<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 1998
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________________to______________________
Commission file number 1-13814
-------
INTIMATE BRANDS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 31-1436998
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
Three Limited Parkway, P.O. Box 16000, Columbus, OH 43216
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 415-6900
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock Outstanding at August 28, 1998
-------------------- ------------------------------
$.01 Par Value 39,337,343 Shares
Class B Common Stock Outstanding at August 28, 1998
-------------------- ------------------------------
$.01 Par Value 210,000,000 Shares
<PAGE> 2
INTIMATE BRANDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and Twenty-six Weeks Ended
August 1, 1998 and August 2, 1997........................................ 3
Consolidated Balance Sheets
August 1, 1998 and January 31, 1998...................................... 4
Consolidated Statements of Cash Flows
Twenty-six Weeks Ended
August 1, 1998 and August 2, 1997........................................ 5
Notes to Consolidated Financial Statements........................................ 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition............................ 11
Part II. Other Information
Item 1. Legal Proceedings ........................................................... 18
Item 5. Other Information ........................................................... 18
Item 6. Exhibits and Reports on Form 8-K ............................................ 18
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------------ ------------------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $874,708 $826,574 $1,645,576 $1,530,615
Cost of Goods Sold, Occupancy and Buying Costs 538,564 544,003 1,037,560 1,019,962
------------- ------------- ------------- -------------
GROSS INCOME 336,144 282,571 608,016 510,653
General, Administrative and Store Operating
Expenses 211,227 175,086 411,681 342,886
------------- ------------- ------------- -------------
OPERATING INCOME 124,917 107,485 196,335 167,767
Interest Expense (7,563) (7,562) (15,126) (15,126)
Other Income 5,408 1,775 9,780 3,855
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 122,762 101,698 190,989 156,496
Provision for Income Taxes 49,200 40,700 76,400 62,600
------------- ------------- ------------- -------------
NET INCOME $73,562 $60,998 $114,589 $93,896
============= ============= ============= =============
NET INCOME PER BASIC AND DILUTED SHARE $.29 $.24 $.45 $.37
============= ============= ============= =============
DIVIDENDS PER SHARE $.14 $.13 $.28 $.26
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
----------- -----------
(Unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and Equivalents $ 21,796 $ 308,720
Accounts Receivable 16,465 34,639
Inventories 432,228 417,703
Intercompany Receivables 192,350 12,457
Other 84,195 102,540
----------- -----------
TOTAL CURRENT ASSETS 747,034 876,059
PROPERTY AND EQUIPMENT, NET 396,168 392,504
OTHER ASSETS 74,687 79,137
----------- -----------
TOTAL ASSETS $ 1,217,889 $ 1,347,700
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 81,593 $ 94,498
Accrued Expenses 176,666 224,380
Income Taxes Payable 20,067 94,058
----------- -----------
TOTAL CURRENT LIABILITIES 278,326 412,936
LONG-TERM DEBT 350,000 350,000
DEFERRED INCOME TAXES 8,599 13,068
OTHER LONG-TERM LIABILITIES 12,738 10,901
SHAREHOLDERS' EQUITY:
Common Stock 2,527 2,527
Paid-in Capital 673,854 674,620
Retained Deficit (70,589) (114,465)
----------- -----------
605,792 562,682
Less: Treasury Stock, at Average Cost (37,566) (1,887)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 568,226 560,795
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,217,889 $ 1,347,700
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
--------------------------------------
August 1, August 2,
1998 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $114,589 $93,896
Net Income
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 49,448 47,173
Changes in Assets and Liabilities:
Accounts Receivable 18,174 97
Inventories (14,525) 15,078
Accounts Payable and Accrued Expenses (60,619) (21,961)
Income Taxes (78,460) (64,714)
Other Assets and Liabilities 37,569 (26,527)
----------------- -----------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 66,176 43,042
----------------- -----------------
CASH USED FOR INVESTING ACTIVITIES:
Capital Expenditures (55,009) (62,370)
----------------- -----------------
FINANCING ACTIVITIES:
Dividends Paid (70,713) (65,660)
Increase in Intercompany Receivable (179,893) (32,901)
Purchase of Treasury Stock (48,659) -
Stock Options and Other 1,174 363
----------------- -----------------
NET CASH USED FOR FINANCING ACTIVITIES (298,091) (98,198)
----------------- -----------------
NET DECREASE IN CASH AND EQUIVALENTS (286,924) (117,526)
Cash and Equivalents, Beginning of Year 308,720 135,111
----------------- -----------------
CASH AND EQUIVALENTS, END OF PERIOD $21,796 $17,585
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
INTIMATE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Intimate Brands, Inc. (the "Company") includes specialty retail and
catalogue operations which offer women's intimate and other apparel,
personal care products and accessories. They consist of Victoria's
Secret Stores, Victoria's Secret Catalogue, Bath & Body Works, and
Gryphon Development. The Limited, Inc. ("The Limited") owns
approximately 83% of the outstanding common stock of the Company.
The consolidated financial statements include the accounts of the
Company and all significant subsidiaries which are more than 50 percent
owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation.
The consolidated financial statements as of August 1, 1998 and for the
thirteen and twenty-six week periods ended August 1, 1998 and August 2,
1997 are unaudited and are presented pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly,
these consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained
in the Company's 1997 Annual Report on Form 10-K. In the opinion of
management, the accompanying consolidated financial statements reflect
all adjustments (which are of a normal recurring nature) necessary to
present fairly the financial position and results of operations and
cash flows for the interim periods, but are not necessarily indicative
of the results of operations for a full fiscal year.
The consolidated financial statements as of August 1, 1998 and for the
thirteen and twenty-six week periods ended August 1, 1998 and August 2,
1997 included herein have been reviewed by the independent public
accounting firm of PricewaterhouseCoopers LLP and the report of such
firm follows the notes to consolidated financial statements.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The SOP requires that certain
external costs and internal payroll and payroll related costs be
capitalized during the application development and implementation
stages of a software development project and amortized over the
software's useful life. The SOP is effective in the first quarter of
1999.
Additionally, SOP 98-5, "Reporting on the Costs of Start-Up
Activities," was issued in April 1998. This SOP requires that entities
expense start-up costs and organization costs as they are incurred. The
SOP is effective in the first quarter of 1999.
6
<PAGE> 7
2. EARNINGS PER SHARE
Weighted average common shares outstanding (thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------------- --------------------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Common shares issued 252,700 252,700 252,700 252,700
Treasury shares (640) (153) (413) (161)
-------------- -------------- -------------- --------------
Basic shares 252,060 252,547 252,287 252,539
Dilutive effect of stock options and
restricted shares 1,989 724 2,026 642
-------------- -------------- -------------- --------------
Diluted shares 254,049 253,271 254,313 253,181
============== ============== ============== ==============
</TABLE>
Options to purchase .6 million and 2.5 million shares of common stock
were outstanding at August 1, 1998 and August 2, 1997, but were not
included in the computation of earnings per share because the options'
exercise price was greater than the average market price of the common
shares during the period.
3. INVENTORIES
The fiscal year of the Company and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and
Fall (the third and fourth quarters). Valuation of finished goods
inventories is based principally upon the lower of average cost or
market determined on a first-in, first-out basis using the retail
method. Inventory valuation at the end of the first and third quarters
reflects adjustments for inventory markdowns and shrinkage estimates
for the total selling season.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
------------------ ------------------
<S> <C> <C>
Property and equipment, at cost $782,677 $743,786
Accumulated depreciation and
amortization (386,509) (351,282)
------------------ ------------------
Property and equipment, net $396,168 $392,504
================== ==================
</TABLE>
7
<PAGE> 8
5. INCOME TAXES
The Company is included in The Limited's consolidated federal and
certain state income tax groups for income tax reporting purposes and
is responsible for its proportionate share of income taxes calculated
upon its federal taxable income at a current estimate of the Company's
annual effective tax rate. Income taxes paid to the Limited during the
twenty-six weeks ended August 1, 1998 and August 2, 1997 approximated
$155 million and $127 million.
6. LONG-TERM DEBT
Long-term debt consists of notes which represent the Company's
proportionate share of certain long-term debt of The Limited. The
interest rates and maturities of the notes parallel those of the
corresponding debt of The Limited. The 7 1/2% debentures are subject to
early redemption beginning in 2003 concurrent with any prepayment of
the corresponding debt by The Limited. Unsecured long-term debt
consisted of (thousands):
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
------------------ ------------------
<S> <C> <C>
7 1/2% Debentures due March 2023 $100,000 $100,000
9 1/8% Notes due February 2001 150,000 150,000
8 7/8% Notes due August 1999 100,000 100,000
------------------ ------------------
$350,000 $350,000
================== ==================
</TABLE>
Interest paid during the twenty-six weeks ended August 1, 1998 and
August 2, 1997, including interest on the intercompany cash management
account (see Note 7), approximated $15.2 million and $22.0 million.
7. INTERCOMPANY RELATIONSHIP WITH PARENT
The Limited provides various services to the Company including, but not
limited to, store design and construction supervision, real estate
management, travel and flight support and merchandise sourcing. To the
extent expenditures are specifically identifiable they are charged to
the Company. All other related support expenses are charged to the
Company and other divisions at The Limited based upon various
allocation methods.
The Company participates in The Limited's centralized cash management
system. Under this system cash received from the Company's operations
is transferred to The Limited's centralized cash accounts and cash
disbursements are funded from the centralized cash accounts on a daily
basis. The intercompany cash management account is an interest-earning
asset or interest-bearing liability of the Company. Interest on the
intercompany cash management account is calculated based on the Federal
Reserve AA Composite 30-day rate.
The Company's proprietary credit card processing is performed by
Alliance Data Systems which is approximately 32%-owned by The Limited.
The Company and The Limited are parties to a corporate agreement under
which the Company granted to The Limited a continuing option to
purchase, under certain circumstances, additional shares of Class B
Common Stock or shares of nonvoting capital
8
<PAGE> 9
stock of the Company. The Corporate Agreement further provides that,
upon request of The Limited, the Company will use its best efforts to
effect the registration of any of the shares of Class B Common Stock
and nonvoting capital stock held by The Limited for sale.
