<PAGE>
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NUMBER 333-70991
Prospectus Supplement to Prospectus dated April 27, 1999.
$250,000,000
[LOGO OF GAP INC.]
Floating Rate Notes due November 15, 2001
----------------
The Gap, Inc. will pay interest on the notes quarterly on the 15th day of
February, May, August and November of each year. The first such payment will
be made on August 15, 2000. The per annum rate of interest for each quarterly
interest period will be reset quarterly as described in this Prospectus
Supplement based on the three-month LIBOR plus 0.125%. The notes will be
issued only in denominations of $1,000 and integral multiples of $1,000.
The notes are not redeemable prior to maturity. There is no sinking fund
for the notes.
----------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense.
----------------
<TABLE>
<CAPTION>
Per Note Total
-------- ------------
<S> <C> <C>
Initial public offering price........................ 100.000% $250,000,000
Underwriting discount................................ 0.200% $ 500,000
Proceeds, before expenses, to The Gap, Inc. ......... 99.800% $249,500,000
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the notes will accrue from May 22, 2000 and must
be paid by the purchaser if the notes are delivered after May 22, 2000.
----------------
The underwriters expect to deliver the notes in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York, on May 22, 2000.
Goldman, Sachs & Co.
J.P. Morgan & Co.
Salomon Smith Barney
ABN AMRO Incorporated
Deutsche Banc Alex.Brown
HSBC Markets
SG Cowen
----------------
Prospectus Supplement dated May 17, 2000.
<PAGE>
THE COMPANY
General
We are a global specialty retailer operating stores selling casual apparel,
personal care and other accessories for men, women and children under the Gap,
Banana Republic and Old Navy brands. As of April 29, 2000, we operated 3,145
stores in the United States, Canada, the United Kingdom, France, Germany and
Japan.
We design virtually all of our products, which in turn are manufactured by
independent sources, and sell them under our brands in the following store
formats:
Gap. Founded in 1969, Gap stores offer extensive selections of
classically-styled, high quality, casual apparel at moderate price points.
Products range from wardrobe basics, such as denim, khakis and T-shirts,
to accessories and personal care products for men and women aged teen
through adult. We entered the children's apparel market with the
introduction of GapKids in 1986 and babyGap in 1989. These stores offer
casual basics, outerwear, shoes and other accessories in the tradition of
Gap style and quality for children aged newborn through teen. As of April
29, 2000, we operated a total of 2,245 Gap brand stores.
Banana Republic. Acquired in 1983 with two stores, Banana Republic now
offers sophisticated, fashionable collections of dress-casual and tailored
clothing and accessories for men and women at higher price points. Banana
Republic products range from clothing, including intimate apparel, to
personal care products and home products. As of April 29, 2000, we
operated 354 Banana Republic stores.
Old Navy. We launched Old Navy in 1994 to address the market for
value-priced family apparel. Old Navy offers broad selections of apparel,
shoes and accessories for adults, children and infants as well as other
items, including personal care products, in an innovative, exciting
shopping environment. As of April 29, 2000, we operated 546 Old Navy
stores.
We established Gap Online in 1997, a web-based store located at
www.gap.com. GapKids and babyGap web-based stores, located at www.gapkids.com
and www.babygap.com, were established in 1998. Products from Gap, GapKids and
babyGap stores can be purchased on-line. Banana Republic introduced a catalog
format in 1998 and Banana Republic Online, a web-based store located at
www.bananarepublic.com, in 1999. Also, Old Navy Online, located at
www.oldnavy.com, began operation as a web-based store in May 2000. The online
and catalog business is offered as an extension of our store experience and is
intended to strengthen our relationship with our customers.
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<PAGE>
Results of Operations for First Quarter of 2000
A summary of our results of operations for the first quarter of fiscal year
2000 compared to the first quarter of fiscal year 1999 follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------
April 29, 2000 May 1, 1999
-------------- ------------
(Unaudited)
(in thousands of dollars,
except share and per share
amounts)
<S> <C> <C>
Net sales......................................... $ 2,731,990 $ 2,277,734
Costs and expenses
Costs of goods sold and occupancy expenses...... 1,601,905 1,334,155
Operating expenses.............................. 750,303 615,149
Net interest expense (income)................... 8,953 4,638
------------ ------------
Earnings before income taxes...................... 370,829 323,792
Income taxes...................................... 135,353 121,422
------------ ------------
Net earnings...................................... $ 235,476 $ 202,370
============ ============
Weighted average number of shares--basic.......... 850,325,670 854,464,568
Weighted average number of shares--diluted........ 888,020,166 900,043,739
Earnings per share--basic......................... $ 0.28 $ 0.24
Earnings per share--diluted....................... $ 0.27 $ 0.22
Number of stores open at end of period............ 3,145 2,574
Total square footage at end of period............. 25,519,300 19,517,136
Comparable store sales increase (decrease)........ (2)% 11%
</TABLE>
In the opinion of management, these results include all adjustments (which
include only normal recurring adjustments) considered necessary to present
fairly our results of operations for the periods presented. These results
should be read in conjunction with our financial statements and notes thereto
included in our Annual Report on Form 10-K for the fiscal year ended January
29, 2000. The results of operations for the thirteen weeks ended April 29, 2000
are not necessarily indicative of the operating results that may be expected
for the fiscal year ending February 3, 2001.
