Document:

EX-10.1

 

Exhibit 10.1

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

	 	 	 	 	 	 	 
	IN RE ABERCROMBIE & FITCH CO.

	 	 	)	 	 	 
	SHAREHOLDER DERIVATIVE

	 	 	)	 	 	Consol. C.A. No. 1077-N
	LITIGATION

	 	 	)	 	 	 

STIPULATION OF SETTLEMENT

     This
Stipulation of Settlement (the “Stipulation”), dated as of April 8, 2005 and subject to
the approval of the Court of the Chancery of the State of Delaware in and for New Castle County
(the “Court”), is entered into by and among plaintiffs John O’Malley and Howard Rosen
(“Plaintiffs”), defendants Michael S. Jeffries (“Jeffries”), Seth R. Johnson, John W. Kessler,
Archie M. Griffin, Russell M. Gertmenian, Samuel N. Shahid, Jr., John A. Golden, Edward F. Limato,
James B. Bachman, and Lauren J. Brisky (collectively, the “Individual Defendants”) and nominal
defendant Abercrombie & Fitch Co. (“Abercrombie” or the “Company”).

STIPULATED FACTS

     WHEREAS:

     A. On February 8, 2005, Plaintiff John O’Malley filed a purported stockholder derivative
action (the “O’Malley Action”) in this Court on behalf of Abercrombie, naming the Individual
Defendants as defendants and Abercrombie as a nominal defendant.

     B. On February 9, 2005, Plaintiff Howard Rosen filed a purported stockholder derivative action
(the “Rosen Action”) in this Court on behalf of Abercrombie, naming the Individual Defendants as
defendants and Abercrombie as a nominal defendant.

     C. On February 14, 2005, in response to the filing of the O’Malley Action and the Rosen
Action, the board of directors of the Company empowered a special committee (the “Special
Committee”) consisting of independent directors James B. Bachman, Lauren J. Brisky, and Edward F.
Limato, with exclusive authority for the purpose of arriving at such decisions and

 

 

taking such actions with respect to the O’Malley Action, the Rosen Action, and any other
related derivative action as the Special Committee deemed appropriate and in the best interests of
the Company;

     D. On February 15, 2005, the Court entered an order consolidating the O’Malley Action and the
Rosen Action into this action (the “Action”). The complaint in the O’Malley Action (the
“Complaint”) was deemed the operative complaint in the Action.

     E. The principal allegations of the Complaint are that the Individual Defendants (i)
improperly and in violation of their fiduciary duties approved the payment to Jeffries of excess
and unwarranted compensation; (ii) engaged in corporate waste by approving payments to Jeffries in
exchange for no consideration or consideration of such little value that no reasonable person would
in good faith approve such payments; and/or (iii) breached their duty of disclosure by failing to
adequately disclose the Company’s compensation philosophy or the nature of the compensation being
provided to Jeffries. The Complaint also alleges that Jeffries was unjustly enriched by the
retention of the aforementioned compensation.

     F. Plaintiffs claim the above-referenced allegations give rise to causes of action against the
Individual Defendants for breaches of their fiduciary duties of care, loyalty and good faith, their
duty of disclosure, and for waste of corporate assets. The Complaint also claims to give rise to a
cause of action for unjust enrichment against Jeffries.

     G. Nominal defendant Abercrombie is a Delaware corporation with its principal executive
offices located in New Albany, Ohio. Abercrombie is a leading specialty retailer encompassing four
concepts: Abercrombie & Fitch, abercrombie, Hollister Co., and RUEHL. The merchandise is sold in
retail stores throughout the United States and through catalogues.

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     H. On March 6, 2001, the Compensation Committee approved a compensation package for Jeffries
including, among other provisions, increases in base pay and bonus opportunity, transportation
perquisites, and a new Supplemental Executive Retirement Plan (“SERP”).

     I. On February 25, 2002, the Compensation Committee approved an increase in Jeffries’ base pay
and the issuance to Jeffries of two million options to purchase Company stock scheduled to vest at
the rate of 25% per year over a four year period.

     J. On January 20, 2003, on the recommendation of the Compensation Committee, the Board
approved an Amended and Restated Employment Agreement for Jeffries (the “Employment Agreement”).
Among other things, the Employment Agreement provided for: (i) a twelve million dollar
($12,000,000) “stay” bonus (the “Stay Bonus”) to be paid after termination of Jeffries’ employment
so long as Jeffries remained employed in his present capacity until December 31, 2008; (ii)
heightened benefits under the SERP; and (iii) a “Career Equity Award” vesting on December 31, 2008,
so long as Jeffries remained employed through such date, consisting of one million (1,000,000)
shares of restricted stock (the “Career Shares”).

     K. The Company and the Individual Defendants have denied, and continue to deny, any liability
or wrongdoing with respect to any and all claims alleged in the Action or otherwise. Without
conceding any infirmities in their defenses to the claims asserted in the Action, the Company and
the Individual Defendants nevertheless consider it desirable that the Action be dismissed, subject
to the terms and conditions herein, because the Settlement will eliminate the substantial burden,
expense, inconvenience and distraction of litigation in the Action and will dispel any uncertainty
that may exist as a result of the Action.

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     L. The Company, Individual Defendants and Plaintiffs have independently considered the terms
of this Settlement and believe that settlement of the Action, subject to the terms herein, is
desirable and in the best interests of the Company and its stockholders because of, among other
things, the substantial expense and the risks of continued litigation in the Action and the
desirability of permitting the Settlement to be consummated as provided by the terms of this
Stipulation.

     NOW THEREFORE IT IS HEREBY STIPULATED AND AGREED AS FOLLOWS, pursuant to Chancery Court Rule
23.1, and subject to the approval of the Court,

SETTLEMENT CONSIDERATION

     1. Within forty-five (45) days following Final Approval, Jeffries and the Company shall amend
Jeffries’ Employment Agreement to provide as follows:

            a. The aggregate amount of the Stay Bonus provided under Section 6(b) of the Employment
Agreement shall be reduced from twelve million dollars ($12,000,000) to six million dollars
($6,000,000). Jeffries shall receive the entire Stay Bonus pursuant to Section 6(b) if and only if
the Company achieves cumulative growth in earnings per share (“EPS”) from February 1, 2005 through
January 31, 2009 (the “Performance Period”) of 13.5% (the “Earnings Target”), which equates to
$12.70 over the entire Performance Period. Jeffries shall receive 50% of the Stay Bonus pursuant
to Section 6(b) if and only if the Company achieves cumulative growth in EPS of at least 10.5%
(the “Earnings Threshold Target”), which equates to $11.83 over the entire Performance Period.
Achievement of cumulative growth in EPS between the Earnings Threshold Target and the Earnings
Target over the Performance Period will entitle Jeffries to a payment based on the following
formula: $3 million + ((Actual Cumulative EPS over the Performance Period — Earnings Threshold
Target) / (Earnings Target — Earnings Threshold Target) X $3 million). If the Company does not
achieve the Earnings

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Threshold Target over the Performance Period, then Jeffries shall not receive any portion of
the Stay Bonus, except pursuant to section 10 of the Employment Agreement, as amended in the manner
set forth below. In determining whether the Company meets the Earnings Target and/or the Earnings
Threshold Target, the following considerations shall apply: (i) appropriate adjustments shall be
made to account for any increases or decreases in the number of outstanding shares during the
Performance Period; (ii) the Company’s EPS during the Performance Period shall be calculated
without including the effects of any one-time or extraordinary charges; and (iii) appropriate
adjustments shall be made to account for the effects of FAS 123(R) on EPS. Sections 10(a)(ii),
10(c)(vi), 10(d)(v) and 10(e)(v) of the Employment Agreement shall be amended to reduce the amount
of the Stay Bonus payable thereunder to six million dollars ($6,000,000). Section 10(b)(vii) of
the Employment Agreement shall be amended to provide that the amount of the Stay Bonus payable
thereunder shall be six million dollars ($6,000,000) multiplied by the fraction obtained by
dividing (1) the number of months of service completed by Jeffries from January 1, 2005 through the
termination of employment by (2) 48; provided, however, that if Jeffries’ employment is terminated
without Cause (as that term is used in the Employment Agreement) pursuant to Section 10(b)(vii)
after December 31, 2006, he shall be entitled, in the alternative and at his option, to that
portion of the full Stay Bonus that he would receive if he had remained employed through December
31, 2008 and if the Company’s cumulative EPS growth at the end of the Performance Period bore the
same relationship to the Earnings Target at the end of the Performance Period as the relationship
between its cumulative EPS growth and the Earnings Target as of the end of the completed fiscal
quarter closest to the termination date. Sections 10(b)(vii) and 10(d)(v) of the Employment
Agreement shall be amended to provide that the Stay Bonus shall be payable on March 31 immediately
following the

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date on which Jeffries’ employment terminates or as soon as administratively practicable
thereafter, but not later than March 31, 2009.

            b. Notwithstanding Section 5 of the Employment Agreement, Jeffries shall not receive any award
of Company stock options during calendar years 2005 and 2006, and beginning in calendar year 2007,
Jeffries shall be entitled to receive stock options only in the discretion of the Compensation
Committee.

            c. Jeffries shall hold the Career Shares awarded under Section 4(b) of the Employment
Agreement and shall not sell, pledge, hypothecate, or otherwise dispose of the Career Shares until
the trading day on the New York Stock Exchange that next follows the one year anniversary of the
date on which he ceases to be an executive officer of the Company (the “Career Shares Holding
Period”).

            d. Jeffries shall hold one half of the Profit Shares received from the first one million
(1,000,000) stock options exercised following the execution of this Stipulation and shall not sell,
pledge, hypothecate, or otherwise dispose of the Profit Shares until the expiration of the Career
Shares Holding Period. For purposes of this provision, “Profit Shares” shall mean the number of
shares determined by dividing (A) the excess of (i) the aggregate market value of the shares
acquired upon such exercise over (ii) the aggregate purchase price of the shares plus applicable
tax withholding by (B) the market value of one share on the date of exercise.

