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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: ...........................................................
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<PAGE> 2
INTIMATE
brands
THREE LIMITED PARKWAY
COLUMBUS, OHIO 43230
(614) 415-8000
April 14, 1999
Dear Stockholder:
You are cordially invited to attend our 1999 annual meeting of stockholders
to be held at 10:30 a.m., Eastern Daylight Time, on May 17, 1999, at the offices
of Bath & Body Works, Inc., Seven Limited Parkway, Reynoldsburg, Ohio. Should
you require assistance in finding the location of the meeting, please call (614)
415-6900. 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 discussed 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
or vote by telephone or by Internet as described on 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 17, 1999
April 14, 1999
TO OUR STOCKHOLDERS:
We are pleased to invite you to attend our 1999 annual meeting of
stockholders to:
- Elect three directors to serve for terms of three years.
- Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 26, 1999 may vote
at the meeting.
Your vote is important. This year, stockholders of record can give proxies
by calling a toll-free telephone number, by using the Internet or by mailing
their signed proxy cards. Whether or not you plan to attend the meeting, please
vote by telephone or Internet or sign, date and return the enclosed proxy card
in the envelope provided. Instructions are included on your proxy card. You may
change your vote by submitting a later dated proxy (including a proxy via
telephone or the Internet) or by attending the meeting and voting in person.
By Order of the Board of Directors
/s/ Leslie H. Wexner
Leslie H. Wexner
Chairman of the Board
<PAGE> 4
PROXY STATEMENT TABLE OF CONTENTS
<TABLE>
<S> <C>
Information About the Annual Meeting and Voting............. 2
Election of Directors....................................... 4
Nominees and directors...................................... 4
Information concerning the Board of Directors............... 6
Committees of the Board of Directors........................ 6
Security ownership of directors and management.............. 7
Executive Compensation...................................... 9
Summary compensation table.................................. 9
Long-term incentive plan awards............................. 11
Stock options............................................... 11
Compensation of directors................................... 13
Employment agreements with certain executive officers....... 13
Section 16(a) beneficial ownership reporting compliance..... 13
Report of the Compensation Committee........................ 14
Compensation philosophy..................................... 14
Principal compensation elements............................. 14
CEO compensation............................................ 16
Stockholder Return Graph.................................... 17
Share ownership of principal stockholders................... 18
Relationship and transactions with The Limited.............. 18
Independent Public Accountants.............................. 21
Other Matters............................................... 22
Stockholder Proposals....................................... 22
Solicitation Expenses....................................... 22
</TABLE>
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors of Intimate Brands, Inc. is soliciting your proxy to
vote at our 1999 annual meeting of stockholders (or at any adjournment of the
meeting). This proxy statement summarizes the information you need to know to
vote at the meeting. "We", "our", "Intimate Brands", and the "Company" refer to
Intimate Brands, Inc.
We began mailing this proxy statement and the enclosed proxy card on or
about April 14, 1999 to all stockholders entitled to vote. The Intimate Brands
1998 Annual Report, which includes our financial statements, is being sent with
this proxy statement.
DATE, TIME AND PLACE OF MEETING
DATE: MAY 17, 1999
TIME: 10:30 A.M., EASTERN DAYLIGHT TIME
PLACE: BATH & BODY WORKS
SEVEN LIMITED PARKWAY
REYNOLDSBURG, OHIO
SHARES ENTITLED TO VOTE
Stockholders entitled to vote are those who owned Intimate Brands Class A
Common Stock and Class B Common Stock (which we refer to together throughout
this proxy statement as "Common Stock") at the close of business on the record
date, March 26, 1999. Each share of Class A Common Stock that you own entitles
you to one vote, and each share of Class B Common Stock that you own entitles
you to three votes.
As of the record date, there were 37,171,083 shares of Class A Common Stock
outstanding and 200,409,163 shares of Class B Common Stock outstanding. The
Class B Common Stock represents approximately 94% of the voting power of
Intimate Brands, and all of it is held by The Limited, Inc. (which we refer to
throughout this proxy statement as "The Limited"). The Class A Common Stock and
the Class B Common Stock will vote together as a single class on all matters
submitted to stockholders for approval at the annual meeting.
VOTING YOUR PROXY
Whether or not you plan to attend the annual meeting, we urge you to vote.
This year, stockholders of record can give proxies by calling a toll-free
telephone number, by using the Internet or by mailing their signed proxy cards.
The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. If you are voting by mail, please complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If you are voting by
telephone or the Internet, please use the telephone or Internet voting
procedures set forth on the enclosed proxy card. Returning the proxy card or
voting via telephone or the Internet will not affect your right to attend the
meeting and vote.
The enclosed proxy card indicates the number of shares that you own.
