SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
THE LIMITED, 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):
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[_] 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:
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(4)Date Filed:
[LOGO] THE LIMITED, INC.
-----------------
April 19, 2002
Dear Stockholder:
You are cordially invited to attend our 2002 annual meeting of stockholders
to be held at 9:00 a.m., Eastern Daylight Time, on May 20, 2002, at our offices
located at Three Limited Parkway, Columbus, Ohio. Our Investor Relations
telephone number is (614) 415-7076 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 The Limited.
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
[LOGO] THE LIMITED, INC.
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 20, 2002
April 19, 2002
TO OUR STOCKHOLDERS:
We are pleased to invite you to attend our 2002 annual meeting of
stockholders to:
. Elect four directors to serve for terms of three years.
. Adopt the 2002 Restatement of the 1993 Stock Option and Performance
Incentive Plan.
. Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 12, 2002 may vote
at the meeting.
Your vote is important. 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
PROXY STATEMENT TABLE OF CONTENTS
Page
----
Information About the Annual Meeting and Voting 1
Election of Directors.......................... 3
The Stock Plan................................. 8
Executive Compensation......................... 15
Report of the Compensation Committee........... 19
Stockholder Return Graph....................... 22
Share Ownership of Principal Stockholders...... 23
Report of the Audit Committee.................. 25
Independent Public Accountants................. 26
Other Matters.................................. 26
Stockholder Proposals.......................... 26
Solicitation Expenses.......................... 27
The Limited, Inc. 1993 Stock Option and Performance Incentive Plan (2002 Restatement) Appendix A
i
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors of The Limited, Inc. is soliciting your proxy to vote
at our 2002 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," "The Limited" and the "Company" refer to The
Limited, Inc.
We began mailing this proxy statement and the enclosed proxy card on or
about April 19, 2002 to all stockholders entitled to vote. The Limited's 2001
Annual Report, which includes our financial statements, is being sent with this
proxy statement.
Date, time and place of meeting
Date: May 20, 2002
Time: 9:00 a.m., Eastern Daylight Time
Place: Three Limited Parkway, Columbus, Ohio
Shares entitled to vote
Stockholders entitled to vote are those who owned The Limited common stock
(which we refer to throughout this proxy statement as "Common Stock") at the
close of business on the record date, April 12, 2002. As of the record date,
there were 518,873,726 shares of Common Stock outstanding. Each share of Common
Stock that you own entitles you to one vote.
Voting your shares
Whether or not you plan to attend the annual meeting, we urge you to vote.
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 Internet but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
. "FOR" the election of four nominees for director (as described on page 3).
. "FOR" the adoption of the 2002 Restatement of the 1993 Stock Option and
Performance Incentive Plan (as described on pages 8-14).
If any other matter is properly presented at the meeting, your proxy will
vote in accordance with his or her best judgment. At the time this proxy
statement went to press, we knew of no other matters to be acted on at the
meeting.
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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 were the beneficial owner of the shares on
April 12, 2002, 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 approve proposals
Item* Vote Necessary*
----- ---------------
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.
Adoption of the 2002 Restatement of the 1993
Stock Option and Performance Incentive Adoption of the 2002 restatement of the 1993 Stock Option
Plan...................................... and Performance Incentive Plan requires the approval by a
majority of votes cast on the proposal in person or by proxy
provided that the total vote cast on the proposal represents
over 50% in interest of all Common Stock.
- --------
* Under New York Stock Exchange rules, if your broker holds your shares in its
name, your broker is permitted to vote your shares on these items even if it
does not receive voting instructions from you.
2
ELECTION OF DIRECTORS
Our Board of Directors has nominated four directors for election at the
annual meeting. If you elect the four nominees, they will hold office for a
three-year term expiring at the 2005 annual meeting or until their successors
have been elected. All nominees are currently serving on our Board of
Directors. 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 fourteen 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 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 a vote FOR 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 2002 Annual Meeting.
Leonard A. Schlesinger Director since 1996 Age 49
Mr. Schlesinger has been Executive Vice President and Chief Operating
Officer of The Limited since March 2001 and was Executive Vice President,
Organization, Leadership and Human Resources of The Limited from October 1999
until March 2001. Mr. Schlesinger was a Professor of Sociology and Public
Policy and Senior Vice President for Development at Brown University from 1998
to 1999. He also was the George F. Baker, Jr. Professor of Business
Administration at Harvard Business School from 1988 to 1998.
Donald B. Shackelford Director since 1975 Age 69
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. and Progressive Corporation.
Martin Trust Director since 1978 Age 67
Mr. Trust was President and Chief Executive Officer of Mast Industries,
Inc., a wholly-owned subsidiary of The Limited, from 1970 to August 2001. He is
also a director of Staples, Inc.
Raymond Zimmerman Director since 1984 Age 69
Mr. Zimmerman has been Chairman of the Board of 99c Stuff, LLC since July
1999. Mr. Zimmerman is a director of Service Merchandise Company, Inc.
("Service Merchandise") and was Non-Executive Chairman of the Board of Service
Merchandise from 1999 to 2000. He was Chairman of the Board of Service
Merchandise from 1997 to 1999 and was Chairman of the Board and Chief Executive
Officer of Service Merchandise from 1981 to 1997. In March 1999, Service
Merchandise filed a reorganization petition under Chapter 11 of the United
States Bankruptcy Code.
3
Directors Whose Terms Continue Until the 2003 Annual Meeting.
E. Gordon Gee Director since 1991 Age 58
Dr. Gee has been Chancellor of Vanderbilt University since August 1, 2000.
He was the President of Brown University from 1998 to 2000, and the President
of The Ohio State University from 1990 to 1997. Dr. Gee is a director of
Allmerica Financial, Dollar General Corporation, Gaylord Entertainment, Inc.,
Hasbro, Inc. and Massey Energy Company.
Alex Shumate Director since 2000 Age 51
Mr. Shumate has been the Managing Partner of the Columbus, Ohio office of
the law firm of Squire, Sanders & Dempsey L.L.P. ("Squire, Sanders") since
1991. Squire, Sanders provided legal services to The Limited during fiscal year
2001, and The Limited anticipates that Squire, Sanders will continue to provide
legal services to The Limited from time to time in the future. Mr. Shumate is
also a director of Wm. Wrigley, Jr. Company.
Allan R. Tessler Director since 1987 Age 65
Mr. Tessler has been Chairman of the Board and Chief Executive Officer of
International Financial Group, Inc., an international merchant banking firm,
since 1987. He is also Chief Executive Officer and Chairman of the Board of J
Net Enterprises, a technology holding company. From March 2001 to August 2001,
Mr. Tessler was Acting Chief Executive Officer of Jasmine Networks. He was
Co-Chairman of the Board of Data Broadcasting Corporation, a provider of
financial and business information to institutional and individual investors,
from June 1992 until May 2000 and Co-Chief Executive Officer from June 1992
until November 1999. Mr. Tessler was Chairman of the Board of Enhance Financial
Services Group, Inc. from 1986 to February 2001. He is also Chairman of the
Board of InterWorld Corporation. Since January 1997, Mr. Tessler has also
served as Chairman of Checking Holdings Corp. IV. He is a director of
Interactive Data Corporation.
Abigail S. Wexner Director since 1997 Age 40
By appointment of the President of the United States, Mrs. Wexner served as
a member of the United States Holocaust Memorial Council from 1994 to 1999. She
is a director of the Children's Defense Fund, Chair of the Governing Committee
of The Columbus Foundation and a member of the Boards of Trustees of Children's
Hospital, Inc., The Columbus Academy and The Wexner Center Foundation in
Columbus, Ohio. Mrs. Wexner is also the founder and President of The Columbus
Coalition Against Family Violence. Mrs. Wexner is the wife of Leslie H. Wexner.
Directors Whose Terms Continue Until the 2004 Annual Meeting.
Eugene M. Freedman Director since 1995 Age 70
Mr. Freedman has been Senior Advisor and Director of Monitor Clipper
Partners, Inc. ("Monitor Clipper"), a private equity firm, since January 2000.
Since 2001, he has been Senior Advisor of Monitor Company Group Limited
Partnership, an international business strategy and consulting firm. He was
Managing Director and President of Monitor Clipper from 1997 to 1999 and Senior
Advisor and Director of Monitor Company Inc. from 1995 to 2000. Until October
1994, and for more than five years prior thereto, Mr. Freedman was a partner of
Coopers & Lybrand, where he served as Chairman and Chief Executive Officer of
Coopers & Lybrand LLP, U.S. ("C & L, U.S.") since October 1991 and as Chairman
of Coopers & Lybrand, International since 1992. During The Limited's 2001
fiscal year, the successor of C & L, U.S., PricewaterhouseCoopers LLP ("PwC"),
served as The Limited's independent public accountants. The amount of
compensation paid by The Limited to PwC for such services was less than 1% of
The Limited's and PwC's consolidated gross revenues for their 2001 fiscal
years. Mr. Freedman is also a director of Bernard Technologies, Inc., e-Studio
Live, Inc., J Net Enterprises, Inc., Outcome Sciences, Inc. and Pathmark
Stores, Inc.
4
V. Ann Hailey Director since 2001 Age 51
Ms. Hailey has been Executive Vice President and Chief Financial Officer of
The Limited since August 1997. Prior to joining The Limited, Ms. Hailey was
Senior Vice President and Chief Financial Officer of The Pillsbury Co. from
1994 to 1997.
David T. Kollat Director since 1976 Age 63
Dr. Kollat has been Chairman of 22, Inc., a management consulting firm,
since 1987. He is also a director of Big Lots, Inc., Cone Mills, Inc., Cooker
Restaurant Corporation, Select Comfort, Inc. and Wolverine World Wide, Inc.
Leslie H. Wexner Director since 1963 Age 64
Mr. Wexner has been Chief Executive Officer since he founded The Limited in
1963, and Chairman of the Board for more than five years. Mr. Wexner is also a
director of Hollinger International, Inc. and Hollinger International
Publishing, Inc. Mr. Wexner is the husband of Abigail S. Wexner.
Information concerning the Board of Directors
Our Board of Directors held seven meetings in fiscal year 2001. During
fiscal year 2001, 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 assists the Board in fulfilling its
oversight responsibilities with respect to various audit, financial reporting
and other matters. The members of the Audit Committee are Mr. Shackelford
(Chair) and Messrs. Shumate, Tessler and Zimmerman. The members of the Audit
Committee are all "independent" for purposes of the New York Stock Exchange's
listing standards. That is, the Board has determined that none of the Audit
Committee members has a relationship to the Company that may interfere with the
exercise of his independence from the Company and its management. The Board has
adopted a written charter for the Audit Committee setting out the functions the
Committee is to perform. The Report of the Audit Committee can be found on page
25 of this proxy statement. The Audit Committee held eight meetings in fiscal
year 2001.
Compensation Committee.
The Compensation Committee of the Board reviews executive compensation and
administers our stock option and performance incentive plans. Its members are
Dr. Gee (Chair) and Mr. Shackelford. A copy of the Compensation Committee's
Report can be found on pages 19-21 of this Proxy Statement. Members of the
Compensation Committee held seven meetings in fiscal year 2001 and took action
in writing without a meeting on fourteen 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. Among
other things, the Executive Committee may declare dividends, authorize the
issuance of stock and authorize the seal of The Limited to be affixed to papers
that require it. Its members are Messrs. Wexner (Chair) and Shackelford. The
Executive Committee took action in writing without a meeting on seven occasions
in fiscal year 2001.
5
Finance Committee.
The Finance Committee of the Board periodically reviews our financial
position and financial arrangements with banks and other financial
institutions. The Finance Committee also makes recommendations on financial
matters that it believes are necessary, advisable or appropriate. Its members
during fiscal year 2001 were Mrs. Wexner and Messrs. Tessler (Chair), Freedman,
Shackelford and Zimmerman. The Finance Committee held five meetings in fiscal
year 2001.
Nominating Committee.
The Nominating Committee of the Board nominates, on behalf of the Board,
suitable persons for election as directors of The Limited. Its members are
Messrs. Tessler (Chair) and Wexner. Stockholders are permitted to nominate
directly directors for election (see "ELECTION OF DIRECTORS" above); therefore,
no formal procedures exist for stockholders to make nominee recommendations to
the Nominating Committee. The Nominating Committee took action in writing
without a meeting on one occasion in fiscal year 2001.
Security ownership of directors and management
The following table shows certain information about the securities ownership
of all directors of The Limited, the executive officers of The Limited named in
the Summary Compensation Table below and all directors and executive officers
of The Limited as a group.