     2. The Special Committee shall recommend to the full Board of Directors that the Company take
the following actions, and the Company shall use its best efforts to take each of the following
actions, subject to the exercise by the members of the Board of Directors of their fiduciary duties
as directors:

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            a. Not later than the one year anniversary of Final Approval, the Company shall have conducted
a full review of the Company’s corporate governance practices and procedures, which shall include
but may not be limited to a review of the committee structure used by the Board of Directors, the
composition of the committees, the responsibilities and authority of the committees, and the use of
outside advisors.

            b. Not later than the one year anniversary of Final Approval, at least a majority of the
members of the Compensation Committee shall be directors who (i) have no business or professional
relationships relating to the Company that would require disclosure under Section 404 of Regulation
SK and (ii) were not members of the Compensation Committee at the time of the events giving rise to
the Action.

            c. Not later than the one year anniversary of Final Approval, the Compensation Committee shall
have retained independent counsel and an independent compensation expert.

            d. Not later than the one year anniversary of Final Approval, the Company shall have adopted
FAS 123® providing for the expensing of stock option compensation.

            e. At least one current director who does not meet the New York Stock Exchange standards for
director independence shall not be nominated for re-election in connection with the Company’s 2005
annual meeting.

            f. For a period of not less than five years, the Company shall not nominate for election to
the Board or fill any vacancy on the Board with an individual who does not meet the New York Stock
Exchange standards for director independence, provided, however, that this
provision shall not prohibit the nomination for election to the Board of any member of

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the Board at the time of Final Approval and the Board may, notwithstanding the requirements of
this provision, nominate no more than three people for election to the Board who are Company
employees, officers, or members of Company management.

            g. The Company shall conduct a review of the disclosures regarding executive compensation to
appear in the Company’s proxy statement for its 2005 Annual Meeting. Plaintiffs’ counsel shall be
provided with an opportunity to review and comment on a draft of the disclosures.

RELEASE OF CLAIMS

     3. Upon Final Approval, all of the Settled Claims (as defined below) are completely, fully,
finally and forever compromised, settled, released, discharged, extinguished and dismissed with
prejudice, upon and subject to the terms and conditions set forth herein:

     4. For the purposes of this Stipulation:

            a. “Final Approval” means the point at which the Order and Final Judgment approving the
Settlement (attached hereto as Exhibit C) becomes final and unappealable, whether by exhaustion of
any possible appeal, lapse of time, writ of certiorari or otherwise.

            b. “Released Persons” means (i) the Company and its parent entities, predecessors, associates,
general or limited partnerships, limited liability companies, affiliates, past and present
subsidiaries, and each and all of their respective past, present or future officers, members,
directors, stockholders, agents, representatives, employees, attorneys, financial or investment
advisors, advisors, consultants, auditors, accountants, investment bankers, commercial bankers,
trustees, engineers, agents, insurers, co-insurers and reinsurers; and (ii) the Individual
Defendants and their respective heirs, executors, trustees, general or limited partners or
partnerships, limited liability companies, members, representatives, employees, attorneys,

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advisors, consultants, agents, estates, and administrators; in each instance, whether or not
they were named, served with process or appeared in the Action.

            c. “Settled Claims” means all claims, demands, rights, actions or causes of action,
liabilities, damages, losses, obligations, judgments, suits, fees, expenses, costs, matters and
issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute,
suspected or unsuspected, disclosed or undisclosed, matured or unmatured, that have been, could
have been, or in the future can or might be asserted in the Action or in any court, tribunal or
proceeding (including, but not limited to, any claims arising under federal or state statutory or
common law relating to alleged fraud, breach of any duty, negligence, violations of the federal
securities laws or otherwise) by or on behalf of Plaintiffs, derivatively by any other past or
present stockholder of the Company or the Company, or by their or its predecessors, successors or
assigns (or any person claiming by, through, in the right of or on behalf of them or the Company by
subrogation, assignment or otherwise), whether legal, equitable or any other type, which have
arisen, arise now or hereafter arise out of, or relate in any manner to, the allegations, facts,
events, practices, conduct, transactions, matters, acts, occurrences, statements, representations,
misrepresentations or omissions, or any fees, expenses or costs incurred in prosecuting, defending
or settling the Action, or any other matter, thing or cause whatsoever, or any series thereof,
embraced, involved or set forth in, or referred to or otherwise related, directly or indirectly, in
any way to, the Action or the subject matter of the Action, and including, without limitation, any
claims in any way related to (i) the Settlement and this Stipulation, (ii) the fiduciary
obligations of the Individual Defendants or Released Persons relating to or in connection with the
allegations made in the Complaint, (iii) any disclosures or alleged misrepresentations or omissions
that were made or allegedly not made by any of the Released

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Persons regarding the subject matter of the Action, the Settlement or any other matters
described or alleged in the Complaint or this Stipulation, including, without limitation, all
disclosure requirements arising from and relating to the compensation of Jeffries, (iv) the
compensation of Jeffries, including, without limitation, the Employment Agreement, (v) the
Company’s Supplemental Executive Retirement Plan, (vi) the Compensation Committee’s retention of
compensation experts and advisors, (vii) all meetings of the Compensation Committee between January
1, 2001 and the date of this Stipulation, including, without limitation, those taking place on
March 6, 2001, February 25, 2002, November 6, 2002, November 19, 2002, and January 20, 2003, (viii)
the decisions of the Compensation Committee in February 2002 with respect to Jeffries’
compensation, and (ix) the recommendation by the Compensation Committee and the adopting by the
Board of the Employment Agreement on January 20, 2003; provided, however, that the Settled Claims
shall not include the right to enforce the terms of this Stipulation.

     5. If any claims that are or would be subject to the release and dismissal contemplated by the
Settlement are asserted against any person in any court prior to Final Approval of the Settlement,
the parties to this Action shall join, where possible, in any motion to dismiss or stay such
proceedings.

     6. The releases contemplated by this Stipulation extend to claims that any parties granting a
release (the “Releasing Parties”) do not know or suspect to exist at the time of the release, which
if known might have affected the Releasing Parties’ decision to enter into this release. The
Releasing Parties will be deemed to relinquish, to the extent applicable and to the full extent
permitted by law, the provisions, rights and benefits of §1542 of the California Civil Code which
provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT

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TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.

     In addition, the Releasing Parties will be deemed to relinquish, to the extent applicable, and
to the fullest extent permitted by law, the provisions, rights and benefits of any law of any state
or territory of the United States, federal law, or principle of common law, which is similar,
comparable or equivalent to §1542 of the California Civil Code. The Releasing Parties acknowledge
that the Releasing Parties may discover facts in addition to or different from those now known or
believed to be true with respect to the Settled Claims, but that it is the intention of the
Releasing Parties to hereby completely, fully, finally and forever compromise, settle, release,
discharge and extinguish any and all Settled Claims known or unknown, suspected or unsuspected,
which now exist, or heretofore existed, or may hereafter exist, and without regard to the
subsequent discovery or existence of additional or different facts. The Releasing Parties warrant
that the Releasing Parties have read and understand §1542 of the California Civil Code and have had
the opportunity to consult with and be advised by counsel regarding its meaning and effect. The
Releasing Parties hereby voluntarily waive the provisions, rights and benefits of §1542 of the
California Civil Code and the provisions, rights and benefits of any law of any state or territory
of the United States, federal law, or principle of common law, which is similar, comparable or
equivalent to §1542 of the California Civil Code.

SUBMISSION AND APPLICATION TO THE COURT

     7. As soon as practicable after the execution of the Stipulation, the parties hereto shall
jointly apply to the Court for an order in the form attached hereto as Exhibit A (the “Scheduling
Order”), which shall provide that:

            a. a settlement hearing (the “Settlement Hearing”) be held to

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determine whether the Court should: (i) approve the Settlement pursuant to the Chancery Court
Rule 23.1 as fair, reasonable, adequate and in the best interests of Abercrombie’s stockholders;
(ii) enter an Order and Final Judgment dismissing the Action with prejudice, each party to bear its
or his own costs, and release and enjoin prosecution of any and all Settled Claims; (iii) consider
the application of Plaintiffs’ counsel for an award of attorneys’ fees and expenses; and (iv) hear
other such matters as the Court may deem necessary and appropriate; and

            b. a copy of the Notice of Hearing and Proposed Settlement of The Abercrombie & Fitch Co.
Derivative Litigation (the “Notice”), substantially in the form attached hereto as Exhibit B, shall
be sent to all stockholders of record of the Company as of the date of the Scheduling Order, and
further provide that the distribution of the Notice substantially in the manner set forth in the
Scheduling Order herein constitutes the best notice practicable under the circumstances, meets the
requirements of applicable law and due process, is due and sufficient notice of all matters
relating to the Settlement and fully satisfies the requirements of due process and of Rule 23.1 of
the Chancery Court Rules.

     8. All costs incurred in identifying and notifying the Company’s stockholders of the
settlement, including the printing and the copying of the Notice, as set forth in the Scheduling
Order, will be paid by the Company, on behalf of and for the benefit of the Individual Defendants.

ORDER AND FINAL JUDGMENT

     9. If the Settlement (including any modification thereto made with the consent of Plaintiffs,
the Company and the Individual Defendants as provided for herein) is approved by the Court, the
parties to the Settlement shall promptly request that the Court enter an Order and Final Judgment
substantially in the form attached hereto as Exhibit C, which among other things:

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            a. approves the Settlement, adjudges the terms thereof to be fair, reasonable, adequate and in
the best interests of the Company’s stockholders, and directs consummation of the Settlement in
accordance with the terms and conditions of the Stipulation;

            b. determines that the requirements of Rule 23.1 of the Chancery Court Rules and due process
have been satisfied in connection with the Notice to the Company’s stockholders;

            c. dismisses the Action with prejudice as to Plaintiffs, the Company, the Company’s
stockholders and all of the Individual Defendants, extinguishing, discharging and releasing any and
all Settled Claims as against the Company and the Individual Defendants, said dismissal subject
only to compliance by the Company and the Individual Defendants with the terms of this Stipulation
and any Order of the Court concerning this Stipulation, and permanently enjoining Plaintiffs, the
Company’s past or present stockholders, the Company and anyone claiming through or for the benefit
of any of them, from asserting, commencing, prosecuting, assisting, instigating or in any way
participating in the commencement or prosecution of any action or other proceeding, in any forum,
asserting any Settled Claims.