Voting instructions are included on your proxy card. If you properly fill
in your proxy card and send it to us or vote via telephone or the Internet in
time to vote, one of the individuals named on your proxy card (your "proxy")
will vote your shares as you have directed. If you sign the proxy card or vote
via telephone or the
2
<PAGE> 6
Internet but do not make specific choices, your proxy will follow the Board's
recommendations and vote your shares:
- "FOR" the election of all 3 nominees for director (as described on page
4).
If any other matter is presented at the meeting, your proxy will vote in
accordance with his or her best judgement. At the time this proxy statement went
to press, we knew of no other matters to be acted on at the meeting.
REVOKING YOUR PROXY
You may revoke your proxy by:
- submitting a later dated proxy (including a proxy via telephone or the
Internet),
- notifying our Secretary in writing before the meeting that you have
revoked your proxy, or
- voting in person at the meeting.
VOTING IN PERSON
If you plan to attend the meeting and vote in person, a ballot will be
available when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring an account statement or letter
from the nominee indicating that you are the beneficial owner of the shares on
March 26, 1999, the record date for voting.
APPOINTING YOUR OWN PROXY
If you want to give your proxy to someone other than the individuals named
as proxies on the proxy card, you may cross out the names of those individuals
and insert the name of the individual you are authorizing to vote. Either you or
that authorized individual must present the proxy card at the meeting.
QUORUM REQUIREMENT
A quorum of stockholders is necessary to hold a valid meeting. The presence
in person or by proxy at the meeting of holders of shares representing one-third
of the votes of the Common Stock entitled to vote constitutes a quorum.
Abstentions and broker "non-votes" are counted as present for establishing a
quorum. A broker non-vote occurs on an item when a broker is not permitted to
vote on that item absent instruction from the beneficial owner of the shares and
no instruction is given.
VOTE NECESSARY TO ELECT DIRECTORS
<TABLE>
<CAPTION>
ITEM VOTE NECESSARY*
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<S> <C>
Election of directors Directors are elected by a plurality of the votes
represented by the shares of Common Stock present at the
meeting in person or by proxy. This means that the director
nominee with the most affirmative votes for a particular
slot is elected for that slot.
</TABLE>
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* Under New York Stock Exchange rules, if your broker holds your shares in its
name, your broker is permitted to vote your shares on this item even if it
does not receive voting instructions from you.
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ELECTION OF DIRECTORS
Our Board of Directors has nominated 3 directors for election at the annual
meeting. Each nominee is currently serving as one of our directors. If you
re-elect them, they will hold office for a three-year term expiring at the 2002
annual meeting or until their successors have been elected.
Your proxy will vote for each of the nominees unless you specifically
withhold authority to vote for a particular nominee. If any nominee is unable to
serve, your proxy may vote for another nominee proposed by the Board. We do not
know of any nominee of the Board who would 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 stating (a) the name, age, business address and, if
known, residence address of each nominee proposed in the notice, (b) the
principal occupation or employment of each nominee and (c) the number of shares
of Common Stock of the Company beneficially owned by each nominee. No person may
be elected as a director unless he or she has been nominated by a stockholder in
this manner or by the Board of Directors.
The Board of Directors recommends the ELECTION of all of the following
nominees of the Board of Directors:
NOMINEES AND DIRECTORS
Nominees of the Board of Directors for election at the 1999 annual meeting.
Roger D. Blackwell Director since 1995 Age 58
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 Airnet Systems, Inc.,
Applied Industrial Technologies, Inc., Bank Stock Group, Checkpoint Systems,
Inc., The Flex-Funds, Max & Erma's Restaurants, Inc. and Worthington Foods, Inc.
Grace A. Nichols Director since 1995 Age 52
Ms. Nichols has been President and Chief Executive Officer of Victoria's
Secret Stores, Inc. ("Victoria's Secret Stores") since January 1991, and assumed
such position with Intimate Brands 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 Director since 1995 Age 66
Mr. Shackelford has been Chairman of the Board of Fifth Third Bank, Central
Ohio, a banking business, since 1998. Mr. Shackelford was Chairman of the Board
and Chief Executive Officer of State Savings Bank from 1972 to 1998. He was
Chairman of the Board and Chief Executive Officer of State Savings Co. for five
years ending in 1997. Mr. Shackelford is also a director of Fifth Third
Bancorp., The Limited, Progressive Corporation and Worthington Foods, Inc.
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Directors whose terms continue until the 2000 annual meeting.
Cynthia A. Fields Director since 1995 Age 49
Ms. Fields joined Intimate Brands in 1984 and has been President and Chief
Executive Officer of Victoria's Secret Catalogue since August 1988, and assumed
such position with Intimate Brands in 1995. Ms. Fields is also a director of
Pathfinder International.
E. Gordon Gee Director since 1995 Age 55
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 Allmerica Financial, ASARCO, Inc., Glimcher Realty Trust and The
Limited.
