SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
THE GAP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PROXY
NOTICE OF ANNUAL MEETING OF GAP INC. SHAREHOLDERS AND PROXY STATEMENT
May 9, 2001
Fishkill, New York
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2001
To Our Shareholders:
The Annual Meeting of Shareholders of The Gap, Inc. (the "Company") will be
held at the Company's Distribution Center located at 110 Merritt Boulevard,
Fishkill, New York, on Wednesday, May 9, 2001 at 10:00 a.m., for the following
purposes:
1. To elect a Board of Directors;
2. To ratify the selection of Deloitte & Touche LLP as independent auditors for
the Company for the fiscal year ending on February 2, 2002; and
3. To attend to other business properly presented at the meeting.
These items of business are more fully described in the Proxy Statement
following this Notice.
You must be a shareholder of record at the close of business on March 16, 2001
to vote at the Annual Meeting. A complete list of shareholders entitled to vote
at this meeting will be available for inspection at our offices at One Harrison
Street, San Francisco, California. Whether or not you plan to attend the Annual
Meeting, please vote your shares by either (a) completing and returning the
enclosed proxy card, (b) touch-tone telephone from the United States and
Canada, using the toll-free telephone number on your proxy card, or (c) the
internet.
If you plan to attend the meeting and you are a shareholder of record (your
shares are in your name), you must bring the enclosed admission ticket and
identification with you to the meeting. If you plan to attend the meeting and
your shares are held in "street name" (your shares are in the name of your
broker or bank), check the box on the right side of the card so that your
broker can send you a legal proxy. You must bring the legal proxy and
identification to the meeting. You will not be allowed to attend this meeting
without proof of share ownership and identification.
By Order of the Board of Directors,
/s/ LAURI M. SHANAHAN
Lauri M. Shanahan
Secretary
April 6, 2001
THE GAP, INC.
ONE HARRISON STREET, SAN FRANCISCO, CALIFORNIA 94105
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Gap, Inc. (the "Company") for use at
the Annual Meeting of Shareholders of the Company to be held on May 9, 2001 at
10:00 a.m. at The Gap, Inc.'s Distribution Center located at 110 Merritt
Boulevard, Fishkill, New York, and at any adjournment thereof. This statement
and the enclosed form of proxy were first sent to shareholders on or about
April 6, 2001.
THE PROXY
The persons named as proxyholders were selected by our Board of Directors and
are officers of the Company.
The proxyholders will vote all proxies, or record an abstention or withholding,
in accordance with the directions on the proxy. If no contrary direction is
given, the shares will be voted:
FOR the election of directors nominated by the Board of Directors; and
FOR the ratification of the selection of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending February 2, 2002.
We will pay all expenses in connection with the solicitation of the enclosed
proxy, including the charges of brokerage houses and other custodians, nominees
or fiduciaries for forwarding documents to security owners. In addition to
solicitation by mail, certain of our officers, directors and employees (who
will receive no extra compensation for their services) or a proxy solicitation
firm retained by us may solicit proxies by telephone, fax or in person.
You may revoke your proxy at any time before its exercise. You may also revoke
your proxy by voting in person at the Annual Meeting.
VOTING SECURITIES AND VOTING RIGHTS
The only outstanding voting securities of the Company are its shares of common
stock, of which 854,429,402 shares were outstanding at the close of business on
March 16, 2001. Only shareholders of record at the close of business on that
date are entitled to vote at the meeting. Each shareholder is entitled to one
vote per share on each matter submitted to the meeting. All share amounts in
this Proxy Statement have been restated to reflect stock splits.
The election inspector(s) 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. 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. Election of
directors by shareholders will be determined by a plurality of the votes of the
shares present in person or by proxy at the Annual Meeting and entitled to vote
on the election of directors. Approval of the Board of Directors' selection of
Deloitte & Touche LLP as independent auditors for the Company requires the
affirmative vote of a majority of the shares present in person or by proxy at
the Annual Meeting and entitled to vote.
Abstentions are included in the determination of shares present for quorum
purposes. Because abstentions represent shares entitled to vote, the effect of
an abstention will be the same as a vote against a proposal. However,
abstentions will have no effect on the election of directors.
1
If you hold shares in "street name" through a broker or other nominee, your
broker or nominee may not be permitted to exercise voting discretion with
respect to certain matters to be acted upon. If you do not give your broker or
nominee specific instructions, your shares may not be voted on those matters
and will not be considered as present and entitled to vote with respect to
those matters. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Directors will be elected at the Annual Meeting to serve until the next Annual
Meeting and until their successors are elected. The Board of Directors proposes
to nominate the persons whose names are set forth below, all of whom are
current directors. In the absence of instructions to the contrary, shares
represented by the proxy will be voted for the election of all these nominees
to the Board of Directors. The Board of Directors has no reason to believe that
any of these nominees will be unable to serve. However, if any nominee should
for any reason be unavailable to serve, the proxies will be voted for the
election of such other person to the office of director as the Board of
Directors may recommend in place of such nominee. Set forth below is certain
information concerning the nominees which is based on data furnished by them.
Name, Age, Principal
Occupation During Past
Five Years and Other
Information Served as Director Since
- --------------------------------------------------------------------------------
Adrian D. P. Bellamy, 59 1995
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Chairman of Gucci Group NV, luxury accessories and apparel manufacturer and
retailer. Director of Reckitt Benckiser plc, The Body Shop International plc,
and Williams-Sonoma, Inc.
Member of the Compensation and Stock Option Committee
Member of the Corporate Governance Committee
Member of the Human Resources Development Committee
Millard S. Drexler, 56 1983
- --------------------------------------------------------------------------------
Chief Executive Officer of the Company since 1995 and President of the Company
since 1987. Director of Apple Computer Inc.
Member of the Human Resources Development Committee
Donald G. Fisher, 72 1969
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Chairman of the Company since 1969. Chief Executive Officer of the Company,
1969-95. Director of The Charles Schwab Corporation.
Member of the Corporate Governance Committee (Donald G. Fisher and Doris F.
Fisher are husband and wife)
Doris F. Fisher, 69 1969
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Merchandising consultant to the Company.
(Donald G. Fisher and Doris F. Fisher are husband and wife)
Robert J. Fisher, 46 1990
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Executive Vice President of the Company, 1992-99; President of Gap Division
1997-99; Chief Operating Officer of the Company, 1992-93 and 1995-97; and Chief
Financial Officer of the Company, 1993-95. Director of Sun Microsystems, Inc.
(Robert J. Fisher is the son of Donald G. and Doris F. Fisher)
Member of the Human Resources Development Committee
2
Glenda A. Hatchett, 49 1999
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Judge on the syndicated television program "Judge Hatchett" since 2000. Chief
Judge, Fulton County Juvenile Court, Atlanta, Georgia, 1991-99. Director of
HCA-The Healthcare Company and The ServiceMaster Company.
