<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
INTIMATE BRANDS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
INTIMATE
brands
THREE LIMITED PARKWAY
COLUMBUS, OHIO 43230
(614) 415-8000
April 20, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at 10:30 a.m., Eastern Daylight Time, on May 18, 1998, at the offices of
Victoria's Secret Catalogue, 3425 Stelzer Road, Columbus, Ohio. Our Investor
Relations telephone number is (614) 415-7070 should you require assistance in
finding the location of the meeting. The formal Notice of Annual Meeting of
Stockholders and Proxy Statement are attached. I hope that you will be able to
attend and participate in the meeting, at which time I will have the opportunity
to review the business and operations of Intimate Brands.
The matters to be acted upon by our stockholders are set forth in the
Notice of Annual Meeting of Stockholders. It is important that your shares be
represented and voted at the meeting. Accordingly, after reading the attached
Proxy Statement, would you kindly sign, date and return the enclosed proxy card.
Your vote is important regardless of the number of shares you own.
Sincerely yours,
/s/ Leslie H. Wexner
Leslie H. Wexner
Chairman of the Board
<PAGE> 3
INTIMATE
brands
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1998
April 20, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Intimate
Brands, Inc., a Delaware corporation (the "Company"), will be held at the
offices of Victoria's Secret Catalogue, 3425 Stelzer Road, Columbus, Ohio on May
18, 1998, at 10:30 a.m., Eastern Daylight Time, for the following purposes:
1. To elect three directors to serve for terms of three years.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record, as shown by the transfer books of the Company,
at the close of business on March 27, 1998 are entitled to notice of and to vote
at the Annual Meeting.
By Order of the Board of Directors
/s/ Leslie H. Wexner
Leslie H. Wexner
Chairman of the Board
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO
IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
<PAGE> 4
INTIMATE
brands
THREE LIMITED PARKWAY
COLUMBUS, OHIO 43230
(614) 415-8000
PROXY STATEMENT
DATED APRIL 20, 1998
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1998
The accompanying proxy is solicited by the Board of Directors of Intimate
Brands, Inc. (the "Company") to be voted at the Annual Meeting of Stockholders
to be held May 18, 1998 (the "Annual Meeting"), and any adjournments thereof.
When such proxy is properly executed and returned, the shares it represents will
be voted at the meeting as directed. If no specification is indicated, the
shares will be voted in accordance with the recommendation of the Company's
Board of Directors with respect to each matter submitted to the Company's
stockholders for approval. Abstentions will not be voted, but will be counted
for determining the presence of a quorum. Broker non-votes will not be counted
for any purpose. Any stockholder giving a proxy has the power to revoke it prior
to its exercise by notice of revocation to the Company in writing, by voting in
person at the Annual Meeting or by execution of a subsequent proxy; provided,
however, that such action must be taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
The shares entitled to vote at the meeting consist of shares of Class A
Common Stock and Class B Common Stock of the Company (collectively, the "Common
Stock"), with each share of Class A Common Stock entitling the holder of record
to one vote and each share of Class B Common Stock entitling the holder of
record to three votes. At the close of business on March 27, 1998, the record
date for the Annual Meeting, there were outstanding 42,503,609 shares of Class A
Common Stock and 210,000,000 shares of Class B Common Stock. All shares of Class
B Common Stock, representing approximately 94% of the voting power of the
Company, are held by The Limited, Inc. ("The Limited"). The Class A Common Stock
and the Class B Common Stock will vote as a single class with respect to all
matters submitted to stockholders for approval at the Annual Meeting. This Proxy
Statement and the accompanying form of proxy are first being sent to
stockholders on or about April 20, 1998.
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS.
Three members of the Board of Directors of the Company will be elected at
the Annual Meeting. Directors elected at the Annual Meeting will hold office for
a three-year term expiring at the Annual Meeting of Stockholders in 2001 or
until their successors are elected and qualified. The nominees of the Board of
Directors for such positions are identified below. In the event any of such
nominees is unable or unwilling to serve as a director, it is intended that the
proxies will be voted for the election of such person nominated by the Board of
<PAGE> 5
Directors in substitution. The Company has no reason to believe that any nominee
of the Board of Directors will be unable to serve as a director if elected.
Stockholders wishing to nominate directors for election may do so by
delivering to the Secretary of the Company, no later than 14 days before the
Annual Meeting, a notice setting forth (a) the name, age, business address and,
if known, residence address of each nominee proposed in such notice, (b) the
principal occupation or employment of each such nominee and (c) the number of
shares of stock of the Company beneficially owned by each such nominee. No
person may be elected as a director unless he or she has been nominated by a
stockholder in the manner just described or by the Board of Directors. The three
nominees receiving the highest number of votes will be elected directors.
Proxies may not be voted for more than three nominees.
BUSINESS EXPERIENCE.
Nominees of the Board of Directors for Election at the 1998 Annual Meeting.
<TABLE>
<S> <C>
KENNETH B. GILMAN Mr. Gilman has been Vice Chairman of the Company since 1995.
Mr. Gilman has been Vice Chairman and Chief Administrative
Officer of The Limited since 1997 and was Vice Chairman and
Chief Financial Officer of The Limited from 1993 to 1997 and
Executive Vice President and Chief Financial Officer of The
Limited for five years prior thereto. Mr. Gilman has also
been the Vice Chairman of the Board of Abercrombie & Fitch
Co. ("Abercrombie & Fitch"), a subsidiary of The Limited,
since 1996.
BETH M. PRITCHARD Ms. Pritchard has been President and Chief Executive Officer
of Bath & Body Works, Inc. ("Bath & Body Works") since
November 1993, and assumed such position with the Company in
1995. Ms. Pritchard also has served as Chief Executive
Officer of Victoria's Secret Bath and Fragrance from June
1996 to March 1998. For approximately one and one-half years
prior to assuming her position with Bath & Body Works, Ms.
Pritchard held the position of Executive Vice President and
General Manager at Bath & Body Works. From 1991 until 1993,
she was Executive Vice President at Express, a business
operated by The Limited.
LESLIE H. WEXNER Mr. Wexner has been Chairman of the Board and Chief
Executive Officer of the Company since 1995. Mr. Wexner has
been President and Chief Executive Officer of The Limited
since he founded The Limited in 1963 and has been Chairman
of the Board of Directors of The Limited for more than five
years. Mr. Wexner is also Chairman of the Board of
Abercrombie & Fitch and a director of Hollinger
International, Inc. and Hollinger International Publishing,
Inc.
</TABLE>
Directors Whose Terms Continue until the 1999 Annual Meeting.
