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GPS » Topics » Background and Reasons for Amendment

This excerpt taken from the GPS DEF 14A filed Mar 28, 2005.

Background and Reasons for Amendment

 

We are amending the Executive MICAP in order to, among other things, provide for greater flexibility in establishing the objective goals against which an executive’s performance will be measured and to offer tax deductible performance-based compensation payable in stock-based compensation and stock denominated units. The substantive changes to the Executive MICAP include:

 

  n   Adding “earnings per share” and other specified financial and operational measures that may be used in establishing performance goals;

 

  n   Specifying certain accounting adjustments that may be applied to the calculation of the performance goals if designated by the Compensation and Management Development Committee (the “Committee”) at the time the performance goals are established;

 

  n   Expanding the form of tender that may be used to pay awards to include stock-based compensation, stock denominated units or any other form of consideration specified by the Committee; and

 

  n   Increasing the maximum percentage of base salary that may be assigned to any participant as a target award in a fiscal year to 200% and the maximum award payable to any participant in a fiscal year to $10,000,000 to accommodate awards payable in performance units to our Chief Executive Officer.

 

The adoption of these amendments must be approved by our shareholders in order for awards granted under the Executive MICAP to qualify for tax deductibility pursuant to Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Under Section 162(m), the federal income tax deductibility

 

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of compensation paid to our CEO and to each of our next four most highly compensated executive officers may be limited to the extent that it exceeds $1,000,000 in any one year. We can only deduct compensation in excess of that amount if it qualifies as “performance-based compensation” under Section 162(m). The Executive MICAP is intended to permit us to pay incentive compensation that qualifies as performance-based compensation, thereby permitting us to receive a federal income tax deduction for the payment of such incentive compensation.

 

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