UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION



Proxy Statement Pursuant to Section 14(a) of the Securities


Exchange Act of 1934 (Amendment No.            )

Filed by the Registrant     x

Filed by a Party other than the Registrant     ¨

Check the appropriate box:

Filed by the Registrant [X]
Filed by a Party other than the Registrant [   ] 
¨
Check the appropriate box:
[   ]      

Preliminary Proxy Statement

¨[   ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[   ]Definitive Additional Materials
[   ]Soliciting Material Pursuant to §240.14a-12

xThe Gap, Inc. 

Definitive Proxy Statement

(Name of Registrant as Specified In Its Charter) 
 
¨   

Definitive Additional Materials

(Name of Person(s) Filing Proxy Statement, if other than the Registrant) 

Payment of Filing Fee (Check the appropriate box):
¨

Soliciting Material Pursuant to § 240.14a-12

THE GAP, INC.

(Name of Registrant as Specified in Its Certificate)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x[X]      No Fee Required.fee required.
¨[   ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)1)       Title of each class of securities to which transaction applies:
2)(2)Aggregate number of securities to which transaction applies:
3)(3)Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4)(4)Proposed maximum aggregate value of transaction:
5)(5)Total fee paid:
¨[   ] Fee paid previously with preliminary materials.
¨[   ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the formForm or scheduleSchedule and the date of its filing.
 
(1)1) Amount Previously Paid:
(2)2) Form, Schedule or Registration Statement No.:
(3)3) Filing Party:
4)Date Filed:
(4) Date Filed:


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LOGO 

 

Notice of Annual Meeting


of Gap Inc. Shareholders

Proxy Statement

May 19, 2015

17, 2016
San Francisco, California

LOGO

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

DATE AND TIME

Tuesday, May 19, 2015

17, 2016
10:00 a.m., San Francisco Time

PLACE

PLACE

Gap Inc. Headquarters


Two Folsom Street


San Francisco, California 94105

ITEMS OF BUSINESS

•
ŸElect to the Board of Directors the ten nominees named in the attached Proxy Statement;

 

•
ŸRatify the selection of Deloitte & Touche LLP as our independent registered public accounting firmfirm for the fiscalfiscal year ending on January 30, 2016;28, 2017;

 

•
Ÿ      Approve the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan;

ŸHold an advisory vote to approve the overall compensation of the named executive officers; andofficers;

 

•
Approve the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan; and

•
ŸTransact such other business as may properly come before the meeting.

 

RECORD DATE

You must have been a shareholder of record at the close of business on March 23, 201521, 2016 to vote at the Annual Meeting.

INTERNET AVAILABILITY

In accordance with U.S. Securities and Exchange Commission rules, we are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending them a notice with instructions for accessing the materials and voting via the Internet. We believe this method of distribution makes the proxy distribution process more efficient,efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2014 2015

Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors, Financial Information, Annual Reports & Proxy links).

PROXY VOTING

Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card.

ADMISSION TO THE


ANNUAL MEETING

You are entitled to attend the Annual Meeting only if you were a Gap Inc. shareholder as of the close of business on March 23, 201521, 2016 or you hold a valid proxy for the Annual Meeting.Photo identificationidentification is required for admittance. In addition, if you are not a shareholder of record but hold shares through a broker, bank, trustee or nominee (i.e., in street name), you will be required to provide proof of beneficialbeneficial ownership as of the Record Date. Proof of beneficialbeneficial ownership can take the form of your most recent account statement prior to the Record Date, a copy of the voting instruction card provided by your broker, bank, trustee or nominee, a copy of the Notice of Internet Availability of Proxy Materials if one was mailed to you, or similar evidence of ownership.

WEBCAST

WEBCAST

You may listen to our Annual Meeting by webcast at www.gapinc.com (follow the Investors, Financial News and Events, Webcasts links). The webcast will

be recorded and available for replay on www.gapinc.com for at least 30 days following the Annual Meeting.

 

By Order of the Board of Directors,

 

LOGO

Michelle Banks

Julie Gruber
Corporate Secretary


April 7, 20155, 2016

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

1

PROPOSALS REQUIRING YOUR VOTE

7

PROPOSAL NO. 1 — Election of Directors

7

Nominees for Election as Directors

7

Corporate Governance

10

Compensation of Directors

17

PROPOSAL NO. 2 — Ratification of Selection of Independent Registered Public Accounting Firm

20

Principal Accounting Firm Fees

20

Report of the Audit and Finance Committee

21

PROPOSAL NO. 3 — Approval of the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan

22

Purpose of the Request for Approval

22

Material Features of the Executive MICAP

23

New Plan Benefits

25

PROPOSAL NO. 4 — Advisory Vote on the Overall Compensation of The Gap, Inc.’s Named Executive Officers

27

BENEFICIAL OWNERSHIP OF SHARES

28

Section 16(a) Beneficial Ownership Reporting Compliance

30

EXECUTIVE COMPENSATION AND RELATED INFORMATION

31

Compensation Discussion and Analysis

31

Compensation Committee Report

50

Summary Compensation Table

51

Grants of Plan-Based Awards

56

Outstanding Equity Awards at Fiscal Year-End

58

Option Exercises and Stock Vested

60

Nonqualified Deferred Compensation

60

Potential Payments Upon Termination

61

Equity Compensation Plan Information

64

OTHER INFORMATION

65

Policies and Procedures with Respect to Related Party Transactions

65

Certain Relationships and Related Transactions

65

QUESTIONS AND ANSWERS ABOUT

THE ANNUAL MEETING AND VOTING

 

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PROXY SUMMARY

References in this Proxy Statement to “Gap Inc.,” “the Company,” “we,” “us,” and “our” refer to The Gap, Inc.

Why did I receive these materials?

These proxy materials are being delivered in connection with the solicitation of proxies by the Board of Directors of The Gap, Inc. for use at our Annual Meeting of Shareholders to be held on May 19, 2015,17, 2016, at 10:00 a.m., San Francisco Time, at Gap Inc. Headquarters, Two Folsom Street, San Francisco, California 94105 and at any adjournment or postponement thereof (the “Annual Meeting”).

On or about April 7, 2015,5, 2016, we commenced distribution of this Proxy Statement and the form of proxy to our shareholders entitled to vote at the Annual Meeting.

Who are the proxyholders and how were they selected?Agenda

Items of Business

Management Recommendation

Page No.

The election of the ten directors nominated by the Board of Directors

The Board recommends you vote FOR each of the ten nominees.

Page 1

The ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2017

The Board recommends you vote FOR the selection of the independent registered public accounting firm.

Page 16

The approval of the overall compensation of the Company’s named executive officers

The Board recommends you vote “FOR” the approval of the overall compensation of the Company’s named executive officers.

Page 18

The approval of the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan

The Board recommends you vote “FOR” the approval of the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan.

Page 49

Voting Shares

The proxyholders were selected by our Boardholders of Directors and are officers of the Company. The proxyholders will vote all proxies, or record an abstention, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted as recommended by our Board of Directors.

How much did this proxy solicitation cost and who pays for it?

The Company will pay all expenses in connection with the solicitation of the proxies relating to this Proxy Statement, including the charges of brokerage houses and other custodians, nominees or fiduciaries for forwarding documents to security owners. In addition to solicitation by mail, certain of our officers, directors and employees (who will receive no extra compensation for their services) may solicit proxies by email, by telephone, by fax or in person. We have also retained the services of D.F. King & Co., Inc. to solicit the proxies of certain shareholders for the Annual Meeting and provide other consultation services. The cost of D.F. King’s services is estimated to be $8,000, plus reimbursement of out-of-pocket expenses.

How can I electronically access the proxy materials?

We are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending a Notice of Internet Availability of Proxy Materials. That Notice contains instructions for accessing the materials and voting via the Internet. The Notice also contains information on how to request a paper copy of the proxy materials by mail. We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2014 Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors, Financial Information, Annual Reports & Proxy links).

Can I receive proxy materials for future annual meetings by email rather than receiving a paper copy of the Notice?

If you are a Shareholder of Record or a Beneficial Owner, you may elect to receive the Notice or other future proxy materials by email by logging into www.provyvote.com. If you are a Beneficial Owner, you can also contact your broker directly to opt for email delivery of proxy materials. If you

choose to receive proxy materials by email, next year you will receive an email with instructions on how to view those materials and vote before the next annual meeting. Your choice to obtain documents by email will remain in effect until you notify us otherwise. Delivering future notices by email will help us further reduce the cost and environmental impact of our shareholder meetings.

What is “householding”?

Under SEC rules, a single package of Notices may be sent to any household at which two or more shareholders reside if they appear to be members of the same family, unless contrary instructions have been received. Each shareholder continues to receive a separate Notice within the package. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting Broadridge toll free at 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders who wish to receive a separate set of proxy materials should contact Broadridgecommon stock at the same phone number or mailing address.

What items will be votedclose of business on at the Annual Meeting?

At the Annual Meeting, the following itemsMarch 21, 2016 (the “Record Date”) are entitled to one vote per share on the agenda:

The election of the ten directors nominated by the Board of Directors;

The ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 30, 2016;

The approval of the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan; and

The approval of the overall compensation of the Company’s named executive officers.

How will any other items beeach matter voted upon at the Annual Meeting?

IfMeeting or any other matter not mentioned in this Proxy Statement is properly brought before the meeting, including without limitation (i) matters about which the proponent failed to notify us onadjournment or before February 19, 2015, (ii) shareholder proposals omitted from this Proxy Statement and the form of proxy pursuant to the proxy rules of the SEC, and (iii) matters incidental to the conduct of the meeting, the proxyholders will vote upon such matters in accordance with their best judgment pursuant to the discretionary authority granted by the proxy.postponement thereof. As of the dateRecord Date, there were 397,873,269 shares of the printing of this Proxy Statement, our management is not aware, nor has it been notified, of any other matters that may be presented for consideration at the meeting.common stock outstanding.

How do I vote my shares?

You may vote your shares (i) by Internet at www.proxyvote.com, (ii) by signing and returning a proxy card (for shareholders of record) or voting instruction card (for beneficial owners of shares), (iii) by phone at 1-800-690-6903 or (iv) in person at the meeting. by:

 

 

 

 

By Internet

By Mail

By Phone

In person

www.proxyvote.com

Sign and return a proxy card (for shareholders of record) or voting instruction card (for beneficial owners of shares)

1-800-690-6903

At the meeting:
May 17, 2016,
10:00 a.m. PST
Gap Inc. Headquarters
Two Folsom Street
San Francisco, California 94105

If you vote by Internet or by phone, you do not need to return a proxy card or voting instruction card, but you will need to have it, or the Notice of Internet Availability, in hand when you access the voting website or call to vote by phone. SpecificSpecific voting instructions are found on the proxy card, voting instruction card, or the Notice of Internet Availability of Proxy Materials.

What are the voting recommendations of the Board of Directors?

The Board of Directors recommends that you vote your shares “FOR” the election of the directors nominated by the Board of Directors, “FOR” the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending January 30, 2016, “FOR” the approval of the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan, and “FOR” the approval of the overall compensation of the Company’s named executive officers.

Who may vote at the Annual Meeting?

The holders of common stock at the close of business on March 23, 2015 (the “Record Date”) are entitled to one vote per share on each matter voted upon at the Annual Meeting or any adjournment or postponement thereof. As of the Record Date, there were 419,734,675 shares of common stock outstanding.

What is the difference between a shareholder of record and a beneficial owner of shares?

Shareholder Of Record

If your shares are registered directly in your name with the Company’s transfer agent, Wells Fargo Bank, N.A., you are considered the shareholder of record with respect to those shares.

Beneficial Owner

If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. Please note that the organization is not allowed to vote your shares on most matters without your instructions, so it is important for you to provide direction to the organization on how to vote.

May I attend the Annual Meeting?

All shareholders as of the close of business on the Record Date, or holders of a valid proxy for the Annual Meeting, are entitled to attend the Annual Meeting. Shareholders who plan to attend the Annual Meeting must present valid photo identification. In addition, if you are not a shareholder of record but hold shares through a broker, bank, trustee, nominee, or other similar organization (i.e., in street name), you must provide proof of beneficial ownership as of the Record Date. Proof of beneficial ownership can take the form of your most recent account statement prior to the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, nominee, or other similar organization, a copy of the Notice of Internet Availability of Proxy Materials, if one was mailed to you, or similar evidence of ownership. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the Record Date.

How can I listen to the live webcast of the meeting?

We plan to offer an audio webcast of the Annual Meeting at www.gapinc.com. If you choose to listen to the webcast, go to our website at www.gapinc.com (follow the Investors, Financial News and

Events, Webcasts links) shortly before the start of the meeting and follow the instructions provided. Please note that this webcast will be “listen only.” If you would like to vote, ask questions, or otherwise interact with the meeting participants, you will need to attend the meeting in person. The webcast will be recorded and available for replay on www.gapinc.com for at least 30 days following the Annual Meeting.

Are votes confidential? Who counts the votes?

Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects the voting privacy of our shareholders. Your vote will not be disclosed to anyone, except:

 

As required to tabulate and certify the vote;TABLE OF CONTENTS

PROPOSALS REQUIRING YOUR VOTE

PROPOSAL NO. 1 — Election of Directors

1

Nominees for Election as Directors

1

Corporate Governance

5

Policies and Procedures with Respect to Related Party Transactions

6

Certain Relationships and Related Transactions

7

Compensation of Directors

13

PROPOSAL NO. 2 — Ratification of Selection of Independent Registered Public Accounting Firm

16

Principal Accounting Firm Fees

16

Report of the Audit and Finance Committee

17

PROPOSAL NO. 3 — Advisory Vote on the Overall Compensation of The Gap, Inc.’s Named Executive Officers

18

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

19

Compensation Committee Report

34

Summary Compensation Table

35

Grants of Plan-Based Awards

39

Outstanding Equity Awards at Fiscal Year-End

41

Option Exercises and Stock Vested

44

Nonqualified Deferred Compensation

44

Potential Payments Upon Termination

45

Equity Compensation Plan Information

48

PROPOSAL NO. 4 — Approval of the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan

49

Purpose of the Request for Approval

49

Material Features of the 2016 Plan

50

Plan Benefits

55

BENEFICIAL OWNERSHIP OF SHARES

Beneficial Ownership Table

58

Section 16(a) Beneficial Ownership Reporting Compliance

60

OTHER INFORMATION

Questions and Answers about the Annual Meeting and Voting

61

 

As required by law; and/or

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If you provide written comments on your proxy card (the proxy card and comments would then be forwarded to us for review).

We retain an independent tabulator and inspector of election to receive and tabulate the proxies and to certify the voting results.

What happens if I do not give specific voting instructions?

Shareholder Of Record

If you are a shareholder of record and you sign, date and return a proxy card but do not specify how to vote, your shares will be voted in accordance with the recommendations of the Board of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the Annual Meeting or any adjournments or postponements thereof.

Beneficial Owner

If you are a beneficial owner and hold your shares through a broker, bank, or other similar organization, and you do not provide the broker or other nominee that holds your shares with voting instructions, the broker or other nominee will determine if it has the discretionary authority to vote on a particular matter. Brokers and other nominees have the discretion to vote on routine matters such as Proposal 2 (ratification of the selection of the independent registered public accounting firm), but do not have the discretion to vote on non-routine matters such as Proposal 1 (election of directors), Proposal 3 (approval of the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan), and Proposal 4 (advisory vote on executive compensation). Therefore, your shares will not be voted on non-routine matters without your voting instructions.

What constitutes a “quorum” for the Annual Meeting?

The holders of a majority of the outstanding shares of our common stock, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. The independent inspector(s) of election appointed for the Annual Meeting will determine whether or not a quorum is present and will tabulate votes cast by proxy or in person at the Annual Meeting.

Abstentions are included in the determination of shares present for quorum purposes. Because abstentions represent shares entitled to vote, the effect of an abstention will be the same as a vote against a proposal. However, abstentions will have no effect on the election of directors.

What are broker non-votes and how are they counted?

Broker non-votes occur when nominees, such as brokers and banks holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. Brokers and other nominees may vote without instruction only on “routine” proposals. On “non-routine” proposals, nominees cannot vote without instructions from the beneficial owner, resulting in so-called “broker non-votes.” The proposal to ratify Deloitte & Touche LLP as the Company’s independent registered public accounting firm is the only routine proposal on the agenda for our Annual Meeting. The other three proposals on the agenda are non-routine. If you hold your shares with a broker or other nominee, they will not be voted on non-routine proposals unless you give voting instructions. So long as the broker has discretion to vote on at least one proposal, broker non-votes are counted in determining a quorum but are not counted for purposes of determining the number of shares present in person or represented by proxy on a voting matter.

What vote is required to approve each proposal?

Election Of Directors

Election of directors by shareholders will be determined by a majority of the votes cast with respect to each director, in person or by proxy, at the Annual Meeting. Pursuant to the Company’s Bylaws, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Votes cast shall include votes “for” and “against” a nominee, and exclude “abstentions” and “broker non-votes” with respect to that nominee’s election. Under our Corporate Governance Guidelines, at any meeting of shareholders where nominees are subject to an uncontested election (the number of nominees is equal to the number of seats), any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election, shall submit to the Corporate Secretary of the Company a letter offering his or her resignation, subject to the Board of Directors’ acceptance. The Governance and Sustainability Committee will consider the offer of resignation and will recommend to the Board the action to be taken. The Board of Directors will act promptly with respect to each such letter of resignation and will promptly notify the director concerned of its decision. The Board of Directors’ decision will be disclosed publicly.

Other Proposals

The other three matters on the agenda for shareholder approval at the Annual Meeting will be decided by the affirmative vote of a majority of the shares present, in person or by proxy, at the Annual Meeting and entitled to vote on the subject matter. Please note that Proposal 2 (ratification of the selection of the independent registered public accounting firm) and Proposal 4 (advisory vote on executive compensation) are advisory only and will not be binding on the Company, the Board or any committee of the Board. The results of the votes on these proposals will be taken into consideration by the Company, the Board or the appropriate committee of the Board, as applicable, when making future decisions regarding these matters.

May I change my vote?

You may revoke your proxy at any time before its exercise by writing to our Corporate Secretary at our principal executive offices as follows:

Corporate Secretary

Gap Inc.

Two Folsom Street

San Francisco, California 94105

You may also revoke your proxy by timely delivery of a properly executed, later-dated proxy (including a telephone or Internet vote) or by voting in person at the Annual Meeting.

When are shareholder proposals for the 2016 Annual Meeting due?

If a shareholder would like us to consider including a proposal in our Proxy Statement and form of proxy for our Annual Meeting in 2016, the Company’s Corporate Secretary must receive it no later than December 9, 2015. Proposals must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105.

Our Amended and Restated Bylaws provide that in order for a shareholder to bring business before our Annual Meeting in 2016 (other than a proposal submitted for inclusion in the Company’s proxy materials), the shareholder must give written notice to our Corporate Secretary by no later than the close of business (San Francisco Time) on February 19, 2016, and no earlier than January 20, 2016 (i.e., not less than 90 days nor more than 120 days prior to the first anniversary of the date of our 2015 Annual Meeting). The notice must contain information required by our Bylaws, including a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the Annual Meeting, the name and address of the shareholder proposing the business, the number of shares of the Company’s stock beneficially owned by the shareholder, any material interest of the shareholder in the business proposed, any interests held by the shareholder in derivative securities of the Company or arrangements with persons holding derivative securities of the Company, and other information required to be provided by the shareholder pursuant to the proxy rules of the SEC. If a shareholder fails to submit the notice by February 19, 2016, then the proposed business would not be considered at our Annual Meeting in 2016 due to the shareholder’s failure to comply with our Bylaws. Additionally, in accordance with Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as amended, management proxyholders intend to use their discretionary voting authority with respect to any shareholder proposal raised at our Annual Meeting in 2016 as to which the proponent fails to notify us on or before February 19, 2016. Notifications must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105. A copy of the full text of the Bylaw provisions relating to our advance notice procedure may be obtained by writing to our Corporate Secretary at that address or at www.gapinc.com (follow the Investors, Governance links).

PROPOSALS REQUIRING YOUR VOTE

PROPOSAL NO. 1 — Election of Directors

NOMINEES FOR ELECTION AS DIRECTORS

Election Process

Directors will be elected at the Annual Meeting to serve until the next Annual Meeting and until their successors are elected. The Governance and Sustainability Committee of the Board of Directors has nominated the persons whose names are set forth below, all of whom are current directors. In the absence of instructions to the contrary, shares represented by the proxy will be voted for the election of all of these nominees to the Board of Directors.

Director Nominations

The Board of Directors has no reason to believe that any of the nominees will be unable to serve. However, if any nominee should for any reason be unavailable to serve, the Board of Directors may reduce the number of directors fixedfixed in accordance with our Bylaws, or the proxies may be voted for the election of such other person to the officeoffice of director as the Board of Directors may recommend in place of the nominee. Set forth below is certain information concerning the nominees, including age, experience, qualificationsqualifications and principal occupation during at least the last fivefive years, based on data furnished by each nominee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH OF THE FOLLOWING NOMINEES.

 

LOGO 

Domenico De Sole, age 71.72.


Director since 2004.

Chairman of Tom Ford International, a luxury retailer, since 2005. Chairman of Sotheby’s, an auction house, since 2015. President and Chief Executive OfficerOfficer of Gucci Group NV, 1995-2004. Chairman of Sotheby’s. Director of Newell Rubbermaid Inc. Former director of The Proctor & Gamble Company, 2001-2005, Delta Air Lines, Inc., 2005-2007, and Telecom Italia, 2004-2008.

As the former chief executive officerofficer of a fashion retailer and the current chairman of a retailer, Mr. De Sole has many years of global experience as a senior executive in the retail industry. In addition, as a former director of The Proctor & Gamble Company and as a director of Newell Rubbermaid Inc., he has insight into the global consumer goods market.

 

LOGO 

Robert J. Fisher, age 60.61.


Director since 1990.

Non-executive Chairman of the Board since February 2015. Managing Director, Pisces, Inc., an investment group, since 2010. Interim President and Chief Executive OfficerOfficer of Gap Inc., January 2007-August 2007. Non-executive Chairman of Gap Inc., 2004-August 2007. Executive of Gap Inc., 1992-1999. Various positions with Gap Inc., 1980-1992. Former director of Sun Microsystems, Inc., 1995-2006.

Mr. Fisher has extensive retail experience, including experience specificspecific to Gap Inc., as a result of his many years serving in a variety of high-level Gap Inc. positions, including Chief Operating Officer,Officer, President of Gap Division, Chairman of the Board, and Interim President and Chief Executive Officer.Officer.

 

1

 

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LOGO 

William S. Fisher, age 57.58.


Director since 2009.

Founder and Chief Executive OfficerOfficer of Manzanita Capital Limited, a private equity fund, since 2001. Various positions with Gap Inc., 1986-1998.

Mr. Fisher brings extensive global retail experience to the Board as a result of his years serving in a variety of high-level Gap Inc. positions, including President of the International Division, as well as his service on the boards of a number of private retail companies, including Space NK and Diptyque.

 

LOGO 

Tracy Gardner, age 52.
Director since 2015.

Principal of Tracy Gardner Consultancy, since 2010. Chief Executive Officer of dELiA*s Inc., an omni-channel retail company primarily marketing to teenage girls, 2013-2014. dELiA*s Inc. filed voluntary petitions for relief under Chapter 11 in December 2014. Former executive of J. Crew Group, Inc., 2004-2010. Various positions with Gap Inc., 1999-2004. Former director of Lands' End, 2014-2015.

With over 30 years of experience in the retail industry, Ms. Gardner brings deep product expertise and vast experience as a merchant, creative director and leader in growing multi-channel brands. In addition, her experience as a former senior leader within Gap Inc., and more recently as an advisor to Gap brand, provides Ms. Gardner with an in-depth understanding of the Company's business and operations.

 

Isabella D. Goren, age 54.55.


Director since 2011.

Chief Financial OfficerOfficer of AMR Corporation and American Airlines, Inc., 2010-2013. AMR Corporation and American Airlines, Inc. successfully completed a reorganization under Chapter 11 in December 2013, for which a voluntary petition was filedfiled in November 2011. Senior Vice President of Customer Relationship Marketing of American Airlines, 2006-2010. Various positions with AMR Corporation and American Airlines, Inc., 1986-2006, including President of AMR Services, previously a subsidiary of AMR, 1996-1998. Director of LyondellBasell Industries N.V. and MassMutual Financial Group.

Ms. Goren has broad experience in a number of key corporate functions, including finance,finance, marketing, human resources and international operations. She brings extensive expertise in leadership, management of complex operations, building of customer loyalty programs, financialfinancial functions and global strategies.

 

LOGO 

Bob L. Martin, age 66.67.


Director since 2002.

Lead Independent Director from 2003 to 2015. Operating Partner of Stephens Group, Inc., a private equity group, since 2003. Chief Executive OfficerOfficer (part-time) of Mcon Management Services, Ltd., a consulting company, since 2002. Independent Consultant, 1999-2002. President and Chief Executive OfficerOfficer of Wal-Mart International, a division of Wal-Mart Stores, Inc., 1984-1999. Director of Conn’s Inc. Former director of Dillard’s, Inc., 2003-2004, Edgewater Technology, Inc., 1999-2005, Furniture Brands International, Inc., 2003-2010, Guitar Center, 2004-2007, Sabre Holdings Corporation, 1997-2007, and SolarWinds, Inc., 2009-2010.

Mr. Martin has over 35 years of work experience in the retail industry. As the former chief executive officerofficer of Wal-Mart International, during which he ran operations in 12 countries across four continents, Mr. Martin acquired extensive global governance experience. As the former executive vice president and chief information officerofficer for Wal-Mart Stores, Inc., Mr. Martin has extensive insight into the areas of IT and supply chain capabilities and strategies for a retail company.

 

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LOGO

 

Jorge P. Montoya, age 68.69.


Director since 2004.

President, Global Snacks & Beverages, and President, Latin America, of The Procter & Gamble Company, a consumer products company, 1999-2004. Director of The Kroger Co. Former director of Rohm & Haas Company, 1996-2007.

Mr. Montoya spent over 30 years working for The Proctor & Gamble Company, during which time he acquired extensive experience in management, international growth, consumer products, and marketing.

 

LOGO 

Arthur Peck, age 59.60.


Director since 2015.

Chief Executive OfficerOfficer of Gap Inc. since February 2015. President, Growth, Innovation and Digital division of Gap Inc., November 2012 to January 2015. President, Gap North America, February 2011 to November 2012. Executive Vice President of Strategy and Operations of Gap Inc., May 2005 to February 2011. President, Gap Inc. Outlet, October 2008 to February 2011. Acting President, Gap Inc. Outlet, February 2008 to October 2008. Senior Vice President of The Boston Consulting Group, a business consulting firm,firm, 1982 to 2005.

As a result of his service as Gap Inc.’s Chief Executive Officer,Officer, as well as his service in other senior positions at Gap Inc. and his experience as a Senior Vice President of The Boston Consulting Group, Mr. Peck has extensive management and leadership experience and a deep knowledge of the complex financialfinancial and operational issues facing retail companies.

 

LOGO 

Mayo A. Shattuck III, age 60.61.


Director since 2002.

Non-Executive Chairman of Exelon Corporation, an energy company, since 2012.2013. Executive Chairman of Exelon Corporation, 2012-2013. Chairman, Chief Executive Officer, and President of Constellation Energy Group, 2002-2012. President and Chief Executive OfficerOfficer and President of Constellation Energy Group, 2001-2012.2001-2002. Director of Capital One Financial Corporation.Corporation and Alarm.com Holdings, Inc.

Mr. Shattuck’s experience on the boards of directors of two other public companies, along with his experience as the former chief executive officerofficer of an investment bank and Constellation Energy Group, and his current position as non-executive Chairman of Exelon Corporation, provides him with extensive knowledge of a number of important areas, including leadership, finance,finance, risk assessment, compliance and governance.

 

LOGO 

Katherine Tsang, age 57.58.


Director since 2010.

Principal of Max Giant Limited, an investment company, since 2014. Chairperson of Greater China Standard Chartered Bank, 2009-2014. Chairperson of Standard Chartered Bank (Taiwan) Ltd., 2009-2014. Chairperson of Standard Chartered Bank (Hong Kong) Ltd., 2011-2014. Chief Executive Officer,Officer, Standard Chartered Bank (China) Ltd., 2005-2009. Former director of Baoshan Iron & Steel Co. Limited, 2006-2012.

Ms. Tsang possesses over two decades of work experience in the global banking industry. As the principal of an investment company and a former senior executive at an international bank, Ms. Tsang possesses extensive financialfinancial expertise. In addition, she has held global and regional roles in human resources spanning 56 countries. Ms. Tsang brings significantsignificant experience in management and international growth to the Board. In addition to her former position as an independent non-executive director of Baoshan Iron & Steel Co. Limited in China, Ms. Tsang has also served on the boards of three Standard Chartered Bank subsidiaries.

LOGO

Padmasree Warrior, age 54.

Director since 2013.

Chief Technology and Strategy Officer of Cisco Systems, a networking technology company, since 2012. Chief Technology Officer and Senior Vice President of Engineering at Cisco Systems, 2010-2012. Chief Technology Officer at Cisco Systems, 2008-2010. Director of Box, Inc.

Ms. Warrior has extensive experience as a business leader within the technology industry. As a senior executive for a global technology company, Ms. Warrior is responsible for worldwide business and technology strategy, mergers and acquisitions, equity investments, and innovation, and is charged with aligning technology development and corporate strategy. Ms. Warrior brings significant experience in driving technology and operational innovation across a global company, and in forging growth through strategic partnerships and new business models.

Robert J. Fisher and William S. Fisher are brothers. Information concerning our executive officersofficers who are not also directors is set forth in our Annual Report on Form 10-K for the fiscalfiscal year ended January 31, 2015.30, 2016.

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

 

We have adopted Corporate Governance Guidelines that outline, among other matters, the role and functions of the Board, the responsibilities of the various Board committees, and the procedures for reporting concerns to the Board. Our Corporate Governance Guidelines are available at www.gapinc.com (follow the Investors, Governance, Guidelines links).

HIGHLIGHTS

•    9 of 10 directors are independent

•    Independent Chairman of the Board

•    Individual director evaluations

•    Director stock ownership guidelines

Code of Business Conduct

Our Code of Business Conduct is designedBack to promote a responsible and ethical work environment for all Gap Inc. employees and directors. The Code contains guidelines on conflicts of interest, legal compliance, Company information and assets, and political contributions and activities. Our Code of Business Conduct is available at www.gapinc.com (follow the Investors, Corporate Compliance, Code of Business Conduct links).Contents

Director Independence

The Board of Directors has determined that the following directors are independent under the New York Stock Exchange (“NYSE”) rules and have no direct or indirect material relationships with the Company:

Domenico De Sole

Isabella D. Goren

Mayo A. Shattuck III

Robert J. Fisher

Bob L. Martin

Katherine Tsang

William S. Fisher

Jorge P. Montoya

Padmasree Warrior
(not standing for reelection)

In particular, the Board has determined that none of these directors has relationships that would cause them not to be independent under the specificspecific criteria of Section 303A.02 of the NYSE Listed Company Manual. In making this determination with respect to Robert and William Fisher, the Board considered the following factors: (i) with the exception of Robert Fisher’s brief period of service during 2007 as Interim President and Chief Executive OfficerOfficer (“CEO”) of the Company during a CEO transition, neither Robert nor William Fisher has served as an officerofficer of the Company in over 15 years; (ii) Donald Fisher (a founder of the Company and their father) ceased being an executive officerofficer of the Company prior to his passing in September 2009; (iii) NYSE guidance indicates that ownership of even a significantsignificant amount of stock does not preclude a findingfinding of independence; and (iv) the lease agreements with Doris Fisher (a founder of the Company and their mother) for the display of her personal art collection (further described on page 65) provide benefits7) provided benefits to the Company, and no financial benefitfinancial benefit to Robert or William Fisher. After consideration of these factors, the Board concluded that there is no material relationship between the Company and Robert and William Fisher that would impact their independence under NYSE rules.

Board Leadership Structure4

Effective February 1, 2015, our Amended

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines that outline, among other matters, the role and Restated Bylaws provide that our Chairmanfunctions of the Board, shall not be an officer or employeethe responsibilities of the Company. Mr. Robert Fisher, an independent director, has served as our Chairman ofvarious Board committees, and the Board since February 2015.procedures for

We believe in the importance of independent oversight. We ensure that this oversight is truly independent and effective through a variety of means, including:

We have separated the positions of CEO and Chairman ofreporting concerns to the Board. We believe this provides the most appropriate leadership structure at this time, particularly in light of the fact that Mr. Peck is a new CEO. Our CEO is responsible for day-to-day leadership and for setting the strategic direction of the Company, while the Chairman of the Board provides independent oversight and advice to our management team, and presides over Board meetings.

Our Corporate Governance Guidelines provide thatare available at least two-thirdswww.gapinc.com (follow the Investors, Governance, Guidelines links).

Additional Corporate Governance Information

If you would like further information regarding our corporate governance practices, please visit the

Governance and Corporate Compliance sections of our directors should be independent. Currently, all of our directors other than Mr. Peck are independent.www.gapinc.com (follow the Investors link). Those sections include:

•
Our Corporate Governance Guidelines provide that(available in the event that theprint on request to our Corporate Secretary);

•
Our Code of Business Conduct (available in print on request to our Corporate Secretary);

•
Our Committee Charters;

•
Our Certificate of Incorporation;

•
Our Bylaws;

•
A method for interested parties to send direct communications to our Board of Directors (through our Chairman and Corporate Secretary) by email to board@gap.com; and

•
Methods for employees and others to report suspected violations of the Board is not an independent director, the Board shall designate an independent directorour Code of Business Conduct or accounting, internal accounting controls, or auditing concerns to serve as Lead Independent Director.

our Global Integrity department by confidential email to global_integrity@gap.com, through our Code

 

At each regularly scheduled Board meeting, all independent directorsHotline (866) GAP-CODE or online at speakup.gapinc.com. Callers from outside North America must dial their country’s AT&T Direct Access Code which can be found at

speakup.gapinc.com. Code Hotline calls are typically scheduledanswered by a live operator from an outside company, and are free, confidential and may be made anonymously. Accounting, auditing, and other significant concerns are referred by the Global Integrity department to meet in an executive session without the presence of any management directors.

The charters for each of our standing committees of the Board (AuditAudit and Finance Compensation and Management Development, and Governance and Sustainability) require that all of the members of those committees be independent.Committee.

Risk Oversight

Board Oversight of Risk

The Board has an active role in overseeing the management of the Company’s risks. Annually, the Company’s Internal Audit department performs a comprehensive enterprise risk assessment encompassing a number of significantsignificant areas of risk, including strategic, operational, compliance, financial,financial, and reputational risks. The assessment process is designed to gather data regarding the most important risks that could impact the Company’s ability to achieve its objectives and execute its strategies. Primary assessment methods include interviews with key executives and Board members, review of critical Company strategies and initiatives, and monitoring of emerging industry trends and issues. The assessment is reviewed by the Company’s CEO, Chief Financial OfficerOfficer (“CFO”), and Chief Compliance OfficerOfficer and presented to the Board to facilitate discussion of high risk areas. It provides the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board oversight. In addition, on a regular basis, management communicates with the Board, both formally and informally, about key initiatives, strategies and industry developments, in part to assess and manage the potential risks.

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While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit and Finance Committee focuses on financialfinancial and compliance risks, and the Compensation and Management Development Committee sets employee incentives with the goal of encouraging an appropriate level of risk-taking, consistent with the Company’s business strategies.

Compensation Risk Assessment

On an annual basis, management conducts a comprehensive overall review of each of the Company’s compensation policies and practices for the purpose of determining whether any ofrisks arising from those policies and practices are reasonably likely to have a material adverse effect on the Company. As a

part of this review, each of the Company’s compensation policies and practices were compared to a number of specificspecific factors that could potentially increase risk, including the specificspecific factors that the SEC has identifiedidentified as potentially triggering disclosure. The Company balanced these factors against a variety of mitigating factors. Examples of some of the mitigating factors are (i) compensation policies and practices are structured similarly across business units; (ii) the risk of declines in performance in our largest business units is well understood and managed; (iii) incentive compensation expense is not a significantsignificant percentage of any significantsignificant unit’s revenues; (iv) for executives, a significantsignificant portion of variable pay is delivered through long-term incentives which carry vesting schedules over multiple years; (v) a mix of compensation vehicles and performance measures is used; (vi) stock ownership requirements for executives are in place; (vii) significantsignificant incentive plans are capped at all levels; (viii) threshold levels of performance must be achieved for the bulk of variable pay opportunities; and (ix) a clawback policy with respect to financialfinancial restatements is in place. Management’s assessment was also presented to the Company’s Chief Compliance OfficerOfficer and the Chair of the Board’s Compensation and Management Development Committee. As a result of management’s review, the Company determined that any risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Communication with Directors

Interested parties can send direct communications to our Board Meetingsof Directors (through our Chairman and Corporate Secretary) by email to: board@gap.com.

Code of Business Conduct

Our Code of Business Conduct is designed to promote a responsible and ethical work environment for all Gap Inc. employees and directors. The Code contains guidelines on conflicts of interest, legal compliance, Company information and assets, and political contributions and activities. Our Code of

Business Conduct is available at www.gapinc.com (follow the Investors, Corporate Compliance, Code of Business Conduct links).

Policies and Procedures with Respect to Related Party Transactions

The Board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest. The Compensation and Management Development Committee’s charter requires that the members of that Committee, all of whom are independent directors, approve all of the Company’s executive compensation policies and programs and all compensation awarded to executive officers. The Audit and Finance Committee’s charter requires that the members of the Audit and Finance Committee, all of whom are independent directors, review and approve transactions with the Company involving management and/or members of the Board of Directors that are not otherwise subject to the

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approval of the Compensation and Management Development Committee and would require disclosure under SEC rules. In the event a transaction involves a committee member, that member will recuse him or herself from the approval of the transaction.

In addition, the Audit and Finance Committee oversees the Company’s Corporate Compliance Program, which includes procedures for the (i) receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and (ii) confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters and other matters under the Company’s Code of Business Conduct.

Certain Relationships and Related Transactions

Pursuant to the approval of the Audit and Finance Committee of the Board, Doris F. Fisher leased approximately 26,000 square feet of space in our One Harrison and Two Folsom, San Francisco headquarters locations under agreements, the last of which expired on January 31, 2016, primarily to display portions of her personal art collection. Mrs. Fisher is a co-founder of the Company, an Honorary Lifetime Member of the Board of Directors, and the mother of Robert J. Fisher and William S. Fisher. The lease agreements provided for base rent ranging from $30.00 to $42.35 per square foot per year over a 15-year term. Based on the Company’s headquarters space needs and Mrs. Fisher’s space needs, the Audit and Finance Committee reviewed and approved the terms of agreements to terminate the lease for a portion of the space in 2014. The remaining portion of the space (approximately 9,300 square feet) continued to be leased by Mrs. Fisher at a base rent of $42.35 per square foot on the same terms as originally agreed, expiring January 31, 2016. Rental income from this leased space for fiscal 2015 was approximately $420,000. We believe that these rental rates were at least competitive when the agreements were entered into. The agreements also provided us and our employees significant benefits, including use of the space on a regular basis for corporate functions at no charge.

During 2015, prior to the effective date of her appointment to the Company's Board of Directors, Ms. Gardner provided consulting services to the Company. The Company paid Ms. Gardner approximately $600,000 during 2015 for these services. The Company and Ms. Gardner terminated this consulting services arrangement as of November 1, 2015.

Board Leadership Structure and Succession

Our Amended and Restated Bylaws provide that our Chairman of the Board shall not be an officer or employee of the Company. Robert Fisher, an independent director, has served as our Chairman of the Board since February 2015.

We believe in the importance of independent oversight. We ensure that this oversight is truly independent and effective through a variety of means, including:

•
We have separated the positions of CEO and Chairman of the Board. We believe this provides the most appropriate leadership structure at this time. Our CEO is responsible for day-to-day leadership and for setting the strategic direction of the Company, while the Chairman of the Board presides over Board meetings, including non-management and independent director sessions, and shareholder meetings.

•
Our Corporate Governance Guidelines provide that at least two-thirds of our directors should be independent. Currently, all of our directors other than Mr. Peck and Ms. Gardner are independent.

•
Our Corporate Governance Guidelines provide that in the event that the Chairman of the Board is not an independent director, the Board shall designate an independent director to serve as Lead Independent Director.

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•
At each regularly scheduled Board meeting, all non-management directors are typically scheduled to meet in an executive session without the presence of any management directors.

•
At least annually, the independent directors meet in executive session.

•
The charters for each of our standing committees of the Board (Audit and Finance, Compensation and Management Development, and Governance and Sustainability) require that all of the members of those committees be independent.

In fiscal 2015, Mr. De Sole turned 72 years old. While our Corporate Governance Guidelines would normally provide that he not stand for re-election at the next annual meeting, the Board exercised its discretion to nominate Mr. De Sole to serve, once elected, on the Board for one year for the following reasons: our CEO and Chairman of the Board assumed their roles in fiscal year 2015; other recent management succession changes; Mr. De Sole’s deep experience in the retail apparel and fashion industries; and Ms. Warrior is not standing for re-election at the next annual meeting given her additional responsibilities in her new position as a chief executive officer.

The Board of Directors has three standing committees: the Governance and Sustainability Committee, the Audit and Finance Committee, and the Compensation and Management Development Committee, each described below. Each director nominee attended at least 75% of the meetings of the Board and committees on which he or she served. In addition, individual Board members often work together and with management outside of formal meetings.

The independent directors are typically scheduled to meet without the presence of management during each regularly scheduled Board meeting. Our Chairman, Mr. Robert Fisher, is responsible for organizing, managing and presiding over the independent director sessions of the Board, and reporting on outcomes of the sessions to the CEO, as appropriate.

