-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ErQvKh9AUSskI3s1wqpFSPYfvv0IUEKekv52lPO/AaMz20d3O0PPBBVM16kGL8pj upO6s1jDT2ZR6MFzmLGDRA== 0001012870-97-000789.txt : 19970423 0001012870-97-000789.hdr.sgml : 19970423 ACCESSION NUMBER: 0001012870-97-000789 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970520 FILED AS OF DATE: 19970421 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAP INC CENTRAL INDEX KEY: 0000039911 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 941697231 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07562 FILM NUMBER: 97584312 BUSINESS ADDRESS: STREET 1: ONE HARRISON CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4159524400 MAIL ADDRESS: STREET 1: ONE HARRISON STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 FORMER COMPANY: FORMER CONFORMED NAME: GAP STORES INC DATE OF NAME CHANGE: 19850617 DEF 14A 1 DEFINITIVE PROXY 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: [_]CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY [_] Preliminary Proxy Statement RULE 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12 THE GAP, INC. ----------------------------------------------------- (Name of Registrant as Specified In Its Charter) ----------------------------------------------------- (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)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [_]Fee paid previously with preliminary materials. [_]Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: Notes: LOGO NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 20, 1997 To Our Stockholders: The Annual Meeting of Stockholders of The Gap, Inc. will be held at the Town Hall of the Delancey Street Foundation, 600 The Embarcadero, San Francisco, California, on Tuesday, May 20, 1997 at 1:30 P.M., for the following purposes: 1. To elect a Board of Directors; 2. To consider and act upon the selection by the Board of Directors of Deloitte & Touche LLP as independent auditors for the Company for the fiscal year ending on January 31, 1998; and 3. To transact such other business as may properly come before the meeting. The foregoing items of business are more fully described in the Proxy Statement following this Notice. Only stockholders of record at the close of business on March 24, 1997, are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. A copy of the Company's annual report is being mailed with this proxy statement to stockholders entitled to notice of this meeting. By Order of the Board of Directors, /s/ANNE B. GUST --------------- Anne B. Gust Secretary April 21, 1997 WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE. PRINTED ON RECYCLED PAPER LOGO THE GAP, INC. ONE HARRISON SAN FRANCISCO, CALIFORNIA 94105 PROXY STATEMENT THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF THE GAP, INC. (THE "COMPANY") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY TO BE HELD ON MAY 20, 1997 AT 1:30 P.M. AT THE TOWN HALL OF THE DELANCEY STREET FOUNDATION IN SAN FRANCISCO, AND AT ANY ADJOURNMENT THEREOF. THIS STATEMENT AND THE ENCLOSED FORM OF PROXY WERE FIRST SENT TO STOCKHOLDERS ON OR ABOUT APRIL 21, 1997. THE PROXY The persons named as proxyholders were selected by the Board of Directors of the Company and are officers of the Company. All proxies will be voted, or an abstention or withholding recorded, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted: FOR the election of directors nominated by the Board of Directors; and FOR the approval of the selection by the Board of Directors of Deloitte & Touche LLP as independent auditors for the Company for the fiscal year ending January 31, 1998. All expenses in connection with the solicitation of the enclosed proxy, including the charges of brokerage houses and other custodians, nominees or fiduciaries for forwarding documents to security owners, will be paid by the Company. In addition to solicitation by mail, officers, directors and employees of the Company, who will receive no extra compensation for their services, may solicit proxies by telephone, fax or in person. A stockholder giving the enclosed proxy may revoke it at any time prior to its exercise by a written revocation delivered to the Company, by a subsequent proxy, or by attending the Annual Meeting and voting in person. VOTING SECURITIES AND VOTING RIGHTS The only outstanding voting securities of the Company are its shares of Common Stock, of which 273,698,780 shares were outstanding at the close of business on March 24, 1997. Only stockholders of record at the close of business on that date are entitled to vote at the meeting. Each stockholder is entitled to one vote per share on each matter submitted to the meeting. The holders of a majority of the outstanding shares of the Common Stock of the Company, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting or any adjournment thereof. Election of directors by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election present in person or by proxy. Votes cast by proxy or in person at the Annual Meeting will be tabulated by the election inspector(s) appointed for the meeting and will determine whether or not a quorum is present. The election inspector(s) will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum but as unvoted for purposes of determining the approval of any matter submitted to the stockholders for a vote. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter. 1 BENEFICIAL OWNERSHIP OF SHARES The following table sets forth certain information as of March 24, 1997, 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.