8. SPECIAL AND NONRECURRING CHARGES
During the fourth quarter of 1997, the Company recorded pretax special
and nonrecurring charges of $68 million related to closing the Cacique
lingerie business. Write-downs related to the $30 million noncash
component of the charge were recognized in 1997. Outlays for the cash
component of the charge are expected to approximate $34 to $36 million
during 1998. Cash outlays of $21 million during the first half of 1998
were principally related to store closings.
9
<PAGE> 10
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Audit Committee of
The Board of Directors of
Intimate Brands, Inc.
We have reviewed the condensed consolidated balance sheet of Intimate Brands,
Inc. and Subsidiaries (the Company) at August 1, 1998, and the related
condensed consolidated statements of income and cash flows for the
thirteen-week and twenty-six-week periods ended August 1, 1998 and August 2,
1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 1998, and the
related consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 20, 1998, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of January 31, 1998, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Columbus, Ohio
August 12, 1998
10
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
During the second quarter of 1998, net sales increased 6% to $874.7 million from
$826.6 million a year ago. Second quarter operating income of $124.9 million
increased 16% from last year's $107.5 million. Net income increased 21% to $73.6
million from $61.0 million in 1997. Earnings per share increased 21% to $.29 per
share compared to $.24 per share in 1997.
Second quarter highlights include the following:
Victoria's Secret Stores operating margin and operating income were
significantly higher on a comparable store sales increase of 2%. Victoria's
Secret Catalogue sales increased 3%. Major lingerie introductions and the
semi-annual sale were supported by national television advertising.
Bath & Body Works, up against strong comparable store sales of 16% a year
ago, delivered a comparable store sales increase of 3% and achieved a 30%
increase in operating profits. New product collections and a strong sale
event contributed to the sales and profit growth.
Sales for the twenty-six weeks ended August 1, 1998 of $1.646 billion increased
8% from sales of $1.531 billion for the same period last year. Operating income
increased 17% to $196.3 million from $167.8 million a year ago. Net income
increased 22% to $114.6 million from $93.9 million in 1997. Earnings per share
grew 22% to $.45 per share, compared to $.37 per share in 1997.
11
<PAGE> 12
21
Financial Summary
- -----------------
The following summarized financial and statistical data compares the thirteen
week and twenty-six week periods ended August 1, 1998 to the comparable 1997
periods:
<TABLE>
<CAPTION>
SECOND QUARTER YEAR - TO - DATE
------------------------------------------ ------------------------------------------
CHANGE CHANGE
FROM FROM
PRIOR PRIOR
1998 1997 YEAR 1998 1997 YEAR
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES (MILLIONS):
Victoria's Secret Stores $413 $389 6% $775 $714 9%
Victoria's Secret Catalogue 202 196 3% 401 376 7%
Bath & Body Works 254 212 20% 459 389 18%
Cacique* - 22 N/M - 42 N/M
Other 6 8 N/M 11 10 N/M
------------ ----------- ----------- ------------ ------------ -----------
Total Net Sales $875 $827 6% $1,646 $1,531 8%
============ =========== =========== ============ ============ ===========
INCREASE IN COMPARABLE STORE SALES:
Victoria's Secret Stores 2% 15% 4% 11%
Bath & Body Works 3% 16% 1% 15%
Cacique* - 11% - 8%
------------ ----------- ------------ ------------
Total Comparable Store Sales 2% 15% 3% 12%
============ =========== ============ ============
*The Cacique business was closed effective January 31, 1998.
RETAIL SALES EXCLUDING CATALOGUE AND OTHER:
Retail sales increase
attributable to net new and
remodeled stores, excluding
Cacique in 1998 9% 16% 9% 17%
Retail sales per average
selling square foot $121 $118 3% $227 $220 3%
Retail sales per average
store (thousands) $375 $370 1% $703 $688 2%
Average store size at end of
quarter (selling square feet) 3,084 3,118 (1%)
Retail selling square feet at
end of quarter (thousands) 5,549 5,360 4%
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
SECOND QUARTER YEAR - TO - DATE
-------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ------------- -----------
NUMBER OF STORES:
<S> <C> <C> <C> <C>
Beginning of period 1,757 1,656 1,710 1,609
Opened 51 65 102 120
Closed (9) (2) (13) (10) *
----------- ----------- ------------- -----------
End of period 1,799 1,719 1,799 1,719
=========== =========== ============= ===========
</TABLE>
* Includes sale of four Penhaligon's stores in April 1997.
<TABLE>
<CAPTION>
Number of Stores Selling Sq. Ft. (thousands)
------------------------------------------ ------------------------------------------
Change Change
August 1, August 2, From Prior August 1, August 2, From Prior
1998 1997 Year 1998 1997 Year
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Victoria's Secret Stores 799 757 42 3,595 3,433 162
Bath & Body Works 1,000 844 156 1,954 1,564 390
Cacique - 118 (118) - 363 (363)
------------ ------------ ------------ ------------ ------------ ------------
Total stores and selling
square feet 1,799 1,719 80 5,549 5,360 189
============ ============ ============ ============ ============ ============
</TABLE>
Net Sales
- ---------
Net sales for the second quarter of 1998 increased by 6% over the same period
last year, net of a 3% decline from the January 31, 1998 closing of Cacique. The
increase was primarily attributable to the net addition of 198 new stores. The
remaining increase came from a 2% increase in comparable store sales and a 3%
increase in catalogue net sales. Year-to-date sales increased 8% over the same
period in 1997, net of a 3% decline from the January 31, 1998 closing of
Cacique. The increase, excluding Cacique, was due to the net addition of new
stores, a 3% increase in comparable store sales and a 7% increase in catalogue
net sales.
Victoria's Secret Stores net sales for the second quarter of 1998 increased 6%
to $413 million from $389 million a year ago. The sales increase was primarily
attributable to the net addition of 42 new stores and 162,000 selling square
feet, a 5% increase in selling square feet over 1997. The balance of the
increase was from a 2% increase in comparable store sales for the quarter.
Bath & Body Works net sales for the second quarter of 1998 increased 20% to $254
million from $212 million a year ago. The sales increase was primarily
attributable to the net addition of 156 stores and 390,000 selling square feet,
a 25% increase in selling square feet over 1997. The balance of the increase was
from a 3% increase in comparable store sales for the quarter.
Victoria's Secret Catalogue net sales for the second quarter of 1998 increased
3% to $202 million from $196 million a year ago. This increase was primarily
attributable to an increase in catalogue circulation in the second quarter of
1998.
Gross Income
- ------------
Gross income, expressed as a percentage of net sales, increased to 38.4% for the
second quarter of 1998 from 34.2% for the same period in 1997. The increase was
primarily due to a 4.5% increase in merchandise margins offset by a .3% increase
in buying and occupancy costs, expressed as a percentage of net sales. The
increase in merchandise margins in the retail
13
<PAGE> 14
operations, expressed as a percentage of net sales, was due to higher retail
markups. This increase was especially significant at Victoria's Secret Stores
which also benefited from the continuation of strong sales increases in high
margin personal care products. The increase in buying and occupancy costs,
expressed as a percentage of net sales, resulted from an increase in catalogue
costs, primarily due to increased paper prices at Victoria's Secret Catalogue
and the accelerated depreciation expense to regularly remodel and refresh stores
at Victoria's Secret. These increases were reduced by the closing of Cacique
(the highest buying and occupancy business, expressed as a percentage of net
sales) and the growth of Bath & Body Works net sales as a percentage of the
Company to 29% from 26% in 1997. Bath & Body Works records lower buying and
occupancy costs due to smaller store size and higher sales productivity.
The 1998 year-to-date gross income percentage increased 3.5% to 36.9% in 1998
from 33.4% for the same period in 1997. The year-to-date increase was primarily
attributable to a 4.0% rate increase in merchandise margins offset by a .5%
increase in buying and occupancy costs, expressed as a percentage of net sales.
The increase in merchandise margins were the result of the same reasons
discussed above. The increase in buying and occupancy costs was primarily due to
an increase in paper usage and prices at Victoria's Secret Catalogue and the
accelerated depreciation expense to regularly remodel and refresh stores at
Victoria's Secret.
General, Administrative and Store Operating Expenses
- ----------------------------------------------------
General, administrative and store operating expenses, expressed as a percentage
of net sales, increased to 24.1% in the second quarter of 1998 from 21.2% for
the same period in 1997. The rate increase was primarily due to additional
national advertising incurred by Victoria's Secret. Increases were also funded
in brand building and other Company initiatives principally in information
technology, real estate and brand marketing. The positive impact of closing
Cacique was offset by the growth of Bath & Body Works net sales as a percentage
of the total Company to 29% from 26% in 1997. Bath & Body Works has historically
recorded higher than Company average general, administrative and store operating
expenses, expressed as a percentage of net sales, due to significantly smaller
stores and emphasis on point-of-sale marketing and sales floor coverage.
Year-to-date, general, administrative and store operating expenses, expressed as
a percentage of net sales, increased 2.6% to 25.0% from 22.4% in 1997 for the
same reasons discussed above.
Operating Income
- ----------------
Second quarter and year-to-date operating income, expressed as a percentage of
net sales, was 14.3% and 11.9% in 1998 compared to 13.0% and 11.0% in 1997,
respectively. The increase in gross income rate, expressed as a percentage of
net sales, more than offset the increase in general, administrative and store
operating expenses for both the second quarter and year-to-date.
Interest Expense and Other Income
- ---------------------------------
Interest expense was unchanged from $7.6 million in the second quarter of 1997
and $15.1 million for the year-to-date period in 1997. The interest expense is
primarily for the Company's $350 million long-term debt.
In the second quarter of 1998, the Company earned $5.4 million in other income
as compared to $1.8 million for the same period in 1997. Year-to-date, the
Company earned $9.8 million compared to $3.9 million in 1997. The increase is
attributable to interest earned on significantly higher average invested cash
balances managed through The Limited's centralized cash management system (see
Note 7).