RIGHT TO WITHDRAW FROM THE SETTLEMENT

     10. Plaintiffs, the Company and each of the Individual Defendants shall have the separate
option to withdraw from the Settlement in the event that (i) either the Order and Final Judgment
referred to above are not entered substantially in the forms specified herein, including such
modifications thereto as may be ordered by the Court with the consent of Plaintiffs, the Company
and the Individual Defendants, or (ii) the Settlement does not receive Final Approval by the Court,
or the Court approves the Settlement but such approval is reversed or vacated or substantially
modified on appeal, reconsideration or otherwise.

     11. In the event that the Settlement proposed herein does not receive Final

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Approval by the Court, or the Court approves the Settlement but such approval is reversed or
vacated on appeal, reconsideration or otherwise, and such order reversing or vacating the
Settlement becomes final by lapse of time or otherwise, or if any of the conditions to such
Settlement are not fulfilled, then the Settlement proposed herein shall be of no further force or
effect, and this Stipulation and all negotiations, proceedings and statements relating thereto and
any amendment thereof shall be null and void and without prejudice to any party hereto, and each
party shall be restored to his, her or its respective position as it existed prior to the execution
of this Stipulation.

     12. In order to exercise any option a party may have to withdraw from and terminate this
Settlement, a party must provide, within five business days of the event giving rise to such
option, written notice of such withdrawal and the grounds therefore to all signatories to this
Stipulation.

STIPULATION NOT AN ADMISSION

     13. The provisions contained in this Stipulation and all negotiations, statements and
proceedings in connection therewith are not, shall not be argued to be, and shall not be deemed, a
presumption, a concession or an admission by the Individual Defendants or the Company of any fault,
liability or wrongdoing as to any fact or claim alleged or asserted in the Action or any other
actions or proceedings and shall not be interpreted, construed, deemed, invoked, offered or
received in evidence or otherwise used by any person in these or any other actions or proceedings,
whether civil, criminal or administrative, except in a proceeding to enforce the terms or
conditions of this Stipulation.

DENIAL OF LIABILITY

     14. Each Released Person specifically disclaims any liability whatsoever relating to any of
the Settled Claims; expressly denies having engaged in, or threatened to engage

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in, any breach of duty, violations of law or wrongful or illegal activity, or having failed to
act in any matter required by law or rule, or having violated, or threatened to violate, any law or
regulation or duty; expressly denies that any person or entity has suffered any harm or damages as
a result of such Released Person’s involvement with the Settled Claims (or the events at issue
therein), and such Released Person is making this Settlement (without conceding any infirmity in
such Released Person’s defenses against the Settled Claims) solely to avoid the uncertainty, harm,
distraction, burden and expense occasioned by litigation. Each Released Person believes such
Released Person acted, at all times, in the best interests of the Company and its stockholders.
The Court has made no finding that any Released Person has engaged in any wrongdoing or wrongful
conduct or otherwise acted improperly or in violation of any law or regulation or duty in any
respect.

GENERAL PROVISIONS

     15. Each of the individuals executing this Stipulation on behalf of one or more of the parties
hereto represents and warrants that he or she has been duly authorized and empowered to execute
this Stipulation on behalf of his or her respective client or clients.

     16. This Stipulation may be executed in any number of actual or telecopied counterparts and by
each of the different parties thereto on several counterparts, each of which when so executed and
delivered shall be an original. The executed signature page(s) from each actual or telecopied
counterpart may be joined together and attached to such original and shall constitute one and the
same instrument.

     17. The waiver by any party of any breach of this Stipulation shall not be deemed or construed
as a waiver of any other breach, whether prior, subsequent, or contemporaneous, of this
Stipulation.

     18. In addition to the actions specifically provided for in this Stipulation, the

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parties will use their reasonable best efforts from the date hereof to take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements, to consummate and make effective this
Stipulation. The parties and their attorneys agree to cooperate fully with one another in seeking
the Court’s approval of this Stipulation and the Settlement and to use their best efforts to effect
the consummation of this Stipulation and the Settlement. Without further order of the Court, the
parties may agree to reasonable extensions of time not expressly set by the Court order to carry
out any of the provisions of this Stipulation.

     19. Each party represents and warrants that the party, or a responsible officer or partner or
other fiduciary thereof, has read this Stipulation and understands the contents hereof, and
believes it is a fair resolution of contested claims.

     20. Each party represents and warrants that the party has made such investigation of the facts
pertaining to the Settlement provided for in this Stipulation, and of all of the matters pertaining
thereto, as the party deems necessary and advisable.

     21. Each term of this Stipulation is contractual and not merely a recital.

     22. This Stipulation may not be amended, changed, waived, discharged or terminated (except as
explicitly provided herein), in whole or in part, except by an instrument in writing signed by the
party against whom or which enforcement of such amendment, change, waiver, discharge or termination
is sought.

     23. This Stipulation and the Settlement will be governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to conflict of laws principles. Any action
relating to this Stipulation or the Settlement will be filed exclusively in the Court. Each party
hereto (i) consents to personal jurisdiction in any such action (but in no other action)

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brought in the Court, (ii) consents to service of process by registered mail upon such party
and/or such party’s agent, (iii) waives any objection to venue in the Court and any claim that
Delaware or the Court is an inconvenient forum, and (iv) waives any right to demand a jury trial as
to any such action.

     24. This Stipulation constitutes the entire agreement among the parties with respect to the
subject matter hereof, and supersedes all prior or contemporaneous oral or written agreements,
understandings or representations. All of the exhibits hereto are incorporated herein by reference
as if set forth herein verbatim, and the terms of all exhibits are expressly made part of this
Stipulation.

     25. This Stipulation is and will be binding upon, and inure to the benefit of, the parties and
their respective affiliates, agents, executors, heirs, successors and permitted assigns.

     26. The terms and provisions of this Stipulation are intended solely for the benefit of the
Released Persons and their respective successors and permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights or remedies upon any other person or
entity, except any attorneys’ fees and expenses to be paid pursuant to the terms of this
Stipulation.

     27. This Stipulation will be deemed to have been mutually prepared by the parties and will not
be construed against any of them by reason of authorship. Paragraph titles have been inserted for
convenience only and will not be used in determining the terms of this Stipulation.

     28. If any provision of this Stipulation is held to be illegal, invalid, or unenforceable (i)
such provision will be fully severable, (ii) this Stipulation will be construed

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and enforced as if such illegal, invalid, or unenforceable provision had never comprised a
part of this Stipulation, and (iii) the remaining provisions of this Stipulation will remain in
full force and effect and will not be affected by the illegal, invalid, or unenforceable provision
or by its severance from this Stipulation.

FEES AND EXPENSES

     29. Plaintiffs in the Action and their counsel intend to apply to the Court for an award of
attorneys’ fees and out of pocket expenses in amount to be set by the Court. Approval by the Court
of such fee application shall not be a precondition to the dismissal of the Action in accordance
with this Stipulation. Plaintiffs’ counsel and defendants’ counsel may, but are not required to,
agree to a fee amount that defendants will not oppose, which would then be filed as an amendment or
supplement to this Stipulation.

     30. The Fee Application may be considered separately from the proposed Settlement of the
Action. Abercrombie shall pay any fees and expenses awarded by the Court in the Action to
Plaintiffs’ counsel in the Action within twenty (20) business days after the date on which the
Final Order is deemed to have received Final Approval.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties have executed this Stipulation effective as of April 8,
2005.

	 	 	 	 	 
	

	 	/s/ Gary F. Traynor	 	 
	

	 	 	 	 
	Of Counsel:
	 	Michael Hanrahan (#941)	 	 
	 

	 	Gary F. Traynor (#2131)	 	 
	Marc A. Topaz

	 	PRICKETT, JONES & ELLIOT, P.A.	 	 
	Robert B. Weiser

	 	1310 N. King Street	 	 
	Eric A. Zagar

	 	Wilmington, Delaware 19899	 	 
	SCHIFFRIN & BARROWAY, LLP

	 	(302) 888-6500	 	 
	Three Bala Plaza, East, Suite 400

	 	Counsel for Plaintiffs	 	 
	Bala Cynwyd, Pennsylvania 19004

	 	 	 	 
	(610) 667-7706

	 	 	 	 
	 
	 	 	 	 
	

	 	/s/ J. Travis Laster	 	 
	

	 	 	 	 
	Of Counsel:

	 	J. Travis Laster (#3514)	 	 
	

	 	RICHARDS, LAYTON & FINGER P.A.	 	 
	John L. Hardiman

	 	One Rodney Square	 	 
	SULLIVAN & CROMWELL LLP
	 	P.O. Box 551	 	 
	125 Broad Street
	 	Wilmington, Delaware 19899	 	 
	New York, NY 10004-2498
	 	(302) 651-7700	 	 
	 
	 	 	 	 
	

	 	Counsel for Defendants other than	 	 
	

	 	Michael Jeffries	 	 
	 
	 	 	 	 
	

	 	/s/ Andre G. Bouchard	 	 
	

	 	 	 	 
	Of Counsel:

	 	Andre G. Bouchard (#2504)	 	 
	Barbara Moses

	 	BOUCHARD, MARGULES &
FRIEDLANDER, P.A.	 	 
	MORVILLO, ABRAMOWITZ, GRAND,

	 	222 Delaware Avenue, Suite 1400	 	 
	IASON & SILBERBERG, P.C.

	 	Wilmington, DE 19801	 	 
	565 Fifth Avenue

	 	Phone: 302-573-3500	 	 
	New York, NY 10017
	 	Fax: 302-573-3501	 	 
	 
	 	 	 	 
	

	 	Counsel for Michael Jeffries	 	 

19

 

EXHIBIT A

 

 

EXHIBIT A

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

	 	 	 	 	 	 	 
	IN RE ABERCROMBIE & FITCH CO.