The Board met six times during fiscal 2014. The following table lists the current members of each of the committees and the number of committee meetings held during fiscal 2014:

Name  Audit &
Finance		  Compensation &
Management
Development		  Governance &
Sustainability
          
   

Domenico De Sole

     X   
   

Robert J. Fisher

        Chair
   

William S. Fisher

         
   

Isabella D. Goren

  X      
   

Bob L. Martin

     Chair  X
   

Jorge P. Montoya

  X      
   

Arthur Peck

         
   

Mayo A. Shattuck III

  Chair     X
   

Katherine Tsang

     X   
   

Padmasree Warrior

     X   
   

Number of Meetings

  8  9  4
          

Governance and Sustainability Committee

The Board’s Governance and Sustainability Committee is composed solely of independent directors, as defineddefined under NYSE rules.

This Committee assists the Board of Directors in fulfillingfulfilling its oversight responsibilities relating to the Company’s corporate governance matters, including the development of corporate governance guidelines, periodic evaluation of the Board, its committees and individual directors, identificationidentification and selection of director nominees, oversight of the Company’s programs, policies and practices relating to social and environmental issues, impacts and strategies, and such other duties as directed by the Board of Directors.

The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Board of Directors, Board Committees links).

Nomination of Directors

The Governance and Sustainability Committee has the responsibility to identify, evaluate, and recommend qualifiedqualified candidates to the Board. The Chairman, CEO, and at least two independent directors interview any qualifiedqualified candidates prior to nomination. Other directors and members of management interview each candidate as requested by the Chairman, CEO, or chair of the Committee.

The Committee may also engage third-party independent consultants to identify potential director nominees based on identifiedidentified criteria and a needs assessment. These consultants have also assisted the Committee in identifying a diverse pool of qualifiedqualified candidates and in evaluating and pursuing individual candidates at the direction of the Committee.

The Committee will also consider director nominees recommended by shareholders. Our Bylaws provide that in order for a shareholder to propose director nominations at the meeting of shareholders in 2016,2017, the shareholder must give written notice to our Corporate Secretary by no later than the close of business (San Francisco Time) on February 19, 2016,16, 2017, and no earlier than January 20, 201617, 2017 (i.e., not less than 90 days nor more than 120 days prior to the firstfirst anniversary of the date of our 20152016 Annual Meeting). The notice must contain information required by our Bylaws about the identity and background of each

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nominee and the shareholder making the nomination, including interests in derivative securities or arrangements with persons holding derivative securities, relationships or arrangements between the nominee and the shareholder making the nomination, and information that would enable the Board to determine a nominee’s eligibility to serve as an independent director. The notice also must contain other information that must be disclosed in proxy solicitations for election of directors under the proxy rules of the SEC (including information regarding the director nominee’s experience, qualifications,qualifications, attributes and/or skills), the nominee’s consent to the nomination and to serve if elected, and certain other information required by our Bylaws. If a shareholder fails to submit the notice by February 19, 2016,16, 2017, then the proposed nominee(s) of the shareholder will not be considered at our Annual Meeting in 20162017 in accordance with our Bylaws. NotificationsNotifications must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105. A copy of the full text of the Bylaw provisions relating to our advance notice

procedure may be obtained at www.gapinc.com (follow the Investors, Governance links) or to any shareholder on request by writing to our Corporate Secretary at the above address.

QualificationsQualifications and Diversity of Board Members

All director nominees must possess certain core competencies, some of which may include experience in retail, consumer products, international business/markets, real estate, store operations, logistics, product design, merchandising, marketing, general operations, strategy, human resources, technology, media or public relations, financefinance or accounting, or experience as a CEO or CFO. In

addition to having one or more of these core competencies, Board member nominees are identifiedidentified and considered on the basis of knowledge, experience, integrity, leadership, reputation, background, qualifications,qualifications, gender, race/ethnicity, personal characteristics, and ability to understand the Company’s business. The Board believes that this overall professional, personal, gender, and racial/ethnic diversity is important to the effectiveness of the Board’s oversight of the Company. Accordingly, diversity is a factor that is considered in the identificationidentification and recommendation of potential director candidates. In this regard, of the ten nominees for director, three are female and threetwo are ethnically diverse. In addition, all director nominees are pre-screened to ensure that each candidate has qualificationsqualifications that complement the overall core competencies of the Board. The screening process also includes conducting a background evaluation and an independence determination. The Board believes that its criteria for selecting board nominees are effective in promoting overall diversity.

Evaluation of Directors

The Governance and Sustainability Committee is responsible for overseeing a formal evaluation process to assess the composition and performance of the Board, each committee, and each individual director on an annual basis. The assessment is conducted to identify opportunities for improvement and skill set needs, as well as to ensure that the Board, committees, and individual members have the appropriate blend of diverse experiences and backgrounds, and are effective and productive. As part of the process, each member completes a survey that includes Board, committee, and individual assessments. In addition, members of senior management complete a similar survey to assess Board and committee performance. While results are aggregated and summarized for discussion purposes, individual responses are not attributed to any individual and are kept confidentialconfidential to ensure honest and candid feedback is received. The Committee discusses opportunities and makes recommendations for improvement as appropriate to the full Board, which implements agreed upon improvements. The Committee Chair also meets privately with individual Board members to provide feedback specificspecific to each director received during the evaluation process. A director will not be nominated for reelection unless it is affirmativelyaffirmatively determined that he or she is substantially contributing to the overall effectiveness of the Board.

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Sustainability

The Governance and Sustainability Committee is also responsible for reviewing and evaluating Company programs, policies and practices relating to social and environmental issues, impacts and strategies to support the sustainable growth of the Company’s businesses. The Committee regularly discusses social and environmental issues at its meetings, and oversees the Company’s development of industry-leading programs and initiatives. For more information regarding our commitment to sustainability,

please see our website and most recent Social and Environmental ResponsibilitySustainability Report available at www.gapinc.com (follow the ResponsibilitySustainability link).

Audit and Finance Committee

The Board’s Audit and Finance Committee is composed solely of independent directors, as defineddefined under SEC and NYSE rules.

This Committee assists the Board of Directors in fulfillingfulfilling its oversight responsibilities relating to the integrity of our financialfinancial statements, compliance with legal and regulatory requirements, the registered public accounting firm’s qualifications,firm’s qualifications, independence and performance, the performance of the Internal Audit function, the effectiveness of the corporate compliance program, financefinance matters, and such other duties as directed by the Board of Directors. In addition, the Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered

public accounting firm. firm.

The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Board of Directors, Board Committees links).

Audit Committee Financial Expert

Our Board of Directors has determined that the Audit and Finance Committee has two members who are “audit committee financialfinancial experts” as determined under Regulation S-K Item 407(d)(5) of the Securities Exchange Act of 1934: Mr. Shattuck and Ms. Goren, both of whom are independent directors as determined under applicable NYSE listing standards.

Compensation and Management Development Committee

The Board’s Compensation and Management Development Committee is composed solely of independent directors, as defineddefined under SEC and NYSE rules.

This Committee assists the Board of Directors in fulfillingfulfilling its oversight responsibilities relating to executive officerofficer and director compensation, succession planning for senior management, development and retention of senior management, and such other duties as directed by the Board of Directors. The

Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Board of Directors, Board Committees links).

The Committee approves all of the Company’s executive compensation policies and programs and all compensation awarded to executive officers.officers. Our CEO evaluates each executive officerofficer and discusses with the Committee his assessment and recommendations for compensation. The CEO is not present during the Committee’s deliberations about his own compensation. The Committee also oversees senior management development, retention, and succession plans. The Committee approves grants of stock units to employees at the Vice President or above level, and has delegated authority, within defineddefined parameters, to the CEO or Committee Chair to approve grants of stock units to employees below the Vice President level (see the “Long-Term Incentive Grant Practices” sectionIncentives” beginning on page 4726 for more details). The Committee has also delegated authority, within defineddefined parameters, to the Company’s Human Resources personnel to make certain non-material changes to the Company’s employee benefitbenefit plans.

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The Committee has engaged Frederic W. Cook & Co. as its independent executive compensation consultant. The consultant provides advice to the Committee from time to time on the compensation program structure and specificspecific individual compensation arrangements (see the “Role of the CEO and Compensation Consultant” section on page 3832 for more details). In addition, under NYSE rules, promulgated as a result of the Dodd-Frank Act (which were incorporated into the Committee’s charter in 2013), the Committee can only retain a compensation advisor after considering six independence factors: (a) whether the advisor’s firmfirm provides other services to the Company, (b) the fees received by the advisor’s firmfirm from the Company as a percentage of the firm’sfirm’s overall revenue, (c) the policies and procedures of the advisor’s firmfirm designed to prevent conflictsconflicts of interest, (d) any business or personal relationship between the advisor and a member of the Committee, (e) any stock of the Company owned by the advisor, and (f) any business or personal relationship of the advisor or advisor’s firmfirm with an executive officerofficer of the Company. Based on a review of the Committee’s relationship with its compensation consultant and an assessment considering these six independence factors, the Committee has identifiedidentified no conflictsconflicts of interest and confirmedconfirmed the independence of Frederic W. Cook & Co.

Compensation Committee Interlocks and Insider Participation

During fiscal 2014, Adrian Bellamy (who retired from the Board of Directors in 2014),fiscal 2015, Mr. De Sole, Mr. Martin, Ms. Tsang, and Ms. Warrior (who is not standing for reelection) served on the Compensation and Management

Development Committee of the Board of Directors. During fiscal 2014,fiscal 2015, none of our executive officersofficers served on the board of directors of any company where one of that company’s executive officersofficers served as one of our directors.

Board Meetings

The Board met eight times during fiscal 2015. The following table lists the current members of each of the committees and the number of committee meetings held during fiscal 2015:

Name

Audit &
Finance

Compensation &
Management
Development

Governance &
Sustainability

Domenico De Sole

 

X

 

Robert J. Fisher

 

 

Chair

William S. Fisher

 

 

 

Tracy Gardner

 

 

 

Isabella D. Goren

X

 

 

Bob L. Martin

 

Chair

X

Jorge P. Montoya

X

 

 

Arthur Peck

 

 

 

Mayo A. Shattuck III

Chair

 

X

Katherine Tsang

 

X

 

Padmasree Warrior (not standing for reelection)

 

X

 

Number of Meetings

8

7

5

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Each director nominee attended at least 75% of the meetings of the Board and committees on which he or she served. In addition, individual Board members often work together and with management outside of formal meetings.

The non-management directors are typically scheduled to meet without the presence of management during each regularly scheduled Board meeting. Our Chairman, Robert Fisher, is responsible for organizing, managing and presiding over the non-management and director sessions of the Board, and reporting on outcomes of the sessions to the CEO, as appropriate.

Attendance of Directors at Annual Meetings of Shareholders

Our policy regarding attendance by directors at our Annual Meeting of Shareholders states that our Chairman and committee chairs should attend and be available to answer questions at our Annual Meeting, if reasonably practicable. Our policy also encourages all other directors to attend. All of our director nominees who served during fiscal 2014Nine directors attended our 20142015 Annual Meeting in person.

Communication with Directors

Interested parties can send direct communications to our Board of Directors (through our Chairman and Corporate Secretary) by email to: board@gap.com.

Stock Ownership Guidelines for Directors

We have adopted minimum stock ownership guidelines for our directors. Each non-management director should, within three years of joining the Board of Directors, hold stock (which includes deferred stock units) of the Company worth at least fivefive times the annual base retainer then in effect. Management directors are required to own stock of the Company in accordance with our stock ownership requirements for executives, described on pages 47-48.page 30. Our insider trading policy, which is applicable to directors, prohibits speculation in the Company’s stock, including short sales, hedging or publicly-traded option transactions, and holding the Company’s stock in a margin account as collateral for a margin loan or otherwise pledging Company stock as collateral.

Additional Corporate Governance Information12

If you would like further information regarding our corporate governance practices, please visit the governance and compliance sections of www.gapinc.com (follow the Investors link). Those sections include:

 

Our Corporate Governance Guidelines (available in print on requestBack to our Corporate Secretary);

Contents

Our Code of Business Conduct (available in print on request to our Corporate Secretary);

Our Committee Charters;

Our Certificate of Incorporation;

Our Bylaws;

A method for interested parties to send direct communications to our Board of Directors (through our Chairman and Corporate Secretary) by email to board@gap.com; and

Methods for employees and others to report suspected violations of our Code of Business Conduct or accounting, internal accounting controls, or auditing concerns to our Global Integrity department by confidential email to global_integrity@gap.com, through our Code Hotline (866) GAP-CODE or online at speakup.gapinc.com. Callers from outside North America must dial their country’s AT&T Direct Access Code which can be found at speakup.gapinc.com. Code Hotline calls are answered by a live operator from an outside company, and are free, confidential and may be made anonymously. Accounting, auditing, and other significant concerns are referred by the Global Integrity department to the Audit and Finance Committee.

COMPENSATION OF DIRECTORS

Retainer and Meeting Fees

The table below shows the annual retainer, attendance fees, and committee chair retainer we paid to our non-employee directors in fiscal 2014,fiscal 2015, as well as the amounts payable for fiscal 2015:fiscal 2016:

        

Fiscal Year 2015 and 2016 Director Cash Compensation

 

2015

2016

Annual Retainer

$

75,000

 

$

75,000

 

Additional Annual Retainer for Committee Chairs

 

 

  

 

 

 

Audit and Finance Committee

 

20,000

  

20,000

 

 

Compensation and Management Development Committee

 

20,000

  

20,000

 

 

Governance and Sustainability Committee

 

15,000

  

15,000

 

Additional Annual Retainer for Chairman of the Board

 

200,000

  

200,000

 

Fee per Board Meeting (1)

 

—

  

—

 

Fee per regularly scheduled Committee Meeting

 

2,000

  

2,000

 

 

Fiscal Year 2014 and 2015 Director Cash Compensation 
    2014   2015 
  

Annual Retainer

  $75,000    $75,000  

Additional Annual Retainer for Committee Chairs

    

Audit and Finance Committee

   20,000     20,000  

Compensation and Management Development Committee

   20,000     20,000  

Governance and Sustainability Committee

   15,000     15,000  

Additional Annual Retainer for Lead Independent Director

   25,000     n/a  

Additional Annual Retainer for Chairman of the Board

   n/a     200,000  

Fee per Board Meeting (1)

   —     —  

Fee per regularly scheduled Committee Meeting

   2,000     2,000  
  
  

Footnote

(1)

Footnote

(1)

This amount does not include a fee of $2,000 that is paid to non-employee directors who reside primarily outside of North America for attendance at each Board and/or committee meeting requiring travel to the United States.

Employee directors are not eligible for the annual retainer or attendance fees, and are not eligible to serve on committees or as committee chairs.committees.

Equity Compensation

Non-employee directors receive the following under our 2011 Long-Term Incentive Plan:

•
Each new non-employee director automatically receives stock units with an initial value of $140,000 based on the then-current fair market value of the Company’s common stock; and

 

•
Each continuing non-employee director automatically receives, on an annual basis, stock units with an initial value of $140,000 at the then-current fair market value of the Company’s common stock; provided that newly-appointed non-employee directors who were appointed after the Company’s last annual shareholders’ meeting will receive their firstfirst annual stock unit grant on a prorated basis based on the number of days that the director has served between his or her appointment and the date of the firstfirst annual stock unit grant.

The annual stock units granted to continuing non-employee directors following the Company’s annual shareholders’ meeting, as well as the initial grant made to any non-employee director who is firstfirst elected to the Board at the Company’s annual shareholders’ meeting, are granted on June 30 of each year; provided, however, that if the Company’s annual shareholders’ meeting takes place after June 30, then the related stock unit grants will be granted on the firstfirst business day following that meeting. All initial stock units to new non-employee directors who are appointed other than at the annual shareholders’ meeting are granted on the date of appointment. The number of stock units is rounded down to the nearest whole share. These stock units are fully-vested but are subject to a

three-year deferral period. During the deferral period, the stock units earn dividend equivalents which are reinvested in additional units annually. Following the deferral period, shares in an amount equal in value to the stock units, including units acquired through dividend equivalent reinvestment, will be issued to each non-employee director unless a further deferral election has been made; provided, however, that shares and accumulated dividend equivalents will be issued immediately upon ceasing to be a director of the Company.

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Expense Reimbursement and Other BenefitsBenefits

We also pay for or reimburse directors for approved educational seminars and for travel expenses related to attending Board, committee, and approved Company business meetings. Additionally, we provide non-employee directors access to officeoffice space and administrative support for Company business from time to time.

Directors and their spouses are eligible to receive discounts on our merchandise in accordance withon terms similar to the Gap Inc. corporate employee merchandise discount policy.

In January 2006, weWe established The Gap, Inc. Deferred Compensation Plan (“DCP”) whereby highly compensated employees, including executive officers,officers, and non-employee directors may elect to defer receipt of certain eligible income. The DCP allows eligible employees to defer a percentage of their salary and bonus on a pre-tax basis, and allows non-employee directors to defer their retainers and meeting fees. The deferred amounts are indexed to reflectreflect the performance of the participant’s choice of approved investment funds. Non-employee director deferrals are not matched, and above-market or preferential interest rate options are not available on deferred compensation.

The Non-Employee Director Retirement Plan is an unfunded deferred compensation plan that provides for annual benefits if a non-employee director has served on the Board for five consecutive years and is still a director at age 72. In fiscal 1996, the Board of Directors terminated this plan for future directors. Mr. Bellamy (who retired from the Board in 2014) is the only director who served during fiscal 2014 and is eligible for plan benefits based on the fact that he remained on the Board until age 72. Accordingly, he is entitled to receive an annual benefit payment equal to $27,000 until 2033. If Mr. Bellamy dies before 2033, payments would continue to his surviving spouse for the life of his spouse, or until 2033, whichever is sooner.

Directors are eligible to participate in our Gift Match Program available to all employees, under which we match contributions to eligible nonprofitnonprofit organizations, up to certain annual limits. In fiscal 2014, Glenn Murphy,fiscal 2015, Art Peck, our former Chairman and CEO, had an annual matching limit of $100,000. The annual limit for non-employee directors was $15,000 under the Gift Match Program. Mr. Murphy, as an employee, was also eligible

14

Back to participate in our Board Service Program that matches nonprofit board service by eligible employees with contributions to eligible nonprofit organizations, up to an annual limit of $10,000.Contents

Director Compensation Summary

The following table sets forth certain information regarding the compensation of our directors in fiscal 2014,fiscal 2015, which ended January 31, 2015.30, 2016.

                   

Name (1)

Fees
Earned
or Paid
in Cash
($)

Stock
Awards
($) (2)

Option
Awards
($) (3)

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)

All Other
Compensation
($) (4)

Total
($)

Domenico De Sole

 

83,000

  

139,969

  

0

  

0

  

0

  

222,969

 

Robert J. Fisher

 

298,000

  

139,969

  

0

  

0

  

15,000

  

452,969

 

William S. Fisher

 

75,000

  

139,969

  

0

  

0

  

15,000

  

229,969

 

Tracy Gardner

 

18,750

  

139,994

  

0

  

0

  

0

  

158,744

 

Isabella D. Goren

 

91,000

  

139,969

  

0

  

0

  

14,519

  

245,488

 

Bob L. Martin

 

115,000

  

139,969

  

0

  

0

  

0

  

254,969

 

Jorge P. Montoya

 

101,000

  

139,969

  

0

  

0

  

12,500

  

253,469

 

Mayo A. Shattuck III

 

119,000

  

139,969

  

0

  

0

  

15,000

  

273,969

 

Katherine Tsang

 

97,000

  

139,969

  

0

  

0

  

0

  

236,969

 

Padmasree Warrior

 

81,000

  

139,969

  

0

  

0

  

0

  

220,969

 

 

Name (1) 

Fees

Earned

or Paid

in Cash

($)

  

Stock

Awards

($) (2)

  

Option

Awards

($) (3)

  

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($) (4)

  

All Other

Compensation

($) (5)

  

Total

($)

 
  

Adrian D.P. Bellamy

  71,000    0    0    (22,092)   0    48,908  

Domenico De Sole

  87,000    139,974    0    0    15,000    241,974  

Robert J. Fisher

  90,500    139,974    0    0    15,000    245,474  

William S. Fisher

  75,000    139,974    0    0    15,000    229,974  

Isabella D. Goren

  91,000    139,974    0    0    15,000    245,974  

Bob L. Martin

  137,500    139,974    0    0    10,000    287,474  

Jorge P. Montoya

  101,000    139,974    0    0    12,500    253,474  

Mayo A. Shattuck III

  115,000    139,974    0    0    10,000    264,974  

Katherine Tsang

  97,000    139,974    0    0    0    236,974  

Padmasree Warrior

  79,000    104,690    0    0    0    183,690  
  
  

Footnotes

(1)

Footnotes

(1)

Mr. Bellamy retired as a director on May 20, 2014.

Mr. MurphyPeck was compensated as our CEO and received no additional compensation as our Chairman or as a director. Mr. Murphy’sPeck’s compensation is reported in the Summary Compensation Table and related executive compensation tables, beginning on page 51.35.

(2)

This column reflectsreflects the aggregate grant date fair value for awards of stock during fiscal 2014,fiscal 2015, computed in accordance with FASB ASC 718. All stock awards reported in this column were granted in fiscal 2014.fiscal 2015. The following directors had outstanding stock awards as of fiscal 2014fiscal 2015 year-end: Mr. De Sole (16,736)(10,389), Mr. Robert Fisher (16,736)(10,389), Mr. William Fisher (11,290)(10,389), Ms. Gardner (5,257), Ms. Goren (10,727)(10,389), Mr. Martin (11,290)(10,389), Mr. Montoya (11,290)(10,389), Mr. Shattuck (11,290)(14,957), Ms. Tsang (11,290)(10,389), and Ms. Warrior (5,994)(9,661). For the period during which the payment of these units is deferred (see pages 17-18)page 13), they will earn dividend equivalents which are reinvested in additional units annually. Please refer to Note 11,10, “Share-Based Compensation,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filedfiled on March 23, 201521, 2016 for the relevant assumptions used to determine the valuation of our stock awards.

(3)

No stock options were granted to our directors in fiscal 2014. The followingfiscal 2015. None of our directors had outstanding option awards as of fiscal 2014 year-end: Mr. Martin (7,500) and Mr. Montoya (7,500).fiscal 2015 year-end.

(4)

The amount in this column for Mr. Bellamy represents the estimated change in present value of his accumulated benefit under the Company’s Non-Employee Director Retirement Plan, described on page 18.

(5)Amounts in this column include any Company matching contributions under the Company’s Gift Match Program (see “Expense Reimbursement and Other Benefits,Benefits,” on page 18)14).

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PROPOSAL NO. 2 — RatificationRatification of Selection of


Independent Registered Public Accounting Firm

The Audit and Finance Committee of the Board of Directors has selected Deloitte & Touche LLP as our independent registered public accounting firmfirm for the fiscalfiscal year ending January 30, 2016.28, 2017. Deloitte & Touche LLP (or its predecessor firm)firm) has been retained as our independent registered public accounting firmfirm since 1976. If shareholders fail to ratify the selection of Deloitte & Touche LLP, the Audit and Finance Committee will reconsider the selection. If the selection of Deloitte & Touche LLP is approved, the Audit and Finance Committee, in its discretion, may still direct the appointment of a different independent auditing firmfirm at any time and without shareholder approval if the Audit and Finance Committee believes that such a change would be in the best interests of the Company and our shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR” THE SELECTION OF DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

Representatives of Deloitte & Touche LLP are expected to be present, available to make statements, and available to respond to appropriate shareholder questions at the Annual Meeting.

Principal Accounting Firm Fees

The following table sets forth the aggregate fees paid and accrued by us for audit and other services for the fiscalfiscal years ended January 30, 2016 and January 31, 2015 and February 1, 2014 provided by our principal accounting firm,firm, Deloitte & Touche LLP, the member firmsfirms of Deloitte Touche Tohmatsu Limited, and their respective affiliatesaffiliates (collectively “Deloitte & Touche”).

       

Fiscal Year 2015 and 2014 Accounting Fees

Fees (see notes below)

Fiscal Year 2015

Fiscal Year 2014

Audit Fees

$

4,792,223

 

$

4,873,960

 

Audit-Related Fees

 

233,401

  

256,222

 

Tax Fees

 

106,617

  

86,595

 

All Other Fees

 

4,500

  

4,782

 

Total

$

5,136,741

 

$

5,221,559

 

 

Fiscal Year 2014 and 2013 Accounting Fees
Fees (see notes below)  Fiscal Year 2014  Fiscal Year 2013
 

Audit Fees

  $                4,873,960  $                4,734,453

Audit-Related Fees

                        256,222                       267,779

Tax Fees

                          86,595                         41,901

All Other Fees

                             4,782                            4,354

Total

  $                5,221,559  $                5,048,487
 

“Audit Fees” consists of fees for professional services rendered in connection with the audit of our consolidated annual financial statements, the review of our interim condensed consolidated financial statements included in quarterly reports, and the audits in connection with statutory and regulatory filings

“Audit Fees” consists of fees for professional services rendered in connection with the integrated audit of our consolidated annual financial statements and internal controls over financial reporting, the review of our interim condensed consolidated financial statements included in quarterly reports, and the audits in connection with statutory and regulatory filings or engagements.

“Audit-Related Fees” consists primarily of fees for professional services rendered in connection with the audit of our employee benefit plans, audit procedures required by store leases and capital verification reports.

“Tax Fees” consists of fees billed for professional services rendered for tax compliance and tax advice. These services include assistance regarding federal, state and international tax compliance, and competent authority proceedings.

“All Other Fees” consists of fees for products and services other than the services reported above.

“Audit-Related Fees” consists primarily of fees for professional services rendered in connection with the audit of our employee benefit plans, audit procedures required by store leases and capital verification reports.

“Tax Fees” consists of fees billed for professional services rendered for tax compliance and tax advice. These services include assistance regarding federal, state and international tax compliance, and competent authority proceedings.

“All Other Fees” consists of fees for products and services other than the services reported above.

The Audit and Finance Committee approves the terms, including compensation, of the engagement of our independent registered public accounting firmfirm on an annual basis, and has a policy to pre-approve all services performed by the firm.firm. This policy requires that all services performed by Deloitte & Touche, whether audit or non-audit services, must be pre-approved by the Audit and Finance Committee or a designated member of the Audit and Finance Committee, with any such services reported to the entire Audit and Finance Committee at the next scheduled meeting.

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Rotation

The Audit and Finance Committee periodically reviews and evaluates the performance of Deloitte & Touche’s lead audit partner, oversees the required rotation of the lead audit partner responsible for our audit and, through the Committee’s Chair as representative of the Audit and Finance Committee, reviews and considers the selection of the lead audit partner. In addition, the Audit and Finance Committee periodically considers whether there should be a rotation of the independent registered public accountants.accounting firm. At this time, the Audit and Finance Committee and the Board believe that the continued retention of Deloitte & Touche LLP to serve as our independent registered public accountantsaccounting firm is in the best interests of the Company and our shareholders.

Report of the Audit and Finance Committee

The Audit and Finance Committee assists the Board of Directors in fulfillingfulfilling its oversight responsibilities relating to the integrity of our financialfinancial statements, compliance with legal and regulatory requirements, the independent registered public accounting firm qualifications,firm qualifications, independence and performance, the performance of the Internal Audit function, the effectiveness of the corporate compliance program, financefinance matters, and such other duties as directed by the Board of Directors. The Committee

operates under a written charter (available at www.gapinc.com, follow the Investors, Governance, Board of Directors, Board Committees links) adopted by the Board of Directors. The Committee is composed exclusively of directors who are independent under New York Stock Exchange listing standards and Securities and Exchange Commission rules.

The Committee has reviewed and discussed the audited financialfinancial statements of the Company for the fiscalfiscal year ended January 31, 201530, 2016 with the Company’s management. In addition, the Committee has discussed with Deloitte & Touche, LLP, the Company’s independent registered public accounting firm,firm, the matters required to be discussed by the applicable Public Company Accounting Oversight Board and Securities and Exchange Commission requirements.

The Committee also has received the communications, including written disclosures and the letter from Deloitte & Touche, LLP, required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Committee concerning independence, and the Committee has discussed the independence of Deloitte & Touche LLP with that firm.firm.

Based on the Committee’s review and discussions noted above, the Committee recommended to the Board of Directors that the Company’s audited financialfinancial statements be included in the Company’s Annual Report on Form 10-K for the fiscalfiscal year ended January 31, 201530, 2016 for filingfiling with the Securities and Exchange Commission.

Mayo A. Shattuck III (Chair)


Isabella D. Goren


Jorge P. Montoya

Notwithstanding anything to the contrary in any of the Company’s previous or future filingsfilings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filingsfilings with the Securities and Exchange Commission, in whole or in part, this report shall not be deemed to be incorporated by reference into any such filing.filing.

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PROPOSAL NO. 3 — Approval of the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan

We are requesting that shareholders approve the Executive Management Incentive Compensation Award Plan, as amended and restated February 25, 2015 (the “Executive MICAP”), with respect to covered employees (defined below). The performance-based compensation exception under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) requires that the shareholders approve the material terms of the Executive MICAP at least every five years. The Executive MICAP was most recently approved by the Company’s shareholders at the 2010 Annual Meeting of Shareholders. Therefore, the Company is asking shareholders to again approve the Executive MICAP in order to satisfy the shareholder approval requirement under Section 162(m).

As proposed for approval, the primary changes to the Executive MICAP from the version approved by the shareholders in 2010 are:

to revise the business criteria (and related adjustments) available under the Executive MICAP for awards intended to comply as performance-based under Section 162(m) (“performance-based bonuses”) in order to conform them to the same provisions previously approved by our shareholders for our 2011 Long-Term Incentive Plan; and

to provide for the ability to award bonuses under the Executive MICAP to covered employees that do not qualify as performance-based bonuses.

The amendment and restatement of the Executive MICAP was adopted by the Board of Directors on February 25, 2015, subject to shareholder approval with respect to current and future covered employees (“covered employees”) under Section 162(m). The material terms of the Executive MICAP, as they have been amended since the 2010 Annual Meeting of Shareholders, are summarized below.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR” THE PROPOSAL TO APPROVE THE AMENDMENT AND
RESTATEMENT OF THE GAP, INC. EXECUTIVE MICAP WITH RESPECT TO
COVERED EMPLOYEES.

Purpose of the Request for Approval

Section 162(m) limits the deductibility of bonuses paid to a company’s principal executive officer and its next three most highly compensated officers (other than its principal financial officer), unless they qualify as performance-based compensation under Section 162(m).

Briefly, Section 162(m) requires the following to ensure that performance-based bonuses paid to covered employees under the Executive MICAP are fully deductible:

bonuses to be paid pursuant to an objective formula;

certification by the Compensation and Management Development Committee (the “Committee”) that the performance goals in the formula have been satisfied; and

that the shareholders of the Company have approved the material terms of the Executive MICAP which include: (i) the eligible participants; (ii) the individual bonus limit; and (iii) the business criteria on which performance goals are based.

The Board of Directors believes the adoption of the Executive MICAP to be in the best interest of shareholders and recommends approval with respect to covered employees. If the Executive MICAP is not approved by the Company’s shareholders, bonuses will not be paid to covered employees under the Executive MICAP.

Material Features of the Executive MICAP

The following is a summary of the material features of the Executive MICAP. This summary does not purport to be a complete description of all of the provisions of the Executive MICAP and is qualified in its entirety by reference to the Executive MICAP, a copy of which is attached as Appendix A to this Proxy Statement and incorporated herein by reference.

Purpose

The purpose of the Executive MICAP is to reward and recognize eligible employees for their contributions towards the achievement by the Company of its business goals.

It is the intention of the Company and the Committee to administer the Executive MICAP in compliance with Section 162(m) with respect to performance-based bonuses. With respect to all other awards, the Executive MICAP may be operated without regard to the constraints of Section 162(m). However, because of the fact-based nature of the performance-based compensation exception under Section 162(m) and the limited availability of binding guidance thereunder, the Company cannot guarantee that performance-based bonuses made under the Executive MICAP to covered employees will qualify for exemption from the Section 162(m) deduction limitation. In addition, there may be circumstances under which the Company makes awards that do not comply with Section 162(m).

Participants

Individuals eligible for Executive MICAP awards are officers of the Company (as determined by the Committee), which include the covered employees. For fiscal 2015, there are currently eight participants in the Executive MICAP. Participants in future years will be at the discretion of the Committee, but it is currently expected that a comparable number of officers will participate each year.

Administration

The Executive MICAP is administered by the Committee, which has the authority to interpret the Executive MICAP, including all decisions on eligibility to participate, the establishment of performance goals, the amount of awards payable under the Executive MICAP, and the payment of awards. The members of the Committee must qualify as “outside directors” under Code Section 162(m). The Committee may delegate, in whole or in part, its administrative authority with respect to Executive MICAP awards that are not intended to comply with the performance-based exception under Section 162(m).

Performance Goals

Awards of performance-based bonuses under the Executive MICAP to each participant will be based on one or more individual incentive targets for the performance period established by the Committee and the satisfaction of the applicable performance goal(s) determined by the Committee for such performance period. Under the Executive MICAP, a performance goal is an objective formula or standard. The formula or standard is based on one or more of the following objectively defined and non-discretionary business criteria pre-established by the Committee in accordance with Section 162(m): (a) comparable store sales growth, (b) earnings, (c) earnings per share, (d) return on equity, (e) return on

net assets, (f) return on invested capital, (g) gross sales, (h) net sales, (i) net earnings, (j) free cash flow, (k) total shareholder return, (l) stock price, (m) gross margin, (n) operating margin, (o) market share, (p) inventory levels, (q) expense reduction, and (r) employee turnover. Awards under the Executive MICAP that are not intended to comply with the performance-based compensation exception under Section 162(m) may utilize objective and/or subjective performance goals based on any financial or non-financial criteria as established by the Committee in its sole discretion.

As determined in the discretion of the Committee, the performance goals for any performance period generally may (a) differ from participant to participant and from award to award, (b) be based on the performance of the Company as a whole or the performance of a specific participant or one or more subsidiaries, divisions, departments, regions, stores, segments, products, functions or business units of the Company, (c) be measured on a per share, per capita, per unit, per square foot, per employee, per store basis, and/or other objective basis, (d) be measured on a pre-tax or after-tax basis, and (e) be measured on an absolute basis or in relative terms (including, but not limited to, the passage of time and/or against other companies, financial metrics and/or an index). Awards issued to participants who are not subject to the limitations of Section 162(m) may take into account other factors (including subjective factors). A performance period is any period up to 36 months in duration as determined by the Committee.

In addition, the impact of objectively defined and non-discretionary items (includable in one or more of the following categories or other categories to the extent permitted by Section 162(m)) may be taken into account in any manner preestablished by the Committee in accordance with Section 162(m) when determining whether a performance goal has been attained with respect to a performance-based bonus: (1) changes in generally accepted accounting principles (“GAAP”); (2) nonrecurring items, if any, that may be defined in an objective and non-discretionary manner under U.S. GAAP accounting standards or other applicable accounting standards in effect from time to time; (3) the sale of investments or non-core assets; (4) discontinued operations, categories or segments; (5) legal claims and/or litigation and insurance recoveries relating thereto; (6) amortization, depreciation or impairment of tangible or intangible assets; (7) reductions in force, early retirement programs, or severance expense; (8) investments, acquisitions or dispositions; (9) political, legal and other business interruptions (such as due to war, insurrection, riot, terrorism, confiscation, expropriation, nationalization, deprivation, seizure, and regulatory requirements); (10) natural catastrophes; (11) currency fluctuations; (12) stock-based compensation expense; (13) early retirement of debt; (14) conversion of convertible debt securities; and (15) termination of real estate leases. Each of the adjustments described above may relate to the Company as a whole or any part of the Company’s business or operations. Awards that are not intended to be performance-based bonuses may be adjusted by the Committee in its sole discretion.

Lastly, the Committee shall generally adjust any performance criterion, performance goal or other feature of an award that relates to or is wholly or partially based on the number of, or the value of, any stock of the Company, to reflect any stock dividend or split, repurchase, recapitalization, combination, or exchange of shares or other similar changes in such stock.

Amount of Awards and Maximum Awards

The maximum amount of any awards that can be paid under the Executive MICAP to any participant with respect to any 12-month performance period is $10,000,000 (pro-rated for performance periods of less than 12 months or a partial or whole multiple thereof for performance periods of more than 12 months), including the fair market value as of the date of grant of any stock, restricted stock or stock-based or stock denominated units awarded to a participant. For this purpose, the fair market value of stock, restricted stock or other stock-based or stock denominated units with restrictions equals the fair market value of unrestricted stock or stock underlying such units without restrictions.

The Committee, in its sole discretion, may reduce or eliminate the amount of any award otherwise payable to a participant under the Executive MICAP. With respect to awards that are not intended to be performance-based compensation under Section 162(m), the Committee, in its sole discretion, may increase the amount of an award otherwise payable under the Executive MICAP.

Payment of Awards

The payment of an award for a given performance period requires the participant to be employed on the date the award is to be paid, subject to exceptions which may be made by the Committee in its sole discretion. Prior to the payment of any performance-based bonus under the Executive MICAP to a covered employee, the Committee must certify in writing that the terms and conditions underlying the payment of such award have been satisfied. Awards under the Executive MICAP may be paid in cash or its equivalent, stock, restricted stock, other stock-based or stock denominated units, or any other form of consideration or any combination of the above, as determined by the Committee in accordance with Section 162(m) for performance-based bonuses and Section 409A of the Internal Revenue Code of 1986, as amended, for all awards.

Term and Amendment

The amendment and restatement of the Executive MICAP will be effective for performance periods beginning in fiscal 2015. The Executive MICAP does not have a fixed termination date and may be terminated by the Committee at any time, provided that the termination will not affect the payment of any awards accrued under the Executive MICAP prior to the time of termination. The Committee may amend or suspend and, if suspended, reinstate, the Executive MICAP in whole or in part at any time, provided that any amendment of the Executive MICAP will be subject to shareholder approval to the extent required by Section 162(m) or any other applicable laws, regulations or rules.

New Plan Benefits

All awards to participants are based on actual performance during fiscal 2015 (and future fiscal years) and are made at the discretion of the Committee. Therefore, the benefits and amounts that will be received or allocated under the Executive MICAP are not determinable at this time. Cash bonuses paid to our named executive officers for the Company’s 2014 fiscal year are shown in this Proxy Statement in the Summary Compensation Table on page 51 and discussed in more detail in the section entitled Compensation Discussion and Analysis beginning on page 31. In February 2015, the Committee set performance goals for the Company’s 2015 fiscal year for cash awards payable based on the achievement of earnings goals under the Executive MICAP.

The following table sets forth the target awards that would be payable to the persons and groups of persons named in the table, assuming that the applicable performance goals established by the Committee for fiscal 2015 are exactly 100% achieved, the participants’ salaries and target awards are those in effect as of March 23, 2015 and that they remain constant throughout the performance period, the participants are employees at the time of payment, and the Committee chooses not to reduce the award otherwise payable to any participant. There can be no assurance that these assumptions actually will occur and, therefore, there can be no assurance that the target awards shown below will be paid.

Executive MICAP

Name and Principal Position

Cash Award

Dollar Value (1)

Arthur Peck, Chief Executive Officer

$2,275,000

Sabrina Simmons, EVP and Chief Financial Officer

     869,231

Stefan Larsson, Global President, Old Navy

  1,000,000

Jack Calhoun, Former Global President, Banana Republic (2)

              —

Glenn Murphy, Former Chief Executive Officer (2)

              —

Stephen Sunnucks, Former Global President, Gap (2)

              —

All executive officers as a group

  7,444,231

All directors, excluding executive officers, as a group (3)

              —

All employees, excluding executive officers, as a group (4)

              —

Footnotes

(1)Target award values include both financial performance and individual objectives components of bonus opportunity for participants in the Executive MICAP. Please see page 41 of the Compensation Discussion and Analysis section for information regarding the individual objectives component.

(2)Mr. Calhoun, Mr. Murphy and Mr. Sunnucks, who are no longer executive officers of the Company, are not eligible to participate in the Executive MICAP in fiscal 2015.

(3)The Company’s non-employee directors are not eligible to participate in the Executive MICAP.

(4)Does not include bonus amounts that may be paid under other plans or arrangements to employees who do not participate in the Executive MICAP.

PROPOSAL NO. 4 — Advisory Vote on the Overall Compensation of


The Gap, Inc.’s Named Executive OfficersOfficers

Pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing shareholders with an advisory (non-binding) vote on the overall compensation of our named executive officers.officers. Accordingly, the following resolution will be submitted for a shareholder vote at the 20152016 Annual Meeting:

“RESOLVED, that the shareholders of The Gap, Inc. (the “Company””Company“) approve, on an advisory basis, the overall compensation of the Company’s named executive officers,officers, as described in the Compensation Discussion and Analysis section, the accompanying compensation tables, and the related narrative disclosure pursuant to Item 402 of Regulation S-K, set forth in the Proxy Statement for this Annual Meeting.”

The Board and the Compensation and Management Development Committee, which is comprised entirely of independent directors, will consider the outcome of the shareholders’ non-binding advisory vote when making future executive compensation decisions to the extent they can determine the cause or causes of any significantsignificant positive or negative voting results.

As described in detail under the section entitled “Compensation Discussion and Analysis,” our executive compensation program is designed to provide the level of compensation necessary to attract motivate, and retain talented and experienced executives, and to motivate them to achieve short-term and long-term goals, thereby enhancing shareholder value and creating a successful company. We are committed to tie pay to performance. Reflecting this commitment, due to the fact that the Company did not meet its performance objectives in 2015, certain compensation components to our named executive officers paid out below established targets, as further described on page 20 of the following Compensation Discussion and Analysis. Overall, we believe our executive compensation program meets each of our compensation objectives.