Member of the Compensation and Stock Option Committee
Member of the Corporate Governance Committee
Steven P. Jobs, 46 1999
- --------------------------------------------------------------------------------
Chief Executive Officer, Apple Computer, Inc., a computer hardware and
software company, since 2000; Interim Chief Executive Officer, 1997-2000.
Chairman, Pixar, an animation company, since 1991 and Chief Executive Officer
since 1986. Chairman and Chief Executive Officer, NeXT Software, Inc., a
software company, 1985-97. Director of Apple Computer, Inc.
Member of the Corporate Governance Committee
John M. Lillie, 64 1992
- --------------------------------------------------------------------------------
Vice Chairman of the Company since January 2001. President, Sequoia Associates
LLC, private investment firm, since 1998. Chairman, The Epic Team, bicycle and
accessory products, 1996-98.
Member of the Corporate Governance Committee
Member of the Human Resources Development Committee
Charles R. Schwab, 63 1986
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Chairman and Co-Chief Executive Officer of The Charles Schwab Corporation,
financial services firm, since 1998. Chairman and Chief Executive Officer of
The Charles Schwab Corporation, 1986-98. Director of Siebel Systems, Inc.
Member of the Audit and Finance Committee
Member of the Corporate Governance Committee
Sergio S. Zyman, 55 1997
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President, Z Group, consulting company, since 1998. Senior Vice President and
Chief Marketing Officer of The Coca-Cola Company, 1993-98. Director of
Netcentives Inc., Launch Media Inc. and CTN Media Group, Inc.
Member of the Audit and Finance Committee
Member of the Corporate Governance Committee
Brooks Walker, Jr. and Evan S. Dobelle, who currently serve on the Board of
Directors are not standing for re-election and will cease to be directors upon
the election of directors at the Annual Meeting. Fewer nominees are named (ten)
than the number fixed by the Board pursuant to the Company's Bylaws (twelve).
Proxies cannot be voted for a greater number of persons than the number of
nominees named.
Information concerning executive officers of the Company who are not also
directors is set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 2001.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: the Audit and Finance
Committee and the Compensation and Stock Option Committee, both of which are
composed of directors who are not employees of the Company, the Corporate
Governance Committee, which is composed mostly of directors who are not
employees of the Company, and the Human Resources Development Committee, which
is composed of non-employee directors and employee directors.
The Audit and Finance Committee assists the Board of Directors in fulfilling
its oversight responsibilities relating to the quality and integrity of the
accounting, auditing, and reporting practices of the Company. The functions of
the committee include (i) recommending the engagement of the Company's
independent auditors and reviewing with them the plan, scope and results of
their audit for each year, (ii) reviewing with the Company's Consulting and
Auditing Services department the plan, scope and results of their operations,
(iii) considering and reviewing other matters relating to the financial and
accounting affairs of the Company,
3
and (iv) overseeing the Company's Corporate Compliance Program. The present
members of the Audit and Finance Committee are Messrs. Dobelle, Schwab, Walker
and Zyman. Effective immediately after the Annual Meeting, Mr. Schwab will be
the Chairman of the committee.
The functions of the Compensation and Stock Option Committee are to review and
approve salaries and other forms of compensation for all corporate and
divisional officers, to approve the guaranteeing or granting of loans to
certain corporate and divisional officers under the Company's Relocation Loan
Plan, to grant stock and options to purchase stock to selected employees under
the Company's stock plans, to make awards under the Company's annual and long-
term incentive plans to key employees, and to make recommendations to the Board
concerning the compensation of non-employee directors. The present members of
the Compensation and Stock Option Committee are Mr. Bellamy (Chairman) and Ms.
Hatchett.
The functions of the Corporate Governance Committee are to make recommendations
to the Board on all matters concerning corporate governance and directorship
practices, including the qualifications and retention of directors, the size
and function of the Board of Directors, the functions and duties of the
committees of the Board, the effectiveness and procedures of the Board,
retirement policies of non-employee directors, and succession planning for
directors. The present members of the Corporate Governance Committee are
Messrs. Bellamy (Chairman), Dobelle, Donald Fisher, Jobs, Lillie, Schwab,
Walker and Zyman, and Ms. Hatchett.
The functions of the Human Resources Development Committee are to advise senior
management on policy and strategy regarding the development of senior
executives, to review the succession planning of the top-level positions, to
review the individual development strategies of that group and their individual
development plans, to assess the overall talent of all vice presidents and
above of the Company, to counsel with the CEO for the placement of key
employees, and to review leadership and management processes as appropriate,
including leadership development programs. The present members of the Human
Resources Development Committee are Messrs. Bellamy, Drexler, Robert Fisher
(Chairman), and Lillie.
During the last fiscal year, the Board of Directors held five meetings, the
Compensation and Stock Option Committee held seven meetings, the Audit and
Finance Committee held four meetings, the Corporate Governance Committee held
two meetings, and the newly formed Human Resources Development Committee held
no meetings. Each director attended at least 75% of the meetings of the Board
and committees on which he or she served.
COMPENSATION OF DIRECTORS
We do not pay director fees to directors who are employees of the Company or
any affiliated company. Directors who are not employees of the Company ("non-
employee directors") do not receive any form of direct remuneration other than
as described below.
We pay each of our non-employee directors an annual retainer of $36,000 per
year, payable quarterly, which is diminished by $2,500 for each Board and/or
Committee meeting missed (maximum of $2,500 per meeting series). Mr. Jobs has
elected not to receive the retainer. Beginning in fiscal 2001, we will pay our
non-employee directors who serve as committee chairs an additional annual
retainer of $16,000 per year, payable quarterly, for each committee chaired. In
addition, we reimburse travel expenses to attend Board and committee meetings.
All directors and their immediate families are eligible to receive discounts on
Company merchandise.
Under the Company's Non-Employee Director Deferred Compensation Plan, each non-
employee director may elect to forego receipt of his or her annual retainer on
a quarterly basis in exchange for an option to purchase 937 shares of our
common stock. Any such option will have an exercise price which is discounted
to reflect the amount of the foregone retainer, will be exercisable
immediately, and will have a maximum term of seven years. Shares issued under
the plan will come from treasury shares. Each non-employee director, except for
Messrs. Dobelle, Jobs, and Robert Fisher participated in the plan in fiscal
2000. Mr. Robert Fisher has elected to participate in fiscal 2001.
Under the Company's 1996 Stock Option and Award Plan, non-employee directors
are eligible to receive stock options according to a pre-determined formula, as
follows: (i) each new non-employee director
4
automatically receives an option to purchase 15,000 shares at the then-current
fair market value; and (ii) each continuing non-employee director automatically
receives yearly an option to purchase 3,750 shares at the then-current fair
market value. All initial options to new non-employee directors are granted on
the date of appointment to the Board. All continuing non-employee director
options are granted on the first business day after each annual meeting of
shareholders. The options normally become exercisable three years after the
date of grant. In addition, the Compensation and Stock Option Committee is
authorized to grant discretionary options to non-employee directors using
treasury shares.