	 	 	)	 	 	 
	SHAREHOLDER DERIVATIVE

	 	 	)	 	 	Consol. C.A. No. 1077-N
	LITIGATION

	 	 	)	 	 	 

SCHEDULING ORDER

     The parties to the above-captioned consolidated derivative action (the “Action”) having
applied pursuant to Court of Chancery Rule 23.1 for an Order to approve the proposed settlement of
the Action in accordance with the Stipulation of Settlement entered into by the parties, dated as
of April ___, 2005 (the “Stipulation”), and for the dismissal of the Action with prejudice upon the
terms and conditions set forth in the Stipulation (the “Settlement”), and the Court having read and
considered the Stipulation and accompanying documents, and all parties having consented to the
entry of this Order,

     NOW, THEREFORE, this ___day of April, 2005, upon application of the parties, IT IS HEREBY
ORDERED as follows:

     1. Except for terms defined herein, the Court adopts and incorporates the
definitions in the Stipulation for purposes of this Order.

     2. The Court has scheduled a Settlement Hearing which will be held on May ___, 2005
at ___.m, at the New Castle County Courthouse, 500 King Street, Wilmington, Delaware 19801,
to:

	 	a.  	approve the Settlement (as defined below) pursuant to the Chancery Court Rule
23.1 as fair, reasonable, adequate and in the best interests of Abercrombie’s
stockholders;

 

 

	 	b.  	enter an Order and Final Judgment dismissing the Action with prejudice, each
party to bear its or his own costs, and release and enjoin prosecution of any and all
Settled Claims;
	 
	 	c.  	consider the application of Plaintiffs’ counsel for an award of attorneys’ fees
and expenses; and
	 
	 	d.  	hear other such matters as the Court may deem necessary and appropriate.

     3. The Court reserves the right to adjourn the Settlement Hearing, including
consideration of the application for attorneys’ fees and costs, without further notice other than
by announcement at the Settlement Hearing or any adjournment thereof.

     4. The Court reserves the right to approve the Settlement at or after the Settlement
Hearing with such modifications as may be consented to by the parties to the Stipulation and
without further notice to Abercrombie’s stockholders.

     5. At least forty-five (45) days prior to the Settlement Hearing, Abercrombie shall
mail to all stockholders of record as of the close of business on the date of this Scheduling
Order, by first class mail, postage prepaid, a copy of the Notice of Hearing and Proposed
Settlement of The Abercrombie & Fitch Co. Shareholder Derivative Litigation (the “Notice”),
substantially in the form attached to the Stipulation as Exhibit B. All record holders of
Abercrombie shares who are not also beneficial owners shall forward the Notice to the beneficial
owners of those shares. Abercrombie shall use reasonable efforts to give notice to such beneficial
owners by (a) making additional copies of the Notice available to any record holder who, prior to
the Settlement Hearing, requests additional copies of the Notice for distribution to beneficial
owners, or (b) mailing additional copies of the Notice to beneficial owners as reasonably requested
by record holders.

-2-

 

     6. The form and method of notice specified herein is the best notice practicable,
shall constitute due and sufficient notice of the Settlement Hearing to all persons entitled to
receive such notice, and fully satisfies the requirements of due process, Court of Chancery Rule
23.1 and applicable law. Abercrombie shall, prior to the date of the Settlement Hearing directed
herein, file proof of mailing of the Notice.

     7. All proceedings in the Action, other than such proceedings as may be necessary to
carry out the terms and conditions of the Settlement, are hereby stayed and suspended until further
Order of this Court. Pending final determination of whether the Stipulation should be approved,
Plaintiffs, the Company, Plaintiffs’ counsel and all of the Company’s stockholders, and any of
them, are barred and enjoined from commencing, prosecuting, instigating or in any way participating
in the commencement or prosecution of any action asserting any Settled Claims (as defined in the
Stipulation) against any Released Person (as defined in the Stipulation).

     8. If the Settlement provided for in the Stipulation shall be approved by the Court
following the Settlement Hearing, a Final Order shall be entered as described in the Stipulation.

     9. If the Stipulation is not approved by the Court, is terminated or shall not
become effective for any reason whatever, the Action shall proceed, completely without prejudice to
any party as to any matter of law or fact, as if the Stipulation had not been made and had not been
submitted to the Court, and neither the Stipulation, any provision contained in the Stipulation,
any action undertaken pursuant thereto, nor the negotiation thereof by any party shall be deemed an
admission or offered or received in evidence at any proceeding in the Action or any other action or
proceeding.

	 	 	 	 	 
	

	 	 	 	 
	

	 	Vice Chancellor	 	 

-3-

 

EXHIBIT B

 

 

EXHIBIT B

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

	 	 	 	 	 	 	 
	IN RE ABERCROMBIE & FITCH CO.

	 	 	)	 	 	 
	SHAREHOLDER DERIVATIVE

	 	 	)	 	 	Consol. C.A. No. 1077-N
	LITIGATION

	 	 	)	 	 	 

NOTICE OF HEARING AND PROPOSED SETTLEMENT OF THE 

ABERCROMBIE & FITCH CO. SHAREHOLDER DERIVATIVE LITIGATION

	TO:   	 ALL RECORD AND BENEFICIAL HOLDERS OF STOCK OF THE ABERCROMBIE & FITCH
CO. ON APRIL ___, 2005, INCLUDING ANY AND ALL OF THEIR RESPECTIVE
SUCCESSORS IN INTEREST, PREDECESSORS IN INTEREST, REPRESENTATIVES,
TRUSTEES, EXECUTORS, ADMINISTRATORS, HEIRS, ASSIGNS OR TRANSFEREES,
IMMEDIATE AND REMOTE, AND ANY PERSON OR ENTITY ACTING FOR OR ON BEHALF
OF, OR CLAIMING UNDER, ANY OF THEM, AND EACH OF THEM (COLLECTIVELY
“CURRENT ABERCROMBIE STOCKHOLDERS”).

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS
WILL BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF YOU
ARE NOT THE BENEFICIAL HOLDER, PLEASE TRANSMIT THIS DOCUMENT TO SUCH
BENEFICIAL HOLDER.

     1. The purpose of the Notice is to inform you of this consolidated derivative action (the
“Action”), which has been brought on behalf of The Abercrombie & Fitch Co. (the “Company” or
“Abercrombie”), a proposed settlement of the Action, and a hearing to be held by the Court of
Chancery of the State of Delaware (the “Court”). The hearing will be held in the New Castle County
Courthouse, 500 N. King Street, Wilmington, Delaware, on May [___,] 2005, at ___:___.m. (the
“Settlement Hearing”) to determine whether the Court should: (i) approve the Settlement (as defined
below) pursuant to the Chancery Court Rule 23.1 as fair, reasonable, adequate and in the best
interests of Abercrombie’s stockholders; (ii) enter an Order and Final Judgment dismissing the
Action with prejudice; (iii) consider the application of Plaintiffs’ counsel for an award of
attorneys’ fees and expenses; and (iv) hear other such matters as the Court may deem necessary and
appropriate.

 

 

EXHIBIT B

BACKGROUND OF THE ACTION

     THE DESCRIPTION OF THE ACTION AND THE SETTLEMENT THAT FOLLOWS HAS BEEN PREPARED BY COUNSEL FOR
THE PARTIES. THE COURT HAS MADE NO FINDINGS WITH RESPECT TO SUCH MATTERS, AND THIS NOTICE IS NOT
AN EXPRESSION OR STATEMENT BY THE COURT OF FINDINGS OF FACT.

     2. On February 8, 2005, Plaintiff John O’Malley filed a stockholder derivative complaint (the
“O’Malley Action”) in this Court on behalf of Abercrombie, naming Michael S. Jeffries (“Jeffries”),
Seth R. Johnson, John W. Kessler, Archie M. Griffin, Russell M. Gertmenian, Samuel N. Shahid, Jr.,
John A. Golden, Edward F. Limato, James B. Bachman, and Lauren J. Brisky (collectively, the
“Individual Defendants”) as defendants, and Abercrombie as a nominal defendant.

     3. On February 9, 2005, Plaintiff Howard Rosen (collectively, with O’Malley, the “Plaintiffs”)
filed a stockholder derivative complaint (the “Rosen Action”) in this Court on behalf of
Abercrombie, naming the Individual Defendants as defendants, and Abercrombie as a nominal
defendant.

     4. On February 15, 2005, the Court entered an order consolidating the O’Malley Action and the
Rosen Action into this action (the “Action”). The complaint in the O’Malley Action (the
“Complaint”) was deemed the operative complaint in the Action.

     5. The principal allegations of the Complaint are that the Individual Defendants (i)
improperly and in violation of their fiduciary duties approved the payment to Jefferies of excess
and unwarranted compensation; (ii) engaged in corporate waste by approving payments to Jefferies in
exchange for no consideration or consideration of such little value that no reasonable person would
in good faith approve such payments; and/or (iii) breached their duty of disclosure

-2-

 

EXHIBIT B

by failing to adequately disclose the Company’s compensation philosophy or the nature of the
compensation being provided to Jefferies. The Complaint also alleges that Jefferies was unjustly
enriched by the retention of the aforementioned compensation.

     6. Plaintiffs claim the above-referenced allegations give rise to causes of action against the
Individual Defendants for breaches of their fiduciary duties of care, loyalty and good faith, their
duty of disclosure, and for waste of corporate assets. The Complaint also claims to give rise to a
cause of action for unjust enrichment against Jefferies.

     7. Nominal defendant Abercrombie is a Delaware corporation with its principal executive
offices located in New Albany, Ohio. Abercrombie is a leading specialty retailer encompassing four
concepts: Abercrombie & Fitch, abercrombie, Hollister Co., and RUEHL. The merchandise is sold in
retail stores throughout the United States and through catalogs..

     8. On March 6, 2001, the Compensation Committee approved a compensation package for Jeffries
including, among other provisions, increases in base pay and bonus opportunity, transportation
perquisites, and a new Supplemental Executive Retirement Plan.

     9. On February 25, 2002, the Compensation Committee approved an increase in Jeffries’ base
pay and the issuance to Jeffries of two million options to purchase Company stock scheduled to vest
at the rate of 25% per year over a four year period.