AMOUNT BENEFICIALLY PERCENT NAME OF BENEFICIAL OWNER OWNED OF CLASS ------------------------ ------------ -------- Adrian D. P. Bellamy.......................... 9,000 * John G. Bowes................................. 374,400(1) * Millard S. Drexler............................ 5,046,200(2)(3) 1.8% Donald G. Fisher.............................. 65,340,960(4) 23.9%(4) Doris F. Fisher............................... 65,340,960(4) 23.9%(4) Robert J. Fisher.............................. 10,801,828(3)(5) 3.9% Lucie J. Fjeldstad............................ 2,125(6) * William A. Hasler............................. 4,500(7) * Warren R. Hashagen............................ 169,352(3)(8) * John M. Lillie................................ 14,000(9) * Richard M. Lyons.............................. 274,273(3)(10) * Charles R. Schwab............................. 17,083(11) * Brooks Walker, Jr. ........................... 149,600(12) * John B. Wilson................................ 20,300(3) * All directors and executive officers as a group (15 persons)........................... 82,272,416 30.1%
- ------- * Indicates ownership of less than 1% of the outstanding shares of the Company's Common Stock. (1) Includes 12,000 shares which Mr. Bowes has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. (2) Includes 237,200 shares which Mr. Drexler has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. (3) Includes shares as to which restrictions have not lapsed which were granted under the Company's Management Incentive Restricted Stock Plan and/or the 1996 Stock Option and Award Plan, and/or shares held by the executive officer in his or her retirement account under the GapShare Plan, a retirement plan that qualifies under Section 401(k) of the Internal Revenue Code of 1986, as amended. (4) 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 the same as that shown for the Company on the first page of this Proxy Statement. In the table shown above, 65,340,960 shares beneficially owned by Donald G. Fisher and Doris F. Fisher are reflected as being beneficially owned by each of them; therefore, the number of shares and percentage of class reflected for each of them should not be added in determining the actual number of shares or percentage owned by both of them. Of the shares shown as owned by each of them, 43,436,062 shares, representing 15.9% of the Company's Common Stock, are held as community property. The remainder of the shares are held in various trusts and foundations of which they are trustees. The shares shown as owned by each of them exclude an aggregate of 35,115,072 shares beneficially held by family members, as to which shares Mr. and Mrs. Fisher each disclaim any beneficial interest. (5) Includes 147,800 shares which Robert Fisher has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. Also included are 275,600 shares held jointly by Robert Fisher and his spouse, 31,628 shares owned by his spouse and 48,550 shares held by Robert Fisher as trustee for his nieces and nephews. (6) Includes 400 shares held in an Individual Retirement Account for which Ms. Fjeldstad has sole voting and investment power. (7) Includes 2,000 shares which Mr. Hasler has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. (8) Includes 54,400 shares which Mr. Hashagen has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. 2 (9) Includes 12,000 shares which Mr. Lillie has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. Also included are 2,000 shares held under the Lillie Family Living Trust, over which Mr. Lillie and his wife share voting and investment power. (10) Includes 35,200 shares which Mr. Lyons has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. Also included are 32,720 shares owned jointly by Mr. Lyons and his spouse, and 2,540 shares held for the benefit of his minor children. (11) Includes 12,000 shares which Mr. Schwab has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. Also included are 1,000 shares owned by Mr. Schwab's spouse. (12) Includes 12,000 shares which Mr. Walker has the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. Also included are 60,000 shares owned by the Brooks Walker, Jr. Charitable Remainder Trust, of which Mr. Walker is the trustee and over which he has sole voting and investment power. (13) Includes 544,200 shares which certain directors and executive officers have the right to acquire within 60 days after March 24, 1997 upon exercise of stock options. PROPOSAL NO. 1 ELECTION OF DIRECTORS NOMINEES FOR ELECTION AS DIRECTORS All directors were elected at the Annual Meeting held in 1996. Directors will be elected at the Annual Meeting to serve until the next Annual Meeting and until their successors are elected. The Board of Directors proposes to nominate the eleven current directors. In the absence of instructions to the contrary, shares represented by the proxy will be voted for the election of all such nominees to the Board of Directors. The Board of Directors has no reason to believe that any of these nominees will be unable to serve. However, if any nominee should for any reason be unavailable to serve, the proxies will be voted for the election of such other person to the office of director as the Board of Directors may recommend in place of such nominee. Set forth below is certain information concerning the nominees which is based on data furnished by them.
SERVED AS NAME, AGE, PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AND OTHER DIRECTOR INFORMATION SINCE ---------------------------------------------------------------- --------- ADRIAN D. P. BELLAMY, 55l* ......................................... 1995 Director of The Body Shop International, P.L.C., personal care retailer; Director of Gucci Group, NV, luxury accessories and apparel manufacturer and retailer; and Director of Paragon Trade Brands, Inc., manufacturer of store brand diapers. Chairman and Chief Executive Officer of DFS Group Limited, specialty retailer, 1983-95. JOHN G. BOWES, 68l*................................................. 1974 Chairman of Yakima Products, Inc. since 1994 and Fastrack, Inc. since 1995. Chairman of Kransco Group Companies, manufacturer of recreational products, 1962-94. MILLARD S. DREXLER, 52.............................................. 1983 Chief Executive Officer of the Company since 1995, President of the Company since 1987 and Chief Executive Officer of the Gap Division since 1987. Chief Operating Officer of the Company 1993-95; Chief Executive Officer of Banana Republic, Inc. 1988-97. Director of Williams-Sonoma, Inc., specialty retailer. DONALD G. FISHER, 68 * +............................................ 1969 Chairman of the Company. Chief Executive Officer from 1969 to 1995. Director of The Charles Schwab Corporation, discount securities brokerage; and Director of AirTouch Communications, telecommunications company. DORIS F. FISHER, 65 +............................................... 1969 Merchandising consultant to the Company. ROBERT J. FISHER, 42 ++............................................. 1990 Executive Vice President and Chief Operating Officer of the Company since 1995 and 1992-1993. Executive Vice President and Chief Financial Officer, 1993-1995. Director of Sun Microsystems, Inc., manufacturer of computer systems.