More Information
For additional information, including certain risks, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition" set
forth in our 1999 Annual Report to Shareholders included as Exhibit 13 to our
Annual Report on Form 10-K for the fiscal year ended January 29, 2000 and Item
1 of our Annual Report on Form 10-K for the fiscal year ended January 29, 2000.
S-3
<PAGE>
USE OF PROCEEDS
We will use the net proceeds from the sale of the notes for general
corporate purposes, including expansion of stores, distribution centers,
distribution channels and headquarter facilities, brand investment and
repurchases of our common stock pursuant to our ongoing share repurchase
program. Pending such uses, we will invest the net proceeds in investment-
grade, interest-bearing securities.
CAPITALIZATION
The following table sets forth our consolidated capitalization as of April
29, 2000, and as adjusted to give effect to the sale of the notes offered
hereby and the application of the estimated net proceeds therefrom, as
described under "Use of Proceeds":
<TABLE>
<CAPTION>
As of April 29, 2000
--------------------------
As Adjusted
Actual For Offering(1)
---------- ---------------
(in thousands)
<S> <C> <C>
Short-Term Debt...................................... $ 631,461 $ 631,461
========== ==========
Long-Term Debt
Notes offered hereby............................... $ -- $ 250,000
Notes due 2007..................................... 496,969 496,969
Notes due 2004..................................... 227,954 227,954
Notes due 2009..................................... 44,364 44,364
---------- ----------
Total Long-Term Debt................................. 769,287 1,019,287
---------- ----------
Total Shareholders' Equity........................... 2,427,794 2,427,794
---------- ----------
Total Capitalization................................. $3,197,081 $3,447,081
========== ==========
</TABLE>
- --------
(1) Since we have no specific plans as to the timing or amount of stock
repurchases pursuant to our stock repurchase program, no amount has been
allocated to any changes in capitalization from any such stock
repurchases.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks
Fiscal Year Ended Ended
------------------------------------------------------------------------------
February 3, February 1, January 31, January 30, January 29, May 1, April 29,
1996 1997 1998 1999 2000 1999 2000
----------- ----------- ----------- ----------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
3.92 4.18 4.01 4.79 5.32 4.69 4.40
</TABLE>
For purposes of computing the ratios of earnings to fixed charges,
earnings consist of income before taxes plus fixed charges (less capitalized
interest), and fixed charges consist of interest expense, capitalized interest
and the portion of rental expense under operating leases representative of an
interest factor.
S-4
<PAGE>
DESCRIPTION OF THE NOTES
The following information concerning the notes offered hereby supplements
and should be read in conjunction with the statements in the accompanying
Prospectus under the caption "Description of the Debt Securities." Capitalized
terms not otherwise defined herein shall have the meanings given to them in the
accompanying Prospectus.
General
The notes will be issued as a series of Debt Securities under the Indenture
dated as of September 1, 1997 (the "Indenture"), between us and The Bank of New
York, as successor trustee to Harris Trust Company of California, which is more
fully described in the accompanying Prospectus.
The notes will be issued as unsecured obligations in an aggregate principal
amount of $250,000,000 and will mature on November 15, 2001. We may not redeem
the notes prior to maturity.
The notes will bear interest from May 22, 2000 or from the most recent
Interest Payment Date on which we have paid or provided for interest on the
notes, at a rate per annum, reset quarterly, equal to LIBOR (as defined below)
plus 0.125%, as determined by the calculation agent. The Bank of New York will
initially act as the calculation agent. We will pay interest on the 15th day of
February, May, August and November, each of which we will refer to as a
"Floating Rate Interest Payment Date." Except as described below for the first
Interest Period, on each Floating Rate Interest Payment Date, we will pay
interest for the period commencing on and including the immediately preceding
Floating Rate Interest Payment Date and ending on and including the day next
preceding that Floating Rate Interest Payment Date. We will refer to this
period as an "Interest Period." The first Floating Rate Interest Payment Date
will be August 15, 2000 and the first Interest Period will begin on and include
May 22, 2000 and end on and include August 14, 2000. We will pay interest on a
note to the person in whose name that note was registered at the close of
business on the preceding 1st day of February, May, August and November, as the
case may be.
If any of the Floating Rate Interest Payment Dates listed above falls on a
day that is not a business day, we will postpone that Floating Rate Interest
Payment Date to the next succeeding business day, unless that business day is
in the next calendar month, in which case, the Floating Rate Interest Payment
Date will be the immediately preceding business day.
"LIBOR," with respect to an Interest Period, shall be the rate (expressed
as a percentage per annum) for deposits in United States dollars for a three-
month period beginning on the second London Banking Day (as defined below)
after the Determination Date (as defined below) that appears on Telerate Page
3750 (as defined below) as of 11:00 a.m., London time, on the Determination
Date. If Telerate Page 3750 does not include this rate or is unavailable on the
Determination Date, LIBOR for the Interest Period shall be the arithmetic mean
of the rates (expressed as a percentage per annum) for deposits in a
Representative Amount (as defined below) in United States dollars for a three-
month period beginning on the second London Banking Day after the Determination
Date that appears on Reuters Screen LIBO Page (as defined below) as of 11:00
a.m., London time, on the Determination Date. If Reuters Screen LIBO Page does
not include two or more rates or is unavailable on the Determination Date, the
calculation agent will request the principal in London office of each of four
major banks in the London interbank market, as selected by the calculation
agent, to provide that bank's offered quotation (expressed as a percentage per
annum) as of approximately 11:00 a.m., London time, on the Determination Date
to prime banks in the London interbank market for deposits in a Representative
Amount in United States dollars for a three-month period beginning on the
second London Banking Day after the Determination Date. If at least two offered
quotations are so provided, LIBOR for the Interest Period will be the
arithmetic mean of those quotations. If fewer than
S-5
<PAGE>
two quotations are so provided, the calculation agent will request each of
three major banks in New York City, as selected by the calculation agent, to
provide that bank's rate (expressed as a percentage per annum), as of
approximately 11:00 a.m., New York City time, on the Determination Date for
loans in a Representative Amount in United States dollars to leading European
banks for a three-month period beginning on the second London Banking Day after
the Determination Date. If at least two rates are so provided, LIBOR for the
Interest Period will be the arithmetic mean of those rates. If fewer than two
rates are so provided, then LIBOR for the Interest Period will be LIBOR in
effect with respect to the immediately preceding Interest Period.