Number of
Shares of
Common Stock
Beneficially Percent
Name Owned (a) of Class
---- ------------ --------
Daniel P. Finkelman............................ 278,964(b)(c) *(d)
Eugene M. Freedman............................. 21,327(b)(c) *(d)
E. Gordon Gee.................................. 34,495(b)(c) *(d)
Mark A Giresi.................................. 39,300(b)(c) *(d)
V. Ann Hailey.................................. 382,329(b)(c)(e) *(d)
David T. Kollat................................ 153,449(b)(c) *(d)
Leonard A. Schlesinger......................... 156,934(b)(c) *(d)
Donald B. Shackelford.......................... 185,226(b)(c)(f) *(d)
Alex Shumate................................... 13,739(b)(c) *(d)
Allan R. Tessler............................... 53,853(b)(c) *(d)
Martin Trust................................... 5,212,029(b)(c)(e)(f) 1.0%(d)
Abigail S. Wexner.............................. 10,408,223(b)(c)(g) 2.0%(d)
Leslie H. Wexner............................... 77,452,330(c)(e)(h) 14.9%(i)
Raymond Zimmerman.............................. 29,705(b)(c)(j) *(d)
All directors and executive officers as a group 94,421,903(b)(c)(e)(f)(g)(h)(j)(k) 18.2%(d)
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* Less than 1%.
(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 beneficial ownership of shares of Common Stock as of March 1, 2002
(as well as beneficial ownership of shares of Class A Common Stock of
Intimate Brands, Inc. ("Intimate Brands") as of March 1, 2002, if any,
multiplied by the 1.10 exchange ratio in The Limited's exchange offer and
merger with respect to Intimate Brands, completed in March 2002).
(c) Includes the following number of shares issuable within 60 days upon the
exercise of outstanding stock options: Mr. Finkelman, 246,778; Mr.
Freedman, 9,276; Dr. Gee, 21,623; Mr. Giresi, 34,900; Ms. Hailey, 297,001;
Dr. Kollat, 9,276; Mr. Schlesinger, 128,548; Mr. Shackelford, 21,623; Mr.
Shumate, 8,278; Mr. Tessler, 9,276; Mr. Trust, 541,388; Mrs. Wexner, 4,980;
Mr. Wexner, 2,680,252; Mr. Zimmerman, 9,276 and all directors and executive
officers as a group, 4,022,475.
6
(d) For purposes of determining the percent of the class of stock owned by each
holder, outstanding shares of Common Stock is based on the sum of (i) the
number of outstanding shares of Common Stock as of March 1, 2002, and (ii)
the number of outstanding shares of Intimate Brands Class A Common Stock as
of March 1, 2002 multiplied by the exchange ratio in the offer and merger
of 1.10.
(e) Includes the following number of shares held in an employee benefit plan,
over which the participant has the power to dispose or withdraw shares: Ms.
Hailey, 4,400; Mr. Trust, 61,176; Mr. Wexner, 1,124,279; and all directors
and executive officers as a group, 1,189,855.
(f) Includes the following number of shares owned by family members, as to
which beneficial ownership is disclaimed: Mr. Shackelford, 38,833, and Mr.
Trust, 418,391.
(g) Includes 400,000 shares held by a trust of which Mrs. Wexner is the
beneficiary. Mrs. Wexner disclaims beneficial ownership of these shares.
Includes 4,296,630 shares held by Wexner Children Holdings and 5,703,370
shares held by The Birthday Trust. Excludes 67,444,107 shares beneficially
owned by Mr. Wexner as to which Mrs. Wexner disclaims beneficial ownership.
(h) Reflects beneficial ownership as set forth in Amendment No. 26 to Schedule
13D, filed by Mr. Wexner on March 27, 2002. Includes 15,650,000 shares held
by Health and Science Interests II, 6,500,000 shares held by The Wexner
Children's Trust II and 25,000,000 shares held by The Children Trust. Mr.
Wexner shares voting and investment power with others with respect to
shares held by Health and Science Interests II, The Wexner Children's Trust
II and The Children's Trust. Excludes 400,000 shares held in a trust of
which Mrs. Wexner is a beneficiary and as to which Mr. Wexner disclaims
beneficial ownership. Includes 10,008,223 shares as to which Mr. Wexner may
be deemed to share voting and investment power. Information gives effect to
The Limited's exchange offer and merger with respect to Intimate Brands.
(i) As reflected in Amendment No. 26 to Schedule 13D, filed by Mr. Wexner on
March 27, 2002.
(j) Includes 2,400 shares which are Mr. Zimmerman's pro rata share of 7,200
shares owned by a corporation of which Mr. Zimmerman is president and a 33%
stockholder plus 4,000 shares held by a partnership which is 45% owned by
Mr. Zimmerman and 45% owned by his wife.
(k) Includes 857,224 shares as to which beneficial ownership is disclaimed.
7
THE STOCK PLAN
Subject to stockholder approval, The Limited's Board of Directors will adopt
the 2002 Restatement of the 1993 Stock Option and Performance Incentive Plan
(1998 Restatement) (the "Stock Plan"). The only changes made to the Stock Plan
from its predecessors are to increase by 11,800,000 the number of shares of
Common Stock that may be subject to awards granted under the Stock Plan,
provide for the issuance of Substitute Awards in connection with acquisitions
or combinations involving The Limited and to provide that it will expire on May
19, 2012. The following summary of the material terms of the Stock Plan, a copy
of which is attached hereto as Appendix A, does not purport to be complete and
is qualified in its entirety by the terms of the Stock Plan.
The Board of Directors recommends that you vote FOR approval of the Stock
Plan.
Purpose of the Stock Plan
The purpose of the Stock Plan is to attract and retain the best available
executive and key management associates for The Limited and its subsidiaries
and to encourage the highest level of performance by such associates, thereby
enhancing the value of The Limited for the benefit of its stockholders. The
Stock Plan is also intended to motivate executive and key management associates
to contribute to The Limited's future growth and profitability and to reward
their performance in a manner that provides them with a means to increase their
holdings of the Common Stock of The Limited and aligns their interests with the
interests of the stockholders of The Limited.
Administration of the Stock Plan
The Stock Plan will be administered by the Compensation Committee of The
Limited's Board of Directors (the "Plan Committee"). The Plan Committee will be
composed of directors who qualify as "non employee directors" within the
meaning of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and as "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Plan Committee has
the power in its discretion to grant awards under the Stock Plan, to determine
the terms thereof, to interpret the provisions of the Stock Plan and to take
action as it deems necessary or advisable for the administration of the Stock
Plan.
Number of authorized shares
The Stock Plan, provides for awards with respect to a maximum of 21,154,951
shares of Common Stock to associates of The Limited and its subsidiaries
(composed of 11,800,000 shares for which stockholder approval is being
requested, which constitutes 2.3% The Limited's currently outstanding
518,873,726 shares of Common Stock, plus 9,354,951 previously authorized and
unissued shares), plus shares of Common Stock issuable upon the exercise of
Substitute Awards. Corresponding Tax Offset Payments (as hereinafter defined)
also may be awarded at the discretion of the Plan Committee. The number and
class of shares available under the Stock Plan and/or subject to outstanding
awards may be adjusted by the Plan Committee to prevent dilution or enlargement
of rights in the event of various changes in the capitalization of The Limited.
"Substitute Awards" are awards granted in assumption of or in substitution for,
any outstanding awards granted by a company acquired by The Limited or with
which The Limited combines. Shares of Common Stock, other than under Substitute
Awards, attributable to: (i) unexercised Options (as hereinafter defined) which
expire or are terminated, surrendered or cancelled (other than in connection
with the exercise of stock appreciation rights ("SARs")); (ii) shares of Common
Stock of The Limited subject to certain restrictions ("Restricted Shares")
which are forfeited to The Limited; (iii) units representing shares of Common
Stock ("Performance Shares") and units which do not represent shares of Common
Stock but which may be paid in Common Stock ("Performance Units") which are not
earned and paid; and (iv) awards settled in cash in lieu of shares of Common
Stock, may be available for subsequent award under the Stock Plan at the Plan
Committee's discretion to the extent permissible under Rule 16b-3 of the
Exchange Act. No more than 4,230,990 shares of Common Stock may be issued other
than pursuant to awards of Options or SARs under the Stock Plan.
8
Eligibility and participation
Eligibility to participate in the Stock Plan is limited to the named
executive officers and full-time executive and key management associates of The
Limited and its subsidiaries who are selected by the Plan Committee. Currently,
approximately 8,000 associates of The Limited and its subsidiaries are within
the classes eligible to participate in the Stock Plan. The Limited anticipates
that approximately 10% of those eligible will participate in the Stock Plan.
Participation in the Stock Plan is at the discretion of the Plan Committee and
shall be based upon the associate's present and potential contributions to the
success of The Limited and its subsidiaries and such other factors as the Plan
Committee deems relevant. No associate may be granted in any calendar year
awards covering more than 2,000,000 shares of Common Stock.
Type of awards under the Stock Plan
The Stock Plan provides that the Plan Committee may grant awards to eligible
associates in any of the following forms, subject to such terms, conditions and
provisions as the Plan Committee may determine to be necessary or desirable:
(i) incentive stock options ("ISOs"); (ii) nonstatutory stock options ("NSOs");
(iii) SARs; (iv) Restricted Shares; (v) Performance Shares; (vi) Performance
Units; (vii) shares of unrestricted Common Stock ("Unrestricted Shares"); and
(viii) tax offset payments ("Tax Offset Payments").
Grant of Options and SARs
The Plan Committee may award ISOs and/or NSOs (collectively, "Options") to
eligible associates. SARs may be awarded either in tandem with Options ("Tandem
SARs") or on a stand-alone basis ("Nontandem SARs"). Tandem SARs may be awarded
by the Plan Committee either at the time the related Option is granted or
thereafter at any time prior to the exercise, termination or expiration of the
related Option.
Exercise price
The exercise price with respect to an Option is determined by the Plan
Committee at the time of grant. The exercise price determined with respect to
an Option shall also be applicable in connection with the exercise of any
Tandem SAR granted with respect to such Option. At the time of grant of a
Nontandem SAR, the Plan Committee will specify the base price of the shares of
Common Stock to be issued for determining the amount of cash or number of
shares of Common Stock to be distributed upon the exercise of such Nontandem
SAR. Except with respect to Substitute Awards, neither the exercise price per
share of Common Stock nor the base price of Nontandem SARs will be less than
100% of the fair market value per share of the Common Stock underlying the
award on the date of grant. Information as to awards granted under the Stock
Plan to named executives, officers and other participants is set forth on page
12.
Vesting
The Plan Committee may determine at the time of grant and any time
thereafter the terms under which Options and SARs shall vest and become
exercisable.
Special limitations on ISOs
No ISO may be granted to an associate who owns, at the time of the grant,
stock representing more than 10% of the total combined voting power of all
classes of stock of The Limited (a "10% Shareholder"), unless the exercise
price per share of Common Stock for the shares subject to such ISO is at least
110% of the fair market value per share of Common Stock on the date of grant
and such ISO award is not exercisable more than five years after its date of
grant. In addition, the total fair market value of shares of Common Stock
subject to ISOs which are exercisable for the first time by an eligible
associate in a given calendar year shall not exceed $100,000, valued as of the
date of the ISOs' grant. ISOs may not be granted more than ten years after the
date of adoption of the Stock Plan by The Limited's Board of Directors.
9
Exercise of Options and SARs
An Option may be exercised by written notice to the Plan Committee stating
the number of shares of Common Stock with respect to which the Option is being
exercised, and tendering payment therefor. The Plan Committee may, at its
discretion, accept shares of Common Stock as payment (valued at their fair
market value on the date of exercise).
Tandem SARs are exercisable only to the extent that the related Option is
exercisable and only for the period determined by the Plan Committee (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem SARs, the related Option shall be
cancelled with respect to an equal number of shares of Common Stock. Similarly,
upon exercise of all or a portion of an Option, the related Tandem SARs shall
be cancelled with respect to an equal number of shares of Common Stock.
Nontandem SARs shall be exercisable for the period determined by the Plan
Committee.