14
<PAGE> 15
FINANCIAL CONDITION
The Company's consolidated balance sheet as of August 1, 1998 provides evidence
of financial strength and flexibility. A more detailed discussion of liquidity,
capital resources and capital requirements follows.
Liquidity and Capital Resources
- -------------------------------
Cash provided from operating activities and cash funding from The Limited's
centralized cash management system provide the resources to support operations,
including projected growth, seasonal working capital requirements and capital
expenditures. A summary of the Company's working capital position and
capitalization follows (thousands):
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
----------------- ----------------
<S> <C> <C>
Working Capital $468,708 $463,123
================= ================
Capitalization:
Long-term debt $350,000 $350,000
Shareholders' equity 568,226 560,795
----------------- ----------------
Total Capitalization $918,226 $910,795
================= ================
</TABLE>
Net cash provided from operating activities totaled $66.2 million for the
twenty-six weeks ended August 1, 1998 versus $43.0 million for the same period
in 1997. The change in net cash provided from operating activities for the
Company compared to last year is primarily the result of the reduction of paper
inventory at Victoria's Secret Catalogue and the increase in operating income,
partially offset by the cost incurred to close Cacique (see Note 8) and the
timing of inventory receipts.
Investing activities were for capital expenditures, which were primarily for new
and remodeled stores.
Financing activities included two quarterly cash dividend payments of $.14 per
share each and $179.9 million of net cash invested through The Limited's
centralized cash management system (see Note 7). The Company has previously
announced authorization by its Board of Directors to repurchase up to four
million shares of its common stock on the open market, specifically reserved to
cover shares needed for employee benefit plans. At August 1, 1998, the Company
had repurchased approximately two million shares for this program, and by the
end of August all four million shares were repurchased.
Capital Expenditures
- --------------------
The Company anticipates spending $120 to $140 million in 1998 for capital
expenditures, of which $90 to $100 million will be for new stores, the
relocation and expansion of existing stores and related improvements for the
retail business.
The Company intends to add approximately 516,000 selling square feet in 1998,
which will represent a 10% increase over year-end 1997. It is anticipated that
the increase will result from
15
<PAGE> 16
the addition of approximately 205 new stores and the remodeling/expansion of
approximately 50 stores. The Company expects that future capital expenditures
will be funded principally with cash from operations.
Information Systems and "Year 2000" Compliance
- ----------------------------------------------
The Company has completed a comprehensive review of its information systems and
is involved in an enterprise-wide program to update computer systems and
applications in preparation for the year 2000. The Company will incur internal
staff costs as well as outside consulting and other expenditures related to this
initiative. Total expenditures related to remediation, testing, conversion,
replacement and upgrading system applications are expected to range from $20 to
$25 million from 1997 through 2000. Of the total, approximately $9 to $11
million will be capital expenditures related to acquisition and implementation
of new package systems. The balance, approximately $11 to $14 million, will be
expenses associated with remediation and testing of existing systems. Total
incremental expenses, including depreciation and amortization of new package
systems, remediation to bring current systems into compliance and writing off
legacy systems are not expected to have a material impact on the Company's
financial condition in any year during the conversion process from 1997 through
2000.
The Company is attempting to contact vendors and others on whom it relies to
assure that their systems will be timely converted. However, there can be no
assurance that the systems of other companies on which the Company's systems
rely will be timely converted or that any such failure to convert by another
company would not have an adverse effect on the Company's systems. Furthermore,
no assurance can be given that any or all of the Company's systems are or will
be Year 2000 compliant, or that the ultimate costs required to address the Year
2000 issue or the impact of any failure to achieve substantial Year 2000
compliance will not have a material adverse effect on the Company's financial
condition.
Adoption of New Accounting Standards
- ------------------------------------
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP requires that certain external costs and internal payroll
and payroll related costs be capitalized during the application development and
implementation stages of a software development project and amortized over the
software's useful life. The SOP is effective in the first quarter of 1999.
Additionally, SOP 98-5, "Reporting on the Costs of Start-Up Activities," was
issued in April 1998. This SOP requires that entities expense start-up costs and
organization costs as they are incurred. The SOP is effective in the first
quarter of 1999 and the Company does not anticipate that this SOP will have an
adverse effect on the Company's reported results of operations.
16
<PAGE> 17
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
this Report or made by management of the Company involve risks and uncertainties
and are subject to change based on various important factors. The following
factors, among others, in some cases have affected and in the future could
affect the Company's financial performance and actual results and could cause
actual results for 1998 and beyond to differ materially from those expressed or
implied in any such forward-looking statements: changes in consumer spending
patterns, consumer preferences and overall economic conditions, the impact of
competition and pricing, changes in weather patterns, political stability,
currency and exchange risks and changes in existing or potential duties, tariffs
or quotas, postal rate increases and charges, paper and printing costs,
availability of suitable store locations at appropriate terms, ability to
develop new merchandise and ability to hire and train associates.
17
<PAGE> 18
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a variety of lawsuits arising in the
ordinary course of business.
On November 13, 1997, the United States District Court for the Southern
District of Ohio, Eastern Division, dismissed with prejudice an amended
complaint previously transferred to that court by the United States
District Court, Central District of California. The amended complaint,
which had been filed against the Company, The Limited and certain of
The Limited's other subsidiaries by the American Textile Manufacturers
Institute ("ATMI"), a textile industry trade association, alleged that
the defendants violated the federal False Claims Act by submitting
false country of origin records to the U.S. Customs Service. On
November 26, 1997, ATMI served a motion to alter or amend judgment and
a motion to disqualify the presiding judge and to vacate the order of
dismissal. The motion to disqualify was denied on December 22, 1997,
but as a matter of his personal discretion, the presiding judge elected
to recuse himself from further proceedings and this matter was
transferred to another judge of the United States District Court for
the Southern District of Ohio, Western Division. On May 21, 1998, this
judge reaffirmed the earlier dismissal and denied all pending motions
seeking to alter, amend or vacate the judgment that had been entered in
favor of the Company. On June 5, 1998, ATMI filed a notice of appeal to
the United States Court of Appeals for the Sixth Circuit.
Although it is not possible to predict with certainty the eventual
outcome of any litigation, in the opinion of management, the foregoing
proceedings are not expected to have a material adverse effect on the
Company's financial position or results of operations.
Item 5. OTHER INFORMATION
The Company's Certificate of Incorporation includes provisions relating
to potential conflicts of interest that may arise between the Company
and The Limited. Such provisions were adopted in light of the fact that
the Company and The Limited and its subsidiaries are engaged in retail
businesses and may pursue similar opportunities in the ordinary course
of business. Among other things, these provisions generally eliminate
the liability of directors and officers of the Company with respect to
certain matters involving The Limited and its subsidiaries, including
matters that may constitute corporate opportunities of The Limited, its
subsidiaries or the Company. Any person purchasing or acquiring an
interest in shares of capital stock of the Company will be deemed to
have consented to such provisions relating to conflicts of interest and
corporate opportunities, and such consent may restrict such person's
ability to challenge transactions carried out in compliance with such
provisions. Investors should review the Company's Certificate of
Incorporation before making any investment in shares of the Company's
capital stock.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
3. Articles of Incorporation and Bylaws.
3.1 Amended and Restated Certificate of Incorporation of
the Company incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 28, 1995.
18
<PAGE> 19
3.2 Bylaws of the Company incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended October 28, 1995.
4. Instruments Defining the Rights of Security Holders.
4.1 Specimen Certificate of Class A Common Stock of the
Company incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-1
(File No. 33-92568) (the "Form S-1").
4.2 Certificate of Incorporation of The Limited, Inc.
incorporated by reference to Exhibit 4.2 to the
Company's Form S-1.
4.3 Bylaws of The Limited, Inc. incorporated by reference
to Exhibit 4.3 to the Company's Form S-1.
10. Material Contracts.
10.1 Intimate Brands, Inc. 1995 Stock Option and
Performance Incentive Plan incorporated by reference
to Exhibit B to the Company's Proxy Statement dated
April 14, 1997.
10.2 Intimate Brands, Inc. Incentive Compensation
Performance Plan incorporated by reference to Exhibit
A to the Company's Proxy Statement dated April 14,
1997.
10.3 Intimate Brands, Inc. 1995 Stock Option and
Performance Incentive Plan for Non-Associate
Directors incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-8
(File No. 333-04923).
10.4 Corporate Agreement by Intimate Brands, Inc. and The
Limited, Inc., dated October 23, 1995 incorporated by
reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.5 Tax Sharing Agreement by Intimate Brands, Inc. and
The Limited, Inc., dated October 23, 1995
incorporated by reference to Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended October 28, 1995.
10.6 Services Agreement by Intimate Brands, Inc. and The
Limited, Inc., dated October 23, 1995 incorporated by
reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 28,
1995.
10.9 Employment agreement by and between Intimate Brands,
Inc. and Cynthia A. Fields dated as of May 20, 1998
with exhibits.
10.17 Employment agreement by and between Intimate Brands,
Inc. and Grace A. Nichols dated as of May 20, 1998
with exhibits.
10.18 Employment agreement by and between Intimate Brands,
Inc. and Beth M. Pritchard dated as of May 20, 1998
with exhibits.
19
<PAGE> 20
15. Letter re: Unaudited Interim Financial Information to
Securities and Exchange Commission re: Incorporation of
Independent Accountants' Report.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
-------------------
None.
20
<PAGE> 21
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTIMATE BRANDS, INC.
(Registrant)
By /S/ Philip E. Mallott
--------------------------
Philip E. Mallott,
Chief Financial Officer*
Date: September 14, 1998
- ----------------------------------------
* Mr. Mallott is the principal financial officer and has been duly authorized to
sign on behalf of the Registrant.
21
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibit No. Document
---------- --------
10.9 Employment agreement by and between Intimate
Brands, Inc. and Cynthia A. Fields dated as of May
20, 1998 with exhibits.
