This Separation
Agreement (“Agreement”) is made by and between Robert
S. Singer (“Employee”) and ABERCROMBIE & FITCH CO.,
a Delaware corporation (the “Company”) (hereinafter
collectively “the parties”).
WHEREAS, Employee
has been employed by the Company as its President and Chief
Operating Officer (and in this capacity holds other various
positions with the Company and its affiliates) and is a member of
the board of directors of the Company (the
“Board”);
WHEREAS,
Employee’s employment is subject to an employment agreement
between him and the Company dated May 11, 2004, as amended on
April 11, 2005 (the “Employment
Agreement”);
WHEREAS, the
parties acknowledge it is in their individual and mutual best
interests for Employee to separate from service as an officer and
employee of the Company effective August 31, 2005 and to
resign from the Company’s Board prior to September 1,
2005, and such separation shall be treated as a termination of
employment pursuant to Section 11(e) of the Employment
Agreement;
WHEREAS, the
parties wish to define the terms and conditions of Employee’s
separation from service with the Company;
NOW, THEREFORE, in
exchange for and in consideration of the following mutual covenants
and promises, the undersigned parties, intending to be legally
bound, hereby agree as follows:
1.
Separation . The Company and Employee agree that Employee
shall separate from service with the Company effective
August 31, 2005 (the “Separation Date”), and such
separation shall be a termination of employment pursuant to Section
11(e) of the Employment Agreement. On the Separation Date,
Employee’s employment with the Company and all further
compensation, remuneration, and eligibility of Employee under
Company benefit plans shall terminate, except as otherwise provided
in this Agreement or by applicable law. In addition, Employee
agrees that this Agreement shall replace and supersede the
Employment Agreement as of the Effective Date (as such term is
defined in Paragraph 21 below) and, as of the Effective Date,
the Employment Agreement shall be null and void and shall have no
further force or effect.
2.
Resignation from Board of Directors and Other Positions .
Effective August 31, 2005, Employee hereby resigns
(i) from any position he may hold on the Company’s Board
of Directors and (ii) as a director, trustee, officer,
managing member and/or member, and from any and all other positions
of any kind or type whatsoever, with the Company and any and all of
its subsidiaries and affiliates.
3.
Separation Payments and Benefits. In connection with his
separation of service from the Company, Employee shall be entitled
to receive the following:
(a) His
unpaid base salary through the Separation Date, payable within
30 days of the Effective Date;
(b) Any
other compensation which has been earned, accrued or is owing,
under the terms of the applicable plan, program or practice, to
Employee as of the Separation Date but not paid, including, without
limitation, any incentive awards under the Company’s
Incentive Compensation Performance Plan (“Bonus Plan”),
payable within 30 days of the Effective Date;
(c) Any
amounts which Employee had previously deferred (including any
interest earned or credited thereon), pursuant to the
Company’s 401(k) Plan (payable in accordance with the terms
of the plans) and the Company’s Nonqualified Savings and
Supplemental Plan (payable no earlier than the date that is six
(6) months after the Separation Date (or, if earlier, his date
of death), and no later than ten (10) business days
thereafter);
(d) Reimbursement
of unpaid business expenses incurred in connection with
Employee’s duties and responsibilities and in accordance with
policies established by the Board from time to time and upon
receipt of appropriate documentation, payable within 30 days
of the date the Company receives the appropriate
documentation;
(e) $364,500
representing Employee’s pro rata Fall 2005 cash and stock
based incentive compensation, payable within 30 days of the
Effective Date;
(f) Employee’s
current base salary and target bonus (calculated for this purpose
at 100% of his current base salary) that would have been paid for
the period beginning on the Separation Date and ending on
May 17, 2007 (the “Severance Period”), payable
within 30 days of the Effective Date;
(g) the
Abercrombie & Fitch Co. Supplemental Executive Retirement Plan
II dated May 17, 2004 (the “SERP”) is hereby
terminated and, in satisfaction of all benefits thereunder,
Employee will be paid in a lump sum payment, no later than
December 31, 2005, the present value of the annuity payable to
him beginning at age 57, determined using the actuarial assumptions
specified in the SERP;
(h) The
Company shall pre-pay, by November 1, 2005, the remaining term
life insurance premiums with respect to Employee’s $8,000,000
death benefit for the Severance Period;
(i) all
outstanding stock options held by Employee as of the Separation
Date shall vest on the Separation Date and shall remain exercisable
beginning on the Effective Date for their full term, as set forth
on Appendix A of this Agreement;
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(j) all
outstanding restricted shares and any other equity grants held by
Employee as of the Separation Date shall vest on the Separation
Date and be deposited in Employee’s brokerage account, net of
tax withholding, no later than the Effective Date, as set forth on
Appendix A of this Agreement;
(k) $40,000
grossed-up for taxes (using a effective tax rate of 43.45%) in
satisfaction of the Company’s obligation to continue
Employee’s welfare benefits that he otherwise would have been
entitled to during the Severance Period, payable within
30 days of the Effective Date;
(l) $488,685
in satisfaction of the Company’s obligation to provide
Employee with the benefits that Employee would have received had he
been a participant during the Severance Period in the
Company’s pension benefit plans, programs and arrangements in
which he was participating immediately prior to the Separation
Date, including without limitation any employer contributions that
would have been made during the Severance Period under the terms of
the applicable plans, no later than December 31,
2005;
(m) three
(3) weeks unused vacation up through the Separation Date,
payable within 30 days of the Separation Date; and
(n) the
Company agrees to reimburse Employee for his reasonable legal fees
incurred in connection with this Agreement, but not to exceed
$20,000.
4.