<TABLE>
<S> <C>
ROGER D. BLACKWELL Dr. Blackwell has been a Professor of Marketing at The Ohio
State University for more than five years and is also
President and Chief Executive Officer of Roger D. Blackwell
Associates, Inc., a marketing consulting firm in Columbus,
Ohio. Dr. Blackwell is also a director of Abercrombie &
Fitch, Airnet Systems, Inc., Applied Industrial
Technologies, Inc., Checkpoint Systems, Inc., The
Flex-Funds, Max & Erma's Restaurants, Inc. and Worthington
Foods, Inc.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
GRACE A. NICHOLS Ms. Nichols has been President and Chief Executive Officer
of Victoria's Secret Stores, Inc. since January 1991, and
assumed such position with the Company in 1995. Prior to her
position as President, Ms. Nichols held the position of
Executive Vice President, General Merchandise Manager from
1988 to 1991 and Vice President, General Merchandise Manager
from 1986 to 1988 at Victoria's Secret Stores.
DONALD B. SHACKELFORD Mr. Shackelford has been Chairman of the Board and Chief
Executive Officer of State Savings Bank, a banking business,
for more than five years and has been the Chief Executive
Officer of State Savings Co. since 1995. Mr. Shackelford is
also a director of Abercrombie & Fitch, The Limited,
Progressive Corporation and Worthington Foods, Inc.
</TABLE>
Directors Whose Terms Continue until the 2000 Annual Meeting.
<TABLE>
<S> <C>
CYNTHIA A. FIELDS Ms. Fields joined the Company in 1984 and has been President
and Chief Executive Officer of Victoria's Secret Catalogue
since August 1988, and assumed such position with the
Company in 1995. Ms. Fields is also a director of Pathfinder
International.
E. GORDON GEE Dr. Gee has been President of Brown University since January
1998. Dr. Gee was President of The Ohio State University
from 1990 to 1997. Dr. Gee is also a director of Abercrombie
& Fitch, ASARCO, Inc., Glimcher Realty Trust and The
Limited.
ALEX SHUMATE Mr. Shumate has been the Managing Partner of the Columbus,
Ohio office of the law firm of Squire, Sanders & Dempsey
L.L.P. since 1991, and a partner with that firm for more
than five years. Mr. Shumate is also a director of Banc One
Corporation and Wm. Wrigley, Jr. Company.
</TABLE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS.
The Company's Board of Directors held 5 meetings in fiscal year 1997.
During fiscal year 1997, all of the directors attended 75% or more of the total
number of meetings of the Board and of Committees of the Board on which they
served.
The Audit Committee of the Board recommends the firm to be employed as the
Company's independent public accountants and reviews the scope of the audit and
audit fees. In addition, the Audit Committee consults with the independent
auditors with regard to the plan of audit, the resulting audit report and the
accompanying management letter, and confers with the independent auditors with
regard to the adequacy of internal accounting controls, as appropriate, out of
the presence of management. Mr. Shumate (Chair) and Dr. Blackwell are the
members of the Audit Committee. The Audit Committee held 5 meetings in fiscal
year 1997.
The Compensation Committee of the Board is charged with reviewing executive
compensation and administering the Company's stock option and performance
incentive plans. Its members are Mr. Shackelford (Chair) and Dr. Gee. Members of
the Compensation Committee held 4 meetings in fiscal year 1997, and took action
in writing without a meeting on 17 occasions.
The Executive Committee of the Board may exercise, to the fullest extent
permitted by law, all of the powers and authority granted to the Board. The
Executive Committee may also declare dividends, authorize the issuance of stock
and authorize the seal of the Company to be affixed to papers that require it.
Its members are Messrs. Wexner (Chair) and Shumate. The Executive Committee took
action in writing without a meeting on 3 occasions in fiscal year 1997.
3
<PAGE> 7
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT.
Set forth below is certain information about the securities ownership of
all directors of the Company, the executive officers of the Company named in the
Summary Compensation Table below and all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
DIRECTOR CLASS A COMMON STOCK THE LIMITED COMMON
NAME, POSITION WITH THE COMPANY OR CONTINUOUSLY BENEFICIALLY OWNED PERCENT OF STOCK BENEFICIALLY
PRINCIPAL OCCUPATION, AND AGE SINCE TERM EXPIRES (A)(B) CLASS OWNED (A)(B)
- ----------------------------------- ------------ ------------ -------------------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Roger D. Blackwell... 1995 1999 7,047(c) * 6,800
Professor of Marketing,
The Ohio State University, 57
Cynthia A. Fields... 1995 2000 66,252(c) * 36,287(d)
President and
Chief Executive Officer--
Victoria's Secret Catalogue, 48
E. Gordon Gee... 1995 2000 2,806(c) * 2,354(d)
President of Brown
University, 54
Kenneth B. Gilman... 1995 1998 23,578(c)(e) * 397,218(d)(f)(g)
Vice Chairman, 51
Grace A. Nichols... 1995 1999 37,451(c) * 195,159(d)
President and
Chief Executive Officer--
Victoria's Secret Stores, 51
Beth M. Pritchard... 1995 1998 47,194(c)(h) * 79,331(d)(f)
President and
Chief Executive Officer--
Bath & Body Works, 51
Donald B. Shackelford... 1995 1999 5,916(c) * 70,168(d)(f)
Chairman of the Board and
Chief Executive Officer of
State Savings Bank, 65
Alex Shumate... 1996 2000 1,853(c) * 0
Managing Partner--
Law Firm of Squire, Sanders &
Dempsey L.L.P., 47
Leslie H. Wexner... 1995 1998 87,218(c) * 66,806,417(d)(g)(i)
Chairman of the Board and
Chief Executive Officer, 60
All directors and executive
officers as a group... ** ** 300,883(c)(j) * 67,617,725(d)(g)(k)
<CAPTION>
PERCENT OF
NAME, POSITION WITH THE COMPANY OR THE LIMITED
PRINCIPAL OCCUPATION, AND AGE COMMON STOCK
- ----------------------------------- ------------
<S> <C>
Roger D. Blackwell... *
Professor of Marketing,
The Ohio State University, 57
Cynthia A. Fields... *
President and
Chief Executive Officer--
Victoria's Secret Catalogue, 48
E. Gordon Gee... *
President of Brown
University, 54
Kenneth B. Gilman... *
Vice Chairman, 51
Grace A. Nichols... *
President and
Chief Executive Officer--
Victoria's Secret Stores, 51
Beth M. Pritchard... *
President and
Chief Executive Officer--
Bath & Body Works, 51
Donald B. Shackelford... *
Chairman of the Board and
Chief Executive Officer of
State Savings Bank, 65
Alex Shumate... **
Managing Partner--
Law Firm of Squire, Sanders &
Dempsey L.L.P., 47
Leslie H. Wexner... 24.5%
Chairman of the Board and
Chief Executive Officer, 60
All directors and executive
officers as a group... 24.8%
</TABLE>
- ------------
<TABLE>
<S> <C>
* Less than 1%.
** Not applicable.
(a) Unless otherwise indicated, each named person has voting and
investment power over the listed shares and such voting and
investment power is exercised solely by the named person or
shared with a spouse.
(b) Reflects ownership as of February 23, 1998.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
(c) Includes the following number of shares issuable within 60
days upon the exercise of outstanding stock options: Dr.
Blackwell, 1,250; Ms. Fields, 45,001; Dr. Gee, 1,250; Mr.
