Business Performance & CEO Pay Fiscal 2016 was a difficult yearDespite challenges for much of the retail industry as mall traffic remained challengingin 2017, we delivered top and bottom line results above expectations throughout the industry continued to evolve at a rapid pace. Within our portfolio of Global brands, year.
·Old Navy delivered anotherstrong positive comp sales growth throughout the year of positivewith broad-based strength across nearly every merchandise category. ·We continue to see significant growth at Athleta, outpacing the industry, while also delivering operating margin expansion. Gap and Banana Republic both saw an improvement in comp and net sales growth. Gap continuedgrowth as they continue to move forward in its transformation, while Banana Republic performance did not meet our expectations. Athleta’s performance was strong and we continue to see opportunity for the brand and category.their transformation. During the year, operating expenses increased overall due to restructuring costs and increased investment·Gap Inc. delivered a total shareholder return of 46% in some categories of expense, such as marketing, that we consider importantfiscal 2017.for our continued transformation and the long-term health of the business.
The charts belowon the right show the directional alignment between Company performance, based on Net Sales and Diluted EPS, and our CEO’s year-over-year reported compensation. Reported compensation (Mr. Murphy (2014) andincludes only the portion of the grant associated with the current year, which is a third of the grant. As a new CEO, Mr. Peck (2015 & 2016)).Peck’s performance shares were not fully reflected in his reported compensation until 2017. | For fiscal 2016, consistent withPayouts under our philosophy of aligning Executiveincentive plans for fiscal 2017 were varied based on each organization’s performance. We believe outcomes reflect ourcontinued commitment to pay to performance, annualfor performance. Annual bonuses earned were at 15169 – 39% 185% of target for all Executives, except Ms. Syngal,Mr. Breitbard, who earned 121%75% of target, given the strong performance of Old Navy, and Mr. DiGrande, whose initialKirwan, who was terminated in March 2018 and received no annual bonus was guaranteed to be at least equal to the target amount in order to recruit him from his prior employer.bonus.
Stock options granted to our Executives during the year have an 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 realize any value from these awards. Our Long-Term Growth Program (“LGP”) awards with a 2014-20162015-2017 performance period paid out at 36%70%, 38%0% and 68%115% of target for Mr. Peck, Ms. SimmonsMr. Kirwan and Ms. Syngal, respectively. Similarly forFor our 20162017-2019 LGP awards, based on our fiscal 2016fiscal 2017 performance, even if target is achieved in future periods, the actual awards earned would not exceed 67% of the target shares for Mr. KirwanBreitbard and 92% ofwould exceed the target shares for allother Executives except Ms. Syngal given strong performanceMr. Kirwan, whose shares were forfeited.
| | CEO REPORTED COMPENSATION ($ MILLIONS) 
NET SALES ($ BILLIONS) 
DILUTED EARNINGS PER SHARE 
|
Table of Contents LISTENING TO OUR SHAREHOLDERS Our Committee is comprised solely of experienced independent directors and has established effective means for communicating with shareholders. Our shareholders also have the opportunity to cast a non-binding advisory vote on executive compensation at Old Navy.our Annual Meeting. | 
| | | Say On Pay – Pay–
97% Approval APPROVAL
At the 20162017 Annual Meeting, shareholders were very supportive of the structure and philosophy of our pay program during fiscal 2015.fiscal 2016. Consequently, we made no material structural changes during fiscal 2016.fiscal 2017 other than to our annual bonus plan, which was modified to incorporate operating model transformation objectives, as further described on page 25. We continued to set rigorous goals and align pay delivery with performance. | | CEO COMPENSATION SUMMARY The structure of our CEO’s compensation package is similar to our other Executives. The package is intended to reward him for sustained improvement of the Company’s financial performance and returns to shareholders while helping to promote alignment of interests across the executive team. The Committee used the same factors outlined under “Compensation Analysis Framework” below, as well as its judgment, in its determinations. 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 receives essentially the same benefits and limited perquisites provided to our other Executives, except that he is provided limited personal use of a Company airplane. The package is described more fully below: ·Base salary was increased by 3%, an amount equal to the budgeted percentage increase for U.S. headquarters employees, to $1,375,000. ·Annual bonus target remained unchanged at 175% of base salary and based 50% on financial performance and 50% on achievement against operatingmodel transformation goals. For fiscal year 2017, annual bonus was earned at 168% of target based on financial performance, which was above our expectations, and at 170% of target based on strong performance against our operating model transformation goals. ·We granted multi-year performance shares to Mr. Peck under the LGP. For LGP shares granted in 2015 to Mr. Peck, and based on financial performance during fiscal years 2015 – 2017, 99,747 shares, or 70% of the target amount, were earned based on strong financial performance in 2017 despite below target financial performance in 2015 and 2016. This further demonstrates alignment of executive pay to performance. ·We granted stock options, with an exercise price of $23.54, to Mr. Peck covering 600,000 shares, which will vest over a four-year period subject to continued service through each vesting date. | | CEO Pay – Total Reported &
Realized Pay(1)
Mr. Peck’s pay since appointment
to CEO on February 1, 2015 (2015
(2015 – 2016)2017) is set forth below:
Average Annual Reported Pay: $7,523,482
Pay
$10,211,383
Average Annual Realized Pay: $4,789,207Pay
$5,146,432 (1)
Average Annual Reported Pay derived from the Summary Compensation Table on page 37.33. Realized Pay is compensation actually received by the CEO, including salary, net spread on stock option exercises, vested full value awards, and all other compensation amounts realized during the period. For comparison purposes, Realized Pay includes annual incentive payouts for the year earned as in Reported Pay. ExcludesRealized Pay excludes the value of unearned and unvested performance shares, including outstanding LGP awards, which will not actually be received, if earned, until a future date. |
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Listening to Our Shareholders
Our Committee is comprised solelyTable of experienced independent directors and has established effective means for communicating with shareholders. Our shareholders also have the opportunity for shareholders to cast a non-binding advisory vote on executive compensation at our Annual Meeting.Contents
The Committee is very interested in the ideas and any concerns of our shareholders regarding executive compensation. An advisory vote on executive compensation was presented to our shareholders at last year’s Annual Meeting and approved by over 97% of shareholder votes, consistent with prior favorable advisory votes by our shareholders on executive compensation. We are also recommending that we continue to put executive compensation to an advisory shareholder vote annually.
Our CEO’s compensation package is structurally similar to that of our other Executives. The package is intended to reward him for sustained improvement of the Company’s financial performance and returns to shareholders while helping to promote alignment of interests across the executive 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 receives essentially the same benefits and limited perquisites provided to our other Executives, except that he is provided limited personal use of a Company airplane. The package is described more fully below:
•
Base salary was increased by 2.7%, an amount slightly below the budgeted percentage increase for US employees, to $1,335,000.
•
Annual bonus target remained unchanged at 175% of base salary and based 100% on financial performance. In fiscal year 2016, annual bonus was earned at 39% of target based on financial performance, which was below our expectations.
•
We granted multi-year performance shares to Mr. Peck under the LGP. For LGP shares granted in 2014 to Mr. Peck prior to his appointment as CEO, and based on financial performance during fiscal years 2014 – 2016, 12,201 shares, or 36% of the target amount, were earned. This further demonstrates alignment of executive pay to performance.
•
We granted stock options, with an exercise price of $30.18, to Mr. Peck covering 500,000 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 Mr. Peck.
The chart below shows the proportion of each component of our CEO’s fiscal 2016fiscal 2017 compensation, as reported in the Summary Compensation Table on page 37,33, the majority of which is weighted toward incentive compensation tied to rigorous financial goals and aligned with the long-term return to shareholders. 
22
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Overall, we believe that our executive compensation program met each of our compensation objectives and continues to demonstrate our strong commitment to pay for performance. The table below 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. | | | | What we don’t do | ✓ üPay for Performance
We tie pay to performance. Our compensation programs are heavily weighted toward performance with limited perquisites. ✓ 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. üMaximum Award Amounts The Committee establishes caps on incentive payouts with an appropriate balance between long-term and short-term objectives. | | X ûNo Long-Term Employment Agreements with Guarantees
We do not have employment contracts of defineddefined length with our Executives or 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 for relocation and international assignment related payments or services that are business-related and also generally available to other employees. X ûNo Repricing or Cash-out of Underwater Options
We have not repriced or cashed-out underwater stock options nor are we able to do so without shareholder approval. X ûNo SERP or Executive Pension Plan
We do not have a supplemental executive retirement plan (“SERP”). or executive pension plan. X ûNo Change in Control Arrangements
We do not have severance arrangements specificspecific to a change in control. X ûNo Material Compensation Risk
We do not have 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 AwardsAwards
We do not pay dividends on unearned performance awards. |
Compensation ObjectivesTable of Contents
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 enablewhile enabling us to attract and retain executive talent. Specifically,Specifically, the program is designed to: Back to Contents
| Support a performance-oriented culture; •·
Support our business strategy by motivating and rewarding achievement of 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 aligned with the long-term return to our 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 targeted performance levels and/or our stock price appreciates, compensation that can be realized by our executives is substantially increased. We believe that this is the most effective means of aligning executive pay with our shareholders’ interests. Elements of Compensation
ELEMENTS OF COMPENSATIONThe main componentselements of our executive compensation program are: •
Annual cash incentive bonus; and
| · | Annual cash incentive bonus; |
| · | Long-term incentives; and |
| · | Benefits and limited perquisites. |
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 benefits 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 salaries are set at a level that the Committee believes will effectively attract and retain top talent, considering the factors described below under “Compensation Analysis Framework.” In addition, the Committee considers the impact of base salary changes on other compensation components where applicable. The Committee reviews base salaries for Executives in the first fiscalfirst fiscal quarter, and as needed in Back to Contents
connection with promotions or other changes in responsibilities. The table below summarizes base salaries during fiscal 2016,fiscal 2017, and changes that occurred during the year. | | | Base Salary | | Base Salary | | | | Name | | on 1/28/2017 | | on 2/3/2018 | | Comments | | Arthur Peck | | $ | 1,335,000 | | $ | 1,375,000 | | Salary was increased in March 2017 as part of the annual review by an amount equal to the budgeted percentage increase for U.S. headquarters employees. | | Teri List-Stoll | | $ | 875,000 | | $ | 875,000 | | | | Mark Breitbard | | | N/A | | $ | 950,000 | | Mr. Breitbard joined the Company in May 2017 as President & CEO, Banana Republic. | | Jeff Kirwan | | $ | 900,000 | | $ | 950,000 | | Salary was increased in March 2017 as part of the annual review to improve competitiveness and position Mr. Kirwan appropriately relative to other executives. | | Sonia Syngal | | $ | 875,000 | | $ | 950,000 | | Salary was increased in March 2017 as part of the annual review to improve competitiveness and position Ms. Syngal appropriately relative to other executives. |
| | | | | | | | | | | | | | | | | | | | Salary was increased in March 2016 as part of the annual review by an amount slightly below the budgeted percentage increase for U.S. employees. | | | | | | | | Ms. List-Stoll joined the Company in January 2017 as Executive Vice President & Chief Financial Officer. | | | | | | | | Mr. DiGrande joined the Company in May 2016 as Executive Vice President, Strategy & Chief Customer Officer. | | | | | | | | Salary was increased in March 2016 as part of the annual review to position Mr. Kirwan appropriately relative to other executives. | | | | | | | | Salary was increased in April 2016 following Ms. Syngal’s appointment as Global President, Old Navy. | | | | | | | | | | | | | | | | Ms. Simmons ceased to be Executive Vice President & Chief Financial Officer in January 2017. |
Table of Contents ANNUAL CASH INCENTIVE BONUS Annual Cash Incentive Bonus
Fiscal 20162017 Annual Bonus We have anIn setting the fiscal 2017 annual bonus structure, the Committee considered our business and talent priorities, as well as the factors described below under “Compensation Analysis Framework.” Notably, we focused on the strategic importance of the Company’s transformation initiatives and the need to further incent achievement of our objectives for fiscal 2017 in this area, in addition to our financial objectives, to successfully position the Company for success in a rapidly evolving retail industry environment. To support this goal, the Committee approved changes to the annual cash incentive bonus programstructure to more equally emphasize financial results for the fiscal year and accomplishments related to our operating model transformation. In addition, the potential target and maximum bonus amounts for Brand President & CEO positions were increased to further incentivize these Executives to motivateachieve our financial and reward achievement of financialtransformation objectives, as well as help ensure retention. The table below describes the target annual bonus and individual objectives and to provide a competitive total compensation opportunity. Mr. Peck’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 accountabilitypotential payout range for operating results. For Executives other than Mr. Peck, theeach Executive. The annual incentive bonus was based on two components:
| 1. | | | | 75%Financial Performance Component. 50% of theirthe 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).
|
| | 25%Operating Model Transformation Component. 50% of their total opportunity was based on subjective individual and organizational objectives to recognize results beyond earnings and net salesachievement against the operating model transformation goals that contribute to the success of the Company or a division of the Company.
|
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In setting the fiscal 2016 annual bonus structure, the Committee considered our business priorities and the factors described below under “Compensation Analysis Framework.” The table below describes the target annual bonus and potential payout range for each Executive. Ms. List-Stoll received a $400,000 sign-on bonus when she joined the Company in January 2017 and was not eligible for a bonus under our fiscal 2016 annual bonus program.
| | Target Percentage of | | Potential Payout Range as a | | | Target
Percentage of
Base Salary
| Potential
Payout
Range as a
Percentage of
Target
| | | | | | | | | | | | | | | | | | | | | | | | Percentage of Target | | | Arthur Peck | 175 | % | | |
| | | Teri List-Stoll | 100 | % | 0 – 200 | % | | Mark Breitbard | Ms. Syngal’s bonus target was increased following her appointment to Global President in April 2016, consistent with other Global Presidents.
| % | 0 – 200 | % | | Jeff Kirwan | 125 | % | 0 – 200 | % | | Sonia Syngal | 125 | % | 0 – 200 | % |
Financial Performance Component
Bonus payments based on financial performance are generally made under the Executive Management Incentive Compensation Award Plan (“Executive MICAP”). , which has been approved by our shareholders. For fiscal 2017, the Committee set a minimum performance goal that needed to be achieved before payment of any bonus. Satisfaction of this goal established the maximum bonus that could be paid to each Executive (equal to the maximum set forth in the table above), subject to downward adjustment by the Committee based on achievement of the financial and transformation goals and other factors determined by the Committee in its sole discretion. For fiscal 2017, this goal was positive net income, as adjusted for certain objective and nondiscretionary items relating to changes in accounting principles, acquisitions and dispositions, employee termination benefits, termination of real estate leases, legal claims, and certain business interruptions, as applicable. The Committee determined that the minimum performance goal for fiscal 2017 had been achieved. The Committee then used negative discretion to determine the actual payout to each Executive based on performance against the financial and transformation goals as described below, as well as a qualitative assessment of individual performance. Actual bonuses were paid in March 2018. Financial Performance Component The Committee approves threshold, target and maximum performance goals at the beginning of each performance period. BonusesPayouts are paidmade under the financialfinancial performance component only if threshold goals are exceeded. Actual bonuses are generally paid in March of each year.achieved. Bonuses for fiscal 2016 financialfiscal 2017 financial performance were based on earnings (weightedbefore interest and taxes (“earnings”), weighted 75%), and net sales, (weightedweighted 25%) goals.. Earnings and net sales were used to measure both Company and division performance, in both cases subject to potential adjustment for certain pre-established items that are unusual in nature or infrequently occur. The earnings measure was selected for fiscal 2016fiscal 2017 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 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. For fiscal 2016,fiscal 2017, a range of earnings and sales targets was used in light of heightened uncertainty from macroeconomic factors and our transformation activities.