10.17 Employment agreement by and between Intimate
Brands, Inc. and Grace A. Nichols dated as of May
20, 1998 with exhibits.
10.18 Employment agreement by and between Intimate
Brands, Inc. and Beth M. Pritchard dated as of May
20, 1998 with exhibits.
15 Letter re: Unaudited Interim Financial Information
to Securities and Exchange Commission re:
Incorporation of Independent Accountants' Report.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.9
------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of May 20, 1997, by and
between Victoria's Secret Catalogue, New York, Inc. and Intimate Brands Inc. a
Delaware corporation (the "Company"), and Cynthia A. Fields (the "Executive")
(hereinafter collectively referred to as "the parties").
WHEREAS, the Executive has heretofore been employed as President
and Chief Executive Officer - Victoria's Secret Catalogue, and is experienced in
all phases of its 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 key management personnel and to
ensure their continued dedication and efforts; and
WHEREAS, the Compensation Committee of 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 and the
Executive is willing to render such services on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective agreements of the parties contained herein, the parties hereby agree
as follows:
1. Term. The initial term of employment under this Agreement
shall be for the period commencing on the date hereof (the "Commencement Date")
and ending on the sixth anniversary of the Commencement Date (the "Initial
Term"); provided, however, that upon the expiration of the Initial Term, this
Agreement shall be automatically extended for a period of one year, unless
either the Company or the Executive shall have given written notice to the other
at least ninety (90) days prior thereto that the term of this Agreement shall
not be so extended.
2. Employment.
(a) Position. The Executive shall be employed as the
President and Chief Executive Officer - Victoria's Secret Catalogue, or such
other position of reasonably comparable or greater status and responsibilities
as may be determined by the Board with any division, subsidiary or affiliate 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 to Leslie H. Wexner or his successor.
(b) Obligations. The Executive agrees to devote her full
business time and attention to the business and affairs of the Company. The
foregoing, however, shall not
<PAGE> 2
preclude the Executive from serving on corporate, civil 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 during the term of this Agreement a base salary at the rate of
$625,000. This base salary will be subject to annual review and may be increased
from time to time by the Board considering factors such as the executive's
responsibilities, compensation of similar executives within the company and in
other companies, performance of the executive and other pertinent factors
(hereinafter referred to as the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executives.
4. Equity Compensation. The Company shall grant to the Executive
rights to receive 250,000 shares of the Company's common stock and options to
acquire 500,000 shares of the Company's common stock pursuant to the terms of
the agreements attached hereto as Exhibits A and B.
5. Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, practices and programs maintained by
the Company and made available to senior executives generally and as may be in
effect from time to time. The Executive's participation in such plans, practices
and programs shall be on the same basis and terms as are applicable to senior
executives of the Company generally.
6. Bonus. The Executive shall be entitled to participate in the
Company's applicable incentive compensation plan on such terms and conditions as
may be determined from time to time by the Board.
7. Other Benefits.
(a) Life Insurance.
(1) During the term of the Agreement, the
Company shall maintain term life insurance coverage on the life of the Executive
in the amount of $5,000,000, the proceeds of which shall be payable to the
beneficiary or beneficiaries designated by the Executive. The Executive agrees
to undergo any reasonable physical examination and other procedures as may be
necessary to maintain such policy.
(2) During the term of this Agreement, the
Company shall be entitled to maintain a "key person" 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. Subject to applicable Company policies,
the Executive shall be entitled to receive prompt reimbursement of all expenses
reasonably incurred by her in
<PAGE> 3
connection with the performance of her duties hereunder or for promoting,
pursuing or otherwise furthering the business or interests of the Company.
(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 those duties hereunder.
8. Vacation. The Executive shall be entitled to annual vacation
in accordance with the policies as periodically established by the Board for
similarly situated executives of the Company.
9. Termination. The Executive's employment hereunder may be
terminated under the following circumstances:
(a) Disability. The Company shall be entitled to
terminate the Executive's employment after having established the Executive's
Disability. For purposes of this Agreement, "Disability" means a physical or
mental infirmity which impairs the Executive's ability to substantially perform
those duties under this Agreement for a period of at least six (6) months in any
12 month calendar period as determined in accordance with the The Limited, Inc.
Long-Term Disability Plan.
(b) Cause. The Company shall be entitled to terminate
the Executive's employment for "Cause" without prior written notice. For
purposes of this Agreement, "Cause" shall mean that the Executive (1) willfully
failed to perform those duties with the Company (other than a failure resulting
from the Executive's incapacity due to physical or mental illness); or (2) has
plead "guilty" or "no contest" to or has been convicted of an act which is
defined as a felony under federal or state law; or (3) engaged in willful
misconduct in bad faith which could reasonably be expected to materially harm
the Company's business or its reputation.
The Executive shall be given written notice by the Board
of termination for Cause, such notice 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. The Executive shall be entitled to a
hearing before the Board or a committee thereof established for such purpose and
to be accompanied by legal counsel. Such hearing shall be held within 15 days of
notice to the Company by the Executive, provided the Executive requests such
hearing within 30 days of the written notice from the Board of the termination
for Cause.
(c) Termination by the Executive. The Executive may
terminate employment hereunder for "Good Reason" by delivering to the Company
(1) a Preliminary Notice of Good Reason (as defined below), and (2) not earlier
than thirty (30) days from the delivery of such Preliminary Notice, a Notice of
Termination. For purposes of this Agreement, "Good Reason" means (i) the failure
to continue the Executive as President and Chief Executive Officer - Victoria's
Secret Catalogue or such other capacity as contemplated by Section 2 hereof;
(ii) the assignment to the Executive of any duties materially inconsistent the
<PAGE> 4
Executive's positions, duties, authority, responsibilities and reporting
requirements as set forth in Section 2 hereof; (iii) 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; (iv) 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 the Agreement or (v) 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 within 15 days after a merger,
consolidation, sale or similar transaction; provided, however, that "Good
Reason" shall not include (A) acts not taken in bad faith which are cured by the
Company in all respects not later than thirty (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 (B) acts taken by the Company by reason of the Executive's physical
or mental infirmity which impairs the Executive's ability to substantially
perform the duties under this Agreement. A Preliminary Notice of Good Reason
shall not, by itself, constitute a Notice of Termination.
(d) Notice of Termination. Subject to Section 9(b), any
purported termination by the Company or by the Executive shall be communicated
by a written Notice of Termination to the other two weeks prior to the
Termination Date (as defined below). 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 shall set forth in reasonable detail
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 such purported termination of employment shall be effective
without such Notice of Termination.
(e) Termination Date, Etc. "Termination Date" shall mean
in the case of the Executive's death, the date of death, or in all other cases,
the date specified in the Notice of Termination; provided, however, that 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 thirty (30) days from
the date the Notice of Termination is given to the Executive.
10. Compensation Upon Termination.
(a) If during the term of this Agreement (including any
extensions thereof), the Executive's employment is terminated by the Company for
Cause, by reason of the Executive's death or if the Executive gives written
notice not to extend the term of this Agreement, 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: (i) Base Salary, (ii) reimbursement for
any and all monies advanced or expenses incurred pursuant to Section 7(b)
through the Termination Date, and (iii) any earned compensation which the
Executive had previously deferred (including any interest earned or credited
thereon) (collectively, "Accrued Compensation"), provided, however, that if the
Executive gives such written notice not to extend, the Company shall continue to
pay the premiums provided for in Section 7(a)(1)
<PAGE> 5
through the end of the calendar year in which the Executive's termination
occurs. The Executive's entitlement to any other benefits shall be determined in
accordance with the Company's employee benefit plans then in effect.
(b) If the Executive's employment is terminated by the
Company other than for Cause or by the Executive for Good Reason, 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 the Base Salary for a period of one (1) year following
the Termination Date; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
(c) If the Executive's employment is terminated by the
Company 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 100% of the Base Salary for the first twelve months
following the Termination Date, 80% of the Base Salary for the
second twelve months following the Termination Date, and 60% of
the Base Salary for the third twelve 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 her Disability under the Company's relevant
disability plan or plans; and
(iii) if the Executive is disabled beyond
thirty-six (36) months, the Company shall continue to pay the
Executive 60% of Base Salary up to a maximum of $250,000 per
year for the period of the Executive's Disability, as defined in
the Company's relevant disability plans; provided, however, that
such payments shall be reduced by the amount of any benefits the
Executive receives by reason of her Disability under the
Company's relevant disability plan or plans; and
(iv) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
<PAGE> 6
(d) If the Executive's employment is terminated by
reason of the Company's written notice to the Executive of its decision not to
extend the term of this Agreement as contemplated in Section 1 hereof, 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 the Base Salary for a period of one (1) year following
the expiration of such term; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which the Executive's termination
occurs.
(e) During the period the Executive is receiving salary
continuation pursuant to Section 10(b)(ii), 10(c)(ii) or 10(d)(ii) hereof, the
Company shall, at its expense, provide to the Executive and the Executive's
beneficiaries medical and dental benefits substantially similar in the aggregate
to those provided to the Executive immediately prior to the date of the
Executive's termination of employment; provided, however, that the Company's
obligation with respect to the foregoing benefits shall be reduced to the extent
that the Executive or the Executive's beneficiaries obtains any such benefits
pursuant to a subsequent employer's benefit plans.
(f) 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.
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 duties as an executive of the Company or as may be legally
required, of any 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);
provided, however, that such term shall not include the use or disclosure by the
Executive, without consent, of any information known generally to the public
(other than as a result of disclosure by the Executive in violation of this
Section 11(a)). This confidentiality covenant has no temporal, geographical or
territorial restriction.
<PAGE> 7
(b) Non-Competition. During the Non-Competition 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 division, subsidiary
or affiliate of the Company; provided, however, that the "beneficial ownership"
by the Executive after termination of employment with the Company, either
individually or as a member of a "group," as such terms are used in Rule 13d of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of not more than two percent (2%) of the voting
stock of any publicly held corporation shall not be a violation of Section 11 of
this Agreement.
