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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE GAP, INC.
(Name of Registrant as Specified in Its Charter)
THE GAP, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(iii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) 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:
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
G A P
M A Y 2 3, 1 9 9 5
To Our Stockholders:
The Annual Meeting of Stockholders of The Gap, Inc. will be held at
the Ritz-Carlton Hotel, San Francisco, California, on Tuesday, May 23, 1995
at 2:00 P.M., for the following purposes:
1. To elect a Board of Directors;
2. To consider and act upon the Company's Employee Stock
Purchase Plan;
3. To consider and act upon an amendment to the Company's
Executive Management Incentive Cash Award Plan;
4. To consider and act upon the selection by the Board of
Directors of Deloitte & Touche LLP as independent auditors
for the Company for the fiscal year ending on February 3,
1996; and
5. To transact such other business as may properly come before
the meeting.
The foregoing items of business are more fully described in the Proxy
Statement following this Notice.
Only stockholders of record at the close of business on March 27,
1995, are entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
A copy of the Company's annual report is being mailed with this proxy
statement to stockholders entitled to notice of this meeting.
By Order of the Board of Directors,
Anne B. Gust
Secretary
April 21, 1995
THE GAP, INC.
ONE HARRISON
SAN FRANCISCO, CALIFORNIA 94105
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of The Gap, Inc. (the "Company") for
use at the Annual Meeting of Stockholders of the Company to be held on May
23, 1995 at 2:00 P.M. at the Ritz-Carlton Hotel in San Francisco, and at
any adjournment thereof. This statement and the enclosed form of proxy
were first sent to stockholders on or about April 21, 1995.
THE PROXY
The persons named as proxyholders were selected by the Board of
Directors of the Company and are officers of the Company.
All proxies will be voted, or an abstention or withholding recorded,
in accordance with the directions on the proxy. If no contrary direction
is given, the shares will be voted:
FOR the election of directors nominated by the Board of Directors;
FOR the approval of the Employee Stock Purchase Plan;
FOR the approval of an amendment to the Executive Management Incentive
Cash Award Plan; and
FOR the approval of the selection by the Board of Directors of
Deloitte & Touche LLP as independent auditors for the Company
for the fiscal year ending February 3, 1996.
All expenses in connection with the solicitation of the enclosed
proxy, including the charges of brokerage houses and other custodians,
nominees or fiduciaries for forwarding documents to security owners, will
be paid by the Company. In addition to solicitation by mail, officers,
directors and employees of the Company, who will receive no extra
compensation for their services, may solicit proxies by telephone, fax or
in person.
A stockholder giving the enclosed proxy may revoke it at any time
prior to its exercise by a written revocation delivered to the Company, by
a subsequent proxy, or by attending the Annual Meeting and voting in
person.
VOTING SECURITIES AND VOTING RIGHTS
The only outstanding voting securities of the Company are its shares
of Common Stock, of which 143,900,233 shares were outstanding at the close
of business on March 27, 1995. Only stockholders of record at the close
of business on that date are entitled to vote at the meeting. Each
stockholder is entitled to one vote per share on each matter submitted to
the meeting.
The holders of a majority of the outstanding shares of the Common
Stock of the Company, present in person or by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting or any
adjournment thereof.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspector(s) appointed for the meeting and will
determine whether or not a quorum is present. The election inspector(s)
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted to the
stockholders for a vote. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information as of March 27,
1995, to indicate beneficial ownership by (i) each person known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock; (ii) each director and nominee and each executive officer named in
the Summary Compensation Table; and (iii) all directors and executive
officers of the Company, as a group, of the Common Stock of the Company.
Unless otherwise indicated, beneficial ownership is direct and the person
indicated has sole voting and investment power.
Amount Beneficially Percent
Name of Beneficial Owner Owned of Class
Adrian D. P. Bellamy . . . . . . . . . . 0 <F11>
John G. Bowes. . . . . . . . . . . . . . 181,200 <F11>
Patricia DeRosa. . . . . . . . . . . . . 133,768 <F1><F2> <F11>
Millard S. Drexler . . . . . . . . . . . 3,814,827 <F3><F2> 2.6%
Donald G. Fisher . . . . . . . . . . . . 33,607,091 <F4> 23.3%<F4>
Doris F. Fisher . . . . . . . . . . . . 33,607,091 <F4> 23.3%<F4>
Robert J. Fisher . . . . . . . . . . . . 6,079,424 <F5> 4.2%
Lucie J. Fjeldstad . . . . . . . . . . . 0 <F11>
William A. Hasler. . . . . . . . . . . . 500 <F11>
John M. Lillie . . . . . . . . . . . . . 1,000 <F6> <F11>
Richard M. Lyons . . . . . . . . . . . . 116,224 <F7><F2> <F11>
Charles R. Schwab. . . . . . . . . . . . 2,541 <F8> <F11>
Brooks Walker, Jr. . . . . . . . . . . . 73,300 <F9> <F11>
All directors and executive
officers as a group (17 persons) 50,247,219 <F10><F2> 34.9%
<F11> Indicates ownership of less than 1% of the outstanding shares of the
Company's Common Stock.
<F1> Includes 25,900 shares which Ms. DeRosa has the right to acquire
within 60 days after March 27, 1995 upon exercise of stock options.
Also included are 90,000 shares owned jointly by Ms. DeRosa and her
spouse and 820 shares held for the benefit of her minor children.
<F2> Includes shares as to which restrictions have not lapsed which were
granted under the Company's Restricted Stock Plan, and shares held by
the executive officer in his or her retirement account under the
GapShare Plan, a retirement plan that qualifies under Section 401(k)
of the Internal Revenue Code of 1986, as amended.
<F3> Includes 120,000 shares which Mr. Drexler has the right to acquire
within 60 days after March 27, 1995 upon exercise of stock options.
<F4> Donald G. Fisher and Doris F. Fisher, who are husband and wife, are
the founders of the Company, directors, and, respectively, the
Chairman and Chief Executive Officer of, and a merchandising
consultant to, the Company. Their address is the same as that shown
for the Company on the first page of this Proxy Statement. In the
table shown above, 33,607,091 shares beneficially owned by Donald G.
Fisher and Doris F. Fisher are reflected as being beneficially owned
by each of them; therefore, the number of shares and percentage of
class reflected for each of them should not be added in determining
the actual number of shares or percentage owned by both of them. Of
the shares shown as owned by each of them, 31,809,259 shares,
representing 22.1% of the Company's Common Stock, are held in The
Donald and Doris Fisher 1991 Revocable Trust, of which they are
trustees. The remainder of the shares are held in various trusts and
foundations of which they are trustees. The shares shown as owned by
each of them exclude an aggregate of 18,202,054 shares beneficially
held by family members, as to which shares Mr. and Mrs. Fisher each
disclaim any beneficial interest.
<F5> Includes 50,900 shares which Robert Fisher has the right to acquire
within 60 days after March 27, 1995 upon exercise of stock options,
and shares as to which restrictions have not lapsed which were granted
under the Company's Restricted Stock Plan. Also included are 70,000
shares held jointly by Mr. Robert Fisher and his spouse, 15,814
shares owned by his spouse and 23,285 shares held by Robert Fisher as
trustee for his nieces and nephews.
<F6> Represents shares held under the Lillie Family Living Trust, for which
Mr. Lillie and his wife share voting and investment power.
<F7> Includes 10,800 shares which Mr. Lyons has the right to acquire within
60 days after March 27, 1995 upon exercise of stock options. Also
included are 16,700 shares owned jointly by Mr. Lyons and his spouse,
and 500 shares held for the benefit of his minor children.
<F8> Includes 500 shares owned by Mr. Schwab's spouse.
<F9> Includes 30,000 shares owned by the Brooks Walker, Jr. Charitable
Remainder Trust, of which Mr. Walker is the trustee and over which he
has sole voting and investment rights.
<F10> Includes 319,500 shares which certain directors and executive officers
have the right to acquire within 60 days after March 27, 1995 upon
exercise of stock options.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Except for Mr. Bellamy and Ms. Fjeldstad, who were appointed to the
Board of Directors on April 5, 1995 and March 21, 1995, respectively, all
directors were elected at the Annual Meeting held in 1994. Directors will
be elected at the Annual Meeting to serve until the next Annual Meeting and
until their successors are elected. The Board of Directors proposes to
nominate the eleven current directors. In the absence of instructions to
the contrary, shares represented by the proxy will be voted for the
election of all such nominees to the Board of Directors. The Board of
Directors has no reason to believe that any of these nominees will be
unable to serve. However, if any nominee should for any reason be
unavailable to serve, the proxies will be voted for the election of such
other person to the office of director as the Board of Directors may
recommend in place of such nominee. Set forth below is certain information
concerning the nominees which is based on data furnished by them.
Name, Age, Principal Occupation Served as
During Past Five Years and Director
Other Information Since
Adrian D. P. Bellamy, 53 1995
Former Chairman and Chief Executive Officer of DFS Group Limited,
specialty retailer. Director of Starbucks Corporation, gourmet
coffee retailer.
John G. Bowes, 66 <F12><F13> 1974
Former Chairman of Kransco Group Companies, manufacturer of
recreational products.
Millard S. Drexler, 50 1983
President of the Company since 1987 and Chief Operating Officer of
the Company since 1993; Chief Executive Officer of Banana Republic,
Inc. since 1988; Chief Executive Officer of the Gap Division since
1987. Director of Williams-Sonoma, Inc., specialty retailer.
Donald G. Fisher, 66 <F14><F15> 1969
Chairman and Chief Executive Officer of the Company; Director of
Ross Stores, Inc., clothing retailer; Director of The Charles
Schwab Corporation, discount securities brokerage; and Director of
AirTouch Communications, telecommunications company.
Doris F. Fisher, 63 <F15> 1969
Merchandising consultant to the Company.
Robert J. Fisher, 40 <F16> 1990
Executive Vice President and Chief Financial Officer of the
Company since 1993; Executive Vice President and Chief Operating
Officer of the Company, 1992-1993; President of Banana Republic,
Inc., 1989-1992.
