Rule 144, an "affiliate" of an issuer is a person that directly or indirectly through the use of one or more intermediaries controls, is controlled by, or is under common control with, such issuer. The Commission has proposed reducing the periods of beneficial ownership of "restricted securities" required by Rule 144. Under the proposal, persons who have beneficially owned restricted securities for at least one year, instead of two years as currently required, would be able to resell such securities by complying with the volume limitations described above. In the case of a person who is not deemed to be an affiliate of the Company during the preceding three months, the proposal would permit sales without regard to the limitations described above as long as at least two years have elapsed since the later of the date of the acquisition of such securities from the issuer or from an affiliate of the issuer, instead of three years as currently required. There can be no assurance that the proposed revisions to Rule 144 will be adopted by the Commission. Rule 144A under the Securities Act ("Rule 144A") provides a non-exclusive safe harbor exemption from the registration requirements of the Securities Act for specified resales of restricted securities to certain institutional investors. In general, Rule 144A allows unregistered resales of restricted securities to a "qualified institutional buyer", which generally includes an entity, acting for its own account or for the account of other qualified institutional buyers, that in the aggregate owns or invests at least $100 million in securities of unaffiliated issuers. Rule 144A does not extend an exemption to the offer or sale of securities that, when issued, were of the same class as securities listed on a national securities exchange or quoted on an automated quotation system. Prior to the Offerings, there has been no market for the Class A Common Stock. No predictions can be made of the effect, if any, that market sales of currently outstanding shares of Class B Common Stock or the availability of such shares for sale will have on the market price of Class A Common Stock prevailing from time to time. Nevertheless, sales of substantial amounts of Class B Common Stock in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices for Class A Common Stock. Although The Limited in the future may effect or direct sales or other dispositions of Common Stock that would reduce its beneficial ownership interest in the Company, The Limited has advised the Company that its current intention is to continue to hold all of the Class B Common Stock beneficially owned by it immediately after the completion of the Offerings. However, The Limited has no agreement with the Company not to sell or distribute such shares and, other than pursuant to the Underwriting Agreement described below, there can be no assurance concerning the period of time during which The Limited will maintain its beneficial ownership of Common Stock. Beneficial ownership of at least 80% of the total voting power and value of the outstanding Common Stock is required in order for The Limited to continue to include the Company in its consolidated group for federal tax purposes and ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock is required in order for The Limited to be able to effect a Tax-Free Spin-Off of the Company. The Limited has indicated to the Company that any decision by The Limited to reduce such beneficial ownership interest would be made in the future on the basis of all of the circumstances existing at such time, including the effect of any such reduction on The Limited (including any benefit to The Limited from the removal from The Limited's consolidated balance sheet of the Company's indebtedness (and assets) in the event The Limited's interest in the Common Stock is reduced below 50%), the needs of The Limited, the performance of The Limited, stock market conditions and other factors. In connection with the Offerings, subject to certain exceptions, the Company and The Limited will agree with the Underwriters not to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any security convertible into or exchangeable or exercisable for Common Stock) for a period of 180 days after the date of this Prospectus without the prior written consent of the Representatives of the Underwriters. DESCRIPTION OF CAPITAL STOCK General The authorized capital stock of the Company will consist of (a) shares of Common Stock, par value $0.01 per share, of which: (i) shares will be designated as Class A Common Stock; and (ii) shares will be designated as Class B Common Stock; and (b) shares of Preferred Stock, of which no shares are outstanding as of the date hereof. Of the shares of Common Stock designated as Class A Common Stock, shares are being offered hereby and shares are reserved for issuance upon conversion of Class B Common Stock into Class A Common Stock. Of the shares of Common Stock designated as Class B Common Stock, shares will be outstanding and held by The Limited upon consummation of the Offerings. Each of the Class A Common Stock and Class B Common Stock constitutes a series of Common Stock under the General Corporation Law of the State of Delaware (the "DGCL"). A description of the material terms and provisions of the Company's Certificate of Incorporation affecting the relative rights of the Class A Common Stock, the Class B Common Stock and the Preferred Stock is set forth below. The description is intended as a summary and is qualified in its entirety by reference to the form of the Company's Certificate of Incorporation filed with the Registration Statement of which this Prospectus forms a part. Common Stock Voting RightsThe holders of Class A Common Stock and Class B Common Stock generally have identical rights except that holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per share on all matters to be voted on by shareholders. Holders of shares of Class A Common Stock and Class B Common Stock are not entitled to cumulate their votes in the election of directors. Generally all matters to be voted on by shareholders must be approved by a majority of the votes entitled to be cast by all shares of Class A Common Stock and Class B Common Stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any Preferred Stock. However, the Company's Certificate of Incorporation includes, among other things: (i) a requirement that a vote of at least 75% of the outstanding Common Stock is required to effect a merger or consolidation with an Interested Person (as defined therein), a sale of all or substantially all of the assets of the Company to an Interested Person and certain other control transactions; and (ii) a provision specifying that certain provisions of the Company's Certificate of Incorporation and Bylaws may be amended, and directors may be removed, only with the approval of 75% of the outstanding Common Stock. Dividends The Board of Directors of the Company currently intends to retain future earnings for the development of its business and does not anticipate paying regular quarterly dividends on the Class A Common Stock or Class B Common Stock for the foreseeable future. Under Delaware law, the declaration of dividends is within the discretion of the Board of Directors and future dividends, if any, will depend upon various factors, including the Company's net income, current and anticipated cash needs and any other factors deemed relevant by the Board of Directors. By virtue of its stock ownership, The Limited will have the ability to change the size and composition of the Company's Board of Directors and thereby control the payments of dividends by the Company. Pursuant to restrictions contained in the Credit Agreement, so long as the Credit Agreement is outstanding, the Company is prohibited from paying any dividends on its capital stock, including the Class A Common Stock. See "Description of Certain Indebtedness--Credit Agreement". Conversion Prior to the earliest to occur of the date on which shares of Class B Common Stock are issued to shareholders of The Limited or its successor in a Tax-Free Spin-Off and the date on which the number of shares of Class B Common Stock outstanding is less than a majority of the aggregate number of shares of Common Stock outstanding and a Tax-Free Spin-Off has not occurred, each share of Class B Common Stock is convertible while held by The Limited or any of its subsidiaries at such holder's option into one share of Class A Common Stock. Any shares of Class B Common Stock transferred to a person other than The Limited or any of its subsidiaries shall automatically convert to shares of Class A Common Stock upon such disposition, except for a disposition effected in connection with a transfer of Class B Common Stock to shareholders of The Limited as a dividend intended to be a Tax-Free Spin-Off. In the event of a Tax-Free Spin-Off, shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock on the fifth anniversary of the Tax-Free Spin-Off unless prior to such Tax-Free Spin-Off, The Limited delivers to the Company an opinion of counsel (which counsel shall be reasonably satisfactory to the Company) to the effect that such conversion would preclude The Limited from obtaining a favorable ruling from the Internal Revenue Service that the distribution would be a Tax-Free Spin-Off under the Code. If such an opinion is received, approval of such conversion shall be submitted to a vote of the holders of the Abercrombie & Fitch Common Stock as soon as practicable after the fifth anniversary of the Tax-Free Spin-Off unless The Limited delivers to the Company an opinion of The Limited's counsel (which counsel shall be reasonably satisfactory to the Company) prior to such anniversary that such vote would adversely affect the status of the Tax-Free Spin-Off. Approval of such conversion will require the affirmative vote of the holders of a majority of the shares of both Abercrombie & Fitch's Class A Common Stock and Class B Common Stock present and voting, voting together as a single class, with each share entitled to one vote for such purpose. No assurance can be given that such conversion would be consummated. The Limited has no current plans with respect to a Tax-Free Spin-Off of Abercrombie & Fitch. The Limited will convert its Class B Common Stock to Class A Common Stock immediately prior to a Tax-Free Spin-Off if, after such conversion, it would have beneficial ownership of at least 80% of the value as well as the voting power of the outstanding Common Stock. All shares of Class B Common Stock shall automatically convert into Class A Common Stock if a Tax-Free Spin-Off has not occurred and the number of outstanding shares of Class B Common Stock falls below 60% of the aggregate number of outstanding shares of Common Stock. This will prevent The Limited from decreasing its economic interest in the Company to less than 60% while still retaining control of approximately % of Abercrombie & Fitch's voting power. All conversions will be effected on a share-for-share basis. The requirement that The Limited retain beneficial ownership of at least 80% of the voting power of the outstanding Common Stock after any conversion prior to a Tax-Free Spin-Off is intended to ensure that the tax treatment of the Tax-Free Spin-Off is preserved. Similarly, the requirement to submit such conversion to a vote of the holders of Common Stock is intended to preserve such tax treatment should the Internal Revenue Service challenge such automatic conversion as violating the 80% vote requirement. Automatic conversion of the Class B Common Stock into Class A Common Stock if a Tax-Free Spin-Off has not occurred and The Limited decreases its economic interest in the Company to less than 60% is intended to ensure that The Limited retains voting control by virtue of its ownership of Class B Common Stock only if it has a sizable economic interest in the Company. In addition, in order to give any holder of the Class A Common Stock or Class B Common Stock the right to participate in any offer for a significant amount of the shares of the other class that is not similarly offered for the shares of such holder's class, following a Tax-Free Spin-Off shares of Common Stock of each class will be convertible, at the option of the registered holder thereof, on a share-for-share basis, into shares of the other class if any person (other than The Limited or any of its consolidated subsidiaries), or any group of persons (other than The Limited or any one or more of its subsidiaries), agreeing to act together for the purpose of acquiring, holding, voting or disposing of shares of Common Stock, makes an offer which the Company's Board of Directors deems to be a bona fide offer, to purchase 5% or more of the other class of Common Stock for cash and/or other securities or property without making a similar offer for the shares of such class. The shares of Common Stock of a class may only be so converted during the period in which such bona fide offer is in effect. Any share of Common Stock so converted and not acquired by the offeror prior to the termination, recission or completion of the offer will automatically reconvert to a share of the class from which it was converted upon such termination, rescission or completion. Other Rights On liquidation, dissolution or winding up of the Company after payment in full of the amounts required to be paid to holders of Preferred Stock, all holders of Common Stock, regardless of class, are entitled to share ratably in any assets available for distribution to holders of shares of Common Stock. No shares of either class of Common Stock are subject to redemption or have preemptive rights to purchase additional shares of Common Stock. However, see "Relationship with The Limited -- Corporate Agreement". Upon consummation of the Offerings, all the outstanding shares of Class A Common Stock and Class B Common Stock will be legally issued, fully paid and nonassessable. Preferred Stock The Preferred Stock is issuable from time to time in one or more series and with such designations and preferences for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by the Board of Directors of Abercrombie & Fitch. The Board of Directors is authorized by Abercrombie & Fitch's Certificate of Incorporation to determine the voting, dividend, redemption and liquidation preferences and limitations pertaining to such series. The Board of Directors, without shareholder approval, may issue Preferred Stock with voting and other rights that could adversely affect the voting power of the holders of the Common Stock and could have certain antitakeover effects. Abercrombie & Fitch has no present plans to issue any shares of Preferred Stock. The ability of the Board of Directors to issue Preferred Stock without shareholder approval could have the effect of delaying, deferring or preventing a change in control of Abercrombie & Fitch or the removal of existing management. Certain Certificate of Incorporation and Bylaw Provisions Transactions with Interested Parties The Company's Certificate of Incorporation includes certain provisions addressing potential conflicts of interest between the Company and The Limited and its subsidiaries and regulating and defining the conduct of certain affairs of the Company as they may involve the Company, The Limited and their subsidiaries, directors and officers. The Company's Certificate of Incorporation provides that no contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) between the Company and The Limited or any subsidiary of The Limited (other than the Company) or between the Company and any entity in which a director of the Company has a financial interest (a "Related Entity") or between the Company and any director or officer of the Company, The Limited, any subsidiary of The Limited or any Related Entity shall be void or voidable solely for the reason that The Limited or such subsidiary, a Related Entity or any one or more of the officers or directors of the Company, The Limited or such subsidiary or any Related Entity are parties thereto, or solely because any such directors or officers are present at, participate in or vote (which vote shall be counted) with respect to the authorization of the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof). Further, the Company's Certificate of Incorporation provides that The Limited, its subsidiaries and any Related Entity shall not be liable to the Company or its shareholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Company or the derivation of any improper personal benefit by reason of the fact that The Limited, such subsidiary or such Related Entity in good faith takes any action or exercises any rights or gives or withholds any consent in connection with any agreement or contract between The Limited, such subsidiary or such Related Entity and the Company. No vote cast or other action taken by any person who is an officer, director or other representative of The Limited, such subsidiary or such Related Entity, which vote is cast or action is taken by such person in his capacity as a director of the Company, shall constitute an action of or the exercise of a right by or a consent of The Limited, such subsidiary or such Related Entity for the purpose of any such agreement or contract. See "Risk Factors". Corporate Opportunities The Company's Certificate of Incorporation provides that except as The Limited may otherwise agree in writing: (i) neither The Limited nor any subsidiary of The Limited (other than the Company) shall have a duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Company; and (ii) neither The Limited nor any subsidiary (other than the Company), officer or director of The Limited (except as provided below) will be liable to the Company or to its shareholders for breach of any fiduciary duty by reason of any such activities or of such person's participation therein. The Company's Certificate of Incorporation also provides that if The Limited or any subsidiary of The Limited (other than the Company) acquires knowledge of a potential transaction or matter which may be a corporate opportunity both for The Limited or such subsidiary and for the Company, neither The Limited nor such subsidiary shall have a duty to communicate or offer such corporate opportunity to the Company and shall not be liable to the Company or its shareholders for breach of fiduciary duty as a shareholder of the Company or controlling person of a shareholder by reason of the fact that The Limited or such subsidiary pursues or acquires such opportunity for itself, directs such corporate opportunity to another person, or does not communicate information regarding such corporate opportunity to the Company. Further, the Company's Certificate of Incorporation provides that in the event that a director, officer or associate of the Company who is also a director, officer or associate of The Limited or its subsidiaries acquires knowledge of a potential transaction or matter that may be a corporate opportunity for the Company, The Limited or its subsidiaries (whether such potential transaction or matter is proposed by a third party or is conceived of by such director, officer or associate of the Company), such director, officer or associate shall be entitled to offer such corporate opportunity to the Company, The Limited or such subsidiary as such director, officer or associate deems appropriate under the circumstances in his or her sole discretion, and no such director, officer or associate shall be liable to the Company or its shareholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Company or the derivation of any improper personal benefit by reason of the fact that (i) such director, officer or associate offered such corporate opportunity to The Limited or such subsidiary (rather than the Company) or did not communicate information regarding such corporate opportunity to the Company or (ii) The Limited or such subsidiary pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the Company. The enforceability of the provisions discussed above under Delaware corporate law has not been established and, due to the absence of relevant judicial authority, counsel to the Company is not able to deliver an opinion as to the enforceability of such provisions. These provisions of the Company's Certificate of Incorporation eliminate certain rights that might have been available to shareholders under Delaware law had such provisions not been included in the Certificate of Incorporation, although the enforceability of such provisions has not been established. The Company's Board of Directors currently consists of three members, two of whom serve concurrently as members of the Board of Directors of The Limited and Intimate Brands. In addition, a significant number of associates and officers of the Company will also be associates or officers of The Limited or its subsidiaries. The foregoing provisions of the Company's Certificate of Incorporation shall expire on the date that The Limited ceases to own beneficially Common Stock representing at least 20% of the number of outstanding shares of Common Stock and no person who is a director or officer of the Company is also a director or officer of The Limited or its subsidiaries. The affirmative vote of the holders of more than 75% of the aggregate voting power of the Common Stock is required to alter, amend or repeal in a manner adverse to the interests of The Limited, or adopt any provision adverse to the interests of The Limited including provisions with respect to the interested party and corporate opportunity provisions described above. Accordingly, so long as The Limited beneficially owns Common Stock representing at least 25% of the number of outstanding shares of Common Stock, it can prevent any such alteration, amendment, repeal or adoption. See "Risk Factors--Control by The Limited". Actions Under Intercompany Agreements The Company's Certificate of Incorporation also limits the liability of The Limited and its subsidiaries for certain breaches of their fiduciary duties in connection with action that may be taken or not taken in good faith under the intercompany agreements. See "Relationship with The Limited". Any person purchasing or acquiring an interest in shares of capital stock of the Company is deemed to have consented to the foregoing provisions relating to intercompany agreements and the provisions set forth above relating to transactions with interested parties and corporate opportunities. The Certificate of Incorporation of The Limited does not include comparable provisions relating to intercompany agreements, transactions with interested parties or corporate opportunities. Advance Notice Provision Abercrombie & Fitch's Bylaws provide for an advance notice procedure for the nomination, other than by or at the direction of the Board of Directors, of candidates for election as directors as well as for other shareholder proposals to be considered at annual meetings of shareholders. In general, notice of intent to nominate a director or raise matters at such meetings will have to be received by Abercrombie & Fitch not less than 120 or more than 150 days prior to the first anniversary of Abercrombie & Fitch's proxy statement in connection with the previous year's annual meeting, and must contain certain information concerning the person to be nominated or the matters to be brought before the meeting and concerning the shareholder submitting the proposal. The Delaware General Corporation Law The Company is a Delaware corporation subject to Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified therein, a corporation shall not engage in any business combination with any "interested shareholder" for a three-year period following the date that such shareholder becomes an interested shareholder unless: (i) prior to such date, the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder; (ii) upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares); or (iii) on or subsequent to such date, the business combination is approved by the Board of Directors of the corporation and by the affirmative vote of at least 66% of the outstanding voting stock which is not owned by the interested shareholder. Except as specified in Section 203 of the DGCL, an interested shareholder is defined to include (x) any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date and (y) the affiliates and associates of any such person. Under certain circumstances, Section 203 of the DGCL makes it more difficult for an "interested shareholder" to effect various business combinations with the Company for a three-year period, although the shareholders of the Company may elect to exclude the Company from the restrictions imposed thereunder. By virtue of its beneficial ownership of Class B Common Stock, The Limited is in a position to elect to exclude the Company from the restrictions under Section 203 and currently has no intention to do so. Transfer Agent The Company's transfer agent and registrar for its Common Stock is . DESCRIPTION OF CERTAIN INDEBTEDNESS Following is a discussion of the material terms of certain indebtedness of the Company. Intercompany Debt Abercrombie & Fitch's subsidiaries have intercompany obligations to The Limited in an aggregate amount of approximately $53.1 million. The long-term Mirror Note in the amount of $50 million bears interest at the rate of 7.80% per annum and matures on May 15, 2002. The interest rate and maturity of the long-term Mirror Note parallel those of the corresponding debt of The Limited. The Working Capital Note, representing indebtedness of $3.1 million, matures on January 31, 1997 and bears interest at a rate of 6.75% per annum. Credit Agreement Two subsidiaries of the Company, Abercrombie & Fitch Stores, Inc. and A & F Trademark, Inc. (each a "Borrower" and together, the "Borrowers"), are parties to the Credit Agreement with the banks listed therein and Chase Manhattan Bank, as agent, pursuant to which such subsidiaries entered into a five-year term loan facility. Under the Credit Agreement, such subsidiaries borrowed an aggregate amount of $150 million. The amounts borrowed are repayable in nine consecutive semi-annual installments, commencing on June 30, 1997 and ending on June 30, 2001, provided, that borrowings must be repaid in an amount equal to the Excess Cash Flow (as defined therein) of the Company, which amount will include the net proceeds of the Offerings. The aggregate amount payable on each June 30 and December 31 is $10 million and $25 million, respectively. Interest on borrowings under the Credit Agreement accrues, at each of the Borrowers' option, at either a base rate or a rate based on the London Interbank Offered Rate ("LIBOR"). Base rate borrowings accrue interest at the higher of the prime rate (announced by Chase Manhattan Bank in New York), or the Federal Funds Rate plus .5%. LIBOR borrowings accrue interest at the rate of interest published by the Telerate Service (or if such rate is not available, then the rate of interest at which dollar deposits of $5 million are available to the Agent in the London interbank market) plus a certain margin. Optional prepayments of the borrowings shall be applied to the repayment installments pro rata and may not be reborrowed. Borrowings under the Credit Agreement are guaranteed by the Company and by Abercrombie & Fitch Holding Corporation ("Holdings"), a wholly-owned subsidiary of the Company and the holding company parent of Abercrombie & Fitch Stores, Inc. In addition, each of the Borrowers have guaranteed all obligations of the other Borrower. In the event that (a) A & F Trademark, Inc. or Holdings is neither a direct, wholly-owned subsidiary of the Company, (b) Abercrombie & Fitch Stores, Inc. ceases to be a direct, wholly-owned subsidiary of Holdings nor a direct wholly-owned subsidiary of the Company or (c) The Limited ceases to own directly at least 80% of the outstanding capital stock of the Company or the Company and its consolidated subsidiaries cease to be consolidated subsidiaries of The Limited, all borrowings will be subject to mandatory prepayment. The Credit Agreement contains financial covenants including an interest and rental expense coverage ratio and a maximum ratio of debt to EBITDA (as defined therein). The Credit Agreement also provides for limitations on mergers, consolidations, acquisitions, sale of assets, transactions with affiliates, sale and lease-back transactions, liens, capital expenditures, debt and investments. The Credit Agreement also prohibits the payment by the Company of dividends on its capital stock, including the Class A Common Stock. CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of the Common Stock applicable to Non-United States Holders of such Common Stock. For the purpose of this discussion, a "Non-United States Holder" is any holder that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership or a non-resident fiduciary of a foreign estate or trust as such terms are defined in the Code. This discussion does not deal with all aspects of United States federal income and estate taxation and does not deal with foreign, state and local tax consequences that may be relevant to Non-United States Holders in light of their personal circumstances. Furthermore, the following discussion is based on current provisions of the Code and administrative and judicial interpretations as of the date hereof, all of which are subject to change. Prospective foreign investors are urged to consult their tax advisors regarding the United States federal, state, local and non-United States income and other tax consequences of owning and disposing of Common Stock. Proposed United States Treasury Regulations were issued on April 15, 1996 (the "Proposed Regulations") which, if adopted, would affect the United States taxation of dividends paid to a Non-United States Holder on Common Stock. The Proposed Regulations are generally proposed to be effective with respect to dividends paid after December 31, 1997, subject to certain transition rules. The discussion below is not intended to be a complete discussion of the provisions of the Proposed Regulations, and prospective investors are urged to consult their tax advisors with respect to the effect the Proposed Regulations would have if adopted. Dividends Generally, any dividend paid to a Non-United States Holder of Common Stock will be subject to United States withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. Under current United States Treasury regulations, dividends paid to an address outside the United States are presumed to be paid to a resident of such country (absent knowledge that such presumption is not warranted) for purposes of the withholding discussed above and, under the current interpretation of United States Treasury regulations, for purposes of determining applicability of a tax treaty rate. Under the Proposed Regulations, to obtain a reduced rate of withholding under a treaty, a Non-United States Holder would generally be required to provide an Internal Revenue Service Form W-8 certifying such Non-United States Holder's entitlement to benefits under a treaty. The Proposed Regulations would also provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends paid to a Non-United States Holder that is an entity should be treated as paid to the entity or those holding an interest in that entity. Dividends received by a Non-United States Holder that are effectively connected with a United States trade or business conducted by such Non-United States Holder are exempt from such withholding tax. However, such effectively connected dividends, net of certain deductions and credits, are taxed at the same graduated rates applicable to United States persons. A Non-United States Holder may claim exemption from withholding under the effectively connected income exception by filing Form 4224 (Statement Claiming Exemption from Withholding of Tax on Income Effectively Connected With the Conduct of Business in the United States) each year with the Company or its paying agent prior to the payment of the dividends for such year. In addition to the graduated tax described above, dividends received by a corporate Non-United States Holder that are effectively connected with a United States trade or business of the corporate Non-United States Holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty. A Non-United States Holder of Common Stock eligible for a reduced rate of United States withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld by filing an appropriate claim for refund with the U.S. Internal Revenue Service. Gain on Disposition of Common Stock A Non-United States Holder generally will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of his Common Stock unless: (i) such gain is effectively connected with a United States trade or business of the Non-United States Holder; (ii) the Non-United States Holder is an individual who holds such Common Stock as a capital asset and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which such sale or disposition occurs and certain other conditions are met; or (iii) the Company is or has been a "United States real property holding corporation" for federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or such holder's holding period. The Company has determined that it is not and does not believe that it will become a "United States real property holding corporation" for federal income tax purposes. Backup Withholding and Information Reporting Generally, the Company must report to the U.S. Internal Revenue Service the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax treaties or other agreements, the U.S. Internal Revenue Service may make its reports available to tax authorities in the recipient's country of residence. Dividends paid to a Non-United States Holder at an address within the United States may be subject to backup withholding at a rate of 31% if the Non-United States Holder fails to establish that it is entitled to an exemption or to provide a correct taxpayer identification number and other information to the payor. Backup withholding will generally not apply to dividends paid to Non-United States Holders at an address outside the United States (unless the payor has knowledge that the payee is a U.S. person). The payment of the proceeds of the disposition of Common Stock to or through the United States office of a broker is subject to information reporting and backup withholding at a rate of 31% unless the holder certifies its non-United States status under penalties of perjury or otherwise establishes an exemption. Generally, the payment of the proceeds of the disposition by a Non-United States Holder of Common Stock outside the United States to or through a foreign office of a broker will not be subject to backup withholding. However, information reporting requirements (but not backup withholding) will apply to a payment of disposition proceeds outside the United States through an office outside the United States of a broker that is (a) a United States person, (b) a United States "controlled foreign corporation" for U.S. tax purposes or (c) a foreign person 50% or more of whose gross income for certain periods is from the conduct of a United States trade or business unless such broker has documentary evidence in its files of the owner's foreign status and has no actual knowledge to the contrary or the holder otherwise establishes an exemption. The Proposed Regulations would, if adopted, alter the foregoing rules in certain respects. Among other things, the Proposed Regulations would provide certain presumptions under which a Non-United States Holder would be subject to backup withholding and information reporting unless the Company receives certification from the holder of non-U.S. status. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the U.S. Internal Revenue Service. Estate Tax An individual Non-United States Holder who owns Common Stock at the time of his death or has made certain lifetime transfers of an interest in Common Stock will be required to include the value of such stock in his gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. LEGAL MATTERS The validity of the Class A Common Stock offered hereby will be passed upon by Davis Polk & Wardwell, New York, New York. Certain legal matters in connection with the Class A Common Stock offered hereby will be passed upon for the Underwriters by Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional corporations), New York, New York. EXPERTS The balance sheet of Abercrombie & Fitch Co. as of July 11, 1996 and the consolidated balance sheet of the Abercrombie & Fitch Business as of January 28, 1995 and February 3, 1996, and the related consolidated statements of operations and cash flows for each of the three fiscal years in the period ended February 3, 1996 included in this Prospectus have been audited by Coopers & Lybrand L.L.P., independent auditors, as stated in their reports appearing herein, and have been included in reliance upon such reports given upon the authority of that firm as experts in accounting and auditing. ADDITIONAL INFORMATION Abercrombie & Fitch has filed with the Commission a registration statement on Form S-1 (the "Registration Statement") under the Securities Act with respect to the Class A Common Stock offered hereby. For the purposes hereof, the term "Registration Statement" means the original Registration Statement and any and all amendments thereto. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and such Class A Common Stock, reference is hereby made to such Registration Statement, including the exhibits and schedules thereto, which can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. Upon completion of the Offerings, the Company will be subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports, proxy and information statements and other information with the Commission. Such reports, proxy and information statements and other information can be inspected and copied at the addresses, and may be accessed electronically at the URL, set forth above. The Company intends to furnish to its shareholders annual reports containing audited consolidated financial statements and an opinion thereon expressed by the Company's independent auditors as well as quarterly reports for the first three fiscal quarters of each fiscal year containing unaudited consolidated condensed financial statements. Statements contained in this Prospectus as to the contents of any agreement, contract or other document are not necessarily complete, and in each instance reference is made to the copy of such agreement, contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of Common Stock in any jurisdiction in which such offer or solicitation is unlawful. See "Underwriting". In this Prospectus, references to "Dollars" and to "$" are to United States dollars. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Abercrombie & Fitch Co. Financial Statements: Report of Independent Accountants...................................... F-2 Balance Sheet.......................................................... F-3 Notes to Balance Sheet................................................. F-4 Abercrombie & Fitch Business Financial Statements: Report of Independent Accountants...................................... F-5 Consolidated Statements of Operations.................................. F-6 Consolidated Balance Sheets............................................ F-7 Consolidated Statements of Cash Flows.................................. F-8 Notes to Consolidated Financial Statements............................. F-9 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder of Abercrombie & Fitch Co. We have audited the accompanying balance sheet of Abercrombie & Fitch Co. as of July 11, 1996. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Abercrombie & Fitch Co. as of July 11, 1996, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Columbus, Ohio July 11, 1996 ABERCROMBIE & FITCH CO. BALANCE SHEET July 11, 1996 ASSETS Current assets: Cash......................................................... $1,000 ====== SHAREHOLDER'S EQUITY Common Stock, $.10 par value; 1,000 shares authorized; 1,000 shares issued and outstanding............... $100 Paid in capital............................................... 900 Retained earnings............................................. - ------ Total shareholder's equity................................... $1,000 ====== The accompanying notes are an integral part of the balance sheet. ABERCROMBIE & FITCH CO. NOTES TO BALANCE SHEET 1. Organization Abercrombie & Fitch Co. was incorporated on June 26, 1996, and, except for organizational matters and activities undertaken in connection with the proposed initial public offering of its common shares, has been inactive since that date. As a result, the Company has not had any income or expenses. On July 11, 1996 the Company issued 1,000 common shares to its sole shareholder, The Limited, Inc. ("The Limited") for cash. 2. Planned Transactions As a result of a Board Resolution by the directors of The Limited, Inc., The Limited will contribute the stock of Abercrombie & Fitch Holdings, the parent company of the Abercrombie & Fitch Business, and A&F Trademark, Inc. to Abercrombie & Fitch Co. Prior to the public offering of its shares, the Company's certificate of incorporation will be amended to authorize shares of preferred stock and shares of Class A common stock and shares of Class B common stock, each with a par value of $.01 per share. Holders of Class A common stock generally will have identical rights to holders of Class B common stock except that holders of Class A common stock will be entitled to one vote per share while holders of Class B common stock will be entitled to three votes per share on all matters submitted to a vote of shareholders. Each share of Class B common stock will be convertible while held by The Limited or any of its subsidiaries into one share of Class A common stock. REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder of The Abercrombie & Fitch Business We have audited the accompanying consolidated balance sheet of the Abercrombie & Fitch Business as of January 28, 1995 and February 3, 1996, and the related consolidated statements of operations and cash flows for each of the three fiscal years in the period ended February 3, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Abercrombie & Fitch Business of January 28, 1995 and February 3, 1996 and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended February 3, 1996 in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Columbus, Ohio July 11, 1996 THE ABERCROMBIE & FITCH BUSINESS CONSOLIDATED STATEMENTS OF OPERATIONS (thousands)
Fiscal Year Ended Quarter Ended (Unaudited) ---------------------------------------------- ------------------------ January 29, January 28, February 3, April 29, May 4, 1994 1995 1996 1995 1996 ----------- ----------- ----------- --------- ------- Net sales............................. $110,952 $165,463 $235,659 $33,377 $51,020 Cost of goods sold, occupancy and buying costs................... 80,390 108,643 155,865 24,949 36,126 -------- -------- -------- ------- ------- Gross income.......................... 30,562 56,820 79,794 8,428 14,894 General, administrative and store operating expenses............. 30,240 43,069 55,996 10,297 15,293 Special and nonrecurring items........ 4,386 -- -- -- -- -------- -------- -------- ------- ------- OOperating income (loss) before income taxes.................... (4,064) 13,751 23,798 (1,869) (399) Provision for (benefit from) income taxes................................. (1,600) 5,500 9,500 (700) (200) -------- -------- -------- ------- ------- Net income (loss)..................... $(2,464) $8,251 $14,298 $(1,169) $(199) ======== ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
THE ABERCROMBIE & FITCH BUSINESS CONSOLIDATED BALANCE SHEETS (thousands)
January 28, February 3, May 4, 1995 1996 1996 Pro Forma May 4, 1996 (Unaudited) (Unaudited) (Note 14) ----------- ----------- ----------- --------------------- ASSETS Current assets Cash.................................................. $592 $874 $823 $824 Accounts receivable................................... 3,632 3,617 3,231 3,231 Inventories........................................... 16,551 30,388 33,042 33,042 Store supplies........................................ 1,974 3,529 3,753 3,753 Deferred income taxes................................. -- -- 1,208 1,208 Other................................................. 357 448 261 261 ------- ------- ------- ------- Total current assets................................ 23,106 38,856 42,318 42,319 Property and equipment, net............................ 34,904 47,203 45,765 45,765 Deferred income taxes.................................. -- 1,624 1,624 1,624 Other assets........................................... 8 10 10 10 ------- ------- ------- ------- Total assets........................................ $58,018 $87,693 $89,717 $89,718 ======= ======= ======= ======= LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) Current liabilities Accounts payable...................................... $4,379 $4,359 $4,044 $4,044 Accrued expenses...................................... 10,411 14,500 13,593 13,593 Credit agreement...................................... -- -- -- 150,000 Working capital note.................................. -- -- -- 3,074 Income taxes payable.................................. 3,434 4,892 200 200 ------- ------- ------- ------- Total current liabilities........................... 18,224 23,751 17,837 170,911 ------- ------- ------- ------- Long-term intercompany debt............................ 74,101 86,045 94,074 -- Long-term mirror note.................................. -- -- -- 50,000 Deferred income taxes.................................. 2,359 -- -- -- Other long-term liabilities............................ 404 519 627 627 Shareholder's equity (deficit)......................... (37,070) (22,622) (22,821) (131,820) ------- ------- ------- ------- Total liabilities and shareholder's equity (deficit) $58,018 $87,693 $89,717 $89,718 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements.
THE ABERCROMBIE & FITCH BUSINESS CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
Fiscal Year Ended Quarter Ended --------------------------------------------- ----------------------- January 29, January 28, February 3, April 29, May 4, 1994 1995 1996 1995 1996 ----------- ----------- ----------- ---------- --------- (Unaudited) Cash flows from operating activities Net income (loss)....................... $(2,464) $8,251 $14,298 $(1,169) $(199) Impact of other operating activities on cash flows Depreciation and amortization........... 7,054 7,799 9,104 2,132 2,483 Special and nonrecurring items.......... 4,386 -- -- -- -- Change in assets and liabilities Accounts receivable..................... (171) (2,058) 15 1,356 386 Inventories............................. 5,023 (6,499) (13,837) (4,372) (2,654) Accounts payable and accrued expenses... 4,809 4,117 4,069 (1,865) (1,222) Income taxes............................ 2,770 5,914 1,458 (5,300) (5,900) Other assets and liabilities............ (768) 2,631 (2,393) (55) 313 ------- ------ ------- ------- ------- Net cash provided by (used for) operating activities....................... 20,639 20,155 12,714 (9,273) (6,793) ------- ------ ------- ------- ------- Investing activities Capital expenditures.................... (4,694) (12,603) (24,526) (2,826) (1,287) ------- ------ ------- ------- ------- Cash used for investing activities......... (4,694) (12,603) (24,526) (2,826) (1,287) ------- ------ ------- ------- ------- Financing activities Change in long-term intercompany debt... (15,796) (7,387) 11,944 12,022 8,029 Other changes in shareholder's equity (deficit)............................... -- 20 150 -- -- ------- ------ ------- ------- ------- Net cash provided by (used for) financing activities.......................... (15,796) (7,367) 12,094 12,022 8,029 ------- ------ ------- ------- ------- Net increase (decrease ) in cash.............. 149 185 282 (77) (51) Cash, beginning of period..................... 258 407 592 592 874 ------- ------ ------- ------- ------- Cash, end of period........................... $407 $592 $874 $515 $823 ======= ====== ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements.
THE ABERCROMBIE & FITCH BUSINESS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Financial Statement Presentation The accompanying financial statements include the accounts of the Abercrombie & Fitch Business and its subsidiaries. The Abercrombie & Fitch Business is a direct subsidiary of The Limited, Inc. ("The Limited"). The Abercrombie & Fitch Business is a specialty retailer of high-quality, casual American apparel for men and women with an active, youthful lifestyle. The business was established in 1892 and was subsequently acquired by The Limited in 1988. The accompanying consolidated financial statements include the historical financial statements of and transactions applicable to the Abercrombie & Fitch Business and reflect the assets, liabilities, results of operations and cash flows on a historical cost basis. Certain investment assets unrelated to the Company have been excluded from the historical financial statements and will not be retained by the Abercrombie & Fitch Business. The consolidated financial statements are prepared for inclusion in a registration statement relating to the public offering of Class A common shares of Abercrombie & Fitch Co., a wholly-owned subsidiary of The Limited. Prior to the aforementioned public offering, The Limited will contribute the stock of Abercrombie & Fitch Holdings, the parent company of the Abercrombie & Fitch Business, and A&F Trademark, Inc. to Abercrombie & Fitch. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Abercrombie and Fitch Business and all significant subsidiaries which are more than 50% owned and controlled. All significant intercompany balances and transactions have been eliminated in consolidation. Fiscal year The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the financial statements and notes by the calendar year in which the fiscal year commences. The results for fiscal year 1995 represent the 53-week period ended February 3, 1996 and the results for fiscal years 1993 and 1994 represents the 52-week periods ended January 29, 1994 and January 28, 1995. Interim financial statements The consolidated financial statements as of and for the periods ended April 29, 1995 and May 4, 1996 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (which are of normal recurring nature) necessary to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year. Store Supplies The initial inventory of supplies for new stores including, but not limited to, hangers, signage, sensormatic tags and point-of-sale supplies are capitalized at the store opening date. Subsequent shipments are expensed except for new merchandise presentation programs which are capitalized. Inventory Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method. Property and equipment Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-15 years for building improvements and 3-10 years for other property and equipment. Beneficial leaseholds represent the present value of the excess of fair market rent over contractual rent of existing stores at the 1988 purchase of the Company by The Limited and are being amortized over the lives of the related leases. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend service lives are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that full recoverability is questionable. Factors used in the valuation include, but are not limited to, management's plans for future operations, recent operating results and projected cash flows. Revenue recognition Sales are recorded upon purchase by customers. Provision for income taxes Income taxes are calculated using the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The Company is included in The Limited's consolidated federal and certain state income tax groups for income tax reporting purposes and is responsible for its proportionate share of income taxes calculated upon its federal taxable income at a current estimate of the annual effective tax rate. Advertising Advertising costs consist of in-store photographs and advertising in selected national publications and are expensed when the photographs or publications first appear. Advertising costs amounted to $519 thousand in 1993, $1.215 million in 1994, $3.121 million in 1995 and $575 thousand and $447 thousand for the quarters ended April 29, 1995 and May 4, 1996. Store pre-opening expenses Pre-opening expenses related to new store openings are charged to operations as incurred. Store closing costs When a store is relocated or closed, estimated unrecoverable costs are charged to operations. Fair value of financial instruments The recorded values of financial instruments, including cash, accounts receivable and accounts payable, approximate fair value due to the short maturity and because the average interest rate approximates current market origination rates. Earnings per share Historical earnings per share data is omitted from the consolidated statements of operations as it is not meaningful. Adoption of New Accounting Standards The Company will make the new disclosures for SFAS No. 123, "Accounting for Stock-Based Compensation" beginning with fiscal year-end 1996. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available. 3. Special and nonrecurring items During 1993, the Abercrombie & Fitch Business participated in a plan of The Limited which provided for the closure, downsizing and remodeling of seven under-performing stores of the Abercrombie & Fitch Business. In developing this program, specific stores were identified based upon historical operating results of such stores and assessment of the quality of real estate. The provision for store closure, downsizing and remodeling aggregated approximately $4.4 million and included the net book value of abandoned fixed assets and lease termination payments. As of October 28, 1995, the Abercrombie & Fitch Business had completed the program. 4. Property and equipment Property and equipment, at cost, consisted of (thousands): January 28, February 3, May 4, 1995 1996 1996 ---------- ----------- ------- (Unaudited) Furniture, fixtures and equipment.... $50,871 $71,590 $72,803 Beneficial leaseholds................ 9,387 7,925 7,925 Building improvements and leaseholds. 2,565 1,267 1,213 Construction in progress............. 212 85 213 ------- ------- ------- 63,035 80,867 82,154 Less - accumulated depreciation and amortization......................... 28,131 33,664 36,389 ------- ------- ------- Property and equipment, net.......... $34,904 $47,203 $45,765 ======= ======= ======= 5. Leased facilities and commitments Annual store rent is comprised of a fixed minimum amount, plus contingent rent based upon percentage of sales exceeding a stipulated amount. Store lease terms generally require additional payments covering taxes, common area costs and certain other expenses. A summary of rent expense for fiscal year 1993, 1994 and 1995 and the quarters ended April 29, 1995 and May 4, 1996 follows (thousands):
January 29, January 28, February 3, April 29, May 4, 1994 1995 1996 1995 1996 ---------- ----------- ----------- --------- ------- (Unaudited) Store rent Fixed minimum..................... $8,112 $11,308 $17,465 $3,667 $5,430 Contingent........................ 1,010 1,475 1,322 199 388 ------ ------- ------- ------ ------ Total store rent........................ 9,122 12,783 18,787 3,866 5,818 Buildings, equipment and other.......... 643 613 1,058 197 304 ------ ------- ------- ------ ------ Total rent expense................ $9,765 $13,396 $19,845 $4,063 $6,122 ====== ======= ======= ====== ======
Rent expense includes charges from The Limited and other divisions of The Limited for space used. The Abercrombie & Fitch Business intends to execute formal agreements for use of such space (see Note 8). The Abercrombie & Fitch Business was committed to noncancelable leases with remaining terms of one to twenty years. These commitments include store leases with initial terms ranging from ten to fifteen years and offices and a distribution center leased from an affiliate of The Limited with an initial term of 15 years. Substantially all of the Abercrombie & Fitch Business store leases are guaranteed by The Limited. A summary of minimum rent commitments under noncancelable leases follows (thousands): 1996................................... $ 22,064 1997................................... 21,982 1998................................... 22,010 1999................................... 22,323 2000................................... 22,354 Thereafter............................. 133,335 6. Accrued expenses Accrued expenses consisted of the following (thousands): January 28, February 3, May 4, 1995 1996 1996 ---------- ----------- --------- (Unaudited) Accrued taxes, other than income. $1,252 $1,882 $1,787 Accrued compensation............. 2,185 3,025 2,378 Accrued rent..................... 2,071 2,872 2,991 Other............................ 4,903 6,721 6,437 ------- ------- ------- Total............................ $10,411 $14,500 $13,593 ======= ======= =======
7. Income Taxes The Abercrombie & Fitch Business consolidated financial statements reflect a charge for federal and state income taxes as if the Abercrombie & Fitch Business had been subject to tax on a separate company basis during the periods presented. The charge is based on the then current tax rates. This provision for (benefit from) income taxes consisted of (thousands):
Fiscal Year Ended Quarter Ended ---------------------------------------------- ------------------------ January 29, January 28, February 3, April 29, May 4, 1994 1995 1996 1995 1996 ----------- ----------- ----------- --------- _________ (Unaudited) Current: Federal.................... $(1,400) $4,300 $6,900 $(700) $(200) State...................... (400) 1,100 1,700 (100) -- ------- ------ ------ ------ ------- (1,800) 5,400 8,600 (800) (200) ------- ------ ------ ------ ------- Deferred: Federal.................... 200 100 700 100 -- State...................... -- -- 200 -- -- ------- ------ ------ ------ ------- 200 100 900 100 -- ------- ------ ------ ------ ------- Total provision (benefit) $(1,600) $5,500 $9,500 $(700) $(200) ======= ====== ====== ====== =======
For the quarters ended April 29, 1995 and May 4, 1996, the statements of operations reflect a provision for federal and state income taxes based on the Company's expected annual tax rates. A reconciliation between the statutory federal income tax rate and the effective income tax rate follows:
Quarter Ended ----------------------------------- 1993 1994 1995 April 29, 1995 May 4, 1996 ----- ----- ----- -------------- ----------- (Unaudited) Federal income tax rate........ 35.0% 35.0% 35.0% 35.0% 35.0% State income tax, net of federal income tax effect 5.2% 5.2% 5.2% 5.2% 5.2% Other items, net............... (1.1%) (0.2%) (0.3%) (2.7%) (1.6%) ----- ----- ----- ----- ----- 39.1% 40.0% 39.9% 37.5% 38.6% ===== ===== ===== ===== =====
Income taxes payable included current deferred tax assets of $1.566 million and $1.208 million, at January 28, 1995 and February 3, 1996. Current income tax obligations are treated as having been settled through the intercompany accounts as if the Company were filing its income tax returns on a separate company basis. Such amounts were $.8 million and $7.5 million in fiscal years 1994 and 1995 and were $4.6 million and $5.7 million for the quarters ended April 29, 1995 and May 4, 1996. The effect of temporary differences which give rise to deferred income tax balances was as follows (thousands):
1994 1995 ---------------------------------------------- -------------------------------------- Assets Liabilities Total Assets Liabilities Total ------------- ----------- --------- -------- ------------- ------- Fixed assets.................. $ - $(2,765) $(2,765) $1,159 $ - $1,159 Accrued expenses.............. 1,469 - 1,469 1,504 - 1,504 Other, net.................... 503 - 503 169 - 169 ------------- ---------- ------- ------ ------------- ------ Total deferred income taxes... $1,972 $ (2,765) $(793) $2,832 $ - $2,832 ============= ========== ======= ====== ============= ======
No valuation allowance has been provided for deferred tax assets because management believes that it is more likely than not that the full amount of the net deferred tax assets will be realized in the future. The Internal Revenue Service has assessed The Limited for additional taxes and interest for the years 1989-1992. The portion of the assessment relating to the Company was based on treatment of construction allowances. Although The Limited made a deposit to mitigate further interest being assessed, the Company strongly disagrees with the assessment and is vigorously contesting the matter. Management believes resolution of this matter will not have a material adverse effect on the Company's results of operations or financial condition. The Limited has allocated a portion of the deposit to the Company which is included in deferred tax assets. 8. Related party transactions Transactions between the Abercrombie & Fitch Business, The Limited, and its subsidiaries and affiliates, commonly occur in the normal course of business and principally consist of the following: Merchandise purchases Real estate management and leasing Capital expenditures Inbound and outbound shipping Corporate services Information with regard to these transactions is as follows: Significant purchases are made from Mast, a wholly owned subsidiary of The Limited. Purchases are also made from Gryphon, an indirect subsidiary of The Limited. Mast is a contract manufacturer and apparel importer while Gryphon is a developer of fragrance and personal care products and also a contract manufacturer. Prices are negotiated on a competitive basis by merchants of the Abercrombie & Fitch Business with Mast, Gryphon and the manufacturers. The Abercrombie & Fitch Business' real estate operations, including all aspects of lease negotiations and ongoing dealings with landlords and developers, are handled centrally by the real estate division of The Limited ("Real Estate Division"). Real Estate Division expenses are allocated to the Abercrombie & Fitch Business based on a combination of new and remodeled store construction projects and open selling square feet. The Abercrombie & Fitch Business' store design and construction operations are coordinated centrally by the store planning division of The Limited ("Store Planning Division"). The Store Planning Division facilitates the design and construction of the stores and upon completion transfers the stores to the Abercrombie & Fitch Business at actual cost. Store Planning Division expenses are charged to the Abercrombie & Fitch Business based on a combination of new and remodeled store construction projects and open selling square feet. The Abercrombie & Fitch Business' inbound and outbound freight is managed centrally by Limited Distribution Services ("LDS"), a wholly owned subsidiary of The Limited. Inbound freight is charged to the Abercrombie & Fitch Business based on actual receipts, which is in turn charged back to Abercrombie & Fitch's FOB Columbus suppliers. Outbound freight is charged on percentage of cartons shipped. The Limited provides certain services to the Abercrombie & Fitch Business including, among other things, certain tax, treasury, legal, corporate secretary, accounting, auditing, corporate development, risk management, associate benefit plan administration, human resource and compensation, government affairs and public relation services. Identifiable costs are charged directly to the Abercrombie & Fitch Business. Aircraft costs are charged based on usage and, effective January 29, 1995, include minimum usage charges. All other services-related costs not specifically attributable to an operating business have been allocated to the Abercrombie & Fitch Business based upon a percentage of sales. The Abercrombie & Fitch Business participates in The Limited's centralized cash management system. Under this system, cash received from The Abercrombie & Fitch Business' operations is transferred to The Limited's centralized cash accounts and cash disbursements are funded from the centralized cash accounts on a daily basis. For all periods presented intercompany transactions have been reported as financing activities in the accompanying consolidated statements of cash flows. Effective July 11, 1996, the intercompany accounts became an interest earning current asset (interest bearing current liability). The Abercrombie & Fitch Business is charged rent expense, common area maintenance charges and utilities for stores shared with other consolidated subsidiaries of The Limited. The charges are based on square footage and represent the proportionate share of the underlying leases with third parties. The Abercrombie & Fitch Business is also charged rent expense and utilities for the distribution and home office space occupied (which approximates fair market value). The Abercrombie & Fitch Business and The Limited plan to enter into intercompany agreements in connection with the Offerings pursuant to which The Limited will continue to provide the services on similar terms as those described above. Management believes the charges and allocations described above are fair and reasonable. The following table summarizes the related party transactions between the Abercrombie & Fitch Business and The Limited and its other wholly owned subsidiaries, for the periods indicated (thousands):
Fiscal Year Ended Quarter Ended ---------------------------------------------- ------------- January 29, January 28, February 3, May 4, 1994 1995 1996 1996 ---------- ---------- ----------- ----------- (Unaudited) Mast and Gryphon purchases.................. $11,019 $25,325 $35,167 $7,746 Capital expenditures........................ 4,910 12,819 22,274 939 Inbound and outbound freight................ 632 2,153 2,869 657 Corporate charges........................... 2,086 2,865 4,019 1,010 Store leases and other occupancy............ 289 380 1,397 373 Distribution center, MIS and home office expense..................................... 1,566 1,676 2,564 679 Centrally managed benefits.................. 1,239 1,289 2,417 1,067 ------- ------- ------- ------- $21,741 $46,507 $70,707 $12,471 ======= ======= ======= =======
The following is a summary of the activity in the long-term intercompany debt account (thousands):
Fiscal Year Ended Quarter Ended --------------------------------------------------------- ------------- January 29, May 4, 1994 January 28, 1995 February 3, 1996 1996 ----------- ---------------- ---------------- ------------- (Unaudited) Beginning balance........................... $97,284 $80,084 $73,211 $86,045 Transactions with related parties........... 21,741 46,507 70,707 12,471 Centralized cash management................. (37,541) (54,180) (65,373) (10,142) Settlement of current period income taxes... (1,400) 800 7,500 5,700 ------- ------- ------- ------- Ending balance.............................. $80,084 $73,211 $86,045 $94,074 ======= ======= ======= =======
9. Shareholder's equity (deficit) A reconciliation of shareholder's equity (deficit) follows (thousands):
Fiscal Year Ended Quarter Ended --------------------------------------------------------- ------------- January 29, May 4, 1994 January 28, 1995 February 3, 1996 1996 ------------ ---------------- ---------------- ----------- (Unaudited) Beginning balance........................ $(42,877) $(45,341) $(37,070) $(22,622) Net income (loss)........................ (2,464) 8,251 14,298 (199) Other changes in shareholder's equity.... -- 20 150 -- --------- -------- -------- -------- Ending balance........................... $(45,341) $(37,070) $(22,622) $(22,821) ========= ======== ======== ========
10. Retirement benefits (thousands) The Abercrombie & Fitch Business participated in a defined contribution retirement plan sponsored by The Limited. Participation in this plan is available to all associates who have completed 1,000 or more hours of service with the Abercrombie & Fitch Business during certain 12 month periods and attained the age of 21. The Abercrombie & Fitch Business' contributions to this plan are based on a percentage of the associates' annual compensation. The cost of this plan was $257 in 1993, $343 in 1994 and $549 in 1995. 11. Employee benefits (thousands) Officers and key employees were granted options to participate in The Limited's stock option and restricted stock plans. Compensation expense related to these awards has been reflected in the financial statements and amounted to $26 in 1993, $224 in 1994 and $437 in 1995. 12. Legal matters There are various claims, lawsuits and pending actions against the Abercrombie & Fitch Business incident to the operations of its business. It is the opinion of management that the ultimate resolution of these matters will not have a material effect on the Abercrombie & Fitch Business' results of operations or financial position. 13. Quarterly financial data (unaudited) (thousands)
First Second Third Fourth ------ ------ -------- ------- 1994 Quarter Net sales........... $23,399 $29,045 $38,584 $74,435 Gross income........ 5,643 8,285 11,815 31,077 Net income (loss)... (1,225) (530) 466 9,540
First Second Third Fourth ------ ------ -------- ------- 1995 Quarter Net sales........... $33,377 $38,668 $57,222 $106,392 Gross income........ 8,428 12,023 19,503 39,840 Net income (loss)... (1,169) 250 2,583 12,634
14. Subsequent events and pro forma financial data (unaudited) Subsequent to the date of the financial statements, Abercrombie & Fitch Co. was incorporated and The Limited will contribute the stock of Abercrombie & Fitch Holdings, the parent company of the Abercrombie & Fitch Business, and A&F Trademark, Inc. to Abercrombie & Fitch Co. effective July 15, 1996. The Abercrombie & Fitch Business is party to a bank credit agreement pursuant to which it borrowed $150 million on July 2, 1996. The agreement has interest rates which are based on either the lender's "Base Rate," as defined, or a LIBOR-related rate. The agreement places restrictions on mergers, consolidations, acquisitions, sales of assets, transactions with affiliates, sale and leaseback transactions, liens, restricted payments, debt and investments. It also contains an interest and rental expense coverage ratio and a maximum ratio of debt to EBITDA. The scheduled final maturity of the borrowings under the credit agreement is June 30, 2001 although such amounts must be repaid by the excess cash flow of the Abercrombie & Fitch Business, which includes the net proceeds of any public offering. It is anticipated that a substantial portion of the borrowings under the credit agreement will be repaid in connection with the proposed public offering and, if needed, by cash flow from operations generated in the fourth quarter of the 1996 fiscal year. Therefore all such amounts are considered as short-term borrowings. Long-term intercompany debt consists of an unsecured note in the amount of $50 million that matures May 15, 2002, and bears interest at 7.80% per annum. The note represents the Abercrombie & Fitch Business' share of certain long-term debt of The Limited, of which interest rate and maturity of the note parallels that of corresponding debt of The Limited. The note is to be automatically prepaid concurrently with any prepayment of the corresponding debt of The Limited. The note is not subject to early redemption by The Limited. The pro forma balance sheet as of May 4, 1996 reflects the following transactions: (1) Represents amounts derived from the historical consolidated financial statements of the Abercrombie & Fitch Business. (2) The initial capitalization of Abercrombie & Fitch Co. ($.10 par value, 1,000 shares authorized, 1,000 shares issued and outstanding). (3) Borrowings by the Abercrombie & Fitch Business of $150 million under the credit agreement on July 2, 1996; (4) Transfer of the Trademark Obligations to The Limited in the amount of $32 million. (5) Distribution to The Limited of the $50 million long-term Mirror Note. (6) Payment of the $32 million Trademark Obligations, payment of $91 million of long-term intercompany debt owed to The Limited and a $27 million dividend to The Limited. (7) Conversion of $3.1 million of long-term intercompany debt into the Working Capital Note. The following transactions are not reflected in the pro forma balance sheet: (1) The issuance and sale of shares in the anticipated public offerings and the application of the $115 million net proceeds therefrom to repay borrowings under the bank credit agreement. UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Company has agreed to sell to each of the U.S. Underwriters named below, and each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Lazard Freres & Co. LLC, Montgomery Securities and J.P. Morgan Securities Inc. are acting as representatives (the "Representatives of the Underwriters"), has severally agreed to purchase from the Company, the respective number of shares of Class A Common Stock set forth opposite its name below: Number of Shares of U.S. Underwriter Class A Common Stock ---------------- -------------------- Goldman, Sachs & Co....................... Lazard Freres & Co. LLC................... Montgomery Securities..................... J.P. Morgan Securities Inc................ --------------------- Total.....................................