"Determination Date" with respect to an Interest Period will be the second
London Banking Day preceding the first day of the Interest Period. The
Determination Date with respect to the first Interest Period will be May 18,
2000.
"London Banking Day" is any day in which dealings in United States dollars
are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Representative Amount" means a principal amount that is representative for
a single transaction in the relevant market at the relevant time.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Bridge Telerate Service (or such other page as may replace Page 3750 on that
service).
"Reuters Screen LIBO Page" means the display designated as "LIBO" on The
Reuters Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service).
The amount of interest for each day that the notes are outstanding, which
we refer to as the "Daily Interest Amount," will be calculated by dividing the
interest rate in effect for that day by 360 and multiplying the result by the
principal amount of the notes. The amount of interest to be paid on the notes
for each Interest Period will be calculated by adding the Daily Interest
Amounts for each day in the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on the notes will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to notes in which $2,500,000 or more has been invested.
The calculation agent will, upon the request of the holder of any note,
provide the interest rate then in effect. All calculations of the calculation
agent, in the absence of manifest error, shall be conclusive for all purposes
and binding on us and the holders of the notes. We may appoint a successor
calculation agent with the written consent of the trustee, which consent shall
not be unreasonably withheld.
The principal of and interest on the notes will be payable, the transfer of
notes will be registrable and the notes may be presented for exchange, at the
corporate trust office of the trustee, The Bank of New York, located at 101
Barclay Street, New York, New York 10286. So long as the notes are represented
by Global Debt Securities, the interest payable on the notes will be paid to
Cede & Co., the nominee of DTC, or its registered assigns as the registered
owner of the Global
S-6
<PAGE>
Debt Securities, by wire transfer of immediately available funds on each of the
applicable interest payment dates, not later than 2:30 p.m. Eastern Standard
Time. If the notes are no longer represented by Global Debt Securities, payment
of interest may, at our option, be made by check mailed to the address of the
Person entitled thereto. No service charge will be made for any transfer or
exchange of notes, but we may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The notes will not be subject to the defeasance or the covenant defeasance
provisions described in the accompanying Prospectus under the caption
"Description of the Debt Securities--Defeasance of Offered Debt Securities or
Certain Covenants in Certain Circumstances."
No sinking fund is provided for the notes.
We may, without the consent of the holders of notes, issue additional notes
of the same series, having the same ranking and the same interest rate,
maturity and other terms, as the notes.
Book-Entry, Delivery and Form
The notes will be represented by Global Debt Securities that will be
deposited with, or on behalf of, DTC, as Depositary, and registered in the name
of Cede & Co., the nominee of DTC.
DTC has advised us and the Underwriters as follows: DTC is a limited-
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC holds securities that its participants ("Participants") deposit with DTC.
DTC facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to DTC's system is also
available to others, such as banks, securities brokers and dealers and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchase of interests in the notes under DTC's system must be made by or
through Direct Participants, which will receive a credit for such interests on
DTC's records. The ownership interest of each actual purchaser of interests in
the notes ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interest in the notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the
notes, except as described below.
To facilitate subsequent transfers, all notes deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the interest in the notes. DTC's records reflect only the
S-7
<PAGE>
identity of the Direct Participants to whose accounts interests in the notes
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
interest in the notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments on the notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the trustee, us
or our paying agent, disbursement of payments to Direct Participants shall be
the responsibility of DTC, and disbursement of payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to
the notes at any time by giving reasonable notice to us or our paying agent.
Under such circumstances, in the event that a successor depository is not
obtained, certificated notes will be printed and delivered. We may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depository). In that event, certificated notes will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
A further description of DTC's procedures with respect to the notes is set
forth in the accompanying Prospectus under the heading "Description of the Debt
Securities-Global Debt Securities."
S-8
<PAGE>
UNDERWRITING
The Gap, Inc. and the underwriters for the offering (the "Underwriters")
named below have entered into an underwriting agreement and a pricing agreement
with respect to the notes. Subject to certain conditions, each Underwriter has
severally agreed to purchase the principal amount of notes indicated in the
following table.