The "Non-Competition Period" means the period the
Executive is employed by the Company plus one (1) year from the Termination Date
if the Executive's employment is terminated (i) by the Company for any reason,
(ii) by the Executive for any reason, or (iii) by reason of either the Company's
or the Executive's decision not to extend the term of this Agreement as
contemplated by Section 1 hereof.
(c) Non-Solicitation. During the No-Raid Period
described below, the Executive shall not, either directly or indirectly, alone
or in conjunction with another party, interfere with or harm, or attempt to
interfere with or harm, the relationship of the Company, its subsidiaries and/or
affiliates, with any person who at any time was an employee, customer or
supplier of the Company, its subsidiaries and/or affiliates or otherwise had a
business relationship with the Company, its subsidiaries and/or affiliates.
The "No-Raid Period" means the period the Executive is employed
by the Company plus one (1) year from the Termination Date if the Executive's
employment is terminated (i) by the Company for any reason except by reason of
the Executive's Disability, (ii) by the Executive for any reason, or (iii) by
reason of either the Company's or the Executive's decision not to extend the
term of this Agreement as contemplated by Section 1 hereof.
(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, and to
all costs and expenses, including reasonable attorneys' fees and costs, in
addition to any other remedies to which the Company may be entitled at law or in
equity. The terms of this paragraph 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
<PAGE> 8
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
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 covenant 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
herself against the enforceability of the covenants and agreements of this
Section 11.
12. Limitation of Payments.
(a) Gross-Up Payment. In the event it shall be
determined that any payment or distribution of any type to or for the benefit of
the Executive, by the Company, any of its affiliates, 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 or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code 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 (a "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 Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments (not including
any 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 six accounting firms in the United States (the "Accounting Firm"). 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 (5) 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
<PAGE> 9
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible 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.
(c) 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 is possible 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.
13. Employee Representation. The Executive expressly represents
and warrants to the Company that the Executive is not a party to any contract or
agreement and is not otherwise obligated in any way, and is not subject to any
rules or regulations, whether governmentally imposed or otherwise, which will or
may restrict in any way the Executive's ability to fully perform the Executive's
duties and responsibilities under this Agreement.
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
to the Company's business and/or assets. 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.
<PAGE> 10
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, the Executive's
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 Section 11(d) hereof, if in the event of any controversy or claim between the
Company or any of its affiliates 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.
16. 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:
- -----------------
Cynthia A. Fields
xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxx
To the Company:
- ---------------
Intimate Brands, Inc.
3 Limited Parkway
Columbus, Ohio 43230
Attn: Secretary
17. 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,
<PAGE> 11
recoupment, defense or other right which the Company may have against the
Executive or others.
18. 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.
19. 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.
20. 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.
22. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, if any, understandings and arrangements,
oral or written, between the parties hereto with respect to the subject matter
hereof.
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.
INTIMATE BRANDS, INC.
By: /s/ LESLIE H. WEXNER
-------------------------
Name: Leslie H. Wexner
Title: Chairman of the Board
/s/ CYNTHIA A. FIELDS
----------------------------
Cynthia A. Fields
<PAGE> 12
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
STOCK OPTION AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Stock Option Agreement is entered into by and between Intimate Brands, Inc.
(the "Company"), and the associate of the Company whose name appears below (the
"Associate") in order to set forth the terms and conditions of Options granted
to the Associate under Intimate Brands, Inc. 1995 Stock Option and Performance
Incentive Plan (1997 Restatement) (the "Plan").
Associate's Name: CYNTHIA A. FIELDS
Division: VICTORIA'S SECRET CATALOGUE
Social Security #:
Address:
<TABLE>
<CAPTION>
Date Expiration Number of Option Exercise Schedule
Plan Name of Grant Date Shares Price Date Shares
- -------------------- -------- ---------- --------- -------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1995 NQ PLAN (97 RESTATEMENT) 05/20/97 05/21/07 488,754 $20.3750 05/20/98 50,000
05/20/99 50,000
05/20/00 50,000
05/20/01 73,568
05/20/02 95,093
05/20/03 170,093
1995 ISO PLAN (97 RESTATEMENT) 05/20/97 05/21/07 11,246 $20.3750 05/20/01 1,432
05/20/02 4,907
05/20/03 4,907
</TABLE>
Subject to the attached Terms and Conditions and the terms of the Plan, which
are incorporated herein by reference, the Company hereby grants to the Associate
Options to purchase shares of Common Stock of the Company, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ CYNTHIA A. FIELDS
------------------------------ ---------------------
Leslie H. Wexner, Chairman
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 13
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
RESTRICTED STOCK AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Restricted Stock Agreement is entered into by and between Intimate Brands,
Inc. (the "Company"), and the associate or director of the Company whose name
appears below (the "Associate") in order to set forth the terms and conditions
of a Restricted Stock Award granted to the Associate under Intimate Brands, Inc.
1995 Stock Option and Performance Incentive Plan (1997 Restatement) ("the
Plan").
Associate's Name: CYNTHIA A. FIELDS
Division: VICTORIA'S SECRET CATALOGUE
Social Security #:
Address:
Date Number of Vesting Schedule*
Plan Name of Grant Shares Date Shares
- ----------------------------- -------- --------- ---------------------
95 RESTRICTED (97 RESTATEMENT) 05/20/97 250,000 05/20/98 25,000
05/20/99 25,000
05/20/00 25,000
05/20/01 37,500
05/20/02 50,000
05/20/03 87,500
* If employment is terminated by the Company other than for Cause or by the
Associate for Good Reason, vesting will be at 16% for each full year following
the date of grant for the first five years, and 20% for the sixth year (offset
by any shares previously vested under the normal schedule).
Subject to the attached Terms and Conditions of this Agreement and the terms of
the Plan, which are incorporated herein by reference, the Company hereby grants
to the Associate Restricted shares, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ CYNTHIA A. FIELDS
------------------------------ ----------------------
Leslie H. Wexner, Chairman
This Restricted Stock Agreement is granted and the 5/20/98 vesting segment of
the award will be earned based on achieving a x% increase in the sales growth
for Intimate Brands, Inc. in the Fall season of 1997 over the Fall season of
1996. Further, the balance of the award will be earned and vest as outlined in
the above schedule based on achieving a x% increase in sales growth for Intimate
Brands, Inc. for the 1998 fiscal year over the 1997 fiscal year.
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 1
EXHIBIT 10.17
-------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of May 20, 1997, by and
between Victoria's Secret Stores, Inc. and Intimate Brands Inc. a Delaware
corporation (the "Company"), and Grace A. Nichols (the "Executive") (hereinafter
collectively referred to as "the parties").
WHEREAS, the Executive has heretofore been employed as President
and Chief Executive Officer - Victoria's Secret Stores, and is experienced in
all phases of its 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 key management personnel and to
ensure their continued dedication and efforts; and
WHEREAS, the Compensation Committee of 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 and the
Executive is willing to render such services on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective agreements of the parties contained herein, the parties hereby agree
as follows:
1. Term. The initial term of employment under this Agreement
shall be for the period commencing on the date hereof (the "Commencement Date")
and ending on the sixth anniversary of the Commencement Date (the "Initial
Term"); provided, however, that upon the expiration of the Initial Term, this
Agreement shall be automatically extended for a period of one year, unless
either the Company or the Executive shall have given written notice to the other
at least ninety (90) days prior thereto that the term of this Agreement shall
not be so extended.
2. Employment.
(a) Position. The Executive shall be employed as the
President and Chief Executive Officer - Victoria's Secret Stores, or such other
position of reasonably comparable or greater status and responsibilities as may
be determined by the Board with any division, subsidiary or affiliate 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 to
Leslie H. Wexner or his successor.
(b) Obligations. The Executive agrees to devote her full
business time and attention to the business and affairs of the Company. The
foregoing, however, shall not
<PAGE> 2
preclude the Executive from serving on corporate, civil 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 during the term of this Agreement a base salary at the rate of
$700,000. This base salary will be subject to annual review and may be increased
from time to time by the Board considering factors such as the executive's
responsibilities, compensation of similar executives within the company and in
other companies, performance of the executive and other pertinent factors
(hereinafter referred to as the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executives.
4. Equity Compensation. The Company shall grant to the Executive
rights to receive 300,000 shares of the Company's common stock and options to
acquire 500,000 shares of the Company's common stock pursuant to the terms of
the agreements attached hereto as Exhibits A and B.
5. Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, practices and programs maintained by
the Company and made available to senior executives generally and as may be in
effect from time to time. The Executive's participation in such plans, practices
and programs shall be on the same basis and terms as are applicable to senior
executives of the Company generally.
6. Bonus. The Executive shall be entitled to participate in the
Company's applicable incentive compensation plan on such terms and conditions as
may be determined from time to time by the Board.
7. Other Benefits.
(a) Life Insurance.
(1) During the term of the Agreement, the
Company shall maintain term life insurance coverage on the life of the Executive
in the amount of $5,000,000, the proceeds of which shall be payable to the
beneficiary or beneficiaries designated by the Executive. The Executive agrees
to undergo any reasonable physical examination and other procedures as may be
necessary to maintain such policy.
(2) During the term of this Agreement, the
Company shall be entitled to maintain a "key person" 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. Subject to applicable Company policies,
the Executive shall be entitled to receive prompt reimbursement of all expenses
reasonably incurred by her in
<PAGE> 3
connection with the performance of her duties hereunder or for promoting,
pursuing or otherwise furthering the business or interests of the Company.
(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 those duties hereunder.
8. Vacation. The Executive shall be entitled to annual vacation
in accordance with the policies as periodically established by the Board for
similarly situated executives of the Company.
9. Termination. The Executive's employment hereunder may be
terminated under the following circumstances:
(a) Disability. The Company shall be entitled to
terminate the Executive's employment after having established the Executive's
Disability. For purposes of this Agreement, "Disability" means a physical or
mental infirmity which impairs the Executive's ability to substantially perform
those duties under this Agreement for a period of at least six (6) months in any
12 month calendar period as determined in accordance with the The Limited, Inc.