Gilman, 12,501; Ms. Nichols, 20,001; Ms. Pritchard, 32,501;
Mr. Shackelford, 1,250; Mr. Shumate, 750; Mr. Wexner,
25,000; and all directors and executive officers as a group,
155,629.
(d) Includes the following number of shares issuable within 60
days upon the exercise of outstanding stock options: Ms.
Fields 33,750; Dr. Gee 500; Mr. Gilman 243,750; Ms. Nichols,
166,250; Ms. Pritchard 65,250; Mr. Shackelford 500; Mr.
Wexner 175,000; and all directors and executive officers as
a group, 705,500.
(e) Includes 1,000 shares owned by family members, as to which
Mr. Gilman disclaims beneficial ownership.
(f) Includes the following number of shares owned by family
members, as to which beneficial ownership is disclaimed: Mr.
Gilman, 1,117; Ms. Pritchard, 200; and Mr. Shackelford,
18,685.
(g) Includes the following number of shares held as of December
31, 1997 in an employee benefit plan, over which the
participant has the power to dispose or withdraw shares: Mr.
Gilman, 33,701; Mr. Wexner, 530,490; and all directors and
executive officers as a group, 599,475.
(h) Includes 1,482 shares, as to which Ms. Pritchard disclaims
beneficial ownership.
(i) Includes 2,000,000 shares held by Health and Science
Interests, 350,000 shares held by Health and Science
Interests II, 1,407,717 shares held by The Wexner
Foundation, 18,750,000 shares held by The Wexner Children's
Trust, 1,644,600 shares held by the Harry & Hannah Wexner
Trust and 2,688,800 shares held by the Harry, Hannah & David
Wexner Trust. Mr. Wexner disclaims beneficial ownership of
the shares held by Health and Science Interests, Health and
Science Interests II and The Wexner Foundation. Mr. Wexner
shares investment and voting power with others with respect
to shares held by The Wexner Foundation. The 18,750,000
shares held by the Wexner Children's Trust are held subject
to the terms of a Contingent Stock Redemption Agreement
entered into on January 26, 1996 between The Limited, Mr.
Wexner and The Wexner Children's Trust.
(j) Includes 2,482 shares, as to which beneficial ownership is
disclaimed.
(k) Includes 3,777,719 shares, as to which beneficial ownership
is disclaimed.
</TABLE>
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE.
The following table provides information concerning compensation paid by
the Company (except, as noted below, for executive officers Wexner and Gilman,
whose compensation was paid by The Limited) to each of the named executive
officers of the Company for each of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- -----------------------------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS ALL OTHER
FISCAL SALARY BONUS(2) AWARDS(3) AWARDED COMPENSATION(4)
NAME AND PRINCIPAL POSITION(1) YEAR ($) ($) ($) (#) ($)
- ------------------------------ ------ ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner............. 1997 $1,000,000 $1,861,560 -- 1,600,000(5) $135,296
Chairman of the Board and 1996 1,011,538 915,000 -- 200,000(5) 151,629
Chief Executive Officer 100,000(6)
1995 1,150,000 768,315 -- 100,000(5) 148,436
Kenneth B.Gilman............. 1997 900,000 1,228,630 $6,220,313(5) 500,000(5) 195,094
Vice Chairman 1996 903,846 603,900 -- 50,000(5) 187,192
50,000(6)
1995 941,935 449,820 -- 25,000(5) 190,772
Grace A. Nichols............. 1997 700,000 1,400,000 6,171,375(6) 500,000(6) 193,441
President and Chief 1996 700,000 577,500 184,195(6) 15,000(6) 185,424
Executive Officer-- 1995 683,300 700,000 1,211,381(6) 50,000(6) 185,848
Victoria's Secret Stores 15,000(5)
Beth M. Pritchard............ 1997 690,385 861,280 6,161,563(6) 500,000(6) 166,275
President and Chief 1996 571,154 575,173 188,140(6) 40,000(6) 160,020
Executive Officer-- 1995 512,475 690,000 1,058,378(6) 50,000(6) 130,115
Bath & Body Works 15,000(5)
Cynthia A. Fields............ 1997 621,154 875,000 5,093,750(6) 500,000(6) 153,442
President and Chief 1996 573,077 474,950 42,130(6) 65,000(6) 141,642
Executive Officer-- 1995 541,815 649,970 882,041(6) 50,000(6) 151,168
Victoria's Secret Catalogue 15,000(5)
</TABLE>
- ------------
(1) Executive officers Wexner and Gilman are also employed by The Limited and
received no direct compensation from the Company. The annual base salary and
annual bonus opportunity for executive officers Wexner and Gilman in respect
of their service with The Limited and its affiliates was determined by The
Limited's Compensation Committee and was paid by The Limited.
(2) Represents for each fiscal year the aggregate of the performance-based
incentive compensation for the Spring and Fall selling seasons.
6
<PAGE> 10
(3) Represents for each executive officer the restricted stock awards for the
specified fiscal year under the Company's 1995 Stock Option and Performance
Incentive Plan for awards of the Company's Class A Common Stock and under
The Limited, Inc. 1993 Stock Option and Performance Incentive Plan for
awards of The Limited's Common Stock. Information set forth above is based
on the closing price of the applicable common stock on the date on which the
awards were made.
On May 20, 1997, 300,000, 300,000 and 250,000 restricted shares of the
Company's Class A Common Stock were granted to executive officers Nichols,
Pritchard and Fields, respectively, and 300,000 restricted shares of The
Limited's Common Stock were granted to Mr. Gilman. The per share value of
the Company's Class A Common Stock on such date was $20.375 and the per
share value of The Limited's Common Stock on such date was $19.50. These
awards are earned subject to established financial performance measures and,
once earned, vest 10%, 10%, 10%, 15%, 20% and 35% on the first through sixth
anniversaries of the grant date, respectively, in each case subject to the
holder's continued employment with the executive's employer.
On March 25, 1997, 3,000 and 2,500 restricted shares of the Company's Class
A Common Stock were granted to executive officers Nichols and Pritchard,
respectively and 19,750 restricted shares of The Limited's Common Stock were
granted to Mr. Gilman. The per share value of the Company's Class A Common
Stock on such date was $19.625 and the per share value of The Limited's
Common Stock on such date was $18.750. These awards vest 100% one year from
the grant date, in each case subject to the holder's continued employment
with the executive's employer.
On February 1, 1997, 7,245 and 7,749 restricted stock performance awards of
the Company's Class A Common Stock were granted to executive officers
Nichols and Pritchard, respectively. The per share value of the Class A
Common Stock on Friday, January 31, 1997 was $17.75. On August 1, 1996,
2,601, 2,367 and 1,971 restricted stock performance awards of the Company's
Class A Common Stock were granted to executive officers Nichols, Pritchard
and Fields, respectively. The per share value of the Class A Common Stock on
such date was $21.375. These awards, which are in respect of 1996
performance, generally vest 10% on the grant date, and 20%, 30% and 40% on
the first through third anniversaries of the grant date, in each case
subject to the holder's continued employment with the Company.
