Document:

exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     Employment Agreement effective as of the 15th day of August, 2005, by and between Action
Performance Companies, Inc., an Arizona corporation (“Employer”) and Herbert M. Baum
(“Executive”). For purposes of paragraphs 8, 9, and 10 of this Agreement, the term “Employer”
shall include each of Employer’s subsidiaries and operating divisions.

WITNESSETH:

     Employer desires to employ Executive, and Executive desires to accept such employment, all on
the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth in this
Agreement, the parties hereto agree as follows:

     1. Position and Duties. Executive shall be employed as the Executive Chairman of Employer and
shall report only to the Board of Directors of Employer (the “Board”). It is anticipated that
Executive will have primary responsibility for: (1) dealing with the financial community, (2)
analyzing strategic alternatives, and (3) supervising the management team. Executive shall serve
Employer faithfully, loyally, honestly, and to the best of his ability. Executive shall spend the
equivalent of one week per month at Employer facilities and will be available daily from his
residence or other location during regular business hours for consultation with other senior
executives. This Agreement, however, shall not preclude Executive from (a) serving on the board of
directors of not more than five other companies (that do not compete with Employer), (b) serve on
the governing body of a reasonable number of trade associations or charitable organizations, (c)
engaging in charitable activities and community affairs, and (d) managing his personal investments
and affairs, provided that such activities do not conflict or materially interfere with the
effective discharge of his duties and responsibilities to Employer and to the extent Employer does
not reasonably object to any service by Executive on behalf of any such third party.

     2. Term of Employment. The term of Executive’s employment hereunder shall commence on the
date hereof and shall continue until December 31, 2007 (the “Initial Term”) and from year to year
thereafter (each a “Renewal Term”), unless and until terminated by either party giving written
notice to the other not less than sixty (60) days prior to the end of the then current term, unless
earlier terminated under the terms of this Agreement.

     3. Compensation and Other Benefits.

          (a) Base Salary. Employer shall pay to Executive a base salary at a rate of One Hundred
Eighty Thousand Dollars ($180,000) per annum to be paid in equal monthly installments, or in such
other periodic installments upon which Employer and Executive shall mutually agree. On at least an
annual basis, the Compensation Committee of the Board shall review Executive’s base salary and may
increase but not decrease Executive’s base salary in the committee’s discretion.

          (b) Stock Options. Employer will grant to Executive options to acquire 100,000 shares of
Employer’s common stock at an exercise price equal to the closing market

 

 

price of Action Performance Companies, Inc. on the effective date of this Agreement. Such
option grant will be subject to the specific terms and conditions with respect to vesting and other
matters as set forth in a separate stock option agreement to be entered into between Employer and
Executive.

          (c) Benefit Plans. Executive shall be entitled to participate in any benefit plans maintained
by Employer, including, but not limited to, retirement plans, disability plans, life insurance
plans, and health and dental plans available to other executive employees of Employer, subject to
any restrictions, including waiting periods, specified in the plans.

          (d) Other Benefits. Executive shall also receive (i) reimbursement for reasonable annual tax
and financial consulting fees, (ii) reimbursement for the costs of an annual physical by the doctor
of his choice, and (iii) reimbursement for reasonable legal and accounting fees and expenses
incurred by Executive in connection with this Agreement, all of which shall be subject to a gross
up, which means that Executive will receive an additional payment in an amount such that after
Executive’s payment of taxes on that additional payment, a sufficient sum remains to pay
Executive’s tax liability resulting from such reimbursement.

          (e) Vacations. Executive shall also be entitled to four (4) weeks of paid vacation each
calendar year, with such vacations to be scheduled and taken by Executive in his discretion,
provided no such vacation shall interfere with the performance of Executive’s duties hereunder and
no unused vacation may be carried over to a succeeding calendar year.

          (f) Business Expenses. Employer shall reimburse Executive for any and all necessary,
customary, and usual expenses, properly receipted in accordance with Employer’s policies, incurred
by Executive on behalf of Employer. If Executive is required to travel in the performance of his
duties under this Agreement, Executive shall be entitled to use any plane maintained by Employer or
to fly first class on commercial flights at his election at Employer’s cost. Employer shall also
reimburse Executive for hotels and meals relating to his service to Employer.

          (g) Signing Bonus. Upon execution of this Agreement by Employee and Executive, Executive will
be entitled to a signing bonus of $7,000.00, less applicable withholding taxes.

     4. Termination by Employer.

          (a) Termination for Cause. Employer may terminate Executive’s employment under this Agreement
for Cause at any time upon written notice to Executive. For purposes of this Agreement, “Cause”
shall be limited to discharge resulting from a determination by the Board that Executive (i) has
been convicted of a felony, involving dishonesty, fraud, theft, or embezzlement; (ii) has
repeatedly failed or refused, after written notice from Employer along with failure of Executive to
cure within thirty (30) days of receipt of such notice, in a material respect to follow reasonable
policies or directives established by Employer; (iii) has willfully and persistently failed, after
written notice from Employer within thirty (30) days of receipt of such notice, to attend to
material duties or obligations imposed upon him under this Agreement; or (iv) has performed an act
or failed to act for which if he were prosecuted and convicted, would

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constitute a felony involving One Thousand Dollars ($1,000) or more of money or property of
Employer. The existence of “Cause” shall be determined by the Board acting in good faith after
prior notice to Executive and after providing Executive with an opportunity to be heard. If
Executive’s employment is terminated for Cause, Executive shall receive no Severance Benefits
pursuant to paragraph 7.

          (b) Termination without Cause. Employer also may terminate Executive’s employment under this
Agreement without Cause at any time upon written notice to Executive. In the event Executive’s
employment is terminated by Employer without Cause, Executive shall receive the Severance Benefits
pursuant to paragraph 7.

     5. Termination by Executive. Executive may terminate his employment under this Agreement with
or without “Good Reason” in accordance with the provisions of this paragraph 5.

          (a) Termination for Good Reason. Executive may terminate his employment under this Agreement
for “Good Reason” by giving written notice to Employer within sixty (60) days, or such longer
period as may be agreed to in writing by Employer, of Executive’s receipt of notice of the
occurrence of any event constituting “Good Reason,” as described below. Executive shall have “Good
Reason” to terminate his employment under this Agreement upon the occurrence of any of the
following events:

               (i) Any reduction in Executive’s status, duties, authority, or compensation;

               (ii) Executive is demoted to a position of less stature or importance within Employer than the
position described in paragraph 1;

               (iii) Executive is assigned duties inconsistent with the positions, duties, responsibilities,
or status of the Executive Chairman of Employer;

               (iv) Upon an event of a “Change of Control” of Employer, provided that a change of control
shall not be considered to have taken place for purposes of this Agreement in the event the Change
of Control shall have been specifically approved by the Board and the provisions of this Agreement
remain in full force and effect as to Executive and Executive suffers no reduction in Executive’s
status, duties, authority, or compensation.

          (b) Change of Control. For the purposes of this paragraph 5, the term “Change in Control” of
Employer shall mean a Change in Control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 as in effect on the date of this Agreement or, if Item 6(e) is no longer in effect, any
regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934 that serve similar purposes; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if and when

               (i) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) directly or indirectly of equity securities of

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Employer representing thirty percent (30%) or more of the combined voting power of Employer’s
then-outstanding equity securities;

               (ii) during the term of this Agreement, individuals who, at the beginning of such period,
constituted the Board of Directors of Employer (the “Original Directors”), cease for any reason to
constitute at least a majority thereof unless the election or nomination for election of each new
director was approved (an “Approved Director”) by the unanimous vote of the Board constituted
entirely of Existing Directors and/or Approved Directors;

               (iii) a tender offer or exchange offer is made whereby the effect of such offer is to take
over and control Employer, and such offer is consummated for the equity securities of Employer
representing twenty percent (20%) or more of the combined voting power of Employer’s
then-outstanding voting securities;

               (iv) Employer is merged, consolidated, or enters into a reorganization transaction with
another person and, as the result of such merger, consolidation, or reorganization, less than 75
percent (75%) of the outstanding equity securities of the surviving, or resulting person shall then
be owned in the aggregate by the former stockholders of Employer; or

               (v) Employer transfers substantially all of its assets to another person or entity which is
not a wholly owned subsidiary of Employer.

If Executive terminates this Agreement and his employment for Good Reason, Executive shall be
entitled to receive Severance Benefits pursuant to paragraph 7.

          (c) Termination Without Good Reason. Executive also may terminate his employment without Good
Reason at any time by giving written notice to Employer. If Executive terminates his employment
under this Agreement without Good Reason, Executive shall not receive Severance Benefits pursuant
to paragraph 7.

     6. Death or Disability.

          (a) Death. Executive’s employment shall terminate automatically on Executive’s death. Any
compensation or other amounts due to Executive for services rendered prior to his death shall be
paid to Executive’s surviving spouse, or if Executive does not leave a surviving spouse, to
Executive’s estate. No other benefits shall be payable to Executive’s heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other benefit plans
maintained by Employer.

          (b) Disability. In the event Executive becomes “Disabled,” Executive’s employment hereunder
and Employer’s obligation to pay Executive’s Base Salary shall continue for a period of twelve (12)
months from the date of Executive’s initial absence due to such Disability and, in the event
Executive becomes “Disabled” during the first year of his employment with Employer. Executive
shall also receive any additional compensation to which Executive may be entitled pursuant to
paragraph 3 (less any amounts payable to Executive pursuant to any long-term disability insurance
policy paid for by Employer). If at the end of the

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twelve (12) month period, Executive has not recovered from such Disability, Executive’s
employment hereunder shall automatically cease and terminate. Executive shall be considered
“Disabled” or to be suffering from a “Disability” for purposes of this paragraph 6(b) if, in the
judgment of a licensed physician selected by the Board and confirmed by a licensed physician
designated by Executive, and after any reasonable accommodations required by applicable law, he is
unable to perform the essential functions of his position due to a physical or mental impairment,
and such incapacity is expected to continue for a period of at least twelve (12) consecutive months
from the date of the initial absence due to such incapacity. The determination by such physicians
shall be binding and conclusive for all purposes. If the physician selected by the Board and the
physician selected by Executive cannot agree, the two (2) physicians shall select a third (3rd)
physician. The decision of the third (3rd) physician concerning Executive’s Disability then shall
be binding and conclusive on all interested parties.

     7. Severance Benefits. If during the Initial Term or any Renewal Term, Executive’s employment
under this Agreement is terminated without Cause by Employer pursuant to paragraph 4(b) prior to
the last day of the Initial Term or any Renewal Term, or if Executive elects to terminate his
employment for Good Reason pursuant to paragraph 5(a), Executive shall receive the “Severance
Benefits” provided by this paragraph. In addition, Executive also shall receive the Severance
Benefits if his employment is terminated due to Disability pursuant to paragraph 6(b).

          (a) Effective Date. The Severance Benefits shall begin immediately following the effective
date of termination of employment and shall continue to be payable for a period of twenty four
months (24) following the effective date, in all events except as set forth in paragraph 6(b).