Surrender or exchange of SARs
Upon the surrender of a Tandem SAR and cancellation of the related
unexercised Option, the associate will be entitled to receive shares of Common
Stock having an aggregate fair market value equal to (A) the excess of (i) the
fair market value of one share of Common Stock as of the date the Tandem SAR is
exercised over (ii) the exercise price per share specified in such Option,
multiplied by (B) the number of shares of Common Stock subject to the Option,
or portion thereof, which is surrendered. Upon surrender of a Nontandem SAR,
the associate will be entitled to receive shares of Common Stock having an
aggregate fair market value equal to (A) the excess of (i) the fair market
value of one share of Common Stock as of the date on which the Nontandem SAR is
exercised over (ii) the base price of the shares covered by the Nontandem SAR
multiplied by (B) the number of shares of Common Stock covered by the Nontandem
SAR, or the portion thereof being exercised. The Plan Committee, in its
discretion, may cause all or any portion of The Limited's obligation to an
associate in respect of the exercise of an SAR to be satisfied in cash in lieu
of Common Stock. Any fractional shares resulting from the exercise of an SAR
will be paid in cash.
Nontransferability of Options and SARs
Options and SARs are not transferable except by will or applicable laws of
descent and distribution.
Expiration of Options
Options will expire at such time as the Plan Committee determines; provided,
however, that no Option may be exercised more than ten years from the date of
grant, unless an ISO is held by a 10% Shareholder, in which case such ISO may
not be exercised more than five years from the date of grant.
Termination of Options and SARs
Except as the Plan Committee may at any time provide, Options and SARs may
be exercised within three months after the termination of an associate's
employment (other than by death or total disability), to the extent then
exercisable, but in no case later than the term specified in the grant. Except
as the Plan Committee may at any time provide, upon the death or total
disability of an associate while employed by The Limited or its subsidiaries
(or upon the death of an associate within three months after termination of
employment), Options and SARs, to the extent then exercisable, shall remain
exercisable for (i) one year following such associate's death or (ii) during
the first nine months that the associate receives benefits under The Limited's
Long-Term Disability Plan.
Restricted Shares
Restricted Shares granted to associates under the Stock Plan may not be
sold, transferred, pledged or otherwise encumbered or disposed of during the
restricted period established by the Plan Committee. The Plan Committee may
also impose additional restrictions on the associate's right to dispose of or
to encumber
10
Restricted Shares, which may include satisfaction of performance objectives.
Performance objectives under the Stock Plan will be determined by the Plan
Committee and will be based on any one or more of the following: price of
Company Common Stock or the stock of any affiliate, shareholder return, return
on equity, return on investment, return on capital, sales productivity,
comparable store sales growth, economic profit, economic value added, net
income, operating income, gross margin, sales, free cash flow, earnings per
share, operating company contribution or market share. These factors shall have
a minimum performance standard below which no payments will be made, and a
maximum performance standard at or above which no incremental payments will be
made. These performance goals may be based on an analysis of historical
performance and growth expectations for the business, financial results of
other comparable businesses, and progress towards achieving the long-range
strategic plan for the business. These performance goals and determination of
results shall be based entirely on financial measures. The Committee may not
use any discretion to modify award results except as permitted under Section
162(m) of the Code.
Except as the Plan Committee may at any time provide, holders of Restricted
Shares may not exercise the rights of a shareholder, such as the right to vote
the shares or receive dividends and other distributions, prior to the vesting
of the shares.
Except as the Plan Committee may at any time provide, upon termination of
the associate's employment with The Limited, Restricted Shares granted to such
associate shall be forfeited.
Performance Shares and Performance Units
The Plan Committee may award to associates Performance Shares, each
equivalent to one share of Common Stock, and Performance Units which will have
a specified value or formula-based value at the end of a performance period.
Performance Shares and Performance Units so awarded will be credited to an
account established and maintained for the associate. The Plan Committee shall
determine performance periods and performance objectives in connection with
each grant of Performance Shares and Performance Units.
Vesting of awards of Performance Shares and Performance Units will occur
upon achievement of the applicable objectives within the applicable performance
period. The Plan Committee may, at its discretion, permit vesting in the event
performance objectives are partially met, or grant additional vested
Performance Shares or Performance Units in the event performance objectives are
surpassed. Payment of vested Performance Shares and Performance Units may be
made in cash, Common Stock or any combination thereof, as determined by the
Plan Committee.
No voting or dividend rights attach to the Performance Shares; however, the
Plan Committee may credit an associate's Performance Share account with
additional Performance Shares equivalent to the fair market value of any
dividends on an equivalent number of shares of Common Stock.
Unrestricted Shares
Unrestricted Shares may also be granted at the discretion of the Plan
Committee. Except as required by applicable law, no payment will be required
for Unrestricted Shares.
Tax withholding and Tax Offset Payments
The Plan Committee may require payment, or withhold payments made by the
Stock Plan, in order to satisfy applicable withholding tax requirements. The
Plan Committee may make Tax Offset Payments to assist associates in paying
income taxes incurred as a result of their participation in the Stock Plan. The
amount of the Tax Offset Payments shall be determined by multiplying a
percentage (established by the Plan Committee) by all or a portion of the
taxable income recognized by an associate upon: (i) the exercise of an NSO or
an SAR; (ii) the disposition of shares received upon exercise of an ISO; (iii)
the lapse of restrictions on Restricted Shares; (iv) the award of Unrestricted
Shares; or (v) payments for Performance Shares or Performance Units.
11
Term of Stock Plan
Unless earlier terminated by The Limited's Board of Directors, the Stock
Plan will terminate on May 19, 2012.
Amendment and termination
The Limited's Board of Directors may suspend, amend, modify or terminate the
Stock Plan; provided, however, that The Limited's stockholders shall be
required to approve any amendment that would materially increase the aggregate
number of shares issuable under the Stock Plan except for anti-dilution
adjustments permitted by the Stock Plan.
Awards granted prior to a termination of the Stock Plan shall continue in
accordance with their terms following such termination. No amendment,
suspension or termination of the Stock Plan shall adversely affect the rights
of an associate in awards previously granted without such associate's consent.
Set forth below is a summary of the awards that were made in respect of
fiscal 2001 pursuant to the predecessor to the Stock Plan.
2002 Restatement of the 1993 Stock Option and
Performance Incentive Plan Table
Number of
Name and Position Units
- ----------------- ---------
Leslie H. Wexner, Chairman of the Board and Chief Executive Officer......... --(1)
--(2)
Leonard A. Schlesinger, Executive Vice President and Chief Operating Officer 650,000(1)
50,000(2)
V. Ann Hailey, Executive Vice President and Chief Financial Officer......... 100,000(1)
--(2)
Daniel P. Finkelman, Senior Vice President, Brand and Business Planning..... --(1)
--(2)
Mark A. Giresi, Senior Vice President, Chief Stores Officer................. 49,600(1)
--(2)
All Executive Officers as a Group........................................... 799,600(1)
50,000(2)
All Current Directors Who are Not Executive Officers as a Group............. --(1)
--(2)
All Associates Other than Executive Officers as a Group..................... 5,018,400(1)
25,000(2)
- --------
(1) Consists of options granted to purchase shares of Common Stock. On April
15, 2002, the closing price per share of Common Stock was $18.99.
(2) Consists of restricted shares of Common Stock which will generally vest in
each case subject to the holder's continued employment with The Limited.
Federal income tax consequences
Stock Options.
There will be no federal income tax consequences to the associate or The
Limited upon the grant of either an ISO or an NSO under the Stock Plan. Upon
exercise of an NSO, an associate generally will recognize ordinary income in an
amount equal to (i) the fair market value, on the date of exercise, of the
acquired shares of Common
12
Stock; less (ii) the exercise price of the NSO. Subject to Section 162(m) of
the Code and the associate including such compensation in income or The Limited
satisfying applicable reporting requirements, The Limited will be entitled to a
tax deduction in the same amount.
Upon the exercise of an ISO, an associate recognizes no immediate taxable
income. Income recognition is deferred until the associate sells the shares of
Common Stock. If the ISO is exercised no later than three months after the
termination of the associate's employment, and the associate does not dispose
of the shares acquired pursuant to the exercise of the ISO within two years
from the date the ISO was granted and within one year after the exercise of the
ISO, the gain on the sale will be treated as long-term capital gain. Certain of
these holding periods and employment requirements are liberalized in the event
of an associate's death or disability while employed by The Limited. The
Company is not entitled to any tax deduction with respect to the grant or
exercise of ISOs, except that if the Common Stock is not held for the full term
of the holding period outlined above, the gain on the sale of such Common
Stock, being the lesser of: (i) the fair market value of the Common Stock on
the date of exercise minus the option price or (ii) the amount realized on
disposition minus the exercise price, will be taxed to the associate as
ordinary income and, subject to Section 162(m) of the Code and the associate
including such compensation in income and The Limited satisfying applicable
reporting requirements, The Limited will be entitled to a deduction in the same
amount. The excess of the fair market value of the Common Stock acquired upon
exercise of an ISO over the exercise price therefor constitutes a tax
preference item for purposes of computing the "alternative minimum tax" under
the Code.
Stock Appreciation Rights.
There will be no federal income tax consequences to either the associate or
The Limited upon the grant of an SAR. However, the associate generally will
recognize ordinary income upon the exercise of an SAR in an amount equal to the
aggregate amount of cash and the fair market value of the shares of Common
Stock received upon exercise. Subject to Section 162(m) of the Code and the
associate including such compensation in income and The Limited satisfying
applicable reporting requirements, The Limited will be entitled to a deduction
equal to the amount includible in the associate's income.
Restricted Shares.
Assuming the associate does not make an election under Section 83(b) of the
Code (which election is discussed below), there will be no federal income tax
consequences to either the associate or The Limited upon the grant of
Restricted Shares until expiration of the restricted period and the
satisfaction of any other conditions applicable to the Restricted Shares. At
that time, the associate generally will recognize taxable income equal to the
then fair market value for the Common Stock and, subject to Section 162(m) of
the Code and the associate including such compensation in income and The
Limited satisfying applicable reporting requirements, The Limited will be
entitled to a corresponding deduction. However, under Section 83(b) of the
Code, the associate may elect, within thirty days after the date of the grant,
to recognize ordinary income as of the date of grant and The Limited will be
entitled to a corresponding deduction at that time.
Performance Shares and Units.
There will be no federal income tax consequences to the associate or The
Limited upon the grant of Performance Shares or Performance Units. Associates
generally will recognize taxable income at the time when payment for the
Performance Shares or Performance Units is received in an amount equal to the
aggregate amount of cash and the fair market value of shares of Common Stock
acquired. Subject to Section 162(m) of the Code, and the associate including
such compensation in income and The Limited satisfying applicable reporting
requirements, The Limited will be entitled to a deduction equal to the amount
includible in the associate's income.
13
Unrestricted Shares.
Associates generally will recognize taxable income at the time Unrestricted
Shares are received. Subject to Section 162(m) of the Code and the associate
including such compensation in income and The Limited satisfying applicable
reporting requirements, The Limited will be entitled to a deduction equal to
the amount includible in the associate's income.
Special rules, summarized below, may apply to associates who are subject to
Section 16 of the Exchange Act.
Section 16 of the Exchange Act.
Associates who are subject to Section 16 of the Exchange Act and receive
shares of Common Stock under the Stock Plan will not recognize ordinary income
at the time unless (i) an election is made by such associate under Section
83(b) of the Code or (ii) the sale of such shares by such associate at a profit
is no longer subject to Section 16(b) of the Exchange Act (generally (1) in the
case of options, six months following the date of grant of the option to which
the shares relate and (2) otherwise, six months after the receipt of shares).
Such associate will instead recognize ordinary income equal to the fair market
value of such shares received (less the price paid for the shares, if any) on
the first day that such a sale is no longer subject to Section 16(b) of the
Exchange Act and, subject to Section 162(m) of the Code and the associate
including such compensation in income and The Limited satisfying applicable
reporting requirements, The Limited or an affiliate generally will be entitled
to a deduction of an equal amount for federal income tax purposes at that time.
An associate subject to Section 16 of the Exchange Act may elect under Section
83(b) of the Code, within 30 days of the transfer of such shares, to recognize
income at the time of transfer equal to the difference between the price paid
for such shares, if any, and the fair market value of such shares. Such amount
will be taxed as ordinary income to the associate and, subject to Section
162(m) of the Code and the associate including such compensation in income and
The Limited satisfying applicable reporting requirements, generally will be
allowed as a deduction for federal income tax purposes to The Limited.
Required vote
Adoption of the Stock Plan requires the approval by a majority of votes cast
on the proposal in person or by proxy provided that the total vote cast on the
proposal represents over 50% in interest of all Common Stock.
14
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the "Summary Compensation Table") shows the
compensation paid by The Limited to each of the named executive officers of The
Limited for each of our last three fiscal years or, in some instances the
period of time, if shorter, such individual has been an executive officer of
The Limited.