===================== Under the terms and conditions of the Underwriting Agreement, the U.S. Underwriters are committed to take and pay for all of the shares offered hereby, if any are taken. The Underwriters propose to offer the shares of Class A Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $ per share. The U.S. Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain brokers and dealers. After the shares of Class A Common Stock are released for sale to the public, the offering price and the other selling terms may from time to time be varied by the Representatives of the Underwriters. The Company has entered into an underwriting agreement (the "International Underwriting Agreement") with the underwriters of the International Offering (the "International Underwriters") providing for the concurrent offer and sale of shares of Class A Common Stock in an International Offering outside the United States. The initial public offering price and aggregate underwriting discounts and commissions per share for the Offerings are identical. The closing of the offering made hereby is a condition to the closing of the International Offering, and vice versa. The representatives of the International Underwriters are Goldman Sachs International, Lazard Capital Markets, Montgomery Securities and J.P. Morgan Securities Limited. Pursuant to the agreement between the U.S. and International Underwriting Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S. Underwriters named herein has agreed that, as a part of the distribution of the shares offered as a part of the U.S. Offering and subject to certain exceptions, it will offer, sell or deliver the shares of Class A Common Stock, directly or indirectly, only in the United States (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (the "United States") and to U.S. persons, which term shall mean, for purposes of this paragraph: (i) any individual who is a resident of the United States or (ii) any corporation, partnership or other entity organized in or under the laws of the United States or any political subdivision thereof and whose office most directly involved with the purchase is located in the United States. Each of the International Underwriters has agreed or will agree pursuant to the Agreement Between that, as a part of the distribution of the shares offered as a part of the International Offering, and subject to certain exceptions, it will (i) not, directly or indirectly, offer, sell or deliver shares of Class A Common Stock (a) in the United States or to any U.S. persons or (b) to any person who it believes intends to reoffer, resell or deliver the shares in the United States or to any U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any concession to agree to observe a similar restriction. Pursuant to the Agreement Between, sales may be made between the U.S. Underwriters and the International Underwriters of such number of shares of Class A Common Stock as may be mutually agreed. The price of any shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. The Company has granted the U.S. Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase up to an aggregate of additional shares of Class A Common Stock solely to cover over-allotments, if any. If the U.S. Underwriters exercise their over-allotment option, the U.S. Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them, as shown in the foregoing table, bears to the shares of Class A Common Stock offered hereby. The Company has granted the International Underwriters a similar option exercisable for up to an aggregate of additional shares of Class A Common Stock. The Company and The Limited have agreed that, during the period beginning from the date of this Prospectus and continuing to and including the date 180 days after the date of this Prospectus, they will not offer, sell, contract to sell or otherwise dispose of, except as provided in the U.S. Underwriting Agreement and the International Underwriting Agreement, any securities of the Company that are substantially similar to the shares of Class A Common Stock, or which are convertible into or exchangeable for, or that represent the right to receive, shares of Class A Common Stock or any such substantially similar securities (other than any issuances or sales of any of the foregoing securities (i) in connection with the acquisition of or merger with any other corporation or other entity or the acquisition of any assets or properties thereof provided that, prior to the issuance of such securities, the Company shall obtain and deliver to the Underwriters executed copies of an agreement from any such corporation or entity substantially to the effect set forth in the Underwriting Agreement in form satisfactory to the Representatives, (ii) pursuant to employee stock option, or other employee benefit plans existing on the date of the Underwriting Agreement or (iii) to The Limited or its subsidiaries in accordance with the terms of the Corporate Agreement between the Company and The Limited or its subsidiaries) without the prior written consent of the Representatives. The Representatives of the Underwriters have informed the Company that they do not expect sales to accounts over which they exercise discretionary authority to exceed five percent of the total number of shares of Class A Common Stock offered by them. The Underwriters have reserved for sale, at the initial public offering price, shares of Class A Common Stock for associates and directors of the Company and certain other businesses operated by The Limited who have expressed an interest in purchasing such shares of Class A Common Stock in the Offerings. It is expected that such associates will purchase, in the aggregate, less than 5% of the Class A Common Stock offered in the Offerings. The number of shares available for sale to the general public in the Offerings will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same basis as the other shares offered hereby. Prior to the Offerings, there has been no public market for the shares of Class A Common Stock. The initial public offering price will be negotiated between the Company and the representatives of the U.S. Underwriters and the International Underwriters. Among the factors to be considered in determining the initial public offering price of the Class A Common Stock in addition to prevailing market conditions, are the Company's historical performance, estimates of the business potential and earnings prospects of the Company, an assessment of the Company's management and the consideration of the above factors in relation to market valuation of companies in related businesses. This Prospectus may be used by underwriters and dealers in connection with offers and sales of Class A Common Stock, including shares initially sold in the International Offering, to persons located in the United States. Application will be made to list the Class A Common Stock on the New York Stock Exchange. The Company has agreed to indemnify the several U.S. Underwriters against certain liabilities, including liabilities under the Securities Act. Certain of the Underwriters have provided from time to time, and expect to provide in the future, investment banking services to The Limited, the Company and their subsidiaries, for which such Underwriters have received and will receive customary fees and commissions. In addition, from time to time, in the ordinary course of their respective businesses, J.P. Morgan Securities Inc. and certain of its affiliates engage and may in the future engage in investment banking and commercial banking transactions with The Limited and certain of its affiliates. Morgan Guaranty Trust Company of New York ("MGT"), an affiliate of J.P. Morgan Securities Inc., is the agent bank on The Limited's $1 billion Revolving Credit Facility maturing December 14, 2000. MGT is also a lender under the Credit Agreement and, as lender, will receive in excess of 10% of the net proceeds of the Offerings. Accordingly, this offering will be conducted in accordance with Rule 2710(c)(8) of the National Association of Securities Dealers, Inc. ("NASD") which requires that the public offering price of an equity security be no higher than the price recommended by a "qualified independent underwriter" meeting the requirements of NASD Rule 2720(b)(15) which has participated in the preparation of the registration statement and performed its usual standard of due diligence with respect thereto. Goldman, Sachs & Co. has agreed to act as "qualified independent underwriter" for the Offerings, and the public offering price of the Class A Common Stock will be no higher than the price recommended by Goldman, Sachs & Co. No person has been authorized to give any information or to make any representations other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or sale is unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to its date. TABLE OF CONTENTS Page ---- Prospectus Summary......... 3 Risk Factors............... 10 Use of Proceeds............ 16 Dividends.................. 16 Dilution................... 17 Capitalization............. 18 Pro Forma Consolidated Financial Statements..... 20 Selected Financial Data.... 27 Management's Discussion and Analysis of Financial Condition and Results of Operations............... 29 Business................... 35 Relationship with The Limited.............. 47 Management................. 52 Executive Compensation..... 53 Principal Shareholder...... 61 Shares Eligible for Future Sale..................... 61 Description of Capital Stock 63 Description of Certain Indebtedness .............. 68 Certain United States Tax Consequences to Non-United States Holders........... 69 Legal Matters.............. 71 Experts.................... 71 Additional Information..... 71 Index to Consolidated Financial Statements..... F-1 Underwriting............... U-1 Through and including , 1996 (the 25th day after the date of this Prospectus), all dealers effecting transactions in the Class A Common Stock, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as Underwriters and with respect to their unsold allotments or subscriptions. Shares Abercrombie & Fitch Class A Common Stock (par value $.01 per share) PROSPECTUS Goldman, Sachs & Co. Lazard Freres & Co. LLC Montgomery Securities J.P. Morgan & Co. Representatives of the Underwriters PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution.The following table sets forth the expenses in connection with the issuance and distribution of the Class A Common Stock being registered, other than the underwriting discount. All of the amounts shown are estimates, except the SEC and NASD registration fees. SEC Registration Fee.......................................... $ 43,104 National Association of Securities Dealers, Inc. Registration Fee............................................ 13,000 New York Stock Exchange Listing Fee........................... Blue Sky fees and expenses.................................... Printing and engraving expenses............................... Legal fees and expenses....................................... Accounting fees and expenses.................................. Transfer Agent and Registrar expenses......................... Miscellaneous................................................. ---------- Total.................................................. $ ========== Item 14. Indemnification of Directors and Officers.Section 145 of the General Corporation Law of the State of Delaware (the "Delaware Law") empowers a Delaware corporation to indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, and, for criminal proceedings, had no reasonable cause to believe his conduct was illegal. A Delaware corporation may indemnify officers and directors against expenses (including attorneys' fees) in connection with the defense or settlement of an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred. In accordance with the Delaware Law, the Certificate of Incorporation of the Company contains a provision to limit the personal liability of the directors of the Company for violations of their fiduciary duty. This provision eliminates each director's liability to the Company or its shareholders for monetary damages except (i) for any breach of the director's duty of loyalty to the Company or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware Law providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions, or (iv) for any transaction from which a director derived an improper personal benefit. The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including any such actions involving gross negligence. Article V of the Bylaws of the Company provides for indemnification of the officers and directors of the Company to the full extent permitted by applicable law. Item 15. Recent Sales of Unregistered SecuritiesExcept for the issuance of common stock to The Limited, the Company has not issued any securities in unregistered transactions. The issuance of such securities is exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof. Item 16. Exhibits and Financial Statement Schedules. Exhibit No. 1.1 Form of Underwriting Agreement (U.S. Version).* 3.1 Form of Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co. 3.2 Form of Bylaws of Abercrombie & Fitch Co. 4.1 Specimen Certificate of Class A Common Stock of Abercrombie & Fitch Co.* 4.2 Certificate of Incorporation of The Limited, Inc. 4.3 Bylaws of The Limited, Inc. 5.1 Opinion of Davis Polk & Wardwell regarding the legality of the securities being registered.* 10.1 Credit Agreement, dated as of June 28, 1996, among Abercrombie & Fitch Stores, Inc., Abercrombie & Fitch Trademark, Inc., the banks listed therein and Chase Manhattan Bank, N.A., as Agent. 10.2 Form of Services Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.3 Sublease Agreement, dated June 1, 1995, between Abercrombie & Fitch Stores, Inc. and Victoria's Secret Stores, Inc. 10.4 Form of Shared Facilities Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.5 Form of Tax-Sharing Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.6 Form of Corporate Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.7 Form of Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan.* 10.8 Form of Abercrombie & Fitch Co. Incentive Compensation Plan.* 10.9 Form of Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors.* 21.1 Subsidiaries of Abercrombie & Fitch Co. 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 24.1 Power of Attorney (included on the signature pages of this Registration Statement) 27.1 Financial Data Schedule
*To be filed by amendment Item 17. Undertakings. The undersigned Registrant hereby undertakes: (a) To provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. (b) (1) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or(4) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Reynoldsburg, State of Ohio, on July 16, 1996. ABERCROMBIE & FITCH CO. /s/ Seth R. Johnson By:____________________________ Name: Seth R. Johnson Title: Vice President - Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Samuel Fried and William K. Gerber his or her true and lawful attorneys-in-fact and agents, each acting alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, including post-effective amendments, as well as any related registration statement (or amendment thereto) filed pursuant to Rule 462 promulgated under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all his or her said attorneys-in- fact and agents or any of them or his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof. This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Leslie H. Wexner _________________________ Chairman of the Board of Directors July 16, 1996 Leslie H. Wexner /s/ Kenneth B. Gilman _________________________ Vice Chairman of the Board of Directors July 16, 1996 Kenneth B. Gilman /s/ Michael S. Jeffries _________________________ Chief Executive Officer, President and Director July 16, 1996 Michael S. Jeffries (principal executive officer) /s/ Seth R. Johnson _________________________ Vice President and Chief Financial Officer Seth R. Johnson (principal financial and accounting officer) July 16, 1996
EXHIBIT INDEX Exhibit No. Page No. 1.1 Form of Underwriting Agreement (U.S. Version).* 3.1 Form of Amended and Restated Certificate of Incorporation of Abercrombie & Fitch Co. 3.2 Form of Bylaws of Abercrombie & Fitch Co. 4.1 Specimen Certificate of Class A Common Stock of Abercrombie & Fitch Co.* 4.2 Certificate of Incorporation of The Limited, Inc. 4.3 Bylaws of The Limited, Inc. 5.1 Opinion of Davis Polk & Wardwell regarding the legality of the securities being registered.* 10.1 Credit Agreement, dated as of June 28, 1996, among Abercrombie & Fitch Stores, Inc., Abercrombie & Fitch Trademark, Inc., the banks listed therein and Chase Manhattan Bank, N.A., as Agent. 10.2 Form of Services Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.3 Sublease Agreement, dated June 1, 1995, between Abercrombie & Fitch Stores, Inc. and Victoria's Secret Stores, Inc. 10.4 Form of Shared Facilities Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.5 Form of Tax-Sharing Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.6 Form of Corporate Agreement between Abercrombie & Fitch Co. and The Limited, Inc. 10.7 Form of Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan.* 10.8 Form of Abercrombie & Fitch Co. Incentive Compensation Plan.* 10.9 Form of Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors.* 21.1 Subsidiaries of Abercrombie & Fitch Co. 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 24.1 Power of Attorney (included on the signature pages of this Registration Statement) 27.1 Financial Data Schedule
*To be filed by amendment. EX-3.1 2 Exhibit 3.1 FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ABERCROMBIE & FITCH CO. * * * * * Abercrombie & Fitch Co. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby amend the Certificate of Incorporation of the Corporation, which was originally filed on June 26, 1996, under the name Abercrombie & Fitch, Inc. FIRST. The name of the Corporation is: ABERCROMBIE & FITCH CO. SECOND. The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The name of its registered agent at such address is Corporation Service Company. THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended ("Delaware Law"). FOURTH. Section 1. Capital Stock. (a) The total number of shares of stock which the Corporation shall have authority to issue is _______, consisting of _______ shares of Common Stock, par value $.01 per share (the "Common Stock"), and _______ shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"). The Common Stock of the Corporation shall be all of one class, and shall be divided into two classes, consisting of Class A Common Stock and Class B Common Stock. The Preferred Stock may be issued in one or more series having such designations as may be fixed by the Board of Directors. (b) The Board of Directors is expressly authorized to provide for the issue of all or any shares of the Common Stock and the Preferred Stock, to determine the number of shares of each class and to fix for each class of Common Stock and for any series of Preferred Stock such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors or a duly authorized committee thereof providing for the issue of such series and as may be permitted by Delaware Law. (c) The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the Common Stock of the Corporation irrespective of the provisions of Section 242(b)(2) of Delaware Law. Section 2. Common Stock. (a) Issuance and Consideration. Any unissued or treasury shares of the Common Stock may be issued for such consideration as may be fixed in accordance with applicable law from time to time by the Board of Directors. (b) Dividends. Subject to the rights of holders of the Preferred Stock, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of stock and the holders of the Preferred Stock shall not be entitled to participate in any such dividends (unless otherwise provided by the Board of Directors in any resolution providing for the issue of a series of Preferred Stock). (c) Number of Shares. Of the ______ shares of Common Stock of the Corporation, ______ shares are initially designated as shares of Class A Common Stock and ______ shares are initially designated as shares of Class B Common Stock. The number of shares designated as Class A Common Stock or Class B Common Stock may be increased or decreased from time to time by a resolution or resolutions adopted by the Board of Directors or any duly authorized committee thereof and in accordance with paragraph (d)(5)(E) below without the consent of the holders of any outstanding shares of Common Stock or Preferred Stock. (d) Powers, Preferences, Etc. The following is a statement of the powers, preferences, and relative participating, optional or other special rights and qualifications, limitations and restrictions of the Class A Common Stock and Class B Common Stock of the Corporation: (1) Except as otherwise set forth below in this ARTICLE FOURTH, the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions of the Class A Common Stock and Class B Common Stock shall be identical in all respects. (2) Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended and Restated Certificate of Incorporation, holders of Class A Common Stock and Class B Common Stock shall be entitled to receive such dividends and other distributions in cash, stock of any corporation (other than Common Stock of the Corporation) or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in all such dividends and other distributions. In the case of dividends or other distributions payable in Common Stock, including distributions pursuant to stock splits or divisions of Common Stock of the Corporation, only shares of Class A Common Stock shall be paid or distributed with respect to Class A Common Stock and only shares of Class B Common Stock shall be paid or distributed with respect to Class B Common Stock. The number of shares of Class A Common Stock and Class B Common Stock so distributed shall be equal in number on a per share basis. Neither the shares of Class A Common Stock nor the shares of Class B Common Stock may be reclassified, subdivided or combined unless such reclassification, subdivision or combination occurs simultaneously and in the same proportion for each class. (3)(A) At every meeting of the stockholders of the Corporation every holder of Class A Common Stock shall be entitled to one vote in person or by proxy for each share of Class A Common Stock standing in his or her name on the transfer books of the Corporation, and every holder of Class B Common Stock shall be entitled to three votes in person or by proxy for each share of Class B Common Stock standing in his or her name on the transfer books of the Corporation in connection with the election of directors and all other matters submitted to a vote of stockholders; provided, however, that with respect to any proposed conversion of the shares of Class B Common Stock into shares of Class A Common Stock pursuant to paragraph (d)(5)(B), every holder of a share of Common Stock, irrespective of class, shall have one vote in person or by proxy for each share of Common Stock standing in his or her name on the transfer books of the Corporation. Except as may be otherwise required by law or by this ARTICLE FOURTH, the holders of Class A Common Stock and Class B Common Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock, on all matters submitted to a vote of the holders of Common Stock. (B) Every reference in this Amended and Restated Certificate of Incorporation to a majority or other proportion of shares of Common Stock, Class A Common Stock or Class B Common Stock, shall refer to such majority or other proportion of the votes to which such shares of Common Stock, Class A Common Stock or Class B Common Stock are entitled. (4) In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment in full of the amounts required to be paid to the holders of Preferred Stock, the remaining assets and funds of the Corporation shall be distributed pro rata to the holders of Class A Common Stock and Class B Common Stock. For the purposes of this paragraph (d)(4), the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the assets of the Corporation or a consolidation or merger of the Corporation with one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger) shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. (5)(A) Prior to the earliest to occur of the date on which shares of Class B Common Stock are issued to stockholders of The Limited, Inc. or its successors ("The Limited") in a Tax-Free Spin-Off (as defined in paragraph (d)(5)(B)) and the date on which the number of shares of Class B Common Stock outstanding is less than 60% of the aggregate number of shares of Common Stock outstanding and a Tax-Free Spin-Off has not occurred, each share of Class B Common Stock is convertible at the option of the holder thereof into one share of Class A Common Stock. At the time of a voluntary conversion, the holder of shares of Class B Common Stock shall deliver to the office of the Corporation or any transfer agent for the Class B Common Stock (i) the certificate or certificates representing the shares of Class B Common Stock to be converted, duly endorsed in blank or accompanied by proper instruments of transfer, and (ii) written notice to the Corporation stating that such holder elects to convert such share or shares and stating the name and address in which each certificate for shares of Class A Common Stock issued upon such conversion is to be issued. To the extent permitted by law and subject to the taking of any necessary action or making any filing contemplated by paragraph (d)(5)(E), such voluntary conversion shall be deemed to have been effected at the close of business on the date when such delivery is made to the Corporation or such transfer agent of the shares to be converted, and the person exercising such voluntary conversion shall be deemed to be the holder of record of the number of shares of Class A Common Stock issuable upon such conversion at such time. The Corporation shall promptly deliver certificates evidencing the appropriate number of shares of Class A Common Stock to such person. (B) Each share of Class B Common Stock shall automatically convert into one share of Class A Common Stock upon the transfer of such share if, after such transfer, such share is not beneficially owned by The Limited, unless such transfer is effected in connection with a transfer of Class B Common Stock to stockholders of The Limited as a dividend intended to be on a tax-free basis under the Internal Revenue Code of 1986, as amended from time to time (the "Code"), (a "Tax-Free Spin-Off"). For purposes of this paragraph (d)(5), the term "beneficially owned" with respect to shares of Class B Common Stock means ownership by a person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise controls the voting power (which includes the power to vote or to direct the voting of) of such Class B Common Stock. In the event of a Tax-Free Spin-Off, shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock on the fifth anniversary of the date on which shares of Class B Common Stock are first transferred to stockholders of The Limited in a Tax-Free Spin-Off unless, prior to such Tax-Free Spin-Off, The Limited delivers to the Corporation an opinion of The Limited's counsel (which counsel shall be reasonably satisfactory to the Corporation) to the effect that such conversion would preclude The Limited from obtaining a favorable ruling from the Internal Revenue Service that the distribution would be a Tax-Free Spin-Off under the Code. If such an opinion is received, approval of such conversion shall be submitted to a vote of the holders of the Common Stock as soon as practicable after the fifth anniversary of the Tax-Free Spin-Off unless The Limited delivers to the Corporation an opinion of The Limited's counsel (which counsel shall be reasonably satisfactory to the Corporation) prior to such anniversary to the effect that such vote would adversely affect the status of the Tax-Free Spin-Off. At the meeting of stockholders called for such purpose, every holder of Common Stock shall be entitled to one vote in person or by proxy for each share of Common Stock standing in his or her name on the transfer books of the Corporation. Approval of such conversion shall require the approval of a majority of the votes entitled to be cast by the holders of the Class A Common Stock and Class B Common Stock present and voting, voting together as a single class, and the holders of the Class B Common Stock shall not be entitled to a separate class vote. Such conversion shall be effective on the date on which such approval is given at a meeting of stockholders called for such purpose. Each share of Class B Common Stock shall automatically convert into one share of Class A Common Stock on the date on which the number of shares of Class B Common Stock outstanding is less than 60% of the aggregate number of shares of Common Stock outstanding and a Tax-Free Spin-Off has not occurred. The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and its issued Common Stock held in its treasury for the purpose of effecting any conversion of the Class B Common Stock pursuant to this paragraph (d)(5)(B), the full number of shares of Class A Common Stock then deliverable upon any such conversion of all outstanding shares of Class B Common Stock. The Corporation will provide notice of any automatic conversion of shares of Class B Common Stock to holders of record of the Common Stock not less than 30 nor more than 60 days prior to the date fixed for such conversion; provided, however, that if the timing or nature of the effectiveness of an automatic conversion makes it impracticable to provide at least 30 days' notice, the Corporation shall provide such notice as soon as practicable. Such notice shall be provided by mailing notice of such conversion first class postage prepaid, to each holder of record of the Common Stock, at such holder's address as it appears on the transfer books of the Corporation; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the automatic conversion of any shares of Class B Common Stock. Each such notice shall state, as appropriate, the following: (i) the automatic conversion date; (ii) the number of outstanding shares of Class B Common Stock that are to be converted automatically; (iii) the place or places where certificates for such shares are to be surrendered for conversion; and (iv) that no dividends will be declared on the shares of Class B Common Stock converted after such conversion date. Immediately upon such conversion, the rights of the holders of shares of Class B Common Stock as such shall cease and such holders shall be treated for all purposes as having become the record owners of the shares of Class A Common Stock issuable upon such conversion; provided, however, that such persons shall be entitled to receive when paid any dividends declared on the Class B Common Stock as of a record date preceding the time of such conversion and unpaid as of the time of such conversion. As promptly as practicable after the time of conversion, upon the delivery to the Corporation of certificates formerly representing shares of Class B Common Stock, the Corporation shall deliver or cause to be delivered, to or upon the written order of the record holder of the surrendered certificates formerly representing shares of Class B Common Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Class A Common Stock into which the shares of Class B Common Stock formerly represented by such certificates have been converted in accordance with the provisions of this paragraph (d)(5)(B). (C) Subject to the provisions of this paragraph (d)(5)(C), from and after the date on which shares of Class B Common Stock are transferred to the stockholders of The Limited in a Tax-Free Spin-Off, (i) each share of Class A Common Stock shall be convertible at the option of the holder thereof into one share of Class B Common Stock on the date on which any person (other than The Limited or any of its consolidated subsidiaries) or any group of persons (other than a group composed of The Limited and/or one or more of its consolidated subsidiaries) agreeing to act together for the purpose of acquiring, holding, voting or disposing of shares of Class B Common Stock, shall make an offer, which the Board of Directors determines in its sole discretion to be "bona fide", to holders of Class B Common Stock to purchase 5% or more of the issued and outstanding shares of such Class B Common Stock for cash or a combination of cash and other securities or property and (ii) each share of Class B Common Stock shall be convertible at the option of the holder thereof into one share of Class A Common Stock on the date on which any person (other than The Limited or any of its consolidated subsidiaries) or any group of persons (other than a group composed of The Limited and/or one or more of its consolidated subsidiaries) agreeing to act together for the purpose of acquiring, holding, voting or disposing of shares of Class A Common Stock, shall make an offer, which the Board of Directors determines in its sole discretion to be "bona fide", to holders of Class A Common Stock to purchase 5% or more of the issued and outstanding shares of Class A Common Stock for cash or a combination of cash and other securities or property. The Corporation will provide notice in writing to all holders of Common Stock of any offer referred to in the foregoing clauses (i) and (ii). Such notice shall be provided by mailing notice of such offer, first class postage prepaid, to each holder of the class of Common Stock then entitled to be converted, at such holder's address as it appears on the transfer books of the Corporation. The Common Stock shall be convertible under this paragraph (d)(5)(C) as long as such offer shall remain in effect and shall not be terminated, rescinded or completed, as determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing, each share of Common Stock converted into a share of the other class of Common Stock pursuant to this paragraph (d)(5)(C) and not purchased pursuant to such offer prior to the termination, rescission or completion thereof, as determined by the Board of Directors in its sole discretion, shall automatically be reconverted into a share of Common Stock of the class from which it was converted pursuant to this paragraph (d)(5)(C) upon the earliest to occur of the termination, rescission or completion of such offer, as so determined by the Board of Directors. Any conversion pursuant to this paragraph (d)(5)(C) may be effected at the office of the Corporation or any transfer agent for the Common Stock and at such other place or places, if any, as the Board of Directors may designate. Upon conversion pursuant to this paragraph (d)(5)(C), the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Common Stock surrendered for conversion or on account of any dividends on Common Stock issuable on such conversion. Before any holder of Common Stock shall be entitled to convert the same into any other class of stock pursuant to this paragraph (d)(5)(C), such holder shall surrender the certificate or certificates for such Common Stock at the office of said transfer agent (or other place as provided above). Such certificate(s), if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to the Corporation). Such certificate(s) shall be accompanied by a written notice to the Corporation at said office stating that such holder elects to convert all or a specified number of Common Stock represented by such certificate(s) in accordance with this paragraph (d)(5)(C) and stating the name(s) in which such holder desires the certificate(s) representing the stock to be issued. Such written notice shall also state the name(s) of the person(s) making the offer entitling such holder to convert such Common Stock. The Corporation will, as soon as practicable after deposit of the certificate(s) for the class of Common Stock to be converted, accompanied by the written notice and the statements prescribed above, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Common Stock was so surrendered, or to such person's nominee or nominees, a certificate or certificates for the number of shares of such other class of Common Stock to which such holder shall be entitled as aforesaid. Any certificate of Common Stock issued in connection with a conversion pursuant to this paragraph (d)(5)(C) shall bear a legend substantially to the effect of the last sentence of the first subparagraph of this paragraph (d)(5)(C) until such certificate shall be transferred to the person(s) making the offer entitling a holder of Common Stock to convert such Common Stock pursuant to this paragraph (d)(5)(C), or the nominee or nominees of such person(s). Any conversion pursuant to this paragraph (d)(5)(C) shall be deemed to have been made as of the date of surrender of the Common Stock to be converted; and the person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock on such date. (D) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of one class of Common Stock on the conversion of shares of the other class of Common Stock pursuant to this paragraph (d)(5); provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of one class of Common Stock in a name other than that of the registered holder of the other class of Common Stock converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (E) Concurrently with any conversion of one class of Common Stock into the other class of Common Stock effected pursuant to paragraphs (d)(5)(A) and (B) above and, in the case of a conversion pursuant to paragraph (d)(5)(C) above, concurrently with the purchase of shares so converted, each share of a class of Common Stock that is converted (i) shall be retired and canceled and shall not be reissued and (ii) shall proportionally decrease the number of shares of Common Stock of such class designated hereby. The Secretary of the Corporation shall be, and hereby is, authorized and directed to file with the Secretary of State of the State of Delaware one or more Certificates of Decrease of Designated Shares to record any such decrease in designated shares of Common Stock. No undesignated shares of Common Stock shall be designated shares of Class B Common Stock following an automatic conversion of shares of Class B Common Stock pursuant to paragraph (d)(5)(B) above. (F) Immediately upon the effectiveness of this Amended and Restated Certificate of Incorporation each share of common stock of the Corporation, par value $1.00 per share, that is issued and outstanding immediately prior to such effectiveness, shall be changed into and reclassified as _____ shares of Class B Common Stock. Section 3. Preferred Stock. (a) Series and Limits of Variations between Series. Any unissued or treasury shares of the Preferred Stock may be issued from time to time in one or more series for such consideration as may be fixed from time to time by the Board of Directors and each share of a series shall be identical in all respects with the other shares of such series, except that, if the dividends thereon are cumulative, the date from which they shall be cumulative may differ. Before any shares of Preferred Stock of any particular series shall be issued, a certificate shall be filed with the Secretary of State of Delaware setting forth the designation, rights, privileges, restrictions, and conditions to be attached to the Preferred Stock of such series and such other matters as may be required, and the Board of Directors shall fix and determine, and is hereby expressly empowered to fix and determine, in the manner provided by law, the particulars of the shares of such series (so far as not inconsistent with the provisions of this ARTICLE FOURTH applicable to all series of Preferred Stock), including, but not limited to, the following: (1) the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) the annual rate of dividends payable on shares of such series, the conditions upon which such dividends shall be payable and the date from which dividends shall be cumulative in the event the Board of Directors determines that dividends shall be cumulative; (3) whether such series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; (4) whether such series shall have conversion privileges and, if so, the terms and conditions of such conversion, including, but not limited to, provision for adjustment of the conversion rate upon such events and in such manner as the Board of Directors shall determine; (5) whether or not the shares of such series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (6) whether such series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; (7) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (8) any other relative rights, preferences and limitations of such series. Section 4. No Preemptive Rights. Except as otherwise set forth above in this ARTICLE FOURTH, no holder of shares of this Corporation of any class shall be entitled, as such, as a matter of right, to subscribe for or purchase shares of any class now or hereafter authorized, or to purchase or subscribe for securities convertible into or exchangeable for shares of the Corporation or to which there shall be attached or appertain any warrants or rights entitling the holders thereof to purchase or subscribe for shares. FIFTH. Section 1. Amendment of Bylaws by Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the Corporation. Section 2. Amendment of Bylaws by the Stockholders. The bylaws shall not be made, repealed, altered, amended or rescinded by the stockholders of the Corporation except by the vote of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon. Any amendment to the Certificate of Incorporation which shall contravene any bylaw in existence on the record date of the stockholders meeting at which such amendment is to be voted upon by the stockholders shall require the vote of not less than 75 percent of the outstanding shares entitled to vote thereon. SIXTH. Section 1. Classified Board. Effective immediately upon the issuance of more than 1,000 shares of Common Stock of the Corporation, the Board of Directors (exclusive of directors to be elected by the holders of any one or more series of Preferred Stock voting separately as a class or classes) shall be divided into three classes, Class A, Class B, and Class C. The number of directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of directors by three, and if a fraction is also contained in such quotient, then if such fraction is one-third, the extra director shall be a member of Class A and if the fraction is two-thirds, one of the extra directors shall be a member of Class A and the other shall be a member of Class B. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class A shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1996, the directors first elected to Class B shall serve for a term ending on the date of the second annual meeting next following the end of the calendar year 1996, and the directors first elected to Class C shall serve for a term ending on the date of the third annual meeting next following the end of the calendar year 1996. Notwithstanding the foregoing formula provisions, in the event that, as a result of any change in the authorized number of directors, the number of directors in any class would differ from the number allocated to that class under the formula provided in this ARTICLE SIXTH immediately prior to such change, the following rules shall govern: (a) each director then serving as such shall nevertheless continue as a director of the class of which such director is a member until the expiration of his current term, or his prior death, resignation or removal; (b) at each subsequent election of directors, even if the number of directors in the class whose term of office then expires is less than the number then allocated to that class under said formula, the number of directors then elected for membership in that class shall not be greater than the number of directors in that class whose term of office then expires, unless and to the extent that the aggregate number of directors then elected plus the number of directors in all classes then duly continuing in office does not exceed the then authorized number of directors of the Corporation; (c) at each subsequent election of directors, if the number of directors in the class whose term of office then expires exceeds the number then allocated to that class under said formula, the Board of Directors shall designate one or more of the directorships then being elected as directors of another class or classes in which the number of directors then serving is less than the number then allocated to such other class or classes under said formula; (d) in the event of the death, resignation or removal of any director who is a member of a class in which the number of directors serving immediately preceding the creation of such vacancy exceeded the number then allocated to that class under said formula, the Board of Directors shall designate the vacancy thus created as a vacancy in another class in which the number of directors then serving is less than the number then allocated to such other class under said formula; (e) In the event of any increase in the authorized number of directors, the newly created directorships resulting from such increase shall be apportioned by the Board of Directors to such class or classes as shall, so far as possible, bring the composition of each of the classes into conformity with the formula in this ARTICLE SIXTH, as it applies to the number of directors authorized immediately following such increase; and (f) designation of directorships or vacancies into other classes and apportionments of newly created directorships to classes by the Board of Directors under the foregoing items (c), (d) and (e) shall, so far as possible, be effected so that the class whose term of office is due to expire next following such designation or apportionment shall contain the full number of directors then allocated to said class under said formula. Notwithstanding any of the foregoing provisions of this ARTICLE SIXTH, each director shall serve until his successor is elected and qualified or until his death, resignation or removal. Section 2. Election by Holders of Preferred Stock. During any period when the holders of any Preferred Stock or any one or more series thereof, voting as a class, shall be entitled to elect a specified number of directors, by reason of dividend arrearages or other provisions giving them the right to do so, then and during such time as such right continues (i) the then otherwise authorized number of directors shall be increased by such specified number of directors, and the holders of such Preferred Stock or such series thereof, voting as a class, shall be entitled to elect the additional directors so provided for, pursuant to the provisions of such Preferred Stock or series; (ii) each such additional director shall serve for such term, and have such voting powers, as shall be stated in the provisions pertaining to such Preferred Stock or series; and (iii) whenever the holders of any such Preferred Stock or series thereof are divested of such rights to elect a specified number of directors, voting as a class, pursuant to the provisions of such Preferred Stock or series, the terms of office of all directors elected by the holders of such Preferred Stock or series, voting as a class pursuant to such provisions or elected to fill any vacancies resulting from the death, resignation or removal of directors so elected by the holders of such Preferred Stock or series, shall forthwith terminate and the authorized number of directors shall be reduced accordingly. Section 3. Ballots. Elections of directors at an annual or special meeting of stockholders need not be by written ballot unless the bylaws of the Corporation shall provide otherwise. Section 4. Elimination of Certain Personal Liability of Directors. A director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of any fiduciary duty as a director to the fullest extent permitted by Delaware Law. SEVENTH. After the issuance of more than 1,000 shares of Common Stock of the Corporation, no action shall be taken by the stockholders except at an annual or special meeting of stockholders. EIGHTH. The Board of Directors of the Corporation, when evaluating any offer of another party to (1) make a tender or exchange offer for any equity security of the Corporation, (2) merge or consolidate the Corporation with another corporation, or (3) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, shall in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its stockholders, give due consideration to all relevant factors, including without limitation the social and economic effects on the employees, customers, suppliers and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located. NINTH. Any director may be removed at any annual or special stockholders' meeting upon the affirmative vote of not less than 75 percent of the outstanding shares of voting stock of the Corporation at that time entitled to vote thereon; provided, however, that such director may be removed only for cause and shall receive a copy of the charges against him, delivered to him personally or by mail at his last known address at least 10 days prior to the date of the stockholders' meeting; provided further, that directors who shall have been elected by the holders of a series or class of Preferred Stock, voting separately as a class, shall be removed only pursuant to the provisions establishing the rights of such series or class to elect such directors. TENTH. Section 1. Amendment of Certain Articles. The provisions set forth in this ARTICLE TENTH and in ARTICLES FIFTH, SIXTH, Section 1, SEVENTH, EIGHTH, NINTH, ELEVENTH, TWELFTH and THIRTEENTH may not be amended, altered, changed, or repealed in any respect unless such amendment, alteration, change or repealing is approved by the affirmative vote of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon; provided that with respect to any proposed amendment, alteration or change to this Amended and Restated Certificate of Incorporation, or repealing of any provision of this Amended and Restated Certificate of Incorporation, which would amend, alter or change the powers, preferences or special rights of the shares of Class A Common Stock or Class B Common Stock so as to affect them adversely, the affirmative vote of not less than 75 percent of the outstanding shares affected by the proposed amendment, voting as a separate class, shall be required in addition to the vote otherwise required pursuant to this ARTICLE TENTH; and provided, further, that with respect to any amendment, alteration or change to, or repealing of, any provision of ARTICLE ELEVENTH, the affirmative vote of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon, other than shares held by the Interested Person (if any) seeking or proposing to effect any transaction involving the Corporation or any subsidiary of the Corporation, shall be required in addition to the vote otherwise required pursuant to this ARTICLE TENTH. Section 2. Amendments Generally. Subject to the provisions of Section 1 of this ARTICLE TENTH, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. ELEVENTH. Section 1. Vote Required for Certain Business Combinations. The affirmative vote of not less than 75 percent of the outstanding shares of "Voting Stock" (as hereinafter defined) held by stockholders other than the "Interested Person" (as hereinafter defined) seeking to effect a "Business Combination" (as hereinafter defined) shall be required for the approval or authorization of any Business Combination with any Interested Person. Section 2. Definitions. Certain words and terms as used in this ARTICLE ELEVENTH shall have the meanings given to them by the definitions and descriptions in this Section. (a) Business Combination. The term "Business Combination" shall mean (a) any merger or consolidation of the Corporation or a subsidiary of the Corporation with or into an Interested Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation, a mortgage or any other security device, of all or any "Substantial Part" (as hereinafter defined) of the assets either of the Corporation (including without limitation, any voting securities of a subsidiary) or of a subsidiary of the Corporation to an Interested Person, (c) any merger or consolidation of an Interested Person with or into the Corporation or a subsidiary of the Corporation, (d) any sale, lease, exchange, transfer or other disposition, including without limitation, a mortgage or other security device, of all or any Substantial Part of the assets of an Interested Person to the Corporation or a subsidiary of the Corporation, (e) the issuance or transfer by the Corporation or any subsidiary of the Corporation of any securities of the Corporation or a subsidiary of the Corporation to an Interested Person, (f) any reclassification of securities, recapitalization or other comparable transaction involving the Corporation that would have the effect of increasing the voting power of any Interested Person with respect to Voting Stock of the Corporation, and (g) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) Interested Person. The term "Interested Person" shall mean and include any individual, corporation, partnership or other person or entity which, together with its "Affiliates" and "Associates" (as defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at the date of the adoption of this ARTICLE ELEVENTH by the stockholders of the Corporation), "Beneficially Owns" (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at the date of the adoption of this ARTICLE ELEVENTH by the stockholders of the Corporation) in the aggregate five percent or more of the outstanding Voting Stock of the Corporation, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity. Without limitation, any share of Voting Stock of the Corporation that any Interested Person has the right to acquire at any time (notwithstanding that Rule 13d-3 deems such shares to be beneficially owned only if such right may be exercised within 60 days) pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed to be Beneficially Owned by the Interested Person and to be outstanding for purposes of this definition. An Interested Person shall be deemed to have acquired a share of the Voting Stock of the Corporation at the time when such Interested Person became the Beneficial Owner thereof. (c) Voting Stock. The term "Voting Stock" shall mean all of the outstanding shares of Common Stock of the Corporation and any outstanding shares of Preferred Stock entitled to vote on each matter on which the holders of record of Common Stock shall be entitled to vote, and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. (d) Substantial Part. The term "Substantial Part" shall mean more than 20 percent of the fair market value as determined by two-thirds of the Continuing Directors of the total consolidated assets of the Corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is being made. (e) Continuing Director. The term "Continuing Director" shall mean a Director who was a member of the Board of Directors of the Corporation immediately prior to the time that the Interested Person involved in a Business Combination became an Interested Person, or a Director who was elected or appointed to fill a vacancy after the date the Interested Person became an Interested Person by a majority of the then-current Continuing Directors; provided, that with respect to The Limited, the term "Continuing Director" shall mean a Director who was a member of the Board of Directors of the Corporation immediately following the consummation of the initial public offering of the Corporation's Class A Common Stock in a transaction registered under the Securities Act of 1933, as amended (the "IPO"), or a Director who was elected or appointed to fill a vacancy after the IPO by a majority of the then-current Continuing Directors. TWELFTH. Section 1. In anticipation that the Corporation will cease to be a wholly owned subsidiary of The Limited, but that The Limited will remain a stockholder of the Corporation, and in anticipation that the Corporation and The Limited may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of (i) the benefits to be derived by the Corporation through its continued contractual, corporate and business relations with The Limited (including service of officers and directors of The Limited as officers and directors of the Corporation) and (ii) the difficulties attendant to any director, who desires and endeavors fully to satisfy such director's fiduciary duties, in determining the full scope of such duties in any particular situation, the provisions of this ARTICLE TWELFTH are set forth to regulate, define and guide the conduct of certain affairs of the Corporation as they may involve The Limited and its officers and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith. Section 2. Except as The Limited may otherwise agree in writing, (a) The Limited shall not have a duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation, and (b) neither The Limited nor any officer or director thereof shall be liable to the Corporation or its stockholders for breach of any fiduciary duty by reason of any such activities of The Limited or of such person's participation therein. In the event that The Limited acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both The Limited and the Corporation, The Limited shall have no duty to communicate or offer such corporate opportunity to the Corporation and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder of the Corporation or controlling person of a stockholder by reason of the fact that The Limited pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or entity, or does not communicate information regarding, or offer, such corporate opportunity to the Corporation. Section 3. In the event that a director, officer or employee of the Corporation who is also a director, officer or employee of The Limited acquires knowledge of a potential transaction or matter that may be a corporate opportunity for the Corporation and The Limited (whether such potential transaction or matter is proposed by a third-party or is conceived of by such director, officer or employee of the Corporation), such director, officer or employee shall be entitled to offer such corporate opportunity to the Corporation or The Limited as such director, officer or employee deems appropriate under the circumstances in his sole discretion, and no such director, officer or employee shall be liable to the Corporation or its stockholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Corporation or the derivation of any improper personal benefit by reason of the fact that (i) such director, officer or employee offered such corporate opportunity to The Limited (rather than the Corporation) or did not communicate information regarding such corporate opportunity to the Corporation or (ii) The Limited pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the Corporation. Section 4. Any person or entity purchasing or otherwise acquiring any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this ARTICLE TWELFTH. Section 5. For purposes of this ARTICLE TWELFTH and ARTICLE THIRTEENTH only, (i) the term "Corporation" shall mean the Corporation and all corporations, partnerships, joint ventures, associations and other entities in which the Corporation beneficially owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power or similar voting interests, and (ii) the term "The Limited" shall mean The Limited and all corporations, partnerships, joint ventures, associations and other entities (other than the Corporation, defined in accordance with clause (i) of this Section 5) in which The Limited beneficially owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power or similar voting interests. Section 6. Notwithstanding anything in this Certificate of Incorporation to the contrary, the foregoing provisions of this ARTICLE TWELFTH shall expire on the date that The Limited ceases to own beneficially Common Stock representing at least 20% of the number of outstanding shares of Common Stock of the Corporation and no person who is a director or officer of the Corporation is also a director or officer of The Limited. Neither the alteration, amendment, change or repeal of any provision of this ARTICLE TWELFTH nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with any provision of this ARTICLE TWELFTH shall eliminate or reduce the effect of this ARTICLE TWELFTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this ARTICLE TWELFTH, would accrue or arise, prior to such alteration, amendment, repeal or adoption. Section 7. The provisions of this ARTICLE TWELFTH are in addition to the provisions of ARTICLE SIXTH, Section 5, and ARTICLE THIRTEENTH. THIRTEENTH. Section 1. No contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) between the Corporation and The Limited or any Related Entity (as defined below) or between the Corporation and one or more of the directors or officers of the Corporation, The Limited or any Related Entity, shall be void or voidable solely for the reason that The Limited, any Related Entity or any one or more of the officers or directors of the Corporation, The Limited or any Related Entity are parties thereto, or solely because any such directors or officers are present at or participate in the meeting of the Board of Directors or committee thereof which authorizes the contract, agreement, arrangement, transaction, amendment, modification or termination or solely because his or their votes are counted for such purpose, but any such contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) shall be governed by the provisions of this Amended and Restated Certificate of Incorporation, the Corporation's Bylaws, Delaware Law and other applicable law. For purposes of this ARTICLE THIRTEENTH, (i) the term "Related Entities" means one or more directors of this Corporation, or one or more corporations, partnerships, associations or other organizations in which one or more of its directors have a direct or indirect financial interest and (ii) the terms the "Corporation" and "The Limited" have the meanings set forth in ARTICLE TWELFTH, Section 5. Section 2. Directors of the Corporation who are also directors or officers of The Limited or any Related Entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes or approves any such contract, agreement, arrangement or transaction (or amendment, modification or termination thereof). Outstanding shares of Common Stock owned by The Limited and any Related Entities may be counted in determining the presence of a quorum at a meeting of stockholders that authorizes or approves any such contract, agreement, arrangement or transaction (or amendment, modification or termination thereof). Section 3. Neither The Limited nor any officer or director thereof or Related Entity shall be liable to the Corporation or its stockholders for breach of any fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Corporation or the derivation of any improper personal benefit by reason of the fact that The Limited or an officer of director thereof or such Related Entity in good faith takes any action or exercises any rights or gives or withholds any consent in connection with any agreement or contract between The Limited or such Related Entity and the Corporation. No vote cast or other action taken by any person who is an officer, director or other representative of The Limited or such Related Entity, which vote is cast or action is taken by such person in his capacity as a director of this Corporation, shall constitute an action of or the exercise of a right by or a consent of The Limited or such Related Entity for the purpose of any such agreement or contract. Section 4. Any person or entity purchasing or otherwise acquiring any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this ARTICLE THIRTEENTH. Section 5. For purposes of this ARTICLE THIRTEENTH, any contract, agreement, arrangement or transaction with any corporation, partnership, joint venture, association or other entity in which the Corporation beneficially owns (directly or indirectly) fifty percent or more of the outstanding voting stock, voting power or similar voting interests, or with any officer or director thereof, shall be deemed to be a contract, agreement, arrangement or transaction with the Corporation. Section 6. Neither the alteration, amendment, change or repeal of any provision of this ARTICLE THIRTEENTH nor the adoption of any provision inconsistent with any provision of this ARTICLE THIRTEENTH shall eliminate or reduce the effect of this ARTICLE THIRTEENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this ARTICLE THIRTEENTH, would accrue or arise, prior to such alteration, amendment, change, repeal or adoption. Section 7. The provisions of this ARTICLE THIRTEENTH are in addition to the provisions of ARTICLE SIXTH, Section 5, and ARTICLE TWELFTH. IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation, having been duly adopted by the written consent of the sole stockholder of the Corporation in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, has been executed this th day of July 1996. ABERCROMBIE & FITCH CO. By:____________________________________ Name: Title: EX-3.2 3 Exhibit 3.2 FORM OF BYLAWS OF ABERCROMBIE & FITCH CO. Adopted _____, 1996 ARTICLE I STOCKHOLDERS Section 1.01. Annual Meeting. The annual meeting of the stockholders of this corporation, for the purpose of fixing or changing the number of directors of the corporation, electing directors and transacting such other business as may come before the meeting, shall be held on such date, at such time and at such place as may be designated by the Board of Directors. Section 1.02. Special Meetings. Special meetings of the stockholders may be called at any time by the chairman of the board, the vice chairman of the board, or in case of the death, absence or disability of the chairman of the board and the vice chairman of the board, the president, or in case of the president's death, absence, or disability, the vice president, if any, authorized to exercise the authority of the president, or a majority of the Board of Directors acting with or without a meeting; provided, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provision of the certificate of incorporation or any amendment thereto or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), then such special meeting may also be called by the person or persons, in the manner, at the times and for the purposes so specified. Section 1.03. Place of Meetings. Meetings of stockholders shall be held at the principal office of the corporation in the State of Ohio, unless the Board of Directors decides that a meeting shall be held at some other place and causes the notice thereof to so state. Section 1.04. Notice of Meetings. (a) Unless waived, a written, printed, or typewritten notice of each annual or special meeting, stating the date, hour and place and the purpose or purposes thereof shall be served upon or mailed to each stockholder of record entitled to vote or entitled to notice, not more than 60 days nor less than 10 days before any such meeting. If mailed, such notice shall be directed to a stockholder at his or her address as the same appears on the records of the corporation. If a meeting is adjourned to another time or place and such adjournment is for 30 days or less and no new record date is fixed for the adjourned meeting, no further notice as to such adjourned meeting need be given if the time and place to which it is adjourned are fixed and announced at such meeting. In the event of a transfer of shares after notice has been given and prior to the holding of the meeting, it shall not be necessary to serve notice on the transferee. Such notice shall specify the place where the stockholders list will be open for examination prior to the meeting if required by Section 1.08 hereof. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (b) A written waiver of any such notice signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 1.05. Fixing Date for Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If the Board shall not fix such a record date, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (ii) in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board of Directors shall adopt the resolution relating thereto. Determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 1.06. Organization. At each meeting of the stockholders, the chairman of the board, or in his absence, the vice chairman of the board, or in his absence, the president, or, in his absence, any vice-president, or, in the absence of the chairman of the board, the vice chairman of the board, the president and a vice-president, a chairman chosen by a majority in interest of the stockholders present in person or by proxy and entitled to vote, shall act as chairman, and the secretary of the corporation, or, if the secretary of the corporation not be present, the assistant secretary, or if the secretary and the assistant secretary not be present, any person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting. Section 1.07. Quorum. A stockholders' meeting duly called shall not be organized for the transaction of business unless a quorum is present. Except as otherwise expressly provided by law, the certificate of incorporation, these bylaws, or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), (i) at any meeting called by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least one-third of the voting power of the corporation shall constitute a quorum for such meeting and (ii) at any meeting called other than by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least a majority of the voting power of the corporation shall constitute a quorum for such meeting. The stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, a majority in voting interest of the stockholders present may adjourn, or, in the absence of a decision by the majority, any officer entitled to preside at such meeting may adjourn the meeting from time to time to such time (not more than 30 days after the previously adjourned meeting) and place as they (or he) may determine, without notice other than by announcement at the meeting of the time and place of the adjourned meeting. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. Section 1.08. Order of Business and Procedure. The order of business at all meetings of the stockholders and all matters relating to the manner of conducting the meeting shall be determined by the chairman of the meeting. Meetings shall be conducted in a manner designed to accomplish the business of the meeting in a prompt and orderly fashion and to be fair and equitable to all stockholders, but it shall not be necessary to follow any manual of parliamentary procedure. Section 1.09. Advance Notice of Stockholder Proposals. In order to properly submit any business to an annual meeting of stockholders, a stockholder must give timely notice in writing to the secretary of the corporation. To be considered timely, a stockholder's notice must be delivered either in person or by United States certified mail, postage prepaid, and received at the principal executive offices of the corporation (a) not less than 120 days nor more than 150 days before the first anniversary date of the corporation's proxy statement in connection with the last annual meeting of stockholders or (b) if no annual meeting was held in the previous year or the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year's proxy statement, not less than a reasonable time, as determined by the Board of Directors, prior to the date of the applicable annual meeting. Nomination of persons for election to the Board of Directors may be made by the Board of Directors or any committee designated by the Board of Directors or by any stockholder entitled to vote for the election of directors at the applicable meeting of stockholders. However, nominations other than those made by the Board of Directors or its designated committee must comply with the procedures set forth in this Section 1.09, and no person shall be eligible for election as a director unless nominated in accordance with the terms of this Section 1.09. A stockholder may nominate a person or persons for election to the Board of Directors by giving written notice to the secretary of the corporation in accordance with the procedures set forth above. In addition to the timeliness requirements set forth above for notice to the corporation by a stockholder of business to be submitted at an annual meeting of stockholders, with respect to any special meeting of stockholders called for the election of directors, written notice must be delivered in the manner specified above and not later than the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. The secretary of the corporation shall deliver any stockholder proposals and nominations received in a timely manner for review by the Board of Directors or a committee designated by the Board of Directors. A stockholder's notice to submit business to an annual meeting of stockholders shall set forth (i) the name and address of the stockholder, (ii) the class and number of shares of stock beneficially owned by such stockholder, (iii) the name in which such shares are registered on the stock transfer books of the corporation, (iv) a representation that the stockholder intends to appear at the meeting in person or by proxy to submit the business specified in such notice, (v) any material interest of the stockholder in the business to be submitted and (vi) a brief description of the business desired to be submitted to the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting. In addition, the stockholder making such proposal shall promptly provide any other information reasonably requested by the corporation. In addition to the information required above to be given by a stockholder who intends to submit business to a meeting of stockholders, if the business to be submitted is the nomination of a person or persons for election to the Board of Directors then such stockholder's notice must also set forth, as to each person whom the stockholder proposes to nominate for election as a director, (a) the name, age, business address and, if known, residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of stock of the corporation which are beneficially owned by such person, (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended, (e) the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected and (f) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder. Any person nominated for election as director by the Board of Directors or any committee designated by the Board of Directors shall, upon the request of the Board of Directors or such committee, furnish to the secretary of the corporation all such information pertaining to such person that is required to be set forth in a stockholder's notice of nomination. Notwithstanding the foregoing provisions of this Section 1.09, a stockholder who seeks to have any proposal included in the corporation's proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended. Section 1.10. Voting. (a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the corporation on the date fixed pursuant to Section 1.05 of these bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting. (b) Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting in sufficient time to permit the necessary examination and tabulation thereof before the vote is taken; provided, however, that no proxy shall be valid after the expiration of three years after the date of its execution, unless the stockholder executing it shall have specified therein the length of time it is to continue in force. At any meeting of the stockholders all matters, except as otherwise provided in the certificate of incorporation, in these bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and voting thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting or required by the certificate of incorporation. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted. Section 1.11. Inspectors. The Board of Directors, in advance of any meeting of the stockholders, may appoint one or more inspectors to act at the meeting. If inspectors are not so appointed, the person presiding at the meeting may appoint one or more inspectors. If any person so appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at the meeting with strict impartiality and according to the best of his ability. The inspectors so appointed, if any, shall determine the number of shares outstanding, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies and shall receive votes, ballots, waivers, releases, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, waivers, releases, or consents, determine and announce the results and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. ARTICLE II BOARD OF DIRECTORS Section 2.01. General Powers of Board. The powers of the corporation shall be exercised, its business and affairs conducted, and its property controlled by or under the direction of the Board of Directors, except as otherwise provided by the law of Delaware or in the certificate of incorporation. Section 2.02. Number of Directors. The number of directors of the corporation (exclusive of directors to be elected by the holders of any one or more series of Preferred Stock voting separately as a class or classes) shall not be less than four nor more than nine, the exact number of directors to be such number as may be set from time to time within the limits set forth above by resolution adopted by affirmative vote of a majority of the whole Board of Directors. As used in these Bylaws, the term "whole Board" means the total number of directors which the corporation would have if there were no vacancies. Section 2.03. Election of Directors. At each meeting of the stockholders for the election of directors, the persons receiving the greatest number of votes shall be the directors. Directors need not be stockholders. Section 2.04. Nominations. 2.04.1. Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. 2.04.2. Such nominations, if not made by the Board of Directors, shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the secretary of the corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the secretary of the corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Each such notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee. 2.04.3. Notice of nominations which are proposed by the Board of Directors shall be given on behalf of the Board by the chairman of the meeting. 