The Non-Employee Director Retirement Plan is an unfunded deferred compensation
plan which sets mandatory retirement from service on the Board at age 72 and
provides for annual benefits if a non-employee director has served on the Board
for five consecutive years and is still a director at age 72. The annual
benefit payable to an eligible retired director is equal to 75% of the annual
retainer fee in effect at the time of the director's retirement. The duration
of these annual payments equals the number of years that the director served on
the Board. If the director dies before the maximum payment period expires,
payments will continue for the life of his or her surviving spouse, or until
the end of the maximum payment period, whichever is sooner. In fiscal 1996, the
Board of Directors elected to discontinue this plan for future directors.
Directors in office at January 27, 1997 are still eligible for plan benefits,
assuming they meet the requirements of the plan; however, the benefit payable
will be capped at the current level (i.e., 75% of $36,000).
In fiscal 2000, Doris Fisher received $24,001 for merchandising services
rendered in the course of her employment with the Company. As a Company
employee, Mrs. Fisher participates in all benefits which the Company makes
available to its employees generally, except for stock-based compensation and
bonus programs.
In fiscal 2000, pursuant to a consulting agreement, Mr. Lillie received
$137,097 from the Company for consulting services and an option to purchase
50,000 shares at a fair market value price of $24.905. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation." The
consulting agreement was terminated in January 2001 when Mr. Lillie joined the
Company as Vice Chairman.
PROPOSAL NO. 2
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending February 2, 2002. Deloitte
& Touche LLP has acted as auditors for the Company since 1972. If shareholders
fail to approve the selection of such auditors, the Board of Directors will
reconsider the selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE SELECTION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and available to make statements to, and respond to appropriate
questions of, shareholders.
AUDIT FEES
The following table sets forth the aggregate fees billed to the Company for the
fiscal year ended February 3, 2001 by the Company's principal accounting firm,
Deloitte & Touche LLP:
Fees Amount
- ---------------------------------------------------------------------------
Audit Fees $ 569,000
Financial Information Systems Design and Implementation Fees 0
All Other Fees (1) 7,676,000
- ---------------------------------------------------------------------------
Total Fees for the fiscal year ended February 3, 2001 $ 8,245,000
1. The Audit and Finance Committee of the Board of Directors has considered
whether the provision of these services is compatible with maintaining the
principal accountant's independence.
5
REPORT OF THE AUDIT AND FINANCE COMMITTEE
Notwithstanding anything to the contrary in any of the Company's previous or
future filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate this Proxy Statement
or future filings with the Securities and Exchange Commission, in whole or in
part, the following report shall not be deemed to be incorporated by reference
into any such filing.
The Audit and Finance Committee assists the Board of Directors in fulfilling
its oversight responsibilities relating to the quality and integrity of the
accounting, auditing, and reporting practices of the Company. The Committee
operates under a written charter adopted by the Board of Directors which is
included in this Proxy Statement as Appendix A. The Committee is composed
exclusively of directors who are independent under New York Stock Exchange
listing standards.
The Committee has reviewed and discussed the audited financial statements of
the Company for the fiscal year ended February 3, 2001 with the Company's
management. The Committee has discussed with Deloitte & Touche LLP, the
Company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Committee has also received the written disclosures and the letter from
Deloitte & Touche LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and the Committee has
discussed the independence of Deloitte & Touche LLP with that firm.
Based on the Committee's review and discussions noted above, the Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 2001 for filing with the Securities and Exchange
Commission.
Brooks Walker, Jr. (Chairman)
Evan S. Dobelle
Charles R. Schwab
Sergio S. Zyman
6
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information as of March 16, 2001, to
indicate beneficial ownership of the common stock of the Company by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's common stock, (ii) each director and
nominee and each executive officer named in the Summary Compensation Table, and
(iii) all directors and executive officers of the Company as a group. Unless
otherwise indicated, beneficial ownership is direct and the person indicated
has sole voting and investment power.
Name of Shares Beneficially Additional Percent
Beneficial Owner Owned (1) Notes of Class
- -------------------------------------------------------------------------------------------
Directors and Executive
Officers
- -------------------------------------------------------------------------------------------
Adrian D. P. Bellamy 114,321 -- *
- -------------------------------------------------------------------------------------------
Charles K. Crovitz 381,001 -- *
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Evan S. Dobelle 0 -- --
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Millard S. Drexler 17,849,112 (2) 2.1%
- -------------------------------------------------------------------------------------------
Donald G. Fisher and
Doris F. Fisher 174,495,374 (3) 20.4%
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Robert J. Fisher 54,926,582 (4) 6.4%
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Anne B. Gust 468,443 -- *
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Glenda A. Hatchett 8,346 -- *
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Steven P. Jobs 0 -- --
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John M. Lillie 117,671 (5) *
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Jenny J. Ming 627,036 -- *
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Kenneth S. Pilot 281,216 -- *
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Charles R. Schwab 142,636 (6) *
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Brooks Walker, Jr. 401,621 (7) *
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John B. Wilson 141,204 -- *
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Sergio S. Zyman 70,343 (8) *
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All directors and
executive officers as a 250,057,406 (9) 28.9%
group (18 persons)
- -------------------------------------------------------------------------------------------
Certain Other
Beneficial Holders
- -------------------------------------------------------------------------------------------
John J. Fisher 57,521,101 (10) 6.7%
- -------------------------------------------------------------------------------------------
Janus Capital
Corporation and 49,235,305 (11) 5.8%
Thomas H. Bailey
- -------------------------------------------------------------------------------------------
* Indicates ownership of less than 1% of the outstanding shares of the
Company's common stock.
1. Shares issuable upon exercise of stock options that are exercisable within
60 days after March 16, 2001 are treated as beneficially owned as follows:
Mr. Bellamy, 81,921; Mr. Crovitz, 304,113; Mr. Drexler, 7,770,937; Ms.
Gust, 449,238; Ms. Hatchett, 7,964; Mr. Lillie, 91,421; Ms. Ming, 512,153;
Mr. Pilot, 217,153; Mr. Schwab, 61,671; Mr. Walker, 71,046; Mr. Wilson,
140,625; Mr. Zyman, 27,502; and all directors and executive officers as a
group, 9,768,244.
2. Includes 281,250 shares held by the Peggy and Millard Drexler Family
Foundation of which Mr. Drexler disclaims beneficial ownership. Also
includes 2,595,292 shares held in Grantor Retained Annuity Trusts (GRATs).
3. Donald G. Fisher and Doris F. Fisher, who are husband and wife, are the
founders of the Company, directors, and, respectively, the Chairman of and
a merchandising consultant to the Company. Their address is One Harrison
Street, San Francisco, California 94105. In the table shown above, the
7
174,495,374 shares beneficially owned by Donald G. Fisher and Doris F.