Table of Contents The following table shows fiscal 2016fiscal 2017 earnings and net sales goals expressed as a percentage of fiscal 2015fiscal 2016 actual results. Goals for fiscal 2016fiscal 2017 were set at realistic levels given our expected performance at the time they were established and were intended to provide a meaningful incentive for Executives to improve performance. Also shown are the actual weighted percentages achieved expressed as a percentage of fiscal 2015fiscal 2016 actual results after adjustments made primarily to exclude goodwill impairment and restructuring charges, and the direct supply chain impact resulting from the fire at our Fishkill, New York distribution facility. The Committee used discretion to reduce payouts to Mr. Peck and Ms. Syngal after considering the overall impact of the Fishkill fire, and the actual attainment percentages below reflect this Back to Contents
reduction.costs. No other adjustments to the results were made other than neutralization of foreign exchange rate fluctuations. Ms. Simmons, who left the Company in February 2017, was not eligible to receive a payout and has been excluded from the table below.fluctuations.
| | | | 2017 Earnings / Net Sales Goals as a | | Actual Fiscal 2017 | | | | | Percentage of Fiscal 2016 | | Percentage Achieved | | | | | | | | | Actual Earnings / Net Sales | | After Adjustments | | | 2016 Earnings / Net Sales Goals as a
Percentage of Fiscal 2015
Actual Earnings / Net Sales | Actual Fiscal 2016
Percentage Achieved
After Adjustments | | Company / | | | | | | | | | | | | | | | | | | | | Division | | Threshold | | Target Range | | Maximum | | Earnings | | Net Sales | | | | | 104.0-110.8% /
102.3-103.9% | | | | | Gap Inc. | | 100.0% / 98.7% | | 111.0-116.2% / | | 125.4% / 102.2% | | 121.6 | % | 102.2 | % | | | | 104.0-110.8% /
102.3-103.9% | | | | | | | | | 100.8-101.7% | | | Teri List-Stoll | | | Gap Inc. | | 100.0% / 98.7% | | 111.0-116.2% / | | 125.4% / 102.2% | | 121.6 | % | 102.2 | % | | | | | 100.8-101.7% | | | Mark Breitbard | | | Banana | | 98.1% / 97.5% | | 113.3-121.4% / | | 133.5% / 101.0% | | 87.6 | % | 96.4 | % | | | | | Republic | | 99.5-100.5% | | | | | 127.4-132.6% /
100.1-101.3% | | | | | Gap Global | | 86.2% / 98.5% | | 100.4-102.9% / | | 123.4% / 102.1% | | 78.8 | % | 98.5 | % | | | | 104.0-110.8% /
102.3-103.9% | | | | | | | 107.8-112.8% /
104.4-105.9% | | | | | | | | | 100.6-101.6% | | | Sonia Syngal | | | Old Navy | | 98.3% / 99.9% | | 109.2-111.7% / | | 117.2% / 103.4% | | 116.9 | % | 106.2 | % | | | | | 101.8-102.8% | |
| | | | Ms. Syngal’s financial performance component was based on Gap Inc. prior to her appointment to Global President, Old Navy in April and based on Old Navy thereafter.
|
Individual ObjectivesOperating Model Transformation Component
Executives other than the CEO were eligible to receive bonuses based on achievement of seven operating model transformation goals in four areas critical to the long-term success of the Company, including 1) our product operating model; 2) customer acquisition, retention and purchase frequency; 3) cost savings, and 4) talent. Goals were measured at the division or corporate level and were weighted equally, with maximum achievement set at 175% for this component. Individual Performance Adjustment Prior to determining the final bonus payout for each Executive, individual performance and organizational objectives. Atis assessed to determine if an adjustment is warranted. The CEO makes recommendations to the beginning of the year, 32 objectives were establishedCommittee for Gap Inc. with shared accountability by Executives. These objectives consisted of initiatives centered on three key themes: (i) product, which included objectives on product design, production and distribution; (ii) customer experience, which included objectivesadjustments, if any, for driving increased traffic and mobile advancements; and (iii) talent, which included objectives on talent acquisition and management. For Executives other than Mr. Peck, the extentthat report to which these objectives were met, partially met, or exceeded was assessed qualitatively by Mr. Peck after the end of the fiscal 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 satisfiedhim, and the ultimate payout that an Executive received. TheCommittee decides whether any adjustment is warranted for the CEO also had the discretion to consider some goals more heavily than others.in a private session. In addition, in judgingassessing each Executive’s individual performance, the CEO took into account any additional initiatives andoutside those described above, challenges that the Executive faced over the course of the year, as well as earningsand financial performance are considered in determining a recommended payout. Payout amounts were then recommended to the Committee for consideration and approval.final payouts.
For fiscal 2016,fiscal 2017, performance against operating model transformation goals applicable to each Executive was above target levels. We observed notable progress against our FY17 transformation goals. In 2017, all of our brands leveraged responsive capabilities that allowed us to test new products and adjust investments to drive strong results and exceed customer expectations, our customer database grew and we embedded a talent management and succession planning process in every business and function that we have already put to use. Performance against earnings and net sales goals applicable to each Executive was belowabove target levels for all Executives, except Ms. Syngal. Mr. Breitbard and except Mr. Kirwan, who was terminated in March 2018 and received no annual bonus. The following table describes the calculation of the actual bonus for fiscal 2016fiscal 2017 for each eligible Executive. In order to recruit him from his prior employer,Executive, except for Mr. DiGrande was paid a $1,000,000 signing bonus and his annual bonus for fiscal 2016 was guaranteed to be at least the target amount, prorated for time he was in the role during the fiscal year. Ms. Simmons received a retention payment with repayment provisions in February 2015, of which a portion was earned in 2016. For additional details regarding Ms. Simmons' retention payment, please see our 2016 Proxy Statement. Ms. Simmons, who left the Company in February 2017, was not eligible to receive a payout and has been excluded from the table below.Kirwan. Back to Contents
| | | | | | | | | | | | | | | | | | Target
Percentage
of Base
Salary | | | Actual
Percentage
Achieved:
Financial
Performance
Component
(1) | | | | Actual
Percentage
Achieved:
Individual
Objectives
Component
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Actual | | | | | | | | | | | | | | | | | | | Percentage | | | | Actual | | | | | | | | | | | | | Target | | Achieved: | | | | Percentage | | | | | | | | | | | | | Percentage | | Financial | | | | Achieved: | | | | | | | | | | | Base | | of Base | | Performance | | | | Transformation | | | | | | Actual | | Name | | | Salary(1) | x | Salary | x ( | Component(2) | x | Weight | + | Component(2) | x | Weight) | | | = | Bonus | | Art Peck | | $ | 1,369,717 | x | 175% | x ( | 168% | x | 50% | + | 170% | x | 50%) | | | = | $4,045,859 | | Teri List-Stoll | | $ | 875,000 | x | 100% | x ( | 168% | x | 50% | + | 170% | x | 50%) | | | = | $1,476,896 | | Mark Breitbard | | $ | 714,420 | x | 125% | x ( | 0% | x | 50% | + | 150% | x | 50%) | | | = | $669,769 | | Sonia Syngal | | $ | 940,094 | x | 125% | x ( | 195% | x | 50% | + | 175% | x | 50%) | | | = | $2,175,093 |
| (1) | Base salaries are prorated based on any changes during the fiscal year. |
| | | Actual percentages achieved are rounded for presentation.Mr. DiGrande received an annual bonus guaranteed at the target amount, prorated for time he was in the role during the fiscal year.
| | Ms. Syngal’s bonus target was increased following her appointment to Global President in April 2016.
|
Table of ContentsLong-Term IncentivesLONG-TERM INCENTIVES
Stock-based long-term incentives align executive compensation and shareholder returns by linking a significant portion of total compensation to the performance of our stock.returns. 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. We have a mix of different grant types for executives to balance performance focus and potential compensation-related risk, but at least half of our regular annual grant value is intended to be in the form of performance shares for performance-based long-term pay delivery and shareholder value alignment. It has been our practice to grant long-term incentives to Executives on an annual basis, usually in the firstfirst quarter of each fiscalfiscal year. This timing was selected because it follows the release of our annual financialfinancial 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 firstfirst day of employment. Stock-based awards are granted under our 2016 Long-Term Incentive Plan, which was approved by our shareholders. In determining the long-term incentive structure and award amounts, the Committee considered the factors described below under “Compensation Analysis Framework,” including a review of market data for comparable positions and 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. 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 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. Award amounts for Executives were increased in fiscal 2016 in order to promote retention in a difficult retail industry environment and to further incentivize Executives. Ms. Syngal was granted additional stock options in April 2016 in connection with her appointment as Global President, Old Navy. Mr. DiGrande and Ms. List-Stoll received an initial stock option grant covering 325,000 shares and 200,000 shares, respectively, to induce them to join the Company. The options vest based on continued service at a rate of 25% annually beginning one year from the grant date. Awards were differentiated based Back to Contents
on the Executive’s role in the organization and competitive practice. All stock options granted to employees during fiscal 2016fiscal 2017 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 table on page 41.36.
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 with a maximum term of ten years, and vested options are normally exercisable for three months following employment termination. Vesting is generally accelerated upon death, disability 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 significantsignificant 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. Mr. DiGrande and Ms. List-Stoll each received an initial stock unit grant covering 100,000 shares to induce them to join the Company. The stock units vest based on continued service at a rate of 25% annually beginning one year from the grant date. The stock unit grants received by our Executives are described in more detail in the Grants of Plan-Based Awards table on page 41.36. Stock units that are granted to Executives other than the CEO have in most cases beenare normally scheduled to vest over three or four years, butalthough 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 of long-term incentives may be accelerated isare described on pages 47-4942-43 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 financialfinancial performance and long-term value creation for shareholders, while taking into accountrecognizing the inherent difficultydifficulty in setting long-term performance goals in the volatile retail industry. Mr. DiGrande joined the Company in May 2016 as Executive Vice President, Strategy and Chief Customer Officer and received a prorated LGP grant for fiscal 2016. Ms. Syngal was appointed as Global President, Old Navy in April 2016 and received additional LGP shares in order to bring her total grant to the Global President level. Ms. List-Stoll joined the Company in January 2017 as Executive Vice President and Chief Financial Officer and did not receive a LGP grant for fiscal 2016. 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 to receive a number of shares of our stock based on achievement against performance goals during a specifiedspecified three-year performance period.period, subject to certain service requirements. Actual shares paid out, if any, will vary based on achievement of the performance goals. Back to Contents
•·
The number of actual shares paidthat an Executive may earn 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,
Table of Contents measured at the division level for Global Presidentsthose with division responsibilities and the corporate level for those with Company-wide responsibilities, and (ii) attainment of a three-year 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 modifiedmodified 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, generally subject to continued service with the Company through the date that the Committee determines the number of shares that are earned, if any, and the remaining 50% is subject to awill vest on the one-year vesting scheduleanniversary of such determination date based on continued service with the Company.
The table below describes the potential payout range as a percentage of the target award for the fiscal 2016-2018fiscal 2017-2019 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. Targets for the President & CEO and those Executives in Brand President & CEO positions were increased for fiscal 2016fiscal 2017 to further incentivize Executivesincent them to improve performance and for retention after considering relevant factors described below under “Compensation Analysis Framework”.Framework.” Mr. Breitbard joined the Company in May 2017 as President & CEO, Banana Republic and received a prorated LGP grant for fiscal 2017. The performance share grants represent only anopportunity to earn actual shares of our stock based onfor 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 range, maximum earnings goals, and adjustments described above under “Fiscal 20162017 Annual Bonus” applied to the 20162017 performance year under the LGP. The same minimum performance goal used for the fiscal 2017 annual bonus was also used for the LGP and established the maximum number of shares that could be paid to each Executive, subject to downward adjustment by the Committee based upon the achievement of the financial performance goals and other factors determined by the Committee in its sole discretion. 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. Ms. Simmons left the Company in February 2017 and is not eligible to receive a payout under the fiscal 2015 or fiscal 2016 awards. | | | | | | | | | Fiscal 2016 Award Potential Payout | | | Target
Number
of Performance
Shares | Potential
Payout
Range as
Percentage
of Target Shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | Fiscal 2017 Award Potential Payout | | Name | | Target
Percentage
of Base Salary | | | Target
Number of
Performance Shares | | Potential Payout
Range as
Percentage
of Target Shares | | | Arthur Peck | | 550 | % | | 321,261 | | 0 – 300 | % | | Teri List-Stoll | | 180 | % | | 66,907 | | 0 – 300 | % | | Mark Breitbard | | 275 | % | | 83,759 | | 0 – 300 | % | | Jeff Kirwan | | 275 | % | | 110,981 | | 0 – 300 | % | | Sonia Syngal | | 275 | % | | 110,981 | | 0 – 300 | % |
The following table describes the actual achievement levels and actual shares for the LGP awards for the completed fiscal 2014-2016fiscal 2015-2017 performance period for each eligible Executive. | | | | | | | | | Fiscal 2014 Award Achievement | | | Year 1, Year 2, & Year 3
(2014-2016)
Actual Percentage
Achieved | | Actual
Cumulative
Company
Earnings
Goal
Modifier | Actual
Percentage
Achieved (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal 2015 Award Achievement | | Name | | Target
Shares | | Year 1, Year 2, & Year 3
(2015-2017)
Actual Percentage
Achieved | | | Three
Year
Average | | | Actual
Cumulative
Company
Earnings
Goal
Modifier | | | Actual
Percentage
Achieved(1) | | | Actual
Shares(1) | | Arthur Peck | | 141,749 | | 0 | % | | 76 | % | | 188 | % | | 88 | % | | 20 | % | | 70 | % | | 99,747 | | Jeff Kirwan | | 30,894 | | 0 | % | | 0 | % | | 0 | % | | 0 | % | | 20 | % | | 0 | % | | 0 | | Sonia Syngal | | 18,173 | | 0 | % | | 191 | % | | 240 | % | | 144 | % | | 20 | % | | 115 | % | | 20,884 |
| | | | Actual percentage achieved is rounded for presentation and is the three-year average, decreased by the cumulative Company earnings goal modifier.modifier. Actual shares is the product of the target shares and the actual percentage achieved. |
Table of ContentsThe table below describes, for each eligible Executive, the actual percentage achievement levels for the completed fiscalfiscal years under the LGP awards for the fiscal 2015-2017fiscal 2016-2018 and fiscal 2016-2018fiscal 2017-2019 performance periods. Final achievement and actual shares for these outstanding awards are still subject to the remaining performance periods and the cumulative Company earnings goal over the same three-year performance period. | | | | | | | Fiscal 2015 Award
Achievement | Fiscal 2016 Award
Achievement | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Benefits Mr. Kirwan, who was terminated in March 2018, is no longer eligible to receive LGP awards for the fiscal 2016-2018 and Perquisitesfiscal 2017-2019 performance periods and, therefore, has been excluded from the table below.
| | | Fiscal 2016 Award
Achievement | | Fiscal 2017 Award
Achievement | | Name | | Target
Shares | | Year 1
(2016)
Actual
Percentage
Achieved | | | Year 2
(2017)
Actual
Percentage
Achieved | | | Target
Shares | | Year 1
(2017)
Actual
Percentage
Achieved | | | Arthur Peck | | 221,172 | | 76 | % | | 188 | % | | 321,261 | | 188 | % | | Teri List-Stoll | | N/A | | N/A | | | N/A | | | 66,907 | | 188 | % | | Mark Breitbard | | N/A | | N/A | | | N/A | | | 83,759 | | 0 | % | | Sonia Syngal | | 52,186 | | 191 | % | | 240 | % | | 110,981 | | 240 | % |
NEW HIRE AND RETENTION ACTIONS Mr. Kirwan received an extraordinary bonus of $750,000 in May 2017 in recognition of his unique contributions toward our operating model transformation and to promote short-term retention. The bonus is 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. Mr. Breitbard was paid a $1,000,000 signing bonus to recruit him from his prior employer. The bonus is repayable in full to the Company in the case of a voluntary termination or termination for cause within one year of his hire date, and half must be repaid should such a termination occur between one and two years from his hire date. Mr. Breitbard also received an initial stock option grant covering 300,000 shares and an initial stock unit grant covering 150,000 shares to induce him to join the Company. Both the options and stock units vest based on continued service at a rate of 25% annually beginning one year from the grant date. BENEFITS 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 to cover these services, 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. For Mr. Peck only, we allow limited personal use of a Company airplane at an amount not to exceed $150,000 per year based on the incremental cost to the Company in order to provide an efficientefficient way for Mr. Peck to manage travel and time commitments. Back to Contents
Various agreements, as described in more detail beginning on page 47, 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.
The value of the benefitsbenefits and perquisites received by our Executives are described in more detail in the footnotes to the Summary Compensation Table beginning on page 40.35. Stock Ownership Requirements for Executive OfficersSTOCK OWNERSHIP REQUIREMENTS FOR EXECUTIVE
OFFICERS / Hedging and Pledging Prohibitions
HEDGING AND PLEDGING PROHIBITIONSWe 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 fivefive years from the date of his or her appointment to reach the requirement. As of January 28, 2017,February 3, 2018, all Executives had either met the shares requirement in the table below or had remaining time to do so. | | Requirements
(shares) | | President & CEO, Gap Inc. | | 300,000 | | | 75,000 | | | Corporate Executive Vice President | | 40,000 |
Table of Contents 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). 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
TERMINATION PAYMENTSVarious agreements, as described in more detail beginning on page 47,42, provide for severance benefitsbenefits in the event of a termination of employment. These benefitsbenefits were selected in light ofconsidering competitive conditions and customary practices at the time of their implementation. We have no severance arrangements specificspecific to a change in control. Compensation Analysis Framework
COMPENSATION ANALYSIS FRAMEWORKThe Committee reviews executive compensation at least annually. The Committee’s review includes base salary, annual incentives, long-term incentives and the value of benefitsbenefits and perquisites. Each element is reviewed 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 Back to Contents
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.termination-related payments. 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 and division revenues. The peer group is reviewed by the Committee each year. The peer group used in 20162017 was comprised of the companies listed below and reflectsreflects changes from the prior year (removal of J.C. Penney and Sears HoldingsAvon Products and addition of Under Armour and V.F. Corporation) to better alignFoot Locker) for continued relevance with Gap Inc.’s talent market and global presence.market. | | | | | J. Crew | | Polo Ralph Lauren | American Eagle Outfitters | | Kellogg | | PVH Corporation | | Best Buy | | Kimberly Clark | | Ross Stores | | Children’s Place Retail Stores | | Kohl’s | | Staples | | Coach | | Levi Strauss | | Starbucks | | Coca-Cola | | L Brands | | Target | | Costco Wholesale | | Macy’s | | TJX Companies | | Disney | | McDonald’s | | Under Armour | | Estee Lauder Companies | | Nike | | V.F. Corporation | | Foot Locker | | Nordstrom | | Williams-Sonoma | | General Mills | | | | YUM! Brands |
The majority of the peer group provides compensation data through surveys conducted by Willis 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 specificspecific benchmarks or percentiles. In conducting its analysis and determining compensation, the Committee also takes into accountconsiders the following factors where relevant: Business and talent strategies; •·
The nature of each Executive’s role; •·
Individual performance (based on specific financialspecific financial and operating objectives for each Executive, as well as leadership behaviors);
•·
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 Back to Contents
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 theROLE OF THE CEO and Compensation Consultant
AND COMPENSATION CONSULTANTThe 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 identifiedidentified no conflictsconflicts of interest. From time to time, the consultant attends Committee meetings, presents briefingsbriefings 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 AND TAX CONSIDERATIONSAccounting, 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. In general, base salary, annual cash incentive bonus payments, and the costs related to benefitsbenefits and perquisites are generally 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 generally 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, prior to modification by recent tax legislation as discussed below, generally doesdid not allow a tax deduction to public companies for compensation over $1,000,000 paid to “Covered Employees,” which included the principal executive officerofficer or any of the other three most highly compensated executive officersofficers (other than the principal financial officer)financial officer) unless the compensation iswas based on attainment of pre-established objective performance goals and certain other requirements arewere met. It ishas been our preference to qualify executive compensation as fully 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, willdoes not limit compensation to those levels or types of compensation that are intended to be deductible. Our compensation Historically, our incentive plans have generally been designed to permit awards that qualify as fully deductible under Section 162(m). However, the Back to Contents
individual objectives component of thenew hire signing bonuses or other bonuses not paid under our annual incentive bonus is qualitative in nature and isplan were generally subject to the deduction limits of Section 162(m). In addition, stock units, other than performance shares, that havehad vesting based only on continued service arewere 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 nohowever, we do not guarantee that compensation that iswas intended to comply with the performance-based compensation exception under Section 162(m) will in fact so qualify.