2.04.4. The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Section 2.05. Resignations. Any director of the corporation may resign at any time by giving written notice to the chairman of the board or the secretary of the corporation. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.06. Vacancies. In the event that any vacancy shall occur in the Board of Directors, whether because of death, resignation, removal, newly created directorships resulting from any increase in the authorized number of directors, the failure of the stockholders to elect the whole authorized number of directors, or any other reason, such vacancy may be filled by the vote of a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy, other than a newly created directorship, shall hold office for the unexpired term of his predecessor. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Section 2.07. Removal of Directors. Directors may be removed only as provided in the certificate of incorporation. Section 2.08. Place of Meeting, etc. The Board of Directors may hold any of its meetings at the principal office of the corporation or at such other place or places as the Board of Directors (or the chairman in the absence of a determination by the Board of Directors) may from time to time designate. Directors may participate in any regular or special meeting of the Board of Directors by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board of Directors can hear each other and such participation shall constitute presence in person at such meeting. Section 2.09. Annual Meeting. A regular annual meeting of the Board of Directors shall be held each year at the same place as and immediately after the annual meeting of stockholders, or at such other place and time as shall theretofore have been determined by the Board of Directors and notice thereof need not be given. At its regular annual meeting the Board of Directors shall organize itself and elect the officers of the corporation for the ensuing year, and may transact any other business. Section 2.10. Regular Meetings. Regular meetings of the Board of Directors may be held at such intervals at such time as shall from time to time be determined by the Board of Directors. After such determination and notice thereof has been once given to each person then a member of the Board of Directors, regular meetings may be held at such intervals and time and place without further notice being given. Section 2.11. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Board of Directors or by the chairman or by a majority of directors then in office to be held on such day and at such time as shall be specified by the person or persons calling the meeting. Section 2.12. Notice of Meetings. Notice of each special meeting or, where required, each regular meeting, of the Board of Directors shall be given to each director either by being mailed on at least the third day prior to the date of the meeting or by being telegraphed, faxed or given personally or by telephone on at least 24 hours notice prior to the date of meeting. Such notice shall specify the place, date and hour of the meeting and, if it is for a special meeting, the purpose or purposes for which the meeting is called. At any meeting of the Board of Directors at which every director shall be present, even though without such notice, any business may be transacted. Any acts or proceedings taken at a meeting of the Board of Directors not validly called or constituted may be made valid and fully effective by ratification at a subsequent meeting which shall be legally and validly called or constituted. Notice of any regular meeting of the Board of Directors need not state the purpose of the meeting and, at any regular meeting duly held, any business may be transacted. If the notice of a special meeting shall state as a purpose of the meeting the transaction of any business that may come before the meeting, then at the meeting any business may be transacted, whether or not referred to in the notice thereof. A written waiver of notice of a special or regular meeting, signed by the person or persons entitled to such notice, whether before or after the time stated therein shall be deemed the equivalent of such notice, and attendance of a director at a meeting shall constitute a waiver of notice of such meeting except when the director attends the meeting and prior to or at the commencement of such meeting protests the lack of proper notice. Section 2.13. Quorum and Voting. At all meetings of the Board of Directors, the presence of a majority of the directors then in office shall constitute a quorum for the transaction of business. Except as otherwise required by law, the certificate of incorporation, or these bylaws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. At all meetings of the Board of Directors, each director shall have one vote. Section 2.14. Committees. The Board of Directors may appoint an executive committee and any other committee of the Board of Directors, to consist of one or more directors of the corporation, and may delegate to any such committee any of the authority of the Board of Directors, however conferred, other than the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation. No committee shall have the power or authority to declare a dividend or to authorize the issuance of stock unless the resolution creating such committee expressly so provides. Each such committee shall serve at the pleasure of the Board of Directors, shall act only in the intervals between meetings of the Board of Directors and shall be subject to the control and direction of the Board of Directors. Any such committee may act by a majority of its members at a meeting or by a writing or writings signed by all of its members. Any such committee shall keep written minutes of its meetings and report the same to the Board of Directors at the next regular meeting of the Board of Directors. Section 2.15. Compensation. The Board of Directors may, by resolution passed by a majority of those in office, fix the compensation of directors for service in any capacity and may fix fees for attendance at meetings and may authorize the corporation to pay the traveling and other expenses of directors incident to their attendance at meetings, or may delegate such authority to a committee of the board. Section 2.16. Action by Consent. Any action required or permitted to be taken at any meeting of the board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or such committee. ARTICLE III OFFICERS Section 3.01. General Provisions. The principal officers of the corporation shall be the chairman of the board (who shall be a director), a vice chairman of the board (who shall be a director), a president and chief executive officer (who shall be a director), such number of vice-presidents as the board may from time to time determine, a secretary and a treasurer. Any person may hold any two or more offices and perform the duties thereof, except the offices of chairman of the board and vice chairman of the board, or the offices of president and vice-president or the offices of president and secretary. Section 3.02. Election, Terms of Office, and Qualification. The officers of the corporation named in Section 3.01 of this Article III shall be elected by the Board of Directors for an indeterminate term and shall hold office at the pleasure of the Board of Directors. Section 3.03. Additional Officers, Agents, etc. In addition to the officers mentioned in Section 3.01 of this Article III, the corporation may have such other officers or agents as the Board of Directors may deem necessary and may appoint, each of whom shall hold office for such period, have such authority and perform such duties as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer the power to appoint any subordinate officers or agents. In the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers and duties, or any of them, of such officer to any other officer, or to any director. Section 3.04. Removal. Except as set forth below, any officer of the corporation may be removed, either with or without cause, at any time, by resolution adopted by the Board of Directors at any meeting, the notice (or waivers of notice) of which shall have specified that such removal action was to be considered. Any officer appointed not by the Board of Directors but by an officer or committee to which the Board of Directors shall have delegated the power of appointment may be removed, with or without cause, by the committee or superior officer (including successors) who made the appointment, or by any committee or officer upon whom such power of removal may be conferred by the Board of Directors. Section 3.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, or to the chairman of the board, the vice chairman of the board, the president, or the secretary of the corporation. Any such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.06. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, shall be filled in the manner prescribed in these bylaws for regular appointments or elections to such office. ARTICLE IV DUTIES OF THE OFFICERS Section 4.01. The Chairman of the Board. The chairman of the board shall have general supervision over the property, business and affairs of the corporation and over its several officers, subject, however, to the control of the Board of Directors. The chairman shall, if present, preside at all meetings of the stockholders and of the Board of Directors. The chairman may sign, with the secretary, treasurer or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares in the corporation. Section 4.02. Vice Chairman of the Board. The vice chairman of the board shall perform such duties as are conferred upon him by these bylaws or as may from time to time be assigned to him by the chairman of the board or the Board of Directors. The authority of the vice chairman of the board to sign in the name of the corporation all certificates for shares and deeds, mortgages, leases, bonds, contracts, notes and other instruments, shall be coordinate with like authority of the chairman of the board. In the absence or disability of the chairman of the board, the vice chairman of the board shall perform all the duties of the chairman of the board, and when so acting, shall have all the powers of the chairman of the board. Section 4.03. The President. The president shall be chief executive officer of the corporation and shall perform such duties as are conferred upon him by these bylaws or as may from time to time be assigned to him by the chairman of the board or the vice chairman of the board or the Board of Directors. The president may sign, execute and deliver in the name of the corporation all deeds, mortgages, bonds, leases, contracts, or other instruments either when specially authorized by the Board of Directors or when required or deemed necessary or advisable by him in the ordinary conduct of the corporation's normal business, except in cases where the signing and execution thereof shall be expressly delegated by these bylaws to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent, and the president may cause the seal of the corporation, if any, to be affixed to any instrument requiring the same. Section 4.04. Vice-Presidents. The vice-presidents shall perform such duties as are conferred upon them by these bylaws or as may from time to time be assigned to them by the Board of Directors, the chairman of the board, the vice chairman of the board or the president. At the request of the chairman of the board, in the absence or disability of the president, the vice-president designated by the chairman of the board shall perform all the duties of the president, and when so acting, shall have all of the powers of the president. Section 4.05. The Treasurer. The treasurer shall be the custodian of all funds and securities of the corporation. Whenever so directed by the Board of Directors, the treasurer shall render a statement of the cash and other accounts of the corporation, and the treasurer shall cause to be entered regularly in the books and records of the corporation to be kept for such purpose full and accurate accounts of the corporation's receipts and disbursements. The treasurer shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors, the chairman of the board or the vice chairman of the board. Section 4.06. The Secretary. The secretary shall record and keep the minutes of all meetings of the stockholders and the Board of Directors in a book to be kept for that purpose. The secretary shall be the custodian of, and shall make or cause to be made the proper entries in, the minute book of the corporation and such other books and records as the Board of Directors may direct. The secretary shall be the custodian of the seal of the corporation, if any, and shall affix such seal to such contracts, instruments and other documents as the Board of Directors or any committee thereof may direct. The secretary shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors, the chairman of the board or the vice chairman of the board. ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 5.01. Indemnification. (a) The corporation shall indemnify and hold harmless any person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in, any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, his testator, or intestate is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, to the fullest extent permitted by the laws of Delaware as they may exist from time to time. The right to indemnification conferred in this Article V shall also include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent permitted by the laws of Delaware as they may exist from time to time. (b) The corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the laws of Delaware as they may exist from time to time. Section 5.02. Insurance. The proper officers of the corporation, without further authorization by the Board of Directors, may in their discretion purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent for another corporation, partnership, joint venture, trust or other enterprise, against any liability. Section 5.03. ERISA. To assure indemnification under this Article of all such persons who are or were "fiduciaries" of an employee benefit plan governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974", as amended from time to time, the provisions of this Article V shall, for the purposes hereof, be interpreted as follows: an "other enterprise" shall be deemed to include an employee benefit plan; the corporation shall be deemed to have requested a person to serve as an employee of an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to said Act of Congress shall be deemed "fines"; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation. Section 5.04. Contractual Nature. The foregoing provisions of this Article V shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at any time while this Article is in effect. Neither any repeal or modification of this Article or, to the fullest extent permitted by the laws of Delaware, any repeal or modification of laws, shall affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. Section 5.05. Construction. For the purposes of this Article V, references to "the corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director or officer of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS Section 6.01. Depositories. The chairman of the board, the vice chairman of the board, the president, the treasurer, and any vice-president of the corporation whom the Board of Directors authorizes to designated depositories for the funds of the corporation are each authorized to designate depositories for the funds of the corporation deposited in its name and the signatories and conditions with respect thereto in each case, and from time to time, to change such depositories, signatories and conditions, with the same force and effect as if each such depository, the signatories and conditions with respect thereto and changes therein had been specifically designated or authorized by the Board of Directors; and each depository designated by the Board of Directors or by the chairman of the board, the vice chairman of the board, the president, the treasurer, or any such vice-president of the corporation, shall be entitled to rely upon the certificate of the secretary or any assistant secretary of the corporation setting forth the fact of such designation and of the appointment of the officers of the corporation or of other persons who are to be signatories with respect to the withdrawal of funds deposited with such depository, or from time to time the fact of any change in any depository or in the signatories with respect thereto. Section 6.02. Execution of Instruments Generally. In addition to the powers conferred upon the chairman of the board in Section 4.01 and the vice chairman of the board in Section 4.02 and except as otherwise provided in Section 6.01 of this Article VI, all contracts and other instruments entered into in the ordinary course of business requiring execution by the corporation may be executed and delivered by the president, the treasurer, or any vice president and authority to sign any such contracts or instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons. Any person having authority to sign on behalf of the corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. ARTICLE VII SHARES AND THEIR TRANSFER Section 7.01. Certificate for Shares. Every owner of one or more shares in the corporation shall be entitled to a certificate, which shall be in such form as the Board of Directors shall prescribe, certifying the number and class of shares in the corporation owned by him. When such certificate is counter-signed by an incorporated transfer agent or registrar, the signature of any of said officers may be facsimile, engraved, stamped or printed. The certificates for the respective classes of such shares shall be numbered in the order in which they shall be issued and shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board, or the president or a vice president, and by the secretary or an assistant secretary or the treasurer or an assistant treasurer. A record shall be kept of the name of the person, firm, or corporation owning the shares represented by each such certificate and the number of shares represented thereby, the date thereof, and in case of cancellation, the date of cancellation. Every certificate surrendered to the corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any existing certificates until such existing certificates shall have been so cancelled. Section 7.02. Lost, Destroyed and Mutilated Certificates. If any certificates for shares in the corporation become worn, defaced, or mutilated but are still substantially intact and recognizable, the directors or authorized officers, upon production and surrender thereof, shall order the same cancelled and shall issue a new certificate in lieu of same. The holder of any shares in the corporation shall immediately notify the corporation if a certificate therefor shall be lost, destroyed, or mutilated beyond recognition, and the corporation may issue a new certificate in the place of any certificate theretofore issued by it which is alleged to have been lost or destroyed or mutilated beyond recognition, and the Board of Directors may, in its discretion, require the owner of the certificate which has been lost, destroyed, or mutilated beyond recognition, or his legal representative, to give the corporation a bond in such sum and with such surety or sureties as it may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, destruction, or mutilation of any such certificate. The Board of Directors may, however, in its discretion, refuse to issue any such new certificate except pursuant to legal proceedings, under the laws of the State of Delaware in such case made and provided. Section 7.03. Transfers of Shares. Transfers of shares in the corporation shall be made only on the books of the corporation by the registered holder thereof, his legal guardian, executor, or administrator, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation or with a transfer agent appointed by the Board of Directors, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by properly executed stock powers and evidence of the payment of all taxes imposed upon such transfer. The person in whose name shares stand on the books of the corporation shall, to the full extent permitted by law, be deemed the owner thereof for all purposes as regards the corporation. Section 7.04. Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these bylaws concerning the issue, transfer, and registration of certificates for shares in the corporation. It may appoint one or more transfer agents or one or more registrars, or both, and may require all certificates for shares to bear the signature of either or both. ARTICLE VIII SEAL The Board of Directors may provide a corporate seal, which shall be circular and contain the name of the corporation engraved around the margin and the words "corporate seal", the year of its organization, and the word "Delaware". EX-4.2 4 Exhibit 4.2 State of Delaware [Image material is contained here consisting of the seal of the State of Delaware] Office of Secretary of State ____________________ I, MICHAEL HARKINS, SECRETARY OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF THE LIMITED, INC. FILED IN THIS OFFICE ON THE FIRST DAY OF JUNE, A.D. 1987, AT 10 O'CLOCK A.M. -------------------- [SEAL OF DELAWARE DEPARTMENT OF STATE] /s/ Michael Harkins 727152027 ----------------------------------- Michael Harkins, Secretary of State AUTHENTICATION: 1257804 DATE: 06/02/1987 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION The Limited, Inc., a corporation organized and existing under and by the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of said corporation, resolutions were duly adopted setting forth proposed amendments to the Certificate of Incorporation of said corporation, declaring said amendments to be advisable and calling a meeting of stockholders for consideration thereof. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that a new Section 5 be added to Article Sixth of the Certificate of Incorporation and approved to read in its entirety as follows: Section 5. Elimination of Certain Personal Liability of Directors. A director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of any fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derives an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after approval by the stockholders of this Section to authorize corporate action further eliminating or limiting the personal liability of directors, then the lability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. The foregoing limitation on liability shall not apply to acts or omissions occurring prior to the effective date of this Section. RESOLVED, that Article Thirteenth of the Certificate of Incorporation be added and approved to read in its entirety as follows: THIRTEENTH. Section 1. Vote Required for Certain Business Combinations. The affirmative vote of the holders of not less than 75 percent of the outstanding shares of "Voting Stock" (as hereinafter defined) held by stockholders other than an "Interested Person" (as hereinafter defined) shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) of the Corporation with any Interested Person; provided, however, that the 75 percent voting requirement shall not be applicable if: (a) the "Continuing Directors" (as hereinafter defined) of the Corporation by at least a two-thirds vote (i) have expressly approved in advance the acquisition of the outstanding shares of Voting Stock that caused such Interested Person to become an Interested Person, or (ii) have expressly approved such Business Combination either in advance of or subsequent to such Interested Person's having become an Interested Person; or (b) the cash or fair market value (as determined by at least two-thirds of the Continuing Directors) of the property, securities or "Other Consideration to be Received" (as hereinafter defined) per share by holders of Voting Stock of the Corporation in the Business Combination is not less than the "Fair Price" (as hereinafter defined) paid by the Interested Person in acquiring any of its holdings of the Corporation's Voting Stock. Section 2. Definitions. Certain words and terms as used in this Article THIRTEENTH shall have the meanings given to them by the definitions and descriptions in this Section. 2.1. Business Combination. The term "Business Combination" shall mean (a) any merger or consolidation of the Corporation or a subsidiary of the Corporation with or into an Interested Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation, a mortgage or any other security device, of all or any "Substantial Part" (as hereinafter defined) of the assets either of the Corporation (including without limitation, any voting securities of a subsidiary) or of a subsidiary of the Corporation to an Interested Person, (c) any merger or consolidation of an Interested Person with or into the Corporation or a subsidiary of the Corporation, (d) any sale, lease, exchange, transfer or other disposition, including without limitation, a mortgage or other security device, of all or any Substantial Part of the assets of an Interested Person to the Corporation or a subsidiary of the Corporation, (e) the issuance or transfer by the Corporation or any subsidiary of any securities of the Corporation or a subsidiary of the Corporation to an Interested Person, (f) any reclassification of securities, recapitalization or other comparable transaction involving the Corporation that would have the effect of increasing the voting power of any Interested Person with respect to Voting Stock of the Corporation, and (g) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. 2.2. Interested Person. The term "Interested Person" shall mean and include any individual, corporation, partnership or other person or entity which, together with its "Affiliates" and "Associates" (as defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at the date of the adoption of this Article THIRTEENTH by the stockholders of the Corporation), "Beneficially Owns" (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect at the date of the adoption of this Article THIRTEENTH by the stockholders of the Corporation) in the aggregate 20 percent or more of the outstanding Voting Stock of the Corporation, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity. Without limitation, any share of Voting Stock of the Corporation that any Interested Person has the right to acquire at any time (notwithstanding that Rule 13d-3 deems such shares to be beneficially owned only if such right may be exercised within 60 days) pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed to be Beneficially Owned by the Interested Person and to be outstanding for purposes of this definition. An Interested Person shall be deemed to have acquired a share of the Voting Stock of the Corporation at the time when such Interested Person became the Beneficial Owner thereof. With respect to the shares owned by Affiliates, Associates or other persons whose ownership is attributed to an Interested Person under the foregoing definition of Interested Person, if the price paid by such Interested Person for such shares is not determinable by two-thirds of the Continuing Directors, the price so paid shall be deemed to be the higher of (a) the price paid upon the acquisition thereof by the Affiliate, Associate or other person or (b) the market price of the shares in question at the time when the Interested Person became the Beneficial Owner thereof. 2.3. Voting Stock. The term "Voting Stock" shall mean all of the outstanding shares of Common Stock of the Corporation and any outstanding shares of Preferred Stock entitled to vote on each matter on which the holders of record of Common Stock shall be entitled to vote, and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. 2.4. Continuing Director. The term "Continuing Director" shall mean a Director who was a member of the Board of Directors of the Corporation immediately prior to the time that the Interested Person involved in a Business Combination became an Interested Person, or a Director who was elected or appointed to fill a vacancy after the date the Interested Person became an Interested Person by a majority of the then-current Continuing Directors. 2.5. Fair Price. The term "Fair Price" shall mean the following: If there is only one class of capital stock of the Corporation issued and outstanding, the Fair Price shall mean the highest price that can be determined by a majority of the Continuing Directors to have been paid at any time by the Interested Person for any share or shares of that class of capital stock. If there is more than one class of capital stock of the Corporation issued and outstanding, the Fair Price shall mean with respect to each class and series of capital stock of the Corporation, the amount determined by a majority of the Continuing Directors to be the highest per share price equivalent of the highest price that can be determined to have been paid at any time by the Interested Person for any share or shares of any class or series of capital stock of the Corporation. In determining the Fair Price, all purchases by the Interested Person shall be taken into account regardless of whether the shares were purchased before or after the Interested Person became an Interested Person. Also, the Fair Price shall include any brokerage commissions, transfer taxes and soliciting dealers' fees paid by the Interested Person with respect to the shares of capital stock of the Corporation acquired by the Interested Person. In the case of any Business Combination with an Interested Person, a majority of the Continuing Directors shall determine the Fair Price for each class and series of the capital stock of the Corporation. The Fair Price shall also include interest compounded annually from the date an Interested Person became an Interested Person through the date the Business Combination is consummated at the publicly announced base rate of interest of Morgan Guaranty Trust Company of New York less the aggregate amount of any cash dividends paid, and the fair market value of any dividends paid in other than cash, on each share of capital stock in the same time period, in an amount up to but not exceeding the amount of interest so payable per share of capital stock. 2.6. Substantial Part. The term "Substantial Part" shall mean more than 20 percent of the fair market value as determined by two-thirds of the Continuing Directors of the total consolidated assets of the Corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is being made. 2.7. Other Consideration to be Received. The term "Other Consideration to be Received" shall include, without limitation, Common Stock or other capital stock of the Corporation retained by its existing stockholders other than Interested Persons or other parties to such Business Combination in the event of a Business Combination in which the Corporation is the surviving corporation. Section 3. Determinations by the Continuing Directors. In making any determinations, the Continuing Directors may engage such persons, including investment banking firms and the independent accountants who have reported on the most recent financial statements of the Corporation, and utilize employees and agents of the Corporation, who will, in the judgment of the Continuing Directors, be of assistance to the Continuing Directors. Any determinations made by the Continuing Directors, acting in good faith on the basis of such information and assistance as was then reasonably available for such purposes, shall be conclusive and binding upon the Corporation and its stockholders, including any Interested Person. RESOLVED, that Article Fourteenth of the Certificate of Incorporation be added and approved to read in its entirety as follows: FOURTEENTH. The provisions set forth in Article THIRTEENTH and in this Article FOURTEENTH may not be amended, altered, changed or repealed in any respect unless such action is approved by the affirmative vote of the holders of not less than 75 percent of the outstanding shares of Voting Stock (as defined in Article THIRTEENTH) of the Corporation at a meeting of the stockholders duly called for the consideration of such amendment, alteration, change or repeal; provided, however, that if there is an Interested Person (as defined in Article THIRTEENTH), such action must also be approved by the affirmative vote of the holders of not less than 75 percent of the outstanding shares of Voting Stock held by the stockholders other than the Interested Person. SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held, upon notice and in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendments. THIRD: That the aforesaid amendments were duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, The Limited, Inc. has caused this certificate to be signed by Leslie H. Wexner, its Chairman of the Board, and attested by Robert H. Morosky, its Assistant Secretary, this 19th day of May, 1987. THE LIMITED, INC. By /s/ Leslie Wexner______________ Leslie H. Wexner, Chairman of the Board ATTEST: /s/ Robert H. Morosky Robert H. Morosky Assistant Secretary State of Delaware [Image material is contained here consisting of the seal of the state of Delaware] Office of Secretary of State ____________________ I, MICHAEL HARKINS, SECRETARY OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF THE LIMITED, INC. FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF MAY, A.D. 1986, AT 10 O'CLOCK A.M. | | | | | | | | | | | [SEAL OF THE DELAWARE DEPARTMENT OF STATE] /s/ Michael Harkins________________ 726147058 Michael Harkins, Secretary of State AUTHENTICATION: 10832776 DATE: 05/28/1986 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION The Limited, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "GCL"), DOES HEREBY CERTIFY that the following amendment to Section 1 of Article FOURTH of its certificate of incorporation has been duly adopted in accordance with the provisions of Section 242 of the GCL and amends such Section 1 in its entirety to read as follows: "Section 1. Capital Stock. The Corporation shall be authorized to issue two classes of stock to be designated, respectively, "Preferred Stock" and "Common Stock"; the total number of shares which the Corporation shall have authority to issue is Five Hundred Ten Million (510,000,000); the total number of shares of Preferred Stock shall be Ten Million (10,000,000) and each such share shall have a par value of One Dollar ($1.00); and the total number of shares of Common Stock shall be Five Hundred Million (500,000,000) and each such share shall have a par value of Fifty Cents ($.50)." IN WITNESS WHEREOF, The Limited, Inc. has caused this certificate to be signed by Leslie H. Wexner, its Chairman of the Board, and attested by Robert H. Morosky, its Assistant Secretary, this 19th day of May, 1986. THE LIMITED, INC. By /s/ Leslie H. Wexner____________ Leslie H. Wexner, Chairman of the Board ATTEST: /s/ Robert H. Morosky Robert H. Morosky Assistant Secretary [Image material is contained here consisting of the seal of the State of Delaware] State of Delaware Office of SECRETARY OF STATE ____________________ I, Glenn C. Kenton, Secretary of State of the State of Delaware, do hereby certify that THE LIMITED, INC. is duly incorporated under the laws of the State of Delaware and is in good standing and has a legal corporate existence so far as the records of this office show, as of the date below shown. [SEAL OF THE DELAWARE DEPARTMENT OF STATE] /s/ Glenn C. Kenton________________ Glenn C. Kenton, Secretary of State BY: /s/ M. Toon____________________ DATE: March 16, 1982_______________ CERTIFICATE OF INCORPORATION THE LIMITED, INC. FIRST. The name of the corporation is: THE LIMITED, INC. SECOND. The address of the registered office of the Corporation in the State of Delaware is 100 West Tenth Street in the City of Wilmington, County of New Castle, and the name of its registered agent at that address is The Corporation Trust Company. THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. Section 1. Capital Stock. The Corporation shall be authorized to issue two classes of stock to be designated, respectively, "Preferred Stock" and "Common Stock"; the total number of shares which the Corporation shall have authority to issue is Fifty-five Million (55,000,000); the total number of shares of Preferred Stock shall be Five Million (5,000,000) and each such share shall have a par value of One Dollar ($1.00); and the total number of shares of Common Stock shall be Fifty Million (50,000,000) and each such share shall have a par value of Fifty Cents ($.50). Section 2. Preferred Stock. 2.1. Series and Limits of Variations between Series. Any unissued or treasury shares of the Preferred Stock may be issued from time to time in one or more series for such consideration as may be fixed from time to time by the Board of Directors and each share of a series shall be identical in all respects with the other shares of such series, except that, if the dividends thereon are cumulative, the date from which they shall be cumulative may differ. Before any shares of Preferred Stock of any particular series shall be issued, a certificate shall be filed with the Secretary of State of Delaware setting forth the designation, rights, privileges, restrictions, and conditions to be attached to the Preferred Stock of such series and such other matters as may be required, and the Board of Directors shall fix and determine, and is hereby expressly empowered to fix and determine, in the manner provided by law, the particulars of the shares of such series (so far as not inconsistent with the provisions of this Article applicable to all series of Preferred Stock), including, but not limited to, the following: 2.1.1 the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; 2.1.2 the annual rate of dividends payable on shares of such series, the conditions upon which such dividends shall be payable and the date from which dividends shall be cumulative in the event the Board of Directors determines that dividends shall be cumulative; 2.1.3 whether such series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; 2.1.4 whether such series shall have conversion privileges and, if so, the terms and conditions of such conversion, including, but not limited to, provision for adjustment of the conversion rate upon such events and in such manner as the Board of Directors shall determine; 2.1.5 whether or not the shares of such series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; 2.1.6 whether such series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; 2.1.7 the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and 2.1.8 any other relative rights, preferences and limitations of such series. Section 3. Common Stock. 3.1. Issuance and Consideration. Any unissued or treasury shares of the Common Stock may be issued for such consideration as may be fixed in accordance with applicable law from time to time by the Board of Directors. 3.2. Voting Rights. At every meeting of the stockholders every holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share of Common Stock standing in the name of such stockholder on the books of the Corporation, on each matter on which the Common Stock is entitled to vote. 3.3. Dividends. Subject to the rights of holders of the Preferred Stock, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of stock and the holders of the Preferred Stock shall not be entitled to participate in any such dividends (unless otherwise provided by the Board of Directors in any resolution providing for the issue of a series of Preferred Stock). 3.4. Rights in Event of Dissolution. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, either voluntarily or involuntarily, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amounts to which the holders of the Preferred Stock shall be entitled, to share ratably in the remaining a~sets of the Corporation to the exclusion of the Preferred Stock (unless otherwise provided by the Board of Directors in any resolution providing for the issue of a series of Preferred Stock). Neither the merger or consolidation of the Corporation, nor the sale, lease or conveyance of all or part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3.4. Section 4. No Preemptive Rights. No holder of shares of this Corporation of any class shall be entitled, as such, as a matter of right, to subscribe for or purchase shares of any class now or hereafter authorized, or to purchase or subscribe for securities convertible into or exchangeable for shares of the Corporation or to which there shall be attached or appertain any warrants or rights entitling the holders thereof to purchase or subscribe for shares. FIFTH. Section 1. Amendment of Bylaws by Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the Corporation. Section 2. Amendment of Bylaws by the Stockholders. The bylaws shall not be made, repealed, altered, amended or rescinded by the stockholders of the Corporation except by the vote of the holders of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon. Any amendment to the Certificate of Incorporation which shall contravene any bylaw in existence on the record date of the stockholders meeting at which such amendment is to be voted upon by the stockholders shall require the vote of the holders of not less than 75 percent of the outstanding shares entitled to vote thereon. SIXTH. Section 1. Classified Board. Effective immediately upon the issuance of more than 1,000 shares of Common Stock of the Corporation, the Board of Directors (exclusive of directors to be elected by the holders of any one or more series of Preferred stock voting separately as a class or classes) shall be divided into three classes, Class A, Class B, and Class C. The number of directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of directors by three, and if a fraction is also contained in such quotient, then if such fraction is one-third, the extra director shall be a member of Class A and if the fraction is two-thirds, one of the extra directors shall be a member of Class A and the other shall be a member of Class B. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class A shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1982, the directors first elected to Class B shall serve for a term ending on the date of the second annual meeting next following the end of the calendar year 1982, and the directors first elected to Class C shall serve for a term ending on the date of the third annual meeting next following the end of the calendar year 1982. Notwithstanding the foregoing formula provisions, in the event that, as a result of any change in the authorized number of directors, the number of directors in any class would differ from the number allocated to that class under the formula provided in this Article immediately prior to such change, the following rules shall govern: (a) each director then serving as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term, or his prior death, resignation or removal; (b) at each subsequent election of directors, even if the number of directors in the class whose term of office then expires is less than the number then allocated to that class under said formula, the number of directors then elected for membership in that class shall not be greater than the number of directors in that class whose term of office then expires, unless and to the extent that the aggregate number of directors then elected plus the number of directors in all classes.then duly continuing in office does not exceed the then authorized number of directors of the Corporation; (c) at each subsequent election of directors, if the number of directors in the class whose term of office then expires exceeds the number then allocated to that class under said formula, the Board of Directors shall designate one or more of the directorships then being elected as directors of another class or classes in which the number of directors then serving is less than the number then allocated to such other class or classes under said formula; (d) in the event of the death, resignation or removal of any director who is a member of a class in which the number of directors serving immediately preceding the creation of such vacancy exceeded the number then allocated to that class under said formula, the Board of Directors shall designate the vacancy thus created as a vacancy in another class in which the number of directors then serving is less than the number then allocated to such other class under said formula; (e) in the event of any increase in the authorized number of directors, the newly created directorships resulting from such increase shall be apportioned by the Board of Directors to such class or classes as shall, so far as possible, bring the composition of each of the classes into conformity with the formula in this Article, as it applies to the number of directors authorized immediately following such increase; and (f) designation of directorships or vacancies into other classes and apportionments of newly created directorships to classes by the Board of Directors under the foregoing items (c), (d) and (e) shall, so far as possible, be effected so that the class whose term of office is due to expire next following such designation or apportionment shall contain the full number of directors then allocated to said class under said formula. Notwithstanding any of the foregoing provisions of this Article, each director shall serve until his successor is elected and qualified or until his death, resignation or removal. Section 2. Election by Holders of Preferred Stock. During any period when the holders of any Preferred Stock or any one or more series thereof, voting as a class, shall be entitled to elect a specified number of directors, by reason of dividend arrearages or other provisions giving them the right to do so, then and during such time as such right continues (i) the then otherwise authorized number of directors shall be increased by such specified number of directors, and the holders of such Preferred Stock or such series thereof, voting as a class, shall be entitled to elect the additional directors so provided for, pursuant to the provisions of such Preferred Stock or series; (ii) each such additional director shall serve for such term, and have such voting powers, as shall be stated in the provisions pertaining to such Preferred Stock or series; and (iii) whenever the holders of any such Preferred Stock or series thereof are divested of such rights to elect a specified number of directors, voting as a class, pursuant to the provisions of such Preferred Stock or series, the terms of office of all directors elected by the holders of such Preferred Stock or series, voting as a class pursuant to such provisions or elected to fill any vacancies resulting from the death, resignation or removal of directors so elected by the holders of such Preferred Stock or series, shall forthwith terminate and the authorized number of directors shall be reduced accordingly. Section 3. Ballots. Elections of directors at an annual or special meeting of stockholders need not be by written ballot unless the bylaws of the Corporation shall provide otherwise. Section 4. Initial Directors. The directors of the Corporation shall initially be Leslie H. Wexner, One Limited Parkway, P.O. Box 16528, Columbus, Ohio 43216, who shall initially be a Class A director and Robert H. Morosky, One Limited Parkway, P.O. Box 16528, Columbus, Ohio 43216, who shall initially be a Class B director. SEVENTH. After the issuance of more than 1,000 shares of Common Stock of the Corporation, no action shall be taken by the stockholders except at an annual or special meeting of stockholders. EIGHTH. The affirmative vote of the holders of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon shall be required for the approval of any proposal that (1) the Corporation merge or consolidate with any other corporation or any affiliate of such other corporation if such other corporation and its affiliates singly or in the aggregate are directly or indirectly the beneficial owners of more than five percent of the outstanding shares of any class of stock of the Corporation entitled to vote in the election of directors (such other corporation and any affiliate thereof being herein referred to as a "Related Corporation"), or (2) the Corporation sell, lease or exchange all or substantially all of its assets or business to or with such Related Corporation, or (3) the Corporation issue or deliver any stock or other securities of its issue in exchange or payment for any properties or assets of any such Related Corporation or securities issued by any such Related Corporation or in a merger of any affiliate of the Corporation with or into any such Related Corporation, or (4) the Corporation dissolve, and to effect such transaction the approval of stockholders of the Corporation is required by law or by any agreement between the Corporation and any national securities exchange; provided, however, that the foregoing clauses (1), (2), (3) and (4) shall not apply (i) to any such merger, consolidation, sale, lease, or exchange, or issuance or delivery of assets or other securities which was approved by resolution of the Board of Directors of the Corporation prior to the acquisition of the beneficial ownership of more than five percent of the outstanding Common Stock by the Related Corporation, (ii) to any such transaction solely between the Corporation and another corporation 50 percent or more of the voting power of which is owned by the Corporation provided that the Certificate of Incorporation of the surviving corporation contains provisions substantially similar to those provided in Articles FIFTH, SIXTH, Section 1, SEVENTH, EIGHTH, NINTH, TENTH, and ELEVENTH, (iii) to any transaction between this Corporation and either (a) any stockholder who owned in excess of 10 percent of the Common Stock of the Corporation immediately after the merger of Limited Interim Ohio, Inc., an Ohio corporation, into The Limited Stores, Inc. an Ohio corporation or (b) any affiliate from time to time organized, established, or incorporated of a stockholder referred to in (iii) (a) above. For the purposes hereof, an "affiliate" is any person (including a corporation, partnership, association, trust, business entity, estate or individual) who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified; "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise; and in computing the percentage of outstanding Common Stock beneficially owned by any person, the shares outstanding and the shares owned shall be determined as of the record date fixed to determine the stockholders entitled to vote or express consent with respect to such proposal. The stockholder vote, if any, required for mergers, consolidations, sales, leases, or exchanges of assets or issuances of stock or other securities not expressly provided for in this Article, shall be such as may be required by applicable law. NINTH. The Board of Directors of the Corporation, when evaluating any offer of another party to (1) make a tender or exchange offer for any equity security of the Corporation, (2) merge or consolidate the Corporation with another corporation, or (3) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, shall in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its stockholders, give due consideration to all relevant factors, including without limitation the social and economic effects on the employees, customers, suppliers and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located. TENTH. Any director may be removed at any annual or special stockholders' meeting upon the affirmative vote of the holders of not less than 75 percent of the outstanding shares of voting stock of the Corporation at that time entitled to vote thereon; provided, however, that such director may be removed only for cause and shall receive a copy of the charges against him, delivered to him personally or by mail at his last known address at least 10 days prior to the date of the stockholders' meeting; provided further, that directors who shall have been elected by the holders of a series or class of Preferred Stock, voting separately as a class, shall be removed only pursuant to the provisions establishing the rights of such series or class to elect such directors. ELEVENTH. Section 1. Amendment of Certain Articles. The provisions set forth in this Article ELEVENTH and in Article FIFTH (dealing with the amendment of bylaws), SIXTH, Section 1 (dealing with the classified Board), SEVENTH (dealing with the prohibition against stockholder action without meetings), EIGHTH (dealing with the 75 percent vote of stockholders required for certain reorganizations), NINTH (dealing with certain matters to be considered by the Board in evaluating certain offers), and TENTH (dealing with the removal of any director) may not be amended, altered, changed, or repealed in any respect unless such repeal or amendment is approved by the affirmative vote of the holders of not less than 75 percent of the outstanding shares of the Corporation entitled to vote thereon. Section 2. Amendments Generally. Subject to the provisions of Section 1 of this Article ELEVENTH, the corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. TWELFTH. The name and mailing address of the incorporator of the Corporation are: Name Address Robert H. Morosky One Limited Parkway P. O. Box 16528 Columbus, Ohio 43216 THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation to do business both within and without the State of Delaware and in pursuance of the Delaware General Corporation Law, does make and file this Certificate hereby declaring and certifying that the facts herein,stated are true, and accordingly has hereunto set his hand this 8th day of March, 1982. /s/ Robert H. Morosky Robert H. Morosky STATE OF OHIO COUNTY OF FRANKLIN, SS: Be it remembered that on this 8th day of March, 1982, personally came before me, the subscriber, a Notary Public for the State and County aforesaid, Robert H. Morosky, known to me personally to be such person, and acknowledged the said Certificate of Incorporation to be his act and deed and that the facts therein stated are truly set forth. Given under my hand and seal of office the day and year aforesaid. /s/ James S. Graham Notary Public [Image material is contained here consisting of the seal of the State of Delaware] State of Delaware Office of SECRETARY OF STATE I, Michael Harkins, Secretary of State of the State of Delaware, do hereby certify that above and foregoing is a true and correct copy of Certificate of Change of Location of Registered Office of the companies represented by "The Corporation Trust Company", as it applies to "THE LIMITED, INC." as received and filed in this office the twenty-seventh day of July, A.D. 1984, at 4:30 o'clock P.M. In Testimony Whereof, I have hereunto set my hand and official seal at Dover this twenty-ninth day of May in the year of our Lord one thousand nine hundred and eighty-five. /s/ Michael Harkins________________ Michael Harkins, Secretary of State CERTIFICATE OF CHANGE OF ADDRESS OF REGISTERED OFFICE AND OF REGISTERED AGENT PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE To: DEPARTMENT OF STATE Division of Corporations Townsend Building Federal Street Dover, Delaware 19903 Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code, the undersigned Agent for service of process, in order to change the address of the registered office of the corporations for which it is registered agent, hereby certifies that: 1. The name of the agent is: The Corporation Trust Company 2. The address of the old registered office was: 100 West Tenth Street Wilmington, Delaware 19801 3. The address to which the registered office is to be changed is: Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 The new address will be effective on July 30, 1984. 4. The names of the corporations represented by said agent are set forth on the list annexed to this certificate and made a part hereof by reference. IN WITNESS WHEREOF, said agent has caused this certificate to be signed on its behalf by its Vice-President and Assistant Secretary this 25th day of July, 1984. THE CORPORATION TRUST COMPANY (Name of Registered Agent) By /s/ Virginia Colwell______ (Vice-President) ATTEST: /s/ Mary G. Murray________ (Assistant Secretary) PAGE 918 STATE OF DELAWARE - DIVISION OF CORPORATIONS CHANGE OF ADDRESS FILING FOR CORPORATION TRUST AS OF JULY 27, 1984 DOMESTIC 0933796 THE LIMITED, INC. 03/16/1982 D DE EX-4.3 5 Exhibit 4.3 RESTATED BYLAWS OF THE LIMITED, INC. Adopted April 2, 1984 and as Amended September 17, 1987 and February 23, 1990 ARTICLE I STOCKHOLDERS Section 1.01. Annual Meeting. The annual meeting of the stockholders of this corporation, for the purpose of fixing or changing the number of directors of the corporation, electing directors and transacting such other business as may come before the meeting, shall be held on such date, at such time and at such place as may be designated by the Board of Directors. Section 1.02. Special Meetings. Special meetings of the stockholders may be called at any time by the chairman of the board, the vice chairman of the board, or in case of the death, absence or disability of the chairman of the board and the vice chairman of the board, the president, or in case of the president's death, absence, or disability, the vice president, if any, authorized to exercise the authority of the president, or a majority of the Board of Directors acting with or without a meeting; provided, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provision of the certificate of incorporation or any amendment thereto or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), then such special meeting may also be called by the person or persons, in the manner, at the times and for the purposes so specified. Section 1.03. Place of Meetings. Meetings of stockholders shall be held at the principal office of the corporation in the State of Ohio, unless the Board of Directors decides that a meeting shall be held at some other place and causes the notice thereof to so state. Section 1.04. Notices of Meetings. Unless waived, a written, printed, or typewritten notice of each annual or special meeting, stating the date, hour and place and the purpose or purposes thereof shall be served upon or mailed to each stockholder of record entitled to vote or entitled to notice, not more than 60 days nor less than 10 days before any such meeting. If mailed, such notice shall be directed to a stockholder at his or her address as the same appears on the records of the corporation. If a meeting is adjourned to another time or place and such adjournment is for 30 days or less and no new record date is fixed for the adjourned meeting, no further notice as to such adjourned meeting need be given if the time and place to which it is adjourned are fixed and announced at such meeting. In the event of a transfer of shares after notice has been given and prior to the holding of the meeting, it shall not be necessary to serve notice on the transferee. Such notice shall specify the place where the stockholders list will be open for examination prior to the meeting if required by Section 1.08 hereof. Section 1.05. Fixing Date for Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If the Board shall not fix such a record date, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (ii) in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board of Directors shall adopt the resolution relating thereto. Determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 1.06. Organization. At each meeting of the stockholders, the chairman of the board, or in his absence, the vice chairman of the board, or in his absence, the president, or, in his absence, any vice-president, or, in the absence of the chairman of the board, the vice chairman of the board, the president and a vice-president, a chairman chosen by a majority in interest of the stockholders present in person or by proxy and entitled to vote, shall act as chairman, and the secretary of the corporation, or, if the secretary of the corporation not be present, the assistant secretary, or if the secretary and the assistant secretary not be present, any person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting. Section 1.07. Quorum. A stockholders' meeting duly called shall not be organized for the transaction of business unless a quorum is present. Except as otherwise expressly provided by law, the certificate of incorporation, these bylaws, or any certificate filed under Section 151 (g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), (i) at any meeting called by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least one-third of the voting power of the corporation shall constitute a quorum for such meeting and (ii) at any meeting called other than by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least a majority of the voting power of the corporation shall constitute a quorum for such meeting. The stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. If meeting cannot be organized because a quorum has not attended, a majority in voting interest of the stockholders present may adjourn, or, in the absence of a decision by the majority, any officer entitled to preside at such meeting may adjourn the meeting from time to time to such time (not more than 30 days after the previously adjourned meeting) and place as they (or he) may determine, without notice other than by announcement at the meeting of the time and place of the adjourned meeting. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. Section 1.08. List of Stockholders. The secretary of the corporation shall prepare and make a complete list of the stockholders of record as of the applicable record date entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 1.09. Order of Business and Procedure. The order of business at all meetings of the stockholders and all matters relating to the manner of conducting the meeting shall be determined by the chairman of the meeting, whose decisions may be overruled only by majority vote of the stockholders present and entitled to vote at the meeting in person or by proxy. Meetings shall be conducted in a manner designed to accomplish the business of the meeting in a prompt and orderly fashion and to be fair and equitable to all stockholders, but it shall not be necessary to follow any manual of parliamentary procedure. Section 1.10. Voting. (a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the corporation on the date fixed pursuant to Section 1.05 of these bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting. (b) Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting in sufficient time to permit the necessary examination and tabulation thereof before the vote is taken; provided, however, that no proxy shall be valid after the expiration of three years after the date of its execution, unless the stockholder executing it shall have specified therein the length of time it is to continue in force. At any meeting of the stockholders all matters, except as otherwise provided in the certificate of incorporation, in these bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and voting thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting or required by the certificate of incorporation. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted. Section 1.11. Inspectors. The Board of Directors, in advance of any meeting of the stockholders, may appoint one or more inspectors to act at the meeting. If inspectors are not so appointed, the person presiding at the meeting may appoint one or more inspectors. If any person so appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at the meeting with strict impartiality and according to the best of his ability. The inspectors so appointed shall determine the number of shares outstanding, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies and shall receive votes, ballots, waivers, releases, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, waivers, releases, or consents, determine and announce the results and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. ARTICLE II BOARD OF DIRECTORS Section 2.01. General Powers of Board. The powers of the corporation shall be exercised, its business and affairs conducted, and its property controlled by the Board of Directors, except as otherwise provided by the law of Delaware or in the certificate of incorporation. Section 2.02. Number of Directors. The number of directors of the corporation (exclusive of directors to be elected by the holders of any one or more series of Preferred Stock voting separately as a class or classes) shall not be less than 9 nor more than 13, the exact number of directors to be such number as may be set from time to time within the limits set forth above by resolution adopted by affirmative vote of a majority of the whole Board of Directors. As used in these Bylaws, the term "whole Board" means the total number of directors which the corporation would have if there were no vacancies. Section 2.03. Election of Directors. At each meeting of the stockholders for the election of directors, the persons receiving the greatest number of votes shall be the directors. Section 2.04. Nominations. 2.04.1. Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. 2.04.2. Such nominations, if not made by the Board of Directors, shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the secretary of the corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the secretary of the corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Each such notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee. 2.04.3. Notice of nominations which are proposed by the Board of Directors shall be given on behalf of the Board by the chairman of the meeting. 2.04.4. The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 2.05. Resignations. Any director of the corporation may resign at any time by giving written notice to the chairman of the board or the secretary of the corporation. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.06. Vacancies. In the event that any vacancy shall occur in the Board of Directors, whether because of death, resignation, removal, newly created directorships resulting from any increase in the authorized number of directors, the failure of the stockholders to elect the whole authorized number of directors, or any other reason, such vacancy may be filled by the vote of a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy, other than a newly created directorship, shall hold office for the unexpired term of his predecessor. Section 2.07. Removal of Directors. Directors may be removed only as provided in the certificate of incorporation. Section 2.08. Place of Meeting, etc. The Board of Directors may hold any of its meetings at the principal office of the corporation or at such other place or places as the Board of Directors may from time to time designate. Directors may participate in any regular or special meeting of the Board of Directors by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board of Directors can hear each other and such participation shall constitute presence in person at such meeting. Section 2.09. Annual Meeting. A regular annual meeting of the Board of Directors shall be held each year at the same place as and immediately after the annual meeting of stockholders, or at such other place and time as shall theretofore have been determined by the Board of Directors and notice thereof need not be given. At its regular annual meeting the Board of Directors shall organize itself and elect the officers of the corporation for the ensuing year, and may transact any other business. Section 2.10. Regular Meetings. Regular meetings of the Board of Directors may be held at such intervals and at such time as shall from time to time be determined by the Board of Directors. After such determination and notice thereof has been once given to each person then a member of the Board of Directors, regular meetings may be held at such intervals and time and place without further notice being given. Section 2.11. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Board of Directors or by the chief executive officer or by a majority of directors then in office to be held on such day and at such time as shall be specified by the person or persons calling the meeting. Section 2.12. Notice of Meetings. Notice of each special meeting or, where required, each regular meeting, of the Board of Directors shall be given to each director either by being mailed on at least the third day prior to the date of the meeting or by being telegraphed or given personally or by telephone on at least 24 hours notice prior to the date of meeting. Such notice shall specify the place, date and hour of the meeting and, if it is for a special meeting, the purpose or purposes for which the meeting is called. At any meeting of the Board of Directors at which every director shall be present, even though without such notice, any business may be transacted. Any acts or proceedings taken at a meeting of the Board of Directors not validly called or constituted may be made valid and fully effective by ratification at a subsequent meeting which shall be legally and validly called or constituted. Notice of any regular meeting of the Board of Directors need not state the purpose of the meeting and, at any regular meeting duly held, any business may be transacted. If the notice of a special meeting shall state as a purpose of the meeting the transaction of any business that may come before the meeting, then at the meeting any business may be transacted, whether or not referred to in the notice thereof. A written waiver of notice of a special or regular meeting, signed by the person or persons entitled to such notice, whether before or after the time stated therein shall be deemed the equivalent of such notice, and attendance of a director at a meeting shall constitute a waiver of notice of such meeting except when the director attends the meeting and prior to or at the commencement of such meeting protests the lack of proper notice. Section 2.13. Quorum and Voting. At all meetings of the Board of Directors, the presence of a majority of the directors then in office shall constitute a quorum for the transaction of business. Except as otherwise required by law, the certificate of incorporation, or these bylaws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. At all meetings of the Board of Directors, each director shall have one vote. Section 2.14. Committees. The Board of Directors may appoint an executive committee and any other committee of the Board of Directors, to consist of one or more directors of the corporation, and may delegate to any such committee any of the authority of the Board of Directors, however conferred, other than the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation. No committee shall have the power or authority to declare a dividend or to authorize the issuance of stock unless the resolution creating such committee expressly so provides. Each such committee shall serve at the pleasure of the Board of Directors, shall act only in the intervals between meetings of the Board of Directors and shall be subject to the control and direction of the Board of Directors. Any such committee may act by a majority of its members at a meeting or by a writing or writings signed by all of its members. Any such committee shall keep written minutes of its meetings and report the same to the Board of Directors at the next regular meeting of the Board of Directors. Section 2.15. Compensation. The Board of Directors may, by resolution passed by a majority of those in office, fix the compensation of directors for service in any capacity and may fix fees for attendance at meetings and may authorize the corporation to pay the traveling and other expenses of directors incident to their attendance at meetings, or may delegate such authority to a committee of the board. Section 2.16. Action by Consent. Any action required or permitted to be taken at any meeting of the board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or such committee. ARTICLE III OFFICERS Section 3.01. General Provisions. The officers of the corporation shall be the chairman of the board (who shall be a director), a vice chairman of the board (who shall be a director), a president, such number of vice-presidents as the board may from time to time determine, a secretary and a treasurer. Any person may hold any two or more offices and perform the duties thereof, except the offices of chairman of the board and vice chairman of the board, or the offices of president and vice-president. Section 3.02. Election, Terms of Office, and Qualification. The officers of the corporation named in Section 3.01 of this Article III shall be elected by the Board of Directors for an indeterminate term and shall hold office during the pleasure of the Board of Directors. Section 3.03. Additional Officers. Agents, etc. In addition to the officers mentioned in Section 3.01 of this Article III, the corporation may have such other officers or agents as the Board of Directors may deem necessary and may appoint, each of whom or each member of which shall hold office for such period, have such authority and perform such duties as may be provided in these bylaws as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer the power to appoint any subordinate officers or agents. In the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers and duties, or any of them, of such officer to any other officer, or to any director. Section 3.04. Removal. Any officer of the corporation may be removed, either with or without cause, at any time, by resolution adopted by the Board of Directors at any meeting, the notice (or waivers of notice) of which shall have specified that such removal action was to be considered. Any officer appointed not by the Board of Directors but by an officer or committee to which the Board of Directors shall have delegated the power of appointment may be removed, with or without cause, by the committee or superior officer (including successors) who made the appointment, or by any committee or officer upon whom such power of removal may be conferred by the Board of Directors. Section 3.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, or to the chairman of the board, the vice chairman of the board, the president, or the secretary of the corporation. Any such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.06. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, shall be filled in the manner prescribed in these bylaws for regular appointments or elections to such office. ARTICLE IV DUTIES OF THE OFFICERS Section 4.01. The Chairman of the Board. The chairman of the board shall be chief executive officer of the corporation and shall have general supervision over the property, business and affairs of the corporation and over its several officers, subject, however, to the control of the Board of Directors. He shall, if present, preside at all meetings of the stockholders and of the Board of Directors. He may sign, with the secretary, treasurer or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares in the corporation. He may sign, execute and deliver in the name of the corporation all deeds, mortgages, bonds, leases, contracts, or other instruments either when specially authorized by the Board of Directors or when required or deemed necessary or advisable by him in the ordinary conduct of the corporation's normal business, except in cases where the signing and execution thereof shall be expressly delegated by these bylaws to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent, and he may cause the seal of the corporation, if any, to be affixed to any instrument requiring the same. Section 4.02. Vice Chairman of the Board. The vice chairman of the board shall perform such duties as are conferred upon him by these bylaws or as may from time to time be assigned to him by the chairman of the board or the Board of Directors. The authority of the vice chairman of the board to sign in the name of the corporation all certificates for shares and deeds, mortgages, leases, bonds, contracts, notes and other instruments, shall be coordinate with like authority of the chairman of the board. In the absence or disability of the chairman of the board, the vice chairman of the board shall perform all the duties of the chairman of the board, and when so acting, shall have all the powers of the chairman of the board. Section 4.03. The President. The president shall perform such duties as are conferred upon him by these bylaws or as may from time to time be assigned to him by the chairman of the board or the vice chairman of the board or the Board of Directors. Section 4.04. Vice-Presidents. The vice-presidents shall perform such duties as are conferred upon them by these bylaws or as may from time to time be assigned to them by the Board of Directors, the chairman of the board, the vice chairman of the board or the president. At the request of the chairman of the board, in the absence or disability of the president, the vice-president, designated by the chairman of the board shall perform all the duties of the president, and when so acting, shall have all of the powers of the president. Section 4.05. The Treasurer. The treasurer shall be the custodian of all funds and securities of the corporation. Whenever so directed by the Board of Directors, he shall render a statement of the cash and other accounts of the corporation, and he shall cause to be entered regularly in the books and records of the corporation to be kept for such purpose full and accurate accounts of the corporation's receipts and disbursements. He shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors, the chairman of the board or the vice chairman of the board. Section 4.06. The Secretary. The secretary shall record and keep the minutes of all meetings of the stockholders and the Board of Directors in a book to be kept for that purpose. He shall be the custodian of, and shall make or cause to be made the proper entries in, the minute book of the corporation and such other books and records as the Board of Directors may direct. He shall be the custodian of the seal of the corporation, if any, and shall affix such seal to such contracts, instruments and other documents as the Board of Directors or any committee thereof may direct. He shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors, the chairman of the board or the vice chairman of the board. ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 5.01. Indemnification. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, his testator, or intestate is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body against all expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding (including appeals) or the defense or settlement thereof or any claim, issue, or matter therein, to the fullest extent permitted by the laws of Delaware as they may exist from time to time. Section 5.02. Insurance. The proper officers of the corporation, without further authorization by the Board of Directors, may in their discretion purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent for another corporation, partnership, joint venture, trust or other enterprise, against any liability. Section 5.03. ERISA. To assure indemnification under this Article of all such persons who are or were "fiduciaries" of an employee benefit plan governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974", as amended from time to time, the provisions of this Article V shall, for the purposes hereof, be interpreted as follows: an "other enterprise" shall be deemed to include an employee benefit plan; the corporation shall be deemed to have requested a person to serve as an employee of an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to said Act of Congress shall be deemed "fines"; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation. Section 5.04. Contractual Nature. The foregoing provisions of this Article V shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at any time while this Section is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. Section 5.05. Construction. For the purposes of this Article V, references to "the corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director or officer of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 5.06. Non-Exclusive. The corporation may indemnify, or agree to indemnify, any person against any liabilities and expenses and pay any expenses, including attorneys' fees, in advance of final disposition of any action, suit or proceeding, under any circumstances, if such indemnification and/or payment is approved by the vote of the stockholders or of the disinterested directors, or is, in the opinion of independent legal counsel selected by the Board of Directors, to be made on behalf of an indemnitee who acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation. ARTICLE VI DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS Section 6.01 Depositories. The chairman of the board, the vice chairman of the board, the president, the treasurer, and any vice-president of the corporation whom the Board of Directors authorizes to designate depositories for the funds of the corporation are each authorized to designate depositories for the funds of the corporation deposited in its name and the signatories and conditions with respect thereto in each case, and from time to time, to change such depositories, signatories and conditions, with the same force and effect as if each such depository, the signatories and conditions with respect thereto and changes therein had been specifically designated or authorized by the Board of Directors; and each depository designated by the Board of Directors or by the chairman of the board, the vice chairman of the board, the president, the treasurer, or any such vice-president of the corporation, shall be entitled to rely upon the certificate of the secretary or any assistant secretary of the corporation setting forth the fact of such designation and of the appointment of the officers of the corporation or of both or of other persons who are to be signatories with respect to the withdrawal of funds deposited with such depository, or from time to time the fact of any change in any depository or in the signatories with respect thereto. Section 6.02. Execution of Instruments Generally. In addition to the powers conferred upon the chairman of the board in Section 4.01 and the vice chairman of the board in Section 4.02 and except as otherwise provided in Section 6.01 of this Article VI, all contracts and other instruments entered into in the ordinary course of business requiring execution by the corporation may be executed and delivered by the president, the treasurer, or any vice president and authority to sign any such contracts or instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons. Any person having authority to sign on behalf of the corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. ARTICLE VII SHARES AND THEIR TRANSFER Section 7.01. Certificate for Shares. Every owner of one or more shares in the corporation shall be entitled to a certificate, which shall be in such form as the Board of Directors shall prescribe, certifying the number and class of shares in the corporation owned by him. When such certificate is counter-signed by an incorporated transfer agent or registrar, the signature of any of said officers may be facsimile, engraved, stamped or printed. The certificates for the respective classes of such shares shall be numbered in the order in which they shall be issued and shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board, or the president or a vice president, and by the secretary or an assistant secretary or the treasurer or an assistant treasurer. A record shall be kept of the name of the person, firm, or corporation owning the shares represented by each such certificate and the number of shares represented thereby, the date thereof, and in case of cancellation, the date of cancellation. Every certificate surrendered to the corporation for exchange or transfer shall be canceled and no new certificate or certificates shall be issued in exchange for any existing certificates until such existing certificates shall have been so cancelled. Section 7.02. Lost Destroyed and Mutilated Certificates. If any certificates for shares in this corporation become worn, defaced, or mutilated but are still substantially intact and recognizable, the directors, upon production and surrender thereof, shall order the same cancelled and shall issue a new certificate in lieu of same. The holder of any shares in the corporation shall immediately notify the corporation if a certificate therefor shall be lost, destroyed, or mutilated beyond recognition, and the corporation may issue a new certificate in the place of any certificate theretofore issued by it which is alleged to have been lost or destroyed or mutilated beyond recognition, and the Board of Directors may, in its discretion, require the owner of the certificate which has been lost, destroyed, or mutilated beyond recognition, or his legal representative, to give the corporation a bond in such sum and with such surety or sureties as it may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, destruction, or mutilation of any such certificate. The Board of Directors may, however, in its discretion, refuse to issue any such new certificate except pursuant to legal proceedings, under the laws of the State of Delaware in such case made and provided. Section 7.03. Transfers of Shares. Transfers of shares in the corporation shall be made only on the books of the corporation by the registered holder thereof, his legal guardian, executor, or administrator, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation or with a transfer agent appointed by the Board of Directors, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by properly executed stock powers and evidence of the payment of all taxes imposed upon such transfer. The person in whose name shares stand on the books of the corporation shall, to the full extent permitted by law, be deemed the owner thereof for all purposes as regards the corporation. Section 7.04. Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these bylaws concerning the issue, transfer, and registration of certificates for shares in the corporation. It may appoint one or more transfer agents or one or more registrars, or both, and may require all certificates for shares to bear the signature of either or both. ARTICLE VIII SEAL The Board of Directors may provide a corporate seal, which shall be circular and contain the name of the corporation engraved around the margin and the words "corporate seal", the year of its organization, and the word "Delaware". 6029G 02/12/88 EX-10.1 6 Exhibit 10.1 - --------------------------------------------------------------------------- $150,000,000 CREDIT AGREEMENT dated as of June 28, 1996 among Abercrombie & Fitch Stores, Inc. A & F Trademark, Inc. The Banks Listed Herein The Chase Manhattan Bank, N.A., as Administrative Agent and Citibank, N.A. and Morgan Guaranty Trust Company of New York, as Co-Agents - --------------------------------------------------------------------------- TABLE OF CONTENTS ------------- Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions.............................................1 Section 1.02. Accounting Terms and Determinations....................17 Section 1.03. Types of Borrowings....................................17 ARTICLE II THE CREDITS Section 2.01. Commitments to Lend....................................18 Section 2.02. Method of Borrowing....................................18 Section 2.03. Notes..................................................20 Section 2.04. Interest Rate Elections................................21 Section 2.05. Interest Rates.........................................23 Section 2.06. Fees...................................................26 Section 2.07. Termination of Commitments.............................26 Section 2.08. Mandatory Repayments and Prepayments...................26 Section 2.09. Optional Prepayments...................................28 Section 2.10. General Provisions as to Payments......................28 Section 2.11. Funding Losses.........................................29 Section 2.12. Computation of Interest................................30 ARTICLE III CONDITIONS Section 3.01. Conditions.............................................30 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Existence and Power....................................32 Section 4.02. Corporate and Governmental Authorization; No Contravention......................................32 Section 4.03. Binding Effect.........................................33 Section 4.04. Financial Information; Title to Properties.............33 Section 4.05. Litigation.............................................33 Section 4.06. Compliance with ERISA..................................34 Section 4.07. Taxes..................................................34 Section 4.08. Subsidiaries...........................................34 Section 4.09. Not an Investment Company..............................34 Section 4.10. Compliance with Laws...................................35 Section 4.11. Agreements.............................................35 Section 4.12. Federal Reserve Regulations............................35 Section 4.13. Disclosure.............................................35 Section 4.14. Solvency...............................................36 Section 4.15. Trademarks.............................................36 Section 4.16. Environmental Matters..................................36 ARTICLE V COVENANTS Section 5.01. Information............................................37 Section 5.02. Payment of Obligations.................................39 Section 5.03. Maintenance of Property and Rights; Insurance..........39 Section 5.04. Conduct of Business and Maintenance of Existence.......40 Section 5.05. Compliance with Laws...................................40 Section 5.06. Inspection of Property, Books and Records..............40 Section 5.07. Fiscal Agent...........................................41 Section 5.08. Subsidiaries; Partnerships.............................41 Section 5.09. Debt...................................................41 Section 5.10. Restricted Payments....................................42 Section 5.11. Mergers, Consolidations, Acquisitions and Sales of Assets......................................42 Section 5.12. Transactions with Affiliates...........................43 Section 5.13. Sale and Lease-Back Transactions.......................43 Section 5.14. Investments............................................43 Section 5.15. Cash Management System.................................44 Section 5.16. Negative Pledge........................................44 Section 5.17. Use of Proceeds........................................45 Section 5.18. Grants of Negative Pledges or Dividend Restrictions....45 Section 5.19. Changes in Accounting..................................45 Section 5.20. Coverage Ratio.........................................46 Section 5.21. Leverage Ratio.........................................46 Section 5.22. Capital Expenditures...................................46 ARTICLE VI DEFAULTS Section 6.01. Events of Default......................................47 Section 6.02. Notice of Default......................................50 ARTICLE VII THE AGENT Section 7.01. Appointment and Authorization..........................50 Section 7.02. Agent and Affiliates...................................51 Section 7.03. Action by Agent........................................51 Section 7.04. Consultation with Experts..............................51 Section 7.05. Liability of Agent.....................................51 Section 7.06. Indemnification........................................52 Section 7.07. Credit Decision........................................52 Section 7.08. Successor Agent........................................52 Section 7.09. Agent's Fees...........................................53 Section 7.10. Sub-Agents.............................................53 ARTICLE VIII CHANGE IN CIRCUMSTANCES Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.................................53 Section 8.02. Illegality.............................................53 Section 8.03. Increased Cost and Reduced Return......................54 Section 8.04. Taxes..................................................56 Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.....................................58 Section 8.06. Substitution of Bank...................................59 ARTICLE IX MISCELLANEOUS Section 9.01. Notices................................................59 Section 9.02. No Waivers.............................................60 Section 9.03. Expenses; Documentary Taxes; Indemnification...........60 Section 9.04. Sharing of Set-offs....................................61 Section 9.05. Amendments and Waivers.................................61 Section 9.06. Successors and Assigns.................................62 Section 9.07. Collateral.............................................64 Section 9.08. Waiver of Trial by Jury................................64 Section 9.09. New York Law...........................................64 Section 9.10. Counterparts; Integration..............................65 Section 9.11. Several Obligations....................................65 Section 9.12. Interest Rate Limitation...............................65 SCHEDULES Schedule 1 -- Commitments Schedule 5.16 -- Existing Liens EXHIBITS: Exhibit A -- Form of Note Exhibit B -- Form of Guarantee Agreement Exhibit C -- Form of Subordination Agreement Exhibit D -- Forms of Opinions of Counsel CREDIT AGREEMENT AGREEMENT dated as of June 28, 1996, among ABERCROMBIE & FITCH STORES, INC., A & F TRADEMARK, INC., the BANKS listed on the signature pages hereof, THE CHASE MANHATTAN BANK, N.A., as Administrative Agent and CITIBANK, N.A. and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Agents. Preliminary Statement The Borrowers (such term, and all other capitalized terms in this preliminary statement, being used as hereinafter defined) have requested the Banks, subject to the terms and conditions of this Agreement, to extend credit to the Borrowers, in the aggregate principal amount of up to $150,000,000, in the form of (i) the A & F Term Loans to be made by the Banks to A & F on the Effective Date in an aggregate principal amount not in excess of $144,000,000, and (ii) the Trademark Co. Term Loans to be made by the Banks to Trademark Co. on the Effective Date in an aggregate principal amount not in excess of $6,000,000. The proceeds of the Loans shall be used (i) by A & F to fund payments to be made by A & F in respect of inter-company indebtedness owed to The Limited or other subsidiaries of The Limited and dividends or other equity distributions by A & F to Holdings and (ii) by Trademark Co. to fund dividends or other equity distributions by Trademark Co. to The Limited. The proceeds of the dividends or other equity distributions received by Holdings from A & F as provided in clause (i) above shall be used by Holdings to fund dividends or other equity distributions by Holdings to The Limited. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. The following terms, as used herein, have the following meanings: "Adjusted Debt" means, at any time, the Borrower Group's Consolidated Debt at such time, excluding (a) any such Debt that constitutes a Subordinated Obligation and (b) any contingent obligation of any member of the Borrower Group as an account party or guarantor thereof in respect of trade letters of credit incurred in the ordinary course of business. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Agent and submitted to the Agent (with a copy to the Borrowers) duly completed by such Bank. "A & F" means Abercrombie & Fitch Stores, Inc., a Delaware corporation, and its successors. "A & F Parent" has the meaning set forth in the definition of the term Reorganization. "A & F Term Commitment" means, as to any Bank, the obligation of such Bank to make an A & F Term Loan to A & F in an aggregate principal amount not exceeding the amount set forth opposite such Bank's name in Schedule 1 hereto under the caption "A & F Term Commitment". "A & F Term Loan" means a loan made by a Bank to A & F pursuant to Section 2.01(a). "Affiliate" means, with respect to any member of the Borrower Group, any Person directly or indirectly controlling, controlled by or under common control with such member of the Borrower Group, but excluding other members of the Borrower Group. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this Agreement and the other Loan Documents, each of The Limited and its subsidiaries (other than members of the Borrower Group) shall be deemed to be an Affiliate of each member of the Borrower Group. "Agent" means The Chase Manhattan Bank, N.A., in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means at any time a loan outstanding hereunder which bears interest at such time at a rate based on the Base Rate pursuant to a Notice of Borrowing or Notice of Interest Rate Election or pursuant to Article VIII. "Borrower Group" means (i) Holdings and its subsidiaries, including A & F, (ii) Trademark Co. and its subsidiaries and (iii) after a Reorganization, A & F Parent and its subsidiaries. "Borrowers" means A & F and Trademark Co. "Borrowing" has the meaning set forth in Section 1.03. "Calculation Period" means a period of four consecutive fiscal quarters of the Borrower Group ending on the last day of a fiscal quarter or fiscal year for which financial statements have been delivered to the Agent pursuant to Section 5.01(a) or 5.01(b). "Capital Expenditures" means, with respect to the Borrower Group for any period, the additions to property, plant and equipment and other capital expenditures of the Borrower Group for such period, as the same are (or would be) set forth, in accordance with generally accepted accounting principles, in a consolidated statement of cash flow of the Borrower Group for such period. "Cash Available for Principal Payments" means, for any period, the sum (without duplication) of (a) the Borrower Group's Consolidated Net Income for such period, (b) depreciation, amortization and other non-cash items deducted in determining such Consolidated Net Income, (c) interest expense deducted in determining such Consolidated Net Income, to the extent such interest expense constitutes a Primary Subordinated Obligation and (d) income taxes deducted in determining such Consolidated Net Income minus, without duplication, (i) Tax Sharing Payments made during such period, (ii) Capital Expenditures made during such period and (iii) the amount of any noncash items included in income in determining such Consolidated Net Income. "Cash Interest Expense" means, with respect to the Borrower Group for any period, the consolidated interest expense of the Borrower Group for such period excluding, to the extent otherwise included therein, (a) amortization of financing costs paid in a previous period and (b) interest expense that constitutes a Primary Subordinated Obligation. "Cash Management System" means the arrangements among The Limited and its subsidiaries for concentrating cash balances for investment and distributing cash balances for application pursuant to open account advances and repayment of advances between and among The Limited and such subsidiaries in the ordinary course of business. "Class" has the meaning set forth in Section 1.03. "Commitment" means, with respect to each Bank, its A & F Term Commitment or Trademark Co. Term Commitment or both, as the context may require. "Consolidated Debt" means, with respect to the Borrower Group at any date, the consolidated Debt of the Borrower Group as of such date. "Consolidated EBITDA" means, with respect to the Borrower Group for any period, the sum (without duplication) of (a) the Borrower Group's Consolidated Net Income for such period, excluding extraordinary or nonrecurring gains or losses, plus (b) interest expense deducted in determining such Consolidated Net Income, plus (c) income taxes deducted in determining such Consolidated Net Income, plus (d) depreciation and amortization deducted in determining such Consolidated Net Income. "Consolidated Net Income" means, with respect to the Borrower Group for any period, the consolidated net income (or loss) of the Borrower Group for such period. "Consolidated Subsidiary" means, with respect to any member of the Borrower Group at any date, any subsidiary or other entity the accounts of which would be consolidated with those of such member of the Borrower Group in its consolidated financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all obligations of such Person as an account party in respect of letters of credit and bankers' acceptances, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrowers and the Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Environmental and Safety Laws" means any and all applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, approvals, concessions, grants, franchises, licenses, agreements with Governmental Authorities or other governmental restrictions or requirements binding upon a member of the Borrower Group relating to the environment, or to employee health or safety as it pertains to the use or handling of or exposure to noxious odors or toxic, caustic or radioactive substances, materials or wastes (including, without limitation, petroleum or petroleum products, polychlorinated byphenyls (PCBs), asbestos or asbestos containing materials) or to the preservation or reclamation of natural resources as a result of the actual or threatened emission, discharge or release of pollutants or contaminants into the environment including, without limitation, ambient air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any such pollutants, contaminants, toxic, caustic or hazardous substances, materials or wastes or the clean-up or other remediation thereof, including the Hazardous Materials Transportation Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, the Clean Air Act of 1970, as amended, the Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of 1970, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as amended, and any similar or implementing state law, and all amendments or regulations promulgated hereunder. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means, with respect to any member of the Borrower Group, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such member, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrowers and the Agent. "Euro-Dollar Loan" means at any time a loan outstanding hereunder which bears interest at such time at a rate based on the London Interbank Offered Rate or the NIBO Rate pursuant to a Notice of Borrowing or Notice of Interest Rate Election. "Euro-Dollar Margin" means (a) 0.400% to and including the earlier of (i) the first date after a Reorganization on which A & F Parent ceases to be a Wholly-Owned Subsidiary of The Limited and (ii) March 31, 1997, and (b) thereafter, (i) 0.400% during a Level I Pricing Period, (ii) 0.500% during a Level II Pricing Period, (iii) 0.625% during a Level III Pricing Period, and (iv) 0.750% during a Level IV Pricing Period. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.05(b). "Event of Default" has the meaning set forth in Section 6.01. "Excess Cash Flow" means, for any period, an amount equal to the excess, if any, of (a) the sum of (i) 100% of the proceeds (net of underwriting discounts and commissions and out-of-pocket expenses) received by or for the account of A&F Parent during such period in respect of the issuance by A&F Parent of any equity securities, plus (ii) 50% of Cash Available for Principal Payments for such period, over (b) the aggregate principal amount of Loans repaid or prepaid during such period (excluding prepayments pursuant to Section 2.08(d)); provided that, if the period for which Excess Cash Flow is being determined is a fiscal quarter, "Cash Available for Principal Payments" for purposes of clause (a)(ii) above shall be an amount equal to 25% of Cash Available for Principal Payments for the period of four consecutive fiscal quarters ended at the end of the fiscal quarter for which such determination is being made. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of l%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank, N.A., on such day on such transactions as determined by the Agent. "Governmental Authority" means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantee Agreement" means the Guarantee Agreement among the Guarantors and the Agent, substantially in the form of Exhibit B hereto, as amended from time to time. "Guarantors" means (i) as to the Obligations of each Borrower, each member of the Borrower Group other than the Borrowers, (ii) as to the Obligations of A & F, Trademark Co. and (iii) as to the Obligations of Trademark Co., A & F. "Holdings" means Abercrombie & Fitch Holding Corporation, a Delaware corporation, and its successors. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter (or, if available, as determined by the Agent after consultation with the Banks, one or two weeks thereafter), as the applicable Borrower may elect in the applicable Notice of Borrowing or Notice of Interest Rate Election; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) in the case of Interest Periods of one month or longer, any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) if any Interest Period includes a date on which a payment of principal of the Loans of the applicable Class is required to be made under subsection (a) or (b) of Section 2.08 but does not end on such date, then (i) the principal amount (if any) of each Euro-Dollar Loan required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such Euro-Dollar Loan shall have an Interest Period determined as set forth above; and (2) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending on the next Quarterly Payment Date that occurs thereafter; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b)(i) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) if any Interest Period includes a date on which a payment of principal of the Loans of the applicable Class is required to be made under subsection (a) or (b) of Section 2.08 but does not end on such date, then (i) the principal amount (if any) of each Base Rate Loan required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such Base Rate Loan shall have an Interest Period determined as set forth above. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "Level I Pricing Period" means any period during which the Pricing Ratio for the most recent Calculation Period is less than or equal to 1.5 to 1.0. "Level II Pricing Period" means any period (other than a Level I Pricing Period) during which the Pricing Ratio for the most recent Calculation Period is less than or equal to 2.5 to 1.0. "Level III Pricing Period" means any period (other than a Level I Pricing Period or Level II Pricing Period) during which the Pricing Ratio for the most recent Calculation Period is less than or equal to 3.25 to 1.0. "Level IV Pricing Period" means any period that is not a Level I Pricing Period, Level II Pricing Period or Level III Pricing Period. "Leverage Ratio" means, at any time, the ratio of (a) the Borrower Group's Adjusted Debt at such time to (b) the Borrower Group's Consolidated EBITDA for the most recent Calculation Period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a member of the Borrower Group shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means an A & F Term Loan or a Trademark Co. Term Loan, whether made as a Base Rate Loan or a Euro-Dollar Loan. "Loan Documents" means this Agreement, the Notes, the Guarantee Agreement and the Subordination Agreement. "London Interbank Offered Rate" has the meaning set forth in Section 2.05(b). "Margin Stock" has the meaning given such term under Regulation U. "Material Adverse Effect" means, with respect to the Borrower Group or any member thereof, (i) a materially adverse effect on the business, assets, results of operations or financial condition of the Borrower Group, (ii) material impairment of the ability of the Borrower Group to perform any material Obligation under the Loan Documents, or (iii) material impairment of the rights of or benefits available to the Banks under any Loan Document or the Obligations. "Material Debt" means Debt (other than a Subordinated Obligation) of one or more members of the Borrower Group, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $15,000,000. "Maturity Date" means June 30, 2001. "NIBO Rate" has the meaning set forth in Section 2.05(b). "Note" means a promissory note of a Borrower payable to a Bank, substantially in the form of Exhibit A hereto for the applicable Class, evidencing the obligation of the applicable Borrower to repay the Loans made by such Bank to such Borrower, and "Notes" means any of or all such promissory notes issued hereunder. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Notice of Interest Rate Election" has the meaning set forth in Section 2.04. "Obligations" means, with respect to either Borrower, (a) the due and punctual payment by such Borrower of (i) the principal of and interest on its Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations of such Borrower to the Agent and the Banks under this Agreement and the other Loan Documents to which such Borrower is or is to be a party, and (b) the due and punctual performance of all other obligations of such Borrower under this Agreement and such other Loan Documents. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and (i) is maintained by a member of the ERISA Group for employees of a member of the ERISA Group, (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group, or (iii) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Period" means a Level I Pricing Period, Level II Pricing Period, Level III Pricing Period or Level IV Pricing Period. "Pricing Ratio" means, for any Calculation Period, the ratio of (a) the Borrower Group's Adjusted Debt as of the last day of such Calculation Period, to (b) the Borrower Group's Consolidated EBITDA for such Calculation Period. "Primary Subordinated Obligations" means, with respect to any member of the Borrower Group, all monetary obligations and other liabilities of such member at any time owing to any Affiliate, including, without limitation, the principal of and interest on any Debt owing to any Affiliate; provided that the Primary Subordinated Obligations of a member of the Borrower Group shall not include Secondary Subordinated Obligations of such member. "Prime Rate" means the rate of interest publicly announced by The Chase Manhattan Bank, N.A., in New York City from time to time as its Prime Rate. "Quarterly Payment Date" means each day that is the last Euro-Dollar Business Day preceding the Saturday closest to January 31, April 30, July 31 and October 31 of each year. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reorganization" means (i) the formation by The Limited of a corporation incorporated under the laws of one of the states of the United States of America as a direct Wholly-Owned Subsidiary of The Limited ("A & F Parent"), (ii) the transfer by The Limited to A & F Parent of all the outstanding shares of capital stock of Holdings, Trademark Co. and, at the option of The Limited, the Specified Subsidiary, with the result that each of Holdings and Trademark Co. (and, if so transferred, the Specified Subsidiary) shall be a direct Wholly-Owned Subsidiary of A & F Parent and A & F shall be an indirect Wholly-Owned Subsidiary of A & F Parent and (iii) the execution and delivery by A & F Parent (and, if so transferred, the Specified Subsidiary) of instruments pursuant to which they shall become Guarantors pursuant to the Guarantee Agreement and shall agree to comply with the provisions of this Agreement applicable to them, all in form and substance satisfactory to the Agent. "Required Banks" means at any time Banks with Loans and unused Commitments representing at least 51% of the sum of the aggregate principal amount of Loans outstanding and unused Commitments at such time. "Restricted Payment" means, with respect to any member of the Borrower Group, (a) any dividend or other distribution on any shares of such member's capital stock (except dividends payable solely in shares of its common stock), (b) any payment or other consideration on account of the purchase, repurchase, redemption, retirement or acquisition of (i) any shares of capital stock of any member of the Borrower Group or (ii) any option, warrant or other right to acquire any shares of such capital stock, or (c) any payment or other consideration on account of or in respect of any Subordinated Obligation. "Secondary Subordinated Obligations" means, with respect to any member of the Borrower Group, the following: (i) Tax Sharing Payments; (ii) its monetary obligations, whether in respect of principal, interest or otherwise, in respect of any funds advanced to it pursuant to the Cash Management System after the Effective Date (or, in the case of A & F Parent or any subsidiary thereof that was not a member of the Borrower Group prior to a Reorganization, after a Reorganization); (iii) its monetary obligations to Affiliates in respect of accounts payable for inventory and other assets acquired from such Affiliates in the ordinary course of business; (iv) its monetary obligations to Affiliates in respect of employee benefit plans maintained for its employees in the ordinary course of business; (v) its monetary obligations to reimburse Affiliates for compensation paid to its employees; (vi) its monetary obligations to reimburse Affiliates for rents paid to third parties under leases of properties utilized by it, to the extent reasonably allocable to it; and (vii) its monetary obligations to reimburse Affiliates for insurance premiums paid to independent insurance carriers (or to Affiliates for self-insurance, in amounts not exceeding fair market premiums), to the extent reasonably allocable to it. "Specified Subsidiary" means High Desert Factoring, Inc., a Nevada corporation, and its successors. "Subordinated Obligations" means the Primary Subordinated Obligations and the Secondary Subordinated Obligations. "Subordination Agreement" means the Subordination Agreement among The Limited, Holdings, the Borrowers and the Agent, substantially in the form of Exhibit C hereto, as amended from time to time. "subsidiary" means, with respect to any Person, any corporation or other entity (including any partnership) of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Tax Sharing Payments" means payments made by one or more members of the Borrower Group to Affiliates in amounts not exceeding (in the aggregate, for all members of the Borrower Group) the United States federal, state and local income and franchise taxes that would have been payable by the Borrower Group for taxable periods beginning on or after February 4, 1996, if the members of the Borrower Group were not members of consolidated, combined or unitary group with The Limited and its other subsidiaries, taking into consideration all post-February 3, 1996 carry-forwards, deductions and credits that would have been available to the members of the Borrower Group under such circumstances, and provided that such payments are not made in advance of the times that such income and franchise taxes would have been so payable by the members of the Borrower Group; provided that the amount of such payments shall not be materially increased as a result of a Reorganization. "Temporary Cash Investment" means any Investment in (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper rated in the highest grade by a nationally recognized credit rating agency, (iii) time deposits with, including certificates of deposit issued by any office located in the United States of any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500,000,000, (iv) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, or (v) any mutual fund managed by a reputable investment manager that invests substantially all of its assets in Investments of the type described in clauses (i), (ii), (iii) or (iv) above; provided in each case that such Investment matures within one year from the date of acquisition thereof by a member of the Borrower Group (except that an Investment described in clause (v) above need not satisfy the foregoing maturity requirement, but such Investment shall be subject to redemption on demand and the Investments made by such mutual fund shall satisfy the foregoing maturity requirement). "The Limited" means The Limited, Inc., a Delaware corporation, and its successors. "Trademark Co." means A & F Trademark, Inc., a Delaware corporation, and its successors. "Trademark Co. Term Commitment" means, as to any Bank, the obligation of such Bank to make a Trademark Co. Term Loan to Trademark Co. in an aggregate principal amount not exceeding the amount set forth opposite such Bank's name in Schedule 1 hereto under the caption "Trademark Co. Term Commitment". "Trademark Co. Term Loan" means a loan made by a Bank to Trademark Co. pursuant to Section 2.01(b). "Transactions" means the transactions contemplated by the Loan Documents, including the borrowing of the Loans. "Type" has the meaning set forth in Section 1.03. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only (a) to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA, or (b) with respect to a Plan that is a Multiemployer Plan as described in Section 4001(a)(3) of ERISA, to the extent of the Unfunded Liabilities of such Plan allocable to any member of the ERISA Group under Section 4211 of ERISA. "Wholly-Owned Subsidiary" means, with respect to any Person, any subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by such Person. Section 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower Group's independent public accountants) with the most recent audited (or, prior to the first time at which audited financial statements are delivered, unaudited) consolidated financial statements of the Borrower Group delivered to the Banks; provided that, if the Borrowers notify the Agent that they wish to amend any covenant contained in Article V or the definition of "Pricing Ratio" to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant or such definition (or if the Agent notifies the Borrowers that the Required Banks wish to amend any such covenant or such definition for such purpose), then compliance with such covenant or the calculation of the Pricing Ratio, as the case may be, shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such amendment becomes effective in accordance with this Agreement. Section 1.03. Types of Borrowings. The term "Borrowing" refers to the portion of the aggregate principal amount of Loans of any Class outstanding hereunder which bears interest of a specific Type and for a specific Interest Period (subject to clauses (1)(c) and (2)(b) of the definition of Interest Period) pursuant to a Notice of Borrowing or Notice of Interest Rate Election. Each Bank's ratable share of each Borrowing is referred to herein as a separate "Loan". Borrowings and Loans hereunder are distinguished by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make such a Loan or of a Borrowing comprising such Loans) refers to whether such Loan is an A & F Term Loan or a Trademark Co. Term Loan, each of which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Euro-Dollar Loan. Borrowings and Loans may be identified by both Class and Type (e.g., an "A & F Euro- Dollar Loan" is a Loan which is both an A & F Term Loan and a Euro-Dollar Loan). ARTICLE II THE CREDITS Section 2.01. Commitments to Lend. A & F Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to A & F on the Effective Date in an aggregate principal amount not exceeding its A & F Term Commitment. (b) Trademark Co. Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to Trademark Co. on the Effective Date in an aggregate principal amount not exceeding its Trademark Co. Term Commitment. (c) Borrowings Ratable. Each Borrowing under subsection (a) or (b) of this Section 2.01 shall be made from the Banks ratably in proportion to their respective Commitments of the relevant Class. Section 2.02. Method of Borrowing. (a) Each Borrower shall give the Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (New York City time) on the Effective Date (if all Borrowings to be made on such date are to be comprised of Base Rate Loans) or at least two Euro-Dollar Business Days before the Effective Date (if any Borrowing to be made on such date is to be comprised of Euro-Dollar Loans) (or such later time as the Agent shall agree to accept such notice), specifying: (i) the Effective Date, which shall be a Euro-Dollar Business Day; (ii) the aggregate amount of the Borrowing to be made by each Borrower on the Effective Date, which shall be $5,000,000 or a larger multiple of $1,000,000; (iii) whether the Loans comprising such Borrowings are to be Base Rate Loans or Euro-Dollar Loans; and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrowers. (c) Not later than 12:00 Noon (New York City time) on the Effective Date, each Bank shall make available its share of the Borrowings to be made on such date, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the respective Borrowers at the Agent's aforesaid address. (d) Unless the Agent shall have received notice from a Bank prior to the Effective Date that such Bank will not make available to the Agent such Bank's share of the Borrowings to be made on such date, the Agent may assume that such Bank has made such share available to the Agent on such date in accordance with subsection (c) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the applicable Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available by the Agent until the date such amount is repaid to the Agent, at (i) in the case of such Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.05, and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount in respect of a Borrowing, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. Section 2.03. Notes. (a) Each Bank's Loans to a Borrower shall be evidenced by a separate Note (in the form applicable to such Class) payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to (i) in the case of its Note evidencing A & F Term Loans, the aggregate principal amount of A & F Term Loans made by such Bank (or its predecessor in interest) on the Effective Date and (ii) in the case of its Note evidencing Trademark Co. Term Loans, the aggregate principal amount of Trademark Co. Term Loans made by such Bank (or its predecessor in interest) on the Effective Date. (b) Each Bank may, by notice to the applicable Borrower and the Agent, request that its Loans of a particular Type and Class be evidenced by a separate Note. Each such Note shall be in substantially the form of Exhibit A hereto applicable to the relevant Class with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Type. Each reference in this Agreement to the "Note" or "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note or Notes pursuant to Section 3.01(b), the Agent shall forward such Note or Notes to such Bank. Each Bank shall record the date and amount of each Loan made by it and the date and amount of each payment of principal made by the applicable Borrower with respect thereto, and prior to any transfer of any of its Notes shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the applicable Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by each Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. Section 2.04. Interest Rate Elections. (a) The initial Type of Loans comprising each Borrowing, and the duration of the initial Interest Period applicable thereto if they are initially Euro-Dollar Loans, shall be as specified in the Notice of Borrowing. Thereafter, each Borrower may from time to time elect to change or continue the Type of, or the duration of the Interest Period applicable to, the Loans made to such Borrower included in any Borrowing (excluding overdue Loans and subject in each case to the provisions of the definition of Interest Period and Article VIII), as follows: (i) if such such Loans are Base Rate Loans, such Borrower may elect to designate such Loans as Euro-Dollar Loans, may elect to continue such Loans as Base Rate Loans for an additional Interest Period, or may elect to designate such Loans as any combination of Base Rate Loans and Euro-Dollar Loans; and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to designate such Loans as Base Rate Loans, may elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, or may elect to designate such Loans as any combination of Base Rate Loans and Euro- Dollar Loans. Notwithstanding the foregoing, a Borrower may not elect an Interest Period for Euro-Dollar Loans unless (A) the aggregate outstanding principal amount of such Euro-Dollar Loans to which such Interest Period will apply is at least $5,000,000 and (B) such election will not result in the total number of outstanding Euro-Dollar Borrowings of a Borrower exceeding five at any time. (b) Any election permitted by subsection (a) of this Section may become effective on any Euro-Dollar Business Day specified by the applicable Borrower (the "Election Date"); provided that such Borrower may not specify an Election Date with respect to an outstanding Euro-Dollar Loan that is not the last day of the Interest Period therefor. Each such election shall be made by a Borrower by delivering a notice (a "Notice of Interest Rate Election") to the Agent not later than 10:00 A.M. (New York City time) at least one Domestic Business Day before the Election Date, if all the resulting Loans will be Base Rate Loans, and at least three Euro-Dollar Business Days before the Election Date, if the resulting Loans will include Euro-Dollar Loans. Each Notice of Interest Rate Election shall specify with respect to the outstanding Loans to which such notice applies: (i) the Election Date; (ii) if the Type of Loan is to be changed, the new Type of Loan and, if such new Type is a Euro-Dollar Loan, the duration of the first Interest Period applicable thereto; (ii) if such Loans are Euro-Dollar Loans and the Type of such Loans is to be continued for an additional or different Interest Period, the duration of such additional or different Interest Period; and (iv) if such Loans are to be designated as a combination of Base Rate Loans and Euro-Dollar Loans, the information specified in clauses (i) through (iii) above as to each resulting Borrowing and the aggregate amount of each such Borrowing. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period and the last sentence of subsection (a) of this Section. (c) Upon receipt of a Notice of Interest Rate Election, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of each Borrowing affected thereby and such notice shall not thereafter be revocable by the Borrower. (d) If a Borrower (i) fails to deliver a timely Notice of Interest Rate Election to the Agent electing to continue or change the Type of, or the duration of the Interest Period applicable to, the Loans included in any Borrowing as provided in this Section and (ii) has not theretofore delivered a notice of prepayment relating to such Loans, then such Borrower shall be deemed to have given the Agent a Notice of Interest Rate Election electing to change the Type of such Loans to (or continue the Type thereof as) Base Rate Loans, with an Interest Period commencing on the last day of the then current Interest Period. Section 2.05. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the applicable Euro-Dollar Margin at the time plus (i) if such Euro-Dollar Loan has an Interest Period of one or two weeks duration, the applicable NIBO Rate, or (ii) otherwise, the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" means, with respect to any Euro-Dollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 A.M., London time, two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "London Interbank Offered Rate" with respect to such Euro-Dollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Euro-Dollar Business Days prior to the commencement of such Interest Period. "NIBO Rate" means, with respect to any Euro-Dollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next higher 1/16th of 1%) equal to the interest rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered in immediately available funds to the Administrative Agent at the Eurodollar lending offices where its foreign currency and exchange operations and Eurodollar funding operations are customarily conducted in the international interbank market at approximately 10:00 A.M., New York City time, two Euro-Dollar Business Days prior to the commencement of such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). (c) Any overdue principal of and, to the extent permitted by law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the applicable Euro-Dollar Margin at the time plus the London Interbank Offered Rate or NIBO Rate, as the case may be, applicable to such Loan and (ii) the applicable Euro-Dollar Margin at the time plus the rate per annum at which one-day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to The Chase Manhattan Bank, N.A., are offered to The Chase Manhattan Bank, N.A., in the London interbank market for the applicable period determined as provided above (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the Base Rate for such day). (d) For so long as any Bank maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), and as a result the cost to such Bank (or its Euro-Dollar Lending Office) of making or maintaining its Euro-Dollar Loans is increased, then such Bank may require the applicable Borrower to pay, contemporaneously with each payment of interest on any Euro-Dollar Loan of such Bank to such Borrower, additional interest on such Euro-Dollar Loan for the Interest Period of such Euro-Dollar Loan at a rate per annum up to but not exceeding the excess of (i)(A) the applicable London Interbank Offered Rate or NIBO Rate, as the case may be, divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the rate specified in the preceding clause (i)(A). Any Bank wishing to require payment of such additional interest pursuant to the preceding sentence (x) shall so notify the applicable Borrower and the Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank to such Borrower shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall furnish to the applicable Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on such Euro-Dollar Loans an officer's certificate setting forth the amount to which such Bank is then entitled under this subsection (d) (which shall be consistent with such Bank's good faith estimate of the level at which the related reserves are maintained by it). Each such certificate shall be accompanied by such information as the applicable Borrower may reasonably request as to the computation set forth therein. (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the applicable Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. For purposes of determining the Euro-Dollar Margin, Pricing Periods shall be determined based upon the Pricing Ratio for the most recent Calculation Period. Any change in Pricing Periods shall be effective on and as of the date of delivery to the Agent of financial statements pursuant to Section 5.01(a) or (b) indicating a change in the Pricing Ratio. Section 2.06. Fees. The Borrowers jointly and severally agree to pay to the Agent on the Effective Date the fees separately agreed to be payable on the Effective Date, for distribution among the Banks as separately agreed. Section 2.07. Termination of Commitments. The Commitments shall automatically terminate at the close of business on the Effective Date or, if the Effective Date does not occur on or prior to July 12, 1996, at the close of business on such date. Section 2.08. Mandatory Repayments and Prepayments. The Borrowers shall repay the Loans in an aggregate principal amount equal to $10,000,000 on June 30 of each year and $25,000,000 on December 31 of each year, commencing on and including June 30, 1997, and ending on and including the Maturity Date. (b) Any and all Loans outstanding on the Maturity Date shall be due and payable on such date. (c) In the event that either Holdings or Trademark Co. ceases to be a direct Wholly-Owned Subsidiary of The Limited at any time prior to a Reorganization, or a direct Wholly-Owned Subsidiary of A & F Parent at any time after a Reorganization, the Borrowers shall prepay all Loans then outstanding at such time. In the event that A & F is neither a direct Wholly-Owned Subsidiary of Holdings nor a direct Wholly-Owned Subsidiary of A&F Parent at any time, the Borrowers shall prepay all Loans then outstanding at such time. In the event that at any time after a Reorganization The Limited ceases to own directly at least 80% of the outstanding capital stock of A & F Parent, or for any other reason A & F Parent and its consolidated subsidiaries cease to be consolidated subsidiaries of The Limited, then the Borrowers shall prepay all Loans then outstanding at such time. (d) In the event that at any time on or after the date of a Reorganization A&F Parent ceases to be a direct Wholly-Owned Subsidiary of The Limited (i) as promptly as practicable after the end of each fiscal quarter of the Borrower Group (and in any event by the time that financial statements are required to be delivered with respect to such fiscal quarter), commencing with the fiscal quarter during which A&F Parent ceases to be a direct Wholly-Owned Subsidiary of The Limited, the Borrowers shall prepay Loans in an aggregate principal amount equal to Excess Cash Flow with respect to such fiscal quarter, provided that the Borrowers shall not be required to make any prepayment pursuant to this clause (i) after making the prepayment in respect of the fiscal quarter during which the aggregate principal amount of the Loans is reduced to less than $50,000,000, and (ii) as promptly as practicable after the end of each successive period of four consecutive fiscal quarters commencing at the end of the last fiscal quarter for which a prepayment was required pursuant to clause (i) above (and in any event by the time that financial statements are required to be delivered with respect to the last fiscal quarter included in such period), the Borrowers shall prepay Loans in an aggregate principal amount equal to Excess Cash Flow with respect to such period. (e) On the date of each repayment or prepayment of Loans pursuant to this Section, the applicable Borrower shall pay interest accrued on the principal amount repaid or prepaid to the day of repayment or prepayment. The repayments and prepayments of the Loans required by the respective subsections of this Section and the optional prepayments permitted by Section 2.09 are separate and cumulative, so that any one such repayment or prepayment shall reduce any other repayment or prepayment only as and to the extent specified in subsection (g) of this Section. (f) Prior to the date of each mandatory repayment or prepayment pursuant to this Section, the applicable Borrower shall, by notice to the Agent given not later than 11:00 A.M. (New York City time) on (i) the Domestic Business Day prior to the date of repayment or prepayment of any Base Rate Borrowing, and (ii) the third Euro-Dollar Business Day prior to the date of repayment or prepayment of any Euro-Dollar Borrowing, select which outstanding Borrowings of the required Class are to be repaid or prepaid; provided that such Borrower shall not elect to prepay any Euro- Dollar Borrowing if a Base Rate Borrowing of the required Class is outstanding. If the applicable Borrower fails to deliver any such notice by the time specified above, it shall be deemed to have notified the Agent to apply such repayment or prepayment, first, to any Base Rate Borrowing of the required Class then outstanding and, second, to Eurodollar Borrowings of the required Class in chronological order based upon the last day of their respective Interest Periods (allocating first to the Eurodollar Borrowing with the least number of days in its remaining Interest Period). Upon receipt of such notice, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment, and such notice shall not thereafter be revocable by the applicable Borrower. Each such repayment or prepayment shall be applied to repay or prepay ratably the respective Loans included in the Borrowings so selected. (g) Each prepayment of Loans pursuant to Section 2.09 or subsection (d) of this Section shall be applied to reduce repayments scheduled to be made pursuant to subsection (a) of this Section pro rata. Section 2.09. Optional Prepayments. (a) A Borrower may, upon at least one Domestic Business Day's notice to the Agent, in the case of Base Rate Borrowings, or three Euro-Dollar Business Days' notice to the Agent, in the case of Euro-Dollar Borrowings, prepay any Borrowing in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such notice of prepayment shall specify which outstanding Borrowing is to be prepaid in connection therewith. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice shall not thereafter be revocable by the applicable Borrower. Section 2.10. General Provisions as to Payments. (a) Each Borrower shall make each payment of principal of, and interest on, its Loans and of fees payable by it hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder that such Borrower will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that such Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. Section 2.11. Funding Losses. If any payment of principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or otherwise) is made on any day other than the last day of the Interest Period applicable thereto, or the end of an applicable period fixed pursuant to Section 2.05(c), or if a Borrower fails to borrow, continue or prepay any Euro-Dollar Loans after notice has been given to any Bank in accordance with Section 2.02, 2.04 or 2.08, the applicable Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow; provided that such Bank shall have delivered to such Borrower a certificate setting forth the amount of such loss or expense and a summary computation thereof, which certificate shall be conclusive in the absence of manifest error. Section 2.12. Computation of Interest. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE III CONDITIONS Section 3.01. Conditions. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent for the account of each Bank of a duly executed Note or Notes, dated on or before the Effective Date complying with the provisions of Section 2.03; (c) receipt by the Agent of opinions of each of Samuel P. Fried, Esq., and Davis Polk & Wardwell, in each case as counsel for the Borrowers and their respective Affiliates that are parties to the Loan Documents, substantially in the forms of Exhibits D-1 and D-2 hereto, respectively, and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request, and receipt by the Agent of an opinion of Cravath, Swaine & Moore, counsel for the Agent, substantially in the form of Exhibit D-3 hereto; (d) receipt by the Agent of a Notice of Borrowing as required by Section 2.02; (e) immediately after the Borrowings to be made on such date, no Default shall have occurred and be continuing; (f) the representations and warranties of each of the Borrowers contained in this Agreement and the other Loan Documents shall be true on and as of such date; (g) receipt by the Agent of a certificate signed by the President, any Vice President, the Treasurer or an attorney-in-fact of each of the Borrowers, dated the Effective Date, to the effect set forth in clauses (e) and (f) above; (h) receipt by the Agent of counterparts of the Guarantee Agreement duly executed by the parties thereto; (i) receipt by the Agent of counterparts of the Subordination Agreement, duly executed by the parties thereto; (j) the Banks shall be satisfied that, after giving effect to the advance of the Loans and application of the proceeds thereof, the Borrower Group shall have sufficient liquidity to satisfy their current liabilities (including interest payments in respect of the Loans) and meet their working capital needs on an ongoing basis; (k) the fact that (i) there shall not have occurred a material adverse change in the business, assets, results of operations or financial condition of the Borrower Group since February 3, 1996, and (ii) there is no action, suit or proceeding pending or threatened against or affecting any member of the Borrower Group or any of its Affiliates in which there is a reasonable possibility of an adverse decision that would reasonably be expected to materially adversely affect the ability of either Borrower to perform any of its obligations under the Loan Documents or the rights of the Banks thereunder or the ability of the Banks to exercise such rights; (l) receipt by the Agent of (i) all fees and other compensation payable to the Agent or the Banks on or prior to the Effective Date pursuant to their agreements with the Borrowers and (ii) reimbursement of all expenses of the Agent for which the Borrowers are liable hereunder to the extent invoices therefor have been presented; and (m) receipt by the Agent of all documents it may reasonably request relating to the existence of each of the Borrowers and the Guarantors, the corporate authority for and the validity of the Loan Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than July 12, 1996. ARTICLE IV REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants that: Section 4.01. Existence and Power. Each member of the Borrower Group is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted or proposed to be conducted. Section 4.02. Corporate and Governmental Authorizatization; No Contravention. The execution, delivery and performance by each member of the Borrower Group of the Loan Documents to which it is or is to be a party and the consummation of the Transactions are within its powers, have been duly authorized by all necessary action on the part of such member and its stockholders, require no action by or in respect of, or filing with, any Governmental Authority (other than such as have been duly taken or made) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or By- laws of such member or of any judgment, injunction, order or decree or any material agreement or other material instrument binding upon such member or result in the creation or imposition of any Lien on any asset of such member, in each case both before and after giving effect to the Transactions. Section 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrowers and the other Loan Documents to which any member of the Borrower Group is to be a party, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of such member, in each case enforceable in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. Section 4.04. Financial Information; Title to Properties. (a) The unaudited combined balance sheet of the Borrower Group as of February 3, 1996, and the related unaudited combined statement of income for the fiscal year then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles (except for the absence of footnotes), the financial position of the Borrower Group as of such date and the results of its operations for such year. (b) The unaudited combined balance sheet of the Borrower Group as of May 4, 1996, and the related combined unaudited statement of income for the 13-week period then ended fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section (except for the absence of footnotes and otherwise as disclosed therein), the financial position of the Borrower Group as of such date and the results of its operations for such periods (subject to normal year-end adjustments). (c) Since February 3, 1996, there has been no material adverse change in the business, results of operations or financial condition of the Borrower Group. (d) A & F has good and marketable title to, or valid leasehold interests in, all its material properties and assets, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or proposed to be conducted or to utilize such properties and assets for their intended purposes. Section 4.05. Litigation. There is no injunction, stay, decree or order of any Governmental Authority or any action, suit or proceeding pending against, or to the knowledge of either Borrower threatened against or affecting, any member of the Borrower Group before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision that would reasonably be expected to have a Material Adverse Effect. Section 4.06. Compliance with ERISA. Each member of the ERISA Group (a) has fulfilled its material obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan, (b) is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code and (c) has not incurred any material liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA; provided that this sentence shall not apply to (i) any member of the ERISA Group described in Section 414(m) of the Internal Revenue Code (other than The Limited or a subsidiary thereof) or any Plan maintained by such a member or (ii) any Plan referred to in clause (iii) of the definition of "Plan" herein (a "Multiemployer Plan"). The Limited and its subsidiaries have made all material payments to Multiemployer Plans which they have been required to make under the related collective bargaining agreement or applicable law. Section 4.07. Taxes. All United States Federal income tax returns and all other material tax returns which are required to be filed by any member of the Borrower Group (or the consolidated group of which it is a member) and all taxes shown to be due on such returns or pursuant to any assessment received by any such member (or such consolidated group) have been paid, except where the same may be contested in good faith by appropriate proceedings. Section 4.08. Subsidiaries. Holdings does not have any subsidiaries other than A & F, which is a Wholly-Owned Subsidiary of Holdings. Neither A & F nor Trademark Co. has any subsidiaries. Section 4.09. Not an Investment Company. No member of the Borrower Group is an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Section 4.10. Compliance with Laws. No member of the Borrower Group is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree applicable to it of any Governmental Authority, that (individually or in the aggregate) would reasonably be expected to result in a Material Adverse Effect. Section 4.11. Agreements. (a) No member of the Borrower Group is a party to any agreement or instrument or subject to any corporate restriction that has resulted or would reasonably be expected to result in a Material Adverse Effect. (b) No member of the Borrower Group is in default in any manner under any agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default would reasonably be expected to result in a Material Adverse Effect. Section 4.12. Federal Reserve Regulations. No member of the Borrower Group is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. Section 4.13. Disclosure. All information (excluding projected financial information) furnished in writing by any member of the Borrower Group or any of its Affiliates to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby was true and accurate in all material respects or based on reasonable estimates on the date as of which such information was stated or certified. The Borrowers have disclosed to the Banks in writing any and all facts (other than prevailing economic conditions affecting similarly situated businesses generally) known to any officer of either Borrower which materially and adversely affect or may materially and adversely affect (to the extent either Borrower can now reasonably foresee) the business, financial position or results of operations of the Borrower Group. All projected financial information which has been furnished by any member of the Borrower Group or any of its Affiliates to the Agent or any Bank was, at the time so furnished, believed by such member to have been prepared in a reasonable manner and based on reasonable assumptions with respect to the business, financial position or results of operations of the Borrower Group; provided that no representation is made by either Borrower that the future results of the Borrower Group will equal those set forth in such projected financial information. Section 4.14. Solvency. As of the Effective Date, after giving effect to the Transactions (including the application of the proceeds of the Loans and the incurrence of all Debt to be incurred by the respective Borrowers on the Effective Date), (a) the fair salable value of the assets of each member of the Borrower Group will exceed the amount that will be required to be paid on or in respect of its existing debts and other liabilities (including contingent liabilities) as they mature; (b) the assets of each member of the Borrower Group will not constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted; and (c) each member of the Borrower Group does not intend to, and does not believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by it and the amounts to be payable on or in respect of its obligations). Section 4.15. Trademarks. All trademarks and tradenames material to the business of the Borrower Group (including, without limitation, rights with respect to the name "Abercrombie & Fitch") are owned by Trademark Co. Section 4.16. Environmental Matters. Each member of the Borrower Group has complied with all Environmental and Safety Laws, except for any non-compliance that, individually or in the aggregate, could not reasonably be anticipated to result in a Material Adverse Effect. No member of the Borrower Group has received notice of any failure so to comply which alone or together with any other such failure could result in a Material Adverse Effect. In the case of A & F, its facilities do not treat, store or dispose of any hazardous wastes, hazardous substances, hazardous materials, toxic substances or toxic pollutants, as those terms are used in any Environmental and Safety Laws, in violation thereof where such violation could result, individually or together with other violations, in a Material Adverse Effect. ARTICLE V COVENANTS Each Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Loan Document remains unpaid: Section 5.01. Information. The Borrowers will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower Group, combined (or, following a Reorganization, consolidated) balance sheets of the Borrower Group as of the end of such fiscal year and the related combined (or, following a Reorganization, consolidated) statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Coopers & Lybrand or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower Group, combined (or, following a Reorganization, consolidated) balance sheets of the Borrower Group as of the end of such quarter and the related combined (or, following a Reorganization, consolidated) statements of income and cash flows for such quarter and for the portion of the Borrower Group's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower Group's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of each Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of each Borrower (i) setting forth in reasonable detail the calculations required to determine the Pricing Ratio for the most recent Calculation Period and (with respect to financial statements for periods that compliance is required) to establish whether the Borrowers were in compliance with the requirements of Sections 5.20, 5.21 and 5.22 on the date of such financial statements, (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrowers are taking or propose to take with respect thereto and (iii) stating whether, since the date of the most recent financial statements previously delivered pursuant to this Section, there has been any material change in the generally accepted accounting principles applied in the preparation of such statements and, if so, describing such change; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) stating whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to sub-clause (i) of clause (c) above; (e) promptly following the end of each period with respect to which any prepayment is required pursuant to Section 2.08(d), a certificate of the chief financial officer or chief accounting officer of each Borrower setting forth a reasonably detailed calculation of Excess Cash Flow for such period; (f) within five days after any executive or financial officer of either Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of an executive or financial officer of such Borrower setting forth the details thereof and the action which the Borrowers are taking or propose to take with respect thereto; (g) if and when any executive or financial officer of either Borrower obtains knowledge that any member of the ERISA Group (i) has given or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for or result in a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) has received notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) has received notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (h) prompt notice of the occurrence of the Reorganization and of any event that results in A & F Parent ceasing to be a Wholly-Owned Subsidiary of The Limited; and (i) from time to time such additional information regarding the financial position or business of any member of the Borrower Group as the Agent, at the request of any Bank, may reasonably request. Section 5.02. Payment of Obligations. Each member of the Borrower Group will pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except in connection with a good faith contest with the applicable obligee, and will maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. Section 5.03. Maintenance of Property and Rights; Insurance. (a) A & F will keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) A & F will insure and keep insured, with reputable insurance companies, so much of its properties and such of its liabilities for bodily injury or property damage, to such extent and against such risks (including fire), as companies engaged in similar businesses customarily insure properties and liabilities of similar character; or, in lieu thereof, A & F will maintain or participate in a system or systems of self-insurance which will be in accord with the customary practices of companies engaged in similar business in maintaining or participating in such systems. Section 5.04. Conduct of Business and Maintenance of Existence. Each member of the Borrower Group will continue to engage in business of the same general type as now conducted, and will preserve, renew and keep in full force and effect their respective existences and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business, except any such right, privilege or franchise the failure of which to keep in full force and effect would not reasonably be expected to have a Material Adverse Effect. Section 5.05. Compliance with Laws. Each member of the Borrower Group will comply with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental and Safety Laws and ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to comply, either alone or combined with other failures to comply, would not reasonably be expected to have a Material Adverse Effect. Section 5.06. Inspection of Property, Books and Records. Each member of the Borrower Group will keep books, records and accounts in which transactions are recorded as necessary to (i) permit preparation of Borrower Group's consolidated financial statements in accordance with generally accepted accounting principles and (ii) permit their Affiliates to comply with the requirements of Section 13(b)(2) of the Securities Act of 1934 as in effect from time to time; and will permit representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired; provided that (a) reasonable advance notice shall be given to such member of any such visit or inspection of properties and (b) such member shall be afforded an opportunity to participate in any such discussions with independent public accountants. A Bank will not publish or disclose to any third Person any information gained under any inspection conducted pursuant to this Section 5.06 or information obtained pursuant to Section 5.01(i) unless and until such information is or becomes a matter of public knowledge through no fault of such Bank or is lawfully acquired by such Bank without restrictions of confidentiality, except (i) as such Bank deems it necessary in connection with the enforcement of its rights arising out of any Default or as required by law or with respect to disclosures to bank regulatory authorities or the independent auditors or counsel or the employees, officers or directors of such Bank, (ii) disclosures to any actual or potential participant or, with the prior written consent of the applicable Borrower, assignee (a "Transferee") of such Bank's rights under this Agreement who signs a confidentiality agreement containing provisions substantially similar to those contained in this sentence; provided that such Bank shall promptly notify the Borrowers of the identity of such actual or potential Transferee, or (iii) as consented to by either Borrower in writing. Section 5.07. Fiscal Agent. Each member of the Borrower Group will cause its fiscal year to end on the Saturday closest to January 31 in each year. Section 5.08. Subsidiaries; Partnerships. No member of the Borrower Group will have any subsidiaries without the prior written consent of the Required Banks, except that a member of the Borrower Group may have a subsidiary that is both a Wholly-Owned Subsidiary and a Guarantor under the Guarantee Agreement. No member of the Borrower Group will enter into any partnership or joint venture. Section 5.09. Debt. No member of the Borrower Group will incur or at any time be liable with respect to any Debt, except: (a) Debt outstanding under this Agreement and the other Loan Documents; (b) Debt of members of the Borrower Group owing to other members of the Borrower Group; (c) Debt constituting Subordinated Obligations; and (d) (i) contingent obligations as an account party in respect of trade letters of credit incurred in the ordinary course of its business and (ii) reimbursement obligations in respect of any drawing under any such letter of credit that is paid within one Domestic Business Day. Section 5.10. Restricted Payments. No member of the Borrower Group will declare or make or agree to make, directly or indirectly, any Restricted Payment, except: (a) the distribution by Trademark Co. as a dividend or other equity distribution of its rights in respect of inter-company indebtedness owed to Trademark Co. by A&F; provided that such inter-company indebtedness is distributed by Trademark Co. on or promptly following the Effective Date and is paid by A&F with the proceeds of A&F Term Loans; (b) Restricted Payments made on, or within five Domestic Business Days after, the Effective Date with the proceeds of the Loans; (c) dividends or other distributions on shares of its capital stock consisting solely of instruments evidencing Debt of such member that constitutes a Primary Subordinated Obligation; (d) Restricted Payments paid to another member of the Borrower Group; and (e) so long as no Default has occurred and is continuing or would result from such payment, payments in respect of its Secondary Subordinated Obligations. Section 5.11. Mergers, Consolidations, Acquisitions and Sales of Assets. (a) No member of the Borrower Group will merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or purchase or otherwise acquire (in one transaction or a series of related trans-actions) any material assets, except that the foregoing shall not prohibit (i) the acquisition by A & F of assets in the ordinary course of business, (ii) Investments permitted under Section 5.14 and (iii) any merger of a member of the Borrower Group with any other member of the Borrower Group. (b) No member of the Borrower Group will sell, assign, transfer or otherwise dispose of any asset, including any stock, without the prior written consent of the Required Banks to such sale, assignment, transfer or disposition and the terms thereof; provided, that the foregoing shall not prohibit (i) Investments permitted under Section 5.14 or the liquidation thereof, (ii) the sale by A & F of inventory, used or surplus equipment or other assets in the ordinary course of business, (iii) Restricted Payments permitted under Section 5.10, (iv) sales, assignments, transfers and other dispositions of assets from one member of the Borrower Group to another member of the Borrower Group and (v) sales by A&F Parent of its common stock. Section 5.12. Transactions with Affiliates. No member of the Borrower Group will, directly or indirectly, (a) make any Investment in an Affiliate, (b) sell, lease or otherwise transfer any assets to or perform services for an Affiliate, (c) purchase, lease or acquire assets or services from an Affiliate, or (d) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, Guarantees and assumptions of obligations of an Affiliate); provided that (i) any member of the Borrower Group may enter into any such transaction with an Affiliate that does not involve the payment of financial or management advisory fees or similar consideration to an Affiliate if the monetary or business consideration arising therefrom would not be less advantageous to such member than the monetary or business consideration which it would obtain in a comparable arm's length transaction with a Person not an Affiliate and (ii) the foregoing shall not prohibit (A) the Restricted Payments permitted under Section 5.10, (B) Investments permitted under Section 5.14 and (C) the incurrence by such member of Debt constituting Subordinated Obligations permitted under Section 5.09. Section 5.13. Sale and Lease-back Transactions. No member of the Borrower Group will enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any asset, real or personal, whether now owned or hereafter acquired, and thereafter it or any other member of the Borrower Group shall rent or lease such asset or other assets which it intends to use for substantially the same purpose or purposes as the asset being sold or transferred. Section 5.14. Investments. No member of the Borrower Group will make or acquire any Investment in any Person other than: (a) Temporary Cash Investments; (b) Investments in another member of the Borrower Group; (c) Investments constituting receivables due from Affiliates arising pursuant to the Cash Management System in accordance with Section 5.15; and (d) loans to Affiliates evidenced by promissory notes of such Affiliates payable to such member on demand; provided that such loans shall be made only to Affiliates that are able to repay such loans on demand, as determined by such member in good faith. Section 5.15. Cash Management System. Transactions pursuant to the Cash Management System by each member of the Borrower Group will comply with the following: (a) each transaction that involves the transfer of such member's cash (or its equivalent) to, or collection of such member's cash (or its equivalent) by, an Affiliate will either (i) constitute a Restricted Payment in respect of a Secondary Subordinated Obligation permitted under Section 5.10 or (ii) constitute an Investment that is a receivable due from an Affiliate payable to such member on demand; and (b) each transaction that involves the transfer of cash (or its equivalent) to or for the benefit of such member will either (i) constitute repayment of a receivable referred to in clause (a)(ii) above, (ii) constitute a receivable due to an Affiliate by such member that is a Subordinated Obligation or (iii) constitute an equity contribution to such member. Section 5.16. Negative Pledge. No member of the Borrower Group will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens for taxes not delinquent or being contested in good faith and by appropriate proceedings; (b) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance; (c) mechanics', workers', materialmen's, warehousemen's, landlords' or other like Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith; (d) any Liens identified on Schedule 5.16 hereto exiting on the Effective Date; provided that any such Lien does not attach to any asset other than the asset or assets identified on such Schedule; (e) Liens incurred in the ordinary course of business to secure performance of surety and indemnity bonds, leases and other contracts (other than to secure Debt); (f) interests (other than Debt) of a lessor or lessee arising under a lease; (g) Liens arising in the ordinary course of its business which (i) do not secure Debt or any other monetary obligation and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; and (h) Liens on assets acquired in the ordinary course of business securing obligations as account party in respect of trade letters of credit issued to support the purchase price of such assets. Section 5.17. Use of Proceeds. The proceeds of the Loans will be used only for the purposes set forth in the preliminary statement of this Agreement. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. Section 5.18. Grants of Negative Pledges or Dividend Restrictions. No member of the Borrower Group will agree to or become bound by any agreement or other arrangement (other than the Loan Documents) that would restrict or impair (i) the ability of such member to grant a Lien on any of its properties or assets to secure the Obligations or (ii) the ability of such member to pay dividends on its capital stock. Section 5.19. Changes in Accounting. No member of the Borrower Group will change its accounting policies or practices from those utilized in the preparation of the financial statements referred to in Section 4.04, except as permitted or required by generally accepted accounting principles consistently applied. Section 5.20. Coverage Ratio. The ratio of (a) the sum of (i) the Borrower Group's Consolidated EBITDA for each period of four consecutive fiscal quarters ending on or after the Saturday closest to October 31, 1996, plus (ii) rental and lease expense deducted in determining such Consolidated EBITDA for such period, to (b) the sum of (i) rental and lease expense deducted in determining such Consolidated EBITDA for such period, plus (ii) Cash Interest Expense for such period (or shorter period commencing at the end of the fiscal quarter ending on the Saturday closest to July 31, 1996), shall not be less than 1.5 to 1.0; provided that the amount of Cash Interest Expense determined pursuant to clause (b)(ii) above shall be multiplied by (a) 4, for purposes of determining such ratio for the period ending on the Saturday closest to October 31, 1996, (b) 2, for purposes of determining such ratio for the period ending on the Saturday closest to January 31, 1997, and (c) 4/3, for purposes of determining such ratio for the period ending on the Saturday closest to April 30, 1997. Section 5.21. Leverage Ratio. The Leverage Ratio will not at any time during any period set forth below, commencing on the last day of the fiscal quarter of the Borrower Group ending on the Saturday closest to October 31, 1996, be greater than the ratio set forth below with respect to such period:
Period - ---------------------------------------------------------- Commencing on and including Saturday closest Ending on and excluding to: Saturday closest to: Ratio - -------------------------- ----------------------- --------- October 31, 1996 January 31, 1997 4.0:1.0 January 31, 1997 January 31, 1998 3.9:1.0 January 31, 1998 January 31, 1999 3.5:1.0 January 31, 1999 January 31, 2000 3.25:1.0 January 31, 2000 thereafter 3.0:1.0
Section 5.22. Capital Expenditures. The members of the Borrower Group will not make Capital Expenditures exceeding, in the aggregate, $29,000,000 during the fiscal year of the Borrower Group ending on the Saturday closest to January 31, 1997, $30,000,000 during the fiscal year of the Borrower Group ending on the Saturday closest to January 31, 1998, $31,000,000 during the fiscal quarter of the Borrower Group ending on the Saturday closest to January 31, 1999, $32,000,000 during the fiscal year of the Borrower Group ending on the Saturday closest to January 31, 2000, or $33,000,000 during any fiscal year of the Borrower Group thereafter. ARTICLE VI DEFAULTS Section 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) either Borrower shall fail to pay (A) within one Domestic Business Day of the date due, any principal of any of its Loans, or (B) within three Domestic Business Days of the date due, any interest on any of its Loans, any fees or any other amount payable by it hereunder or under any other Loan Document; (b) either Borrower shall fail to observe or perform (i) any covenant contained in clause (a) or (b) of Section 5.01 for three Domestic Business Days after notice thereof has been given to such Borrower by the Agent at the request of any Bank or (ii) any covenant contained in Section 5.08, or in Sections 5.09 through 5.11, inclusive, or in Section 5.13, 5.14 or 5.21 and any such failure shall continue unremedied for five days after any director or executive or financial officer of either Borrower obtains knowledge of such failure, or (iii) any covenant contained in clause (f) of Section 5.01, or in Section 5.07 or 5.12, or in Sections 5.15 through 5.19, inclusive, and any such failure shall continue unremedied for 15 days after any director or executive or financial officer of either Borrower obtains knowledge of such failure, or (iv) any covenant contained in Section 5.20 or 5.22 and a period of five days shall have elapsed since any director or executive or financial officer of either Borrower first obtained knowledge of such failure without the Borrowers and the Required Banks having reached agreement with respect to the terms and conditions, if any, on which the Required Banks are willing to waive such failure (it being understood that any such agreement or waiver shall be in the sole discretion of such Banks); (c) any member of the Borrower Group shall fail to observe or perform any covenant or agreement contained in any Loan Document (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrowers by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by any member of the Borrower Group or any of its Affiliates in any Loan Document or in any certificate, financial statement or other document delivered pursuant to any Loan Document shall prove to have been incorrect in any material respect when made and a period of five days shall have elapsed since any director or executive or financial officer of either Borrower first obtained knowledge of such incorrectness without the Borrowers and the Required Banks having reached agreement with respect to the terms and conditions, if any, on which the Required Banks are willing to waive such incorrectness (it being understood that any such agreement or waiver shall be in the sole discretion of such Banks); (e) any member of the Borrower Group shall fail to make any payment of principal, interest or premium in respect of any of its Material Debt (other than the Obligations) at maturity or within any applicable grace period; (f) any event or condition (including, without limitation, failure to make any payment when due) shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof or to require the prepayment, redemption or repurchase thereof; (g) any member of the Borrower Group (i) shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or (iii) shall make a general assignment for the benefit of creditors, or (iv) shall fail generally to pay its debts as they become due, or (v) shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against any member of the Borrower Group seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against any member of the Borrower Group under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $10,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of $10,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) one or more judgments or orders for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against any member of the Borrower Group or any combination thereof and shall continue unsatisfied and unstayed for a period of 10 days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any member of the Borrower Group to enforce any such judgment; or (k) the Guarantee of any Guarantor under the Guarantee Agreement shall cease to be, or shall be asserted by such Guarantor not to be, a valid and binding obligation of such Guarantor; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrowers terminate the Commitments and they shall thereupon terminate, (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrowers declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable (in whole or, in the sole discretion of the Banks, from time to time in part) without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers, (iii) exercise remedies available under the Guarantee Agreement, as requested by the Required Banks, or (iv) any combination of the foregoing; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to either Borrower, without any notice to either Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable (in whole) without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers. Section 6.02. Notice of Default. The Agent shall give notice to the Borrowers under clause (b)(i) or (c) of Section 6.01 promptly upon being requested to do so by any Bank, and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Citibank, N.A. and Morgan Guaranty Trust Company of New York shall not have any duties or responsibilities in their respective capacities as Co-Agents. Section 7.02. Agent and Affiliates. The Chase Manhattan Bank, N.A., shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and The Chase Manhattan Bank, N.A., and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the members of the Borrower Group and their Affiliates as if it were not the Agent. Section 7.03. Action by Agent. The obligations of the Agent under the Loan Documents are only those expressly set forth herein and therein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. Section 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for a member of the Borrower Group), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 7.05. Liability of Agent. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (a) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of either Borrower or any other member of the Borrower Group; (c) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to it; or (d) the validity, effectiveness or genuineness of this Agreement, any other Loan Document or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a telecopy, bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Section 7.06. Indemnification. Each Bank shall, ratably in accordance with its Loans, indemnify the Agent (to the extent not reimbursed by the Borrowers) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with this Agreement or any other Loan Document or any action taken or omitted by the Agent hereunder or thereunder. Section 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. Section 7.08. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrowers. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent after consultation with the Borrowers (but the foregoing shall not be construed to require any consent or approval by the Borrowers). If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of its appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations. After any retiring Agent's resignation, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent. Section 7.09. Agent's Fees. The Borrowers shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrowers and the Agent. Section 7.10. Sub-Agents. The Agent may perform any of its obligations and exercise any of its rights under the Loan Documents by or through sub-agents. The provisions of this Article VII shall inure to the benefit of any sub-agent of the Agent in the same manner and to the same extent as they inure to the benefit of the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing: (a) the Agent determines that it is not possible to determine the London Interbank Offered Rate or NIBO Rate, as applicable, for such Interest Period, or (b) Banks having 50% or more of the aggregate amount of the Commitments or Loans of the relevant Class advise the Agent that the London Interbank Offered Rate or NIBO Rate, as applicable, as determined by the Agent, will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Borrowers and the Banks, whereupon until the Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make Euro-Dollar Loans of the Class of such Euro-Dollar Borrowing shall be suspended. Section 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or of any change therein, or of any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrowers, whereupon until such Bank notifies the Borrowers and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the applicable Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the applicable Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. Section 8.03. Increased Cost and Reduced Return. (a) If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or of any change therein, or of any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit, insurance assessment or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition affecting its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the applicable Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or of any change therein, or of any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the applicable Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrowers and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder (including a statement in reasonable detail as to the method by which such amount or amounts shall have been determined) shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Section 8.04. Taxes. For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by a Borrower pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be), is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Notes or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. (b) Any and all payments by either Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if a Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) Each Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expense) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by a Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrowers and the Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrowers or the Agent with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the applicable Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If a Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If a Bank shall become aware that it is entitled to claim a refund from a Governmental Authority in respect of Taxes or Other Taxes as to which it has been indemnified by a Borrower, or with respect to which a Borrower has paid additional amounts, pursuant to this Section 8.04, it shall promptly notify the relevant Borrower of the availability of such refund claim and shall, within 30 days after receipt of a request by such Borrower, make a claim to such Governmental Authority for such refund at such Borrower's expense. If a Bank receives a refund (including pursuant to a claim for refund made pursuant to the preceding sentence) in respect of any Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this Section 8.04, it shall within 30 days from the date of such receipt pay over such refund to the relevant Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section 8.04 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Bank and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that a Borrower, upon the request of such Bank, agrees to repay the amount paid over to such Borrower (plus penalties, interest or other charges) to such Bank in the event such Bank is required to repay such refund to such Governmental Authority. Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 and the applicable Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies such Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made or continued by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. Section 8.06. Substitution of Bank. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank (or any Participant in its Loans) has demanded compensation under Section 8.03 or is receiving increased payments or indemnification payments under Section 8.04, the applicable Borrower shall have the right to seek a bank or banks ("Substitute Banks"), which may be one or more of the Banks or one or more other banks satisfactory to the Agent, to purchase the Notes of such Bank (the "Affected Bank") and, if such Borrower locates a Substitute Bank, the Affected Bank shall, upon payment to it of the purchase price agreed between it and the Substitute Bank (or, failing such agreement, a purchase price in the amount of the outstanding principal amount of its Loans and accrued interest thereon to the date of payment) plus any amount (other than principal and interest) then due to it or accrued for its account hereunder, assign all its rights and obligations under this Agreement and the Notes to the Substitute Bank, and the Substitute Bank shall assume such rights and obligations, whereupon the Substitute Bank shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank. ARTICLE IX MISCELLANEOUS Section 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party: (x) in the case of the Borrowers or the Agent, at its address or telex or telecopy number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex or telecopy number set forth in its Administrative Questionnaire or (z) in the case of any party, at such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Borrowers. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in or pursuant to this Section and the appropriate answer back is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in or pursuant to this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. Section 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses of the Agent, including fees and disbursements of Cravath, Swaine & Moore, special counsel for the Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of- pocket expenses incurred by the Agent and any Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy and other enforcement proceedings resulting therefrom. (b) The Borrowers agree to indemnify the Agent and each Bank and hold the Agent and each Bank harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel and settlement costs, which may be incurred by any Bank (or by the Agent) in connection with any investigative, administrative or judicial proceeding (whether or not the Agent or such Bank shall be designated a party thereto) relating to or arising out of any Loan Document or any actual or proposed use of proceeds of Loans hereunder; provided that neither the Agent nor any Bank shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. (c) The provisions of this Section 9.03 shall remain in effect and survive regardless of any termination of this Agreement or the repayment of the Obligations. Section 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it evidencing Loans of a Class which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank evidencing Loans of such Class, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes evidencing Loans of such Class held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of claims in respect of principal and interest with respect to the Notes held by the Banks evidencing Loans of such Class shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of a Borrower other than its indebtedness under the Loan Documents. Each Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note evidencing its Loans of a Class, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Borrower in the amount of such participation. Section 9.05. Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed or otherwise approved in writing by the Borrowers and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall (i) increase the Commitment of any Bank or subject any Bank to any additional obligation without the consent of such Bank, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder without the consent of each Bank affected thereby, (iii) postpone the date fixed for any payment of principal of any Loan under Section 2.08(a) or (b) or for any payment of interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment without the consent of each Bank affected thereby, (iv) permit the release of any Guarantor from its Guarantee under the Guarantee Agreement without the consent of each Bank, (v) postpone the date fixed for any payment of principal of any Loan under Section 2.08(c) or (d) without the consent of Banks with Loans and unused Commitments representing at least 70% of the sum of the aggregate principal amount of Loans outstanding and unused Commitments at such time, or (vi) change the percentage of the Commitments, the percentage of the aggregate unpaid principal amount of the Notes or the number of Banks which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement without the consent of each Bank. Section 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrowers may not assign or otherwise transfer any of their respective rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in any or all of its Commitment or its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrowers and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver described in clause (i), (ii), (iii), (iv) or (vi) (but, in the case of clause (vi), only to the extent such modification, amendment or waiver would affect any requirement of approval by all Banks of the matters referred to in such clauses (i), (ii), (iii) or (iv)) of Section 9.05 without the consent of the Participant. The Borrowers agree that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII and Section 2.11 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this sub section (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes of either Class, and such Assignee shall assume such rights and obligations, pursuant to an instrument executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrowers and of the Agent (such consents not to be unreasonably withheld); provided that such consents shall not be required for an assignment to an Assignee that is, before giving effect to such assignment, a Bank or is an existing lender under any other credit facility for The Limited or any Wholly-Owned Subsidiary thereof, or an affiliate of any such Bank or lender; provided further, that (i) unless otherwise agreed by the Borrowers and the Agent, each such assignment shall be in a minimum amount of $5,000,000 or, if less, all the remaining rights and obligations of the transferor Bank, and (ii) any such assignment of rights and obligations in respect of any Class of Loans or Commitments shall be made ratably with respect to all rights and obligations of the transferor Bank in respect of both Classes. Upon execution and delivery of such an instrument, payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, delivery to the Agent of an executed copy of such instrument and payment to the Agent by the Assignee of a processing fee of $2,500, then such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrowers shall make appropriate arrangements so that, if required, a new Note or Notes are issued to the Assignee, at the Borrowers' expense. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, on or prior to the date on which it becomes a Bank party to this Agreement, deliver to the Borrowers and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04(d). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrowers' prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. Section 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. Section 9.08. Waiver of Trial by Jury. Each of the parties hereto irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby. Section 9.09. New York Law. THIS AGREEMENT AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Section 9.10. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and the other Loan Documents constitute the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. Section 9.11. Several Obligations. The Obligations of the respective Borrowers hereunder and under the Notes to pay the principal of and interest on their respective Loans are several and not joint; provided that the foregoing shall not be construed to release or otherwise impair either Borrower's obligations as a Guarantor under the Guarantee Agreement. All other monetary obligations of the Borrowers hereunder and under the Loan Documents are joint and several. Section 9.12. Interest Rate Limitation. Notwithstanding anything herein or in the Notes to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively the "Charges"), as provided for herein or in any other Loan Document, or otherwise contracted for, charged, received, taken or reserved by any Bank, shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by such Bank in accordance with applicable law, the rate of interest payable under the Note or Notes held by such Bank, together with all Charges payable to such Bank, shall be limited to the Maximum Rate. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ABERCROMBIE & FITCH STORES, INC. by _________________________________ Name: Title: Address: 3 Limited Parkway Columbus, OH 43230 Telecopy number: 614-479-7060 A & F TRADEMARK, INC., by _________________________________ Name: Title: Address: 3 Limited Parkway Columbus, OH 43230 Telecopy number: 614-479-7060 THE CHASE MANHATTAN BANK, N.A., individually and as Administrative Agent, by _________________________________ Name: Title: Address: c/o Chemical Bank Grand Central Tower 140 East 45th Street New York, NY 10017-3162 Telecopy number: 212-622-0002 CITIBANK, N.A., by _________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, by _________________________________ Name: Title:
Schedule 1 Commitments ----------- A & F Trademark Co. Bank Term Commitment Term Commitment - ------------------------------------ ---------------- ---------------- The Chase Manhattan Bank, N.A. $48,000,000 $2,000,000 Citibank, N.A. $48,000,000 $2,000,000 Morgan Guaranty Trust Company of New $48,000,000 $2,000,000 York ---------------- --------------- $144,000,000 $6,000,000
================ =============== Schedule 5.16 Existing Liens None. EXHIBIT A TERM NOTE New York, New York [Effective Date] For value received, [A & F TRADEMARK, INC.], a Delaware corporation (the "Borrower"), promises to pay to the order of [THE CHASE MANHATTAN BANK, N.A.] (the "Bank"), for the account of its Applicable Lending Office, on the Maturity Date, the aggregate unpaid principal amount of [A & F Trademark Co.] Term Loans of the Bank. The Borrower also promises to pay interest on the unpaid principal amount of each such [A & F Trademark Co.] Term Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, N.A., New York, New York. All [A & F Trademark Co.] Term Loans made by the Bank and all repayments of the principal of any such [A & F Trademark Co.] Term Loans, shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such [A & F Trademark Co.] Term Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on Pa continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under any of the other Loan Documents. This note is one of the Notes referred to in the Credit Agreement dated as of June 28, 1996, among the Borrower, [ABERCROMBIE & FITCH STORES, INC.], the banks listed on the signature pages thereof and The Chase Manhattan Bank, N.A., as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the mandatory and optional prepayment hereof and the acceleration of the maturity hereof. [A & F TRADEMARK, INC. by ____________________ Name: Title: LOANS AND PAYMENTS OF PRINCIPAL Unpaid Type Amount Amount of Principal Notations Date of Loan of Loan Principal Repaid Balance Made by - ---- ------- ------- ---------------- --------- ----------
EXHIBIT B GUARANTEE AGREEMENT dated as of [ ], 1996, among ABERCROMBIE & FITCH HOLDING CORPORATION, a Delaware corporation ("Holdings"), ABERCROMBIE & FITCH STORES,INC., a Delaware corporation ("A&F"), A&F TRADEMARK, INC. ("Trademark Co." and, together with Holdings, A&F and any other entities that became parties hereto as contemplated by Section 15 hereof, referred to herein individually as a "Guarantor" and collectively as the "Guarantors"), and THE CHASE MANHATTAN BANK, N.A., as administrative agent (the "Agent") for the banks (the"Banks") party to the Credit Agreement dated as of June 28, 1996 (as amended from time to time, the "Credit Agree ment"), among A&F,Trademark Co., the Banks and the Agent. The Banks have respectively agreed to make loans to A&F and Trademark Co. The obligations of the Banks to lend under the Credit Agreement are conditioned on, among other things, the execution and delivery by the Guarantors of a guarantee agreement in the form hereof. The Guarantors acknowledge that they will derive substantial benefits from the extension of credit to A&F and Trademark Co. under the Credit Agreement. As consideration therefor and in order to induce the Banks to make the Loans (such term and the other capitalized terms used herein and not otherwise defined herein having the meanings assigned to them in the Credit Agreement), the Guarantors are willing to execute and deliver this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Each of the Guarantors unconditionally guarantees, jointly with the other Guarantors and severally,as a primary obligor and not merely as a surety, (a) the due and punctual payment by each Borrower (other than itself) of (i) the principal of and interest on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations of each Borrower (other than itself) to the Banks and the Agent under the Credit Agreement and the other Loan Documents to which such Borrower is or is to be a party and (b) the due and punctual performance of all other obligations of each Borrower (other than itself) under the Credit Agreement and the other Loan Documents (all the foregoing obligations being collectively called the "Obligations"). Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. SECTION 2. Each of the Guarantors waives presentment to, demand of payment from and protest to the Borrowers of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Agent or any Bank to assert any claim or demand or to enforce any right or remedy against either Borrower under the provisions of any Loan Document or otherwise; (b) any rescission, waiver,amendment or modification of, or any release from any of the terms or provisions of, any Loan Document, any guarantee or any other agreement, including with respect to any other Guarantor under this Agreement; (c) the release of any security held by the Agent or any Bank for the Obligations or any of them; or (d) the failure of the Agent or any Bank to exercise any right or remedy against any other Guarantor or guarantor of the Obligations. SECTION 3. Each of the Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that resort be had by the Agent or any Bank to any security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Agent or any Bank in favor of either Borrower or any other person. SECTION 4. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any Bank to assert any claim or demand or to enforce any remedy under any Loan Document, any guarantee or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of either Borrower or any Guarantor as a matter of law or equity (other than the indefeasible payment in full of all the Obligations). SECTION 5. Each of the Guarantors further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Agent or any Bank upon the bankruptcy or reorganization of either Borrower, any other Guarantor or otherwise. SECTION 6. In furtherance of the foregoing and not in limitation of any other right which the Agent or any Bank has at law or in equity against any Guarantor by virtue hereof, upon the failure of either Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each of the Guarantors hereby promises to and will, upon receipt of written demand by the Agent, forthwith pay, or cause to be paid, to the Agent for distribution to the Banks, if and as appropriate, in cash the amount of such unpaid Obligation. Notwithstanding any payment or payments made by a Guarantor hereunder or any setoff or application of funds of a Guarantor by the Agent or any Bank, no Guarantor shall be entitled to be subrogated to any of the rights of the Agent or any Bank against either Borrower or any collateral security or guarantee or right of offset held for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from either Borrower in respect of payments made by such Guarantor hereunder, until all amounts owing to the Agent or any Bank by each Borrower on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall erroneously be paid to any Guarantor on account of such subrogation, contribution, reimbursement, indemnity and similar rights, such amount shall be held in trust for the benefit of the Banks and shall forthwith be paid to the Agent to be credited and applied to the payment of the Obligations. Any term or provision of this Agreement to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed by that Guarantor without rendering this Agreement, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 7. Each of the Guarantors represents and warrants that (a) it is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) the execution, delivery and performance by it of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate and (if necessary) stockholder action, and do not contravene, or constitute a default under, any provision of applicable law or regulation or of its certificate of incorporation or By-Laws or any material agreement or instrument binding upon it, and (c) this Agreement constitutes a valid and binding agreement of such Guarantor, enforceable in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. SECTION 8. The guarantees made hereunder shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid, and shall be reinstated to the extent provided in Section 5. SECTION 9. This Agreement and the terms, covenants and conditions hereof shall be binding upon each Guarantor and its successors and shall inure to the benefit of the Agent and the Banks and their respective successors and assigns. None of the Guarantors shall be permitted to assign or transfer any of its rights or obligations under this Agreement, except as expressly contemplated by this Agreement. SECTION 10. No failure on the part of the Agent to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Agent or any Bank preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder and under the other Loan Documents are cumulative and are not exclusive of any other remedies provided by law. Except as provided in the Credit Agreement, none of the Agent or the Banks shall be deemed to have waived any rights hereunder or under any other agreement or instrument unless such waiver shall be in writing and signed by such parties. SECTION 11. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 12. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement; provided that any communication or notice hereunder to any Guarantor that is not a Borrower shall be given to it in care of A&F at the address or telecopy or telex number specified in the Credit Agreement. SECTION 13. In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect with respect to any Guarantor, no party hereto shall be required to comply with such provision with respect to such Guarantor for so long as such provision is held to be invalid, illegal or unenforceable and the validity, legality and enforceability of the remaining provisions contained herein, and of such provision with respect to any other Guarantor, shall not in any way be affected or impaired. The parties shall endeavor in good-faith negotiations to replace any invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which come as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 14. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument; provided that this Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. This Agreement shall be effective with respect to any Guarantor when a counterpart which bears the signature of such Guarantor shall have been delivered to the Agent. SECTION 15. Upon execution and delivery by the Agent and a member of the Borrower Group of an instrument in the form of Annex 1 attached hereto, such member of the Borrower Group shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. ABERCROMBIE & FITCH HOLDING CORPORATION by ____________________ Name: Title: ABERCROMBIE & FITCH STORES, INC. by ____________________ Name: Title: THE CHASE MANHATTAN BANK, N.A., as Administrative Agent by ____________________ Name: Title: ANNEX 1 to the Guarantee Agreement SUPPLEMENT NO. dated as of , to the GUARANTEE AGREEMENT dated as of [ ], 1996, among ABERCROMBIE & FITCH HOLDING CORPORATION, a Delaware corporation ("Holdings"), ABERCROMBIE & FITCH STORES,INC., a Delaware corporation ("A&F"), A&F TRADEMARK, INC. ("Trademark Co." and, together with Holdings, A&F and any other entities that became parties thereto as contemplated by Section 15 thereof, referred to herein individually as a "Guarantor" and collectively as the "Guarantors"), and THE CHASE MANHATTAN BANK, N.A., as administrative agent (the "Agent") for the banks (the"Banks") party to the Credit Agreement dated as of June 28, 1996 (as amended from time to time, the "Credit Agree ment"), among A&F, Trademark Co., the Banks and the Agent. The Guarantors have entered into the Guarantee Agreement in order to induce the Banks to make loans to the Borrowers (such term and other capitalized terms used herein and not otherwise defined herein having the meanings assigned to such terms in the Guarantee Agreement and the Credit Agreement). Section 15 of the Guarantee Agreement provides that members of the Borrower Group may become Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned member of the Borrower Group (the "New Guarantor") is executing this Supplement to become a Guarantor under the Guarantee Agreement. As a member of the Borrower Group, the New Guarantor acknowledges that it derives substantial benefits from the extension of credit to the Borrowers under the Credit Agreement. Accordingly, the Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 15 of the Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder. Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to include the New Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Agent shall have received a counterpart of this Supplement that bears the signature of the New Guarantor. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable and the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement, and of any such provision with respect to any other Guarantor, shall not in any way be affected or impaired. The parties shall endeavor in good faith negotiations to replace any invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 12 of the Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below. SECTION 8. The New Guarantor agrees to reimburse the Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Agent. IN WITNESS WHEREOF, the New Guarantor and the Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. [NAME OF NEW GUARANTOR], by ____________________ Name: Title: [Address] THE CHASE MANHATTAN BANK, N.A., as Administrative Agent by ____________________ Name: Title: EXHIBIT C SUBORDINATION AGREEMENT dated as of [ ], 1996, among THE LIMITED, INC., a Delaware corporation ("TLI"), ABERCROMBIE & FITCH HOLDING CORPORATION, a Delaware corporation ("Holdings"), ABERCROMBIE & FITCH STORES, INC., a Delaware corporation ("A & F"), A & F TRADEMARK, INC., a Delaware corporation ("Trademark Co.") and THE CHASE MANHATTAN BANK, N.A., as Administrative Agent (the "Agent") for the banks (the "Banks") party to the Credit Agreement dated as of June 28, 1996 (as amended from time to time, the "Credit Agreement"), among A & F, Trademark Co., the Banks and the Agent. The Banks have respectively agreed to make loans to A & F and Trademark Co. The obligations of the Banks to lend under the Credit Agreement are conditioned on, among other things, the execution and delivery by TLI, Holdings, A & F, Trademark Co. and the Agent of a subordination agreement in the form hereof. In order to induce the Banks to make Loans, each of TLI, Holdings, A & F and Trademark Co. is willing to execute and deliver this Agreement. Accordingly, TLI, Holdings, A & F, Trademark Co. and the Agent hereby agree as follows: ARTICLE I DEFINITIONS Capitalized terms used herein but not defined herein shall have the meanings set forth in the Credit Agreement. In addition to the terms defined elsewhere in this Agreement or in the Credit Agreement, as used herein the following terms shall have the following meanings: "Restricted Subsidiaries" means each member of the Borrower Group and their respective successors. "Senior Creditors" means each of the Banks, the Agent and their respective successors and assigns. "Senior Obligations" means all monetary obligations of each Borrower and Guarantor under the Loan Documents, including the payment of (i) principal of and interest (including interest accruing after the commencement of any proceeding under any bankruptcy, insolvency, receivership or similar law, regardless of whether a claim therefor is allowable in such proceeding) on indebtedness under the Credit Agreement, including any amendments, modifications, deferrals, renewals, extensions or increases of any such indebtedness, and (ii) all fees, indemnities, expense reimbursement obligations and other amounts payable under any Loan Document. ARTICLE II SUBORDINATION SECTION 2.1. Subordination. TLI hereby agrees on behalf of itself and its subsidiaries that all the Subordinated Obligations of each Restricted Subsidiary are hereby expressly subordinated, to the extent and in the manner set forth in this Article II, to the prior payment in full in cash of all Senior Obligations of such Restricted Subsidiary in accordance with the terms thereof. SECTION 2.2. Dissolution or Insolvency. Upon any distribution of the assets of any Restricted Subsidiary or upon any dissolution, winding up, liquidation or reorganization of any Restricted Subsidiary, whether in bankruptcy, insolvency, reorganization, arrangement or receivership proceedings or otherwise, or upon any assignment for the benefit of creditors or any other marshaling of the assets and liabilities of any Restricted Subsidiary, or otherwise: (a) the Senior Creditors of such Restricted Subsidiary shall first be entitled to receive payment in full in cash of the Senior Obligations of such Restricted Subsidiary in accordance with the terms of such Senior Obligations before TLI or any subsidiary of TLI shall be entitled to receive any payment on account of the Subordinated Obligations of such Restricted Subsidiary, whether as principal, interest or otherwise; and (b) any payment by, or distribution of the assets of, such Restricted Subsidiary of any kind or character, whether in cash, property or securities, to which TLI or any subsidiary of TLI would be entitled except for the provisions of this Agreement shall be paid or delivered by the person making such payment or distribution (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Senior Creditors of such Restricted Subsidiary to the extent necessary to make payment in full in cash of all Senior Obligations of such Restricted Subsidiary remaining unpaid, after giving effect to any concurrent payment or distribution to such Senior Creditors in respect of Senior Obligations of such Restricted Subsidiary. SECTION 2.3. Payment of Primary Subordinated Obligations Prohibited. (a) No payment (whether directly, by exercise of any right of set-off or otherwise) in respect of any Primary Subordinated Obligation of any Restricted Subsidiary, whether as principal, interest or otherwise, shall be permitted at any time until all Senior Obligations have been paid in full. (b) No payment of any Primary Subordinated Obligation that is prohibited by paragraph (a) above shall be received or accepted by or on behalf of TLI or permitted by TLI to be received or accepted by or on behalf of any of its subsidiaries. (c) The provisions of this Section 2.3 shall not apply to the payment of any Primary Subordinated Obligation of A & F on, or within five Domestic Business Days after, the Effective Date with the proceeds of the A & F Term Loans. SECTION 2.4. Payment of Secondary Subordinated Obligations Prohibited Upon Default. No payment (whether directly, by exercise of any right of set-off or otherwise) in respect of the Secondary Subordinated Obligations of any Restricted Subsidiary, whether as principal, interest or otherwise, shall be permitted, and no such payment shall be received or accepted by or on behalf of TLI or permitted by TLI to be received or accepted by or on behalf of any of its subsidiaries, if prior to or after giving effect to such payment, any Default shall have occurred and be continuing. SECTION 2.5. Certain Payments Held in Trust. In the event that any payment by, or distribution of the assets of, any Restricted Subsidiary of any kind or character, whether in cash, property or securities, and whether directly, by exercise of any right of set-off or otherwise, shall be received by or on behalf of TLI or any subsidiary of TLI at a time when such payment is prohibited by this Agreement, such payment or distribution shall be held in trust for the benefit of, and shall be paid over to, (a) the Senior Creditors of such Restricted Subsidiary to the extent necessary to make payment in full in cash of all Senior Obligations of such Restricted Subsidiary remaining unpaid, after giving effect to any concurrent payment or distribution to such Senior Creditors in respect of such Senior Obligations or (b) in the case of any payment prohibited under Section 2.3 or 2.4 hereof, the Restricted Subsidiary from which such payment was received or, if directed by the Senior Creditors of such Restricted Subsidiary, to such Senior Creditors to be applied to pay any Senior Obligations then due or to be held as collateral security therefor. SECTION 2.6. Subrogation. Subject to the prior indefeasible payment in full in cash of the Senior Obligations of a Restricted Subsidiary, TLI and its subsidiaries, as applicable, shall be subrogated to the rights of the Senior Creditors of such Restricted Subsidiary to receive payments or distributions in cash, property or securities of such Restricted Subsidiary applicable to such Senior Obligations until all amounts owing on the Subordinated Obligations of such Restricted Subsidiary shall be paid in full, and as between and among a Restricted Subsidiary, its creditors (other than its Senior Creditors) and TLI and its subsidiaries, no such payment or distribution made to the Senior Creditors of such Restricted Subsidiary by virtue of this Agreement that otherwise would have been made to TLI or any subsidiary of TLI shall be deemed to be a payment by such Restricted Subsidiary on account of its Subordinated Obligations, it being understood that the provisions of this Section 2.6 are intended solely for the purpose of defining the relative rights of TLI and its subsidiaries, on the one hand, and the Senior Creditors, on the other hand. ARTICLE III OTHER MATTERS REGARDING THE SUBORDINATED OBLIGATIONS SECTION 3.1. Other Creditors. Nothing contained in this Agreement is intended to or shall impair, as between and among the Restricted Subsidiaries, their creditors (other than their Senior Creditors) and TLI and its subsidiaries, the obligations of each Restricted Subsidiary to pay to TLI and its subsidiaries the Subordinated Obligations of such Restricted Subsidiary as and when the same shall become due and payable in accordance with the terms thereof, or affect the relative rights of TLI and its subsidiaries and the creditors of the Restricted Subsidiaries (other than their Senior Creditors). SECTION 3.2. Proofs of Claims. In the event of any dissolution, winding up, liquidation or reorganization of any Restricted Subsidiary, whether in bankruptcy, insolvency, reorganization, arrangement or receivership proceedings or otherwise, or any assignment for the benefit of creditors or any other marshaling of the assets and liabilities of any Restricted Subsidiary, TLI agrees to file proofs of claim for the Subordinated Obligations upon demand of the Agent, in default of which the Agent or other authorized representative of the Senior Creditors is hereby irrevocably authorized so to file in order to effectuate the provisions hereof. SECTION 3.3. No Waiver. No right of any Senior Creditor to enforce this Agreement shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of any of the Agent, the other Senior Creditors, or any Restricted Subsidiary, or by any noncompliance by any Restricted Subsidiary with the terms, provisions and covenants contained herein, and the Senior Creditors are hereby expressly authorized to extend, renew, increase, decrease, modify or amend the terms of the Senior Obligations or any security therefor, and to release, sell or exchange any such security and otherwise deal freely with the Restricted Subsidiaries, all without notice to or consent of TLI or any of its subsidiaries and without affecting the liabilities and obligations of the parties hereto. SECTION 3.4. Acceleration and Remedies; Bankruptcy Filings. TLI agrees that, except for claims submitted in any proceeding contemplated by Section 2.2 hereof, it will not, and will not permit any of its subsidiaries to, exercise any remedies or take any action or proceeding to enforce any Subordinated Obligation if the payment of such Subordinated Obligation is then prohibited by Section 2.3 or 2.4, and TLI further agrees not to join, or to permit any of its subsidiaries to join, with any other creditors of any Restricted Subsidiary in filing any petition commencing any bankruptcy, insolvency, reorganization, arrangement or receivership proceeding or any assignment for the benefit of creditors against or in respect of any Restricted Subsidiary or any other marshaling of the assets and liabilities of any Restricted Subsidiary. TLI further agrees, to the fullest extent permitted under applicable law, that it will not cause or permit any Restricted Subsidiary to file any such petition, commence any such proceeding or make any such assignment referred to above until all Senior Obligations have been paid in full. SECTION 3.5. Transfer of Subordinated Obligations. TLI will not, and will not permit any of its subsidiaries to, sell, assign, transfer or otherwise dispose of all or any part of the Subordinated Obligations, or sell, assign, transfer or otherwise dispose of any subsidiary that has or may have any claim constituting a Subordinated Obligation, unless the Person to whom such sale, assignment, transfer or disposition is made (i) is TLI or a subsidiary of TLI or (ii) shall acknowledge in writing (delivered to the Agent) that it shall be bound by the terms of this Agreement, including the terms of this Section 3.5, as though named herein as a successor to TLI. SECTION 3.6. Obligations Hereunder Not Affected. (a) All rights and interests of the Senior Creditors hereunder, and all agreements and obligations of TLI hereunder, shall remain in full force and effect irrespective of: (i) any lack of validity or enforceability of the Credit Agreement or any other Loan Document; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Obligations, or any other amendment or waiver of or consent to departure from the Credit Agreement or any other Loan Document (other than this Agreement); (iii) any exchange, release or nonperfection of any security interest in any collateral, or any release or amendment or waiver of or consent to departure from any guarantee, in respect of all or any of the Senior Obligations; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Restricted Subsidiary in respect of its Senior Obligations or of TLI in respect of this Agreement. (b) This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of the Senior Obligations or any part thereof is rescinded or must otherwise be returned by any Senior Creditor upon the insolvency, bankruptcy or reorganization of any Restricted Subsidiary or otherwise, all as though such payment had not been made. (c) TLI hereby authorizes the Senior Creditors, without notice or demand and without affecting or impairing any of the obligations of TLI hereunder, from time to time to (i) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of, the Senior Obligations or any part thereof and (ii) exercise or refrain from exercising any rights against TLI, any subsidiary of TLI, any Restricted Subsidiary or any other Person. ARTICLE IV CERTAIN AGREEMENTS OF TLI TLI agrees, for the benefit of the Banks, that it will not cause or permit either Borrower to fail to observe or perform any of its covenants contained in Sections 5.09 and 5.16 of the Credit Agreement; provided that TLI shall not be responsible for a failure to observe or perform the covenants contained in Section 5.16 of the Credit Agreement to the extent such failure is attributable to any of the following: (a) mechanics', workers', materialmen's, warehousemen's, landlords' or other like Liens that arise by operation of law; (b) Liens obtained by judgment creditors without the consent of the Borrowers (unless such judgment relates to Debt incurred by a Borrower in violation of Section 5.09 of the Credit Agreement); or (c) other Liens that arise by operation of law without the consent of the Borrowers (unless such Liens arise as a result of a failure by TLI and its subsidiaries to pay income or franchise taxes or to comply with ERISA). ARTICLE V REPRESENTATIONS AND WARRANTIES OF TLI TLI represents and warrants to the Agent, for the benefit of the Senior Creditors, that: (a) TLI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by TLI of this Agreement and the consummation of the transactions contemplated hereby are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Governmental Authority (other than such as have been duly taken or made) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of TLI or any of its subsidiaries or of any material agreement, judgment, injunction, order, decree or other instrument binding upon TLI or any of its subsidiaries. (c) This Agreement constitutes a valid and binding agreement of TLI, enforceable against TLI and its subsidiaries in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. ARTICLE VI MISCELLANEOUS SECTION 6.1. Notices. All communications and notices hereunder shall be in writing and shall be given as provided in Section 9.01 of the Credit Agreement; provided that any communication or notice hereunder to TLI shall be given to it at the address or telecopy or telex number set forth under its signature on the signature pages hereof. SECTION 6.2. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All representations, warranties, covenants, promises and agreements by or on behalf of TLI that are contained in this Agreement shall bind its successors and assigns and inure to the benefit of the Senior Creditors and the successors and assigns of the Senior Creditors. TLI shall not assign or delegate any of its obligations under this Agreement without the prior written consent of the Agent, and any attempted assignment or delegation without such consent shall be void and of no effect. SECTION 6.3. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6.4. Waivers; Amendment. No failure or delay of any Senior Creditor in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power by any Senior Creditor preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Senior Creditors hereunder and under the other documents and instruments creating or securing their respective Senior Obligations are cumulative and are not exclusive of any other rights or remedies provided by law. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by TLI, the Restricted Subsidiaries and the Agent. SECTION 6.5. Waiver of Jury Trial. Each party hereto irrevocably waives any and all rights it may have to a trial by jury in any legal proceeding arising out of or relating to this Agreement. SECTION 6.6. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace any invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 6.7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one instrument. SECTION 6.8. Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 6.9. Subsidiaries of TLI. References herein to subsidiaries of TLI shall not be deemed to include any Borrower or Guarantor. SECTION 6.10. Termination. Subject to Section 3.6(b), this Agreement shall terminate upon payment in full of the Senior Obligations. IN WITNESS WHEREOF, TLI, Holdings, A & F, Trademark Co. and the Agent have caused this Agreement to be duly executed by their respective authorized representatives as of the day and year first above written. THE LIMITED, INC., by ____________________ Name: Title: ABERCROMBIE & FITCH HOLDING CORPORATION by ____________________ Name: Title: ABERCROMBIE & FITCH STORES, INC. by ____________________ Name: Title: THE CHASE MANHATTAN BANK, N.A., as Administrative Agent by ____________________ Name: Title: EXHIBIT D-3 [Effective Date] Abercrombie & Fitch Stores, Inc. A & F Trademark, Inc. Credit Agreement Dear Sirs: We have participated in the preparation of (i) the Credit Agreement dated as of June 28, 1996 (the "Credit Agreement"), among Abercrombie & Fitch Stores, Inc., a Delaware corporation ("A & F"), A & F Trademark, Inc., a Delaware corporation ("Trademark Co."), the banks listed on the signature pages thereof (the "Banks"), and The Chase Manhattan Bank, N.A., as Administrative Agent (the "Agent") and (ii) the Guarantee Agreement dated as of June 28, 1996 (the "Guarantee Agreement"), among Abercrombie & Fitch Holding Corporation, A & F, Trademark Co. (collectively, the "Guarantors") and the Agent, and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement and the Guarantee Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Based upon the foregoing, we are of opinion that the Credit Agreement constitutes a valid and binding agreement of each of A & F and Trademark Co., the Guarantee Agreement constitutes a valid and binding agreement of each Guarantor, and the Notes constitute valid and binding obligations of A & F and Trademark Co., in each case enforceable against A & F, Trademark Co. or the Guarantors, as the case may be, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws relating to or affecting creditor's rights generally from time to time in effect and to general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law. With respect to the foregoing opinion, (i) insofar as provisions contained in the Credit Agreement provide for indemnification, the enforceability thereof may be limited by public policy considerations, (ii) the availability of a decree for specific performance or an injunction is subject to the discretion of the court requested to issue any such decree or injunction and (iii) we express no opinion as to the effect of the laws of any jurisdiction other than the State of New York where any lender may be located or where enforcement of the Credit Agreement may be sought that limits the rates of interest legally chargeable or collectible. In giving this opinion, we have assumed that (i) each of the Borrowers and the Guarantors is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and (ii) the execution and delivery, and the performance, by each of the Borrowers and the Guarantors of each Loan Document to which it is a party are within its powers, have been duly authorized by all necessary action on the part of such Borrower or Guarantor and its respective stockholders, require no action by or in respect of, or filing with, any Governmental Authority (other than such as have been duly taken or made) and do not contravene, or constitute a default under any provision of applicable law or regulation or of the certificate of incorporation or By-Laws of such Borrower or Guarantor or of any judgment, injunction, order or decree or any material agreement or other material instrument binding upon such Borrower or Guarantor. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the Federal laws of the United States of America and the General Corporation Law of the State of Delaware. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person (other than an Assignee or Participant) without our prior written consent. Very truly yours, To the Banks and the Agent Referred to Herein In care of The Chase Manhattan Bank, N.A., as Agent c/o Chemical Bank Grand Central Tower 140 East 45th Street New York, NY 10017-3162 OPINION OF [ ], COUNSEL FOR THE BORROWERS Effective Date To the Banks, the Agent and the Security Agent referred to below c/o The Chase Manhattan Bank, N.A., as Agent [Address] Ladies and Gentlemen: I am the [ ] of The Limited, Inc., a Delaware corporation ("The Limited"), and have acted on behalf of The Limited and its subsidiaries in connection with the Credit Agreement dated as of [ ] (the "Credit Agreement") among Abercrombie & Fitch Stores, Inc., A&F Trademark, Inc., the banks listed on the signature pages thereof (the "Banks") and The Chase Manhattan Bank, N.A., as Agent (the "Agent"). Terms defined in the Credit Agreement are used herein as therein defined. I, or individuals under my direction, have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Based upon the foregoing, and subject to the qualifications set forth below, I am of the opinion that: 1. Each of Holdings, the Limited and the Borrowers (individually, a "Company" and collectively, the "Companies") is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted or proposed to be conducted [, except any such powers or governmental licenses, authorizations, consents or approvals the absence of which would not reasonably be expected to have a Material Adverse Effect]. 2. The execution, delivery and performance by each of the Companies of the Loan Documents to which it is a party [and the consummation of the Transactions] are within its powers, have been duly authorized by all necessary action on the part of such Company and its stockholders, require no action by or in respect of, or filing with, any Governmental Authority (other than such as have been duly taken or made) and do not contravene, or constitute a default under, any provision of applicable law or regulation of the State of Ohio or the United States of America or of the certificate of incorporation or By-laws of such Company or of any judgment, injunction, order or decree or any material agreement or other material instrument binding upon such Company or result in the creation or imposition of any Lien on any asset of such Company, in each case both before and after giving effect to the Transactions. 3. To the best of my knowledge, there is no injunction, stay, decree or order of any Governmental Authority or any action, suit or proceeding pending against, threatened against or affecting any of the Companies before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision that would reasonably be expected to have a Material Adverse Effect. I am a member of the bar of the State of Ohio and the foregoing opinion is limited to the laws of the State of Ohio, the Federal laws of the United States of America and the General Corporation Law of the State of Delaware. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without my prior written consent. Sincerely, [Draft--6/26/96] OPINION OF DAVIS POLK & WARDWELL COUNSEL FOR THE BORROWERS [ ], 1996 To the Banks, the Agent and the Security Agent referred to below c/o The Chase Manhattan Bank, N.A., as Agent [Address] Ladies and Gentlemen: We have acted as special counsel for The Limited, Inc., a Delaware corporation ("The Limited"), and its subsidiaries in connection with the Credit Agreement dated as of May 19, 1995 (the "Credit Agreement") among Abercrombie & Fitch Stores, Inc., A&F Trademark, Inc., the banks listed on the signature pages thereof (the "Banks") and The Chase Manhattan Bank, N.A., as Agent (the "Agent"). Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Based upon the foregoing, and subject to the qualifications set forth below, we are of the opinion that: 1. Each of the Loan Documents constitutes a valid and binding agreement of each of the Borrowers that is a party thereto, in each case enforceable in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. 2. Neither Borrower is an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The foregoing are subject to the following qualifications: [(a) As to various provisions in the Documents that grant the parties thereto certain rights to make determinations or take actions in their discretion, we assume that such discretion will be exercised in good faith and in a commercially reasonable manner.] [(a) or (b)] We express no opinion as to the effect (if any) of (i) any law of any jurisdiction (except the State of New York) in which any Bank is located that may limit the rate of interest that such Bank may charge or collect or (ii) the effect of Section 548 of the United States Bankruptcy Code or any similar provisions of state law. (c) We have assumed that (i) each of the Borrowers is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and (ii) the execution and delivery, and the performance, by each of the Borrowers of each Loan Document to which it is a party are within its powers, have been duly authorized by all necessary action on the part of such Borrower and its stockholders, require no action by or in respect of, or filing with, any Governmental Authority (other than such as have been duly taken or made) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or By-laws of such Borrower or of any judgment, injunction, order or decree or any material agreement or other material instrument binding upon such Borrower. We are members of the bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the Federal laws of the United States of America. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, EX-10.2 7 Exhibit 10.2 FORM OF SERVICES AGREEMENT This Services Agreement (this "Agreement") is entered into as of [______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation ("Abercrombie & Fitch"), and The Limited, Inc. a Delaware corporation ("The Limited"). RECITALS WHEREAS, Abercrombie & Fitch is issuing shares of Class A Common Stock, $0.01 par value per share ("Class A Common Stock"), to the public in an offering (the "Initial Public Offering") registered under the Securities Act of 1933, as amended; WHEREAS, The Limited beneficially owns all of the issued and outstanding Abercrombie & Fitch Class B Common Stock, par value $0.01 per share ("Class B Common Stock"); WHEREAS, The Limited has heretofore directly or indirectly provided certain administrative, financial, management and other services to Abercrombie & Fitch or its Subsidiaries; WHEREAS, on the terms and subject to the conditions set forth herein, Abercrombie & Fitch desires to retain The Limited as an independent contractor to provide, directly or indirectly, certain of those services to Abercrombie & Fitch and its Subsidiaries (as defined below) after the Closing Date (as defined below); and WHEREAS, on the terms and subject to the conditions set forth herein, The Limited desires to provide, directly or indirectly, such services to Abercrombie & Fitch and its Subsidiaries. AGREEMENTS NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, The Limited and Abercrombie & Fitch, for themselves, their successors and assigns, hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Agreement, the following terms will have the following meanings, applicable both to the singular and the plural forms of the terms described: "Abercrombie & Fitch" has the meaning ascribed thereto in the preamble hereto. "Abercrombie & Fitch Entities" means Abercrombie & Fitch and its Subsidiaries and "Abercrombie & Fitch Entity" shall mean any of the Abercrombie & Fitch Entities. "Abercrombie & Fitch Indemnified Person" has the meaning ascribed thereto in Section 4.05. "Actions" has the meaning ascribed thereto in Section 4.04. "Agreement" has the meaning ascribed thereto in the preamble hereto, as such agreement may be amended and supplemented from time to time in accordance with its terms. "Associate Discount Program" means the program which allows the associates of The Limited and Abercrombie & Fitch to purchase items at agreed upon discount rates at each of the Subsidiaries of The Limited and Abercrombie & Fitch. "Benefit Billing" has the meaning ascribed thereto in Section 3.01. "Benefits Services" has the meaning ascribed thereto in Section 3.05. "Change Notice" has the meaning ascribed thereto in Section 3.07. "Class A Common Stock" has the meaning ascribed thereto in the recitals to this Agreement. "Class B Common Stock" has the meaning ascribed thereto in the recitals to this Agreement. "Closing Date" means the date of the closing of the initial sale of Class A Common Stock in the Initial Public Offering. "Common Stock" means the Class B Common Stock, the Class A Common Stock and any other class of Abercrombie & Fitch capital stock representing the right to vote generally for the election of directors. "Customary Billing" has the meaning ascribed thereto in Section 3.01. "Employee Welfare Plans" has the meaning ascribed thereto in Section 4.02. "Initial Public Offering" has the meaning ascribed thereto in the recitals to this Agreement. "Limited Entities" means The Limited and Subsidiaries of The Limited and "Limited Entity" shall mean any of The Limited Entities. "Limited Indemnified Person" has the meaning ascribed thereto in Section 4.03. "Pass-Through Billing" has the meaning ascribed thereto in Section 3.01. "Payment Date" has the meaning ascribed thereto in Section 3.06. "Percent of Sales Billing" has the meaning ascribed thereto in Section 3.01. "Person" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Prior Agreements" has the meaning ascribed thereto in the recitals to this Agreement. "Schedule I" means the first schedule hereto which lists the Services (other than Services relating to employee plan and benefit matters) to be provided by The Limited to Abercrombie & Fitch and sets forth the related billing methodology. "Schedule II" means the second schedule attached hereto which lists the Services relating to employee plans and benefit arrangements to be provided by The Limited to Abercrombie & Fitch and sets forth the related billing methodology. "Schedules" has the meaning ascribed thereto in Section 3.01. "SEC" means the United States Securities and Exchange Commission. "Service Costs" has the meaning ascribed thereto in Section 3.01. "Services" has the meaning ascribed thereto in Section 2.01. "Subsidiary" means, as to any Person, any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting capital stock or other voting ownership interests is owned or controlled directly or indirectly by such Person or by one or more of the Subsidiaries of such Person or by a combination thereof. Subsidiary, when used with respect to The Limited or Abercrombie & Fitch, shall also include any other entity affiliated with The Limited or Abercrombie & Fitch, as the case may be, that The Limited and Abercrombie & Fitch may hereafter agree in writing shall be treated as a "Subsidiary" for the purposes of this Agreement. "The Limited" has the meaning ascribed thereto in the preamble hereto. Section 1.02. Internal References. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement and references to the parties shall mean the parties to this Agreement. ARTICLE II PURCHASE AND SALE OF SERVICES Section 2.01. Purchase and Sale of Services. (a) On the terms and subject to the conditions of this Agreement and in consideration of the Service Costs described below, The Limited agrees to provide to Abercrombie & Fitch, or procure the provision to Abercrombie & Fitch of, and Abercrombie & Fitch agrees to purchase from The Limited, the services described in Schedules I and II (the "Services"). Unless otherwise specifically agreed by The Limited and Abercrombie & Fitch, the Services to be provided or procured by The Limited hereunder shall be substantially similar in scope, quality, and nature to those provided to, or procured on behalf of, the Abercrombie & Fitch Entities prior to the Closing Date. (b) It is understood that (i) Services to be provided to Abercrombie & Fitch under this Agreement will, at Abercrombie & Fitch' request, be provided to Subsidiaries of Abercrombie & Fitch and (ii) The Limited may satisfy its obligation to provide or procure Services hereunder by causing one or more of its Subsidiaries to provide or procure such Services. With respect to Services provided to, or procured on behalf of, any Subsidiary of Abercrombie & Fitch, Abercrombie & Fitch agrees to pay on behalf of such Subsidiary all amounts payable by or in respect of such Services; provided that, without in any way limiting the obligations of Abercrombie & Fitch to pay for such Services, Abercrombie & Fitch may allow [Abercrombie & Fitch Service Corp.], a Delaware corporation, to make such payments on its behalf. Section 2.02. Additional Services. In addition to the Services to be provided or procured by The Limited pursuant to Section 2.01, if requested by Abercrombie & Fitch, and to the extent that The Limited and Abercrombie & Fitch may mutually agree, The Limited shall provide additional services (including services not provided by The Limited to the Abercrombie & Fitch Entities prior to the Closing Date) to Abercrombie & Fitch The scope of any such services, as well as the term, costs, and other terms and conditions applicable to such services, shall be as mutually agreed by The Limited and Abercrombie & Fitch. ARTICLE III SERVICE COSTS; OTHER CHARGES Section 3.01. Service Costs Generally. (a) Schedules I and II hereto (collectively, the "Schedules") indicate, with respect to each Service listed therein, whether the costs to be charged to Abercrombie & Fitch for such Service or program are determined by (i) the customary billing method ("Customary Billing"), (ii) the pass-through billing method ("Pass-Through Billing"), (iii) the percentage of Abercrombie & Fitch' net sales method ("Percent of Sales Billing") or (iv) based upon a calculation of certain costs relating to employee benefit plans and benefit arrangements ("Benefit Billing"). The Customary Billing, Pass-Through Billing, Percent of Sales Billing and Benefit Billing methods applicable to Services provided to Abercrombie & Fitch are collectively referred to herein as the "Service Costs". Abercrombie & Fitch agrees to pay to The Limited in the manner set forth in Section 3.06 the Service Costs applicable to each of the Services provided by The Limited. (b) As provided herein, The Limited shall permit eligible Abercrombie & Fitch associates to participate in certain of The Limited's employee benefit plans. In addition to reimbursing The Limited for the Services as set forth herein, Abercrombie & Fitch shall reimburse The Limited for The Limited's costs (including any contributions and premium costs and including certain third-party expenses and allocations of certain Limited personnel expenses), generally in accordance with past practice, subject to Section 3.05 hereof, relating to participation by Abercrombie & Fitch associates in any of The Limited's benefit plans. It is the express intent of the parties that Service Costs relating to the administration of Abercrombie & Fitch employee plans and the performance of related Services will not exceed reasonable compensation for such Services as defined in 29 CFR Section 2550.408c-2. Section 3.02. Customary Billing. The costs of Services determined by the Customary Billing method shall be comparable to the costs charged from time to time to other businesses operated by The Limited for comparable services. Section 3.03Pass-Through Billing. The costs of Services determined by the Pass-Through Billing method shall be equal to the third-party costs and expenses incurred by The Limited or any of its Subsidiaries on behalf of any Abercrombie & Fitch Entity. If The Limited incurs costs or expenses on behalf of Abercrombie & Fitch or any of its Subsidiaries as well as other businesses operated by The Limited, The Limited will allocate any such costs or expenses in good faith between the various businesses on behalf of which such costs or expenses were incurred as The Limited shall determine in the exercise of The Limited's reasonable judgment. The Limited shall apply usual and accepted accounting conventions in making such allocations and The Limited or its agents shall keep and maintain such books and records as may be reasonably necessary to make such allocations. The Limited shall make copies of such books and records available to any business upon request and with reasonable notice. Section 3.04 Percent of Sales. Services for which the billing methodology is the Percent of Sales method shall not be billed individually. Instead, The Limited shall provide all such Services for an aggregate annual cost equal to the amount obtained by multiplying (x) The Limited Service Corp.'s (or any successor) projected budget for Services to be provided to all Subsidiaries of The Limited, including Abercrombie & Fitch, for the relevant year by (y) the projected net sales for the year of the Abercrombie & Fitch' Subsidiaries divided by The Limited's net sales (the "Net Sales Ratio"). At the end of the fiscal year, actual expenses versus budgeted expenses for Services will be compared and any overage or shortfall will be allocated based on the Net Sales Ratio. The Limited Service Corp.'s budget for Services to be provided to Abercrombie & Fitch shall be determined on a basis consistent with the manner in which The Limited Service Corp. determines the budgets for other businesses operated by The Limited. Section 3.05. Benefit Billing. (a) Prior to the Closing Date, certain associates of Abercrombie & Fitch participated in certain benefit plans sponsored by The Limited ("The Limited Plans"). On and after the Closing Date, Abercrombie & Fitch associates shall continue to be eligible to participate in The Limited Plans, subject to the terms of the governing plan documents as interpreted by the appropriate plan fiduciaries. On and after the Closing Date, subject to regulatory requirements and the provisions of Section 4.01 hereof, The Limited will continue to provide Benefits Services to and in respect of Abercrombie & Fitch associates with reference to The Limited Plans as it administered the plans prior to the Closing Date. (b) The costs payable by Abercrombie & Fitch for Services relating to employee plans and benefit arrangements ("Benefits Services") may be charged on the basis of Customary Billing, Pass-Through Billing, Percent of Sales Billing or Benefit Billing. In addition, costs associated with certain plans and programs identified in Schedule II will be paid principally through employee payroll deductions for such plans and programs. Benefit Services consists of those categories of Services which are more fully described on Schedule II attached hereto. (c) Each party to this Agreement may request changes in the applicable terms of or services relating to The Limited Plans, approval of which shall not be unreasonably withheld; provided, however, that approval of changes in the terms of any of The Limited Plans shall be in the sole discretion of The Limited. (d) The Limited and Abercrombie & Fitch agree to cooperate fully with each other in the administration and coordination of regulatory and administrative requirements associated with The Limited Plans. Such coordination, upon request, will include (but is not limited to) the following: sharing payroll data for determination of highly compensated associates, providing census information (including accrued benefits) for purposes of running discrimination tests, providing actuarial reports for purposes of determining the funded status of any plan, review and coordination of insurance and other independent third party contracts, and providing for review of all summary plan descriptions, requests for determination letters, insurance contracts, Forms 5500, financial statement disclosures and plan documents. Section 3.06. Invoicing and Settlement of Costs. (a) The Limited will invoice or notify Abercrombie & Fitch on a monthly basis (not later than the fifth day of each month), either directly or through The Limited's intracompany billing system, in a manner substantially consistent with the billing practices used in connection with services provided to the Abercrombie & Fitch Entities prior to the Closing Date (except as otherwise agreed), of the Service Costs. In connection with the invoicing described in this Section 3.06(a), The Limited will provide to Abercrombie & Fitch the same billing data and level of detail as it customarily provided to the Abercrombie & Fitch Entities prior to the Closing Date and as it customarily provides to other businesses operated by The Limited and such other data as may be reasonably requested by Abercrombie & Fitch. (b) Abercrombie & Fitch agrees to pay on or before 30 days after the date on which The Limited invoices or notifies Abercrombie & Fitch of the Service Costs after the Closing Date (or the next Business Day, if such day is not a Business Day) (each, a "Payment Date"), at The Limited's option upon reasonable notice to Abercrombie & Fitch, through The Limited's intra-company billing system, cash management systems, or, if requested by The Limited, by wire transfer of immediately available funds payable to the order of The Limited and without set off, all amounts invoiced by The Limited pursuant to paragraph (a) during the preceding calendar month (or since the Closing Date, in the case of the first Payment Date). If Abercrombie & Fitch fails to pay any monthly payment within 90 days of the relevant Payment Date, Abercrombie & Fitch shall be obligated to pay, in addition to the amount due on such Payment Date, interest on such amount at the prime, or best rate announced by Banc One Corp. plus 3% per annum compounded monthly from the relevant Payment Date through the date of payment. (c) Except as otherwise provided in the Schedules or agreed in writing by the parties, Abercrombie & Fitch shall take such action as is necessary to establish bank accounts (to be funded by Abercrombie & Fitch) or to otherwise fund all wage and salary payments to Abercrombie & Fitch associates and to fund all medical, retirement and other benefit claims payable to or on behalf of Abercrombie & Fitch associates and their dependents to the extent not covered by third party insurance. Payroll services and benefit claims processing activities performed by The Limited or The Limited's subcontractors shall be coordinated to facilitate payments. Following prior written notice of not less than 15 business days, The Limited shall be relieved of any obligation to deliver benefit and payroll services under this Agreement to the extent that such bank accounts or other funding arrangements are not established at the time drafts are presented for payment, or at any time when there are insufficient funds in the relevant account or such other arrangements fail to satisfy a properly presented claim. Section 3.07. Amended Schedules. (a) Prior to January 31 of each year for so long as the relevant Services continue to be provided under this Agreement, The Limited shall prepare and deliver to Abercrombie & Fitch updated versions of Schedules I and II (to the extent applicable), setting forth with respect to the Services described in such schedules, any proposed changes in billing methodology and, to the extent available, the Service Costs estimated to be payable for such Services for the then current fiscal year. Except as Abercrombie & Fitch and The Limited may otherwise agree, and except as specifically described in this Agreement (including the Schedules), the method of allocating and charging the costs reflected on Schedules I and II, and any updated versions of such schedules, shall be consistent with The Limited's prior practices with respect to the allocation of costs for services to the Abercrombie & Fitch Entities immediately prior to the Closing Date; provided that if The Limited changes the method of allocating and charging such costs to The Limited businesses generally, such revised method shall also be applied to Abercrombie & Fitch and Abercrombie & Fitch shall be notified in writing not less than 60 days in advance of implementing such revised method (a "Change Notice"). If a revised method of allocating and charging costs for particular Services would result in a significant increase in the amount of Service Costs that Abercrombie & Fitch would be obligated to pay under this Agreement as compared to those that would be payable were such method not revised, then, notwithstanding Article VI, Abercrombie & Fitch shall have the right during the 45-day period following receipt of The Limited's Change Notice to terminate such Services upon written notice to The Limited, and such termination shall be effective on the implementation date of the change in methodology. Such change in allocation method shall be deemed accepted by Abercrombie & Fitch if no such notice of termination is received by The Limited during such 45-day period, and thereafter any termination shall be governed by the provisions of Article VI. For purposes of this paragraph (a), a "significant increase" means, with respect to any amount, an aggregate increase of more than 10% over the base amount of Service Costs applicable to all such Services; provided such increase is at least $1,000,000. ARTICLE IV THE SERVICES Section 4.01. General Standard of Service. Except as otherwise agreed with Abercrombie & Fitch or described in this Agreement, and provided that The Limited is not restricted by contract with third parties or by applicable law, The Limited agrees that the nature, quality, and standard of care applicable to the delivery of the Services hereunder will be substantially the same as that of the Services which The Limited provides from time to time throughout its businesses; provided that in no event shall such standard of care be less than the standard of care that The Limited has customarily provided to the Abercrombie & Fitch Entities with respect to the relevant Service prior to the Closing Date. The Limited shall use its reasonable efforts to ensure that the nature and quality of Services provided to Abercrombie & Fitch associates either by The Limited directly or through administrators under contract shall be undifferentiated as compared with the same services provided to or on behalf of The Limited associates under The Limited Plans. Section 4.02. Delegation. Subject to Section 4.01 above, Abercrombie & Fitch hereby delegates to The Limited final, binding, and exclusive authority, responsibility, and discretion to interpret and construe the provisions of employee welfare benefit plans in which Abercrombie & Fitch has elected to participate and which are administered by The Limited under this Agreement (collectively, "Employee Welfare Plans"). The Limited may further delegate such authority to plan administrators to: (i) provide administrative and other services; (ii) reach factually supported conclusions consistent with the terms of the Employee Welfare Plans; (iii) make a full and fair review of each claim denial and decision related to the provision of benefits provided or arranged for under the Employee Welfare Plans, pursuant to the requirements of ERISA, if within sixty days after receipt of the notice of denial, a claimant requests in writing a review for reconsideration of such decisions. Administrator shall notify the claimant in writing of its decision on review. Such notice shall satisfy all ERISA requirements relating thereto; and (iv) notify the claimant in writing of its decision on review. Section 4.03. Limitation of Liability. Abercrombie & Fitch agrees that none of The Limited and its Subsidiaries and their respective directors, officers, agents, and employees (each, a "Limited Indemnified Person") shall have any liability, whether direct or indirect, in contract or tort or otherwise, to Abercrombie & Fitch for or in connection with the Services rendered or to be rendered by any Limited Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any Limited Indemnified Person's actions or inactions in connection with any such Services or transactions, except for damages which have resulted from such Limited Indemnified Person's gross negligence or willful misconduct in connection with any such Services, actions or inactions. Section 4.04. Indemnification of The Limited by Abercrombie & Fitch. Abercrombie & Fitch agrees to indemnify and hold harmless each Limited Indemnified Person from and against any damages, and to reimburse each Limited Indemnified Person for all reasonable expenses as they are incurred in investigating, preparing, pursuing, or defending any claim, action, proceeding, or investigation, whether or not in connection with pending or threatened litigation and whether or not any Limited Indemnified Person is a party (collectively, "Actions"), arising out of or in connection with Services rendered or to be rendered by any Limited Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any Limited Indemnified Person's actions or inactions in connection with any such Services or transactions; provided that Abercrombie & Fitch will not be responsible for any damages of any Limited Indemnified Person that have resulted from such Limited Indemnified Person's gross negligence or willful misconduct in connection with any of the advice, actions, inactions, or Services referred to above. Section 4.05. Indemnification of Abercrombie & Fitch by The Limited. The Limited agrees to indemnify and hold harmless Abercrombie & Fitch and its Subsidiaries and their respective directors, officers, agents, and employees (each, a "Abercrombie & Fitch Indemnified Person") from and against any damages, and will reimburse each Abercrombie & Fitch Indemnified Person for all reasonable expenses as they are incurred in investigating, preparing, or defending any Action, arising out of the gross negligence or willful misconduct of any Limited Indemnified Person in connection with the Services rendered or to be rendered pursuant to this Agreement. Section 4.06. Further Indemnification. To the extent that any other Person has agreed to indemnify any Limited Indemnified Person or to hold a Limited Indemnified Person harmless and such Person provides services to The Limited or any affiliate of The Limited relating directly or indirectly to any employee plan or benefit arrangement for which Benefit Services are provided under this Agreement, The Limited will exercise reasonable efforts (x) to make such agreement applicable to any Abercrombie & Fitch Indemnified Person so that each Abercrombie & Fitch Indemnified Person is held harmless or indemnified to the same extent as any Limited Indemnified Person or (y) otherwise make available to each Abercrombie & Fitch Indemnified Person the benefits of such agreement. Section 4.07. Reports. The Limited shall provide or shall cause to be provided to Abercrombie & Fitch with data or reports requested by Abercrombie & Fitch relating to (i) benefits paid to or on behalf of Abercrombie & Fitch associates under The Limited Plans, including but not limited to financial statements, claims history, and census information, and (ii) other information relating to the Services that is required to satisfy any reporting or disclosure requirement of ERISA or the Code. The Limited will provide such information within a reasonable period of time after it is requested. The costs for reports which are substantially similar to reports prepared by The Limited or on behalf of The Limited generally for its businesses shall be billed as part of the Benefit Costs. The cost for additional reports shall be billed as incremental costs in accordance with Section 3.06. ARTICLE V ADDITIONAL AGREEMENT Section 5.01. Notice. Unless otherwise agreed in writing by the parties, Abercrombie & Fitch agrees to provide The Limited with at least two months prior written notice of any material change in the eligible Abercrombie & Fitch associates and retirees covered by The Limited Plan, and any change in the scope of Services to be provided by The Limited with respect to such plans and arrangements. Notwithstanding the preceding sentence, if Abercrombie & Fitch provides The Limited with less than two months notice of any such change and The Limited is nonetheless able, with reasonable efforts, to effectuate such change with such shorter notice, than The Limited shall implement the requested change. ARTICLE VI TERM AND TERMINATION Section 6.01. Term. Except as otherwise provided in this Article VI or in Section 7.05 or as otherwise agreed in writing by the parties, this Agreement shall have an initial term of five years from the Closing Date, and will be renewed automatically thereafter for successive one-year terms unless either Abercrombie & Fitch or The Limited elects not to renew this Agreement upon not less than six-months' written notice. Section 6.02. Termination. (a) After the initial five year term, Abercrombie & Fitch may from time to time terminate this Agreement with respect to one or more of the Services, in whole or in part, upon giving at least six months prior notice to The Limited; provided that Abercrombie & Fitch may not terminate those Services which it was not allowed to terminate prior to the Closing Date. (b) This Agreement will be subject to early termination by either Abercrombie & Fitch or The Limited upon six months' written notice if The Limited ceases to own shares of Common Stock representing more than 50% of the combined voting power of the Common Stock of Abercrombie & Fitch. (c) The Limited may, at its option, terminate this Agreement as it relates to any given Service if The Limited would otherwise be required to provide such Service with respect to any employee benefit plan or program that is not substantially similar to a corresponding plan or program of The Limited (as such plans and programs of The Limited exist from time to time) or if the method of delivering such Service would no longer be substantially similar to the manner in which such Service was delivered to the Abercrombie & Fitch Entities, as such delivery may change from time to time. (d) The Limited may terminate any affected Service at any time if Abercrombie & Fitch shall have failed to perform any of its material obligations under this Agreement relating to any such Service, The Limited has notified Abercrombie & Fitch in writing of such failure, and such failure shall have continued for a period of 60 days after receipt of Abercrombie & Fitch of notice of such failure. (e) Abercrombie & Fitch may terminate any affected Service at any time if The Limited shall have failed to perform any of its material obligations under this Agreement relating to any such Service, Abercrombie & Fitch has notified The Limited in writing of such failure, and such failure shall have continued for a period of 60 days after receipt by The Limited of notice of such failure. (f) Each of Abercrombie & Fitch and The Limited agrees that prior to exercising its rights under this Section 6.02 it will consult for a reasonable period with the other party in advance of such termination as to its implementation. (g) Notwithstanding this Section 6.02, either The Limited or Abercrombie & Fitch may terminate coverage of Abercrombie & Fitch under The Limited's umbrella liability, property, casualty or fiduciary insurance policies (as more fully described in Schedule I) at any time upon written notice during the 90 days prior to the anniversary date of the policy; provided that termination of coverage by Abercrombie & Fitch may only be for nonpayment and only if a replacement policy, acceptable to The Limited, is entered into by Abercrombie & Fitch. (h) Abercrombie & Fitch may terminate any affected Service pursuant to Section 3.07 hereof. Section 6.03. Effect of Termination. (a) Other than as required by law, upon termination of any Service pursuant to Section 6.01 or Section 6.02, and upon termination of this Agreement in accordance with its terms, The Limited will have no further obligation to provide the terminated Service (or any Service, in the case of termination of this Agreement) and Abercrombie & Fitch will have no obligation to pay any fees relating to such Services or make any other payments hereunder; provided that notwithstanding such termination, (i) Abercrombie & Fitch shall remain liable to The Limited for fees owed and payable in respect of Services provided prior to the effective date of the termination; (ii) The Limited shall continue to charge Abercrombie & Fitch for administrative and program costs relating to benefits paid after but incurred prior to the termination of any Service and other services required to be provided after the termination of such Service and Abercrombie & Fitch shall be obligated to pay such expenses in accordance with the terms of this Agreement; and (iii) the provisions of Articles IV, V, VI and VII shall survive any such termination. All program and administrative costs attributable to Abercrombie & Fitch associates for The Limited Plans that relate to any period after the effective date of any such termination shall be for the account of Abercrombie & Fitch. (b) Following termination of this Agreement with respect to any Service, The Limited and Abercrombie & Fitch agree to cooperate in providing for an orderly transition of such Service to Abercrombie & Fitch or to a successor service provider. Without limiting the foregoing, The Limited agrees to (i) provide, within 90 days of the termination, copies in a format designated by The Limited, all records relating directly or indirectly to benefit determinations of Abercrombie & Fitch associates, including but not limited to compensation and service records, correspondence, plan interpretive policies, plan procedures, administration guidelines, minutes, or any data or records required to be maintained by law and (ii) work with Abercrombie & Fitch in developing a transition schedule. ARTICLE VII MISCELLANEOUS Section 7.01. Prior Agreements. In the event there is any conflict between the provisions of this Agreement, on the one hand, and provisions of prior services agreements among The Limited or its Subsidiaries and any of the Abercrombie & Fitch businesses (the "Prior Agreements"), on the other hand, the provisions of this Agreement shall govern and such provisions in the Prior Agreements are deemed to be amended so as to conform with this Agreement. Section 7.02. Future Litigation and Other Proceedings. In the event that Abercrombie & Fitch (or any of its officers or directors) or The Limited (or any of its officers or directors) at any time after the date hereof initiates or becomes subject to any litigation or other proceedings before any governmental authority or arbitration panel with respect to which the parties have no prior agreements (as to indemnification or otherwise), the party (and its officers and directors) that has not initiated and is not subject to such litigation or other proceedings shall comply, at the other party's expense, with any reasonable requests by the other party for assistance in connection with such litigation or other proceedings (including by way of provision of information and making available of employees as witnesses). In the event that Abercrombie & Fitch (or any of its officers or directors) and The Limited (or any of its officers or directors) at any time after the date hereof initiate or become subject to any litigation or other proceedings before any governmental authority or arbitration panel with respect to which the parties have no prior agreements (as to indemnification or otherwise), each party (and its officers and directors) shall, at their own expense, coordinate their strategies and actions with respect to such litigation or other proceedings to the extent such coordination would not be detrimental to their respective interests and shall comply, at the expense of the requesting party, with any reasonable requests of the other party for assistance in connection therewith (including by way of provision of information and making available of employees as witnesses). Section 7.03. No Agency. Nothing in this Agreement shall constitute or be deemed to constitute a partnership or joint venture between the parties hereto or, except to the extent provided in Section 4.02, constitute or be deemed to constitute any party the agent or employee of the other party for any purpose whatsoever and neither party shall have authority or power to bind the other or to contract in the name of, or create a liability against, the other in any way or for any purpose. Section 7.04. Subcontractors. The Limited may hire or engage one or more subcontractors to perform all or any of its obligations under this Agreement, provided that, subject to Section 4.03, The Limited will in all cases remain primarily responsible for all obligations undertaken by it in this Agreement with respect to the scope, quality and nature of the Services provided to Abercrombie & Fitch. Section 7.05. Force Majeure. (a) For purposes of this Section, "force majeure" means an event beyond the control of either party, which by its nature could not have been foreseen by such party, or, if it could have been foreseen, was unavoidable, and includes without limitation, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) and failure of energy sources. (b) Neither party shall be under any liability for failure to fulfill any obligation under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered, or delayed as a consequence of circumstances of force majeure, provided always that such party shall have exercised all due diligence to minimize to the greatest extent possible the effect of force majeure on its obligations hereunder. (c) Promptly on becoming aware of force majeure causing a delay in performance or preventing performance of any obligations imposed by this Agreement (and termination of such delay), the party affected shall give written notice to the other party giving details of the same, including particulars of the actual and, if applicable, estimated continuing effects of such force majeure on the obligations of the party whose performance is prevented or delayed. If such notice shall have been duly given, and actual delay resulting from such force majeure shall be deemed not to be a breach of this Agreement, and the period for performance of the obligation to which it relates shall be extended accordingly, provided that if force majeure results in the performance of a party being delayed by more than 60 days, the other party shall have the right to terminate this Agreement with respect to any Service effected by such delay forthwith by written notice. Section 7.06. Entire Agreement. This Agreement (including the Schedules constituting a part of this Agreement) and any other writing signed by the parties that specifically references this Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof. This Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 7.07.Information. Subject to applicable law and privileges, each party hereto covenants and agrees to provide the other party with all information regarding itself and transactions under this Agreement that the other party reasonably believes are required to comply with all applicable federal, state, county and local laws, ordinances, regulations and codes, including, but not limited to, securities laws and regulations. Section 7.08.Confidential Information. Abercrombie & Fitch and The Limited hereby covenant and agree to hold in trust and maintain confidential all Confidential Information relating to the other party. "Confidential Information" shall mean all information disclosed by either party to the other in connection with this Agreement whether orally, visually, in writing or in any other tangible form, and includes, but is not limited to, economic and business data, business plans, and the like, but shall not include (i) information which becomes generally available other than by release in violation of the provisions of this Section 7.08, (ii) information which becomes available on a nonconfidential basis to a party from a source other than the other party to this Agreement provided the party in question reasonably believes that such source is not or was not bound to hold such information confidential, (iii) information acquired or developed independently by a party without violating this Section 7.08 or any other confidentiality agreement with the other party and (iv) information that any party hereto reasonably believes it is required to disclose by law, provided that it first notifies the other party hereto of such requirement and allows such party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure. Without prejudice to the rights and remedies of either party to this Agreement, a party disclosing any Confidential Information to the other party in accordance with the provisions of this Agreement shall be entitled to equitable relief by way of an injunction if the other party hereto breaches or threatens to breach any provision of this Section 7.08. Section 7.09.Notices. Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing will be duly given upon delivery, if delivered by hand, facsimile transmission, intercompany mail, or mail, to the following addresses: (a) If to Abercrombie & Fitch, to: Abercrombie & Fitch Co. Four Limited Parkway Reynoldsburg, OH 43068 Attention: Samuel P. Fried Fax: 614-479-7188 (b) If to The Limited, to: The Limited, Inc. Three Limited Parkway Columbus, OH 43230 Attention: Samuel P. Fried Fax: 614-479-7188 with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attention: Jeffrey Small Fax: 212-450-4800 or to such other addresses or telecopy numbers as may be specified by like notice to the other parties. Section 7.10.Governing Law. This Agreement shall be construed in accordance with and governed by the substantive internal laws of the State of Delaware. Section 7.11.Severability. If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not render the entire Agreement invalid. Rather, the Agreement shall be construed as if not containing the particular invalid or unenforceable provision, and the rights and obligations of each party shall be construed and enforced accordingly. Section 7.12.Amendment. This Agreement may only be amended by a written agreement executed by both parties hereto. Section 7.13.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Section 7.14. Services to The Limited. (a) Abercrombie & Fitch agrees to continue to participate in the Associate Discount Program. (b) Abercrombie & Fitch agrees to permit The Limited and its Subsidiaries to use the trademarks and service marks owned by Abercrombie & Fitch or any of its Subsidiaries at no cost to The Limited or its Subsidiaries in The Limited's annual report to shareholders and publicity materials and for other similar purposes. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their duly authorized representatives. ABERCROMBIE & FITCH CO. By: ____________________________________ Name: Title: THE LIMITED, INC. By:____________________________________ Name: Title: Services Agreement - Schedule I General Corporate Services(1)
Service Billing Methodology - ------------------------------------------------ -------------------------- o Aircraft Services Customary Billing o General Real Estate Services Customary Billing o Import and Shipping Services Customary Billing o International Expansion Services Customary Billing o Store Planning and Construction Customary Billing o Accounting, Public Reporting Percent of Sales Billing and Consolidation Services o Internal Audit Percent of Sales Billing o Treasury and Cash Management Percent of Sales Billing (including loans and investments) o Corporate Development Percent of Sales Billing o Risk Management and Administrative Percent of Sales Billing Insurance o Corporate Secretarial Services Percent of Sales Billing o Marketing Data Services Percent of Sales Billing o Executive Compensation and Customary Billing Benefit Plan Design Services o Governmental Affairs Percent of Sales Billing o Human Resources and Compensation Customary Billing o Investor and Public Relations Percent of Sales Billing o Legal Services Percent of Sales Billing o Tax Return Preparation and Percent of Sales Billing Tax Planning Services o Corporate Finance Percent of Sales Billing o Insurance Policies Pass-Through Billing (liability, property, casualty and fiduciary) o Corporate, administrative Percent of Sales Billing and general overhead (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.
Services Agreement - Schedule II Benefits Services Service Billing Methodology - ------------------------------------- ----------------------- MEDICAL/DENTAL PROGRAMS Benefits/Claims o Claims costs for Abercrombie & Fitch Customary Billing Associates participating in the following Limited Plans and programs: - - Medical Plan - - Short Term Disability Plan - - Prescription Drug Plan - - Dental Plan Administration o Administration of above Abercrombie & Fitch Customary Billing plans and programs, including: - - maintenance of eligibility files upon Abercrombie & Fitch' notification of status changes - - claim adjudication under the terms of applicable plans - - maintenance of toll-free telephone lines for inquiries, etc. - - support services (internal and external, including COBRA) Participant Contributions oParticipant contributions for Participant payroll deductions above plans or direct bill to associates/retirees OTHER BENEFIT PLANS oLife Insurance Customary Billing Life insurance for Abercrombie & Fitch Associates (including Accidental Death and Dismemberment) o Savings/Retirement Plans - - Company match/retirement contribution Customary Billing - - Participant Contributions Payroll Deduction o Long-Term Disability Plans - - Employer contributions Customary Billing - - Associate contributions Payroll deduction Other Benefit Support Services oAudit, Legal, Actuarial Fees and Customary Billing related recoveries oPayroll support of benefits Customary Billing administration (insurance, savings, other benefit plans and statutory requirements) Employee Stock Purchase Program - -Payroll Services Customary Billing EX-10.3 8 Exhibit 10.3 Abercrombie & Fitch SUBLEASE AGREEMENT This Sublease Agreement (this "Sublease") is entered into and made as of the 1st day of June, 1995, by and between Victoria's Secret Stores, Inc., a Delaware corporation (hereinafter referred to as "Landlord") and Abercrombie & Fitch, Inc., a Delaware corporation (hereinafter referred to as "Tenant"). W I T N E S S E T H: WHEREAS, Landlord has leased from Distribution Land Corp., a Delaware corporation ("DLC") a certain office/warehouse distribution facility containing approximately 951,798 square feet of floor space identified on Exhibit A attached hereto and made a part hereof by this reference (the "Building") pursuant to the terms of that certain Building Lease Agreement between Landlord and DLC dated as of June 1, 1995 (the "Building Lease"); and WHEREAS, the Building is located upon an approximately 321.1 acre parcel of land located at the intersection of East Broad Street (State Route 16) and Taylor Road, Reynoldsburg, Ohio, which land is depicted on Exhibit A attached hereto and made a part hereof by this reference (the "Campus"); and WHEREAS, Landlord wishes to sublease to Tenant a portion of the Building as more particularly described in Section 1.02 below (the "Premises") and to grant to Tenant the right to utilize certain common areas and facilities located within the Building and the Campus, all subject to the terms and conditions of this Sublease and the Building Lease; and WHEREAS, Tenant wishes to sublease, from Landlord, a portion of the Building and to utilize those certain common areas and facilities located within the Building and the Campus; and WHEREAS, DLC, Landlord and others have entered into a Services Agreement which relates, in part, to certain aspects of the management, operation and ownership of the Building and the Campus (the "Services Agreement"). NOW, THEREFORE, in consideration of the premises described above and the mutual promises set forth herein, Landlord and Tenant, intending to be legally bound, hereby agree as follows: I -- LEASE OF PREMISES 1.01 - Lease of Premises. Landlord, in consideration of the rents and covenants hereinafter set forth, does hereby demise, let and lease to Tenant, and Tenant does hereby hire, take and lease from Landlord, on the terms and conditions hereinafter set forth, the Premises, to have and to hold the same, with all appurtenances unto Tenant for the Term hereinafter specified. Tenant agrees to comply with all of the terms and conditions of the Service Agreement if and to the extent that Tenant is a party thereto. Landlord has provided to Tenant a copy of the Building Lease, which Tenant has reviewed and fully understands. Tenant acknowledges and agrees that all of Tenant's rights under this Sublease are derived from Landlord's rights under the Building Lease and are subordinate and subject to the Building Lease. Tenant agrees to adhere to and comply with all of the terms and conditions set forth in the Building Lease. Any action or inaction by Tenant which violates the terms and conditions of the Building Lease shall also violate this Sublease and constitute an event of default hereunder, entitling Landlord to pursue all remedies available to it hereunder or under applicable law. 1.02 - Basic Sublease Provisions. A. Building Address: 8455 East Broad Street Reynoldsburg, Ohio 43068 B. Building Description: a two-story office/warehouse distribution facility, containing approximately 138,534 square feet of office space, 773,640 square feet of distribution space and 39,624 square feet of Building Common Area (as hereinafter defined) C. Premises Description: the floors of the building on which the Premises are located are as follows: (i) 1st floor (ii) The space within the Premises is further depicted on the floor plan attached hereto as Exhibit B and made a part hereof by this reference, and consists of the following approximate number of square feet: 236,073 (consisting of 34,776 square feet of office space and 201,297 square feet of distribution space) D. Term: Fifteen (15) years, beginning on June 1, 1995 (the "Commencement Date") and ending on May 31, 2010 (the "Expiration Date") E. Annual Base Rent: (i) Office space - $11.00 per square foot, or $382,536.00 (ii) Distribution space - $2.85 per square foot, or $573,696.45 (iii) Total Annual Base Rent (for distribution and office space) of $956,232.45 (iv) The Annual Base Rent shall be subject to periodic adjustments as provided in Section 4.02 of this Sublease F. Monthly Installments of Base Rent (for distribution and office space): $79,686.04 G. Renewal Option(s): eight (8) five (5) year Renewal Option(s) - See Section 4.05 of this Sublease for terms of the Renewal Options H. Addresses for Notices and Payments: Tenant: Abercrombie & Fitch, Inc. 8455 East Broad Street Reynoldsburg, Ohio 43068 with a copy to: Abercrombie & Fitch, Inc. Three Limited Parkway Columbus, Ohio 43230 Attention: Corporate Real Estate Department Landlord: Victoria's Secret Stores, Inc. 8455 East Broad Street Reynoldsburg, Ohio 43068 with a copy to: Victoria's Secret Stores, Inc. Three Limited Parkway Columbus, Ohio 43230 Attention: Corporate Real Estate Department I. Use: office/warehouse distribution use related to distribution for retail sale of men's, women's and children's apparel, accessories, personal care items and other products, and for all administrative activities relating thereto 1.03 - Description of the Building, the Premises and the Common Areas. J. The Building. The Building is depicted on the attached Exhibit A. The address and description of the Building are specified in Items A and B of the Basic Sublease Provisions (which are set forth in Section 1.02 of this Sublease). K. The Premises. The Premises consist of space which: (i) is located on the floor or floors of the Building specified in Item C(i) of the Basic Sublease Provisions, (ii) is located in one or more areas or parts of each such floor, and (iii) is bound by the proposed or existing demising walls therefor, the approximate locations of such demising walls and space being marked in color or cross-hatched and shown on the diagram of the floor plan for each such floor, such diagram being attached to this Sublease as Exhibit B and made a part hereof by this reference. The approximate number of square feet contained in the area which comprises the Premises, as determined by Landlord for identification purposes only, is specified in Item C(ii) of the Basic Sublease Provisions. L. Common Areas. The Building is located within, and constitutes a part of, the Campus. Those portions of the Campus which are defined as "Common Areas" under the Building Lease, as the Building Lease presently exists or as it is amended from time to time, shall be referred to herein as the "Campus Common Areas." The Building contains certain areas or parts which are designated for use in common by all of the tenants of the Building and their respective employees, agents, customers, and invitees. Such areas include entrances, exits and doors, lobbies, hallways, corridors and stairwells, elevators, restrooms, and certain "special amenities" such as the cafeteria, mail room and reception area, but excluding those areas and facilities described on Exhibit C attached hereto and made a part hereof by this reference, as said Exhibit C may be amended by Landlord from time to time (all of which are referred to herein as the "Building Common Areas"). The Campus Common Areas and the Building Common Areas are sometimes referred to herein collectively as the "Common Areas". II -- COMMON AREAS 2.01 - Use of Building Common Areas. Subject to Landlord's right at any time to use the Building Common Areas for its own purposes, Landlord hereby gives to Tenant and its employees, agents, customers and invitees, the nonexclusive right to use the Building Common Areas in common with and subject to the rights given to other tenants of the Building. 2.02 - Use of Campus Common Areas. Subject to Landlord's right at any time to use the Campus Common Areas for its own purposes, Landlord hereby gives to Tenant and its employees, agents, customers and invitees, the nonexclusive right to use the Campus Common Areas to the same extent as Landlord is permitted to use the same under the Building Lease. 2.03 - Rules and Regulations for Common Areas. The Campus Common Areas and the Building Common Areas shall at all times be subject to the exclusive management and control of DLC and Landlord, respectively, and each shall have the right, from time to time, to establish, modify and enforce reasonable rules and regulations with respect to all such Common Areas, and the use of such Campus Common Areas and the Building Common Areas by Tenant, its subtenants and their respective employees, agents, customers and invitees shall be subject to such rules and regulations. Such rules and regulations may include, but shall not be limited to, restrictions on parking, hours of operation, access routes, hours of access to the Building and the Campus, rules with respect to the Building and such other matters as may be deemed appropriate by Landlord or DLC, as the case may be, from time to time. 2.04 - Changes in Common Areas. DLC and Landlord may do and perform such acts in and to the Campus Common Areas and the Building Common Areas, respectively, as each shall determine to be advisable. DLC and Landlord hereby reserve the right to make reconfigurations, alterations, additions, deletions or changes to the Campus Common Areas and Building Common Areas, respectively, including, but not limited to, changes in the size and configuration of said Common Areas. Landlord and DLC also reserve the right to restrict and limit the use of the Campus Common Areas and Building Common Areas, respectively, by Tenant, its subtenants and their respective employees, agents, customers and invitees. 2.05 - Maintenance of Common Areas. Subject to the provisions of Section 4.03 hereof, Landlord and DLC shall adequately maintain the Campus Common Areas and Building Common Areas, respectively, in a good and usable condition throughout the Term of this Sublease. 2.06 - Common Area Capital Improvements. DLC and Landlord may make capital improvements to the Campus Common Areas and Building Common Areas, respectively. In such case, Landlord may charge, as an Operating Expense (as hereinafter defined), an amount equal to the annual depreciation or amortization allowance with respect to the cost of such capital improvement, as determined by Landlord in accordance with generally accepted accounting principles, together with interest on such costs or the unamortized balance thereof, at the rate as may be paid by or accrued on the books of Landlord. III -- TERM AND POSSESSION 3.01 - Term. The Term of this Sublease shall be for the period of years and months specified in Item D of the Basic Sublease Provisions; and shall begin and end on the Commencement Date and Expiration Date, respectively, specified in Item D of the Basic Sublease Provisions, unless the Term of this Sublease is renewed, modified or terminated as provided elsewhere herein. If the Commencement and Expiration Dates have not been established at the time of the execution of this Sublease, then Landlord and Tenant agree, upon demand of the other, to execute a writing establishing the Commencement and Expiration Dates as soon as the Commencement Date has been determined. 3.02 - Tenant's Acceptance of the Premises. Tenant hereby accepts the Premises in an "as is" condition and acknowledges that Landlord has made no representations or warranties with respect thereto, and that Tenant has inspected the Premises and found it to be in satisfactory condition. 3.03 - Surrender of the Premises. Upon the expiration or earlier termination of this Sublease, or upon the exercise by Landlord of its right to re-enter the Premises without terminating this Sublease, Tenant shall immediately surrender the Premises to Landlord, together with all alterations, improvements and other property as provided elsewhere herein, in broom-clean condition and in good order, condition and repair, except for ordinary wear and tear and damage which Tenant is not obligated to repair, failing which Landlord may restore the Premises to such condition at Tenant's expense. Upon such expiration or termination, Tenant may, provided Tenant is not in default and unless prohibited from doing so by other provisions of this Sublease, have the right to remove its personal property and trade fixtures. Tenant shall promptly repair any damage caused by any such removal, and shall restore the Premises to the condition existing prior to the installation of the items so removed, ordinary wear and tear and damage which Tenant is not obligated to repair excepted. If Tenant fails to remove any and all such trade fixtures from the Premises on the Expiration Date or earlier termination of this Lease, all such trade fixtures shall become the Property of Landlord, unless Landlord elects to require their removal, in which case Tenant shall, at its cost, promptly remove the same and restore the Premises to its prior condition. 3.04 - Holding Over. In the event that Tenant shall not immediately surrender the Premises on the Expiration Date of the Term hereof, Tenant shall, by virtue of the provisions hereof, become a tenant by the month at the monthly rent in effect during the last month of the Term of this Sublease, which monthly tenancy shall commence with the first day next after the Expiration Date. Tenant, as a monthly tenant, shall be subject to all of the terms, conditions, covenants and agreements of this Sublease. Tenant shall give to Landlord at least thirty (30) calendar days written notice of any intention to quit the Premises, and Tenant shall be entitled to thirty (30) calendar days written notice to quit the Premises, unless Tenant is in default hereunder, in which event Tenant shall not be entitled to any notice to quit, the usual thirty (30) calendar days notice to quit being hereby expressly waived. Notwithstanding the foregoing provisions of this Section 3.04, in the event that Tenant shall hold over after the expiration of the Term of this Sublease, and if Landlord shall desire to regain possession of the Premises promptly at the expiration of the Term of this Sublease, then, at any time prior to Landlord's acceptance of rent from Tenant as a monthly tenant hereunder, Landlord, at its option, may forthwith re-enter and take possession of the Premises without process, or by any legal process in force. 3.05 - Renewal Options. So long as Tenant is not in default under the terms of this Sublease, Landlord does hereby grant to Tenant the right and option to extend and renew the fifteen (15) year Term of this Sublease (herein called the "Initial Term") for eight (8) additional period(s) of five (5) years each (herein the "Renewal Term(s)"), beginning on the date immediately following the Expiration Date of the Initial Term or the preceding Renewal Term, as appropriate, upon the same terms, conditions, covenants and provisions as are provided in this Sublease (including the Base Rent, subject to adjustment as provided in Section 4.02 hereof). Unless in respect of each Renewal Term Landlord or Tenant notifies the other party, at least one (1) year prior to the expiration of the Initial Term or Renewal Term then in effect, of its intent not to extend and renew the Term of this Sublease, then the Tenant shall be deemed to have exercised its Renewal Option in respect of that Renewal Term. If the Renewal Option is exercised as provided herein, then this Sublease shall be amended to reflect the changes which will result from such extension of the Term of this Sublease, including the modification to all references in the Sublease to the "Term" thereof (as defined in Section 3.01) to include the Renewal Term as well as the Initial Term. IV -- RENT 4.01 - Base Rent. A. Interim Rent. During the months of June and July of 1995, Tenant shall pay, on a monthly basis and in lieu of the Base Rent described in Section 4.01 (B) below, the sum of $70,176.21. Commencing July 30, 1995, Tenant shall pay to Landlord, as Base Rent for the Premises during the last two (2) days of the month of July, the sum of $5,141.03, which is the Base Rent applicable to the Premises, prorated on the basis of the number of days during July for which the Tenant is obligated to pay Base Rent as defined in the Basic Sublease Provisions. B. Monthly Base Rent. Commencing on August 1, 1995, Tenant shall pay to Landlord, as Base Rent for the Premises, the annual sum specified in Item E of the Basic Sublease Provisions, payable in equal consecutive monthly installments as specified in Item F of the Basic Sublease Provisions, in advance, on or before the first day of each and every calendar month during the Term of this Sublease; provided, however, that if the Expiration Date shall be a day other than the first day of a calendar month, the Base Rent installment for such last fractional month shall be prorated on the basis of the number of days during the month this Sublease was in effect in relation to the total number of days in such month. 4.02 - Base Rent Adjustment. A. CPI Adjustments. Commencing on the third (3rd) anniversary of the Commencement Date and continuing on the same date every three (3) years thereafter during the entirety of this Sublease (including any Renewal Terms), the Base Rent due and payable to Landlord shall be adjusted for the next succeeding three (3) year period. The adjusted Base Rent for each year in such three (3) year period shall be equal to the Base Rent paid during the immediately preceding twelve (12) month period (the "lease year") increased by a percentage equal to the percentage increase in the CPI (as hereinafter defined) computed by comparing the CPI figure for that month which is two (2) months prior to the adjustment date (the "adjustment month") with the CPI figure for the month occurring thirty-six (36) months prior to the adjustment month (the "base month"). For example, in computing the percentage increase for the lease year commencing July 1, 2000, the percentage increase in the CPI would be determined by comparing the CPI figure for May, 2000, the adjustment month, with the CPI figure for May, 1997, the base month, and similar comparisons would be made using the CPI figures for adjustment months and base months every three (3) years thereafter. For the purposes hereof, "CPI" shall mean the Consumer Price Index, published by the Bureau of Labor Statistics of the United States Department of Labor, in the column for "all items" in the table titled "Consumer Price Index for all Urban Consumers: U.S. City average, 1982-1984 = 100". If the CPI at any time herein is no longer published or issued, Landlord and Tenant shall agree on such other index as is then generally recognized for determination of purchasing power in the United States. B. Capital Improvements. If Landlord shall, at any time after the Commencement Date, install any equipment or make any other capital improvement to the Premises, then Landlord may add to the Base Rent (to be paid in monthly installments), in each year during the useful life of such equipment or other capital improvement, an amount equal to the annual depreciation or amortization allowance with respect to the cost of such equipment or capital improvement, as determined by Landlord in accordance with generally accepted accounting principles, together with interest on such cost or the unamortized balance thereof at the rate as may have to be paid by or accrued on the books of Landlord on the unamortized balance. 4.03 - Additional Rent. A. Definitions. For purposes of this Section 4.03, the following definitions shall apply: 1. "Additional Rent" - shall mean the Tenant's proportionate share of Landlord's Taxes, Insurance and Operating Expenses. 2. "Taxes" - shall mean those amounts paid by Landlord for real and personal property taxes relating to the Building pursuant to the terms of the Services Agreement. 3. "Insurance" - shall mean those amounts paid by Landlord for property, casualty, liability and any other insurance coverages relating to the Building pursuant to the terms of the Services Agreement. 4. "Operating Expenses" - shall mean the total dollar amount of all costs and expenses paid or incurred by Landlord in connection with the operation of the Building, as determined by Landlord in conformity with its accounting practices consistently applied, including without limitation: water, gas, electrical, telephone and other utility charges (other than any separately billed utility charges paid by Tenant as provided in this Sublease); maintenance and repair costs and expenses, including the repair or replacement of equipment or other parts of the Building (except those treated as capital improvements as hereinafter described) and other charges paid or incurred in the operation and maintenance of the elevators and the electrical, plumbing, heating, ventilation and air conditioning equipment and systems and other parts of the Building; any and all rental costs incurred by Landlord under the Building Lease in respect of the Building Common Areas; the costs of equipping and operating certain "special amenities" of the Building, such as the mail room, reception area and cafeteria; cleaning and other janitorial services; refuse collection; supplies; landscape maintenance costs; building security services; license and permit fees; the costs of all property management services relating to the Building and provided to Landlord pursuant to the Services Agreement; computer and electronic data processing equipment and services costs; and, in general, all other costs and expenses which are related or incidental to, are considered by Landlord to be necessary, appropriate or desirable for or are treated under Landlord's accounting practices as costs and expenses paid or incurred in connection with the management, operation and maintenance of the Building. In addition, Operating Expenses shall include Landlord's proportionate share (as defined in the Building Lease) of "Operating Expenses" under the Building Lease. 5. Tenant's proportionate share of the foregoing shall be determined by multiplying the total expenses incurred by Landlord or Landlord's designee for Taxes, Insurance and Operating Expenses by .2588, computed as a fraction, the numerator of which shall be the number of leasable square feet in the Premises, or 236,073 square feet, and the denominator of which shall be the total number of leasable square feet in the Building (excluding any Building Common Areas), or 912,174 square feet; with the method of measurement to be as reasonably determined by Landlord. B. Payment Obligation. In addition to the Base Rent specified in this Sublease, Tenant shall, in each calendar year or partial calendar year during the Term of this Sublease, pay to Landlord the Additional Rent. The Additional Rent shall be paid by Tenant in monthly installments, in such amounts as are estimated and billed by Landlord at the beginning of each calendar year, each installment being due on the first day of each calendar month. Within one hundred twenty (120) days (or such additional time thereafter as is reasonable under the circumstances) after the end of each calendar year, Landlord shall deliver to Tenant a statement of Additional Rent for such calendar year, and the monthly installments paid or payable shall be adjusted between Landlord and Tenant, the parties hereby agreeing that Tenant shall pay to Landlord or Landlord shall credit Tenant's account or (if such adjustment is at the end of the Sublease Term) pay Tenant, as the case may be, within thirty (30) days of receipt of such statement, such amounts as may be necessary to effect adjustment to the actual Additional Rent for such calendar year. If the Commencement Date shall be a day other than the first day of a calendar year, or if the Expiration Date or other date of termination of this Sublease shall be a day other than the last day of a calendar year, then the Additional Rent for such partial calendar year shall be prorated on the basis of the number of days during the year this Sublease was in effect in relation to the total number of days in such year. C. Tenant Verification. Tenant or its accountants shall have the right to inspect, at reasonable times and in a reasonable manner during the forty-five (45) calendar day period following the delivery of Landlord's statement of Additional Rent, such of Landlord's books of account and records as pertain to and contain information concerning such costs and expenses, in order to verify the amounts thereof. If Tenant shall dispute any item or items included in the determination of Additional Rent for a particular calendar year, and such dispute is not resolved by the parties hereto within forty-five (45) calendar days after the statement for such year was delivered to Tenant, then either party may, within thirty (30) calendar days thereafter, request that a firm of independent certified public accountants selected by Landlord render an opinion as to whether or not the disputed item or items may properly be included in the determination of Additional Rent for such year; and the opinion of such firm on the matter shall be conclusive and binding upon the parties hereto. The fees and expenses incurred in obtaining such an opinion shall be borne by the party adversely affected thereby; and if more than one item is disputed and the opinion adversely affects both parties, the fees and expenses shall be apportioned accordingly. If Tenant shall not dispute any item or items included in the determination of Additional Rent for a particular calendar year within forty-five (45) calendar days after the statement for such year was delivered to it, Tenant shall be deemed to have approved such statement. 4.04 - Late Payment Service Charge; Interest. In the event any installment of Base Rent, or any installment of Additional Rent, or any other amount which may become due under this Sublease is not paid when due, and such nonpayment continues for a period of ten (10) days after Landlord gives to Tenant written notice of such nonpayment, then, for each and every such payment, Tenant shall immediately pay a service charge equal to five percent (5%) of the amount not timely paid, together with interest on the amount not timely paid at the rate of eight percent (8%) per annum, from the due date of such payment until paid. The provisions of this Section 4.04 shall not be construed to extend the date for payment of Base Rent or Additional Rent, or any other amount which may become due under this Sublease, or to relieve Tenant of its obligations to pay all such items at the time or times herein stipulated, and neither demand for, nor collection by Landlord of, late payment service charges and interest pursuant to this Section 4.04 shall be construed as a cure of any default in payment by Tenant. V -- USE OF PREMISES 5.01 - Specific Use. The Premises shall be occupied and used exclusively for the purposes specified in Item I of the Basic Sublease Provisions and for purposes incidental thereto, and shall not be used for any other purposes. 5.02 - Covenants Regarding Use. In connection with its use of the Premises, Tenant agrees to do the following: A. Tenant shall use the Premises and conduct its business therein in a safe, careful, reputable and lawful manner; shall keep any garbage, trash, rubbish or other refuse in sealed containers within the interior of the Premises until removed and placed in a dumpster or other authorized container for the deposit of garbage and refuse, which shall be located in an area designated by Landlord. B. Tenant shall not commit, nor allow to be committed, in, on or about the Premises any act of waste, including any act which might deface, damage or destroy the Premises or any part thereof; use or permit to be used within the Premises any hazardous substance, equipment, or other thing which might cause injury to person or property or increase the danger of fire or other casualty in, on or about the Premises; or permit any objectionable or offensive noise or odors to be emitted from the Premises. Notwithstanding the foregoing, Landlord acknowledges that Tenant will utilize certain distribution equipment which, but for this sentence, might be deemed to violate this provision and use of such equipment is expressly permitted. C. Tenant shall not use the Premises, or allow the Premises to be used, for any purpose or in any manner other than the permitted uses which would, in Landlord's opinion, invalidate any policy of insurance now or hereafter carried on the Premises or the Building or increase the rate of premiums payable on any such insurance policy. Should Tenant fail to comply with this covenant, Landlord may, at its option, require Tenant to stop engaging in such activity or to reimburse Landlord as additional rent for any increase in premiums charged during the Term of this Sublease on the insurance carried by Landlord on the Premises and the Building and attributable to the use being made of the Premises by Tenant. 5.03 - Access to and Inspection of the Premises. Landlord, its employees and agents, shall have the right to enter any part of the Premises, at all reasonable times after reasonable notice, for the purpose of examining or inspecting the same, showing the same to prospective purchasers, mortgagees or tenants, and for making such repairs, alterations or improvements to the Premises and the Building as Landlord may deem necessary or desirable. Landlord shall incur no liability to Tenant for such entry, except with respect to the negligence or intentional, wrongful acts or omissions of Landlord, its agents, employees and invitees, nor shall such entry constitute an eviction of Tenant or a termination of this Sublease, or entitle Tenant to any abatement of rent therefor. 5.04 - Compliance with Laws. Tenant shall comply with all laws, statutes, ordinances, rules, regulations and orders of any federal, state, municipal, or other government or agency thereof having jurisdiction over and relating to the use and occupancy of the Premises, including any such laws, statutes or regulations requiring modifications or alterations to the Premises. 5.05 - Rules and Regulations. The Building shall at all times be subject to the management and control of the Landlord, and Landlord shall have the right, from time to time, to establish, modify and enforce reasonable rules and regulations with respect to the Building, and the use of the Building by Tenant, its subtenants and their respective employees, agents, customers and invitees shall be subject to such rules and regulations. Such rules and regulations may include, but shall not be limited to restrictions upon Tenant's hours of operation, noise levels with the Building, load placement and utility usage. VI - UTILITIES AND OTHER SERVICES 6.01 - Electric, Gas, Water and Telephone Service. Landlord shall contract with the appropriate public utilities companies or other providers supplying electric, gas, water, sanitary sewer, telephone services and all other utilities and services to the Premises or to Tenant and shall pay directly all charges for such services from and after the Commencement Date. Thereafter, Landlord shall reasonably allocate these utility or service charges attributable to the Premises or to Tenant and, on a periodic basis, provide to Tenant a written statement detailing Tenant's allocation thereof. Tenant shall pay to Landlord, within fifteen (15) days of Tenant's receipt of the written statement therefor, all such utility and service charges. Provided, however, that Tenant may, if such utilities or services are separately metered for the Premises or if Tenant, at its sole cost and expense, undertakes to have such utilities or services separately metered for the Premises, elect to contract directly for all such services and to pay directly all charges therefor. 6.02 - Janitorial and Refuse Collection Service. Landlord shall contract for janitorial and refuse collection services for the Premises and shall pay for all charges for such services (subject to the provisions of Section 4.03 hereof). 6.03 - Discontinuances and Interruptions of Utility Services. Landlord shall not be liable to Tenant in damages or otherwise (i) if any utilities shall become unavailable from any public utility company, public authority, or any other person supplying or distributing such utility, or (ii) for any interruption in any utility service (including, without limitation, any heating, ventilation or air conditioning) caused by the making of any necessary repairs or improvements or by any cause beyond Landlord's reasonable control, and the same shall not constitute a termination of this Sublease or an eviction of Tenant. VII -- SIGNS Tenant shall not inscribe, paint, affix or display any signs, advertisements or notices on the Premises, the Building, or the Campus without Landlord's prior written consent, which consent Landlord shall have no obligation to give and which may be given or withheld in Landlord's sole discretion. VIII -- REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS AND FIXTURES 8.01 - Repair and Maintenance of Building. Landlord shall keep and maintain the Building (including all doors, whether interior or exterior, any plate glass in the exterior walls and doors, the roof, exterior and interior structural walls, and the foundation) and the electrical, plumbing, heating, ventilation and air conditioning systems serving the Building in good order, condition and repair, and shall make all necessary repairs to the Building and the electrical, plumbing, heating, ventilation and air conditioning systems serving the Building, and will make all replacements from time to time required thereto. 8.02 - Repair and Maintenance of Premises. Tenant shall maintain the Premises in good order and in the same condition as the Premises existed and were accepted by Tenant on the Commencement Date, except that (i) Tenant shall not be liable to Landlord for ordinary wear and tear to the Premises, including the carpeting, window coverings and other parts thereof or for damage to the Premises resulting from a fire or other casualty except as provided elsewhere herein; (ii) Tenant shall not be permitted to make any repairs, alterations or other improvements to the Premises without Landlord's prior written consent; and (iii) Tenant, in satisfying its obligations under this Section 8.02, may rely upon the cleaning, janitorial, maintenance, repair and restoration services to be furnished or performed by Landlord, provided that Tenant gives to Landlord notice of the need for the same. If a repair is needed to so maintain the Building, then Tenant shall give to Landlord verbal notice, and as soon thereafter as possible confirming written notice, of such need for repair. Within a reasonable period of time thereafter, Landlord shall examine the item or matter described in Tenant's notice, and if Landlord should determine that such item or matter is in need of repair, Landlord shall make such repair. The cost of maintaining the Premises, including the cleaning, janitorial, maintenance and repair services specified in this Section 8.02, shall be borne and paid by Landlord as part of the Operating Expenses of the Building; and the cost of the restoration of any damaged part of the Premises as a result of a fire or other casualty shall be borne by and paid by Landlord as provided in Article IX, except for the cost of the following repairs, alterations and other improvements made to the Premises: (i) those made pursuant to Section 8.03; and (ii) those made necessary as a result of Tenant's failure to perform any of its obligations as specified herein or as a result of the negligence or intentional misconduct of Tenant or any person for whom it is legally responsible. If either of the exceptions specified in the preceding sentence shall apply, then Landlord shall make all such repairs, alterations or other improvements, but the cost thereof shall be borne by Tenant, who shall be separately billed and shall reimburse Landlord therefor. 8.03 - Alterations or Improvements. Tenant shall neither make, nor permit to be made, any alterations or improvements to the Premises without obtaining the prior written consent of DLC and Landlord, which consent shall not be unreasonably withheld. If DLC and Landlord allow Tenant to make any such alterations or improvements, Tenant shall make the same in accordance with all applicable laws and building codes, in a good and workmanlike manner and in quality equal to or better than the original construction of the Building, and shall comply with such requirements as DLC and Landlord considers necessary or desirable, including, without limitation, requirements as to the manner in which and the times at which such work shall be done and the contractor or subcontractors to be selected to perform such work. Tenant shall promptly pay all costs attributable to such alterations and improvements and shall indemnify Landlord against any mechanics' liens or other liens or claims filed or asserted as a result thereof and against any costs or expenses which may be incurred as a result of building code violations attributable to such work. Tenant shall promptly repair any damage to the Premises and the Building caused by any such alterations or improvements. Any alterations or improvements to the Premises, except movable equipment and trade fixtures, shall become a part of the realty and the property of Landlord, and shall not be removed by Tenant. 8.04 - Trade Fixtures. Any trade fixtures installed in the Premises by Tenant at its own expense, such as movable partitions, counters, shelving, and the like, may and, at the request of Landlord, shall be removed on the Expiration Date or earlier termination of this Sublease, provided that Tenant is not then in default, that Tenant bears the cost of such removal, and further that Tenant repairs, at its own expense, any and all damage to the Premises and the Building resulting from such removal. If Tenant fails to remove any and all such trade fixtures from the Premises on the Expiration Date or earlier termination of this Sublease, all such trade fixtures shall become the property of Landlord, unless Landlord elects to require their removal, in which case Tenant shall, at its cost, promptly remove same and restore the Premises to its prior condition. IX -- FIRE OR OTHER CASUALTY; CASUALTY INSURANCE 9.01 - Damage or Destruction by Casualty. If the Building should be destroyed by fire or other casualty, the result of which being that either Landlord or DLC terminates the Building Lease, then all Base Rent and Additional Rent due under this Sublease shall be apportioned to and shall cease as of the date of such casualty, and Tenant shall be given a reasonable period of time, not to exceed thirty-five (35) calendar days after receipt from Landlord of a termination notice, in which to remove its trade fixtures and personal property, whereupon both parties shall be released from all further obligations and liability hereunder (except for any obligations previously incurred hereunder). If such damage by fire or other casualty does not result in a termination of the Building Lease, and the Building and the Premises are reconstructed and restored by DLC in accordance with the Building Lease to substantially the same condition as existed prior to the casualty, then Base Rent and Additional Rent shall be abated from the date of the casualty until substantial completion of the reconstruction repairs; and this Sublease shall continue in full force and effect for the balance of the Term. Notwithstanding the foregoing, in the event the Premises are substantially destroyed or damaged (which, as used herein, means destruction or material damages to at least fifty percent (50%) of the Premises, as applicable), then Tenant may, at its option and without regard to whether Landlord has a similar option to terminate the Building Lease, terminate this Sublease by giving written notice thereof to Landlord within thirty (30) calendar days after the date of such casualty. In such event, all Base Rent and Additional Rent due under this Sublease shall be apportioned to and shall cease as of the date of such casualty, and Tenant shall be given a reasonable period of time, not to exceed thirty-five (35) calendar days, in which to remove its trade fixtures and personal property, whereupon both parties shall be released from all further obligations and liabilities hereunder (except for any obligations previously incurred hereunder). 