Fisher are beneficially owned by both of them, except that Mrs. Fisher has
no voting or dispositive power over 1,155,994 of such shares. Of the shares
shown, 54,118,104 shares are held as community property and 86,000,000 are
held in a partnership. The remainder of the shares are held by the Fishers
as trustees for various foundations and trusts. Amounts shown include
1,155,994 shares held by the D2F2 Foundation, beneficial ownership of which
is disclaimed. Amounts shown exclude shares held directly or indirectly by
the Fishers' three adult sons, beneficial ownership of which is disclaimed.
4. Includes 2,623,725 shares held jointly by Robert Fisher and his spouse and
26,391,889 shares held by Robert Fisher as trustee under certain trusts.
Robert Fisher's address is One Maritime Plaza, Suite 1400, San Francisco,
California 94111.
5. Includes 21,750 shares held under the Lillie Family Living Trust, over
which Mr. Lillie and his wife share voting and investment power. Includes
4,500 shares held by Mr. Lillie's adult children. Mr. Lillie only has
investment power over these shares and disclaims beneficial ownership.
6. Includes 8,438 shares owned by Mr. Schwab's spouse.
7. Includes 149,050 shares owned by the Brooks Walker, Jr. Charitable
Remainder Trust, of which Mr. Walker is the trustee and over which he has
sole voting and investment power.
8. Includes 234 shares held by Mr. Zyman's minor children.
9. Reflects the information in the footnotes set forth above. Includes shares
beneficially owned by Mr. Wilson who ceased to be an executive officer in
April 2000.
10. Includes 27,532,325 shares owned by John Fisher as trustee under certain
trusts. John Fisher's address is One Maritime Plaza, Suite 1400, San
Francisco, California 94111.
11. The address of Janus Capital Corporation and Thomas H. Bailey is 100
Fillmore Street, Denver, Colorado 80206. Janus Capital Corporation and Mr.
Bailey indicate that they each have sole voting and dispositive power over
49,235,305 shares. Mr. Bailey specifically disclaims beneficial ownership
of the shares. This disclosure is based on information contained in a
report as of December 31, 2000 on Schedule 13G filed with the Securities
and Exchange Commission pursuant to Rule 13d-1(b) of the Securities and
Exchange Act of 1934, as amended.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by the Securities and Exchange Act of 1934, as amended, the Company
notes that Mr. Schwab reported one transaction late on a Form 4. The
transaction involved the purchase of common stock by his spouse in September
1999.
8
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth for the periods presented compensation paid to,
earned by or awarded to the Chief Executive Officer and the four other most
highly compensated executive officers of the Company in the fiscal year ended
February 3, 2001. In addition, the table also sets forth compensation paid to a
former executive officer of the Company who would have been among the five most
highly compensated executive officers, but for the fact that he ceased to be an
executive officer of the Company in April 2000. The footnotes to the table
provide additional information concerning the Company's compensation and
benefit programs.
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
- ----------------------------------------------------------------------------------------------------------------
Securities
Other Annual Restricted Underlying All Other
Fiscal Salary Bonus Compensation Stock Options Compensation
Name and Principal Position Year ($) ($) (1) ($) (2) Awards ($) (#) (3) ($) (4)
- ----------------------------------------------------------------------------------------------------------------
Millard S. Drexler 2000 $2,279,138 $3,262,500 $10,525 $0 1,500,000 $171,322
President and Chief Executive 1999 2,154,084 5,672,500 13,618 0 120,000 20,494
Officer of the Company 1998 1,976,870 5,335,000 0 0 5,402,250 492,896
- ----------------------------------------------------------------------------------------------------------------
Charles K. Crovitz 2000 531,531 424,500 0 0 100,000 7,184
Executive Vice President 1999 436,063 706,000 4,959 0 31,500 6,186
of the Company 1998 395,745 613,500 0 0 379,125 7,653
- ----------------------------------------------------------------------------------------------------------------
Anne B. Gust 2000 580,386 450,000 0 0 100,000 21,515
Executive Vice President 1999 466,925 752,000 0 0 75,000 6,361
of the Company 1998 385,924 605,950 0 0 311,625 13,771
- ----------------------------------------------------------------------------------------------------------------
Jenny J. Ming 2000 825,165 630,000 0 0 80,000 12,044
President, Old Navy Division (5)
- ----------------------------------------------------------------------------------------------------------------
Kenneth S. Pilot 2000 622,037 457,500 0 0 250,000 7,895
President, Gap Division (6)
- ----------------------------------------------------------------------------------------------------------------
John B. Wilson (7) 2000 848,848 923,156 202,941 0 0 309,716
1999 848,848 2,012,500 207,883 0 75,000 5,501
1998 721,926 1,537,074 462 0 452,250 10,443
- ----------------------------------------------------------------------------------------------------------------
1. Bonus amounts for fiscal 2000 reflect amounts paid pursuant to predetermined
financials goals under the Company's Executive Long-Term Cash Award
Performance Plan for the 1998-2000 cycle.
2. While the named executive officers enjoy certain perquisites, for fiscal
years 1998, 1999 and 2000 these did not exceed the lesser of $50,000 or 10%
of each executive officer's salary and bonus, except for perquisites of Mr.
Wilson in 1999 and 2000. The amounts listed in 1999 and 2000 for Mr. Drexler
and the amount listed in 1999 for Mr. Crovitz represent tax gross-up
payments. The amount listed for Mr. Wilson in 2000 includes $183,169 for
forgiveness of interest on an interest-free loan. The amount listed for Mr.
Wilson in 1999 includes $2,182 for tax gross-up payments and $167,178 for
forgiveness of interest on an interest-free loan. The amount listed for Mr.
Wilson in 1998 represents tax gross-up payments in connection with the
reimbursement of relocation expenses.
3. Stock option awards have been adjusted to reflect stock splits.
4. These amounts include earnings over 120% of applicable federal long-term
rate in accordance with Securities and Exchange Commission rules on deferred
compensation credited, but not paid or payable, during the fiscal year under
the Company's Executive Capital Accumulation Plan, Executive Deferred
Compensation Plan and/or Supplemental Executive Retirement Plan as follows:
Mr. Drexler, $164,486 for 2000, $14,035 for 1999 and $486,184 for 1998;
Mr. Crovitz, $797 for 2000, $136 for 1999 and $1,138 for 1998; Ms. Gust,
$16,068 for 2000, $1,125 for 1999 and $7,965 for 1998; Ms. Ming, $5,459 for
2000; Mr. Pilot, $3,453 for 2000; and Mr. Wilson, $1,817 for 2000, $199 for
1999 and $2,043 for 1998. The amount listed for Mr. Wilson in 2000 includes
$300,000 for forgiveness of principal on an interest-free loan as
consideration for early final settlement of the loan. All remaining amounts
shown represent the Company's contributions to the Company's GapShare 401(k)
Plan.
9
5. Ms. Ming became an executive officer in October 2000.
6. Mr. Pilot became an executive officer in October 2000.
7. Mr. Wilson ceased to be an executive officer in April 2000.
STOCK OPTIONS
The following tables set forth certain information regarding stock options
granted to, exercised by and held by the executive officers named in the
Summary Compensation Table. All stock option awards in the following tables and
elsewhere in this Proxy Statement have been adjusted to reflect stock splits.