          (b) Benefits. The Executive’s Severance Benefits shall consist of two (2) times the
Executive’s then base salary and bonus compensation. The Company will pay this amount to Executive
in a lump sum, within 10 days of termination. Executive’s bonus compensation shall be the greater
of (i) the amount paid to him as bonus or incentive compensation for the prior year, and (ii) an
amount estimated to be due him under any then current bonus program. By way of example, if
Executive was paid a bonus of $100,000 for the prior year, and is estimated to earn a $60,000 bonus
in the year of termination, he would be paid $200,000 as his bonus payout upon termination. The
Severance shall also consist of the continuation for two (2) years of any health, life, disability,
or other insurance benefits that Executive was receiving as of the Change of Control date, but only
to the extent permitted under the policies for such benefits. If a particular insurance benefit
may not be continued for any reason, Employer shall pay to the Executive in a lump sum an amount
estimated in good faith for him to obtain comparable coverage for the two (2) year post-termination
period. Notwithstanding the above, at all times under the terms of this Section 7(b), the cash
portion of the Executive’s Severance Benefit shall be paid no later than the date that is two and
one-half months after the end of the later of (i) the Employer’s fiscal year, or (ii) the calendar
year, in which the payments are no longer subject to a substantial risk of forfeiture, as
determined in accordance with the guidance promulgated under Section 409A of the Internal Revenue
Code of 1986, as amended (“Code”).

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          (c) Exceptions to Benefits. If Executive voluntarily terminates this Agreement and his
employment without Good Reason prior to the end of the Initial Term or any Renewal Term, or if
Employer terminates the Agreement and Executive’s employment for Cause, no Severance Benefits shall
be paid to Executive. No Severance Benefits are payable in the event of Executive’s death while in
the active employ of Employer.

          (d) Future Employment. The payment of Severance Benefits shall not be affected by whether
Executive seeks or obtains other employment. Executive shall have no obligation to seek or obtain
other employment, and Executive’s Severance Benefits shall not be impacted by Executive’s failure
to mitigate.

     8. Covenant-Not-to-Compete.

          (a) Interests to be Protected.

               (i) Customers. The parties acknowledge that during the term of his employment under this
Agreement, Executive will perform essential services for Employer, its employees, and shareholders,
and for customers of Employer. Therefore, Executive will be given an opportunity to meet, work
with, and develop close working relationships with Employer’s customers on a first-hand basis and
will gain valuable insight as to the customers’ operations, personnel, and need for services. In
addition, Executive will be exposed to, have access to, and be required to work with, a
considerable amount of Employer’s Confidential and Proprietary Information.

               (ii) Employees. The parties also expressly recognize and acknowledge that the personnel of
Employer have been trained by, and are valuable to Employer, and that if Employer must hire new
personnel or retrain existing personnel to fill vacancies it will incur substantial expense in
recruiting and training such personnel. The parties expressly recognize that should Executive
compete with Employer in any manner whatsoever, it could seriously impair the goodwill and diminish
the value of Employer’s business.

               (iii) Extended Duration. The parties acknowledge that this covenant has an extended duration;
however, they agree that this covenant is reasonable and it is necessary for the protection of
Employer, its shareholders and employees.

               (iv) Fair and Reasonable. For these and other reasons, and the fact that there are many other
employment opportunities available to Executive if his employment with Employer should terminate,
the parties are in full and complete agreement that the following restrictive covenants (which
together are referred to as the “Covenant-Not-To-Compete”) are fair and reasonable and are freely,
voluntarily, and knowingly entered into. Further, each party has been given the opportunity to
consult with independent legal counsel before entering into this Agreement.

          (b) Devotion to Employment. Executive shall devote substantially all his business time and
efforts to the performance of his duties on behalf of Employer during the term of his employment
under this Agreement. During his term of employment, Executive shall not at any time or place or
to any extent whatsoever, either directly or indirectly, without the express written consent of
Employer, engage in any outside employment, or in any activity competitive

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with or adverse to Employer’s business or affairs, whether alone or as partner, officer,
director, employee, shareholder of any corporation or as a trustee, fiduciary, consultant or other
representative. This is not intended to prohibit Executive from engaging in nonprofessional
activities, such as personal investments or conducting to a reasonable extent private business
affairs, which may include other boards of directors’ activity, so long as they do not conflict
with Employer’s business. Participation to a reasonable extent in civic, social, or community
activities is encouraged.

          (c) Non-Solicitation of Customers. During the term of Executive’s employment with Employer
under this Agreement and for a period of twenty-four (24) months after the termination of
employment with Employer under this Agreement, regardless of who initiates the termination and for
whatever reason, Executive shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or governmental entity, in
any manner whatsoever, call upon, contact, encourage, handle, or solicit customers of Employer with
whom he has worked as an employee of Employer at any time prior to termination, or at the time of
termination, for the purpose of soliciting or selling such customer the same, similar, or related
services that he provided on behalf of Employer.

          (d) Non-Solicitation of Executives. During the term of Executive’s employment with Employer
under this Agreement and for a period of twenty-four (24) months after the termination of
employment with Employer under this Agreement, regardless of who initiates the termination and for
whatever reason, Executive shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or governmental entity, seek
to hire, and/or hire any of Employer’s personnel or employees for the purpose of having such
employee engage in services that are the same, similar, or related to the services that such
employee provided for Employer.

          (e) Competing Business. During the term of Executive’s employment with Employer under this
Agreement and for a period of twenty-four (24) months after the termination of employment with
Employer under this Agreement, regardless of who initiates the termination and for whatever reason,
Executive shall not, directly or indirectly, for himself, or on behalf of, or in conjunction with,
any other person, company, partnership, corporation, or governmental entity, in any manner
whatsoever, engage in the same or similar business as Employer, which would be in direct
competition with any Employer line of business, in any geographical service area where Employer
engaged in business at time of termination. For the purposes of this provision, the term
“competition” shall mean directly or indirectly engaging in or having a substantial interest in a
business or operation which has been, is, or will be, providing the same products provided by
Employer; provided, however the ownership of not more than 5% by Executive of a publicly held
corporation shall not constitute competition which is prohibited by this paragraph 8(e).

          (f) Limitation and Judicial Amendment. Notwithstanding any other provision of this Agreement,
the provisions contained in paragraphs 8(c), 8(d), and 8(e) shall not apply for more than twelve
(12) months after Executive no longer receives Severance Benefits under this Agreement. If the
scope of any provision of this Agreement is found by the Court to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the

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maximum extent permitted by law. The parties agree that the scope of any provision of this
Agreement may be modified by a judge in any proceeding to enforce this Agreement, so that such
provision can be enforced to the maximum extent permitted by law. If any provision of this
Agreement is found to be invalid or unenforceable for any reason, it shall not affect the validity
of the remaining provisions of this Agreement.

          (g) Injunctive Relief, Damages and Forfeiture. Due to the nature of Executive’s position with
Employer, and with full realization that a violation of this Agreement will cause immediate and
irreparable injury and damage, which is not readily measurable, and to protect Employer’s
interests, Executive understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Employer may seek to enforce this
Agreement with an action for injunctive relief, to cease or prevent any actual or threatened
violation of this Agreement on the part of Executive.

          (h) Survival. The provisions of this paragraph shall survive the termination of Executive’s
employment to the extent necessary to enforce such provisions.

     9. Confidential Information. During the course of his employment under this Agreement,
Executive will become exposed to a substantial amount of confidential and proprietary information,
including, but not limited to, financial information, annual reports, audited and unaudited
financial reports, operational budgets and strategies, methods of operation, customer lists,
strategic plans, business plans, marketing plans and strategies, new business strategies, merger
and acquisition strategies, management systems programs, computer systems, personnel and
compensation information and payroll data, and other such reports, documents, or information
(collectively the “Confidential and Proprietary Information”). In the event his employment is
terminated by either party for any reason, Executive agrees that he will not take with him any
copies of such Confidential and Proprietary Information in any form, format, or manner whatsoever
(including computer print-outs, computer tapes, floppy disks, and CD roms) nor will he disclose the
same in whole or in part to any person or entity, in any manner either directly or indirectly.
Excluded from this Agreement is information that is already disclosed to third parties and is in
the public domain or that Employer consents to be disclosed, with such consent to be in writing.
The provisions of this paragraph shall survive the termination of this Agreement.

     10. Indemnity by Employer.

          (a) Generally. Unless Executive is covered by an indemnity agreement covering the directors
and executive officers of Employer, Employer shall indemnify Executive to the fullest extent
permitted or required by the laws of the state of Arizona of and from any “Expenses” incurred by
Executive in any “Proceeding.”

          (b) Expenses. For purposes of this paragraph 10, “Expenses” shall mean and include all
expense, liability, and loss, including expenses of investigations, judicial or administrative
proceedings or appeals, attorney, accountant and other professional fees and disbursements,
judgments, fines, and amounts paid in settlement.

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          (c) Proceeding. For purposes of this paragraph 10, “Proceeding” shall mean and include any
threatened, pending, or completed action, suit, or proceeding, whether brought in the right of
Employer or otherwise, and whether of a civil, criminal, administrative, or investigative nature,
in which the Executive may be or may have been involved as a party, witness or otherwise, by reason
of the fact that the Executive is or was an officer of Employer or is or was serving at the request
of Employer as a director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, whether or not serving in such capacity at the time any
liability or expense is incurred for which indemnification may be provided under this Agreement.

          (d) Payment of Executive Expenses. Employer shall pay the Expenses incurred by Executive in
any Proceeding in advance of the final disposition of the Proceeding at the written request of
Executive, if Executive (i) furnishes Employer with a written affirmation of Executive’s good faith
belief that he is entitled to indemnification by Employer; and (ii) furnishes Employer with a
written undertaking to repay the advance to the extent that it is ultimately determined that
Executive is not entitled to be indemnified by Employer. Such undertaking shall be an unlimited
general obligation of Executive, but need not be secured. Advances pursuant to this paragraph 10
shall be made no later than twenty (20) days after Employer’s receipt of the affirmation and
undertakings set forth above and shall be made without regard to the Executive’s ability to repay
the amount advanced and without regard to Executive’s ultimate entitlement to indemnification under
this Agreement.

     11. Miscellaneous.

          (a) Notices. All notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly given upon (a)
personal delivery, (b) transmitter’s confirmation of the receipt of a facsimile or e-mail
transmission, (c) confirmed delivery by a standard overnight carrier, or (d) the expiration of
three business days after the day when mailed via United States Postal Service by certified or
registered mail, return receipt requested, postage prepaid at the following addresses:

               (i) If to Employer:

Action Performance Companies, Inc.

1480 South Hohokam Avenue

Tempe, Arizona 85281

Attention: Chief Financial Officer

               (ii) If to Executive:

1480 South Hohokam Avenue

Tempe, Arizona 85281

     Either party may alter the address to which communications are to be sent by giving notice of
such change of address in conformity with the provisions of this paragraph for the giving of
notice.