The recently enacted Tax Cuts and Jobs Act eliminated the ability to rely on the performance-based compensation exception for amounts deductible in fiscal years after fiscal 2017. In addition, under the legislation, the definition of “Covered Employees” was expanded to include any person who served as the principal executive officer or principal financial officer at any time during the fiscal year and any person who was a Covered Employee in any prior fiscal year beginning with fiscal 2017. As a result, beginning in fiscal 2018, the Company may no longer take a deduction for any compensation paid to “Covered Employees” in excess of $1,000,000, except to the extent that it is “performance based” as defined in Section 162(m) and subject to a “written binding contract” in effect as of November 2, 2017 that is not later modified in any material respect. However, because of lack of guidance to date, the application of this transition relief to any of the Company’s
Table of Contents compensation arrangements is not certain. Therefore, no assurance can be given that any compensation otherwise subject to a deduction limit under the legislation will qualify for an exception under this transition rule. 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-ups or other reimbursement for tax amounts the Executive might be required to pay under Section 4999. Recovery and Adjustments to Awards
RECOVERY AND ADJUSTMENTS TO AWARDSSubject to the approval of the Board, we will require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, 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. Back to ContentsCompensation Committee Report
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 28, 2017February 3, 2018 and the Proxy Statement for the 20172018 Annual Meeting of Shareholders.
Brian Goldner
Domenico De Sole
Katherine Tsang
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Summary Compensation Table The following table shows compensation information for fiscal 2016,fiscal 2017, which ended January 28, 2017,February 3, 2018, for our CEO, CFO, and the three other most highly compensated executive officersofficers at fiscalfiscal year-end and another officer who served as the Company's principal financial officer during the fiscal year, regardless of compensation, as required under SEC rules (“named executive officers”officers”). The table also shows compensation information for fiscalfiscal 2016 and fiscal 2015, and fiscal 2014, which ended January 30, 201628, 2017 and January 31, 2015,30, 2016, respectively, for those named executive officersofficers who were also were named executive officersofficers in either of those years. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position (1) | | | | | | Non-Equity
Incentive Plan
Compensation
($) (7) | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (8) | All Other
Compensation
($) (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EVP, Strategy & Chief Customer Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Global President, Old Navy | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Change in | | | | | | | | | | | | | | | | | | | | Pension | | | | | | | | | | | | | | | | | | | | Value and | | | | | | | | | | | | | | | | | | Non-Equity | | Nonqualified | | | | | | | | | | | | | | Stock | | Option | | Incentive Plan | | Deferred | | All Other | | | | Name and | | Fiscal | | Salary | | Bonus | | Awards | | Awards | | Compensation | | Compensation | | Compensation | | | | Principal Position(1) | | Year | | ($)(2) | | ($)(3) | | ($)(4)(5) | | ($)(5)(6) | | ($)(7) | | Earnings ($)(8) | | ($)(9) | | Total ($) | | Arthur Peck | | 2017 | | 1,396,058 | | 0 | | 6,762,235 | | 3,275,460 | | 4,045,859 | | 0 | | 107,574 | | 15,587,186 | | President and CEO, | | 2016 | | 1,330,288 | | 0 | | 3,637,795 | | 2,932,000 | | 917,511 | | 0 | | 88,572 | | 8,906,166 | | Gap Inc. | | 2015 | | 1,300,000 | | 0 | | 2,733,227 | | 2,079,960 | | 0 | | 0 | | 27,611 | | 6,140,798 | | Teri List-Stoll | | 2017 | | 891,827 | | 200,000 | | 647,204 | | 0 | | 1,476,896 | | 0 | | 329,997 | | 3,545,924 | | EVP and CFO | | 2016 | | 30,288 | | 0 | | 2,192,680 | | 1,076,000 | | 0 | | 0 | | 22,874 | | 3,321,842 | | Mark Breitbard | | 2017 | | 730,769 | | 0 | | 4,361,174 | | 1,549,290 | | 669,769 | | 0 | | 29,178 | | 7,340,180 | | President and CEO, | | | | | | | | | | | | | | | | | | | | Banana Republic | | | | | | | | | | | | | | | | | | | | Jeff Kirwan | | 2017 | | 961,538 | | 0 | | 1,924,532 | | 1,091,820 | | 0 | | 0 | | 153,275 | | 4,131,165 | | President and CEO, | | 2016 | | 893,269 | | 0 | | 771,499 | | 1,319,400 | | 133,990 | | 0 | | 65,394 | | 3,183,552 | | Gap | | 2015 | | 850,000 | | 0 | | 3,642,268 | | 555,728 | | 127,500 | | 0 | | 1,061,541 | | 6,237,037 | | Sonia Syngal | | 2017 | | 958,173 | | 0 | | 1,779,318 | | 1,091,820 | | 2,175,093 | | 0 | | 76,032 | | 6,080,436 | | President and CEO, | | 2016 | | 850,000 | | 0 | | 729,630 | | 1,081,720 | | 992,501 | | 0 | | 70,603 | | 3,724,454 | | Old Navy | | 2015 | | 750,000 | | 0 | | 3,378,237 | | 243,131 | | 90,000 | | 0 | | 67,541 | | 4,528,909 |
| | | | Mr. Peck became our CEO in February 2015. Ms. List-Stoll became our CFO in January 2017. Mr. DiGrandeBreitbard became an executive officerofficer of the Company in May 2016. Ms. Simmons2017. Mr. Kirwan ceased to be our CFOan executive officer of the Company in January 2017.
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| | The amounts in this column for Ms. Syngal, in fiscal 2016, for Mr. Kirwan, in 2016, forand Mr. Peck in 2014 and 2016 and for Ms. Simmons in fiscal 2015, reflectreflect the prorated payment of their salaries based on changes during the year. Base salary changes in fiscal 2016fiscal 2017 are further described on page 2524 of the Compensation Discussion and Analysis section. |
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| | | | The amount in this column for Mr. DiGrande reflects the earned portion of a bonus with repayment provisions that he received when he joined the Company. The amount in this column for Ms. Simmons reflectsList-Stoll reflects the earned portion of a retention paymentsign-on bonus with repayment provisions from February 2015. For additional details regarding Ms. Simmons' retention payment, please see our 2016 Proxy Statement.
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| | This column reflectsreflects the aggregate grant date fair value for awards of stock during fiscalfiscal 2017, 2016 2015 and 2014,2015, 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 2014,2015, this column includes (a) the grant date fair value of the target number of shares that may be earned under the Company’s Long-Term Growth Program (LGP) with respect to year 3 of a three-year performance period beginning with fiscal 2012fiscal 2013 (“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 2013fiscal 2014 (“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 2014fiscal 2015 (“LGP 3”). For 2015,2016, 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 2015fiscal 2016 (“LGP 4”). For 2016,2017, 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 2016fiscal 2017 (“LGP 5”). See page 3128 of the Compensation Discussion and Analysis section for actual shares granted under LGP 3. Ms. List-Stoll and Mr. KirwanBreitbard each received his firsttheir first grant under the LGP in 2015, and Mr. DiGrande received his first grant under the LGP in 2016. | | | | 2017. For executives other than Mr. Peck, this column also includes the aggregate grant date fair value of any restricted stock units granted during fiscal 2016, 2015 and 2014. | | | | Details on the figures included in this column for 2016 are reflected in the following table. Details on the figures included in this column for 2015 and 2014 are included in ourfiscal 2017, 2016 and 2015 Proxy Statements.
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Table of Contents Details on the figures included in this column for 2017 are reflected in the following table. Details on the figures included in this column for 2016 and 2015 are included in our 2017 and 2016 Proxy Statements. | | | LGP 3 | | LGP 4 | | LGP 5 | | | | Total Reported | | | | (FY 2015 Grant) | | (FY 2016 Grant) | | (FY 2017 Grant) | | | | in Stock Awards | | | | Year 3 Target | | Year 2 Target | | Year 1 Target | | Grant Date Fair | | Column (Rounded | | | | Shares Grant Date | | Shares Grant Date | | Shares Grant Date | | Value of Non-LGP | | to the nearest | | | | Fair Value ($) | | Fair Value ($) | | Fair Value ($) | | Stock Awards ($) | | dollar) ($) | | Arthur Peck | | 1,452,434 | | 2,202,136 | | 3,107,665 | | 0 | | 6,762,235 | | Teri List-Stoll | | 0 | | 0 | | 647,204 | | 0 | | 647,204 | | Mark Breitbard | | 0 | | 0 | | 810,209 | | 3,550,965 | | 4,361,174 | | Jeff Kirwan (a) | | 316,561 | | 534,434 | | 1,073,537 | | 0 | | 1,924,532 | | Sonia Syngal | | 186,192 | | 519,589 | | 1,073,537 | | 0 | | 1,779,318 |
(a) Mr. Kirwan, who was terminated in March 2018, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards. 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 table. 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 ($38.13), year 2 of LGP 3 ($27.92), and year 3 of LGP 3 ($30.74), (ii) year 1 of LGP 4 ($27.05), and years 2 and 3 of LGP 4 ($29.87), and (iii) years 1, 2 and 3 of LGP 5 ($29.02). The grant date fair value for year 2 of LGP 4 was used for year 3 of LGP 4, and the grant date fair value for year 1 of LGP 5 was used for years 2 and 3 of LGP 5. Ms. List-Stoll and Mr. Breitbard did not receive LGP grants until they joined the Company in 2017. For a description of the Company’s Long-Term Growth Program, please see pages 27-29 of the Compensation Discussion and Analysis section. | | | Maximum Shares Total Grant Date Fair Value ($) | | | | LGP 3 | | LGP 4 | | LGP 5 | | | | (FY 2015 Cycle) | | (FY 2016 Cycle) | | (FY 2017 Cycle) | | Art Peck | | 13,719,886 | | 19,195,518 | | 27,968,983 | | Teri List-Stoll | | n/a | | n/a | | 5,824,923 | | Mark Breitbard | | n/a | | n/a | | 7,292,059 | | Jeff Kirwan (a) | | 2,990,230 | | 4,658,627 | | 9,662,006 | | Sonia Syngal | | 1,758,965 | | 4,529,223 | | 9,662,006 |
(a) Mr. Kirwan, who was terminated in March 2018, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards. | | | | | | | LGP 3 (FY 2014 Grant)
Year 3
Target Shares
Grant Date Fair Value
($) | LGP 4 (FY 2015 Grant)
Year 2
Target Shares
Grant Date Fair Value
($) | LGP 5 (FY 2016 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)
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (5) | | | | Ms. Simmons, who left the Company in February 2017, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.
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| | 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 ($39.21), year 2 of LGP 3 ($39.01), and year 3 of LGP 3 ($28.82), (ii) year 1 of LGP 4 ($38.13), and years 2 and 3 of LGP 4 ($27.92), and (iii) years 1, 2 and 3 of LGP 5 ($20.80 for Ms. Syngal, $15.26 for Mr. DiGrande, and $27.05 for the other named executive officers). The grant date fair value for year 2 of LGP 4 was used for year 3 of LGP 4, and the grant date fair value for year 1 of LGP 5 was used for years 2 and 3 of LGP 5. Mr. Kirwan did not receive an LGP grant in fiscal 2014, Mr. DiGrande did not receive an LGP grant until he joined the Company in 2016, and Ms. List-Stoll did not receive an LGP grant until she joined the Company in 2017. For a description of the Company’s Long-Term Growth Program, please see pages 29-31 of the Compensation Discussion and Analysis section.
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| | | | | | | | | | | | | | | | | Maximum Shares
Total Grant Date Fair Value
($) | | | Maximum Shares
Total Grant Date Fair Value
($) | | | Maximum Shares
Total Grant Date Fair Value
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Ms. Simmons, who left the Company in February 2017, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.
| | | | 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 20, 20172018 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 20162017 and 20152016 Proxy Statements for information on awards actually granted in fiscal 2015fiscal 2016 and 2014. |
| | This column reflectsreflects the aggregate grant date fair value for awards of stock options during fiscalfiscal 2017, 2016 2015 and 2014,2015, 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. |
| | The amounts in this column reflectreflect the non-equity amounts earned by the named executive officersofficers under the Company’s annual incentive bonus plan. For Mr. DiGrande, this amount reflects the guaranteed portion of his annual bonus for fiscal 2016 under his employment agreement. |
| | 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. |
Table of Contents | | The amounts shown in the All Other Compensation column are detailed in the following table. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal
Use of
Airplane
($) (a) | Financial
Counseling
($) (b) | | Deferred
Compensation
Plan Match
($) (d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Personal | | | | | | Deferred | | 401 (k) | | | | | | | | | | | | | | | | | | Use of | | Financial | | Tax | | Compensation | | Plan | | Disability | | Life | | | | Gift | | | | | | | | Fiscal | | Airplane | | Counseling | | Payments | | Plan Match | | Match | | Plan | | Insurance | | Relocation | | Matching | | Other | | Total | | Name | | Year | | ($)(a) | | ($)(b) | | ($)(c) | | ($)(d) | | ($)(e) | | ($)(f) | | ($)(g) | | ($)(h) | | ($)(i) | | ($) | | ($) | | Arthur | | 2017 | | 36,734 | | 15,300 | | 0 | | 43,831 | | 10,718 | | 415 | | 576 | | 0 | | 0 | | 0 | | 107,574 | | Peck | | 2016 | | 19,523 | | 14,838 | | 0 | | 42,477 | | 10,703 | | 524 | | 507 | | 0 | | 0 | | 0 | | 88,572 | | | | 2015 | | 0 | | 14,800 | | 0 | | 0 | | 11,261 | | 650 | | 900 | | 0 | | 0 | | 0 | | 27,611 | | Teri | | 2017 | | 0 | | 12,892 | | 87,616 | | 22,402 | | 12,888 | | 415 | | 576 | | 178,208 | | 15,000 | | 0 | | 329,997 | | List-Stoll | | 2016 | | 0 | | 0 | | 0 | | 0 | | 0 | | 16 | | 48 | | 22,810 | | 0 | | 0 | | 22,874 | | Mark | | 2017 | | 0 | | 0 | | 0 | | 0 | | 13,435 | | 311 | | 432 | | 0 | | 15,000 | | 0 | | 29,178 | | Breitbard | | | | | | | | | | | | | | | | | | | | | | | | | | Jeff | | 2017 | | 0 | | 15,300 | | 0 | | 26,738 | | 8,992 | | 415 | | 576 | | 101,254 | | 0 | | 0 | | 153,275 | | Kirwan | | 2016 | | 0 | | 14,838 | | 0 | | 24,938 | | 10,342 | | 527 | | 507 | | 14,242 | | 0 | | 0 | | 65,394 | | | | 2015 | | 0 | | 14,800 | | 777,099 | | 23,400 | | 9,881 | | 647 | | 900 | | 234,814 | | 0 | | 0 | | 1,061,541 | | Sonia | | 2017 | | 0 | | 15,300 | | 0 | | 26,508 | | 7,975 | | 415 | | 576 | | 11,558 | | 13,700 | | 0 | | 76,032 | | Syngal | | 2016 | | 0 | | 18,341 | | 0 | | 22,919 | | 8,553 | | 489 | | 648 | | 15,703 | | 3,950 | | 0 | | 70,603 | | | | 2015 | | 0 | | 10,627 | | 0 | | 18,823 | | 8,774 | | 650 | | 900 | | 23,272 | | 4,495 | | 0 | | 67,541 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | | | The Compensation and Management Development Committee determined that it was appropriate to provide Mr. Peck use of a Company airplane for limited personal use (not to exceed $150,000 per fiscalfiscal 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, fixedfixed costs which do not change based on usage, such as the pilot'spilot’s salary and maintenance costs unrelated to the trip, are excluded. |
| | 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. |
| | For Ms. List-Stoll, these amounts reflect tax reimbursements in connection with her relocation to San Francisco when she joined the Company in January 2017. For Mr. Kirwan, these amounts reflectreflect tax reimbursements in connection with his previous international assignments and relocation to the U.S. |
| | 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 ($265,000270,000 for calendar year 2016)2017), which are matched at up to 4% of base pay, the same rate as is in effect under the Company’s 401(k) plan. |
| | These amounts reflectreflect Company matching contributions under the Company’s 401(k) Plan. |
| | These amounts reflectreflect premium payments for long-term disability insurance, which is available to benefits-eligiblebenefits-eligible employees generally. |
| | These amounts reflectreflect premiums paid for life insurance provided to employees at the Director level and above. |
| | For Ms. List-Stoll, the amounts reflect costs in connection with her relocation to San Francisco when she joined the Company in January 2017. For Mr. Kirwan, the amounts reflectreflect costs in connection with his relocation from China to New York when he assumed the role of Global President, Gap brand. For Ms. Syngal, the amounts reflectreflect costs in connection with her relocation from the U.K. to San Francisco. |
| | 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 2016,calendar year 2017, the limit for the named executive officersofficers was $15,000, with the exception of Mr. Peck who had an annual matching limit of $100,000. The annual gift match eligibility limits are based on the executive’s original donation date. | | | The amount in this column for Mr. Peck reflects reimbursement of attorney fees he incurred in connection with the review of his October 2014 agreement with the Company regarding his transition to the CEO position.