Option Grants In Last Fiscal Year
- ------------------------------------------------------------------------------------------------------
Individual Grants
Number of
Securities Percent of Total Market
Underlying Options Granted Exercise or Price on Grant Date
Options Granted to Employees in Base Price Grant Date Expiration Present Value
Name (#) (1,2) Fiscal Year ($/Sh) ($/Sh) (3) Date (4) ($) (5)
- ------------------------------------------------------------------------------------------------------
Millard S. Drexler 500,000 1.8% $45.5625 $45.5625 4/10/10 $12,126,725
500,000 1.8% 54.6750 45.5625 4/10/10 10,988,450
500,000 1.8% 59.2313 45.5625 4/10/10 10,482,625
- ------------------------------------------------------------------------------------------------------
Charles K. Crovitz 100,000 0.4% 45.5625 45.5625 4/10/10 1,630,913
- ------------------------------------------------------------------------------------------------------
Anne B. Gust 100,000 0.4% 45.5625 45.5625 4/10/10 1,630,913
- ------------------------------------------------------------------------------------------------------
Jenny J. Ming 80,000 0.3% 45.5625 45.5625 4/10/10 1,304,730
- ------------------------------------------------------------------------------------------------------
Kenneth S. Pilot 200,000 0.7% 45.5625 45.5625 4/10/10 3,701,175
50,000 0.2% 30.6563 30.6563 6/19/10 626,860
- ------------------------------------------------------------------------------------------------------
John B. Wilson 0 0% 0 0 0 0
- ------------------------------------------------------------------------------------------------------
1. Except for the options granted to Mr. Drexler and Mr. Pilot, the options
will become exercisable in four equal annual installments commencing one
year from the date of grant. The options granted to Mr. Drexler will vest in
two equal annual installments commencing five years from date of grant. The
200,000 options granted to Mr. Pilot will vest in four equal annual
installments commencing two years from the date of grant and the 50,000
options granted will vest in two equal annual installments commencing three
years from date of grant.
2. Under the terms of the Company's 1996 Stock Option and Award Plan, the
Compensation and Stock Option Committee retains discretion, subject to plan
limits, to modify the terms of outstanding stock options.
3. Average of high and low stock prices for the Company's common stock as
reported in NYSE-Composite Transactions for the date of grant.
4. All options granted in fiscal 2000 were granted for a term of ten years,
subject to termination three months following termination of employment in
certain events.
5. This column represents the present value of the options on the grant date
using the Black-Scholes option pricing model for the common stock, utilizing
the following assumptions: stock price volatility of between 39% to 40%;
dividend yield of 0.27%; 4 to 8-year expected option terms; 4.35% to 5.19%
risk-free interest rate; and no adjustment for non-transferability or
forfeiture. The actual value, if any, that an executive officer may realize
will depend on the excess of the market price over the exercise price on the
date the option is exercised so there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model, which is based on assumptions as to the variables of
stock price volatility, future dividend yield and interest rate. For an
estimate of the impact of all stock option grants on the Company's financial
results using the Black-Scholes valuation method, see Note G in the Notes to
Consolidated Financial Statements in the Company's Annual Report to
Shareholders for the fiscal year ended February 3, 2001.
10
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
- --------------------------------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at FY-End (#) at FY-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
- --------------------------------------------------------------------------------------------------------
Millard S. Drexler 361,800 $9,960,173 7,568,437 13,974,750 $200,231,617 $234,648,649
- --------------------------------------------------------------------------------------------------------
Charles K. Crovitz 31,050 642,948 196,425 618,625 4,804,017 6,191,289
- --------------------------------------------------------------------------------------------------------
Anne B. Gust 0 0 341,550 695,875 8,156,270 7,481,194
- --------------------------------------------------------------------------------------------------------
Jenny J. Ming 10,125 407,351 379,653 1,259,750 9,594,328 12,388,181
- --------------------------------------------------------------------------------------------------------
Kenneth S. Pilot 14,000 451,803 131,653 851,500 2,823,567 8,199,303
- --------------------------------------------------------------------------------------------------------
John B. Wilson 253,125 5,135,711 0 1,192,875 0 23,628,666
- --------------------------------------------------------------------------------------------------------
1. Represents the difference between the closing price of the Company's common
stock on February 2, 2001 ($32.525) and the exercise price of the options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, Messrs. Bellamy and Lillie and Ms. Hatchett, all of whom
were non-employee directors, served on the Compensation and Stock Option
Committee of the Board of Directors. Mr. Lillie ceased to be on the
Compensation and Stock Option Committee as of October 24, 2000 and joined the
Company as an executive officer in January 2001.
In November 2000, Mr. Lillie entered into a consulting agreement with the
Company, pursuant to which Mr. Lillie was to provide consulting services to the
Company for a minimum of 10 days per month. Pursuant to the agreement, Mr.
Lillie was to be paid $50,000 per month and in November 2000 was granted a
discretionary option to purchase 50,000 shares at a fair market value price of
$24.905 per share. The option is exercisable in full six months from the date
of grant. The consulting agreement was due to expire by its terms in May 2001,
but it was terminated early in January 2001 when Mr. Lillie joined the Company
as Vice Chairman.
During fiscal 2000, Mr. Drexler served as a member of the Board of Directors of
Apple Computer Inc., which does not have a compensation committee. Mr. Jobs,
Chief Executive Officer of Apple Computer Inc., serves on the Company's Board
of Directors.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors is
responsible for reviewing and approving the Company's compensation policies and
the compensation paid to executive officers.
Compensation Philosophy
The general philosophy of the Company's compensation program, which has been
reviewed and approved by the Committee, is to provide a competitive advantage
to the Company and rewards to the executives based both on the Company's
performance and on the individual's contribution to the Company. Corporate and
divisional performance are evaluated by reviewing the extent to which financial
and strategic goals are met, including such factors as profitability and sales
growth. These performance criteria are reviewed each year to ensure that they
are consistent with the Company's mission and strategies. Officers are also
given annual goals and their individual performance is evaluated by reviewing
progress against these objectives.
The Company's executive compensation policies are intended to motivate and
reward highly qualified executives for long-term strategic management and the
enhancement of shareholder value, to support a performance-oriented environment
that rewards achievement of specific internal Company and individual goals, and
to attract and retain executives whose abilities are critical to the long-term
success and competitiveness of the Company. The program is heavily oriented
toward incentive compensation tied to the
11
annual and long-term financial performance of the Company and to the long-term
return realized by the Company's shareholders.
There are three main components in the Company's executive compensation
program:
. Base Salary
. Annual Incentives
. Long-Term Incentives
Base Salary
Executive officers' salaries generally have been targeted above the average
rates paid by competitors to enable the Company to attract and retain highly
skilled executives. The Committee believes that the historical growth in the
Company's revenues, stores and profitability has made the Company a target for
other companies seeking employees and that, therefore, these rates are
necessary to retain the Company's executive officers and other key employees.