We were pleased to have received over 98%99% of all votes cast in support of the overall compensation of our executives at our 20142015 Annual Meeting of Shareholders. The Compensation and Management Development Committee continued to apply the same philosophy and protocol it used in prior years to determine fiscal 2014fiscal 2015 compensation. In addition, as described on page 36,22, we have several compensation governance programs in place to manage compensation risk and align the Company’s executive compensation with long-term shareholder interests.

Shareholders are encouraged to read the “Compensation Discussion and Analysis” section of this Proxy Statement, the accompanying compensation tables, and the related narrative disclosures, which more thoroughly discuss how our compensation policies and procedures implement our compensation philosophy.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE TO APPROVE, ON AN ADVISORY BASIS, THE OVERALL
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
BY VOTING “FOR” THIS RESOLUTION.

BENEFICIAL OWNERSHIP OF SHARES

 

18

 

The following table sets forth certain information as of March 23, 2015Back to indicate beneficial ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each director and nominee and each executive officer and former executive officer named in the “Summary Compensation Table” of this Proxy Statement, and (iii) all of our directors and executive officers as a group. Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment power. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.Contents

  Shares Beneficially Owned  
Name of Beneficial Owner 

        Common        

Stock

 

Awards

Vesting Within

60 Days (1)

 Total 

% of

Class (2)

 

Directors and Named Executive Officers

        

Domenico De Sole

          31,836      17,681          49,517 *

Robert J. Fisher (3) (9)

 107,631,620      17,681 107,649,301 25.6%

William S. Fisher (4) (9)

 108,457,914      11,495 108,469,409 25.8%

Isabella D. Goren

                   0      10,914          10,914 *

Stefan Larsson

          ��        0     122,500       122,500 *

Bob L. Martin

          33,963      18,995          52,958 *

Jorge P. Montoya

          21,459      18,995          40,454 *

Arthur Peck

        129,260     185,000       314,260 *

Mayo A. Shattuck III

          86,144      11,495          97,639 *

Sabrina L. Simmons

                   0      45,000          45,000 *

Katherine Tsang

          10,679      11,495          22,174 *

Padmasree Warrior

                   0        6,064            6,064 *

All directors and executive officers, as a group (18 persons) (5)

 126,748,657     687,315 127,435,972 30.3%

Former Executive Officers

    

Jack Calhoun (6)

            1,008                0            1,008 *

Glenn K. Murphy (7)

        589,069 1,697,926     2,286,995 *

Stephen Sunnucks (8)

        256,438               0       256,438 *

Certain Other Beneficial Holders

    

Fisher Core Holdings L.P. (9)

   81,000,000               0   81,000,000 19.3%

Doris F. Fisher (10)

   35,369,995               0   35,369,995   8.4%

John J. Fisher (9) (11)

 117,647,903               0 117,647,903 28.0%

 

 

Footnotes

(1)Reflects stock options exercisable and stock units vesting within 60 days after March 23, 2015. Also includes the outstanding stock units earned but unpaid to non-employee directors, which are subject to a three-year deferral period but would be issued immediately upon the resignation or retirement of the non-employee director, as described onpages 17-18.

(2)“*” indicates ownership of less than 1% of the outstanding shares of our common stock.

(3)Includes 2,702,468 shares held jointly by Robert J. Fisher and his spouse, 17,657,263 shares held by Robert J. Fisher as trustee under certain trusts for which voting and investment power is shared, 15,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which Robert J. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 9 below and the note regarding various Fisher family holdings immediately following this table. Robert J. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 123,673 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

Footnotes (continued)

(4)Includes 663,149 shares held jointly by William S. Fisher and his spouse, 18,942,930 shares held by William S. Fisher as trustee under certain trusts, including 18,211,007 shares (of which 550,000 shares are held in a charitable foundation) for which voting and investment power is shared, 15,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which William S. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 9 below and the note regarding various Fisher family holdings immediately following this table. William S. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 162,477 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

(5)Reflects the information above as well as information regarding our unnamed executive officers; provided, however, that shares reflected more than once in the table above with respect to Robert J. Fisher and William S. Fisher are only reflected once in this line. See the note regarding various Fisher family holdings immediately following this table.

(6)Mr. Calhoun ceased to be an executive officer of the Company in February 2015.

(7)Mr. Murphy resigned as Chairman and Chief Executive Officer of the Company in January 2015.

(8)Mr. Sunnucks ceased to be an executive officer of the Company in December 2014.

(9)The address of Fisher Core Holdings L.P. is One Maritime Plaza, Suite 1400, San Francisco, California 94111. As general partners, Messrs. Robert J. Fisher, John J. Fisher, and William S. Fisher have shared power (by majority vote) to vote or direct the vote of 70,200,000 shares and to dispose or direct the disposition of all of the partnership’s 81,000,000 shares. Limited liability companies which are not partners of Fisher Core Holdings L.P. nor are controlled by its general partners hold a proxy to vote 10,800,000 shares held by Fisher Core Holdings L.P.

(10)Doris F. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include shares held directly or indirectly by Mrs. Fisher’s three adult sons or their spouses, beneficial ownership of which is disclaimed because Mrs. Fisher does not have voting or dispositive control over such shares.

(11)Includes 22,081,209 shares held by John J. Fisher as trustee under certain trusts, including 17,662,714 shares for which voting and investment power is shared, 20,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which John J. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 9 above and the note regarding various Fisher family holdings immediately following this table. John J. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 42,268 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

Note Regarding Various Fisher Family Holdings

SEC rules require reporting of beneficial ownership of certain shares by multiple parties where voting and/or dispositive power over those shares is shared by those multiple parties. As a result, the following shares are listed multiple times in the table above.

The 81,000,000 shares held by Fisher Core Holdings L.P. (see footnote 9 above) are included three additional times in the above table under the names of Messrs. Robert J. Fisher, William S. Fisher, and John J. Fisher (that is, there are only 81,000,000 shares rather than 324,000,000 shares).

In addition, the shares described in footnotes (3), (4) and (11) above for which voting and investment power is shared by Messrs. Robert J. Fisher, William S. Fisher, and John J. Fisher actually represent an aggregate of 26,490,492 shares, rather than 52,980,984 shares, as a result of that shared voting and investment power.

For purposes of the above table, removing the shares counted multiple times (described above) results in an aggregate total ownership of 34.6% of the outstanding shares by one or more of Messrs. John J. Fisher, Robert J. Fisher, William S. Fisher and Fisher Core Holdings L.P.

The aggregate total ownership of one or more of Mrs. Doris F. Fisher and Messrs. John J. Fisher, Robert J. Fisher, William S. Fisher and Fisher Core Holdings L.P. is 43.0% of the outstanding shares. Mrs. Doris F. Fisher, and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher each

disclaim beneficial ownership over shares owned by other members of the Fisher family and Fisher Core Holdings L.P., except as specifically disclosed in the footnotes above.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and holders of more than 10% of the Company’s common stock, to file with the SEC reports about their ownership of the Company’s common stock. Such directors, officers and 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

SEC regulations require us to identify in this Proxy Statement anyone who filed a required report late during the most recent fiscal year. The Company notes that, due to a Company administrative error, (i) Glenn Murphy and Stephen Sunnucks each reported the March 17, 2014 issuance and release of performance shares one day late on a Form 4, and (ii) Stephen Sunnucks reported the March 17, 2014 grant of stock options one day late on a Form 4. These transactions did not result in any liability under Section 16(b) of the Exchange Act. Based on our review of forms we received, or written representations from reporting persons stating that they were not required to file these forms, we believe that during fiscal 2014 all other Section 16(a) filing requirements were satisfied on a timely basis.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion & Analysis explains the key elements of our executive compensation program and compensation decisions for our named executive officersofficers (“Executives”). The Compensation and Management Development Committee of our Board of Directors (the “Committee”) oversees these programs and determines compensation for our Executives.

Introduction

In this Compensation Discussion and Analysis, we discuss the following:

•
Executive Summary

page 19

•
Compensation Objectives

page 21

•
Elements of Compensation

page 23

•
Promotions and Retention

page 30

•
Compensation Analysis Framework

page 31

Executive Summary

Fiscal 2015 was a year of leadership transition. Fiscal 2015 at a glance:

Our Executives during fiscal 2014 were:

  •Management Succession – New Leadership for the Future

Glenn Murphy

ChairmanAfter seven years of the Board andservice as CEO, (until January 2015)

  •

Sabrina SimmonsExecutive Vice President and Chief Financial Officer

  •

Jack CalhounGlobal President, Banana Republic (until February 2015)

  •

Stefan LarssonGlobal President, Old Navy

  •

Arthur PeckPresident, Growth, Innovation, and Digital (became CEO in February 2015)

  •

Stephen SunnucksGlobal President, Gap (until December 2014)

Fiscal 2014 Business Highlights

In fiscal 2014, we successfully grew both revenue and earnings per share, while delivering progress against our strategic and financial objectives. Building on last year’s strong performance, 2014 net sales grew 2% on flat comparable sales. We continued to execute on our key initiatives, including global growth and omni-channel innovation. Within our portfolio of brands, Old Navy had strong performance for the year with a positive 5% comp, while results at Gap brand at a negative 5% comp were disappointing. Banana Republic’s comparable sales were flat for the year. In the face of challenging results at Gap brand, which pressured gross margins, we demonstrated strong expense and inventory discipline across the Company. Additionally, we generated healthy operating cash flow of $1.4 billion and continued our commitment to returning excess cash to shareholders, buying back about 30 million shares. Despite depreciating foreign currencies, which negatively impacted our earnings per share growth rate by about five percentage points, our balanced approach of revenue growth combined with disciplined expense management and cash distribution drove earnings per share growth of 5%.

Demonstrating the strength of our internal succession planning process, Art Peck succeeded Glenn Murphy as CEO of the Company in February 2015. During Mr. Murphy’s tenure, we delivered exceptional financial results with an impressive six-year compounded annual growth rate on earnings per share of 13.5% and a total shareholder return (“TSR”) of 190% through the end of fiscal 2014. Under Mr. Murphy’s stewardship, we acquired new brands and globalized our business by expanding store locations from about 10 to 50 countries, including China.

Other Important Milestones

We also achieved the following important milestones during the year:

We continued to execute on our global growth strategy, opening 216 Company-operated stores in fiscal 2014.

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Less than four years after the first Gap store opened in greater China, the brand surpassed 100 stores in the region, finishing the year with 111 Gap and Gap Outlet stores across mainland China, Hong Kong and Taiwan.

¡

Old Navy continued to expand its global customer base, opening its first Company-operated store and e-commerce site in mainland China, with 7 stores at year-end. During the year, Old Navy also opened its first-ever franchise-operated store in March in the Philippines, and announced plans to open franchise-operated stores in six Middle Eastern countries beginning in Spring 2015.

¡

We opened an additional 18 Old Navy stores in Japan, ending the year with 36.

¡

We opened 60 Gap Outlet and Banana Republic Factory stores to end the year with 583.

¡

We opened 37 Athleta stores and 5 Intermix stores, for a total of 101 and 42, respectively.

We continued to enhance our digital and omni-channel capabilities, expanding our Reserve in Store service to all U.S. Gap, Banana Republic and Athleta stores. We also extended our Order in Store capabilities to about 1,000 U.S. stores across the fleet and made in-store mobile experiences easily accessible to customers by adding Wi-Fi service in more than 1,100 stores.

We reinforced our commitment to shareholders by returning about $1.6 billion in cash to shareholders through share repurchases and dividends for the full year. In October, we announced a new $500 million share repurchase authorization.

Fiscal 2014 Executive Compensation Summary

We were pleased to have received over98% of all votes cast in support of the overall compensation of our Executives at our 2014 Annual Meeting of Shareholders.

The Committee considered this advisory vote and believes that it underscores shareholder support for our compensation philosophy and the overall structure of our executive compensation programs. As in past years, our compensation programs align Executives with our annual and long-term objectives as well as the returns realized by our long-term shareholders. While we achieved a TSR of 10% in fiscal 2014 and successfully grew revenue and earnings per share, led by strong performance at Old Navy and very disciplined expense management, our incentive compensation targets for both revenue and earnings were set at a level that required meaningful improvement from fiscal 2013 and we fell short of these goals except at Old Navy. As a result, payouts based on financial performance under our incentive plans for fiscal 2014 were substantially below target levels except for Old Navy. Although we did not achieve these financial goals in most cases, there were a number of other noteworthy successes during the year as highlighted in the previous section, which helped drive solid individual objective component payouts under the annual bonus.

At the beginning of fiscal 2014, we made compensation decisions intended to motivate achievement of performance goals and to retain key Executives, including the following:

•

Base salaries.  We did not increase base salaries, other than a modest increase given to Mr. Peck in light of increased responsibilities as President, Growth, Innovation and Digital.

•

Financial performance goals.  Target performance goals were set prospectivelywas succeeded at the beginning of fiscal 2015 by long-time executive Arthur Peck. In connection with this CEO transition, we established a new leadership team and the next generation of brand leaders by making several internal promotions. Jeff Kirwan and Andi Owen, both long-time employees of the Company, were each promoted to the position of Global President for Gap and Banana Republic, respectively. In October 2015, Stefan Larsson stepped down as Global President of Old Navy and Jill Stanton, EVP of Global Product at Old Navy, was selected to lead the division on an interim basis. In light of these leadership changes, we took certain actions to promote retention as described on page 30.

Executives

•
Arthur Peck, Chief Executive Officer

•
Sabrina Simmons, Executive Vice President & Chief Financial Officer

•
Jeff Kirwan, Global President, Gap

•
Stefan Larsson, Global President, Old Navy (until October 2015)

•
Andi Owen, Global President, Banana Republic

•
Sonia Syngal, Executive Vice President, Global Supply Chain & Product Operations

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Financial Performance & CEO Pay

Fiscal 2015 was a challenging year to provide an appropriatefor much of the retail industry. Notwithstanding strong foreign exchange headwinds, we continued our investment in digital capabilities, continued right-sizing the Gap-brand store fleet and realisticexpanded globally in key markets.

The charts below show the directional relationship between Company performance, based on Net Sales and Diluted EPS, and our CEO’s year-over-year compensation (Mr. Murphy (2013 & 2014) and Mr. Peck (2015)).

Pay for Performance

In fiscal 2015, we did not meet the performance targets in our incentive while requiring improved performance from the prior year. We believe the resulting annualcompensation plans, so our CEO did not receive a bonus and long-term incentive payouts described below reflect our continued commitment to pay for performance.

•

Annual bonuses.  The target bonus as a percentage of base salary was increased for Ms. Simmons to maintain appropriate positioning externally and compared to other Executives. Consistent with our philosophy of linking Executive pay to performance, annualExecutives received bonuses that were earnedsignificantly below target, except for allMr. Larsson who left the Company and was not eligible to receive a bonus. Stock options granted to our Executives except Mr. Larsson. Actual annual bonuses paid are described in detail on page 42.

•

Long-term incentives.  The long-term incentive awards granted during the year represent onlyhave anopportunity exercise price well above the closing stock price at the end of the fiscal year, which means our stock price must increase significantly for our Executives to earn actual realized compensation based on future financial performance and shareholderrealize any value creation. We granted stock options to certain Executives other than the CEO, aligning Executive compensation with the long-term interests of our shareholders. We also approved a special stock unit grant to Ms. Simmons following a review of outstanding long-term incentives to further encourage retention over an extended period.

We granted performance shares under ourfrom these awards. Our Long-Term Growth Program (“LGP”) to Executives other than the CEO.

The 2012-2014awards with a 2013-2015 performance period paid out below target. Similarly for our 2015 LGP awards, grantedeven if target is achieved in 2012future periods, the actual awards earned will be below target based on our fiscal 2015 performance.

 

 

 

Say On Pay – 99% Approval

At the 2015 Annual Meeting, shareholders were very supportive of the structure and philosophy of our pay program. Other than aligning the compensation structure for our new CEO with our other Executives, we have made no material changes.

Change in CEO Pay - Total Reported Compensation

Fiscal 2014 (Mr. Murphy): $16,064,312, of which 89% was completed, and awards were earned above target, as described in detail on page 46, reflecting our strong financial performance during the overall period. TSR during this periodbased.

Fiscal 2015 (Mr. Peck): $6,140,798, of which 78% was 130%.performance based.

Listening to Our Shareholders

Our experienced Committee is comprised solely of independent directors and has established effective means for communicating with shareholders, including the opportunity for shareholders to cast a non-binding advisory vote regarding executive compensation at our Annual Meeting.

The Committee is very interested in the ideas and concerns of our shareholders regarding executive compensation. An advisory vote regarding executive compensation was presented to our shareholders at last year’s Annual Meeting and approved by over 99% of shareholder votes, consistent with prior advisory votes by our shareholders regarding executive compensation.

CEO Compensation Summary

We did not increase base salary, which remained at the same level established on Mr. Murphy’s hire date in 2007.

Annual bonus was earned at 24% of target based on financial performance, which was below our expectations.

In fiscal 2012, we granted performance shares that covered the period from the beginning of fiscal 2012 to the end of fiscal 2014. The target number of shares that could be earned during the period was an aggregate of 1,000,000, with a potential range at the time of grant of 0 to 2,000,000 shares. At the time the grant was made, the Committee viewed the annualized value of the grant over the three-year period as sufficient to cover three years’ worth of equity grants to Mr. Murphy. Therefore, the Committee did not award further equity grants to Mr. Murphy through fiscal 2014.

Based on our fiscal 2014 financial performance, the third tranche of Mr. Murphy’s performance shares was not earned. However, based on strong financial performance during the overall three-year period, 1,297,926 shares were earned and became vested on January 31, 2015, which is approximately 130% of the target shares over the three-year period. TSR during this period was 130%.

The chart below shows the proportion of each major component of our CEO’s fiscal 2014 compensation, as reported in the Summary Compensation Table on page 51, the majority of which is weighted toward incentive compensation tied to our financial performance and the long-term return realized by shareholders.

LOGO

In connection with the appointment of Mr. Peck as our new CEO, effective February 1, 2015, we established a compensation package that is structurally the same assimilar to that of our other ExecutivesExecutives. The package is intended to help ensurereward him for sustained improvement of the Company’s financial performance and returns to shareholders while helping to promote alignment of interests across the Executiveexecutive team. The Committee used the same factors outlined under “Compensation Analysis Framework” below, as well as its judgment, to determine the structure and value of the package. Over 50% of the target long-term incentive compensation is in the form of performance shares and most of the total compensation opportunity requires achievement of performance goals or share price appreciation. Mr. Peck has no benefitsreceives essentially the same

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benefits and limited perquisites outside of what is provided to our other Executives. The Committee received advice from its independent compensation consultant on the compensation structure, which is described more fully below:

•
Base salary was set at $1,300,000.

•
Annual bonus target was set at 175% of base salary and based 100% on financial performance. In fiscal year 2015, because our financial performance was well below our expectations, no bonus was earned.

•
We granted multi-year performance shares to Mr. Peck under the LGP. For LGP shares granted in 2013 to Mr. Peck prior to his appointment as CEO, Pay Alignment with Performance

The charts below show the directional relationship between Company performance,and based on Net Sales and Diluted Earnings Per Share, andfinancial performance during fiscal years 2013 – 2015, 14,159 shares, or 38% of the target amount, were earned.

•
We granted stock options, with an exercise price of $41.19, to Mr. Peck covering 300,000 shares, which will vest over a four-year period subject to continued service. Our stock price must increase significantly for the stock options to create any value for the CEO.

The chart below shows the proportion of each component of our CEO’s fiscal 2015 compensation, as reported in the Summary Compensation Table on page 35, the majority of which is weighted toward incentive compensation from 2012tied to 2014. These two key metrics are illustrated because they tend to correlate toour financial performance and the long-term value forreturn realized by shareholders. Gap Inc.’s stock delivered a total return of 10% in fiscal 2014, and 130% over the three fiscal years ending in 2014.

 

LOGOLOGOLOGO

Compensation Objectives

Our compensation program is intended to align total compensation for executives with the short- and long-term performance of the Company and to enable us to attract and retain executive talent. Specifically,Specifically, the program is designed to:

Support a performance-oriented culture;

Support our business strategy by motivating and rewarding achievement of annual short- and long-term objectives, as well as individual contributions;

Attract and retain executive talent;

Link executive rewards to shareholder returns; and

Promote a culture of executive stock ownership.

•
Support a performance-oriented culture;

•
Support our business strategy by motivating and rewarding achievement of annual short- and long-term objectives, as well as individual contributions;

•
Attract and retain executive talent;

•
Link executive rewards to shareholder returns; and

•
Promote a culture of executive stock ownership.

Our program rewards executives for the achievement of corporate and divisional financialfinancial and non-financialnon-financial objectives, for their individual contributions to these results, and for optimizing long-term returns to shareholders. The majority of each executive’s total compensation opportunity is weighted toward incentive compensation tied to the financialfinancial performance of the Company and the long-term return realized by shareholders. When we do not achieve targeted performance levels and/or our stock price does not appreciate, compensation that can be realized by our executives is substantially reduced. When we exceed

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targeted performance levels and/or our stock price appreciates, compensation that can be realized by our Executivesexecutives is substantially increased. We believe that this is the most effective means of aligning executive incentives with our shareholders’ interests.

Overall, we believe our executive compensation program met each of our compensation objectives and continues to demonstrate our strong commitment to pay for performance. The table on the next pagebelow highlights key compensation practices – both the practices we believe support strong governance principles and the practices we have not implemented because we do not believe they would serve our shareholders’ long-term interests.

Compensation Governance

What we do

What we don’t do

✓ üPay for Performance
We tie pay to performance. Our
compensation programs are heavily
weighted toward performance with limited
perquisites, and competitive severance
benefits. benefits.

✓ üTally Sheets
We review tally sheets, which are intended
to summarize key elements of total
compensation and potential wealth
accumulation, for our Executives prior to
making annual compensation decisions.

✓ üRecoupment Policy
We have an incentive compensation
recoupment (“clawback”) policy covering
our Executives.

✓ üCulture of Ownership
We have executive stock ownership
requirements which we review on a regular
basis and revise as needed.

✓ üNo Hedging
We prohibit Executives from engaging in
any hedging or publicly-traded derivative
transactions in Company stock.

✓ üNo Pledging
We prohibit Executives from pledging
Company stock as collateral for a loan or
for any other purpose.

✓ üIndependent Compensation Consultant
The Committee utilizes an independent
compensation consulting firm,firm, Frederic W.
Cook & Co., Inc. The firmfirm does not provide
any other services to the Company, and we
have identified no conflicts of interest
related to the consulting firm’s provision of
services to the Committee.Company.

X ûNo Long-Term Employment Agreements
with Guarantees
We have no employment contracts of
defined defined length with our Executives and no
multi-year guarantees for base salary
increases, bonuses or equity
compensation.

X ûNo Golden Parachute Tax Gross-Ups
None of our Executives are entitled to tax
gross-up payments other than on relocation
and international assignment related
payments or services that are business-
relatedbusiness-related and also generally available to other
employees.

X ûNo Repricing
We have not repriced stock options nor are
we able to do so without shareholder
approval.

X ûNo SERP
We have no supplemental executive
retirement plan (“SERP”).

X ûNo Change in Control Arrangements
We have no severance arrangements
specific specific to a change in control.

X ûNo Material Compensation Risk
We have no incentive compensation
arrangements for Executives that create
potential material risk for the Company,
based on a risk assessment conducted by
the Company.

X ûNo Dividends on Unearned Performance
Awards
We do not pay dividends on unearned
performance awards.

Compensation Analysis Framework

 

22

 

The Committee reviews executive compensation at least annually. The Committee’s review includes base salary, annual incentives, long-term incentives and the value of benefits and perquisites. Each element is considered individually and in total using tally sheets, which are intendedBack to summarize all of the elements of total actual and potential compensation and wealth accumulation. The

tally sheets present the dollar value of each compensation component, including accumulated vested and unvested long-term incentive gains and potential gains using stock price assumptions, vesting schedules for long-term incentive awards, accumulated deferred compensation and potential severance benefits.

The Committee also uses a summary of compensation data covering other companies to support its analysis. The Committee selected a broad spectrum of retail and consumer products companies for purposes of comparing market compensation levels (the “peer group”) because we have both recruited from and lost executive talent to these industries in the past, and to ensure appropriate scope and complexity relative to the Company. Because the size of the peer group companies varies considerably, regression analysis is used where appropriate to adjust the compensation data for differences in Company revenues.

The peer group is reviewed by the Committee each year. The peer group used in 2014 was comprised of the companies listed below and was unchanged from 2013.

Abercrombie & Fitch

Aeropostale

American Eagle Outfitters

Avon Products

Best Buy

Children’s Place Retail Stores

Coach

Coca-Cola

Costco Wholesale

Estee Lauder Companies

Disney

General Mills

J.C. Penney

J. Crew

Kellogg

Kimberly Clark

Kohl’s

Levi Strauss

L Brands

Macy’s

McDonald’s

Nike

Nordstrom

PepsiCo

Polo Ralph Lauren

Ross Stores

Sears Holdings

Staples

Starbucks

Target

TJX Companies

Williams-Sonoma

YUM! Brands

The majority of peer group companies provide compensation data through surveys conducted by Towers Watson, an international consulting company. The surveys provide levels of base salary, annual incentives, and long-term incentive grant values in a summarized form, and we believe that this data provides a reasonable indicator of total compensation values for the peer group. This data is supplemented by information obtained through proxy statement disclosures and other public sources. The Committee uses the peer group data along with the tally sheet data as a frame of reference to inform compensation decisions, but compensation is not set to meet specific benchmarks or percentiles.

In conducting its analysis and determining compensation, the Committee also takes into account these factors where relevant:

Contents

Business and talent strategies;

The nature of each Executive’s role;

Individual performance (based on specific financial and operating objectives for each Executive, as well as leadership behaviors);

Compensation history, including at former employers in the case of new hires;

Future potential contributions by the Executive;

Internal comparisons to other Executives;

Comparisons of the value and nature of each compensation element to each other and in total; and

Retention risk.

The Committee also considers management’s recommendations and advice from the Committee’s independent compensation consultant when appropriate. Significant weight is placed on the recommendations by the CEO for compensation other than his own. The Committee periodically reviews the accounting and tax implications of each compensation element, and shareholder dilution in the case of equity awards. Analysis for each compensation component and the decisions that were made is described below.

Role of the CEO and Compensation Consultant

The CEO evaluates each Executive using the factors described above under “Compensation Analysis Framework” and makes recommendations to the Committee about the structure of the compensation program and individual arrangements. The CEO is generally present at Committee meetings when compensation, other than his own, is considered and approved. However, approval rests solely with the Committee.

The Committee has engaged Frederic W. Cook & Co. as its independent compensation consultant to advise the Committee periodically on the compensation program structure and individual compensation arrangements. The consultant was selected by the Committee and does not provide any other services to the Company. In addition, we have conducted a review of the Committee’s relationship with its compensation consultant, and have identified no conflicts of interest. From time to time, the consultant attends Committee meetings, presents briefings on general and retail-industry compensation trends and developments, and is also available to the Committee outside of meetings as necessary. The consultant reports directly to the Committee, although the consultant meets with management from time to time to obtain information necessary to advise the Committee.

Elements of Compensation

The main components of our executive compensation program are:

•
Base salary;

 

•
Annual cash incentive bonus; and

 

•
Long-term incentives.

We have chosen these elements because we believe each supports achievement of one or more of our compensation objectives, and that together they have been and will continue to be effective in this regard. We also provide our Executives with benefitsbenefits and limited perquisites that are available to a broader group of employees or that are intended to maximize productivity.

The use and weight of each compensation element is based on the judgment of the Committee regarding the importance of each compensation objective in supporting our business and talent strategies, as well as the structure of these elements for executives at other companies. Base salary, benefitsbenefits and perquisites represent less than half of each Executive’s potential compensation at target performance levels, to emphasize the importance of performance-based compensation.

Base Salary

Base salaries are set at a level that the Committee believes will effectively attract and retain top talent, considering the factors described abovebelow under “Compensation Analysis Framework.” In addition, the Committee considers the impact of base salary changes on other compensation

components where applicable. Potential deferred compensation accumulation and severance benefits are also impacted when base salaries are changed, but these effects are generally not considered when making base salary decisions. The Committee reviews base salaries for Executives in the first fiscalfirst fiscal quarter, and as needed in connection with promotions or other changes in responsibilities. The table below summarizes base salaries during fiscal 2014,fiscal 2015, and changes that occurred during the year.

        

Name

Base Salary
on 1/31/2015

Base Salary
on 1/30/2016

Comments

Arthur Peck

$

950,000

 

$

1,300,000

 

Mr. Peck’s salary was increased when he was appointed as CEO on February 1, 2015. Mr. Murphy’s salary on January 31, 2015 was $1,500,000.

Sabrina Simmons

$

825,000

 

$

875,000

 

Salary was increased in March 2015 as part of the annual review in light of expanded responsibilities and to position Ms. Simmons appropriately relative to other executives.

Jeff Kirwan

$

850,000

 

$

850,000

 

 

Andi Owen

$

850,000

 

$

850,000

 

 

Sonia Syngal

$

600,000

 

$

750,000

 

Salary was increased in February 2015 in light of expanded responsibilities.

Former Executive

 

 

 

 

Stefan Larsson

$

1,000,000

  

N/A

 

Mr. Larsson ceased to be an Executive in October 2015.

 

Name  

Base Salary

on 2/1/2014

   

Base Salary

on 1/31/2015

   Comments
 
Glenn Murphy   $1,500,000     $1,500,000    Mr. Murphy resigned as Chief Executive Officer in January 2015.
Sabrina Simmons   $825,000     $825,000     
Jack Calhoun   $900,000     $900,000    Mr. Calhoun ceased to be an Executive in February 2015.
Stefan Larsson   $1,000,000     $1,000,000     
Arthur Peck   $900,000     $950,000    Salary was increased in March 2014 during the annual review to recognize increased responsibilities as President, Growth, Innovation, and Digital.
  
Former Executive          
Stephen Sunnucks   $1,052,096     N/A    Mr. Sunnucks ceased to be an Executive in December 2014. Salary (paid in British pound sterling) was unchanged. The exchange rate as of the last business day of fiscal 2013 was used to convert Mr. Sunnucks’ base salary (£640,000) to U.S. dollars for purposes of this presentation.

23

 

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Annual Incentive Bonus

Fiscal 20142015 Annual Bonus

We have an annual cash incentive bonus program for Executives to motivate and reward achievement of financialfinancial and individual objectives and to provide a competitive total compensation opportunity. Mr. Murphy’sPeck’s annual incentive bonus was based exclusively on earnings and net sales performance (weighted 75% and 25%, respectively) given his role as CEO and direct accountability for operating results. For Executives other than Mr. Murphy,Peck, the annual incentive bonus was based on two components:

1.

75% of their total opportunity was based on the financialfinancial performance of the Company or a division of the Company (of this, 75% was based on earnings, given the importance of accountability for operating results, and 25% on net sales, to drive top-line focus).

2.

2.

25% of their total opportunity was based on subjective individual and organization objectives, to recognize results outside of the earnings and net sales goals.

In setting the fiscal 2014fiscal 2015 annual bonus structure, the Committee considered our business priorities and the factors described abovebelow under “Compensation Analysis Framework.” To maintain appropriate positioning, the target percentage of base salary for Ms. Simmons was increased from 75% to 100%. The table below describes the target annual bonus and potential payout range for each Executive.

Name

 

Target

Percentage of

Base Salary

Potential

Payout

Range as a

Percentage of

Target

Glenn Murphy

150%0 – 200%

Sabrina Simmons

100%0 – 200%

Jack Calhoun

100%0 – 200%

Stefan Larsson

100%0 – 200%

Arthur Peck

100%0 – 200%
Former Executive    

Stephen SunnucksName

Target
Percentage of
Base Salary

Potential
Payout
Range as a
Percentage of
Target

Arthur Peck

 100%

175

%

 

0 – 200%200

%

Sabrina Simmons

100

%

0 – 200

%

Jeff Kirwan

100

%

0 – 200

%

Andi Owen

100

%

0 – 200

%

Sonia Syngal

80

%

0 – 200

%

Former Executive

 

Stefan Larsson

100

%

0 – 200

%

Financial Performance Component

Bonus payments based on financialfinancial performance are generally made under the Executive Management Incentive Compensation Award Plan (“Executive MICAP”). The Committee approves threshold, target and maximum performance goals at the beginning of each performance period. Bonuses are paid under the financialfinancial performance component only if threshold goals are exceeded. The Committee may reduce (but not increase) earned bonuses under this component. Actual bonuses are generally paid in March.March of each year.

Bonuses for fiscal 2014 financialfiscal 2015 financial performance were based on earnings (weighted 75%) and net sales (weighted 25%) goals. Earnings and net sales were used to measure both Company and division performance, in both cases subject to potential adjustment for certain items such as extraordinary and non-recurring items. The earnings measure was selected for fiscal 2014fiscal 2015 and weighted more heavily because the Committee believed that earnings should continue to be a focus of Executives and is a good measure of actual operating performance within their control and accountability. The net sales measure is intended to

24

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drive top-line focus and to promote continued focus on growing market share. Measuring both earnings and net sales diversifiesdiversifies performance metrics, and we believe it provides an appropriate balance between cost management and top line performance.

The following table below shows fiscal 2014fiscal 2015 earnings and net sales goals expressed as a percentage of fiscal 2013fiscal 2014 actual results. Goals for fiscal 2014fiscal 2015 were set at levels that required improvement from 20132014 results for Executives to earn target payouts given our expected performance at the time goals were established. Goals were also set at a level intended to provide a meaningful incentive to Executives to improve performance. Also shown are the actual weighted percentages achieved expressed as a percentage of fiscal 2013fiscal 2014 actual results after adjustments to exclude charges related to strategic actions and the costs associated with closureimpact of the Piperlime business, the benefit from the sale of one of our headquarters buildings and a store lease, one-time litigation expense, and severance costs associated with leadership transitions.west coast port delays. These adjustments did not impact bonus payouts. No other adjustments to the results were made other than neutralization of foreign exchange rate fluctuations.fluctuations. Mr. Larsson, who left the Company in October 2015, was not eligible to receive a payout and has been excluded from the table below.

 

 

2015 Earnings / Net Sales Goals as a
Percentage of Fiscal 2014
Actual Earnings / Net Sales

Actual Fiscal 2015
Percentage Achieved
After Adjustments

Name

Company /
Division

Threshold

Target

Maximum

Earnings

Net Sales

Arthur Peck

Gap Inc.

91% / 103%

107% / 106%

111% / 106%

85%

100%

Sabrina Simmons

Gap Inc.

91% / 103%

107% / 106%

111% / 106%

85%

100%

Jeff Kirwan

Gap Global

97% / 104%

114% / 106%

120% / 107%

70%

99%

Andi Owen

Banana Republic Global

98% / 103%

109% / 107%

114% / 107%

73%

94%

Sonia Syngal

Gap Inc.

91% / 103%

107% / 106%

111% / 106%

85%

100%

    2014 Earnings / Net Sales Goals as a
Percentage of Fiscal 2013
Actual Earnings / Net Sales		 Actual Fiscal 2014
Percentage Achieved
After Adjustments

Name

 Company /
Division		 Threshold Target Maximum Earnings Net Sales
 

Glenn Murphy

 Gap Inc. 94% / 104% 108% / 107% 111% / 108% 98% 103%

Sabrina Simmons

 Gap Inc. 94% / 104% 108% / 107% 111% / 108% 98% 103%

Jack Calhoun

 Banana Republic Global 97% / 103% 112% / 108% 115% / 108% 100% 103%

Stefan Larsson

 Old Navy Global 93% / 103% 107% / 108% 109% / 108% 116% 107%

Arthur Peck

 Growth, Innovation & Digital 121% / 107% 166% / 115% 180% / 120% 130% 108%

Former Executive

     

Stephen Sunnucks

 Gap Global 94% / 103% 108% / 106% 110% / 107% 71% 96%
 

Individual Objectives Component

Executives other than the CEO were eligible to receive bonuses based on individual performance and organization objectives. At the beginning of the year, 2126 objectives were established for Gap Inc. with shared accountability by Executives. These objectives consisted of initiatives centered on fourthree key themes: (i) responsive supply chain,product, which included an increased percentage ofobjectives on product created through demand-based capabilities, increased fabric platforming, reduced number of fabrics,design, production and margin expansion;distribution; (ii) growth,customer experience, which included market explorationobjectives for store digital enablement, mobile advancements and future store growth initiatives;design; and (iii) omni-channel,talent, which included initiatives to enable order in store, ship from storeobjectives on talent retention, leadership assessment and reserve in store capabilities,development, and an enhanced loyalty program pilot; and (iv) seamless inventory, which included inventory management initiatives, development of a global brand inventory operating model, and margin expansion.recruiting.

In addition to the organizational objectives listed above, each Executive also had individual objectives specific to his or her role.

For Executives other than Mr. Peck, the extent to which these objectives were met, partially met, or exceeded was assessed qualitatively by Mr. Peck with input from Mr. Murphy, after the end of the fiscalfiscal year. In this regard, while certain of the objectives had quantitative components, there was no formulaic link between the extent to which a particular objective was satisfiedsatisfied and the ultimate payout that an Executive received. The CEO also had the discretion to consider some goals more heavily than others. In addition, in judging each Executive’s individual performance, the CEO took into account any additional initiatives and challenges that the Executive faced over the course of the year, as well as earnings performance, in determining a recommended payout. Payout amounts were then recommended to the Committee for consideration and approval. The Committee considered attainment of objectives and the associated payout amount for Mr. Peck with input from Mr. Murphy.

Actual Bonuses

For fiscal 2014,fiscal 2015, performance against target earnings and net sales goals applicable to each Executive was well below targeted levels with the exception of Mr. Larsson, whose attainment was well above target based on strong performance at Old Navy.levels. The following table below describes the calculation of the actual bonus for fiscal 2014fiscal 2015 for each eligible Executive. Mr. Larsson, who left the Company in October 2015, was not eligible to receive a payout and has been excluded from the table below.

25

 

Name Base
Salary		  x  Target
Percentage
of Base
Salary		  x  (  Actual
Percentage
Achieved:
Financial
Performance
Component
(2)		 x  Weight  +  Actual
Percentage
Achieved:
Individual
Objectives
Component
(2)		  x  Weight )  =  Actual
Bonus
 

Glenn Murphy

  $1,500,000    x    150%    x    (   24%  x    100%    +    N/A    x    N/A )   =   $538,218

Sabrina Simmons

  $825,000    x    100%    x    (   24%  x    75%    +    150%    x    25% )   =   $457,385

Jack Calhoun

  $900,000    x    100%    x    (   17%  x    75%    +    100%    x    25% )   =   $337,993

Stefan Larsson

  $1,000,000    x    100%    x    (   169%  x    75%    +    175%    x    25% )   =   $1,707,576

Arthur Peck

  $943,269    x    100%    x    (   16%  x    75%    +    130%    x    25% )   =   $419,411
Former Executive                                        

Stephen Sunnucks (1)

  $850,460    x    100%    x    (   0%  x    75%    +    100%    x    25% )   =   $212,615
 

Footnotes

 

(1)    Mr. Sunnucks was paid in British pound sterling. For presentation purposes, his prorated base salary of £564,396 and his bonus of £141,099 were converted to U.S. dollars using the exchange rate as of the last business day of fiscal 2014. Mr. Sunnucks’ bonus was prorated pursuant to his compromise agreement (as further described on page 62).

 

(2)    Actual percentages achieved are rounded for presentation.

 

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Name

Base
Salary

x

Target
Percentage
of Base
Salary

x

(

Actual
Percentage
Achieved:
Financial
Performance
Component
(1)

x

Weight

+

Actual
Percentage
Achieved:
Individual
Objectives
Component
(1)

x

Weight )

=

Actual
Bonus

Art Peck

$1,300,000

x

175%

x

(

0%

x

100%

+

N/A

x

N/A )

=

$0

Sabrina Simmons

$868,269

x

100%

x

(

0%

x

75%

+

60%

x

25% )

=

$130,241

Jeff Kirwan

$850,000

x

100%

x

(

0%

x

75%

+

60%

x

25% )

=

$127,500

Andi Owen

$850,000

x

100%

x

(

0%

x

75%

+

50%

x

25% )

=

$106,250

Sonia Syngal

$750,000

x

80%

x

(

0%

x

75%

+

60%

x

25% )

=

$90,000

Footnotes

(1)

Actual percentages achieved are rounded for presentation.

Long-Term Incentives

Stock-based long-term incentives align executive compensation and shareholder returns by linking a significantsignificant portion of total compensation to the performance of our stock. Unlike some of the members of our peer group, we do not have a pension plan, and we rely on long-term incentives to provide a substantial percentage of each Executive’s potential retirement savings. Long-term incentives have typically consisted of stock options, stock units or performance shares. It has been our practice to grant long-term incentives to Executives on an annual basis usually in the first quarter of each fiscal year. This timing was selected because it follows the release of our annual financial results and completion of annual compensation reviews. We also grant long-term incentives on other dates to newly hired Executives and periodically in connection with promotions or for special recognition and retention. Grants are typically approved by the Committee at a meeting and are effective on the meeting date or, if approved by unanimous written consent, the date of the last signature on the consent. However, the effective date for new hires is no earlier than the first day of employment. Stock-based awards are granted under our 2011 Long-Term Incentive Plan (the “2011 Plan”), which was approved by our shareholders.