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Grants of Plan-Based Awards The following table shows all plan-based awards granted to the named executive officersofficers during fiscal 2016,fiscal 2017, which ended on January 28, 2017.February 3, 2018. The option awards and the unvested portion of the stock awards identifiedidentified in the table below are also reported in the Outstanding Equity Awards at Fiscal Year-End table. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1) | Estimated Future Payouts
Under Equity Incentive Plan
Awards (2) | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | Exercise
or Base
Price of
Option
Awards
($) | Grant Date
Fair
Value of
Stock
and Option
Awards
($) (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | All | | | | | | | | | | | | | | | | | | | | | | | | | | Other | | | | | | | | | | | | | | | | | | | | | | | | | | Stock | | | | | | Grant | | | | | | | | | | | | | | | | | | | | Awards: | | All Other | | | | Date | | | | | | | | | | | | | | | | | | | | Number | | Option | | | | Fair | | | | | | | | | | | | | | | | | | | | of | | Awards: | | Exercise | | Value of | | | | | | | | Estimated Future Payouts | | Estimated Future Payouts | | Shares | | Number of | | or Base | | Stock | | | | | | | | Under Non-Equity Incentive | | Under Equity Incentive Plan | | of | | Securities | | Price of | | and | | | | | | | | Plan Awards(1) | | Awards(2) | | Stock or | | Underlying | | Option | | Option | | | | Grant | | Approval | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | Units | | Options | | Awards | | Awards | | Name | | Date | | Date | | ($) | | ($) | | ($) | | (#) | | (#) | | (#) | | (#) | | (#) | | ($) | | ($)(3) | | Arthur | | 3/13/17 | | 3/13/17 | | | | | | | | | | | | | | | | 600,000 | | 23.54 | | 3,275,460 | | Peck | | 3/13/17 | | 3/13/17 | | | | | | | | 21,262 | | 47,249 | | 141,749 | | | | | | | | 1,452,434 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 33,175 | | 73,724 | | 221,172 | | | | | | | | 2,202,136 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 48,189 | | 107,087 | | 321,261 | | | | | | | | 3,107,665 | | | | N/A | | | | 599,251 | | 2,397,005 | | 4,794,009 | | | | | | | | | | | | | | | | Teri List- | | 3/13/17 | | 3/13/17 | | | | | | | | 10,036 | | 22,302 | | 66,907 | | | | | | | | 647,204 | | Stoll | | N/A | | | | 218,750 | | 875,000 | | 1,750,000 | | | | | | | | | | | | | | | | Mark | | 5/1/17 | | 2/21/17 | | | | | | | | | | | | | | | | 300,000 | | 25.90 | | 1,549,290 | | Breitbard | | 5/1/17 | | 2/21/17 | | | | | | | | | | | | | | 150,000 | | | | | | 3,550,965 | | | | 5/1/17 | | 2/21/17 | | | | | | | | 12,563 | | 27,919 | | 83,759 | | | | | | | | 810,209 | | | | N/A | | | | 223,256 | | 893,026 | | 1,786,051 | | | | | | | | | | | | | | | | Jeff | | 3/13/17 | | 3/13/17 | | | | | | | | | | | | | | | | 200,000 | | 23.54 | | 1,091,820 | | Kirwan | | 3/13/17 | | 3/13/17 | | | | | | | | 4,634 | | 10,298 | | 30,894 | | | | | | | | 316,561 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 8,051 | | 17,892 | | 53,677 | | | | | | | | 534,434 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 16,647 | | 36,993 | | 110,981 | | | | | | | | 1,073,537 | | | | N/A | | | | 294,811 | | 1,179,245 | | 2,358,491 | | | | | | | | | | | | | | | | Sonia | | 3/13/17 | | 3/13/17 | | | | | | | | | | | | | | | | 200,00 | | 23.54 | | 1,091,820 | | Syngal | | 3/13/17 | | 3/13/17 | | | | | | | | 2,725 | | 6,057 | | 18,173 | | | | | | | | 186,192 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 4,473 | | 9,940 | | 29,821 | | | | | | | | 296,908 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 3,354 | | 7,455 | | 22,365 | | | | | | | | 222,681 | | | | 3/13/17 | | 3/13/17 | | | | | | | | 16,647 | | 36,993 | | 110,981 | | | | | | | | 1,073,537 | | | | N/A | | | | 293,779 | | 1,175,118 | | 2,350,236 | | | | | | | | | | | | | | |
| | | | The amounts shown in these columns reflectreflect the estimated potential payment levels for the fiscal 2016fiscal 2017 performance period under the Company’s annual incentive bonus plan, further described on pages 25-2825-26 of the Compensation Discussion and Analysis section. The potential payouts were performance-based and, therefore, were completely at risk. The potential target and maximumthreshold payment amounts assumeamount assumes 25% achievement of 100%the transformation goals component and 200%, respectively,25% achievement of the individual objectives component of the annual incentive bonus plan, described on page 27.financial performance component. The potential thresholdtarget payment amount assumes 100% achievement of the individual objectivestransformation goals component and 0%100% achievement of the financialfinancial performance component. With the exceptionThe potential maximum payment amount assumes 200% of Ms. List-Stoll, who joined the Company in January 2017, and Ms. Simmons, who left the Company in February 2017, eachtarget. The annual incentive bonus plan is further described on pages 25-26. Each named executive officerofficer 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.” |
Table of Contents | | The amounts shown in these columns for each of the 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 2014fiscal 2015 (“LGP 3”), (b) the threshold, target and maximum amounts for year 2 of a three-year performance period beginning in fiscal 2015fiscal 2016 (“LGP 4”) and (c) the threshold, target and maximum amounts for year 1 of a three-year performance period beginning in fiscal 2016fiscal 2017 (“LGP 5”) under the Company’s Long-Term Growth Program, further described on pages 29-3127-29 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 grantedearned for the entire three-year performance period under LGP 3 for each named executive was as follows: Mr. Peck (12,201)(99,747), Ms. Simmons (11,005)Mr. Kirwan (0), and Ms. Syngal (9,669)(20,884). As of the end of fiscal 2016,fiscal 2017, 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 (141,749)(221,172), Mr. Kirwan (30,894)(53,677), and Ms. Syngal (18,173)(52,186). As of the end of fiscal 2016,fiscal 2017, 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 (221,172)(321,261), Mr. Breitbard (83,759), Mr. Kirwan (53,677)(110,981), Ms. List-Stoll (66,907), and Ms. Syngal (52,186)(110,981). | | Mr. Kirwan did not receive an LGP grant in fiscal 2014. Mr. DiGrande, who joined the Company in May 2016, did not receive LGP grants in fiscal 2014 or 2015. Ms. List-Stoll and Mr. Breitbard, who joined the Company in January 2017 and May 2017, respectively, did not receive LGP grants in fiscal 2014,fiscal 2015 or 2016. Ms. Simmons,Mr. Kirwan, who left the Companywas terminated in February 2017,March 2018, is not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.
|
| | 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 20, 20172018 for the relevant assumptions used to determine the valuation of our stock and option awards. For fiscal 2016,fiscal 2017, 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 grantedlast day of fiscal 2017 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 $28.82.$30.74. For year 2 of LGP 4, the grant date fair value is $27.92.$29.87. For year 1 of LGP 5, the grant date fair value is $20.80 for Ms. Syngal, $15.26 for Mr. DiGrande and $27.05 for the other named executive officers.$29.02. For the total grant date fair value of awards if maximum performance conditions are achieved over the entire three-year performance period under LGP 3, LGP 4, and LGP 5, see footnote 4 to the Summary Compensation Table. |
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Outstanding Equity Awards at Fiscal Year-End The following table shows all outstanding equity awards held by the named executive officersofficers at the end of fiscal 2016,fiscal 2017, which ended on January 28, 2017.February 3, 2018. | | | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | | | | | | Equity | | | | | Incentive | | | | | Equity | | Plan Awards: | | | | | Equity | | Incentive | | Market or | | | | | Incentive | | Plan Awards: | | Payout | | | | | Plan Awards: | | Market | | Number of | | Value of | | | | | Number of | | Number of | | Number of | | Number of | | Value of | | Unearned | | Unearned | | | | | Securities | | Securities | | Securities | | Shares or | | Shares or | | Shares, | | Shares, | | | | | Underlying | | Underlying | | Underlying | | Units of | | Units of | | Units or | | Units or | | | | | Unexercised | | Unexercised | | Unexercised | | Option | | Stock | | Stock | | Other Rights | | Other Rights | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options | | Options | | Unearned | | Exercise | | Option | | That Have | | That Have | | That Have | | That Have | | | | | (#) | | (#) | | Options | | Price | | Expiration | | Not Vested | | Not Vested | | Not Vested | | Not Vested | | Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1) | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) | | | Number of
Shares or
Units of Stock
That Have
Not Vested
(#) (2) | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (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
($) (5) | | Exercisable | | Unexercisable(1) | | | (#) | | ($) | | Date | | (#)(2) | | | ($)(3) | | (#)(4) | | | ($)(5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,000 | | 23.07 | | 3/15/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 50,000 | | 21.79 | | 3/14/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 75,000 | | 25.09 | | 3/12/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 80,000 | | 36.45 | | 3/18/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 60,000 | | 20,000 | (a) | | 42.20 | | 3/17/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 225,000 | | 75,000 | (b) | | 41.19 | | 2/1/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 125,000 | | 375,000 | (c) | | 30.18 | | 3/14/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 600,000 | (d) | | 23.54 | | 3/13/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 99,747 | (a) | | 3,200,881 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 378,855 | (b) | | 12,157,457 | | | | | 883,607 | (c) | | 28,354,949 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 50,000 | | 150,000 | (e) | | 24.15 | | 1/17/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 75,000 | (a) | | 2,406,750 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 184,023 | (c) | | 5,905,298 | | Mark | | | | 300,000 | (f) | | 25.90 | | 5/1/2027 | | | Breitbard | | | | 150,000 | (b) | | 4,813,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,503 | (c) | | 1,075,111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,000 | | 36.45 | | 3/18/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,750 | | 6,250 | (g) | | 42.20 | | 3/17/2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 40,000 | | 40,000 | (h) | | 41.27 | | 3/16/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31,250 | | 93,750 | (i) | | 30.18 | | 3/14/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,000 | | 75,000 | (j) | | 30.18 | | 3/14/2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 200,000 | (k) | | 23.54 | | 3/13/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,231 | (c) | | 135,773 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,946 | (b) | | 287,077 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 44,392 | (c) | | 1,424,539 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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
(#) | | | 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) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | | | | | | Incentive | | | | | | | | | | | | | | | | | | | | Equity | | | Plan Awards: | | | | | | | | | Equity | | | | | | | | | | | Incentive | | | Market or | | | | | | | | | Incentive | | | | | | | | | | | Plan Awards: | | | Payout | | | | | | | | | Plan Awards: | | | | | | | | | Market | | Number of | | | Value of | | | | Number of | | Number of | | | Number of | | | | | | Number of | | | Value of | | Unearned | | | Unearned | | | | Securities | | Securities | | | Securities | | | | | | Shares or | | | Shares or | | Shares, | | | Shares, | | | | Underlying | | Underlying | | | Underlying | | | | | | Units of | | | Units of | | Units or | | | Units or | | | | Unexercised | | Unexercised | | | Unexercised | | Option | | | | Stock | | | Stock | | Other Rights | | | Other Rights | | | | Options | | Options | | | Unearned | | Exercise | | Option | | That Have | | | That Have | | That Have | | | That Have | | | | (#) | | (#) | | | Options | | Price | | Expiration | | Not Vested | | | Not Vested | | Not Vested | | | Not Vested | | Name | | Exercisable | | Unexercisable(1) | | | (#) | | ($) | | Date | | (#)(2) | | | ($)(3) | | (#)(4) | | | ($)(5) | | Sonia | | 3,750 | | | | | | | 25.09 | | 3/12/2022 | | | | | | | | | | | | Syngal | | 10,000 | | | | | | | 36.45 | | 3/18/2023 | | | | | | | | | | | | | | 22,500 | | 7,500 | (l) | | | | 42.20 | | 3/17/2024 | | | | | | | | | | | | | | 17,500 | | 17,500 | (m) | | | | 41.27 | | 3/16/2025 | | | | | | | | | | | | | | 18,750 | | 56,250 | (n) | | | | 30.18 | | 3/14/2026 | | | | | | | | | | | | | | 12,500 | | 37,500 | (o) | | | | 30.18 | | 3/14/2026 | | | | | | | | | | | | | | 18,750 | | 56,250 | (p) | | | | 23.93 | | 4/13/2026 | | | | | | | | | | | | | | | | 200,000 | (q) | | | | 23.54 | | 3/13/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,884 | (a) | | 670,168 | | | | | | | | | | | | | | | | | | | | 118,453 | (b) | | 3,801,157 | | | | | | | | | | | | | | | | | | | | 328,673 | (c) | | 10,547,117 |
| (1) | | | | The following footnotes set forth the vest dates for the outstanding option awards (vesting generally depends upon continued employment): |
| | Options vest 20,000 on 3/18/2017.
| | | Options vest 20,000 on 3/17/2017 and 20,000 on 3/17/2018. |
| (b) | Options vest 75,000 on 2/1/2017, 75,000 on 2/1/2018 and 75,000 on 2/1/2019. |
| (c) | Options vest 125,000 on 3/14/2017, 125,000 on 3/14/2018, 125,000 on 3/14/2019 and 125,000 on 3/14/2020. |
| (d) | Options vest 50,000150,000 on 1/17/3/13/2018, 150,000 on 3/13/2019, 150,000 on 3/13/2020 and 150,000 on 3/13/2021. |
| (e) | Options vest 50,000 on 1/17/2019, 50,000 on 1/17/2020 and 50,000 on 1/17/2021. |
| | Options vest 81,25075,000 on 5/23/2017, 81,2501/2018, 75,000 on 5/23/2018, 81,2501/2019, 75,000 on 5/23/20191/2020 and 81,25075,000 on 5/23/2020. |
| | Options vest 5,000 on 3/18/2017.
| | | Options vest 6,250 on 3/17/2017, 6,250 on 3/17/2018. |
| (h) | Options vest 20,000 on 3/16/2017, 20,000 on 3/16/2018 and 20,000 on 3/16/2019. |
| (i) | Options vest 31,250 on 3/14/2017, 31,250 on 3/14/2018, 31,250 on 3/14/2019 and 31,250 on 3/14/2020. |
| (j) | Options vest 25,000 on 3/14/2017, 25,000 on 3/14/2018, 25,000 on 3/14/2019 and 25,000 on 3/14/2020. |
| (k) | Options vest 2,50050,000 on 3/18/2017. |
| (l) | Options vest 7,500 on 3/17/2017 and 7,500 on 3/17/2018. |
| (m) | Options vest 8,750 on 3/16/2017, 8,750 on 3/16/2018 and 8,750 on 3/16/2019. |
| (n) | Options vest 18,750 on 3/14/2017, 18,750 on 3/14/2018, 18,750 on 3/14/2019 and 18,750 on 3/14/2020. |
| (o) | Options vest 12,500 on 3/14/2017, 12,500 on 3/14/2018, 12,500 on 3/14/2019 and 12,500 on 3/14/2020. |
| (p) | Options vest 18,750 on 4/13/2017, 18,750 on 4/13/2018, 18,750 on 4/13/2019 and 18,750 on 4/13/2020. |
| (q) | Options vest 22,50050,000 on 3/18/2017. | | | Options vest 22,50013/2018, 50,000 on 3/17/201713/2019, 50,000 on 3/13/2020 and 22,50050,000 on 3/17/2018.
|
| (2) | Options vest 22,500 on 3/16/2017, 22,500 on 3/16/2018 and 22,500 on 3/16/2019.