The Committee reviews the performance of and approves salaries for the Chief
Executive Officer and the executive officers on an annual basis, generally in
the first quarter.
The Committee believes that the market for retailing executives, and thus the
relevant competitive data, includes a broader group of companies than that
shown in the stock price performance graph presented in this Proxy Statement
under the heading "Performance Graph." Thus, in reviewing salaries for
executive officers, the Committee periodically examines market data and salary
increase surveys for specialty retail, consumer/branded goods, and general
industry groups which were prepared by national consulting companies. Salaries
are adjusted based on actual individual job performance and/or changes in
duties and responsibilities.
Mr. Drexler's base salary for fiscal year 2000 was $2.3 million, representing
an increase of 5.7% over the prior year. In setting the Chief Executive
Officer's 2000 salary, the Committee considered the Company's 1999 results,
future objectives and challenges, and Mr. Drexler's individual performance and
contributions. The Company's 1999 performance was judged by the Committee to be
above expectations and very good compared to industry/competitor results. The
Committee reviewed in detail Mr. Drexler's achievement of his 1999 goals and
his individual contributions to the Company. The Committee concluded that he
had achieved his 1999 goals and had provided a leadership role in achieving the
Company's three strategic priorities for 1999: growing earnings and improving
the return on investments, developing employees and strengthening the Brand.
The Committee also considered Mr. Drexler's decisive management of operational
and strategic issues, his drive to reinforce a culture of innovation and his
ability and dedication to enhance the long-term value of the Company for the
shareholders. The Committee believes that Mr. Drexler has continued to provide
the leadership and vision that he has provided throughout his 17-year tenure as
a Company executive, during which, on a compounded annual growth basis, the
Company's net earnings increased by 20%, net sales by 22% and market value by
36%. In making its salary decisions with respect to Mr. Drexler, the Committee
exercised its discretion and judgment based on the above factors, and no
specific formula was applied to determine the weight of each factor.
Annual Incentive Bonus
Annual incentive bonuses for executive officers are intended to reflect the
Committee's belief that a significant portion of the annual compensation of
each executive officer should be contingent upon the performance of the
Company.
To carry out this philosophy, the Company has implemented a performance-based
Executive Management Incentive Cash Award Plan ("Executive MICAP"), in which
executive officers are measured solely on Company performance targets. As a
pay-for-performance plan, the Executive MICAP is intended to motivate and
reward executive officers by directly linking the amount of any cash bonus to
specific corporate and/or divisional financial goals. Specific measurements are
chosen each year among earnings, sales growth and volume, return on assets,
and/or return on equity; and threshold, target and maximum payout levels are
12
established to reflect the Company's objectives. These goals and the potential
bonuses are reviewed and approved by the Committee in the first quarter of each
fiscal year. Under the 2000 guidelines adopted by the Committee, executive
officers were eligible to receive a bonus between 15% and 120% of their salary,
depending on actual earnings performance compared to target earnings goals set
for each division. Actual bonus amounts are calculated within this range
pursuant to a set formula which takes into account the extent to which earnings
goals were achieved and the grade level of the officer. No bonus is paid if
threshold goals are not met.
The Company's 2000 performance fell short of its predetermined financial goals
for the year. The Chief Executive Officer was eligible to receive between 20%
and 120% of his base salary as a bonus under the 2000 guidelines adopted by the
Committee. Because the Company did not meet threshold expectations, Mr. Drexler
did not receive an Executive MICAP bonus.
The Committee believes that the Executive MICAP program provides an excellent
link between annual results and the incentives paid to executives.
Long-Term Incentives
Long-term incentives represent over half the total income opportunity for
executive officers. These incentives create a direct linkage between executive
rewards and increased shareholder value by delivering a significant portion of
total compensation opportunity through both stock options and through a cash
performance plan with multi-year overlapping performance cycles. This
compensation program is designed to focus on Company performance.
The Committee believes that executive officers and other key employees should
have significant ownership of the Company's stock. Notably, all executive
officers as a group beneficially own approximately 22.8% of the outstanding
shares of common stock. In particular, Mr. Donald Fisher, the Company's
founder and Chairman, beneficially owns jointly with his wife Doris Fisher
approximately 20.4% of the outstanding shares.
Long-Term Performance Plan
In order to emphasize its compensation philosophy oriented to longer-term
results, the Company has an Executive Long-Term Cash Award Performance Plan
("ELCAPP"), in which officers are measured and compensated on Company and/or
business unit performance targets. Typically, a three-year performance cycle is
established each year, with participants receiving a cash payout if certain
minimum, target or maximum predetermined performance goals are achieved at the
end of the cycle. As a pay-for-performance plan, ELCAPP is intended to motivate
and reward officers by directly linking the amount of any cash bonus to
specific corporate and/or divisional long-term financial goals. Specific
measurements are chosen at the beginning of each performance cycle. The type of
measurements considered include earnings, return on equity, return on net
assets, return on invested capital, sales volume and total sales. Threshold,
target and maximum payout levels are established to reflect the Company's
objectives. These goals and the potential amounts of officer bonuses are
reviewed and approved by the Committee in the first quarter of each fiscal
year. Under the guidelines adopted by the Committee, officers will be eligible
to receive between 15% and 150% of their three-year average salary as a bonus,
depending on actual performance compared to target goals set for each division.
Actual bonus amounts are calculated within this range pursuant to a set formula
which takes into account the extent to which goals were achieved and the grade
level of the officer. No bonus is paid if threshold goals are not met unless
the Company's return on assets is in the top 10% of a predesignated group of
competitors, in which case, 50% of the base target award is paid (target awards
range between 30% and 100% of three-year average salary).
ELCAPP was established in 1996, with the first cycle comprising fiscal years
1996-1998. The Company's performance for the 1998-2000 cycle exceeded
predetermined financial goals for the three-year cycle, even though fiscal year
2000 was below expectations. Based on these goals, Mr. Drexler received a bonus
of 150% of the average of his salary over the three-year cycle.
The Committee continues to believe that the ELCAPP program provides an
excellent link between long-term results and financial incentives paid to
executives.
13
Stock Option and Award Plan
The Committee has the power to grant both stock options and restricted stock
under the Company's 1996 Stock Option and Award Plan. It has been the
Committee's practice to grant stock options to executive officers on an annual
basis, usually in the first quarter of each fiscal year. Historically, the
options have vested in three years or more from date of grant and executives
must be employed by the Company at the time of vesting in order to exercise the
options. In 2000, the Committee began granting options which vest 25% per year
for four years. The Committee has discretion to grant discounted stock options
and it has done so when it felt it was necessary to attract and/or retain key
executives. The Committee believes that stock option grants provide an
incentive that focuses the executives' attention on managing the Company from
the perspective of an owner with an equity stake in the business. The Company's
stock options are tied to the future performance of the Company's stock and
will for the vast majority of grants, provide value to the recipient only when
the price of the Company's stock increases above the option grant price.