Lucie J. Fjeldstad, 51 <F13><F14> 1995
President, Video and Networking, Tektronix, Inc., electronics
company, since 1995. President, Fjeldstad International, consulting
company, from 1993 to 1995. Vice President and General Manager,
Multimedia, IBM, from 1992 to 1993; and Vice President, IBM, and
President, Multimedia and Education Division, IBM, from 1990 to
1992. Director of KeyCorp Ohio, bank holding company; Director of
Entergy Corp. DE, utility holding company; Director of Recognition
International, Inc., imaging systems manufacturer; and Director
of Bolt Beranek & Newman, Inc., manufacturer of computer support
systems.
William A. Hasler, 53 <F12><F13><F14> 1991
Dean, Haas Graduate School of Business, University of California,
Berkeley since 1991. Vice Chairman, Management Consulting, KPMG
Peat Marwick from 1986 to 1991. Director of Tenera MLP,
information services company; Director of Aphton, Inc.,
biotechnology pharmaceutical company; Director of ESCAgenetics,
Inc., biotechnology company; and Director of Teknekron
Communication Systems, communications technology company. Governor
of the Pacific Stock Exchange.
John M. Lillie, 58 <F12><F13><F14> 1992
Chairman and Chief Executive Officer of American President
Companies, Ltd., transportation company, since 1992. President
and Chief Operating Officer of American President Companies,
Ltd., 1990-1991. General Partner of Sequoia Associates, private
investment firm, 1989-1990. Director of Vons Companies,
supermarket chain.
Charles R. Schwab, 57 <F12><F14> 1986
Chairman and Chief Executive Officer of The Charles Schwab
Corporation, discount securities brokerage. Director of
Transamerica Corporation, insurance and financial services
company; and Director of AirTouch Communications,
telecommunications company.
Brooks Walker, Jr., 67 <F12><F13><F14> 1972
General Partner, Walker Investors, venture capital investment
partnership. Director of Pope & Talbot, Inc., manufacturer of
wood products; and Director of AT&T Capital Corporation,
equipment leasing and financing company.
____________________________
<F12> Member of the Audit and Finance Committee.
<F13> Member of the Compensation and Stock Option Committee.
<F14> Member of the Corporate Governance Committee.
<F15> Donald G. Fisher and Doris F. Fisher are husband and wife.
<F16> Robert J. Fisher is the son of Donald G. and Doris F. Fisher.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Board of Directors has three standing committees: the Audit and
Finance Committee and the Compensation and Stock Option Committee, both of
which are composed of directors who are not employees of the Company, and
the Corporate Governance Committee, which is made up of five non-employee
directors and one employee director.
The functions of the Audit and Finance Committee are to recommend the
engagement of the Company's independent auditors; to review with them the
plan, scope and results of their audit for each year; to review with the
Company's internal auditors the plan, scope and results of their
operations; and to consider and review other matters relating to the
financial and accounting affairs of the Company. This committee is
composed exclusively of directors who are, in the opinion of the Board of
Directors, free from any relationship that will interfere with the exercise
of independent judgment as a committee member. The present members of the
Audit and Finance Committee are Messrs. Bowes, Hasler, Lillie, Schwab and
Walker (who is Chairman).
The functions of the Compensation and Stock Option Committee are to
review and approve salaries and other forms of compensation for all
corporate and divisional officers; to approve the guaranteeing or granting
of loans to certain corporate and divisional officers under the Company's
Relocation Loan Plan; to grant stock options and restricted stock to
selected employees under the Company's stock plans; and to make awards
under the Company's management incentive plans to key employees. This
committee is composed exclusively of directors who have not been eligible
to receive stock options or awards under such plans (except for
predetermined, formula-based awards, as described below) for a period of
at least one year prior to membership on the committee. The present
members of the Compensation and Stock Option Committee are Mr. Bowes (who
is Chairman), Ms. Fjeldstad, and Messrs. Hasler, Lillie, and Walker.
The functions of the newly-created Corporate Governance Committee are
to make recommendations to the Board on all matters concerning corporate
governance and directorship practices, including the qualifications of
officers, directors, candidates for election as directors, the size,
composition, compensation and function of the Board of Directors, the
functions and duties of the committees of the Board, the effectiveness and
procedures of the Board, and succession planning for important Company
functions. The present members of the Corporate Governance Committee are
Mr. Donald Fisher (who is Chairman), Ms. Fjeldstad, and Messrs. Hasler,
Lillie, Schwab and Walker.
During the last fiscal year, the Board of Directors held six meetings,
the Audit and Finance Committee held two meetings, the Compensation and
Stock Option Committee held two meetings, and the Corporate Governance
Committee, which was created at the end of the fiscal year, did not hold
any meetings. Except for Messrs. Bowes and Lillie, no directors attended
fewer than 75% of the aggregate of (i) the total number of meetings of the
Board of Directors held while they were members, and (ii) the total number
of meetings held by all Committees of the Board on which they were members.
COMPENSATION OF DIRECTORS
The Company does not pay director fees to directors who are employees
of the Company or any affiliated company. Directors who are not employees
of or consultants to the Company do not receive any form of direct
remuneration other than as described below. In addition, travel expenses
to attend meetings of the Board of Directors are reimbursed by the Company.
All directors are eligible to receive discounts on Company merchandise.
Each director of the Company who is not an employee receives
director's fees in the form of an annual retainer of $36,000 per year,
payable quarterly, which is diminished by $2,500 for each Board and/or
Committee meeting day missed.
Under the Company's Amended and Restated 1981 Stock Option Plan, non-
employee directors are eligible to receive stock options according to a
pre-determined formula, as follows: (i) at the time of appointment as
director, each new non-employee director automatically receives an option
to purchase 5,000 shares at the then-current fair market value; and (ii)
on the first business day after the date of the annual meeting of
stockholders, each continuing or newly appointed non-employee director
automatically receives an option to purchase 1,000 shares at the then-
current fair market value. The options normally become exercisable three
years after the date of grant.
The Non-Employee Director Retirement Plan is an unfunded deferred
compensation plan which sets mandatory retirement from service on the Board
at age 72 and provides for annual benefits if a director has served on the
Board for five consecutive years and is still a director at age 72. The
annual benefit payable to an eligible retired director is equal to 75% of
the annual retainer fee in effect at the time of the director's retirement.
The duration of these annual payments equals the number of years that the
director served on the Board. If the director dies before the maximum
payment period expires, payments will continue for the life of his or her
surviving spouse, or until the end of the maximum payment period, whichever
is sooner.
In fiscal 1994, Doris Fisher received $24,000 for merchandising
services rendered in the course of her employment with the Company. As a
Company employee, Mrs. Fisher participates in all benefits which the
Company makes available to all its employees generally.
Information concerning the executive officers of the Company is set
forth in the Company's annual report on Form 10-K for the fiscal year ended
January 28, 1995.
EXECUTIVE COMPENSATION
The following table sets forth compensation paid to, earned by or
awarded to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company for the periods presented.
The footnotes to the table provide additional information concerning the
Company's compensation and benefit programs.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards
Other Restricted Securities All
Annual Stock Underlying Other
Name and Fiscal Compensation Awards Options Compensation
Principal Position Year Salary($) Bonus($) ($)<F17> ($)<F18> (#)<F19> ($)<F20>
<S> <C> <C> <C> <C> <C> <C> <C>
Donald G. Fisher, 1994 1,450,662 715,000 32,085 N/A N/A 9,606
Chairman and Chief 1993 1,397,808 1,082,000 - N/A N/A 9,259
Executive Officer 1992 1,325,211 0 - N/A N/A 7,190
Millard S. Drexler, 1994 1,449,731 715,000 22,490 0 19,300 7,616
President and Chief 1993 1,396,907 1,082,500 - 0 19,300 8,882
Operating Officer 1992 1,324,691 0 - 40,250,000 15,000 7,190
Robert J. Fisher, 1994 600,940 297,675 - 0 14,000 9,296
Executive Vice President 1993 570,904 450,000 - 566,250 14,000 7,852
Chief Financial Officer 1992 475,786 50,000 - 0 10,200 8,945
Richard M. Lyons, 1994 581,324 288,000 - 0 14,000 9,717
Executive Vice President, 1993 463,115 400,000 - 1,269,375 14,000 9,415
Gap, Inc. 1992 336,091 100,000 - 0 3,600 9,017
& President, Gap Division
Patricia DeRosa, 1994 544,305 150,000 - 0 14,000 9,401
President, GapKids 1993 518,884 335,101 - 566,250 14,000 9,102
Division 1992 438,305 50,000 - 0 10,200 8,879
_________________________________________
</TABLE>
<F17> While the named executive officers enjoy certain perquisites, for
fiscal years 1992, 1993 and 1994 these did not exceed the lesser of
$50,000 or 10% of each officer's salary and bonus. The amounts listed
for Messrs. Donald Fisher and Drexler represent above-market earnings
on deferred compensation payable during the fiscal year but deferred
at their election under the Company's Executive Capital Accumulation
Plan.
<F18> Donald Fisher does not participate in the Company's restricted stock
plan. No named executive received a restricted stock award in fiscal
1994. As of the end of fiscal 1994, the aggregate restricted stock
holdings for the named executives consisted of 3,705,000 shares worth
$120,412,500 at the then-current fair market value (as represented by
the closing price of the Company's Common Stock on January 28, 1995),
without giving effect to the diminution of value attributable to the
restrictions on such stock. Such amount included $113,750,000 for Mr.
Drexler (3,500,000 shares), $1,950,000 for Robert Fisher (60,000
shares), $2,762,500 for Mr. Lyons (85,000 shares), and $1,950,000 for
Ms. DeRosa (60,000 shares). Dividends are paid on the restricted
shares to the extent payable on the Company's Common Stock generally.
No shares granted to the named executives vest in less than three
years from the date of grant.
<F19> Donald Fisher does not participate in the Company's stock option plan.
<F20> These amounts represent the Company's contributions to the Company's
GapShare Plan for fiscal year 1994 and 1993. For fiscal year 1992,
the amounts represent the Company's contributions to the Company's
GapShare Plan and Supplemental Executive Retirement Plan ("SERP").
The non-qualified SERP was discontinued on December 31, 1993 and the
Company made no contributions under the SERP to the named executives
in 1993.