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          (b) Indulgences. Neither any failure nor any delay on the part of either party to exercise
any right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power, or privilege preclude any other
or further exercise of the same or of any other right, remedy, power, or privilege, nor shall any
waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power, or privilege with respect to any other occurrence.

          (c) Controlling Law. This Agreement and all questions relating to its validity,
interpretation, performance, and enforcement, shall be governed by and construed in accordance with
the laws of the state of Arizona, notwithstanding any Arizona or other conflict-of-interest
provisions to the contrary.

          (d) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal representatives, successors, and
permitted assigns.

          (e) Execution in Counterpart. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken together, shall
bear the signatures of the parties reflected hereon as the signatories.

          (f) Provisions Separable. The provisions of this Agreement are independent of and separable
from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid or unenforceable in
whole or in part.

          (g) Entire Agreement. This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, inducements, and conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement
may not be modified or amended other than by an agreement in writing.

          (h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only;
they form no part of this Agreement and shall not affect its interpretation.

          (i) Number of Days. In computing the number of days for purposes of this Agreement, all days
shall be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday, or holiday, then the final day shall be deemed
to be the next day which is not a Saturday, Sunday, or holiday.

          (j) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto; provided that because the obligations of
Executive hereunder involve the performance of personal services, such obligations shall not be
delegated by Executive. For purposes of this Agreement, successors and

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assigns shall include, but not be limited to, any individual, corporation, trust, partnership,
or other entity that acquires a majority of the stock or assets of Employer by sale, merger,
consolidation, liquidation, or other form of transfer. Employer shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of Employer to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. Without limiting the foregoing, unless the
context otherwise requires, the term “Employer” includes all subsidiaries of Employer.

          (k) Code Section 409A. If any payments under this Agreement are subject to the provisions of
Code Section 409A, it is intended that the Agreement will comply fully with and meet all the
requirements of Code Section 409A.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 
	 	 	EMPLOYER:
	 
	 	 	 	 
	 	 	ACTION PERFORMANCE COMPANIES, INC.,
	 	 	an Arizona corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David Riddiford
	 

	 	 	 	 
	 

	 	Name:
	 	David Riddiford
	 

	 	Its:
	 	Chief Financial Officer
	 
	 	 	 	 
	 	 	EXECUTIVE:
	 
	 	 	 	 
	 	 	/s/ Herbert M. Baum
	 	 	 
	 
	 	 	 	 
	 	 	Herbert M. Baum

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                                                                    EXHIBIT 10.1

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
entered into as of August 15, 2005, by and between Abercrombie & Fitch Co., a
Delaware corporation (the "Company"), and Michael S. Jeffries (the "Executive")
(hereinafter collectively referred to as "the parties").

                              W I T N E S S E T H :

         WHEREAS, the Executive has been employed by the Company as the Chairman
of the Board of the Company since May 1998 and as Chief Executive Officer of the
Company since February 1992 and served as President of the Company from February
1992 until May 1998; and

         WHEREAS, the Executive is experienced in all phases of the Company's
business and possesses an intimate knowledge of the business and affairs of the
Company and its policies, procedures, methods and personnel; and

         WHEREAS, the Company has determined that it is essential and in its
best interests to retain the services of its key management personnel and to
ensure their continued dedication and efforts; and

         WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interest of the Company to secure the
continued services and employment of the Executive for the balance of the
Executive's career and the Executive is willing to render such services on the
terms and conditions set forth herein; and

         WHEREAS, the Board has determined that it is in the best interest of
the Company to incentivize the Executive to train and develop management who
will be able to conduct the business of the Company successfully following the
retirement of the Executive; and

         WHEREAS, the parties entered into a written Employment Agreement on May
13, 1997 (the "1997 Employment Agreement"), which the parties amended and
restated in its entirety pursuant to a written Amended and Restated Employment
Agreement (the "2003 Employment Agreement") between the parties with an
effective date of January 30, 2003 (the "Effective Date"); and

         WHEREAS, the Court of Chancery of the State of Delaware granted
approval on June 14, 2005 to a settlement agreement in the action titled In Re
Abercrombie & Fitch Co. Shareholder Derivative Litigation (the "Settlement
Agreement"); and

         WHEREAS, the terms of the Settlement Agreement provide that the
Executive and the Company shall amend the 2003 Employment Agreement in certain
respects; and

<PAGE>

         WHEREAS, the parties wish to amend and restate in its entirety the 2003
Employment Agreement to reflect the terms contained in the Settlement Agreement
in respect of the changes to be made to the 2003 Employment Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises of the parties contained herein, the parties, intending
to be legally bound, hereby agree as follows:

         1. Term. The term of employment under this Agreement shall be for the
period commencing on May 13, 1997 (the "Commencement Date") and ending on
December 31, 2008 (the "Term"). Notwithstanding the foregoing, the Term shall
end on the date on which the Executive's employment is earlier terminated by
either party in accordance with the provisions of Section 9 of this Agreement.

         2. Employment.

                  (a) Position. The Executive shall be employed by the Company
as the Chairman of the Board and Chief Executive Officer of the Company. The
Executive shall perform the duties, undertake the responsibilities and exercise
the authority customarily performed, undertaken and exercised by persons
employed in a similar executive capacity. The Executive shall report only to the
Board.

                  (b) Obligations. The Executive agrees to devote his full
business time and attention to the business and affairs of the Company. The
foregoing, however, shall not preclude the Executive from serving on corporate,
civic or charitable boards or committees or managing personal investments, so
long as such activities do not interfere with the performance of the Executive's
responsibilities hereunder.

         3. Base Salary. The Company agrees to pay or cause to be paid to the
Executive commencing no later than the Effective Date and during the Term a base
salary at the rate of $1,000,000 per year or such larger amount as the Board may
from time to time determine (the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executive officers.

         4. Equity Compensation.

                  (a) The Executive shall be entitled to participate in the
stock-based employee benefit plans, including, without limitation, the 1998
Restatement of the Abercrombie & Fitch Co. Stock Option and Performance
Incentive Plan (the "Stock Incentive Plan") and the Abercrombie & Fitch Co. 2002
Stock Option Plan for Associates (the "2002 Stock Option Plan") maintained by
the Company, on such terms and conditions as may be determined from time to time
in the discretion of the Compensation Committee of the Board; provided, however,
that the Executive shall not receive any award of Company stock options during
the 2005 and 2006 calendar years.

                  (b) In exchange for the Executive agreeing to forego
participation, in respect of each fiscal year of the Company ending after
February 3, 2003, in the Company's program

                                       2
<PAGE>

pursuant to which executive officers of the Company are eligible to receive
annual grants of restricted shares under the Stock Incentive Plan (or any other
stock-based employee benefit plan maintained by the Company), on January 30,
2003, the Executive was granted a career share award representing the right to
receive 1,000,000 shares of Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), of the Company (the "Career Share Award") in accordance
with the terms of this Agreement.

                           (i) The Career Share Award was granted under the
         Stock Incentive Plan and shall be adjusted in respect of the number of
         shares of Class A Common Stock which may be received by the Executive
         thereunder to prevent dilution or enlargement of the Executive's
         rights, in the event of certain changes in the capitalization of the
         Company, in a manner consistent with the provisions of Article 16 of
         the Stock Incentive Plan.

                           (ii) Subject to the provisions of Subsections
         10(b)(vi), 10(d)(iv) and 10(e)(iv) of this Agreement, the Career Share
         Award shall become vested on December 31, 2008 as to all 1,000,000 of
         the shares of Class A Common Stock, provided that the Executive remains
         continuously employed by the Company through such date. A stock
         certificate or other appropriate documentation evidencing the shares
         shall be delivered to the Executive on March 31st of the calendar year
         immediately following the calendar year in which the Executive's
         employment is terminated and the Executive shall thereupon become the
         holder of those shares of Class A Common Stock. Until such time as the
         stock certificate or other appropriate documentation evidencing such
         shares shall have been issued, the Executive shall have no rights in
         respect of such shares.

                           (iii) Notwithstanding the foregoing, upon the
         occurrence of a Change of Control (as defined in Subsection 10(i) of
         this Agreement), the Career Share Award shall become vested as to all
         1,000,000 of the shares of Class A Common Stock, and a stock
         certificate or other appropriate documentation evidencing such shares
         shall be delivered to the Executive upon such Change of Control or as
         soon thereafter as practicable.

                           (iv) The Executive may not transfer, sell, pledge,
         hypothecate, or otherwise dispose of the shares underlying the Career
         Share Award until the first trading day on the New York Stock Exchange
         immediately following the first anniversary of the date he ceases to be
         an executive officer of the Company (the "Career Share Award Holding
         Period") and any share certificates representing such shares shall be
         appropriately legended to reflect this restriction.

                  (c) In the event the Executive is found by a court of
competent jurisdiction to have materially breached any of the material terms of
Section 11 of this Agreement during the period the Executive was employed by the
Company or during the one year period thereafter, the Career Share Award granted
to the Executive pursuant to Subsection 4(b) of this Agreement shall be
immediately forfeited by the Executive effective as of the date on which the
breach occurred, unless forfeited sooner by operation of any other provision of
this Agreement, and the Executive shall have no further rights in respect
thereof. If any of the shares of Class A

                                       3
<PAGE>

Common Stock of the Company which the Executive shall have the right to receive
in accordance with the terms of the Career Share Award shall have been delivered
to the Executive as a result of the vesting of the Career Share Award or any
portion thereof in accordance with the terms of this Agreement prior to the date
on which the breach occurred, such shares of Class A Common Stock shall be
forfeited by the Executive effective the date on which the breach occurred and
such shares shall be transferred and delivered by the Executive to the Company
without any payment therefor by the Company. Notwithstanding the foregoing, the
provisions of this Subsection 4(c) shall not apply if a Change of Control (as
defined in Subsection 10(i) of this Agreement) has occurred or if the
Executive's employment has been terminated by the Company without Cause (as
defined in Subsection 9(c) of this Agreement) or by the Executive with Good
Reason (as defined in Subsection 9(d) of this Agreement).

                  (d) The Executive hereby agrees that, until the expiration of
the Career Share Award Holding Period, the Executive shall at all times continue
to hold and shall not transfer, sell, pledge, hypothecate or otherwise dispose
of one half of the "Profit Shares" (as defined below) received from the first
one million (1,000,000) Company stock options exercised by the Executive
following April 8, 2005. "Profit Shares" shall mean the number of shares
determined by dividing (i) the excess of (A) the aggregate market value of the
shares of Class A Common Stock acquired upon such exercise over (B) the
aggregate purchase price of the shares of Class A Common Stock plus applicable
tax withholding by (ii) the market value of one share of Class A Common Stock on
the date of exercise.

         5. Employee Benefits. Except as provided in Subsections 4(a) and 4(b)
of this Agreement, the Executive shall be entitled to participate in all
employee benefit plans, practices and programs maintained by the Company and
made available to executive officers generally and as may be in effect from time
to time. Except as provided in Subsections 4(a) and 4(b) of this Agreement, the
Executive's participation in such plans, practices and programs shall be on the
same basis and terms as are applicable to executive officers of the Company
generally.