In order to determine the appropriate number of options to be granted to its
executive officers in 2000, the Company considered competitive practices for a
wide array of companies in a large number of industries. The calculations
underlying these guidelines are based on the grant value of the option (i.e.,
number of shares times the exercise price) in relation to the employee's salary
and performance level. The Company's actual 2000 option grants to executive
officers were in line with those ranges. The size of each grant was based on a
range of potential shares for each eligible employee's level.
In April of 2000, Mr. Drexler was granted options to purchase 1,500,000 shares.
The shares become exercisable in five and six years from date of grant. This
grant was intended to reward exceptional performance and is consistent with the
Committee's philosophies of increasing shareholder value and including at-risk
compensation as a significant part of an executive's overall compensation. The
number and price of these shares are as follows: 500,000 at market value at the
date of grant, 500,000 at a price which was 20% above the market value at the
date of grant and 500,000 at a price which was 30% above the market value at
the date of grant. The "premium price" options are intended to reward Mr.
Drexler only after shareholders have been delivered growth in the stock price.
Impact of Section 162(m) of the Internal Revenue Code
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on its compensation plans and has determined that it is
the Company's preference to qualify its executives' compensation for
deductibility under applicable tax laws, to the extent the Committee determines
it is consistent with the Company's best interests. The Company's compensation
plans have been designed to permit the Committee to grant awards (other than
restricted stock and discounted stock options) which qualify for deductibility
under Section 162(m).
To help prevent the loss of any deductibility of base salaries, those named
executive officers whose base salaries exceed the $1,000,000 limit have in the
past deferred that portion of their compensation above the limit under the
Company's deferred compensation plans.
Adrian D. P. Bellamy (Chairman)
Glenda A. Hatchett
14
PERFORMANCE GRAPH
The graph below compares the percentage changes in the Company's cumulative
total shareholder return* on its common stock for the five-year period ended
February 3, 2001, with the cumulative total return of the S&P 500 Index and the
Dow Jones Retailers Index. The Dow Jones Retailer Index replaced the Dow Jones
All Specialty Index, which had been used in previous years, but is no longer
available.
Total Return to Shareholders
(Assumes $100 investment on 02/03/96)
[PERFORMANCE GRAPH APPEARS HERE]
Total Return Analysis
- ---------------------------------------------------------------------------------------
02/03/1996 02/01/1997 01/31/1998 01/30/1999 01/29/2000 02/03/2001
- ---------------------------------------------------------------------------------------
The Gap, Inc. $100 $121 $247 $612 $640 $474
- ---------------------------------------------------------------------------------------
DJ Retailers Index $100 $120 $169 $274 $274 $288
- ---------------------------------------------------------------------------------------
S&P 500 $100 $125 $159 $206 $227 $228
- ---------------------------------------------------------------------------------------
* Total return assumes quarterly reinvestment of dividends.
Source: Carl Thompson and Associates / (800) 959-9677. Data from BRIDGE
Information Systems and Dow Jones Total Return Indices.
EMPLOYMENT CONTRACTS
In December 1998, the Company entered into an agreement with John B. Wilson.
Under the terms of the agreement, if the Company decides to significantly
decrease Mr. Wilson's level of responsibilities, the Company will provide him
with continued employment for two years. Subject to certain exceptions, during
the two-year period, Mr. Wilson will continue to receive his latest base salary
and will continue to participate in other standard Company benefits, as well as
certain Executive MICAP and ELCAPP payouts. At the start of any such two-year
period, 50% of the options that vest during the two-year period will be
decelerated to vest at the end of the two-year period. The Company invoked this
agreement in April 2000, at which time Mr. Wilson ceased to be an executive
officer of the Company, although he remains an employee at this time.
15
OTHER REPORTABLE TRANSACTIONS
The Company has an annual agreement with Fisher Development, Inc. ("FDI"), a
company which is wholly owned by Robert S. Fisher (and his immediate family),
the brother of Donald G. Fisher, the Chairman and a principal shareholder of
the Company. The agreement sets forth the terms under which FDI may act as one
of the Company's general contractors in connection with the Company's
construction activities. During the 2000 fiscal year, FDI supervised the
construction of new store leasehold improvements for 675 stores and expansions,
remodels and relocations of 262 stores. The total amount paid for such
construction was approximately $741 million, including profit and overhead
costs of approximately $59 million paid by the Company to FDI relating to this
construction. This relationship is reviewed annually by the Audit and Finance
Committee of the Board of Directors.
In 1999, the Company made a $3,000,000 loan to Mr. Wilson at no interest,
secured by a third deed of trust on his home and by the stock options granted
to him under the Company's 1996 Stock Option and Award Plan. In consideration
for early payment, the Company accepted from Mr. Wilson $2,700,000 on January
19, 2001 in final settlement of this loan.
In 2000, the Company made a $2,000,000 loan to Ms. Heidi Kunz, Executive Vice
President and Chief Financial Officer of the Company, at no interest, secured
by a deed of trust on her home and by the stock options granted to her under
the Company's 1996 Stock Option and Award Plan. The loan will be due and
payable on February 1, 2005, or earlier upon termination of employment.
OTHER BUSINESS
If any matter not mentioned in this Proxy Statement is properly brought before
the meeting, including without limitation matters about which the proponent
failed to notify the Company on or before February 18, 2001, stockholder
proposals omitted from this Proxy Statement and the form of proxy pursuant to
the proxy rules of the Securities and Exchange Commission and matters incident
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,
the Company's management is not aware, nor has it been notified, of any other
matters that may be presented for consideration at the meeting.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's Annual
Meeting in 2002 must be received by the Company on or before December 7, 2001
to be considered for inclusion in the Company's Proxy Statement and form of
proxy relating to that meeting. Proposals must be addressed to the Company's
Corporate Secretary at One Harrison Street, San Francisco, California 94105.
In accordance with Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as
amended, management proxyholders intend to use their discretionary voting
authority with respect to any shareholder proposal raised at the Company's
Annual Meeting in 2002 as to which the proponent fails to notify the Company on
or before February 20, 2002 (one year after 45 days prior to the date on which
this Proxy Statement was first mailed to shareholders). Notifications must be
addressed to the Company's Corporate Secretary at One Harrison Street, San
Francisco, CA 94105.
By Order of the Board of Directors,
/s/ LAURI M. SHANAHAN
Lauri M. Shanahan
Secretary
16
APPENDIX A
AUDIT AND FINANCE COMMITTEE CHARTER
While the Audit and Finance Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the committee to plan or conduct
audits or to determine that the company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditors. Nor is
it the duty of the committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors or to
assure compliance with the laws and regulations and the company's Code of
Business Conduct.
The Audit and Finance Committee of the board of directors assists the board in
fulfilling its oversight responsibilities relating to the quality and integrity
of the accounting, auditing, and reporting practices of the company and such
other duties as directed by the board of directors.