Long-Term Disability Plan.
(b) Cause. The Company shall be entitled to terminate
the Executive's employment for "Cause" without prior written notice. For
purposes of this Agreement, "Cause" shall mean that the Executive (1) willfully
failed to perform those duties with the Company (other than a failure resulting
from the Executive's incapacity due to physical or mental illness); or (2) has
plead "guilty" or "no contest" to or has been convicted of an act which is
defined as a felony under federal or state law; or (3) engaged in willful
misconduct in bad faith which could reasonably be expected to materially harm
the Company's business or its reputation.
The Executive shall be given written notice by the Board
of termination for Cause, such notice 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. The Executive shall be entitled to a
hearing before the Board or a committee thereof established for such purpose and
to be accompanied by legal counsel. Such hearing shall be held within 15 days of
notice to the Company by the Executive, provided the Executive requests such
hearing within 30 days of the written notice from the Board of the termination
for Cause.
(c) Termination by the Executive. The Executive may
terminate employment hereunder for "Good Reason" by delivering to the Company
(1) a Preliminary Notice of Good Reason (as defined below), and (2) not earlier
than thirty (30) days from the delivery of such Preliminary Notice, a Notice of
Termination. For purposes of this Agreement, "Good Reason" means (i) the failure
to continue the Executive as President and Chief Executive Officer - Victoria's
Secret Stores or such other capacity as contemplated by Section 2 hereof; (ii)
the assignment to the Executive of any duties materially inconsistent the
<PAGE> 4
Executive's positions, duties, authority, responsibilities and reporting
requirements as set forth in Section 2 hereof; (iii) 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; (iv) 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 the Agreement or (v) 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 within 15 days after a merger,
consolidation, sale or similar transaction; provided, however, that "Good
Reason" shall not include (A) acts not taken in bad faith which are cured by the
Company in all respects not later than thirty (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 (B) acts taken by the Company by reason of the Executive's physical
or mental infirmity which impairs the Executive's ability to substantially
perform the duties under this Agreement. A Preliminary Notice of Good Reason
shall not, by itself, constitute a Notice of Termination.
(d) Notice of Termination. Subject to Section 9(b), any
purported termination by the Company or by the Executive shall be communicated
by a written Notice of Termination to the other two weeks prior to the
Termination Date (as defined below). 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 shall set forth in reasonable detail
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 such purported termination of employment shall be effective
without such Notice of Termination.
(e) Termination Date, Etc. "Termination Date" shall mean
in the case of the Executive's death, the date of death, or in all other cases,
the date specified in the Notice of Termination; provided, however, that 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 thirty (30) days from
the date the Notice of Termination is given to the Executive.
10. Compensation Upon Termination.
(a) If during the term of this Agreement (including any
extensions thereof), the Executive's employment is terminated by the Company for
Cause, by reason of the Executive's death or if the Executive gives written
notice not to extend the term of this Agreement, 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: (i) Base Salary, (ii) reimbursement for
any and all monies advanced or expenses incurred pursuant to Section 7(b)
through the Termination Date, and (iii) any earned compensation which the
Executive had previously deferred (including any interest earned or credited
thereon) (collectively, "Accrued Compensation"), provided, however, that if the
Executive gives such written notice not to extend, the Company shall continue to
pay the premiums provided for in Section 7(a)(1)
<PAGE> 5
through the end of the calendar year in which the Executive's termination
occurs. The Executive's entitlement to any other benefits shall be determined in
accordance with the Company's employee benefit plans then in effect.
(b) If the Executive's employment is terminated by the
Company other than for Cause or by the Executive for Good Reason, 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 the Base Salary for a period of one (1) year following
the Termination Date; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
(c) If the Executive's employment is terminated by the
Company 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 100% of the Base Salary for the first twelve months
following the Termination Date, 80% of the Base Salary for the
second twelve months following the Termination Date, and 60% of
the Base Salary for the third twelve 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 her Disability under the Company's relevant
disability plan or plans; and
(iii) if the Executive is disabled beyond
thirty-six (36) months, the Company shall continue to pay the
Executive 60% of Base Salary up to a maximum of $250,000 per
year for the period of the Executive's Disability, as defined in
the Company's relevant disability plans; provided, however, that
such payments shall be reduced by the amount of any benefits the
Executive receives by reason of her Disability under the
Company's relevant disability plan or plans; and
(iv) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
<PAGE> 6
(d) If the Executive's employment is terminated by
reason of the Company's written notice to the Executive of its decision not to
extend the term of this Agreement as contemplated in Section 1 hereof, 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 the Base Salary for a period of one (1) year following
the expiration of such term; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which the Executive's termination
occurs.
(e) During the period the Executive is receiving salary
continuation pursuant to Section 10(b)(ii), 10(c)(ii) or 10(d)(ii) hereof, the
Company shall, at its expense, provide to the Executive and the Executive's
beneficiaries medical and dental benefits substantially similar in the aggregate
to those provided to the Executive immediately prior to the date of the
Executive's termination of employment; provided, however, that the Company's
obligation with respect to the foregoing benefits shall be reduced to the extent
that the Executive or the Executive's beneficiaries obtains any such benefits
pursuant to a subsequent employer's benefit plans.
(f) 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.
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 duties as an executive of the Company or as may be legally
required, of any 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);
provided, however, that such term shall not include the use or disclosure by the
Executive, without consent, of any information known generally to the public
(other than as a result of disclosure by the Executive in violation of this
Section 11(a)). This confidentiality covenant has no temporal, geographical or
territorial restriction.
<PAGE> 7
(b) Non-Competition. During the Non-Competition 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 division, subsidiary
or affiliate of the Company; provided, however, that the "beneficial ownership"
by the Executive after termination of employment with the Company, either
individually or as a member of a "group," as such terms are used in Rule 13d of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of not more than two percent (2%) of the voting
stock of any publicly held corporation shall not be a violation of Section 11 of
this Agreement.
The "Non-Competition Period" means the period the
Executive is employed by the Company plus one (1) year from the Termination Date
if the Executive's employment is terminated (i) by the Company for any reason,
(ii) by the Executive for any reason, or (iii) by reason of either the Company's
or the Executive's decision not to extend the term of this Agreement as
contemplated by Section 1 hereof.
(c) Non-Solicitation. During the No-Raid Period
described below, the Executive shall not, either directly or indirectly, alone
or in conjunction with another party, interfere with or harm, or attempt to
interfere with or harm, the relationship of the Company, its subsidiaries and/or
affiliates, with any person who at any time was an employee, customer or
supplier of the Company, its subsidiaries and/or affiliates or otherwise had a
business relationship with the Company, its subsidiaries and/or affiliates.
The "No-Raid Period" means the period the Executive is employed
by the Company plus one (1) year from the Termination Date if the Executive's
employment is terminated (i) by the Company for any reason except by reason of
the Executive's Disability, (ii) by the Executive for any reason, or (iii) by
reason of either the Company's or the Executive's decision not to extend the
term of this Agreement as contemplated by Section 1 hereof.
(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, and to
all costs and expenses, including reasonable attorneys' fees and costs, in
addition to any other remedies to which the Company may be entitled at law or in
equity. The terms of this paragraph 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
<PAGE> 8
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
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 covenant 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
herself against the enforceability of the covenants and agreements of this
Section 11.
12. Limitation of Payments.
(a) Gross-Up Payment. In the event it shall be
determined that any payment or distribution of any type to or for the benefit of
the Executive, by the Company, any of its affiliates, 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 or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code 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 (a "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 Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments (not including
any 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 six accounting firms in the United States (the "Accounting Firm"). 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 (5) 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
<PAGE> 9
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible 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.
(c) 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 is possible 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.
13. Employee Representation. The Executive expressly represents
and warrants to the Company that the Executive is not a party to any contract or
agreement and is not otherwise obligated in any way, and is not subject to any
rules or regulations, whether governmentally imposed or otherwise, which will or
may restrict in any way the Executive's ability to fully perform the Executive's
duties and responsibilities under this Agreement.
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
to the Company's business and/or assets. 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.
<PAGE> 10
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, the Executive's
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 Section 11(d) hereof, if in the event of any controversy or claim between the
Company or any of its affiliates 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.
16. 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:
- -----------------
Grace A. Nichols
xxxxxxxxxxxxxx
xxxxxxxxxxxxxx
To the Company:
- ---------------
Intimate Brands, Inc.
3 Limited Parkway
Columbus, Ohio 43230
Attn: Secretary
17. 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
<PAGE> 11
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.
18. 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.
19. 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.
20. 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.
22. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, if any, understandings and arrangements,
oral or written, between the parties hereto with respect to the subject matter
hereof.
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.
INTIMATE BRANDS, INC.
By: /s/ LESLIE H. WEXNER
-------------------------
Name: Leslie H. Wexner
Title: Chairman of the Board
/s/ GRACE A. NICHOLS
----------------------------
Grace A. Nichols
<PAGE> 12
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
STOCK OPTION AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Stock Option Agreement is entered into by and between Intimate Brands, Inc.
(the "Company"), and the associate of the Company whose name appears below (the
"Associate") in order to set forth the terms and conditions of Options granted
to the Associate under Intimate Brands, Inc. 1995 Stock Option and Performance
Incentive Plan (1997 Restatement) (the "Plan").
Associate's Name: GRACE A. NICHOLS
Division: VICTORIA'S SECRET STORES
Social Security #:
Address:
<TABLE>
<CAPTION>
Date Expiration Number of Option Exercise Schedule
Plan Name of Grant Date Shares Price Date Shares
- -------------------- -------- ---------- --------- -------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1995 NQ PLAN (97 RESTATEMENT) 05/20/97 05/21/07 488,754 $20.3750 05/20/98 50,000
05/20/99 50,000
05/20/00 50,000
05/20/01 73,568
05/20/02 95,093
05/20/03 170,093
1993 ISO PLAN (97 RESTATEMENT) 05/20/97 05/21/07 11,246 $20.3750 05/20/01 1,432
05/20/02 4,907
05/20/03 4,907
</TABLE>
Subject to the attached Terms and Conditions and the terms of the Plan, which
are incorporated herein by reference, the Company hereby grants to the Associate
Options to purchase shares of Common Stock of the Company, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ GRACE A. NICHOLS
------------------------------ ---------------------
Leslie H. Wexner, Chairman
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 13
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
RESTRICTED STOCK AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Restricted Stock Agreement is entered into by and between Intimate Brands,
Inc. (the "Company"), and the associate or director of the Company whose name
appears below (the "Associate") in order to set forth the terms and conditions
of a Restricted Stock Award granted to the Associate under Intimate Brands, Inc.