Alex Shumate Director since 1996 Age 48
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. Mr. Shumate is also
a director of Bank One Corporation, Bank One Columbus, N.A. and Wm. Wrigley, Jr.
Company.
Directors whose terms continue until the 2001 annual meeting.
Kenneth B. Gilman Director since 1995 Age 52
Mr. Gilman has been Vice Chairman of Intimate Brands 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.
William E. Kirwan Director since 1998 Age 60
Dr. Kirwan has been president of The Ohio State University since 1998. Dr.
Kirwan has also been a director of Columbia Gas since September 1998.
Beth M. Pritchard Director since 1995 Age 52
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 Intimate Brands 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 Director since 1995 Age 61
Mr. Wexner has been Chairman of the Board and Chief Executive Officer of
Intimate Brands 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 a director of Hollinger International, Inc. and Hollinger
International Publishing, Inc.
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<PAGE> 9
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Our Board of Directors held 4 meetings in fiscal year 1998. During fiscal
year 1998, 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.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee.
The Audit Committee of the Board recommends the firm to be employed as our
independent public accountants and reviews the scope of the audit and audit
fees. In addition, the Audit Committee consults with the independent auditors
about the plan of audit, the resulting audit report and the accompanying
management letter. The Audit Committee also confers with the independent
auditors about the adequacy of internal accounting controls, as appropriate,
outside of the presence of management. The members of the Audit Committee are
Mr. Shumate (Chair) and Dr. Blackwell. The Audit Committee held 9 meetings in
fiscal year 1998.
Compensation Committee.
The Compensation Committee of the Board reviews executive compensation and
administers our stock option and performance incentive plans. Its members are
Mr. Shackelford (Chair) and Dr. Gee. Members of the Compensation Committee held
6 meetings in fiscal year 1998 and took action in writing without a meeting on
15 occasions.
Executive Committee.
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 Intimate Brands 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 6 occasions in fiscal year 1998.
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SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows certain information about the securities
ownership of all directors of Intimate Brands, the executive officers of
Intimate Brands named in the Summary Compensation Table below and all directors
and executive officers of Intimate Brands as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS A NUMBER OF SHARES OF THE LIMITED PERCENT OF THE
COMMON STOCK BENEFICIALLY PERCENT COMMON STOCK BENEFICIALLY LIMITED COMMON
NAME OWNED(a)(b) OF CLASS OWNED(a)(b) STOCK
- ---- --------------------------- -------- ------------------------------- --------------
<S> <C> <C> <C> <C>
Roger D. Blackwell....... 8,430(c) * 6,800 *
Cynthia A. Fields........ 161,910(c) * 40,702(d) *
E. Gordon Gee............ 4,209(c) * 3,492(d) *
Kenneth B. Gilman........ 36,078(c)(e) * 449,302(d)(f)(g) *
William E. Kirwan........ 211 * 0 **
Philip E. Mallott........ 44,532(c) * 22,371(d)(g) *
Grace A. Nichols......... 119,096(c) * 129,072(d)(f) *
Beth M. Pritchard........ 141,998(c)(h) * 58,473(d)(f) *
Donald B. Shackelford.... 7,388(c) * 72,430(d)(f) *
Alex Shumate............. 3,006(c) * 100 *
Leslie H. Wexner......... 112,218(c) * 58,625,235(d)(g)(i) 25.8%
All directors and
executive officers as a
group.................. 639,076(c)(j) 1.7% 59,407,977(d)(g)(k) 26.1%
</TABLE>
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<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 28, 1999.
(c) Includes the following number of shares issuable within 60
days upon the exercise of outstanding stock options: Dr.
Blackwell, 2,250; Ms. Fields, 123,751; Dr. Gee, 2,250; Mr.
Gilman, 25,001; Mr. Mallott, 32,500; Ms. Nichols, 86,251;
Ms. Pritchard, 105,001; Mr. Shackelford, 2,250; Mr. Shumate,
1,500; Mr. Wexner, 50,000; and all directors and executive
officers as a group, 430,754.
(d) Includes the following number of shares issuable within 60
days upon the exercise of outstanding stock options: Ms.
Fields, 38,165; Dr. Gee, 1,272; Mr. Gilman, 253,981; Mr.
Mallot, 18,828; Ms. Nichols, 110,674; Ms. Pritchard, 44,335;
Mr. Shackelford, 1,272; Mr. Wexner, 437,610; and all
directors and executive officers as a group, 906,137.
(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. Nichols, 360; Ms. Pritchard, 200; and Mr.
Shackelford, 18,955.
(g) Includes the following number of shares held as of February
28, 1999 in an employee benefit plan, over which the
participant has the power to dispose or withdraw shares: Mr.
Gilman, 34,270; Mr. Mallott, 3,151; Mr. Wexner, 539,436; and
all directors and executive officers as a group, 576,857.