Long-term incentives are typically granted annually On February 23, 2016, the Plan was amended, restated, and renamed the 2016 Long-Term Incentive Plan (the “Plan”), subject to Executives (or, in the case of new Executives,shareholder approval at the time they joinAnnual Meeting. A description of the Company). However, there may also be grants in connection with promotions, to promote retention, and/or to create focusPlan is located on specific performance objectives. Annual long-term incentive awards have typically consistedpage 49 of stock options and, based on achievement of performance goals, stock units or performance shares. The Committee also grants stock units that vest based on continued service with the Company specifically to promote retention.this Proxy Statement.

In determining the long-term incentive structure and award amounts, the Committee considered the factors described abovebelow under “Compensation Analysis Framework,” including a review of each individual’s accumulated vested and unvested awards, the current and potential realizable value over time using stock appreciation assumptions, vesting schedules, comparison of individual awards between Executives and in relation to other compensation elements, shareholder dilution and accounting expense.

Stock Options

We believe stock options focus Executives on managing the Company from the long-term perspective of an owner. Stock options provide value to the recipient only if the price of our stock increases. Because of this inherent linkage to increased shareholder returns, we believe stock options are an important component of executive long-term incentive compensation. However, we believe that this component as a percentage of total long-term incentive grant value should typically be weighted at less than 50% to balance performance focus and mitigate potential compensation-related risk, so that the majority of long-term incentive value at grant is placed on full-value awards including those subject to achievement of performance goals. Consistent with prior grant practice, the Committee approved grants of stock options in the first quarter of fiscal 2014. Award amounts were differentiated based on the Executive’s role in the organization and competitive practice. No stock options were granted to the CEO in 2014 in light of the significant performance share grant he received in 2012, as described below.

Stock Units and Performance Shares

A portion of long-term incentives is delivered in units representing full-value shares of our stock to drive performance, promote retention and foster a long-term ownership perspective. Unlike stock options, full-value share awards, in combination with stock ownership requirements, subject Executives to the same downside risk experienced by shareholders but still encourage retention if our stock price does not appreciate, and help to focus Executives on sustaining the value of the Company. In general, we believe the grant or vesting of a significant percentage of full-value shares for Executives should be based on performance against annual or long-term objectives unless they are made to offset compensation from prior employment in the case of new hires. However, to balance our performance, retention, and ownership objectives, in the past we have granted stock units or other full-value shares that vest only for continued service with the Company, and we may do so in the future.

2012 CEO Performance Shares

During 2012, the Committee approved a grant of performance shares to Mr. Murphy in order to (i) provide a strong incentive for successful execution on our growth strategies and improvement in the financial performance in fiscal 2012, 2013 and 2014, and (ii) ensure the retention of Mr. Murphy during this important period for the Company.

The 2012 performance share grant was designed to pay for performance over a three-year period. The target number of shares that could be earned was an aggregate of 1,000,000, with a potential range at the time of grant of 0 to 2,000,000 shares. Actual shares earned were based on attainment of annual earnings goals for each of fiscal years 2012, 2013 and 2014, and the target number of shares were allocated evenly across the three years. No shares for a given year could be earned if threshold performance was not achieved.

The table below shows the earnings goals, expressed as a percentage of fiscal 2013 actual results, for the fiscal 2014 portion of the 2012 performance share grant. The target earnings goal was set at the same level used for the annual bonus. The threshold and maximum earnings goals were set at a higher level based on the terms approved by the Committee for the performance shares at the time of grant. Also shown are the actual weighted percentages achieved expressed as a percentage of fiscal 2013 actual results after adjustments to exclude the costs associated with closure of the Piperlime

business, the benefit from the sale of one of our headquarters buildings and a store lease, and one-time litigation expense. No other adjustments to the results were made other than neutralization of foreign exchange rate fluctuations.

2014 Earnings Goals as a
Percentage of Fiscal 2013
Actual Earnings		     Actual Fiscal 2014
Percentage Achieved
After Adjustments
Threshold  Target  Maximum     Earnings
 

99%

  108%  112%     98%

A total of 1,297,926 shares were earned under the 2012 performance share grant based on performance over the three-year period. These shares vested 100% on January 31, 2015.

The strategic rationale for selecting performance shares was to link Mr. Murphy’s compensation to changes in our stock price and returns to our shareholders over an extended period, helping to balance risks and potential rewards. The use of annual earnings goals over a three-year period maintained our ability to set realistic goals while creating focus on results over a longer time horizon and a strong linkage to overall long-term Company results. The structure also enabled a reasonable level of alignment with how other Executives were measured under the LGP described below. The Committee continues to believe that this performance share grant struck an appropriate balance between meeting our compensation objectives and establishing performance goals over a realistic timeframe, and appropriately rewarded Mr. Murphy for performance during the period.

In light of this grant, there were no additional equity grants to Mr. Murphy in fiscal 2013 or fiscal 2014. The Committee viewed the annualized value of this grant over the three-year period to be of sufficient value to cover three years’ worth of equity grants to Mr. Murphy.

The table below describes the actual percentage achievement level for each year of the performance period as well as final achievement and the overall number of actual shares earned. The extent to which the goals were satisfied has been certified by the Committee.

CEO Performance Shares – Years 1, 2 & 3 (2012, 2013 & 2014)
   Target
Shares		  

Actual

Percentage

Achieved
(1)

  

Actual

Shares (2)

 

Year 1

  333,333  200%  666,666

Year 2

  333,333  189%  631,260

Year 3

  333,334  0%  0
 

Footnotes

 

(1)    Actual percentages achieved are rounded for presentation.

 

(2)    Shares vested on January 31, 2015.

 

LGP (Long-Term Growth Program)

Executives are eligible to participate in the LGP, which is intended to promote sustained improvement in financial performance and long-term value creation for shareholders, while taking into account the inherent difficulty in setting long-term performance goals in the volatile retail industry. In light of the performance share grant Mr. Murphy received that is described above, he did not receive a

grant under the LGP in fiscal 2012, 2013 or 2014. Mr. Larsson did not receive an LGP grant in fiscal 2012 given his start date with the Company in October 2012. The key features of the program are described below:

Each Executive is eligible to receive an annual performance share award. Performance shares give the Executive the right (subject to Committee discretion to reduce but not increase awards) to receive a number of shares of our stock based on achievement against performance goals during a specified three-year performance period. Actual shares, if any, will vary based on achievement of the performance goals.

The number of actual shares at the end of three years is based on two performance metrics: (i) average attainment of separate annual earnings goals that are established each year over three years, measured at the division level for Division Presidents and the corporate level for those with Company-wide responsibilities, and (ii) attainment of a cumulative Company earnings goal set at the beginning of the same three-year period. The potential payout range as a percentage of the target award based on average annual earnings attainment is 0% to 250%. The award is modified up or down by up to 20% (for a maximum opportunity of 300% of target) based on the level of attainment of the cumulative Company earnings goal.

If earned, 50% of the award is payable at the end of the three-year performance period, and the remaining 50% is subject to a one-year vesting schedule based on continued service with the Company.

In selecting performance shares, the Committee considered the same factors described above under “2012 CEO Performance Shares.”

The table below describes the potential payout range as a percentage of the target award for the fiscal 2014-2016 performance period. The target number of shares was determined using our closing stock price on the date of grant and a percentage of base salary. The performance share grants represent only anopportunity to earn actual shares of our stock based on achievement of performance goals over three years. The associated amount listed in the Summary Compensation Table under Stock Awards is the grant date fair value for accounting purposes, which is the required disclosure under SEC rules, not necessarily the compensation that will be actually realized by each Executive. The same threshold, target, and maximum earnings goals described above under “Fiscal 2014 Annual Bonus” applied to the 2014 performance year under the LGP. We use earnings for both annual cash awards and performance-based long-term incentives because we believe that it is the best metric to drive shareholder value. All payments are in shares at vesting and dividends are not paid or accrued on unvested shares. Mr. Sunnucks, who left the Company in December 2014, is not eligible to receive a payout under any outstanding LGP awards and has been excluded from the tables below. Mr. Calhoun left the Company in February 2015 and is not eligible to receive a payout under the fiscal 2013 or fiscal 2014 awards.

Fiscal 2014 Award Potential Payout
Name  

Percentage

of Base Salary

 

Target
Number

of Performance
Shares

  Potential
Payout
Range as
Percentage
of Target Shares
 

Sabrina Simmons

  150% 29,324  0 – 300%

Jack Calhoun

  150% 31,990  0 – 300%

Stefan Larsson

  150% 35,545  0 – 300%

Arthur Peck

  150% 33,767  0 – 300%
 

The table below describes the actual achievement levels and actual shares for the LGP awards for the completed fiscal 2012-2014 performance period for each eligible Executive.

Fiscal 2012 Award Achievement
Name Target
Shares		 

Year 1, Year 2, & Year 3

(2012-2014)

Actual Percentage

Achieved (1)

 Three
Year
Average		 Actual
Cumulative
Company
Earnings
Goal
Modifier		 Actual
Percentage
Achieved (2)		  

Actual

Shares (2)

 

Sabrina Simmons

 30,888   250% 163% 64% 159% 20% 191%  58,996

Jack Calhoun

 32,881   244%   60% 60% 121% 20% 145%  47,784

Arthur Peck

 33,878   250%   84% 59% 131% 20% 157%  53,305
 

Footnotes

 

(1)    In 2013, the Committee used discretion to reduce the payouts to a level equal to what would have been achieved if certain adjustments at the Gap Inc. level for foreign exchange fluctuations had not been included. If the Committee’s discretion had not been applied, the actual percentage achieved for 2013 would have been 234% for Ms. Simmons.

 

(2)    Actual percentage achieved is rounded for presentation and is the three-year average increased by the cumulative Company earnings goal modifier. Actual shares is the product of the target shares and the actual percentage achieved.

 

 

The table below describes, for each eligible Executive, the actual percentage achievement levels for the completed fiscal years under the LGP awards for the fiscal 2013-2015 and fiscal 2014-2016 performance periods. Final achievement and actual shares for the outstanding fiscal 2013-2015 and fiscal 2014-2016 performance periods are still subject to the remaining performance periods and the cumulative Company earnings goal over the same three-year performance period.

   Fiscal 2013 Award
Achievement		 Fiscal 2014 Award
Achievement

Name

  Target
Shares		  Year 1

(2013)

 

Actual

Percentage

Achieved (1)

 Year 2

(2014)

 

Actual

Percentage

Achieved

 Target
Shares		  Year 1

(2014)

 

Actual

Percentage

Achieved

 

Sabrina Simmons

  33,950  163% 64% 29,324  64%

Jack Calhoun

  37,037  60% 60% 31,990  60%

Stefan Larsson

  41,152  94% 250% 35,545  250%

Arthur Peck

  37,037  84% 59% 33,767  59%
 

Footnote

 

(1)    If the Committee’s discretion had not been applied as described above, the actual percentage achieved for 2013 would have been 234% for Ms. Simmons.

 

 

Special Stock Unit Grant

Ms. Simmons received a stock unit grant of 25,000 shares in March 2014 to promote retention, to position the retention value of her long-term incentives appropriately relative to other Executives, and to create further alignment with shareholder interests. In determining the award amount, the Committee considered the factors described above under “Compensation Analysis Framework” where

relevant and used its judgment to identify the appropriate value, placing significant weight on Mr. Murphy’s recommendation. The grant will vest 50% two years following the grant date to create a retention incentive for a shorter time horizon and 50% three years following the grant date to promote longer-term retention.

Long-Term Incentive Grant Practices

It has been our practice to grant long-term incentives to Executives on an annual basis, usually in the first quarter of each fiscal year. This timing was selected because it follows the release of our annual financial results and completion of annual performance reviews. We also grant long-term incentives on other dates to newly hired Executives and periodically in connection with promotions or for special recognition and retention. Grants are typically approved by the Committee at a meeting and are effective on the meeting date or, if approved by unanimous written consent, the date of the last signature on the consent. However, the effective date for new hires is no earlier than the first day of employment. Grants to employees below the Vice President level are approved by the CEO or Committee Chair on a monthly basis using authority delegated by the Committee, typically for new employees hired in the prior month.

All stock options granted to employees during fiscal 2014fiscal 2015 had an exercise price equal to the closing price of our stock on the date of grant. The stock option grants received by our Executives are described in more detail in the Grants of Plan-Based Awards on page 39.

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Stock options typically vest based on continued service at a rate of 25% annually beginning one year from the grant date, which we have determined helps meet our retention objectives. We have also used other vesting schedules to align with timing of compensation being forfeited at a prior employer for new hires or to align with critical retention periods. Stock options are typically granted for a maximum term of ten years and vested options are exercisable for three months following employment termination. Vesting is generally accelerated upon death or retirement if the stock options are held for at least one year.

Stock Units and Performance Shares

A portion of long-term incentives is delivered in units representing full-value shares of our stock to drive performance, promote retention and foster a long-term ownership perspective. Unlike stock options, full-value share awards, in combination with stock ownership requirements, subject Executives to the same downside risk experienced by shareholders but still encourage retention if our stock price does not appreciate, and help to focus Executives on sustaining the value of the Company. In general, we believe the grant or vesting of a significant percentage of full-value shares for Executives should be based on performance against annual or long-term objectives unless they are made to offset compensation from prior employment in the case of new hires. However, to balance our performance, retention, and ownership objectives, in the past we have granted stock units or other full-value shares that vest only for continued service with the Company, and we may do so in the future. The stock unit grants received by our Executives are described in more detail in the Grants of Plan-Based Awards on page 39.

Stock units that are granted to Executives other than the CEO have in most cases been scheduled to vest over three years, but the schedule may differ based on critical retention or performance periods, or the vesting of compensation being forfeited at a prior employer for new hires. Executives generally must be employed on the vesting date or awards are forfeited. Vesting is generally accelerated upon death or retirement if the awards are held for at least one year and any performance conditions have been previously satisfied.satisfied. Additional circumstances under which vesting on long-term incentives may be accelerated is described on pages 61-6245-47 of this Proxy Statement.

LGP (Long-Term Growth Program)

Executives are eligible to participate in the LGP, which is intended to promote sustained improvement in financial performance and long-term value creation for shareholders, while taking into account the inherent difficulty in setting long-term performance goals in the volatile retail industry. Mr. Kirwan and Ms. Owen were appointed as Global Presidents and each received their first LGP grant in fiscal 2015. Mr. Peck’s LGP target was increased to 450% of base salary in connection with his appointment as CEO, a level which in the Committee’s judgment positioned him appropriately internally and relative to the peer group. The key features of the program are described below:

Stock Ownership Requirements•
Each Executive is eligible to receive an annual performance share award. Performance shares give the Executive the right to receive a number of shares of our stock based on achievement against performance goals during a specified three-year performance period. Actual shares paid out, if any, will vary based on achievement of the performance goals.

•
The number of actual shares paid after the end of three years is based on two performance metrics: (i) average attainment of separate annual earnings goals that are established each year over three years, measured at the division level for Division Presidents and the corporate level for those with Company-wide responsibilities, and (ii) attainment of a cumulative Company earnings goal set at the beginning of the same three-year period. The potential payout range as a percentage of the target award based on average annual earnings attainment is 0% to 250%. The award is modified up or down by up to 20% (for a maximum opportunity of 300% of target) based on the level of attainment of the cumulative Company earnings goal.

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•
If earned, 50% of the award is payable at the end of the three-year performance period, and the remaining 50% is subject to a one-year vesting schedule based on continued service with the Company.

The table below describes the potential payout range as a percentage of the target award for the Global Management Team / Hedging and Pledging Prohibitions

In 2004, we adopted minimumfiscal 2015-2017 performance period. The target number of shares was determined using our closing stock ownership requirements for certain executive positions to more closely link executive and shareholder interests, to balance potential rewards and risks, and to encourage a long-term perspective in managing the Company. Each executive has five years fromprice on the date of his or her appointmentgrant and a percentage of base salary. The performance share grants represent only an opportunity to reach the requirement.

Asearn actual shares of January 31, 2015, all executives had either met the shares requirementour stock based on achievement of performance goals over three years. The associated amount listed in the Summary Compensation Table under Stock Awards is the grant date fair value for accounting purposes, which is the required disclosure under SEC rules, not necessarily the compensation that will be actually realized by each Executive. The same threshold, target, and maximum earnings goals described above under “Fiscal 2015 Annual Bonus” applied to the 2015 performance year under the LGP. We use earnings for both annual cash awards and performance-based long-term incentives because we believe that it is the best metric to drive shareholder value. The use of annual goals over a three-year period maintains our ability to set realistic goals while creating focus on results over a longer time horizon and a strong linkage to overall long-term Company results. All payments are made in shares at vesting and dividends are not paid or accrued on unvested shares. Mr. Larsson, who left the Company in October 2015, is not eligible to receive a payout under any outstanding LGP awards.

        

Fiscal 2015 Award Potential Payout

Name

Percentage
of Base Salary

Target
Number
of Performance
Shares

Potential
Payout
Range as
Percentage
of Target Shares

Arthur Peck

 

450

%

 

141,749

 

0 – 300%

Sabrina Simmons

 

150

%

 

31,802

 

0 – 300%

Jeff Kirwan

 

150

%

 

30,894

 

0 – 300%

Andi Owen

 

150

%

 

30,894

 

0 – 300%

Sonia Syngal

 

100

%

 

18,173

 

0 – 300%

Former Executive

 

 

  

 

 

 

Stefan Larsson

 

150

%

 

36,346

 

0 – 300%

The following table below or had remaining time to do so.describes the actual achievement levels and actual shares for the LGP awards for the completed fiscal 2013-2015 performance period for each eligible Executive.

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Fiscal 2013 Award Achievement

Name

Target
Shares

Year 1, Year 2, & Year 3
(2013-2015)
Actual Percentage
Achieved (1)

Three
Year
Average

Actual
Cumulative
Company
Earnings
Goal
Modifier

Actual
Percentage
Achieved (2)

Actual
Shares (2)

Arthur Peck

37,037

84%

59%

0%

48%

-20%

38%

14,159

Sabrina Simmons

33,950

163%

64%

0%

76%

-20%

61%

20,596

Sonia Syngal

3,224

163%

64%

0%

76%

-20%

61%

1,955

Requirements
(shares)

Footnotes

(1)

In 2013, the Committee used discretion to reduce the payouts to a level equal to what would have been achieved if certain adjustments at the Gap Inc. level for foreign exchange fluctuations had not been included. If the Committee’s discretion had not been applied, the actual percentage achieved for 2013 would have been 234% for Ms. Simmons and Ms. Syngal.

CEO(2)

300,000

Division PresidentActual percentage achieved is rounded for presentation and is the three-year average increased by the cumulative Company earnings goal modifier. Actual shares is the product of the target shares and the actual percentage achieved.

75,000

Corporate Executive Vice President

40,000

Other global management team member

20,000

Executives not meeting

The table below describes, for each eligible Executive, the requirement must retain 50% of after-taxactual percentage achievement levels for the completed fiscal years under the LGP awards for the fiscal 2014-2016 and fiscal 2015-2017 performance periods. Final achievement and actual shares acquired through stock compensation programs untilfor the requirement is reached.

For purposes of determining stock ownership levels, in additionoutstanding fiscal 2014-2016 and fiscal 2015-2017 performance periods are still subject to shares held directly, certain forms of equity interests in the remaining performance periods and the cumulative Company count towardsearnings goal over the stock ownership requirement, including non-performance-based stock units (vested or unvested) and shares held within a 401(k) Plan. A complete description of the requirements, including a complete list of accepted forms of ownership, is located at www.gapinc.com (follow the Investors, Governance, Executive Stock Ownership links).same three-year performance period.

 

Fiscal 2014 Award
Achievement

Fiscal 2015 Award
Achievement

 

 

Year 1
(2014)

Year 2
(2015)

 

Year 1
(2015)

Name

Target
Shares

Actual
Percentage
Achieved

Actual
Percentage
Achieved

Target
Shares

Actual
Percentage
Achieved

Arthur Peck

33,767

59%

0%

141,749

0%

Sabrina Simmons

29,324

64%

0%

31,802

0%

Jeff Kirwan

N/A

N/A

N/A

30,894

0%

Andi Owen

N/A

N/A

N/A

30,894

0%

Sonia Syngal

14,218

64%

0%

18,173

0%

Our insider trading policy applicable to executives prohibits speculation in our stock, including short sales, hedging or publicly-traded option transactions. We also prohibit executives from pledging Company stock as collateral for a loan or for any other purpose.

BenefitsBenefits and Perquisites

Executives generally are eligible for the same health and welfare plans as other full-time Gap Inc. employees, including medical, dental, life and disability insurance, and retirement plans. Although not a significantsignificant part of total compensation, we also provide limited additional benefitsbenefits and perquisites to our Executives, which we believe are reasonable and consistent with our overall compensation objectives. These perquisites and benefitsbenefits include: financialfinancial planning services or an allowance, as Executives typically have more complex financialfinancial planning requirements; participation in a deferred compensation plan that is offered to all highly compensated employees, as a means to help meet retirement savings goals; and matching charitable donations, up to certain annual limits, which are available to all employees.

Various agreements, as described in more detail beginning on page 61,45, provide for severance benefitsbenefits in the event of a termination of employment before or after a change in control.employment. These benefitsbenefits were selected in light of competitive conditions and customary practices at the time of their implementation.

For Mr. Murphy only, we provided limited personal use of a Company airplane at an amount not29

Back to exceed $200,000 per year based on the incremental cost to the Company (the cost in 2014 was $110,690), in order to provide an efficient way for Mr. Murphy to manage travel time and commitments. We also reimbursed Mr. Murphy up to $75,000 (gross) for financial planning services on a fiscal year basis given the unique complexity of his financial arrangements.Contents

Mr. Peck received reimbursement in the amount of $27,920 (gross) for legal fees incurred in connection with his appointment to CEO.

Mr. Sunnucks began an expatriate assignment from England to the United States in 2012, which ended when he left the Company in December 2014. Certain expenses arising from the

assignment such as travel costs, housing, and tax equalization are covered under our long-term international assignment policy, which is intended to minimize any financial detriment or gain. In addition, Mr. Sunnucks received a special payment of £150,000 in lieu of eligibility for certain elements of the assignment policy and to substantially offset certain expenses such as travel for family visits outside of the international assignment policy provisions, incidental expenses, and financial planning for the fiscal year. Mr. Sunnucks participated in benefit programs applicable to United Kingdom employees.

The value of the benefitsbenefits and perquisites received by our Executives are described in more detail in the footnotes to the Summary Compensation Table on pages 54-55.page 38.

Promotions and Retention

We granted promotion stock units of 75,000 to each of Mr. Kirwan and Ms. Owen in February 2015 in connection with their promotions to Global President.

The Committee also considered potential retention risk for other Executives created by the announced departure of our previous CEO, as well as an increasingly challenging business environment and highly competitive market for executive talent. In light of this, we granted retention stock units of 75,000 shares to each of Mr. Larsson, Ms. Simmons and Ms. Syngal in February 2015. These awards vest based on continued service, 50% two years following the grant date to create a retention incentive for a shorter time horizon and 50% three years following the grant date to promote longer-term retention. In addition, retention payments of $1,000,000 with repayment provisions were made to Mr. Larsson and Ms. Simmons to promote short-term retention. The payments are repayable in full to the Company in the case of a voluntary termination or termination for Cause within one year of the payment date, and half must be repaid should such a termination occur between one and two years from the payment date.

When Mr. Larsson left the Company, his retention payment was repaid in full and his retention stock unit grant was forfeited.

Stock Ownership Requirements for Executive Officers / Hedging and Pledging Prohibitions

We have minimum stock ownership requirements for certain executive positions to more closely link executive and shareholder interests, to balance potential rewards and risks, and to encourage a long-term perspective in managing the Company. Each executive has five years from the date of his or her appointment to reach the requirement.

As of January 30, 2016, all Executives had either met the shares requirement in the table below or had remaining time to do so.

Requirements
(shares)

CEO

300,000

Global President

75,000

Corporate Executive Vice President

40,000

Executives not meeting the requirement must retain 50% of their after-tax shares acquired through stock compensation programs until the requirement is reached.

For purposes of determining stock ownership levels, in addition to shares held directly, certain forms of equity interests in the Company count towards the stock ownership requirement, including non-performance-based stock units (vested or unvested) and shares held within our 401(k) Plan. A complete description of the requirements, including a complete list of accepted forms of ownership, is located at

www.gapinc.com (follow the Investors, Governance, Executive Stock Ownership links).

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Our insider trading policy applicable to executives prohibits speculation in our stock, including short sales, hedging or publicly-traded option transactions. We also prohibit executives from pledging Company stock as collateral for a loan or for any other purpose.

Termination Payments

Various agreements, as described in more detail beginning on page 45, provide for severance benefits in the event of a termination of employment. These benefits were selected in light of competitive conditions and customary practices at the time of their implementation. We have no severance arrangements specific to a change-in-control.

Compensation Analysis Framework

The Committee reviews executive compensation at least annually. The Committee’s review includes base salary, annual incentives, long-term incentives and the value of benefits and perquisites. Each element is considered individually and in total using tally sheets, which are intended to summarize all of the elements of total actual and potential compensation and wealth accumulation. The tally sheets present the dollar value of each compensation component, including accumulated vested and unvested long-term incentive gains and potential gains using stock price assumptions, vesting schedules for long-term incentive awards, accumulated deferred compensation and potential severance benefits.

The Committee also uses a summary of compensation data covering other companies to support its analysis. The Committee selected a broad spectrum of retail and consumer products companies for purposes of comparing market compensation levels (the “peer group”) because we have both recruited from and lost executive talent to these industries in the past, and to ensure appropriate scope and complexity relative to the Company. Because the size of the peer group companies varies considerably, regression analysis is used where appropriate to adjust the compensation data for differences in Company revenues.

The peer group is reviewed by the Committee each year. The peer group used in 2015 was comprised of the companies listed below and reflects only one change from the prior year (replacement of Aeropostale with PVH Corporation) to better align with Gap Inc.’s global presence.

Abercrombie & Fitch

American Eagle Outfitters

Avon Products

Best Buy

Children’s Place Retail Stores

Coach

Coca-Cola

Costco Wholesale

Estee Lauder Companies

Disney

General Mills

J.C. Penney

J. Crew

Kellogg

Kimberly Clark

Kohl’s

Levi Strauss

L Brands

Macy’s

McDonald’s

Nike

Nordstrom

PepsiCo

Polo Ralph Lauren

PVH Corporation

Ross Stores

Sears Holdings

Staples

Starbucks

Target

TJX Companies

Williams-Sonoma

YUM! Brands

The majority of the peer group provides compensation data through surveys conducted by Towers Watson, an international consulting company. The surveys provide levels of base salary, annual incentives, and long-term incentive grant values in a summarized form, and we believe that this data provides a reasonable indicator of total compensation values for the peer group. This data is supplemented by information obtained through proxy statement disclosures and other public sources. The Committee uses

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the peer group data along with the tally sheet data as a frame of reference to inform compensation decisions, but compensation is not set to meet specific benchmarks or percentiles.

In conducting its analysis and determining compensation, the Committee also takes into account the following factors where relevant:

•
Business and talent strategies;

•
The nature of each Executive’s role;

•
Individual performance (based on specific financial and operating objectives for each Executive, as well as leadership behaviors);

•
Compensation history, including at former employers in the case of new hires;

•
Future potential contributions by the Executive;

•
Internal comparisons to other Executives;

•
Comparisons of the value and nature of each compensation element to each other and in total; and

•
Retention risk.

As described below, the Committee also considers management’s recommendations and advice from the Committee’s independent compensation consultant when appropriate. The Committee periodically reviews the accounting and tax implications of each compensation element, and shareholder dilution in the case of equity awards.

Role of the CEO and Compensation Consultant

The CEO evaluates each Executive using relevant factors described above under “Compensation Analysis Framework” and makes recommendations to the Committee about the structure of the compensation program and individual arrangements. The CEO is generally present at Committee meetings when compensation, other than his own, is considered and approved. However, approval rests solely with the Committee.

The Committee has engaged Frederic W. Cook & Co. as its independent compensation consultant to advise the Committee periodically on the compensation program structure and individual compensation arrangements. The consultant was selected by the Committee and does not provide any other services to the Company. In addition, we have conducted a review of the Committee’s relationship with its compensation consultant, and have identified no conflicts of interest. From time to time, the consultant attends Committee meetings, presents briefings on general and retail-industry compensation trends and developments, and is also available to the Committee outside of meetings as necessary. The consultant reports directly to the Committee, although the consultant meets with management from time to time to obtain information necessary to advise the Committee.

Accounting and Tax Considerations

Accounting, tax and related financialfinancial implications to the Company and Executives are considered during the analysis of our compensation and benefitsbenefits program and individual elements. Overall, the Committee seeks to balance attainment of our compensation objectives with the need to maximize current tax deductibility of compensation that may impact earnings and other measures of importance to shareholders. The Committee determined that the accounting and tax impacts described below were reasonable in light of our objectives.

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In general, base salary, annual cash incentive bonus payments, and the costs related to benefitsbenefits and perquisites are recognized as compensation expense at the time they are earned or provided. Share-based compensation expense is recognized in our consolidated statements of income for stock options, stock units, and performance shares.

Subject to the exceptions and limits below, we deduct for federal income tax purposes all payments of compensation and other benefitsbenefits to Executives. We do not deduct deferred compensation until the year that the deferred compensation is paid to an Executive.

Section 162(m) of the Internal Revenue Code generally does not allow a tax deduction to public companies for compensation over $1,000,000 paid to the principal executive officerofficer or any of the other three most highly compensated executive officersofficers (other than the principal executive officer or principal financial officer)financial officer) unless the compensation is based on attainment of pre-established objective performance goals and certain other requirements are met. It is our preference to qualify executive compensation as deductible under Section 162(m) where we determine it is consistent with our interests and compensation objectives. However, to maintain maximum flexibilityflexibility in achieving compensation objectives, the Committee, while considering company tax deductibility as one of its factors in determining compensation, will not limit compensation to those levels or types of compensation that are intended to be deductible. Our compensation plans have generally been designed to permit awards that qualify as deductible under Section 162(m). However, the individual objectives component of the annual incentive bonus is qualitative in nature and is subject to the deduction limits of Section 162(m). In addition, stock units, other than performance shares, that have vesting based only on continued service are also subject to the deduction limits of Section 162(m). Because of the fact-based nature of the performance-based compensation exception and the limited amount of guidance, there is no guarantee that compensation that is intended to comply with the performance-based compensation exception under Section 162(m) will in fact so qualify.

Section 4999 and Section 280G of the Internal Revenue Code provide that executives could be subject to additional taxes if they receive payments or benefitsbenefits that exceed certain limits in connection with a change in control of the Company and that the Company could lose an income tax deduction for such payments. We have not provided any Executive with tax gross upsgross-ups or other reimbursement for tax amounts the Executive might be required to pay under Section 4999.

Recovery and Adjustments to Awards

Subject to the approval of the Board, we will require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an Executive or other member of our global management team after April 1, 2007 where all of the following factors are present: (i) the award was predicated upon the achievement of certain financialfinancial results that were subsequently the subject of a restatement, (ii) in the Board’s view, the Executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (iii) a lower award would have been made to the Executive based upon the restated financialfinancial results. In each such instance, we will seek to recover the individual Executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest. The Board is monitoring this policy to ensure that it is consistent with applicable laws, including any requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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COMPENSATION COMMITTEE REPORT

The Compensation and Management Development Committee (the “Committee”) has reviewed and discussed this Compensation Discussion and Analysis with management. Based on the review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K for the fiscalfiscal year ended January 31, 201530, 2016 and the Proxy Statement for the 20152016 Annual Meeting of Shareholders.

Bob L. Martin (Chair)


Domenico De Sole


Katherine Tsang


Padmasree Warrior

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Summary Compensation Table

The following table shows compensation information for fiscal 2014,fiscal 2015, which ended January 31, 2015,30, 2016, for our CEO, CFO, the three other most highly compensated executive officersofficers at fiscalfiscal year-end, and an officerofficer who would have been one of the three other most highly compensated officersofficers had he still been serving as an officerofficer at fiscalfiscal year-end, as required under SEC rules (“named executive officers”officers”). The table also shows compensation information for fiscalfiscal 2014 and fiscal 2013, and fiscal 2012, which ended January 31, 2015 and February 1, 2014, and February 2, 2013, respectively, for those named executive officersofficers who also were named executive officersofficers in either of those years.

                             

Name and Principal Position (1)

Fiscal
Year

Salary
($) (2)

Bonus
($) (3)

Stock Awards
($) (4) (5)

Option
Awards
($) (5) (6)

Non-Equity
Incentive Plan
Compensation
($) (7)

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (8)

All Other
Compensation
($) (9)

Total
($)

Arthur Peck

 

2015

  

1,300,000

  

0

  

2,733,227

  

2,079,960

  

0

  

0

  

27,611

  

6,140,798

 

 

CEO

 

2014

  

943,269

  

0

  

1,397,332

  

656,576

  

419,411

  

0

  

93,424

  

3,510,012

 

 

 

2013

  

900,000

  

0

  

3,029,232

  

658,920

  

1,072,869

  

0

  

51,998

  

5,713,019

 

Sabrina Simmons

 

2015

  

868,269

  

0

  

4,156,533

  

625,194

  

130,241

  

0

  

64,810

  

5,845,047

 

 

EVP and CFO

 

2014

  

825,000

  

0

  

2,258,223

  

738,648

  

457,385

  

0

  

63,651

  

4,342,907

 

 

 

2013

  

818,269

  

0

  

1,156,744

  

741,285

  

823,500

  

0

  

63,637

  

3,603,435

 

Jeff Kirwan

 

2015

  

850,000

  

0

  

3,642,268

  

555,728

  

127,500

  

0

  

1,061,541

  

6,237,037

 

 

Global President, Gap

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Andi Owen

 

2015

  

850,000

  

0

  

3,312,226

  

520,995

  

106,250

  

0

  

49,653

  

4,839,124

 

 

Global President, Banana Republic

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Sonia Syngal

 

2015

  

750,000

  

0

  

3,378,237

  

243,131

  

90,000

  

0

  

67,541

  

4,528,909

 

 

EVP, Global Supply Chain & Product Operations

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Former Executive Officer

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Stefan Larsson

 

2015

  

673,077

  

0

  

4,391,007

  

625,194

  

0

  

0

  

44,519

  

5,733,797

 

 

Former Global President, Old Navy

 

2014

  

1,000,000

  

0

  

1,013,789

  

738,648

  

1,707,576

  

0

  

75,566

  

4,535,579

 

 

 

2013

  

1,000,000

  

125,000

  

471,453

  

0

  

968,717

  

0

  

815,203

  

3,380,373

 

 

Name and Principal Position (1) 

Fiscal

Year

  

Salary

($) (2)

  

Bonus

($) (3)

  

Stock Awards

($) (4) (5)

  

Option

Awards

($) (5) (6)

  

Non-Equity

Incentive Plan

Compensation

($) (7)

  

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($) (8)

  

All Other

Compensation

($) (9)

  

Total

($)

 

 

 

Glenn Murphy

  2014    1,500,000    0    13,776,694    0    538,218                          0    249,400    16,064,312  

Chairman and CEO

  2013    1,500,000    0    14,200,512    0    2,675,567    0    350,833    18,726,912  
   2012    1,500,000    0    18,267,270    0    4,500,000    0    360,542    24,627,812  

Sabrina Simmons

  2014    825,000    0    2,258,223    738,648    457,385    0    63,651    4,342,907  

EVP and CFO

  2013    818,269    0    1,156,744    741,285    823,500    0    63,637    3,603,435  
   2012    771,635    0    3,154,350    600,590    1,099,670    0    60,701    5,686,946  

Jack Calhoun

  2014    900,000    0    1,360,544    574,504    337,993    0    68,149    3,241,190  

Global President, Banana Republic

  2013    900,000    0    2,976,850    658,920    331,099    0    66,689    4,933,558  

Stefan Larsson

  2014    1,000,000    0    1,013,789    738,648    1,707,576    0    75,566    4,535,579  

Global President, Old Navy

  2013    1,000,000    125,000    471,453    0    968,717    0    815,203    3,380,373  
   2012    326,923    350,000    6,972,460    1,728,280    0    0    319,661    9,697,324  

Arthur Peck

  2014    943,269    0    1,397,332    656,576    419,411    0    93,424    3,510,012  

President, GID

  2013    900,000    0    3,029,232    658,920    1,072,869    0    51,998    5,713,019  
   2012    861,538    0    2,030,326    600,590    1,230,959    0    51,645    4,775,058  

Former Executive Officer

  

Stephen Sunnucks (10)

  2014    803,653    0    1,509,987    738,648    212,615    0    7,308,510    10,573,413  

Former Global President, Gap

  2013    1,052,096    0    4,248,819    741,285    1,005,657    0    1,715,437    8,763,294  
   2012    921,383    0    3,247,284    600,590    287,817    0    767,072    5,824,146  

 

 

 

 

Footnotes

Footnotes

(1)

Mr. Murphy resigned as Chairman and CEO effective at fiscal 2014 year-end, and

Mr. Peck became our CEO in February 2015. Mr. CalhounLarsson ceased to be an executive officerofficer of the Company in February 2015 (fiscal 2015), and Mr. Sunnucks ceased to be an executive officer of the Company in December 2014 (fiscal 2014).October 2015.

(2)

(2)

The amounts in this column for Ms. Simmons in fiscal 2012fiscal 2013 and 2013,2015, and for Mr. Peck in fiscal 2012 and 2014, and for Mr. Sunnucks in fiscal 2012, reflectreflect the prorated payment of their salaries based on changes during the year. Base salary changes in fiscal 2014fiscal 2015 are further described on page 3923 of the Compensation Discussion and Analysis section. The amount in this column for Mr. SunnucksLarsson in fiscal 2014 reflectsfiscal 2015 reflects the prorated payment of his actual salary until his departure in December 2014.October 2015.

35

Footnotes (continued)

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Footnotes (continued)

(3)

Mr. Larsson received a new hire bonus of $350,000 in October 2012, and a special bonus of $125,000 in March 2013 in light of his fiscalfiscal 2012 performance.

(4)

(4)

This column reflectsreflects the aggregate grant date fair value for awards of stock during fiscalfiscal 2015, 2014 2013 and 2012,2013, computed in accordance with FASB ASC 718. These amounts reflectreflect the grant date fair value, and do not necessarily represent the actual value that may be realized by the named executive officers.officers. For 2012,2013, this column includes (a) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 3 of a three-year performance period beginning with fiscal 2010fiscal 2011 (“LGP 1”), (b) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 2 of a three-year performance period beginning with fiscal 2011fiscal 2012 (“LGP 2”), and (c) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 1 of a three-year performance period beginning with fiscal 2012fiscal 2013 (“LGP 3”). For 2013,2014, this column includes (a) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 3 of LGP 2, (b) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 2 of LGP 3, and (c) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 1 of a three-year performance period beginning with fiscal 2013fiscal 2014 (“LGP 4”). For 2014,2015, this column includes (a) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 3 of LGP 3, (b) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 2 of LGP 4, and (c) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 1 of a three-year performance period beginning with fiscal 2014fiscal 2015 (“LGP 5”). See page 46pages 28-29 of the Compensation Discussion and Analysis section for actual shares granted under LGP 3. Mr. Murphy did not receive LGP grants in fiscal 2012, 2013 or 2014. Mr. Larsson joined the Company in October 2012 and was not entitled to a grant under the LGP in fiscalfiscal 2012. Ms. Owen and Mr. Kirwan received their first grants under the LGP in 2015.

For Mr. Murphy, (a) this column for 2014 includes the aggregate grant date fair value (at $41.33 per share) based on the probable outcome with respect to year 3 of a three-year performance period under the performance share grant he received on May 4, 2012 (“CEO Performance Share Grant”), (b) this column for 2013 includes the aggregate grant date fair value (at $35.26 per share) based on the probable outcome with respect to year 2 of a three-year performance period under the CEO Performance Share Grant, and (c) this column for 2012 includes the aggregate grant date fair value (at $26.72 per share) based on the probable outcome with respect to year 1 of a three-year performance period under the CEO Performance Share Grant. The total grant date fair value of the CEO Performance Share Grant granted to Mr. Murphy in fiscal 2012 if maximum performance conditions were achieved over the entire three-year period was $68,873,347 using the per share grant date fair value for year 1, year 2, and year 3 of the three-year performance period (666,666 shares at $26.72 per share, 666,666 shares at $35.26 per share, and 666,668 shares at $41.33 per share).

For Ms.Mses. Owen, Simmons, and Syngal, and Messrs. Calhoun,Kirwan, and Larsson, Peck and Sunnucks, this column also includes the aggregate grant date fair value of any restricted stock units granted during fiscalfiscal 2015, 2014 2013 and 2012.2013.

Details on the figuresfigures included in this column for 20142015 are reflectedreflected in the following table. Details on the figuresfigures included in this column for 20132014 and 20122013 are included in our 20142015 and 20132014 Proxy Statements.

 

    

LGP 3 (FY 2012 Grant)

Year 3

Target Shares

Grant Date Fair Value

($)

  

LGP 4 (FY 2013 Grant)

Year 2

Target Shares

Grant Date Fair Value

($)

  

LGP 5 (FY 2014 Grant)

Year 1

Target Shares

Grant Date Fair Value

($)

  

Grant Date Fair
Value of Non-LGP Stock  

Awards

($)

  

Total Reported in
Stock Awards Column

(Rounded to the

nearest dollar)

($)

Glenn Murphy

  n/a  n/a  n/a  13,776,694  13,776,694

Sabrina Simmons

  421,003  453,093  383,239  1,000,888  2,258,223

Jack Calhoun (a)

  448,154  494,294  418,096  0  1,360,544

Stefan Larsson

  n/a  549,229  464,560  0  1,013,789

Arthur Peck

  461,730  494,294  441,309  0  1,397,332

Stephen Sunnucks (b)

  484,342  531,010  494,634  0  1,509,987

 

LGP 3 (FY 2013 Grant)
Year 3
Target Shares
Grant Date Fair Value
($)

LGP 4 (FY 2014 Grant)
Year 2
Target Shares
Grant Date Fair Value
($)

LGP 5 (FY 2015 Grant)
Year 1
Target Shares
Grant Date Fair Value
($)

Grant Date Fair
Value of Non-LGP Stock
Awards
($)

Total Reported in
Stock Awards Column
(Rounded to the
nearest dollar)
($)

Arthur Peck

492,566

439,057

1,801,604

0

2,733,227

Sabrina Simmons

451,508

381,284

404,178

2,919,563

4,156,533

Jeff Kirwan

0

0

392,663

3,249,605

3,642,268

Andi Owen

0

0

392,663

2,919,563

3,312,226

Sonia Syngal

42,853

184,868

230,953

2,919,563

3,378,237

Stefan Larsson (a)

547,308

462,191

461,945

2,919,563

4,391,007

 

(a)

Mr. Calhoun,Larsson, who left the Company in FebruaryOctober 2015, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.