1995 Stock Option and Performance Incentive Plan (1997 Restatement) ("the
Plan").
Associate's Name: GRACE A. NICHOLS
Division: VICTORIA'S SECRET STORES
Social Security #:
Address:
Date Number of Vesting Schedule*
Plan Name of Grant Shares Date Shares
- ------------------------------ -------- --------- ---------------------
95 RESTRICTED (97 RESTATEMENT) 05/20/97 300,000 05/20/98 30,000
05/20/99 30,000
05/20/00 30,000
05/20/01 45,000
05/20/02 60,000
05/20/03 105,000
* If employment is terminated by the Company other than for Cause or by the
Associate for Good Reason, vesting will be at 16% for each full year following
the date of grant for the first five years, and 20% for the sixth year (offset
by any shares previously vested under the normal schedule).
Subject to the attached Terms and Conditions of this Agreement and the terms of
the Plan, which are incorporated herein by reference, the Company hereby grants
to the Associate Restricted shares, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ GRACE A. NICHOLS
------------------------------ ---------------------
Leslie H. Wexner, Chairman
This Restricted Stock Agreement is granted and the 5/20/98 vesting segment of
the award will be earned based on achieving a x% increase in the sales growth
for Intimate Brands, Inc. in the Fall season of 1997 over the Fall season of
1996. Further, the balance of the award will be earned and vest as outlined in
the above schedule based on achieving a x% increase in sales growth for Intimate
Brands, Inc. for the 1998 fiscal year over the 1997 fiscal year.
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 1
EXHIBIT 10.18
-------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of May 20, 1997, by and
between Bath & Body Works, Inc. and Intimate Brands Inc. a Delaware corporation
(the "Company"), and Beth M. Pritchard (the "Executive") (hereinafter
collectively referred to as "the parties").
WHEREAS, the Executive has heretofore been employed as President
and Chief Executive Officer Bath & Body Works, and is experienced in all phases
of its 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 key management personnel and to
ensure their continued dedication and efforts; and
WHEREAS, the Compensation Committee of 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 and the
Executive is willing to render such services on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective agreements of the parties contained herein, the parties hereby agree
as follows:
1. Term. The initial term of employment under this Agreement
shall be for the period commencing on the date hereof (the "Commencement Date")
and ending on the sixth anniversary of the Commencement Date (the "Initial
Term"); provided, however, that upon the expiration of the Initial Term, this
Agreement shall be automatically extended for a period of one year, unless
either the Company or the Executive shall have given written notice to the other
at least ninety (90) days prior thereto that the term of this Agreement shall
not be so extended.
2. Employment.
(a) Position. The Executive shall be employed as the
President and Chief Executive Officer - Bath & Body Works, or such other
position of reasonably comparable or greater status and responsibilities as may
be determined by the Board with any division, subsidiary or affiliate 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 to
Leslie H. Wexner or his successor.
(b) Obligations. The Executive agrees to devote her 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,
civil or charitable boards or committees or
<PAGE> 2
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 during the term of this Agreement a base salary at the rate of
$700,000. This base salary will be subject to annual review and may be increased
from time to time by the Board considering factors such as the executive's
responsibilities, compensation of similar executives within the company and in
other companies, performance of the executive and other pertinent factors
(hereinafter referred to as the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executives.
4. Equity Compensation. The Company shall grant to the Executive
rights to receive 300,000 shares of the Company's common stock and options to
acquire 500,000 shares of the Company's common stock pursuant to the terms of
the agreements attached hereto as Exhibits A and B.
5. Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, practices and programs maintained by
the Company and made available to senior executives generally and as may be in
effect from time to time. The Executive's participation in such plans, practices
and programs shall be on the same basis and terms as are applicable to senior
executives of the Company generally.
6. Bonus. The Executive shall be entitled to participate in the
Company's applicable incentive compensation plan on such terms and conditions as
may be determined from time to time by the Board.
7. Other Benefits.
(a) Life Insurance.
(1) During the term of the Agreement, the
Company shall maintain term life insurance coverage on the life of the Executive
in the amount of $5,000,000, the proceeds of which shall be payable to the
beneficiary or beneficiaries designated by the Executive. The Executive agrees
to undergo any reasonable physical examination and other procedures as may be
necessary to maintain such policy.
(2) During the term of this Agreement, the
Company shall be entitled to maintain a "key person" 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. Subject to applicable Company policies,
the Executive shall be entitled to receive prompt reimbursement of all expenses
reasonably incurred by her in
<PAGE> 3
connection with the performance of her duties hereunder or for promoting,
pursuing or otherwise furthering the business or interests of the Company.
(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 those duties hereunder.
8. Vacation. The Executive shall be entitled to annual vacation
in accordance with the policies as periodically established by the Board for
similarly situated executives of the Company.
9. Termination. The Executive's employment hereunder may be
terminated under the following circumstances:
(a) Disability. The Company shall be entitled to
terminate the Executive's employment after having established the Executive's
Disability. For purposes of this Agreement, "Disability" means a physical or
mental infirmity which impairs the Executive's ability to substantially perform
those duties under this Agreement for a period of at least six (6) months in any
12 month calendar period as determined in accordance with the The Limited, Inc.
Long-Term Disability Plan.
(b) Cause. The Company shall be entitled to terminate
the Executive's employment for "Cause" without prior written notice. For
purposes of this Agreement, "Cause" shall mean that the Executive (1) willfully
failed to perform those duties with the Company (other than a failure resulting
from the Executive's incapacity due to physical or mental illness); or (2) has
plead "guilty" or "no contest" to or has been convicted of an act which is
defined as a felony under federal or state law; or (3) engaged in willful
misconduct in bad faith which could reasonably be expected to materially harm
the Company's business or its reputation.
The Executive shall be given written notice by the Board
of termination for Cause, such notice 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. The Executive shall be entitled to a
hearing before the Board or a committee thereof established for such purpose and
to be accompanied by legal counsel. Such hearing shall be held within 15 days of
notice to the Company by the Executive, provided the Executive requests such
hearing within 30 days of the written notice from the Board of the termination
for Cause.
(c) Termination by the Executive. The Executive may
terminate employment hereunder for "Good Reason" by delivering to the Company
(1) a Preliminary Notice of Good Reason (as defined below), and (2) not earlier
than thirty (30) days from the delivery of such Preliminary Notice, a Notice of
Termination. For purposes of this Agreement, "Good Reason" means (i) the failure
to continue the Executive as President and Chief Executive Officer - Bath & Body
Works or such other capacity as contemplated by Section 2 hereof; (ii) the
assignment to the Executive of any duties materially inconsistent the
Executive's
<PAGE> 4
positions, duties, authority, responsibilities and reporting requirements as set
forth in Section 2 hereof; (iii) 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; (iv) 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 the Agreement or (v) 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 within 15 days after a merger, consolidation, sale or
similar transaction; provided, however, that "Good Reason" shall not include (A)
acts not taken in bad faith which are cured by the Company in all respects not
later than thirty (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 (B) acts
taken by the Company by reason of the Executive's physical or mental infirmity
which impairs the Executive's ability to substantially perform the duties under
this Agreement. A Preliminary Notice of Good Reason shall not, by itself,
constitute a Notice of Termination.
(d) Notice of Termination. Subject to Section 9(b), any
purported termination by the Company or by the Executive shall be communicated
by a written Notice of Termination to the other two weeks prior to the
Termination Date (as defined below). 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 shall set forth in reasonable detail
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 such purported termination of employment shall be effective
without such Notice of Termination.
(e) Termination Date, Etc. "Termination Date" shall mean
in the case of the Executive's death, the date of death, or in all other cases,
the date specified in the Notice of Termination; provided, however, that 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 thirty (30) days from
the date the Notice of Termination is given to the Executive.
10. Compensation Upon Termination.
(a) If during the term of this Agreement (including any
extensions thereof), the Executive's employment is terminated by the Company for
Cause, by reason of the Executive's death or if the Executive gives written
notice not to extend the term of this Agreement, 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: (i) Base Salary, (ii) reimbursement for
any and all monies advanced or expenses incurred pursuant to Section 7(b)
through the Termination Date, and (iii) any earned compensation which the
Executive had previously deferred (including any interest earned or credited
thereon) (collectively, "Accrued Compensation"), provided, however, that if the
Executive gives such written notice not to extend, the Company shall continue to
pay the premiums provided for in Section 7(a)(1)
<PAGE> 5
through the end of the calendar year in which the Executive's termination
occurs. The Executive's entitlement to any other benefits shall be determined in
accordance with the Company's employee benefit plans then in effect.
(b) If the Executive's employment is terminated by the
Company other than for Cause or by the Executive for Good Reason, 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 the Base Salary for a period of one (1) year following
the Termination Date; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
(c) If the Executive's employment is terminated by the
Company 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 100% of the Base Salary for the first twelve months
following the Termination Date, 80% of the Base Salary for the
second twelve months following the Termination Date, and 60% of
the Base Salary for the third twelve 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 her Disability under the Company's relevant
disability plan or plans; and
(iii) if the Executive is disabled beyond
thirty-six (36) months, the Company shall continue to pay the
Executive 60% of Base Salary up to a maximum of $250,000 per
year for the period of the Executive's Disability, as defined in
the Company's relevant disability plans; provided, however, that
such payments shall be reduced by the amount of any benefits the
Executive receives by reason of her Disability under the
Company's relevant disability plan or plans; and
(iv) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which such termination occurs.
