UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 8, 2005
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ABERCROMBIE & FITCH CO.
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(Exact name of registrant as specified in its charter)
Delaware 1-12107 31-1469076
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6301 Fitch Path, New Albany, Ohio 43054
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(Address of principal executive offices) (Zip Code)
(614) 283-6500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
In February 2005, two substantially similar actions were filed in the
Court of Chancery of the State of Delaware by stockholders of Abercrombie &
Fitch Co. ("A&F") challenging the compensation received by A&F's Chief Executive
Officer, Michael S. Jeffries. The complaints allege, among other things, that
the Board of Directors of A&F and the members of the Compensation Committee of
the Board breached their fiduciary duties in granting stock options and an
increase in cash compensation to Mr. Jeffries in February 2002 and in approving
Mr. Jeffries' current employment agreement in January 2003 (the "Amended and
Restated Employment Agreement"). The complaints further assert that A&F's
disclosures with respect to Mr. Jeffries' compensation were deficient. The
complaints seek, among other things, to rescind the purportedly wrongful
compensation and to set aside the current employment agreement. The actions have
been consolidated under the caption, In re Abercrombie & Fitch Co. Shareholder
Derivative Litigation., C.A. No. 1077 (the "Litigation"). A&F has formed a
special committee of independent directors (the "Special Committee") to
determine what action to take with respect to the Litigation. A&F and the
defendant members of the Board of Directors have denied, and continue to deny,
any liability or wrongdoing with respect to all claims alleged in the
Litigation. Nevertheless, the Special Committee, A&F and the other defendants
have determined that it is desirable to settle the Litigation and thereby
eliminate the substantial burden, expense, inconvenience and distraction that
the Litigation would entail and to dispel any uncertainty that may exist as a
result of the Litigation.
Pursuant to a stipulation of settlement dated April 8, 2005, and
subject to the approval of the Court, the parties have agreed to settle the
Litigation on the following terms: (i) Mr. Jeffries' Amended and Restated
Employment Agreement will be amended to reduce his "stay bonus" from twelve
million dollars to six million dollars and to condition receipt of the stay
bonus on A&F's achieving defined performance criteria (except in certain
terminations), (ii) Mr. Jeffries will not receive any award of stock options
during calendar years 2005 and 2006 and in subsequent years will receive stock
options only in the discretion of the Compensation Committee, (iii) Mr. Jeffries
will hold the Career Shares awarded under Section 4(b) of his Amended and
Restated Employment Agreement for a period of one year after he ceases to be an
executive officer of A&F (the "Holding Period"), and (iv) Mr. Jeffries will hold
one half of the A&F shares received from the first one million stock options
exercised following this settlement, net of shares equal to the amount of
withholding taxes and exercise price, until the expiration of the Holding
Period. Also as part of the settlement, the Special Committee has agreed to
recommend to the full Board that the Board cause A&F to take, subject to the
directors' fiduciary duties, and A&F has agreed to use its best efforts to take,
each of the following actions, with the actions described in clauses (i) through
(iv) to be achieved not later than the one year anniversary of the settlement
becoming final: (i) A&F shall conduct a full review of its corporate governance
practices and procedures, (ii) at least a majority of the members of the
Compensation Committee shall be directors who were not members of the
Compensation Committee at the time of the events giving rise to the Litigation
and who have no substantial business or professional relationship with A&F other
than their status as directors, (iii) the Compensation Committee shall retain
independent counsel and an independent compensation expert, (iv) A&F shall adopt
FAS 123 providing for the expensing of stock option compensation, (v) for a
period of five years A&F shall not nominate for election to the Board any
director who does not meet the New York Stock Exchange standards for director
independence (provided, however, this provision shall not apply to any current
member of the Board or to up to three members of A&F's senior management), (vi)
one member of the Board who does not meet such standards shall not be nominated
for re-election in connection with the 2005 annual meeting, and (vii) A&F shall
review the disclosures to appear in A&F's proxy statement for its 2005 Annual
Meeting relating to executive compensation and will provide plaintiffs' counsel
with an opportunity to comment on the disclosures. The stipulation of settlement
provides for a release of all claims that A&F has or may have against any of the
defendants relating to the
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matters and claims that were or could have been raised in the Litigation. The
plaintiffs will apply to the Court for an award of attorneys' fees.
The Board has approved the following compensation to the Special
Committee members for their services in this matter beginning December 9, 2004:
a three-month retainer of $45,000 per member, an additional Chairman retainer of
$15,000 for the initial three-month period, and, as necessary, an additional
retainer for services beyond the initial three-month period.
[Remainder of page intentionally left blank;
signature on following page.]
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ABERCROMBIE & FITCH CO.
Dated: April 12, 2005 By: /s/ Susan J. Riley
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Susan J. Riley
Senior Vice President-Chief
Financial Officer
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