        (b)Mr. Sunnucks, who left the Company in December 2014, is not eligible to receive a payout under any outstanding LGP 3, LGP 4 or LGP 5 awards.

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Footnotes (continued)

The total grant date fair value of the LGP awards if maximum performance conditions were achieved over the entire three-year period under LGP 3, LGP 4 and LGP 5 are detailed in the following tables. The grant date fair values per share used in calculating the total grant date fair values below were as follows: (i) year 1 of LGP 3 ($23.37)34.04 for Ms. Syngal and $34.37 for the other named executive officers), year 2 of LGP 3 ($34.96)40.04), and year 3 of LGP 3 ($40.89)39.90), (ii) year 1 of LGP 4 ($34.37)39.21), and years 2 and 3 of LGP 4 ($40.04)39.01), and (iii) years 1, 2 and 3 of LGP 5 ($39.21)38.13). The grant date fair value for year 2 of LGP 4 was used for year 3 of LGP 4, and the grant date fair value for year 1 of LGP 5 was used for years 2 and 3 of LGP 5. Ms. Owen and Mr. MurphyKirwan did not receive LGP grants in fiscal 2012,fiscal 2013 or 2014,2014. For a description of the Company’s Long-Term Growth Program, please see pages 27-29 of the Compensation Discussion and has been excluded from the tables below.Analysis section.

 

LGP 3

(FY 2012 Cycle)

  

Maximum Shares

Total Grant Date Fair Value  

($)

     

LGP 4

(FY 2013 Cycle)

  

Maximum Shares

Total Grant Date Fair Value  

($)

    

LGP 5

(FY 2014 Cycle)

  

Maximum Shares

Total Grant Date Fair Value

($)

Sabrina Simmons

  3,064,707    

Sabrina Simmons

  3,885,578   

Sabrina Simmons

  3,449,382

Jack Calhoun

  3,262,453    

Jack Calhoun (b)

  4,238,885   

Jack Calhoun (b)

  3,762,984

Stefan Larsson

  n/a    

Stefan Larsson

  4,709,846   

Stefan Larsson

  4,181,158

Arthur Peck

  3,361,375    

Arthur Peck

  4,238,885   

Arthur Peck

  3,972,012

Stephen Sunnucks (a)

  3,525,783    

Stephen Sunnucks (a)

  4,553,622   

Stephen Sunnucks (a)

  4,451,943

 

 

 

 

 

 

 

 

LGP 3
(FY 2013 Cycle)

Maximum Shares
Total Grant Date Fair Value
($)

 

LGP 4
(FY 2014 Cycle)

Maximum Shares
Total Grant Date Fair Value
($)

 

LGP 5
(FY 2015 Cycle)

Maximum Shares
Total Grant Date Fair Value
($)

Art Peck

4,233,699

 

Art Peck

3,958,505

 

Art Peck

16,214,668

Sabrina Simmons

3,880,825

 

Sabrina Simmons

3,437,653

 

Sabrina Simmons

3,637,831

Jeff Kirwan

n/a

 

Jeff Kirwan

n/a

 

Jeff Kirwan

3,533,965

Stefan Larsson (a)

4,704,085

 

Stefan Larsson (a)

4,166,940

 

Stefan Larsson (a)

4,157,619

Andi Owen

n/a

 

Andi Owen

n/a

 

Andi Owen

3,533,965

Sonia Syngal

367,472

 

Sonia Syngal

1,666,776

 

Sonia Syngal

2,078,809

 

(a)

Mr. Sunnucks,Larsson, who left the Company in December 2014,October 2015, is not eligible to receive a payout under any outstanding LGP 3, LGP 4 or LGP 5 awards.

        (b)

(5)

Mr. Calhoun, who left the Company in February 2015, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.

For a description of the Company’s Long-Term Growth Program, please see pages 44-46 of the Compensation Discussion and Analysis section. For a description of the CEO Performance Share Grant, please see pages 43-44 of the Compensation Discussion and Analysis section.

(5)Please refer to Note 11,10, “Share-Based Compensation,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filedfiled on March 23, 201521, 2016 for the relevant assumptions used to determine the compensation cost of our stock and option awards. Please refer to the Grants of Plan-Based Awards table in this Proxy Statement and in our 20142015 and 20132014 Proxy Statements for information on awards actually granted in fiscalfiscal 2015, 2014 2013 and 2012.2013.

(6)

(6)

This column reflectsreflects the aggregate grant date fair value for awards of stock options during fiscalfiscal 2015, 2014 2013 and 2012,2013, computed in accordance with FASB ASC 718. These amounts reflectreflect the grant date fair value, and do not necessarily represent the actual value that may be realized by the named executive officers.officers.

(7)

(7)

The amounts in this column reflectreflect the non-equity amounts earned by the named executive officersofficers under the Company’s annual incentive bonus plan.

(8)

(8)

No above-market or preferential interest rate options are available under our deferred compensation programs. Please refer to the NonqualifiedNonqualified Deferred Compensation table for additional information on deferred compensation earnings.

Footnotes (continued)

(9)

The amounts shown in the All Other Compensation column are detailed in the table below.following table.

 

Name 

Fiscal

Year

  

Personal

Use of

Airplane

($) (a)

  

Financial

Counseling

($) (b)

  

Tax

Payments

($) (c)

  

Deferred

Compensation

Plan Match

($) (d)

  

401(k)

Plan

Match

($) (e)

  

Disability

Plan

($) (f)

   

Life

Insurance

($) (g)

   

Relocation

($) (h)

   

Gift

Matching

($) (i)

   

Other

($) (j)

   Total ($) 
                                                      

Glenn Murphy

  2014    110,690    75,000                0    49,600    12,246    736     1,128                 0     0     0     249,400  
   2013    112,337    75,000    0    49,800    11,862    736     1,098     0     100,000     0     350,833  
   2012    56,087    75,000    0    52,308    10,000    961     1,186     0     100,000     65,000     360,542  

Sabrina Simmons

  2014    0    14,800    0    22,600    10,387    736     1,128     0     14,000     0     63,651  
   2013    0    14,067    0    22,338    10,398    736     1,098     0     15,000     0     63,637  
   2012    0    14,000    0    21,942    10,112    961     1,186     0     12,500     0     60,701  

Jack Calhoun

  2014    0    14,800    0    25,600    10,885    736     1,128     0     15,000     0     68,149  
   2013    0    14,067    0    25,800    9,988    736     1,098     0     15,000     0     66,689  

Stefan Larsson

  2014    0    14,800    2,727    29,600    8,885    736     1,128     6,190     11,500     0     75,566  
   2013    0    19,943    423,938    29,800    14,431    736     1,098     325,256     0     0     815,203  
   2012    0    4,914    71,529    0    0    245     352     242,621     0     0     319,661  

Arthur Peck

  2014    0    14,800    0    27,139    11,813    624     1,128     0     10,000     27,920     93,424  
   2013    0    14,067    0    25,800    10,297    736     1,098     0     0     0     51,998  
   2012    0    14,000    0    25,615    9,883    961     1,186     0     0     0     51,645  

Stephen Sunnucks

  2014    0    0    6,257,865    0    0    7,902     6,498     578,548     0     457,697     7,308,510  
   2013    0    0    1,394,616    0    0    13,801     8,507     278,786     0     19,727     1,715,437  
   2012    0    32,571    214,628    0    0    5,216     65     495,756     0     18,836     767,072  

 

 

 

 

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Name

Fiscal
Year

Financial
Counseling
($) (a)

Tax
Payments
($) (b)

Deferred
Compensation
Plan Match
($) (c)

401(k)
Plan
Match
($) (d)

Disability
Plan
($) (e)

Life
Insurance
($) (f)

Relocation
($) (g)

Gift
Matching
($) (h)

Other
($) (i)

Total ($)

Arthur Peck

 

2015

  

14,800

  

0

  

0

  

11,261

  

650

  

900

  

0

  

0

  

0

  

27,611

 

 

 

2014

  

14,800

  

0

  

27,139

  

11,813

  

624

  

1,128

  

0

  

10,000

  

27,920

  

93,424

 

 

 

2013

  

14,067

  

0

  

25,800

  

10,297

  

736

  

1,098

  

0

  

0

  

0

  

51,998

 

Sabrina Simmons

 

2015

  

14,800

  

0

  

23,938

  

9,529

  

643

  

900

  

0

  

15,000

  

0

  

64,810

 

 

 

2014

  

14,800

  

0

  

22,600

  

10,387

  

736

  

1,128

  

0

  

14,000

  

0

  

63,651

 

 

 

2013

  

14,067

  

0

  

22,338

  

10,398

  

736

  

1,098

  

0

  

15,000

  

0

  

63,637

 

Jeff Kirwan

 

2015

  

14,800

  

777,099

  

23,400

  

9,881

  

647

  

900

  

234,814

  

0

  

0

  

1,061,541

 

Andi Owen

 

2015

  

0

  

0

  

23,208

  

9,898

  

647

  

900

  

0

  

15,000

  

0

  

49,653

 

Sonia Syngal

 

2015

  

10,627

  

0

  

18,823

  

8,774

  

650

  

900

  

23,272

  

4,495

  

0

  

67,541

 

Stefan Larsson

 

2015

  

11,100

  

0

  

0

  

4,096

  

536

  

900

  

21,537

  

6,350

  

0

  

44,519

 

 

 

2014

  

14,800

  

2,727

  

29,600

  

8,885

  

736

  

1,128

  

6,190

  

11,500

  

0

  

75,566

 

 

 

2013

  

19,943

  

423,938

  

29,800

  

14,431

  

736

  

1,098

  

325,256

  

0

  

0

  

815,203

 

(a)

The Compensation and Management Development Committee determined that it was appropriate to provide Mr. Murphy use of a Company airplane for limited personal use (not to exceed $200,000 per fiscal year in incremental cost to the Company). As required by SEC rules, the amounts shown are the incremental cost to the Company of personal use of the Company airplane and are calculated based on the variable operating costs to the Company, including fuel costs, mileage, trip-related maintenance, and other miscellaneous variable costs. Since the Company airplane is primarily used for business travel, fixed costs which do not change based on usage, such as the pilot’s salary and maintenance costs unrelated to the trip, are excluded.
        (b)

We provide certain executive officersofficers access to financialfinancial counseling services, which may include tax preparation and estate planning services. We value this benefitbenefit based on the actual cost for those services. Beginning in fiscal 2012, Mr. Murphy was removed from the existing financial planning services program provided to other executives in favor of an annual reimbursement of expenses, given his complex circumstances and a review of the actual expenses he has incurred over time outside of the existing program.

        (c)

(b)

For Mr. Larsson and Mr. Sunnucks,Kirwan, these amounts reflectreflect tax reimbursements in connection with Mr. Larsson’shis previous international assignments and relocation to the U.S. andFor Mr. Sunnucks’ international assignment. In the case of Mr. Sunnucks,Larsson, these amounts were generally paid directlyreflect tax reimbursements in connection with his relocation to taxing authorities on his behalf, and the Company expects to recover a significant portion of these amounts as foreign tax credits in future periods.U.S.

        (d)

(c)

These amounts reflectreflect Company matching contributions under the Company’s nonqualifiednonqualified Deferred Compensation Plan for base salary deferrals representing the excess of the participant’s base pay over the current IRS qualifiedqualified plan limit ($260,000265,000 for calendar year 2014)2015), which are matched at up to 4% of base pay, the same rate as is in effect under the Company’s 401(k) plan.

        (e)

(d)

These amounts reflectreflect Company matching contributions under the Company’s 401(k) Plan.

        (f)

(e)

These amounts reflectreflect premium payments for long-term disability insurance, which is available to benefits-eligiblebenefits-eligible employees generally.

Footnotes (continued)

        (g)

(f)

These amounts reflectreflect premiums paid for life insurance provided to employees at the Director level and above.

        (h)

(g)

For Mr. Larsson, the amounts reflectreflect costs in connection with his relocation from Sweden to California when he joined the Company in 2012. For Mr. Sunnucks,Kirwan, the amounts reflectreflect costs in connection with his relocation from LondonChina to New York in 2012, including a special relocation paymentwhen he assumed the role of £250,000 in fiscal 2012, which is further described in the Compensation Discussion and Analysis section of our 2013 Proxy Statement, and a special relocation payment of £150,000 in fiscal 2014, which is further described in the Compensation Discussion and Analysis section on page 49 of this Proxy Statement.Global President, Gap brand.

        (i)

(h)

These amounts reflectreflect Company matching contributions under the Company’s Gift Match Program, available to all employees, under which contributions to eligible nonprofitnonprofit organizations are matched by the Company, up to certain annual limits. In fiscal 2014,fiscal 2015, the limit for the named executive officersofficers was $15,000, with the exception of Mr. MurphyPeck who had an annual matching limit of $100,000. The annual gift match eligibility limits are based on the executive’s original donation date.

        (j)

(i)

The amount in this column for Mr. Murphy reflects reimbursement of attorney fees he incurred in connection with the review of his CEO Performance Share Grant.

The amount in this column for Mr. Peck reflectsreflects reimbursement of attorney fees he incurred in connection with the review of his October 2014 agreement with the Company regarding his transition to the CEO position. The amounts in this column for Mr. Sunnucks for fiscal 2012 and 2013 reflect a car allowance. The amount in this column for Mr. Sunnucks for fiscal 2014 reflects a car allowance and payment in lieu of notice pursuant to his compromise agreement (further described on page 62).

(10)Mr. Sunnucks’ cash compensation was paid in British pound sterling. For presentation purposes, the exchange rates as of the last business day of fiscal 2012 (February 1, 2013), fiscal 2013 (January 31, 2014) and fiscal 2014 (January 30, 2015) were used to convert Mr. Sunnucks’ compensation to U.S. dollars. Certain fiscal 2013 amounts for Mr. Sunnucks have been adjusted due to an overstatement in our 2014 Proxy Statement.

 

 

38

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Grants of Plan-Based Awards

The following table shows all plan-based awards granted to the named executive officersofficers during fiscal 2014,fiscal 2015, which ended on January 31, 2015.30, 2016. The option awards and the unvested portion of the stock awards identifiedidentified in the table below are also reported in the Outstanding Equity Awards at Fiscal Year-End table.

                                     

Name

Grant
Date

Approval
Date

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)

Estimated Future Payouts
Under Equity Incentive Plan
Awards (2)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

Exercise
or Base
Price of
Option
Awards
($)

Grant Date
Fair
Value of
Stock
and Option
Awards
($) (3)

Threshold
($)

Target
($)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

Arthur Peck

 

2/01/15

  

10/02/14

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

300,000

  

41.19

  

2,079,960

 

 

 

 

  

 

  

 

  

 

  

 

  

5,555

  

12,345

  

37,037

  

 

  

 

  

 

  

492,566

 

 

 

 

  

 

  

 

  

 

  

 

  

5,065

  

11,255

  

33,767

  

 

  

 

  

 

  

439,058

 

 

 

 

  

 

  

 

  

 

  

 

  

21,262

  

47,249

  

141,749

  

 

  

 

  

 

  

1,801,604

 

 

 

N/A

  

 

  

 

  

2,275,000

  

4,550,000

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Sabrina Simmons

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

90,000

  

41.27

  

625,194

 

 

 

2/01/15

  

1/22/15

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

 

  

 

  

2,919,563

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

5,092

  

11,316

  

33,950

  

 

  

 

  

 

  

451,508

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

4,398

  

9,774

  

29,324

  

 

  

 

  

 

  

381,284

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

4,770

  

10,600

  

31,802

  

 

  

 

  

 

  

404,178

 

 

 

N/A

  

 

  

217,067

  

868,269

  

1,736,538

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Jeff Kirwan

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

80,000

  

41.27

  

555,728

 

 

 

2/01/15

  

1/22/15

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

 

  

 

  

2,919,563

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

 

  

 

  

8,461

  

 

  

 

  

330,042

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

4,634

  

10,298

  

30,894

  

 

  

 

  

 

  

392,663

 

 

 

N/A

  

 

  

212,500

  

850,000

  

1,700,000

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Andi Owen

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

41.27

  

520,995

 

 

 

2/01/15

  

1/22/15

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

 

  

 

  

2,919,563

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

4,634

  

10,298

  

30,894

  

 

  

 

  

 

  

392,663

 

 

 

N/A

  

 

  

212,500

  

850,000

  

1,700,000

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Sonia Syngal

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

35,000

  

41.27

  

243,131

 

 

 

2/01/15

  

1/22/15

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

 

  

 

  

2,919,563

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

483

  

1,074

  

3,224

  

 

  

 

  

 

  

42,853

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

2,132

  

4,739

  

14,218

  

 

  

 

  

 

  

184,868

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

2,725

  

6,057

  

18,173

  

 

  

 

  

 

  

230,953

 

 

 

N/A

  

 

  

150,000

  

600,000

  

1,200,000

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Former Executive Officer

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Stefan Larsson

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

 

  

��

  

 

  

 

  

90,000

  

41.27

  

625,194

 

 

 

2/01/15

  

1/22/15

  

 

  

 

  

 

  

 

  

 

  

 

  

75,000

  

 

  

 

  

2,919,563

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

6,172

  

13,717

  

41,152

  

 

  

 

  

 

  

547,308

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

5,331

  

11,848

  

35,545

  

 

  

 

  

 

  

462,190

 

 

 

3/16/15

  

3/16/15

  

 

  

 

  

 

  

5,451

  

12,115

  

36,346

  

 

  

 

  

 

  

461,945

 

 

 

N/A

  

 

  

250,000

  

1,000,000

  

2,000,000

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

Name 

Grant

Date

  

Approval

Date

  

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards (1)

 Estimated Future Payouts
Under Equity Incentive Plan
Awards (2)		  

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units

(#)

  

All Other

Option

Awards:

Number of

Securities

Underlying

Options

(#)

  

Exercise

or Base

Price of

Option

Awards

($)

  

Grant Date

Fair

Value of

Stock

and Option

Awards

($) (3)

 
   

Threshold

($)

 

Target

($)

 

Maximum

($)

 

Threshold

(#)

  

Target

(#)

  

Maximum

(#)

     
                               

Glenn Murphy

  3/17/14    3/17/14          0    333,334    666,668                13,776,694  
   N/A         2,250,000 4,500,000                            

Sabrina Simmons

  3/17/14    3/17/14                  90,000    42.20    738,648  
   3/17/14    3/17/14                25,000        1,000,888  
   3/17/14    3/17/14          4,633    10,296    30,888          421,003  
   3/17/14    3/17/14          5,092    11,316    33,950          453,093  
   3/17/14    3/17/14          4,398    9,774    29,324          383,239  
   N/A       206,250 825,000 1,650,000                            

Jack Calhoun

  3/17/14    3/17/14                  70,000    42.20    574,504  
   3/17/14    3/17/14          4,932    10,960    32,881          448,154  
   3/17/14    3/17/14          5,555    12,345    37,037          494,294  
   3/17/14    3/17/14          4,798    10,663    31,990          418,096  
   N/A       225,000 900,000 1,800,000                            

Stefan Larsson

  3/17/14    3/17/14                  90,000    42.20    738,648  
   3/17/14    3/17/14          6,172    13,717    41,152          549,229  
   3/17/14    3/17/14          5,331    11,848    35,545          464,560  
   N/A       250,000 1,000,000 2,000,000                            

Arthur Peck

  3/17/14    3/17/14                  80,000    42.20    656,576  
   3/17/14    3/17/14          5,081    11,292    33,878          461,730  
   3/17/14    3/17/14          5,555    12,345    37,037          494,294  
   3/17/14    3/17/14          5,065    11,255    33,767          441,309  
   N/A       235,817 943,269 1,886,538                            

Former Executive Officer

                       

Stephen Sunnucks

  3/17/14    3/17/14                          90,000    42.20    738,648  
   3/17/14    3/17/14          5,330    11,845    35,535          484,342  
   3/17/14    3/17/14          5,968    13,262    39,787          531,010  
   3/17/14    3/17/14          5,677    12,615    37,847          494,634  
   N/A     241,096 964,384 1,928,768             
                               
                               

 

Footnotes

 

(1)   The amounts shown in these columns reflect the estimated potential payment levels for the fiscal 2014 performance period under the Company’s annual incentive bonus plan, further described on page 39 of the Compensation Discussion and Analysis section. The potential payouts were performance-based and, therefore, were completely at risk. The potential target and maximum payment amounts assume achievement of 100% and 200%, respectively, of the individual objectives component of the annual incentive bonus plan, described on page 41. The potential threshold payment amount assumes 100% achievement of the individual objectives component and 0% achievement of the financial performance component. Each named executive officer received a bonus under the annual incentive bonus plan, which is reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.” For presentation purposes, the amounts for Mr. Sunnucks were converted to U.S. dollars using the exchange rate as of the last business day of fiscal 2014.

  

            

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Footnotes (continued)

(1)

(2)   For Mr. Murphy,The amounts shown in these columns reflect the numbers in this columnestimated potential payment levels for the grant with a target value of 333,334 shares reflect the threshold, target and maximum amounts for year 3 of a three-yearfiscal 2015 performance period beginning in fiscal 2012 under the CEO Performance Share Grant,Company’s annual incentive bonus plan, further described on pages 43-4424-26 of the Compensation Discussion and Analysis section. The potential payouts were performance-based and, therefore, were completely at risk. The potential target and maximum payment amounts assume achievement of 100% and 200%, respectively, of the individual objectives component of the annual incentive bonus plan, described on pages 24-26. The potential threshold payment amount assumes 100% achievement of the individual objectives component and 0% achievement of the financial performance component. With the exception of Mr. Larsson, who left the Company in October 2015, and Mr. Peck, each named executive officer received a bonus under the annual incentive bonus plan, which is reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.”

(2)

The amounts shown in these columns for each of the other named executive officers reflect,officers reflect, in shares, (a) the threshold, target and maximum amounts for year 3 of a three-year performance period beginning in fiscal 2012fiscal 2013 (“LGP 3”), (b) the threshold, target and maximum amounts for year 2 of a three-year performance period beginning in fiscal 2013fiscal 2014 (“LGP 4”) and (c) the threshold, target and maximum amounts for year 1 of a three-year performance period beginning in fiscal 2014fiscal 2015 (“LGP 5”) under the Company’s Long-Term Growth Program, further described on pages 44-4627-29 of the Compensation Discussion and Analysis section. Potential payouts are based on the applicable interpolated award values between the threshold, target, and maximum payout levels. The potential awards are performance-based and, therefore, completely at risk. The total number of shares that were actually granted for the entire three-year performance period under LGP 3 for each named executive was as follows: Mr. Peck (14,159), Ms. Simmons (58,996), Mr. Calhoun (47,784)(20,596), and Mr. Peck (53,305)Ms. Syngal (1,955). As of the end of fiscal 2014,fiscal 2015, the total number of shares that could be earned if the target performance conditions are achieved over the entire three-year performance period under LGP 4 for each named executive is as follows: Mr. Peck (33,767), Ms. Simmons (33,950), Mr. Calhoun (37,037), Mr. Larsson (41,152)(29,324), and Mr. Peck (37,037)Ms. Syngal (14,218). As of the end of fiscal 2014,fiscal 2015, the total number of shares that could be earned if the target performance conditions are achieved over the entire three-year performance period under LGP 5 for each named executive is as follows: Mr. Peck (141,749), Ms. Simmons (29,324)(31,802), Mr. Calhoun (31,990)Kirwan (30,894), Mr. Larsson (35,545)Ms. Owen (30,894), and Mr. Peck (33,767)Ms. Syngal (18,173).

 

Mr. MurphyKirwan and Ms. Owen did not receive LGP grants in fiscal 2012,fiscal 2013 and 2014. Mr. Calhoun,Larsson, who left the Company in FebruaryOctober 2015, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards. Mr. Sunnucks, who left the Company in December 2014, is not eligible to receive a payout under any outstanding LGP 3, LGP 4 or LGP 5 awards.

(3)

The value of a stock award or option award is based on the fair value as of the grant date of such award determined pursuant to FASB ASC 718. Please refer to Note 11,10, “Share-Based Compensation,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filedfiled on March 23, 201521, 2016 for the relevant assumptions used to determine the valuation of our stock and option awards. For fiscal 2014,fiscal 2015, the grant date fair value of the Equity Incentive Plan Awards is based on the closing price of a share of our stock on the date that the awards were granted less future expected dividends during the vesting period, multiplied by the target number of shares that may be earned. For year 3 of LGP 3, the grant date fair value is $40.89.$39.90. For year 2 of LGP 4, the grant date fair value is $40.04.$39.01. For year 1 of LGP 5, the grant date fair value is $39.21. For Mr. Murphy, this column also includes the grant date fair value (at $41.33 per share) based on the probable outcome at the time of grant with respect to year 3 of a three-year performance period under the CEO Performance Share Grant.$38.13. For the total grant date fair value of awards if maximum performance conditions are achieved over the entire three-year performance period under LGP 3, LGP 4, and LGP 5, and the CEO Performance Share Grant, see footnote 4 to the Summary Compensation Table.

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Outstanding Equity Awards at Fiscal Year-End

The following table shows all outstanding equity awards held by the named executive officersofficers at the end of fiscal 2014,fiscal 2015, which ended on January 31, 2015.30, 2016.

                            

 

Option Awards

Stock Awards

Name

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or
Units of Stock
That Have
Not Vested
(#) (2)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (3)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#) (4)

Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($) (5)

Arthur Peck

 

25,000

  

 

  

 

  

23.07

  

3/15/2020

  

 

  

 

  

 

  

 

 

 

 

50,000

  

 

  

 

  

21.79

  

3/14/2021

  

 

  

 

  

 

  

 

 

 

 

50,000

  

25,000 (a

)

 

 

  

25.09

  

3/12/2022

  

 

  

 

  

 

  

 

 

 

 

40,000

  

40,000 (b

)

 

 

  

36.45

  

3/18/2023

  

 

  

 

  

 

  

 

 

 

 

20,000

  

60,000 (c

)

 

 

  

42.20

  

3/17/2024

  

 

  

 

  

 

  

 

 

 

 

 

  

300,000 (d

)

 

 

  

41.19

  

2/2/2025

  

 

  

 

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

25,406 (a

)

 

628,036

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

23,830 (b

)

 

589,078

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

14,159 (a

)

 

350,010

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

11,065 (b

)

 

273,527

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

42,524 (c

)

 

1,051,193

 

Sabrina Simmons

 

 

  

25,000 (e

)

 

 

  

25.09

  

3/22/2022

  

 

  

 

  

 

  

 

 

 

 

22,500

  

45,000 (f

)

 

 

  

36.45

  

3/18/2023

  

 

  

 

  

 

  

 

 

 

 

22,500

  

67,500 (g

)

 

 

  

42.20

  

3/17/2024

  

 

  

 

  

 

  

 

 

 

 

 

  

90,000 (h

)

 

 

  

41.27

  

3/16/2025

  

 

  

 

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

29,498 (c

)

 

729,191

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

25,000 (d

)

 

618,000

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

75,000 (e

)

 

1,854,000

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

20,596 (a

)

 

509,133

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

10,069 (b

)

 

248,906

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

9,540 (c

)

 

235,829

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Jeff Kirwan

 

3,750

  

 

  

 

  

21.79

  

3/14/2021

  

 

  

 

  

 

  

 

 

 

 

2,680

  

3,750 (i

)

 

 

  

25.09

  

3/12/2022

  

 

  

 

  

 

  

 

 

 

 

5,000

  

10,000 (j

)

 

 

  

36.45

  

3/18/2023

  

 

  

 

  

 

  

 

 

 

 

6,250

  

18,750 (k

)

 

 

  

42.20

  

3/17/2024

  

 

  

 

  

 

  

 

 

 

 

 

  

80,000 (l

)

 

 

  

41.27

  

3/16/2025

  

 

  

 

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

5,000 (f

)

 

123,600

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

3,885 (g

)

 

96,037

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

8,352 (h

)

 

206,461

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

75,000 (i

)

 

1,854,000

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

8,461 (j

)

 

209,156

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

9,268 (c

)

 

229,105

 

Andi Owen

 

7,500

  

 

  

 

  

23.07

  

3/15/2020

  

 

  

 

  

 

  

 

 

 

 

7,500

  

 

  

 

  

21.79

  

3/14/2021

  

 

  

 

  

 

  

 

 

 

 

11,250

  

3,750 (m

)

 

 

  

25.09

  

3/12/2022

  

 

  

 

  

 

  

 

 

 

 

10,000

  

10,000 (n

)

 

 

  

36.45

  

3/18/2023

  

 

  

 

  

 

  

 

 

 

 

6,250

  

18,750 (o

)

 

 

  

42.20

  

3/17/2024

  

 

  

 

  

 

  

 

 

 

 

 

  

75,000 (p

)

 

 

  

41.27

  

3/16/2025

  

 

  

 

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

3,750 (k

)

 

92,700

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

6,937 (l

)

 

171,483

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

7,500 (m

)

 

185,400

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

7,550 (n

)

 

186,636

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

75,000 (0

)

 

1,854,000

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

10,903 (c

)

 

269,522

 

41

 

  Option Awards  Stock Awards 
Name 

Number of
Securities
Underlying
Unexercised
Options

(#)

Exercisable

  

Number of
Securities
Underlying
Unexercised
Options

(#)

Unexer
cisable (1)

  

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

 

Option
Exercise
Price

($)

  Option
 Expiration 
Date		  

Number of
Shares or
Units of Stock 
That Have
Not Vested

(#) (2)

  

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($) (3)

  

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That
Have  Not
Vested

(#) (4)

  

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

($) (5)

 

 

 

 

 

Glenn Murphy

  300,000      18.91    8/3/2017      
  450,000    150,000 (a)    21.79    3/14/2021      
                     155,186 (a)   6,392,111          

Sabrina Simmons

   25,000 (b)    21.79    3/14/2021      
   50,000 (c)    25.09    3/12/2022      
   67,500 (d)    36.45    3/18/2023      
   90,000 (e)    42.20    3/17/2024      
       50,000 (b)   2,059,500    
       25,864 (c)   1,065,338    
       25,000 (d)   1,029,750    
         58,996 (a)   2,430,045  
         37,062 (b)   1,526,584  
         25,850 (c)   1,064,762  

Jack Calhoun

      22,500 (f)     21.79    3/14/2021                  
   50,000 (g)    25.09    3/12/2022      
   60,000 (h)    36.45    3/18/2023      
   70,000 (i)    42.20    3/17/2024      
       22,342 (e)   920,267    
       50,000 (f)   2,059,500    
         47,784 (a)   1,968,223  
         27,125 (b)   1,117,279  
         27,691 (c)   1,140,592  

Stefan Larsson

  100,000    100,000 (j)     36.10    10/1/2022                  
   90,000 (k)    42.20    3/17/2024      
       100,000 (g)   4,119,000    
         81,531 (b)   3,358,262  
         88,862 (c)   3,660,226  

Arthur Peck

  25,000          23.07    3/15/2020                  
  25,000    25,000 (l)    21.79    3/14/2021      
  25,000    50,000 (m)    25.09    3/12/2022      
  20,000    60,000 (n)    36.45    3/18/2023      
   80,000 (o)    42.20    3/17/2024      
       25,000 (h)   1,029,750    
       23,693 (i)   975,915    
       50,000 (j)   2,059,500    
         53,305 (a)   2,195,633  
         30,044 (b)   1,237,512  
                             29,178 (c)   1,201,842  

Former Executive Officer

  

Stephen Sunnucks

  25,001          23.07    3/15/2020                  
  25,000      21.79    3/14/2021      
  25,000      25.09    3/12/2022      
  22,500      36.45    3/18/2023      
       50,000 (k)   2,059,500    
       82,304 (l)   3,390,102    
                      

Back to Contents

Footnotes

                            

 

Option Awards

Stock Awards

Name

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or
Units of Stock
That Have
Not Vested
(#) (2)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (3)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#) (4)

Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($) (5)

Sonia Syngal

 

 

  

3,750 (q

)

 

 

  

25.09

  

3/12/2022

  

 

  

 

  

 

  

 

 

 

 

5,000

  

5,000 (r

)

 

 

  

36.45

  

3/18/2023

  

 

  

 

  

 

  

 

 

 

 

7,500

  

22,500 (s

)

 

 

  

42.20

  

3/17/2024

  

 

  

 

  

 

  

 

 

 

 

 

  

35,000 (t

)

 

 

  

41.27

  

3/16/2025

  

 

  

 

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

2,500 (p

)

 

61,800

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

7,500 (q

)

 

185,400

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

3,995 (r

)

 

98,756

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

75,000 (s

)

 

1,854,000

  

 

  

 

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

1,955 (a

)

 

48,328

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

4,882 (b

)

 

120,683

 

 

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

5,451 (c

)

 

134,749

 

 

42

Back to Contents

(1)

Footnotes

(1)

The following footnotes set forth the vest dates for the outstanding option awards (vesting generally depends upon continued employment):

 

(a)

Options vest 150,000 on 3/14/2015.

(b)Options vest 25,000 on 3/14/2015.

(c)Options vest 25,000 on 3/12/20152016.

(b)

Options vest 20,000 on 3/18/2016 and 20,000 on 3/18/2017.

(c)

Options vest 20,000 on 3/17/2016, 20,000 on 3/17/2017 and 20,000 on 3/17/2018.

(d)

Options vest 75,000 on 2/1/2016, 75,000 on 2/1/2017, 75,000 on 2/1/2018 and 75,000 on 2/1/2019.

(e)

Options vest 25,000 on 3/12/2016.

 

(d)

(f)

Options vest 22,500 on 3/18/2015, 22,500 on 3/18/2016 and 22,500 on 3/18/2017.

 

(e)

(g)

Options vest 22,500 on 3/17/2015, 22,500 on 3/17/2016, 22,500 on 3/17/2017 and 22,500 on 3/17/2018.

 

(f)

(h)

Options vest 22,500 on 3/14/2015.16/2016, 22,500 on 3/16/2017, 22,500 on 3/16/2018 and 22,500 on 3/16/2019.

 

(g)

(i)

Options vest 25,000 on 3/12/2015 and 25,0003,750 on 3/12/2016.

 

(j)

Options vest 5,000 on 3/18/2016 and 5,000 on 3/18/2017.

(h)

(k)

Options vest 6,250 on 3/17/2016, 6,250 on 3/17/2017 and 6,250 on 3/17/2018.

(l)

Options vest 20,000 on 3/18/2015,16/2016, 20,000 on 3/16/2017, 20,000 on 3/16/2018 and 20,000 on 3/16/2019.

(m)

Options vest 3,750 on 3/12/2016.

(n)

Options vest 5,000 on 3/18/2016 and 20,0005,000 on 3/18/2017.

 

(i)

(o)

Options vest 17,500 on 3/17/2015, 17,5006,250 on 3/17/2016, 17,5006,250 on 3/17/2017 and 17,5006,250 on 3/17/2018.

 

(j)

(p)

Options vest 50,00018,750 on 10/1/20153/16/2016, 18,750 on 3/16/2017, 18,750 on 3/16/2018 and 50,00018,750 on 10/1/2016.3/16/2019.

 

(k)

(q)

Options vest 22,5003,750 on 3/17/2015, 22,50012/2016.

(r)

Options vest 2,500 on 3/18/2016 and 2,500 on 3/18/2017.

(s)

Options vest 7,500 on 3/17/2016, 22,5007,500 on 3/17/2017 and 22,5007,500 on 3/17/2018.

 

(l)

(t)

Options vest 25,0008,750 on 3/14/2015.

(m)Options vest 25,00016/2016, 8,750 on 3/12/201516/2017, 8,750 on 3/16/2018 and 25,0008,750 on 3/12/2016.16/2019.

(2)

(n)Options vest 20,000 on 3/18/2015, 20,000 on 3/18/2016 and 20,000 on 3/18/2017.

(o)Options vest 20,000 on 3/17/2015, 20,000 on 3/17/2016, 20,000 on 3/17/2017 and 20,000 on 3/17/2018.

(2)The following footnotes set forth the vest dates for the outstanding stock awards (vesting generally depends upon continued employment):

 

(a)

Award vests 155,18625,406 on 3/17/2015.16/2016.

 

(b)

Award vests 50,00023,830 on 3/12/2015.18/2016.

 

(c)

Award vests 25,86429,498 on 3/17/2015.16/2016.

 

(d)

Award vests 12,500 on 3/17/2016 and 12,500 on 3/17/2017.

 

(e)

Award vests 22,34237,500 on 3/17/2015.2/1/2017 and 37,500 on 2/1/2018.

 

(f)

Award vests 25,000 on 3/18/2015 and 25,0005,000 on 3/18/2016.

 

(g)

Award vests 50,000 on 10/1/2015 and 50,000 on 10/1/2016.

(h)Award vests 25,000 on 3/12/2015.

(i)Award vests 23,693 on 3/17/2015.

(j)Award vests 25,000 on 3/18/2015 and 25,0003,885 on 3/18/2016.

 

(k)

(h)

Award vests 50,0004,176 on 3/12/2015.17/2016 and 4,176 on 3/17/2017.

 

(l)

(i)

Award vests 41,15237,500 on 3/18/20152/1/2017 and 41,15237,500 on 2/1/2018.

(j)

Award vests 4,230 on 3/16/2017 and 4,231 3/16/2018.

(k)

Award vests 3,750 on 3/18/2016.

 

(l)

Award vests 6,937 on 3/18/2016.

(3)

(m)

Award vests 3,750 on 3/17/2016 and 3,750 on 3/17/2017.

(n)

Award vests 3,775 on 3/17/2016 and 3,775 on 3/17/2017.

(o)

Award vests 37,500 on 2/1/2017 and 37,500 on 2/1/2018.

(p)

Award vests 2,500 on 3/18/2016.

(q)

Award vests 7,500 on 11/1/2016.

(r)

Award vests 1,997 on 3/17/2016 and 1,998 on 3/17/2017.

(s)

Award vests 37,500 on 2/1/2017 and 37,500 on 2/1/2018.

(3)

Represents the number of stock awards multiplied by the closing price of our common stock as of January 30, 201529, 2016 ($41.19)24.72).

(4)

(a) Represents the number of shares earned under the Company’s Long-Term Growth Program (described on pages 44-4627-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2012)(fiscal 2013), year 2 (fiscal 2013)(fiscal 2014) and year 3 (fiscal 2014)(fiscal 2015) of a three-year performance period (“LGP 3”). Mr. Murphy did not receive a grant under the Company’s Long-Term Growth Program in fiscal 2012. Mr. Larsson, who joined the Company in October 2012, did not receive an LGP grant in fiscal 2012. Mr. Sunnucks, who left the Company in December 2014,October 2015, is not eligible to receive a payout under any outstandingthe LGP 3 awards. Ms. Owen and Mr. Kirwan received their first grants under the LGP in 2015.

(b)  Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 44-46 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2013), year 2 (fiscal 2014) and year 3 (fiscal 2015) of a three-year performance period (“LGP 4”), based on a combination of actual and assumed performance as required by SEC disclosure rules. Mr. Murphy did not receive a grant under the Company’sLong-Term Growth Program in fiscal 2013. Mr. Sunnucks, who left the Company in December 2014, and Mr. Calhoun, who left the Company in February 2015, are not eligible to receive a payout under the LGP 4 awards. Half of any award earned will vest on the date the Company’s Compensation and Management Development Committee certifies attainment in 2016, and the remainder will vest on the anniversary of such certification date, contingent on continued service with the Company.

(c)  Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 44-46 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2014), year 2 (fiscal 2015) and year 3 (fiscal 2016) of a three-year performance period (“LGP 5”), based on a combination of actual and assumed performance as required by SEC disclosure rules. Mr. Murphy did not receive a grant under the Company’s Long-Term Growth Program in fiscal 2014. Mr. Sunnucks, who left the Company in December 2014, and Mr. Calhoun, who left the Company in February 2015, are not eligible to receive a payout under the LGP 5 awards. Half of any award earned will vest on the date the Company’s Compensation and Management Development Committee certifies attainment in 2017, and the remainder will vest on the anniversary of such certification date, contingent on continued service with the Company.

 

(b) Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 27-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2014), year 2 (fiscal 2015) and year 3 (fiscal 2016) of a three-year performance period (“LGP 4”), based on a combination of actual and assumed performance as required by SEC disclosure rules. Half of any award earned will vest on the date the Company’s Compensation and Management Development Committee certifies attainment in 2017, and the remainder will vest on the anniversary of such certification date, contingent on continued service with the Company. Mr. Larsson, who left the Company in October 2015, is not eligible to receive a payout under the LGP 4 awards. Ms. Owen and Mr. Kirwan received their first grants under the LGP in 2015.

(5)

(c) Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 27-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2015), year 2 (fiscal 2016) and year 3 (fiscal 2017) of a three-year performance period (“LGP 5”), based on a combination of actual and assumed performance as required by SEC disclosure rules. Half of any award earned will vest on the date the Company’s Compensation and Management Development Committee certifies attainment in 2018, and the remainder will vest on the anniversary of such certification date, contingent on continued service with the Company. Mr. Larsson, who left the Company in October 2015, is not eligible to receive a payout under the LGP 5 awards.