     10. On January 20, 2003, on the recommendation of the Compensation Committee, the Board
approved an Amended and Restated Employment Agreement for Jeffries (the “Employment Agreement”).
Among other things, the Employment Agreement provided for: (i) a twelve million dollar
($12,000,000) “stay” bonus (the “Stay Bonus”) to be paid after termination of Jeffries’ employment
so long as Jeffries remained employed in his present capacity until December 31, 2008; (ii)
heightened benefits under the Company’s Supplemental

-3-

 

EXHIBIT B

Executive Retirement Plan; and (iii) a “Career Equity Award” vesting on December 31, 2008, so
long as Jeffries remained employed through such date, consisting of one million (1,000,000) shares
of restricted stock (the “Career Shares”).

     11. The Company and the Individual Defendants have denied, and continue to deny, any liability
or wrongdoing with respect to any and all claims alleged in the Action or otherwise. Without
conceding any infirmities in their defenses to the claims asserted in the Action, the Company and
the Individual Defendants consider it desirable that the Action be dismissed, subject to the terms
and conditions herein, because the Settlement will eliminate the substantial burden, expense,
inconvenience and distraction of litigation in the Action and will dispel any uncertainty that may
exist as a result of the Action.

     12. The Company, Individual Defendants and Plaintiffs have independently considered the terms
of this Settlement and believe that settlement of the Action, subject to the terms herein, is
desirable and in the best interests of the Company and its stockholders because of, among other
things, the substantial expense and the risks of continued litigation in the Actions, and the
desirability of permitting the Settlement to be consummated as provided by the terms of this
Stipulation.

THE SETTLEMENT TERMS

     13. Within forty-five (45) days following Final Approval, Jeffries and the Company shall amend
Jeffries’ Employment Agreement to provide as follows:

            (a) The aggregate amount of the Stay Bonus provided under Section 6(b) of the Employment
Agreement shall be reduced from twelve million dollars ($12,000,000) to six million dollars
($6,000,000). Jeffries shall receive the entire Stay Bonus pursuant to Section 6(b) if and only if
the Company achieves cumulative growth in earnings per share (“EPS”) from February 1, 2005 through
January 31, 2009 (the “Performance Period”) of 13.5% (the “Earnings

-4-

 

EXHIBIT B

Target”), which equates to $12.70 over the entire Performance Period. Jeffries shall receive
50% of the Stay Bonus pursuant to Section 6(b) if and only if the Company achieves cumulative
growth in EPS of at least 10.5% (the “Earnings Threshold Target”), which equates to $11.83 over
the entire Performance Period. Achievement of cumulative growth in EPS between the Earnings
Threshold Target and the Earnings Target over the Performance Period will entitle Jeffries to a
payment based on the following formula: $3 million + ((Actual Cumulative EPS over the Performance
Period — Earnings Threshold Target) / (Earnings Target — Earnings Threshold Target) X $3 million).
If the Company does not achieve the Earnings Threshold Target over the Performance Period, then
Jeffries shall not receive any portion of the Stay Bonus, except pursuant to section 10 of the
Employment Agreement, as amended in the manner set forth below. In determining whether the Company
meets the Earnings Target and/or the Earnings Threshold Target, the following considerations shall
apply: (i) appropriate adjustments shall be made to account for any increases or decreases in the
number of outstanding shares during the Performance Period; (ii) the Company’s EPS during the
Performance Period shall be calculated without including the effects of any one-time or
extraordinary charges; and (iii) appropriate adjustments shall be made to account for the effects
of FAS 123(R); on EPS. Sections 10(a)(ii), 10(c)(vi), 10(d)(v) and 10(e)(v) of the Employment
Agreement shall be amended to reduce the amount of the Stay Bonus payable thereunder to six million
dollars ($6,000,000). Section 10(b)(vii) of the Employment Agreement shall be amended to provide
that the amount of the Stay Bonus payable thereunder shall be six million dollars ($6,000,000)
multiplied by the fraction obtained by dividing (1) the number of months of service completed by
Jeffries from January 1, 2005 through the termination of employment by (2) 48; provided, however,
that if Jeffries’ employment is terminated without Cause (as that term is used in the

-5-

 

EXHIBIT B

Employment Agreement) pursuant to Section 10(b)(vii) after December 31, 2006, he shall be
entitled, in the alternative and at his option, to that portion of the full Stay Bonus that he
would receive if he had remained employed through December 31, 2008 and if the Company’s cumulative
EPS growth at the end of the Performance Period bore the same relationship to the Earnings Target
at the end of the Performance Period as the relationship between its cumulative EPS growth and the
Earnings Target as of the end of the completed fiscal quarter closest to the termination date.
Sections 10(b)(vii) and 10(d)(v) of the Employment Agreement shall be amended to provide that the
Stay Bonus shall be payable on March 31 immediately following the date on which Jeffries’
employment terminates or as soon as administratively practicable thereafter, but not later than
March 31, 2009.

            (b) Notwithstanding Section 5 of the Employment Agreement, Jeffries shall not receive any
award of Company stock options during calendar years 2005 and 2006, and beginning in calendar year
2007, Jeffries shall be entitled to receive stock options only in the discretion of the
Compensation Committee.

            (c) Jeffries shall hold the Career Shares awarded under Section 4(b) of the Employment
Agreement and shall not sell, pledge, hypothecate, or otherwise dispose of the Career Shares until
the trading day on the New York Stock Exchange that next follows the one year anniversary of the
date on which he ceases to be an executive officer of the Company (the “Career Shares Holding
Period”).

            (d) Jeffries shall hold one half of the Profit Shares received from the first one million
(1,000,000) stock options exercised following the execution of this Stipulation and shall not sell,
pledge, hypothecate, or otherwise dispose of the Profit Shares until the expiration of the Career
Shares Holding Period. For purposes of this provision, “Profit Shares” shall mean the

-6-

 

EXHIBIT B

number of shares determined by dividing (A) the excess of (i) the aggregate market value of
the shares acquired upon such exercise over (ii) the aggregate purchase price of the shares plus
applicable tax withholding by (B) the market value of one share on the date of exercise.

     14. The Special Committee shall recommend to the full Board of Directors that the Company take
the following actions, and the Company shall use its best efforts to take each of the following
actions, subject to the exercise by the members of the Board of Directors of their fiduciary duties
as directors:

          (a) Not later than the one year anniversary of Final Approval, the Company shall have
conducted a full review of the Company’s corporate governance practices and procedures, which shall
include but may not be limited to a review of the committee structure used by the Board of
Directors, the composition of the committees, the responsibilities and authority of the committees,
and the use of outside advisors.

          (b) Not later than the one year anniversary of Final Approval, at least a majority of the
members of the Compensation Committee shall be directors who (i) have no business or professional
relationships relating to the Company that would require disclosure under Section 404 of Regulation
SK and (ii) were not members of the Compensation Committee at the time of the events giving rise to
the Action.

          (c) Not later than the one year anniversary of Final Approval, the Compensation Committee
shall have retained independent counsel and an independent compensation expert.

          (d) Not later than the one year anniversary of Final Approval, the Company shall have adopted
FAS 123® providing for the expensing of stock option compensation.

 - 7 -

 

EXHIBIT B

          (e) At least one current director who does not meet the New York Stock Exchange standards for
director independence shall not be nominated for re-election in connection with the Company’s 2005
annual meeting.

          (f) For a period of not less than five years, the Company shall not nominate for election to
the Board or fill any vacancy on the Board with an individual who does not meet the New York Stock
Exchange standards for director independence, provided, however, that this
provision shall not prohibit the nomination for election to the Board of any member of the Board at
the time of Final Approval and the Board may, notwithstanding the requirements of this provision,
nominate no more than three people for election to the Board who are Company employees, officers,
or members of Company management.

          (g) The Company shall conduct a review of the disclosures regarding executive compensation to
appear in the Company’s proxy statement for its 2005 Annual Meeting. Plaintiffs’ counsel shall be
provided with an opportunity to review and comment on a draft of the disclosures.

     15. Upon Final Approval and compliance with the terms described herein, and subject to the
contingencies contained herein, the Company, the Individual Defendants and each of the other
Released Persons shall be deemed to be released and forever discharged from all of the Settled
Claims.

     16. If any claims that are or would be subject to the release and dismissal contemplated by
the Settlement are asserted against any person in any court prior to Final Approval of the
Settlement, the parties to the Action shall join, where possible, in any motion to dismiss or stay
such proceedings.

DISMISSAL AND RELEASE

 - 8 -

 

EXHIBIT B

     17. It is the intent of the parties to the Action that the proposed Settlement, if the Court
approves it, shall extinguish for all time completely, fully, finally and forever compromise,
settle, release, discharge, extinguish and dismiss with prejudice, upon and subject to the terms
and conditions set forth herein, all rights, claims and causes of action that are or relate to the
Settled Claims against the Company and any of the Released Persons and that the Company and the
Individual Defendants and each of the other Released Persons shall be deemed to be released and
forever discharged from all of the Settled Claims. For purposes of the Settlement,

          (a) “Final Approval” means the point at which the Order and Final Judgment approving the
Settlement becomes final and unappealable, whether by exhaustion of any possible appeal, lapse of
time, writ of certiorari or otherwise;

          (b) “Released Persons” means (i) the Company and its parent entities, predecessors,
associates, general or limited partnerships, limited liability companies, affiliates, past and
present subsidiaries, and each and all of their respective past, present or future officers,
members, directors, stockholders, agents, representatives, employees, attorneys, financial or
investment advisors, advisors, consultants, auditors, accountants, investment bankers, commercial
bankers, trustees, engineers, agents, insurers, co-insurers and reinsurers; and (ii) the Individual
Defendants and their respective heirs, executors, trustees, general or limited partners or
partnerships, limited liability companies, members, agents, representatives, employees, attorneys,
advisors, consultants, agents, estates, and administrators; in each instance, whether or not they
were named, served with process or appeared in the Action; and

          (c) “Settled Claims” means all claims, demands, rights, actions or causes of action,
liabilities, damages, losses, obligations, judgments, suits, fees, expenses, costs, matters and
issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute,

 - 9 -

 