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------------
Restricted Securities
Stock Underlying
Name and Principal Fiscal Other Annual Awards($) Options All Other
Position(1) Year Salary($)(2) Bonus($)(3) Compensation($) (5)(6) Awarded(#)(6) Compensation($)
------------------ ------ ------------ ----------- --------------- ---------- ------------- ---------------
Leslie H. Wexner.............. 2001 $1,395,192 $1,720,320 $ 4,368(4) $ -- -- $ 298,788(7)
Chairman of the Board, 2000 1,361,538 628,992 9,432 -- -- 266,232
Chief Executive Officer 1999 1,185,577 3,331,968 -- 2,353,431 -- 262,914
V. Ann Hailey................. 2001 740,385 576,000 13,308(4) -- 100,000 141,105(7)
Executive Vice President, 2000 657,692 189,280 17,255 -- 100,000 169,259
Chief Financial Officer 1999 592,788 937,116 -- -- 100,000 79,969
Leonard A. Schlesinger........ 2001 737,981 576,000 31,064(4) 970,000 650,000 123,215(7)
Executive Vice President, 2000 632,212 200,000 118,638 84,759 27,616 168,000
Chief Operating Officer 1999 187,981 376,499 -- 1,915,625 502,110 --
Daniel P. Finkelman........... 2001 571,635 353,280 11,336(4) -- -- 112,736(7)
Senior Vice President,
Brand and Business Planning
Mark A. Giresi................ 2001 465,577 324,008 235(4) -- 49,600 71,167(7)
Senior Vice President,
Chief Stores Officer
- --------
(1) Mr. Schlesinger joined The Limited on October 1, 1999 as Executive Vice
President, Organization, Leadership and Human Resources; therefore, amounts
disclosed for 1999 are for partial year. Mr. Finkelman became an executive
officer on March 21, 2001 and Mr. Giresi became an executive officer on
December 10, 2001; therefore, only the information with respect to the
fiscal year 2001 is noted in the Summary Compensation Table.
(2) Amounts reported for 2000 reflect a 53 week fiscal year.
(3) Represents for each fiscal year, the aggregate of the performance-based
incentive compensation for the spring and fall selling seasons; however,
Mr. Giresi's bonus for 2001 was determined based on his pre-existing
agreement with The Limited. Mr. Schlesinger's bonus amount for 2000 was
determined based on his pre-existing agreement with The Limited.
(4) Represents for the 2001 fiscal year, reimbursement of taxes on life
insurance premiums paid on behalf of executive officers Hailey, Schlesinger
and Finkelman, reimbursement of certain taxes on non-qualified retirement
plan imputed income paid on behalf of executive officers Wexner, Hailey,
Schlesinger, Finkelman and Giresi and reimbursement for tax on relocation
expenses paid on behalf of Mr. Schlesinger.
(5) Represents for each executive officer, the restricted stock awards for the
specified fiscal year under The Limited's 1993 Stock Option and Performance
Incentive Plan. Information set forth above is based on the closing price
of Common Stock on the date on which the awards were made.
On February 5, 2001, 50,000 restricted shares of Common Stock were granted
to Mr. Schlesinger. The per share value of Common Stock on such date was
$19.40. This award vests 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.
On January 31, 2000, 5,524 restricted shares of Common Stock were granted to
Mr. Schlesinger. The per share value of Common Stock on such date was
$15.3438. This award vests 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.
15
On October 1, 1999, 100,000 restricted shares of Common Stock were granted
to Mr. Schlesinger. The per share value of Common Stock on such date was
$19.1563. This award has been earned in accordance with pre-established
financial performance measures and vests 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.
On May 18, 1999, 101,770 restricted shares of Common Stock were granted to
Mr. Wexner. The per share value of the Common Stock on such date was
$23.125. This award was earned in accordance with pre-established financial
performance measures and vested 100% at the end of the 1999 fiscal year.
These shares were subsequently adjusted to reflect the spin-off of Limited
Too.
Dividends will not be paid or accrue with respect to shares of restricted
stock until such shares vest.
As of February 2, 2002, the aggregate restricted stock holdings and the
value of such holdings for each of the named executive officers were: Mr.
Wexner, no shares; Ms. Hailey, 193,310 shares, $3,566,570; Mr. Schlesinger,
134,415 shares, $2,479,957; Mr. Finkelman, no shares; and Mr. Giresi, 10,000
shares, $184,500 (based on the $18.45 fair market value of a share of Common
Stock as of Friday, February 1, 2002).
(6) Restricted shares and stock option grants for 2000 and 1999 have been
adjusted to reflect The Limited's two-for one stock split in May 2000.
(7) Includes employer matching and supplemental contributions allocated during
the year to each executive officer's account under certain of The Limited's
qualified and non-qualified defined contribution plans during the year in
the amount of $298,788, $128,730, $48,504, $102,001 and $21,167 for
executive officers Wexner, Hailey, Schlesinger, Finkelman and Giresi,
respectively.
Includes term life insurance premiums in the amount of $12,375, $31,140 and
$10,735 paid on behalf of executive officers Hailey, Schlesinger and
Finkelman, respectively.
Includes $50,000 incentive bonus paid in connection with Mr. Giresi's
commencement of employment with the Company.
Includes reimbursement of relocation expenses in the amount of $43,571 for
Mr. Schlesinger.
Long-Term Incentive Plan Awards
The Limited did not grant any awards for the 2001 fiscal year to the
executive officers named in the Summary Compensation Table.
Stock Options
The following table shows certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table
during our 2001 fiscal year.
Option Grants in Fiscal Year 2001
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(2)
------------------------------------------------ -----------------------------
Approximate
% of Total
Securities Options
Underlying Granted to Exercise
Options Associates in Price Per Expiration
Name Granted(#)(1) Fiscal Year Share($) Date 5%($) 10%($)
---- ------------- ------------- --------- ---------- ---------- ----------
Leslie H. Wexner...... -- -- -- -- -- --
V. Ann Hailey......... 100,000 1.81% $19.4000 02/05/11 $1,220,056 $3,091,860
Leonard A. Schlesinger 150,000 2.71% 19.4000 02/05/11 1,830,083 4,637,791
500,000 9.05% 11.2000 10/29/11 3,521,810 8,924,958
Daniel P. Finkelman... -- -- -- -- -- --
Mark A. Giresi........ 19,600 0.35% 19.4000 02/05/11 239,131 606,005
30,000 0.54% 9.6000 09/26/11 181,122 458,998
16
- --------
(1) Options were granted to Ms. Hailey on February 5, 2001, to Mr. Schlesinger
on February 5, 2001 and October 29, 2001 and to Mr. Giresi on February 5,
2001 and September 26, 2001 pursuant to The Limited's 1993 Stock Option and
Performance Incentive Plan (1998 Restatement). Options granted to executive
officers Hailey and Schlesinger vest 10%, 10%, 10%, 15%, 20% and 35% on the
first through sixth anniversaries of the grant date, respectively, and
options granted to Mr. Giresi vest in four equal installments beginning on
the first anniversary of the grant date, in each case subject to the
holder's continued employment with the Company.
(2) The assumed rates of growth were selected by the Securities and Exchange
Commission (the "Commission") for illustrative purposes only and are not
intended to predict or forecast future stock prices.
The following table sets forth certain information regarding stock options
exercised by the executive officers named in the Summary Compensation Table
during The Limited's 2001 fiscal year and the year-end values of unexercised
options held by those executive officers.
Aggregated Option Exercises in 2001 Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End(#) Fiscal Year-End($)
------------------------- ---------------------------
Shares
Acquired on Value
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ----------- ------------- ----------- -------------
Leslie H. Wexner...... 42,218 $310,522 2,449,252(2) 2,126,346(2) $20,294,260(2) $16,467,836(2)
210,000(3) -- (3) 1,600,242(3) -- (3)
V. Ann Hailey......... -- -- 287,001(2) 496,263(2) 1,612,395(2) 1,623,759(2)
Leonard A. Schlesinger -- -- 113,548(2) 1,072,622(2) 56,900(2) 3,626,173(2)
Daniel P. Finkelman... -- -- 246,778(2) 268,264(2) 1,717,373(2) 1,847,455(2)
Mark A. Giresi........ -- -- 15,000(2) 94,600(2) 25,500(2) 342,000(2)
- --------
(1) Calculated on the basis of the number of shares exercised, multiplied by
the excess of the fair market value of a share of Common Stock on the date
of exercise over the exercise price of such option.
(2) Denominated in shares of 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 Common Stock at fiscal year-end
($18.45) 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 each such
option, multiplied by the excess of the fair market value of a share of
Intimate Brands Class A Common Stock at fiscal year-end ($17.90) over the
exercise price of such option.
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 The Limited for their services as directors:
. an annual retainer of $20,000 per year (increased by $4,000 for each
committee chair held), plus
. a fee of $3,500 for each Board meeting attended ($1,000 for a telephonic
meeting) and, as committee members, a fee of $1,500 per committee meeting
attended ($500 for a telephonic meeting), and
. a fee of $500 for each action in writing taken by the Board or any
committee.
Under The Limited's 1996 Stock Plan for Non-Associate Directors, each
non-associate director of The Limited receives (i) annual grants of options to
purchase 1,000 shares of 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 Common Stock.
17
Employment agreements with certain executive officers
In 1999 the Company entered into an employment agreement with Mr.
Schlesinger, at which time he was to serve as the Company's Executive Vice
President for Organization, Leadership and Human Resources. On March 1, 2001,
Mr. Schlesinger was appointed Executive Vice President and Chief Operating
Officer of The Limited. The initial term of Mr. Schlesinger's agreement is six
years, with automatic one-year extensions thereafter unless either party gives
written notice to the contrary. Mr. Schlesinger's agreement provides for an
initial base salary of $575,000, life insurance coverage of $5 million and
disability benefits in addition to the benefits available under the Company's
disability plans. Mr. Schlesinger's agreement also provides that, if the
Company fails to extend the agreement or terminates Mr. Schlesinger's
employment without cause, or if he terminates his employment for good reason,
he will continue to receive his base salary for one year after the termination
date. In the event any "parachute" excise tax is imposed on Mr. Schlesinger, he
will be entitled to tax reimbursement payments.
In 1998 the Company entered into an employment agreement with Ms. Hailey
under which she serves as the Company's Executive Vice President and Chief
Financial Officer. The initial term of Ms. Hailey's agreement is six years,
with automatic one-year extensions thereafter unless either party gives written
notice to the contrary. Ms. Hailey's agreement provides for an initial base
salary of $525,000, life insurance coverage of $5 million and disability
benefits in addition to the benefits available under the Company's disability
plans. Ms. Hailey's agreement also provides that, if the Company fails to
extend the agreement or terminates Ms. Hailey's employment without cause, or if
she terminates her employment for good reason, she will continue to receive her
base salary for one year after the termination date. In the event any
"parachute" excise tax is imposed on Ms. Hailey, she will be entitled to tax
reimbursement payments.
In 1998 the Company entered into an employment agreement with Mr. Finkelman
under which he serves as the Company's Senior Vice President, Brand and
Business Planning. The initial term of Mr. Finkelman's agreement is six years,
with automatic one-year extensions thereafter unless either party gives written
notice to the contrary. Mr. Finkelman's agreement provides for an initial base
salary of $450,000, life insurance coverage of $2 million and disability
benefits in addition to the benefits available under the Company's disability
plans. Mr. Finkelman's agreement also provides that, if the Company fails to
extend the agreement or terminates Mr. Finkelman's employment without cause, or
if he terminates his employment for good reason, he will continue to receive
his base salary for one year after the termination date. In the event any
"parachute" excise tax is imposed on Mr. Finkelman, he will be entitled to tax
reimbursement payments.
In 2000, the Company entered into an agreement with Mr. Giresi. Under this
agreement, if the Company terminates Mr. Giresi's employment other than for
cause, he will be entitled to continue to receive his weekly base salary for 26
weeks, subject to reduction for any salary or compensation he receives for any
other employment during the 26 week period.
Section 16(a) beneficial ownership reporting compliance
The Limited's officers and directors, and persons who own more than ten
percent of a registered class of The Limited's equity securities, must file
reports of ownership and changes in ownership of The Limited's equity
securities with the Commission and the New York Stock Exchange. Copies of those
reports must also be furnished to The Limited.
Based solely on a review of the copies of reports furnished to The Limited
and written representations that no other reports were required, we believe
that during fiscal 2001 our officers, directors and greater than ten-percent
beneficial owners complied with these filing requirements.
18
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") reviews and approves The
Limited's compensation philosophy and policies and the application of such
policies to the compensation of Mr. Wexner and other executive officers. The
Limited has retained independent compensation consultants to assist in
developing, and periodically assessing the effectiveness and reasonableness of,
The Limited's executive officer compensation program. The Committee meets
independently on a periodic basis with these consultants to review the
Company's programs.