(5)

Represents the number of stock awards multiplied by the closing price of our common stock as of January 30, 201529, 2016 ($41.19)24.72).

43

 

Back to Contents

Option Exercises and Stock Vested

The following table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the named executive officersofficers during fiscal 2014,fiscal 2015, which ended on January 31, 2015.30, 2016.

             

 

Option Awards

Stock Awards(1)

Name

Number of
Shares
Acquired on
Exercise
(#)

Value
Realized
on
Exercise
($)

Number of
Shares
Acquired on
Vesting
(#)

Value
Realized on
Vesting
($)

Art Peck

 

0

  

0

  

102,762

  

4,232,706

 

Sabrina Simmons

 

50,000

  

885,817

  

105,362

  

4,356,048

 

Jeff Kirwan

 

1,070

  

14,884

  

12,834

  

539,670

 

Andi Owen

 

0

  

0

  

18,671

  

783,078

 

Sonia Syngal

 

18,750

  

359,070

  

16,903

  

595,897

 

Former Executive Officer

 

 

  

 

  

 

  

 

 

Stefan Larsson

 

0

  

0

  

50,000

  

1,398,000

 

   Option Awards     Stock Awards 
Name  

Number of
Shares
Acquired on
Exercise

(#)

   

Value
Realized
on
Exercise

($)

     

Number of
Shares
Acquired on
Vesting

(#)

   

Value
Realized on
Vesting

($)

 

 

 

Glenn Murphy (1)

   900,000     24,469,506       1,595,156     65,996,155  

Sabrina Simmons

   97,500     1,538,063      93,720     3,908,913  

Jack Calhoun

   330,000     7,082,486      99,769     4,284,731  

Stefan Larsson

   0     0      50,000     2,075,500  

Arthur Peck

   0     0       108,563     4,553,016  

Former Executive Officer

                      

Stephen Sunnucks

   0     0      118,958     4,968,367  

 

 

 

 

Footnote

Footnote

(1)

The amounts in the “Stock Awards” columns for Mr. Murphyreflected include 1,297,926 shares awarded under the CEO Performance Share Grant (further described on pages 43-44) with a vesting date of January 31, 2015 and a settlement date of April 30,performance awards released during fiscal 2015.

NonqualifiedNonqualified Deferred Compensation

The table below provides information on the nonqualifiednonqualified deferred compensation activity for the named executive officersofficers in fiscal 2014,fiscal 2015, which ended on January 31, 2015.30, 2016.

                

Name

Executive
Contribution
in Fiscal
2015
($) (1)

Registrant
Contributions
in Fiscal 2015
($) (2)

Aggregate
Earnings
in Fiscal
2015
($) (3)

Aggregate
Withdrawals/
Distributions
in Fiscal
2015
($)

Aggregate
Balance
at Fiscal
2015
Year-End
($) (4)

Arthur Peck

 

213,706

  

0

  

(12,505

)

 

0

  

4,377,462

 

Sabrina Simmons

 

34,692

  

23,938

  

(25,430

)

 

0

  

338,290

 

Jeff Kirwan

 

239,869

  

23,400

  

(19,766

)

 

0

  

923,822

 

Andi Owen

 

34,000

  

23,208

  

(4,943

)

 

0

  

216,337

 

Sonia Syngal

 

29,308

  

18,823

  

(2,537

)

 

14,852

  

168,302

 

Former Executive Officer

 

 

  

 

  

 

  

 

  

 

 

Stefan Larsson

 

103,846

  

0

  

(1,781

)

 

0

  

332,795

 

Name  

Executive

Contribution
in Fiscal
2014
($) (1)

   

Registrant
Contributions
in Fiscal 2014

($) (2)

   Aggregate
Earnings
in Fiscal
2014
($) (3)		   

Aggregate
Withdrawals/
Distributions

in Fiscal
2014
($)

  

Aggregate
Balance
at Fiscal
2014
Year-End

($) (4)

 

 

 

Glenn Murphy

           55,385             49,600     91,390                   0    1,077,031  

Sabrina Simmons

   33,000     22,600     11,978     0    305,089  

Jack Calhoun

   275,192     25,600     65,603     0    1,287,628  

Stefan Larsson

   103,846     29,600     9,170     0    230,730  

Arthur Peck

   623,358     27,139     475,407     (55,869)   4,176,261  

Former Executive Officer

                        

Stephen Sunnucks (5)

   0     0     0     0    902,902  

 

 

 

 

Footnotes

(1)

These amounts are included in the “Salary” column of the Summary Compensation Table.

(2)

Footnote 9 to the Summary Compensation Table shows matching contributions under the Company’s Deferred Compensation Plan (“DCP”) for base salary deferrals representing the excess of the participant’s base pay over the current IRS qualifiedqualified plan limit ($260,000265,000 for calendar year 2014)2015), which are matched at up to 4%, the same rate as is in effect under the Company’s 401(k) plan.

(3)

These amounts include earnings and dividends. In fiscal 2014,fiscal 2015, no above-market or preferential interest rate options were available on notional investments in the DCP.

(4)

A portion of these amounts were previously reported as deferred compensation in the NonqualifiedNonqualified Deferred Compensation and Summary Compensation tables in the Proxy Statements for prior Annual Meetings. The remaining aggregate amounts due to our former executive officer will be paid six months following his departure in December 2014, pursuant to the “key employee” requirements of Section 409A of the Internal Revenue Code, adjusted for any change in value between the termination date and the payment date.

(5)

From 2005 to 2011, Mr. Sunnucks participated in a retirement program available to all of the Company’s eligible U.K. employees. The last contribution was submitted as of November 4, 2011. As of December 19, 2014, the most recent balance date available, the aggregate balance was £599,198. For presentation purposes, Mr. Sunnucks’ aggregate balance was converted to U.S. dollars using the exchange rate as of the last business day of fiscal 2014. The retirement program is a tax-qualified program in the U.K. and eligible U.K. employees may contribute any portion of their earnings up to a £40,000 annual limit and a prescribed lifetime cap (currently £1,250,000). The minimum age to begin withdrawals is 55 years old.

44

 

Back to Contents

Potential Payments Upon Termination

Post-Termination Benefits — Glenn MurphyBenefits

On July 25, 2007, the Company and Mr. Murphy, our former Chairman and CEO, executed an employment agreement in connection with Mr. Murphy joining the Company. The employment agreement was amended and restated on December 1, 2008 in response to Section 409A of the Internal Revenue Code (“Section 409A”), and was amended again on February 9, 2009 in connection with a change in Mr. Murphy’s salary (the “Employment Agreement”). The Employment Agreement was filed as an exhibit to the Company’s Annual Report on Form 10-K, filed with the SEC on March 27, 2009.

Mr. Murphy voluntarily resigned as Chairman and Chief Executive Officer of the Company in January 2015 and was not entitled to any severance benefits under the Employment Agreement.

Post-Termination Benefits — Arthur Peck, Sabrina Simmons, Jack Calhoun, Stefan Larsson, and Stephen Sunnucks

In 2012, the Company entered into agreements with Mr. Peck, Ms. Simmons Mr. Calhoun,and Mr. Larsson in 2012, with Ms. Syngal in 2013, and with Mr. Sunnucks thatKirwan and Ms. Owen in 2014, which provided eligibility for post-termination benefitsbenefits in the case of involuntary termination without cause. The agreements with Ms. Simmons, Mr. Larsson and Ms. Syngal were amended in June 2014 to extend the term of eligibility for post-termination benefits for the executive officers,benefits, and to align the terms of Mr. Larsson’s post-termination benefitsbenefits with those of the other executive officers. In October 2014, in connection with Mr. Peck’s appointment as CEO effective on February 1, 2015, theofficers. The Company and Mr. Peck entered into an employment agreement with Mr. Peck on October 3, 2014 that provides for substantially the same post-termination benefitsbenefits as those of the other executive officers,officers, with the exception of his term of eligibility for such benefits.benefits.

These agreements in total provide that if the executive is involuntarily terminated without cause (as specifiedspecified in each respective agreement) prior to February 13, 2018, (under Ms. Simmons’, Mr. Calhoun’s, Mr. Larsson’s, and Mr. Sunnucks’ agreements) or prior to February 13, 2020 (underfor Mr. Peck’s agreement),Peck, the executive is eligible to receive (in exchange for a release of claims):

 

i.

The executive’s then-current salary for eighteen months (the “post-termination period”). Post-termination period payments will cease if the executive accepts other employment or professional relationship with another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually, or if the executive breaches his or her obligations to the Company (e.g., duty to protect confidentialconfidential information, agreement not to solicit Company employees). Post-termination period payments will be reduced by any compensation the executive receives during the post-termination period from other employment or professional relationship with a non-competitor.

 

ii.

Should the executive elect to continue health coverage through COBRA, reimbursement for a portion of the COBRA premium during the period in which the executive is receiving payments under paragraph (i) above.

 

iii.

During the period in which the executive is receiving payments under paragraph (i) above, reimbursement for his or her costs to maintain the financialfinancial counseling program the Company provides to senior executives.

 

iv.

A prorated bonus in the year of termination if the executive worked at least 3 months of the fiscalfiscal year and if earned based on actual fiscalfiscal results achieved in the year of termination.

 

v.

Accelerated vesting (but not settlement) of restricted stock units and performance shares or units that remain subject only to time vesting conditions scheduled to vest prior to April 1 following the fiscalfiscal year of termination.

Subparagraphs (i) through (v) above were added to Mr. Sunnucks’ U.K. employment agreement in a manner that conforms with other entitlements under that agreement.

Mr. Calhoun and Mr. Sunnucks ceased to be executive officers of the Company in February 2015 and December 2014, respectively, and are receiving post-termination benefits in accordance with the agreements described above. In November 2014, the Company entered into a compromise agreement with Mr. Sunnucks to clarify the terms, conditions, and timing of post-termination payments outlined above to be consistent with his U.K. employment agreement. The compromise agreement provides that, in exchange for a release of claims and subject to the terms and conditions of the agreement, Mr. Sunnucks is eligible to receive the benefits under (i) above in the following manner:

a.A lump sum gross amount of £293,744 within 30 days of his termination date of December 19, 2014, as payment in lieu of six months’ notice of termination.

b.A gross amount equivalent to his then-current salary of £640,000 paid in twelve equal installments according to the following payment schedule:

(1)the first two installments were paid on the Company’s last regular pay date of each successive month commencing with February 2015,

(2)the third, fourth and fifth installments will be paid in a lump sum on the Company’s first regular pay date on or after June 22, 2015, and

(3)the remaining seven installments will be paid on the Company’s last regular pay date of each successive month, commencing July 2015 and ending January 2016.

For Mr. Calhoun and Mr. Sunnucks, the table below shows the amounts that each is eligible to receive under the agreements described above as a result of their termination of employment with the Company.

For Ms. Simmons, Mr. Larsson and Mr. Peck, the table below shows the amounts that eachexecutive would have been eligible to receive under the agreements described above assuming that they had been terminated without cause on January 31, 2015,30, 2016, the last day of our 2014 fiscal2015 fiscal year. Mr. Larsson voluntarily resigned in October 2015 and was not entitled to any severance benefits under his employment agreement and is therefore excluded from the table.

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Potential Post-Termination Payment Eligibility for

Sabrina Simmons, Stefan Larsson and Arthur Peck and

Actual Severance Payment Eligibility for Jack Calhoun and Stephen Sunnucks

 
Description  Ms. Simmons   Mr. Calhoun   Mr. Larsson   Mr. Peck   Mr. Sunnucks 
       

Cash Payments related to salary (1)

  $    1,237,500    $    1,350,000    $    1,500,000    $    1,425,000    $    1,446,576  

Cash Payments related to bonus (2)

   457,385     337,993     1,707,576     419,411     212,615  

Health Benefits

   22,392     16,434     22,500     22,698     2,122  

Financial Counseling (3)

   22,200     22,200     22,200     22,200     0  

Stock Award Vesting Acceleration

   4,339,861     4,947,990     0     4,133,211     4,081,764  

Total

   6,079,338     6,674,617     3,252,276     6,022,520     5,743,077  
       

FootnotesBack to Contents

 

                

Potential Post-Termination Payment Eligibility

Description

Mr. Peck

Ms. Simmons

Mr. Kirwan

Ms. Owen

Ms. Syngal

Cash Payments related to salary (1)

$

1,950,000

 

$

1,312,500

 

$

1,275,000

 

$

1,275,000

 

$

1,125,000

 

Cash Payments related to bonus (2)

 

0

  

130,241

  

127,500

  

106,250

  

90,000

 

Health Benefits

 

23,094

  

22,806

  

23,094

  

23,094

  

23,094

 

Financial Counseling

 

22,200

  

22,200

  

22,200

  

0

  

29,250

 

Stock Award Vesting Acceleration

 

1,392,107

  

1,601,757

  

426,099

  

636,219

  

370,108

 

Total

 

3,387,401

  

3,089,504

  

1,873,893

  

2,040,563

  

1,637,452

 

(1)

Footnotes

(1)

Payments represent salary continuation for 18 months. The amounts do not include the deferred compensation these executives would also be entitled to receive upon termination, as described in the NonqualifiedNonqualified Deferred Compensation section, above.

(2)

For presentation purposes, Mr. Sunnucks’ salary (paid in British pound sterling) is shown in U.S. Dollars using the currency exchange rate as of the last business day of fiscal 2014.

(2)Payments represent fiscal 2014fiscal 2015 bonus that was earned by each executive.

Acceleration of Equity Upon Change in Control

Under the 2011 Long-Term Incentive Plan (the “Plan”), in the event of a change in control, any acquiror may assume or substitute outstanding awards with substantially equivalent awards of the acquiror's stock. Except as set forth in an award agreement, outstanding awards which are neither assumed or substituted by the acquiror in the change in control become fully vested immediately prior to the change in control. The table below shows the value of all unvested options and unvested stock awards that would have become vested in the event of a change in control on January 30, 2016, the last day of our 2015 fiscal year, in the event that awards were not assumed or substituted as described above. Mr. Larsson voluntarily resigned from the Company in October 2015 and, therefore, is excluded from the table below.

                

Description

Mr. Peck

Ms. Simmons

Mr. Kirwan

Ms. Owen

Ms. Syngal

Stock Option Vesting Acceleration (1)

 

0

  

0

  

0

  

0

  

0

 

Stock Award Vesting Acceleration (2)

 

6,821,435

  

5,551,469

  

3,252,954

  

3,253,918

  

3,080,359

 

Total

 

6,821,435

  

5,551,469

  

3,252,954

  

3,253,918

  

3,080,359

 

 

(3)Mr. Sunnucks was

Footnotes

(1)

Reflects the value of all unvested stock options that would have become vested assuming a change in control on January 30, 2016 in which awards were not entitled to a financial counseling benefit duringassumed or substituted as described above, based on the term of his relocation assignment from London to New York in light ofdifference between the special relocation payment of £250,000 he received, which is further described inoption exercise price and $24.72 per share, the Compensation Discussion and Analysis sectionlast closing price of our 2013 Proxy Statement.common stock as of that date.

(2)

Reflects the value of all unvested stock awards that would have become vested assuming a change in control on January 30, 2016 in which awards were not assumed or substituted as described above, based on the last closing price of our common stock as of that date, which was $24.72. For Ms. Simmons, Ms. Syngal, and Mr. Peck, amounts include the target number of shares that could be earned under the Company's Long-Term Growth Program (LGP) for the following three year performance periods: 2013-2015, 2014-2016, and 2015-2017. For Ms. Owen and Mr. Kirwan, amounts include the target number of shares under the LGP for the following three year performance period: 2015-2017.

Death, Disability or Retirement

Each of our named executive officersofficers is generally entitled to the following additional death, disability or retirement benefits:benefits:

 

i.

Executive supplemental long-term disability insurance, which increases income replacement to 50% of base salary up to a maximum payment of $25,000 per month.

 

ii.

Life insurance, provided to employees at the Director level and above, which provides coverage of three times base salary up to a maximum of $2 million.

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iii.

iii.

Upon retirement, our standard forms of stock option and stock award agreements provide for accelerated vesting of any unvested shares under awards that have been outstanding for at least a year. None of our named executive officers was old enough to be eligibleyear and, for retirement-based accelerated vesting as of January 31, 2015,performance shares, for which the last day of our 2014 fiscal year.performance period has been completed. For these purposes, “Retirement” means Employee’s Termination of Service for any reason (other than due to Employee’s misconduct as determined by the Company in its sole discretion) after Employee has attained age 60 and completed at least fivefive years of continuous service as an Employee of the Company or an Affiliate.Affiliate. Mr. Peck reached Retirement age in September 2015. As a result, certain eligible grants were subject to accelerated vesting. Other than Mr. Peck, none of our named executive officers was eligible for retirement-based accelerated vesting as of January 30, 2016, the last day of our 2015 fiscal year. In the event Mr. Peck retired on January 30, 2016, the last day of our 2015 fiscal year, the value of his unvested options that would have become vested was $0 because their exercise price was higher than the last closing price of our common stock as of that date, and the value of his unvested stock awards that would have become vested was $1,217,114, based on the last closing price of our common stock as of that date.

 

iv.

Upon death (and, in the case of stock options, termination on account of disability), our standard forms of stock option and stock award agreements provide for accelerated vesting of any unvested shares under awards that have been outstanding for at least a year provided that anyand, for performance targets haveshares, for which the performance period has been satisfied.completed. The table below shows the value of all unvested options and unvested stock awards that would have become vested in the event of the named executive’s death (and, in the case of stock options, termination on account of disability) on January 31, 2015,30, 2016, the last day of our 2014 fiscal2015 fiscal year. Mr. Larsson voluntarily resigned from the Company in October 2015 and, therefore, is excluded from the table below.

 

Description  Mr. Murphy   Ms. Simmons   Mr. Larsson   Mr. Peck 
  

Stock Option Vesting Acceleration (1)

  $    2,910,000    $    1,609,950    $        509,000    $    1,574,400  

Stock Award Vesting Acceleration (2)

   6,392,111     5,554,883     4,119,000     6,260,798  

Total

   9,302,111     7,164,833     4,628,000     7,835,198  
  

Footnotes

                

Description

Mr. Peck

Ms. Simmons

Mr. Kirwan

Ms. Owen

Ms. Syngal

Stock Option Vesting Acceleration (1)

 

0

  

0

  

0

  

0

  

0

 

Stock Award Vesting Acceleration (2)

 

1,217,114

  

1,347,191

  

426,099

  

636,219

  

740,240

 

Total

 

1,217,114

  

1,347,191

  

426,099

  

636,219

  

740,240

 

 

(1)Reflects

Footnotes

(1)

Reflects the value of all unvested stock options that would have become vested assuming the named executive officersofficers had died (or terminated on account of disability) on January 31, 2015,30, 2016, based on the difference between the option exercise price and the last closing price of our common stock as of that date.

(2)

Reflects

Reflects the value of all unvested stock awards that would have become vested assuming the named executive officersofficers had died on January 31, 2015,30, 2016, based on the last closing price of our common stock as of that date.

 

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Equity Compensation Plan Information

The following table provides information as of January 31, 201530, 2016 about shares of our common stock which may be issued upon the exercise of options, warrants and rights granted to employees, consultants or members of our Board of Directors under all of our equity compensation plans, including the 2011 Long-Term Incentive Plan the 2002 Stock Option Plan, and the Employee Stock Purchase Plan.

          

Equity Plan Summary

 

Column (A)

Column (B)

Column (C)

Plan Category

Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights (#)

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
($)

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans (#)
(Excluding Securities
Reflected in Column (A))

Equity Compensation Plans Approved by Security Holders (1)

 

9,150,177

(2)

 

36.29

  

47,498,170

(3)

Equity Compensation Plan Not Approved by Security Holders

 

0

  

0

  

0

 

Total

 

9,150,177

  

36.29

  

47,498,170

 

 

Equity Plan Summary 
   Column (A)  Column (B)   Column (C) 
Plan Category  Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights (#)		  Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
($)		   

Number of Securities

Remaining Available
for Future Issuance
Under Equity
Compensation Plans (#)

(Excluding Securities
Reflected in Column (A))

 
  

Equity Compensation Plans Approved by Security Holders (1)

   11,923,732 (2)               30.93                 54,185,060 (3) 

Equity Compensation Plan Not Approved by Security Holders (4)

   18,568     21.95     0   

Total

   11,942,300     30.92     54,185,060   
  

Footnotes

(1)

Footnotes

(1)

These plans consist of our 2011 Long-Term Incentive Plan (the “2011 Plan”) and Employee Stock Purchase Plan (the “ESPP”).

(2)

This number excludes 232,053324,490 shares that were issued at the end of the most recent ESPP purchase period, which began on December 1, 2014November 30, 2015 and ended on February 27, 2015,29, 2016, after the end of our 2014 fiscal2015 fiscal year. This number also excludes shares that may be issued upon satisfaction of performance targets under the 2011 Plan because the number of shares that could be issued will be based upon the per share value of our stock on the ultimate date of grant. This number includes the number of shares that could be earned under the Company’s Long-Term Growth Program (described on pages 44-4627-29 of the Compensation Discussion and Analysis section) if the maximum performance conditions were achieved over the entire three-year performance periods.

(3)

This number includes 3,467,9422,518,191 shares that were available for future issuance under the ESPP at the end of our 2014 fiscal2015 fiscal year, including the 232,053324,490 shares described in footnote 2 above. For those grants prior to May 17, 2011, the number shown reflectsreflects the deduction of three shares from the Company’s share reserve for every one stock award at the time of grant and, for those grants on or after May 17, 2011, the number shown reflectsreflects the deduction of two shares from the Company’s share reserve for every one stock award at the time of grant, pursuant to the terms of the 2011 Plan.

 

(4)The 2002 Stock Option Plan (discontinued in May 2006), which is described below, was not required to be approved by our shareholders.

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OurPROPOSAL NO. 4 — Approval of the Amendment and Restatement of
The Gap, Inc. 2011 Long-Term Incentive Plan

We are requesting that shareholders approve the amendment and our Employee Stock Purchase Plan were approved by our shareholders. The plan described below was not required to be approved by our shareholders.

•

2002 Stock Option Plan

Our Board of Directors originally approved the 2002 Stock Option Plan (the “2002 Plan”), formerly known as “Stock Up On Success, The Gap, Inc.’s Stock Option Bonus Program,” effective as of January 1, 1999. The 2002 Plan was intended to increase incentives and to encourage share ownership on the part of eligible non-officer regular employees of the Company and its affiliates by providing limited grants of nonqualified stock options to such employees. In May 2006, the 2002 Plan was discontinued for new grants following the approvalrestatement of our amended and restated 20062011 Long-Term Incentive Plan (now(the “2011 Plan”) to be known upon approval as the 2011 Long-Term Incentive Plan) by our shareholders at the 2006 Annual Meeting. Shares that were then available under the 2002 Plan transferred to the 20062016 Long-Term Incentive Plan (now the 2011 Long-Term Incentive Plan). Any outstanding awards under the 2002 Plan remain subject to the terms and conditions under the 2002 Plan. A total of 18,568 awards remained outstanding under the 2002 Plan as of January 31, 2015.

OTHER INFORMATION

Policies and Procedures with Respect to Related Party Transactions

The Board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest. The Compensation and Management Development Committee’s charter requires that the members of that Committee, all of whom are independent directors, approve all of the Company’s executive compensation policies and programs and all compensation awarded to executive officers. The Audit and Finance Committee’s charter requires that the members of the Audit and Finance Committee, all of whom are independent directors, review and approve transactions with the Company involving management and/or members of the Board of Directors that are not otherwise subject to the approval of the Compensation and Management Development Committee and would require disclosure under SEC rules. In the event a transaction involves a committee member, that member will recuse him or herself from the approval of the transaction.

In addition, the Audit and Finance Committee oversees the Company’s Corporate Compliance Program, which includes procedures for the (i) receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and (ii) confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters and other matters under the Company’s Code of Business Conduct.

Certain Relationships and Related Transactions

Pursuant to the approval of the Audit and Finance Committee of the Board, Doris F. Fisher leased approximately 26,000 square feet of space in our One Harrison and Two Folsom, San Francisco headquarters locations under agreements expiring in 2016, primarily to display portions of her personal art collection. Mrs. Fisher is a co-founder of the Company, an Honorary Lifetime Member of the Board of Directors, and the mother of Robert J. Fisher and William S. Fisher. The lease agreements provided for base rent ranging from $30.00 to $42.35 per square foot per year over a15-year term.

Based on the Company’s headquarters space needs and Mrs. Fisher’s space needs, the Company determined that taking back a portion of the gallery space in 2014 would be beneficial to the Company. Accordingly, in February 2014, the Audit and Finance Committee reviewed and approved the terms of agreements to terminate the lease of the space in One Harrison in February 2014 and a portion of the space in Two Folsom in August 2014. The remaining portion of the space in Two Folsom (approximately 9,300 square feet) will continue to be leased by Mrs. Fisher at a base rent of $42.35 per square foot on the same terms as originally agreed. Rental income from this leased space for fiscal 2014 was approximately $670,000. We believe that these rental rates were at least competitive when the agreements were entered into. The agreements also provide us and our employees significant benefits, including use of the space on a regular basis for corporate functions at no charge.

By Order of the Board of Directors,

LOGO

Michelle Banks

Corporate Secretary

APPENDIX A

THE GAP, INC.

EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION AWARD PLAN

(February 25, 2015 Amendment and Restatement)

1.Purpose

The purpose of the Executive Management Incentive Compensation Award Plan (the “Plan”“2016 Plan”) is to motivate and reward eligible officers of The Gap, Inc. (the “Company”) and its affiliates with financial incentives if they meet or exceed certain goals. The Plan is designed with the intention that certain incentives paid hereunder to certain officers of the Company will be deductible under. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”(“Section 162(m)”), and requires that shareholders approve the regulations and interpretations promulgated thereunder. The adoptionmaterial terms of the 2011 Plan for currentat least every five years. The 2011 Plan was most recently approved by the Company’s shareholders at the 2011 Annual Meeting of Shareholders.

The Company is asking shareholders to approve the amendment and future covered employees (determined under Coderestatement of the 2011 Plan (to be known upon approval as the 2016 Plan) primarily in order to satisfy Section 162(m)) isand to also adopt other changes described below. We are not increasing the number of shares authorized for issuance under the 2016 Plan.

The amendment and restatement of the 2016 Plan was adopted by the Board of Directors on February 23, 2016, subject to shareholder approval. Approval of the 2016 Plan requires the affirmative vote of a majority of the shares of our common stock (“Shares”) that are present in person or by proxy at the Annual Meeting and entitled to vote on this matter. If the shareholders approve the amended and restated 2016 Plan, it will replace the current version of the 2011 Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE GAP, INC. 2011 LONG-TERM INCENTIVE PLAN.

General

The primary purpose for this request is to satisfy Section 162(m) as described above. Below is a summary of the material changes made since shareholders approved the 2011 Plan, as well as certain other changes:

(1) To provide that any dividend equivalents payable with respect to performance-based awards under the 2016 Plan will be held in escrow or deemed reinvested in additional shares subject to the same conditions applicable to the payout of the underlying award;

(2) To clarify that Shares purchased by the Company with the proceeds of stock option exercises will not again be available for issuance under the 2016 Plan;

(3) To add a limit on the grant date value of awards that may be granted under the 2016 Plan to our nonemployee directors in any fiscal year;

(4) To provide for the Share counting rules that apply to substituted awards in acquisition transactions and stock plans assumed in such transactions;

(5) To modify the performance goals and adjustments thereto that may be used under the 2016 Plan;

(6) To provide that awards under the 2016 Plan are subject to recoupment in accordance with applicable law or any recoupment policy or arrangement that we may adopt from time to time; and

(7) To address the impact of a change in control on awards granted under the 2016 Plan.

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We believe strongly that the approval of the 2016 Plan is essential to our success. Our employees are our most valuable assets. Stock options and other awards such as those provided for under the 2016 Plan are vital to our ability to attract and retain outstanding and highly skilled employees, especially in the extremely competitive market in which we must compete. Such awards also are crucial to our ability to motivate employees to achieve our goals.

The proposed modifications to the 2016 Plan are designed to allow the Company to continue to attract, retain and motivate people whose skills and performance are critical to the Company’s shareholders.success. We will continue to monitor the environment in which we operate and make changes to our equity compensation program to help us meet our goals, including achieving long-term shareholder value.

Material Features of the 2016 Plan

The following is a summary of the material features of the 2016 Plan and its operation. This summary does not purport to be a complete description of all of the provisions of the 2016 Plan and is qualified in its entirety by reference to the 2016 Plan, a copy of which is attached as Appendix A to this Proxy Statement and incorporated herein by reference.

Purpose

The purpose of the 2016 Plan is to permit grants of stock options, stock appreciation rights, restricted stock, unrestricted stock, performance units, performance shares, and stock units (collectively, “Awards”) to eligible participants. The 2016 Plan is intended to provide incentives to further the growth and profitability of the Company and to encourage stock ownership on the part of (1) employees of the Company and its affiliates, (2) consultants and others who provide significant services to the Company and its affiliates (“consultants”), and (3) directors of the Company who are employees of neither the Company nor any of its affiliates (“non-employee directors”). The 2016 Plan also is intended to permit the payment of qualified performance-based compensation under Section 162(m). However, because of the fact-based nature of the performance-based compensation exception under Section 162(m) and the limited availability of binding guidance thereunder, the Company cannot guarantee that Awards made under the Plan that are intended to qualify as performance-based compensation under Section 162(m) will in fact so qualify.

Eligible Participants

Employees, consultants and non-employee directors are eligible to be selected to receive one or more different types of Awards. However, incentive stock options (which are entitled to favorable U.S. federal tax treatment) may be granted only to employees of the Company or any subsidiary of the Company at the time of grant. The actual number of individuals who will receive Awards cannot be determined in advance because the Committee retains the discretion to select the participants.

Administration

The 2016 Plan is administered by the Compensation and Management Development Committee of the Board of Directors (the “Committee”). The Committee will consist of two or more directors who qualify as “non-employee directors” under Rule 16b-3 under the Securities Exchange Act of 1934, and as “outside directors” under Section 162(m) (so that the Company can be eligible to receive a federal tax deduction for certain compensation paid under the 2016 Plan).

Subject to the terms of the 2016 Plan, the Committee has the discretion to select the employees, consultants and non-employee directors who will be granted Awards, determine the terms and conditions of Awards (for example, the exercise price and vesting schedule), and to construe and interpret the provisions of the 2016 Plan and outstanding Awards. Notwithstanding the foregoing, Awards granted to non-employee

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2.Definitions

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directors shall be subject to Board approval if so required by the Committee Charter. In addition, the Committee may not reprice Awards or exchange Awards for other Awards, cash or a combination thereof, without the approval of the shareholders. The Committee may delegate all or any part of its authority to one or more directors or officers of the Company in accordance with applicable law, but only the Committee itself can make Awards to participants who are executive officers of the Company.

Under the 2016 Plan, no nonemployee director may be granted awards in any fiscal year of the Company having a grant date value in excess of $500,000. For this purpose, restricted stock, unrestricted stock, performance units, performance shares and stock units shall be valued based on the fair market value on the grant date of the maximum number of Shares covered thereby (or the maximum dollar value thereof with respect to Awards denominated in dollars) and stock options and stock appreciation rights shall be valued using a Black-Scholes or other accepted valuation model, using reasonable assumptions.

If an Award expires or is canceled, forfeited or repurchased by the Company for any reason, the unvested or cancelled number of Shares that were subject to the Award (plus the number of additional Shares, if any, that counted against the share pool using the share counting rule in effect at the time the Award was granted) generally will be returned to the available pool of Shares reserved for issuance under the 2016 Plan. Except for shares of restricted stock that are forfeited (rather than vesting), Shares actually issued under the 2016 Plan or withheld to pay the exercise price of an Award or to satisfy tax withholding obligations with respect to an Award will not be returned to the 2016 Plan and will not be available for future issuance under the 2016 Plan. Shares purchased by the Company with the proceeds of stock option exercises will not again be available for issuance under the 2016 Plan.

Substitute awards made under the 2016 Plan to persons who become our employees as a result of an acquisition transaction shall not reduce the Shares available for issuance under the 2016 Plan or be added back to the Shares available for issuance under the 2016 Plan. In accordance with the rules of the applicable stock exchange on which the Shares are listed, shares under a pre-existing plan sponsored by a company acquired by us (as adjusted, to the extent appropriate, to reflect the transaction) may be used for awards under the 2016 Plan without reducing the Shares available for issuance under the 2016 Plan, and shares subject to such awards shall not be added back to the Shares available for awards under the 2016 Plan.

Lastly, if the Company experiences a dividend or other distribution, merger, reorganization, consolidation, recapitalization, separation, liquidation, stock split, reverse stock split, split-up, spin-off, Share combination, repurchase, or exchange of Shares or other securities of the Company, other significant corporate transaction or other significant change affecting the Shares, the Committee shall, as it deems appropriate, equitably adjust the number, kind and class of securities reserved for issuance under the 2016 Plan, the number, kind, class, and price of securities subject to outstanding Awards and the per-person numerical limits on Awards to reflect the stock dividend or other change.

Performance Goals

Awards under the 2016 Plan may be made subject to performance conditions as well as time-vesting conditions. Such performance conditions may be established and administered in accordance with the requirements of Section 162(m) for Awards intended to be qualified performance-based compensation thereunder. To the extent that performance conditions under the 2016 Plan are applied to awards intended to be qualified performance-based compensation under Section 162(m), such performance conditions shall be based on an objective formula or standard utilizing one or more of the following objectively defined and non-discretionary factors pre-established by the Committee in accordance with Section 162(m): (1) comparable store sales growth, (2) earnings, (3) earnings per share, (4) return on equity, (5) return on net assets, (6) return on invested capital, (7) gross sales, (8) net sales, (9) net earnings, (10) free cash flow, (11) total shareholder return, (12) stock price, (13) gross margin, (14) operating margin, (15) market share,

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2.1“Award” means one or more awards to a Participant with respect to a Performance Period pursuant to the provisions of the Plan.

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2.2“Board” means the Board of Directors of the Company, as constituted from time to time.

(16) inventory levels, (17) expense reduction, and (18) employee turnover (each, a “Performance Goal”). For awards that are not intended to comply with the performance-based compensation exception under Section 162(m), Performance Goals may consist of objective and/or subjective elements based on any financial and non-financial criteria (including, without limitation, subjective criteria and individual performance), as established by the Committee in its sole discretion.

2.3“Committee” means the Compensation and Management Development Committee of the Board, or any other Committee appointed by the Board which is comprised of two or more “outside directors” as defined in regulations under Code Section 162(m).

2.4“Participant” means any officer of the Company who is designated as a Participant by the Committee.

2.5“Performance Goals” means, for Awards intended to comply with the performance-based compensation exception under Code Section 162(m), an objective formula or standard determined by the Committee (in its sole discretion) for a Performance Period, utilizing one or more of the following objectively defined and non-discretionary factors, pre-established by the Committee in accordance with the performance-based compensation exception of Code Section 162(m): (a) comparable store sales growth; (b) earnings; (c) earnings per share; (d) return on equity; (e) return on net assets; (f) return on invested capital; (g) gross sales; (h) net sales; (i) net earnings; (j) free cash flow; (k) total shareholder return; (l) stock price; (m) gross margin; (n) operating margin; (o) market share; (p) inventory levels; (q) expense reduction; and (r) employee turnover. For awards that are not intended to comply with the performance-based compensation exception under Code Section 162(m), Performance Goals may consist of objective and/or subjective elements based on any financial and/or non-financial criteria (including, without limitation, subjective criteria and individual performance) as established by the Committee in its sole discretion.

As determined in the discretion ofby the Committee, the Performance Goals for any Performance Period may, to the extent consistent with the performance-based compensation exception under Code Section 162(m) for Awards intended to comply with the performance-based compensation exception thereunder, (a) differ from Participantparticipant to Participantparticipant and from Awardaward to Award;award, (b) be based on the performance of the Company as a whole or the performance of a specific Participantspecific participant or one or more subsidiaries, divisions, departments, regions, stores, segments, products, functions or business units of the Company;Company, (c) be measured on a per share, per capita, per unit, per square foot, per employee, per store basis, and/or other objective basis (d) be measured on a pre-tax or after-tax basis;basis, and (e) be

measured on an absolute basis or in relative terms (including, but not limited to, the passage of time and/or against other companies, financialfinancial metrics and/or an index).

Without limiting the foregoing, and to the extent permitted under Code Section 162(m)In addition, for Awardsawards intended to comply with the performance-based compensation exception under Section 162(m), the impact of objectively defined and non-discretionary items (includable in one or more of the following categories or other categories to the extent permitted by 162(m)) may be taken into account in any manner preestablished by the Committee in accordance with Section 162(m) when determining whether a Performance Goal has been attained: (1) changes in generally accepted accounting principles (“GAAP”); (2) nonrecurring items, if any, that may be defined in an objective and non-discretionary manner under U.S. GAAP accounting standards or other applicable accounting standards in effect from time to time; (3) the sale of investments or non-core assets; (4) discontinued operations, categories or segments; (5) legal claims and/or litigation and insurance recoveries relating thereto; (6) amortization, depreciation or impairment of tangible or intangible assets; (7) reductions in force, early retirement programs or severance expense; (8) investments, acquisitions or dispositions; (9) political, legal and other business interruptions (such as due to war, insurrection, riot, terrorism, confiscation, expropriation, nationalization, deprivation, seizure, and regulatory requirements); (10) natural catastrophes; (11) currency fluctuations; (12) stock-based compensation expense; (13) early retirement of debt; (14) conversion of convertible debt securities; and (15) termination of real estate leases. Each of the adjustments described above may relate to the Company as a whole or any part of the Company’s business or operations.

Stock Option Awards

A stock option is the right to acquire Shares at a fixed exercise price for a fixed period of time. Under the 2016 Plan, the Committee may grant nonqualified stock options and/or incentive stock options. The number of Shares covered by each option will be determined by the Committee, but during any fiscal year of the Company, no participant may be granted options covering more than 18,000,000 Shares. The exercise price of the Shares subject to each option is set by the Committee but cannot be less than 100% of the fair market value (on the date of grant) of the Shares covered by the option. The exercise price of incentive stock options shall not be less than 110% of fair market value if the participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its subsidiaries. The total fair market value of the Shares (determined on the grant date) covered by incentive stock options that first become exercisable by any participant during any calendar year also may not exceed $100,000.

Options become exercisable and terminate at the times and on the terms established by the Committee, but options generally may not expire later than ten years after the date of grant (such term to be limited to five years in the case of an incentive stock option granted to a participant who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any

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of its subsidiaries). If the participant terminates service before his or her option’s normal expiration date, the Option may terminate sooner than its normal expiration date, depending upon the reason for the termination.

The exercise price of each option must be paid in full at the time of exercise. The Committee also may permit payment through the tender of Shares that are already owned by the participant, by cashless or “net” exercise, or by any other means that the Committee determines to provide legal consideration for the Shares and is consistent with the 2016 Plan’s purpose. Any taxes required to be withheld must be paid by the participant at the time of exercise.

Stock Appreciation Right Awards

Stock appreciation rights (“SARs”) are Awards that give a participant the right to receive payment from the Company in an amount equal to: (1) the excess of the fair market value of a Share on the date of exercise over the exercise price, multiplied by (2) the number of Shares with respect to which the SAR is exercised. SARs may be granted as a separate Award or together with an option. Proceeds from SAR exercises may be paid in cash or Shares, as determined by the Committee. The number of Shares covered by each SAR will be determined by the Committee, but during any fiscal year of the Company, no participant may be granted SARs for more than 18,000,000 Shares.

Awards of SARs may be granted in connection with all or any part of an option or may be granted independently of options. The Committee determines the terms and conditions of each SAR. However, the exercise price of a SAR may not be less than 100% of the fair market value of a Share on the grant date. SARs expire at the times established by the Committee, but subject to the same maximum time limits as are applicable to options granted under the 2016 Plan.

Restricted and Unrestricted Stock Awards

Restricted stock awards are shares of the Company’s common stock which vest in accordance with terms established by the Committee in its discretion. Unrestricted stock awards are shares of the Company’s common stock that have no restrictions such as vesting terms. The number of Shares of restricted and unrestricted stock granted to any employee or consultant will be determined by the Committee, but during any fiscal year of the Company, no participant may be granted more than 2,000,000 Shares.

In determining the vesting schedule for any Award of restricted stock, the Committee may impose whatever conditions to vesting it determines to be appropriate. For example, the Committee may (but is not required to) provide that restricted stock will vest only if one or more performance objectives are satisfied and/or only if the participant remains employed with the Company for a specified period of time. If the Committee desires that the Award be intended to qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals (see “Performance Goals” above for more information).

Unless the Committee determines otherwise, Shares of restricted stock will be held by the Company as escrow agent until any restrictions on the Shares have lapsed. The Committee may accelerate the time at which any restriction may lapse or be removed.

Stock Unit, Performance Unit, and Performance Share Awards

Stock units, performance units, and performance shares are Awards in which amounts are credited to a bookkeeping account established for the participant. A stock or performance unit has an initial value that is established by the Committee at the time of its grant. A performance share has an initial value equal

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to the fair market value of a Share on the date of grant. The number of stock units, performance units or performance shares granted to any employee or consultant will be determined by the Committee, but during any fiscal year of the Company, no participant may be granted stock units, performance units or performance shares having, in the aggregate, a grant date value (assuming maximum payout) greater than $20 million or covering more than 2,000,000 Shares (assuming maximum payout), whichever is greater.