9.02 - Casualty Insurance. Landlord shall obtain and pay for insurance against fire and other casualty in respect of the Building in accordance with the terms and conditions of the Services Agreement. Landlord shall not be responsible for, and shall not be obligated to insure against, any loss of or damage to any personal property of Tenant or which Tenant may have in the Premises, or any trade fixtures installed by or paid for by Tenant in the Premises, or any additional improvements which Tenant may construct in the Premises, as provided in Section 8.03. 9.03 - Waiver of Subrogation. Landlord and Tenant each hereby waive any and all right that they may have to recover from the other damages for any loss occurring to them by reason of any act or omission of the other, but only to the extent that the waiving party is actually compensated therefor by insurance; provided that this waiver shall be effective only with respect to loss or damage occurring during such time as the waiving party's coverage under the appropriate policy of insurance is not adversely affected by this waiver. If, in order to avoid such adverse effect, an endorsement must be added to any insurance policy required hereunder, Landlord and Tenant shall cause such endorsement immediately to be added and thereafter maintained throughout the Term of this Sublease. X -- GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE 10.01 - Indemnification. Tenant shall indemnify Landlord and hold it harmless from any and all liability for any loss, damage or injury to person or property occurring in, on or about the Campus, the Building and the Premises, regardless of cause, except for that caused by the negligence or intentional wrongful acts of Landlord and its employees, agents, customers and invitees; and Tenant hereby releases Landlord from any and all liability for the same. Landlord shall indemnify Tenant and hold it harmless from any and all liability for any loss, damage or injury to person or property resulting from the gross negligence or intentional wrongful acts of Landlord and its employees, agents, customers and invitees; and Landlord hereby releases Tenant from any and all liability for the same. The obligation to indemnify hereunder shall include the duty to defend against any claims asserted by reason of such loss, damage or injury and to pay any judgments, settlements, costs, fees and expenses, including attorneys' fees, incurred in connection therewith. 10.02 - Tenant's Insurance. Tenant, shall, at all times during the Term of this Sublease, carry, at its own expense, policies of insurance, with such coverages, in such amounts, and with such insurers as are reasonably acceptable to Landlord, covering Tenant's property and fixtures located in the Premises. XI - EMINENT DOMAIN Pursuant to the terms of the Building Lease, if the whole or any part of the Building shall be taken for public or quasi-public use by a governmental or other authority having the power of eminent domain, or shall be conveyed to such authority in lieu of such taking, and if such taking or conveyance shall cause the remaining part of the Building to be untenantable and inadequate for use by Landlord for the purpose for which it was leased under the Building Lease, then Landlord may, at its option, terminate the Building Lease as of the date DLC is required to surrender possession of the Building. In such event, all Base Rent and Additional Rent due under this Sublease shall be apportioned to and shall cease as of the date DLC is required to surrender possession of the Building, and Landlord and Tenant shall be released from all further obligations and liability hereunder (except for any obligations previously incurred hereunder). If a part of the Building shall be taken or conveyed, but the remaining part is tenantable and adequate for Landlord's use, and if the Building Lease shall be terminated as to the part taken or conveyed as of the date DLC surrenders possession and DLC shall make such repairs, alterations and improvements (exclusive of repairs, alterations or improvements to tenant improvements, if any, installed by Tenant pursuant to Section 8.03) as may be necessary to render the part not taken or conveyed tenantable, if such taking or conveyance includes any part of the Premises, the Base Rent and Additional Rent shall be reduced in proportion to the part of the Premises so taken or conveyed. All compensation awarded for such taking or conveyance shall be the property of DLC, without any deduction therefrom for any present or future estate of Landlord or Tenant, and Tenant hereby assigns to DLC all of its right, title and interest in and to any such award. However, Tenant shall have the right to recover from such authority, but not from Landlord or DLC, such compensation as may be awarded to Tenant on account of moving and relocation expenses and depreciation to and removal of Tenant's trade fixtures and personal property and alterations or tenant improvements, if any, installed by Tenant pursuant to Section 8.03. XII - LIENS If, because of any act or omission of Tenant or anyone claiming by, through or under Tenant, any mechanic's lien or other lien shall be filed against the Campus, the Building, the Premises or against other property of Landlord or DLC (whether or not such lien is valid or enforceable as such), Tenant shall, at its own expense, cause the same to be discharged or bonded of record within a reasonable time, not to exceed thirty (30) calendar days after the date Tenant becomes aware of the filing thereof, and shall also indemnify Landlord and hold it harmless from any and all claims, losses, damages, judgments, settlements, costs and expenses, including attorneys' fees, resulting therefrom or by reason thereof. XIII - ASSIGNMENT AND SUBLETTING Tenant will not assign, transfer, mortgage, or otherwise encumber this Sublease or sublet or rent (or permit occupancy or use of) the Premises, or any part thereof, without obtaining the prior written consent of DLC and Landlord, which consent neither DLC or Landlord shall have an obligation to give and which may be given or withheld in either's sole discretion. XIV - TRANSFER BY LANDLORD 14.01 - Assignment of Leasehold Rights. Subject to the terms of the Building Lease, Landlord shall have the right to assign its rights under the Building Lease at any time during the Term of this Sublease, subject only to the rights of Tenant hereunder; and such assignment shall operate to release Landlord from liability hereunder for all acts or omissions occurring after the date of such assignment. 14.02 - Subordination. Unless a mortgagee shall otherwise elect, as provided in Section 14.03, this Sublease is and shall be subject and subordinate to the lien of any and all mortgages (which term "mortgages" shall include both construction and permanent financing and shall include deeds of trust and similar security instruments) which may now or hereafter encumber or otherwise affect the Building Lease, the Building, the Campus, or both, and to all and any renewals, extensions, modifications, recastings or refinancings thereof. In confirmation of such subordination, Tenant shall, at the request of either DLC or Landlord or both, promptly execute any requisite or appropriate certificate or other document. Tenant agrees that in the event that any proceedings are brought for the foreclosure of any such mortgage, Tenant shall attorn to the purchaser at such foreclosure sale, if requested to do so by such purchaser, and to recognize such purchaser as the landlord under this Sublease, provided that such purchaser agrees not to disturb Tenant's possession and other rights under this Sublease so long as Tenant is not in default hereunder, and Tenant waives the provisions of any statute or rule of law, now or hereafter in effect, which may give or purport to give Tenant any right to terminate or otherwise adversely affect this Sublease and the obligations of Tenant hereunder, in the event that any such foreclosure proceeding is prosecuted or completed. 14.03 - Mortgagee's Unilateral Subordination. If a mortgagee shall so elect by notice to Tenant or by the recording of a unilateral declaration of subordination, this Sublease and Tenant's rights hereunder shall be superior and prior in right to the mortgage of which such mortgagee has the benefit, with the same force and effect as if this Sublease had been executed, delivered and recorded prior to the execution, delivery and recording of such mortgage, subject, nevertheless, to such conditions as may be set forth in any such notice of declaration which do not result in Tenant's occupancy under this Sublease being disturbed while Tenant is not in default hereunder. 14.04 - Subordination to Covenants, Conditions and Restrictions. Tenant agrees that this Sublease shall be subordinate and subject to any covenants, conditions, easements and restrictions ("CCR's") which DLC, in its sole discretion, hereafter grants or adopts with respect to or imposes upon the Campus, or any portion thereof, as long as such CCR's do not substantially impair Tenant's use of the Premises for the permitted uses hereunder. In confirmation of such subordination, Tenant shall, at DLC's request, promptly execute any requisite or appropriate certificate or other document. 14.05 - Exculpation. If Landlord shall fail to perform any covenant, term or condition of this Sublease upon Landlord's part to be performed, and if, as a consequence of such default, Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the Landlord's leasehold interest in the Building and out of rents or other income from the Building receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's leasehold interest in the Building, subject, nevertheless, to the rights of any mortgagee, and neither Landlord nor any of the shareholders, directors or officers of Landlord shall be liable for any deficiency. XV - DEFAULTS AND REMEDIES 15.01 - Defaults by Tenant. The occurrence of any one or more of the following events shall be a default and breach of this Sublease by Tenant: A. Tenant shall fail to pay any monthly installment of Base Rent or Additional Rent within five (5) calendar days after the same shall be due and payable, or any other sum(s) within ten (10) calendar days after the same shall be due and payable, and such nonpayment continues for a period of ten (10) days after Landlord gives to Tenant written notice of such nonpayment. B. Tenant shall fail to perform or observe any term, condition, covenant or obligation required to be performed or observed by it under this Sublease for a period of thirty (30) calendar days or more after notice thereof from Landlord; provided, however, that if the term, condition, covenant or obligation to be performed by Tenant is of such nature that the same cannot reasonably be performed within such thirty (30) day period, such default shall be deemed to have been cured if Tenant commences such performance within said thirty (30) day period and thereafter diligently completes the same. C. A trustee or receiver shall be appointed to take possession of substantially all of Tenant's assets in or about the Premises or of Tenant's interest in this Sublease (and Tenant does not regain possession within sixty (60) calendar days after such appointment); Tenant makes an assignment for the benefit of creditors; or substantially all of Tenant's assets in or about the Premises or Tenant's interest in this Sublease are attached or levied upon under execution (and Tenant does not discharge the same within sixty (60) calendar days thereafter). D. A petition in bankruptcy, insolvency, or for reorganization or arrangement is filed by or against Tenant pursuant to any federal or state statute (and, with respect to any such petition filed against it, Tenant fails to secure a stay or discharge thereof within sixty (60) calendar days after the filing of the same). 15.02 - Remedies of Landlord - Upon the occurrence of any event of default set forth in Section 15.01, Landlord shall have the following rights and remedies, in addition to those allowed by law, any one or more of which may be exercised without further notice to or demand upon Tenant: E. Landlord may re-enter the Premises and cure any default of Tenant, in which event Tenant shall reimburse Landlord as additional rent for any costs and expenses which Landlord may incur to cure such default; and Landlord shall not be liable to Tenant for any loss or damage which Tenant may sustain by reason of Landlord's action, regardless of whether caused by Landlord's negligence or otherwise. F. Landlord may terminate this Sublease as of the date of such default, in which event: (1) neither Tenant nor any person claiming under or through Tenant shall thereafter be entitled to possession of the Premises, and Tenant shall immediately thereafter surrender the Premises to Landlord; (2) Landlord may re-enter the Premises and dispossess Tenant or any other occupants of the Premises by force, summary proceedings, ejectment or otherwise, and may remove their effects, without prejudice to any other remedy which Landlord may have for possession or arrearages in rent; and (3) notwithstanding the termination of this Sublease (a) Landlord may recover from Tenant, as general damages, the maximum amount allowed by law, which, at a minimum, shall be the present value of the balance of the Base Rent and Additional Rent which would have been due and payable for the balance of the Term of this Sublease, less the present value of the fair rental value of the Premises for such period (with said present values being determined using an eight percent (8%) discount rate), whereupon Tenant shall be obligated to pay the same to Landlord, together with all costs, losses and damages which Landlord may sustain by reason of such termination and re-entry, or (b) Landlord may relet all or any part of the Premises for a term different from that which would otherwise have constituted the balance of the Term of this Sublease, and for rent and on terms and conditions different from those contained herein, whereupon Tenant shall immediately be obligated to pay to Landlord, as liquidated damages, the difference between the rent provided for herein and that provided for in any lease covering a subsequent reletting of the Premises, for the period which would otherwise have constituted the balance of the Term of this Sublease, together with all of Landlord's costs and expenses for preparing the Premises for reletting, including all repairs, brokers' and attorneys' fees, and all costs, losses and damages which Landlord may sustain by reason of such termination, re-entry and reletting, it being expressly understood and agreed that the liabilities and remedies specified in clauses (a) and (b) hereof shall survive the termination of this Sublease. Notwithstanding the foregoing, Landlord shall use all reasonable efforts to mitigate its damages. G. Landlord may sue for injunctive relief or to recover damages for any loss resulting from the breach. 15.03 - Non-Waiver of Defaults. The failure or delay by Landlord or Tenant to enforce or exercise, at any time, any of the rights or remedies or other provisions of this Sublease shall not be construed to be a waiver thereof, nor affect the validity of any part of this Sublease or the right of Landlord or Tenant thereafter to enforce each and every such right or remedy or other provision. No waiver of any default and breach of the Sublease shall be held to be a waiver of any other default and breach. The receipt by Landlord of less than the full rent due shall not be construed to be other than a payment on account of rent then due, nor shall any statement on Tenant's check or any letter accompanying Tenant's check be deemed an accord and satisfaction, and Landlord may accept such payment without prejudice to Landlord's right to recover the balance of the rent due or to pursue any other remedies provided in this Sublease. No act or omission by Landlord or its employees or agents during the Term of this Sublease shall be deemed an acceptance or a surrender of the Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord. XVI - NOTICE AND PLACE OF PAYMENT 16.01 - Notice. Any notice or other communication required or permitted to be given to a party under this Sublease shall be in writing, unless otherwise specified in this Sublease, and shall be given by one of the following methods to such party at the address set forth in Item H of the Basic Sublease Provisions: (1) it may be sent by registered or certified United States mail, return receipt requested and postage prepaid, or (2) it may be sent by ordinary United States mail or delivered in person or by courier, telecopier, telex, telegram, interconnected computers, or any other means for transmitting a written communication. Any such notice shall be deemed to have been given as follows: (i) when sent by registered or certified United States mail, as of the earlier of date of delivery shown on the receipt, or as of the second calendar day after it was mailed, and (ii) when delivered by any other means, upon receipt. Either party may change its address for notice by giving written notice thereof to the other party. 16.02 - Place of Payment. All rent and other payments required to be made by Tenant to Landlord shall be delivered or mailed to Landlord at the address specified in Item H of the Basic Sublease Provisions, or any other address Landlord may specify from time to time by written notice given to Tenant. XVII - HAZARDOUS SUBSTANCES Tenant shall not cause or permit any Hazardous Substance (as hereinafter defined) to be used, stored, generated or disposed of on or in the Premises or the Building by Tenant, Tenant's agents, employees, contractors, invitees or sublessees, without first obtaining DLC and Landlord's written consent. If Hazardous Substances are used, stored, generated or disposed of on or in the Premises, or if the Premises or the Building becomes contaminated in any manner for which Tenant is legally liable, Tenant shall indemnify and hold harmless Landlord from any and all claims, damages, fines, judgments, penalties, costs, liabilities or losses (including, without limitation, a decrease in value of the Building, damages caused by loss or restriction of rentable or usable space, or any damages caused by adverse impact on marketing of the space, and any and all sums paid for settlement of claims, attorneys' fees, consultant and expert fees) arising during or after the Term of the Lease, and arising as a result of that contamination by Tenant. This indemnification includes, without limitation, any and all costs incurred because of any investigation of the site or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on or in the Premises or the Building and that results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions to return the Premises and the Building to the condition existing prior to the presence of any such Hazardous Substance on or in the Premises. Tenant shall first obtain Landlord's approval for any such remedial action. As used herein, "Hazardous Substance" means any substance that is toxic, ignitable, reactive or corrosive and that is regulated by any local government, the State of Ohio, or the United States Government. "Hazardous Substance" includes any and all materials or substances that are defined as "hazardous waste", "extremely hazardous waste", or a "hazardous substance" pursuant to state, federal or local government law. "Hazardous Substance" includes, but is not restricted to, asbestos, polychlorinated biphenyls, petroleum, petroleum products, and petroleum wastes. XVIII - MISCELLANEOUS GENERAL PROVISIONS 18.01 - Relocation. Tenant acknowledges and agrees that, pursuant to the Building Lease between DLC and Landlord, DLC has reserved the right and option to relocate Landlord to a different building within the Campus. Tenant agrees that this Sublease is, and Tenant's possession rights hereunder are, subject to said relocation rights. In the event Landlord is compelled to relocate to another building, Tenant agrees to relocate in accordance with DLC's plan of relocation and to cooperate fully with DLC and Landlord in completing the relocation. 18.02 - Definition of Rent. Any amounts of money to be paid by Tenant to Landlord pursuant to the provisions of this Sublease, whether or not such payments are denominated "Base Rent" or "Additional Rent" and whether or not they are to be periodic or recurring, shall be deemed "Base Rent" or "Additional Rent" for purposes of this Sublease; and any failure to pay any of the same, as provided in Section 16.01 hereof, shall entitle Landlord to exercise all of the rights and remedies afforded hereby or by law for the collection and enforcement of Tenant's obligation to pay rent. Tenant's obligation to pay any such Base Rent or Additional Rent, pursuant to the provisions of this Sublease, shall survive the expiration or other termination of this Sublease and the surrender of possession of the Premises after any hold over period. 18.03 - Estoppel Certificate. Tenant agrees, at any time and from time to time, upon not less than ten (10) calendar days prior written notice by DLC or Landlord, to execute, acknowledge and deliver to DLC or Landlord, as appropriate, a statement in writing (i) certifying that this Sublease is unmodified and in full force and effect, (or, if there have been modifications, stating such modifications); (ii) stating the dates to which the rent and any other charges hereunder have been paid by Tenant; (iii) stating whether or not, to the best of Tenant's knowledge, Landlord is in default in the performance of any covenant, agreement or condition contained in this Sublease, and, if so, specifying each such default of which Tenant may have knowledge; and (iv) stating the address to which notices to Tenant should be sent. Any such statement delivered pursuant hereto may be relied upon by any owner of the Building or the Campus, any prospective purchaser of the Building, any mortgagee or prospective mortgagee of the Building, or any prospective assignee of any such mortgagee. 18.04 - Governing Law. This Sublease shall be construed and enforced in accordance with the laws of the State of Ohio. 18.05 - Successors and Assigns. This Sublease and the respective rights and obligations of the parties hereto shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto, as well as the parties themselves; provided, however, that Landlord, its successors and assigns, shall be obligated to perform Landlord's covenants under this Sublease only during and in respect to their successive periods of ownership during the Term of this Sublease. 18.06 - Severability of Invalid Provisions. If any provision of this Sublease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall not be affected or impaired, and such remaining provisions shall remain in full force and effect. 18.07 - Certain Words, Gender and Headings. As used in this Sublease, the word "person" shall mean and include, where appropriate, an individual, corporation, partnership or other entity; the plural shall be substituted for the singular and the singular for the plural, where appropriate; and words of any gender shall include any other gender. The topical headings of the several paragraphs of this Sublease are inserted only as a matter of convenience and reference, and do not affect, define, limit or describe the scope or intent of this Sublease. 18.08 - Quiet Enjoyment. Subject to the terms and conditions of the Building Lease and the performance by DLC of its obligations thereunder, so long as Tenant pays the prescribed rent and performs or observes all of the terms, conditions, covenants and obligations of this Sublease required to be performed or observed by it hereunder, Tenant shall, at all times during the Term hereof, have the peaceable and quiet enjoyment, possession, occupancy and use of the Premises, without any interference from Landlord or any person or persons claiming the Premises, by, through or under Landlord. 18.09 - Complete Agreement; Amendments. This Sublease, including all Exhibits, Riders and Addenda, constitutes the entire agreement between the parties hereto; it supersedes all previous understandings and agreements between the parties, if any, and no oral or implied representation or understandings shall vary its terms; and it may not be amended, except by a written instrument executed by both parties hereto. 18.10 - Reasonable Modifications. Tenant will consent to such reasonable modifications of this Sublease as Landlord may hereafter find it necessary to make in order to obtain mortgage financing, provided that such modifications (a) do not change the rental to be paid hereunder or the length of the Term of the Sublease; and (b) do not impose obligations upon Tenant which are substantially or practically more burdensome to it than the obligations contained herein. IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of the day and year first above written. Witnesses as to Landlord: LANDLORD: VICTORIA'S SECRET STORES, INC., a Delaware corporation /s/ David M. Schira By: George R. Sappenfield Print Name: David M. Schira George R. Sappenfield, Vice President - Real Estate /s/ Joan C. Makley Print Name: Joan C. Makley ATTESTED BY: /s/ David M. Schira /s/ C. David Zoba Print Name: David M. Schira C. David Zoba, Assistant Secretary /s/ Joan C. Makley Print Name: Joan C. Makley Witnesses as to Tenant: TENANT: ABERCROMBIE & FITCH, INC., a Delaware corporation /s/ David M. Schira By: George R. Sappenfield Print Name: David M. Schira George R. Sappenfield, Vice President - Real Estate /s/ Joan C. Makley Print Name: Joan C. Makley ATTESTED BY: /s/ David M. Schira /s/ C. David Zoba Print Name: David M. Schira C. David Zoba, Assistant Secretary /s/ Joan C. Makley Print Name: Joan C. Makley STATE OF OHIO, COUNTY OF FRANKLIN, SS: The foregoing instrument was acknowledged before me this 12th day of September, 1995, by George R. Sappenfield and C. David Zoba, Vice President - Real Estate and Assistant Secretary, respectively, of Victoria's Secret Stores, Inc., a Delaware corporation, on behalf of the corporation. /s/ Joan C. Makley Notary Public [Notarial Seal of Joan C. Makley is contained here] STATE OF OHIO, COUNTY OF FRANKLIN, SS: The foregoing instrument was acknowledged before me this 12th day of September, 1995, by George R. Sappenfield and C. David Zoba, Vice President - Real Estate and Assistant Secretary, respectively, of Abercrombie & Fitch, Inc., a Delaware corporation, on behalf of the corporation. /s/ Joan C. Makley Notary Public [Notarial Seal of Joan C. Makley is contained here] This Instrument Prepared By: Vorys, Sater, Seymour and Pease 52 East Gay Street P.O. Box 1008 Columbus, OH 43216-1008 CONSENT TO SUBLEASE AND NONDISTURBANCE AGREEMENT OF DISTRIBUTION LAND CORP. This Consent to Sublease and Nondisturbance Agreement is made as of the 1st day of June, 1995, by Distribution Land Corp., a Delaware Corporation ("DLC"), and is executed in conjunction with that certain Sublease Agreement, of even date herewith, and to which this instrument is attached (the "Sublease"). Defined terms not otherwise defined herein shall have the same meanings as given to them in the Sublease. R E C I T A L S: WHEREAS, DLC is the landlord under the Building Lease pursuant to which DLC has leased to Landlord the Building; and WHEREAS, the Building Lease is the basis for Landlord's right to use and occupy the Building (including the Premises) and, upon the consent of DLC, to sublease the Premises to Tenant pursuant to the terms and conditions of the Sublease; and WHEREAS, DLC and Tenant wish to confirm their agreements and understandings relative to the Building Lease and the Sublease. NOW, THEREFORE, in consideration of the covenants set forth in the Sublease, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, DLC hereby: 1. Consents to the Sublease and the Tenant's use and occupancy of the Premises thereunder. 2. Agrees that, notwithstanding an event of default by Landlord under the Building Lease (and the subsequent termination of the Building Lease as a result thereof) or the termination of the Building Lease as a result of Tenant's failure or refusal to exercise its Renewal Options thereunder or otherwise, and provided Tenant is not in default after the expiration of any applicable cure period provided for in the Sublease and Tenant attorns to DLC in a manner acceptable to DLC, then: (a) the Sublease (and all amendments thereto) and the rights of the Tenant thereunder, shall continue in full force and effect and shall not be terminated, impaired, or otherwise affected except in accordance with the terms of the Sublease; and (b) if Tenant desires to enter into a direct and separate lease with DLC for the Premises, then DLC shall cooperate in good faith and likewise agree to enter into a direct and separate lease with Tenant for the Premises. IN WITNESS WHEREOF, Distribution Land Corp. has caused this instrument to be executed by its duly authorized officer as of the date first above written. Witnesses: DISTRIBUTION LAND CORP.,a Delaware corporation /s/ Debra R. Robinett By: /s/ George R. Sappenfield Print Name: Debra R. Robinett George R. Sappenfield, Vice President - Real Estate /s/ Dorothy J. Martin Print Name: Dorothy J. Martin ATTESTED BY: /s/ Debra R. Robinett /s/ C. David Zoba Print Name: Debra R. Robinett C. David Zoba, Assistant Secretary /s/ Dorothy J. Martin Print Name: Dorothy J. Martin STATE OF OHIO, COUNTY OF FRANKLIN, SS: The foregoing instrument was acknowledged before me this 21st day of September, 1995, by George R. Sappenfield and C. David Zoba, Vice President - Real Estate and Assistant Secretary, respectively, of Distribution Land Corp., a Delaware corporation, on behalf of the corporation. /s/ Debra R. Robinett Notary Public [Notarial Seal of Debra R. Robinett is contained here] EXHIBIT A [Image material is contained here consisting of a map of Distribution Center No. 4 Building Area.] EXHIBIT B [Image material is contained here consisting of a blueprint of Distribution Center No. 4, first floor.] EXHIBIT C None EX-10.4 9 Exhibit 10.4 FORM OF SHARED FACILITIES AGREEMENT This SHARED FACILITIES AGREEMENT is entered into as of [_________], 1996 (this "Agreement"), by and between [TENANT ENTITY], a Delaware corporation ("Sublessor"), and ABERCROMBIE & FITCH CO., a Delaware corporation (" Sublessee"). WITNESSETH: WHEREAS, Sublessor is a tenant under each of the lease agreements described on Schedule 1 attached hereto and made a part hereof; WHEREAS, prior to the date hereof, Sublessee has occupied all or a portion of the premises leased by Sublessor under such lease agreements without a written agreement; and WHEREAS, Sublessor and Sublessee desire to evidence their agreement relating to such shared occupancy upon the terms and conditions set forth below. NOW, THEREFORE, in consideration of the covenants set forth herein, the parties covenant and agree as follows 1. Definitions. The following are the defined terms used in this Agreement: "Affiliate" means a corporation, partnership or other business entity, which, directly or indirectly, controls, is controlled by, or is under common control with, another corporation, partnership or other business entity. If more than 50 percent of the voting stock of a corporation shall be owned by another corporation or by a partnership or other business entity, the corporation whose stock is so owned shall be deemed to be controlled by the corporation, partnership or business entity owning such stock. "Lease Term" means the initial term of a Prime Lease as it may be extended by Sublessor pursuant to a renewal or extension option therein. "Leased Premises" means the premises in which Sublessor has a leasehold interest under a Prime Lease or all such premises collectively, as the context may require. "Lessor" means the landlord under a Prime Lease. "Prime Lease" means each of the leases described on Schedule 1; all such leases are collectively referred to as the "Prime Leases". The parties may, after the date hereof, designate any other lease as a Prime Lease subject to the terms of this Agreement, by replacing Schedule 1 with a new Schedule 1,which describes such other lease and which is initialed by both parties. "Space Size Ratios" means, in respect of any Leased Premises and the Subleased Premises forming a part thereof, the ratio that the size of the Subleased Premises bears to the size of the entire Leased Premises and the ratio that the size of the Leased Premises exclusive of the Subleased Premises bears to the size of the entire Leased Premises, with all such sizes being as reflected on Schedule 1. "Subleased Premises" means the portion of the Leased Premises occupied by Sublessee as described on Schedule 1, individually or collectively, as the context may require. 2. Sublease. Sublessor, in consideration of the covenants and agreements to be performed by Sublessee and upon the terms and conditions hereinafter stated, does hereby sublease, demise and let unto Sublessee, and Sublessee does hereby sublease from Sublessor, each of the Subleased Premises upon the terms and conditions set forth below. 3. Priority of Prime Lease. This Agreement, as it relates to the Subleased Premises, is expressly subject and subordinate to the applicable Prime Lease and, subject to the modifications set forth in this Agreement, all the terms, conditions and covenants therein contained. Except to the extent otherwise expressly set forth in this Agreement, in which event the terms of this Agreement shall prevail, all the terms, covenants and conditions of a Prime Lease shall be applicable to this Agreement with respect to the corresponding Subleased Premises with the same force and effect as if Sublessor were the landlord under the Prime Lease and Sublessee were the tenant thereunder and the provisions of the Prime Lease are incorporated herein by reference with the same force and effect as if they were fully set forth herein (except to the extent that they are modified by the terms of this Agreement), and Sublessee shall assume and fully perform and discharge, with regard to the Subleased Premises, all the obligations of Sublessor as tenant under the Prime Lease during the Lease Term. In the event of any breach by Sublessee of any term, covenant or condition of this Agreement, Sublessor shall have all the rights against Sublessee as would be available to the Lessor against the Sublessor as tenant under the applicable Prime Lease if such breach were by Sublessor thereunder. 4. Term. The term of the sublease granted herein shall be coextensive, less one day, with the Lease Term of the applicable Prime Lease, unless sooner terminated as provided herein. Sublessee acknowledges that the Lease Term may include renewal or extension options exercisable by Sublessor and that the exercise of any such option shall be determined by Sublessor in its sole and absolute discretion. Sublessor will notify Sublessee in the event Sublessor has determined not to exercise any renewal or extension option and will offer to assign the Prime Lease, to the extent permitted under such Prime Lease or by the Lessor, or otherwise to cooperate with Sublessee to allow Sublessee, in its discretion, to exercise any such option with respect to the Leased Premises, so long as Sublessor has no responsibility or liability under the Prime Lease after expiration of the Lease Term (without consideration of such option) 5. Utilities/Other Services. (a) Except as otherwise specified herein, the only services, utilities or rights to which Sublessee is entitled under this Agreement with respect to the Subleased Premises are those to which Sublessor is entitled from the Lessor under the applicable Prime Lease and Sublessor shall have no liability to Sublessee for the failure to provide such services, utilities or rights unless such failure to provide same is the result of some act or omission of Sublessor under the Prime Lease. In addition, Sublessee shall not be entitled to utility services greater than that which it was receiving (if Sublessee was in possession) prior to the date hereof. (b) If any utility services to the Leased Premises are not separately metered as between the Subleased Premises and the remainder of the Leased Premises, the accounts shall be in the name of Sublessor, or the Lessor if required by the Prime Lease, and the payments to the utility companies or the Lessor, as the case may be, shall be shared prorata by Sublessee and Sublessor based on the Space Size Ratios, and without regard to consumption. Sublessee shall pay its share of same to Sublessor on or before the later of (i) five business days after Sublessee receives an invoice (including a copy of the Lessor's invoice, if any) for same or (ii) the date such payment is due and payable to the utility company or the Lessor, as the case may be 6. Monetary Obligations. (a) All monetary obligations of Sublessor under a Prime Lease, other than percentage rent, shall be shared prorata by Sublessee and Sublessor based on the Space Size Ratios. Any percentage rent payable under a Prime Lease shall be prorated by Sublessor and Sublessee based solely on the sales made by each party during the period for which such percentage rent is payable. Each party's proportionate share of percentage rent payable under a Prime Lease shall be equal to the ratio that such party's sales during the period for which such percentage rent is payable bears to the aggregate of such party's sales and the other party's sales for such period. For purposes of such proration, the percentage rent breakpoint shall not be prorated based on the size of the Subleased Premises or by any other method. (b) Sublessee shall pay its prorata share of such monetary obligations to Sublessor on or before the later of (i) five business days after Sublessee's receipt of written notice of such obligation (if the obligation is a recurring one, only one notice that specifies the due dates shall be required) and a copy of the Lessor's invoice, if any, or (ii) the date Sublessor is required to pay such monetary obligations to the Lessor. The monetary obligations referred to in this Section 6 shall include, without limitation, base, fixed and minimum rent, percentage rent, common area maintenance charges, enclosed mall maintenance charges, real estate taxes and assessments, insurance charges, merchants association dues, marketing, advertising and other promotional fund contributions and HVAC and chilled water charges. 7. Non-Monetary Obligations. In the event any non-monetary obligation of the tenant under a Prime Lease, other than those for which specific provision is made in this Agreement, is not attributable to the Subleased Premises exclusively or the remainder of the Leased Premises exclusively (e.g., the maintenance of insurance or the repair of any HVAC unit serving the entire Leased Premises), such obligation shall be performed by Sublessor and the cost of performing same shall be shared prorata by Sublessee and Sublessor based on the Space Size Ratios, unless the parties have agreed to a different cost-sharing arrangement under a separate written agreement (e g, the "Services Agreement" between The Limited, Inc., and Abercrombie & Fitch Co.) 8. Tenant Inducements. The parties acknowledge that all monetary tenant inducements arising prior to the date hereof, including, without limitation, tenant improvement allowances and moving allowances, under a Prime Lease have been or will be received by Sublessor for its sole and exclusive benefit, unless the parties have made prior arrangements (through course of conduct or written or oral agreement) to share any such monetary inducement. All monetary inducements arising after the date hereof, including, without limitation, tenant improvement allowances and moving allowances, under a Prime Lease shall be shared prorata by Sublessee and Sublessor based on the Space Size Ratios, unless otherwise agreed by the parties 9. Termination Rights. All rights of the tenant to terminate a Prime Lease, including, without limitation, any "kickout" or "cotenancy" rights or rights to terminate in the event of a casualty or condemnation or default of the Lessor, shall belong exclusively to Sublessor and may be exercised by Sublessor in its sole and absolute discretion without liability to Sublessee; provided, however, Sublessor will notify Sublessee of its intent to terminate a Prime Lease and will offer to assign the Prime Lease to Sublessee, to the extent permitted under such Prime Lease or by the Lessor, so long as Sublessor has no responsibility or liability under the Prime Lease after such assignment. Sublessee acknowledges that in the event of any such termination, this Agreement shall terminate with respect to such Prime Lease. 10. Access; Alterations. (a) The parties acknowledge that certain of the Leased Premises may be configured such that Sublessor may need access to the Subleased Premises and Sublessee may need access to the remainder of the Leased Premises for purposes of maintaining or making adjustments or repairs to facilities (e.g., pipes, conduits, electrical and telecommunication wiring, etc.) serving such party's premises or for purposes of using restroom facilities or stock or storage rooms or for such other reasonable purposes. The parties hereby grant each other access through their respective premises for such purposes, provided that the party exercising such right does not unreasonably interfere with the business of the other party. (b) No party may make any alterations to its premises that would adversely affect the other party's business or use or occupancy of its premises, including any alterations that would (i) reduce the availability of utilities, HVAC or other services to the other party's premises, (ii) impair access to the other party's premises or (iii) cause the other party's premises not to comply with applicable law 11. Assignment and Subletting. (a) Sublessee may not assign this Agreement, or allow it to be assigned, in whole or in part, by operation of law or otherwise or mortgage or pledge the same, or sublet the Subleased Premises, or any part thereof (any of the foregoing transactions is herein referred to as a "Transfer"), without the prior written consent of Sublessor, which consent may be withheld by Sublessor in its sole and absolute discretion without regard to standards of reasonableness. Notwithstanding the foregoing, but subject to the terms of the Prime Lease, Sublessee may effect a Transfer, without the consent of Sublessor, to an Affiliate of Sublessee or Sublessor, provided that if at any time after such permitted Transfer the transferee is no longer an Affiliate of either Sublessor or Sublessee, the event terminating such affiliation shall be deemed a Transfer subject to Sublessor's consent pursuant to the preceding sentence. (b) In the event of any Transfer, whether or not Sublessor grants its consent to such Transfer or has the right to withhold its consent to such Transfer, Sublessee shall remain fully liable to perform its duties under this Agreement following a Transfer. If Sublessee enters into a Transfer, Sublessee shall pay Sublessor any and all consideration received by Sublessee in such transaction (as rent or inducement for such Transfer) in excess of the total sums that Sublessee is obligated to pay Sublessor under this Agreement, or the prorated portion thereof if only a portion of the Subleased Premises is Transferred, as additional rent under this Agreement without affecting or reducing any other obligations of Sublessee hereunder. Sublessee acknowledges that the foregoing is intended to preclude Sublessee from obtaining a profit from a Transfer. (c) Any proposed Transfer shall also be subject to the restrictions and requirements set forth in the Prime Lease. Any purported Transfer consummated in violation of the provisions of this Section 11 shall be null and void and of no force or effect. (d) In the event Sublessor intends to assign a Prime Lease or further sublet the Leased Premises exclusive of the Subleased Premises to a person or entity that is not an Affiliate of Sublessor, Sublessor shall give Sublessee written notice of such proposed assignment or sublease at least 60 days prior to the effective date of such assignment or sublease, and Sublessee shall have the right to terminate this Agreement with respect to such Prime Lease by giving written notice thereof to Sublessor prior to such effective date. Sublessee's termination notice shall specify the termination's effective date, which shall be no later than 60 days after the effective date of the Sublessor's assignment or sublease. If Sublessee does not elect to terminate this Agreement with respect to such Prime Lease or such assignment or sublease is to an Affiliate of Sublessor, the following shall be conditions precedent to the effectiveness of such assignment or sublease: (i) in the case of an assignment, Sublessor shall cause the assignee to assume and be bound by the terms of this Agreement, but only to the extent such terms apply to such Prime Lease, and, notwithstanding such assignment, Sublessor shall not be released from and shall remain fully liable under the terms of this Agreement with respect to such Prime Lease; and (ii) in the case of a sublease, Sublessor shall cause the sublessee to acknowledge the rights of Sublessee under this Agreement with respect to the Subleased Premises and the remainder of the Leased Premises and agree that its possession is subject to such rights of Sublessee. 12. No Default Under Prime Lease. (a) Sublessee shall do nothing nor permit anything to be done that would cause the Prime Lease to be terminated or forfeited because of any right of termination or forfeiture reserved or vested in the Lessor under the Prime Lease or that would cause Sublessor to be in default under the Prime Lease or to pay damages or any penalty (e.g., late charges). Except as may be due to the default by Sublessor under the Prime Lease or except as may be due to the negligence or willful misconduct of Sublessor, Sublessee will defend, indemnify and hold harmless Sublessor from and against all claims, damages, losses, liabilities, obligations and costs (including, without limitation, reasonable attorney's fees) of any kind arising from any breach or default on the part of Sublessee by reason of which the Prime Lease may be terminated or forfeited or Sublessor found to be in default thereunder or the Lessor may be entitled to damages or a penalty. (b) Sublessor shall do nothing nor permit anything to be done that would cause the Prime Lease to be terminated or forfeited because of any right of termination or forfeiture reserved or vested in the Lessor under the Prime Lease or that would cause Sublessor to be in default under the Prime Lease or to pay damages or any penalty (e.g., late charges). Except as may be due to the default by Sublessee under this Agreement or except as may be due to the negligence or willful misconduct of Sublessee, Sublessor will defend, indemnify and hold harmless Sublessee from and against all claims, damages, losses, liabilities, obligations and costs (including, without limitation, reasonable attorney's fees) of any kind arising from any breach or default on the part of Sublessor by reason of which the Prime Lease may be terminated or forfeited or the Lessor may be entitled to damages or a penalty 13. Familiaritv with Prime Lease. Sublessee represents and acknowledges that it is familiar with the terms of the Prime Leases. 14. Consent/Approvals. In the event Sublessee seeks a consent or approval from Sublessor with respect to any matter to which such consent or approval is required under this Agreement or the Prime Lease, then (i) the time period, if any, in which Sublessor shall be required to respond to Sublessee shall be extended by ten days after the expiration of any time period in which the Lessor has to respond under the Prime Lease and (ii) the denial of such consent or approval by the Lessor shall be conclusive and binding on Sublessee; provided, however, that where consent or approval of the Lessor under a Prime Lease is required, Sublessor shall use good faith efforts, unless a different standard is specified herein with respect to a particular matter, to obtain such consent or approval from the Lessor, except that nothing herein shall require Sublessor to make any payment, or to amend any terms of such Prime Lease in a way that would have an adverse effect on Sublessor, in respect of such consent or approval. 15. Default Notice from Lessor. In the event Sublessor receives a notice of default from the Lessor with respect to any matter pertaining to the Subleased Premises or any obligation of Sublessee under this Agreement, Sublessor shall immediately notify Sublessee of same in writing, and if Sublessee fails to promptly commence the cure of such default or fails to cure such default as of a date that is at least 15 days prior to the expiration of the applicable cure period under the Prime Lease, Sublessor shall have the right, but no obligation, to immediately cure such default and Sublessee shall reimburse Sublessor for the costs incurred in connection with curing such default within 30 days after receipt of an invoice therefor from Sublessor. In the event (i) Sublessor receives a notice of any monetary default from the Lessor with respect to any matter pertaining to the Leased Premises that does not pertain to any obligation of Sublessee under this Agreement, (ii) Sublessor is not contesting or undertaking to cure the alleged default and (iii) the Prime Lease permits a sublessee to cure such a default, Sublessor shall immediately notify Sublessee of same in writing, and Sublessee shall have the right, but no obligation, to immediately cure such default but shall not be entitled to reimbursement from Sublessor for the costs incurred in connection with such cure. 16. Signage. Sublessee shall have the right to maintain any existing signage it may have in respect of any Subleased Premises. If Sublessee does not have a storefront sign in respect of any Subleased Premises, Sublessee shall have the right to install a sign on the storefront of such Subleased Premises provided it conforms to the sign criteria set forth in the Prime Lease and does not impair the rights of Sublessor to maintain signage on its storefront. In the event any Leased Premises does not have a separate storefront for each party, the parties shall mutually agree on the locations of their respective signs. 17. Indemnity; Subrogation. (a) Sublessor shall defend, indemnify and hold harmless Sublessee and its employees, officers, directors, partners and agents against and from any and all claims, liabilities, demands, fines, suits, actions, proceedings, orders, decrees and judgments (collectively, "Claims") of any kind or nature by, or in favor of, anyone whomsoever, and against and from any and all costs, damages and expenses, including attorneys' fees, resulting from, or in connection with, loss of life, bodily or personal injury or property damage (i) arising, directly or indirectly, out of, or from, or on account of any accident or other occurrence in, upon or from the Leased Premises exclusive of the Subleased Premises or (ii) occasioned in whole or in part through the use and occupancy of the Leased Premises exclusive of the Subleased Premises or any construction, repair, alterations or improvements therein or appurtenances thereto, or by any act or omission of Sublessor or any subtenant, concessionaire or licensee of Sublessor (other than Sublessee), or its employees, agents, contractors or invitees in, upon, at or from the Leased Premises exclusive of the Subleased Premises. (b) Sublessee shall defend, indemnify and hold harmless Sublessor and its employees, officers, directors, partners and agents against and from any and all Claims in favor of, anyone whomsoever, and against and from any and all costs, damages and expenses, including attorneys' fees, resulting from, or in connection with, loss of life, bodily or personal injury or property damage (i) arising, directly or indirectly, out of, or from, or on account of any accident or other occurrence in, upon or from the Subleased Premises or (ii) occasioned in whole or in part through the use and occupancy of the Subleased Premises or any construction, repair, alterations or improvements therein or appurtenances thereto, or by any act or omission of Sublessee or any subtenant, concessionaire or licensee of Sublessee, or its employees, agents, contractors or invitees in, upon, at or from the Subleased Premises. (c) Each party hereto (the "Releasing Party") hereby releases the other (the "Released Party"), from any loss, damage, claim or liability which the Released Party would, but for this Section 1 7(c), have had to the Releasing Party arising out of or in connection with any damage to the property of the Releasing Party to the extent such damage or the cause thereof is covered by insurance maintained by the Releasing Party. Such insurance coverage maintained shall be deemed to include any deductible or self-insured retention in effect or permitted pursuant to this Agreement. SUCH RELEASE SHALL EXTEND TO ANY LOSS, DAMAGE, CLAIM OR LIABILITY THAT MAY HAVE RESULTED 1N WHOLE OR 1N PART FROM ANY ACT OR NEGLECT OF THE RELEASED PARTY, ITS OFFICERS, AGENTS OR EMPLOYEES. Each party hereto shall immediately give to each insurance company which has issued to it property insurance policies written notice of the terms of such mutual releases and have such insurance policies properly endorsed, if necessary, to prevent the invalidation of such insurance coverages by reason of such releases and to waive the Releasing Party's insurer's right of subrogation that would exist had the Releasing Party not given the foregoing release. 18. Required Notice Under Prime Lease. Sublessee shall promptly give written notice to Sublessor of (i) all claims, demands or controversies by or with the Lessor under the Prime Lease or (ii) any injury, death or property damage arising on or about the Subleased Premises. Sublessor shall promptly give written notice to Sublessee of (i) all claims, demands or controversies by or with the Lessor under the Prime Lease or (ii) any injury, death or property damage arising on or about the Leased Premises. 19. Accepting Subleased Premises "As Is". Sublessee acknowledges that it is familiar with the Subleased Premises and has operated therein prior to the date hereof. Sublessee accepts and has accepted possession of the Subleased Premises "AS IS". Sublessee acknowledges that, notwithstanding anything contrary in the Prime Lease, Sublessor has made no representations or warranties with respect to the Subleased Premises or to the condition thereof. 20. No Waiver. The failure of a party to insist in any instance upon the strict keeping, observance or performance of any covenant, agreement, term, provision or condition of this Agreement or to exercise any election herein contained shall not be construed as a waiver or relinquishment for the future of such covenant, agreement, term, provision, condition or election, but the same shall continue and remain in full force and effect. No waiver or modification by a party of any covenant, agreement, term, provision or condition of this Agreement shall be deemed to have been made unless expressed in writing and signed by such party. No surrender by Sublessee of possession of the Subeased Premises or of any part thereof or of any remainder of the term of this Agreement shall release Sublessee from any of its obligations hereunder. 21. Notices. Any notice or demand which either party may or must give to the other under this Agreement shall be given in the same manner for giving notices under the Prime Lease, but addressed as follows: If to Sublessor: [address of Sublessor] with a copy to: The Limited, Inc. Three Limited Parkway P.O. Box 16000 Columbus, Ohio 43216 (Columbus, Ohio 43230 for non-U.S. mail) Attn: Corporate Real Estate Department If to Sublessee: Abercrombie & Fitch Co. Four Limited Parkway East Columbus, Ohio 43218 (Reynoldsburg, Ohio 43068 for non-U.S. mail) Attn: Real Estate Department with a copy to: The Limited, Inc. Three Limited Parkway P.O. Box 16000 Columbus, Ohio 43216 (Columbus, Ohio 43230 for non-U.S. mail) Attn: Corporate Real Estate Department Either party may, by notice in writing, direct that future notices or demands be sent to a different address. 22. Successors. The covenants and agreements herein contained shall bind and inure to the benefit of Sublessor and Sublessee and their respective permitted successors and assigns. 23. Captions. The captions or headings of paragraphs in this Agreement are inserted for convenience only, and shall not be considered in construing the provisions hereof if any question of intent should arise. 24. Severability. If any provisions of this Agreement shall be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby. 25. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Ohio. 26. Further Assurances. Sublessor and Sublessee shall execute, acknowledge and deliver such instruments and take such other action as may be necessary or advisable to carry out their rights and obligations under this Agreement, including the execution of any agreement or instrument required by the Lessor under the Prime Lease. In addition, if Sublessee or Sublessor desires to enter into a direct and separate lease with a Lessor for the Subleased Premises or the remainder of the Leased Premises, respectively, the other party shall cooperate in good faith and likewise agree to enter into a direct and separate lease for its premises provided that such other party's new lease is on terms at least as favorable as the terms of this Agreement, in the case of Sublessee, or the terms of the Prime Lease, in the case of Sublessor. 27. Amendment to Prime Lease. Sublessor may not make any amendment to a Prime Lease that would impair or reduce the rights or increase the obligations of Sublessee under this Agreement, without the written consent of Sublessee. Sublessor shall furnish Sublessee with a copy of any amendment to the Prime Lease. 28. Reasonable Efforts of Sublessor. To the extent in this Agreement that Sublessor has conveyed to Sublessee such utilities, services and similar entitlements as the Lessor may provide under a Prime Lease, or to which Sublessor may be entitled under a Prime Lease, Sublessor agrees and covenants to use its reasonable efforts to obtain delivery of same to Sublessee. With respect to all such entitlements, as well as any covenants, warranties, representations, obligations or other agreements of the Lessor (not otherwise expressly limited in this Agreement), Sublessor's "reasonable efforts" shall require the performance by Sublessor, at Sublessee's reasonable request and at Sublessee's sole cost and expense, of one or more of the following: (i) the execution by Sublessor and delivery to the Lessor, promptly following receipt of Sublessee's written request therefor, of notices, requests and other similar writings; and (ii) the institution by Sublessor, promptly following receipt of Sublessee's written request therefor, of arbitration (if permitted under the Prime Lease) or legal proceedings to enforce, interpret or define the Lessor's obligations under the Prime Lease; provided, however, that any legal proceedings instituted by Sublessor hereunder shall be under the exclusive control of Sublessor and shall include all reasonable preliminary and trial proceedings in the court of original jurisdiction. Sublessee shall defend, indemnify and hold Sublessor harmless from and against any and all court costs, costs of filing, attorneys' fees and awards resulting from, or incurred in connection with, legal proceedings instituted by Sublessor pursuant to this Section 28. 29. Reasonableness and Good Faith. Whenever this Agreement grants Sublessor or Sublessee the right to take action, exercise discretion or make other determinations regarding the Subleased Premises, each party agrees to act reasonably and in good faith unless a different standard is specified herein. 30. Arbitration. Except for the non-payment of rental or other charges due by Sublessee under this Agreement (unless Sublessee first pays under protest as provided for below), or in the event that any action or inaction taken by Sublessee would cause Sublessor to be in default under a Prime Lease, all disputes and disagreements between Sublessor and Sublessee shall be resolved pursuant to an arbitration proceeding pursuant to the rules of the American Arbitration Association. The provisions of this Agreement contain the sole and exclusive method, means and procedure to resolve, as between Sublessor and Sublessee, any and all disputes or disagreements, including whether any particular matter constitutes, or with the passage of time would constitute, a default. As to any matter submitted to arbitration to determine whether it would, with the passage of time, constitute a default, such passage of time shall not commence to run until any such affirmative determination, so long as it is simultaneously determined that the challenge of such matter as a potential default was made in good faith, except with respect to the payment of money. With respect to the payment of money, such passage of time shall not commence to run in the event that the party which is obligated to make the payment does in fact make payment to the other party. Such payment can be accompanied by a good-faith notice stating why the party has elected to make a payment under protest. Such protest will be deemed waived unless the subject matter identified in the protest is submitted to arbitration pursuant to this Section 30. IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed the day and year first written above. SUBLESSOR: [TENANT ENTITY], a Delaware corporation, ATTEST: By:____________________________________ Name: Title: ____________, Assistant Secretary SUBLESSEE: ABERCROMBIE & FITCH CO., a Delaware corporation, ATTEST: By:____________________________________ Name: Title: ___________, Assistant Secretary Schedule 1 (See attached) EX-10.5 10 Exhibit 10.5 FORM OF TAX SHARING AGREEMENT THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of [______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation ("Abercrombie & Fitch"), and The Limited, Inc., a Delaware corporation ("The Limited"). RECITALS WHEREAS, The Limited is the common parent corporation of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, The Limited beneficially owns all of the issued and outstanding Abercrombie & Fitch Class B Common Stock, par value $.01 per share and Abercrombie & Fitch is a member of The Limited consolidated group for federal income tax purposes; WHEREAS, the parties are contemplating the possibility that Abercrombie & Fitch will issue shares of Class A Common Stock, $.01 par value per share to the public in an offering (the "Initial Public Offering") registered under the Securities Act of 1933, as amended; WHEREAS, The Limited Group (as defined below) has filed and intends to file consolidated federal income tax returns as permitted by Section 1501 of the Code and certain members of the Abercrombie & Fitch Group (as defined below) and certain members of The Limited Sub-Group (as defined below), have filed and intend to file returns relating to Combined State Taxes (as defined below); WHEREAS, Abercrombie & Fitch desires to engage The Limited to provide certain services, and The Limited desires to provide certain services, relating to separate state, local and foreign taxes other than Federal Taxes and Combined State Taxes; and WHEREAS, The Limited and Abercrombie & Fitch desire to agree upon a method for determining the financial consequences to each party and their subsidiaries resulting from the filing of a consolidated federal income tax return and the filing of returns relating to Combined State Taxes. AGREEMENTS NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, The Limited and Abercrombie & Fitch, for themselves, their successors, and assigns, hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. For purposes of this Agreement, the terms set forth below shall have the following meanings. "Abercrombie & Fitch Combined State Tax Liability" shall mean, with respect to any taxable year and any jurisdiction, an amount of Combined State Taxes determined in accordance with the principles set forth in the definition of Abercrombie & Fitch Federal Tax Liability; provided, however, that (i) the total amount of Combined State Taxes shall also include any actual income, franchise or similar state or local tax liability (a "State Liability") owed in a jurisdiction (a "Combined Jurisdiction") in which a member of the Abercrombie & Fitch Group files tax returns with a member of The Limited Sub-Group, on a consolidated, combined or unitary basis, to the extent such liability exceeds the liability that would have been owed had no member of the Abercrombie & Fitch Group been included in such returns; and (ii) the total amount of Combined State Taxes shall be reduced to the extent that, in any Combined Jurisdiction, the State Liability of the Limited Sub-Group is less than the liability that would have been owed had no member of the Abercrombie & Fitch Group been included in the returns of such Combined Jurisdiction. "Abercrombie & Fitch Federal Tax Liability" shall mean, with respect to any taxable year, the sum of the Abercrombie & Fitch Group's Federal Tax liability and any interest, penalties and other additions to such taxes for such taxable year, computed as if the Abercrombie & Fitch Group were not and never were part of The Limited Group, but rather were a separate affiliated group of corporations filing a consolidated federal income tax return pursuant to Section 1501 of the Code, provided, however, that transactions with members of The Limited Sub-Group shall be reflected according to the provisions of the consolidated return regulations promulgated under the Code governing intercompany transactions, and that Deconsolidation will trigger any deferred amounts, excess loss accounts or similar items. Such computation shall be made (A) without regard to the income, deductions (including net operating loss and capital loss deductions) and credits in any year of any member of The Limited Group that is not a member of the Abercrombie & Fitch Group, (B) by taking account of any Tax Asset of the Abercrombie & Fitch Group in accordance with Section 2.1(c)(iii) hereof, (C) with regard to net operating loss and capital loss carryforwards and carrybacks and minimum tax credits from earlier years of the Abercrombie & Fitch Group, but without regard to any such carryforward from a tax period (or portion thereof) ending on or before the date of the Initial Public Offering and arising solely due to treating the Abercrombie & Fitch Group as if it were never part of The Limited Group, (D) as though the highest rate of tax specified in subsection (b) of Section 11 of the Code (or any other similar rates applicable to specific types of income) were the only rates set forth in that subsection, and with other similar adjustments as described in Section 1561 of the Code, and (E) reflecting the positions, elections and accounting methods used by The Limited in preparing the consolidated federal income tax return for The Limited Group and (F) by not permitting the Abercrombie & Fitch Group any compensation deductions arising in respect of any exercise of options on Limited stock by any employee of the Abercrombie & Fitch Group. "Abercrombie & Fitch Group" shall mean, at any time, Abercrombie & Fitch and any direct or indirect corporate subsidiaries of Abercrombie & Fitch that would be eligible to join with Abercrombie & Fitch, with respect to Federal Taxes, in the filing of a consolidated federal income tax return and, with respect to Combined State Taxes, in the filing of a consolidated, combined or unitary income or franchise tax return if Abercrombie & Fitch were not consolidated, combined or filing on a unitary basis with any member of The Limited Sub-Group. "Combined State Tax" means, with respect to each state or local taxing jurisdiction, any income, franchise or similar tax payable to such state or local taxing jurisdiction in which a member of the Abercrombie & Fitch Group files tax returns with a member of The Limited Sub-Group, on a consolidated, combined or unitary basis for purposes of such income or franchise tax. "Deconsolidation" means any event pursuant to which Abercrombie & Fitch ceases to be a subsidiary corporation includible in a consolidated tax return of The Limited Group for Federal Tax purposes. "Federal Tax" means any tax imposed under Subtitle A of the Code. "Final Determination" shall mean (i) with respect to Federal Taxes, a "determination" as defined in Section 1313 (a) of the Code or execution of an Internal Revenue Service Form 870AD and, with respect to taxes other than Federal Taxes, any final determination of liability in respect of a tax that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise, (ii) any final disposition of a tax issue by reason of the expiration of a statute of limitations or (iii) the payment of tax by The Limited with respect to any item disallowed or adjusted by any taxing authority where The Limited determines in good faith that no action should be taken to recoup such payment. "Post-Deconsolidation Tax Period" means (i) any tax period beginning and ending after the date of Deconsolidation and (ii) with respect to a tax period that begins before and ends after the date of Deconsolidation, such portion of the tax period that commences on the day immediately after the date of Deconsolidation. "Pre-Deconsolidation Tax Period" means (i) any tax period beginning and ending before or on the date of Deconsolidation and (ii) with respect to a period that begins before and ends after the date of Deconsolidation, such portion of the tax period ending on and including the date of Deconsolidation. "Tax Asset" means any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction or any other deduction, credit or tax attribute which could reduce taxes (including, without limitation, deductions and credits related to alternative minimum taxes). "The Limited Group" shall mean, at any time, The Limited and each direct and indirect corporate subsidiary eligible to join with The Limited in the filing of a consolidated federal income tax return. "The Limited Sub-Group" shall mean, at any time, The Limited and each of its direct and indirect corporate subsidiaries other than those subsidiaries that are members of the Abercrombie & Fitch Group. 1.2. Internal References. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement and references to the parties shall mean the parties to this Agreement. ARTICLE II TAX SHARING 2.1. Tax Sharing. (a) General. For each taxable year of The Limited Group during which income, loss, or credit against tax of the Abercrombie & Fitch Group are includible in the consolidated Federal Tax return of The Limited Group, Abercrombie & Fitch shall pay to The Limited an amount equal to the Abercrombie & Fitch Federal Tax Liability and for each taxable period during which income, loss or credit against tax of any member of the Abercrombie & Fitch Group are includible in a return relating to a Combined State Tax, Abercrombie & Fitch shall pay The Limited an amount equal to the Abercrombie & Fitch Combined State Tax Liability for such taxable period, each as shown on the Pro Forma Returns (as defined in paragraph (c) below). (b) Estimated Payments. The Limited shall determine the amount of the estimated tax installment of the Abercrombie & Fitch Federal Tax Liability (corresponding to The Limited's estimated Federal Tax installment), as determined under the principles of Section 2.1(a) of this Agreement. Abercrombie & Fitch shall, within 5 days of receipt of such determination (but in no event earlier than 5 days prior to the due date of The Limited's corresponding estimated tax payment), pay to The Limited the amount so determined. The Limited shall determine under provisions of applicable law the amount of the estimated tax installment of the Abercrombie & Fitch Combined State Tax Liability (corresponding to the relevant estimated Combined State Tax installment), as determined under the principles of Section 2.1(a) of this Agreement. Abercrombie & Fitch shall, within 5 days of receipt of such determination (but in no event earlier than 5 days prior to the due date of The Limited's corresponding estimated tax payment), pay to The Limited the amount so determined. (c) Payment of Taxes at Year-End. (i) On or before the due date (including all applicable and valid extensions) for The Limited Group's consolidated Federal Tax return, The Limited shall make available to Abercrombie & Fitch a pro forma Federal Tax return (a "Pro Forma Federal Return") of the Abercrombie & Fitch Group reflecting the Abercrombie & Fitch Federal Tax Liability. On or before the due date for each Combined State Tax return, The Limited shall make available to Abercrombie & Fitch the relevant pro forma Combined State Tax return (each a "Pro Forma Combined State Return" and together with the Pro Forma Federal Return, the "Pro Forma Returns") of the Abercrombie & Fitch Group reflecting the relevant Abercrombie & Fitch Combined State Tax Liability. The Pro Forma Returns shall be prepared in good faith in a manner generally consistent with past practice. (ii) On or before the date The Limited files its consolidated Federal Tax return for any year for which payments are to be made under this Agreement, Abercrombie & Fitch shall pay to The Limited, or The Limited shall pay to Abercrombie & Fitch, as appropriate, an amount equal to the difference, if any, between the Abercrombie & Fitch Federal Tax Liability reflected on the Pro Forma Federal Return for such year and the aggregate amount of the estimated installments of the Abercrombie & Fitch Federal Tax Liability for such year made pursuant to Section 2.1(b). On or before the date The Limited files a Combined State Tax return for any year for which payments are to be made under this Agreement, Abercrombie & Fitch shall pay to The Limited, or The Limited shall pay to Abercrombie & Fitch, as appropriate, an amount equal to the difference, if any, between the Abercrombie & Fitch Combined State Tax Liability reflected on the relevant Pro Forma Combined State Tax Return and the aggregate amount of the estimated installments paid with respect to the corresponding Abercrombie & Fitch Combined State Tax Liability pursuant to Section 2.1(b). (iii) If a Pro Forma Return reflects a Tax Asset that may under applicable law be used to reduce a Federal Tax or Combined State Tax liability of any member of The Limited Sub-Group for any taxable period, The Limited shall pay to Abercrombie & Fitch an amount equal to the actual tax saving (which would include refunds actually received) produced by such Tax Asset at the time such tax saving is realized and the future Pro Forma Returns of the Abercrombie & Fitch Group shall be adjusted to reflect such use. The amount of any such tax saving for any taxable period shall be the amount of the reduction in taxes payable to a taxing authority with respect to such tax period as compared to the taxes that would have been payable to a taxing authority with respect to such tax period in the absence of such Tax Asset. (iv) In the event that The Limited makes a cash deposit with a taxing authority in order to stop the running of interest or makes a payment of tax and correspondingly takes action to recoup such payment (such as suing for a refund), Abercrombie & Fitch shall pay to The Limited an amount equal to Abercrombie & Fitch' share of the amount so deposited or paid (calculated in a manner consistent with the determinations provided in this Article 2). Upon receipt by The Limited of a refund of any amounts paid by it in respect of which Abercrombie & Fitch shall have advanced an amount hereunder, The Limited shall pay to Abercrombie & Fitch the amount of such refund, together with any interest received by it on such refund. If and to the extent that any claim for refund or contest based thereupon shall be unsuccessful, the payment by Abercrombie & Fitch under Section 2.1(c)(iv) shall be credited toward Abercrombie & Fitch' obligations under this Section 2(c)(iv) and any other payment obligation of Abercrombie & Fitch under Section 2(d) below. (d) Treatment of Adjustments. If any adjustment is made in a Federal Tax return of The Limited Group or in a return relating to a Combined State Tax, after the filing thereof, in which income or loss of the Abercrombie & Fitch Group (or any member thereof) is included, then at the time of a Final Determination of the adjustment, Abercrombie & Fitch shall pay to The Limited or The Limited shall pay to Abercrombie & Fitch, as the case may be, the difference between all payments actually made under Section 2.1 with respect to the taxable year or period covered by such tax return and all payments that would have been made under Section 2.1 taking such adjustment into account, together with any penalties actually paid and interest for each day until the date of Final Determination calculated at the rate determined, in the case of a payment by Abercrombie & Fitch, under Section 6621(a)(2) of the Code and, in the case of a payment by The Limited, under Section 6621(a)(1) of the Code. (e) Preparation of Returns and Contests. So long as (i) The Limited Group elects to file consolidated Federal Tax returns as permitted by Section 1501 of the Code or (ii) any Combined State Tax return is filed, The Limited shall prepare and file such returns and any other returns, documents or statements required to be filed with the Internal Revenue Service with respect to the determination of the Federal Tax liability of The Limited Group and with the appropriate taxing authorities with respect to the determination of a Combined State Tax liability. With respect to such return preparation, The Limited shall act in good faith with regard to all members included in an applicable return. The Limited shall have the right with respect to any consolidated Federal Tax returns or returns relating to a Combined State Tax that it has filed or will file to determine in good faith (i) the manner in which such returns, documents or statements shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported, (ii) whether any extensions should be requested, and (iii) the elections that will be made by any member of The Limited Group. In addition, The Limited shall have the right, in good faith, to (i) contest, compromise or settle any adjustment or deficiency proposed, asserted or assessed as a result of any audit of any Federal Tax return or return relating to a Combined State Tax, (ii) file, prosecute, compromise or settle any claim for refund, and (iii) determine whether any refunds shall be received by way of refund or credited against tax liabilities. In addition, The Limited shall prepare and file ruling requests, and take all other actions on behalf of any member of The Limited Group that it deems appropriate in providing tax services to the members of The Limited Group. The Limited shall, to the extent such information is available, advise Abercrombie & Fitch of any significant Abercrombie & Fitch tax issue being contested by the federal, state, local or other relevant taxing authorities, and shall keep Abercrombie & Fitch informed with respect to any contest, compromise or settlement thereof. 