Options vest 31,250 on 3/14/2017, 31,250 on 3/14/2018, 31,250 on 3/14/2019 and 31,250 on 3/14/2020.
Options vest 25,000 on 3/14/2017, 25,000 on 3/14/2018, 25,000 on 3/14/2019 and 25,000 on 3/14/2020.
| | The following footnotes set forth the vest dates for the outstanding stock awards (vesting generally depends upon continued employment): |
| | Awards vests 25,000 on 1/17/2018, 25,000 on 1/17/2019, 25,000 on 1/17/2020 and 25,000 on 1/17/2021. |
| | Awards vests 25,000 on 5/23/2017, 25,000 on 5/23/2018, 25,000 on 5/23/2019 and 25,000 on 5/23/2020.
| | | Award vests 4,176 on 3/17/2017
| | | Awards vests 37,500 on 2/01/20175/1/2018, 37,500 on 5/1/2019, 37,500 on 5/1/2020 and 37,500 on 2/01/2018. |
| (c) | AwardsAward vests 4,230 on 3/16/2017 and 4,231 on 3/16/2018.
|
| (3) | Award vests 1,998 on 3/17/2017.
| | | Awards vests 37,500 on 2/01/2017 and 37,500 on 2/01/2018.
| | | Award vests 12,500 on 3/17/2017.
| | | Award vests 37,500 on 2/01/2017 and 37,500 on 2/01/2018.
| | | Awards vests 25,000 on 1/17/2018, 25,000 on 1/17/2019, 25,000 on 1/17/2020 and 25,000 on 1/17/2021.
| | Represents the number of stock awards multiplied by the closing price of our common stock as of January 28, 2017February 2, 2018 ($22.58)32.09). |
| | (a) Represents the number of shares earned under the Company’s Long-Term Growth Program (described on pages 29-3127-29 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 3”). Mr. Kirwan did not receive an LGP grant in fiscal 2014. Mr. DiGrande, who joined the Company in May 2016, did not receive an LGP grant in fiscal 2014. Ms. List-Stoll, who joined the Company in January 2017, did not receive an LGP grant in fiscal 2014. |
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 3”) . Mr. Kirwan did not earn any shares under the LGP 3 awards. Mr. Breitbard, who joined the Company in May 2017, did not receive an LGP grant in fiscal 2015. Ms. List-Stoll, who joined the Company in January 2017, did not receive an LGP grant in fiscal 2015. | | Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 29-3127-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2015)(fiscal 2016), year 2 (fiscal 2016)(fiscal 2017) and year 3 (fiscal 2017)(fiscal 2018) 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 certifiescertifies attainment in 2018,2019, and the remainder will vest on the anniversary of such certificationcertification date, contingent on continued service with the Company. Mr. DiGrande,Breitbard, who joined the Company in May 2016,2017, did not receive an LGP grant in fiscal 2015.fiscal 2016. Ms. List-Stoll, who joined the Company in January 2017, did not receive an LGP grant in fiscal 2015. Ms. Simmons,fiscal 2016. Mr. Kirwan, who left the companywas terminated in February 2017,March 2018, is not eligible to receive a payout under the LGP 4 awards. |
| | Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described on pages 29-3127-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2016)(fiscal 2017), year 2 (fiscal 2017)(fiscal 2018) and year 3 (fiscal 2018)(fiscal 2019) 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 certifiescertifies attainment in 2019,2020, and the remainder will vest on the first anniversary of such certificationcertification date, contingent on continued service with the Company. Ms. List-Stoll,Mr. Kirwan, who joined the Companywas terminated in January 2017, did not receive an LGP grant in fiscal 2016. Ms. Simmons, who left the company in February 2017,March 2018, is not eligible to receive a payout under the LGP 5 awards. |
| | Represents the number of stock awards multiplied by the closing price of our common stock as of January 28, 2017February 2, 2018 ($22.58)32.09). |
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Option Exercises and Stock Vested The following table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the named executive officersofficers during fiscal 2016,fiscal 2017, which ended on January 28, 2017.February 3, 2018. | | | | | | | | | | | | | | | | | | Number of
Shares
Acquired on
Exercise
(#) | Value
Realized
on
Exercise
($) | Number of
Shares
Acquired on
Vesting
(#) | Value
Realized on
Vesting
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards(1) | | | | Number of | | | | Number of | | | | | | Shares | | Value | | Shares | | Value | | | | Acquired on | | Realized on | | Acquired on | | Realized on | | | | Exercise | | Exercise | | Vesting | | Vesting | | Name | | (#) | | ($) | | (#) | | ($) | | Art Peck | | 0 | | 0 | | 13,180 | | 311,390 | | Teri List-Stoll | | 0 | | 0 | | 25,000 | | 831,500 | | Mark Breitbard | | 0 | | 0 | | 0 | | 0 | | Jeff Kirwan(2) | | 6,430 | | 44,547 | | 83,406 | | 2,279,741 | | Sonia Syngal | | 0 | | 0 | | 82,810 | | 2,262,998 | | | | | | | | | | | |
| | | | The amounts reflectedreflected include performance awards releasedthat vested during fiscal 2016. |
| (2) | Mr. Kirwan ceased to be an executive officer of the Company in March 2018. |
NonqualifiedNonqualified Deferred Compensation
The table below provides information on the nonqualifiednonqualified deferred compensation activity for the named executive officersofficers in fiscal 2016,fiscal 2017, which ended on January 28, 2017.February 3, 2018. | | | | | | | | | | | | | | | | | | Executive
Contribution
in Fiscal
2016
($) (1) | Registrant
Contributions
in Fiscal 2016
($) (2) | Aggregate
Earnings
in Fiscal
2016
($) (3) | Aggregate
Withdrawals/
Distributions
in Fiscal
2016
($) | Aggregate
Balance
at Fiscal
2016
Year-End
($) (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Aggregate | | | Aggregate | | | | Executive | | Registrant | | Aggregate | | Withdrawals/ | | | Balance | | | | Contribution | | Contributions | | Earnings | | Distributions | | | at Fiscal | | | | in Fiscal | | in Fiscal | | in Fiscal | | in Fiscal | | | 2017 | | | | 2017 | | 2017 | | 2017 | | 2017 | | | Year-End | | Name | | ($)(1) | | ($)(2) | | ($)(3) | | ($) | | | ($)(4) | | Arthur Peck | | 238,256 | | 43,831 | | 1,324,482 | | 0 | | | 6,903,307 | | Teri List-Stoll | | 43,758 | | 22,402 | | (358) | | 0 | | | 65,802 | | Mark Breitbard | | 2,192 | | 0 | | (39) | | 0 | | | 2,153 | | Jeff Kirwan(5) | | 205,514 | | 26,738 | | 156,154 | | 0 | | | 1,333,103 | | Sonia Syngal | | 37,538 | | 26,508 | | 58,522 | | 0 | | | 380,611 |
| | | | These amounts are included in the “Salary” column of the Summary Compensation Table. |
| | 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 ($265,000270,000 for calendar year 2016)2017), which are matched at up to 4%, the same rate as is in effect under the Company’s 401(k) plan. |
| | These amounts include earnings and dividends. In fiscal 2016,fiscal 2017, no above-market or preferential interest rate options were available on notional investments in the DCP. |
| | A portion of these amounts were previously reported as deferred compensation in the Nonqualified Deferred Compensation and Summary Compensation tablestable in the Proxy Statements for prior Annual Meetings as follows: Mr. Peck ($2,772,032)2,963,064), Mr. Kirwan ($243,503)263,269), and Ms. Syngal ($45,594)48,131). |
| (5) | Mr. Kirwan ceased to be an executive officer of the Company in March 2018. |
The DCP allows eligible employees to defer up to 75% of their salary and 90% of their bonuses (or such other percentages determined by the Company) on a pre-tax basis. Additional amounts are credited annually to participants' accounts in the form of Company matching contributions of up to a specified percentage of the eligible compensation deferred each year by participants. Contributions credited to a participant's account are credited or debited with notional investment gains and losses, as well as appreciation and depreciation equal to the experience of selected investment funds offered under the DCP and elected by the participant. Deferred compensation is payable upon a participant's termination of employment, death, or on a date or dates selected by the participant in accordance with the terms of the DCP. Deferred compensation is generally payable in the form of a lump sum distribution or installments at the election of the participant and subject to exceptions in the case of death or termination of employment prior to age 50. Participants or, in the case of the participant's death, their beneficiaries, may not sell, transfer, anticipate, assign, hypothecate or otherwise dispose of any right or interest in the DCP. A participant may designate one or more beneficiaries to receive any portion of his or her deferred compensation payable in the event of the participant's death. The Company also reserves the right to amend the DCP at any time, or to terminate the DCP in accordance with the restrictions under Section 409A of the Internal Revenue Code.
Table of Contents Relationship Between CEO and Median
Employee Annual Total Compensation Gap Inc. is one of the largest retailers in the United States. While our employees work in a variety of roles and settings, the majority of our employees work in stores. Our store workforce consists largely of part-time, hourly employees who weave their part-time schedule together with other life commitments such as education or family responsibilities. For fiscal year 2017, using the methodology described below, we determined that the employee with the median annual total compensation of our employees (“median employee”) was a part-time sales associate located in Alabama and the employee's total compensation in fiscal year 2017 was $5,375. This employee did not work the full year and we did not annualize employee compensation. The annual reported compensation of our CEO for that same period was $15,587,186. Accordingly, the ratio of the median employee pay to CEO pay for 2017 is 1 to 2,900, which was calculated in compliance with the requirements set forth in Item 402(u) of SEC Regulation S-K. To identify the median employee and determine the annual total compensation of the median employee, we used the following methodology: | 1. | As of February 3, 2018, our employee population, prior to excluding any non-U.S. employees, consisted of approximately 134,815 employees. As permitted by the SEC rules, we excluded 5,474 employees from the following countries: Bangladesh 29, Cambodia 10, Dominican Republic 1, El Salvador 1, France 770, Guatemala 7, India 348, Indonesia 17, Ireland 125, Italy 306, Mexico 595, Pakistan 2, Philippines 2, Singapore 2, Sri Lanka 9, Turkey 8, United Kingdom 3,118, and Ms. Simmons ($148,254).Vietnam 124. In the aggregate, the total number of excluded employees equaled 4.1% of the total employee population, resulting in a total U.S. and non-U.S. employee population of approximately 129,341 that was used for our calculation. |
| 2. | For the non-excluded employees, we used total gross earnings paid for the fiscal year ending February 3, 2018 as a consistently applied measure to determine the median employee. Total gross earnings were obtained from local payroll data. |
| 3. | We calculated the total compensation elements for both the CEO and the median employee for fiscal 2017 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K. |
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Potential Payments Upon Termination Post-Termination BenefitsPOST-TERMINATION BENEFITS
The Company entered into agreements with Mr. Peck, Ms. Simmons in 2012, withList-Stoll, Mr. Breitbard, Mr. Kirwan in 2014, and with Mr. DiGrande, Ms. List-Stoll and Ms. Syngal in 2016,2017, which provide eligibility for post-termination benefitsbenefits in the case of involuntary termination without cause. The agreement with Ms. Simmons was amended in 2014 to extend the term of eligibility for post-termination benefits. The Company entered into an employment agreement with Mr. Peck on October 3, 2014 that provides for substantially the same post-termination benefits as those of the other executive officers, with the exception of his term of eligibility for such 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, or February 13,July 1, 2020, for Mr. 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. |
| | 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. |
| | 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. |
| | A prorated bonus for the fiscal year in the year ofwhich termination occurs if the executive worked at least 3 months of the fiscalfiscal year and if earned based on actual fiscalfinancial results achieved inand 100% standard for any non-financial component. In the event termination occurs after the end of the fiscal year but before the date of termination. |
| | 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. |
For Ms. Simmons,Mr. Kirwan, the table below shows the amounts that she ishe became eligible to receive under the agreement described above as a result of herhis termination of employment with the Company.Company in March 2018. For all other executives, the following table shows the amounts that each executive would have been eligible to receive under the agreements described above assuming that they had been terminated without cause on January 28, 2017,February 3, 2018, the last day of our 2016 fiscal2017 fiscal year. Back to Contents
| | | | | | | | | | | | | | | | | | | | | | Potential Post-Termination Payment Eligibility | | | | | | | | Cash Payments related to salary (1) | | | | | | | | | | | | | | | | | | | Cash Payments related to bonus (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Award Vesting Acceleration | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Potential Post-Termination Payment Eligibility | | Description | | Mr. Peck | | Ms. List-Stoll | | Mr. Breitbard | | Mr. Kirwan | | Ms. Syngal | | Cash Payments | | | | | | | | | | | | related to salary(1) | | $2,062,500 | | $1,312,500 | | $1,425,000 | | $1,425,000 | | $1,425,000 | | Cash Payments | | | | | | | | | | | | related to bonus(2) | | 4,045,859 | | 1,476,896 | | 669,769 | | 0 | | 2,175,093 | | Health Benefits | | 27,486 | | 20,106 | | 27,486 | | 20,376 | | 27,486 | | Financial Counseling | | 22,950 | | 22,950 | | 22,950 | | 22,950 | | 22,950 | | Stock Award Vesting | | | | | | | | | | | | Acceleration | | 3,396,662 | | 0 | | 0 | | 0 | | 825,323 | | Total | | 9,555,457 | | 2,832,452 | | 2,145,205 | | 1,468,326 | | 4,475,852 |
| | | | 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. |
| | Payments represent fiscal 2016fiscal 2017 bonus that was earned by each executive. |
ACCELERATION OF EQUITY UPON CHANGE IN CONTROL Under the 2016 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 nor 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 28, 2017,February 3, 2018, the last day of our 2016 fiscal2017 fiscal year, in the event that awards were not assumed or substituted as described above. | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Option Vesting Acceleration (1) | | | | | | | | | | | | | | | | | | | Stock Award Vesting Acceleration (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Mr. Peck | | Ms. List-Stoll | | Mr. Breitbard | | Mr. Kirwan | | Ms. Syngal | | Stock Option Vesting | | | | | | | | | | | | Acceleration(1) | | $5,846,250 | | $1,191,000 | | $1,857,000 | | $2,032,313 | | $2,348,063 | | Stock Award Vesting | | | | | | | | | | | | Acceleration(2) | | 20,803,337 | | 4,553,796 | | 7,501,326 | | 5,419,648 | | 6,061,352 | | Total | | 26,649,587 | | 5,744,796 | | 9,358,326 | | 7,451,961 | | 8,409,415 |
| | | (1) | | | ReflectsReflects the value of all unvested stock options that would have become vested assuming a change in control on January 28, 2017February 3, 2018 in which awards were not assumed or substituted as described above, based on the difference between the option exercise price and $22.58$32.09 per share, the last closing price of our common stock as of that date.
|
| | Reflects the value of all unvested stock awards that would have become vested assuming a change in control on January 28, 2017February 3, 2018 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 $22.58.$32.09. 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: 2014-2016, 2015-2017, and 2016-2018. For Mr. Kirwan, amounts include the target number of shares under the LGP for the following three yearthree-year performance periods: 2015-2017, 2016-2018, and 2016-2018.2017-2019. For Ms. List-Stoll and Mr. DiGrande, amount includesBreitbard, amounts include the target number of shares that could be earned under the LGP for the following three-year performance period: 2016-2018.2017-2019. For Mr. Kirwan, amounts include the target number of shares that could be earned under the LGP for the 2015-2017 three-year performance period. Mr. Kirwan, who was terminated in March 2018, is not eligible to receive a payout under the LGP for the 2016-2018 and 2017-2019 performance periods. |
DEATH, DISABILITY OR RETIREMENT 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. |
| | 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. | | | | 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 and, for performance shares, for which the 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 officersofficers was eligible for retirement-based accelerated vesting as of January 28, 2017,February 3, 2018, the last day of our 2016 fiscal2017 fiscal year. In the event Mr. Peck retired on January 28, 2017,February 3, 2018, the last day of our 2016 fiscal2017 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,$716,250, and the value of his unvested stock awards that would have become vested was $435,365,$3,396,662, based on the last closing price of our common stock as of that date. |
| | 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 and, for performance shares, for which the performance period has been 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 28, 2017,February 3, 2018, the last day of our 2016 fiscal2017 fiscal year. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Option Vesting Acceleration (1) | | | | | | | | | | | | | | | | | | | Stock Award Vesting Acceleration (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Mr. Peck | | Ms. List-Stoll | | Mr. Breitbard | | Mr. Kirwan | | Ms. Syngal | | Stock Option Vesting | | | | | | | | | | | | Acceleration(1) | | $716,250 | | $1,191,000 | | $0 | | $322,313 | | $638,063 | | Stock Award Vesting | | | | | | | | | | | | Acceleration(2) | | 3,396,662 | | 2,406,750 | | 0 | | 135,773 | | 670,168 | | Total | | 4,112,912 | | 3,597,750 | | 0 | | 458,086 | | 1,308,231 |
| | | | ReflectsReflects the value of all unvested stock options that would have become vested assuming the named executive officersofficers had died (or terminated on account of disability) on January 28, 2017,February 3, 2018, based on the difference between the option exercise price and the last closing price of our common stock as of that date.