Compensation philosophy
The Limited attempts to apply a consistent philosophy to compensation for
all leadership associates, including senior executives. The primary goal of the
compensation program is to link total executive compensation to performance
that enhances stockholder value. Accordingly, The Limited has structured total
compensation for leadership individuals so that a lower proportion is fixed
compensation and a much higher proportion is variable, keyed to business and
stock performance.
The Limited's philosophy is based on the following basic principles:
To Pay for Outstanding Performance.
The Limited 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 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 managing
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 Limited 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 Limited 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 Limited 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, and the performance of each individual executive.
Principal compensation elements
The principal elements of executive compensation at The Limited are base
salary, short-term performance-based cash incentive compensation and long-term
equity-based incentive programs. In determining guidelines for each
compensation element, The Limited 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 Limited in
business and merchandise focus. In addition, The Limited participates in
special surveys focusing on specific segments of the business, such as
merchandise design and production sourcing. With the help of The Limited's
compensation consultants, The Limited analyzes executive compensation levels and
19
practices relative to the performance of these competitor companies and, from
this information, develops pay guidelines that generally reward exceptional
executive performance with pay well above the industry survey median. 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 The Limited uses for this purpose
contains approximately 40% of the companies in the S&P Retail Stores Composite
Index represented in the Stockholder Return Graph (on page 22). Subject to The
Limited's needs, The Limited generally attempts to design all incentive and
equity-based compensation programs to be deductible under 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.
In 2001, the base salaries of Ms. Hailey and Messrs. Finkelman, Giresi,
Schlesinger and Wexner were adjusted based on both performance and market
comparisons, with continued emphasis placed on performance-based cash and
equity incentive compensation.
Performance-Based Cash Incentive Compensation.
The Limited 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. The Limited sets these goals
at the beginning of each six-month season, and bases them on an analysis of
historical performance, growth and income improvement expectations for that
business, financial results of other comparable businesses both inside and
outside The Limited and progress toward achieving the strategic plan for that
business. Annually, The Limited establishes 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 stockholder objectives. In 2001, the Committee
awarded equity-based incentives, granting stock options and also, to a limited
extent, restricted stock. The Committee 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 The Limited's Common Stock. In determining the awards for an executive
officer, the Committee evaluated competitive practice and the executive
officer's performance and importance to the business.
20
Stock Options.
In 2001, stock options were awarded to Ms. Hailey and Messrs. Schlesinger
and Giresi, in the amounts set forth in the Option Grants in Fiscal Year 2001
table above. The options granted to both Ms. Hailey and
Mr. Schlesinger vest, subject to continued employment, on a graduated basis
over a period of six years. Grants for Mr. Giresi vest over a period of four
years, subject to continued employment. The exercise price for these options is
equal to the fair market value of the underlying common stock on the date of
grant.
Restricted Stock.
The Committee awarded Mr. Schlesinger restricted shares in 2001, which vest
on a graduated basis over a six-year period.
CEO compensation
Mr. Wexner has been Chief Executive Officer since founding The Limited in
1963. The Limited conducts the same type of competitive review and analysis to
determine base salary and incentive guidelines for
Mr. Wexner's position as it does for the other executive positions.
In 2001, as in prior years, in establishing Mr. Wexner's compensation
package the Committee considered competitive practices, the extent to which The
Limited achieved operating income and sales objectives, progress regarding
brand strategy, and the continued recruitment and development of leadership
talent for the business. These factors are considered subjectively in the
aggregate and none of these factors is accorded specific weight.
As described earlier, the Committee and The Limited continue to emphasize
variable, performance-based compensation components for all executives,
including Mr. Wexner. Accordingly, as a result of fiscal 2000 performance, in
early 2001, Mr. Wexner's base salary was adjusted by 3.7% from $1,350,000 to
$1,400,000 while his incentive compensation target remained at 160%. In
establishing these compensation elements, the Committee considered the
financial results for fiscal 2000, changes in stockholder value, Mr. Wexner's
progress in recruiting and developing senior leadership talent, and continued
focus on the brand development strategy of the business units.
In fiscal 2001, The Limited posted adjusted net sales of $8.868 billion, a
decrease of 3% compared to adjusted net sales in fiscal 2000. Excluding sales
from the extra week in fiscal 2000, adjusted net sales decreased 2%.
Additionally, fiscal 2001 adjusted net income was $357.0 million, which was 14%
below comparable adjusted net income for fiscal 2000, and adjusted earnings per
share were $.82 per share, a decrease of 12% compared to fiscal 2000 adjusted
earnings per share. These fiscal 2001 results were below targeted performance
objectives established by the Committee for the year, and as a result, the
annual cash incentive payment earned by Mr. Wexner was below target level for
the year, according to the plan.
Compensation Committee
E. Gordon Gee, Chair
Donald B. Shackelford
21
STOCKHOLDER RETURN GRAPH
The following graph shows the changes, over the past five-year period, in
the value of $100 invested in Common Stock of The Limited, the Standard &
Poor's 500 Composite Stock Price Index and the Standard & Poor's 500 Retail
Composite Index. The plotted points represent the closing price on the last day
of the fiscal year indicated.
[CHART]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE LIMITED, INC., THE S & P 500 INDEX
AND THE S & P RETAIL COMPOSITE INDEX
LTD S&P 500 S&P 500 Retail Composite
----- ------- ------------------------
2/01/97 100 100 100
1/31/98 158 127 149
1/30/99 211 168 249
1/29/00 203 183 273
2/03/01 268 182 275
2/02/02 255 154 299
* $100 INVESTED IN STOCK OR IN INDEX AT THE CLOSING PRICE ON 2/01/97 - INCLUDING
REINVESTMENT OF DIVIDENDS.
22
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth the names of all persons who, on April 1,
2002, were known by The Limited 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
Limited. The information was obtained from information supplied by stockholders
on Schedules 13D and 13G and, except for the information for Mr. Wexner, does
not reflect consummation of The Limited's exchange offer and merger with
respect to Intimate Brands.
Amount Percent
Beneficially of
Name and Address of Beneficial Owner Owned Class
------------------------------------ ------------ -------
Leslie H. Wexner(1)....................... 77,452,330 14.9%
Three Limited Parkway
P.O. Box 16000
Columbus, OH 43216
Capital Research and Management Company(2) 61,603,920 14.4%
333 South Hope Street
Los Angeles, CA 90071
Putnam Investments, LLC.(3)............... 33,140,127 7.7%
One Post Office Square
Boston, MA 02109-2137
FMR Corp.(4).............................. 24,205,986 5.6%
82 Devonshire Street
Boston, MA 02109-3614
- --------
(1) Based on information set forth in Amendment No. 26 to Mr. Wexner's Schedule
13D filing, dated March 27, 2002. Includes 1,124,279 shares held in an
employee benefit plan over which Mr. Wexner exercises dispositive but not
voting control and 2,680,252 shares issuable within 60 days of March 27,
2002 upon exercise of outstanding options held by Mr. Wexner. Also includes
10,008,223 shares beneficially owned by Abigail S. Wexner, Mr. Wexner's
wife, as to which Mr. Wexner may be deemed to share the power to vote and
direct the disposition. Excludes 400,000 shares held in trust of which Mrs.
Wexner is a beneficiary and as to which Mr. Wexner disclaims beneficial
ownership. Power to vote or direct the disposition of 15,650,000 shares
held by Health and Science Interests II and 25,000,000 shares held by The
Children Trust may, in each case, be deemed to be shared by Mr. Wexner and
the other trustee thereof. Power to vote or direct the disposition of
6,500,000 shares held by The Wexner Children's Trust II may be deemed
shared by Mr. Wexner, who may revoke The Trust, and the trustee.
(2) Based on information set forth in Amendment No. 5 to Capital Research and
Management Company's Schedule 13G filing, dated February 11, 2002. Capital
Research and Management Company, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is deemed to be the
beneficial owner of 61,603,920 shares of The Limited's Common Stock as a
result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940.
(3) Based on information set forth in Schedule 13G dated February 13, 2002.
According to the Schedule 13G, Marsh & McLennan Companies, Inc. wholly owns
Putnam Investments, LLC., which wholly owns two registered investment
advisers: Putnam Investment Management, LLC., the investment adviser to the
Putnam Family of Mutual Funds and The Putnam Advisory Company, LLC., which
is the investment adviser to Putnam's institutional clients. Both Putnam
Investment Management, LLC. and The Putnam Advisory Company, LLC. have
dispository power over the shares as investment managers, but each of the
mutual funds' trustees have voting power over the shares held by each fund,
and the Putnam Advisory Company, LLC. has shared voting power over the
shares held by the institutional clients. The Schedule 13G indicates the
following interests: (i) Putnam Investments, LLC. has shared voting power
with respect to 2,389,932 shares and shared dispositive power with respect
to 33,140,127 shares; (ii) Putnam Investment Management LLC. has shared
dispositive power with respect to 28,157,412 shares; and (iii) the Putnam
Advisory Company has shared voting power with respect to 2,389,923 shares
and shared dispositive power with respect to 4,982,715 shares.
23
(4) Based on information set forth in Amendment No. 7 to FMR Corp.'s 13G
filing, dated February 14, 2002. 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 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 12.0% of the aggregate outstanding voting
stock of FMR Corp. and Ms. Johnson 3d, a director of FMR Corp., owns 24.5%
of the aggregate outstanding voting stock of FMR Corp.
24
REPORT OF THE AUDIT COMMITTEE
In accordance with our written charter adopted by the Board in 2000, the
Audit Committee assists the Board in fulfilling its oversight responsibilities
with respect to the following matters: the system of internal control, the
audit process, the financial reporting process and the process for monitoring
compliance with applicable laws and regulations and our code of business
conduct. We and the Board have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace our independent public
accountants. We also annually review our independent public accountants'
qualifications and fees. In addition, we (i) ensure that The Limited's
independent public accountants submit, on a periodic basis, a formal written
statement delineating relationships between the accountants and The Limited,
(ii) actively engage in dialogue with the accountants with respect to any
disclosed relationships or services that may impact their objectivity and
independence and (iii) recommend that the Board take appropriate action in
response to the foregoing to satisfy itself of the accountants' independence.
Management is responsible for the financial reporting process, including the
system of internal control, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. The
Company's independent accountants are responsible for auditing those financial
statements. Our responsibility is to monitor and review the output of these
processes. However, we are not professionally engaged in the practice of
accounting and auditing and are not experts in the fields of accounting and
auditing. We rely on the information provided to us and on the representations
made by management and the independent accountants.
We have reviewed and discussed The Limited's audited financial statements as
of and for the year ended February 2, 2002 and met with both management and our
independent accountants to discuss the financial statements. Management has
represented to us that the financial statements were prepared in accordance
with generally accepted accounting principles. We have reviewed with the
internal auditors and independent accountants the overall scope and plans for
their respective audits. We also met with the internal auditors and independent
accountants, with and without management present, to discuss the results of
their examinations and their evaluations of the Company's internal controls.
We have also discussed with the independent accountants all matters required
to be discussed with audit committees by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent accountants
also provided to us the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and we discussed with the independent accountants their
independence from the Company. We considered whether the provision of
information technology consulting services relating to financial information
systems design and implementation and other non-audit services by the
independent accountants to the Company is compatible with maintaining their
independence.
Based on the reviews and discussions summarized in this Report, and subject
to the limitations on our role and responsibilities, certain of which are
referred to above and in the Audit Committee charter, we recommended to the
Board that The Limited's audited financial statements be included in our Annual
Report on Form 10-K for the fiscal year 2001 for filing with the Securities and
Exchange Commission.
Audit Committee
Donald B. Shackelford, Chair
Alex Shumate
Allan R. Tessler
Raymond Zimmerman
25
INDEPENDENT PUBLIC ACCOUNTANTS
During our 2001 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 February
2, 2002. We annually review the selection of our independent public accountants
and have selected PricewaterhouseCoopers LLP as our 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.
Audit Fees.
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with its audit of The Limited's
consolidated financial statements as of and for the year ended February 2, 2002
and reviews of The Limited's unaudited consolidated interim financial
statements in the 2001 fiscal year were $1,539,000 (including $546,000
attributable to Intimate Brands).
Financial Information Systems Design and Implementation Fees.
The aggregate fees billed for our 2001 fiscal year by PricewaterhouseCoopers
LLP for designing or implementing a hardware or software system that aggregates
source data underlying the financial statements or generates information that
is significant to The Limited's financial statements taken as a whole were
$2,383,000 (including $1,200,000 attributable to Intimate Brands). During
fiscal year 2001, PricewaterhouseCoopers LLP did not directly or indirectly
operate or supervise the operation of The Limited's information systems or
manage The Limited's local area network.