3
SERVED AS NAME, AGE, PRINCIPAL OCCUPATION DURING PAST FIVE YEARS AND OTHER DIRECTOR INFORMATION SINCE ---------------------------------------------------------------- --------- LUCIE J. FJELDSTAD, 53l*............................................. 1995 President, Video and Networking, Tektronix, Inc., electronics company, since 1995. President, Fjeldstad International, consulting company, from 1993 to 1995. Vice President and General Manager, Multimedia, IBM, from 1992 to 1993. Director of KeyCorp Ohio, bank holding company; Director of Entergy Corp. DE, utility holding company; and Director of Bolt Beranek & Newman, Inc., manufacturer of computer support systems. WILLIAM A. HASLER, 55 *............................................. 1991 Dean, Haas Graduate School of Business, University of California, Berkeley since 1991. Director of Tenera, Inc., information services company; Director of Aphton, Inc., biotechnology pharmaceutical company; Director of Walker Interactive Systems, Inc., software company; and Director of TCSI, communications technology company. Governor of the Pacific Stock Exchange. JOHN M. LILLIE, 60l*................................................. 1992 Chairman, The Epic Team, bicycle and accessory products, since 1996. Chairman and Chief Executive Officer of American President Companies, Ltd., transportation company, 1992-1995. Director of Consolidated Freightways, Ltd., transportation company; Director of The Harper Group, Inc., freight logistics and services company; and Director of Walker Interactive Systems, Inc., software company. CHARLES R. SCHWAB, 59 *............................................. 1986 Chairman and Chief Executive Officer of The Charles Schwab Corporation, discount securities brokerage, since 1986. Director of Transamerica Corporation, insurance and financial services company; Director of AirTouch Communications, telecommunications company; and Director of Siebel Systems, Inc., software company. BROOKS WALKER, JR., 69 *............................................ 1972 General Partner, Walker Investors, venture capital investment partnership, since 1979. Director of Pope & Talbot, Inc., manufacturer of wood products; and Director of AT&T Capital Corporation, equipment leasing and financing company.
- ------- Member of the Audit and Finance Committee. l Member of the Compensation and Stock Option Committee. * Member of the Corporate Governance Committee. + Donald G. Fisher and Doris F. Fisher are husband and wife. ++Robert J. Fisher is the son of Donald G. and Doris F. Fisher. INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD The Board of Directors has three standing committees: the Audit and Finance Committee, and the Compensation and Stock Option Committee, both of which are composed of directors who are not employees of the Company, and the Corporate Governance Committee, which is made up of seven non-employee directors and one employee director. The functions of the Audit and Finance Committee are to recommend the engagement of the Company's independent auditors; to review with them the plan, scope and results of their audit for each year; to review with the Company's Consulting and Auditing Services department the plan, scope and results of their operations; and to consider and review other matters relating to the financial and accounting affairs of the Company. This committee is composed exclusively of directors who are, in the opinion of the Board of Directors, free from any relationship that will interfere with the exercise of independent judgment as a committee member. The present members of the Audit and Finance Committee are Messrs. Hasler, Schwab and Walker (who is Chairman). The functions of the Compensation and Stock Option Committee are to review and approve salaries and other forms of compensation for all corporate and divisional officers; to approve the guaranteeing or granting of loans to certain corporate 4 and divisional officers under the Company's Relocation Loan Plan; to grant stock to selected employees under the Company's stock plan; and to make awards under the Company's annual and long-term incentive plans to key employees. This committee is composed exclusively of directors who have not been eligible to receive stock options or awards under such plan (except for predetermined, formula-based awards, as described below) for a period of at least one year prior to membership on the committee. The present members of the Compensation and Stock Option Committee are Messrs. Bellamy, Bowes, and Lillie (who is Chairman), and Ms. Fjeldstad. 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 of officers, directors, candidates for election as directors, the size, composition, compensation and function of the Board of Directors, the functions and duties of the committees of the Board, the effectiveness and procedures of the Board, and succession planning for important Company functions. The present members of the Corporate Governance Committee are Messrs. Bellamy, Bowes, Donald Fisher, Hasler (who is Chairman), Lillie, Schwab and Walker, and Ms. Fjeldstad. During the last fiscal year, the Board of Directors held seven meetings, the Compensation and Stock Option Committee held three meetings, the Audit and Finance Committee held two meetings and the Corporate Governance Committee held one meeting. No directors attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board of Directors held while they were members, and (ii) the total number of meetings held by all Committees of the Board on which they were members. COMPENSATION OF DIRECTORS The Company does not pay director fees to directors who are employees of the Company or any affiliated company. Directors who are not employees of or consultants to the Company ("non-employee directors") do not receive any form of direct remuneration other than as described below. In addition, travel expenses to attend meetings of the Board of Directors are reimbursed by the Company. All directors are eligible to receive discounts on Company merchandise. Each non-employee director of the Company receives director fees in the form of an annual retainer of $36,000 per year, payable quarterly, which is diminished by $2,500 for each Board and/or Committee meeting day missed. Under the Company's 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 automatically receives an option to purchase 10,000 shares at the then-current fair market value; and (ii) each continuing non-employee director automatically receives an option to purchase 2,500 shares at the then-current fair market value. All non-employee director options are granted on the first business day after each annual meeting of stockholders. The options normally become exercisable three years after the date of grant. Furthermore, non-employee directors may elect to receive all or a portion of their fees in Company stock options. 