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Notes
------------ ----------------
<S> <C>
Goldman, Sachs & Co......................................... $150,000,000
J.P. Morgan Securities Inc.................................. 43,750,000
Salomon Smith Barney Inc.................................... 43,750,000
ABN AMRO Incorporated....................................... 3,125,000
Deutsche Bank Securities Inc. .............................. 3,125,000
HSBC Securities (USA) Inc. ................................. 3,125,000
SG Cowen Securities Corporation............................. 3,125,000
------------
Total..................................................... $250,000,000
============
</TABLE>
Notes sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this Prospectus
Supplement. Any notes sold by the Underwriters to securities dealers may be
sold at a discount from the initial public offering price of up to 0.125% of
the principal amount of the notes. Any such securities dealers may resell any
notes purchased from the Underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to 0.100% of the
principal amount of the notes. If all the notes are not sold at the initial
public offering price, the Underwriters may change the offering price and the
other selling terms.
The notes are a new issue of securities with no established trading market.
The Gap, Inc. has been advised by the Underwriters that the Underwriters intend
to make a market in the notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the notes.
In connection with the offering, the Underwriters may purchase and sell the
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the Underwriters have repurchased notes sold by
or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
The Gap, Inc. estimates that its share of the total expenses of the
offering, excluding the underwriting discount, will be approximately $255,000.
The Gap, Inc. has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
S-9
<PAGE>
In the ordinary course of business, the Underwriters and their respective
affiliates have in the past performed, and may in the future perform,
investment banking and commercial banking services for The Gap, Inc. for which
they have received, and may in the future receive, fees or other compensation.
VALIDITY OF THE NOTES
The validity of the notes offered hereby and certain other legal matters
will be passed upon for us by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California. The validity of the notes offered hereby will be passed
upon for the Underwriters by Sullivan & Cromwell, Los Angeles, California.
S-10
<PAGE>
$500,000,000
[LOGO OF GAP INC.]
Debt Securities
----------------
The Gap, Inc. may from time to time issue up to $500,000,000 aggregate
principal amount of Debt Securities. The accompanying Prospectus Supplement
will specify the terms of the securities.
The Gap, Inc. may sell these securities to or through underwriters, and
also to other purchasers or through agents. The names of any underwriters or
agents involved in the sale of the securities will be set forth in the
accompanying Prospectus Supplement.
----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
----------------
Prospectus dated April 27, 1999.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our
SEC filings are also available to the public at the SEC's web site at
http://www.sec.gov. Reports, proxy material and other information about us can
also be inspected at the offices of the New York and Pacific Stock Exchanges.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below as well as all future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), until we sell
all the Debt Securities:
(a) Our Annual Report on Form 10-K for the fiscal year ended January
31, 1998; and
(b) Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
May 2, 1998, August 1, 1998 and October 31, 1998.
This Prospectus is part of a Registration Statement on Form S-3 (the
"Registration Statement") we filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC. You
should look at the Registration Statement and its exhibits for further
information about us and about the Debt Securities.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
The Gap, Inc.
One Harrison Street
San Francisco, CA 94105
Attention: Investor Relations
Telephone: 1-800-GAP-NEWS.
In addition, documents incorporated by reference in this Prospectus are
made available by the SEC to any person through (i) the public reference
facilities maintained by the SEC by calling the SEC at 1-800-SEC-0330 and (ii)
the SEC's Internet site at http://www.sec.gov.
2
<PAGE>
THE COMPANY
General
The Gap, Inc. (together with its subsidiaries, the "Company") is an
international specialty retailer which operates stores selling casual apparel,
personal care and other accessories for men, women and children under the Gap,
GapKids, babyGap, Banana Republic and Old Navy brands. As of January 2, 1999,
the Company operated 2,430 stores in the United States, Canada, the United
Kingdom, France, Germany and Japan.
The Company designs virtually all of its products for sale under its brands
in Company-operated stores. These brands and their corresponding store formats
collectively are positioned to address a broad consumer base. The Company
operates the following store formats:
Gap, GapKids and babyGap. Founded in 1969, Gap stores offer extensive
selections of classically-styled, high quality, casual apparel at moderate
price points. Products range from wardrobe basics, such as denim, khakis
and T-shirts, to accessories and personal care products for men and women
aged teen to adult. At January 2, 1999, the Company operated 1,108 Gap
stores, including 161 in international locations. One hundred of the
domestic stores are Gap Outlet stores. The Company entered the children's
apparel market with the introduction of GapKids in 1986 and babyGap in
1989. These stores offer casual basics, outerwear, shoes and other
accessories in the tradition of Gap style and quality for children aged
newborn through teen. At January 2, 1999, the Company operated a total of
634 GapKids and babyGap stores, including 128 in international locations.
Banana Republic. Acquired in 1983 with two stores, Banana Republic now
offers sophisticated, fashionable collections of dress-casual and tailored
clothing and accessories for men and women at higher price points. At
January 2, 1999, the Company operated 290 Banana Republic stores,
including 9 in Canada.
Old Navy. The Company launched Old Navy in 1994 to address the market
for value-priced family apparel. Old Navy offers broad selections of
apparel, shoes and accessories for adults, children and infants in an
innovative, exciting shopping environment. At January 2, 1999, the Company
operated 398 Old Navy stores.
Direct. The Company established "Gap Online" in 1997, a web-based
store located at www.gap.com. Products from Gap, GapKids and babyGap
stores can be purchased on-line. In 1998, Banana Republic reintroduced its
catalog format, which offers clothing and accessories comparable to those
carried in its collections, and is aimed at developing a closer
relationship with its customer base.
The Company's executive offices are located at One Harrison Street, San
Francisco, California 94105, and its telephone number is (415) 427-2000.