On February 1, 1996, 12,975, 19,890 and 7,935 restricted stock performance
awards of the Company's Class A Common Stock were granted to executive
officers Nichols, Pritchard and Fields, respectively, in respect of 1995
performance. The per share value of the Class A Common Stock on such date
was $14.75. These awards generally vest as set forth in the preceding
paragraph, in each case, subject to the holder's continued employment with
the Company.
On October 24, 1995, 60,000, 45,000 and 45,000 restricted shares of the
Company's Class A Common Stock were awarded to executive officers Nichols,
Pritchard and Fields, respectively, in consideration of the cancellation of
March 1, 1994 grants of restricted shares of The Limited's Common Stock to
such executive officers. The per share value of the Class A Common Stock on
such date was the Initial Public Offering price of $17.00 per share. These
awards vest 100% on March 1, 1999, in each case, subject to the holder's
continued employment with the Company.
As of January 31, 1998, the aggregate holdings of restricted shares of the
Company's Class A Common Stock and the market value of such holdings for
such named executive officers were: Ms. Nichols, 380,425 shares, $9,629,508;
Ms. Pritchard, 370,055 shares, $9,367,017; and Ms. Fields, 301,935,
$7,642,730 (based on the $25.3125 fair market value of the Company's Class A
Common Stock as of Friday, January 30, 1998).
7
<PAGE> 11
As of January 31, 1998, the aggregate holdings of the restricted shares of
The Limited's Common Stock and the market value of such holdings for each of
the named executive officers were: Mr. Wexner, 13,000 shares, $344,500; Mr.
Gilman, 326,250 shares, $8,645,625; Ms. Nichols, 10,620 shares, $281,430;
Ms. Pritchard, 6,720 shares, $178,080; and Ms. Fields, 4,320 shares,
$114,480 (based on the $26.50 fair market value of a share of The Limited's
Common Stock as of Friday, January 30, 1998).
Dividends will not be paid or accrue with respect to shares of restricted
stock until such shares vest.
(4) Represents for each executive officer, the amount of employer matching and
supplemental contributions allocated to his or her account under certain of
The Limited's qualified and non-qualified defined contribution plans during
1997.
(5) Denominated in shares of The Limited's Common Stock.
(6) Denominated in shares of the Company's Class A Common Stock.
LONG-TERM INCENTIVE PLAN AWARDS.
No awards were granted in respect of the 1997 fiscal year to the named
executive officers other than the restricted stock performance awards as
disclosed in the Summary Compensation Table.
STOCK OPTIONS.
The following table sets forth certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table during
the Company's 1997 fiscal year.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS(1) POTENTIAL REALIZABLE
------------- VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS ASSOCIATES IN PRICE EXPIRATION -------------------------
NAME GRANTED(1)(#) FISCAL YEAR PER SHARE($) DATE 5%($) 10%($)
- ---------------------- ------------- ------------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner...... 1,600,000(3) 22.01% $22.1375(4) 07/02/07 $22,275,448 $56,450,358
Kenneth B. Gilman..... 500,000(3) 6.88% 19.5000 05/21/07 6,131,723 15,538,989
Grace A. Nichols...... 500,000(5) 16.94% 20.3750 05/21/07 6,406,864 16,236,251
Beth M. Pritchard..... 500,000(5) 16.94% 20.3750 05/21/07 6,406,864 16,236,251
Cynthia A. Fields..... 500,000(5) 16.94% 20.3750 05/21/07 6,406,864 16,236,251
</TABLE>
- ------------
(1) On July 1, 1997, options were granted to Mr. Wexner, and, on May 20, 1997,
options were granted to Mr. Gilman pursuant to The Limited, Inc. 1993 Stock
Option and Performance Incentive Plan (1997 Restatement). On May 20, 1997,
options were granted to executive officers Nichols, Pritchard and Fields
pursuant to the Company's 1995 Stock Option and Performance Incentive Plan
(1997 Restatement). Such options vest 10%, 10%, 10%, 15%, 20% and 35% on the
first through sixth anniversaries of the grant date, respectively, in each
case subject to the holder's continued employment with the executive's
employer.
8
<PAGE> 12
(2) The assumed rates of growth were selected by the Securities and Exchange
Commission (the "Commission") for illustrative purposes only and are not
intended to predict or forecast future stock prices.
(3) Denominated in shares of The Limited's Common Stock.
(4) The per share exercise price of all such options to Mr. Wexner is set at
110% of the fair market value of the stock on the date of grant.
(5) Denominated in shares of the Company's Class A Common Stock.
The following table sets forth certain information relating to stock
options exercised and the number and value of shares of The Limited's Common
Stock and the Company's Class A Common Stock subject to the stock options held
by the executive officers named in the Summary Compensation Table during the
Company's 1997 fiscal year and the year-end value of unexercised options held by
such executive officers.
AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE(1) REALIZED(2)($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- --------------------- ----------- -------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner..... -- -- 25,000(3) 75,000(3) $ 93,125(3) $ 279,375(3)
137,500(4) 1,812,500(4) 1,113,750(4) 8,471,250(4)
Kenneth B. Gilman.... 31,250 $384,766 4,167(3) 45,833(3) 46,618(3) 512,757(3)
222,917(4) 564,583(4) 1,629,430(4) 4,124,476(4)
Grace A. Nichols..... 10,000 98,750 16,251(3) 548,749(3) 145,868(3) 2,906,320(3)
158,750(4) 11,250(4) 1,015,000(4) 103,125(4)
Beth M. Pritchard.... -- -- 22,501(3) 567,499(3) 215,790(3) 3,116,085(3)
58,500(4) 10,500(4) 384,250(4) 96,000(4)
Cynthia A. Fields.... 40,000 377,500 28,751(3) 586,249(3) 285,711(3) 3,325,851(3)
56,500(4) 10,500(4) 296,750(4) 96,000(4)
</TABLE>
- ------------
(1) All such shares acquired on exercise represent shares of The Limited's
Common Stock.
(2) Calculated on the basis of the number of shares exercised, multiplied by the
excess of the fair market value of a share of The Limited's Common Stock on
the date of exercise over the exercise price of such option.
(3) Denominated in shares of the Company's Class A Common Stock. Value is
calculated on the basis of the number of shares subject to such option,
multiplied by the excess of the fair market value of a share of the
Company's Class A Common Stock on the last trading day prior to fiscal
year-end ($25.3125) over the exercise price of such option.
(4) Denominated in shares of The Limited's Common Stock. Value is calculated on
the basis of the number of shares subject to each such option, multiplied by
the excess of the fair market value of a share of The Limited's Common Stock
on the last trading day prior to fiscal year-end ($26.50) over the exercise
price of such option.
9
<PAGE> 13
COMPENSATION OF DIRECTORS.