The following two tables set forth certain information regarding stock
options granted to, exercised by and held by the executive officers named
in the foregoing Summary Compensation Table.
<TABLE>
Option Grants In Last Fiscal Year
Individual Grants
<CAPTION>
Number of Potential Realizable Value at
Securities Percent of Total Assumed Annual Rates of Stock
Underlying Options Granted Exercise or Price Appreciation for
Options to Employees in Base Price Expiration Option Term<F24>
Name Granted(#)<F21> Fiscal Year ($/Sh)<F22> Date<F23> 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Donald G. Fisher N/A N/A N/A N/A N/A N/A
Millard S. Drexler 19,300 1.7% $45.1875 3/22/2002 $416,398 $997,345
Robert J. Fisher 14,000 1.2% $45.1875 3/22/2002 $302,050 $723,463
Richard M. Lyons 14,000 1.2% $45.1875 3/22/2002 $302,050 $723,463
Patricia DeRosa 14,000 1.2% $45.1875 3/22/2002 $302,050 $723,463
</TABLE>
__________________________________________
<F21> All options granted in fiscal 1994 are exercisable in full
three years from date of grant. Under the terms of the
Company's Amended and Restated 1981 Stock Option Plan, the
Compensation and Stock Option Committee retains discretion,
subject to plan limits, to modify the terms of outstanding
options. Donald Fisher does not participate in the Company's
stock option plan.
<F22> All options were granted at market value (average of high and
low stock prices for the Company's Common Stock as reported
in the Western edition of The Wall Street Journal) at date of
grant.
<F23> All options granted in fiscal 1994 were granted for a term of
eight years, subject to termination 90 days following
termination of employment in certain events.
<F24> Realizable values are reported net of the option exercise
price but before any income taxes that the executives may have
to pay. The dollar amounts under these columns are the result
of calculations at the 5% and 10% rates (determined from the
price at the date of grant, not the stock's current market
value) set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. Actual
gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock as well as the
optionholder's continued employment through the vesting
period. The potential realizable value calculation assumes
that the optionholder waits until the end of the option term
(eight years from date of grant) to exercise the option. The
amounts reflected in this table may not be achieved.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Shares Acquired Options at FY-End(#) Options at FY-End ($)
Name On Exercise (#) Value Realized($) Exercisable/Unexercisable Exercisable/Unexercisable<F25>
<S> <C> <C> <C> <C> <C> <C> <C>
Donald G. Fisher <F26> N/A N/A N/A N/A N/A N/A
Millard S. Drexler 40,000 792,500 120,000 38,600 1,999,219 80,819
Robert J. Fisher 0 0 50,900 28,000 550,109 58,625
Richard M. Lyons 14,400 408,850 10,800 28,000 57,375 58,625
Patricia DeRosa 5,600 165,900 25,900 28,000 125,109 58,625
</TABLE>
<F25> Represents the difference between the closing price of the
company's Common Stock on January 28, 1995 and the exercise
price of the options.
<F26> Donald Fisher does not participate in the Company's stock
option plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has an employment agreement with Mr. Drexler,
which provides that Mr. Drexler's employment can only be terminated
for cause. In addition, the agreement provides: (i) in the event
of termination of employment by either party, that Mr. Drexler can
require the Company to repurchase his San Francisco residence for
an amount equal to his federal income tax basis in the residence
plus an amount calculated to reflect the average increase in value
of certain New York City properties during the period from November
1983 to the date of repurchase; (ii) in the event Mr. Drexler's
employment with the Company is terminated within stated time
periods of a change of control of the Company (defined to include
an acquisition of shares of the Company having a majority of the
votes that can be cast for election of directors or an event
resulting in a change of a majority of the members of the Board of
Directors), that he is entitled to receive an amount equal to two
times his then current annual salary; and (iii) in the event Mr.
Drexler voluntarily terminates his employment with the Company on
less than twelve months' prior notice, that he must pay the Company
$100,000 as liquidated damages for each month less than twelve.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of
Directors consists of Messrs. Bowes, Hasler, Lillie and Walker, all
of whom are outside directors. Mr. Lillie is the Chairman and
Chief Executive Officer of American President Companies, Ltd.,
whose foreign and domestic subsidiaries furnish consolidation and
distribution services to the Company. A total of $8,932,019 was
paid by the Company to these entities during fiscal 1994 for these
services.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of
Directors is responsible for reviewing and approving the Company's
compensation policies and the compensation paid to executive
officers. The Committee is comprised of the members named below,
all of whom are non-employee Directors.
Compensation Philosophy
The general philosophy of the Company's compensation program,
which has been reviewed and approved by the Committee, is to offer
employees competitive compensation based both on the Company's
performance and on the individual's contribution and performance.
Corporate and divisional performance are evaluated by reviewing the
extent to which financial and strategic goals are met, including
such factors as profitability, asset management, sales growth and
expense control. These performance criteria are reviewed each year
to ensure that they are consistent with the Company's mission and
strategies. Individual performance is evaluated by reviewing
organizational and management development progress against set
objectives and the degree to which teamwork and Company values are
fostered.
The Company's compensation policies are intended to motivate
and reward highly qualified executives for long-term strategic
management and the enhancement of stockholder value, to support a
performance-oriented environment that rewards achievement of
specific internal Company goals, and to attract and retain
executives whose abilities are critical to the long-term success
and competitiveness of the Company.
There are three main components in the Company's executive
compensation program:
- Base Salary
- Annual Incentives
- Long-Term Incentives
Base Salary
Executive officers' salaries have been targeted at or above
the average rates paid by competitors to enable the Company to
attract, motivate, reward and retain highly skilled executives.
The Committee believes that the historical growth in the Company's
revenues, stores and profitability has made the Company a target
for other companies seeking key executives and that, therefore,
these rates are necessary to retain key employees. The Committee
reviews and approves salaries for the Chief Executive Officer and
the executive officers on an annual basis, generally in the first
quarter.
The Committee believes that the market for retailing
executives, and thus the relevant competitive data, includes a
broader group of companies than that shown in the stock price
performance graph presented in this proxy statement on page 12.
Thus, in reviewing the 1994 salaries for executive officers, the
Committee examined salary increase surveys for specialty retail and
general industry groups which were prepared by national consulting
companies (e.g., The Hay Group, Wyatt, William Mercer, Coopers &
Lybrand and ACA). The Committee approved average salary increases
of 5.5% for all employees, which were in line with the averages
reflected in these surveys. In addition, individual base salaries
of executive officers were reviewed and adjusted based on actual
individual job performance and/or changes in the position's duties
and responsibilities. In making salary decisions, the Committee
exercised its discretion and judgment based on these factors. No
specific formula was applied to determine the weight of each
factor.
For fiscal year 1994, individual adjustments in base pay for
four of the five executive officers named in this proxy statement
ranged from 3.5% to 5.2%, which is below the 5.5% average salary
increase guideline set for all of the Company's employees. The
amounts reported in the Summary Compensation Table for these
executives appear to represent increases greater than 5.5% over
1993 salaries because it is the Company's practice to implement new
salary levels during the first quarter but not at the beginning of
any given fiscal year. The remaining named executive officer
received a 20% salary increase, due to the record performance (in
terms of sales and earnings increases) of the division this
executive heads.
Donald Fisher's base salary for fiscal year 1994 was
$1,460,000, representing a salary increase of 3.5% over fiscal
1993. Again, this increase was below the 5.5% average salary
increase guideline for all employees. In setting the Chief
Executive Officer's 1994 salary, the Committee considered equally
the Company's 1993 results and Mr. Fisher's individual performance
and contribution. The Company's 1993 performance (including record
sales and a 23% earnings increase) was judged by the Committee to
be excellent. Among Mr. Fisher's individual contributions to the
Company were his leadership role in achieving its three strategic
priorities for the year (profitability through inventory control
management and expense control, sales productivity through
merchandise creativity, and long-term growth through communication
and people development) while continuing to build the Company's
global brand. In making its salary decision with respect to Mr.
Fisher, the Committee exercised its discretion and judgment based
on the above factors, and no specific formula was applied to
determine the weight of each factor.
Annual Incentive Bonus
Annual incentive bonuses for executive officers are intended
to reflect the Committee's belief that a significant portion of the
annual compensation of each executive officer should be contingent
upon the performance of the Company.
To carry out this philosophy, the Company has implemented a
performance-based Executive Management Incentive Cash Award Plan
(Executive MICAP), in which executive officers are measured solely
on Company performance targets. There is no individual performance
measurement for executive officers in the plan. As a pay-for-
performance plan, the Executive MICAP is intended to motivate and
reward executive officers by directly linking the amount of any
cash bonus to specific corporate and/or divisional financial goals.
Specific measurements are chosen each year among earnings, sales
growth and volume, return on assets, and/or return on equity; and
threshold, target and maximum payout levels are established to
reflect the Company's objectives. These goals and the potential
amounts of executive officer bonuses are reviewed and approved by
the Committee in the first quarter of each year. Under the 1994
guidelines adopted by the Committee, executive officers were
eligible to receive between 16.7% and 75% of their salary as a
bonus, depending on actual earnings performance compared to target
earnings goals set for each division. Actual bonus amounts are
calculated within this range pursuant to a set formula which takes
into account the growth potential of a division, the extent to
which earnings goals were achieved, and the grade level of the
officer.
The performance-based philosophy underlying the Executive
MICAP is illustrated by the bonus payments made in fiscal 1992,
when the Company's performance fell short of the goals set by the
Committee: in that year, the Chief Executive Officer and the
President received no bonuses and bonuses received by the other
named executive officers aggregated $200,000. Conversely, in 1993,
when the Company exceeded the goals set by the Committee and
achieved record operating profits, all executive officers were paid
the maximum level of bonuses.
The Company's 1994 performance (including a sales increase of
13% and an earnings increase of 24%) was judged by the Committee to
be right within the target levels. As a result, the Chief
Executive Officer and other named executive officers received
annual incentive bonuses for 1994 which aggregated $2,166,475 and
which were at target levels.