Recent Developments
The Company has been named as a defendant in two lawsuits relating to
sourcing of products from Saipan (Commonwealth of the Northern Mariana
Islands). A complaint was filed on January 13, 1999 in California Superior
Court in San Francisco by the Union of Needletrades Industrial and Textile
Employees, AFL-CIO; Global Exchange; Sweatshop Watch; and Asian Law Caucus
against the Company and 17 other parties. The plaintiffs allege violations of
California's unlawful, fraudulent and unfair business practices and untrue and
misleading advertising statutes in connection with labeling of product and
labor practices regarding workers of factories that make product for the
Company in Saipan. The plaintiffs seek injunctive relief, restitution,
disgorgement of profits and other damages. A second complaint was filed on
January 13, 1999 in Federal District Court, Central
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District of California, by various unidentified worker plantiffs against the
Company and 25 other parties. Those unidentified worker plaintiffs seek class-
action status and allege, among other things, that the Company violated the
Racketeer Influenced and Corrupt Organizations Act in connection with the labor
practices and treatment of workers of factories in Saipan that make product for
the Company. The plaintiffs seek injunctive relief as well as actual and
punitive damages.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
be used by the Company as set forth in a Prospectus Supplement relating to such
Debt Securities. Except as otherwise specified in the Prospectus Supplement
relating to a particular series of Debt Securities, the net proceeds from any
offering will be used for general corporate purposes, including expansion of
stores, distribution centers and headquarters facilities, brand investment,
development of additional distribution channels and repurchase of the Company's
common stock pursuant to the Company's ongoing share repurchase program.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
-------------------------------------------------------------- -----------------------
January 29, January 28, February 3, February 1, January 31, November 1, October 31,
1994 1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
3.81 4.07 3.92 4.18 4.01 2.96 3.52
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges (less capitalized interest),
and fixed charges consist of interest expense, capitalized interest and the
portion of rental expense under operating leases representative of an interest
factor.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (as amended or
supplemented from time to time, the "Indenture") between the Company and Harris
Trust Company of California, as Trustee (the "Trustee"), a copy of which is
incorporated by reference as an exhibit to the Registration Statement. The
statements herein relating to the Debt Securities and the following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions therein of certain
terms, and the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). Wherever particular sections or defined terms of the Indenture are
referred to in this Prospectus or in a Prospectus Supplement, such sections or
defined terms are incorporated herein or therein by reference.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") and the extent, if
any, to which such general terms and provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities (the "Applicable Prospectus Supplement").
General
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and Debt Securities may be issued thereunder from time to
time in one or more series. The Debt
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Securities will be unsecured and unsubordinated obligations of the Company and
will rank equally and ratably with other unsecured and unsubordinated
obligations of the Company.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registrable, at the office
or agency to be maintained by the Company in The City of New York and at any
other office or agency maintained by the Company for this purpose. (Sections
301, 305 and 1002) The Debt Securities will be issued only in fully registered
form without coupons and, unless otherwise indicated in the Applicable
Prospectus Supplement, in denominations of $1,000 or integral multiples of
$1,000. (Section 302) No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. (Section 305)
The Applicable Prospectus Supplement will describe the terms of the Offered
Debt Securities, including:
(1) the title of the Offered Debt Securities;
(2) any limit on the aggregate principal amount of the Offered Debt
Securities;
(3) the person or entity to whom any interest on the Offered Debt
Securities shall be payable, if other than the person or entity in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest;
(4) the date or dates on which the principal of and premium, if any, on
the Offered Debt Securities is payable or the method of determination
thereof;
(5) the rate or rates at which the Offered Debt Securities shall bear
interest, if any, or the method of calculating the rate or rates of
interest, the date or dates from which any interest shall accrue or
the method by which the date or dates shall be determined, the
Interest Payment Dates on which any interest shall be payable and the
Regular Record Date for interest payable on any Interest Payment Date;
(6) the place or places where the principal of, premium, if any, and
interest on the Offered Debt Securities shall be payable;
(7) the period or periods within which, the price or prices at which, the
currency or currencies (including currency units) in which and the
other terms and conditions upon which the Offered Debt Securities may
be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase the
Offered Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a holder and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which the Offered Debt Securities shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple of
$1,000, the denominations in which the Offered Debt Securities shall
be issuable;
(10) the currency, currencies or currency units in which payment of the
principal of and any premium and interest on any Offered Debt
Securities shall be payable if other than the currency of the United
States of America and the manner of determining the equivalent thereof
in the currency of the United States of America;
(11) if the amount of payments of principal of or any premium or interest
on any Offered Debt Securities may be determined with reference to an
index, formula or other method, the index, formula or other method by
which these amounts shall be determined;
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<PAGE>
(12) if the principal of or any premium or interest on any Offered Debt
Securities is to be payable, at the election of the Company or a
holder, in one or more currencies or currency units other than that or
those in which the Debt Securities are stated to be payable, the
currency, currencies or currency units in which payment of the
principal of and any premium and interest on the Offered Debt
Securities as to which such election is made shall be payable, and the
periods within which and the other terms and conditions upon which
such election is to be made;
(13) if other than the principal amount, the portion of the principal
amount of the Offered Debt Securities which shall be payable upon
declaration of acceleration of maturity or the method by which the
portion may be determined;
(14) the applicability of the provisions described under "Defeasance of
Offered Debt Securities or Certain Covenants in Certain
Circumstances";
(15) if the Offered Debt Securities will be issuable only in the form of
one or more Global Debt Securities as described under "Global Debt
Securities", the Depositary or its nominee with respect to the Offered
Debt Securities and the circumstances under which the Global Debt
Security may be registered for transfer or exchange or authenticated
and delivered in the name of a person or entity other than the
Depositary or its nominee; and
(16) any other terms of the Offered Debt Securities.