2.2 Reimbursement for Certain Services. The Limited shall provide services in connection with this Agreement, including but not limited to, (i) those services relating to the preparation of returns (including Pro Forma Returns) described in paragraphs 2.1(b), 2.1(c) and 2.1(e) and (ii) services relating to the other activities described in paragraph 2.1(e). As compensation for these services, Abercrombie & Fitch shall pay The Limited a fee calculated on a basis such that The Limited is reimbursed for all direct and indirect costs and expenses incurred with respect to Abercrombie & Fitch' share of the overall costs and expenses incurred by The Limited with respect to tax related services. The Limited shall calculate the fee payable, invoice Abercrombie & Fitch for the fee and Abercrombie & Fitch will pay the invoiced amount in a manner consistent with the invoice and payment procedures provided for in the "Intercompany Services and Operating Agreement." 2.3 Additional Services. The Limited will provide the tax services described in this Article II with respect to all of the separate state, local and foreign taxes of any members of the Abercrombie & Fitch Group that do not relate to Federal Taxes or Combined State Taxes. The Limited will provide these services in a manner consistent with the principles contained in Article II and be compensated in the same manner as described in Section 2.2. ARTICLE III POST-DECONSOLIDATION 3.1. Additional Rights and Liabilities Post-Deconsolidation. (a) Abercrombie & Fitch covenants that on or after a Deconsolidation it will not, nor will it cause or permit any member of the Abercrombie & Fitch Group to make or change any tax election, change any accounting method, amend any tax return or take any tax position on any tax return, take any other action, omit to take any action or enter into any transaction that results in any increased tax liability or reduction of any Tax Asset of The Limited Group or any member thereof (immediately after the Deconsolidation) in respect of any Pre-Deconsolidation Tax Period, without first obtaining the written consent of an authorized representative of The Limited. (b) In the event of a Deconsolidation, The Limited may, at its option, elect and Abercrombie & Fitch shall join The Limited in electing (if necessary), (i) to reattribute to itself certain Tax Assets of the Abercrombie & Fitch Group pursuant to Treasury Regulations Section 1.1502-20(g) and, if The Limited makes such election, Abercrombie & Fitch shall comply with the requirements of Treasury Regulations Section 1.1502-20(g)(5)) and (ii) to ratably allocate items (other than extraordinary items) of the Abercrombie & Fitch Group in accordance with relevant provisions of the Treasury Regulations Section 1.1502-76. If The Limited elects to reattribute to itself any Tax Assets under clause (i) this Section 3.1(b), The Limited shall pay Abercrombie & Fitch an amount equal to the actual tax saving (which would include refunds actually received) produced by such Tax Asset if and when such actual tax saving is realized. (c) The Limited agrees to pay to Abercrombie & Fitch the actual tax benefit received by The Limited Group from the use in any Pre- Deconsolidation Tax Period of a carryback of any Tax Asset of the Abercrombie & Fitch Group from a Post-Deconsolidation Tax Period. Such benefit shall be considered equal to the excess of (i) the amount of Federal Taxes or Combined State Taxes, as the case may be, that would have been payable by The Limited Group in the absence of such carryback over (ii) the amount of Federal Taxes or Combined State Taxes, as the case may be, actually payable by The Limited Group. Payment of the amount of such benefit shall be made within 90 days of the filing of the applicable tax return for the taxable year in which the Tax Asset is utilized. If, subsequent to the payment by The Limited to Abercrombie & Fitch of any such amount, there shall be (A) a Final Determination which results in a disallowance or a reduction of the Tax Asset so carried back or (B) a reduction in the amount of the benefit realized by The Limited Group as a result of any other Tax Asset that arises in a Post-Deconsolidation Tax Period, Abercrombie & Fitch shall repay to The Limited, within 90 days of such event described in (A) or (B) (an "Event" or, collectively, the "Events") any amount which would not have been payable to Abercrombie & Fitch pursuant to this Section 3.1(c) had the amount of the benefit been determined in light of the Events. Abercrombie & Fitch shall hold The Limited harmless for any penalty or interest payable by any member of The Limited Group, as a result of any Event. Any such amount shall be paid by Abercrombie & Fitch to The Limited within 90 days of the payment by The Limited or any member of The Limited Group of any such interest or penalty. Nothing in this Section 3.1(c) shall require The Limited to file a claim for refund of Federal Taxes or Combined State Taxes which The Limited, in its sole discretion, determines lacks substantial authority, as defined in the Code and the regulations thereunder. ARTICLE IV MISCELLANEOUS 4.1. Limitation of Liability. Neither The Limited nor Abercrombie & Fitch shall be liable to the other for any special, indirect, incidental or consequential damages of the other arising in connection with this Agreement; provided, however that in the event that (i) the Internal Revenue Service (or other competent taxing authority) asserts a tax liability directly against Abercrombie & Fitch or any member of the Abercrombie & Fitch Group, pursuant to its authority under Treasury Regulation Section 1.1502-6 (or other relevant statutory authority), (ii) Abercrombie & Fitch has made all payments and performed all of its obligations otherwise required of it under this Agreement with respect to such liability or otherwise, and (iii) The Limited was given the opportunity to contest, settle or compromise such liability pursuant to Section 2.1(e) of this Agreement, then The Limited shall indemnify Abercrombie & Fitch for actual payments made after a Final Determination with respect to such liability to the extent that such payments exceed Abercrombie & Fitch' share of such liability (calculated in a manner that avoids double-counting under this Agreement), such share determined in accordance with Article II of this Agreement. 4.2. Subsidiaries. (a) Performance. The Limited agrees and acknowledges that The Limited shall be responsible for the performance of the obligations of each member of The Limited Sub-Group hereunder applicable to such subsidiary. Abercrombie & Fitch agrees and acknowledges that Abercrombie & Fitch shall be responsible for the performance by each member of the Abercrombie & Fitch Group of the obligations hereunder applicable to such member. (b) Application to Present and Future Subsidiaries. This Agreement is being entered into by The Limited and Abercrombie & Fitch on behalf of themselves and each member of The Limited Sub-Group and Abercrombie & Fitch Group, respectively. This Agreement shall constitute a direct obligation of each such member and shall be deemed to have been readopted and affirmed on behalf of any corporation which becomes a member of The Limited Sub-Group or Abercrombie & Fitch Group in the future. 4.3. Cooperation. The Limited and Abercrombie & Fitch shall cooperate fully in the implementation of this Agreement, including but not limited to, providing promptly to the requesting party such assistance and documentation as may be reasonably requested by such party in connection with any of the activities described in Article II or Article III. In addition, The Limited and Abercrombie & Fitch shall retain all relevant tax records for relevant open periods in accordance with past practice. 4.4. Agent. Each member of the Abercrombie & Fitch Group hereby irrevocably appoints The Limited as its agent and attorney-in-fact to take any action as The Limited may deem necessary or appropriate to effect Section 2.1 including, without limitation, those actions specified in Treasury Regulation Section 1.1502-77(a). 4.5. Amendments. This Agreement may not be amended or terminated orally, but only by a writing duly executed by or on behalf of the parties hereto. Any such amendment shall be validly and sufficiently authorized for purposes of this Agreement if it is signed on behalf of The Limited and Abercrombie & Fitch by any of their respective presidents or vice presidents. 4.6. Term. Subject to Article III, this Agreement shall expire upon the date of Deconsolidation with respect to all Post-Deconsolidation periods; provided, however, that all rights and obligations arising hereunder with respect to a Pre-Deconsolidation Tax Period shall survive until they are fully effectuated or performed and, provided, further, that notwithstanding anything in this Agreement to the contrary, all rights and obligations arising hereunder with respect to a Post-Deconsolidation Tax Period shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof). 4.7. Effective Date. This Agreement shall be effective as of the date that the Initial Public Offering is consummated ("effective date"), shall govern all open taxable periods and shall supersede all prior agreements as to the allocation of federal income tax liability between the parties to this Agreement for all such open taxable years and for all subsequent taxable years. As of the effective date, all such prior agreements are hereby canceled with respect to members of the Abercrombie & Fitch Group. 4.8. Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid, illegal or unenforceable to any extent, the remainder of this Agreement or such provision or the application of such provision to such party or circumstances, other than those to which it is so determined to be invalid, illegal or unenforceable, shall remain in full force and effect to the fullest extent permitted by law and shall not be affected thereby, unless such a construction would be unreasonable. 4.9. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be deemed duly given upon actual receipt, and shall be delivered (a) in person, (b) by registered or certified mail, postage prepaid, return receipt requested, or (c) by facsimile or other generally accepted means of electronic transmission (provided that a copy of any notice delivered pursuant to this clause (c) shall also be sent pursuant to clause (b), addressed as follows: (a) If to Abercrombie & Fitch, to: Abercrombie & Fitch Co. Three Limited Parkway Columbus, OH 43230 Attention: Timothy B. Lyons Fax: 614-479-7020 (b) If to The Limited, to: The Limited, Inc. Three Limited Parkway Columbus, OH 43230 Attention: Timothy B. Lyons Fax: 614-479-7020 or to such other addresses or telecopy numbers as may be specified by like notice to the other parties. 4.10. Further Assurances. The Limited and Abercrombie & Fitch shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document or other instrument delivered pursuant hereto. 4.11. Entire Agreement. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof. 4.12. Successors. This agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto (including but not limited to any successor of The Limited and Abercrombie & Fitch succeeding to the tax attributes of such party under Section 381 of the Code), to the same extent as if such successor had been an original party hereto. 4.13. Authorization, etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such party. 4.14. Section Captions. Section captions used in this Agreement are for convenience and reference only and shall not affect the construction of this Agreement. 4.15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO LAWS AND PRINCIPLES RELATING TO CONFLICTS OF LAW. 4.16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to be executed by a duly authorized officer as of the date first above written. ABERCROMBIE & FITCH CO. By:____________________________________ Name: Title: THE LIMITED, INC. By:____________________________________ Name: Title: EX-10.6 11 Exhibit 10.6 FORM OF CORPORATE AGREEMENT THIS CORPORATE AGREEMENT ("Agreement") is entered into as of [______], 1996 by and between Abercrombie & Fitch Co., a Delaware corporation ("Abercrombie & Fitch"), and The Limited, Inc., a Delaware corporation ("The Limited"). RECITALS WHEREAS, The Limited beneficially owns all of the issued and outstanding Abercrombie & Fitch Class B Common Stock, par value $0.01 per share ("Class B Common Stock"), and Abercrombie & Fitch is a member of The Limited's "affiliated group" of corporations ("Limited Group") for federal income tax purposes; WHEREAS, Abercrombie & Fitch issued shares of Class A Common Stock, $0.01 par value per share ("Class A Common Stock"), to the public in an offering (the "Initial Public Offering") registered under the Securities Act of 1933, as amended; and WHEREAS, the parties desire to enter into this Agreement to set forth their agreement regarding (i) The Limited's rights to purchase additional shares of Class B Common Stock upon any issuance of certain classes of capital stock of Abercrombie & Fitch to any person to permit The Limited to maintain its then current percentage ownership interest in Abercrombie & Fitch, (ii) The Limited's rights to purchase shares of non-voting classes of capital stock of Abercrombie & Fitch to permit The Limited to own 80 percent of each class of such stock outstanding, (iii) certain registration rights with respect to Class B Common Stock (and any other securities issued in respect thereof or in exchange therefor) and (iv) certain representations, warranties, covenants and agreements applicable to Abercrombie & Fitch so long as it is a subsidiary of The Limited. AGREEMENTS NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, The Limited and Abercrombie & Fitch, for themselves, their successors and assigns, hereby agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. As used in this Agreement, the following terms will have the following meanings, applicable both to the singular and the plural forms of the terms described: "Abercrombie & Fitch" has the meaning ascribed thereto in the preamble hereto. "Abercrombie & Fitch Entities" means Abercrombie & Fitch and its Subsidiaries and "Abercrombie & Fitch Entity" shall mean any of the Abercrombie & Fitch Entities. "Affiliate" means, with respect to any Person, any Person controlling, controlled by or under common control with such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to vote a majority of the securities having voting power for the election of directors (or other Persons acting in similar capacities) of such Person or otherwise to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" has the meaning ascribed thereto in the preamble hereto, as such agreement may be amended and supplemented from time to time in accordance with its terms. "Applicable Stock" means at any time the (i) shares of Class B Common Stock owned by the Limited Entities that were owned on the date hereof, plus (ii) shares of Class B Common Stock owned by the Limited Entities that were purchased by the Limited Entities pursuant to Article II of this Agreement, plus (iii) shares of Common Stock that were issued to the Limited Entities in respect of shares described in either clause (i) or clause (ii) in any reclassification, share combination, share subdivision, share dividend, share exchange, merger, consolidation or similar transaction or event. "Class A Common Stock" has the meaning ascribed thereto in the recitals to this Agreement. "Class B Common Stock" has the meaning ascribed thereto in the recitals to this Agreement. "Class B Common Stock Option" has the meaning ascribed thereto in Section 2.1(a). "Class B Common Stock Option Notice" has the meaning ascribed thereto in Section 2.2. "Common Stock" means the Class B Common Stock, the Class A Common Stock, any other class of Abercrombie & Fitch capital stock having the right to vote generally for the election of directors and, for so long as Abercrombie & Fitch continues to be a subsidiary corporation includible in a consolidated federal income tax return of the Limited Group, any other security of Abercrombie & Fitch treated as stock for purposes of Section 1504 of the Internal Revenue Code of 1986, as amended. "Company Securities" has the meaning ascribed thereto in Section 3.2(b). "Disadvantageous Condition" has the meaning ascribed thereto in Section 3.1(a). "Holder" means The Limited and any Transferee. "Holder Securities" has the meaning ascribed thereto in Section 3.2(b). "Initial Public Offering" has the meaning ascribed thereto in the recitals to this Agreement. "Initial Public Offering Date" means the date of completion of the initial sale of Class A Common Stock in the Initial Public Offering. "Issuance Event" has the meaning ascribed thereto in Section 2.2. "Issuance Event Date" has the meaning ascribed thereto in Section 2.2. "Limited Entities" means The Limited and Subsidiaries of The Limited and "Limited Entity" shall mean any of the Limited Entities. "Limited Group" has the meaning ascribed thereto in the recitals to this Agreement. "Limited Ownership Reduction" means any decrease at any time in the Ownership Percentage to less than 50%. "Limited Transferee" has the meaning ascribed thereto in Section 3.9. "Market Price" of any shares of Class A Common Stock on any date means (i) the average of the last sale price of such shares on each of the five trading days immediately preceding such date on the Nasdaq National Market or, if such shares are not quoted thereon, on the principal national securities exchange or automated interdealer quotation system on which such shares are traded or (ii) if such sale prices are unavailable or such shares are not so traded, the value of such shares on such date determined in accordance with agreed-upon procedures reasonably satisfactory to Abercrombie & Fitch and The Limited. "Nonvoting Stock" means any class of Abercrombie & Fitch capital stock not having the right to vote generally for the election of directors. "Nonvoting Stock Option" has the meaning ascribed thereto in Section 2.1(b). "Nonvoting Stock Option Notice" has the meaning ascribed thereto in Section 2.2. "Other Holders" has the meaning ascribed thereto in Section 3.2(c). "Other Securities" has the meaning ascribed thereto in Section 3.2. "Ownership Percentage" means, at any time, the fraction, expressed as a percentage and rounded to the next highest thousandth of a percent, whose numerator is the aggregate Value of the Applicable Stock and whose denominator is the sum of the aggregate Value of the then outstanding shares of Common Stock of Abercrombie & Fitch plus Repurchased Shares; provided, however, that any shares of Common Stock issued by Abercrombie & Fitch in violation of its obligations under Article II of this Agreement shall not be deemed outstanding for the purpose of determining the Ownership Percentage. For purposes of this definition and the definition of Repurchased Shares, "Value" means, with respect to any share of stock, the value of such share determined by The Limited under principles applicable for purposes of Section 1504 of the Internal Revenue Code of 1986, as amended. "Person" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Registrable Securities" means Class B Common Stock and any stock or other securities into which or for which such Class B Common Stock may hereafter be changed, converted or exchanged and any other shares or securities issued to Holders of such Class B Common Stock (or such shares or other securities into which or for which such shares are so changed, converted or exchanged) upon any reclassification, share combination, share subdivision, share dividend, share exchange, merger, consolidation or similar transaction or event or pursuant to the Nonvoting Stock Option. As to any particular Registrable Securities, such Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale by the Holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public in accordance with Rule 144, (iii) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by Abercrombie & Fitch and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any state securities or blue sky law then in effect or (iv) they shall have ceased to be outstanding. "Registration Expenses" means any and all expenses incident to performance of or compliance with any registration of securities pursuant to Article III, including, without limitation, (i) the fees, disbursements and expenses of Abercrombie & Fitch's counsel and accountants and the reasonable fees and expenses of counsel selected by the Holders in accordance with this Agreement in connection with the registration of the securities to be disposed of; (ii) all expenses, including filing fees, in connection with the preparation, printing and filing of the registration statement, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto and the mailing and delivering of copies thereof to any underwriters and dealers; (iii) the cost of printing or producing any agreements among underwriters, underwriting agreements, and blue sky or legal investment memoranda, any selling agreements and any other documents in connection with the offering, sale or delivery of the securities to be disposed of; (iv) all expenses in connection with the qualification of the securities to be disposed of for offering and sale under state securities laws, including the fees and disbursements of counsel for the underwriters or the Holders of securities in connection with such qualification and in connection with any blue sky and legal investment surveys; (v) the filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the securities to be disposed of; (vi) transfer agents' and registrars' fees and expenses and the fees and expenses of any other agent or trustee appointed in connection with such offering; (vii) all security engraving and security printing expenses; (viii) all fees and expenses payable in connection with the listing of the securities on any securities exchange or automated interdealer quotation system or the rating of such securities; (ix) any other fees and disbursements of underwriters customarily paid by the issuers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any; and (x) other reasonable out-of-pocket expenses of Holders other than legal fees and expenses referred to in clause (i) and (iv) above. "Repurchased Shares" mean the aggregate Value of shares of Abercrombie & Fitch's Common Stock that are, from and after the date hereof, repurchased by Abercrombie & Fitch from its shareholders, less the aggregate Value of shares of Common Stock (up to the aggregate Value so repurchased) that are re-issued from and after the date hereof upon the exercise of stock options or otherwise. "Rule 144" means Rule 144 (or any successor rule to similar effect) promulgated under the Securities Act. "Rule 415 Offering" means an offering on a delayed or continuous basis pursuant to Rule 415 (or any successor rule to similar effect) promulgated under the Securities Act. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, or any successor statute. "Selling Holder" has the meaning ascribed thereto in Section 3.5(e). "Subsidiary" means, as to any Person, any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting capital stock or other voting ownership interests is owned or controlled directly or indirectly by such Person or by one or more of the Subsidiaries of such Person or by a combination thereof. "The Limited" has the meaning ascribed thereto in the preamble hereto. "Transferee" has the meaning ascribed thereto in Section 3.9. 1.2. Internal References. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement, and references to the parties shall mean the parties to this Agreement. ARTICLE II OPTIONS 2.1. Options. (a) Abercrombie & Fitch hereby grants to The Limited, on the terms and conditions set forth herein, a continuing right (the "Class B Common Stock Option") to purchase from Abercrombie & Fitch, at the times set forth herein, such number of shares of Class B Common Stock as is necessary to allow the Limited Entities to maintain the then-current Ownership Percentage. The Class B Common Stock Option shall be assignable, in whole or in part and from time to time, by The Limited to any Limited Entity. The exercise price for the shares of Class B Common Stock purchased pursuant to the Class B Common Stock Option shall be the Market Price of the Class A Common Stock as of the date of first delivery of notice of exercise of the Class B Common Stock Option by The Limited (or its permitted assignee hereunder) to Abercrombie & Fitch. (b) Abercrombie & Fitch hereby grants to The Limited, on the terms and conditions set forth herein, a continuing right (the "Nonvoting Stock Option" and, together with the Class B Common Stock Option, the "Options") to purchase from Abercrombie & Fitch, at the times set forth herein, such number of shares of Nonvoting Stock as is necessary to allow the Limited Entities to own 80 percent of each class of outstanding Nonvoting Stock. The Nonvoting Stock Option shall be assignable, in whole or in part and from time to time, by The Limited to any Limited Entity. The exercise price for the shares of Nonvoting Stock purchased pursuant to the Nonvoting Stock Option shall be the price at which such Nonvoting Stock is then being sold to third parties or, if no Nonvoting Stock is being sold, the fair market value thereof as determined in good faith by the Board of Directors of Abercrombie & Fitch. 2.2. Notice. At least 20 business days prior to the issuance of any shares of Common Stock or the first date on which any event could occur that, in the absence of a full or partial exercise of the Class B Common Stock Option, would result in a reduction in the Ownership Percentage, Abercrombie & Fitch will notify The Limited in writing (a "Class B Common Stock Option Notice") of any plans it has to issue such shares or the date on which such event could first occur. At least 20 business days prior to the issuance of any shares of Nonvoting Stock or the first date on which any event could occur that, in the absence of a full or partial exercise of the Nonvoting Stock Option, would result in the Limited Entities owning less than 80 percent of each class of outstanding Nonvoting Stock, Abercrombie & Fitch will notify The Limited in writing (a "Nonvoting Stock Option Notice" and, together with a Class B Common Stock Option, an "Option Notice") of any plans it has to issue such shares or the date on which such event could first occur. Each Option Notice must specify the date on which Abercrombie & Fitch intends to issue such additional shares or on which such event could first occur (such issuance or event being referred to herein as an "Issuance Event" and the date of such issuance or event as an "Issuance Event Date"), the number of shares Abercrombie & Fitch intends to issue or may issue and the other terms and conditions of such Issuance Event. 2.3. Option Exercise and Payment. The Class B Common Stock Option may be exercised by The Limited (or any Limited Entity to which all or any part of the Class B Common Stock Option has been assigned) for a number of shares equal to or less than the number of shares that are necessary for the Limited Entities to maintain, in the aggregate, the Ownership Percentage. The Nonvoting Stock Option may be exercised by The Limited (or any Limited Entity to which all or any part of the Nonvoting Stock Option has been assigned) for a number of shares equal to or less than the number of shares that are necessary for the Limited Entities to own, in the aggregate, 80% of each class of outstanding Nonvoting Stock. Each Option may be exercised at any time after receipt of an applicable Option Notice and prior to the applicable Issuance Event Date by the delivery to Abercrombie & Fitch of a written notice to such effect specifying (i) the number of shares of Class B Common Stock or Nonvoting Stock (as the case may be) to be purchased by The Limited, or any of the Limited Entities, and (ii) a calculation of the exercise price for such shares. Upon any such exercise of either Option, Abercrombie & Fitch will, simultaneously with the issuance of Class B Common Stock, Class A Common Stock or Nonvoting Stock in connection with an Issuance Event, deliver to The Limited (or any Limited Entity designated by The Limited), against payment therefor, certificates (issued in the name of The Limited or its permitted assignee hereunder, or as directed by The Limited) representing the shares of Class B Common Stock or Nonvoting Stock (as the case may be) being purchased upon such exercise. Payment for such shares shall be made by wire transfer or intrabank transfer to such account as shall be specified by Abercrombie & Fitch, for the full purchase price for such shares. 2.4. Effect of Failure to Exercise. Any failure by The Limited to exercise either Option, or any exercise for less than all shares purchasable under either Option, in connection with any particular Issuance Event shall not affect The Limited's right to exercise the relevant Option in connection with any subsequent Issuance Event; provided, however, that, in the case of the Class B Common Stock Option, the Ownership Percentage following such Issuance Event in connection with which The Limited so failed to exercise such Option in full or in part shall be recalculated as set forth in Section 1.1. 2.5. Initial Public Offering. Notwithstanding the foregoing, The Limited shall not be entitled to exercise the Class B Common Stock Option in connection with the Initial Public Offering of the Class A Common Stock. 2.6. Termination of Options. The Options shall terminate upon the occurrence of the first Issuance Event that results in the Ownership Percentage being less than 60%, other than any Issuance Event in violation of this Agreement. Each Option, or any portion thereof assigned to any Limited Entity other than The Limited, also shall terminate in the event that the Person to whom such Option, or such portion thereof has been transferred, ceases to be a Limited Entity for any reason whatsoever. ARTICLE III REGISTRATION RIGHTS 3.1. Demand Registration - Registrable Securities. (a) Upon written notice provided at any time after the Initial Public Offering Date from any Holder of Registrable Securities requesting that Abercrombie & Fitch effect the registration under the Securities Act of any or all of the Registrable Securities held by such Holder, which notice shall specify the intended method or methods of disposition of such Registrable Securities, Abercrombie & Fitch shall use its best efforts to effect the registration under the Securities Act and applicable state securities laws of such Registrable Securities for disposition in accordance with the intended method or methods of disposition stated in such request (including in a Rule 415 Offering, if Abercrombie & Fitch is then eligible to register such Registrable Securities on Form S-3 (or a successor form) for such offering); provided that: (i) with respect to any registration statement filed, or to be filed, pursuant to this Section 3.1, if Abercrombie & Fitch shall furnish to the Holders of Registrable Securities that have made such request a certified resolution of the Board of Directors of Abercrombie & Fitch (adopted by the affirmative vote of a majority of the directors not designated by the Limited Entities) stating that in the Board of Directors' good faith judgment it would (because of the existence of, or in anticipation of, any acquisition or financing activity, or the unavailability for reasons beyond Abercrombie & Fitch's reasonable control of any required financial statements, or any other event or condition of similar significance to Abercrombie & Fitch) be significantly disadvantageous (a "Disadvantageous Condition") to Abercrombie & Fitch for such a registration statement to be maintained effective, or to be filed and become effective, and setting forth the general reasons for such judgment, Abercrombie & Fitch shall be entitled to cause such registration statement to be withdrawn and the effectiveness of such registration statement terminated, or, in the event no registration statement has yet been filed, shall be entitled not to file any such registration statement, until such Disadvantageous Condition no longer exists (notice of which Abercrombie & Fitch shall promptly deliver to such Holders). Upon receipt of any such notice of a Disadvantageous Condition, such Holders shall forthwith discontinue use of the prospectus contained in such registration statement and, if so directed by Abercrombie & Fitch, each such Holder will deliver to Abercrombie & Fitch all copies, other than permanent file copies then in such Holder's possession, of the prospectus then covering such Registrable Securities current at the time of receipt of such notice; provided, that the filing of any such registration statement may not be delayed for a period in excess of six months due to the occurrence of any particular Disadvantageous Condition; (ii) after the occurrence of the Limited Ownership Reduction, if any, the Holders of Registrable Securities may collectively exercise their rights under this Section 3.1 on not more than three occasions (it being acknowledged that prior to the Limited Ownership Reduction, if any, there shall be no limit to the number of occasions on which such Holders (other than any of the Limited Transferees and their Affiliates (other than the Limited Entities)) may exercise such rights); and (iii) the Holders of Registrable Securities shall not have the right to exercise registration rights pursuant to this Section 3.1 in any six-month period following the registration and sale of Registrable Securities effected pursuant to a prior exercise of the registration rights provided in this Section 3.1. (b) Notwithstanding any other provision of this Agreement to the contrary, a registration requested by a Holder of Registrable Securities pursuant to this Section 3.1 shall not be deemed to have been effected (and, therefore, not requested for purposes of paragraph (a) above), (i) unless it has become effective, (ii) if after it has become effective such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason other than a misrepresentation or an omission by such Holder and, as a result thereof, the Registrable Securities requested to be registered cannot be completely distributed in accordance with the plan of distribution set forth in the related registration statement or (iii) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied or waived other than by reason of some act or omission by such Holder of Registrable Securities. (c) In the event that any registration pursuant to this Section 3.1 shall involve, in whole or in part, an underwritten offering, the Holders of a majority of the Registrable Securities to be registered shall have the right to designate an underwriter or underwriters as the lead or managing underwriters of such underwritten offering reasonably acceptable to Abercrombie & Fitch and, in connection with each registration pursuant to this Section 3.1, such Holders may select one counsel to represent all such Holders. (d) Abercrombie & Fitch shall have the right to cause the registration of additional equity securities for sale for the account of any Person (including, without limitation, Abercrombie & Fitch and any existing or former directors, officers or employees of the Abercrombie & Fitch Entities) in any registration of Registrable Securities requested by the Holders pursuant to paragraph (a) above; provided, that if such Holders are advised in writing (with a copy to Abercrombie & Fitch) by a nationally recognized investment banking firm selected by such Holders reasonably acceptable to Abercrombie & Fitch (which shall be the lead underwriter or a managing underwriter in the case of an underwritten offering) that, in such firm's good faith view, all or a part of such additional equity securities cannot be sold and the inclusion of such additional equity securities in such registration would be likely to have an adverse effect on the price, timing or distribution of the offering and sale of the Registrable Securities then contemplated by any Holder, the registration of such additional equity securities or part thereof shall not be permitted. The Holders of the Registrable Securities to be offered may require that any such additional equity securities be included in the offering proposed by such Holders on the same conditions as the Registrable Securities that are included therein. In the event that the number of Registrable Securities requested to be included in a registration statement by the Holders thereof exceeds the number which, in the good faith view of such investment banking firm, can be sold without adversely affecting the price, timing, distribution or sale of securities in the offering, the number shall be allocated pro rata among the requesting Holders on the basis of the relative number of Registrable Securities then held by each such Holder (provided that any number in excess of a Holder's request may be reallocated among the remaining requesting Holders in a like manner). 3.2. Piggyback Registration. In the event that Abercrombie & Fitch at any time after the Initial Public Offering Date proposes to register any of its Common Stock, any other of its equity securities or securities convertible into or exchangeable for its equity securities (collectively, including Common Stock, "Other Securities") under the Securities Act, whether or not for sale for its own account, in a manner that would permit registration of Registerable Securities for sale for cash to the public under the Securities Act, it shall at each such time give prompt written notice to each Holder of Registrable Securities of its intention to do so and of the rights of such Holder under this Section 3.2. Subject to the terms and conditions hereof, such notice shall offer each such Holder the opportunity to include in such registration statement such number of Registerable Securities as such Holder may request. Upon the written request of any such Holder made within 15 days after the receipt of Abercrombie & Fitch's notice (which request shall specify the number of Registrable Securities intended to be disposed of and the intended method of disposition thereof), Abercrombie & Fitch shall use its best efforts to effect, in connection with the registration of the Other Securities, the registration under the Securities Act of all Registrable Securities which Abercrombie & Fitch has been so requested to register, to the extent required to permit the disposition (in accordance with such intended methods thereof) of the Registrable Securities so requested to be registered; provided, that: (a) if, at any time after giving such written notice of its intention to register any Other Securities and prior to the effective date of the registration statement filed in connection with such registration, Abercrombie & Fitch shall determine for any reason not to register the Other Securities, Abercrombie & Fitch may, at its election, give written notice of such determination to such Holders and thereupon Abercrombie & Fitch shall be relieved of its obligation to register such Registrable Securities in connection with the registration of such Other Securities, without prejudice, however, to the rights of the Holders of Registrable Securities immediately to request that such registration be effected as a registration under Section 3.1 to the extent permitted thereunder; (b) if the registration referred to in the first sentence of this Section 3.2 is to be an underwritten registration on behalf of Abercrombie & Fitch, and a nationally recognized investment banking firm selected by Abercrombie & Fitch advises Abercrombie & Fitch in writing that, in such firm's good faith view, the inclusion of all or a part of such Registrable Securities in such registration would be likely to have an adverse effect upon the price, timing or distribution of the offering and sale of the Other Securities then contemplated, Abercrombie & Fitch shall include in such registration: (i) first, all Other Securities Abercrombie & Fitch proposes to sell for its own account ("Company Securities"), (ii) second, up to the full number of Registrable Securities held by Holders constituting the Limited Entities that are requested to be included in such registration (Registrable Securities that are so held being sometimes referred to herein as "Holder Securities") in excess of the number of Company Securities to be sold in such offering which, in the good faith view of such investment banking firm, can be sold without adversely affecting such offering and the sale of the Other Securities then contemplated (and (x) if such number is less than the full number of such Holder Securities, such number shall be allocated by The Limited among such Limited Entities and (y) in the event that such investment banking firm advises that less than all of such Holder Securities may be included in such offering, such Limited Entities may withdraw their request for registration of their Registrable Securities under this Section 3.2 and 90 days subsequent to the effective date of the registration statement for the registration of such Other Securities request that such registration be effected as a registration under Section 3.1 to the extent permitted thereunder), (iii) third, up to the full number of Registrable Securities held by Holders (other than the Limited Entities) of Registrable Securities that are requested to be included in such registration in excess of the number of Company Securities and Holder Securities to be sold in such offering which, in the good faith view of such investment banking firm, can be so sold without so adversely affecting such offering (and (x) if such number is less than the full number of such Registrable Securities, such number shall be allocated pro rata among such Holders on the basis of the number of Registrable Securities requested to be included therein by each such Holder and (y) in the event that such investment banking firm advises that less than all of such Registrable Securities may be included in such offering, such Holders may withdraw their request for registration of their Registrable Securities under this Section 3.2 and 90 days subsequent to the effective date of the registration statement for the registration of such Other Securities request that such registration be effected as a registration under Section 3.1 to the extent permitted thereunder), and (iv) fourth, up to the full number of the Other Securities (other than Company Securities), if any, in excess of the number of Company Securities and Registrable Securities to be sold in such offering which, in the good faith view of such investment banking firm, can be so sold without so adversely affecting such offering (and, if such number is less than the full number of such Other Securities, such number shall be allocated pro rata among the holders of such Other Securities (other than Company Securities) on the basis of the number of securities requested to be included therein by each such holder); (c) if the registration referred to in the first sentence of this Section 3.2 is to be an underwritten secondary registration on behalf of holders of Other Securities (the "Other Holders"), and the lead underwriter or managing underwriter advises Abercrombie & Fitch in writing that in their good faith view, all or a part of such additional securities cannot be sold and the inclusion of such additional securities in such registration would be likely to have an adverse effect on the price, timing or distribution of the offering and sale of the Other Securities then contemplated, Abercrombie & Fitch shall include in such registration the number of securities (including Registrable Securities) that such underwriters advise can be so sold without adversely affecting such offering, allocated pro rata among the Other Holders and the Holders of Registrable Securities on the basis of the number of securities (including Registrable Securities) requested to be included therein by each Other Holder and each Holder of Registrable Securities; provided, that if such registration statement is to be filed at any time after the Limited Ownership Reduction, if any, and if such Other Holders have requested that such registration statement be filed pursuant to demand registration rights granted to them by Abercrombie & Fitch, Abercrombie & Fitch shall include in such registration (1) first, Other Securities sought to be included therein by the Other Holders pursuant to the exercise of such demand registration rights, (2) second, the number of Holder Securities sought to be included in such registration in excess of the number of Other Securities sought to be included in such registration by the Other Holders which in the good faith view of such investment banking firm, can be so sold without so adversely affecting such offering (and (x) if such number is less than the full number of such Holder Securities, such number shall be allocated by The Limited among such Limited Entities and (y) in the event that such investment banking firm advises that less than all of such Holder Securities may be included in such offering, such Limited Entities may withdraw their request for registration of their Registrable Securities under this Section 3.2 and 90 days subsequent to the effective date of the registration statement for the registration of such Other Securities request that such registration be effected as a registration under Section 3.1 to the extent permitted thereunder) and (3) third, the number of Registrable Securities sought to be included in such registration by Holders (other than the Limited Entities) of Registrable Securities in excess of the number of Other Securities and the number of Holder Securities sought to be included in such registration which, in the good faith view of such investment banking firm, can be so sold without so adversely affecting such offering (and (x) if such number is less than the full number of such Registrable Securities, such number shall be allocated pro rata among such Holders on the basis of the number of Registrable Securities requested to be included therein by each such Holder and (y) in the event that such investment banking firm advises that less than all of such Registrable Securities may be included in such offering, such Holders may withdraw their request for registration of their Registrable Securities under this Section 3.2 and 90 days subsequent to the effective date of the registration statement for the registration of such Other Securities request that such registration be effected as a registration under Section 3.l to the extent permitted thereunder); (d) Abercrombie & Fitch shall not be required to effect any registration of Registrable Securities under this Section 3.2 incidental to the registration of any of its securities in connection with mergers, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock option or other executive or employee benefit or compensation plans; and (e) no registration of Registrable Securities effected under this Section 3.2 shall relieve Abercrombie & Fitch of its obligation to effect a registration of Registrable Securities pursuant to Section 3.1. 3.3. Expenses. Except as provided herein, Abercrombie & Fitch shall pay all Registration Expenses with respect to a particular offering (or proposed offering). Notwithstanding the foregoing, each Holder and Abercrombie & Fitch shall be responsible for its own internal administrative and similar costs, which shall not constitute Registration Expenses. 3.4. Registration and Qualification. If and whenever Abercrombie & Fitch is required to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 3.1 or 3.2, Abercrombie & Fitch shall as promptly as practicable: (a) prepare, file and use its best efforts to cause to become effective a registration statement under the Securities Act relating to the Registrable Securities to be offered; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities until the earlier of (A) such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in such registration statement and (B) the expiration of six-months after such registration statement becomes effective; provided, that such six-month period shall be extended for such number of days that equals the number of days elapsing from (x) the date the written notice contemplated by paragraph (f) below is given by Abercrombie & Fitch to (y) the date on which Abercrombie & Fitch delivers to the Holders of Registrable Securities the supplement or amendment contemplated by paragraph (f) below; (c) furnish to the Holders of Registrable Securities and to any underwriter of such Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as the Holders of Registrable Securities or such underwriter may reasonably request, and a copy of any and all transmittal letters or other correspondence to or received from, the SEC or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering; (d) use its best efforts to register or qualify all Registrable Securities covered by such registration statement under the securities or blue sky laws of such jurisdictions as the Holders of such Registrable Securities or any underwriter to such Registrable Securities shall request, and use its best efforts to obtain all appropriate registrations, permits and consents in connection therewith, and do any and all other acts and things which may be necessary or advisable to enable the Holders of Registrable Securities or any such underwriter to consummate the disposition in such jurisdictions of its Registrable Securities covered by such registration statement; provided, that Abercrombie & Fitch shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any such jurisdiction wherein it is not so qualified or to consent to general service of process in any such jurisdiction; (e) (i) use its best efforts to furnish to each Holder of Registrable Securities included in such registration (each, a "Selling Holder") and to any underwriter of such Registrable Securities an opinion of counsel for Abercrombie & Fitch addressed to each Selling Holder and dated the date of the closing under the underwriting agreement (if any) (or if such offering is not underwritten, dated the effective date of the registration statement), and (ii) use its best efforts to furnish to each Selling Holder a "cold comfort" letter addressed to each Selling Holder and signed by the independent public accountants who have audited the financial statements of Abercrombie & Fitch included in such registration statement, in each such case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities and such other matters as the Selling Holders may reasonably request and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements; (f) as promptly as practicable, notify the Selling Holders in writing (i) at any time when a prospectus relating to a registration pursuant to Sections 3.1 or 3.2 is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) of any request by the SEC or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to such offering, and in either such case, at the request of the Selling Holders prepare and furnish to the Selling Holders a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading: (g) if reasonably requested by the lead or managing underwriters, use its best efforts to list all such Registrable Securities covered by such registration on each securities exchange and automated inter-dealer quotation system on which a class of common equity securities of Abercrombie & Fitch is then listed; (h) to the extent reasonably requested by the lead or managing underwriters, send appropriate officers of Abercrombie & Fitch to attend any "road shows" scheduled in connection with any such registration, with all out-of-pocket costs and expense incurred by Abercrombie & Fitch or such officers in connection with such attendance to be paid by Abercrombie & Fitch; and (i) furnish for delivery in connection with the closing of any offering of Registrable Securities pursuant to a registration effected pursuant to Sections 3.1 or 3.2 unlegended certificates representing ownership of the Registrable Securities being sold in such denominations as shall be requested by the Selling Holders or the underwriters. 3.5. Conversion of Other Securities, Etc. In the event that any Holder offers any options, rights, warrants or other securities issued by it or any other Person that are offered with, convertible into or exercisable or exchangeable for any Registrable Securities, the Registrable Securities underlying such options, rights, warrants or other securities shall continue to be eligible for registration pursuant to Sections 3.1 and 3.2. 3.6. Underwriting; Due Diligence. (a) If requested by the underwriters for any underwritten offering of Registrable Securities pursuant to a registration requested under this Article III, Abercrombie & Fitch shall enter into an underwriting agreement with such underwriters for such offering, which agreement will contain such representations and warranties by Abercrombie & Fitch and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnification and contribution provisions substantially to the effect and to the extent provided in Section 3.7, and agreements as to the provision of opinions of counsel and accountants' letters to the effect and to the extent provided in Section 3.4(e). The Selling Holders on whose behalf the Registrable Securities are to be distributed by such underwriters shall be parties to any such underwriting agreement and the representations and warranties by, and the other agreements on the part of, Abercrombie & Fitch to and for the benefit of such underwriters, shall also be made to and for the benefit of such Selling Holders. Such underwriting agreement shall also contain such representations and warranties by such Selling Holders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnification and contribution provisions substantially to the effect and to the extent provided in Section 3.7. (b) In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act pursuant to this Article III, Abercrombie & Fitch shall give the Holders of such Registrable Securities and the underwriters, if any, and their respective counsel and accountants, such reasonable and customary access to its books and records and such opportunities to discuss the business of Abercrombie & Fitch with its officers and the independent public accountants who have certified the financial statements of Abercrombie & Fitch as shall be necessary, in the opinion of such Holders and such underwriters or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act; provided, that such Holders and the underwriters and their respective counsel and accountants shall use their reasonable best efforts to coordinate any such investigation of the books and records of Abercrombie & Fitch and any such discussions with Abercrombie & Fitch's officers and accountants so that all such investigations occur at the same time and all such discussions occur at the same time. 3.7. Indemnification and Contribution. (a) In the case of each offering of Registrable Securities made pursuant to this Article III, Abercrombie & Fitch agrees to indemnify and hold harmless, to the extent permitted by law, each Selling Holder, each underwriter of Registrable Securities so offered and each Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act and the officers, directors, affiliates, employees and agents of each of the foregoing, against any and all losses, liabilities, costs (including reasonable attorney's fees and disbursements), claims and damages, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, insofar as such losses, liabilities, costs, claims and damages (or actions or proceedings in respect thereof, whether or not such indemnified Person is a party thereto) arise out of or are based upon any untrue statement by Abercrombie & Fitch or alleged untrue statement by Abercrombie & Fitch of a material fact contained in the registration statement (or in any preliminary or final prospectus included therein) or in any offering memorandum or other offering document relating to the offering and sale of such Registrable Securities prepared by Abercrombie & Fitch or at its direction, or any amendment thereof or supplement thereto, or in any document incorporated by reference therein, or any omission by Abercrombie & Fitch or alleged omission by Abercrombie & Fitch to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that Abercrombie & Fitch shall not be liable to any Person in any such case to the extent that any such loss, liability, cost, claim or damage arises out of or relates to any untrue statement or alleged untrue statement, or any omission, if such statement or omission shall have been made in reliance upon and in conformity with information relating to a Selling Holder or another holder of securities included in such registration statement furnished to Abercrombie & Fitch by or on behalf of such Selling Holder, other holder or underwriter, as the case may be, specifically for use in the registration statement (or in any preliminary or final prospectus included therein), offering memorandum or other offering document, or any amendment thereof or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Selling Holder or any other holder and shall survive the transfer of such securities. The foregoing indemnity agreement is in addition to any liability that Abercrombie & Fitch may otherwise have to each Selling Holder, other holder or underwriter of the Registrable Securities or any controlling person of the foregoing and the officers, directors, affiliates, employees and agents of each of the foregoing; provided, further, that, in the case of an offering with respect to which a Selling Holder has designated the lead or managing underwriters (or a Selling Holder is offering Registrable Securities directly, without an underwriter), this indemnity does not apply to any loss, liability, cost, claim or damage arising out of or relating to any untrue statement or alleged untrue statement or omission or alleged omission in any preliminary prospectus or offering memorandum if a copy of a final prospectus or offering memorandum was not sent or given by or on behalf of any underwriter (or such Selling Holder or other holder, as the case may be) to such Person asserting such loss, liability, cost, claim or damage at or prior to the written confirmation of the sale of the Registrable Securities as required by the Securities Act and such untrue statement or omission had been corrected in such final prospectus or offering memorandum. (b) In the case of each offering made pursuant to this Agreement, each Selling Holder, by exercising its registration rights hereunder, agrees to indemnify and hold harmless, and to cause each underwriter of Registrable Securities included in such offering (in the same manner and to the same extent as set forth in Section 3.7(a)) to agree to indemnify and hold harmless, Abercrombie & Fitch, each other underwriter who participates in such offering, each other Selling Holder or other holder with securities included in such offering and in the case of an underwriter, such Selling Holder or other holder, and each Person, if any, who controls any of the foregoing within the meaning of the Securities Act and the officers, directors, affiliates, employees and agents of each of the foregoing, against any and all losses, liabilities, costs, claims and damages to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, insofar as such losses, liabilities, costs, claims and damages (or actions or proceedings in respect thereof, whether or not such indemnified Person is a party thereto) arise out of or are based upon any untrue statement or alleged untrue statement by such Selling Holder or underwriter, as the case may be, of a material fact contained in the registration statement (or in any preliminary or final prospectus included therein) or in any offering memorandum or other offering document relating to the offering and sale of such Registrable Securities prepared by Abercrombie & Fitch or at its direction, or any amendment thereof or supplement thereto, or any omission by such Selling Holder or underwriter, as the case may be, or alleged omission by such Selling Holder or underwriter, as the case may be, of a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement of a material fact is contained in, or such material fact is omitted from, information relating to such Selling Holder or underwriter, as the case may be, furnished to Abercrombie & Fitch by or on behalf of such Selling Holder or underwriter, as the case may be, specifically for use in such registration statement (or in any preliminary or final prospectus included therein), offering memorandum or other offering document. The foregoing indemnity is in addition to any liability which such Selling Holder or underwriter, as the case may be, may otherwise have to Abercrombie & Fitch, or controlling persons and the officers, directors, affiliates, employees, and agents of each of the foregoing; provided, that, in the case of an offering made pursuant to this Agreement with respect to which Abercrombie & Fitch has designated the lead or managing underwriters (or Abercrombie & Fitch is offering securities directly, without an underwriter), this indemnity does not apply to any loss, liability, cost, claim, or damage arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission in any preliminary prospectus or offering memorandum if a copy of a final prospectus or offering memorandum was not sent or given by or on behalf of any underwriter (or Abercrombie & Fitch, as the case may be) to such Person asserting such loss, liability, cost, claim or damage at or prior to the written confirmation of the sale of the Registrable Securities as required by the Securities Act and such untrue statement or omission had been corrected in such final prospectus or offering memorandum. (c) Each party indemnified under paragraph (a) or (b) above shall, promptly after receipt of notice of a claim or action against such indemnified part in respect of which indemnity may be sought hereunder, notify the indemnifying party in writing of the claim or action; provided, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party on account of the indemnity agreement contained in paragraph (a) or (b) above except to the extent that the indemnifying party was actually prejudiced by such failure, and in no event shall such failure relieve the indemnifying party from any other liability that it may have to such indemnified party. If any such claim or action shall be brought against an indemnified party, and it shall have notified the indemnifying party thereof, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified party and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 3.7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. Any indemnifying party against whom indemnity may be sought under this Section 3.7 shall not be liable to indemnify an indemnified party if such indemnified party settles such claim or action without the consent of the indemnifying party. The indemnifying party may not agree to any settlement of any such claim or action, other than solely for monetary damages for which the indemnifying party shall be responsible hereunder, the result of which any remedy or relief shall be applied to or against the indemnified party, without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld. In any action hereunder as to which the indemnifying party has assumed the defense thereof with counsel satisfactory to the indemnified party, the indemnified party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but the indemnifying party shall not be obligated hereunder to reimburse the indemnified party for the costs thereof. (d) If the indemnification provided for in this Section 3.7 shall for any reason be unavailable (other than in accordance with its terms) to an indemnified party in respect of any loss, liability, cost, claim or damage referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, cost, claim or damage (i) as between Abercrombie & Fitch and the Selling Holders on the one hand and the underwriters on the other, in such proportion as shall be appropriate to reflect the relative benefits received by Abercrombie & Fitch and the Selling Holders on the one hand and the underwriters on the other hand or, if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of Abercrombie & Fitch and the Selling Holders on the one hand and the underwriters on the other with respect to the statements or omissions which resulted in such loss, liability, cost, claim or damage as well as any other relevant equitable considerations and (ii) as between Abercrombie & Fitch on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of Abercrombie & Fitch and of each Selling Holder in connection with such statements or omissions as well as any other relevant equitable considerations. The relative benefits received by Abercrombie & Fitch and the Selling Holders on the one hand and the underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by Abercrombie & Fitch and the Selling Holders bear to the total underwriting discounts and commissions received by the underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of Abercrombie & Fitch and the Selling Holders on the one hand and of the underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by Abercrombie & Fitch and the Selling Holders or by the underwriters. The relative fault of Abercrombie & Fitch on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, but not by reference to any indemnified party's stock ownership in Abercrombie & Fitch. The amount paid or payable by an indemnified party as a result of the loss, cost, claim, damage or liability, or action in respect thereof, referred to above in this paragraph (d) shall be deemed to include, for purposes of this paragraph (d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Abercrombie & Fitch and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.7 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding any other provision of this Section 3.7, no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. Each Selling Holder's obligations to contribute pursuant to this Section 3.7 are several in proportion to the proceeds of the offering received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) Indemnification and contribution similar to that specified in the preceding paragraphs of this Section 3.7 (with appropriate modifications) shall be given by Abercrombie & Fitch, the Selling Holders and underwriters with respect to any required registration or other qualification of securities under any state law or regulation or governmental authority. (f) The obligations of the parties under this Section 3.7 shall be in addition to any liability which any party may otherwise have to any other party. 3.8. Rule 144 and Form S-3. Commencing 90 days after the Initial Public Offering Date, Abercrombie & Fitch shall use its best efforts to ensure that the conditions to the availability of Rule 144 set forth in paragraph (c) thereof shall be satisfied. Upon the request of any Holder of Registrable Securities, Abercrombie & Fitch will deliver to such Holder a written statement as to whether it has complied with such requirements. Abercrombie & Fitch further agrees to use its reasonable efforts to cause all conditions to the availability of Form S-3 (or any successor form) under the Securities Act of the filing of registration statements under this Agreement to be met as soon as practicable after the Initial Public Offering Date. Notwithstanding anything contained in this Section 3.8, Abercrombie & Fitch may deregister under Section 12 of the Securities Exchange Act of 1934, as amended, if it then is permitted to do so pursuant to said Act and the rules and regulations thereunder. 3.9. Transfer of Registration Rights. Any Holder may transfer all or any portion of its rights under Article III to any transferee of a number of Registrable Securities owned by such Holder exceeding three percent (3%) of the outstanding class or series of such securities at the time of transfer (each transferee that receives such minimum number of Registrable Securities, a "Transferee"); provided, that each Transferee of Registrable Securities to which Registrable Securities are transferred, sold or assigned directly by a Limited Entity (such Transferee, a "Limited Transferee"), together with any Affiliate of such Limited Transferee (and any subsequent direct or indirect Transferees of Registrable Securities from such Limited Transferee and any Affiliates (other than the Limited Entities) thereof), shall be entitled to request the registration of Registrable Securities pursuant to Section 3.1 only once. Any transfer of registration rights pursuant to this Section 3.9 shall be effective upon receipt by Abercrombie & Fitch of (i) written notice from such Holder stating the name and address of any Transferee and identifying the number of Registrable Securities with respect to which the rights under this Agreement are being transferred and the nature of the rights so transferred and (ii) a written agreement from such Transferee to be bound by the terms of this Article III and Sections 5.3, 5.4, 5.9, 5.10, and 5.11 of this Agreement. The Holders may exercise their rights hereunder in such priority as they shall agree upon among themselves. 3.10. Holdback Agreement. If any registration pursuant to this Article III shall be in connection with an underwritten public offering of Registrable Securities, each Selling Holder agrees not to effect any public sale or distribution, including any sale under Rule 144, of any equity security of Abercrombie & Fitch (otherwise than through the registered public offering then being made), within 7 days prior to or 90 days (or such lesser period as the lead or managing underwriters may permit) after the effective date of the registration statement (or the commencement of the offering to the public of such Registrable Securities in the case of Rule 415 offerings). Abercrombie & Fitch hereby also so agrees and agrees to cause each other holder of equity securities or securities convertible into or exchangeable or exercisable for such securities (other than in the case of equity securities, under dividend reinvestment plans or employee stock plans) purchased from Abercrombie & Fitch otherwise than in a public offering to so agree. ARTICLE IV CERTAIN COVENANTS AND AGREEMENTS 4.1. No Violations. (a) For so long as the Ownership Percentage is equal to or greater than 50%, Abercrombie & Fitch covenants and agrees that it will not take any action or enter into any commitment or agreement which may reasonably be anticipated to result, with or without notice and with or without lapse of time or otherwise, in a contravention or event of default by any Limited Entity of (i) any provisions of applicable law or regulation, including but not limited to provisions pertaining to the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income Security Act of 1974, as amended, (ii) any provision of The Limited's certificate of incorporation or bylaws, (iii) any credit agreement or other material instrument binding upon The Limited, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over The Limited or any of their respective assets. (b) Abercrombie & Fitch and The Limited agree to provide to the other any information and documentation requested by the other for the purpose of evaluating and ensuring compliance with Section 4.1(a) hereof. (c) Notwithstanding the foregoing Sections 4.1(a) and 4.1(b), nothing in this Agreement is intended to limit or restrict in any way the ability of The Limited to effect, restrict or limit any action or proposed action of Abercrombie & Fitch, including, but not limited to, the incurrence by Abercrombie & Fitch of indebtedness, based upon The Limited's internal policies or other factors. ARTICLE V MISCELLANEOUS 5.1. Limitation of Liability. Neither The Limited nor Abercrombie & Fitch shall be liable to the other for any special, indirect, incidental or consequential damages of the other arising in connection with this Agreement. 5.2. Subsidiaries. The Limited agrees and acknowledges that The Limited shall be responsible for the performance by each Limited Entity of the obligations hereunder applicable to such Limited Entity. 5.3. Amendments. This Agreement may not be amended or terminated orally, but only by a writing duly executed by or on behalf of the parties hereto. Any such amendment shall be validly and sufficiently authorized for purposes of this Agreement if it is signed on behalf of The Limited and Abercrombie & Fitch by any of their respective presidents or vice presidents. 5.4. Term. This Agreement shall remain in effect until all Registrable Securities held by Holders have been transferred by them to Persons other than Transferees; provided, that the provisions of Section 3.7 shall survive any such expiration. 5.5. Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid, illegal or unenforceable to any extent, the remainder of this Agreement or such provision of the application of such provision to such party or circumstances, other than those to which it is so determined to be invalid, illegal or unenforceable, shall remain in full force and effect to the fullest extent permitted by law and shall not be affected thereby, unless such a construction would be unreasonable. 5.6 Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be deemed duly given upon actual receipt, and shall be delivered (a) in person, (b) by registered or certified mail, postage prepaid, return receipt requested, or (c) by facsimile or other generally accepted means of electronic transmission (provided that a copy of any notice delivered pursuant to this clause (c) shall also be sent pursuant to clause (b), addressed as follows: (a) If to Abercrombie & Fitch, to: Abercrombie & Fitch, Inc. Four Limited Parkway Reynoldsburg, OH 43068 Attention: Samuel P. Fried Fax: 614-479-7188 (b) If to The Limited, to: The Limited, Inc. Three Limited Parkway Columbus, OH 43230 Attention: Samuel P. Fried Fax: 614-479-7188 with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attention: Jeffrey Small Fax: 212-450-4800 or to such other addresses or telecopy numbers as may be specified by like notice to the other parties. 5.7. Further Assurances. The Limited and Abercrombie & Fitch shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document or other instrument delivered pursuant hereto. 5.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same agreement. 5.9. Governing Law. This Agreement and the transactions contemplated hereby shall be construed in accordance with, and governed by, the laws of the State of New York. 5.10. Entire Agreement. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof. 5.11. Successors. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. Nothing contained in this Agreement, express or implied, is intended to confer upon any other person or entity any benefits, rights or remedies. 5.12. Specific Performance. The parties hereto acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, it is agreed that they shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which they may be entitled at law or equity. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. ABERCROMBIE & FITCH CO. By:__________________________ Name: Title: THE LIMITED, INC. By:__________________________ Name: Title: EX-21.1 12 Exhibit 21.1 Jurisdiction of Subsidiary Incorporation - ---------- ---------------- Abercrombie & Fitch Holding Corporation Delaware Abercrombie & Fitch Stores, Inc. Delaware A&F Trademark, Inc. Delaware High Desert Factoring Nevada Abercrombie & Fitch Service Corporation Ohio EX-23.1 13 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 of our reports dated July 11, 1996, on our audits of the balance sheet of Abercrombie & Fitch Co. as of July 11, 1996 and the consolidated financial statements of The Abercrombie & Fitch Business as of January 28, 1995 and February 3, 1996, and for each of the three years in the period ended February 3, 1996. We also consent to the reference to our firm under the caption "Experts." /s/ COOPERS & LYBRAND LLP EX-27 14 ARTICLE 5 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ABERCROMBIE & FITCH BUSINESSES' FEBRUARY 3, 1996 AND MAY 4, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR 3-MOS FEB-03-1996 FEB-01-1997 JAN-29-1995 FEB-04-1996 FEB-03-1996 MAY-04-1996 874 823 0 0 3,617 3,231 0 0 30,388 33,042 38,856 42,318 80,867 82,154 33,664 36,389 87,693 89,717 23,751 17,837 86,045 94,074 0 0 0 0 0 0 0 0 87,693 89,717 235,659 51,020 235,659 51,020 155,865 36,126 155,865 36,126 55,996 15,293 0 0 0 0 23,798 (399) 9,500 (200) 0 0 0 0 0 0 0 0 14,298 (199) 0 0 0 0
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