The Chief Executive Officer was eligible to receive between
16.7% and 75% of his base salary as a bonus under the 1994
guidelines adopted by the Committee. The actual bonus received by
Mr. Fisher was 49% of his base salary.
The Committee believes that the Executive MICAP program
provides an excellent link between earnings performance and the
incentives paid to executives.
Long-Term Incentives
The Company utilizes both stock options and restricted stock
as long-term incentives to reward and retain employees. The
Committee believes that these programs serve to link management and
stockholder interests and to motivate executive officers to make
long-term decisions that are in the best interests of the Company
and that will, over the long run, give the best return to
stockholders. The Committee also believes that executive officers
and other key employees should have significant ownership of the
Company's stock. Notably, all executive officers as a group own
approximately 35% of the outstanding shares of Common Stock. In
particular, Mr. Donald Fisher, the Company's founder and Chief
Executive Officer, owns jointly with his wife Doris Fisher
approximately 23% of the outstanding shares.
The Chief Executive Officer does not participate in the stock
option or restricted stock plans.
Stock Option Plan
With respect to executive officers, stock options are normally
granted on an annual basis, usually in the first quarter.
Generally, stock options vest three years after the grant date and
employees must be employed by the Company at the time of vesting in
order to exercise the options. The Committee believes that stock
option grants provide an incentive that focuses the executives'
attention on managing the Company from the perspective of an owner
with an equity stake in the business. Granted at the fair market
value on the date of grant, the Company's stock options are tied to
the future performance of the Company's stock and will provide
value to the recipient only when the price of the Company's stock
increases above the option grant price, that is, only to the extent
that stockholders as a whole have benefitted.
In order to determine the appropriate number of options to be
granted to its executive officers, the Company relied on
competitive guidelines prepared by an independent outside
compensation consultant based on practices for a wide array of
companies in a large number of industries. The consultant was
solely responsible for the criteria used to select the companies
included in the comparison group. The calculations underlying
these guidelines are based on the grant value of the option (i.e.,
number of shares times the exercise price) in relation to the
employee's salary and performance level. The Company's actual 1994
option grants to executive officers were in line with those ranges.
The size of each grant was based on a range of potential shares
(high, medium, low) for each eligible employee's salary level.
Actual shares awarded were based on the score obtained by eligible
employees on their yearly individual performance evaluation. No
consideration was given to the amount of shares previously granted
to executive officers.
Restricted Stock Plan
The Company's restricted stock grants are also a part of its
long-term incentives. Restricted stock awards have been granted
from time to time under the Company's restricted stock plan.
Generally, restrictions on the shares lapse in three to five years
from the grant date and the employee must still be employed by the
Company on the date the restrictions lapse in order to receive the
stock. The Committee utilizes these awards to attract new key
executives, to recognize and reward current executive officers for
special individual accomplishments, and to retain high-performing
officers and key employees by financially linking them to future
employment with the Company.
The ultimate value of any restricted stock received will vary
based both on dividends which may be paid and on the value of the
stock at the time when shares vest. Restricted stock awards build
stock ownership and provide a long-term focus since the stock is
restricted from being sold, transferred or assigned, and is
forfeitable.
During fiscal 1994, no grants of restricted stock were made to
the executives named in this proxy statement pursuant to the
Committee's determination to study the impact of Section 162(m) of
the Internal Revenue Code on the Company's Restricted Stock Plan
and to evaluate possible alternatives. Enacted in 1993, Section
162(m) generally disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1,000,000 in any
taxable year for any of the executive officers named in the proxy
statement, unless compensation is performance-based. The Committee
continues to consider possible alternatives and, pending the
outcome of these deliberations, may decide to grant restricted
stock to the named executives without the Plan being qualified
under Section 162(m).
Impact of Section 162(m) of the Internal Revenue Code
The Committee has considered the potential impact of Section
162(m) of the Internal Revenue Code on its compensation plans and
has determined that it is the Company's preference to qualify to
the maximum extent possible its executives' compensation for
deductibility under applicable tax laws. Except for the Restricted
Stock Plan, all other compensation plans qualify for deductibility
under Section 162(m).
In addition, to allow for full deductibility of base salaries,
those Named Executive Officers whose base salaries exceed the
$1,000,000 limit have in the past deferred that portion of their
compensation above the limit under either or both of the Company's
nonqualified deferred compensation plans, the Executive Capital
Accumulation Plan and the Executive Deferred Compensation Plan.
John G. Bowes (Chairman)
William A. Hasler
John M. Lillie
Brooks Walker, Jr.
PERFORMANCE GRAPH
The graph below compares the percentage changes in the
Company's cumulative total stockholder return<F27> on its Common
Stock for the five-year period ended January 28, 1995, with the
cumulative total return of the S&P 500 Index and the Dow Jones
Retailers - All Specialty Index.
The following chart represents data points on the performance graph
which appears in the printed version of this proxy.
1990 1991 1992 1993 1994 1995
The Gap, Inc. 100 185 466 305 377 293
Dow Jones 100 117 166 192 182 189
S&P 500 100 108 133 147 166 167
<F27> Total return assumes quarterly reinvestment of dividends.
OTHER REPORTABLE TRANSACTIONS
The Company has an agreement with Fisher Development, Inc.
("FDI"), which is wholly owned by Robert S. Fisher, the brother of
Donald G. Fisher, the Chairman, Chief Executive Officer and a
principal stockholder of the Company. The agreement, which is
reviewed annually by the Audit and Finance Committee of the Board
of Directors, sets forth the terms under which FDI may act as
general contractor in connection with the Company's construction
activities. During the 1994 fiscal year, FDI supervised the
construction of new store leasehold improvements for 159 stores,
expansions of 79 stores, and remodels of existing stores and
administrative offices. The total cost of such construction was
$142,791,424, including profit and overhead costs of $10,737,615
paid by the Company to FDI relating to this construction.
Robert J. Fisher and William S. Fisher, adult sons of
Donald G. and Doris F. Fisher, are employed as: Executive Vice
President and Chief Financial Officer of the Company; and
President, International Division of the Company, respectively.
Robert J. Fisher is also a director of the Company. William S.
Fisher was paid a salary and bonus of $501,092 during the 1994
fiscal year; Company contributions to his account under GapShare
for fiscal year 1994 amounted to $7,777.
Comparable transactions with the persons described above are
expected to continue during the current fiscal year.
On February 6, 1995, the Company repurchased from Millard S.
Drexler 250,000 shares of Common Stock which had been granted to
Mr. Drexler on February 23, 1988 under the Management Incentive
Restricted Stock Plan II and which were part of a total of 500,000
shares vesting on February 6, 1995. The purchase price was $33.75,
the average between the high and the low price reported on the New
York Stock Exchange for the Company's stock on that day, for a
total purchase price of $8,437,500.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC") and the New
York Stock Exchange. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the
Company believes that, during the period from January 30, 1994 to
January 28, 1995, all filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners
were complied with, except that Mr. Schwab's wife reported on a
Form 4 one late transaction which occurred in May 1991 and involved
the acquisition of 500 shares of Common Stock.
PROPOSAL NO. 2
PROPOSED ADOPTION OF THE
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan ("ESPP") was adopted by the
Board of Directors in October 1994 to encourage all employees to
become stockholders and to provide both a meaningful employment
benefit as well as an incentive to improved performance.
The ESPP entitles employees who elect to participate to invest
between 1% and 15% of their base salary toward the semi-annual
purchase of shares of the Company's Common Stock. The price
charged to participants at the end of each six-month period will
equal 85% of the closing price of the Company's stock on the New
York Stock Exchange Composite Transaction Index ("NYSE CTI") on the
purchase date or 85% of the closing price of the Company's stock on
the NYSE CTI at the beginning of the applicable plan year,
whichever is less (the "Discounted Price"). (The plan year begins
on June 1 and ends on the following May 31, except that the first
plan year runs from December 1, 1994, to May 31, 1995.)
The Company has reserved 2,000,000 shares of the Company's
Common Stock for purchase under the ESPP. As of March 27, 1995, no
shares had been sold under the ESPP (because the first purchase
date is not until May 31, 1995).
The following summary of the principal features of the ESPP is
qualified in its entirety by the full text of the ESPP, a copy of
which is attached hereto as Exhibit A.
The Plan became effective on December 1, 1994, and will remain
in effect until terminated or amended by the Board of Directors, or
insufficient shares remain available for purchase under the Plan.
The ESPP is administered by the Retirement Committee, which is
appointed by and serves at the discretion of the Board of
Directors. The members of the Retirement Committee are employees
of the Company. Subject to the terms of the ESPP, the Retirement
Committee has exclusive authority to construe and interpret the
ESPP, prescribe terms and provisions for participation, designate
other subsidiaries of the Company which may participate in the
ESPP, approve the number of shares which may be purchased through
the ESPP, and make such other determinations which the Retirement
Committee believes are necessary or advisable for administration of
the ESPP.
In the event of any reorganization, recapitalization, stock
split, reverse stock split, stock dividend, combination of shares,
merger, consolidation, offering of rights or other similar change
in the capital structure of the Company, appropriate adjustments
will be made in the number, kind and purchase price of the shares
available for purchase under the ESPP and in the maximum number of
shares subject to purchase under the ESPP.
The Board of Directors may amend, alter or terminate the ESPP
at any time. In the event the ESPP is terminated, the Board of
Directors may elect to terminate all outstanding rights to purchase
shares thereunder immediately or upon completion of the purchase of
shares on the next applicable purchase date. If such rights to
purchase are terminated prior to their expiration, all funds
contributed to the ESPP that have not been used to purchase shares
shall be returned to participating employees as soon as
administratively feasible.
Eligibility
Employees of the Company or a participating subsidiary are
eligible to participate in the ESPP unless the employee is
customarily scheduled to work less than five months in the calendar
year, is an executive officer of the Company (as defined by Rule
16a-1 of the Securities Exchange Act of 1934), or upon enrollment
owns or would have a right to acquire 5% or more of the Company's
Common Stock. Approximately 42,000 employees are currently
eligible to participate in the ESPP.
Enrollment and Contributions
Eligible employees elect whether or not to enroll in the ESPP
as of the first day of each plan year (the "Enrollment Date").