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 in exchange for an option to purchase shares of Company Common Stock. Any such option will have an exercise price equal to the then-current fair market value of the stock, a maximum term no longer than seven years, and cover a number of shares to be determined by a widely-used option valuation formula (so that the option has a value equal to the amount of the foregone retainer). Alternatively, the director may elect to receive a stock option for a predetermined number of shares with an exercise price which is discounted to reflect the amount of the foregone retainer. 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. Then-current participants will continue to be eligible for plan benefits, assuming they meet the requirements of the plan; however, the benefit payable will be capped at current levels (i.e., 75% of $36,000). 5 In fiscal 1996, Doris Fisher received $24,000 for merchandising services rendered in the course of her employment with the Company. As a Company employee, Mrs. Fisher participates in all benefits which the Company makes available to its employees generally, except for stock-based compensation and bonus programs. Information concerning executive officers of the Company who are not also directors is set forth in the Company's annual report on Form 10-K for the fiscal year ended February 1, 1997. EXECUTIVE COMPENSATION The following table sets forth compensation paid to, earned by or awarded to the Chief Executive Officer and the four other most highly compensated executive officers of the Company for the periods presented. In addition, the table also sets forth compensation paid to a former executive officer of the Company who would have been among the five most highly compensated executive officers, were it not for the fact that he ceased to be considered an executive officer of the Company in January 1997. The footnotes to the table provide additional information concerning the Company's compensation and benefit programs. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION AWARDS --------------------------------- --------------------- OTHER RESTRICTED SECURITIES ANNUAL STOCK UNDERLYING ALL OTHER NAME AND FISCAL COMPENSATION AWARDS OPTIONS COMPENSATION PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) (#)(3) ($)(4) ------------------ ------ --------- --------- ------------ ---------- ---------- ------------ Millard S. Drexler...... 1996 1,780,385 1,350,000 135,367 0 120,000 6,037 President and Chief 1995 1,588,616 314,100 108,831 0 4,062,500 10,100 Executive Officer 1994 1,449,731 715,000 22,490 0 38,600 7,616 Donald G. Fisher........ 1996 1,058,047 787,313 273,219 N/A N/A 4,886 Chairman 1995 1,508,777 299,100 155,812 N/A N/A 10,008 1994 1,450,662 715,000 32,085 N/A N/A 9,606 Robert J. Fisher........ Executive Vice 1996 840,940 637,500 86,742 0 100,000 6,485 President 1995 694,162 137,500 1,399 840,625 1,034,000 9,782 Chief Operating Officer 1994 600,940 297,675 0 0 28,000 9,296 John B. Wilson.......... 1996 188,098 1,006,750 27,268 597,581 370,000 0 Executive Vice 1995 0 0 0 0 0 0 President, 1994 0 0 0 0 0 0 Chief Administrative Officer(5) Warren R. Hashagen...... 1996 311,660 175,000 822 0 24,000 5,450 Senior Vice President-- 1995 275,192 40,000 0 127,750 60,000 8,468 Chief Financial Officer 1994 249,038 110,000 0 180,750 9,200 7,936 Richard M. Lyons........ 1996 728,248 375,000 758 0 88,500 6,623 Executive Vice 1995 693,240 100,000 329 1,681,250 442,500 10,163 President-- 1994 581,324 288,000 0 0 28,000 9,717 Brand Development, International Division(6)
- ------- (1) While the named executive officers enjoy certain perquisites, for fiscal years 1994, 1995 and 1996 these did not exceed the lesser of $50,000 or 10% of each officer's salary and bonus. Except as set forth below, the amounts listed for the named executive officers, if any, represent above- market earnings on deferred compensation payable during the fiscal year but deferred at their election under the Company's Executive Capital Accumulation Plan and/or Executive Deferred Compensation Plan and/or Supplemental Executive Retirement Plan. The amount listed for Mr. Wilson includes relocation expenses reimbursed ($12,602); tax gross-up payments in connection with the reimbursement ($11,812); and below-market interest on a relocation loan ($2,854). (2) Donald Fisher does not participate in the Company's restricted stock plan. As of the end of fiscal 1996, the aggregate restricted stock holdings for the named executives consisted of 2,294,300 shares worth $65,961,125 at the then-current 6 fair market value (as represented by the closing price of the Company's Common Stock on January 31, 1997), without giving effect to the diminution of value attributable to the restrictions on such stock. Such amount included $57,500,000 for Mr. Drexler (2,000,000 shares), $2,587,500 for Robert Fisher (90,000 shares), $583,625 for Mr. Wilson (20,300 shares), $690,000 for Mr. Hashagen (24,000 shares), and $4,600,000 for Mr. Lyons (160,000 shares). Dividends are paid on the restricted shares to the extent payable on the Company's Common Stock generally. Of the named executive