Directors who are not associates of the Company receive an annual retainer
of $20,000 per year (increased by $2,000 for each committee chair held), plus a
fee of $1,000 for each Board meeting attended ($500 for a telephonic meeting)
and, as committee members, receive $750 per committee meeting attended ($200 for
a telephonic meeting). Each action in writing taken by the Board or any
committee entitles each such director to be paid $200. Associates and officers
who are directors receive no additional compensation for services rendered as
directors. Under the Company's 1995 Non-Associate Director Stock Plan, each
director who is not an associate of the Company receives (i) annual grants of
options to acquire 1,000 shares of the Company's Class A Common Stock at an
exercise price equal to the fair market value of the underlying shares on the
date of grant and (ii) 50% of the annual retainer in shares of the Company's
Class A Common Stock.
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS.
In 1997, the Company entered into individual employment agreements with
Executive Officers Nichols, Pritchard and Fields. Pursuant to these agreements,
Ms. Nichols serves as President and Chief Executive Officer-Victoria's Secret
Stores, Ms. Pritchard serves as President and Chief Executive Officer-Bath and
Body Works and Ms. Fields serves as President and Chief Executive
Officer-Victoria's Secret Catalogue. The initial term of each agreement is six
years, with automatic one-year extensions thereafter unless either party gives
written notice to the contrary. Ms. Nichols' and Ms. Pritchard's agreements
provide for an initial base salary of $700,000 and Ms. Fields' agreement
provides for an initial base salary of $625,000. Option grants and the value of
performance-based stock awards made in 1997 pursuant to the agreements are
disclosed in the Summary Compensation Table. Each agreement also provides for
incentive plan participation as determined by the Board and life insurance
coverage of $5 million. Under each agreement, upon the failure of the Company to
extend the agreement or the termination of the executive's employment either by
the Company without cause or by the executive for good reason, the executive
will continue to receive her base salary for one year after the termination
date. Under the agreements, each executive agrees not to compete with the
Company or solicit its employees or customers during the employment term and for
one year thereafter. Each executive's agreement provides for disability benefits
in addition to the benefits available under the Company's disability plans. In
the event any "parachute" excise tax is imposed on an executive, she will be
entitled to tax reimbursement payments.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
The Company's executive officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, are
required to file reports of ownership and changes in ownership of the Company's
equity securities with the Commission and the New York Stock Exchange. Copies of
those reports must also be furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during fiscal 1997 its executive officers, directors and greater
than ten-percent beneficial owners complied with such filing requirements.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") reviews and approves the
Company's executive compensation philosophy and policies and the application of
such policies to the compensation of executive officers. Messrs. Wexner and
Gilman were compensated by The Limited and did not participate in the Company's
compensation programs. The Company's compensation programs and compensation
philosophy are generally
10
<PAGE> 14
consistent with those of The Limited. The Company and the Committee have also
retained independent compensation consultants to assist in developing, and
periodically assessing the reasonableness of, the Company's executive officer
compensation program.
COMPENSATION PHILOSOPHY.
The Company seeks to apply a consistent philosophy to compensation for all
leadership associates, including senior executives. The primary goal of the
compensation program has been increasingly to link total executive compensation
to business performance that enhances stockholder value. Accordingly, total
compensation for leadership individuals is structured to provide a lower
proportion as fixed compensation and a much higher variable proportion keyed to
business unit and Company performance.
Our philosophy is based on the following basic principles:
To Pay for Outstanding Performance.
The Company believes in paying for results. Individuals in leadership roles
are compensated based on a combination of total company, business unit and
individual performance factors. Total company and business unit performance are
evaluated primarily on the degree by which financial targets are met. Individual
performance is evaluated based upon several factors, including building brand
identity, attainment of specific merchandise and financial objectives, building
and developing a strong leadership team, developing an infrastructure to support
future business growth and controlling expenses. In addition, a significant
portion of total compensation is in the form of equity-based award opportunities
to directly tie any increased compensation to increased stockholder value.
To Pay Competitively.
The Company is committed to providing a total compensation program designed
to attract the best senior leaders to the business and to retain the best,
consistently highest performers. To achieve this goal, the Company annually
compares its pay practices and overall pay levels with other leading retail and
where appropriate, non-retail companies, and sets pay guidelines based on this
review.
To Pay Equitably.
The Company believes that it is important to apply generally consistent
guidelines for all leadership compensation programs across business units,
considering the size, complexity, stage of development and performance of the
business, along with the performance of the individual executive.
PRINCIPAL COMPENSATION ELEMENTS.
The principal elements of executive compensation at the Company are base
salary, short-term performance-based cash incentive compensation and
equity-based incentive programs. In determining guidelines for each compensation
element, the Company participates in compensation surveys which include
approximately 75 national and regional specialty and department store retail
businesses, chosen because of their general similarity to the Company in
business and merchandise focus. In addition, the Company participates in special
surveys focusing on specific segments of the business, such as merchandise
design and the personal care products business. The Company, along with its
compensation consultants, analyzes executive compensation levels and practices
relative to the performance of these competitor companies and, from this
information, develops pay guidelines that generally target, and place the
Company in, the 75th to 90th percentile of pay for those executives
11
<PAGE> 15
with exceptional performance. The competitor group that is surveyed is subject
to periodic review and is modified from time to time to reflect new businesses,
mergers, acquisitions and changes in business focus. The competitor group
contains approximately 50% of the companies in the S&P Retail Stores Composite
Index represented in the Stockholder Return Graph below. The Company generally
attempts to design all incentive and equity-based compensation programs to meet
the requirements for deductibility under the Internal Revenue Code of 1986, as
amended (the "Code").
Base Salary.
The Committee annually reviews and approves the base salary of each
executive officer and business president. In determining salary adjustments, the
Committee considers the size and responsibility of the individual's position,
the business unit's overall performance, the individual's overall performance
and future potential and the base salaries paid by competitors to employees in
comparable positions. Individual performance is measured against the following
factors: seasonal and annual business goals, brand strategy execution and
business growth goals, and the recruitment and development of leadership talent.
These factors are considered subjectively in the aggregate, and none of these
factors is accorded a formula weight.
Performance-Based Cash Incentive Compensation.
The Company has employed a short-term performance-based cash incentive
compensation program for specified key leadership positions that provides for
incentive payments based on the extent to which pre-established objective goals
for each six-month operating season are attained.
For most businesses, the goals under this plan are based on operating
income. However, goals also may be based on other objectives and/or criteria,
depending on the business unit and its strategy. These goals are set at the
beginning of each six-month season, and are based on an analysis of historical
performance and growth expectations for that business, financial results of
other comparable businesses both inside and outside the Company, and progress
toward achieving the strategic plan for that business. Target cash incentive
compensation opportunities are established annually for eligible executives
stated as a specific percent of base salary. The amount of performance-based
incentive compensation earned by participating executives can range from zero to
double their incentive target, based upon the extent to which the
pre-established financial goals are achieved.
Equity-Based Incentive Programs.
The Committee believes that continued emphasis on equity-based compensation
opportunities encourages performance that enhances stockholder value, thereby
further linking leadership and shareholder objectives. In 1997, continuing a
program that commenced in 1995, the Committee awarded equity-based incentive
compensation under two programs: a stock option program, and a restricted stock
program under which shares of stock are earned based on attainment of specified
financial performance objectives. The Committee also believes that stock awards,
the ultimate vesting of which is subject to continued employment, assist the
Company in retaining key high performing executives.