Employee contributions to the ESPP are made through payroll
deductions. Participating employees may contribute from 1% to 15%
(in whole percentages) of their base pay, and may increase or
decrease the contribution percentage at any time by written
notification to the Company's payroll department. At the end of
the last business day in May and November, the employee's payroll
deductions are used to purchase shares at the Discounted Price and
share certificates are then delivered to a broker designated by the
Retirement Committee to hold shares for the benefit of
participants.
Participation in the ESPP terminates when a participating
employee's employment with the Company ceases for any reason
(including death and disability). Participating employees may
withdraw their contributions which are not yet used to purchase
shares at any time by written notification to the Company's payroll
department. As soon as administratively feasible after such
termination of employment or cancellation of participation,
accumulated payroll deductions which have not yet been used to
purchase stock are refunded to the employee.
The Retirement Committee may set a maximum number of shares
which an employee may purchase pursuant to the ESPP during a
12-month enrollment period. Also, in no event may the aggregate
purchases which an employee may make in any year exceed $25,000.
The Company uses all proceeds from ESPP stock purchases for
general corporate purposes.
Certain Federal Income Tax Effects
United States taxpayers who participate in the ESPP are
subject to federal taxation only upon sale (or other disposition)
of shares purchased under the ESPP.
For shares which are not disposed of until more than 24 months
after the enrollment date under which the shares were purchased
(the "24-Month Period"), gain up to the amount of the 15% discount
from the market price of the stock on the enrollment date is taxed
as ordinary income. Any additional gain above this amount is taxed
at long-term capital gain rates. Shares held for the same 24-Month
Period and sold for less than the purchase price will receive long-
term capital loss treatment. Shares sold within the 24-Month
Period are taxed at ordinary income tax rates on the amount of
discount received from the stock's market price on the purchase
date. An additional gain (or loss) is taxed to the stockholder as
long-term or short-term capital gain (or loss), depending upon the
holding period. The holding period begins on the purchase date.
The Company receives a deduction for federal income tax
purposes in the amount taxable to the employee as ordinary income
when shares are disposed of by sale or gift within the 24-Month
Period. The Company does not receive such a deduction for shares
disposed of after the 24-Month Period.
Pro Forma Benefits for ESPP
Given that the first purchases of shares under the ESPP will
not occur until May 31, 1995, and that additional purchases will
occur at the end of each subsequent six-month period thereafter, it
is not possible to conclusively state the amount of benefits which
will be paid under the ESPP in any year. Instead, the following
table sets forth the amounts that would have been received by each
of the following groups if the first purchase had occurred on March
31, 1995.
New Plan Benefits
Employee Stock Purchase Plan
Dollar Number
Name and Position Value ($) of Units
Donald G. Fisher, Chairman and CEO <F28> <F28>
Millard S. Drexler, President and COO <F28> <F28>
Robert J. Fisher, Executive Vice President and CFO <F28> <F28>
Richard M. Lyons, Exec. Vice President - Gap, Inc. <F28> <F28>
& President - Gap Division
Patricia DeRosa, President - GapKids Division <F28> <F28>
Executive Group <F28> <F28>
Non-Executive Director Group <F28> <F28>
Non-Executive Officer Employee Group 320,214<F29> 65,942<F29>
________________________________________________________________
<F28> Not eligible to participate in the ESPP.
<F29> These pro-forma calculations are based on an actual enrollment
figure of 3,307 employees as of March 31, 1995. The dollar value
is based on the assumption of a four-month purchase period (from
December 1, 1994 through March 31, 1995) and a 15% discount applied
to the lower of the price at December 1, 1994 ($32.375) or March
31, 1995 ($35.50), for a purchase price of $27.52 and a discount of
$4.856 per share. The actual total amount of payroll deductions
accumulated as of March 31, 1995 was $1,814,739, yielding a total
amount of shares to be purchased of 65,942. The dollar value for
this group of employees is calculated by multiplying the per-share
discount amount ($4.856) by the number of shares to be purchased.
Required Vote
Approval of the ESPP requires the affirmative vote of a
majority of the shares represented, in person or by proxy, and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 3
PROPOSED AMENDMENT TO THE
EXECUTIVE MANAGEMENT INCENTIVE CASH AWARD PLAN
At the Annual Meeting there will be submitted to stockholders
a proposal to approve an amendment to the Company's Executive
Management Incentive Cash Award Plan ("Executive MICAP"). The
Executive MICAP is intended to provide the Company's executive
officers with financial incentives to meet and exceed pre-
determined financial goals of the Company and its divisions. The
Executive MICAP is intended to comply with Section 162(m) of the
Internal Revenue Code.
Under Section 162(m), the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to
each of its next four most highly compensated executive officers
may be limited to the extent that it exceeds $1 million in any one
year. However, the Company can continue to deduct compensation in
excess of that amount if the compensation qualifies as
"performance-based compensation" under Section 162(m).
In order that the Company might continue to provide incentive
compensation to its executive officers, and continue to receive a
federal income tax deduction for the payment of such compensation,
the Company's Board of Directors in March 1994 adopted the
Executive MICAP, which is intended to comply with Section 162(m).
The Company's stockholders approved the Executive MICAP at the 1994
Annual Meeting.
In March 1995, the Board of Directors amended and restated the
Executive MICAP, subject to the approval of the Company's
stockholders. The primary changes to the Executive MICAP were to
add six new financial performance measures which may be used in
setting the performance goals which must be achieved in order for
a bonus to be paid under the Executive MICAP. (Previously, the
Executive MICAP contained only one such performance measure.) If
approved at the Annual Meeting, the amended and restated Executive
MICAP will replace the version of the Executive MICAP that was
approved by the Company's stockholders in 1994.
The following summary of the principal features of the amended
and restated Executive MICAP is qualified in its entirety by the
full text of the Executive MICAP, a copy of which is attached
hereto as Exhibit B.
Eligibility for the Executive MICAP is determined annually in
the discretion of the Compensation and Stock Option Committee of
the Company's Board of Directors (the "Committee"), which is
responsible for the administration of the Executive MICAP. In
selecting participants for the Executive MICAP, each year the
Committee chooses from among the officers of the Company and its
affiliates whose responsibilities significantly influence Company
financial performance. For fiscal year 1995, the participants in
the Executive MICAP are the five individuals named in the table
below, and two of the Company's other executive officers.
Participation in future years will be at the discretion of the
Committee, but it currently is expected that a similar number of
officers will participate each year.
Under the Executive MICAP, cash awards are paid to eligible
participants for the achievement of target goals for one or more of
the following financial performance measures for the Company and/or
its divisions: comparable store sales growth, earnings, return on
equity, return on assets, sales volume, and/or total sales growth.
Each of these measures is defined in the Plan. For each fiscal
year, the Committee will set (1) the target bonuses for each
participant, and (2) the financial performance goals which must be
achieved prior to the payment of any bonuses. Target bonuses will
be expressed as a percentage (not to exceed 100%) of the
participant's base salary in effect at the time the Committee sets
the performance goals for the fiscal year. The Committee may set
performance goals which differ from participant to participant.
For example, the goals applicable to a participant for a given
fiscal year may be based on either company-wide or divisional
financial goal(s), as deemed appropriate by the Committee in light
of the officer's specific responsibilities.
A participant actually will be eligible to receive a bonus
only if the target goals applicable to him or her are achieved. In
setting the target bonuses and performance goals for a fiscal year,
the Committee will establish threshold (minimum), target, and
maximum payout bonus levels which will apply depending upon the
actual level of performance that is achieved. The payout levels
for differing performance results will be established by the
Committee for each fiscal year, with payouts which increase as
performance increases or decreases, depending upon the extent to
which the pre-determined goals are achieved or exceeded. However,
under no circumstances may the maximum bonus payable to any
participant under the Executive MICAP for any fiscal year exceed $3
million. After the end of each fiscal year, and prior to any
payment being made under the Executive MICAP, the Committee must
certify in writing the extent to which the performance goals
applicable to each participant were achieved or exceeded.
Under the Executive MICAP, all bonuses are to be paid in cash.
However, the Committee reserves the right to reduce (but not to
increase) the bonuses which otherwise would be payable under the
Executive MICAP for any fiscal year. Also, if a participant's
employment with the Company or its affiliates is terminated prior
to the end of a fiscal year, the Executive MICAP provides that he
or she shall not be eligible for a bonus for that fiscal year.
The Committee may amend the Executive MICAP at any time;
however, in doing so, the requirements of Section 162(m) must be
met in order that payments made to the Company's executive officers
thereunder remain eligible as deductible compensation expense to
the Company for federal tax purposes.
Pro Forma Benefits for Executive MICAP
Given that payments under the Executive MICAP are determined
by comparing the actual financial performance of the Company and
its divisions to the annual targets established by the Committee,
it is not possible to conclusively state the amount of benefits
which will be paid under the Executive MICAP in any year. Instead,
the following table sets forth the amounts that actually were
received by each of the following persons and groups for fiscal
year 1994 under the Executive MICAP, as previously approved by the
Company's Board of Directors and stockholders. For fiscal 1994,
awards were paid for the achievement of pre-determined goals for
pre-tax income of the Company and its divisions. For fiscal 1995
and later years, awards, if any, will be paid for the achievement
of goals using one or more of the six financial performance
measures discussed above.
New Plan Benefits
Executive Management Incentive Cash Award Plan
Dollar Number
Name and Position Value ($) of Units
Donald G. Fisher, Chairman and CEO 715,000 N/A
Millard S. Drexler, President and COO 715,000 N/A
Robert J. Fisher, Executive Vice President and CFO 297,675 N/A
Richard M. Lyons, Exec. Vice President-Gap, Inc. 288,000 N/A
and President-Gap Division
Patricia DeRosa, President-GapKids Division 150,000 N/A
Executive Group 2,460,475 N/A
Non-Executive Director Group <F30> N/A
Non-Executive Officer Employee Group <F30> N/A
_______________________________________________________
<F30> Not eligible to participate in the Executive MICAP.
Required Vote
The amendment of the Executive Management Incentive Cash Award
Plan requires the affirmative vote of a majority of the shares
represented, in person or by proxy, and entitled to vote at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT OF THE EXECUTIVE MANAGEMENT INCENTIVE CASH
AWARD PLAN.