officers, only Mr. Wilson received a restricted stock grant in fiscal year 1996, to compensate him for certain unvested stock options at a prior employer. Unless otherwise noted in the following sentences, no shares granted to the named executives vest in less than three years from the date of grant. On October 16, 1996, Mr. Wilson was granted a total of 20,300 shares which will vest in full on October 16, 1997. On May 23, 1995, Mr. Lyons was granted a total of 100,000 shares, vesting as follows: 10,000 shares on March 21, 1998, 40,000 shares on March 21, 1999 and 50,000 shares on March 21, 2000. (3) Donald Fisher does not participate in the Company's stock option plan. (4) These amounts represent the Company's contributions to the Company's GapShare Plan for fiscal years 1996, 1995 and 1994. (5) Mr. Wilson joined the Company in October 1996. (6) Mr. Lyons' responsibilities were changed significantly in January 1997. He is no longer considered an executive officer of the Company. The following two tables set forth certain information regarding stock options granted to, exercised by and held by the executive officers named in the foregoing Summary Compensation Table. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ------------------------------------------------------------------------- NUMBER OF PERCENT OF MARKET SECURITIES TOTAL OPTIONS PRICE ON GRANT UNDERLYING GRANTED TO EXERCISE OR GRANT DATE OPTIONS GRANTED EMPLOYEES IN BASE PRICE DATE EXPIRATION PRESENT NAME (#)(1) FISCAL YEAR ($/SH)(2) ($/SH) DATE(3) VALUE($)(4) - ---- --------------- ------------- ----------- -------- ---------- ----------- Millard S. Drexler...... 120,000 1.9% $33.0625 $33.0625 05/21/06 $1,464,672 Donald G. Fisher........ N/A N/A N/A N/A N/A N/A Robert J. Fisher........ 100,000 1.6% $33.0625 $33.0625 05/21/06 $1,081,300 John B. Wilson(5)....... 300,000 4.8% $29.4375 $29.4375 10/16/06 $2,888,220 70,000 1.1% $14.7188 $29.4375 10/16/06 $1,212,204 Warren R. Hashagen...... 24,000 0.4% $33.0625 $33.0625 05/21/06 $ 259,512 Richard M. Lyons........ 88,500 1.4% $33.0625 $33.0625 05/21/06 $ 956,951
- ------- (1) Except as noted below for Mr. Wilson, all options granted to the named executive officers during fiscal 1996 will become exercisable in two equal installments three and four years from date of grant. 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 options. Donald Fisher does not participate in the Company's stock option plan. (2) Except as noted below for Mr. Wilson, all options were granted at market value (average of high and low stock prices for the Company's Common Stock as reported in the Western edition of The Wall Street Journal) at date of grant. (3) All options granted in fiscal 1996 were granted for a term of ten years, subject to termination 90 days following termination of employment in certain events. (4) 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: five-year stock price volatility of 0.30; dividend yield of 1%; 4.68 to 5.75-year expected option terms; 5.5 to 6.5% 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 that 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 arbitrary 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 to the Consolidated Financial Statements in the Company's Annual Report to Stockholders for the fiscal year ended February 1, 1997. 7 (5) The 300,000 options granted to Mr. Wilson will become exercisable in three equal installments two, three and four years from date of grant. The 70,000 options will become exercisable as follows: 42,000 shares on February 1, 1998 and 28,000 shares on October 16, 1999. These shares were granted at a 50% discount off fair market value to compensate him for certain unvested stock options at a prior employer. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF VALUE OF SECURITIES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY SHARES ACQUIRED OPTIONS AT FY-END(#) OPTIONS AT FY-END($) NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1) - ---- --------------- ----------------- ------------------------- ---------------------------- Millard S. Drexler...... 80,000 1,800,000 198,600 4,221,100 3,326,288 37,861,459 Donald G. Fisher(2)..... N/A N/A N/A N/A N/A N/A Robert J. Fisher........ 10,000 234,375 119,800 1,162,000 1,942,184 11,243,188 John B. Wilson.......... 0 0 0 370,000 0 971,250 Warren R. Hashagen...... 4,000 93,875 62,400 93,200 1,142,000 655,488 Richard M. Lyons........ 42,400 601,725 7,200 559,000 62,100 5,828,078
- ------- (1) Represents the difference between the closing price of the company's Common Stock on January 31, 1997 and the exercise price of the options. (2) Donald Fisher does not participate in the Company's stock option plan. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS When John B. Wilson joined the Company in October 1996, the Company entered into an arrangement with him providing for the grant of 20,300 shares of restricted stock and options to purchase 370,000 shares (70,000 at a discount). See the tables above entitled "Summary Compensation Table" and "Option Grants in Last Fiscal Year." Mr. Wilson received the restricted stock and a portion of the options to compensate him for certain unvested stock options at a prior employer. Mr. Wilson agreed with the Company that if he receives any acceleration of those stock options ("Accelerated Stock"), then his grant of restricted stock and stock options will be reduced by his pre-tax gain on the Accelerated Stock. For this purpose, Mr. Wilson's pre-tax gain on the Accelerated Stock will be calculated as of the market value on the accelerated vesting date ("Vesting Date"). Fifty percent of the gain (up to a maximum of $1.15 million) will be used to reduce the value of his restricted stock and option grant from the Company by first reducing the number of shares of restricted stock (calculated at their market value on the Vesting Date) and then reducing the number of discounted option shares, until the $1.15 million maximum is recaptured by the Company. In addition, in the event that Mr. Wilson is involuntarily terminated for any reason other than cause within the first 24 months of employment, the Company will provide him with the following protection: (i) one year of severance pay at his then-effective base rate, payments to cease as soon as new employment is effective; (ii) if his termination occurs prior to October 16, 1997, the vesting of his shares of restricted stock which vest in October 1997 will be accelerated to the date of termination; and (iii) if his termination occurs prior to February 1, 1998, the vesting of his discounted options which vest in February 1998 (42,000 shares) will be accelerated to the date of termination. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation and Stock Option Committee of the Board of Directors consists of Ms. Fjeldstad and Messrs. Bellamy, Bowes, and Lillie, all of whom are outside directors. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation and Stock Option Committee of the Board of Directors is responsible for reviewing and approving the Company's compensation policies and the compensation paid to executive officers. The Committee is comprised of the members named below, all of whom are non-employee Directors. 8 COMPENSATION PHILOSOPHY The general philosophy of the Company's compensation program, which has been reviewed and approved by the Committee, is to offer employees competitive compensation opportunities based both on the Company's performance and on the individual's contribution and performance. Corporate and divisional performance are evaluated by reviewing the extent to which financial and strategic goals are met, including such factors as profitability, sales growth and expense control. These performance criteria are reviewed each year to ensure that they are consistent with the Company's mission and strategies. Officers are also given annual goals and their individual performance is evaluated by reviewing progress against these objectives. The Company's compensation policies are intended to motivate and reward highly qualified executives for long-term strategic management and the enhancement of stockholder value, to support a performance-oriented environment that rewards achievement of specific internal Company 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 annual and longer-term financial performance of the Company and to the longer-term return realized by the Company's stockholders. There are three main components in the Company's executive compensation program: . Base Salary . Annual Incentives . Long-Term Incentives BASE SALARY Executive officers' salaries have been targeted at or above the average rates paid by competitors to enable the Company to attract, motivate, reward and retain highly skilled executives. The Committee believes that the historical growth in the Company's revenues, stores and profitability has made the Company a target for other companies seeking employees and that, therefore, these rates are necessary to retain key officers. 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 on page 12. Thus, in reviewing the 1996 salaries for executive officers, the Committee examined salary increase surveys for specialty retail and general industry groups which were prepared by national consulting companies. Salaries were adjusted based on actual individual job performance and/or changes in a person's duties and responsibilities. Mr. Drexler's base salary for fiscal year 1996 was $1,800,000, representing an increase of 7% over the prior year. In setting the Chief Executive Officer's 1996 salary, the Committee considered the Company's 1995 results, future objectives and challenges, and Mr. Drexler's individual performance and contributions. The Company's 1995 performance was judged by the Committee to be below expectations but good compared to industry/competitor results. The Committee reviewed in detail Mr. Drexler's achievement of his 1995 goals and his individual contributions to the Company. The Committee concluded that he had achieved his 1995 goals and had provided a leadership role in achieving the Company's three strategic priorities for 1995: growing earnings, enhancing employee performance and satisfaction, and exceeding customers' expectations. 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 stockholders. The Committee believes that Mr. Drexler has continued to provide the leadership and vision that he has provided throughout his 14-year tenure as a Company executive, during which, on a compound annual growth basis, the Company's earnings increased by 26%, sales by 19% and market value by 34%. 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. 9 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 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 year. Under the 1996 guidelines adopted by the Committee, executive officers were eligible to receive between 16.6% and 75% of their salary as a bonus, depending on actual earnings performance compared to target earnings goals set for each division. Actual bonus amounts are calculated within this range pursuant to a set formula which takes into account the growth potential of a division, the extent to which earnings goals were achieved, and the grade level of the officer. The Company's 1996 performance was judged by the Committee to be excellent. The Company achieved record earnings and surpassed its financial goals for the year. As a result, the Chief Executive Officer and other named executive officers received annual incentive bonuses for 1996 which aggregated $3,482,563 and which were at maximum levels. The Chief Executive Officer was eligible to receive between 16.6% and 75% of his base salary as a bonus under the 1996 guidelines adopted by the Committee. Because the Company exceeded its goals and achieved superior results, the actual bonus received by Mr. Drexler was 75% of his base salary. 