Transition Payments and Benefits . In addition to
Paragraph 3 above, Employee shall be entitled to:
(a) one
first-class round trip air travel for him and his spouse from Ohio
or New York to Milan, Italy, to be used on or before
December 31, 2005;
(b) use
of aircraft owned or leased by the Company for 3 round trips from
Columbus, Ohio to New York City for him and his spouse air travel ,
and the Company agrees to reimburse Employee for his increased
income taxes incurred as a result of the use of such aircraft, to
be used on or before December 31, 2005 (for the avoidance of
doubt, the 3 round trips do not include Employee’s air travel
from California scheduled for September 5, 2005, which has
been previously approved by the Company);
(c) purchase
(which closing of title shall take place, and Employee shall have
vacated such residence, no later than December 15, 2005) of
his Columbus, Ohio residence by the Company for an amount equal to
the sum of (x) the purchase price of such residence plus
(y) an additional amount (not to exceed $500,000) representing
the cost of capital improvements made to such residence, as
evidenced by written documentation;
(d) all
reasonable costs for packing, shipping and temporary storage of his
household goods located at his Columbus, Ohio residence to New York
City and Milan;
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(e) payment
of $40,000 grossed-up for taxes (using a effective tax rate of
43.45%), payable prior to December 31, 2005, representing New
York City housing allowance;
(f) the
Company reimbursing Employee for the remaining lease payments on
his two cars located in Ohio; and
(g) continued
use of a personal assistant chosen by the Company through
December 31, 2005.
5. No
Mitigation . None of the foregoing benefits provided in
Paragraphs 3 or 4 shall (i) be subject to any mitigation
obligation on Employee’s part, or (ii) be terminated or
diminished if Employee should accept other employment after the
Separation Date, otherwise in accordance with this
Agreement.
6.
Securities and Tax Considerations .
(a)
Internal Revenue Code Section 409A . Notwithstanding
anything in this Agreement to the contrary, the parties hereby
agree that it is the intention that any payments or benefits
provided under this Agreement comply in all respects with
Section 409A of the Internal Revenue Code of 1986, as amended
(“Code”) and any guidance issued thereunder, and this
Agreement be interpreted accordingly. In addition, in the event
that additional guidance with respect to Section 409A of the
Code becomes available, the Company agrees that, upon
Employee’s reasonable request, it will amend this Agreement
solely to the extent necessary and appropriate to avoid adverse tax
consequences pursuant to Section 409A of the Code. The Company
agrees that it shall not do anything to cause Employee to become
subject to any penalty or additional taxes under Section 409A
of the Code with respect to any Company compensation or benefits.
In addition, the Company agrees that it shall take all necessary
action so that Employee never becomes subject to any penalty or
additional taxes under Section 409A of the Code with respect
to any Company compensation or benefits.
(b) The
Company agrees to cooperate as reasonably necessary and appropriate
with respect to any equity compensation instructions issued by
Employee’s broker or authorized representative, subject in
all respects to applicable federal, state, local or self regulatory
entity securities laws, rules and/or regulations.
(a)
Unauthorized Disclosure . Employee shall not, during the
term of this Agreement and thereafter, make any Unauthorized
Disclosure. For purposes of this Agreement, “Unauthorized
Disclosure” shall mean disclosure by Employee without the
prior written consent of the Board to any person, other than an
employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance by Employee of his duties as an executive officer of
the Company, of any confidential information relating to the
business or prospects of the Company including, but not limited to,
any
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confidential
information with respect to any of the Company’s customers,
products, methods of distribution, strategies, business and
marketing plans and business policies and practices, litigation
strategies or defenses, and plans for new business concepts;,
except (i) to the extent disclosure is or may be required by
law, by a court of law or by any governmental agency or other
person or entity with apparent jurisdiction to require him to
divulge, disclose or make available such information or
(ii) in confidence to an attorney or other advisor for the
purpose of securing professional advice concerning Employee’s
personal matters provided such attorney or other advisor agrees to
observe these confidentiality provisions. Unauthorized Disclosure
shall not include the use or disclosure by Employee, without
consent, of any information known generally to the public or known
within the Company’s trade or industry (other than as a
result of disclosure by him in violation of this
Paragraph 7(a)). This confidentiality covenant has no
temporal, geographical or territorial restriction.
(b)
Non-Competition . During the Non-Competition/No-Raid Period
described below, Employee shall not, directly or indirectly,
without the prior written consent of the Company, own, manage,
operate, join, control, be employed by, consult with or participate
in the ownership, management, operation or control of, or be
connected with (as a stockholder, partner, or otherwise) the
following companies: American Eagle Outfitters, Gap Inc., J Crew,
Aero Postale or Limited Brands, or any of their affiliates in
substantially the same markets and market segments as the foregoing
companies; provided, however, that the “beneficial
ownership” (as that term is defined in Rule 13d-3 under
the Exchange Act) by Employee after his termination of employment
with the Company, either individually or as a member of a
“group” for purposes of Section 13(d)(3) under the
Exchange Act and the regulations promulgated thereunder, of not
more than two percent (2%) of the voting stock of any of these
corporations which are publicly held shall not be a violation of
this Agreement.
(c)
Non-Solicitation . During the Non-Competition/No-Raid Period
described below, Employee shall not, either directly or indirectly,
alone or in conjunction with another person, interfere with or
harm, or attempt to interfere with or harm, the relationship of the
Company, its subsidiaries and/or affiliates, with any person who at
any time was an employee, customer or supplier of the Company, its
subsidiaries and/or affiliates or otherwise had a business
relationship with the Company, its subsidiaries and/or
affiliates.
(d)
Non-Competition/No-Raid Period . For purposes of this
Agreement, the “Non-Competition/No-Raid Period” means
the one-year period immediately followi
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