PROPOSAL NO. 4
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as
independent auditors for the Company for the fiscal year ending
February 3, 1996. Deloitte & Touche LLP has acted as auditors for
the Company since 1972. Although action by the stockholders is not
required by law, the Board of Directors has determined that it is
desirable to request approval of this selection by the stockholders
of the Company. If the stockholders fail to approve the selection
of such auditors, the Board of Directors will reconsider the
selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE SELECTION OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS.
Representatives of Deloitte & Touche LLP are expected to be
present at the Annual Meeting of Stockholders and available to make
statements to, and respond to appropriate questions of,
stockholders.
OTHER BUSINESS
The Company's management is not aware of any other matters to
come before the meeting. If any matter not mentioned herein is
properly brought before the meeting, the persons named in the
enclosed proxy will have discretionary authority to vote all
proxies with respect thereto in accordance with their judgment.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next
annual meeting must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that
meeting on or before December 29, 1995.
By Order of the Board of Directors,
Anne B. Gust
Secretary
EXHIBIT A
THE GAP, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan
The Gap, Inc. hereby establishes The Gap, Inc. Employee Stock
Purchase Plan, effective as of December 1, 1994, in order to
provide eligible employees of the Company and its participating
Subsidiaries with the opportunity to purchase Common Stock through
payroll deductions. The Plan is intended to qualify as an employee
stock purchase plan under Section 423(b) of the Code.
2. Definitions
2.1 "1934 Act" means the Securities Exchange Act of 1934, as
amended. Reference to a specific Section of the 1934 Act or
regulation thereunder shall include such Section or regulation, any
valid regulation promulgated under such Section, and any comparable
provision of any future legislation or regulation amending,
supplementing or superseding such Section or regulation.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a specific Section of the Code or regulation
thereunder shall include such Section or regulation, any valid
regulation promulgated under such Section, and any comparable
provision of any future legislation or regulation amending,
supplementing or superseding such Section or regulation.
2.4 "Committee" shall mean the committee appointed by the
Company's Chief Executive Officer to administer the Plan. The
members of the Committee shall serve at the pleasure of the Chief
Executive Officer. Any member of the Committee may resign at any
time by notice in writing mailed or delivered to the Secretary of
the Company. As of the effective date of the Plan, the members of
the Committee shall consist of the Retirement Committee appointed
under GapShare, the Company's "401(k)" plan.
2.5 "Common Stock" means the common stock of the Company.
2.6 "Company" means The Gap, Inc., a Delaware corporation.
2.7 "Compensation" means a Participant's salary, wages
commissions and overtime pay. A Participant's compensation shall
not include any other type of remuneration.
2.8 "Eligible Employee" means every Employee of an Employer,
except (a) any Employee who is an officer of the Company (as
defined in Rule 16a-1 promulgated under the 1934 Act), and (b) any
Employee who, immediately after the grant of an option under the
Plan, would own stock and/or hold outstanding options to purchase
stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of
any Subsidiary of the Company (including stock attributed to such
Employee pursuant to Section 424(d) of the Code).
2.9 "Employee" means an individual who is a common-law
employee of any Employer, whether such employee is so employed at
the time the Plan is adopted or becomes so employed subsequent to
the adoption of the Plan. Notwithstanding the preceding sentence,
the term "Employee" shall not include any individual who is
classified as a "seasonal employee" (i.e., an employee whose
customary employment is for not more than 5 months in any calendar
year).
2.10 "Employer" or "Employers" means any one or all of the
Company and those Subsidiaries which, with the consent of the
Board, have adopted the Plan.
2.11 "Enrollment Date" means December 1, 1994, each June 1 of
each subsequent year, and/or such other dates determined by the
Committee (in its discretion) from time to time.
2.12 "Grant Date" means any date on which a Participant is
granted an option under the Plan.
2.13 "Participant" means an Eligible Employee who (a) has
become a Participant in the Plan pursuant to Section 4.1 and (b)
has not ceased to be a Participant pursuant to Section 8 or Section
9.
2.14 "Plan" means The Gap, Inc. Employee Stock Purchase Plan,
as set forth in this instrument and as hereafter amended from time
to time.
2.15 "Purchase Date" means the last business day of May and
November, or such other specific business days as may be
established by the Committee from time to time prior to an
Enrollment Date for all options to be granted on such Enrollment
Date.
2.16 "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting options under the Plan, each of
the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
3. Shares Subject to the Plan
3.1 Number Available. 2,000,000 shares of Common Stock are
available for issuance pursuant to the Plan. Shares sold under the
Plan may be newly issued shares or treasury shares.
3.2 Adjustments. In the event of any reorganization,
recapitalization, stock split, reverse stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or
other similar change in the capital structure of the Company, the
Board may make such adjustment, if any, as it deems appropriate in
the number, kind and purchase price of the shares available for
purchase under the Plan and in the maximum number of shares subject
to any option under the Plan.
4. Enrollment
4.1 Participation. Each Eligible Employee may elect to
become a Participant by enrolling or re-enrolling in the Plan
effective as of any Enrollment Date. In order to enroll, an
eligible employee must complete, sign and submit to the Company an
enrollment form in such form as may be specified by the Committee
from time to time. Any enrollment form received by the Company no
later than seven (7) calendar days before an Enrollment Date shall
be effective on that Enrollment Date, provided that the Committee,
in its discretion, may (on a uniform and nondiscriminatory basis)
specify an earlier or later deadline for the submission of
enrollment forms. Any Participant whose option expires and who has
not withdrawn from the Plan automatically will be re-enrolled in
the Plan on the Enrollment Date immediately following the Purchase
Date on which his or her option expires.
4.2 Payroll Withholding. On his or her enrollment form, each
Participant must elect to make Plan contributions via payroll
withholding from his or her Compensation at a rate equal to any
whole percentage from 1% to 15%, or such lesser percentage that the
Committee may establish from time to time for all options to be
granted on any Enrollment Date. A Participant may elect to
increase or decrease his or her rate of payroll withholding
(effective as of any Enrollment Date) by submitting a new
enrollment form in accordance with such procedures as may be
established by the Committee from time to time. A Participant may
stop his or her payroll withholding by submitting a new enrollment
form in accordance with such procedures as may be established by
the Committee from time to time. In order to be effective, an
enrollment form must be received by the Company no later than seven
(7) calendar days before the date elected for the change or
cessation, provided that the Committee, in its discretion, may (on
a uniform and nondiscriminatory basis) specify an earlier or later
deadline for the submission of enrollment forms. Any Participant
who is automatically re-enrolled in the Plan will be deemed to have
elected to continue his or her contributions at the percentage last
elected by the Participant.
5. Options to Purchase Common Stock
5.1 Grant of Option. On each Enrollment Date on which the
Participant enrolls or re-enrolls in the Plan, he or she shall be
granted an option to purchase shares of Common Stock.
5.2 Duration of Option. Each option granted under the Plan
shall expire on the earliest to occur of (a) the completion of the
purchase of shares on the last Purchase Date occurring within 27
months of the Grant Date of such option, (b) such shorter option
period as may be established by the Committee from time to time
prior to an Enrollment Date for all options to be granted on such
Enrollment Date, or (c) the date on which the Participant ceases to
be such for any reason. Until otherwise determined by the
Committee for all options to be granted on an Enrollment Date, the
period referred to in clause (b) in the preceding sentence shall
mean (a) for options granted on December 1, 1994, the period from
December 1, 1994, through May 31, 1995, and (b) for options granted
on or after June 1, 1995, the period from the applicable Enrollment
Date through the last business day of the May next following the
Enrollment Date.
5.3 Number of Shares Subject to Option. The number of shares
available for purchase by each Participant under the option will be
established by the Committee from time to time prior to an
Enrollment Date for all options to be granted on such Enrollment
Date. Notwithstanding the preceding, an option (taken together
with all other options then outstanding under this Plan and under
all other similar employee stock purchase plans of the Employers)
shall not give the Participant the right to purchase shares at a
rate which accrues in excess of $25,000 of fair market value at the
applicable Grant Dates of such shares (less the fair market value
at the applicable Grant Dates of any shares previously purchased
during such year under options which have expired or terminated) in
any calendar year during which such Participant is enrolled in the
Plan at any time.
5.4 Other Terms and Conditions. Each option shall be subject
to the following additional terms and conditions:
(a) payment for shares purchased under the option shall be
made only through payroll withholding under Section 4.2;
(b) purchase of shares upon exercise of the option will be
accomplished only in installments in accordance with Section 6.1;
(c) the price per share under the option will be determined as
provided in Section 6.1; and
(d) the option in all respects shall be subject to such other
terms and conditions (applied on a uniform and nondiscriminatory
basis), as the Committee shall determine from time to time in its
discretion.
6. Purchase of Shares
6.1 Exercise of Option. On each Purchase Date, the funds
then credited to each Participant's account shall be used to
purchase whole shares of Common Stock. Any cash remaining after
whole shares of Common Stock have been purchased shall be carried
forward in the Participant's account for the purchase of shares on
the next Purchase Date. The price of the shares purchased under
any option shall be 85% of the lower of:
(a) the closing price of Common Stock on the Grant Date for
such option on the New York Stock Exchange Composite Transactions
Index; or
(b) the closing price of Common Stock on the Purchase Date on
the New York Stock Exchange Composite Transactions Index.
6.2 Crediting of Shares. Shares purchased on any Purchase
Date shall be delivered to a broker designated by the Committee to
hold shares for the benefit of the Participants. As determined by
the Committee from time to time, such shares shall be delivered as
physical certificates or by means of a book entry system. Although
the Participant may direct the broker to sell such shares at any
time (subject to applicable securities laws), the shares may not be
transferred to another broker or to any other person (including the
Participant) until 24 months after the Grant Date of the option
with which the shares were purchased.
6.3 Exhaustion of Shares. If at any time the shares
available under the Plan are over-enrolled, enrollments shall be
reduced proportionately to eliminate the over-enrollment. Any funds
that cannot be applied to the purchase of shares due to over-
enrollment shall be refunded to the Participants (without
interest).