         6. Bonus.

                  (a) The Executive shall be entitled to participate in the
Abercrombie & Fitch Co. Incentive Compensation Performance Plan (the "Bonus
Plan") or any successor to the Bonus Plan on such terms and conditions as may be
determined from time to time by the Compensation Committee of the Board,
provided that the Executive's annual target bonus opportunity shall be at least
120% of Base Salary upon attainment of target, subject to a maximum bonus
opportunity of 240% of Base Salary.

                  (b) Subject to the provisions of Subsections 10(a),
10(b)(vii), 10 (c)(vi), 10(d)(v) and 10(e)(v) of this Agreement, if the
Executive shall remain employed by the Company in the capacity of Chairman and
Chief Executive Officer through December 31, 2008, the Executive shall also be
entitled to receive a bonus of up to $6 million (the "Stay Bonus"), provided,
however, that the actual amount of the Stay Bonus, if any, earned by the
Executive shall be determined as follows:

                                       4
<PAGE>

                           (i) 100% of the Stay Bonus 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%,
         which equates to $12.70 over the entire Performance Period (the
         "Earnings Target");

                           (ii) 50% of the Stay Bonus if and only if the Company
         achieves cumulative growth in EPS during the Performance Period of at
         least 10.5%, which equates to $11.83 over the entire Performance Period
         (the "Earnings Threshold Target");

                           (iii) Between 50% and 100% of the Stay Bonus if the
         Company achieves cumulative growth in EPS during the Performance Period
         between the Earnings Threshold Target and the Earnings Target, with the
         actual amount equal to $3,000,000 plus the product of (A) the fraction
         obtained by dividing (1) the excess of (x) actual cumulative growth in
         EPS during the Performance Period over (y) the Earnings Threshold
         Target by (2) the excess of (x) the Earnings Target over (y) the
         Earnings Threshold Target, and (B) $3,000,000; or

                           (iv) 0% of the Stay Bonus (except pursuant to Section
         10) if the Company's actual cumulative growth in EPS during the
         Performance Period is less than the Earnings Threshold Target.

                  (c) 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 of
         the Company's Class A Common Stock 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 on the Company's EPS of Financial Accounting
         Standards Board's Statement of Financial Accounting Standards No. 123
         (revised 2004), Share-Based Payment (Statement No. 123R).

         7. Other Benefits.

                  (a) Life Insurance.

                           (i) The Company shall maintain term life insurance
coverage on the life of the Executive in the amount of $10,000,000, the proceeds
of which shall be payable to the beneficiary or beneficiaries designated by the
Executive. The Company shall pay the premiums with respect to such term life
insurance policy for the period commencing on the Commencement Date and ending
on the later to occur of December 31, 2008 and the last day of the period during
which welfare benefits are continued pursuant to Subsection 10(g) of this
Agreement; provided, however, that the Company shall no longer be obligated to
maintain such

                                       5
<PAGE>

coverage and pay such premiums in the event that the Executive's employment is
or was terminated by the Company for Cause (as defined in Subsection 9(c) of
this Agreement) or by the Executive without Good Reason (as defined in
Subsection 9(d) of this Agreement). Such policy shall provide for its conversion
to an individual policy owned by the Executive subsequent to termination of his
employment. The Executive agrees to undergo any reasonable physical examination
and other procedures as may be necessary to maintain such policy.

                           (ii) During the term of this Agreement, the Company
shall be entitled to maintain a "key man" term life insurance policy on the life
of the Executive, the proceeds of which shall be payable to the Company or its
designees. The Executive agrees to undergo any reasonable physical examination
and other procedures as may be necessary to maintain such policy.

                  (b) Expenses. The Executive shall be entitled to receive
prompt reimbursement of all expenses reasonably incurred by him in connection
with the performance of his duties hereunder or for promoting, pursuing or
otherwise furthering the business or interests of the Company, in each case in
accordance with policies established by the Board from time to time and upon
receipt of appropriate documentation.

                  (c) Office and Facilities. The Executive shall be provided
with an appropriate office and with such secretarial and other support
facilities as are commensurate with the Executive's status with the Company and
adequate for the performance of his duties hereunder.

                  (d) Vacation. The Executive shall be entitled to annual
vacation in accordance with the policies periodically established by the Board
for similarly situated executive officers of the Company.

                  (e) Retirement Benefit. The Executive shall be provided with a
retirement benefit in accordance with the Abercrombie & Fitch Co. Supplemental
Executive Retirement Plan (Michael S. Jeffries) in the form in effect from time
to time (the "SERP") which is attached hereto as Exhibit A.

                  (f) Perquisites. The Executive shall be entitled to
perquisites on the same basis as provided to other senior level executive
officers.

         8. Aircraft Travel. For security purposes, the Executive shall be
provided, at the expense of the Company, with use of a private aircraft for
business and personal travel in North America. Outside North America, the
Executive shall be entitled to first class air travel.

         9. Termination.

                  (a) Death. The Executive's employment hereunder shall
terminate upon the Executive's death.

                  (b) Disability. Either the Executive or the Company shall be
entitled to terminate the Executive's employment for "Disability" by giving the
other party a Notice of Termination (as defined below). For purposes of this
Agreement, "Disability" shall mean the

                                       6
<PAGE>

Executive's inability to perform his duties for a period of 180 consecutive days
as a result of physical or mental impairment, illness or injury, and such
condition, in the opinion of a medical doctor selected by the Company and
reasonably acceptable to the Executive or his legal representative, is total and
permanent.

                  (c) Cause. The Company shall be entitled to terminate the
Executive's employment for "Cause." For purposes of this Agreement, "Cause"
shall mean that the Executive (i) pleads "guilty" or "no contest" to or is
convicted of an act which is defined as a felony under federal or state law, or
(ii) engages in willful misconduct which could reasonably be expected to harm
the Company's business or its reputation. For this purpose, an act or failure to
act shall be considered "willful misconduct" only if done, or omitted to be
done, by the Executive in bad faith and without a reasonable belief that such
act or failure to act was in the best interests of the Company.

                  The Executive's employment with the Company shall not be
terminated for Cause unless he has been given written notice by the Board of its
intention to so terminate his employment (a "Preliminary Notice of Cause"), such
notice (i) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (ii) to be given within six months of the Board's learning of such
acts or failures to act. The Executive shall have ten days after the date that
the Preliminary Notice of Cause is given in which to cure such conduct, to the
extent such cure is possible. If the Executive fails to cure such conduct, the
Executive shall be entitled to a hearing before the Board, and to be accompanied
by his counsel, at which he shall be entitled to contest the Board's findings.
Such hearing shall be held within 15 days of notice to the Company by the
Executive, provided he requests such hearing within 30 days of the Preliminary
Notice of Cause. If the Executive fails to request such hearing within the
30-day period specified in the preceding sentence, his employment shall be
terminated for Cause effective upon the expiration of such period, and the
Preliminary Notice of Cause shall be deemed to constitute a Notice of
Termination. If the Executive requests such hearing and, within 10 days
following such hearing, the Executive is furnished with a copy of a resolution,
duly adopted by the affirmative vote of a majority of the members of the Board,
finding that in the good-faith opinion of the Board, the Executive was guilty of
the conduct constituting Cause as specified in the Preliminary Notice of Cause,
the Executive's employment shall be terminated for Cause upon his receipt of
such resolution, and such resolution shall be deemed to constitute a Notice of
Termination. Any such resolution shall be accompanied by a certificate of the
Secretary or another appropriate officer of the Company which shall state that
such resolution was duly adopted by the affirmative vote of a majority of the
members of the Board at a duly convened meeting called for such purpose.

                  (d) Good Reason. The Executive may terminate his employment
hereunder for "Good Reason" by delivering to the Company (i) a Preliminary
Notice of Good Reason (as defined below), and (ii) not earlier than 30 days from
the delivery of such Preliminary Notice of Good Reason, a Notice of Termination.
For purposes of this Agreement, "Good Reason" shall mean the occurrence of any
of the following without the Executive's prior written consent: (A) the failure
to continue the Executive as Chairman of the Board and Chief Executive Officer
of the Company; (B) the failure of the Board to nominate the Executive for
election to the Board at the Company's annual meeting of stockholders; (C) a
material diminution in the Executive's

                                       7
<PAGE>

duties, or the assignment to the Executive of duties materially inconsistent
with, or the failure to assign to the Executive duties which are materially
consistent with, his duties, positions, authority, responsibilities and
reporting requirements as set forth in Section 2 of this Agreement, or the
assignment of duties which materially impair the Executive's ability to function
as the Chairman and Chief Executive Officer of the Company; (D) a reduction in
or a material delay in payment of the Executive's total cash compensation and
benefits from those required to be provided in accordance with the provisions of
this Agreement; (E) the failure of the Company to implement the SERP, a material
reduction in the benefits to be provided under the SERP or an adverse change in
the terms and conditions of the SERP; (F) the Company, the Board or any person
controlling the Company requires the Executive to be based outside of the United
States, other than on travel reasonably required to carry out the Executive's
obligations under this Agreement; or (G) the failure of the Company to obtain
the assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company not later
than the effective date of a merger, consolidation, sale or similar transaction;
provided, however, that "Good Reason" shall not include (X) acts not taken in
bad faith which are cured by the Company in all respects not later than 30 days
from the date of receipt by the Company of a written notice from the Executive
identifying in reasonable detail the act or acts constituting "Good Reason" (a
"Preliminary Notice of Good Reason") or (Y) acts taken by the Company to
reassign the Executive's duties and/or titles to another person or persons if
the Executive has suffered a physical or mental infirmity which renders him
unable to substantially perform his duties under this Agreement, provided that
any such acts may be taken by the Company only after receiving an opinion of a
physician reasonably acceptable to the Executive or his legal representative
stating that there is no reasonable likelihood that the Executive will be able
to return to full-time employment with the Company performing his duties
hereunder within 180 days. A Preliminary Notice of Good Reason shall not, by
itself, constitute a Notice of Termination.

                  (e) Without Cause. The Company may terminate the Executive's
employment hereunder, without Cause, at any time and for any reason (or for no
reason) by giving the Executive a Notice of Termination.

                  (f) Voluntary; Retirement. The Executive may terminate his
employment hereunder at any time and for any reason other than Good Reason or
Disability (or for no reason) by giving the Company a Notice of Termination.
Such voluntary termination shall be a "Retirement" and such termination shall
not be deemed a breach of this Agreement.

                  (g) Notice of Termination. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail, if applicable, the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no purported termination of
employment which requires a Notice of Termination shall be effective without
such Notice of Termination. The Termination Date (as defined below) specified in
such Notice of Termination shall be no less than two weeks from the date the
Notice of Termination is given; provided, however, that (i) if the Executive's
employment is terminated by the Company due to Disability, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice

                                       8
<PAGE>

of Termination is given to the Executive and (ii) if the Executive terminates
his employment in accordance with Subsection 9(f) of this Agreement, the date
specified in the Notice of Termination shall be at least 30 days from the date
the Notice of Termination is given to the Company.