Structure and Organization
1. The committee will be composed solely of directors who are independent of
the management of the company and are free of any relationship that, in the
opinion of the board of directors, may interfere with their exercise of
independent judgment as a committee member, all in accordance with NYSE
requirements.
2. The membership of the committee will consist of at least three independent
members of the board of directors. Committee members and the committee chair
shall be designated by and serve at the pleasure of the board of directors.
All members must be or become financially literate and at least one member
must have accounting or related financial management expertise, in each case
in the judgment of the board of directors.
3. The committee shall meet at least four times per year or more frequently as
circumstances require. The committee may ask members of management or others
to attend the meetings and provide pertinent information as necessary.
Meetings may be by telephone.
4. The committee is expected to maintain free and open communication with
management, the internal auditors, and the independent auditors.
5. The committee has the authority to investigate any matter brought to its
attention and to retain outside counsel for this purpose if, in its
judgment, that is appropriate.
The committee's responsibilities include:
General Responsibilities
1. Meet periodically with the independent auditors, the internal auditors, and
management in separate sessions to discuss any matters that the committee or
these groups believe should be discussed privately with the committee.
Provide sufficient opportunity for the independent auditors to meet with the
internal auditors and others in the company as appropriate without members
of management present.
2. Submit the minutes of all committee meetings to, or discuss the matters
addressed at each committee meeting with, the board of directors.
3. Review and reassess the adequacy of this Charter annually.
Responsibilities for Engaging Independent Auditors and Appointing the Chief
Internal Auditor
1. Recommend for approval by the board of directors and ratification by the
shareholders the selection and retention of the independent auditors,
approve compensation of the independent auditors, and review and approve in
advance the discharge of the independent auditors. The independent auditors
will ultimately be accountable to the committee and the board of directors,
and the board of directors and the committee have ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace the
independent auditors.
A-1
2. Discuss and consider the auditors' written affirmation that the auditors
are in fact independent. Obtain a formal written statement from the
independent auditors delineating all relationships between the company and
the independent auditors, actively engage in dialogue regarding disclosed
relationships or services which may impact the objectivity and independence
of the independent auditors, and take or recommend that the board of
directors take appropriate action in response to the outside auditors'
report to satisfy itself of the outside auditors' independence. In
considering the independence of the independent auditors, the committee
will review the nature of the services provided by the independent
auditors' firm and the fees charged, and such other matters as the
committee deems appropriate.
3. At the committee's discretion, arrange for the independent auditors to be
available to the full board of directors at least annually to help provide
a basis for the board's approval of the independent auditors' appointment.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the company's chief internal auditor.
Responsibilities for Oversight of the Quality and Integrity of Accounting,
Auditing, and Reporting Practices of the Company
1. Review the annual financial statements with management and the independent
auditors prior to release. The committee, or at least its Chair, should
discuss each quarterly earnings announcement with management (and the
independent auditors if desired) prior to release. These discussions should
cover the quality (not just the acceptability) of the financial reporting,
and such other matters as the committee deems appropriate.
2. Review with the independent auditors, the internal auditors, and management
the audit plan of the independent auditors for the current year and the
following year.
3. Review with the independent auditors, the company's internal auditors, and
financial and accounting personnel the adequacy and effectiveness of the
accounting, financial, and computerized information systems controls of the
company.
4. Review the internal audit function of the company, including a general
review of the internal audit plan and the internal audit organization and
its reporting structure, objectivity, and sufficiency.
Periodic Responsibilities
1. Review periodically with management and the Board any legal and regulatory
matters that may have a material impact on the company's financial
statements, compliance policies, and compliance programs.
2. Review with management and approve transactions involving management and/or
members of the board of directors which are not otherwise subject to the
approval of the Compensation and Stock Option Committee and would require
disclosure under SEC rules.
3. Oversee the company's Corporate Compliance Program and periodically review
and suggest to management any necessary improvements in the Compliance
Program.
4. Review with management major expenditures on information technology.
5. Review with management and approve the company's annual capital budget.
6. Perform such other functions assigned by law, the company's charter or
bylaws, or the board of directors.
A-2
[GAP INC. LOGO APPEARS HERE]
GAP INC. One Harrison Street, San Francisco, CA 94105
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 9, 2001--Fishkill, New York
10:00 a.m. Local Time
Admission Ticket
This is your admission ticket to the 2001 Annual Meeting of Shareholders of The
Gap, Inc.
Presentation of this ticket on the day of the meeting will grant admission to
the shareholder(s) named on the reverse side of this card.
Attendance will be limited to shareholders only.
Gap Inc.
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PROXY Gap Inc.
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Annual Meeting of Shareholders -- May 9, 2001
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Millard Drexler, Heidi Kunz and Lauri M.
Shanahan, or any of them, each with full power of substitution, as proxies to
vote, in accordance with the instructions set forth in this Proxy, all shares
of common stock of The Gap, Inc. which the undersigned is entitled to vote at
the Annual Meeting of Shareholders to be held on May 9, 2001 at 10:00 a.m. local
time in Fishkill, New York, and any postponements and adjournments thereof. The
proxies are authorized in their discretion to vote upon such other business as
may properly come before the meeting.
IMPORTANT -- This proxy must be signed and dated on the reverse side.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE ON THE REVERSE SIDE. IF NO CHOICES ARE INDICATED, THE SHARES
COVERED BY THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE REVERSE SIDE,
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FOR PROPOSAL 2, AND, WITH RESPECT TO ANY OTHER MATTERS AS MAY PROPERLY COME
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BEFORE THE MEETING, IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES.
See reverse for voting instructions.
COMPANY #
CONTROL #
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There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
. Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week,
until 12:00 p.m. (ET) on May 8, 2001.
. You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
. Follow the simple instructions the voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/gps/ -- QUICK *** EASY *** IMMEDIATE
. Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00
p.m. (CT) on May 8, 2001.
. You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to The Gap, Inc., c/o Shareowner Services/(TM)/,
P.0. Box 64873, St. Paul, MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card
V Please detach here V
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The Board of Directors Recommends a Vote FOR Items 1 and 2.
1. Election of 01 Adrian D.P. Bellamy 05 Robert J. Fisher 08 John M. Lillie [_] Vote FOR [_] Vote WITHHELD
directors: 02 Millard S. Drexler 06 Glenda A. Hatchett 09 Charles R. Schwab all nominees from all nominees
03 Donald G. Fisher 07 Steven P. Jobs 10 Sergio S. Zyman (except as
04 Doris F. Fisher marked)
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
[_______________________________]
2. Ratify the appointment of Deloitte & Touche LLP as independent auditors.
[_] For [_] Against [_] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
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Address Change? Mark Box [_]
Indicate changes below:
Date: ____________, 2001
[_______________________________]
Signature(s) in Box
NOTE: Please sign exactly as
your name(s) appears hereon.
Joint owners should each sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.