(Section 301)
Debt Securities may be issued under the Indenture as Original Issue
Discount Debt Securities to be offered and sold at a substantial discount below
their stated principal amount. Special Federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus
Supplement relating thereto. "Original Issue Discount Debt Security" means any
Debt Security which provides for an amount less than the principal amount to be
due and payable upon a declaration of acceleration of maturity upon the
occurrence and continuance of an Event of Default. (Section 101)
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units, if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. federal income tax considerations and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the Applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities,
material U.S. federal income tax, accounting and other considerations
applicable thereto will be described in the Applicable Prospectus Supplement.
Global Debt Securities
The following description of Global Debt Securities will apply to any
series of Debt Securities except as otherwise provided in the Applicable
Prospectus Supplement.
The Debt Securities of a series may be issued in the form of one or more
Global Debt Securities that will be deposited with or on behalf of a
Depositary, which will be a clearing agent registered under the Exchange Act.
Global Debt Securities will be registered in the name of the Depositary or a
nominee of the Depositary, will be deposited with the Depositary or nominee or
a custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer and any other matters as may be provided
for pursuant to the Indenture. Unless and until it
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<PAGE>
is exchanged in whole or in part for Debt Securities in definitive certificated
form, a Global Debt Security may not be transferred or exchanged except as a
whole by the Depositary for such Global Debt Security to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any nominee to a successor
Depositary for such series or a nominee of a successor Depositary, or except in
the circumstances described in the Applicable Prospectus Supplement. (Section
305)
Upon the issuance of any Global Debt Security, and the deposit of the
Global Debt Security with or on behalf of the Depositary for the Global Debt
Security, the Depositary will credit on its book-entry registration and
transfer system the respective principal amounts of the Debt Securities
represented by the Global Debt Security to the accounts of institutions
("Participants") that have accounts with the Depositary. The accounts to be
credited will be designated by the underwriters or agents engaging in the
distribution of the Debt Securities or by the Company, if the Debt Securities
are offered and sold directly by the Company. Ownership of beneficial interests
in a Global Debt Security will be limited to Participants or persons that may
hold interests through Participants. Ownership of beneficial interests in a
Global Debt Security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the Depositary for the Global
Debt Security or by its nominee. Ownership of beneficial interests in the
Global Debt Security by persons who hold through Participants will be shown on,
and the transfer of beneficial interests within such Participants will be
effected only through, records maintained by those Participants. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. These laws may impair the ability to
transfer beneficial interests in a Global Debt Security.
So long as the Depositary for a Global Debt Security, or its nominee, is
the owner of that Global Debt Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Debt Security
represented by that Global Debt Security for all purposes under the Indenture.
Accordingly, each person owning a beneficial interest in the Global Debt
Security must rely on the procedures of the Depositary and, if the person is
not a Participant, on the procedures of the Participant through which that
person owns its interest, to exercise any rights of a holder under the
Indenture. The Company understands that under existing industry practices, if
it requests any action of holders or if an owner of a beneficial interest in a
Global Debt Security desires to give or take any instruction or action which a
holder is entitled to give or take under the Indenture, the Depositary would
authorize the Participants holding the relevant beneficial interests to give or
take that instruction or action, and the Participants would authorize
beneficial owners owning through those Participants to give or take that
instruction or action or would otherwise act upon the instructions of
beneficial owners holding through them.
Unless otherwise specified in the Applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
the Debt Securities represented by a Global Debt Security registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of that Global Debt
Security. The Company expects that the Depositary for any Debt Securities
represented by a Global Debt Security, upon receipt of any payment of principal
or interest in respect of the Global Debt Security, will credit immediately
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Debt Security as shown on the
records of the Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in the Global Debt Security held
through those Participants will be governed by standing instructions and
customary practices, as is now the case with securities in bearer form held for
the accounts of customers or registered in "street name", and will be the
responsibility of those Participants. None of the Company, the Trustee or any
agent of the Company or the Trustee shall have any responsibility or liability
for any aspect of the records relating to, or payments made on account of,
beneficial interests in any Global Debt Security, or for maintaining,
supervising or reviewing any records relating to those beneficial interests.
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<PAGE>
A Global Debt Security shall be exchangeable for Debt Securities in
certificated registered form, of like tenor and of an equal aggregate principal
amount, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for that Global Debt Security or if at any time
the Depositary ceases to be a clearing agency registered under the
Exchange Act;
(b) the Company in its sole discretion determines that such Global Debt
Security shall be exchangeable for Debt Securities in certificated
registered form; or
(c) there shall have occurred and be continuing an Event of Default with
respect to the Debt Securities.
Any Global Debt Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Debt Securities registered in the name or
names of such person or persons as the Depositary shall instruct the Trustee.
It is expected that these instructions may be based upon directions received by
the Depositary from its Participants with respect to ownership of beneficial
interests in the Global Debt Security.