                  (i) Termination Date. "Termination Date" shall mean the date
of the termination of the Executive's employment with the Company and
specifically (i) in the case of the Executive's death, his date of death; (ii)
in the case of a termination of the Executive's employment for Cause, the
relevant date specified in Subsection 9(c) of this Agreement; (iii) in the case
of the expiration of the Term of this Agreement in accordance with Section 1,
the date of such expiration; and (iv) in all other cases, the date specified in
the Notice of Termination.

         10. Compensation Upon Termination of Employment.

                  (a) For Cause; Without Good Reason; Retirement. If during the
term of this Agreement, the Executive's employment under this Agreement is
terminated by the Company for Cause, by the Executive other than for Good Reason
and other than by reason of the Executive's death or Disability or by the
Executive on account of his Retirement, (i) the Company's sole obligation
hereunder shall be to pay the Executive the following amounts earned hereunder
but not paid as of the Termination Date (collectively, "Accrued Compensation"):

         (A)      Base Salary through the Termination Date;

         (B)      any other compensation which has been earned, accrued or is
                  owing, under the terms of the applicable plan, program or
                  practice, to the Executive as of the Termination Date but not
                  paid, including, without limitation, any incentive awards
                  under the Bonus Plan;

         (C)      any amounts which the Executive had previously deferred
                  (including any interest earned or credited thereon);

         (D)      reimbursement of any and all reasonable expenses incurred in
                  connection with the Executive's duties and responsibilities
                  under this Agreement in accordance with policies established
                  by the Board from time to time and upon receipt of appropriate
                  documentation; and

         (E)      other or additional benefits and entitlements in accordance
                  with applicable plans, programs and arrangements of the
                  Company; and

(ii) subject to the provisions of Subsection 4(b) of this Agreement, the Career
Share Award granted to the Executive pursuant to Subsection 4(b) of this
Agreement shall be immediately forfeited by the Executive effective on the
Termination Date and the Executive shall have no further rights in respect
thereof. Notwithstanding the foregoing, if the Executive terminates his
employment with the Company in accordance with Subsection 9(f) of this Agreement
after a Change of Control (as defined in Subsection 10(i) of this Agreement),
the Company shall also be obligated to pay to the Executive a Stay Bonus in an
amount equal to (A) $6 million if the Termination Date is on or after January 1,
2007 or (B) the product of (1) $1.5 million and (2) the

                                       9
<PAGE>

number of completed years of service by the Executive to the Company during the
period commencing on the Effective Date and ending on the Termination Date, if
the Termination Date is on or before December 31, 2006.

                  (b) Without Cause or for Good Reason Prior to a Change of
Control. If the Executive's employment hereunder is terminated by the Company
without Cause and other than due to Disability or by the Executive for Good
Reason prior to a Change of Control (as defined in Subsection 10(i) of this
Agreement), the Company's sole obligation hereunder shall be as follows:

         (i)      the Company shall pay the Executive the Accrued Compensation;

         (ii)     the Company shall continue to pay the Executive Base Salary
                  for a period of two years following the Termination Date in
                  accordance with the Company's customary practices applicable
                  to its executive officers;

         (iii)    the Company shall continue to pay the premiums provided for in
                  Subsection 7(a) of this Agreement for the time period set
                  forth therein;

         (iv)     the Company shall pay the Executive, in accordance with its
                  customary practices applicable to executive officers, any
                  compensation in the form of incentive awards under the Stock
                  Incentive Plan (or any successor plan) earned (as to both
                  satisfaction of performance-based criteria and vesting) in
                  respect of periods prior to and including the Termination
                  Date, but not paid as of the Termination Date, provided that
                  the Career Share Award shall vest and be delivered in
                  accordance with Section 10(b)(vi) of this Agreement;

         (v)      the Company shall pay the Executive, at such time as other
                  participants in the Bonus Plan are paid their respective
                  bonuses in respect of that fiscal year, a bonus (a "Pro-Rata
                  Bonus") with respect to the fiscal year in which the
                  Termination Date occurs equal to the product of (A) the
                  Executive's target bonus opportunity for that fiscal year and
                  (B) the fraction obtained by dividing (1) the number of days
                  in the period beginning on the first day of that fiscal year
                  and ending on the Termination Date by (2) 365, but only to the
                  extent that such Pro-Rata Bonus is not payable as part of the
                  Accrued Compensation;

         (vi)     the Career Share Award shall become vested as to that number
                  of shares of Class A Common Stock of the Company equal to the
                  product of (A) 1,000,000 (one million) and (B) the fraction
                  obtained by dividing (1) the number of completed years of
                  service by the Executive to the Company during the period
                  commencing on the Effective Date and ending on the Termination
                  Date by (2) six. A stock certificate or other appropriate
                  documentation evidencing the number of shares of Class A
                  Common Stock of the Company which become vested in accordance
                  with the terms of this Subsection 10(b)(vi), shall be
                  delivered to the Executive on March 31st of the calendar year
                  immediately following the calendar year in which

                                       10
<PAGE>

                  the Termination Date occurs and the Executive shall thereupon
                  become the holder of such number of shares of Class A Common
                  Stock; and

         (vii)    A Stay Bonus shall be payable to the Executive on March 31st
                  immediately following the Termination Date or as soon as
                  administratively practicable thereafter, but not later than
                  March 31, 2009, and the actual amount of the Stay Bonus shall
                  be equal to the product of (A) $6 million and (B) the fraction
                  obtained by dividing (1) the number of months of service
                  completed by the Executive during the period commencing on
                  January 1, 2005 and ending on the Termination Date by (2) 48;
                  provided, however, that if the Executive's employment is
                  terminated by the Company without Cause under this Section
                  10(b) after December 31, 2006, the Executive shall be
                  entitled, in the alternative and at his option, to that
                  portion of the full Stay Bonus that he would receive under
                  Section 6(b) if he had remained employed through December 31,
                  2008 and if the Company's cumulative growth in EPS 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 growth in EPS and the
                  Earnings Target as of the end of the completed fiscal quarter
                  closest to the Termination Date.

                  (c) Without Cause or for Good Reason Within Two Years after a
Change of Control. If the Executive's employment hereunder is terminated by the
Company other than for Cause or by the Executive for Good Reason within two
years after a Change of Control, the Company's sole obligation hereunder shall
be as follows:

         (i)      the Company shall pay the Executive the Accrued Compensation;

         (ii)     the Company shall pay to the Executive, in a lump sum in cash
                  within five business days after the Termination Date, the
                  amount of Base Salary which would have been paid to the
                  Executive for a period of two years following the Termination
                  Date;

         (iii)    the Company shall continue to pay the premiums provided for in
                  Subsection 7(a) of this Agreement for the time period set
                  forth therein;

         (iv)     the Company shall pay the Executive, in a lump sum within five
                  business days after the Termination Date, any compensation in
                  the form of incentive awards (other than the Career Share
                  Award) under the Stock Incentive Plan (or any successor plan)
                  earned (as to satisfaction of performance-based criteria) in
                  respect of periods prior to and including the Termination
                  Date, but not paid as of the Termination Date;

         (v)      the Company shall pay the Executive, within five business days
                  after the end of that fiscal year, a Pro-Rata Bonus with
                  respect to the fiscal year in which the Termination Date
                  occurs, but only to the extent that such Pro-Rata Bonus is not
                  payable as part of the Accrued Compensation; and

                                       11
<PAGE>
         (vi)     the Company shall pay the Executive a Stay Bonus in an amount
                  equal to $6 million. The Stay Bonus shall be paid to the
                  Executive as promptly as practicable following the Termination
                  Date.

                  (d) Disability. If the Executive's employment hereunder is
terminated by either party by reason of the Executive's Disability, the
Company's sole obligation hereunder shall be as follows:

         (i)      the Company shall pay the Executive the Accrued Compensation;

         (ii)     the Company shall continue to pay the Executive, in accordance
                  with the Company's customary practices applicable to its
                  executive officers, 100% of Base Salary for the first 24
                  months following the Termination Date and 80% of Base Salary
                  for the third 12 months following the Termination Date;
                  provided, however, that such Base Salary shall be reduced by
                  the amount of any benefits the Executive receives by reason of
                  his Disability under the Company's relevant disability plan or
                  plans;

         (iii)    the Company shall continue to pay the premiums provided for in
                  Subsection 7(a) of this Agreement for the time period set
                  forth therein;

         (iv)     the Career Share Award shall become vested as to that number
                  of shares of Class A Common Stock of the Company equal to the
                  product of (A) 1,000,000 (one million) and (B) the fraction
                  obtained by dividing (1) the number of completed years of
                  service by the Executive to the Company during the period
                  commencing on the Effective Date and ending on the Termination
                  Date by (2) six. A stock certificate or other appropriate
                  documentation evidencing the number of shares of Class A
                  Common Stock of the Company which become vested in accordance
                  with the terms of this Subsection 10(d)(iv), shall be
                  delivered to the Executive on March 31st of the calendar year
                  immediately following the calendar year in which the
                  Termination Date occurs and the Executive shall thereupon
                  become the holder of such number of shares of Class A Common
                  Stock; and

         (v)      the Company shall pay the Executive a Stay Bonus in an amount
                  equal to $6 million. The Stay Bonus shall be payable to the
                  Executive on March 31st immediately following the Termination
                  Date or as soon as administratively practicable thereafter,
                  but not later than March 31, 2009.

                  (e) Death. If the Executive's employment hereunder is
terminated due to his death, the Company's sole obligation hereunder shall be as
follows:

         (i)      the Company shall pay the Executive's estate or his
                  beneficiaries (as the case may be) the Accrued Compensation;

         (ii)     the Company shall pay the Executive's estate or beneficiaries
                  (as the case may be), at such time as other participants in
                  the Bonus Plan are paid their respective bonuses in respect of
                  that fiscal year, a Pro-Rata Bonus with respect to the fiscal

                                       12
<PAGE>

                  year in which the Termination Date occurs, but only to the
                  extent that such Pro-Rata Bonus is not payable as part of the
                  Accrued Compensation;

         (iii)    the Company shall provide such assistance as is necessary to
                  facilitate the payment of the life insurance proceeds provided
                  for in Subsection 7(a) of this Agreement to the Executive's
                  beneficiary or beneficiaries;

         (iv)     the Career Share Award shall become vested as to that number
                  of shares of Class A Common Stock of the Company equal to the
                  product of (A) 1,000,000 (one million) and (B) the fraction
                  obtained by dividing (1) the number of completed years of
                  service by the Executive to the Company during the period
                  commencing on the Effective Date and ending on the Termination
                  Date by (2) six. A stock certificate or other appropriate
                  documentation evidencing the number of shares of Class A
                  Common Stock of the Company which become vested in accordance
                  with the terms of this Subsection 10(e)(iv), shall be
                  delivered to the Executive's estate or his beneficiaries (as
                  the case may be) on March 31st of the calendar year
                  immediately following the calendar year in which the
                  Termination Date occurs and the Executive's estate or his
                  beneficiaries (as the case may be) shall thereupon become the
                  holder(s) of such number of shares of Class A Common Stock;
                  and

         (v)      the Company shall pay the Executive's estate or his
                  beneficiaries (as the case may be) a Stay Bonus in an amount
                  equal to $6 million. The Stay Bonus shall be paid to the
                  Executive's estate or his beneficiaries as promptly as
                  practicable following the Executive's death.