Award opportunities for each eligible participant are based on guidelines
which include size of the executive's business unit, the individual's
responsibility level within that business, competitive practice, and the market
price of the Company's Common Stock. In determining the awards for an executive
officer, the Committee evaluated competitive practice and the executive
officer's performance and criticality to the business.
Stock Options. In 1997, stock options were awarded to executives in the
amounts set forth in the Option Grants in Fiscal Year 1997 Table above. The
option program utilizes vesting periods to encourage retention of
12
<PAGE> 16
key executives. The options granted to Mr. Wexner, Mr. Gilman, Ms. Nichols, Ms.
Pritchard and Ms. Fields vest, subject to continued employment, on a graduated
basis over a period of six years. The exercise price for each option granted,
with the exception of the options granted to Mr. Wexner (who was granted
above-market value options), is equal to the fair market value of the underlying
common stock on the date of grant.
Performance-Based Restricted Stock. In 1997, with the exception of Mr.
Wexner, Mr. Gilman, Ms. Nichols, Ms. Pritchard and Ms. Fields, the Committee
continued a program commenced in 1995 under which specific key executives are
eligible to receive restricted stock based on the achievement of pre-established
financial goals. Through this program, executives can earn from zero to double
their targeted number of restricted shares based upon the extent to which
financial goals are achieved. In 1997, special restricted stock grants, as
outlined in the Summary Compensation Table, were made to Mr. Gilman, Ms.
Nichols, Ms. Pritchard and Ms. Fields and are earned based on attainment of
specified financial goals. If earned, these shares vest on a graduated basis
over six years, subject to continued employment with the Company.
CEO COMPENSATION.
In the last completed fiscal year, Mr. Wexner's compensation was determined
by the Compensation Committee of The Limited and was therefore based on the
performance of, and paid by, The Limited.
Compensation Committee
Donald B. Shackelford, Chair
E. Gordon Gee
13
<PAGE> 17
STOCKHOLDER RETURN GRAPH
The following graph shows the changes, during fiscal 1997 and 1996 and the
three-month period in fiscal 1995 commencing after the initial public offering
of the Class A Common Stock (the "Initial Public Offering"), in the value of
$100 invested in Class A Common Stock of the Company, the Standard & Poor's 500
Composite Stock Price Index and the Standard & Poor's Retail Stores Composite
Index. The plotted points represent the closing price on the last day of the
fiscal year indicated.
COMPARISON OF 27 MONTH CUMULATIVE TOTAL RETURN*
AMONG INTIMATE BRANDS, INC., THE S&P 500 INDEX
AND THE S&P RETAIL COMPOSITE INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 'INTIMATE S&P RETAIL
(FISCAL YEAR COVERED) BRANDS, INC.' S&P 500 COMPOSITE
<S> <C> <C> <C>
10/24/95 100 100 100
JAN-96 87 108 103
JAN-97 104 134 119
JAN-98 149 167 178
</TABLE>
* $100 INVESTED IN STOCK OR IN INDEX ON
10/24/95 -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JANUARY 31.
14
<PAGE> 18
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth the names of all persons who, on February
23, 1998, were known by the Company to be the beneficial owners (as defined in
the rules of the Commission) of more than 5% of the shares of Common Stock of
the Company:
<TABLE>
<CAPTION>
AMOUNT PERCENT
NAME AND ADDRESS CLASS OF BENEFICIALLY OF
OF BENEFICIAL OWNER COMMON OWNED CLASS
- ------------------- -------- ------------ -------
<S> <C> <C> <C>
The Limited, Inc............................................ Class B 210,000,000 100.0%
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
FMR Corp.(1)................................................ Class A 5,535,600 13.0%
82 Devonshire Street
Boston, Massachusetts 02109
The Capital Group Companies, Inc.(2)........................ Class A 3,656,000 8.6%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ------------
(1) FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and certain subsidiaries
of FMR Corp. may be deemed to be members of a "group" as such term is
defined in the rules promulgated by the Commission. The FMR Group is the
beneficial holder of the Company's Common Stock as a result of the
investment-related activities of certain subsidiaries of FMR Corp. Members
of the Edward C. Johnson 3d family and trusts for their benefit are the
predominant owners of Class B shares of common stock of FMR Corp.
representing approximately 49% of its voting power. Mr. Johnson 3d, the
chairman of FMR Corp., owns 12% of the aggregate outstanding voting stock of
FMR Corp. and Ms. Johnson, a director of FMR Corp., owns 24.5% of the
aggregate outstanding voting stock of FMR Corp.
(2) The Capital Group Companies, Inc. ("Capital") is the parent holding company
of a group of investment management companies that hold investment power
and, in some cases, voting power over the securities reported in their
Schedule 13Gs. The investment management companies, which include a "bank"
as defined in Section 3(a)6 of the Securities Exchange Act of 1934 (the
"Act") and several investment advisors registered under Section 203 of the
Investment Advisors Act of 1940, provide investment advisory and management
services for their respective clients which include registered investment
companies and institutional accounts. Capital does not have investment power
or voting power over any of the securities mentioned herein; however,
Capital may be deemed to beneficially own such securities by virtue of Rule
13d-3 under the Act.
15
<PAGE> 19
RELATIONSHIP AND TRANSACTIONS WITH THE LIMITED
The Limited owns 100% of the outstanding Class B Common Stock of the
Company, which represents approximately 94% of the combined voting power of all
of the Company's outstanding Common Stock. The Limited has advised the Company
that its current intent is to continue to hold all of the Class B Common Stock
beneficially owned by it. However, The Limited has no agreement with the Company
not to sell or distribute such shares and there can be no assurance concerning
the period of time during which The Limited will maintain its beneficial
ownership of Common Stock. Beneficial ownership of at least 80% of the total
voting power and value of the outstanding Common Stock is required in order for
The Limited to continue to include the Company in its consolidated group for
federal income tax purposes and ownership of at least 80% of the total voting
power and 80% of each class of nonvoting capital stock is required in order for
The Limited to be able to effect a tax-free spin-off of the Company in the
future.
INTERCOMPANY ARRANGEMENTS.
The Company's relationship with The Limited is governed, in part, by
agreements entered into in connection with the Initial Public Offering,
including a services agreement, a corporate agreement, several lease agreements,
several shared facilities agreements and a tax-sharing agreement, the material
terms of which are summarized below.
The following summary of the material terms of the agreements does not
purport to be complete and is qualified in its entirety by reference to the
forms of the relevant agreements, copies of which were filed with the Commission
as exhibits to the Company's Registration Statement filed in connection with the
Initial Public Offering, and are available for inspection at the Commission.
Services Agreement.