|
| | Reflects the value of all unvested stock awards that would have become vested assuming the named executive officersofficers had died on January 28, 2017,February 3, 2018, based on the last closing price of our common stock as of that date. |
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Equity Compensation Plan Information The following table provides information as of January 28, 2017February 3, 2018 about shares of our common stock which may be issued upon the exercise of options, warrants and rights granted to employees, consultants or members of our Board of Directors under all of our equity compensation plans, including the 2016 Long-Term Incentive Plan and the Employee Stock Purchase Plan. | | | | | | | | | | | | | | | | | Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights (#) | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
($) | 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) | | | | | | | | | | Equity Compensation Plan Not Approved by Security Holders | | | | | | | | | | | | | | | | | | | |
| | | Equity Plan Summary | | | | Column (A) | | Column (B) | | Column (C) | | | | | | | | | Number of Securities | | | | | | | | | Remaining Available | | | | Number of | | Weighted-Average | | for Future Issuance | | | | Securities to be Issued | | Exercise Price of | | Under Equity | | | | Upon Exercise of | | Outstanding Options, | | Compensation Plans (#) | | | | Outstanding Options, | | Warrants and Rights | | (Excluding Securities | | Plan Category | | Warrants and Rights (#) | | ($) | | Reflected in Column (A)) | | Equity Compensation Plans | | | | | | | | | | Approved by Security | | | | | | | | | | Holders(1) | | 19,641,798 | (2) | | $28.67 | | 33,592,229 | (3) | | Equity Compensation Plan | | | | | | | | | | Not Approved by Security | | | | | | | | | | Holders | | 0 | | | 0 | | 8,225 | | | Total | | 19,641,798 | | | $28.67 | | 33,600,454 | | | | | | | | | | | | |
| | | | These plans consist of our 2016 Long-Term Incentive Plan (the “2016 Plan”) and Employee Stock Purchase Plan (the “ESPP”). |
| | This number excludes 324,139257,881 shares that were issued at the end of the most recent ESPP purchase period, which began on November 30, 2016December 1, 2017 and ended on February 28, 2017,2018, after the end of our 2016 fiscal2017 fiscal year. This number also excludes shares that may be issued upon satisfaction of performance targets under the 2016 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 29-3127-29 of the Compensation Discussion and Analysis section) if the maximum performance conditions were achieved over the entire three-year performance periods. |
| | This number includes 1,257,8308,144,190 shares that were available for future issuance under the ESPP at the end of our 2016 fiscal2017 fiscal year, including the 324,139257,881 shares described in footnote 2 above. For those grants prior to May 17, 2011, theThe number shown reflectsalso reflects 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 aftergranted prior to May 17, 2011, the number shown reflectsand the deduction of two shares from the Company’s share reserve for every one stock award at the time of grant,granted on or after May 17, 2011, pursuant to the terms of the 2016 Plan. |
50
EARNED PERFORMANCE-BASED AWARDS DATA
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PROPOSAL NO. 5 — ApprovalWe granted performance-based awards under the LGP (Long-Term Growth Program) in fiscal 2015 and 2016, which are granted at the beginning of the Amendmentperformance period and Restatement
of The Gap, Inc. Employee Stock Purchase Plan
Purpose of the Amendment and Restatement
Our shareholders are being asked to vote on a proposal to approve the amendment and restatement of our Employee Stock Purchase Plan (the “ESPP”). Our ESPP provides our eligible employees and those of our participating subsidiaries with the opportunity to designate in advance of specified purchase periods a percentage of compensation to be withheld from their pay and applied toward the purchase of discounted shares of our common stock. As such, the ESPP serves as a valuable means for our Company to attract and retain talented employees. In addition, our Board of Directors believes that it isdisclosed in our best interests to provide our employees with the opportunity to acquire an ownership interest in our Company through their participation in the ESPP, and thereby more closely align their interests with thoseForm 10-K at maximum performance. A portion of the shareholders.
The principal purpose of the amendment and restatement of the ESPP is to approve an 8,000,000 share increase to the number of shares of common stock available for issuance under the plan. As of March 1, 2017, the Company had approximately 933,691 shares of its common stock remaining available for issuance under the ESPP. Based on the Company’s current ESPP usage rate, the Company expects to deplete that remaining share reserve in late 2017.
The Board of Directors has determined that the number of shares issuable under the ESPP should be increased by 8,000,000 shares, subject to approval of our shareholders at the 2017 Annual Meeting. Based on the Plan’s past participation rate, the Company believes that the 8,000,000 additional authorizedthese shares will be sufficient to operateforfeited if maximum performance goals are not achieved. The table below shows the ESPPLGP shares earned in each fiscal year for approximately five additional years.
The secondarythe purpose of the amendment and restatement of the ESPP is to approve the following technical changes to the plan: (i) revise the definition of “compensation” eligible to be contributed to the plan to exclude “commissions”, in order to equalize contributions to the plan across all our brands, (ii) formalize within the plan document our administrative requirement that no more than 6,250 shares of our common stock be purchasable by any one participant on any quarterly purchase date, (iii) provide specific authority under the plan for us to authorize one or more offerings under the ESPP that are not designed to comply with the requirements of Internal Revenue Code Section 423, but with the requirements of the foreign jurisdictions in which those offerings are conducted, and (iv) modify the adjustment provision contained within the plan.burn rate calculation.
Our Board approved the amended and restated ESPP on February 22, 2017, subject to shareholder approval at the Annual Meeting.
| THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSAL TO AMEND AND RESTATE THE ESPP.
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Summary Description of the Amended and Restated Plan
The principal terms and provisions of the ESPP are summarized below. The summary, however, is not intended to be a complete description of all the terms of the ESPP and is qualified in its entirety by reference to the complete text of the plan document, a copy of which is attached as Appendix A to this Proxy Statement and incorporated herein by reference.
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The purpose of the ESPP is to provide our eligible employees with the opportunity to purchase discounted shares of our common stock through payroll deductions. The Purchase Plan is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code (the “Code”). The ESPP was originally established effective as of December 1, 1994. It was amended and restated effective as of January 29, 2002, was further amended and restated, effective December 1, 2006, and was further amended, effective as of June 2, 2008. The ESPP was last approved by our shareholders at our 2008 Annual Meeting.
Securities Subject to the ESPP
The number of shares of our common stock reserved for issuance under the ESPP will be limited to 40,500,000 shares, assuming shareholder approval of this Proposal 5. The ESPP does not contain an evergreen provision, pursuant to which the share pool would be automatically increased each year based upon a specified formula. As of March 1, 2017, 18,712,622 shares had been issued under the plan, and, assuming shareholder approval of this Proposal 5, 8,933,691 shares remain available for future issuance under the plan. The shares issuable under the ESPP may be made available from authorized but unissued shares of our common stock or from shares of common stock repurchased by us, including shares repurchased on the open market. On March 1, 2017, the closing price of our common stock was $24.33.
Should any change be made to our outstanding common stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding common stock as a class without our receipt of consideration, should the value of the outstanding shares of our common stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable adjustments will be made by the plan administrator to (i) the maximum number and/or class of securities issuable under the ESPP, (ii) the maximum number and/or class of securities purchasable per participant on any one purchase date or in any calendar year, and (iii) the number and class of securities and the purchase price per share in effect under each outstanding purchase right. The adjustments will be made in such manner as the plan administrator deems appropriate and such adjustments shall be final, binding and conclusive.
Shares of our common stock will be offered for purchase under the ESPP through a series of successive quarterly purchase periods, commencing on the first business day in June, September, December and March. From time to time, the Company may change the length or commencement date of the purchase periods (but in no event may any purchase period exceed 27 months).
The terms and conditions of each purchase period may vary, and two or more periods may run concurrently under the ESPP, each with its own terms and conditions.
The plan administrator may authorize one or more offerings under the ESPP that are not designed to comply with the requirements of Code Section 423, but with the requirements of the foreign jurisdictions in which those offerings are conducted.
Eligibility to Participate
In general, any individual who is in the employ of any of our participating parent or subsidiary corporations is eligible to participate in the ESPP. However, any employee whose customary employment is for not more than five months in any calendar year or who would own stock and/or hold outstanding options to purchase stock representing five percent or more of our voting stock or the voting stock of any of
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our subsidiaries is not eligible to participate in the Plan. As of March 1, 2017, 109,861 employees, including 9 executive officers, were eligible to participate in the ESPP.
Participation in the ESPP terminates when a participating employee’s employment with the Company ceases for any reason, the employee withdraws from the ESPP, or the ESPP is terminated or amended such that the employee no longer is eligible to participate. Any payroll deductions which the participating employee may have made for the purchase period in which such cessation of employment or loss of eligibility occurs will be refunded and will not be applied to the purchase of our common stock.
Enrollment and Contributions
Eligible employees voluntarily elect whether or not to enroll in the ESPP prior to the commencement of the applicable purchase period. Employees who have enrolled in the ESPP in previous purchase periods will continue to participate in future purchase periods. However, an employee may cancel his or her participation at any time (subject to certain administrative requirements).
Employees contribute to the ESPP through after-tax payroll deductions. Participating employees generally may contribute up to 15% of their eligible compensation to the ESPP. For purposes of the ESPP, eligible compensation means a participant’s gross salary, wages and overtime pay, but does not include bonuses or commissions. From time to time, the Company may establish a lower maximum permitted contribution percentage.
After the purchase period begins, employees may not change their current contribution percentage, and any requested change will be effective for the next purchase period. An employee, however, may withdraw from the ESPP at any time.
Purchase of Shares/Special Limitations
On the last business day of each quarterly purchase period, each participating employee’s payroll deductions are used to purchase shares of our common stock on the employee’s behalf. The purchase price of the shares will be equal to 85% the fair market value of our common stock on the last day of the applicable purchase period. The fair market value of our stock, for purposes of the ESPP, is the closing price of our common stock on the New York Stock Exchange Composite Transactions Index on the day in question.
No employee may purchase under the ESPP more than 25,000 shares of our common stock in any one calendar year or more than 6,250 shares of our common stock on any one quarterly purchase date. In addition, no employee may purchase more than $25,000 worth of our common stock (based on the fair market value on the start date of the applicable purchase period in which the shares are purchased) in any one calendar year.
No participating employee will have any stockholder rights with respect to the shares covered by his or her purchase rights until the shares are actually purchased on his or her behalf and the participating employee has become a holder of record of the purchased shares. No adjustment will be made for dividends, distributions or other rights for which the record date is prior to the date of such purchase. No purchase rights will be assignable or transferable by a participating employee, and the purchase rights will be exercisable only by the participating employee.
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No purchase rights will be granted on the basis of the increase to the share reserve of the ESPP unless our stockholders approve the amended and restated ESPP at the 2017 Annual Meeting.
The following table sets forth, for each of the individuals and groups indicated, the total number of shares of our common stock that were purchased under the ESPP during the period beginning in June 2008 and ending on February 28, 2017.1
| Fiscal Year | | Granted Shares | | Earned Shares | | 2017(1) | | 0 | | 32,875 | | 2016 | | 896,469 | | 50,356 | | 2015 | | 597,131 | | 260,034 |
| | | (1) | NumberIn fiscal 2017, we changed our accounting treatment and performance awards will not be considered granted until such performance conditions have been established. There were 1,470,938 shares of shares
| | | | | | | | | | | | | | | All current executive officers asperformance-based awards, which are at maximum, granted in 2017 for which the performance conditions had not yet been established. As a group
| | All current directors whoresult, these shares are not executive officersreflected as a group
| | Each associate of any director or executive officer
| | Each other person who received or is to receive 5% of purchase rights granted under the ESPP
| | All employees, including all current officers who are not executive officers, as a group
| in our Form 10-K. |
1Represents ESPP shares acquired since June 2008, when the ESPP was last amended and approved by shareholders.
Administration, Amendment and Termination
Subject to the terms of the ESPP, the Company has all discretion and authority necessary to supervise and control the operation and administration of the ESPP, including the power to interpret and determine any question arising in connection with the ESPP. The Company may delegate one or more of its duties in the administration of the ESPP to any one of its employees or to any other person. The Board of Directors, in its sole discretion, may amend or terminate the ESPP at any time and for any reason, including approving amendments that could increase the cost of the ESPP or alter the allocation of benefits among the participants. In no event, however, may our Board of Directors effect any of the following amendments or revisions to the ESPP without the approval of our stockholders: (i) increase the number of shares of our common stock issuable under the ESPP, except for permissible adjustments described above in the event of certain changes in our capitalization or (ii) modify the eligibility requirements for participation in the ESPP.
Federal Income Tax Consequences
The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. The U.S. federal income tax consequences of the purchase of shares of common stock under a plan which so qualifies are as follows:
An employee will have no taxable income when the shares of common stock are purchased for him or her under the ESPP. The employee generally will be taxed when he or she sells or otherwise disposes of the stock (such sales or dispositions are collectively referred to below as sales).
The employee’s income tax treatment depends on whether shares are sold within 24 months after the first day of the three-month purchase period in which the shares were purchased (the “24-month holding period”).
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For a sale after the 24-month holding period, an employee will have ordinary income equal to the lesser of: (i) 15% of the fair market value of the shares on the first day of the purchase period; or (ii) the amount by which the fair market value of the stock at the time of sale exceeds the purchase price. Any additional gain from a sale after the 24-month holding period will be taxed as a long-term capital gain. Any loss will be taxed as a long-term capital loss.
If shares are sold before the end of the 24-month holding period, the entire amount of the discount received from the stock’s market price when the shares were purchased will be taxed as ordinary income. Any additional gain or any loss, measured by the difference between the sales proceeds and the fair market value of the stock when the shares were purchased, will be taxed as a long-term or short-term capital gain or loss, depending on whether the employee has held the shares for more than one year at the time of sale. The holding period for determining whether the gain or loss is short-term or long-term begins on the day after the stock is purchased through the ESPP.
We will be entitled to deduct, for U.S. federal income tax purposes, an amount equal to the ordinary income that an employee recognizes when he or she sells stock purchased under the ESPP within the 24-month holding period. We will not be entitled to such a deduction with respect to any shares that are sold after the 24-month holding period.
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PROPOSAL NO. 6 — Shareholder Proposal
The National Center for Public Policy Research, 20 F Street, NW, Suite 700, Washington, DC 20001, who held more than $2,000 of shares of common stock on December 5, 2016, intends to submit the following proposal to shareholders for approval at the 2017 Annual Meeting of Shareholders.
The Board opposes the adoption of this proposal and asks shareholders to review the Position of the Board of Directors (Opposition Statement), which follows the proposal.
The proposal and the proponent's supporting statement are reproduced below without alteration (italics added):
Human Rights Review – High-Risk Region
Whereas, the Securities and Exchange Commission has consistently recognized that human rights constitute a significant policy issue.
Company operations in high-risk regions with poor human rights records risk damage to Gap’s reputation and shareholder value.
Gap has a presence in areas such as Qatar, Saudi Arabia and the United Arab Emirates – all nations that have questionable human rights records as it relates to women’s rights and gay rights.
The company’s operations in high-risk regions may worsen certain human rights abuses in those areas.
Resolved: The proponent requests the board of directors review the company’s guidelines for selecting countries / regions for its operations and issue a report, at reasonable expense excluding any proprietary information, to shareholders by December 2017. The report should identify Gap’s criteria for investing in, operating in and withdrawing from high-risk regions.
Supporting Statement: If the company chooses, the review may consider developing guidelines on investing or withdrawing from areas where the government has engaged in systematic human rights violations.
In its review and report, the company might also consider a congruency analysis between its stated corporate values and company operations in certain regions, which raises an issue of misalignment with those corporate values, and stating the justification for such exceptions.
For example, the company worked to defeat religious freedom efforts in Indiana and Arkansas by mischaracterizing those efforts as “legalized discrimination” and claiming that “[t]hese new laws and legislation, that allow people and businesses to deny service to people based on their sexual orientation, turn back the clock on equality and foster a culture of intolerance.”
Yet, the company maintains operations in high-risk regions where homosexual acts are criminalized.
The proponent believes that Gap’s record to date demonstrates a gap between its statements and its actions. The requested report would play a role in illuminating and addressing the factors accounting for this gap.
POSITION OF THE BOARD OF DIRECTORS (OPPOSITION STATEMENT)
The Board of Directors has considered this proposal and believes that its adoption at this time is not in the best interests of the Company or our shareholders.
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The requested report wastefully duplicates current efforts. The Board believes that providing the requested report wastefully duplicates existing policies and current public disclosures—without
improving shareholder value. Our website (www.gapincsustainability.com) shares our sustainability strategy which includes improving factory working conditions, promoting equal pay for women and increasing minimum wage, and the Company’s P.A.C.E. (Personal Advancement & Career Enhancement) program to provide women with skills and confidence to advance their lives. As part of our sustainability and business practices, the Company already reviews guidelines for selecting countries or regions for its operations including evaluating criteria for investing in, operating in, and withdrawing from certain areas. The proposal’s separate review is unnecessary and our website discloses our sustainability achievements and efforts.