</TABLE>
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<TABLE>
<S> <C>
(h) Includes 1,482 shares, as to which Ms. Pritchard disclaims
beneficial ownership.
(i) Includes 350,000 shares held by Health and Science Interests
II, 883,317 shares held by The Wexner Foundation, 18,750,000
shares held by The Wexner Children's Trust, 81,081 shares
held by the Harry, Hannah & David Wexner Trust and 5,000,000
shares held by the Harry, Hannah, David & Sarah Wexner
Trust. Mr. Wexner disclaims beneficial ownership of the
shares held by 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 1,253,949 shares, as to which beneficial ownership
is disclaimed.
</TABLE>
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table (the "Summary Compensation Table") shows the
compensation paid by Intimate Brands (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 Intimate Brands for each of our last three
fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- --------------------------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS AWARDED COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR ($) ($)(2) ($)(3) ($)(4) (#) ($)(5)
- ------------------------------ ------ ---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner............ 1998 $1,046,154 $1,519,392 -- $29,316(6) $203,540(6) $154,706
Chairman of the Board, 1997 1,000,000 1,861,560 -- -- 1,628,320(6) 135,296
Chief Executive Officer 1996 1,011,538 915,000 -- -- 203,540(6) 151,629
100,000(7)
Kenneth B. Gilman........... 1998 936,923 935,150 $14,955 158,304(6) -- 277,290
Vice Chairman 1997 900,000 1,228,630 -- 6,220,313(6) 508,850(6) 195,094
1996 903,846 603,900 -- -- 50,855(6) 187,192
50,000(7)
Beth M. Pritchard........... 1998 727,692 932,356 9,996 -- -- 197,690
President and Chief 1997 690,385 861,280 -- 6,161,563(7) 500,000(7) 166,275
Executive Officer-- 1996 571,154 575,173 -- 188,140(7) 40,000(7) 160,020
Bath & Body Works
Grace A. Nichols............ 1998 727,692 653,058 14,847 -- -- 246,642
President and Chief 1997 700,000 1,400,000 -- 6,171,375(7) 500,000(7) 193,441
Executive Officer-- 1996 700,000 577,500 -- 184,195(7) 15,000(7) 185,424
Victoria's Secret Stores
Cynthia A. Fields........... 1998 652,692 334,378 23,786 -- -- 202,496
President and Chief 1997 621,154 875,000 -- 5,093,750(7) 500,000(7) 153,442
Executive Officer-- 1996 573,077 474,950 -- 42,130(7) 65,000(7) 141,642
Victoria's Secret Catalogue
</TABLE>
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(1) Executive officers Wexner and Gilman are also employed by The Limited and
received no direct compensation from Intimate Brands. 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.
(3) Represents for the 1998 fiscal year, reimbursement of taxes on life
insurance premiums paid on behalf of executive officers Gilman, Pritchard,
Nichols and Fields.
(4) Represents for each executive officer the restricted stock awards for the
specified fiscal year under Intimate Brands' 1995 Stock Option and
Performance Incentive Plan for awards of Intimate Brands' Class A Common
Stock and under The Limited, Inc. 1993 Stock Option and Performance
Incentive Plan for awards of The
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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 June 1, 1998, 885 and 4,779 restricted shares of The Limited's Common
Stock were granted to executive officers Wexner and Gilman, respectively.
The per share value of The Limited's Common Stock on such date was $33.125.
These awards were made in connection with the distribution in 1998 of the
Abercrombie & Fitch shares to The Limited's stockholders. The vesting of
these awards is the same as the vesting of the previously granted restricted
stock awards to which these adjustment grants relate.
On May 20, 1997, 300,000, 300,000 and 250,000 restricted shares of Intimate
Brands' Class A Common Stock were granted to executive officers Pritchard,
Nichols and Fields, respectively, and 300,000 restricted shares of The
Limited's Common Stock were granted to Mr. Gilman. The per share value of
Intimate Brands' 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, 2,500 and 3,000 restricted shares of Intimate Brands'
Class A Common Stock were granted to executive officers Pritchard and
Nichols, respectively, and 19,750 restricted shares of The Limited's Common
Stock were granted to Mr. Gilman. The per share value of Intimate Brands'
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 vested 100%
one year from the grant date.
On February 1, 1997, 7,749 and 7,245 restricted stock performance awards of
Intimate Brands' Class A Common Stock were granted to executive officers
Pritchard and Nichols, respectively. The per share value of the Class A
Common Stock on Friday, January 31, 1997 was $17.75. On August 1, 1996,
2,367, 2,601 and 1,971 restricted stock performance awards of Intimate
Brands' Class A Common Stock were granted to executive officers Pritchard,
Nichols 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 Intimate Brands.