Whether a stock unit, performance unit or performance share Award actually will result in a payment to a participant will depend upon the extent to which the performance objectives, if any, established by the Committee are satisfied and the vesting criteria, if any, are met. The applicable performance objectives, vesting criteria and all other terms and conditions of the Award will be determined at the discretion of the Committee and may be based upon the achievement of Company-wide, business unit or individual goals, which may include continued employment or service, or any other basis determined by the Committee. In order for an Award of performance units, performance shares or stock units to qualify as “performance-based” compensation under Section 162(m), the Committee must use one or more of the Performance Goals that are discussed above.

After a stock unit, performance unit or performance share Award has vested (that is, after any applicable performance objective(s) have been achieved and/or any applicable vesting criteria satisfied), the participant will be entitled to a payment of cash and/or Shares, as determined by the Committee. However, upon grant of an Award of performance shares, performance units or stock units, the Committee may set terms and conditions for deferral of payment of an Award of performance shares, performance units or stock units. The deferral period will be fixed by the Committee on the date of grant and any Award may provide for the earlier termination of such period in the event of a change in control of the Company or other similar transaction or event.

Nontransferability of Awards

Awards granted under the 2016 Plan may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution. If permitted by the Committee (at its discretion), a participant may designate one or more beneficiaries to receive any vested but unpaid Awards following his or her death. Notwithstanding the foregoing, a Participant may, if the Committee (in its discretion) so permits, transfer an Award to an individual or entity other than the Company. Any such transfer shall be made in accordance with such procedures as the Committee may specify from time to time.

Change in Control

The 2016 Plan provides that, except as set forth in an applicable award agreement, in the event of a change in control, the acquiror may, without the consent of any participant, either assume or continue awards under the 2016 Plan or substitute for outstanding awards substantially equivalent awards covering the acquiror’s stock. Except as set forth in an applicable award agreement, outstanding awards which are neither assumed, continued or substituted by the acquiror in connection with the change in control shall, contingent on the change in control, become fully vested and, if applicable, exercisable immediately prior to the change in control.

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Plan Benefits

As described above, the number of Awards (if any) that an individual may receive under the 2016 Plan is in the discretion of the Committee and therefore cannot be determined in advance. Our named executive officers and directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the 2016 Plan. The following table sets forth (1) the total number of Shares subject to stock options granted under the 2016 Plan to the listed persons and groups during the last fiscal year of the Company, (2) the average per Share exercise price of such options, (3) the total number of restricted stock units granted under the 2016 Plan to the listed persons and groups during the last fiscal year of the Company, (4) the dollar value of such restricted stock units based on $24.72 per Share, the last reported trade price for Shares on January 29, 2016, (5) the total number of performance units granted under the 2016 Plan to the listed persons and groups during the last fiscal year of the Company, (6) the dollar value of such performance units based on $24.72 per Share, the last reported trade price for Shares on January 29, 2016, (7) the total number of performance shares granted under the 2016 Plan to the listed persons and groups during the last fiscal year of the Company, and (8) the dollar value of such performance shares based on $24.72 per Share, the last reported trade price for Shares on January 29, 2016.

                   

2016 Long-Term Incentive Plan

Name and Principal Position 

Number
of Stock
Options
Granted

Average Per
Share Exercise
Price of Stock
Options

Number of
Restricted
Stock Units

Dollar Value
of Restricted
Stock Units

Number of
Performance
based
Awards (2)

Dollar Value
of Performance-based
Awards

Arthur Peck 

Chief Executive Officer 

 

 300,000

 

$

41.19

  

-

  

-

  

425,247

  

10,512,106

 

Sabrina Simmons 

EVP and Chief Financial Officer 

 

 90,000

 

$

41.27

  

75,000

  

1,854,000

  

95,406

  

2,358,436

 

Jeff Kirwan 

Global President, Gap  

 

 80,000

 

$

41.27

  

83,461

  

2,063,156

  

92,682

  

2,291,099

 

Andi Owen 

Global President, Banana Republic 

 

75,000

 

$

41.27

  

75,000

  

1,854,000

  

92,682

  

2,291,099

 

Sonia Syngal 

EVP, Global Supply Chain & Product Operations 

 

35,000

 

$

41.27

  

75,000

  

1,854,000

  

54,519

  

1,347,710

 

Stefan Larsson (1)

Former Global President, Old Navy 

 

90,000

 

$

41.27

  

75,000

  

1,854,000

  

109,038

  

2,695,419

 

All executive officers as a group 

 

750,400

 

$

41.23

  

429,644

  

10,620,800

  

909,552

  

22,484,125

 

All directors, excluding executive officers, as a group 

 

-

  

-

  

38,260

  

945,787

  

 

  

 

 

All employees, excluding executive officers, as a group 

 

1,163,638

 

$

40.68

  

2,125,376

  

52,539,295

  

936,199 

  

23,142,839

 

Footnote

(1)

Mr. Larsson resigned as Global President, Old Navy in October 2015.

(2)

For awards in this column, the number of shares represent the maximum number of shares that could be issued under performance-based awards. Please refer to the Compensation Discussion and Analysis section and the Grants of Plan-Based Awards table in this Proxy Statement for additional details on these awards.

U.S. Federal Income Tax Consequences

The following is a general summary of the federal income tax consequences to U.S. taxpayers and the Company of Awards under the 2016 Plan. Tax consequences for any particular individual may be different. Participants should consult with their own tax advisors for more detailed information on how Awards will be taxed in their particular circumstances.

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Nonqualified Stock Options and SARs

No amount is included in the taxable income of a participant when a nonqualified stock option or SAR is awarded or vests. Upon exercise of a nonqualified stock option, a participant will recognize ordinary income equal to the difference between the fair market value of the Shares received and the exercise price. Upon exercise of a SAR, a participant will recognize ordinary income equal to the amount of cash received and the fair market value of any Shares received from the Company (before tax withholding). Any additional gain or loss recognized upon a later sale or other disposition of the acquired Shares is generally taxed as capital gain or loss.

Incentive Stock Options

No amount is included in the taxable income of a participant when an incentive stock option is granted or exercised. However, the participant may be subject to the alternative minimum tax in the year of exercise because the difference between the fair market value of the Shares received and the exercise price is included in the amount of the participant’s alternative minimum taxable income for that year. If the participant exercises the option and then sells the acquired Shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as long-term capital gain or loss. If the participant exercises the option and sells the acquired Shares before the end of the two- or one-year holding periods, however, the difference between the fair market value of the stock on the date of the option exercise and the exercise price is taxed as ordinary income. If the value of the Shares has decreased following the option exercise, the participant’s ordinary income is limited to the difference between the sale price and the exercise price. If the value of the Shares has increased following the option exercise, the difference between the fair market value of the Shares at the time of exercise and the sale price is taxed as capital gain.

Restricted Stock, Unrestricted Stock, Stock Units, Performance Units and Performance Shares

No amount is included in the taxable income of a participant upon receipt of restricted stock, stock units, performance units, or performance shares if such Awards are subject to vesting requirements. The participant will generally recognize ordinary income upon vesting of restricted stock, and payout of stock units, performance units or performance shares. In the case of stock units, performance units, or performance shares, if the Committee has set terms and conditions for the deferral of payment of the Award following the time of vesting, the participant will recognize ordinary income at the time of such payment. Alternatively, with respect to restricted stock, a participant may elect under Code Section 83(b) to be taxed at the time of the Award. An election under Section 83(b) must be filed with the Internal Revenue Service (with a copy to the Company) within 30 days after the date of the Award. A participant receiving unrestricted stock will recognize income at the time of the Award. With respect to restricted stock and unrestricted stock, the amount of ordinary income recognized by the participant will be equal to the fair market value of the Shares at the time income is recognized minus any amount paid for the Shares. With respect to stock units, performance units or performance shares, the amount of ordinary income will be equal to the amount of cash and/or the fair market value of Shares (at the time income is recognized) that the participant receives from the Company (before tax withholding) minus any amount paid for the Shares. In general, any gain or loss recognized upon sale of the Shares thereafter will be taxed as a capital gain or loss.

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Tax Effect on the Company

The Company generally will be entitled to a tax deduction in connection with an Award made under the 2016 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, when a participant exercises a nonqualified stock option). Special rules limit the deductibility of compensation paid to the Company’s Chief Executive Officer and the Company’s other three most highly compensated executive officers (other than the Chief Financial Officer). Under Section 162(m), the annual compensation paid to any of these executive officers will be deductible only to the extent that it does not exceed $1 million. However, the Company can preserve the deductibility of certain compensation paid in excess of $1 million if the conditions of Section 162(m) are met. These conditions include shareholder approval of the 2016 Plan, setting limits on the number of Awards that any individual may receive, and for Awards other than options and SARs, establishing performance criteria that must be met before the Award actually will vest or be paid. The 2016 Plan has been designed with the intention that the Committee may grant Awards that qualify as “performance-based compensation” for purposes of Section 162(m). However, because of the fact-based nature of the performance-based compensation exception under Section 162(m) and the limited availability of binding guidance thereunder, the Company cannot guarantee that Awards made under the Plan that are intended to qualify as performance-based compensation under Section 162(m) will in fact so qualify.

The foregoing is only a summary of the effect of federal income taxation upon participants and the Company with respect to the grant and exercise of awards under the 2016 Plan. It does not purport to be complete, and does not discuss the tax consequences of a service provider's death or the provisions of the income tax laws of any municipality, state or foreign country in which the service provider may reside.

Amendment and Termination

The Board generally may amend or terminate the 2016 Plan at any time and for any reason. However, no amendment, suspension or termination may materially and adversely impair the rights of any participant in the 2016 Plan without his or her consent. Amendments will be contingent on shareholder approval if required by applicable law.

Summary

We are requesting that shareholders approve the 2016 Plan. We believe that employees with an ownership stake in our business become highly motivated to achieve our corporate goals and increase long-term shareholder value.

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BENEFICIAL OWNERSHIP OF SHARES

Beneficial Ownership Table

The following table sets forth certain information as of March 21, 2016 to indicate beneficial ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each director and nominee and each executive officer and former executive officer named in the “Summary Compensation Table” of this Proxy Statement, and (iii) all of our directors and executive officers as a group. Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment power. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

              

 

Shares Beneficially Owned

 

Name of Beneficial Owner

Common
Stock

Awards
Vesting Within
60 Days (1)

Total

% of
Class (2)

Directors and Named Executive Officers

 

 

  

 

  

 

  

 

 

Domenico De Sole

 

35,393

  

10,389

  

45,782

  

 

*

Robert J. Fisher (3) (8)

 

101,353,344

  

10,609

  

101,363,953

  

25.5

%

William S. Fisher (4) (8)

 

105,276,110

  

10,609

  

105,286,719

  

26.5

%

Tracy Gardner

 

0

  

5,257

  

5,257

  

 

*

Isabella D. Goren

 

4,227

  

10,389

  

14,616

  

 

*

Jeff Kirwan

 

15,685

  

52,680

  

68,365

  

 

*

Bob L. Martin

 

38,784

  

10,389

  

49,173

  

 

*

Jorge P. Montoya

 

25,196

  

10,389

  

35,585

  

 

*

Andi Owen

 

0

  

76,250

  

76,250

  

 

*

Arthur Peck

 

200,218

  

325,000

  

525,218

  

 

*

Mayo A. Shattuck III

 

86,144

  

14,957

  

101,101

  

 

*

Sabrina L. Simmons

 

0

  

137,500

  

137,500

  

 

*

Sonia Syngal

 

7,958

  

35,000

  

42,958

  

 

*

Katherine Tsang

 

14,778

  

10,389

  

25,167

  

 

*

Padmasree Warrior (5)

 

0

  

9,661

  

9,661

  

 

*

All directors and executive officers, as a group (19 persons) (6)

 

118,766,484

  

863,369

  

119,626,852

  

30.0

%

Former Executive Officers

 

 

  

 

  

 

  

 

 

Stefan Larsson (7)

 

0

  

0

  

0

  

0

%

Certain Other Beneficial Holders

 

 

  

 

  

 

  

 

 

Fisher Core Holdings L.P. (8)

 

81,000,000

  

0

  

81,000,000

  

20.4

%

Doris F. Fisher (9)

 

33,561,387

  

0

  

33,561,387

  

8.4

%

John J. Fisher (8) (10)

 

114,414,116

  

0

  

114,414,116

  

28.8

%

Blackrock, Inc. (11)

 

26,832,464

  

0

  

26,832,464

  

6.7

%

Footnotes

(1)

Reflects stock options exercisable and stock units vesting within 60 days after March 21, 2016. Also includes the outstanding stock units earned but unpaid to non-employee directors, which are subject to a three-year deferral period but would be issued immediately upon the resignation or retirement of the non-employee director, as described on page 13.

(2)

“*” indicates ownership of less than 1% of the outstanding shares of our common stock.

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(3)

Includes 2,713,618 shares owned as community property with his spouse over which Mr. Robert J. Fisher has shared dispositive and voting power, 17,624,726 shares held by Robert J. Fisher as trustee under certain trusts, including 8,326,817 shares owned through a trust for which Mr. Fisher is a trustee and has sole dispositive and voting power, 8,297,909 shares (of which 600,000 shares are held in a charitable foundation) for which voting and investment power is shared, and 1,000,000 shares held by Mr. Fisher as trustee of a trust for which he has sole dispositive power and a special trustee has sole voting power,15,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which Robert J. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 8 below and the note regarding various Fisher family holdings immediately following this table. Robert J. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 124,211 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

(4)

Includes 667,970 shares owned as community property with his spouse over which Mr. William S. Fisher has shared dispositive and voting power, 23,593,140 shares held by William S. Fisher as trustee under certain trusts, including 11,895,752 shares owned through trusts for which Mr. Fisher is trustee and has sole dispositive and voting power, 10,097,388 shares (of which 550,000 shares are held in a charitable foundation) for which voting and investment power is shared and 1,600,000 shares held by Mr. Fisher as trustee of a trust for which he has sole dispositive power and a special trustee has sole voting power, 15,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which William S. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 8 below and the note regarding various Fisher family holdings immediately following this table. William S. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 163,015 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

(5)

Ms. Warrior is not standing for reelection to the Board of Directors.

(6)

Reflects the information above as well as information regarding our unnamed executive officers; provided, however, that shares reflected more than once in the table above with respect to Robert J. Fisher and William S. Fisher are only reflected once in this line. See the note regarding various Fisher family holdings immediately following this table.

(7)

Mr. Larsson ceased to be an executive officer of the Company in October 2015.

(8)

The address of Fisher Core Holdings L.P. is One Maritime Plaza, Suite 1400, San Francisco, California 94111. As general partners, Messrs. Robert J. Fisher, John J. Fisher, and William S. Fisher have shared power (by majority vote) to vote or direct the vote of 70,200,000 shares and to dispose or direct the disposition of all of the partnership’s 81,000,000 shares. Limited liability companies which are not partners of Fisher Core Holdings L.P. nor are controlled by its general partners hold a proxy to vote 10,800,000 shares held by Fisher Core Holdings L.P.

(9)

Doris F. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include shares held directly or indirectly by Mrs. Fisher’s three adult sons or their spouses, beneficial ownership of which is disclaimed because Mrs. Fisher does not have voting or dispositive control over such shares.

(10)

Includes 25,601,188 shares held by John J. Fisher as trustee under certain trusts, including 12,351,747 shares owned through trusts for which Mr. Fisher is trustee and has sole dispositive and voting power, 9,649,441 shares for which voting and investment power is shared and 3,600,000 shares held by Mr. Fisher as trustee of a trust for which he has sole dispositive power and a special trustee has sole voting power, 20,000 shares beneficially owned through limited partnerships over which Mr. Fisher has sole dispositive and voting power, and 81,000,000 shares held by Fisher Core Holdings L.P., of which John J. Fisher is a general partner. Mr. Fisher disclaims individual beneficial ownership of shares owned by Fisher Core Holdings L.P. or its other general partners except to the extent of his actual ownership interest therein. Also see footnote 8 above and the note regarding various Fisher family holdings immediately following this table. William S. Fisher’s address is One Maritime Plaza, Suite 1400, San Francisco, California 94111. Amounts shown do not include 42,806 shares owned by Mr. Fisher’s spouse, beneficial ownership of which is disclaimed as Mr. Fisher does not have voting or dispositive control over such shares.

(11)

The Schedule 13G filed with the SEC by Blackrock, Inc. on February 9, 2016 indicates that, as of December 31, 2015, Blackrock, Inc. has sole power to direct the voting of 24,614,253 shares, and has sole power to dispose of or direct the disposition of 26,832,464 shares. The address of Blackrock, Inc., as reported in its Schedule 13G, is 44 East 52nd Street, New York, New York 10055.

Note Regarding Various Fisher Family Holdings

SEC rules require reporting of beneficial ownership of certain shares by multiple parties where voting and/or dispositive power over those shares is shared by those multiple parties. As a result, the following shares are listed multiple times in the table above.

The 81,000,000 shares held by Fisher Core Holdings L.P. (see footnote 8 above) are included three additional times in the above table under the names of Messrs. Robert J. Fisher, William S. Fisher, and John J. Fisher (that is, there are only 81,000,000 shares rather than 324,000,000 shares).

In addition, the shares described in footnotes (3), (4) and (10) above for which voting and investment power is shared by Messrs. Robert J. Fisher, William S. Fisher, and John J. Fisher actually represent an aggregate of 13,447,369 shares, rather than 26,894,738 shares, as a result of that shared voting and investment power.

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For purposes of the above table, removing the shares counted multiple times (described above) results in an aggregate total ownership of 36.6% of the outstanding shares by Messrs. John J. Fisher, Robert J. Fisher, William S. Fisher and Fisher Core Holdings L.P.

The aggregate total ownership of Mrs. Doris F. Fisher, Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher, and Fisher Core Holdings L.P. is 45.0% of the outstanding shares. Mrs. Doris F. Fisher, and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher each disclaim beneficial ownership over shares owned by other members of the Fisher family and Fisher Core Holdings L.P., except as specifically disclosed in the footnotes above.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and holders of more than 10% of the Company’s common stock, to file with the Securities and Exchange Commission reports about their ownership of the Company’s common stock. Such directors, officers and 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Securities and Exchange Commission regulations require us to identify in this Proxy Statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received, or written correspondence from reporting persons stating that they were not required to file these forms, we believe that during fiscal 2015 all Section 16(a) filing requirements were satisfied on a timely basis. Due to a Company administrative error, Julie Gruber reported the March 12, 2016 release of stock units three days late on a Form 4. This transaction did not result in any liability under Section 16(b) of the Exchange Act, and is being voluntarily reported early in this Proxy Statement.

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QUESTIONS AND ANSWERS ABOUT
THE ANNUAL MEETING AND VOTING

Who are the proxyholders and how were they selected?

The proxyholders were selected by our Board of Directors and are officers of the Company. The proxyholders will vote all proxies, or record an abstention, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted as recommended by our Board of Directors.

How much did this proxy solicitation cost and who pays for it?

The Company will pay all expenses in connection with the solicitation of the proxies relating to this Proxy Statement, including the charges of brokerage houses and other custodians, nominees or fiduciaries for forwarding documents to security owners. In addition to solicitation by mail, certain of our officers, directors and employees (who will receive no extra compensation for their services) may solicit proxies by email, by telephone, by fax or in person. We have also retained the services of D.F. King & Co. to solicit the proxies of certain shareholders for the Annual Meeting and provide other consultation services. The cost of D.F. King’s services is estimated to be $8,000, plus reimbursement of out-of-pocket expenses.

How can I electronically access the proxy materials?

We are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending a Notice of Internet Availability of Proxy Materials. That Notice contains instructions for accessing the materials and voting via the Internet. The Notice also contains information on how to request a paper copy of the proxy materials by mail. We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2015

Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors, Financial Information, Annual Reports & Proxy links).

Can I receive proxy materials for future annual meetings by email rather than receiving a paper copy of the Notice?

If you are a Shareholder of Record or a Beneficial Owner, you may elect to receive the Notice or

other future proxy materials by email by logging into www.proxyvote.com. If you are a Beneficial Owner, you can also contact your broker directly to opt for email delivery of proxy materials. If you choose to receive proxy materials by email, next year you will receive an email with instructions on how to view those materials and vote before the next annual meeting. Your choice to obtain documents by email will remain in effect until you notify us otherwise. Delivering future notices by email will help us further reduce the cost and environmental impact of our shareholder meetings.

What is “householding”?

Under SEC rules, a single package of Notices may be sent to any household at which two or more shareholders reside if they appear to be members of the same family, unless contrary instructions have been received. Each shareholder continues to receive a separate Notice within the package. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting Broadridge toll free at 1-800-542-1061, or by writing to Broadridge,

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Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders who wish to receive a separate set of proxy materials should contact Broadridge at the same phone number or mailing address.

What is the difference between a shareholder of record and a beneficial owner of shares?

Shareholder Of Record

If your shares are registered directly in your name with the Company’s transfer agent, Wells Fargo Bank, N.A., you are considered the shareholder of record with respect to those shares.

Beneficial Owner

If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. Please note that the organization is not allowed to vote your shares on most matters without your instructions, so it is important for you to provide direction to the organization on how to vote.

May I attend the Annual Meeting?

All shareholders as of the close of business on the Record Date, or holders of a valid proxy for the Annual Meeting, are entitled to attend the Annual Meeting. Shareholders who plan to attend the Annual Meeting must present valid photo identification. In addition, if you are not a shareholder of record but hold shares through a broker, bank, trustee, nominee, or other similar organization (i.e., in street name), you must provide proof of beneficial ownership as of the Record Date. Proof of beneficial ownership can take the form of your most recent account statement prior to the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, nominee, or other similar organization, a copy of the Notice of Internet Availability of Proxy Materials, if one was mailed to you, or similar evidence of ownership. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the Record Date.

How can I listen to the live webcast of the meeting?

We plan to offer an audio webcast of the Annual Meeting at www.gapinc.com. If you choose to

listen to the webcast, go to our website at www.gapinc.com (follow the Investors, Financial News and Events, Webcasts links) shortly before the start of the meeting and follow the instructions provided. Please note that this webcast will be “listen only.” If you would like to vote, ask questions, or otherwise interact with the meeting participants, you will need to attend the meeting in person. The webcast will be recorded and

available for replay on www.gapinc.com for at least 30 days following the Annual Meeting.

Are votes confidential? Who counts the votes?

Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects the voting privacy of our shareholders. Your vote will not be disclosed to anyone, except:

•
As required to tabulate and certify the vote;

•
As required by law; and/or

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•
If you provide written comments on your proxy card (the proxy card and comments would then be forwarded to us for review).

We retain an independent tabulator and inspector of election to receive and tabulate the proxies and to certify the voting results.

What happens if I do not give specific voting instructions?

Shareholder Of Record

If you are a shareholder of record and you sign, date and return a proxy card but do not specify how to vote, your shares will be voted in accordance with the recommendations of the Board of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the Annual Meeting or any adjournments or postponements thereof.

Beneficial Owner

If you are a beneficial owner and hold your shares through a broker, bank, or other similar organization, and you do not provide the broker or other nominee that holds your shares with voting instructions, the broker or other nominee will determine if it has the discretionary authority to vote on a particular matter. Brokers and other nominees have the discretion to vote on routine matters such as Proposal 2 (ratification of the selection of independent registered public accounting firm), but do not have the discretion to vote on non-routine matters such as Proposal 1 (election of directors), Proposal 3 (advisory vote on executive compensation), and Proposal 4 (approval of the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan). Therefore, your shares will not be voted on non-routine matters without your voting instructions.

What constitutes a “quorum” for the Annual Meeting?

The holders of a majority of the outstanding shares of our common stock, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. The independent inspector(s) of election appointed for the Annual Meeting will determine whether or not a quorum is present and will tabulate votes cast by proxy or in person at the Annual Meeting.

Abstentions are included in the determination of shares present for quorum purposes. Because abstentions represent shares entitled to vote, the effect of an abstention will be the same as a vote against a proposal. However, abstentions will have no effect on the election of directors.

What are broker non-votes and how are they counted?

Broker non-votes occur when nominees, such as brokers and banks holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. Brokers and other nominees may vote without instruction only on “routine” proposals. On “non-routine” proposals, nominees cannot vote without instructions from the beneficial owner, resulting in so-called “broker non-votes.” The proposal to ratify Deloitte & Touche LLP as the Company’s independent registered public accounting firm is the only routine proposal on the agenda for our Annual Meeting. The other three proposals on the agenda are non-routine. If you hold your shares with a broker or other nominee, they will not be voted on non-routine proposals unless you give voting instructions. So long as the broker has discretion to vote on at least one proposal, broker non-votes are

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counted in determining a quorum but are not counted for purposes of determining the number of shares present in person or represented by proxy on a voting matter.

What vote is required to approve each proposal?

Election Of Directors

Election of directors by shareholders will be determined by a majority of the votes cast with respect to each director, in person or by proxy, at the Annual Meeting. Pursuant to the Company’s Bylaws, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Votes cast shall include votes “for” and “against” a nominee, and exclude “abstentions” and “broker non-votes” with respect to that nominee’s election. Under our Corporate Governance Guidelines, at any meeting of shareholders where nominees are subject to an uncontested election (the number of nominees is equal to the number of seats), any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election, shall submit to the Corporate Secretary of the Company a letter offering his or her resignation, subject to the Board of Directors’ acceptance. The Governance and Sustainability Committee will consider the offer of resignation and will recommend to the Board the action to be taken. The Board of Directors will act promptly with respect to each such letter of resignation and will promptly notify the director concerned of its decision. The Board of Directors’ decision will be disclosed publicly.

Other Proposals

The other three matters on the agenda for shareholder approval at the Annual Meeting will be decided by the affirmative vote of a majority of the shares present, in person or by proxy, at the Annual Meeting and entitled to vote on the subject matter. Please note that Proposal 2 (ratification of the selection of independent registered public accounting firm) and Proposal 3 (advisory vote on executive compensation) are advisory only and will not be binding on the Company, the Board or any committee of the Board. The results of the votes on these proposals will be taken into consideration by the Company, the Board or the appropriate committee of the Board, as applicable, when making future decisions regarding these matters.

How will any other items be voted upon at the Annual Meeting?

If any other matter not mentioned in this Proxy Statement is properly brought before the meeting, including without limitation (i) matters about which the proponent failed to notify us on or before February 19, 2016 (ii) shareholder proposals omitted from this Proxy Statement and the form of proxy pursuant to the proxy rules of the SEC, and (iii) matters incidental to the conduct of the meeting, the proxyholders will vote upon such matters in accordance with their best judgment pursuant to the discretionary authority granted by the proxy. As of the date of the printing of this Proxy Statement, our management is not aware, nor has it been notified, of any other matters that may be presented for consideration at the meeting.

May I change my vote?

You may revoke your proxy at any time before its exercise by writing to our Corporate Secretary at our principal executive offices as follows:

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Corporate Secretary
Gap Inc.
Two Folsom Street
San Francisco, California 94105

You may also revoke your proxy by timely delivery of a properly executed, later-dated proxy (including a telephone or Internet vote) or by voting in person at the Annual Meeting.

When are shareholder proposals for the 2017 Annual Meeting due?

If a shareholder would like us to consider including a proposal in our Proxy Statement and form of proxy for our Annual Meeting in 2017, the Company’s Corporate Secretary must receive it no later than December 6, 2016. Proposals must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105.

Our Amended and Restated Bylaws provide that in order for a shareholder to bring business before our Annual Meeting in 2017 (other than a proposal submitted for inclusion in the Company’s proxy materials), the shareholder must give written notice to our Corporate Secretary by no later than the close of business (San Francisco Time) on February 16, 2017, and no earlier than January 17, 2017 (i.e., not less than 90 days nor more than 120 days prior to the first anniversary of the date of our 2016 Annual Meeting). The notice must contain information required by our Bylaws, including a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the Annual Meeting, the name and address of the shareholder proposing the business, the number of shares of the Company’s stock beneficially owned by the shareholder, any material interest of the shareholder in the business proposed, any interests held by the shareholder in derivative securities of the Company or arrangements with persons holding derivative securities of the Company, and other information required to be provided by the shareholder pursuant to the proxy rules of the SEC. If a shareholder fails to submit the notice by February 16, 2017, then the proposed business would not be considered at our Annual Meeting in 2017 due to the shareholder’s failure to comply with our Bylaws. Additionally, in accordance with Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as amended, management proxyholders intend to use their discretionary voting authority with respect to any shareholder proposal raised at our Annual Meeting in 2017 as to which the proponent fails to notify us on or before February 16, 2017. Notifications must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105. A copy of the full text of the Bylaw provisions relating to our advance notice procedure may be obtained by writing to our

Corporate Secretary at that address or at www.gapinc.com (follow the Investors, Governance links).

By Order of the Board of Directors,

 

Julie Gruber
Corporate Secretary

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APPENDIX A

THE GAP, INC. 2016 LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective as of May 17, 2016)

THE GAP, INC., having adopted The Gap, Inc. 2011 Long-Term Incentive Plan (formerly known as the “1996 Stock Option and Award Plan” and the “2006 Long-Term Incentive Plan”) (the “Plan”) effective as of March 26, 1996, and having amended the Plan on several subsequent occasions, hereby amends and restates the Plan in its entirety, effective as of May 17, 2016, as follows:

SECTION 1
BACKGROUND, PURPOSE AND DURATION

1.1 Background. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Unrestricted Stock, Performance Units, Performance Shares, and Stock Units.

1.2 Purpose of the Plan. The Plan is intended to increase incentive and to encourage Share ownership on the part of Employees, Consultants and Nonemployee Directors. The Plan also is intended to further the growth and profitability of the Company and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m) of the Code.

1.3 Duration. This amended and restated Plan is effective as of May 17, 2016 and shall remain in effect thereafter unless terminated earlier under Section 11. However, without further stockholder approval, no Incentive Stock Option may be granted under the Plan after May 17, 2026.

SECTION 2
DEFINITIONS

The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

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 “Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.

2.3 “Applicable Laws” means the requirements relating to the administration of equity compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

2.4 “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Unrestricted Stock, Performance Units, Performance Shares, or Stock Units.

2.5 “Award Agreement” means the written agreement (which may be electronic) setting forth the terms and conditions applicable to each Award granted under the Plan.

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2.6 “Board” or “Board of Directors” means the Board of Directors of the Company.

2.7 “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.

2.8 “Committee” means the committee appointed by the Board (pursuant to Section 3.1) to administer the Plan. Unless otherwise determined by the Board, the Compensation and Management Development Committee of the Board shall constitute the Committee.

2.9 “Common Stock” means the common stock of the Company.

2.10 “Company” means The Gap, Inc., a Delaware corporation, or any successor thereto.

2.11 “Consultant” means any consultant, independent contractor, director of an Affiliate, or other person who provides significant services to the Company or an Affiliate, but who is neither an Employee nor a Director.

2.12 “Deferral Period” means the period of time during which Stock Units, Performance Units, or Performance Shares are subject to deferral limitations under Section 9.

2.13 “Determination Date” means, as to a Performance Period, the latest date possible that will not jeopardize an Award’s qualification as “performance-based compensation” under Section 162(m) of the Code.

2.14 “Director” means any individual who is a member of the Board.

2.15 “Disability” means a permanent and total disability within the meaning of Code Section 22(e)(3), provided that in the case of Awards other than Incentive Stock Options, the Committee in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Committee from time to time.

2.16 “Dividend Equivalents” means a right entitling the Participant to receive amounts equal to the ordinary dividends paid on the Company’s Shares from time to time. The Committee shall determine at the time of grant whether Dividend Equivalents shall be settled in cash or Shares, the time or times at which they shall be settled, and such other vesting or forfeiture provisions and other terms and conditions as the Committee, in their sole discretion, deem appropriate; provided, however, that any dividends payable with respect to Awards that are subject to performance conditions shall be held in escrow or deemed reinvested in additional Shares until the achievement of the applicable performance conditions and shall otherwise be subject to all of the same conditions applicable to payment of the underlying Award. Notwithstanding the foregoing, (a) unless otherwise determined by the Committee, no Dividend Equivalents shall be granted to any Participant the Committee believes is likely to be a “covered employee” as defined under Code Section 162(m)(3) when taxable income is recognized pursuant to the Dividend Equivalent or its related Award to the extent such grant would cause the compensation represented by the Dividend Equivalent or its related Award not to constitute performance-based compensation under Section 162(m) of the Code, and (b) unless otherwise determined by the Committee, no Dividend Equivalent right shall be granted to the extent such grant could result in the payment of any tax under Code Section 409A. In addition, no Dividend Equivalents shall be granted with respect to SARs or Stock Options.

2.17 “Employee” means any employee of the Company or an Affiliate. Except as otherwise determined by the Company, a person shall not cease to be an Employee in the case of (i) any leave of absence approved

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by the Company or the employing Affiliate or (ii) transfers between locations of the Company or between the Company, any Affiliate, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

2.18 “Exchange Program” means a program established by the Committee (i) providing for the repurchase of outstanding and unexercised Options or Stock Appreciation Rights by the Company whether in the form of a cash payment or otherwise or (ii) under which outstanding Awards are amended to provide for a lower Exercise Price or surrendered or cancelled in exchange for (a) Awards with a lower Exercise Price, (b) a different type of Award or awards under a different equity incentive plan, (c) cash, or (d) a combination of (a), (b) and/or (c). Notwithstanding the preceding, the term Exchange Program does not include any (i) action described in Section 4.3 or any action taken in connection with a change in control transaction nor (ii) transfer or other disposition permitted under Section 10.5. For the purpose of clarity, each of the actions described in the prior sentence, none of which constitute an Exchange Program, may be undertaken (or authorized) by the Committee in its sole discretion without stockholder approval.

2.19 “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option.

2.20 “Fair Market Value” means the fair market value of a Share on a particular date, as determined by the Committee in good faith. Unless otherwise determined by the Committee, the fair market value shall be the closing stock price of Shares as reported on the New York Stock Exchange (NYSE) on the relevant date (or, if no closing stock price is reported for the relevant date, on the last trading day for which a closing stock price of Shares is reported on the NYSE).

2.21 “Fiscal Year” means the fiscal year of the Company.

2.22 “Grant Date” means, with respect to an Award, the date that the Award was granted. The Grant Date of an Award shall not be earlier than the date the Award is approved by the Committee.

2.23 “Incentive Stock Option” means an Option to purchase Shares which is designated as an Incentive Stock Option and that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Code Section 422 and the regulations promulgated thereunder.

2.24 “Nonemployee Director” means a Director who is not an Employee.

2.25 “Nonqualified Stock Option” means an option to purchase Shares that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

2.26 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

2.27 “Parent” means a “parent corporation” of the Company whether now or hereafter existing, as defined in Code Section 424(e).

2.28 “Participant” means an Employee, Consultant, or Nonemployee Director who has an outstanding Award.

2.29 “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) pursuant to Section 5 to be applicable to a Participant with respect to an Award.

2.30 “Performance Period” means any Fiscal Year or such other period as determined by the Committee in its sole discretion during which performance objectives or other vesting criteria must be met.

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2.31 “Performance Share” means an Award of Performance Shares granted to a Participant pursuant to Section 9.

2.32 “Performance Unit” means an Award of Performance Units granted to a Participant pursuant to Section 9.

2.33 “Period of Restriction” means the period during which Shares of Restricted Stock, Unrestricted Stock, Stock Units, Performance Units, or Performance Shares are subject to forfeiture and/or restrictions on transferability and therefore, the Shares covered by the Award are subject to a substantial risk of forfeiture. As provided in Section 8 and 9, such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Committee, in its discretion.

2.34 “Plan” means The Gap, Inc. 2016 Long-Term Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.

2.35 “Restricted Stock” means an Award granted to a Participant pursuant to Section 8.

2.36 “Retirement” shall, in the case of an Employee, have the meaning, if any, set forth in the Employee’s Award Agreement; provided, however, that with respect to Awards granted prior to May 17, 2011, “Retirement” shall have the meaning set forth in GapShare (the Company’s “401(k)” plan) as of the Grant Date of the applicable Award. With respect to an Award granted to a person who is a Consultant at the time of grant, no Termination of Service shall be deemed to be on account of “Retirement”. With respect to a Nonemployee Director, “Retirement” means a Termination of Service at or after the age of 72 or such other meaning provided by the Committee in an Award Agreement.

2.37 “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending, supplementing or superseding such regulation.

2.38 “Section 16 Person” means a person who, with respect to the Shares, is subject to Section 16 of the 1934 Act.

2.39 “Shares” means the shares of the Company’s common stock, $0.05 par value.

2.40 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, that pursuant to Section 7 is designated as a SAR.

2.41 “Stock Unit” means an Award of Stock Units granted pursuant to Section 9.

2.42 “Subsidiary” means any corporation in an unbroken chain of corporations beginning with the Company as the corporation at the top of the chain, but only if each of the corporations below the Company (other than the last corporation in the unbroken chain) then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.43 “Tax Obligations” means tax and social insurance liability obligations and requirements in connection with the Awards, including, without limitation, (a) all federal, state, and local taxes (including the Participant’s FICA obligation) and all non-U.S. taxes that are required to be withheld by the Company or the employing Affiliate, and (b) any other Company (or employing Affiliate) taxes the responsibility for which (i) the Participant has agreed to bear or (ii) where permitted by governing authorities outside the U.S., taxes the Company may choose to pass on to Participants, in each case with respect to the applicable Award (including on the grant, vesting or exercise thereof or purchase or issuance of Shares thereunder).

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2.44 “Termination of Service” means (a) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Company or an Affiliate for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, Retirement, or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous (i) reemployment of the individual by the Company or an Affiliate, or (ii) with respect to Awards (other than Incentive Stock Options) granted on or after January 28, 2003, engagement of the consulting services of the individual by the Company or an Affiliate; (b) in the case of a Consultant, a termination of the service relationship between the Consultant and the Company or an Affiliate for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous (i) re-engagement of the services of the individual by the Company or an Affiliate, or (ii) with respect to Awards granted on or after January 28, 2003, employment of the individual by the Company or an Affiliate; and (c) in the case of a Nonemployee Director, a cessation of the Director’s service on the Board for any reason, including, but not by way of limitation, a termination by resignation, death, Disability, Retirement or non-reelection to the Board, but excluding, with respect to Awards granted on or after May 17, 2011, any such cessation where there is a simultaneous (i) re-engagement of the services of the individual by the Company or an Affiliate, or (ii) employment of the individual by the Company or an Affiliate.

2.45 “Unrestricted Stock” means an Award granted to a Participant pursuant to Section 8.

SECTION 3
ADMINISTRATION

3.1 The Committee. The Plan shall be administered by the Committee. The Committee shall consist of not less than two (2) Directors who shall be appointed from time to time by, and shall serve at the pleasure of, the Board. The Committee shall be comprised solely of Directors who both are (a) “non-employee directors” under Rule 16b-3, and (b) “outside directors” under Code Section 162(m).

3.2 Authority of the Committee. It shall be the duty of the Committee to administer the Plan in accordance with the Plan’s provisions. Subject to the provisions of the Plan, the Committee shall have all powers and discretion necessary or appropriate to administer the Plan and to control its operation, including, but not limited to, the power to (a) determine which Employees and Consultants shall be granted Awards, (b) prescribe the terms and conditions of such Awards or amendments thereto, (c) determine which Nonemployee Directors shall be granted Awards and the terms and conditions thereof, provided that such Awards shall be subject to Board approval if so required by the Committee Charter, (d) interpret the Plan and the Awards, (e) adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by Employees, Consultants and Nonemployee Directors who are foreign nationals or employed outside of the United States, (f) implement an Exchange Program, (g) implement or permit (i) an action described in Section 4.3, and/or (ii) a transfer or other disposition permitted under Section 10.5, (h) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith, and (i) interpret, amend or revoke any such rules. Notwithstanding the preceding, the Committee shall not implement an Exchange Program without the approval of the holders of a majority of the Shares that are present in person or by proxy and entitled to vote at any Annual or Special Meeting of Shareholders of the Company. With respect to Nonemployee Directors, all references in the Plan to the Committee’s discretion shall be subject to this Section 3.2 and shall require Board approval if so required by the Committee Charter.

3.3 Delegation by the Committee. The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Plan to one or more Directors or officers of the Company in accordance with Applicable Laws; provided, however, that the Committee may not delegate its authority and powers (a) with respect to Section 16 Persons, or (b) in any way which would jeopardize the Plan’s qualification under Code Section 162(m) or Rule 16b-3.

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3.4 Decisions Binding. All determinations and decisions made by the Committee, the Board, and any delegate of the Committee pursuant to the provisions of the Plan shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

SECTION 4
SHARES SUBJECT TO THE PLAN,
NONEMPLOYEE DIRECTOR LIMIT

4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the total number of Shares available for grant under the Plan shall not exceed the sum of (a) 123,341,342 and (b) the number of Shares (not to exceed 40,225,653) that remain available for grant under the Company’s 2002 Stock Option Plan as of the date of obtaining shareholder approval of the amended and restated Plan on May 9, 2006, (c) any Shares (not to exceed 28,019,786) that otherwise would have been returned to the 2002 Stock Option Plan after May 9, 2006 on account of the expiration, cancellation, or forfeiture of Awards granted thereunder, and (d) 25,000,000 Shares. For purposes of this Section 4.1, effective with respect to Awards granted on or after the May 17, 2011, each Award other than an Option or SAR shall reduce the number of Shares available for Awards under the Plan by 2 Shares for each Share covered by the Award in lieu of the 3-to-1 Share counting rule that applied under the Plan prior to such date. With respect to SARs and Options, the number of Shares which shall cease to be available under the Plan shall equal the total number of Shares covered by each SAR or Option, as evidenced in the applicable Award Agreement. To the extent an Award under the Plan (other than a SAR or Option) is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan (and in the case of Options or SARs shall reduce the number of Shares available for issuance under the Plan by the number of Shares having a Fair Market Value equal to the cash delivered). Subject to adjustment provided in Section 4.3, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate Share number stated in this Section 4.1, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under Section 4.2. Shares granted under the Plan may be either authorized but unissued Shares or treasury Shares.