We are dedicated to supporting human rights in all aspects of our business. Gap Inc. has a strong track record of supporting human rights. The Company received the 2016 Catalyst Award in recognition of our culture of equality, inclusion, and opportunity. We were selected for our leadership on equal pay for women, our strong representation of women at all levels, and our dedication to advancing women. We support the principles articulated in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and the International Labor Organization’s (ILO’s) Declaration on Fundamental Principles and Rights at Work. We expect our business partners, including suppliers, to adopt and adhere to similar values. We implement our human rights commitment through our Code of Vendor Conduct and enforce the Code through our assessment, remediation, capability building, and worker engagement programs at supplier facilities. For example, more than 45,000 women in 12 countries have participated in P.A.C.E. since it was launched in 2007, and we announced our commitment to expand P.A.C.E. to reach one million women and girls around the world by 2020. We also partner with our peers in collaborative initiatives such as the Alliance for Bangladesh Worker Safety, the Ethical Trading Initiative, the ILO’s Better Work Program, the Sustainable Apparel Coalition, the Zero Discharge of Hazardous Chemicals Initiative, and the UN Global Compact.
Our ongoing work is to embed human rights considerations in all relevant business decisions. This commitment applies globally to our own operations, our products and services, and our business relationships. The Company will continue to look for ways to promote and advance human rights within its sphere of influence.
We believe human rights are protected and enhanced through local engagement. We do not believe exiting certain regions protects or enhances human rights. On the contrary, local engagement protects and improves human rights. We recognize our responsibility to engage with our local business partners to address and remedy adverse impacts and seek to build their capacity to respect human rights through training and engagement.
| THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE “AGAINST” THE SHAREHOLDER PROPOSAL.
|
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BENEFICIAL OWNERSHIP OF SHARES
BeneficialBeneficial Ownership Table
The following table sets forth certain information as of March 20, 201726, 2018 to indicate beneficialbeneficial ownership of our common stock by (i) each person known by us to be the beneficialbeneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each director and nominee and each executive officerofficer and former executive officerofficer named in the “Summary Compensation Table” of this Proxy Statement, and (iii) all of our directors and executive officersofficers as a group. Unless otherwise indicated, beneficialbeneficial ownership is direct and the person indicated has sole voting and investment power. BeneficialBeneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. | | | | | | | | | | | | | | | | | | | Awards
Vesting Within
60 Days (2) | | | Directors and Named Executive Officers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All directors and executive officers, as a group (18 persons) (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Certain Other Beneficial Holders | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares Beneficially Owned | | | | Name of Beneficial Owner | Common
Stock | Awards
Vesting Within
60 Days(1) | Total | % of
Class(2) | | | Directors and Named Executive Officers | | | | | | | Mark Breitbard | 0 | 112,500 | 112,500 | * | | | Robert J. Fisher(3) | 48,021,217 | 18,135 | 48,039,352 | 12.3 | % | | William S. Fisher(4) | 69,109,689 | 18,135 | 69,127,824 | 17.8 | % | | Tracy Gardner | 0 | 17,251 | 17,251 | * | | | Brian Goldner | 5,000 | 12,242 | 17,242 | * | | | Isabella D. Goren | 11,619 | 18,135 | 29,754 | * | | | Teri List-Stoll | 16,201 | 50,000 | 66,201 | * | | | Bob L. Martin | 40,148 | 18,135 | 58,283 | * | | | Jorge P. Montoya | 30,927 | 18,135 | 49,062 | * | | | Chris O'Neill | 0 | 4,985 | 4,985 | * | | | Arthur Peck | 242,048 | 935,000 | 1,177,048 | * | | | Mayo A. Shattuck III | 89,888 | 27,175 | 117,063 | * | | | Sonia Syngal | 35,657 | 220,000 | 255,657 | * | | | Katherine Tsang(5) | 783 | 18,135 | 18,918 | * | | | All directors and executive officers, as a group (19 persons)(6) | 117,653,414 | 1,970,801 | 119,624,215 | 30.6 | % | | Former Executive Officers | | | | | | | Jeff Kirwan(7) | 2,655 | 156,250 | 158,905 | * | | | Certain Other Beneficial Holders | | | | | | | Doris F. Fisher(8) | 24,530,644 | 0 | 24,530,644 | 6.3 | % | | John J. Fisher(9) | 64,069,166 | 0 | 64,069,166 | 16.5 | % | | The Vanguard Group(10) | 25,421,798 | 0 | 25,421,798 | 6.5 | % |
| | | | Mr. De Sole is not standing for reelection to the Board of Directors.
| | ReflectsReflects stock options exercisable and stock units vesting within 60 days after March 20, 2017.26, 2018. 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.
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| | “*” indicates ownership of less than 1% of the outstanding shares of our common stock. |
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| | | (3) | Includes (a) 14,01818,135 shares to be issued upon settlement of stock units (and related dividend equivalent rights) which are subject to a three-year deferral period but would be issued immediately upon his resignation or retirement over which he has sole dispositive and voting power, (b) 7,697,9098,279,029 shares beneficiallybeneficially owned as a co-trustee of trusts for other beneficiariesbeneficiaries of which Robert J. Fisher shares dispositive and voting power (including shares held by the trusts through a limited liability company), (c) 2,717,2662,721,010 shares owned as community property with his spouse with shared dispositive and voting power, (d) 15,000 shares beneficiallybeneficially owned through Delaware limited partnerships over which Robert J. Fisher has sole dispositive and voting power, (e) 6,633,1836,131,087 shares beneficiallybeneficially owned as trustee of a trust for his benefitbenefit with sole dispositive and voting power, (f) 2,385,304 shares beneficiallybeneficially owned as trustee of trusts for his benefitbenefit over which Robert J. Fisher has sole dispositive power and another individual proxyholder hasother proxyholders have proxies granting sole voting power, (g) 616,487 shares for which Robert J. Fisher has a proxy granting him sole voting power, (h) 738,515873,300 shares beneficiallybeneficially owned as a co-trustee of a trust organized exclusively for charitable purposes over which Robert J. Fisher shares dispositive and voting power, and (i) 27,000,000 shares owned by FCH TBME LLC of which Robert J. Fisher is the sole manager with sole dispositive power over 27,000,00027,00,000 shares, sole voting power over 23,400,000 shares and an irrevocable proxy granting a proxyholder sole voting power over 3,600,000 shares. In addition to the shares identifiedidentified in the table above, Robert J. Fisher’s spouse separately owns 124,277125,195 shares over which Mr. Fisher has no dispositive or voting control. Robert J. Fisher’s address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| | Includes (a) 14,01818,135 shares to be issued upon settlement of stock units (and related dividend equivalent rights) which are subject to a three-year deferral period but would be issued immediately upon his resignation or retirement over which he has sole dispositive and voting power, (b) 367,01411,360,396 shares beneficiallybeneficially owned as trustee of a trust for William S. Fisher's benefitFisher’s benefit with sole dispositive and voting power, (c) 9,233,9899,815,109 shares beneficiallybeneficially owned as a co-trustee of trusts for other beneficiariesbeneficiaries of which he shares dispositive and voting power (including shares held by the trusts through a limited liability company), (d) 375,701378,590 shares beneficiallybeneficially owned as trustee of trusts for other beneficiariesbeneficiaries with sole dispositive and voting power, (e) 663,10515,624 shares owned as community property with his spouse with shared dispositive and voting power, (f) 8,513 shares beneficiallybeneficially owned and held in a 401(k) account with shared dispositive and voting power, (g)(f) 15,000 shares beneficiallybeneficially owned through Delaware limited partnerships over which William S. Fisher has sole dispositive and voting power, (h) 11,862,511(g) 367,014 shares beneficiallybeneficially owned as trustee of a trust for his benefitbenefit with sole dispositive and voting power, (i)(h) 616,487 shares beneficiallybeneficially owned as trustee of a trust for his benefitbenefit over which William S. Fisher has sole dispositive power and another individual proxyholder has a proxy granting sole voting power, (j) 11,616,487(i) 16,306,469 shares for which William S. Fisher has proxies granting him sole voting power, (k) 2,235,000(j) 3,235,000 shares beneficiallybeneficially owned as a co-trustee of a trust organized exclusively for charitable purposes over which he shares dispositive and voting power, and (l)(k) 27,000,000 shares owned by FCH TBMS LLC of which William S. Fisher is the sole manager with sole dispositive power over 27,000,000 shares, sole voting power over 23,400,000 shares and an irrevocable proxy granting a proxyholder sole voting power over 3,600,000 shares. In addition to the shares identifiedidentified in the table above, William S. Fisher’s spouse separately owns 163,581163,999 shares over which Mr. Fisher has no dispositive or voting control. William S. Fisher’s address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| | Ms. Tsang is not standing for reelection to the Board of Directors. |
| (6) | Reflects the information above as well as information regarding our unnamed executive officers;officers; provided, however, that shares reflectedreflected more than once in the table above with respect to Robert J. Fisher and William S. Fisher are only reflectedreflected once in this line. See the note regarding various Fisher family holdings immediately following this table. |
| | Mr. Kirwan ceased to be an executive officerofficer of the Company in January 2017.March 2018. |
| | Includes 5,000,000 shares beneficially owned as trustee of a trust for her benefit over which Doris F. Fisher’s address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188.Fisher has sole dispositive power and another individual proxyholder has a proxy granting sole voting power. Amounts shown do not include shares held directly or indirectly by Mrs. Fisher’s three adult sons or their spouses, beneficialbeneficial ownership of which is disclaimed because Mrs. Fisher does not have voting or dispositive control over such shares. Doris F. Fisher's address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| | Includes (a) 442,0144,563,553 shares beneficially owned as trustee of a trustthrough trusts for which John J. Fisher's benefit withFisher is trustee and has sole dispositive and voting power, (b) 3,581,500 shares beneficially owned as trustee of a trust for his benefit with sole dispositive and voting power, (c) 9,336,042 shares beneficiallybeneficially owned as a co-trustee of trusts for other beneficiaries ofbeneficiaries for which he sharesvoting and dispositive and voting power is shared (including shares held by the trusts through a limited liability company), (d) 216,876(c) 16,035,368 shares beneficiallybeneficially owned as trustee of trusts for other beneficiaries withhis benefit over which John J. Fisher has sole dispositive power and another individual proxyholder has proxies granting sole voting power, (d) 7,114,203 shares for which John J. Fisher has proxies granting sole voting power, (e) 20,000 shares beneficially owned through Delaware limited partnerships over which John J. Fisher has sole dispositive and voting power, (f) 7,322,329 shares beneficially owned as trustee of a trust for his benefit with sole dispositive and voting power, (g) 11,616,487 shares beneficially owned as trustee of trusts for his benefit over which John J. Fisher has sole dispositive power and another individual proxyholder has proxies granting sole voting power, (h) 2,385,304 shares for which John J. Fisher has proxies granting him sole voting power, and (i)(f) 27,000,000 shares owned by FCH TBML LLC of which John J. Fisher is the sole manager with sole dispositive power over 27,000,000 shares, sole voting power over 23,400,000 shares andwith an irrevocable proxy granting a proxyholder sole voting power over 3,600,000 shares. In additionMr. Fisher disclaims individual beneficial ownership of shares owned by FCH TBML LLC except to the extent of his actual ownership interest therein. Also see the note regarding various Fisher family holdings immediately following this table. Amounts shown do not include 43,790 shares identified in the table above, John J. Fisher’sowned by Mr. Fisher's spouse, separately owns 43,372 shares over which Mr. Fisher has nodoes not have voting or dispositive or voting control. John J. Fisher’s address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| | The Schedule 13G/A filed13G filed with the SEC by Blackrock Inc.The Vanguard Group on January 27, 2017February 9, 2018 indicates that, as of December 31, 2016, Blackrock, Inc. has sole power to direct the voting of 20,067,620 shares, and the sole power to direct the disposition of 23,396,705 shares. The address of Blackrock, Inc. Is 55 East 52nd Street, New York, New York 10055. | | The Schedule 13G filed with the SEC by Blackrock Inc. on February 9, 2017, indicates that, as of December 31, 2016, The Vanguard Group has sole power to direct the voting of 357,307317,467 shares, shared power to direct the voting of 40,02748,639 shares, sole power to direct the disposition of 20,840,62725,070,391 shares, and shared power to direct the disposition of 383,205351,407 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
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Note Regarding Various Fisher Family Holdings SEC rules require reporting of beneficialbeneficial 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 shares described in footnotes (4)(3), (5)(4) and (9) above for which voting and investment power is shared by Messrs. Robert J. Fisher, William S. Fisher, andand/or John J. Fisher actually represent an aggregate of 13,133,97013,715,090 shares, rather than 26,267,94027,430,180 shares, as a result of that shared voting and investment power. In addition, the shares described in footnotes (4)(3), (5)(4) and (9) above for which sole dispositive power is held by one person and, pursuant to irrevocable proxies, sole voting power is held by a different person actually represent an aggregate of 14,618,27821,537,159 shares, rather than 29,236,55643,074,318 shares. For purposes of the above table, removing the shares counted multiple times (described above) results in an aggregate total beneficial ownership of 36.5%37.5% of the outstanding shares by Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher.Fisher and charitable entities for which one or more Fishers is a trustee. The aggregate total beneficial ownership of Mrs. Doris F. Fisher and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher, including charitable entities for which one or more of the Fishers is 43.7%a trustee, is 43.8% of the outstanding shares. Mrs. Doris F. Fisher, and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher each disclaim beneficialbeneficial ownership over shares owned by other members of the Fisher family, except as specificallyspecifically disclosed in the footnotes above. Section 16(a) BeneficialBeneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s directors and executive officers,officers, and holders of more than 10% of the Company’s common stock, to filefile with the Securities and Exchange Commission reports about their ownership of the Company’s common stock. Such directors, officersofficers and 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.file. Securities and Exchange Commission regulations require us to identify in this Proxy Statement anyone who filedfiled a required report late during the most recent fiscalfiscal year. The Company notes that due to a third-party administrative error, a sale by Mr. De SoleMartin of the Company’s common stock on November 19, 2012 wasMarch 18, 2013, and a gift by Mr. Martin on December 31, 2014, were never reported on a Form 4.4 or Form 5. Mr. De SoleMartin reported this transactionthese transactions on a Form 5 on March 9, 2017. This transaction2018. 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 filefile these forms, we believe that during fiscal 2016fiscal 2017 all other Section 16(a) filingfiling requirements were satisfiedsatisfied on a timely basis or previously disclosed.
Back to ContentsOTHERINFORMATION
Questions and Answers About the Annual Meeting and Voting QUESTIONS AND ANSWERS ABOUT
THE ANNUAL MEETING AND VOTING
Who are the proxyholders and how were they selected? The proxyholders are Arthur Peck, Julie Gruber and Teri List-Stoll, who were selected by our Board of Directors and are officersofficers 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 fiduciariesfiduciaries for forwarding documents to security owners. In addition to solicitation by mail, certain of our officers,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,efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2016 2017 Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors, Financial Information, Annual Reports &and 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 BeneficialBeneficial 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 BeneficialBeneficial 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. 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 1-866-540-7095, or by writing to Broadridge, Back to Contents
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 beneficialbeneficial owner of shares? If your shares are registered directly in your name with the Company’s transfer agent, Wells Fargo Bank, N.A.,Equiniti Trust Company, you are considered the shareholder of record with respect to those shares.
Table of Contents BeneficialBeneficial Owner
If your shares are held in an account at a brokerage firm,firm, bank, broker-dealer, or other similar organization, then you are the beneficialbeneficial 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 beneficialbeneficial 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.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 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 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?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).
| · | As required to tabulate and certify the vote; |
| · | As required by law; and/or |
| · | 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 specificspecific voting instructions? 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. BeneficialBeneficial Owner
If you are a beneficialbeneficial 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(ratification of the selection of independent registered public accounting firm)firm), but do not have the discretion to vote on non-routine matters such as Proposal 1 (election of directors), and Proposal 3 (advisory vote on frequency of advisory vote on executive compensation), Proposal 4 (advisory vote on executive compensation), Proposal 5 (approval of the Amendment and Restatement of The Gap, Inc. Employee Stock Purchase Plan), and Proposal 6 (shareholder proposal). Therefore, your shares will not be voted on non-routine matters without your voting instructions.
Table of Contents 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 generally be the same as a vote against a proposal. However, abstentions will have no effect on the election of directors or the vote on the frequency of the advisory vote on the overall compensation of the Company's named executive officers.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 beneficialbeneficial owners, are prohibited from exercising discretionary voting authority for beneficialbeneficial 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 beneficialbeneficial owner, resulting in so-called “broker non-votes.” The proposal to ratify Deloitte & Touche LLP as the Company’s independent registered public accounting firmfirm is the only routine proposal on the agenda for our Annual Meeting. The other fivetwo 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. Back to Contents
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 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. With respect to the vote on the frequency of the advisory vote on the overall compensation of the Company's named executive officers, if none of the frequency options receives a majority of the votes cast, the option receiving the greatest number of votes will be considered the frequency recommended by the Company's shareholders.
The other fourtwo matters on the agenda for shareholder approval at the Annual Meeting will be decided by the affirmativeaffirmative 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 noteNote that Proposal 2 (ratification(ratification of the selection of independent registered public accounting firm),firm) and Proposal 3 (advisory vote on frequency of advisory vote on executive compensation), Proposal 4 (advisory vote on executive compensation) and Proposal 6 (shareholder proposal) 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 16, 20172018 (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,notified, of any other matters that may be presented for consideration at the meeting.