As of January 30, 1999, the aggregate holdings of restricted shares of
Intimate Brands' Class A Common Stock and the market value of such holdings
for such named executive officers were: Ms. Pritchard, 329,328 shares,
$13,131,954; Ms. Nichols, 341,303 shares, $13,609,457; and Ms. Fields,
273,963 shares, $10,924,275 (based on the $39.875 fair market value of
Intimate Brands' Class A Common Stock as of Friday, January 29, 1999).
As of January 30, 1999, 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, 50,885 shares, $1,736,451;
and Mr. Gilman, 274,779 shares, $9,376,833 (based on the $34.125 fair market
value of a share of The Limited's Common Stock as of Friday, January 29,
1999).
Dividends will not be paid or accrue with respect to shares of restricted
stock until such shares vest.
(5) Includes employer matching and supplemental contributions allocated to each
executive officer's account under certain of Intimate Brands' qualified and
non-qualified defined contribution plans during the year in the amount of
$154,706, $261,165, $186,665, $230,267 and $177,971 for executive officers
Wexner, Gilman, Pritchard, Nichols and Fields, respectively.
Includes term life insurance premiums in the amount of $16,125, $11,025,
$16,375, and $24,525 paid on behalf of executive officers Gilman, Pritchard,
Nichols and Fields, respectively.
10
<PAGE> 14
(6) Denominated in shares of The Limited's Common Stock. Options have been
adjusted to reflect the spin-off of Abercrombie & Fitch in May 1998.
(7) Denominated in shares of Intimate Brands' Class A Common Stock.
LONG-TERM INCENTIVE PLAN AWARDS
Intimate Brands did not grant any awards for the 1998 fiscal year.
STOCK OPTIONS
The following table shows certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table during
our 1998 fiscal year.
OPTIONS GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS ASSOCIATES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR PER SHARE($) DATE 5%($) 10%($)
- ------------------------ ------------- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner........ 203,540(3) 4.82% $29.3186(4) 02/02/08 $3,025,656 $8,352,603
Kenneth B. Gilman....... -- -- -- -- -- --
Beth M. Pritchard....... -- -- -- -- -- --
Grace A. Nichols........ -- -- -- -- -- --
Cynthia A. Fields....... -- -- -- -- -- --
</TABLE>
- ------------
(1) On February 2, 1998, options were granted to Mr. Wexner pursuant to The
Limited, Inc. 1993 Stock Option and Performance Incentive Plan (1998
Restatement). Such options vest 10%, 10%, 10%, 15%, 20% and 35% on the first
through sixth anniversaries of the grant date, respectively, subject to
continued employment with The Limited.
The number of options and the exercise price have been adjusted to reflect
the spin-off of Abercrombie & Fitch in May 1998.
(2) The assumed rates of growth were selected by the Securities and Exchange
Commission (the "Commission") for illustrative purposes only and are not
intended to predict or forecast future stock prices.
(3) Denominated in shares of The Limited's Common Stock.
(4) The per share exercise price of all such options to Mr. Wexner was set at
110% of the fair market value of the stock on the date of grant.
11
<PAGE> 15
The following table shows certain information about stock options exercised
by the executive officers named in the Summary Compensation Table during
Intimate Brands' 1998 fiscal year and the year-end values of unexercised options
held by those executive officers.
AGGREGATED OPTION EXERCISES IN 1998 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(#)(1) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- -------------- -------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leslie H. Wexner..... -- -- 50,000(3) 50,000(3) $ 914,375(3) $ 914,375(3)
-- -- 391,813(4) 1,796,242(4) 5,631,146(4) 20,978,692(4)
Kenneth B. Gilman.... -- -- 12,501(3) 37,499(3) 321,901(3) 965,599(3)
64,049 $894,186 234,899(4) 502,490(4) 3,341,148(4) 7,639,625(4)
Beth M. Pritchard.... -- -- 95,001(3) 494,999(3) 2,061,898(3) 9,861,852(3)
25,436 303,965 40,518(4) 3,817(4) 541,692(4) 64,620(4)
Grace A. Nichols..... -- -- 82,501(3) 482,499(3) 1,740,023(3) 9,539,977(3)
11,250 135,000 157,742(4) 3,817(4) 2,252,973(4) 64,620(4)
Cynthia A. Fields.... -- -- 107,501(3) 507,499(3) 2,383,773(3) 10,183,727(3)
29,500 340,281 34,348(4) 3,817(4) 405,236(4) 64,620(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 Intimate Brands' 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 Intimate
Brands' Class A Common Stock on the last trading day prior to fiscal
year-end ($39.875) 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 ($34.125) over the exercise
price of such option.
Options have been adjusted to reflect the spin-off of Abercrombie & Fitch
in May 1998.