The Company and The Limited are parties to an intercompany services and
operating agreement (the "Services Agreement") with respect to services provided
by The Limited (or subsidiaries of The Limited) to the Company. The services
provided by The Limited to the Company include, among other things, certain
accounting, aircraft, associate benefit plan administration, audit, cash
management, corporate development, corporate secretary, governmental affairs,
human resources and compensation, investor and public relations, international
expansion, import and shipping, legal, real estate, risk management, store
design/planning, tax and treasury services. The Services Agreement provides that
such services are to be provided in exchange for fees which (based on current
costs for such services) management believes do not exceed fees that would be
paid if such services were provided by independent third parties. Under the
Services Agreement, the fees for services provided by The Limited to the Company
during 1997 were approximately $51,376,000.
In addition to the identified services, during fiscal 1997, The Limited
continued coverage of the Company under The Limited's umbrella liability,
property, casualty and fiduciary insurance policies. The Company reimburses The
Limited for the portion of The Limited's premium cost with respect to such
insurance that is attributable to coverage of the Company. Either The Limited or
the Company may terminate such coverage under The Limited's policies at any time
upon prior written notice during the 90 days prior to the anniversary date of
the policy, provided that termination of coverage by the Company may only be for
nonpayment and only if a replacement policy, acceptable to The Limited, is
entered into by the Company.
The Services Agreement further provides for eligible associates of the
Company to participate in The Limited's associate benefit plans. In addition to
a monthly services fee, the Company reimburses The Limited for The Limited's
costs (including any contributions and premium costs and including certain
third-party expenses and allocations of certain personnel expenses of The
Limited) relating to participation by the Company's associates in any of The
Limited's benefit plans.
16
<PAGE> 20
The Services Agreement has an initial term of five years and will be
renewed automatically thereafter for successive one-year terms, unless either
the Company or The Limited elects not to renew the Services Agreement. After the
initial five-year term, the Services Agreement may be terminated at any time by
either party upon six months' written notice. Furthermore, the Services
Agreement is subject to early termination by either the Company or The Limited
upon six months' written notice if The Limited ceases to own shares of Common
Stock representing more than 50% of the combined voting power of the Common
Stock of the Company, whether as a result of a tax-free spin-off of the Company
or otherwise.
Lease Agreement.
The businesses operated by the Company entered into lease agreements with
The Limited or one or more subsidiaries of The Limited (collectively, the "Lease
Agreement") pursuant to which The Limited, directly or indirectly, leased to the
relevant businesses of the Company a distribution center and headquarters office
space. The Lease Agreement provides for the lessee to lease space at an average
annual rental rate equal to $11.00 per square foot, in the case of office space,
and $2.85 per square foot, in the case of the distribution centers, subject to
adjustment based on the consumer price index every third year. The Company paid
The Limited (or subsidiaries of The Limited) approximately $10,022,000 in lease
payments during 1997.
The Lease Agreement has an initial term of fifteen years and will be
renewed automatically thereafter for successive five-year terms unless either
the lessor or lessee (or sublessor or sublessee) elects not to renew the Lease
Agreement upon at least one year's notice.
Shared Facilities Agreement.
Certain businesses operated by the Company and certain businesses operated
by The Limited entered into shared facilities agreements (collectively, the
"Shared Facilities Agreement") pursuant to which the relevant businesses
operated by the Company sub-leased facilities from the relevant businesses
operated by The Limited. Under the Shared Facilities Agreement, the sublessee is
responsible for its pro rata share (based on square feet occupied) of all costs
and expenses (principally fixed rent) under the relevant lease, plus the portion
of any performance-based rent attributable to the sublessee. In 1997, the
Company paid The Limited approximately $38,700,000 for the portion of the cost
and expenses attributable to it under the relevant leases.
Tax-Sharing Agreement.
The Company is included in The Limited's federal consolidated income tax
group and the Company's federal income tax liability is included in the
consolidated federal income tax liability of The Limited and its subsidiaries.
In certain circumstances, certain subsidiaries of the Company are also included
with certain subsidiaries of The Limited (other than subsidiaries of the
Company) in combined, consolidated or unitary income tax groups for state and
local tax purposes. The Company and The Limited entered into a tax-sharing
agreement (the "Tax-Sharing Agreement") pursuant to which the Company and The
Limited make payments between them such that, with respect to any period, the
amount of taxes to be paid by the Company, subject to certain adjustments, will
be determined as though the Company were to file separate federal, state and
local income tax returns (including, except as provided below, any amounts
determined to be due as a result of a redetermination of the tax liability of
The Limited arising from an audit or otherwise) as the common parent of an
affiliated group of corporations filing combined, consolidated or unitary (as
applicable) federal, state and local returns rather than a consolidated
subsidiary of The Limited with respect to federal, state and local income taxes.
The Company will be reimbursed, however, for tax attributes that it generates,
such as net operating losses, if and when they are used on a consolidated basis.
17
<PAGE> 21
In determining the amount of tax-sharing payments under the Tax-Sharing
Agreement, The Limited prepares for the Company pro forma returns with respect
to federal and applicable state and local income taxes that reflect the same
positions and elections used by The Limited in preparing the returns for The
Limited's consolidated group and other applicable groups. The Limited continues
to have all the rights of a parent of a consolidated group (and similar rights
provided for by applicable state and local law with respect to a parent of a
combined, consolidated or unitary group), is the sole and exclusive agent for
the Company in any and all matters relating to the income, franchise and similar
tax liabilities of the Company, is solely and exclusively responsible for the
preparation and filing of consolidated federal and consolidated or combined
state income tax returns (or amended returns), and has the power, in its sole
discretion, to contest or compromise any asserted tax adjustment or deficiency
and to file, litigate or compromise any claim for refund on behalf of the
Company. In addition, The Limited provides the aforementioned services with
respect to the Company's separate state and local returns and the Company's
foreign returns. Under the Tax-Sharing Agreement, the Company must pay The
Limited a fee intended to reimburse The Limited for all direct and indirect
costs and expenses incurred with respect to the Company's share of the overall
costs and expenses incurred by The Limited with respect to tax-related services.
In general, the Company will be included in The Limited's consolidated
group for federal income tax purposes for so long as The Limited beneficially
owns at least 80% of the total voting power and value of the outstanding Common
Stock. Each member of a consolidated group is jointly and severally liable for
the federal income tax liability of each other member of the consolidated group.
Accordingly, although the Tax-Sharing Agreement allocates tax liabilities
between the Company and The Limited, during the period in which the Company is
included in The Limited's consolidated group, the Company could be liable in the
event that any federal tax liability is incurred, but not discharged, by any
other member of The Limited's consolidated group.
Corporate Agreement.