                  (f) Determination of Base Salary. For purposes of this Section
10, Base Salary shall be determined by the Base Salary at the annualized rate in
effect on the Termination Date.

                  (g) Continuation of Employee Welfare Benefits. The Company
shall, at its expense, provide to the Executive and his beneficiaries continued
participation in all medical, dental, vision, prescription drug, hospitalization
and life insurance coverages and in all other employee welfare benefit plans,
programs and arrangements in which the Executive was participating immediately
prior to the Termination Date, on terms and conditions that are no less
favorable than those that applied on the Termination Date, during the following
periods:

         (i)      The period during which the Executive is receiving continued
                  payment of Base Salary pursuant to Subsection 10(b)(ii) or
                  10(d)(ii) of this Agreement; or

         (ii)     For a period of two years following the Termination Date, if
                  the Executive's employment is terminated by the Company other
                  than for Cause or by the Executive for Good Reason within two
                  years after a Change of Control.

In each case, COBRA benefits will commence after the applicable period has been
completed. Notwithstanding the foregoing, the Company's obligation under this
Subsection 10(g) shall be

                                       13
<PAGE>

reduced to the extent that equivalent coverages and benefits (determined on a
coverage-by-coverage and benefit-by-benefit basis) are provided under the plans,
programs or arrangements of a subsequent employer.

                  In the event that the Executive is precluded from continuing
full participation in any employee benefit plan, program or arrangement as
contemplated by this Subsection 10(g), the Executive shall be provided with the
after-tax economic equivalent of any benefit or coverage foregone. For this
purpose, the economic equivalent of any benefit or coverage foregone shall be
deemed to be the total cost to the Executive of obtaining such benefit or
coverage himself on an individual basis. Payment of such after-tax economic
equivalent shall be made quarterly.

                  (h) No Mitigation; No Offset. In the event of any termination
of his employment hereunder, the Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation provided to the Executive in any subsequent employment, except as
provided in Subsection 10(g) of this Agreement.

                  (i) Change of Control. For purposes of this Agreement, the
term "Change of Control" shall mean an occurrence of a nature that would be
required to be reported by the Company in response to Item 6(e) of Schedule 14A
of Regulation 14A issued under the Securities Exchange Act of 1934 (the
"Exchange Act"). Without limiting the inclusiveness of the definition in the
preceding sentence, a Change of Control of the Company shall be deemed to have
occurred as of the first day that any one or more of the following conditions is
satisfied:

         (i)      Any person is or becomes the "beneficial owner" (as that term
                  is defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Company representing 20% or
                  more of the combined voting power of the Company's then
                  outstanding securities and such person would be deemed an
                  "Acquiring Person" for purposes of the Rights Agreement dated
                  as of July 16, 1998, as amended, between the Company and
                  National City Bank, as successor Rights Agent (the "Rights
                  Agreement"); or

         (ii)     any of the following occur: (A) any merger or consolidation of
                  the Company, other than a merger or consolidation in which the
                  voting securities of the Company immediately prior to the
                  merger or consolidation continue to represent (either by
                  remaining outstanding or being converted into securities of
                  the surviving entity) 80% or more of the combined voting power
                  of the Company or surviving entity immediately after the
                  merger or consolidation with another entity; (B) any sale,
                  exchange, lease, mortgage, pledge, transfer, or other
                  disposition (in a single transaction or a series of related
                  transactions) of assets or earning power aggregating more than
                  50% of the assets or earning power of the Company on a
                  consolidated basis; (C) any complete liquidation or
                  dissolution of the Company; (D) any reorganization, reverse
                  stock split or recapitalization of the Company that would
                  result in a Change of Control as otherwise defined herein; or
                  (E) any

                                       14
<PAGE>

                  transaction or series of related transactions having, directly
                  or indirectly, the same effect as any of the foregoing.

                  (j) Release. In exchange for the payment by the Company of the
amounts contemplated by Subsections 10(b) or 10(c) of this Agreement, the
Executive agrees to execute such form of release as is mutually acceptable to
the Company and the Executive.

         11. Employee Covenants.

                  (a) Unauthorized Disclosure. The Executive shall not, during
the term of this Agreement and thereafter, make any Unauthorized Disclosure. For
purposes of this Agreement, "Unauthorized Disclosure" shall mean disclosure by
the Executive without the prior written consent of the Board to any person,
other than an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties as an executive officer of the Company, of any
confidential information relating to the business or prospects of the Company
including, but not limited to, any confidential information with respect to any
of the Company's customers, products, methods of distribution, strategies,
business and marketing plans and business policies and practices, except (i) to
the extent disclosure is or may be required by law, by a court of law or by any
governmental agency or other person or entity with apparent jurisdiction to
require him to divulge, disclose or make available such information or (ii) in
confidence to an attorney or other advisor for the purpose of securing
professional advice concerning the Executive's personal matters provided such
attorney or other advisor agrees to observe these confidentiality provisions.
Unauthorized Disclosure shall not include the use or disclosure by the
Executive, without consent, of any information known generally to the public or
known within the Company's trade or industry (other than as a result of
disclosure by him in violation of this Subsection 11(a)). This confidentiality
covenant has no temporal, geographical or territorial restriction.

                  (b) Non-Competition. During the Non-Competition/No-Raid Period
described below, the Executive shall not, directly or indirectly, without the
prior written consent of the Company, own, manage, operate, join, control, be
employed by, consult with or participate in the ownership, management, operation
or control of, or be connected with (as a stockholder, partner, or otherwise),
any business, individual, partner, firm, corporation or other entity that
competes, directly or indirectly, with the Company or any affiliate of the
Company; provided, however, that the "beneficial ownership" (as that term is
defined in Rule 13d-3 under the Exchange Act) by the Executive after his
termination of employment with the Company, either individually or as a member
of a "group" for purposes of Section 13(d)(3) under the Exchange Act and the
regulations promulgated thereunder, of not more than two percent (2%) of the
voting stock of any publicly-held corporation shall not be a violation of this
Agreement.

                  (c) Non-Solicitation. During the Non-Competition/No-Raid
Period described below, the Executive shall not, either directly or indirectly,
alone or in conjunction with another person, interfere with or harm, or attempt
to interfere with or harm, the relationship of the Company, its subsidiaries
and/or affiliates, with any person who at any time was an employee,

                                       15
<PAGE>

customer or supplier of the Company, its subsidiaries and/or affiliates or
otherwise had a business relationship with the Company, its subsidiaries and/or
affiliates.

                  For purposes of this Agreement, the "Non-Competition/No-Raid
Period" means the period the Executive is employed by the Company plus one year
thereafter.

                  (d) Remedies. The Executive agrees that any breach of the
terms of this Section 11 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any threat
of breach, the Company shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach and/or
continued breach by the Executive and/or any and all persons and/or entities
acting for and/or with the Executive, without having to prove damages, in
addition to any other remedies to which the Company may be entitled at law or in
equity. The terms of this Subsection 11(d) shall not prevent the Company from
pursuing any other available remedies for any breach or threatened breach
hereof, including but not limited to the recovery of damages from the Executive.
The Executive and the Company further agree that the provisions of the covenants
not to compete and solicit are reasonable and that the Company would not have
entered into this Agreement but for the inclusion of such covenants herein.
Should a court or arbitrator determine, however, that any provision of the
covenants is unreasonable, either in period of time, geographical area, or
otherwise, the parties hereto agree that the covenants should be interpreted and
enforced to the maximum extent which such court or arbitrator deems reasonable.

                  The provisions of this Section 11 shall survive any
termination of this Agreement, and the existence of any claim or cause of action
by the Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 11; provided, however, that this
paragraph shall not, in and of itself, preclude the Executive from defending
himself against the enforceability of the covenants and agreements of this
Section 11.

         12. Certain Additional Payments.

                  (a) In the event it shall be determined that any payment,
benefit or distribution of any type to or for the benefit of the Executive by
the Company, any of its affiliates, or any person who acquires ownership or
effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations thereunder) or any
affiliate of such person, whether paid or payable, received or receivable, or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), is subject to the excise tax imposed by
Section 4999 of the Code or any similar successor provision or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the

                                       16
<PAGE>

Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments (not including the Gross-Up Payment).

                  (b) All determinations as to whether any of the Total Payments
are "parachute payments" (within the meaning of Section 280G of the Code),
whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and
any amounts relevant to the last sentence of Subsection 12(a), shall be made by
an independent accounting firm selected by the Company from among the largest
five accounting firms in the United States (the "Accounting Firm"). Unless the
Executive agrees otherwise in writing, the Accounting Firm cannot during the two
years preceding the date of its selection have acted in any way on behalf of the
Company or any of its affiliates. The Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations, regarding the amount of any Gross-Up Payment and any other
relevant matter, both to the Company and the Executive, within five days of the
Termination Date, if applicable, or such earlier time as is requested by the
Company or the Executive (if the Executive reasonably believes that any of the
Total Payments may be subject to the Excise Tax). Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it may be determined
that the Company should have made Gross-Up Payments ("Underpayment"), or that
Gross-Up Payments will have been made by the Company which should not have been
made ("Overpayments"). In either such event, the Accounting Firm shall determine
the amount of the Underpayment or Overpayment that has occurred. In the case of
an Underpayment, the amount of such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. In the case of an Overpayment,
the Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and claims
for refund), follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to correct such
Overpayment. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.

         13. Indemnification.

                  (a) The Company agrees that if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that he is or was a director, officer or employee of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of the Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorneys' fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or

                                       17
<PAGE>

suffered by the Executive in connection therewith, and such indemnification
shall continue as to the Executive even if he has ceased to be a director,
member, employee or agent of the Company or other entity and shall inure to the
benefit of the Executive's heirs, executors and administrators. The Company
shall advance to the Executive all reasonable costs and expenses incurred by him
in connection with a Proceeding within 20 calendar days after receipt by the
Company of a written request for such advance. Such request shall include an
undertaking by the Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses; provided that the amount of such obligation to repay shall
be limited to the after-tax amount of any such advance except to the extent the
Executive is able to offset such taxes incurred on the advance by the tax
benefit, if any, attributable to a deduction realized by him for the repayment.

                  (b) Neither the failure of the Company (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Executive under Section 13(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption in any judicial
proceeding that the Executive has not met the applicable standard of conduct.

                  (c) The Company agrees to continue and maintain a directors'
and officers' liability insurance policy covering the Executive, until such time
as actions against the Executive are no longer permitted by law, with terms and
conditions no less favorable than the most favorable coverage then applying to
any other senior level executive officer or director of the Company.

         14. Successors and Assigns.

                  (a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns and the Company shall
require any successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. The
term "the Company" as used herein shall include any such successors and assigns.
The term "successors and assigns" as used herein shall mean a corporation or
other entity acquiring or otherwise succeeding to, directly or indirectly, all
or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.