12
<PAGE> 16
COMPENSATION OF DIRECTORS
Associates and officers who are directors receive no additional
compensation for their service as directors. We provide the following
compensation to our directors who are not associates of Intimate Brands for
their services as directors:
- 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, a fee of $750 per committee meeting
attended ($200 for a telephonic meeting) and
- a fee of $200 for each action in writing taken by the Board or any
committee.
Under Intimate Brands' 1995 Non-Associate Director Stock Plan, each
director who is not an associate of Intimate Brands receives (i) annual grants
of options to purchase 1,000 shares of Intimate Brands' Class A Common Stock at
a price equal to the fair market value of such shares at the date of grant and
(ii) 50% of the annual retainer in shares of Intimate Brands' Class A Common
Stock.
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
In 1997, the Company entered into individual employment agreements with
Executive Officers Pritchard, Nichols and Fields. Pursuant to these agreements,
Ms. Pritchard serves as President and Chief Executive Officer -- Bath and Body
Works, Ms. Nichols serves as President and Chief Executive Officer -- Victoria's
Secret Stores 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. Pritchard's and Ms. Nichols'
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. Each agreement provides that, if the Company fails to
extend the agreement or terminates the executive's employment without cause or
if the executive terminates the employment 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
Intimate Brands' officers and directors, and persons who own more than ten
percent of a registered class of Intimate Brands' equity securities, must file
reports of ownership and changes in ownership of Intimate Brands' equity
securities with the Commission and the New York Stock Exchange. Copies of those
reports must also be furnished to Intimate Brands.
Based solely on a review of the copies of reports furnished to Intimate
Brands and written representations that no other reports were required, we
believe that during fiscal 1998 our officers, directors and greater than ten-
percent beneficial owners complied with these filing requirements except for one
transaction by Philip E. Mallot that was inadvertently omitted and later
reported in an amended filing.
13
<PAGE> 17
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") reviews and approves Intimate
Brands' 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 our
compensation programs. Our compensation programs and compensation philosophy are
generally consistent with those of The Limited. We have also retained
independent compensation consultants to assist in developing, and periodically
assessing the effectiveness and reasonableness of, our executive officer
compensation program.
COMPENSATION PHILOSOPHY
We attempt to apply a consistent philosophy to compensation for all
leadership associates, including senior executives. The compensation program has
moved toward linking executive compensation to business performance that
enhances stockholder value. Accordingly, we have structured total compensation
for leadership individuals so that a lower proportion is fixed compensation and
a much higher variable proportion is keyed to business unit and stock
performance.
Our philosophy is based on the following basic principles:
- To Pay for Outstanding Performance.
We believe 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 leadership 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.
We are 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, we annually compare
our pay practices and overall pay levels with other leading retail and
where appropriate, non-retail companies, and set pay guidelines based on
this review.
- To Pay Equitably.
We believe 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, and the performance of each individual executive.
PRINCIPAL COMPENSATION ELEMENTS
The principal elements of executive compensation at Intimate Brands are
base salary, short-term performance-based cash incentive compensation and long
term equity-based incentive programs. In determining guidelines for each
compensation element, we participate in compensation surveys which include
approximately 75 national and regional specialty and department store retail
businesses, chosen because of their general similarity to Intimate Brands in
business and merchandise focus. In addition, we participate in special surveys
focusing on specific segments of the business, such as merchandise design and
the personal care products
14
<PAGE> 18
business. With the help of our compensation consultants, we analyze executive
compensation levels and practices relative to the performance of these
competitor companies and, from this information, develop pay guidelines that
generally target Intimate Brands' executive pay well above the industry survey
median for those executives 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 that we use for this purpose contains approximately 50% of
the companies in the S&P Retail Stores Composite Index represented in the
Stockholder Return Graph below. Subject to our needs, we generally attempt to
design all incentive and equity-based compensation programs to meet the
requirements of 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, business
growth and brand execution 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.
Intimate Brands has implemented a short-term performance-based cash
incentive compensation program for specified key leadership positions that
provides for incentive payments for each six-month operating season. These
incentive payments are based on the attainment of pre-established objective
financial goals.
For most businesses, the goals under this plan are based on operating
income. However, goals also may be based on other objectives or criteria,
depending on the business unit and its strategy. We set these goals at the
beginning of each six-month season, and base them on an analysis of historical
performance and growth expectations for that business, financial results of
other comparable businesses both inside and outside Intimate Brands, and
progress toward achieving the strategic plan for that business. Annually, we
establish target cash incentive compensation opportunities 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 1998, continuing a
program that began 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 vesting of which is subject to continued employment, help us to retain 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 Intimate Brands' Common Stock. In determining the awards for an
executive officer, the
15
<PAGE> 19
Committee evaluated competitive practice and the executive officer's performance
and importance to the business.
Stock options.
In 1998, other than to Mr. Wexner, no additional stock options were awarded
to the named executives in the Option Grants in Fiscal Year 1998 table above.