Events of Default
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Debt Securities of any series:
(a) failure to pay any interest on any Debt Security of that series when
due, continued for 30 days;
(b) failure to pay principal of or any premium on any Debt Security of that
series when due;
(c) failure to deposit any sinking fund payment, when due, in respect of
any Debt Security of that series;
(d) failure to perform, or breach of, any covenant or warranty of the
Company in the Indenture with respect to Debt Securities of that series
continued for 60 days after written notice as provided in the
Indenture;
(e) a default under any indebtedness for money borrowed by the Company or
any Subsidiary if (A) the default either (1) results from the failure
to pay the principal of any such indebtedness at its stated maturity or
(2) relates to an obligation other than the obligation to pay the
principal of such indebtedness at its stated maturity and results in
such indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable, (B) the
principal amount of such indebtedness, together with the principal
amount of any other such indebtedness in default for failure to pay
principal at stated maturity or the maturity of which has been so
accelerated, aggregates $25,000,000 or more at any one time outstanding
and (C) such indebtedness is not discharged, or such acceleration is
not rescinded or annulled, within 10 business days after written notice
as provided in the Indenture;
(f) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(g) any other Event of Default provided with respect to Debt Securities of
that series.
(Section 501)
If an Event of Default (other than an Event of Default described in clause
(f) of the preceding paragraph) with respect to the Debt Securities of any
series at the time Outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series may accelerate the maturity of all
Debt Securities of that series; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of the Outstanding Debt
Securities
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<PAGE>
of that series may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default described in clause (f) of the immediately preceding
paragraph occurs, the Outstanding Debt Securities will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any holder. (Section 502)
Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Debt Securities that are Original Issue Discount Debt
Securities for the particular provisions relating to acceleration of the Stated
Maturity of a portion of the principal amount of such series of Original Issue
Discount Debt Securities upon the occurrence of an Event of Default and the
continuation thereof.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of Debt Securities, unless such
holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, the holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series. (Section 512)
No holder of Debt Securities of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless that holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless the holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. (Section 507)
However, these limitations do not apply to a suit instituted by a holder of
Debt Securities for enforcement of payment of the principal of and premium, if
any, or interest on such Debt Securities on or after the respective due dates
expressed in such Debt Securities. (Section 508)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1004)
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of the holders of any of the Debt
Securities in order
(1) to evidence the succession of another entity to the Company and the
assumption of the covenants and obligations of the Company under the
Debt Securities and the Indenture by such successor to the Company;
(2) to add to the covenants of the Company for the benefit of the holders
of all or any series of Debt Securities or to surrender any right or
power conferred on the Company by the Indenture;
(3) to add additional Events of Default with respect to any series of Debt
Securities;
(4) to add to or change any provisions to such extent as may be necessary
to permit or facilitate the issuance of Debt Securities in bearer form
or to facilitate the issuance of Global Debt Securities;
(5) to add to, change or eliminate any provision affecting only Debt
Securities not yet issued;
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(6) to secure the Debt Securities;
(7) to establish the form or terms of Debt Securities of any series;
(8) to evidence and provide for successor Trustees or to add or change any
provisions to such extent as may be necessary to provide for or
facilitate the appointment of a separate Trustee or Trustees for
specific series of Debt Securities;
(9) to permit payment in respect of Debt Securities in bearer form in the
United States to the extent allowed by law; or
(10) to cure any ambiguity, to correct or supplement any mistaken or
inconsistent provisions or to make any other provisions with respect
to matters or questions arising under the Indenture, provided that any
such action (other than in respect of a mistaken provision) does not
adversely affect in any material respect the interests of any holder
of Debt Securities of any series then outstanding.
(Section 901)
Modifications and amendments of the Indenture also may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series issued under the Indenture and affected by the modification or
amendments; provided, however, that no modification or amendment may, without
the consent of the holders of all Debt Securities affected thereby,
(1) change the Stated Maturity of the principal amount of, or any
installment of principal of or interest on, any Debt Security;
(2) reduce the principal amount of, or the premium, if any, or (except as
otherwise provided in the Applicable Prospectus Supplement) interest
on any Debt Security (including in the case of an Original Issue
Discount Debt Security the amount payable upon acceleration of
maturity);
(3) change the place or currency of payment of principal of, premium, if
any, or interest on any Debt Security;
(4) impair the right to institute suit for the enforcement of any payment
on any Debt Security on or after its Stated Maturity (or in the case
of redemption, on or after the Redemption Date); or
(5) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of compliance
with certain provisions of the Indenture or for waiver of certain
defaults.
(Section 902)
The holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all holders of Debt
Securities of that series, waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 1008) The holders of not less
than a majority in aggregate principal amount of the Outstanding Debt
Securities of any series may, on behalf of all holders of Debt Securities of
that series, waive any past default under the Indenture, except a default in
the payment of principal, premium or interest or in respect of a covenant or
provision of the Indenture that cannot be modified or amended without the
consent of the holder of each Outstanding Debt Security of such series affected
thereby. (Section 513)
No Protection In the Event of a Change of Control
Unless otherwise set forth in the Applicable Prospectus Supplement, the
Debt Securities will not contain any provisions which may afford holders of the
Debt Securities protection in the event of a change in control of the Company
or in the event of a highly leveraged transaction (whether or not the
transaction results in a change in control of the Company).
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Covenants
Unless otherwise set forth in the Applicable Prospectus Supplement, and
except as set forth below, the Debt Securities will not contain any restrictive
covenants, including covenants restricting the Company or any of its
Subsidiaries from incurring, issuing, assuming or guaranteeing any indebtedness
or encumbering any property of the Company or any subsidiary, or restricting
the Company or any Subsidiary from transferring assets or entering into any
sale and leaseback transaction.