         (b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.

         15. Arbitration. Except with respect to the remedies set forth in
Subsection 11(d) hereof, if in the event of any controversy or claim between the
Company or any of its affiliates

                                       18
<PAGE>

and the Executive arising out of or relating to this Agreement, either party
delivers to the other party a written demand for arbitration of a controversy or
claim, then such claim or controversy shall be submitted to binding arbitration.
The binding arbitration shall be administered by the American Arbitration
Association under its Commercial Arbitration Rules. The arbitration shall take
place in Columbus, Ohio. Each of the Company and the Executive shall appoint one
person to act as an arbitrator, and a third arbitrator shall be chosen by the
first two arbitrators (such three arbitrators, the "Panel"). The Panel shall
have no authority to award punitive damages against the Company or the
Executive. The arbitrator shall have no authority to add to, alter, amend or
refuse to enforce any portion of the disputed agreements. The Company and the
Executive each waive any right to a jury trial or to petition for stay in any
action or proceeding of any kind arising out of or relating to this Agreement.
Pending the resolution of any claim under this Section 15, the Executive (and
his beneficiaries) shall continue to receive all payments and benefits due under
this Agreement, except to the extent that the arbitrator(s) otherwise provide.

         16. Fees and Expenses. The Company agrees to pay promptly upon
presentation of an invoice from the Executive, to the full extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a
result of (a) any contest by the Company of the validity or enforceability of,
or liability under, any provision of this Agreement, (b) any effort to enforce
the Executive's rights hereunder or (c) any dispute between the Executive and
the Company relating to this Agreement; provided that Executive also undertakes
in writing to repay such legal fees and expenses if such contest, effort or
dispute does not result in a judgment, award or settlement in Executive's favor
in any material respect.

         17. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, or upon receipt if overnight delivery
service or facsimile is used, addressed as follows:

                  To the Executive:

                           Michael S. Jeffries
                           xxxxxxxxxx
                           xxxxxxxxxx

                  To the Company:

                           Abercrombie & Fitch Co.
                           6301 Fitch Path
                           New Albany, Ohio  43054
                           Attn:  President and Chief Operating Officer

         18. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.

                                       19
<PAGE>

         19. Survivorship. Except as otherwise set forth in this Agreement, the
respective rights and obligations of the Executive and the Company hereunder
shall survive any termination of the Executive's employment.

         20. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.

         21. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio without giving
effect to the conflict of law principles thereof.

         22. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

         23. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof. This Agreement may be executed in one
or more counterparts.

         24. Company Representation. The Company represents and warrants that it
has obtained or will obtain any corporate approvals which are necessary for the
Company to enter into and implement this Agreement.

         25. SERP Amendment. The Company and the Executive agree that the SERP
shall be amended by replacing the phrase "the Amended and Restated Employment
Agreement entered into as of January 30, 2003" in Section 2.07[4] with the
phrase "the Amended and Restated Employment Agreement entered into as of August
15, 2005".

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.

                         SIGNATURES ON FOLLOWING PAGE.]

                                       20
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.

                                            THE COMPANY:

                                            ABERCROMBIE & FITCH CO.

                                            By:  /s/ Robert S. Singer
                                                 -----------------------------
                                                 Robert S. Singer, its President
                                                 and Chief Operating Officer

                                            THE EXECUTIVE:

                                            /s/ Michael S. Jeffries
                                            ----------------------------------
                                            Michael S. Jeffries

                                       21
<PAGE>

                                    EXHIBIT A

                             ABERCROMBIE & FITCH CO.
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                              (Michael S. Jeffries)

                           Effective February 2, 2003

<PAGE>

                             ABERCROMBIE & FITCH CO.
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                              (MICHAEL S. JEFFRIES)

                                  1.00 Purpose

         Effective February 2, 2003, Abercrombie & Fitch Co. establishes the
Abercrombie & Fitch Co. Supplemental Executive Retirement Plan ("Plan") to
provide additional retirement income to Michael S. Jeffries, one of its select
management and highly compensated employees. This Plan is intended to be an
unfunded, nonqualified deferred compensation plan within the meaning of Title I
of ERISA.

                                2.00 Definitions

         Whenever used in this Plan, the following words and phrases will have
the meanings given below. Also, the singular form of any term will include the
plural, the plural form will include the singular, the masculine pronoun will
include the feminine and the feminine pronoun will include the masculine. Other
words and phrases also may be defined in the Plan text.

2.01 Affiliate: Any entity that is related, through common control with the
Company.

2.02 Board: The Company's board of directors.

2.03 Cause: That the Participant [1] pleads "guilty" or "no contest" to or is
convicted of an act which is defined as a felony under federal or state law, or
[2] engages in willful misconduct which could reasonably be expected to harm the
Company's business or its reputation. For this purpose, an act or failure to act
shall be considered "willful misconduct" only if done, or omitted to be done, by
the Participant in bad faith and without a reasonable belief that such act or
failure to act was in the best interests of the Company.

The Participant shall not be terminated for Cause unless he has been given
written notice by the Board of its intention to so terminate his employment (a
"Preliminary Notice of Cause"), such notice [3] to state in detail the
particular act or acts or failure or failures to act that constitute the grounds
on which the proposed termination for Cause is based and [4] to be given within
six months of the Board's learning of such acts or failures to act. The
Participant shall have ten days after the date that the Preliminary Notice of
Cause is given in which to cure such conduct, to the extent that such cure is
possible. If the Participant fails to cure such conduct, the Participant shall
be entitled to a hearing before the Board, and to be accompanied by his counsel,
at which he shall be entitled to contest the Board's findings. Such hearing
shall be held within 15 days of notice to the Company by the Participant,
provided he requests such hearing within 30 days of the Preliminary Notice of
Cause. If the Participant fails to request such hearing within the 30-day period
specified in the preceding sentence, his employment shall be terminated for
Cause effective upon the expiration of such period. If the Participant requests
such hearing and, within ten days following such hearing, the Participant is
furnished with a copy of a resolution, duly adopted by the affirmative vote of a
majority of the members of the Board, finding that in the good-faith opinion of
the Board, the Participant was guilty of conduct constituting Cause as

<PAGE>

specified in the Preliminary Notice of Cause, the Participant's employment shall
be terminated for Cause upon receipt of such resolution. Any such resolution
shall be accompanied by a certificate of the Secretary or another appropriate
officer of the Company which shall state that such resolution was duly adopted
by the affirmative vote of a majority of the members of the Board at a duly
convened meeting called for such purpose.

2.04 Code: The Internal Revenue Code of 1986, as amended.

2.05 Committee: The Company's Compensation Committee.

2.06 Company: Abercrombie & Fitch Co., a Delaware corporation, and any successor
to it.

2.07 Compensation: The base salary and cash bonus payable by the Company and
each Affiliate to the Participant in respect of services performed during the
period under consideration, plus all amounts earned that the Participant defers
to a later period, including, without limitation, deferrals under a plan or
program described in Code (S)(S) 125 or 401(k) or under any nonqualified plan of
deferred compensation. Compensation shall include the pro-rata portion of any
cash bonus (based on the number of days that the Participant was employed during
the period with respect to which such cash bonus would have been payable) that
the Participant would have received had his employment continued until such cash
bonus was paid. However, Compensation does not include [1] Company contributions
(or contributions by an Affiliate) to, or benefits derived from those
contributions under, this Plan or any other plan of deferred compensation,
whether or not tax-qualified; or [2] the value of any welfare or fringe
benefits, expense reimbursement or similar payments, whether or not deductible
by the Company or any Affiliate or taxable to the Participant; or [3] the value
of any stock options, restricted shares or performance based equity
compensation, regardless of the form in which (or the time at which) it is paid;
or [4] the amount of any "Stay Bonus" as defined and payable in accordance with
the terms of the Amended and Restated Employment Agreement entered into as of
January 30, 2003 by the Company and the Participant.

2.08 Effective Date: February 2, 2003.

2.09 Enrollment Form: The form described in Article 3.00 which the Participant
must complete before he may begin to accrue a Plan benefit. Although a copy of
this form is attached to the Plan, it is not a part of the Plan and may be
modified by the Committee without separate action by the Board and without
regard to the restrictions described in Article 7.00.

2.10 Final Average Compensation: The Participant's Compensation averaged over
the last 36 consecutive full calendar months ending before his Retirement.

2.11 Participant: Michael S. Jeffries.

2.12 Plan: The Abercrombie & Fitch Co. Supplemental Executive Retirement Plan,
as described in this document and any amendments to it.

2.13 Retirement or Retire: The Participant's Termination of Employment for any
reason other than death or for Cause at or after age 62.

                                       2
<PAGE>

2.14 Termination of Employment: Discontinuance of the Participant's status as a
common law employee of the Company and all Affiliates. For purposes of this
Plan, the Participant will have Terminated Employment even if he continues to
serve as a consultant to or as an independent contractor with respect to the
Company or any Affiliate (including as a member of the Board or an Affiliate's
board of directors) after severing his common law employment relationship with
the Company and each Affiliate.

                               3.00 Participation

         The Participant may enter the Plan on the Effective Date but only after
completing an Enrollment Form.

                                4.00 Plan Benefit

4.01 Amount of Benefit

         Subject to the conditions described in this section and elsewhere in
the Plan, the Participant will receive the benefit described in this section
payable in the form described in Section 4.02.

         [1] Retirement On or After December 31, 2008. If the Participant
         Retires on or after December 31, 2008, he will receive a monthly
         benefit for life equal to 50 percent of his Final Average Compensation.
         The amount of this benefit will not be actuarially adjusted to reflect
         the value of any payments not made to the Participant because he
         Retires after December 31, 2008 although changes in the Participant's
         Compensation occurring after December 31, 2008 will be taken into
         account in calculating the Participant's benefit.

         [2] Retirement at or After Age 62, But Before December 31, 2008. If the
         Participant Retires at or after age 62, but before December 31, 2008,
         he will receive a monthly benefit for life equal to the amount
         determined under the following table:

<TABLE>
<CAPTION>
                           Attained Age                              Monthly Benefit
                           ------------                              ---------------
<S>                                              <C>
                                 64                  46.66% of his Final Average Compensation
                                 63                  43.33% of his Final Average Compensation
                                 62                  40% of his Final Average Compensation
</TABLE>

         In the event that the Participant's Retirement occurs at least one full
         calendar month after one of his birthdays set forth in the above table
         and before the next birthday, the above percentages of Final Average
         Compensation shall be determined by interpolation based on the number
         of full calendar months that have elapsed since the Participant's last
         birthday.

         [3] Other Termination of Employment. The Participant will receive no
         Plan benefit if he:

                  [a]      Terminates Employment for any reason before reaching
                           age 62;

                                       3
<PAGE>

                  [b]      Dies while actively employed, regardless of his age
                           at the time of death; or

                  [c]      Is terminated for Cause, regardless of his age at the
                           time Termination of Employment for Cause occurs.