EXHIBIT B

suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured,
that have been, could have been, or in the future can or might be asserted in the Action or in any
court, tribunal or proceeding (including, but not limited to, any claims arising under federal or
state statutory or common law relating to alleged fraud, breach of any duty, negligence, violations
of the federal securities laws or otherwise) by or on behalf of Plaintiffs, derivatively by any
other past or present stockholder of the Company or the Company, or by their or its predecessors,
successors or assigns (or any person claiming by, through, in the right of or on behalf of them or
the Company by subrogation, assignment or otherwise), whether legal, equitable or any other type,
which have arisen, arise now or hereafter arise out of, or relate in any manner to, the
allegations, facts, events, practices, conduct, transactions, matters, acts, occurrences,
statements, representations, misrepresentations or omissions, or any fees, expenses or costs
incurred in prosecuting, defending or settling the Action, or any other matter, thing or cause
whatsoever, or any series thereof, embraced, involved or set forth in, or referred to or otherwise
related, directly or indirectly, in any way to, the Action or the subject matter of the Action, and
including, without limitation, any claims in any way related to (i) the Settlement and Stipulation,
(ii) the fiduciary obligations of the Individual Defendants or Released Persons relating to or in
connection with the allegations made in the Complaint, (iii) any disclosures or alleged
misrepresentations or omissions that were made or allegedly not made by any of the Released Persons
regarding the subject matter of the Action, the Settlement or any other matters described or
alleged in the Complaint or this Stipulation, including, without limitation, all disclosure
requirements arising from and relating to the compensation of Jefferies, (iv) the compensation of
Jefferies, including, without limitation, the Employment Agreement, (v) the Company’s Supplemental
Executive Retirement Plan, (vi) the Compensation Committee’s

 - 10 -

 

EXHIBIT B

retention of counsel, compensation experts, and advisors, (vii) all meetings of the
Compensation Committee between January 1, 2001 and the date of this Stipulation, including, without
limitation, those taking place on March 6, 2001, February 25, 2002, November 6, 2002, November 19,
2002, and January 20, 2003, (viii) the decisions of the Compensation Committee in February 2002
with respect to Jefferies’ compensation, and (ix) the recommendation by the Compensation Committee
and the adopting by the Board of the Employment Agreement on January 20, 2003; provided, however,
that the Settled Claims shall not include the right to enforce the terms of this Stipulation.

INJUNCTION

     18. The Court has ordered that pending final determination of whether the Settlement should be
approved, the parties to the Action are enjoined and barred from commencing, prosecuting,
instigating or in any way participating in the commencement or prosecution of any action or
proceeding asserting any Settled Claims against any Released Person.

PROCEDURES

     19. The effective date of the Settlement shall be the date on which the Order of the Court
approving the Settlement of the Action becomes final and no longer subject to further appeal or
review, whether by exhaustion of any possible appeal, writ of certiorari, lapse of time or
otherwise. If the Court does not approve the Stipulation, or the Settlement is terminated or does
not become effective for any reason whatsoever, the Action shall proceed, completely without
prejudice to any party as to any matter of law or of fact (including the appropriateness of any
certification of the class), as if the Stipulation had not been made and had not been submitted to
the Court, and the Stipulation shall not be deemed to prejudice in any way the respective positions
of the parties with respect to the Action, and neither the Stipulation, nor its contents,

 - 11 -

 

EXHIBIT B

nor any action undertaken pursuant thereto shall be admissible in evidence or shall be
referred to for any purpose in the Action or in any other litigation or proceeding.

     20. If the Court approves the Settlement, the Action and the Settled Claims will be dismissed
on the merits with respect to all Defendants and with prejudice against the Company, Plaintiffs and
all of the Company’s stockholders. Such release and dismissal will bar Plaintiffs, Abercrombie’s
shareholders, the Company and anyone claiming through or for the benefit of any of them, from
asserting, commencing, prosecuting, assisting, instigating or in any way participating in the
commencement or prosecution of any action or other proceeding, in any forum, asserting any Settled
Claims.

RELEASE OF UNKNOWN CLAIMS

     21. The releases contemplated in the Settlement and the Stipulation extend to claims that the
parties granting the release (the “Releasing Parties”) do not know or suspect to exist at the time
of the release, which if known might have affected the Releasing Parties’ decision to enter into
the release; the Releasing Parties shall be deemed to relinquish, to the extent applicable and to
the fullest extent permitted by law, the provisions, rights and benefits of Section 1542 of the
California Civil Code; and the Releasing Parties shall be deemed to waive any and all provisions,
rights and benefits conferred by any law of any state or territory of the United States, or
principle of common law, which is similar, comparable or equivalent to California Civil Code
Section 1542.

ATTORNEYS’ FEES

     22. Plaintiffs in the Action and their counsel intend to apply to the Court for an award of
attorneys’ fees and out of pocket expenses in amount to be set by the Court. Approval by the Court
of such fee application shall not be a precondition to the dismissal of the Action in accordance
with the Stipulation. Plaintiffs’ counsel and defendants’ counsel may, but are not

 - 12 -

 

EXHIBIT B

required to, agree to a fee amount that defendants will not oppose, which would then be filed
as an amendment or supplement to the Stipulation.

     23. The Fee Application may be considered separately from the proposed Settlement of the
Action. Abercrombie shall pay any fees and expenses awarded by the Court in the Action to
Plaintiffs’ counsel in the Action within twenty (20) business days after the date on which the
Final Order is deemed to have received Final Approval.

THE SETTLEMENT HEARING

     24. The Court has scheduled a Settlement Hearing which will be held on May             , 2005 at                                 
_.m, at the New Castle County Courthouse, 500 King Street, Wilmington, Delaware 19801, to:

	 	i.  	approve the Settlement pursuant to the Chancery Court
Rule 23.1 as fair, reasonable, adequate and in the best interests of
Abercrombie’s stockholders;
	 
	 	ii.  	enter an Order and Final Judgment dismissing the
Action with prejudice, each party to bear its or his own costs, and
release and enjoin prosecution of any and all Settled Claims;
	 
	 	iii.  	consider the application of Plaintiffs’ counsel for
an award of attorneys’ fees and expenses; and
	 
	 	iv.  	hear other such matters as the Court may deem
necessary and appropriate.

     25. The Court reserves the right to adjourn the Settlement Hearing, including consideration of
the application for attorneys’ fees and costs, without further notice other than by announcement at
the Settlement Hearing or any adjournment thereof.

 - 13 -

 

EXHIBIT B

     26. The Court reserves the right to approve the Settlement at or after the Settlement Hearing
with such modifications as may be consented to by the parties to the Stipulation and without
further notice to Abercrombie’s stockholders.

YOUR RIGHT TO BE HEARD AT THE SETTLEMENT HEARING

     27. Any Current Abercrombie Shareholder who wishes to object to the Settlement or any of the
terms therein, the dismissal of the Action, the Order and Final Judgment to be entered approving
the Settlement, or the Fee Application, or who otherwise wishes to be heard, may appear in person
or through counsel at the settlement hearing and present evidence or argument that may be proper
and relevant; provided, however, that no person other than counsel for Plaintiffs and Defendants
shall be heard, and no papers, briefs, pleadings or other documents by any such person shall be
received and considered by the Court (unless the Court in its discretion shall thereafter otherwise
direct, upon application of such person and for good cause shown), unless not later than ten (10)
business days prior to the Settlement Hearing such person files with the Court:

	 	(i)  	a written notice of intention to appear;
	 
	 	(ii)  	competent evidence that such person held shares of Abercrombie
stock as of April                     , 2005 and that the person continues to hold shares of Abercrombie Common Stock as of the date of the Settlement Hearing; and
	 
	 	(iii)  	a statement of such person’s objections to any matters before
the Court, the grounds therefor or the reasons for such person’s
desiring to appear and be heard, as well as all documents or writings
such person desires the Court to consider;

and, on or before the date of such filing, serves the same documents via first class mail or
overnight delivery upon all of the following counsel of record:

	 	 	 
	

	 	Michael Hanrahan (#941)
	

	 	Gary F. Traynor (#2131)
	

	 	PRICKETT, JONES & ELLIOT, P.A.

 - 14 -

 

EXHIBIT B

	 	 	 
	

	 	1310 N. King Street
	

	 	Wilmington, Delaware 19899
	

	 	(302) 888-6500
	

	 	Counsel for Plaintiffs
	 
	 	 
	

	 	J. Travis Laster (#3514)
	

	 	RICHARDS, LAYTON & FINGER P.A.
	

	 	One Rodney Square
	

	 	P.O. Box 551
	

	 	Wilmington, Delaware 19899
	

	 	(302) 651-7700
	

	 	Counsel for the Company and for Individual
	

	 	Defendants other than Michael Jeffries
	 
	 	 
	

	 	Andre G. Bouchard (#2504)
	

	 	BOUCHARD, MARGULES & FRIEDLANDER, P.A
	

	 	222 Delaware Avenue, Suite 1400
	

	 	Wilmington, DE 19801
	

	 	Phone: 302-573-3500
	

	 	Fax: 302-573-3501
	

	 	Counsel for Michael Jeffries

Such objecting persons must also contemporaneously deliver a copy of all documents described above
to the Register in Chancery, New Castle County Courthouse, 500 N. King St., Wilmington, Delaware
19801; and even if such persons do not appear at the Settlement Hearing, the Court will consider
their written submissions. Unless the Court otherwise directs, no person shall be entitled to
object to the approval of the Settlement, to any Order and Final Judgment entered thereon, to the
Fee Application, or to otherwise to be heard, except by serving and filing a written objection and
supporting papers and documents as prescribed above. Any persons who fail to object in the manner
and within the time prescribed above shall be deemed to have waived the right to object (including
the right to appeal) and forever shall be barred, in this proceeding or in any other proceeding,
from raising such objection.