Consolidation, Merger and Sale of Assets
The Company may not consolidate with or merge with or into any other entity
or transfer or lease its assets substantially as an entirety to any entity,
unless
(1) either the Company is the continuing corporation, or any successor or
purchaser is a corporation, partnership or trust organized under the
laws of the United States of America, any State or the District of
Columbia, and the successor or purchaser expressly assumes the
Company's obligations on the Debt Securities under a supplemental
indenture,
(2) immediately after giving effect to the transaction, no Event of
Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be
continuing, and
(3) if a supplemental indenture is to be executed in connection with such
consolidation, merger, transfer or lease, the Company has delivered to
the Trustee an officers' certificate and an opinion of counsel stating
compliance with these provisions.
(Section 801)
Defeasance of Offered Debt Securities or Certain Covenants in Certain
Circumstances
Defeasance and Discharge
The Indenture provides that the terms of any series of Debt Securities may
provide the Company with the option to be discharged from any and all
obligations in respect of the Debt Securities of such series (except for
certain transfer and administrative duties) upon the deposit with the Trustee,
in trust, of money and/or U.S. Government Obligations which, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient to pay any installment of principal (and premium,
if any) and interest on, and any mandatory sinking fund payments in respect of,
the Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of the Indenture and such Debt Securities. Discharge
may only occur if, among other things, the Company has delivered to the Trustee
an opinion of counsel to the effect that the Company has received from, or
there has been published by, the United States Internal Revenue Service a
ruling, or there has been a change in tax law, in either case to the effect
that such discharge will not be deemed, or result in, a taxable event with
respect to holders of the Debt Securities of such series. (Sections 1302 and
1304)
Defeasance of Certain Covenants
The Indenture provides that the terms of any series of Debt Securities may
provide the Company with the option to omit to comply with the restrictive
covenant described in this Prospectus under "Consolidation, Merger and Sale of
Assets" and any other covenants made applicable to any series of Debt
Securities as described in the Applicable Prospectus Supplement. The Company,
in order to exercise this option, will be required to deposit with the Trustee
money and/or U.S. Government Obligations which, through the payment of interest
and principal in accordance with their terms, will provide money in an amount
sufficient to pay principal (and premium, if any) and interest on, and any
mandatory sinking fund payments in respect of, the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the Indenture and such Debt Securities. The
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Company will also be required to deliver to the Trustee an opinion of counsel
to the effect that the deposit and related covenant defeasance will not cause
the holders of the Debt Securities of such series to recognize income, gain or
loss for federal income tax purposes. (Sections 1303 and 1304)
In the event the Company exercises this option and the Debt Securities of
such series are declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations on deposit with
the Trustee will be sufficient to pay amounts due on the Debt Securities of
such series at the time of their Stated Maturity but may not be sufficient to
pay amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company shall
remain liable for such payments.
The Applicable Prospectus Supplement will state if any defeasance
provisions will apply to the Offered Debt Securities.
Concerning the Trustee
Harris Trust Company of California, a California trust company, is the
Trustee under the Indenture. The Trustee may resign at any time or may be
removed by the holders of at least a majority in aggregate principal amount of
the Outstanding Debt Securities. If the Trustee resigns, is removed or becomes
incapable of acting as Trustee or if a vacancy occurs in the office of the
Trustee for any cause, a successor Trustee shall be appointed in accordance
with the provisions of the Indenture.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through one or more underwriters
or dealers and also may sell Debt Securities to other investors directly or
through agents.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to those
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and those dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any underwriter or agent
will be identified, and any compensation received from the Company will be
described, in the applicable Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities will be passed upon by Orrick,
Herrington & Sutcliffe LLP, San Francisco, California, and, unless otherwise
indicated in a Prospectus Supplement relating to Offered Debt Securities, by
Sullivan & Cromwell, Los Angeles, California, counsel for the underwriters or
agents.
12
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of January 31, 1998
and February 1, 1997 and for each of the three fiscal years in the period ended
January 31, 1998, incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended May 2, 1998 and May 3, 1997, and for the periods ended August 1, 1998 and
August 2, 1997, and for the periods ended October 31, 1998 and November 1, 1997
which is incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review of
such information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended May 2, 1998, August 1,
1998 and October 31, 1998 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Securities Act.
13
<PAGE>
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this Prospectus. You must
not rely on any unauthorized information or representations. This Prospectus is
an offer to sell only the notes offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this Prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company................................................................ S-2
Use of Proceeds............................................................ S-4
Capitalization............................................................. S-4
Ratio of Earnings to Fixed Charges......................................... S-4
Description of the Notes................................................... S-5
Underwriting............................................................... S-9
Validity of the Notes...................................................... S-10
Prospectus
Where You Can Find More Information........................................ 2
Documents Incorporated by Reference........................................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Description of the Debt Securities......................................... 4
Plan of Distribution....................................................... 12
Validity of the Debt Securities............................................ 12
Experts.................................................................... 13
</TABLE>
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$250,000,000
[LOGO OF GAP INC.]
Floating Rate Notes
due November 15, 2001
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PROSPECTUS SUPPLEMENT
----------------
Goldman, Sachs & Co.
J.P. Morgan & Co.
Salomon Smith Barney
ABN AMRO Incorporated
Deutsche Banc Alex.Brown
HSBC Markets
SG Cowen
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