4.02 Form of Payment

         Any benefit payable under Section 4.01 will be paid in monthly
installments beginning on the first day of the month following the Participant's
Retirement and ending on the first day of the month during which the Participant
dies. No payment will be made (and no Plan benefit will be due) to any person
after the Participant's death.

                                   5.00 Taxes

5.01 Withholding for Taxes Due on Plan Payments

         Regardless of any other provision of this Plan, any payment due under
Article 4.00 will be reduced by the amount of any federal, state and local
income and employment taxes the Company is required to withhold under any
applicable law or regulation from any payment made under Article 4.00.

5.02 Withholding for Taxes Due Before Payments Begin

         The Committee and the Participant will agree on the method to be
applied to pay the Participant's portion of any employment, wage and other taxes
imposed under any applicable law or regulation on any Plan benefit before that
benefit is paid to the Participant. If the Committee and Participant fail to
agree on the method to be applied, the Company will withhold the amount of the
Participant's liability from his other Compensation.

5.03 Special Distribution

         If any taxing authority finally establishes that the Participant is
constructively in receipt of any Plan benefit that has not actually been
distributed and that the Participant is immediately liable for any income or
other taxes (other than any taxes within the scope of Section 5.02) that
normally would not be imposed until the Plan benefit is actually paid to the
Participant, the Committee will immediately distribute to the Participant a lump
sum amount equal to that which the taxing authority has deemed the Participant
to have constructively received.

                               6.00 Administration

6.01 Appointment of Committee

         The Plan will be administered by the Committee.

6.02 Powers and Duties

                                       4
<PAGE>

         The Committee is fully empowered to exercise complete discretion to
administer the Plan and to construe and apply all of its provisions. These
powers and duties include:

         [1] Resolving disputes that may arise with regard to the rights of the
         Participant and his legal representatives under the terms of the Plan.
         Subject to Section 6.07, the Committee's decisions in these matters
         will be final in each case;

         [2] Obtaining from the Company, each Affiliate and the Participant
         information that the Committee needs to determine the Participant's
         rights and benefits under the Plan. The Committee may rely conclusively
         upon any information furnished by the Company or the Participant;

         [3] Compiling and maintaining all records it needs to administer the
         Plan;

         [4] Upon request, furnishing the Company with reasonable and
         appropriate reports of its administration of the Plan;

         [5] Authorizing the distribution of all benefits that are payable under
         the Plan;

         [6] Engaging legal, administrative, actuarial, investment, accounting,
         consulting and other professional services that the Committee believes
         are necessary and appropriate;

         [7] Adopting rules and regulations for the administration of the Plan
         that are not inconsistent with the terms of the Plan; and

         [8] Doing and performing any other acts provided for in the Plan.

Also, the Committee may delegate any of the powers and duties described in
subsections 6.02[2] through [4] to any other person or organization, as it deems
appropriate.

6.03 Actions by the Committee

         The Committee may act at a meeting by the vote or assent of a majority
of its members or in writing without a meeting by the written assent of all its
Members. The Committee will appoint one of its members to act as secretary to
record all Committee actions. The Committee also may authorize one or more if
its members to execute papers and perform other ministerial duties on behalf of
the Committee.

6.04 Indemnification

         The Committee will be indemnified by the Company to the fullest extent
permitted by the Company's certificate of incorporation and by-laws.

6.05 Conclusiveness of Action

                                       5
<PAGE>

         Subject to Section 6.07, any action on matters within the discretion of
the Committee will be conclusive, final and binding upon the Participant and
upon all persons claiming any rights under the Plan.

6.06 Payment of Expenses

         [1] Committee members will not be separately compensated for their
         services as Committee members. However, the Company will reimburse
         Committee members for all appropriate expenses they incur while
         carrying out their Plan duties.

         [2] The compensation or fees of accountants, counsel and other
         specialists and any other costs of administering the Plan will be paid
         by the Company.

6.07 Resolution of Disputes

         If, in the event of any controversy or claim between the Company or any
of its Affiliates and the Participant arising out of or relating to this Plan,
either party delivers to the other party a written demand for arbitration of a
controversy or claim, then such claim or controversy shall be submitted to
binding arbitration. The binding arbitration shall be administered by the
American Arbitration Association under its Commercial Arbitration Rules. The
arbitration shall take place in Columbus, Ohio. Each of the Company and the
Participant shall appoint one person to act as an arbitrator, and a third
arbitrator shall be chosen by the first two arbitrators (such three arbitrators,
the "Panel"). The Panel shall have no authority to award punitive damages
against the Company or the Participant. The Panel shall have no authority to add
to, alter, amend or refuse to enforce any portion of the disputed agreements.
The Company and the Participant each waive any right to a jury trial or to
petition for stay in any action or proceeding of any kind arising out or
relating to this Plan. Pending the resolution of any claim under this Section
6.07, the Participant shall continue to receive all undisputed payments and
benefits due under this Plan, except to the extent that the Panel otherwise
provides.

                               7.00 Plan Amendment

         The Company, by action of the Board, may modify, alter or amend the
Plan at any time. However, no such amendment may affect, directly or indirectly,
the Participant's rights under the Plan unless the Participant agrees to such
amendment either in a separate written agreement or by voting, as a member of
the Board, for such amendment.

                     8.00 Merger of Plan; Successor Employer

8.01 Merger and Consolidation

         If the Plan is merged into or consolidated with any other plan, the
Participant will be entitled to rights and benefits immediately after the merger
or consolidation at least equal to his rights and benefits under this Plan.

8.02 Successor Employer

                                       6
<PAGE>

         If the Company dissolves, reorganizes, merges into or consolidates with
another business entity, provision may be made by which the successor will
continue the Plan, in which case the successor will be substituted for the
Company under the terms and provisions of this Plan. The substitution of the
successor for the Company will constitute an assumption by the successor of all
Plan liabilities and the successor will have all of the powers, duties and
responsibilities of the Company under the Plan.

                                  9.00 Funding

         This Plan constitutes an unfunded, unsecured promise by the Company and
each Affiliate to pay only those benefits that are accrued by the Participant
under the terms of the Plan. Neither the Company nor any Affiliate will
segregate any assets into a fund established exclusively to pay Plan benefits
unless the Company, in its sole discretion, establishes a trust for this
purpose. Neither the Company nor any Affiliate is liable for the payment of Plan
benefits that are actually paid from a trust established for that purpose. Also,
the Participant has only the rights of a general unsecured creditor and does not
have any interest in or right to any specific asset of the Company or any
Affiliate. Nothing in this Plan constitutes a guaranty by the Company, any
Affiliate or any other entity or person that the assets of the Company, any
Affiliate or any other entity will be sufficient to pay Plan benefits.

                               10.00 Miscellaneous

10.01 Voluntary Plan

         The Plan is purely voluntary on the part of the Company; neither the
establishment of the Plan nor any amendment to it nor the creation of any fund
or account nor the payment of any benefits may be construed as giving any person
[1] a legal or equitable right against the Company, any Affiliate or the
Committee other than those specifically granted under the Plan or conferred by
affirmative action of the Committee or the Company or any Affiliate in a manner
that is consistent with the terms and provisions of this Plan or [2] the right
to be retained as an employee.

10.02 Nonalienation of Benefits

         The Participant's right to receive Plan benefits may not be assigned,
transferred, pledged or encumbered, including by will or by applicable laws of
descent and distribution. Any attempt to assign, transfer, pledge, encumber or
devise a Plan benefit will be null and void and of no legal effect.

10.03 Inability to Receive Benefits

         Any Plan benefit payable to the Participant after he is declared
incompetent will be paid to the guardian, conservator or other person legally
charged with the care of his person or estate. Also, if the Committee, in its
sole discretion, concludes that the Participant is unable to manage his
financial affairs, the Committee may, but is not required to, direct the Company
to distribute Plan benefits to any one or more of his spouse, lineal ascendants
or descendants or other close living relatives of the Participant or any other
person then contributing toward or providing the

                                       7
<PAGE>

care and maintenance of the Participant who demonstrates to the satisfaction of
the Committee the propriety of those distributions. Any payment made under this
Section 10.03 will completely discharge the Plan's liability with respect to
that payment. The Committee is not required to see to the application of any
distribution made to any person.

10.04 Lost Participant

         The Participant is obliged to keep the Committee apprised of his
current mailing address. The Committee's obligation to search for the
Participant is limited to sending a registered or certified letter to the
Participant's last known address. If the Participant does not file a claim for
benefits with the Committee within 12 months after benefits are otherwise
payable, benefits will be forfeited. However, this forfeited benefit will be
restored and paid if the Committee subsequently approves a claim for benefits.

10.05 Limitation of Rights

         Nothing in the Plan, expressed or implied, is intended or may be
construed as conferring upon or giving to any person, firm or association (other
than the Company, the Affiliates and the Participant) any right, remedy or claim
under or by reason of this Plan.

10.06 Invalid Provision

         If any provision of this Plan is held to be illegal or invalid for any
reason, the Plan will be construed and enforced as if the offending provision
had not been included in the Plan. However, that determination will not affect
the legality or validity of the remaining parts of this Plan.

10.07 One Plan

         This Plan may be executed in any number of counterparts, each of which
will be deemed to be an original.

10.08 Governing Law

         The Plan will be governed by and construed in accordance with the laws
of the United States and, to the extent applicable, the laws of Ohio.

10.09 Coordination With Other Programs

         The Participant's right to any benefits accrued or payable under this
Plan will be determined solely by reference to the terms of this Plan document
and will be unaffected by any other document or agreement between the
Participant and the Company.

                                       8
<PAGE>

         IN WITNESS WHEREOF, the undersigned authorized officer of the Company
has executed this Plan to be effective as of February 2, 2003.

                                         ABERCROMBIE & FITCH CO.

                                         By:         /s/ Seth R. Johnson
                                            -----------------------------

                                         Print Name: Seth R. Johnson
                                                    ---------------------

                                         Title:      Ex. VP/COO
                                               --------------------------

                                         Date:       1/30/03
                                              ---------------------------

                                       9
<PAGE>

                             ABERCROMBIE & FITCH CO.
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                                 ENROLLMENT FORM

                Name:               Michael Jeffries
                                    ----------------------------------------

                Soc. Sec. No.:      XXXXXXX
                                    ----------------------------------------

                Date of Birth:      XXXXXXX
                                    ----------------------------------------

                Address:            XXXXXXX
                                    ----------------------------------------
                                    XXXXXXX
                                    ----------------------------------------

         By signing this form, I acknowledge that [1] I have read and understand
the Plan and the terms and conditions I must meet to receive a Plan benefit, [2]
the Plan is unfunded, [3] I am solely responsible for ensuring that the
Committee's files contain my current mailing address and [4] by signing this
form, I agree to be bound by all terms and conditions imposed by the Plan.

                                    Signature:       /s/ Michael Jeffries
                                              ------------------------------

                                    Name (please print):  Michael Jeffries
                                                        --------------------

                                    Date signed:     1/30/03
                                                ----------------------------

                                    Received by Committee on:   1/30/03
                                                             ---------------

                                    By:           John W. Kessler
                                       -------------------------------------

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