4.2 Lapsed Awards. To the extent an Award expires or is cancelled without having been exercised, or is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock, Unrestricted Stock, Performance Units, Performance Shares, or Stock Units is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or repurchased Shares) which were subject thereto plus the number of additional Shares, if any, that counted against Shares available for issuance under the Plan in respect thereof using the Share counting rule in effect at the time the applicable Award was granted will become available for future grant or sale under the Plan (unless the Plan has terminated). Notwithstanding the foregoing, and except with respect to shares of Restricted Stock that are forfeited rather than vesting, Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan. Shares used to pay the tax and/or exercise price of an Award will not become available for future grant or sale under the Plan. For the avoidance of doubt, Shares purchased by the Company with the proceeds of a Stock Option exercise shall not again be available for issuance under the Plan.

4.3 Adjustments in Awards and Authorized Shares. In the event of a dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), merger, reorganization, consolidation, recapitalization, separation, liquidation, stock split, reverse stock split, split-up, spin-off, Share combination, repurchase, or exchange of Shares or other securities of the Company or other significant corporate transaction, or other significant change affecting the Shares, the Committee shall adjust the number, kind and class of securities which may be delivered under the Plan, the number, class, kind and price of securities subject to outstanding Awards, and the numerical limits of Sections 4.4, 6.1, 7.1.1, 8.1 and 9.1 in such manner as the Committee (in its sole discretion) shall determine to be appropriate to equitably adjust such Awards. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a

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whole number. Notwithstanding the foregoing, all adjustments under this Section 4.3 shall be made in a manner that does not result in taxation under Code Section 409A or, for the avoidance of doubt, loss of the performance-based compensation exception under Code Section 162(m).

4.4 Limit on Nonemployee Director Awards. No Nonemployee Director shall be granted Awards in any fiscal year of the Company having an aggregate Grant Date value in excess of $500,000. For this purpose, Restricted Stock, Unrestricted Stock, Performance Units, Performance Shares and Stock Units shall be valued based on the Fair Market Value on the Grant Date of the maximum number of Shares covered thereby (or the maximum dollar value thereof with respect to Awards denominated in dollars) and Options and SARs shall be valued using a Black-Scholes or other accepted valuation model, in each case, using reasonable assumptions. The limits set forth in Sections 6.1, 7.1.1, 8.1 and 9.1 shall not apply to Nonemployee Directors.

4.5 The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees of another corporation who become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Committee may direct that such Awards be granted with such terms and conditions as the Committee considers appropriate in the circumstances. Such Awards shall not reduce the Shares available for issuance under the Plan, nor shall shares subject to such Awards be added back to the Shares available for issuance under the Plan. Additionally, subject to the rules of the applicable stock exchange on which the Shares are listed, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consolidation payable to holder of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares available for issuance under the Plan (and shares subject to such Awards shall not be added back to the Shares available for Awards under the Plan); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not eligible to receive Awards under the Plan prior to such acquisition or combination.

SECTION 5
PERFORMANCE GOALS

5.1 Establishment of Performance Goals. For each Performance Period, on or before the applicable Determination Date, the Committee shall establish and set forth in writing the Performance Goals, if any, and any particulars, components and adjustments relating thereto, applicable to each Participant. The Performance Goals, if any, will be objectively measurable and will be based upon the achievement of a specified percentage or level in one or more of the following objectively defined and non-discretionary factors preestablished by the Committee in accordance with Code Section 162(m): (a) comparable store sales growth; (b) earnings; (c) earnings per share; (d) return on equity; (e) return on net assets; (f) return on invested capital; (g) gross sales; (h) net sales; (i) net earnings; (j) free cash flow; (k) total shareholder return; (l) stock price; (m) gross margin; (n) operating margin; (o) market share; (p) inventory levels; (q) expense reduction; and (r) employee turnover. For Awards that are not intended to comply with the performance-based compensation exception under Code Section 162(m), Performance Goals may consist of objective and/or subjective elements based on any financial and non-financial criteria (including, without limitation, subjective criteria and individual performance), as established by the Committee in its sole discretion.

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5.2 Committee Discretion on Performance Goals. As determined in the discretion of the Committee, the Performance Goals for any Performance Period may to the extent consistent with the performance-based compensation exception under Code Section 162(m) (a) differ from Participant to Participant and from Award to Award, (b) be based on the performance of the Company as a whole or the performance of a specific Participant or one or more subsidiaries, divisions, departments, regions, stores, segments, products, functions or business units of the Company, (c) be measured on a per share, per capita, per unit, per square foot, per employee, per store basis, and/or other objective basis (d) be measured on a pre-tax or after-tax basis, and (e) be measured on an absolute basis or in relative terms (including, but not limited to, the passage of time and/or against other companies, financial metrics and/or an index). Without limiting the foregoing, and for the avoidance of doubt except as would be inconsistent with the performance-based compensation exception under Code Section 162(m), the Committee shall adjust any performance criterion,criteria, Performance Goal or other feature of an Award that relates to or is wholly or partially based on the number of, or the value of, any stock of the Company, to reflectreflect any stock dividend or split, repurchase, recapitalization, combination, or exchange of shares or other similar changes in such stock. All determinations by the Committee shall be made in objective terms and in accordance with Code Section 162(m) for Awards intended to comply with the performance-based compensation exception thereunder. Awards that are not intended by the Company to comply with the performance-based compensation exception under Code Section 162(m) may take into account other factors (including subjective factors).

5.3 Adjustments. For Awards intended to comply with the performance-based compensation exception under Code Section 162(m), the impact of objectively defineddefined and non-discretionary items (includable in one or more of the following categories or other categories to the extent permitted by Code Section 162(m)) may be taken into account in any manner preestablished by the Committee in accordance with Code Section 162(m) when determining whether a Performance Goal has been attained: (a) changes in generally accepted accounting principles (“GAAP”); (b) nonrecurring items, if any, that may be defineddefined in an objective and non-discretionary manner under U.S. GAAP accounting standards or other applicable accounting standards in effect from time to time; (c) the sale of investments or non-core assets; (d) discontinued operations, categories or segments; (e) legal claims and/or litigation and insurance recoveries relating thereto; (f) amortization, depreciation or impairment of tangible or intangible assets; (g) reductions in force, early retirement programs or severance expense; (h) investments, acquisitions or dispositions; (i) political, legal and other business interruptions (such as due to war, insurrection, riot, terrorism, confiscation,confiscation, expropriation, nationalization, deprivation, seizure, and regulatory requirements); (j) natural catastrophes; (k) currency fluctuations;fluctuations; (l) stock based compensation expense; (m) early retirement of debt; (n) conversion of convertible debt securities; and (o) termination of real estate leases. Each of the adjustments described above may relate to the Company as a whole or any part of the Company’s business or operations. For Awards

SECTION 6
STOCK OPTIONS

6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Employees, Consultants and Nonemployee Directors at any time and from time to time as determined by the Committee in its sole discretion. The Committee, in its sole discretion, shall determine the number of Shares subject to each Option, provided that are notduring any Fiscal Year, no Participant shall be granted Options covering more than 18,000,000 Shares. The Committee may grant Incentive Stock Options, Nonqualified Stock Options, or a combination thereof; provided, however, that any Options granted to Consultants or Nonemployee Directors pursuant to this Section 6 shall be Nonqualified Stock Options.

6.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Option, the number of Shares to which the Option pertains, any conditions to exercise of the Option, and such other terms and conditions as the Committee, in its discretion, shall determine. The Award Agreement shall also specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.

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6.3 Exercise Price. Subject to the provisions of this Section 6.3, the Exercise Price for each Option shall be determined by the Committee in its sole discretion.

6.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the Exercise Price shall be determined by the Committee in its discretion but shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.

6.3.2 Incentive Stock Options. In the case of an Incentive Stock Option, the Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date; provided, however, that if on the Grant Date, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to Code Section 424(d)) owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Exercise Price shall be not less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the Grant Date.

6.3.3 Substitute Options. Notwithstanding the provisions of Sections 6.3.1 and 6.3.2, in the event that the Company or an Affiliate consummates a transaction described in Code Section 424(a) (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Employees or Consultants on account of such transaction may be granted Options in substitution for options granted by their former employer. If such substitute Options are granted, the Committee, in its sole discretion and consistent with Code Section 424(a) and Code Section 409A, may determine that such substitute Options shall have an Exercise Price less than one hundred percent (100%) of the Fair Market Value of the Shares on the Grant Date.

6.4 Expiration of Options.

6.4.1 Expiration Dates. Except as set forth by the Committee in an Award Agreement, each Option shall terminate no later than the first to occur of the following events:

(a) The date for termination of the Option set forth in the Award Agreement; or

(b) The expiration of ten (10) years from the Grant Date; or

(c) The expiration of three (3) months from the date of the Participant’s Termination of Service for a reason other than the Participant’s death, Disability or Retirement; or

(d) The expiration of one (1) year from the date of the Participant’s Termination of Service by reason of Disability or death; or

(e) The expiration of one (1) year from the date of the Participant’s Retirement (except as provided in Section 6.8.2 regarding Incentive Stock Options).

6.4.2 Committee Discretion. The Committee, in its sole discretion, (a) shall provide in each Award Agreement when each Option expires and becomes unexercisable, and (b) may, after an Option is granted, extend the term of the Option (subject to Section 6.8.4 regarding Incentive Stock Options). With respect to the Committee’s authority in Section 6.4.2(b), if, at the time of any such extension, the exercise price per Share of the Option is less than the Fair Market Value of a Share, the extension shall, unless otherwise determined by the Committee, be limited to the earlier of (1) the maximum term of the Option as set by its original terms, or (2) ten (10) years from the Grant Date. Unless otherwise determined by the Committee, any extension of the term of an Option pursuant to this Section 6.4.2 shall comply with Code Section 409A to the performance-based compensation exceptionextent necessary to avoid taxation thereunder.

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6.5 Exercisability of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine in its sole discretion. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option.

6.6 Payment. Options shall be exercised by the Participant’s delivery of a notice of exercise in such form and manner as the Company may designate to the Secretary of the Company (or its designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. Upon the exercise of any Option, the Exercise Price shall be payable to the Company in full in cash or its equivalent. The Committee, in its sole discretion, also may permit exercise (a) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price, (b) by cashless or “net” exercise, or (c) by any other means which the Committee, in its sole discretion, determines to both provide legal consideration for the Shares, and to be consistent with the purposes of the Plan. As soon as practicable after receipt of a notification of exercise in such form and manner as the Company may designate and full payment for the Shares purchased, the Company shall deliver to the Participant (or the Participant’s designated broker), Share certificates (which may be in book entry form) representing such Shares.

6.7 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including, but not limited to, restrictions related to applicable federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded, or any blue sky or state securities laws.

6.8 Certain Additional Provisions for Incentive Stock Options.

6.8.1 Exercisability. The aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Company and its Subsidiaries or any Parent) shall not exceed $100,000. To the extent that the aggregate Fair Market Value of the Shares with respect to which an Option designated as an Incentive Stock Option exceeds this $100,000 limit, such Option will be treated as a Nonqualified Stock Option. For purposes of this Section 6.8.1, Incentive Stock Options will be taken into account in the order in which they were granted, the Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted, and calculation will be performed in accordance with Code Section 422 and Treasury Regulations promulgated thereunder.

6.8.2 Termination of Service. No Incentive Stock Option may be exercised more than three (3) months after the Participant’s Termination of Service for any reason other than Disability or death, unless (a) the Participant dies during such three-month period, and/or (b) the Award Agreement or the Committee permits later exercise (in which case the Option instead may be deemed to be a Nonqualified Stock Option). No Incentive Stock Option may be exercised more than one (1) year after the Participant’s Termination of Service on account of Disability, unless (a) the Participant dies during such one-year period, and/or (b) the Award Agreement or the Committee permit later exercise (in which case the option instead may be deemed to be a Nonqualified Stock Option). Unless otherwise determined by the Committee, any extension of the term or exercise period on an Option pursuant to this Section 6.8.2 shall comply with Code Section 409A to the extent necessary to avoid taxation thereunder.

6.8.3 Company and Subsidiaries Only. Incentive Stock Options may be granted only to persons who are employees of the Company or a Subsidiary on the Grant Date.

6.8.4 Expiration. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the Grant Date; provided, however, that if the Option is granted to an Employee who, together with persons whose stock ownership is attributed to the Employee pursuant to Code Section 424(d), owns stock

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possessing more than 10% of the total combined voting power of all classes of the stock of the Company or any of its Subsidiaries, the Option may not be exercised after the expiration of five (5) years from the Grant Date.

SECTION 7
STOCK APPRECIATION RIGHTS

7.1 Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to Employees, Consultants, and Nonemployee Directors at any time and from time to time as shall be determined by the Committee, in its sole discretion.

7.1.1 Number of Shares. The Committee shall have complete discretion to determine the number of SARs granted to any Participant, provided that during any Fiscal Year, no Participant shall be granted SARs covering more than 18,000,000 Shares.

7.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan. The exercise price of each SAR shall be determined by the Committee in its discretion but shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date. After a SAR is granted, the Committee, in its sole discretion, may accelerate the exercisability of the SAR.

7.2 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Committee, in its sole discretion, shall determine.

7.3 Expiration of SARs. A SAR granted under the Plan shall expire upon the date determined by the Committee, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6.4 also shall apply to SARs.

7.4 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(a) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares of equivalent value or a combination thereof, as set forth in the applicable Award Agreement.

SECTION 8
RESTRICTED STOCK AND UNRESTRICTED STOCK

8.1 Grant of Restricted Stock and Unrestricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and Unrestricted Stock to Employees, Consultants, and Nonemployee Directors in such amounts as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion, shall determine the number of Shares to be granted to each Participant, provided that during any Fiscal Year, no Participant shall receive more than 2,000,000 Shares of Restricted Stock or Unrestricted Stock.

8.2 Restricted Stock or Unrestricted Stock Agreement. Each Award of Restricted Stock or Unrestricted Stock shall be evidenced by an Award Agreement that shall specify any Period of Restriction (if any), the number of Shares granted, and such other terms and conditions as the Committee, in its sole discretion,

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shall determine. Unless the Committee determines otherwise, Shares of Restricted Stock shall be held by the Company as escrow agent until the restrictions on such Shares have lapsed.

8.3 Transferability. Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

8.4 Other Restrictions. The Committee, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate, in accordance with this Section 8.4.

8.4.1 General Restrictions. The Committee may set restrictions based upon continued employment or service with the Company and its Affiliates, the achievement of specific performance objectives (Company-wide, divisional, or individual), applicable federal or state securities laws, or any other basis determined by the Committee in its discretion.

8.4.2 Section 162(m) Performance Restrictions. For purposes of qualifying Awards of Restricted Stock as “performance-based compensation” under Code Section 162(m), the Committee, in its discretion, may adjustset restrictions based upon the achievement of Performance Goals during the Performance Period. For such Awards, the Performance Goals and Performance Period shall be set by the Committee on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Code Section 162(m), the Committee shall follow any procedures determined by it from time to time to be necessary or appropriate thereunder.

8.4.3 Legend on Certificates. The Committee, in its discretion, may legend the certificates representing Restricted Stock to give appropriate notice of the restrictions applicable to such Shares.

8.5 Removal of Restrictions. Except as may be provided in the Award Agreement, Restricted Stock shall be released from escrow as soon as practicable after the last day of the Period of Restriction. The Committee, in its discretion, may accelerate the time at which any restrictions shall lapse or be removed. After the restrictions have lapsed, the Participant shall be entitled to have any legend or legends under Section 8.4.3 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to applicable laws. The Committee (in its discretion) may establish procedures regarding the release of Shares from escrow and the removal of legends, as necessary or appropriate to minimize administrative burdens on the Company.

8.6 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Committee determines otherwise.

8.7 Dividends and Other Distributions. During any Period of Restriction, Participants holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid, unless otherwise provided in the Award Agreement.

8.8 Return of Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed shall revert to the Company and again shall become available for grant under the Plan.

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SECTION 9
STOCK UNITS, PERFORMANCE UNITS, AND PERFORMANCE SHARES

9.1 Grant of Stock Units, Performance Units, or Performance Shares. Subject to the terms and provisions of the Plan, Stock Units, Performance Units, or Performance Shares may be granted to Employees, Consultants, and Nonemployee Directors at any time and from time to time, as shall be determined by the Committee, in its sole discretion.

2.6“Performance Period” means any period not exceeding 36 months as determined by the Committee, in its sole discretion. The Committee may establish different Performance Periods for different Participants, and the Committee may establish concurrent or overlapping Performance Periods.

2.7“Plan” means this Executive Management Incentive Compensation Award Plan as amended from time to time.

3.Administration of the Plan

The PlanCommittee shall be administeredhave complete discretion in determining the number of Stock Units, Performance Units, or Performance Shares granted to each Participant, provided that during any Fiscal Year no Participant shall receive Stock Units, Performance Units or Performance Shares having, in the aggregate, a grant date value (assuming maximum payout) greater than $20,000,000 or covering more than 2,000,000 Shares (assuming maximum payout), whichever is greater.

9.2 Initial Value of Stock Units, Performance Units, or Performance Shares. Each Stock Unit and Performance Unit shall have an initial value that is established by the Committee on or before the Grant Date. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant Date.

9.3 Award Agreement. Each Award of Stock Units, Performance Units, or Performance Shares shall be evidenced by an Award Agreement that shall specify the Performance Period, Period of Restriction, Deferral Period (if any), and such other terms and conditions as the Committee, in its sole discretion, shall determine.

9.4 Performance Objectives and Other Terms. The Committee shall set performance objectives, a Period of Restriction, Deferral Period, or other vesting criteria in its discretion which, depending on the extent to which they are met, will determine the number or value of Stock Units, Performance Units, or Performance Shares that will be paid out to the Participants. Each Award of Stock Units or Performance Units subject to a Deferral Period and each Award of Performance Shares subject to a Deferral Period shall be referred to herein as Deferred Units or Deferred Shares, respectively. Each Award of Stock Units subject to a Period of Restriction shall be referred to herein as a “Restricted Stock Unit.” The time period during which the Award is subject to deferral shall be the “Deferral Period”.

9.4.1 General Performance Objectives. The Committee may set performance objectives or vesting criteria based upon the achievement of Company-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Committee in its discretion (for example, but not by way of limitation, upon continued employment or service with the Company and its Affiliates).

9.4.2 Section 162(m) Performance Objectives. For purposes of qualifying Awards of Stock Units, Performance Units, or Performance Shares as “performance-based compensation” under Code Section 162(m), the Committee, in its discretion, may determine that the performance objectives applicable to Stock Units, Performance Units, or Performance Shares shall be based on the achievement of Performance Goals during the Performance Period. For such Awards, the Performance Goals and Performance Period shall be set by the Committee on or before the Determination Date. In granting Stock Units which are intended to qualify under Code Section 162(m), the Committee shall follow any procedures determined by it from time to time to be necessary or appropriate thereunder.

9.4.3 Deferral of Awards. The Committee may set such terms and conditions for deferral of payment of an Award granted under this Section 9 in accordance with the following provisions or such other terms and conditions determined by the Committee in its sole discretion:

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(a) Deferred Compensation. Each grant shall constitute the agreement by the Company to issue or transfer Shares or cash, or a combination thereof, to the Participant in the future in consideration of the performance of services, subject to the fulfillment during the Deferral Period of such conditions as the Committee may specify.

(b) Consideration. Each grant may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than Fair Market Value on the Grant Date.

(c) Deferral Period. Each grant shall provide that the Deferred Units and Deferred Shares covered thereby shall be subject to a Deferral Period, which shall be fixed by the Committee on the Grant Date (or such earlier time required for compliance with Code Section 409A), and any Award may provide for the earlier termination of such period in the event of a change in control of the Company or other similar transaction or event. If the Deferral Period is to terminate on account of a change in control or other similar transaction or event, unless otherwise determined by the Committee, such change in control or other similar transaction or event must constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company (as determined in accordance with Section 409A(a)(2)(A)(v) of the Code and Treasury regulation Section 1.409A-3(i)(5)).

9.5 Earning of Stock Units, Performance Units, or Performance Shares. After the applicable Period of Restriction or Deferral Period has ended, the Participant shall be entitled to receive a payout of the number of Stock Units, Performance Units, or Performance Shares earned by the Participant over the Period of Restriction or Deferral Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting requirements have been achieved during the Performance Period.

9.6 Form and Timing of Payment. Except as otherwise set forth in an Award Agreement, payment of earned Stock Units, Performance Units, or Performance Shares shall be upon the expiration of the applicable Period of Restriction (subject to any deferral permitted under Section 10.9) or Deferral Period. The Committee, in its sole discretion, may pay such earned Awards in cash, Shares, or a combination thereof, as set forth in the applicable Award Agreement.

9.7 Dividend Equivalents and Other Ownership Rights. During the Period of Restriction or Deferral Period, the Participant shall not have any right to transfer any rights under the subject Award, shall not have any rights of ownership in the Stock Units, Performance Units, or Performance Shares and shall not have any right to vote such Awards, but the Committee may, consistent with the requirements of Code Section 409A (including any exemption therefrom), on or after the Grant Date authorize the payment of Dividend Equivalents on such shares or units in cash or additional Shares on a current, deferred or contingent basis.

9.8 Cancellation. On the date set forth in the Award Agreement, all unearned or unvested Stock Units, Performance Units, or Performance Shares shall be forfeited to the Company.

SECTION 10
MISCELLANEOUS

10.1 No Effect on Employment or Service. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment or service at any time, with or without cause. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Affiliates (or between Affiliates) shall not be deemed a Termination of Service. Employment with the Company and its Affiliates is on an at-will basis only.

10.2 Participation. No Employee, Consultant or Nonemployee Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. A Participant’s rights, if any, in respect of or in connection with any Award is derived solely from the

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discretionary authority to interpret the provisionsdecision of the Plan. The decisionsCompany to permit the individual to participate in the Plan and to benefit from a discretionary Award. By accepting an Award under the Plan, a Participant expressly acknowledges that there is no obligation on the part of the CommitteeCompany to continue the Plan and/or grant any additional Awards. Any Award granted hereunder is not intended to be compensation of a continuing or recurring nature, or part of a Participant’s normal or expected compensation, and in no way represents any portion of a Participant’s salary, compensation, or other remuneration for purposes of pension benefits, severance, redundancy, resignation or any other purpose. The Company and its Subsidiaries and Affiliates reserve the right to terminate the service of any person at any time, and for any reason, subject to applicable laws and such person’s written employment agreement (if any), and such terminated person shall be final anddeemed irrevocably to have waived any claim to damages or specific performance for breach of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the Plan or any outstanding Award that is forfeited and/or is terminated by its terms or to any future Award.

10.3 Successors. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all parties making claimsor substantially all of the business or assets of the Company.

10.4 Beneficiary Designations. If permitted by the Committee, a Participant under the Plan.Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate and, subject to the terms of the Plan and of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participant’s estate.

10.5 Limited Transferability of Awards. No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the limited extent provided in Section 10.4. All rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to the Participant. Notwithstanding the foregoing, a Participant may, if the Committee (in its discretion) so permits, transfer an Award granted on or after January 24, 2006, to an individual or entity other than the Company. Any such transfer shall be made in accordance with such procedures as the Committee may specify from time to time.

10.6 No Rights as Stockholder. Except to the limited extent provided in Sections 8.6 and 8.7, no Participant (nor any beneficiary) shall have any of the rights or privileges of a stockholder of the Company with respect to any Shares issuable pursuant to an Award (or exercise thereof), unless and until certificates (which may be in book entry form) representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant (or beneficiary).

10.7 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), or at such earlier time as the Tax Obligations are due, the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy all Tax Obligations. Notwithstanding any contrary provision of the Plan, if a Participant fails to remit to the Company the amount of such Tax Obligations within the time period specified by the Committee (in its discretion), the Participant’s Award may, in the Committee’s discretion, be forfeited and in such case the Participant shall not receive any of the Shares covered by such Award.

10.8 Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may delegate its administrative authorityspecify from time to time, may permit or require a Participant to satisfy Tax Obligations, in whole or in part by (a) having the Company withhold otherwise deliverable Shares, or (b) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld or remitted

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which have been held for such period of time required to avoid adverse accounting consequences. The amount of the Tax Obligations shall be deemed to include any amount which the Committee agrees may be withheld at the time the election is made, and to the extent necessary to avoid adverse accounting consequences not to exceed the amount determined by using the minimum federal, state, local or foreign jurisdiction statutory withholding rates applicable to the Participant with respect to Awardsthe Award on the date that are not intendedthe amount of tax or social insurance liability to comply withbe withheld or remitted is to be determined. Except as otherwise determined by the performance-based compensation exception under Code Section 162(m).

4.Eligibility and Participation

OfficersCommittee, the Fair Market Value of the CompanyShares to be withheld or delivered shall be eligibledetermined as of the date that the Tax Obligations are required to participatebe withheld or remitted.

10.9 Deferrals. The Committee, in the Plan as determined at theits sole discretion, of the Committee.

5.Amount of Awards

5.1With respect to each Participant, the Committee shall establish one or more Performance Periods, one or more individual Participant incentive targets for each Performance Period, and the Performance Goal(s) to be met during such Performance Periods. With respect to Awards intended to comply with the performance-based compensation exception under Code Section 162(m), the establishment of the Performance Period(s), the applicable Performance Goals, and the targets shall comply with, to the extent required, the rules of Code Section 162(m). Notwithstanding the foregoing, the Committee may also grant Awards that are not intended to comply with the performance-based compensation exception under Code Section 162(m), which may be based on the Performance Goals and/or other financial or non-financial performance criteria (including, without limitation, subjective criteria and individual performance).

5.2The maximum amount of any Awards that can be paid under the Plan to any Participant with respect to any 12-month Performance Period is $10,000,000, (pro-rated for Performance Periods of less than 12 months or a partial or whole multiple thereof for Performance Periods of more than 12 months) including the fair market value as of date of grant of any stock, restricted stock or stock-based or stock denominated units awarded to the Participant hereunder. For purposes of determining the maximum award payable, the fair market value of stock, restricted stock or other stock-based or stock denominated units with restrictions shall equal the fair market value of unrestricted stock or stock underlying such units without restrictions, respectively. The Committee reserves the right, in its sole discretion, to reduce or eliminate the amount of an Award otherwise payable to a Participant with respect to any Performance Period. In addition, with respect to Awards that are not intended to satisfy the performance-based compensation exception under Code Section 162(m), the Committee reserves the right, in its sole discretion, to increase the amount of an Award otherwise payable to a Participant with respect to any Performance Period.

6.Payment of Awards

6.1Unless otherwise determined by the Committee, a Participant must be employed on the date the Award is to be paid. The Committee may make exceptions in the case of retirement, death or disability or under other circumstances, as determined by the Committee in its sole discretion.

6.2

Any Awards made under the Plan may be paid in cash, or its equivalent, stock, restricted stock, other stock-based or stock denominated units, or any other form of consideration or any combination thereof, as determined by the Committee, subject to the requirements of Code Section 162(m) for Awards intended to comply with the performance-based compensation exception thereunder and Code Section 409A for all Awards; provided, that no Award intended to comply with the performance-based compensation exception under Code Section 162(m) will be paid to a Participant who is subject to the limitations of Code Section 162(m) with respect to any Performance Period until the Committee has certified in writing that the terms and conditions underlying the payment of such Award have been satisfied. Notwithstanding the foregoing, in order to comply with the short-term deferral exception under Section 409A of the Code, if the Committee waives the requirement that a Participant must be employed on the date the Award is to be paid, payout shall occur no later than the 15th day of the third month following the later of (i) the end of the Company’s taxable

year in which such requirement is waived or (ii) the end of the calendar year in which such requirement is waived. Equity or equity based awards granted as payment for an Award shall be issued pursuant to the Company’s equity compensation plans in existence at the time of grant. The number of shares or units awarded shall be determined based on the fair market value of the Company’s common stock on the award grant date. For the avoidance of doubt, the fair market value of restricted stock and other stock-based or stock denominated units with restrictions shall be as set forth in Section 5 above.

7.General

7.1Tax Withholding. The Company shall have the right to deduct from all Awards any federal, state, or local income and/or payroll taxes required by law to be withheld with respect to such payments. The Company also may withhold from any other amount payable by the Company or any affiliate to the Participant an amount equal to the taxes required to be withheld from any Award.

7.2Claim to Awards and Employment Rights. Nothing in the Plan shall confer upon any Participant the right to continued employment with the Company or any of its affiliates, or affect in any way the right of the Company or any affiliate to terminate the Participant’s employment at any time, and for any reason, or change the Participant’s responsibilities. Awards represent unfunded and unsecured obligations of the Company and a holder of any right hereunder in respect of any Award shall have no rights other than those of a general unsecured creditor to the Company.

7.3Beneficiaries. To the extent the Committee permits beneficiary designations, any payment of Awards due under the Plan to a deceased Participant shall be paid to the beneficiary duly designated by the Participant in accordance with the Company’s practices. If no such beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s legal representative. A beneficiary designation may be changed or revoked by a Participant at any time, provided the change or revocation is filed with the Committee prior to the Participant’s death.

7.4Nontransferability. A person’s rights and interests under the Plan, including any Award previously made to such person or any amounts payable under the Plan, may not be assigned, pledged, or transferred except, in the event of a Participant’s death, to a designated beneficiary as provided in the Plan, or in the absence of such designation, by will or the laws of descent and distribution.

7.5Indemnification. Each person who is or shall have been a member of the Committee and each employee of the Company or an affiliate who is delegated a duty under the Plan shall be indemnified and held harmless by the Company from and against any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by him in satisfaction of judgment in any such action, suit or proceeding against him, provided such loss, cost, liability or expense is not attributable to such person’s willful misconduct. Any person seeking indemnification under this provision shall give the Company prompt notice of any claim and shall give the Company an opportunity, at its own expense, to handle and defend the same before the person undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power than the Company may have to indemnify them or hold them harmless.

7.6Expenses. The expenses of administering the Plan shall be borne by the Company.

7.7Titles and Headings. The titles and headings of the sections of the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

7.8Intent. The intention of the Company and the Committee is to administer the Plan in compliance with Code Section 162(m) with respect to Awards intended to comply with the performance-based compensation exception thereunder so that such Awards will be treated as performance-based compensation under Code Section 162(m). If any provision of such an Award does not comply with the requirements of Code Section 162(m), then such provision shall be construed or deemed amended to the extent necessary to conform to such requirements. With respect to all other Awards, the Plan may be operated without regard to the constraints of Code Section 162(m).

7.9Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award shall be determined in accordance with the laws of the State of California (without giving effect to principles of conflicts of laws thereof) and applicable Federal law.

8.Amendments, Suspension or Termination of the Plan

The Committee may terminate the Plan at any time, provided such termination shall not affectpermit a Participant to defer receipt of the payment of any Awards accruedcash or the delivery of Shares that would otherwise be delivered to a Participant under the Plan prior toPlan. In the dateevent of such a deferral, the termination. The Committee, in its discretion, may at anyprovide that the payment of Dividend Equivalents attributable thereto shall be also deferred until such time or from time to time, amend or suspend and, if suspended, reinstate,as the PlanAward will be settled in whole or in part, provided however, that any amendment ofaccordance with the PlanParticipant’s deferral election. Any such deferral election shall be subject to such rules and procedures as shall be determined by the approval of the Company’s shareholders to the extent required toCommittee in its sole discretion, which rules and procedures shall comply with the requirements of Code Section 162(m),409A, unless otherwise determined by the Committee.

10.10 Elections by Nonemployee Directors. Pursuant to such procedures as the Committee (in its discretion) may adopt from time to time, each Nonemployee Director may elect to forego receipt of all or a portion of the annual retainer, committee fees and meeting fees otherwise due to the Nonemployee Director in exchange for Shares or Stock Units. The number of Shares or Stock Units received by any Nonemployee Director shall equal the amount of foregone compensation divided by the Fair Market Value of a Share on the date the compensation otherwise would have been paid to the Nonemployee Director, rounded up to the nearest whole number of Shares. The procedures adopted by the Committee for elections under this Section 10.10 shall be designed to ensure that any such election by a Nonemployee Director will not disqualify him or her as a “non-employee director” under Rule 16b-3. Unless otherwise determined by the Committee, the elections permitted under this Section 10.10 shall comply with Code Section 409A or an exemption therefrom.

10.11 Fractional Shares. The Company shall not be required to issue any fractional Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement thereof in cash.

10.12 Code Section 409A. Unless otherwise determined by the Committee, each Award shall comply with Code Section 409A or an exemption therefrom, and the Committee shall comply with Code Section 409A in establishing the rules and procedures applicable to deferrals in accordance with Section 10 and taking or permitting such other actions under the terms of the Plan that would otherwise result in a deferral of compensation subject to Code Section 409A.

10.13 Recoupment of Awards. Awards are subject to recoupment in accordance with any Applicable Law and any recoupment policy, arrangement or agreement adopted by the Company from time to time.

SECTION 11
AMENDMENT AND TERMINATION

11.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend, suspend or terminate the Plan, or any other applicable laws, regulationspart thereof, at any time and for any reason. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. The amendment, suspension, or rules.termination of the Plan shall not, without the consent of the Participant, materially and adversely alter or impair any rights or obligations under any Award theretofore granted to such Participant. No Award may be granted during any period of suspension or after termination of the Plan.

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SECTION 12
CHANGE IN CONTROL

12.1 Effect of Change in Control on Options and SARs.  Except as set forth in an applicable Award Agreement and subject to Code Section 409A, in the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under outstanding Options or SARs or substitute for outstanding Options or SARs substantially equivalent options or SARs covering the Acquiror’s stock.  Except as set forth in an applicable Award Agreement and subject to Code Section 409A, any Options or SARs which are neither assumed, continued or substituted by the Acquiror in connection with the Change in Control nor exercised as of the Change in Control shall, contingent on the Change in Control, become fully vested and exercisable immediately prior to the Change in Control.  Options and SARs which are assumed or continued in connection with a Change in Control shall be subject to such additional accelerated vesting and/or exercisability as the Board may determine, if any.

12.2 Effect of Change in Control on Other Awards. Except as set forth in an applicable Award Agreement and subject to Code Section 409A, in the event of a Change in Control, the Acquiror may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under outstanding Awards other than Options or SARs or substitute for such Awards substantially equivalent Awards covering the Acquiror’s stock.  Except as set forth in an applicable Award Agreement and subject to Code Section 409A, any such Awards which are neither assumed, continued or substituted by the Acquiror in connection with the Change in Control shall, contingent on the Change in Control, become fully vested.  Awards which are assumed or continued in connection with a Change in Control shall be subject to such additional accelerated vesting or lapse of restrictions as the Board may determine, if any.

12.3 For purposes of the Plan, except as set forth in an applicable Award Agreement and subject to Code Section 409A, “Change in Control” means the consummation of one or more of the following events:

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(i)

any “person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of shares representing more than 50% of the combined voting power of the then outstanding Voting Stock (as defined below in this Section 12.3) of the Company; provided, however, that a “Change in Control” shall not be deemed to occur solely as the result of the acquisition by Doris F. Fisher, John J. Fisher, William Fisher and/or Robert R. Fisher (collectively, the “Fishers”) and the Permitted Designees (as defined below in this Section 12.3) of shares representing in the aggregate more than 50% but less than 75% of the combined voting power of the then outstanding Voting Stock of the Company;

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(ii)

the Company consolidates with or merges into any other corporation, any other corporation merges into the Company, or the Company effects a share exchange or the Company conveys, sells, transfers or leases all or substantially all (more than 75%) of its assets (other than to one or more of its wholly-owned subsidiaries), and, in the case of any such consolidation, merger or share exchange transaction, the outstanding Common Stock of the Company is reclassified into or exchanged for any other property or securities, unless the shareholders of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined voting power of the then outstanding Voting Stock of the entity resulting from such transaction in substantially the same proportion as their ownership of the Voting Stock of the Company immediately before such transaction, or unless such transaction is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock;

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(iii)

the Company or the Company and its subsidiaries, taken as a whole, sells, assigns, conveys, transfers or leases all or substantially all (more than 75%) of the assets of the Company or of the Company and its subsidiaries, taken as a whole over a 12-month period, as applicable (other than to one or more wholly-owned subsidiaries of the Company); or

(iv)

any time the Continuing Directors (as defined below in this Section 12.3) do not constitute a majority of the Board (or, if applicable, a successor entity to the Company).

For purposes of the above definition of Change in Control, “Continuing Directors” means, as of any date of determination, any member of the Board who (A) was a member of such Board on May 17, 2016 (the “Original Directors”) or (B) was appointed, nominated for election, or elected to such Board with the approval of a majority of the Original Directors or Continuing Directors who were members of such Board at the time of such nomination or election.

For purposes of the above definition of Change-in-Control, “Permitted Designees” means (i) a spouse or lineal descendent by blood or adoption of any of the Fishers; (ii) trusts solely for the benefit of any of the Fishers, one or more charitable foundations, institutions or entities or any of the individuals referred to in clause (i); (iii) in the event of the death of a Fisher, his or her estate, heirs, executor, administrator, committee or other personal representative; or (iv) any Person (as defined below in this Section 12.3) so long as any of the Fishers or any of the individuals referred to in clause (i) are the sole beneficial owners of more than 50% of the Voting Stock of such Person and constitute a majority of the board of directors of such Person, in the case of a corporation, or of the individuals exercising similar functions, in the case of an entity other than a corporation.

For purposes of the above definition of Change in Control, “Person” means any individual, corporation, partnership, joint venture, trust, estate, unincorporated organization, limited liability company or government or any agency or political subdivision thereof.

For purposes of the above definition of Change in Control, “Voting Stock” means all classes of capital stock (shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of the applicable entity, but excluding any debt securities convertible into such equity) of the applicable Person then outstanding and normally entitled to vote in the election of directors.

SECTION 13
LEGAL CONSTRUCTION

13.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

13.2 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.

13.3 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

13.4 Securities Law Compliance. With respect to Section 16 Persons, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan, Award Agreement or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.

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13.5 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of California (with the exception of its conflict of laws provisions).

13.6 Captions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of the Plan.

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This Proxy Statement is printed on paper manufactured from well-
managed forests, controlled sources, and recycled wood or fiber.fiber. Soy
ink, rather than petroleum-based ink, is used throughout. We
encourage you to recycle this document when you are finishedfinished with it.

LOGO

GAP INC.

ATTN: MARIE MA

TWO FOLSOM STREET

SAN FRANCISCO, CA 94105

VOTE BY INTERNET -www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 


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GAP INC.
ATTN: MARIE MA
TWO FOLSOM STREET
SAN FRANCISCO, CA 94105

VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.







TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M89200-P62246-Z65040      E07383-P73025-Z67144          KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.GAP INC.

The Board of Directors recommends that you vote FOR Items 1, 2, 3 and 4:

     

GAP INC.

  

The Board

1.     Election of Directors recommends that you vote FOR

Items 1, 2, 3 and 4:

     For   AgainstAbstain
Nominees:
  
1a.     Domenico De Sole☐☐☐

1.    Election of Directors

ForAgainst Abstain 
  
1b.Robert J. Fisher☐☐☐

Nominees:

  
1c.

1a.   Domenico De Sole

¨¨¨

1b.   Robert J. Fisher

¨

¨¨

For

Against

 Abstain 

1c.   William S. Fisher

☐

¨

¨¨☐2.

Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending on January 30, 2016;

¨¨¨☐

1d.   Isabella D. Goren

¨

¨¨

1e.   Bob L. Martin

¨

¨¨

1f.    Jorge P. Montoya

¨

¨¨3.

Approve the Amendment and Restatement of The Gap, Inc. Executive Management Incentive Compensation Award Plan;

¨¨¨

1g.   Arthur Peck

¨

¨¨

1h.   Mayo A. Shattuck III

¨

¨¨4.

Hold an advisory vote to approve the overall compensation of the named executive officers; and

¨¨¨

1i.    Katherine Tsang

¨

¨¨

1j.    Padmasree Warrior

¨

¨¨5.

Transact such other business as may properly come before the meeting.

  
1d.Tracy Gardner☐☐☐
1e.Isabella D. Goren☐☐☐
  
1f.Bob L. Martin☐☐☐
1g.Jorge P. Montoya☐☐☐
1h.Arthur Peck☐☐☐
1i.Mayo A. Shattuck III☐☐☐
1j.Katherine Tsang☐☐☐

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

  
ForAgainstAbstain
  
2.     Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending on January 28, 2017;☐☐☐
3.Approve, on an advisory basis, the overall compensation of the named executive officers;☐☐☐
4.Approve the Amendment and Restatement of The Gap, Inc. 2011 Long-Term Incentive Plan; and☐☐☐
5.Transact such other business as may properly come before the meeting.


 
     

Signature [PLEASE SIGN WITHIN BOX]

     Date Signature (Joint Owners)     Date


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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:


The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.








E07384-P73025-Z67144




M89201-P62246-Z65040

GAP INC.


Annual Meeting of Shareholders


May 19, 201517, 2016 10:00 AM


This proxy is solicited by the Board of Directors

The undersigned hereby appoint(s) Arthur Peck, Michelle BanksJulie Gruber and Sabrina Simmons, or any of them, each with full power of substitution, as proxies to vote, in accordance with the instructions, as designated on the reverse side of this proxy, all of the shares of common stock of THE GAP, INC. that the undersigned is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:00 AM local time on May 19, 201517, 2016 at THE GAP, INC. Headquarters, Two Folsom Street, San Francisco, CA 94105, and any adjournment or postponement thereof. The proxies are authorized in their discretion to vote upon such other business as may properly come before the meeting.

This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’Directors' recommendations.

Continued and to be signed on reverse side