ORDER AND FINAL JUDGMENT OF THE COURT

 - 15 -

 

EXHIBIT B

     28. If the Settlement (including any modification thereto made with the consent of Plaintiffs,
the Company and the Individual Defendants as provided for herein) is approved by the Court, the
parties to the Settlement shall promptly request that the Court enter an Order and Final Judgment,
which among other things:

	 	a.  	approves the Settlement, adjudges the terms thereof to be fair, reasonable,
adequate and in the best interests of the Company’s stockholders, and directs
consummation of the Settlement in accordance with the terms and conditions of the
Stipulation;
	 
	 	b.  	determines that the requirements of Rule 23.1 of the Chancery Court Rules and
due process have been satisfied in connection with Notice to Abercrombie’s
stockholders;
	 
	 	c.  	dismisses the Action with prejudice as to Plaintiffs, the Company, the
Company’s stockholders and all of the Individual Defendants extinguishing, discharging
and releasing any and all Settled Claims as against the Company and the Individual
Defendants, said dismissal subject only to compliance by the Company and the Individual
Defendants with the terms of the Stipulation and any Order of the Court concerning the
Stipulation, and permanently enjoining Plaintiffs, Abercrombie’s stockholders, the
Company and anyone claiming through or for the benefit of any of them, from asserting,
commencing, prosecuting, assisting, instigating or in any way participating in the
commencement or prosecution of any action or other proceeding, in any forum, asserting
any Settled Claims, either representatively, derivatively or in any other capacity.

SCOPE OF THIS NOTICE AND FURTHER INFORMATION

 - 16 -

 

EXHIBIT B

     29. This Notice does not purport to be a comprehensive description of the Action, the
allegations or transactions related thereto, the terms of the Settlement or the Settlement Hearing.
For a more detailed statement of the matters involved in this litigation, you may inspect the
pleadings, the Stipulation, the Orders entered by the Court of Chancery and other papers filed in
the litigation, unless sealed, at the Office of the Register in Chancery in the Court of Chancery
of the State of Delaware, New Castle County Courthouse, 500 N. King Street, Wilmington, Delaware
19801, during regular business hours of each business day. DO NOT WRITE OR TELEPHONE THE COURT.

NOTICE TO PERSONS OR ENTITIES HOLDING

RECORD OWNERSHIP ON BEHALF OF OTHERS

     30. Brokerage firms, banks and other persons or entities who are record owners of Abercrombie,
but not beneficial owners, are directed to send this Notice promptly to beneficial owners. If
additional copies of this Notice are needed for forwarding to beneficial owners, any timely
requests for such additional copies or provision of a list of names and mailing addresses of
beneficial owners may be directed to: In re Abercrombie & Fitch Co. Stockholder Derivative Action,
c/o National City Bank, Shareholder Services Dept., Corporate Trust Operations Dept. 5352, Third
Floor North Annex, 4100 West 150th Street, Cleveland, OH 44135, (216) 257-8663 or (800) 622-6757,
shareholder.inquiries@nationalcity.com.

	 	 	 	 	 
	Dated: April                     , 2005

	 	BY ORDER OF THE COURT:	 	 
	 
	 	 	 	 
	

	 	

	 	 

 - 17 -

 

EXHIBIT C

 

 

EXHIBIT C

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

	 	 	 	 	 
	IN RE ABERCROMBIE & FITCH CO.

SHAREHOLDER DERIVATIVE

LITIGATION

	 	)

)

)
	 	
 Consol. C.A. No. 1077-N

ORDER AND FINAL JUDGMENT

     A hearing having been held before this Court on May ___, 2005, pursuant to the Court’s Order
of April ___, 2005 (the “Scheduling Order”), upon a Stipulation of Settlement, dated as of April
___, 2005 (the “Stipulation”), providing for a settlement of the above-captioned consolidated action
(the “Action”), which is incorporated herein by reference; it appearing that due notice of said
hearing has been given in accordance with the aforesaid Scheduling Order; the respective parties
having appeared by their attorneys of record; the Court having heard and considered evidence in
support of the proposed Settlement; the attorneys for the respective parties having been heard; an
opportunity to be heard having been given to all other persons requesting to be heard in accordance
with the Scheduling Order; the Court having determined that notice to the Company’s stockholders
was adequate and sufficient; and the entire matter of the proposed Settlement having been heard and
considered by the Court;

     IT IS HEREBY ORDERED, ADJUDGED AND DECREED, this ___day of May, 2005, that:

     1. Unless otherwise defined herein, all defined terms shall have the meaning set forth in the
Stipulation.

     2. The Notice of Hearing and Proposed Settlement of The Abercrombie & Fitch Co. Shareholder
Derivative Litigation (the “Notice”) has been given to Abercrombie’s stockholders,
pursuant to and in the manner directed by the Scheduling Order, proof of mailing of the Notice

 

 

was filed with the Court, and full opportunity to be heard has been offered to all parties and
persons in interest. The form and manner of the Notice is hereby determined to have been the best
notice practicable under the circumstances and to have been given in full compliance with each of
the requirements of Delaware Court of Chancery Rule 23.1 and due process, and it is further
determined that the Company, Plaintiffs and all of Abercrombie’s stockholders are bound by this
Order and Final Judgment.

     3. The Stipulation, the Settlement and all transactions preparatory or incidental thereto are
found to be fair and in the best interests of the Company’s stockholders and are hereby approved
pursuant to Court of Chancery Rule 23.1. The parties to the Stipulation are hereby authorized and
directed to comply with and to consummate the Settlement in accordance with its terms and
provisions, and the Register in Chancery is directed to enter and docket this Order and Final
Judgment.

     4. This Order and Final Judgment shall not constitute any evidence of or admission by any
party herein that any acts of wrongdoing have been committed by any of the parties to the Action
and shall not be deemed to create any inference that there is any liability therefor.

     5. The Action is hereby dismissed with prejudice as to the Individual Defendants and against
Plaintiffs, the Company and all of the Company’s shareholders on the merits and, except as provided
in the Stipulation, without costs.

     6. All claims, demands, rights, actions or causes of action, liabilities, damages, losses,
obligations, judgments, suits, fees, expenses, costs, matters and issues of any kind or nature
whatsoever, whether known or unknown, contingent or absolute, suspected or unsuspected, disclosed
or undisclosed, hidden or concealed, matured or unmatured, that have
been, could have been, or in the future can or might be asserted in the Action or in any
court,

- 2 -

 

tribunal or proceeding (including, but not limited to, any claims arising under federal or
state statutory or common law relating to alleged fraud, breach of any duty, negligence, violations
of the federal securities laws or otherwise) by or on behalf of Plaintiffs, derivatively by any
other past or present stockholder of the Company or the Company, or by their or its predecessors,
successors or assigns (or any person claiming by, through, in the right of or on behalf of them or
the Company by subrogation, assignment or otherwise), as against any of (i) the Company and its
parent entities, predecessors, associates, general or limited partnerships, limited liability
companies, affiliates or subsidiaries, past and present, and each and all of their respective past,
present or future officers, members, directors, stockholders, agents, representatives, employees,
attorneys, financial or investment advisors, advisors, consultants, auditors, accountants,
investment bankers, commercial bankers, trustees, engineers, agents, insurers, co-insurers and
reinsurers; and (ii) the Individual Defendants and their respective heirs, executors, trustees,
general or limited partners or partnerships, limited liability companies, members, representatives,
employees, attorneys, advisors, consultants, agents, estates, and administrators (collectively, the
“Released Persons”), whether or not any such Released Persons were named, served with process or
appeared in the Action; whether legal, equitable or any other type, which have arisen, arise now or
hereafter arise out of, or relate in any manner to, the allegations, facts, events, practices,
conduct, transactions, matters, acts, occurrences, statements, representations, misrepresentations
or omissions, or any fees, expenses or costs incurred in prosecuting, defending or settling the
Action, or any other matter, thing or cause whatsoever, or any series thereof, embraced, involved
or set forth in, or referred to or otherwise related, directly or indirectly, in any way to, the
Action or the subject matter of the Action, and including, without
limitation, any claims in any way related to (i) the Settlement and this Stipulation, (ii) the

- 3 -

 

fiduciary obligations of the Individual Defendants or Released Persons in connection with the
allegations made in the Complaint, (iii) any disclosures or alleged misrepresentations or omissions
that were made or allegedly not made by any of the Released Persons regarding the subject matter of
the Action, the Settlement or any other matters described or alleged in the Complaint or this
Stipulation, including, without limitation, all disclosure requirements arising from and relating
to the compensation of Michael S. Jeffries (“Jeffries”), (iv) the compensation of Jeffries,
including, without limitation, the Employment Agreement, (v) the Company’s Supplemental Executive
Retirement Plan, (vi) the Compensation Committee’s retention of compensation experts and advisors,
(vii) all meetings of the Compensation Committee between January 1, 2001 and the date of this
Stipulation, including, without limitation, those taking place on March 6, 2001, February 25, 2002,
November 6, 2002, November 19, 2002, and January 20, 2003, (viii) the decisions of the Compensation
Committee in February 2002 with respect to Jeffries’ compensation, and (ix) the recommendation by
the Compensation Committee and the adopting by the Board of the Employment Agreement on January 20,
2003 (collectively, the “Settled Claims”) are hereby completely, fully, finally and forever
compromised, settled, released, discharged, extinguished and dismissed with prejudice; provided,
however, that the Settled Claims shall not include the right to enforce the terms of the
Stipulation.

     7. The release set forth herein extends to claims that the parties granting the release (the
“Releasing Parties”) do not know or suspect to exist at the time of the release, which if known,
might have affected the Releasing Parties’ decision to enter into the release; the Releasing
Parties shall be deemed to relinquish, to the extent applicable and to the fullest extent permitted
by law, the provisions, rights and benefits of Section 1542 of the California Civil
Code; and the Releasing Parties shall be deemed to waive any and all provisions, rights and

- 4 -

 

benefits conferred by any law of any state or territory of the United States, or principle of
common law, which is similar, comparable or equivalent to California Civil Code Section 1542.

     8. Plaintiffs, Abercrombie’s past and present stockholders, the Company and anyone claiming
through or for the benefit of any of them, are hereby permanently enjoined from asserting,
commencing, prosecuting, assisting, instigating or in any way participating in the commencement or
prosecution of any action or other proceeding, in any forum, asserting derivatively any Settled
Claims.