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 stockholder value by delivering approximately 50% of the compensation opportunity through stock options and 50% through a cash performance plan with three-year overlapping performance cycles. This compensation program is designed to balance Company performance, individual performance and individual risk. 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 own approximately 29.8% of the outstanding shares of Common Stock. In particular, Mr. Donald Fisher, the Company's founder and Chairman, owns jointly with his wife Doris Fisher approximately 23.9% of the outstanding shares. Long-Term Performance Plan In order to emphasize its compensation philosophy oriented to longer-term results, the Company has implemented an Executive Long-Term Cash Performance Plan (ELCAPP), in which officers are measured and compensated on Company and/or business unit performance targets. 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, the ELCAPP is intended to motivate and reward executive officers by directly linking the amount of any cash bonus to specific corporate and/or divisional long-term financial goals. Specific measurements are chosen each year for each successive three-year cycle. The type of measurements include comparable store sales, 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 executive officer bonuses are reviewed and approved by the Committee in the first quarter of each year. Under the 1997 guidelines adopted by the Committee, executive officers will be eligible to receive between 30% and 100% of their 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 growth potential of a division, the extent to which earnings goals were achieved, and the grade level of the officer. Because the ELCAPP was established in 1996, no payouts have yet been made under the plan for the 1996-98 cycle. 10 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. With respect to executive officers, it has been the Committee's practice to grant stock options on an annual basis, usually in the first quarter. Generally, the options vest in two equal installments three and four years from date of grant and executives must be employed by the Company at the time of vesting in order to exercise the options. 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 provide value to the recipient only when the price of the Company's stock increases above the option grant price, that is, only to the extent that stockholders as a whole have benefitted. In order to determine the appropriate number of options to be granted to its executive officers, in 1996 the Company relied on competitive guidelines prepared by an independent outside compensation consultant based on practices for a wide array of companies in a large number of industries. The consultant was solely responsible for the criteria used to select the companies included in the comparison group. The calculations underlying these guidelines are based on the grant value of the option (i.e., number of shares times the exercise price) in relation to the employee's salary and performance level. The Company's actual 1996 option grants to executive officers were in line with those ranges. The size of each grant was based on a range of potential shares (high, medium, low) for each eligible employee's salary level. Actual shares awarded were based on the score obtained by eligible employees on their yearly individual performance evaluation. No consideration was given to the amount of shares previously granted to executive officers. In 1996, Mr. Drexler was granted options to purchase 120,000 shares at market value at the date of grant. The shares become exercisable in two equal installments three and four years from date of grant. This grant is consistent with the Committee's philosophy that at-risk compensation should comprise a significant part of an executive's overall compensation. In the past, restricted stock grants were also a significant part of the Company's long-term incentives. Under the new guidelines set by the Committee in fiscal year 1996, restricted stock was de-emphasized as a long-term compensation vehicle for executives, in favor of a combination of the long- term performance plan and stock options and was refocused as a tool for recruiting and retaining key employees. Generally, restrictions on the shares lapse in three to five years from the grant date and the employee must be employed by the Company on the date the restrictions lapse in order to receive the stock. The ultimate value of any restricted stock received varies based both on the amount of dividends which may be paid and on the value of the stock at the time when shares vest. Mr. Drexler was not granted any restricted stock during fiscal year 1996. IMPACT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE The Committee has considered the potential impact of Section 162(m) of the Internal Revenue Code on its compensation plans and has determined that it is the Company's preference to qualify to the maximum extent possible its executives' compensation for deductibility under applicable tax laws. The Company's compensation plans have been designed to permit the Committee to grant awards (other than restricted stock) which qualify for deductibility under Section 162(m). In addition, to allow for full deductibility of base salaries, those Named Executive Officers whose base salaries exceed the $1,000,000 limit have in the past deferred that portion of their compensation above the limit under either or both of the Company's nonqualified deferred compensation plans, the Executive Capital Accumulation Plan and the Executive Deferred Compensation Plan. John M. Lillie (Chairman) Adrian D. P. Bellamy John G. Bowes Lucie J. Fjeldstad 11 PERFORMANCE GRAPH The graph below compares the percentage changes in the Company's cumulative total stockholder return* on its Common Stock for the five-year period ended February 1, 1997, with the cumulative total return of the S&P 500 Index and the Dow Jones Retailers-All Specialty Index. [PERFORMANCE GRAPH APPEARS HERE] The following chart represents data points on the performance graph which appears in the printed version of the proxy.