All Other Fees.
In addition to the fees described above, aggregate fees of $5,216,000
(including $718,000 attributable to Intimate Brands) were billed by
PricewaterhouseCoopers LLP during the year ended February 2, 2002, primarily
for the following services:
Audit-related services (a)....................... $ 822,000
Income tax compliance and related tax services... 2,863,000
Other (b)........................................ 1,531,000
----------
Total............................................ $5,216,000
==========
(a) Audit-related fees include fees for issuance of consents and comfort
letters, audit of the financial statements of a joint venture and
accounting and auditing services related to a business divested during the
year.
(b) Includes fees for information technology design and implementation services
related to management information systems.
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 as proxy intends to vote in accordance with his or her
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 Secretary of The
Limited at our principal executive offices on or before December 20, 2002.
26
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 and personal
solicitation, in addition to the use of the mails. We have retained Georgeson
Shareholder Communications Inc., New York, New York, to help us solicit 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
27
APPENDIX A
THE LIMITED, INC.
1993 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
(2002 Restatement)
TABLE OF CONTENTS
Page
----
ARTICLE 1
ESTABLISHMENT AND PURPOSE
Section 1.01 Establishment and Effective Date......... A-1
Section 1.02 Purpose.................................. A-1
ARTICLE 2
AWARDS
Section 2.01 Form of Awards........................... A-1
Section 2.02 Maximum Shares Available................. A-1
ARTICLE 3
ADMINISTRATION
Section 3.01 Committee................................ A-2
Section 3.02 Powers of Committee...................... A-2
Section 3.03 Delegation............................... A-2
Section 3.04 Interpretations.......................... A-2
Section 3.05 Liability; Indemnification............... A-2
ARTICLE 4
ELIGIBILITY
Section 4.01 Eligibility.................................. A-3
ARTICLE 5
STOCK OPTIONS
Section 5.01 Grant of Options............................. A-3
Section 5.02 Option Price................................. A-3
Section 5.03 Term of Options.............................. A-3
Section 5.04 Exercise of Options.......................... A-3
Section 5.05 Cancellation of Stock Appreciation Rights.... A-3
ARTICLE 6
SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS
Section 6.01 Ten Percent Stockholder...................... A-4
Section 6.02 Limitation on Grants......................... A-4
Section 6.03 Limitations on Time of Grant................. A-4
Page
----
ARTICLE 7
STOCK APPRECIATION RIGHTS
Section 7.01 Grants of Stock Appreciation Rights........................ A-4
Section 7.02 Limitations on Exercise.................................... A-4
Section 7.03 Surrender or Exchange of Tandem Stock Appreciation Rights.. A-4
Section 7.04 Exercise of Nontandem Stock Appreciation Rights............ A-5
Section 7.05 Settlement of Stock Appreciation Rights.................... A-5
Section 7.06 Cash Settlement............................................ A-5
ARTICLE 8
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Section 8.01 Nontransferability of Options and Stock Appreciation Rights A-5
ARTICLE 9
TERMINATION OF EMPLOYMENT
Section 9.01 Exercise after Termination of Employment................... A-5
Section 9.02 Total Disability........................................... A-5
ARTICLE 10
DEATH OF ASSOCIATE
Section 10.01 Death of Associate......................................... A-6
ARTICLE 11
RESTRICTED SHARES
Section 11.01 Grant of Restricted Shares................................. A-6
Section 11.02 Restrictions............................................... A-6
Section 11.03 Restricted Stock Certificates.............................. A-6
Section 11.04 Rights of Holders of Restricted Shares..................... A-6
Section 11.05 Forfeiture................................................. A-6
Section 11.06 Delivery of Restricted Shares.............................. A-7
Section 11.07 Performance-Based Objectives............................... A-7
ARTICLE 12
PERFORMANCE SHARES
Section 12.01 Award of Performance Shares................................ A-7
Section 12.02 Performance Period......................................... A-7
Section 12.03 Right to Payment of Performance Shares..................... A-7
Section 12.04 Payment for Performance Shares............................. A-7
Section 12.05 Voting and Dividend Rights................................. A-8
Page
----
ARTICLE 13
PERFORMANCE UNITS
Section 13.01 Award of Performance Units...................... A-8
Section 13.02 Right to Payment of Performance Units........... A-8
Section 13.03 Payment for Performance Units................... A-8
ARTICLE 14
UNRESTRICTED SHARES
Section 14.01 Award of Unrestricted Shares.................... A-9
Section 14.02 Delivery of Unrestricted Shares................. A-9
ARTICLE 15
TAX OFFSET PAYMENTS
Section 15.01 Tax Offset Payments............................. A-9
ARTICLE 16
ADJUSTMENTS
Section 16.01 Adjustments..................................... A-9
ARTICLE 17
AMENDMENT AND TERMINATION
Section 17.01 Amendment and Termination....................... A-9
ARTICLE 18
WRITTEN AGREEMENT
Section 18.01 Written Agreement............................... A-10
ARTICLE 19
MISCELLANEOUS PROVISIONS
Section 19.01 Fair Market Value............................... A-10
Section 19.02 Tax Withholding................................. A-10
Section 19.03 Compliance With Section 16(b) and Section 162(m) A-10
Section 19.04 Successors...................................... A-10
Section 19.05 General Creditor Status......................... A-10
Section 19.06 No Right to Employment.......................... A-11
Section 19.07 Notices......................................... A-11
Section 19.08 Severability.................................... A-11
Section 19.09 Governing Law................................... A-11
Section 19.10 Term of Plan.................................... A-11
THE LIMITED, INC.
1993 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
(2002 RESTATEMENT)
ARTICLE 1
ESTABLISHMENT AND PURPOSE
Section 1.01. Establishment and Effective Date. The Limited, Inc., a
Delaware corporation (the "Company"), hereby establishes a stock incentive plan
to be known as "The Limited, Inc. 1993 Stock Option and Performance Incentive
Plan (2002 Restatement)" (the "Plan"). The Plan shall become effective on May
20, 2002, subject to the approval of the Company's stockholders at the 2002
Annual Meeting. Upon approval by the Board of Directors of the Company (the
"Board"), awards may be made as provided herein, subject to stockholder
approval.
Section 1.02. Purpose. The Company desires to attract and retain the best
available executive and key management associates for itself and its
subsidiaries and to encourage the highest level of performance by such
associates in order to serve the best interests of the Company and its
stockholders. The Plan is expected to contribute to the attainment of these
objectives by offering eligible associates the opportunity to acquire stock
ownership interests in the Company, and other rights with respect to stock of
the Company, and to thereby provide them with incentives to put forth maximum
efforts for the success of the Company and its subsidiaries.
ARTICLE 2
AWARDS
Section 2.01. Form of Awards. Awards under the Plan may be granted in any
one or all of the following forms: (i) incentive stock options ("Incentive
Stock Options") meeting the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) nonstatutory stock options
("Nonstatutory Stock Options") (unless otherwise indicated, references in the
Plan to Options shall include both Incentive Stock Options and Nonstatutory
Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"),
as described in Article 7, which may be awarded either in tandem with Options
("Tandem Stock Appreciation Rights") or on a stand-alone basis ("Nontandem
Stock Appreciation Rights"); (iv) shares of common stock of the Company
("Common Stock") which are restricted as provided in Article 11 ("Restricted
Shares"); (v) units representing shares of Common Stock, as described in
Article 12 ("Performance Shares"); (vi) units which do not represent shares of
Common Stock but which may be paid in the form of Common Stock, as described in
Article 13 ("Performance Units"); (vii) shares of unrestricted Common Stock
("Unrestricted Shares"); and (viii) tax offset payments ("Tax Offset
Payments"), as described in Article 15. "Substitute Awards" are Awards granted
in assumption of, or in substitution for, any outstanding awards previously
granted by a company acquired by the Company or with which the Company (or a
subsidiary thereof) combines.
Section 2.02. Maximum Shares Available. The maximum aggregate number of
shares of Common Stock available for award under the Plan is 21,154,951 subject
to adjustment pursuant to Article 16, plus shares of Common Stock issuable upon
the exercise of Substitute awards; provided, however, that no more than
4,230,990 of shares of Common Stock may be issued other than pursuant to awards
of Options or SARs under the Plan. In addition, Tax Offset Payments which may
be awarded under the Plan will not exceed the number of shares available for
issuance under the Plan. Shares of Common Stock issued pursuant to the Plan may
be either authorized but unissued shares or issued shares reacquired by the
Company. In the event that prior to the end of the period during which Options
may be granted under the Plan, any Option or any Nontandem Stock Appreciation
Right under the Plan expires unexercised or is terminated, surrendered or
canceled (other than in connection with the exercise of a Stock Appreciation
Right) without being exercised in whole or in part for any
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reason, or any Restricted Shares, Performance Shares or Performance Units are
forfeited, or if such awards are settled in cash in lieu of shares of Common
Stock, then such shares or units may, at the discretion of the Committee (as
defined below) to the extent permissible under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Act"), be made available for subsequent awards under
the Plan, upon such terms as the Committee may determine; provided, however,
that the foregoing shall not apply to or in respect of Substitute Awards.
ARTICLE 3
ADMINISTRATION
Section 3.01. Committee. The Plan shall be administered by a Committee
(the "Committee") appointed by the Board and consisting of not less than two
(2) members of the Board. Each member of the Committee shall be an "outside
director" (within the meaning of Section 162(m) of the Code) and a
"non-employee director" (within the meaning of Rule 16b-3(b)(3)(i) under the
Act).
Section 3.02. Powers of Committee. Subject to the express provisions of
the Plan, the Committee shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock covered by each Option,
the term of each Option, the number of shares of Common Stock to be covered by
each Option and any performance objectives or vesting standards applicable to
each Option; (ii) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options and to determine which Options, if any, shall be
accompanied by Tandem Stock Appreciation Rights; (iii) to grant Tandem Stock
Appreciation Rights and Nontandem Stock Appreciation Rights and to determine
the terms and conditions of such rights; (iv) to grant Restricted Shares and to
determine the term of the restricted period and other conditions and
restrictions applicable to such shares; (v) to grant Performance Shares and
Performance Units and to determine the performance objectives, performance
periods and other conditions applicable to such shares or units; (vi) to grant
Unrestricted Shares; (vii) to determine the amount of, and to make, Tax Offset
Payments; and (viii) to determine the associates to whom, and the time or times
at which, Options, Stock Appreciation Rights, Restricted Shares, Performance
Shares, Performance Units and Unrestricted Shares shall be granted.
Section 3.03. Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may
deem advisable; provided, however, that the Committee may not delegate any of
its responsibilities hereunder if such delegation will cause (i) transactions
under the Plan to fail to comply with Section 16 of the Act or (ii) the
Committee to fail to qualify as "outside directors" under Section 162(m) of the
Code. The Committee may also employ attorneys, consultants, accountants or
other professional advisors and shall be entitled to rely upon the advice,
opinions or valuations of any such advisors.
Section 3.04. Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Company, all associates who have received awards under the Plan and
all other interested persons.
Section 3.05. Liability; Indemnification. No member of the Committee, nor
any person to whom duties have been delegated, shall be personally liable for
any action, interpretation or determination made with respect to the Plan or
awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Company with respect to any liability he or
she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in the
Company's Certificate of Incorporation and Bylaws, as amended from time to time.
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ARTICLE 4
ELIGIBILITY
Section 4.01. Eligibility. Awards shall be limited to executive and key
management associates who are regular, full-time associates of the Company and
its present and future subsidiaries. In determining the associates to whom
awards shall be granted and the number of shares to be covered by each award,
the Committee shall take into account the nature of the services rendered by
such associates, their present and potential contributions to the success of
the Company and its subsidiaries and such other factors as the Committee in its
sole discretion shall deem relevant. As used in this Plan, the term
"subsidiary" shall mean any corporation which at the time qualifies as a
subsidiary of the Company under the definition of "subsidiary corporation" set
forth in Section 424(f) of the Code, or any successor provision hereafter
enacted. No associate may be granted in any calendar year awards covering more
than 2,000,000 shares of Common Stock.
ARTICLE 5
STOCK OPTIONS
Section 5.01. Grant of Options. Options may be granted under this Plan for
the purchase of shares of Common Stock. Options shall be granted in such form
and upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
Section 5.02. Option Price. The option price of each Option to purchase
Common Stock shall be determined by the Committee at the time of the grant,
but, except in the case of Substitute Awards, shall not be less than 100
percent of the fair market value of the Common Stock subject to such Option on
the date of grant. The option price so determined shall also be applicable in
connection with the exercise of any Tandem Stock Appreciation Right granted
with respect to such Option.