The Company and The Limited are parties to a corporate agreement (the
"Corporate Agreement") under which the Company granted to The Limited a
continuing option, transferable to any of its subsidiaries, to purchase, under
certain circumstances, additional shares of Class B Common Stock or shares of
nonvoting capital stock of the Company (the "Stock Option"). The Corporate
Agreement further provides that, upon the request of The Limited, the Company
will use its best efforts to effect the registration under the applicable
federal and state securities laws of any of the shares of Class B Common Stock
and nonvoting capital stock (and any other securities issued in respect of or in
exchange for either) held by The Limited for sale in accordance with The
Limited's intended method of disposition thereof, and will take such other
actions as may be necessary to permit the sale thereof in other jurisdictions,
subject to certain limitations specified in the Corporate Agreement. The Company
will pay all out-of-pocket costs and expenses in connection with each such
registration that The Limited requests or in which The Limited participates. The
Corporate Agreement also restricts the Company from taking certain actions for
so long as The Limited maintains beneficial ownership of a majority of the
number of outstanding shares of the Company's Common Stock.
INTERCOMPANY OBLIGATIONS.
The Company has intercompany obligations to The Limited in an aggregate
amount of $350 million (the "Mirror Notes"), which mature as follows: $100
million on August 15, 1999 (the "1999 Notes"), $150 million on February 1, 2001
(the "2001 Notes"), and $100 million on March 15, 2023 (the "2023 Notes"). The
1999 Notes, the 2001 Notes and the 2023 Notes represent the Company's
proportionate share of certain long-term debt of The Limited, and the interest
rates and maturities of the Mirror Notes parallel those of the corresponding
debt of The Limited.
18
<PAGE> 22
The 1999 Notes bear interest (payable on February 15 and August 15 of each
year) at a rate of 8 7/8% per annum, the 2001 Notes bear interest (payable on
February 1 and August 1 of each year) at a rate of 9 1/8% per annum and the 2023
Notes bear interest (payable on March 15 and September 15 of each year) at a
rate of 7 1/2% per annum. Each of the 1999 Notes, the 2001 Notes and the 2023
Notes are to be automatically prepaid concurrently with any prepayment of the
corresponding debt of The Limited. The debt of The Limited corresponding to the
2023 Notes is subject to early redemption by The Limited at its option beginning
in 2013 at specified declining premiums. The 1999 Notes and the 2001 Notes are
not subject to early redemption by The Limited.
INDEPENDENT PUBLIC ACCOUNTANTS
During the Company's 1997 fiscal year, Coopers & Lybrand L.L.P. served as
the Company's independent public accountants and in that capacity rendered an
opinion on the Company's consolidated financial statements as of and for the
fiscal year ended January 31, 1998. The Company annually reviews the selection
of its independent public accountants; no selection has yet been made for the
current fiscal year.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting. They will be available to respond to appropriate questions and
may make a statement if they so desire.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if other matters should come before the meeting, it is
the intention of each of the persons named in the proxy to vote in accordance
with his judgment on such matters.
STOCKHOLDER PROPOSALS
Any proposals of stockholders which are intended to be presented at the
next Annual Meeting of Stockholders, but which are not received by the Secretary
of the Company at the principal executive offices of the Company on or before
December 21, 1998, may be omitted by the Company from the Proxy Statement and
form of proxy relating to that meeting.
EXPENSES OF SOLICITATION
The expense of preparing, assembling, printing and mailing the proxy form
and the form of material used in solicitation of proxies will be paid by the
Company. In addition to the use of the mails, solicitation may be made by
employees of the Company by telephone, mailgram, facsimile, telegraph, cable and
personal interview. The Company has retained Shareholder Communications
Corporation, New York, New York, to aid in the solicitation of proxies with
respect to shares held by brokerage houses, custodians, fiduciaries and other
nominees for a fee of approximately $8,000, plus expenses. The Company does not
expect to pay any other compensation for the solicitation of proxies.
By Order of the Board of Directors
/s/ Leslie H. Wexner
Leslie H. Wexner
Chairman of the Board
19
<PAGE> 23
INTIMATE BRANDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1998
The undersigned hereby appoints Leslie H. Wexner and Kenneth B.
Gilman, and each of them, proxies, with full power of substitution,
to vote for the undersigned all shares of Class A Common Stock of
Intimate Brands, Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders to
be held on May 18, 1998 at 10:30 a.m., Eastern Daylight Time, and
at any adjournments thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may
properly come before the meeting or any adjournments thereof.
<TABLE>
<S> <C>
Election of Directors, Nominees:
Kenneth B. Gilman, Beth M. Pritchard, Leslie H. Wexner
</TABLE>
SAID PROXIES ARE DIRECTED TO VOTE AS MARKED ON THE REVERSE SIDE
AND IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
P
R
O
X
Y
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
O FOLD AND DETACH HERE O
<PAGE> 24
<TABLE>
<C> <S>
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<CAPTION>
<C> <C>
X
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE NAMED NOMINEES. IF NO
SPECIFICATION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS
RECOMMENDED BY THE BOARD.
6395
[CAPTION]
[S] [C]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD
FOR
</TABLE>
1. Election of
Directors
(see reverse)
For, except vote
withheld from the
following nominee(s):
The undersigned acknowledges receipt with this Proxy of a copy of the Notice
of Annual Meeting of
Stockholders and Proxy
Statement dated April 20,
1998.
IMPORTANT: Please date this Proxy and sign exactly as your name or names
appear hereon. If stock is
held jointly, signature
should include both names.
Executors, Administrator,
Trustees, Guardians and
others signing in a
representative capacity
should indicate full
titles.
SIGNATURE(S) DATE _______
- --------------------------------------------------------------------------------
O FOLD AND DETACH HERE O
<PAGE> 25
PROXY
INTIMATE BRANDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1998
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NAMED NOMINEES.
IF NO SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS RECOMMENDED BY THE BOARD.
Election of Directors, Nominees:
Kenneth B. Gilman, Beth M. Pritchard, Leslie H. Wexner
<TABLE>
<S> <C> <C>
1. Election of Directors [ ] FOR [ ] WITHHELD
</TABLE>
For, except vote withheld from following nominee(s):
-----------------------------------------------------------------------------
(Continued and to be signed on the reverse side)
<PAGE> 26
The undersigned hereby appoints Leslie H. Wexner and Kenneth B. Gilman, and
each of them, proxies, with full power of substitution, to vote for the
undersigned all shares of Class A Common Stock of Intimate Brands, Inc. which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held on May 18, 1998 at 10:30 a.m., Eastern
Daylight Time, and at any adjournments thereof, upon the matters described in
the accompanying Proxy Statement and upon any other business that may properly
come before the meeting or any adjournments thereof.
The undersigned acknowledges receipt with this Proxy of a copy of the Notice
of Annual Meeting of Stockholders and Proxy Statement dated April 20, 1998.
Dated:
----------------------------------------------------------------------------
, 1998
------------------------------
Signature
------------------------------
Signature (if jointly held)
IMPORTANT: PLEASE DATE THIS
PROXY AND SIGN EXACTLY AS YOUR
NAME OR NAMES APPEAR HEREON.
IF STOCK IS HELD JOINTLY,
SIGNATURE SHOULD INCLUDE BOTH
NAMES. EXECUTORS,
ADMINISTRATORS, TRUSTEES,
GUARDIANS AND OTHERS SIGNING
IN A REPRESENTATIVE CAPACITY
SHOULD INDICATE FULL TITLES.