     9. Plaintiffs in the Action and their counsel are awarded attorneys’ fees and reimbursement of
reasonable expenses incurred in connection with the Action in the total amount of
$                                        , which sum the Court finds to be fair and reasonable, and which shall be
paid by the Company on behalf of and for the benefit of the other defendants in the Action within
twenty (20) business days after the Order and Final Judgment becomes final and no longer subject to
further appeal or review, whether by exhaustion of any possible appeal, writ of certiorari, lapse
of time or otherwise.

     10. The effectiveness of this Order and Final Judgment and the obligations of Plaintiffs, the
Company and the Individual Defendants under the Settlement shall not be conditioned upon or subject
to the resolution of any appeal from this Order and Final Judgment that relates solely to the issue
of Plaintiffs’ counsel’s application for an award of attorneys’ fees and expenses.

     11. Without affecting the finality of this Order and Final Judgment in any way, this Court
reserves jurisdiction over all matters relating to the administration and consummation of the
Settlement.

- 5 -

 

	 	 	 	 	 
	 

	 	 	 	 
	

	 	 	 	 
	

	 	Chancellor	 	 

- 6 -EX-10.2

 

Exhibit 10.2

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

	 	 	 	 	 
	IN RE ABERCROMBIE & FITCH CO.

	 	)	 	 
	SHAREHOLDER DERIVATIVE 

	 	)	 	Consol. C.A. No.  1077-N
	LITIGATION
	 	)	 	 

SUPPLEMENTAL STIPULATION OF SETTLEMENT

     This Supplemental Stipulation of Settlement (the “Supplemental Stipulation”), dated as of June
1, 2005 and subject to the approval of the Court,1 is entered into by and among the
Plaintiffs, the Individual Defendants and nominal defendant Abercrombie.

STIPULATED FACTS

     WHEREAS:

          1. On April 8, 2005, subject to the approval of the Court, the Plaintiffs, the Individual
Defendants and Abercrombie entered into a Stipulation of Settlement (the “Stipulation”) proposing a
settlement of the Action.

          2. Paragraph 29 of the Stipulation states:

Plaintiffs in the Action and their counsel intend to apply to the
Court for an award of attorneys’ fees and out of pocket expenses in
amount to be set by the Court. Approval by the Court of such fee
application shall not be a precondition to the dismissal of the
Action in accordance with this Stipulation. Plaintiffs’ counsel
and defendants’ counsel may, but are not required to, agree to a fee
amount that defendants will not oppose, which would then be filed as
an amendment or supplement to this Stipulation.

          3. On May 27, 2005, defendants agreed not to oppose an application by Plaintiffs’ in the
Action and their counsel for an award of attorneys’ fees and out of pocket expenses in an aggregate
amount of up to $1.2 million.

	1	Unless otherwise noted, all defined terms shall
have the same meaning ascribed to them in the Stipulation.

 

 

          4. Plaintiffs in the Action and their counsel intend to apply to the Court for an award of
fees and reimbursement of Plaintiffs’ reasonable expenses incurred in connection with the Action in
an aggregate amount of not more than $1.2 million (the “Fee Application”).

     NOW THEREFORE IT IS HEREBY STIPULATED AND AGREED AS FOLLOWS, pursuant to Court of Chancery
Rule 23.1, and subject to the approval of the Court:

          5. Defendants in the Action shall not oppose the Fee Application in an aggregate amount of up
to $1.2 million. Abercrombie, on behalf of and for the benefit of the other defendants in the
Action, agrees to pay any final award of fees and expenses by the Court up to the amount of the Fee
Application. Final resolution by the Court of the Fee Application shall not be a precondition to
the dismissal of the Action in accordance with the Stipulation.

          6. A copy of the Supplemental Notice of Hearing and Proposed Settlement of The Abercrombie &
Fitch Co. Shareholder Derivative Litigation (the “Notice”), substantially in the form attached
hereto as Exhibit A, shall be sent to all stockholders of record of Abercrombie as of the date of
the Scheduling Order.

          7. All costs incurred in identifying and notifying Abercrombie’s stockholders of this
Supplemental Stipulation, including the printing and the copying of the Notice, will be paid by
Abercrombie, on behalf of and for the benefit of the Individual Defendants.

          8. This Supplemental Stipulation shall not be deemed to modify the Stipulation except to the
extent the terms of the Supplemental Stipulation are inconsistent with Paragraph 29 of the
Stipulation. This Supplemental Stipulation shall be subject to all terms and conditions agreed
upon in the Stipulation.

2

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

3

 

     IN WITNESS WHEREOF, the parties have executed this Stipulation effective as of June 1, 2005.

	 	 	 
	Of Counsel:

	 	/s/ Michael Hanrahan
	

	 	 
	
Marc A. Topaz

Robert B. Weiser 

Eric A. Zagar 

SCHIFFRIN & BARROWAY, LLP

Three Bala Plaza, East, Suite 400

Bala Cynwyd, Pennsylvania 19004

(610) 667-7706

	 	Michael Hanrahan (#941)

Gary F. Traynor (#2131)

PRICKETT, JONES & ELLIOT, P.A.

1310 N. King Street

Wilmington, Delaware 19899

(302) 888-6500

Counsel for Plaintiffs
	 
	 	 
	Of Counsel:

	 	/s/ Harry Tashjian IV
	

	 	 
	
John L. Hardiman

SULLIVAN & CROMWELL LLP

125 Broad Street 

New York, NY 10004-2498

	 	Harry Tashjian (#4609)

RICHARDS, LAYTON & FINGER P.A.

One Rodney Square

P.O. Box 551

Wilmington, Delaware 19899

(302) 651-7700

Counsel for Defendants other than

Michael Jeffries
	 
	 	 
	Of Counsel:

	 	/s/ Andre G. Bouchard
	

	 	 
	
Barbara Moses

MORVILLO, ABRAMOWITZ, GRAND,
IASON &
SILBERBERG, P.C.

565 Fifth Avenue

New York, NY 10017

	 	Andre G. Bouchard (#2504)

BOUCHARD, MARGULES &
FRIEDLANDER,
P.A.

222 Delaware Avenue, Suite 1400

Wilmington, DE 19801

Phone: 302-573-3500

Fax: 302-573-3501

Counsel for Michael Jeffries

4

 

Exhibit A

 

 

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW
CASTLE COUNTY

	 	 	 	 	 
	IN RE
ABERCROMBIE & FITCH CO.
	 	)	 	 
	SHAREHOLDER DERIVATIVE
	 	)	 	Consol. C.A. No. 1077-N
	LITIGATION
	 	)	 	 

SUPPLEMENTAL NOTICE OF HEARING AND PROPOSED SETTLEMENT OF THE
ABERCROMBIE & FITCH
CO. SHAREHOLDER DERIVATIVE LITIGATION

		
	TO: 	ALL RECORD AND BENEFICIAL HOLDERS OF STOCK OF THE ABERCROMBIE & FITCH CO. ON APRIL 29, 2005,
INCLUDING ANY AND ALL OF THEIR RESPECTIVE SUCCESSORS IN INTEREST, PREDECESSORS IN INTEREST,
REPRESENTATIVES, TRUSTEES, EXECUTORS, ADMINISTRATORS, HEIRS, ASSIGNS OR TRANSFEREES,
IMMEDIATE AND REMOTE, AND ANY PERSON OR ENTITY ACTING FOR OR ON BEHALF OF, OR CLAIMING UNDER,
ANY OF THEM, AND EACH OF THEM (COLLECTIVELY “CURRENT ABERCROMBIE
STOCKHOLDERS”).
	 	 
	 	PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE AFFECTED BY THE
LEGAL PROCEEDINGS IN THIS LITIGATION. IF YOU ARE NOT THE BENEFICIAL HOLDER, PLEASE TRANSMIT
THIS DOCUMENT TO SUCH BENEFICIAL HOLDER.

     1. The purpose of this Supplemental Notice is to supplement the Notice dated April 18, 2005,
which informed you of a settlement in this consolidated derivative action (the “Action”), which
has been brought on behalf of The Abercrombie & Fitch Co. (the “Company” or “Abercrombie”) and a
hearing to be held by the Court of Chancery of the State of Delaware (the “Court”).

     2. The Notice advised you that Plaintiffs in the Action and their counsel intend to apply to
the Court for an award of attorneys’ fees and out of pocket
expenses in amount to be set by the Court. The
Notice further advised you that Plaintiffs’ counsel and defendants’ counsel may, but are not required to, agree to a
fee amount that defendants will not oppose.

     3. On May 27, 2005, defendants agreed not to oppose an application by Plaintiffs’ counsel for
an award of attorneys’ fees and out of pocket expenses in an aggregate amount of up to $1.2 million.

     4. There have not been any other changes in the description of the Action set forth in the
Notice.

     5. As disclosed in the Notice, a hearing will be held in the Court of Chancery Courthouse, 34
The Circle, Georgetown, Delaware, on June 14, 2005, at 10:30 a.m. to determine whether the Court should:
(i) approve the settlement of the Action pursuant to the
Chancery Court Rule 23.1 as fair, reasonable,
adequate and in the best interests of Abercrombie’s stockholders; (ii) enter an Order and Final Judgment dismissing the
Action with prejudice; (iii) consider the application of Plaintiffs’ counsel for an award of attorneys’
fees and expenses; and (iv) hear other such matters as the Court may deem necessary and appropriate.

NOTICE TO PERSONS OR ENTITIES HOLDING

RECORD OWNERSHIP ON BEHALF OF OTHERS

     6. Brokerage firms, banks and other persons or entities who are record owners of Abercrombie,
but not beneficial owners, are directed to send this Supplemental Notice promptly to beneficial
owners. If additional copies of this Supplemental Notice are needed for forwarding to beneficial
owners, any timely requests for such additional copies or provision of a list of names and mailing
addresses of beneficial owners may be directed to: In re Abercrombie
& Fitch Co. Stockholder
Derivative Action, c/o National City Bank, Shareholder Services Dept, Corporate Trust Operations
Dept, 5352, Third Floor North Annex, 4100 West 150th Street, Cleveland, OH 44135

	 	 	 
	     Dated: May 31, 2005

	 	BY ORDER OF THE COURT:
	 
	 	 
	

	 	 
	

	 	Register in Chancery

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