Section 5.03. Term of Options. The term of each Option granted under the
Plan shall not exceed ten (10) years from the date of grant, subject to earlier
termination as provided in Articles 9 and 10, except as otherwise provided in
Section 6.01 with respect to ten (10) percent stockholders of the Company.
Section 5.04. Exercise of Options. An Option may be exercised, in whole or
in part, at such time or times as the Committee shall determine. The Committee
may, in its discretion, accelerate the exercisability of any Option at any
time. Options may be exercised by an associate by giving written notice to the
Committee stating the number of shares of Common Stock with respect to which
the Option is being exercised and tendering payment therefor. Payment for the
Common Stock issuable upon exercise of the Option shall be made in full in cash
or by certified check or, if the Committee, in its sole discretion, permits, in
shares of Common Stock (valued at fair market value on the date of exercise).
As soon as reasonably practicable following such exercise, a certificate
representing the shares of Common Stock purchased, registered in the name of
the associate, shall be delivered to the associate.
Section 5.05. Cancellation of Stock Appreciation Rights. Upon exercise of
all or a portion of an Option, the related Tandem Stock Appreciation Rights
shall be canceled with respect to an equal number of shares of Common Stock.
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ARTICLE 6
SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS
Section 6.01. Ten Percent Stockholder. Notwithstanding any other provision
of this Plan to the contrary, no associate may receive an Incentive Stock
Option under the Plan if such associate, at the time the award is granted, owns
(after application of the rules contained in Section 424(d) of the Code) stock
possessing more than ten (10) percent of the total combined voting power of all
classes of stock of the Company or its subsidiaries, unless (i) the option
price for such Incentive Stock Option is at least 110 percent of the fair
market value of the Common Stock subject to such Incentive Stock Option on the
date of grant and (ii) such Option is not exercisable after the date five (5)
years from the date such Incentive Stock Option is granted.
Section 6.02. Limitation on Grants. The aggregate fair market value
(determined with respect to each Incentive Stock Option at the time such
Incentive Stock Option is granted) of the shares of Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by an
associate during any calendar year (under this Plan or any other plan of the
Company or a subsidiary) shall not exceed $100,000.
Section 6.03. Limitations on Time of Grant. No grant of an Incentive Stock
Option shall be made under this Plan more than ten (10) years after the earlier
of the date of adoption of the Plan by the Board or the date the Plan is
approved by stockholders.
ARTICLE 7
STOCK APPRECIATION RIGHTS
Section 7.01. Grants of Stock Appreciation Rights. Tandem Stock
Appreciation Rights may be awarded by the Committee in connection with any
Option granted under the Plan, either at the time the Option is granted or
thereafter at any time prior to the exercise, termination or expiration of the
Option. Nontandem Stock Appreciation Rights may also be granted by the
Committee at any time. At the time of grant of a Nontandem Stock Appreciation
Right, the Committee shall specify the number of shares of Common Stock covered
by such right and the base price of shares of Common Stock to be used in
connection with the calculation described in Section 7.04 below. The base price
of a Nontandem Stock Appreciation Right shall be not less than 100 percent of
the fair market value of a share of Common Stock on the date of grant. Stock
Appreciation Rights shall be subject to such terms and conditions not
inconsistent with the other provisions of this Plan as the Committee shall
determine.
Section 7.02. Limitations on Exercise. A Tandem Stock Appreciation Right
shall be exercisable only to the extent that the related Option is exercisable
and shall be exercisable only for such period as the Committee may determine
(which period may expire prior to the expiration date of the related Option).
Upon the exercise of all or a portion of Tandem Stock Appreciation Rights, the
related Option shall be canceled with respect to an equal number of shares of
Common Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of a Tandem Stock Appreciation Right, shall not be
available for subsequent awards under the Plan. A Nontandem Stock Appreciation
Right shall be exercisable during such period as the Committee shall determine.
Section 7.03. Surrender or Exchange of Tandem Stock Appreciation Rights. A
Tandem Stock Appreciation Right shall entitle the associate to surrender to the
Company unexercised the related option, or any portion thereof, and to receive
from the Company in exchange therefor that number of shares of Common Stock
having an aggregate fair market value equal to (A) the excess of (i) the fair
market value of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Right is exercised over (ii) the option price per share specified
in such Option, multiplied by (B) the number of shares of Common Stock subject
to the Option, or portion thereof, which is surrendered. Cash shall be
delivered in lieu of any fractional shares.
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Section 7.04. Exercise of Nontandem Stock Appreciation Rights. The
exercise of a Nontandem Stock Appreciation Right shall entitle the associate to
receive from the Company that number of shares of Common Stock having an
aggregate fair market value equal to (A) the excess of (i) the fair market
value of one (1) share of Common Stock as of the date on which the Nontandem
Stock Appreciation Right is exercised over (ii) the base price of the shares
covered by the Nontandem Stock Appreciation Right, multiplied by (B) the number
of shares of Common Stock covered by the Nontandem Stock Appreciation Right, or
the portion thereof being exercised. Cash shall be delivered in lieu of any
fractional shares.
Section 7.05. Settlement of Stock Appreciation Rights. As soon as is
reasonably practicable after the exercise of a Stock Appreciation Right, the
Company shall (i) issue, in the name of the associate, stock certificates
representing the total number of full shares of Common Stock to which the
associate is entitled pursuant to Section 7.03 or 7.04 hereof, and cash in an
amount equal to the fair market value, as of the date of exercise, of any
resulting fractional shares, and (ii) if the Committee causes the Company to
elect to settle all or part of its obligations arising out of the exercise of
the Stock Appreciation Right in cash pursuant to Section 7.06, deliver to the
associate an amount in cash equal to the fair market value, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.
Section 7.06. Cash Settlement. The Committee, in its discretion, may cause
the Company to settle all or any part of its obligation arising out of the
exercise of a Stock Appreciation Right by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver
in an amount equal to the fair market value of such shares on the date of
exercise.
ARTICLE 8
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Section 8.01. Nontransferability Of Options And Stock Appreciation
Rights. No Option or Stock Appreciation Right may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Right shall be subject to execution, attachment or
similar process. Any attempted assignment transfer, pledge, hypothecation or
other disposition of an Option or a Stock Appreciation Right not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Right may be exercised by an associate only during his or her
lifetime, or following his or her death pursuant to Article 10.
ARTICLE 9
TERMINATION OF EMPLOYMENT
Section 9.01. Exercise after Termination of Employment. Except as the
Committee may at any time provide, in the event that the employment of an
associate to whom an Option or Stock Appreciation Right has been granted under
the Plan shall be terminated (for reasons other than death or total
disability), such Option or Stock Appreciation Right may be exercised (to the
extent that the associate was entitled to do so at the termination of his
employment) at any time within three (3) months after such termination of
employment.
Section 9.02. Total Disability. In the event that an associate to whom an
Option or Stock Appreciation Right has been granted under the Plan shall become
totally disabled, except as the Committee may at anytime provide, such Option
or Stock Appreciation Right may be exercised at any time during the first nine
(9) months that the associate receives benefits under The Limited, Inc.
Long-Term Disability Plan (the "Disability Plan"). For purposes hereof, "total
disability" shall have the definition set forth in the Disability Plan, which
definition is hereby incorporated by reference.
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ARTICLE 10
DEATH OF ASSOCIATE
Section 10.01. Death Of Associate. If an associate to whom an Option or
Stock Appreciation Right has been granted under the Plan shall die while
employed by the Company or one of its subsidiaries or within three (3) months
after the termination of such employment, except as the Committee may at
anytime provide, such Option or Stock Appreciation Right may be exercised to
the extent that the associate was entitled to do so at the time of his or her
death, by the associate's estate or by the person who acquires the right to
exercise such Option or Stock Appreciation Right upon his or her death by
bequest or inheritance. Such exercise may occur at any time within one (1) year
after the date of the associate's death or such other period as the Committee
may at anytime provide, but in no case later than the date on which the Option
or Stock Appreciation Right terminates.
ARTICLE 11
RESTRICTED SHARES
Section 11.01. Grant of Restricted Shares. The Committee may from time to
time cause the Company to grant Restricted Shares under the Plan to associates,
subject to such restrictions, conditions and other terms as the Committee may
determine.
Section 11.02. Restrictions. At the time a grant of Restricted Shares is
made, the Committee shall establish a period of time (the "Restricted Period")
applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which shall be
applicable to all or any portion of the Restricted Shares. Except with respect
to grants of Restricted Shares intended to qualify as performance-based
compensation for purposes of Section 162(m) of the Code, the Committee may
also, in its sole discretion, shorten or terminate the Restricted Period or
waive any other restrictions applicable to all or a portion of such Restricted
Shares. None of the Restricted Shares may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restricted Period or
prior to the satisfaction of any other restrictions prescribed by the Committee
with respect to such Restricted Shares.
Section 11.03. Restricted Stock Certificates. If the Committee deems it
necessary or appropriate, the Company may issue, in the name of each associate
to whom Restricted Shares have been granted, stock certificates representing
the total number of Restricted Shares granted to the associate, provided that
such certificates bear an appropriate legend or other restriction on transfer.
The Secretary of the Company shall hold such certificates, properly endorsed
for transfer, for the associate's benefit until such time as the Restricted
Shares are forfeited to the Company, or the restrictions lapse.
Section 11.04. Rights of Holders of Restricted Shares. Except as
determined by the Committee either at the time Restricted Shares are awarded or
any time thereafter prior to the lapse of the restrictions, holders of
Restricted Shares shall not have the right to vote such shares or the right to
receive any dividends with respect to such shares. All distributions, if any,
received by an associate with respect to Restricted Shares as a result of any
stock split-up, stock distribution, a combination of shares, or other similar
transaction shall be subject to the restrictions of this Article 11.
Section 11.05. Forfeiture. Except as the Committee may at any time
provide, any Restricted Shares granted to an associate pursuant to the Plan
shall be forfeited if the associate terminates employment with the Company or
its subsidiaries prior to the expiration or termination of the Restricted
Period and the satisfaction of any other conditions applicable to such
Restricted Shares. Upon such forfeiture, the Secretary of the Company shall
either cancel or retain in its treasury the Restricted Shares that are
forfeited to the Company.
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Section 11.06. Delivery of Restricted Shares. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the
Restricted Shares shall lapse and a stock certificate for the number of
Restricted Shares with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the associate or the associate's
beneficiary or estate, as the case may be.
Section 11.07. Performance-based Objectives. At the time of the grant of
Restricted Shares to an associate, and prior to the beginning of the
performance period to which performance objectives relate, the Committee may
establish performance objectives based on any one or more of the following:
price of Company Common Stock or the stock of any affiliate, shareholder
return, return on equity, return on investment, return on capital, sales
productivity, comparable store sales growth, economic profit, economic value
added, net income, operating income, gross margin, sales, free cash flow,
earnings per share, operating company contribution or market share. These
factors shall have a minimum performance standard below which, and a maximum
performance standard above which, no payments will be made. These performance
goals may be based on an analysis of historical performance and growth
expectations for the business, financial results of other comparable
businesses, and progress towards achieving the long-range strategic plan for
the business. These performance goals and determination of results shall be
based entirely on financial measures. The Committee may not use any discretion
to modify award results except as permitted under Section 162(m) of the Code.
ARTICLE 12
PERFORMANCE SHARES
Section 12.01. Award of Performance Shares. For each Performance Period
(as defined in Section 12.02), Performance Shares may be granted under the Plan
to such associates of the Company and its subsidiaries as the Committee shall
determine. Each Performance Share shall be deemed to be equivalent to one (1)
share of Common Stock. Performance Shares granted to an associate shall be
credited to an account (a "Performance Share Account") established and
maintained for such associate.
Section 12.02. Performance Period. "Performance Period" shall mean such
period of time as shall be determined by the Committee in its sole discretion.
Different Performance Periods may be established for different associates
receiving Performance Shares. Performance Periods may run consecutively or
concurrently.
Section 12.03. Right to Payment of Performance Shares. With respect to
each award of Performance Shares under this Plan, the Committee shall specify
performance objectives (the "Performance Objectives") which must be satisfied
in order for the associate to vest in the Performance Shares which have been
awarded to him or her for the Performance Period. If the Performance Objectives
established for an associate for the Performance Period are partially but not
fully met, the Committee may, nonetheless, in its sole discretion, determine
that all or a portion of the Performance Shares have vested. If the Performance
Objectives for a Performance Period are exceeded, the Committee may, in its
sole discretion, grant additional, full vested Performance Shares to the
associate. The Committee may also determine, in its sole discretion, that
Performance Shares awarded to an associate shall become partially or fully
vested upon the associate's death, total disability (as defined in Article 9)
or retirement, or upon the termination of the associate's employment prior to
the end of the Performance Period.