<PAGE> 6
(d) If the Executive's employment is terminated by
reason of the Company's written notice to the Executive of its decision not to
extend the term of this Agreement as contemplated in Section 1 hereof, 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 the Base Salary for a period of one (1) year following
the expiration of such term; and
(iii) the Company shall continue to pay the
premiums provided for in Section 7(a)(1) hereof through the end
of the calendar year in which the Executive's termination
occurs.
(e) During the period the Executive is receiving salary
continuation pursuant to Section 10(b)(ii), 10(c)(ii) or 10(d)(ii) hereof, the
Company shall, at its expense, provide to the Executive and the Executive's
beneficiaries medical and dental benefits substantially similar in the aggregate
to those provided to the Executive immediately prior to the date of the
Executive's termination of employment; provided, however, that the Company's
obligation with respect to the foregoing benefits shall be reduced to the extent
that the Executive or the Executive's beneficiaries obtains any such benefits
pursuant to a subsequent employer's benefit plans.
(f) 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.
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 duties as an executive of the Company or as may be legally
required, of any 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);
provided, however, that such term shall not include the use or disclosure by the
Executive, without consent, of any information known generally to the public
(other than as a result of disclosure by the Executive in violation of this
Section 11(a)). This confidentiality covenant has no temporal, geographical or
territorial restriction.
<PAGE> 7
(b) Non-Competition. During the Non-Competition 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 division, subsidiary
or affiliate of the Company; provided, however, that the "beneficial ownership"
by the Executive after termination of employment with the Company, either
individually or as a member of a "group," as such terms are used in Rule 13d of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of not more than two percent (2%) of the voting
stock of any publicly held corporation shall not be a violation of Section 11 of
this Agreement.
The "Non-Competition Period" means the period the
Executive is employed by the Company plus one (1) year from the Termination Date
if the Executive's employment is terminated (i) by the Company for any reason,
(ii) by the Executive for any reason, or (iii) by reason of either the Company's
or the Executive's decision not to extend the term of this Agreement as
contemplated by Section 1 hereof.
(c) Non-Solicitation. During the No-Raid Period
described below, the Executive shall not, either directly or indirectly, alone
or in conjunction with another party, interfere with or harm, or attempt to
interfere with or harm, the relationship of the Company, its subsidiaries and/or
affiliates, with any person who at any time was an employee, customer or
supplier of the Company, its subsidiaries and/or affiliates or otherwise had a
business relationship with the Company, its subsidiaries and/or affiliates.
The "No-Raid Period" means the period the Executive is employed
by the Company plus one (1) year from the Termination Date if the Executive's
employment is terminated (i) by the Company for any reason except by reason of
the Executive's Disability, (ii) by the Executive for any reason, or (iii) by
reason of either the Company's or the Executive's decision not to extend the
term of this Agreement as contemplated by Section 1 hereof.
(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, and to
all costs and expenses, including reasonable attorneys' fees and costs, in
addition to any other remedies to which the Company may be entitled at law or in
equity. The terms of this paragraph 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
<PAGE> 8
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
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 covenant 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
herself against the enforceability of the covenants and agreements of this
Section 11.
12. Limitation of Payments.
(a) Gross-Up Payment. In the event it shall be
determined that any payment or distribution of any type to or for the benefit of
the Executive, by the Company, any of its affiliates, 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 or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code 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 (a "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 Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments (not including
any 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 six accounting firms in the United States (the "Accounting Firm"). 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 (5) 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
<PAGE> 9
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible 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.
(c) 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 is possible 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.
13. Employee Representation. The Executive expressly represents
and warrants to the Company that the Executive is not a party to any contract or
agreement and is not otherwise obligated in any way, and is not subject to any
rules or regulations, whether governmentally imposed or otherwise, which will or
may restrict in any way the Executive's ability to fully perform the Executive's
duties and responsibilities under this Agreement.
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
to the Company's business and/or assets. 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.
<PAGE> 10
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, the Executive's
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 Section 11(d) hereof, if in the event of any controversy or claim between the
Company or any of its affiliates 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.
16. 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:
- -----------------
Beth M. Pritchard
xxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxx
To the Company:
- ---------------
Intimate Brands, Inc.
3 Limited Parkway
Columbus, Ohio 43230
Attn: Secretary
17. 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,
<PAGE> 11
recoupment, defense or other right which the Company may have against the
Executive or others.
18. 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.
19. 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.
20. 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.
22. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, if any, understandings and arrangements,
oral or written, between the parties hereto with respect to the subject matter
hereof.
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.
INTIMATE BRANDS, INC.
By: /s/ LESLIE H. WEXNER
-------------------------
Name: Leslie H. Wexner
Title: Chairman of the Board
/s/ BETH M. PRITCHARD
----------------------------
Beth M. Pritchard
<PAGE> 12
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
STOCK OPTION AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Stock Option Agreement is entered into by and between Intimate Brands, Inc.
(the "Company"), and the associate of the Company whose name appears below (the
"Associate") in order to set forth the terms and conditions of Options granted
to the Associate under Intimate Brands, Inc. 1995 Stock Option and Performance
Incentive Plan (1997 Restatement) (the "Plan").
Associate's Name: BETH M. PRITCHARD
Division: BATH & BODY WORKS
Social Security #:
Address:
<TABLE>
<CAPTION>
Date Expiration Number of Option Exercise Schedule
Plan Name of Grant Date Shares Price Date Shares
- -------------------- -------- ---------- --------- -------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1995 NQ PLAN (97 RESTATEMENT) 05/20/97 05/21/07 488,754 $20.3750 05/20/98 50,000
05/20/99 50,000
05/20/00 50,000
05/20/01 73,568
05/20/02 95,093
05/20/03 170,093
1993 ISO PLAN (97 RESTATEMENT) 05/20/97 05/21/07 11,246 $20.3750 05/20/01 1,432
05/20/02 4,907
05/20/03 4,907
</TABLE>
Subject to the attached Terms and Conditions and the terms of the Plan, which
are incorporated herein by reference, the Company hereby grants to the Associate
Options to purchase shares of Common Stock of the Company, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ BETH M. PRITCHARD
------------------------------ ----------------------
Leslie H. Wexner, Chairman
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 13
=============== [LOGO OF INTIMATE BRANDS, INC. APPEARS HERE] ===================
S T O C K A W A R D
RESTRICTED STOCK AGREEMENT
ACKNOWLEDGEMENT OF RECEIPT
This Restricted Stock Agreement is entered into by and between Intimate Brands,
Inc. (the "Company"), and the associate or director of the Company whose name
appears below (the "Associate") in order to set forth the terms and conditions
of a Restricted Stock Award granted to the Associate under Intimate Brands, Inc.
1995 Stock Option and Performance Incentive Plan (1997 Restatement) ("the
Plan").
Associate's Name: BETH M. PRITCHARD
Division: BATH & BODY WORKS
Social Security #:
Address:
Date Number of Vesting Schedule*
Plan Name of Grant Shares Date Shares
- ------------------------------ -------- --------- ---------------------
95 RESTRICTED (97 RESTATEMENT) 05/20/97 300,000 05/20/98 30,000
05/20/99 30,000
05/20/00 30,000
05/20/01 45,000
05/20/02 60,000
05/20/03 105,000
* If employment is terminated by the Company other than for Cause or by the
Associate for Good Reason, vesting will be at 16% for each full year following
the date of grant for the first five years, and 20% for the sixth year (offset
by any shares previously vested under the normal schedule).
Subject to the attached Terms and Conditions of this Agreement and the terms of
the Plan, which are incorporated herein by reference, the Company hereby grants
to the Associate Restricted shares, as outlined above.
The Company and the Associate have executed this Agreement as of the Date of
Grant set forth above.
INTIMATE BRANDS, INC. ASSOCIATE
By: /s/ LESLIE H. WEXNER /s/ BETH M. PRITCHARD
------------------------------ -----------------------
Leslie H. Wexner, Chairman
This Restricted Stock Agreement is granted and the 5/20/98 vesting segment of
the award will be earned based on achieving a x% increase in the sales growth
for Intimate Brands, Inc. in the Fall season of 1997 over the Fall season of
1996. Further, the balance of the award will be earned and vest as outlined in
the above schedule based on achieving a x% increase in sales growth for Intimate
Brands, Inc. for the 1998 fiscal year over the 1997 fiscal year.
Please return one signed copy of this agreement to
The Limited, Inc.
Three Limited Parkway
Columbus, OH 43230
614-415-7000
<PAGE> 1
[PRICEWATERHOUSECOOPERS LOGO]
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C 20549
We are aware that our report dated August 12, 1998, on our review of the
interim consolidated financial information of Intimate Brands, Inc. and
Subsidiaries for the thirteen-week and twenty-six-week periods ended August 1,
1998 and included in this Form 10-Q is incorporated by reference in the
Company's registration statements on Form S-8, Registration Nos. 333-04921 and
333-04923. Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration statement prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Columbus, Ohio
September 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF INTIMATE BRANDS, INC. AND
SUBSIDIARIES FOR THE QUARTER ENDED AUGUST 1, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> AUG-01-1998
<CASH> 21,796
<SECURITIES> 0
<RECEIVABLES> 16,465
<ALLOWANCES> 0
<INVENTORY> 432,228
<CURRENT-ASSETS> 747,034
<PP&E> 782,677
<DEPRECIATION> 386,509
<TOTAL-ASSETS> 1,217,889
<CURRENT-LIABILITIES> 278,326
<BONDS> 0
0
0
<COMMON> 2,527
<OTHER-SE> 565,699
<TOTAL-LIABILITY-AND-EQUITY> 1,217,889
<SALES> 874,708
<TOTAL-REVENUES> 874,708
<CGS> 538,564
<TOTAL-COSTS> 538,564
<OTHER-EXPENSES> 211,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,563
<INCOME-PRETAX> 122,762
<INCOME-TAX> 49,200
<INCOME-CONTINUING> 73,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,562
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