7. Withdrawal
7.1 Withdrawal. A Participant may withdraw from the Plan by
submitting a completed enrollment form to the Company. A
withdrawal will be effective only if it is received by the Company
at least seven (7) calendar days before the proposed date of
withdrawal, provided that the Committee, in its discretion, may
specify (on a uniform and nondiscriminatory basis) an earlier or
later deadline for the submission of enrollment forms. When a
withdrawal becomes effective, the Participant's payroll
contributions shall cease and all amounts then credited to the
Participant's account shall be distributed to him or her (without
interest).
8. Cessation of Participation
8.1 Termination of Status as Eligible Employee. A
Participant shall cease to be a Participant immediately upon the
cessation of his or her status as an Eligible Employee (for
example, because of his or her termination of employment from all
Employers for any reason). As soon as practicable after such
cessation, the Participant's payroll contributions shall cease and
all amounts then credited to the Participant's account shall be
distributed to him or her (without interest). Notwithstanding the
preceding sentence, if the Participant's termination is not entered
into the Company's payroll system in sufficient time to prevent the
purchase of shares on the next Purchase Date, the amounts then
credited to the Participant's account shall be used to purchase
whole shares of Common Stock, with any remaining amount refunded to
the Participant (without interest).
9. Designation of Beneficiary
9.1 Designation. Each Participant may, pursuant to such
uniform and nondiscriminatory procedures as the Committee may
specify from time to time, designate one or more Beneficiaries to
receive any amounts credited to the Participant's account at the
time of his or her death. Notwithstanding any contrary provision
of this Section 10, Sections 10.1 and 10.2 shall be operative only
after (and for so long as) the Committee determines (on a uniform
and nondiscriminatory basis) to permit the designation of
Beneficiaries.
9.2 Changes. A Participant may designate different
Beneficiaries (or may revoke a prior Beneficiary designation) at
any time by delivering a new designation (or revocation of a prior
designation) in like manner. Any designation or revocation shall
be effective only if it is received by the Committee. However,
when so received, the designation or revocation shall be effective
as of the date the designation or revocation is executed (whether
or not the Participant still is living), but without prejudice to
the Committee on account of any payment made before the change is
recorded. The last effective designation received by the Committee
shall supersede all prior designations.
9.3 Failed Designations. If a Participant dies without
having effectively designated a Beneficiary, or if no Beneficiary
survives the Participant, the Participant's Account shall be
payable to his or her estate.
10. Administration
10.1 Plan Administrator. The Plan shall be administered by
the Committee. The Committee shall have the authority to control
and manage the operation and administration of the Plan.
10.2 Actions by Committee. Each decision of a majority of
the members of the Committee then in office shall constitute the
final and binding act of the Committee. The Committee may act with
or without a meeting being called or held and shall keep minutes of
all meetings held and a record of all actions taken by written
consent.
10.3 Powers of Committee. The Committee shall have all
powers and discretion necessary or appropriate to supervise the
administration of the Plan and to control its operation in
accordance with its terms, including, but not by way of limitation,
the following discretionary powers:
(a) To interpret and determine the meaning and validity of
the provisions of the Plan and the options and to determine any
question arising under, or in connection with, the administration,
operation or validity of the Plan or the options;
(b) To determine any and all considerations affecting the
eligibility of any employee to become a Participant or to remain a
Participant in the Plan;
(c) To cause an account or accounts to be maintained for each
Participant;
(d) To determine the time or times when, and the number of
shares for which, options shall be granted;
(e) To establish and revise an accounting method or formula
for the Plan;
(f) To designate a broker to receive shares purchased under
the Plan and to determine the manner and form in which shares are
to be delivered to the designated broker;
(g) To determine the status and rights of Participants and
their Beneficiaries or estates;
(h) To employ such brokers, counsel, agents and advisers, and
to obtain such broker, legal, clerical and other services, as it
may deem necessary or appropriate in carrying out the provisions of
the Plan;
(i) To establish, from time to time, rules for the
performance of its powers and duties and for the administration of
the Plan;
(j) To adopt such procedures and subplans as are necessary or
appropriate to permit participation in the Plan by employees who
are foreign nationals or employed outside of the United States;
(k) To delegate to any one or more of its members or to any
other person, severally or jointly, the authority to perform for
and on behalf of the Committee one or more of the functions of the
Committee under the Plan.
10.4 Decisions of Committee. All actions, interpretations,
and decisions of the Committee shall be
conclusive and binding on all persons, and shall be given the
maximum possible deference allowed by law.
10.5 Administrative Expenses. All expenses incurred in the
administration of the Plan by the Committee, or otherwise,
including legal fees and expenses, shall be paid and borne by the
Employers, except any stamp duties or transfer taxes applicable to
the purchase of shares may be charged to the account of each
Participant. Any brokerage fees for the purchase of shares by a
Participant shall be paid by the Company, but brokerage fees for
the resale of shares by a Participant shall be borne by the
Participant.
10.6 Eligibility to Participate. No member of the Committee
who is also an employee of an Employer shall be excluded from
participating in the Plan if otherwise eligible, but he or she
shall not be entitled, as a member of the Committee, to act or pass
upon any matters pertaining specifically to his or her own account
under the Plan.
10.7 Indemnification. Each of the Employers shall, and
hereby does, indemnify and hold harmless the members of the
Committee and the Board, from and against any and all losses,
claims, damages or liabilities (including attorneys' fees and
amounts paid, with the approval of the Board, in settlement of any
claim) arising out of or resulting from the implementation of a
duty, act or decision with respect to the Plan, so long as such
duty, act or decision does not involve gross negligence or willful
misconduct on the part of any such individual.
11. Amendment, Termination and Duration
11.1 Amendment, Suspension, or Termination. The Board, in
its sole discretion, may amend or terminate the Plan, or any part
thereof, at any time and for any reason. If the Plan is
terminated, the Board, in its discretion, may elect to terminate
all outstanding options either immediately or upon completion of
the purchase of shares on the next Purchase Date, or may elect to
permit options to expire in accordance with their terms (and
participation to continue through such expiration dates). If the
options are terminated prior to expiration, all amounts then
credited to Participants' accounts which have not been used to
purchase shares shall be returned to the Participants (without
interest) as soon as administratively practicable.
11.2 Duration of the Plan. The Plan shall commence on the
date specified herein, and subject to Section 12.1 (regarding the
Board's right to amend or terminate the Plan), shall remain in
effect thereafter.
12. General Provisions
12.1 Participation by Subsidiaries. One or more Subsidiaries
of the Company may become participating Employers by adopting the
Plan and obtaining approval for such adoption from the Board. By
adopting the Plan, a Subsidiary shall be deemed to agree to all of
its terms, including (but not limited to) the provisions granting
exclusive authority (a) to the Board to amend the Plan, and (b) to
the Committee to administer and interpret the Plan. Any Subsidiary
may terminate its participation in the Plan at any time. The
liabilities incurred under the Plan to the Participants employed by
each Employer shall be solely the liabilities of that Employer, and
no other Employer shall be liable for benefits accrued by a
Participant during any period when he or she was not employed by
such Employer.
12.2 Inalienability. In no event may either a Participant,
a former Participant or his or her Beneficiary, spouse or estate
sell, transfer, anticipate, assign, hypothecate, or otherwise
dispose of any right or interest under the Plan; and such rights
and interests shall not at any time be subject to the claims of
creditors nor be liable to attachment, execution or other legal
process. Accordingly, for example, a Participant's interest in the
Plan is not transferable pursuant to a domestic relations order.
The preceding shall not affect the Participant's right to direct
the sale or transfer of shares that have been allocated to the
Participant's account at the broker designated by the Committee
(subject to the provisions of the Plan).
12.3 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the 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.
12.4 Requirements of Law. The granting of options and the
issuance of shares shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies
or securities exchanges as the Committee may determine are
necessary or appropriate.
12.5 No Enlargement of Employment Rights. Neither the
establishment or maintenance of the Plan, the granting of options,
the purchase of shares, nor any action of any Employer or the
Committee, shall be held or construed to confer upon any individual
any right to be continued as an employee of the Employer nor, upon
dismissal, any right or interest in any specific assets of the
Employers other than as provided in the Plan. Each Employer
expressly reserves the right to discharge any employee at any time,
with or without cause.
12.6 Apportionment of Costs and Duties. All acts required of
the Employers under the Plan may be performed by the Company for
itself and its Subsidiary, and the costs of the Plan may be
equitably apportioned by the Committee among the Company and the
other Employers. Whenever an Employer is permitted or required
under the terms of the Plan to do or perform any act, matter or
thing, it shall be done and performed by any officer or employee of
the Employers who is thereunto duly authorized by the Employers.
12.7 Construction and Applicable Law. The Plan is intended
to qualify as an "employee stock purchase plan" within the meaning
of Section 423 of the Code. Any provision of the Plan which is
inconsistent with Section 423 of the Code shall without further act
or amendment by the Company or the Board be reformed to comply with
the requirements of Section 423. The provisions of the Plan shall
be construed, administered and enforced in accordance with such
Section and with the laws of the State of California (excluding
California's conflict of laws provisions).
12.8 Captions. The captions contained in and the table of
contents prefixed to the Plan are inserted only as a matter of
convenience, and in no way define, limit, enlarge or describe the
scope or intent of the Plan nor in any way shall affect the
construction of any provision of the Plan.
EXHIBIT B
THE GAP, INC.
EXECUTIVE MANAGEMENT INCENTIVE CASH AWARD PLAN
(March 21, 1995 Amendment and Restatement)
1. Purpose of the Plan
The purpose of the Executive Management Incentive Cash Award
Plan (the "Plan") is to provide financial incentives for certain of
the Company's officers to meet and exceed the Company's annual
financial goals. The Plan is intended to qualify as "performance-
based compensation" under Code Section 162(m).
2. Definitions
2.1 "Affiliated Company" means any company controlling,
controlled by, or under common control with the Company.
2.2 "Award" means a cash award pursuant to the provisions of
the Plan.
2.3 "Base Salary" means as to a Fiscal Year, a Participant's
actual salary rate in effect on the Determination Date. Such
salary shall be before (1) deductions for taxes and benefits, and
(2) deferrals of compensation pursuant to Company-sponsored plans.