The option program utilizes vesting periods to encourage retention of key
executives. The options granted to Mr. Wexner vest, subject to continued
employment, on a graduated basis over a period of six years. The exercise price
for Mr. Wexner's options were granted at 10% above fair market value of the
underlying common stock on the date of grant.
Performance-based restricted stock.
In 1998, with the exception of Mr. Wexner, Mr. Gilman, Ms. Nichols, Ms.
Pritchard and Ms. Fields, the Committee continued a program began 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 1998,
restricted shares of The Limited's Common Stock were awarded to Mr. Wexner and
Mr. Gilman in connection with the distribution in 1998 of Abercrombie & Fitch
shares to The Limited's stockholders.
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
16
<PAGE> 20
STOCKHOLDER RETURN GRAPH
The following graph shows the changes, during fiscal 1998, 1997 and 1996
and the three-month period in fiscal 1995 beginning after the initial public
offering of the Class A Common Stock of Intimate Brands (the "Initial Public
Offering"), in the value of $100 invested in the Class A Common Stock of
Intimate Brands, 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 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG INTIMATE BRANDS, INC., THE S&P 500 INDEX
AND THE S&P RETAIL COMPOSITE INDEX
[STOCKHOLDER RETURN LINE GRAPH]
<TABLE>
<CAPTION>
INTIMATE BRANDS, INC. S&P 500 S&P RETAIL COMPOSITE
--------------------- ------- --------------------
<S> <C> <C> <C>
10/24/95 100 100 100
1/31/96 88 108 103
1/31/97 108 134 119
1/30/98 158 167 178
1/29/99 253 218 283
</TABLE>
* $100 INVESTED IN STOCK OR IN INDEX ON
10/24/95 -- INCLUDING REINVESTMENT OF
DIVIDENDS.
17
<PAGE> 21
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table shows all persons who, on February 28, 1999, were known
by Intimate Brands to be the beneficial owners (as defined in the rules of the
Commission) of more than 5% of the shares of Common Stock of Intimate Brands:
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS CLASS OF BENEFICIALLY PERCENT
OF BENEFICIAL OWNER COMMON OWNED OF CLASS
- ------------------- -------- ------------ --------
<S> <C> <C> <C>
The Limited, Inc. ......................................... Class B 204,312,595 100.0%
Three Limited Parkway
P.O. Box 16000
Columbus, Ohio 43216
FMR Corp. (1).............................................. Class A 5,499,700 14.6%
82 Devonshire Street
Boston, Massachusetts 02109
</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. FMR Corp. is the
beneficial holder of Intimate Brands' 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.
RELATIONSHIP AND TRANSACTIONS WITH THE LIMITED
The Limited owns 100% of the outstanding Class B Common Stock of Intimate
Brands, which represents approximately 94% of the combined voting power of all
of Intimate Brands' outstanding Common Stock. The Limited has advised Intimate
Brands that it currently intends to continue to hold all of the Class B Common
Stock beneficially owned by it, subject to its participation, on a pro-rata
basis with Intimate Brands' public stockholders, in Intimate Brands' pending
repurchase program. The Limited has no agreement with Intimate Brands 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 Intimate Brands 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 Intimate Brands 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.
18
<PAGE> 22
Because the following description of the material terms of the agreements
is only a summary, it is not necessarily complete and is qualified in its
entirety by reference to the forms of the relevant agreements. Copies of the
forms of agreements were filed with the Commission as exhibits to Intimate
Brands' 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
Intimate Brands. The services provided by The Limited to Intimate Brands
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 Intimate Brands during 1998 were approximately $69,864,000.
In addition to the identified services, during fiscal 1998, The Limited
continued coverage of Intimate Brands 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 Intimate Brands. Either The
Limited or Intimate Brands may terminate this 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
Intimate Brands may only be for nonpayment and only if a replacement policy,
acceptable to The Limited, is entered into by Intimate Brands.
The Services Agreement further provides for eligible associates of Intimate
Brands to participate in The Limited's associate benefit plans. In addition to a
monthly services fee, Intimate Brands 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 Intimate Brands' associates in any of The
Limited's benefit plans.
The Services Agreement has an initial term of five years and will be
renewed automatically thereafter for successive one-year terms, unless either
Intimate Brands 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 Intimate Brands 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 Intimate Brands, whether as a result of a tax-free spin-off of
Intimate Brands or otherwise.
Lease Agreement. The businesses operated by Intimate Brands entered into
lease agreements with The Limited or one or more subsidiaries of The Limited
(collectively, the "Lease Agreement"). Under the Lease Agreement, The Limited,
directly or indirectly, leased to the relevant businesses of Intimate Brands 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 $9,626,000 in lease payments during 1998.