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You may revoke your proxy at any time before its exercise by writing to our Corporate Secretary at our principal executive officesoffices 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 20182019 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 2018,2019, the Company’s Corporate Secretary must receive it no later than December 5, 2017.11, 2018. 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 20182019 (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, 2018,21, 2019, and no earlier than January 17, 201822, 2019 (i.e., not less than 90 days nor more than 120 days prior to the firstfirst anniversary of the date of our 20172018 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 beneficiallybeneficially 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, 2018,21, 2019, then the proposed business would not be considered at our Annual Meeting in 20182019 due to the shareholder’s failure to comply with our Bylaws. Additionally, in accordance with Rule 14a-4(c)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 20182019 as to which the proponent fails to notify us on or before February 16, 2018. Notifications21, 2019. 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 Back to Contents
THE GAP, INC. EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective as of May 17, 2017)
The Company originally established The Gap, Inc. Employee Stock Purchase Plan, effective as of December 1, 1994, in order to provide eligible employees of the Company and its participating Subsidiaries with the opportunity to purchase Common Stock through payroll deductions. The Plan was amended and restated effective as of May 17, 2017, subject to shareholder approval at the Company’s 2017 Annual Meeting of Shareholders. The Plan is intended to qualify as an employee stock purchase plan under Section 423(b) of the Code.
2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific Section of the 1934 Act shall include such Section, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
2.2 “Board” means the Board of Directors of the Company.
2.3 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
2.4 “Common Stock” means the common stock of the Company.
2.5 “Company” means The Gap, Inc., a Delaware corporation.
2.6 “Compensation” means a Participant’s gross salary, wages and overtime pay, but shall not include bonuses or commissions.
2.7 “Eligible Employee” means every Employee of an Employer, except any Employee who, immediately after the grant of a purchase right under the Plan, would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company (including stock attributed to such Employee pursuant to Section 424(d) of the Code).
2.8 “Employee” means an individual who is a common-law employee of any Employer. Notwithstanding the preceding sentence, the term “Employee” shall not include any Non-Employee, regardless of any subsequent reclassification of any such Non-Employee as an employee of an Employer by any government agency, court, or other third party, which shall not have a retroactive effect for purposes of the Plan, except to the extent required in order to maintain the qualified status of the Plan under Section 423 of the Code.
2.9 “Employer” or “Employers” means any one or all of the Company and those Subsidiaries which, with the consent of the Board, have adopted the Plan.
2.10 “Enrollment Date” means each March 1, June 1, September 1, and December 1, and such other dates determined by the Plan Administrator (in its discretion) from time to time.
2.11 “Non-Employee” means an individual who is classified by any Employer (a) as a “seasonal employee” (i.e., an employee whose customary employment is for not more than five months in any calendar year) or (b) as an independent contractor or any other non-employee classification that does not receive any compensation through the payroll of Gap, Inc. or any Subsidiary.
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2.12 “Participant” means an Eligible Employee who (a) has become a Participant in the Plan pursuant to Section 4.1 and (b) has not ceased to be a Participant pursuant to Section 7 or Section 8.
2.13 “Payroll Deduction Account” means an account maintained by the Plan Administrator for each Participant to which shall be credited all payroll deductions and from which shall be deducted amounts charged for the purchaseTable of shares of Common Stock hereunder and withdrawals.Contents
2.14 “Plan” means The Gap, Inc. Employee Stock Purchase Plan, as amended and restated as set forth in this instrument and as hereafter amended from time to time.
2.15 “Plan Administrator” means the Company.
2.16 “Purchase Date” means the last business day of May, August, November and February, or such other specific business days as may be established by the Plan Administrator from time to time, on which shares shall be purchased for Participants hereunder.
2.17 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting purchase rights under the Plan, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
3. Shares Subject to the Plan
3.1 Number Available. 40,500,000 shares of Common Stock are available for issuance pursuant to the Plan. Shares sold under the Plan may be newly issued shares or treasury shares.
3.2 Adjustments. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, or should the value of the outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable adjustments shall be made by the Board to (i) the maximum number and class of securities issuable under the Plan, (ii) the maximum number and class of securities purchasable per Participant on any one Purchase Date or in any calendar year, and (iii) the number and class of securities and the price per share in effect under each outstanding purchase right. The adjustments shall be made in such manner as the Board deems appropriate and such adjustments shall be final, binding and conclusive.
4.1 Participation. Each Eligible Employee may elect to become a Participant by enrolling in the Plan as of any Enrollment Date. Each such election shall be made at such time, and in such manner, as the Plan Administrator shall determine from time to time. A Participant who enrolls as of an Enrollment Date shall be automatically re-enrolled in the Plan on each subsequent Enrollment Date until the Participant withdraws pursuant to Section 7 or otherwise ceases to be a Participant pursuant to Section 8.
4.2 Payroll Withholding. Each Participant must elect to make Plan contributions via payroll withholding from his or her Compensation at a rate equal to any whole percentage from 1% to 15%, or such lesser percentage that the Plan Administrator may establish from time to time. A Participant may elect to increase or decrease his or her rate of payroll withholding (effective as of any Enrollment Date), or may stop his or her payroll withholding entirely. Each election under this Section shall be made at such time, and in such manner, as the Plan Administrator shall determine from time to time. Any Participant who is automatically re-enrolled in the Plan will be deemed to have elected to continue his or her contributions at the percentage last elected by the Participant.
5. Right to Purchase Shares of Common Stock
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5.1 Purchase Right. Each Participant enrolling or re-enrolling in the Plan on an Enrollment Date shall have the right to purchase shares of Common Stock on the next following Purchase Date.
5.2 Number of Shares Available for Purchase. Each Participant shall have the right to purchase as many full and fractional shares of Common Stock as may be purchased with the amounts credited to his or her Payroll Deduction Account as of the applicable Purchase Date. Notwithstanding the preceding, no Participant shall have the right to purchase shares under the Plan, or under any other similar employee stock purchase plan of the Employers, having a fair market value in excess of $25,000 (with fair market value to be measured at the applicable Enrollment Dates of such shares) in any calendar year during which such Participant is enrolled in the Plan at any time. Furthermore, in no event shall a Participant have the right to purchase in excess of 6,250 shares of Common Stock on any Purchase Date or in excess of 25,000 shares of Common Stock in any calendar year.
5.3 Other Terms and Conditions. Each purchase right shall be subject to the following additional terms and conditions:
(a) payment for shares purchased shall be made only through payroll withholding under Section 4.2;
(b) purchase of shares will be accomplished only in accordance with Section 6.1;
(c) the price per share to be purchased will be determined as provided in Section 6.1; and
(d) the purchase right in all respects shall be subject to such other terms and conditions (applied on a uniform and nondiscriminatory basis) as the Plan Administrator shall determine from time to time in its discretion.
6.1 Purchases. On each Purchase Date, the funds then credited to each Participant’s Payroll Deduction Account shall be used to purchase whole shares of Common Stock, or fractional shares of Common Stock at the Plan Administrator’s discretion. To the extent that fractional shares are not purchased, any cash remaining after whole shares of Common Stock have been purchased shall be carried forward in the Participant’s Payroll Deduction Account for the purchase of shares on the next Purchase Date. However, any funds remaining in a Participant’s Payroll Deduction Account after whole shares of Common Stock have been purchased by reason of the limitation on the maximum number of shares purchasable per Participant on the Purchase Date or in any calendar year shall be refunded to the Participant (without interest) as soon as administratively practicable following the applicable Purchase Date. The price of the shares purchased under the Plan shall be 85% of the closing price of Common Stock on the applicable Purchase Date on the New York Stock Exchange Composite Transactions Index.
6.2 Crediting of Shares. Shares purchased on any Purchase Date shall be delivered to a broker designated by the Plan Administrator to hold shares for the benefit of the Participants. As determined by the Plan Administrator from time to time, such shares shall be delivered as physical certificates or by means of a book entry system. Although the Participant may direct the broker to sell such shares at any time (subject to applicable securities laws), the shares may not be transferred to another broker (other than the one designated from time to time by the Plan Administrator) or to any other person (including the Participant) until 24 months after the Enrollment Date immediately preceding the Purchase Date of the shares.
6.3 Exhaustion of Shares. If at any time the shares available under the Plan are over-enrolled, enrollments shall be reduced proportionately to eliminate the over-enrollment. Any funds that cannot be applied to the purchase of shares due to over-enrollment shall be refunded to the Participants (without interest).
A Participant may withdraw from the Plan at any time, by notifying the Plan Administrator in accordance with such procedures and within such time periods as the Plan Administrator shall determine.
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Upon a Participant’s withdrawal, the Participant’s payroll contributions shall cease. All amounts then credited to the Participant’s Payroll Deduction Account shall be used to purchase shares in accordance with Section 6.1 at the next following Purchase Date or, at the election of the Participant and only in accordance with such procedures and within such time periods as the Plan Administrator shall determine, be distributed to him or her (without interest) as soon as administratively feasible thereafter.
8. Cessation of Participation
A Participant shall cease to be a Participant immediately upon the proper good faith notification to the Plan Administrator of the cessation of his or her status as an Eligible Employee (for example, because of his or her termination of employment from all Employers for any reason). As soon as practicable after such cessation, the Participant’s payroll contributions shall cease and all amounts then credited to the Participant’s Payroll Deduction Account shall be distributed to him or her (without interest).
9.1 Plan Administrator. The Plan Administrator shall have the authority to control and manage the operation and administration of the Plan.
9.2 Powers of Plan Administrator. The Plan Administrator shall have all powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the following discretionary powers:
(a) To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan;
(b) To determine any and all considerations affecting the eligibility of any employee to become a Participant or to remain a Participant in the Plan;
(c) To cause an account or accounts to be maintained for each Participant;
(d) To determine the time or times when, and the number of shares for which, purchase rights shall be granted;
(e) To establish and revise an accounting method or formula for the Plan;
(f) To designate a broker to receive shares purchased under the Plan and to determine the manner and form in which shares are to be delivered to the designated broker;
(g) To determine the status and rights of Participants;
(h) To employ such brokers, counsel, agents and advisers, and to obtain such broker, legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;
(i) To establish, from time to time, rules for the administration of the Plan;
(j) To adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by employees who are foreign nationals or employed outside of the United States;
(k) To delegate to any person the authority to perform for and on behalf of the Plan Administrator one or more of the functions of the Plan Administrator under the Plan; and
(l) To authorize one or more offerings under the Plan that are not designed to comply with the requirements of Code Section 423, but with the requirements of the foreign jurisdictions in which those offerings are conducted. Any such offerings shall be separate from any offerings designed to comply with the Code Section 423 requirements, but may be conducted concurrently with those offerings.
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9.3 Decisions of Plan Administrator. All actions, interpretations, and decisions of the Plan Administrator shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.
9.4 Administrative Expenses. All expenses incurred in the administration of the Plan by the Plan Administrator, or otherwise, including legal fees and expenses, shall be paid and borne by the Employers; except that any stamp duties or transfer taxes applicable to a Participant’s purchase of shares may be charged to the Participant’s Payroll Deduction Account. Any brokerage fees for the purchase of shares by a Participant shall be paid by the Company, but brokerage fees for the resale of shares by a Participant shall be borne by the Participant.
10. Amendment, Termination and Duration
10.1 Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend or terminate the Plan, or any part thereof, at any time and for any reason, by action of the Board, the Compensation and Management Development Committee of the Board, or a duly authorized officer of the Company.
If the Plan is terminated, the Board, in its discretion, may elect to terminate all outstanding purchase rights either immediately or upon completion of the purchase of shares on the next Purchase Date. If the purchase rights are terminated before the applicable Purchase Date, all amounts then credited to Participants’ Payroll Deduction Accounts which have not been used to purchase shares shall be returned to the Participants (without interest) as soon as administratively practicable.
10.2 Duration of the Plan. Subject to Section 10.1 (regarding the Board’s right to amend or terminate the Plan), the Plan shall remain in effect indefinitely.
11.1 Participation by Subsidiaries. One or more Subsidiaries of the Company may become Employers by adopting the Plan and obtaining approval for such adoption from the Board. By adopting the Plan, a Subsidiary shall be deemed to agree to all of its terms, including (but not limited to) the provisions granting exclusive authority (a) to the Board to amend the Plan, and (b) to the Plan Administrator to administer and interpret the Plan. Any Employer may terminate its participation in the Plan at any time. The liabilities incurred under the Plan to the Participants employed by each Employer shall be solely the liabilities of that Employer, and no other Employer shall be liable for benefits accrued by a Participant during any period when he or she was not employed by such Employer.
11.2 Inalienability. In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process. Accordingly, for example, a Participant’s interest in the Plan is not transferable pursuant to a domestic relations order. The preceding shall not affect the Participant’s right to direct the sale or transfer of shares that have been delivered to the broker designated by the Plan Administrator under Section 6.2 (subject to the provisions of the Plan).
11.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
11.4 Requirements of Law. The granting of purchase rights and the issuance of shares shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or securities exchanges as the Plan Administrator may determine are necessary or appropriate.
11.5 No Enlargement of Employment Rights. Neither the establishment or maintenance of the Plan, the granting of purchase rights, the purchase of shares, nor any action of any Employer or the Plan Administrator, shall be held or construed to confer upon any individual any right to be continued as an
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employee of the Employer nor, upon dismissal, any right or interest in any specific assets of the Employers other than as provided in the Plan. Each Employer expressly reserves the right to discharge any employee at any time, with or without cause.
11.6 Apportionment of Cost and Duties. All acts required of the Employers under the Plan may be performed by the Company for itself and its Subsidiaries, and the costs of the Plan may be equitably apportioned by the Plan Administrator among the Company and the other Employers. Whenever an Employer is permitted or required under the terms of the Plan to do or perform any act, matter or thing, it shall be done and performed by any officer or employee of the Employers who is thereunto duly authorized by the Employers.
11.7 Construction and Applicable Law. The Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Any provision of the Plan which is inconsistent with Section 423 of the Code shall without further act or amendment by the Company or the Board be reformed to comply with the requirements of Section 423. The provisions of the Plan shall be construed, administered and enforced in accordance with such Section and with the laws of the State of California (excluding California’s conflict of laws provisions).
11.8 Captions. The captions contained in the Plan are inserted only as a matter of convenience, and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the construction of any provision of the Plan.
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 | |  | This Proxy Statement is printed on paper manufactured from well-managedwell-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. |
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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: | E23436-P87307-Z69458 | E44430-P06435-Z72111 | | KEEP THIS PORTION FOR YOUR RECORDS | | | DETACH AND RETURN THIS PORTION ONLY | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
GAP INC. | The Board of Directors recommends you vote "FOR" Item 1. | | | | | | | | | | | | | | |
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| 1. | Election of Directors.
| | | | | | | | | | | | Nominees:
| | | For | | Against | | Abstain | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | | 1a. | Robert J. Fisher
| | ☐ | | ☐ | | ☐ | | | | ☐ | | | | | | ☐ | | | 1b. | William S. Fisher
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1c. | Tracy Gardner
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1d. | Brian Goldner
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1e. | Isabella D. Goren
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1f. | Bob L. Martin
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1g. | Jorge P. Montoya
| | ☐ | | ☐ | | ☐ | | 1h. | Chris O'Neill
| | ☐ | | ☐ | | | ☐ | | | 1h.1i. | Arthur Peck
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1i.1j. | Mayo A. Shattuck III | | ☐ | | ☐ | | ☐ |
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. |
| | | | | | | | | | | 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.
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| | | | The Board of Directors recommends you vote "FOR" Item 2.Items 2 and 3.
| | For | | Against | | Abstain | | | 2. | Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending on February 3, 2018. 2, 2019.
| | ☐ | | ☐ | | ☐ | | The Board of Directors recommends you vote"1 YEAR" on Item 3.
| | 1 Year | | 2 Years | | 3 Years | | Abstain | | | 3. | An advisory vote on whether an advisory vote on executive compensation should be held every one, two or three years.
| | ☐ | | ☐ | | ☐ | | ☐ | | The Board of Directors recommends you vote "FOR" Items 4 and 5.
| | For | | Against | | Abstain | | 4. | Approval, on an advisory basis, of the overall compensation of the named executive officers.
| | ☐ | | ☐ | | ☐ | | 5.4. | Approval of the Amendment and Restatement of The Gap, Inc. Employee Stock Purchase Plan.
| | ☐ | | ☐ | | ☐ | | The Board of Directors recommends you vote "AGAINST" Item 6.
| | | | | | | | 6. | The shareholder proposal contained in the attached Proxy Statement, if properly presentedat the meeting.
| | ☐ | | ☐ | | ☐ | | 7. | Transact such other business as may properly come before the meeting. | | | | | | |
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| | | | | | | 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. | E44431-P06435-Z72111 |
E23437-P87307-Z69458GAP INC.
Annual Meeting of Shareholders
May 22, 2018 10:00 AM
This proxy is solicited by the Board of Directors
The undersigned hereby appoint(s) Arthur Peck, Julie Gruber and Teri List-Stoll, 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 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 22, 2018 at 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' recommendations. Continued and to be signed on reverse side
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GAP INC.
Annual Meeting of Shareholders
May 17, 2017 10:00 AM
This proxy is solicited by the Board of Directors
The undersigned hereby appoint(s) Arthur Peck, Julie Gruber and Teri List-Stoll, 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 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 17, 2017 at 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' recommendations.
Continued and to be signed on reverse side
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