2.4 "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a specific section of the Code shall include
such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.5 "Committee" means the Compensation and Stock Option
Committee of the Company's Board of Directors, or any other
Committee appointed by the Board pursuant to Section 3 of the Plan.
2.6 "Company" means The Gap, Inc., a Delaware corporation.
2.7 "Comparable Store Sales Growth" means the Company's or a
division's net sales growth for the Fiscal Year in excess of the
prior year from stores open more than one year.
2.8 "Determination Date" means as to a Fiscal Year, the
earlier of (1) the first business day in April of such Fiscal Year,
or (2) the latest date possible which will not jeopardize the
Plan's qualification as "performance-based compensation" under Code
section 162(m).
2.9 "Earnings" shall mean either: (i) operating income of the
Company or one of its divisions for a given fiscal year less
certain allocated expenses (e.g., headquarters, distribution
centers, etc.); or (ii) income before taxes; determined in
accordance with Generally Accepted Accounting Principles, provided
that prior to the Determination Date the Committee shall determine
whether any significant non-recurring items or adjustments should
be excluded from the calculation.
2.10 "Fiscal Year" means the 1995 fiscal year of the Company
and each succeeding fiscal year of the Company.
2.11 "Officer" means an officer (whether or not a member of
the Company's Board of Directors) employed by the Company or any
Affiliated Company.
2.12 "Participant" means as to any Fiscal Year, an Officer who
has been selected by the Committee for participation in the Plan
for such Fiscal Year.
2.13 "Performance Goals" means the goal(s) (or combined
goal(s)) determined by the Committee (in its sole discretion) to be
applicable to a Participant for a Fiscal Year. As determined by
the Committee, the Performance Goals applicable to each Participant
shall provide for a targeted level or levels of achievement using
one or more of the following measures: (a) Comparable Store Sales
Growth, (b) Earnings, (c) Return on Equity, (d) Return on Assets,
(e) Sales Volume, and (f) Total Sales Growth. The Performance
Goals may differ from Participant to Participant, and may apply on
a company-wide or divisional basis, as deemed appropriate by the
Committee (in its sole discretion) in light of the Participant's
specific responsibilities.
2.14 "Return on Equity" means the Company's or a division's
Earnings expressed as a percentage of average shareholders' equity.
2.15 "Return on Assets" means the Company's or a division's
Earnings expressed as a percentage of average assets.
2.16 "Sales Volume" means the average total sales volume per
store of the Company or one of its divisions for the Fiscal Year,
determined in accordance with Generally Accepted Accounting
Principles.
2.17 "Termination of Employment" means the time when the
employee-employer relationship between the Participant and the
Company and its Affiliated Companies is terminated for any reason,
including, but not limited to, a termination by resignation,
discharge, death, permanent disability, retirement, or the
disaffiliation of an Affiliated Company, but excluding any such
termination where there is a simultaneous reemployment by either
the Company or one of its Subsidiaries or Affiliated Companies.
2.18 "Total Sales Growth" means the Company's or a division's
net sales growth for the Fiscal Year in excess of the prior year.
3. Administration of the Plan
3.1 The Plan shall be administered by the Committee, which
shall consist of no fewer than two members of the Company's Board
of Directors, who shall be appointed and serve at the pleasure of
the Company's Board of Directors. No member of the Company's Board
of Directors who is not an "outside director" under Code section
162(m) shall serve on the Committee.
3.2 Subject to the provisions of the Plan, the Committee
shall have exclusive authority to select the Plan Participants, and
to determine the target Award levels, the times when Awards will be
granted, and the Performance Goals which must be achieved prior to
payment of any Awards. For each Fiscal Year, all actions by the
Committee shall be taken by the Determination Date.
3.3 The Committee shall have all discretion and authority
necessary or appropriate to administer the Plan, including, but not
limited to, the power to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, and to make all
other determinations necessary or advisable in the administration
of the Plan, and such determination shall be final and binding upon
all persons having an interest in the Plan.
3.4 A majority of the Committee shall constitute a quorum,
and the acts of a majority of the members present at a meeting at
which a quorum is present or any action taken without a meeting by
a writing executed by a majority of the Committee shall constitute
the act of the Committee.
3.5 All expenses and liabilities incurred by the Committee in
the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants, or other
persons. The Committee, the Company and its officers and directors
shall be entitled to rely upon the advice, opinion, or valuations
of any such persons. No member of the Committee shall be
personally liable for any action, determination, or interpretation
taken or made with respect to the Plan, unless such action,
determination, or interpretation constitutes criminal misconduct,
willful negligence or demonstrates bad faith, and all members of
the Committee shall be fully protected by the Company in respect of
any such action, determination or interpretation.
4. Eligibility and Participation
The Plan is designed for Officers whose responsibilities
significantly influence Company results. Participants shall be
selected by the Committee prior to or on the Determination Date.
Participation in the Plan is on a Fiscal Year basis and in the sole
discretion of the Committee. Thus, an Officer who is selected for
participation in a given Fiscal Year is in no way guaranteed to be
selected for participation in any subsequent Fiscal Year or Years.
5. Determination of Awards
5.1 Award Pool Funding: Prior to or on the Determination
Date, the Committee, in its sole discretion, shall set a
Performance Goal or Performance Goals for the Fiscal Year.
Achievement of the Performance Goal(s) will result in the creation
of an actual pool called the Target Award Pool. At the same time,
the Committee, in its sole discretion, also will specify a minimum
funding threshold and a funding maximum, and the corresponding
levels of Award pool funding.
5.2 Prior to or on the Determination Date, the Committee, in
its sole discretion, shall assign each Participant a target Award
expressed as a percentage of Base Salary. The maximum percentage
of Base Salary that may be assigned to any Participant is 100%.
5.3 On or prior to the Determination Date, the Committee, in
its sole discretion, shall establish a payout table or formula for
purposes of determining the Award (if any) payable to each
Participant. Each payout formula or table shall (a) be in writing,
(b) be based on a comparison of actual performance to the
Performance Goals, (c) provide for the payment of a Participant's
target Award if the Performance Goals for the Fiscal Year are
achieved, and (d) provide for an actual Award greater than or less
than the Participant's target Award, depending upon the extent to
which actual performance exceeds or falls below the Performance
Goals.
5.4 After the end of each Fiscal Year, the Committee shall
certify in writing the extent to which the Performance Goals
applicable to each Participant for the Fiscal Year were achieved or
exceeded. The actual Award for each Participant shall be
determined by applying the payout formula or table to the level of
actual performance which has been certified by the Committee.
5.5 No Awards shall be paid to a Participant unless the
Company or division, as the case may be, achieves at least its
minimum Performance Goals for the Fiscal Year, as determined by the
Committee pursuant to Section 5.1 of the Plan.
5.6 The Committee, in its sole discretion, may reduce the
Award for any Participant below that which otherwise would be
payable in accordance with the Plan.
6. Maximum Award Payable
For any Fiscal Year, the maximum Award payable to any
Participant under the Plan shall be $3,000,000.
7. Payment of Award
Payment of Awards will be made in cash or its equivalent, on
or about April 1st following the completion of each Fiscal Year.
Notwithstanding any contrary provision of the Plan, (a) if a
Participant incurs a Termination of Employment prior to the end of
a Fiscal Year, he or she shall not be entitled to the payment of an
Award for such Fiscal Year, and (b) no provision of the Plan shall
be construed to create a trust or to establish or evidence any
Participant's claim of any right other than as an unsecured general
creditor with respect to any payment to which he or she may be
entitled. The Company shall withhold all applicable taxes required
by law from any payment, including any federal, FICA, state and
local taxes.
8. Employment Rights
Nothing in the Plan shall confer upon any Participant the
right to continue in the employ of the Company or its Affiliated
Companies or shall interfere with or restrict in any way the rights
of the Participant's employer to discharge or change the terms of
employment of any Participant at any time for any reason
whatsoever, with or without cause.
9. Effect upon Other Plans
The adoption of the Plan shall not affect any other equity or
other compensation or incentive plan in effect for the Company or
any Affiliated Company, and the Plan shall not preclude the
Company's Board of Directors from establishing any other forms of
incentive compensation for Officers.
10. Amendment, Suspension or Termination of the Plan
The Board, in its sole discretion, may alter, amend, or
terminate the Plan or any part thereof at any time and for any
reason; provided, however, that if and to the extent required to
ensure the Plan's qualification under Code section 162(m) as
"performance-based compensation", any such amendment shall be
subject to stockholder approval.
11. Effective Date
The effective date of the Plan, as amended and restated, is
March 21, 1995.
THE GAP, INC.
Annual Meeting of Stockholders - May 23, 1995
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Donald G. Fisher, Robert J. Fisher and
Anne B. Gust, or any of them, each with full power of substitution, as
proxies to vote all shares of common stock of the The Gap, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to
be held on May 23, 1995, and any postponements and adjournments thereof,
on all matters properly coming before the meeting.
IMPORTANT - This proxy must be signed and dated on the reverse side.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON
THE REVERSE SIDE. BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ON THE REVERSE SIDE, FOR PROPOSALS 2, 3
AND 4, AND, WITH RESPECT TO ANY OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING, IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES.
THE GAP, INC.
PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors, Nominees: FOR ALL
Adrian D. P. Bellamy, John G. Bowes, Millard S. FOR WITHHOLD EXCEPT AS
Drexler, Donald G. Fisher, Doris F. Fisher, LISTED
Robert J. Fisher, Lucie J. Fjeldstad, William A.
Hasler, John M. Lillie, Charles R. Schwab,
Brooks Walker, Jr.
2. Approval of the Employee Stock Purchase Plan. FOR AGAINST ABSTAIN
3. Approval of an amendment to the Executive FOR AGAINST ABSTAIN
Incentive Cash Award Plan.
4. Ratify the appointment of Deloitte & Touche LLP FOR AGAINST ABSTAIN
as independent auditors.
Date: , 1995
(Signature)
(Signature)
NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as Attorney, executor, administrator, trustee or
guardian, please give full title as such.