Section 12.04. Payment for Performance Shares. As soon as practicable
following the end of a Performance Period, the Committee shall determine
whether the Performance Objectives for the Performance Period have been
achieved (or partially achieved to the extent necessary to permit partial
vesting at the discretion of the Committee pursuant to Section 12.03). If the
Performance Objectives for the Performance Period have been exceeded, the
Committee shall determine whether additional Performance Shares shall be
granted to the associate pursuant to Section 12.03. As soon as reasonably
practicable after such determinations, or at such later date as the Committee
shall determine at the time of grant, the Company shall pay to the associate an
amount
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with respect to each vested Performance Share equal to the fair market value of
a share of Common Stock on such payment date or, if the Committee shall so
specify at the time of grant, an amount equal to (i) the fair market value of a
share of Common Stock on the payment date less (ii) the fair market value of a
share of Common Stock on the date of grant of the Performance Share. Payment
shall be made entirely in cash, entirely in Common Stock (including Restricted
Shares) or in such combination of cash and Common Stock as the Committee shall
determine.
Section 12.05. Voting and Dividend Rights. Except as the Committee may
otherwise provide, no associate shall be entitled to any voting rights, to
receive any dividends, or to have his or her Performance Share Account credited
or increased as a result of any dividends or other distribution with respect to
Common Stock. Notwithstanding the foregoing, within sixty (60) days from the
date of payment of a dividend by the Company on its shares of Common Stock, the
Committee, in its discretion, may credit an associate's Performance Share
Account with additional Performance Shares having an aggregate fair market
value equal to the dividend per share paid on the Common Stock multiplied by
the number of Performance Shares credited to his or her account at the time the
dividend was declared.
ARTICLE 13
PERFORMANCE UNITS
Section 13.01. Award of Performance Units. For each Performance Period (as
defined in Section 12.02), Performance Units may be granted under the Plan to
such associates of the Company and its subsidiaries as the Committee shall
determine. The award agreement covering such Performance Units shall specify a
value for each Performance Unit or shall set forth a formula for determining
the value of each Performance Unit at the time of payment (the "Ending Value").
If necessary to make the calculation of the amount to be paid to the associate
pursuant to Section 13.03, the Committee shall also state in the award
agreement the initial value of each Performance Unit (the "Initial Value").
Performance Units granted to an associate shall be credited to an account (a
"Performance Unit Account") established and maintained for such associate.
Section 13.02. Right to Payment of Performance Units. With respect to each
award of Performance Units under this Plan, the Committee shall specify
Performance Objectives which must be satisfied in order for the associate to
vest in the Performance Units which have been awarded to him or her for the
Performance Period. If the Performance Objectives established for an associate
for the Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the associate. The Committee may
also determine, in its sole discretion, that Performance Units awarded to an
associate shall become partially or fully vested upon the associate's death,
total disability (as defined in Article 9) or retirement, or upon the
termination of employment of the associate by the Company.
Section 13.03. Payment for Performance Units. As soon as practicable
following the end of a Performance Period, the Committee shall determine
whether the Performance Objectives for the Performance Period have been
achieved (or partially achieved to the extent necessary to permit partial
vesting at the discretion of the Committee pursuant to Section 13.02). If the
Performance Objectives for the Performance Period have been exceeded, the
Committee shall determine whether additional Performance Units shall be granted
to the associate pursuant to Section 13.02. As soon as reasonably practicable
after such determinations, or at such later date as the Committee shall
determine, the Company shall pay to the associate an amount with respect to
each vested Performance Unit equal to the Ending Value of the Performance Unit
or, if the Committee shall so specify at the time of grant, an amount equal to
(i) the Ending Value of the Performance Unit less (ii) the Initial Value of the
Performance Unit. Payment shall be made entirely in cash, entirely in Common
Stock (including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine.
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ARTICLE 14
UNRESTRICTED SHARES
Section 14.01. Award of Unrestricted Shares. The Committee may cause the
Company to grant Unrestricted Shares to associates at such time or times, in
such amounts and for such reasons as the Committee, in its sole discretion,
shall determine. No payment shall be required for Unrestricted Shares.
Section 14.02. Delivery of Unrestricted Shares. The Company shall issue,
in the name of each associate to whom Unrestricted Shares have been granted,
stock certificates representing the total number of Unrestricted Shares granted
to the associate, and shall deliver such certificates to the associate as soon
as reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
ARTICLE 15
TAX OFFSET PAYMENTS
Section 15.01. Tax Offset Payments. The Committee shall have the authority
at the time of any award under this Plan or anytime thereafter to make Tax
Offset Payments to assist associates in paying income taxes incurred as a
result of their participation in this Plan. The Tax Offset Payments shall be
determined by multiplying a percentage established by the Committee by all or a
portion (as the Committee shall determine) of the taxable income recognized by
an associate upon (i) the exercise of a Nonstatutory Stock Option or a Stock
Appreciation Right, (ii) the disposition of shares received upon exercise of an
Incentive Stock Option, (iii) the lapse of restrictions on Restricted Shares,
(iv) the award of Unrestricted Shares, or (v) payments for Performance Shares
or Performance Units. The percentage shall be established, from time to time,
by the Committee at that rate which the Committee, in its sole discretion,
determines to be appropriate and in the best interests of the Company to assist
associates in paying income taxes incurred as a result of the events described
in the preceding sentence. Tax Offset Payments shall be subject to the
restrictions on transferability applicable to Options and Stock Appreciation
Rights under Article 8.
ARTICLE 16
ADJUSTMENTS
Section 16.01. Adjustments. Notwithstanding any other provision of the
Plan, the Committee may at any time make or provide for such adjustments to the
Plan, to the number and class of shares available thereunder or to any
outstanding Options, Stock Appreciation Rights, Restricted Shares or
Performance Shares as it shall deem appropriate to prevent dilution or
enlargement of rights, including adjustments in the event of changes in the
number of shares of outstanding Common Stock by reason of stock dividends,
extraordinary cash dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like.
ARTICLE 17
AMENDMENT AND TERMINATION
Section 17.01. Amendment And Termination. The Board may suspend,
terminate, modify or amend the Plan, provided that any amendment that would
materially increase the aggregate number of shares which may be issued under
the Plan shall be subject to the approval of the Company's stockholders, except
that any such increase or modification that may result from adjustments
authorized by Article 16 does not require such approval. If the Plan is
terminated, the terms of the Plan shall, notwithstanding such termination,
continue to apply to awards granted prior to such termination. No suspension,
termination, modification or amendment of the Plan may, without the consent of
the associate to whom an award shall theretofore have been granted, adversely
affect the rights of such associate under such award.
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ARTICLE 18
WRITTEN AGREEMENT
Section 18.01. Written Agreements. Each award of Options, Stock
Appreciation Rights, Restricted Shares, Performance Shares, Performance Units,
Unrestricted Shares and Tax Offset Payments shall be evidenced by a written
agreement, executed by the associate and the Company, and containing such
restrictions, terms and conditions, if any, as the Committee may require. In
the event of any conflict between a written agreement and the Plan, the terms
of the Plan shall govern.
ARTICLE 19
MISCELLANEOUS PROVISIONS
Section 19.01. Fair Market Value. "Fair market value" for purposes of this
Plan shall be the closing price of the Common Stock as reported on the
principal exchange on which the shares are listed for the date on which the
grant, exercise or other transaction occurs, or if there were no sales on such
date, the most recent prior date on which there were sales.
Section 19.02. Tax Withholding. The Company shall have the right to
require associates or their beneficiaries or legal representatives to remit to
the Company an amount sufficiently to satisfy federal, state and local
withholding tax requirements, or to deduct from all payments under this Plan,
including Tax Offset Payments, amounts sufficient to satisfy all withholding
tax requirements. Whenever payments under the Plan are to be made to an
associate in cash, such payments shall be net of any amounts sufficient to
satisfy all federal, state and local withholding tax requirements. The
Committee may, in its discretion, permit an associate to satisfy his or her tax
withholding obligation either by (i) surrendering shares owned by the associate
or (ii) having the Company withhold from shares otherwise deliverable to the
associate. Shares surrendered or withheld shall be valued at their fair market
value as of the date on which income is required to be recognized for income
tax purposes. In the case of an award of Incentive Stock Options, the foregoing
right shall be deemed to be provided to the associate at the time of such award.
Section 19.03. Compliance With Section 16(b) and Section 162(m). In the
case of associates who are or may be subject to Section 16 of the Act, it is
the intent of the corporation that the Plan and any award granted hereunder
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3, so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Act and
will not be subjected to liability thereunder. If any provision of the Plan or
any award would otherwise conflict with the intent expressed herein, that
provision, to the extent possible, shall be interpreted and deemed amended so
as to avoid such conflict. To the extent of any remaining irreconcilable
conflict with such intent, such provision shall be deemed void as applicable to
associates who are or may be subject to Section 16 of the Act. If any award
hereunder is intended to qualify as performance-based for purposes of Section
162(m) of the Code, the Committee shall not exercise any discretion to increase
the payment under such award except to the extent permitted by Section 162(m)
and the regulations thereunder.
Section 19.04. Successors. The obligations of the Company under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and businesses of the Company. In the event of any of the foregoing, the
Committee may, at its discretion prior to the consummation of the transaction,
cancel, offer to purchase, exchange, adjust or modify any outstanding awards,
at such time and in such manner as the Committee deems appropriate and in
accordance with applicable law.
Section 19.05. General Creditor Status. Associates shall have no right,
title, or interest whatsoever in or to any investments which the Company may
make to aid it in meeting its obligations under the Plan. Nothing
A-10
contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any associate or beneficiary or legal
representative of such associate. To the extent that any person acquires a
right to receive payments from the Company under the Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as expressly
set forth in the Plan.
Section 19.06. No Right to Employment. Nothing in the Plan or in any
written agreement entered into pursuant to Article 18, nor the grant of any
award, shall confer upon any associate any right to continue in the employ of
the Company or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such written agreement or interfere with or limit
the right of the Company or a subsidiary to modify the terms of or terminate
such associate's employment at any time.
Section 19.07. Notices. Notices required or permitted to be made under the
Plan shall be sufficiently made if sent by registered or certified mail
addressed (a) to the associate at the associate's address set forth in the
books and records of the Company or its subsidiaries, or (b) to the Company or
the Committee at the principal office of the Company.
Section 19.08. Severability. In the event that any provision of the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
Section 19.09. Governing Law. To the extent not preempted by federal law,
the Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.
Section 19.10. Term of Plan. Unless earlier terminated pursuant to Article
17 hereof, the Plan shall terminate on May 19, 2012.
A-11
[X] Please mark your votes as in this example.
- --------------------------------------------------------------------------------
9788
The Board of Directors recommends a vote "FOR" the election of the nominated
Directors and the following proposal. If no specification is indicated, the
shares represented by this proxy will be voted as recommended by the Board.
FOR WITHHELD
1.Election of
Directors
(see reverse) [_] [_]
For, except vote withheld from the following nominee(s):
_______________________________________________________________________________
FOR AGAINST ABSTAIN
2.To adopt the 2002 Restatement of the 1993 Stock and [_] [_] [_]
Performance Incentive Plan
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Annual Meeting of Stockholders and Proxy Statement dated April
19, 2002.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
(triangle up) FOLD AND DETACH HERE (triangle up)
The Limited, Inc.
Dear Stockholder:
The Limited, 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 appears
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.eproxyvote.com/ltd
2. To vote by telephone:
. On a touch-tone telephone, call 1-877-779-8683, 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.
P
R
O
X
Y
THE LIMITED, INC.
This Proxy is Solicited by the Board of Directors
Annual Meeting of Stockholders
May 20, 2002
The undersigned hereby appoints Leslie H. Wexner, Leonard A. Schlesinger and V.
Ann Hailey, and each of them, proxies, with full power of substitution, to vote
for the undersigned all shares of Common Stock of The Limited, Inc. which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held on May 20, 2002 at 9:00 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.
Election of Directors, Nominees:
01. Leonard A. Schlesinger, 02. Donald B. Shackelford, 03. Martin Trust, 04.
Raymond Zimmerman
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)
SEE REVERSE SIDE
(triangle up) FOLD AND DETACH HERE (triangle up)