Cumulative Total Return 1/92 1/93 1/94 1/95 1/96 1/97 Gap Inc. 100 65 81 63 93 114 S&P 500 100 111 125 125 174 220 DJ Retailers 100 115 109 113 120 144 All Specialty Index
- ------- * Total return assumes quarterly reinvestment of dividends. OTHER REPORTABLE TRANSACTIONS The Company has an agreement with Fisher Development, Inc. ("FDI"), which is wholly owned by Robert S. Fisher, the brother of Donald G. Fisher, the Chairman and a principal stockholder of the Company. The agreement, which is reviewed annually by the Audit and Finance Committee of the Board of Directors, sets forth the terms under which FDI may act as general contractor in connection with the Company's construction activities. During the 1996 fiscal year, FDI supervised the construction of new store leasehold improvements for 177 stores, expansions of 38 stores, and remodels of existing stores and administrative offices. The total cost of such construction was $111,871,000, including profit and overhead costs of $10,751,000 paid by the Company to FDI relating to this construction. Robert J. Fisher and William S. Fisher, adult sons of Donald G. and Doris F. Fisher, are employed as: Executive Vice President and Chief Operating Officer of the Company; and President, International Division of the Company, respectively. Robert J. Fisher is also a director of the Company. William S. Fisher was paid a salary and bonus of $652,706 during the 1996 fiscal year; Company contributions to his account under GapShare for fiscal year 1996 amounted to $5,707. Comparable transactions with the persons described above are expected to continue during the current fiscal year. Pursuant to the Company's Relocation Loan Plan, on November 30, 1996, the Company made a $550,000 loan to Mr. Wilson at the interest rate of 3% per year, secured by a second mortgage on his home and by the stock granted to him under the Company's 1996 Stock Option and Award Plan. The loan is payable in full on November 25, 2001, or earlier upon termination of employment. Mr. Wilson is also required to apply a prorata share of the proceeds of any sale of stock options to decrease the amount of this loan. Interest on the loan is payable via bi-weekly payroll deductions. The amount outstanding on April 15, 1997 with respect to this loan was $550,000. 12 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC") and the New York Stock Exchange. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during the period from February 4, 1996 to February 1, 1997, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with, except that in February 1997 Mr. Hashagen reported on a Form 4 filed two days late one transaction involving a stock option exercise and sale of the underlying stock. 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 January 31, 1998. Deloitte & Touche LLP has acted as auditors for the Company since 1972. Although action by the stockholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by the stockholders of the Company. If the stockholders fail to approve the selection of such auditors, the Board of Directors will reconsider the selection. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting of Stockholders and available to make statements to, and respond to appropriate questions of, stockholders. OTHER BUSINESS The Company's management is not aware of any other matters to come before the meeting. If any matter not mentioned herein is properly brought before the meeting, the persons named in the enclosed proxy will have discretionary authority to vote all proxies with respect thereto in accordance with their judgment. PROPOSALS OF STOCKHOLDERS Proposals of stockholders intended to be presented at the next annual meeting must be received by the Company for inclusion in the Company's proxy statement and form of proxy relating to that meeting on or before December 1, 1997. Proposals should be addressed to the Company's Secretary at One Harrison Street, San Francisco, California 94105. By Order of the Board of Directors, /s/ANNE B. GUST --------------- Anne B. Gust Secretary 13 THE GAP, INC. ------------- ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1997 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Donald G. Fisher, Warren R. Hashagen and Anne B. Gust, or any of them, each with full power of substitution, as proxies to vote all shares of common stock of The Gap, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on May 20, 1997, and any postponements and adjournments thereof, on all matters properly coming before the meeting. IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL --- NOMINEES LISTED ON THE REVERSE SIDE, FOR PROPOSAL 2, AND, WITH RESPECT TO ANY --- OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES. THE GAP, INC. PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY 1. Election of Directors, Nominees: FOR WITHHOLD FOR ALL Adrian D. P. Bellamy, John G. Bowes, ALL ALL EXCEPT AS Millard S. Drexler, Donald G. Fisher, LISTED Doris F. Fisher, Robert J. Fisher, Lucie J. Fjeldstad, William A. Hasler, John M. Lillie, Charles R. Schwab, Brooks Walker, Jr. ____________________________________________ 2. Ratify the appointment of Deloitte & Touche LLP FOR AGAINST ABSTAIN as independent auditors. Date: ___________________________________________, 1997 _______________________________________________________ (Signature) _______________________________________________________ (Signature) NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as Attorney, executor, administrator, trustee or guardian, please give full title as such. -----END PRIVACY-ENHANCED MESSAGE-----