19
<PAGE> 23
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 Intimate
Brands 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 Intimate Brands 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 1998, Intimate Brands paid The Limited
approximately $26,223,000 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 Intimate Brands' 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 Intimate
Brands are also included with certain subsidiaries of The Limited (other than
subsidiaries of Intimate Brands) 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
Intimate Brands and The Limited make payments between them such that, with
respect to any period, the amount of taxes to be paid by Intimate Brands,
subject to certain adjustments, will be determined as though Intimate Brands
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.
In determining the amount of tax-sharing payments under the Tax-Sharing
Agreement, The Limited prepares for Intimate Brands 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 Intimate Brands in any and all matters relating to the income,
franchise and similar tax liabilities of Intimate Brands, 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 Intimate Brands. In addition, The Limited provides the
aforementioned services with respect to Intimate Brands' separate state and
local returns and Intimate Brands' foreign returns. Under the Tax-Sharing
Agreement, Intimate Brands must pay The Limited a fee intended to reimburse The
Limited for all direct and indirect costs and expenses incurred with respect to
Intimate Brands' share of the overall costs and expenses incurred by The Limited
with respect to tax-related services.
In general, Intimate Brands 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
20
<PAGE> 24
Agreement allocates tax liabilities between Intimate Brands and The Limited,
during the period in which Intimate Brands is included in The Limited's
consolidated group, Intimate Brands 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. Intimate Brands and The Limited are parties to a
corporate agreement (the "Corporate Agreement") under which Intimate Brands
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 Intimate Brands
(the "Stock Option"). The Corporate Agreement further provides that, upon the
request of The Limited, Intimate Brands will use its best efforts to register
under the applicable federal and state securities laws 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 relating to
each such registration that The Limited requests or in which The Limited
participates. The Corporate Agreement also restricts Intimate Brands from taking
certain actions for so long as The Limited maintains beneficial ownership of a
majority of the number of outstanding shares of Intimate Brands' 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 Intimate Brands'
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.
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 our 1998 fiscal year, PricewaterhouseCoopers LLP served as our
independent public accountants and in that capacity rendered an opinion on our
consolidated financial statements as of and for the fiscal year ended January
30, 1999. We annually review the selection of our independent public
accountants, but we have not yet selected independent public accountants for the
current fiscal year.
Representatives of PricewaterhouseCoopers LLP 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.
21
<PAGE> 25
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, each
of the persons named in the proxy intends to vote in accordance with his
judgment on such matters.
STOCKHOLDER PROPOSALS
We may omit from the Proxy Statement and form of proxy relating to the next
annual meeting of stockholders any proposals of stockholders which are intended
to be presented at that meeting which are not received by the Intimate Brands'
Secretary at our principal executive offices on or before December 16, 1999.
SOLICITATION EXPENSES
We will pay the expense of preparing, assembling, printing and mailing the
proxy form and the form of material used in solicitation of proxies. Our
employees may solicit proxies by telephone, mailgram, facsimile, telegraph,
cable and personal interview, in addition to the use of the mails. We have
retained Shareholder Communications Corporation, New York, New York, to aid in
the solicitation of proxies relating to shares held by brokerage houses,
custodians, fiduciaries and other nominees for a fee of approximately $10,000,
plus expenses. We do 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
22
<PAGE> 26
INTIMATE BRANDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
P MAY 17, 1999
R
O The undersigned hereby appoints Leslie H. Wexner and Kenneth B.
X Gilman, and each of them, proxies, with full power of substitution,
Y 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 17, 1999 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:
1. Roger D. Blackwell, 2. Grace A. Nichols, 3. Donald B. Shackelford
</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.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
O FOLD AND DETACH HERE O
<PAGE> 27
<TABLE>
<C> <S>
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
</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
<TABLE>
<S> <C>
FOR WITHHELD
1. Election of [ ] [ ]
Directors
(see reverse)
For, except vote
withheld from the
following nominee(s):
- -------------------------------------------------
</TABLE>
The undersigned
acknowledges receipt with
this Proxy of a copy of
the Notice of Annual
Meeting of Stockholders
and Proxy Statement dated
April 14, 1999.
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
INTIMATE BRANDS, INC.
Dear Stockholder:
Intimate Brands, Inc. encourages you to take advantage of new and convenient
ways by which you can vote your shares. You can vote your shares electronically
through the Internet or by telephone. This eliminates the need to return your
proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
- Log on to the Internet and go to the web site http://www.vote-by-net.com.
2. To vote by telephone:
- On a touch-tone telephone, call 1-800-OK2-VOTE (1-800-652-8683) 24 hours a
day, 7 days a week.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need to mail back
your proxy card.
Your vote is important. Thank you for voting.
<PAGE> 28
PROXY
INTIMATE BRANDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 1999
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:
Roger D. Blackwell, Grace A. Nichols, Donald B. Shackelford
<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> 29
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 17, 1999 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 14, 1999.
Dated: , 1999
------------------
------------------------------
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.
